U. S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-K

          [X] Annual Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 2003

          [ ]  Transition  Report  under  Section 13 or 15(d) of the  Securities
Exchange Act of 1934 for the transition period from ______ to ______.

                          Commission file number 0-439

                       American Locker Group Incorporated
-------------------------------------------------------------------------------
             (Exact Name of registrant as specified 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                  14701-3966
-------------------------------------------------------------------------------
  (Address of principal executive offices)                  (Zip Code)

(Registrant's telephone number,  including area code) 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)

     Indicate  by check mark  whether the  registrant  (1) has 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   .
             ---    ---

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation  S-K is not contained in this form, and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

<PAGE>

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the exchange Act).

                                 Yes [ ] No [X]

     As of June 30, 2003,  1,517,146 shares of Common Stock, $1.00 par value per
share, were outstanding, and the aggregate market value of the Common Stock held
by non-affiliates  was approximately  $15,695,662 based on the closing price per
share of Common  Stock on this date of $14.05 as reported on the NASDAQ.  Shares
of Common Stock known by the Registrant to be beneficially owned by directors of
the  Registrant  and  officers of the  Registrant  and other  persons  reporting
beneficial  ownership  of 5% or more of Common Stock  pursuant to the  reporting
requirements  of Section 16 of the  Securities  Exchange Act of 1934, as amended
(the  "Exchange  Act"),  are not included in the  computation.  The  Registrant,
however, has made no determination that such persons are "affiliates" within the
meaning of Rule 12b-2 under the Exchange Act.

At March 16, 2004, the Registrant had outstanding 1,534,146 shares of its Common
Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

     Portions of the  definitive  Proxy  Statement for the Annual  Stockholders'
Meeting to be held May 11, 2004, are incorporated by reference into Part III.



                                     - 2 -
<PAGE>


PART I
------

Item 1.  Description of Business

American Locker Group  Incorporated  (the "Company") is engaged primarily in the
sale of lockers.  This includes coin,  key-only,  and electronically  controlled
checking lockers and related locks and plastic and aluminum 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 and  aluminum  centralized
mail and  parcel  distribution  lockers  are sold to the  United  States  Postal
Service  ("USPS"),  directly to end users, and to distributors and resellers for
use in  centralized  mail and parcel  delivery  in new  housing  and  industrial
developments,  inside postal lobbies and apartment buildings and for replacement
of older style lockers in existing locations.

The  Company  is  an  engineering,   assembling,   manufacturing  and  marketing
enterprise.

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.

On July 6, 2001, the Company acquired Security Manufacturing  Corporation (SMC).
SMC  manufactures  aluminum  cluster  box units,  which are sold to the USPS and
private markets,  as well as other mail delivery  receptacles.  The Company made
this  acquisition  to increase  its  product  offerings  to existing  customers,
provide  additional  products to attract new customers and to increase its share
in the postal market.

One of the Company's subsidiaries is a party to a Manufacturing  Agreement dated
October 1, 2000 with Signore,  Inc.,  formerly a wholly owned  subsidiary of the
Company, to furnish fabricating,  assembly and shipping services. The Agreement,
which replaced a similar  agreement  dated January 1, 1990, has been amended and
restated  to  provide  for a term which  expires  August  31,  2006,  subject to
automatic  renewal for a one year period on  September  1, 2006,  and subject to
termination  by  either  party on one  years  notice  to the  other  party.  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  primarily in one
business:   sale  of  lockers,   including  coin,  key-only  and  electronically
controlled  checking  lockers  and locks and the sale of  plastic  and  aluminum
centralized mail and parcel distribution lockers.


                                     - 3 -
<PAGE>

The  Company has  developed  a range of  products  to support the United  States
Postal  Service  (USPS)  Centralized  Delivery  program.  Outdoor Parcel Lockers
(OPLs) are used by the USPS for  delivery  of parcels.  Since  March  1989,  the
Company has shipped  over 171,000  plastic  OPLs to the USPS.  Cluster Box Units
(CBUs) are used by the USPS for  delivery  of letters  and  parcels  and for the
collection of outgoing mail. In November 1994, the Company negotiated a contract
to sell Type Three plastic CBUs in quantity to the United States Postal Service.
The Company,  including  SMC, is approved to ship Type One, Two,  Three and Four
plastic CBUs,  and Type Two, Three and Four aluminum CBUs. As of March 16, 2004,
plastic  Cluster  Box  Units  with  aggregate  invoice  prices in excess of $183
million have been shipped to the United  States Postal  Service  pursuant to the
1994 contract and  subsequent  contracts.  Components of these units are made by
outside  vendors  and the units are  assembled  by the  Company's  wholly  owned
subsidiary,  American Locker Security Systems,  Inc. (ALSSI). The units are sold
directly  by  ALSSI  to  the  USPS  and  private  markets.   Aluminum  CBUs  are
manufactured by SMC and sold directly to the USPS and private markets.

The checking  lockers are  fabricated  by Signore,  Inc. and are marketed in the
United  States by ALSSI.  Lockers for the Canadian  market are  manufactured  by
Signore,  Inc. with locks supplied from ALSSI. Lockers are marketed in Canada by
the  Canadian  Locker  Company,   Ltd.  ("Canadian   Locker"),   a  wholly-owned
subsidiary.  Sales of  checking  lockers  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 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 sold by ALSSI and Canadian  Locker.  ALSSI also provides  nationwide and
Canadian  maintenance and repair services with respect to coin operated  lockers
previously  sold  by  ALSSI  and  Canadian  Locker.  The  Company  developed  an
electronic cash and credit card operated  baggage cart system that has been sold
to several U.S. airports and also to third-party  operators for use in two major
U.S.  airports.  The Company also sells this vending system to shopping  centers
for the rental of shopping carts.

Additional   information  with  respect  to  business  segment  data,  including
significant  customers,  is  disclosed  in Note 13 of the  financial  statements
included in Item 8 of this Form 10-K.

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.  The Company
faces active  competition from several  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,  aluminum 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 CBUs 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



                                     - 4 -
<PAGE>

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 coin operated and electronic  lockers are  manufactured  by
Signore,  Inc.  pursuant to the Manufacturing  Agreement,  except for the locks,
which are manufactured by ALSSI.  The Company's  aluminum CBUs and mailboxes are
manufactured  and  sold  by the  Company's  subsidiary,  Security  Manufacturing
Corporation.

Patents
-------

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

Employees
---------

The  Company  and  its  subsidiaries  actively  employed  154  individuals  on a
full-time  basis as of December 31, 2003, in its  businesses,  12 of whom are in
Canada.   The  Company   considers  its  relations  with  its  employees  to  be
satisfactory. None of the Company's employees are represented by a union.

Dependence on Material Customer
-------------------------------

During 2003,  2002 and 2001,  one customer,  the United  States Postal  Service,
accounted for 52.7%,  56.4%, and 63.1% of net sales,  respectively.  The loss of
this  customer,  or a  reduction  in its  orders,  could  adversely  affect  the
Company's operations and financial results.

Research and Development
------------------------

The Company engages in research and development  activities  relating to new and
improved products. It expended $431,000, $174,000, and $91,000 in 2003, 2002 and
2001, respectively, for such activity in its continuing businesses.

Compliance with Environmental Laws and Regulations
--------------------------------------------------

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

As previously  reported,  in December 1998, the Company was named as a defendant
in a lawsuit titled Roberta  Raiport,  et al. v. Gowanda  Electronics  Corp. And
American  Locker  Group,  Inc.  pending in the State of New York Supreme  Court,
County of Cattaraugus.  The suit involves property located in Gowanda, New York,
which was sold by the Company to Gowanda  Electronics  Corp.  prior to 1980. The
plaintiffs,  current or former property owners in Gowanda, New York, assert that
defendants  each  operated  machine  shops at the site during  their  respective
periods  of  ownership  and  that  as a  result  of  such  operation,  soil  and
groundwater  contamination  occurred which has adversely affected the plaintiffs
and the  value of  plaintiffs'  properties.  The  plaintiffs  assert a number of
causes of action and seek compensatory  damages of $5,000,000


                                     - 5 -
<PAGE>

related to alleged diminution of property values, $3,000,000 for economic losses
and "disruption to plaintiffs' lives," $10,000,000 for "nuisance, inconveniences
and  disruption to plaintiffs'  lives,"  $25,000,000  in punitive  damages,  and
$15,000,000 to establish a "trust account" for monitoring indoor air quality and
other  remedies." In June 2003,  Gowanda  Electronics  Corp.  filed a motion for
summary  judgment  seeking to be dismissed from the suit. The plaintiffs and the
Company  have filed  objections  to such motion and the court has yet to rule on
the motion.  The Company  believes that its potential  liability with respect to
this  site,  if  any,  is not  material.  Therefore,  based  on the  information
currently  available,  management does not believe the outcome of this suit will
have  a  material  adverse  impact  on the  Company's  operations  or  financial
condition.  Defense  of this case has been  assumed by the  Company's  insurance
carrier, subject to a reservation of rights.

As previously reported, on July 30, 2001, the Company received a letter from the
New York State  Department of Environmental  Conservation  (the NYSDEC) advising
the Company  that it is a  potentially  responsible  party (PRP) with respect to
environmental  contamination at the site mentioned above located in Gowanda, New
York which was sold by the Company to Gowanda  Electronics  Corp. prior to 1980.
In March  2001,  the  NYSDEC  issued a Record of  Decision  with  respect to the
Gowanda site in which it sets forth a remedy which includes continued  operation
of an existing  extraction  well and air stripper,  installation  of groundwater
pumping wells and a collection  trench,  construction of a treatment system in a
separate building on the site, installation of a reactive iron wall covering 250
linear feet  intended to intercept any  contaminates  and  implementation  of an
on-going  monitoring  system. The NYSDEC has estimated that the remediation plan
selected by NYSDEC will cost approximately $688,000 for initial construction and
a total of  $1,997,000  with  respect  to  expected  operation  and  maintenance
expenses over a thirty-year period after completion of initial construction. The
Company has not  conceded to the NYSDEC that the Company is liable with  respect
to this  matter and has not agreed  with the NYSDEC  that the  remediation  plan
selected by NYSDEC is the most  appropriate.  This matter has not been litigated
and at the  present  time the  Company has only been  identified  as a PRP.  The
Company also believes  other  parties may have been  identified by the NYSDEC as
PRPs and the allocation of financial responsibility of such parties has not been
litigated. Based upon currently available information,  the Company is unable to
estimate  timing with respect to the  resolution of this matter.  The NYSDEC has
not  commenced  construction  of the remedial  plan and has not  indicated  when
construction  will start, if ever. The Company's  primary  insurance carrier has
assumed  the  cost  of the  Company's  defense  in  this  matter,  subject  to a
reservation  of rights,  and to date the  Company has not  experienced  any cost
associated with this matter.

Backlog
-------

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.




                                     - 6 -
<PAGE>

Executive Officers of the Company
---------------------------------
                                                                   Year First
                                                                    Assumed
      Name                 Age    Office Held with Company          Position
-------------------------------------------------------------------------------

Edward F. Ruttenberg       57     Chairman of the Board and           1998
                                  Chief Executive Officer

Roy J. Glosser             43     President, Chief Operating          1996
                                  Officer and Treasurer

Mr. E.F.  Ruttenberg has been employed in his positions since  September,  1998.
Prior to that  date he served  as Vice  Chairman  of the  Company.  Mr.  Glosser
assumed his position as President  and Chief  Operating  Officer in May 1996 and
became  Treasurer in September  1998.  Prior to that date, Mr. Glosser served as
Vice  President - Operations  of the Company since 1995 and has been employed by
the Company since 1992 in operations and product development.

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 and an  employment  contract  between the Company and
Edward F.  Ruttenberg.  Except as provided  in such  employment  contracts,  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.

Available Information
---------------------

The Company files with the U.S. Securities and Exchange Commission quarterly and
annual  reports on Forms 10-Q and 10-K,  respectively,  current  reports on Form
8-K, and proxy  statements  pursuant to the Securities  Exchange Act of 1934, in
addition  to other  information  as  required.  The public may read and copy any
materials that the Company files with the SEC at the SEC's Public Reference Room
at 450 Fifth  Street,  N.W.,  Washington,  D.C.  20549.  The  public  may obtain
information on the operation of the Public  Reference Room by calling the SEC at
1  (800)   SEC-0330.   The  Company   files  this   information   with  the  SEC
electronically,  and the SEC maintains an Internet  site that contains  reports,
proxy and information  statements,  and other information regarding issuers that
file  electronically  with  the  SEC at  http://www.sec.gov.  The  Company  also
maintains a web site at http://www.americanlocker.com.

Our   code  of   ethics   is   available   free  of   charge   at  our   website
http://www.americanlocker.com.

Also, copies of our annual report will be made available,  free of charge,  upon
written request to American Locker Group, Inc., Attn:  Investor  Relations,  608
Allen Street, Jamestown, NY 14701-3966.



                                     - 7 -
<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):

<TABLE>
<CAPTION>
                                                              Approximate
                                                              Floor Space
Location             Subsidiary                               In Sq. Ft.           Use
--------             ---------                                -----------          --------

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

Jamestown, NY        American Locker Security                 30,200*              Assembly and
                       Systems, Inc.                                               Warehouse

Pittsburgh, PA       Executive Office                            200*              Office space

Ellicottville, NY    American Locker Security                 12,800               Lock manufactur-
                       Systems, Inc. - Lock Shop                                   ing service and
                                                                                   repair

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

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

Grapevine, TX        Altreco, Inc (Operated by Security       70,000               Manufacturing
                     Manufacturing Corporation)                                    and office
                                                             -------
                                                TOTAL        157,200
                                                             =======
</TABLE>

The Company believes that its facilities, which are of varying ages and types of
construction and the machinery and equipment utilized in such facilities, are in
good  condition  and are  adequate for its  presently  contemplated  needs.  All
facilities  are leased  except for the  Ellicottville,  New York and  Grapevine,
Texas facilities. The leases on these properties terminate at various times from
2004 through 2011.



                                     - 8 -
<PAGE>


Item 3.  Legal Proceedings

In September 1998 and subsequent  months, the Company was named as an additional
defendant in  approximately  140 cases pending in state court in  Massachusetts.
The  plaintiffs in each case assert that a division of the Company  manufactured
and furnished to various  shipyards  components  containing  asbestos during the
period  from  1948 to 1972 and that  injuries  resulted  from  exposure  to such
products.  The assets of this division were sold by the Company in 1973.  During
the process of discovery  in certain of these  actions,  documents  from sources
outside the Company have been produced which  indicate that the Company  appears
to have been  included  in the  chain of title for  certain  wall  panels  which
contained  asbestos  and which were  delivered to the  Massachusetts  shipyards.
Defense of these  cases has been  assumed by the  Company's  insurance  carrier,
subject  to a  reservation  of  rights.  As of  February  19,  2004,  settlement
agreements  have been entered in 15 cases with funds  authorized and provided by
the Company's insurance carrier. Further, over 90 cases originally filed in 1995
through  2000  against  other  defendants  to which the Company was joined as an
additional defendant have been terminated as to the Company without liability to
the Company under  Massachusetts  procedural  rules.  Therefore,  the balance of
unresolved cases against the Company as of February 19, 2004 is approximately 35
cases originally filed against other defendants in 2001 through 2003.

While the Company cannot predict what the ultimate  resolution of these asbestos
cases may be because the  discovery  proceedings  on the cases are not complete,
based upon the Company's  experience to date with similar cases,  as well as the
assumption that insurance  coverage will continue to be provided with respect to
these cases,  at the present time, the Company does not believe that the outcome
of  these  cases  will  have a  significant  adverse  impact  on  the  Company's
operations or financial condition.

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 2003.



                                     - 9 -
<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.

<TABLE>
                                Per Common Share
                                ----------------
                                  Market Price
                                  ------------
<CAPTION>
                                                              Dividend
     2003              High              Low                  Declared
-----------------------------------------------------------------------
<S>                    <C>              <C>                 <C>

First Quarter          $  14.87         $  11.85            $   0.00
Second Quarter            16.22            12.00                0.00
Third Quarter             15.35            11.80                0.00
Fourth Quarter            13.00            10.25                0.00
                                                               -----
Total                                                       $   0.00
                                                            ========


                                                              Dividend
     2002              High              Low                  Declared
-----------------------------------------------------------------------

First Quarter          $ 17.50          $  10.50            $   0.00
Second Quarter           14.00             10.53                0.00
Third Quarter            13.99              9.52                0.00
Fourth Quarter           14.00             10.00                0.00
                                                               -----
Total                                                       $   0.00
                                                            ========
</TABLE>


As of March 16, 2004, the Company had 1,046 security holders of record.

By agreement with its principal lender,  the Company's ability to declare future
dividends is restricted. See Note 4 to the financial statements included in Item
8 of this Form 10-K.



                                     - 10 -
<PAGE>


Item 6.  Selected Financial Data

The following table sets forth selected historical financial data of the Company
as of, and for the years ended December 31, 2003,  2002,  2001,  2000, and 1999.
For  a  more  detailed  discussion  of  2001  through  2003,  refer  to  Item  7
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and Item 8 Financial  Statements and Supplementary Data of this Form
10-K.  The  below  amounts   include  the  results  of  Security   Manufacturing
Corporation since its acquisition by the Company on July 6, 2001.

<TABLE>
<CAPTION>
                                                   2003           2002          2001          2000         1999
                                                   ----           ----          ----          ----         ----

<S>                                               <C>           <C>           <C>          <C>           <C>
Sales                                             $39,256,438   $40,670,721   $39,627,216  $37,662,140   $34,950,104

Income before income taxes                          3,545,379     4,972,307     4,939,946    4,840,632     4,395,208

Income taxes                                        1,398,247     1,949,479     1,879,585    1,891,419     1,771,407

Net income                                          2,147,132     3,022,828     3,060,361    2,949,213     2,623,801

Earnings per share - basic                               1.41          1.57          1.49         1.33          1.11

Earnings per share - diluted                             1.38          1.54          1.47         1.32          1.09

Weighted average common shares
outstanding - basic                                 1,523,429     1,921,612     2,053,838    2,214,406     2,363,338

Weighted average common shares
outstanding - diluted                               1,554,328     1,957,561     2,083,484    2,230,785     2,402,108

Dividends declared                                       0.00          0.00          0.00         0.00          0.00

Interest expense                                      529,642       670,144       441,773      140,920       153,861

Depreciation and amortization expense                 893,236       974,165       956,430      796,140       630,047

Expenditures for property, plant and                  543,146       316,180       801,009      206,604     1,915,139
equipment

YEAR-END POSITION
Total assets                                       25,873,480    25,034,616    29,735,420   15,582,599    15,179,069

Long-term debt, including current portion           8,305,487     9,933,813    11,578,687      333,320     2,034,324

Stockholders' equity                               14,162,140    11,874,709    14,553,876   11,723,825    10,107,210

Stockholders' equity per share (1)                       9.23          7.83          7.12         5.68          4.44

Common shares outstanding at year-end               1,534,146     1,517,146     2,043,046    2,062,540     2,277,118

Number of employees                                       154           161           198          144           137

(1) Based on shares outstanding at year-end.

</TABLE>


                                     - 11 -
<PAGE>



Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

Critical Accounting Policies And Estimates

The Company's  discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States. The preparation of these financial statements requires the
Company to make  estimates,  assumptions  and judgments  that affect the amounts
reported in the financial  statements and the accompanying notes. On an on-going
basis, the Company  evaluates its estimates,  including those related to product
returns, bad debts,  inventories,  intangible assets, income taxes, pensions and
other post-retirement  benefits,  and contingencies and litigation.  The Company
bases its estimates on  experience  and on various  other  assumptions  that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgments  about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates.

The Company believes the following critical  accounting policies affect its more
significant  judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue Recognition

The Company recognizes revenue at the point of passage of title, which is at the
time of shipment to the customer.  The Company derived  approximately 20% of its
revenue in 2003 from sales to  distributors.  These  distributors  do not have a
right to return unsold  products,  however  returns may be permitted in specific
situations. Historically returns have not been significant.

Allowance for Doubtful Accounts

The Company  maintains  allowances  for doubtful  accounts for estimated  losses
resulting  from  the  inability  of its  customers  to make  required  payments.
Management  uses judgmental  factors such as customer's  payment history and the
general economic climate,  as well as considering the age of and past due status
of invoices in assessing  collectiblity and establishing allowances for doubtful
accounts.  If  the  financial  condition  of the  Company's  customers  were  to
deteriorate,  resulting in an inability to make payments,  additional allowances
would be required.

Inventory

The  Company  records  reserves  for  estimated   obsolescence  or  unmarketable
inventory  equal  to the  difference  between  the  cost  of  inventory  and the
estimated  market value based upon  assumptions  about future  demand and market
conditions and management's review of existing  inventory.  If actual demand and
market  conditions  are less  favorable  than  those  projected  by  management,
additional  inventory  reserves  resulting  in a  charge  to  expense  would  be
required.

Legal Matters

The Company is subject to certain legal  proceedings  as discussed in Note 16 of
the consolidated financial statements.  Currently,  the Company does not believe
that these  matters  will have a  material  impact on its  financial  results or
financial  position.  This  conclusion  is  based  primarily  on  the  Company's
insurance  coverage  for these  matters.  It is possible,  however,  that future
results of  operations  for any  particular  quarter or annual  period  could be
materially affected by


                                     - 12 -
<PAGE>

changes in assumptions  or other  circumstances  involving  these legal matters.
Historically  the  Company has not  incurred  significant  costs for  litigation
matters.

Goodwill

As described in Note 2 to the consolidated financial statements, the Company has
recorded  goodwill of $6,155,000 in connection  with its  acquisition  of SMC in
2001.  Beginning in 2002,  the Company,  in  accordance  with the  provisions of
Statement  of  Financial  Accounting  Standards  No.  142,  Goodwill  and  Other
Intangible Assets,  performed the required goodwill impairment tests. Based upon
these tests no impairment was determined to exist. The annual required  goodwill
impairment test is performed at the beginning of the fourth calendar quarter. In
assessing  impairment  the Company  must make  assumptions  regarding  estimated
future  cash  flows  and  other  factors  to  determine  the  fair  value of the
respective net assets. If these estimates or their related assumptions change in
the future,  the Company may be required to record an impairment  charge for the
recorded goodwill.

Pension Assumptions

The Company  maintains a defined benefit plan covering its U.S.  employees.  The
accounting  for the  plan is  based  in part on  certain  assumptions  that  are
uncertain and that could have a material  impact on the financial  statements if
different reasonable  assumptions were used. The assumption for return on assets
reflects  the rate of earnings  expected on funds  invested or to be invested to
provide for benefits included in the projected benefit  obligation.  The assumed
rate of return of 7% used in 2003 was determined  based on a forecasted  rate of
return for a portfolio invested 50% in equities and 50% in bonds. In addition to
the  return  on  assets  assumption,  assumptions  for the rate of  compensation
increase and discount rate were made. The rate of compensation  increase used in
determining  the  2003  pension  cost  was  5.5%,  and  was  determined  using a
projection of inflation and real wage  increase  assumptions.  The discount rate
used in  determining  the 2003  pension  cost was 6.75%.  Consistent  with prior
years,  the  Company  uses a  discount  rate that  approximates  the  average AA
corporate  bond rate.  The  discount  rate used to value the  projected  benefit
obligation  at December 31, 2003 was 6% due to the  decrease  during 2003 of the
average AA corporate bond rates.  A 0.25% change in the expected  return on plan
assets or the discount rate would not have a significant impact on the Company's
annual pension expense.

Deferred Income Tax Assets

The Company has net  deferred tax assets of  approximately  $783,000 at December
31,  2003.  This balance  relates to timing  differences  between the  financial
reporting and tax reporting of certain expenses. The ultimate realization of the
deferred  income tax assets is  primarily  dependent  on  generating  sufficient
future  taxable  income or being able to carryback any taxable  losses and claim
refunds against  previously paid income taxes.  The Company has historically had
taxable  income and believes its net deferred  income tax assets at December 31,
2003, are realizable.  If future operating results lead to taxable losses it may
be  necessary  to  provide  valuation  allowances  to reduce  the  amount of the
deferred income tax assets to realizable value.



                                     - 13 -
<PAGE>


Results of Operations - 2003 Compared to 2002

Overall Results and Outlook
---------------------------
2003 results were impacted by various factors, which are provided in more detail
below.  Net income  decreased  by  $875,000 in 2003  versus  2002.  This was due
primarily to lower sales volume with the USPS and increases in certain expenses,
especially  employee related costs. The Company  continues to expand its product
offerings  and believes  that it is  maintaining  its market share with the USPS
regarding both plastic and aluminum products.

The Company  believes that the long-term  outlook for sales of Cluster Box Units
(CBUs) volume remains favorable in light of the continued USPS commitment to the
CBU program and its resulting operating cost reduction benefits.  In April 2003,
the Company's contract with the USPS was renewed for a one-year term expiring on
April 15, 2004. The Company has been advised by the USPS that this contract will
likely be  extended  on a short term  basis and that the USPS  will,  as in past
years,  seek bids with  respect to this  contract  later this year.  The current
contract  covers all four types of plastic CBUs,  aluminum CBUs and the OPL. The
contract  contained  price  reductions  ranging  from zero to  approximately  2%
depending on the CBU or OPL type. As previously  disclosed,  total CBU demand is
influenced  by a number of  factors  over  which  the  Company  has no  control,
including but not limited to: USPS budgets,  policies and financial performance,
domestic new housing starts, postal rate increases,  postal purchasing practices
and the weather, as these units are installed outdoors. The Company believes its
CBU product  line,  including  the  acquired  line of aluminum  CBUs made by the
Company's new  subsidiary,  SMC,  continues to represent the best value when all
factors  including  price,   quality  of  design  and  construction,   long-term
durability and service are considered.

Net Sales
---------
Consolidated  sales in 2003  totaled  $39,256,000,  a 3% decrease  from sales of
$40,671,000  in 2002.  Plastic  locker sales to the United States Postal Service
(USPS) totaled  $21,967,000  in 2003 compared to  $23,580,000 in 2002.  Sales of
plastic Cluster Box Units (CBUs) to the USPS decreased 6% to $21,223,000 in 2003
from  $22,649,000 in 2002.  Sales of plastic  Outdoor Parcel Lockers (OPLs) were
$744,000 in 2003 compared to $931,000 in 2002. The decrease in CBU sales in 2003
compared to 2002 was the result primarily of decreased  purchases from the USPS.
Price  reductions that became effective in April 2003 resulted in a reduction of
revenue of approximately  $90,000 in 2003 versus 2002. The Company also believes
that the  decline in its sales of CBUs is the  result of  changes in  purchasing
practices by the USPS from district level  purchasing to purchasing at the local
post office level.

Sales from the  Company's  other locker  products,  primarily the sale of metal,
coin and key-only and electronically  controlled lockers, and aluminum CBUs were
$17,135,000  in 2003 compared to  $16,512,000  in 2002, an increase of $623,000.
This increase consists of an increase of $1,140,000 in SMC's sales,  offset by a
decrease of $517,000  relating to other  locker  products.  The  increase in SMC
sales is due primarily to increases in aluminum mailbox sales.

Revenues from the luggage cart business for airport  terminals  were $154,000 in
2003 versus $578,000 in 2002. The decline in the luggage cart business  revenues
is primarily  due to the  expiration  of the service  contract  with the Toronto
International  Airport in November 2002 and



                                     - 14 -
<PAGE>

continued decline in revenue at the Detroit International Airport.  Effective in
January 2004,  the Company has  terminated the luggage cart services in Detroit.
As such the Company does not presently provide any luggage cart rental services.

Cost of Sales
-------------
Consolidated  cost of sales as a percentage  of sales was 69.7% in 2003 compared
to 68.9% in 2002.  The  slight  increase  in 2003 is the  result of lower  sales
volume  in  general,  price  reductions  to the  USPS for  CBUs,  as well as the
elimination of the Toronto  airport  operations,  where margins were higher than
certain other Company operations.

Selling, Administrative and General Expenses
--------------------------------------------
Selling,  administrative  and general  expenses were $8,086,000  during 2003, an
increase of 9% from  $7,400,000 in 2002.  This increase of $686,000 is partially
due to a one-time reduction of $319,000 in 2002 as the result of the reversal in
2002 of a liability,  which existed under the Supplemental  Executive Retirement
Plan  due to the  death  in the  first  quarter  of  2002  of the  only  current
beneficiary  under the Plan.  The increase  was also  impacted by an increase in
pension  costs of $155,000 in 2003 versus  2002,  a 2003 charge of $65,000 for a
severance agreement relating to a terminated management employee at SMC, as well
as increased  engineering costs in 2003 relating to product development.  Higher
health and liability insurance premiums also contributed to the increase.

Interest Income and Expense
---------------------------
Interest  income  decreased  by $58,000 in 2003  compared to 2002 as a result of
lower interest rates earned on cash deposits during 2003 versus 2002.

Interest expense  decreased in 2003 as a result of lower outstanding debt as the
Company  continues to make scheduled  payments on its  outstanding  debt. No new
debt was incurred in 2003.

Other Income - net
------------------
Other  income - net  consists  primarily of cash  discounts  earned,  which were
$121,000 in 2003 and  $132,000 in 2002 and service  maintenance  revenue,  which
were  $53,000 in 2003 and  $143,000  in 2002.  The service  maintenance  revenue
results from the Company  providing  maintenance to customers of previously sold
products.  Other  income - net in 2003 also  includes a gain on the  disposal of
assets of $28,000.

Income Taxes
------------
Income taxes decreased in 2003 versus 2002 as a result of the decrease in income
before income taxes. The effective tax rate was 39% in 2003 and 2002.



                                     - 15 -
<PAGE>


Results of Operations - 2002 Compared to 2001

Net Sales
---------
Consolidated  sales in 2002  totaled  $40,671,000,  a 3% increase  from sales of
$39,627,000  in 2001.  Plastic  locker sales to the United States Postal Service
(USPS) totaled  $23,580,000  in 2002 compared to  $25,166,000  in 2001.  Plastic
Cluster Box Units (CBUs) to the United States Postal Service (USPS) decreased 5%
to $22,649,000 in 2002 from $23,864,000 in 2001. Sales of plastic Outdoor Parcel
Lockers  (OPLs)  were  $931,000  in 2002  compared to  $1,302,000  in 2001.  The
decrease in sales of plastic  CBUs is the result of overall  declines in volume,
changes in product mix as a lower priced plastic CBU was introduced in mid 2001,
and to a lesser  extent price  reductions  of 3% to 5% that became  effective in
April 2001 on  existing  plastic CBU  models.  The  decrease in sales of OPLs is
primarily the result of lower volume. The declines in CBU and OPL volume are due
to decreased purchases made by the USPS as a result of USPS budget constraints.

Revenues from the Company's other locker products,  primarily the sale of metal,
coin and key-only and  electronically  controlled  lockers,  were $16,512,000 in
2002 compared to $13,382,000  in 2001, an increase of $3,130,000.  This increase
of  $3,130,000  consists  of  increased  sales  from the  Company's  subsidiary,
Security  Manufacturing  Corporation  (SMC),  which was  acquired  July 6, 2001,
offset by a decrease from other products and services. SMC sales were $7,708,000
in 2002, compared to $3,137,000 in 2001, beginning from the date of acquisition,
July 6, 2001.  Decreases in sales in 2002 for other locker products and services
relate to declines in locker sales to amusement  parks and others as a result of
current economic conditions.

Revenues from the luggage cart business for airport  terminals  were $578,000 in
2002,  a decrease of  $502,000  compared to 2001  revenues of  $1,080,000.  This
decrease is primarily due to decreased air passenger volume during 2002 compared
to 2001. Also in November 2002, the Company's  agreement to provide luggage cart
services at the Toronto International Airport expired. Revenue from luggage cart
and other  services  at this  airport  were  approximately  $332,000 in 2002 and
$556,000 in 2001.

Cost of Sales
-------------
Consolidated  cost of sales as a percentage  of sales was 68.9% in 2002 compared
to 70.8% in 2001. The improvement in 2002 is due to higher margins obtained from
SMC and stable margins for other products.

Selling, Administrative and General Expenses
--------------------------------------------
Selling,  administrative  and general  expenses were $7,400,000  during 2002, an
increase of $711,000 or 11% over the 2001 amount of $6,689,000. This increase is
primarily  from SMC,  since its 2002  amounts  include a full year  whereas 2001
amounts  only  include  the  period  from the July 6, 2001  acquisition  date to
December 31, 2001. The increase at SMC was approximately $954,000, whereas there
was a one  time  reduction  of  $319,000  as the  result  of the  reversal  of a
liability which existed under the Supplemental  Executive Retirement Plan due to
the death in March of 2002, of the only current beneficiary under the Plan. This
one time reduction,  which was recorded in the first quarter of 2002,  increased
basic  and  diluted  earnings  per share by $.09 for  2002.  Remaining  selling,
administrative  and general expenses  increased modestly during


                                     - 16 -
<PAGE>

2002 compared to 2001. Selling, administrative and general expenses were 18% and
17% of sales in 2002 and 2001, respectively.

Interest Income and Expense
---------------------------
Interest  income  decreased  by $68,000 in 2002  compared to 2001 as a result of
lower cash  deposits,  primarily due to the  repurchase of the Company's  common
stock during 2002.

Interest expense  increased in 2002 compared to 2001 due to the outstanding debt
in connection  with the  acquisition of SMC being  outstanding  for all of 2002,
whereas in 2001 the debt was  outstanding  only  subsequent  to the July 6, 2001
acquisition date.

Other Income - net
------------------
Other  income - net  consists  primarily of cash  discounts  earned,  which were
$132,000 in 2002 and  $155,000 in 2001 and service  maintenance  revenue,  which
were  $143,000 in 2002 and  $85,000 in 2001.  The  service  maintenance  revenue
results from the Company  providing  maintenance to customers of previously sold
products.

Income Taxes
------------
Income taxes  increased  by $70,000 in 2002 versus 2001,  this was the result of
additional  income  before  income taxes as well as an increase in permanent tax
differences,  which results in an increase in the effective tax rate from 38% in
2001 to 39% in 2002.

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 3.1
to 1 and 2.8 to 1 at December 31, 2003 and 2002, respectively.  Working capital,
or the excess of current  assets over current  liabilities  was  $9,853,000  and
$8,370,000 at December 31, 2003 and 2002, respectively.  The increase in working
capital resulted primarily from the retention of cash generated from operations.

The Company's  policy is to maintain  modern  equipment  and adequate  capacity.
During  2003,  2002,  and 2001 the  Company  expended  $543,000,  $316,000,  and
$801,000, respectively, for capital additions. Capital expenditures in all three
years were financed  principally  from  operations.  The Company expects capital
expenditures  during 2004 to fall within the range of  expenditures  made in the
last three years. It is expected that capital  expenditures  will be funded from
cash on hand or cash generated from operations in 2004.

During  2001,  the  Company   acquired   B.L.L.   Corporation,   d/b/a  Security
Manufacturing  Corporation  (SMC) and  related  real  estate  for  approximately
$12,100,000, excluding cash received. This acquisition was funded with term loan
borrowings of approximately  $11,000,000,  a $960,000 note payable to the former
owners and $140,000 of cash.  These  borrowings  require  principal  payments of
approximately $1,630,000 during 2004.

During 2002,  the Company  expended  $5,679,000 for the repurchase of its common
stock.  This was funded through cash generated from  operations and cash on hand
in 2002.  The Company



                                     - 17 -
<PAGE>

does not have any current  agreement or  requirements  to repurchase  its common
stock,  though it maintains  the ability,  subject to approval by the  Company's
lender,  to repurchase  its common stock if market or other  conditions  warrant
such action.

The Company expects that cash generated from operations in 2004 will be adequate
to fund the needs for working capital,  capital  expenditures and debt payments.
However,   if   necessary,   the  Company  has  a  $3,000,000   revolving   bank
line-of-credit available to assist in satisfying future operating cash needs, $0
of which was  outstanding  at December 31, 2003.  Currently the Company does not
have any long-term capital commitments or obligations.

Contractual Obligations
-----------------------
The Company  has  contractual  obligations  at December  31,  2003,  relating to
long-term debt and operating lease  arrangements.  The Company does not have any
significant  purchase  obligations  or  commitments  at December 31,  2003.  The
Company does not guarantee the debt of any third  parties.  All of the Company's
subsidiaries  are 100% owned by the Company and are included in its consolidated
financial  statements.  Total  payments  to be made  under  long-term  debt  and
operating leases are listed below:

                        Long-Term Debt      Operating Leases         Total
                        --------------      ----------------         -----
       2004                $1,641,000         $  260,000        $  1,901,000
       2005                 1,331,000            157,000           1,488,000
       2006                 3,508,000            146,000           3,654,000
       2007                 1,200,000            134,000           1,334,000
       2008                   625,000                  -             625,000

The above amounts for long-term  debt do not include  interest.  The increase in
2006  long-term  debt  repayment  is the result of a balloon  payment due on the
Company's  mortgage  payable.  The Company  expects to  refinance  the  mortgage
payable prior to its scheduled maturity in 2006.

The Company also has obligations under its defined benefit pension plan. This is
a funded plan, under which the Company is required to make contributions to meet
ERISA funding  requirements.  The Company  contributions to the plan have ranged
from  approximately  $200,000 to $340,000 over the last four years. The required
funding is based on actuarial calculations that take into account various actual
results and certain assumptions.  It is expected that the funding requirement in
2004 will approximate $300,000.

The Company does not have any off balance sheet arrangements with unconsolidated
entities or other persons.

Other Agreements
----------------
During 2002,  the Company  entered into  agreements  to become 5% members of two
limited liability corporations (LLCs). Third parties formed the LLCs in order to
provide  luggage cart  services at two U.S.  airports.  The Company has sold, or
expects to sell luggage cart products to the LLCs.  The  governing  documents of
the LLCs  provide that the Company  does not share in the  distribution  of cash
flow or profits and losses of the LLCs through 2007, nor is the Company required
to make any  capital  contribution  to the LLCs.  Ownership  by the Company of a
minority


                                     - 18 -
<PAGE>

interest  in the LLCs had no  impact  on the  Company's  2003 or 2002  operating
results or financial position,  and are not expected to have any material impact
in the future.

Impact of Inflation and Changing Prices

Although  inflation  has been low 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.  Specifically,  the Company does
have the ability to modify its contract with the USPS regarding  sales prices in
the event of a  significant  price  increase for  materials  subject  however to
competitive  situations.  In  respect  to its other  products,  which use steel,
aluminum and plastic,  the Company  expects that any raw material  price changes
would be reflected in adjusted sales prices.

The  Company  intends  to seek  additional  ways to control  the  administrative
overhead necessary to successfully run the business. By controlling these costs,
the Company can  continue to  competitively  price its  products  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.

Reliance on Signore, Inc.

Certain of the Company's  non-plastic  lockers are manufactured or fabricated by
Signore,   Inc.,  with  locks  supplied  by  the  Company.  The  Company  has  a
manufacturing  agreement with Signore,  Inc. as described in Item 1. Description
of Business. A significant portion of the Company's  non-plastic locker revenues
is  reliant  on  Signore  fulfilling  its  obligation  under  the  manufacturing
agreement.  In the event that Signore, Inc. was unable to fulfill its obligation
the  Company  would be required to find  alternative  sources of  manufacturing,
fabricating  and assembly for certain of its  products.  Such a situation  could
have a material adverse impact on the Company's revenues and operations.










                                     - 19 -
<PAGE>


Market Risks

Raw Materials
-------------
The Company  does not have any  long-term  commitments  for the  purchase of raw
materials.  As explained  previously  under  "Impact of  Inflation  and Changing
Prices," the Company does have the ability to modify its contract  with the USPS
regarding  sales  prices  in the  event  of a  significant  price  increase  for
materials  subject  however to competitive  situations.  In respect to its other
products,  which use steel,  aluminum and plastic,  the Company expects that any
raw material  price  changes would be reflected in adjusted  sales  prices.  The
Company  believes that the risk of supply  interruptions  due to such matters as
strikes at the source of supply or to logistics systems is limited.

Foreign Currency
----------------
The Company's  Canadian operation subjects the Company to foreign currency risk,
though it is not  considered a significant  risk since the Canadian  operation's
net assets  represent  less than 10% of the  Company's  aggregate  net assets at
December 31, 2003.  Presently,  management  does not hedge its foreign  currency
risk as it plans  to  indefinitely  reinvest  the  Canadian  net  assets  in the
Canadian operation.

Interest Rate Risks
-------------------
The Company has fixed  interest  rates on $4,255,000  of its  long-term  debt at
December  31,  2003 and  variable  interest  rates based on three month LIBOR on
$4,050,000 of its long-term debt at December 31, 2003.  Based upon the Company's
outstanding  long-term  debt subject to variable  interest rates at December 31,
2003,  a 1%  increase  in the LIBOR rate would  result in an annual  increase to
interest expense of approximately $40,000.

Effect of New Accounting Pronouncement

There are no recently issued accounting standards that the Company believes will
have a material impact on its financial position or results of operations.

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   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,  (iii) the risk that the Company's  contract with the
USPS will not be renewed or that orders  placed by the USPS under such  contract
will be substantially reduced, and (iv) other risks and uncertainties  indicated
from time to time in the  Company's  filings  with the  Securities  and Exchange
Commission.



                                     - 20 -
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The  information  required is reported  under  "Impact of Inflation and Changing
Prices" and "Market  Risks" in Item 7.  Management's  Discussion and Analysis of
Financial Condition and Results of Operations.

































                                     - 21 -
<PAGE>

Item 8.  Financial Statements and Supplementary Data


Report of Independent Auditors


Board of Directors and Stockholders
American Locker Group Incorporated and Subsidiaries


We have audited the accompanying  consolidated balance sheets of American Locker
Group  Incorporated  and  Subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of income,  stockholders' equity, and cash flows
for each of the three years in the period ended  December  31, 2003.  Our audits
also  included  the  financial  statement  schedule  listed in the index at Item
15(a).  These financial  statements and schedule are the  responsibility  of the
management of the Company.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, 2003 and 2002,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 2003, in conformity with accounting
principles  generally  accepted in the United States.  Also in our opinion,  the
related financial statement  schedule,  when considered in relation to the basic
financial statements taken as a whole,  presents fairly in all material respects
the information set forth therein.




/s/Ernst & Young LLP

Buffalo, New York
February 24, 2004








                                     - 22 -
<PAGE>

<TABLE>
<CAPTION>


               American Locker Group Incorporated and Subsidiaries

                           Consolidated Balance Sheets

                                                                                 December 31
                                                                          2003                 2002
                                                                   -----------------------------------------

<S>                                                                 <C>                 <C>
Assets

Current assets:

     Cash and cash equivalents                                       $   3,597,990      $  2,002,225
     Accounts and notes receivable, less allowance
        for doubtful accounts of $371,000 in 2003
        and $333,000 in 2002                                            4,682,946          4,166,972
     Inventories                                                        5,458,865          6,020,966
     Prepaid expenses                                                     118,819            104,115
     Prepaid income taxes                                                       -            234,008
     Deferred income taxes                                                729,546            579,137
                                                                   ------------------------------------
Total current assets                                                   14,588,166         13,107,423


Property, plant and equipment:
     Land                                                                 500,500            500,500
     Buildings                                                          3,456,766          3,444,688
     Machinery and equipment                                           12,137,813         11,611,883
                                                                   ------------------------------------
                                                                       16,095,079         15,557,071
     Less allowance for depreciation                                  (11,092,999)       (10,296,881)
                                                                   ------------------------------------
                                                                        5,002,080          5,260,190

Deferred income taxes                                                      53,756             18,152
Goodwill                                                                6,155,204          6,155,204
Other assets                                                               74,274            192,447
Notes receivable, long-term portion                                             -            301,200


                                                                   ------------------------------------
Total assets                                                         $ 25,873,480       $ 25,034,616
                                                                   ====================================


</TABLE>



                                     - 23 -
<PAGE>
<TABLE>
<CAPTION>

                                                                                   December 31
                                                                             2003               2002
                                                                      ---------------------------------

<S>                                                                    <C>               <C>
Liabilities and stockholders' equity

Current liabilities:

     Line of credit                                                     $          -      $     25,000
     Accounts payable                                                      1,713,010         1,740,763
     Commissions, salaries, wages and taxes thereon                          573,762           602,792
     Other accrued expenses and current liabilities                          658,405           739,309
     Income taxes payable                                                    148,218                 -
     Current portion of long-term debt                                     1,641,316         1,630,000
                                                                    -----------------------------------
Total current liabilities                                                  4,734,711        44,737,864

Long-term liabilities:

     Long-term debt                                                        6,664,171         8,303,813
     Pension and other benefits                                              312,458           118,230
                                                                    -----------------------------------
                                                                           6,976,629         8,422,043

Stockholders' equity:

     Common stock, $1 par value:
       Authorized shares - 4,000,000
         Issued shares -1,726,146 in 2003, 1,709,146 in 2002
         Outstanding shares - 1,534,146 in 2003,
         1,517,146 in 2002                                                 1,726,146         1,709,146
     Other capital                                                            97,812                 -
     Retained earnings                                                    14,818,080        12,670,948
     Treasury stock at cost (192,000 shares in 2003
       and 2002)                                                          (2,112,000)       (2,112,000)
     Accumulated other comprehensive loss                                   (367,898)         (393,385)
                                                                    -----------------------------------
Total stockholders' equity                                                14,162,140        11,874,709
                                                                    -----------------------------------

Total liabilities and stockholders' equity                              $ 25,873,480      $ 25,034,616
                                                                    ===================================

See accompanying notes.

</TABLE>




                                     - 24 -
<PAGE>

<TABLE>


                                       American Locker Group Incorporated and Subsidiaries

                                              Consolidated Statements of Income

<CAPTION>
                                                                          Year ended December 31
                                                              2003                 2002                 2001
                                                       --------------------------------------------------------------

<S>                                                        <C>                     <C>                   <C>
Net sales                                                  $  39,256,438           $ 40,670,721          $39,627,216
Cost of products sold                                         27,362,405             28,030,169           28,061,281
                                                       --------------------------------------------------------------
                                                              11,894,033             12,640,552           11,565,935
Selling, administrative and general expenses                   8,086,610              7,399,754            6,688,676
                                                       --------------------------------------------------------------
                                                               3,807,423              5,240,798            4,877,259

Interest income                                                   36,908                 94,826              163,497
Other income - net                                               230,690                306,827              340,963
Interest expense                                                (529,642)             (670,144)            (441,773)
                                                       --------------------------------------------------------------
Income before income taxes                                     3,545,379              4,972,307            4,939,946
Income taxes                                                   1,398,247              1,949,479            1,879,585
                                                       --------------------------------------------------------------
Net income                                                 $   2,147,132            $ 3,022,828          $ 3,060,361
                                                       ==============================================================





Earnings per share of common stock:

     Basic                                                         $1.41                  $1.57                $1.49
                                                       ==============================================================
     Diluted                                                       $1.38                  $1.54                $1.47
                                                       ==============================================================

Dividends per share of common stock:                               $0.00                  $0.00                $0.00
                                                       ==============================================================


See accompanying notes.


</TABLE>


                                     - 25 -
<PAGE>

<TABLE>




               American Locker Group Incorporated and Subsidiaries

                 Consolidated Statements of Stockholders' Equity

<CAPTION>
                                                                                                       Accumulated
                                                                                                          Other
                                                                                                        Compre-          Total
                                             Common         Other        Retained        Treasury       hensive       Stockholders'
                                               Stock       Capital       Earnings         Stock       Income (Loss)      Equity
                                           -----------------------------------------------------------------------------------------

<S>                                        <C>            <C>          <C>            <C>              <C>             <C>
Balance at January 1, 2001                 $ 2,511,550    $ 565,331    $ 12,550,001   $ (3,717,603)    $ (185,454)     $ 11,723,825
Comprehensive income:
   Net income                                        -            -       3,060,361              -              -         3,060,361
   Other comprehensive income
     Foreign currency transaction                    -            -               -              -        (55,733)          (55,733)
                                                                                                                    ----------------
Total comprehensive income                                                                                                3,004,628
Common stock purchased for treasury
  (12,470 shares)                                    -            -               -        (98,930)             -           (98,930)
Common stock purchased and retired
  (7,024 shares)                                (7,024)     (68,623)              -              -              -           (75,647)
                                           -----------------------------------------------------------------------------------------
Balance at December 31, 2001                 2,504,526      496,708      15,610,362     (3,816,533)      (241,187)       14,553,876

Comprehensive income:
   Net income                                        -            -       3,022,828              -              -         3,022,828
   Other comprehensive income:
     Foreign currency translation                    -            -               -              -          7,081             7,081
     Minimum pension liability
     adjustment, net of tax
     benefit of $106,186                             -            -               -              -       (159,279)         (159,279)
                                                                                                                    ----------------
Total comprehensive income                                                                                                2,870,630
Common stock issued (18,000 shares)             18,000       43,688               -              -              -            61,688
Tax benefit of exercised stock options               -       67,300               -              -              -            67,300
Common stock purchased for treasury
  (163,000 shares)                                   -            -               -     (1,793,000)             -        (1,793,000)
Common stock purchased and retired
  (380,900 shares)                            (380,900)    (607,696)     (2,897,189)             -              -        (3,885,785)
Retirement of treasury stock
  (432,480 shares)                            (432,480)           -      (3,065,053)     3,497,533              -                 -
                                           -----------------------------------------------------------------------------------------
Balance at December 31, 2002                 1,709,146            -      12,670,948     (2,112,000)      (393,385)       11,874,709

Comprehensive income:

   Net income                                        -            -       2,147,132              -              -         2,147,132
   Other comprehensive income:
     Foreign currency translation                    -            -               -              -        182,290           182,290
     Minimum pension liability
     adjustment, net of tax
     benefit of $104,536                             -            -               -              -       (156,803)         (156,803)
                                                                                                                    ----------------
Total comprehensive income                                                                                                2,172,619
Common stock issued (17,000 shares)             17,000       30,812               -              -              -            47,812
Tax benefit of exercised stock options               -       67,000               -              -              -            67,000
                                           -----------------------------------------------------------------------------------------
Balance at December 31, 2003                $1,726,146     $ 97,812     $14,818,080    $(2,112,000)     $(367,898)      $14,162,140
                                           =========================================================================================

See accompanying notes.

</TABLE>


                                     - 26 -
<PAGE>

<TABLE>


                                American Locker Group Incorporated and Subsidiaries

                                       Consolidated Statements of Cash Flows

<CAPTION>
                                                                                   Year ended December 31
                                                                          2003              2002             2001
                                                                  -----------------------------------------------------

<S>                                                                 <C>                 <C>               <C>
Operating activities

Net income                                                            $  2,147,132      $ 3,022,828       $ 3,060,361
Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization                                       893,236          974,165           956,430
       Provision for uncollectible accounts                                 94,000          111,000           248,895
       Gain on disposal of assets                                          (28,523)               -                 -
       Deferred income taxes (credits)                                     (81,476)         153,021           (93,678)
       Changes in assets and liabilities:
         Accounts and notes receivable                                    (267,144)         465,338            32,567
         Inventories                                                       595,975          792,736          (601,363)
         Prepaid expenses                                                  (13,144)          21,771           (52,698)
         Accounts payable and accrued expenses                            (172,265)         429,795          (423,235)
         Income taxes                                                      328,411         (560,984)         (236,924)
         Pension and other benefits                                         32,863         (469,336)          (60,295)
                                                                  -----------------------------------------------------
Net cash provided by operating activities                                3,529,065        4,940,334         2,830,060

Investing activities

Purchase of property, plant and equipment                                 (543,146)        (316,180)         (801,009)
Purchase of business and related real estate,
     net of cash acquired                                                        -                -       (12,084,711)
Payment for other assets                                                         -                -          (100,000)
Proceeds from sale of property, plant and equipment                         28,523           31,915                 -
                                                                  -----------------------------------------------------
Net cash used in investing activities                                     (514,623)        (284,265)      (12,985,720)

Financing activities

Long-term debt payments                                                 (1,628,326)      (1,644,874)         (681,315)
(Repayments ) borrowings on line of credit                                 (25,000)          25,000                 -
Long-term debt borrowings                                                        -                -        11,926,682
Common stock issued                                                         47,812           61,688                 -
Common stock purchased for treasury                                              -       (1,793,000)          (98,930)
Common stock purchased and retired                                               -       (3,885,785)          (75,647)
                                                                  -----------------------------------------------------
Net cash (used in) provided by financing activities                     (1,605,514)      (7,236,971)       11,070,790
Effect of exchange rate changes on cash                                    186,837            4,093           (32,455)
                                                                  -----------------------------------------------------
Net (decrease) increase in cash                                          1,595,765       (2,576,809)          882,675
Cash and cash equivalents at beginning of year                           2,002,225        4,579,034         3,696,359
                                                                  -----------------------------------------------------
Cash and cash equivalents at end of year                              $  3,597,990      $ 2,002,225       $ 4,579,034
                                                                  =====================================================

Supplemental cash flow information:
     Cash paid during the year for:
       Interest                                                      $     546,273      $   731,198       $   325,351
                                                                  =====================================================
       Income taxes                                                  $   1,030,497      $ 2,347,283       $ 2,215,000
                                                                  =====================================================
See accompanying notes.

</TABLE>


                                     - 27 -
<PAGE>


Notes to Consolidated Financial Statements
American Locker Group Incorporated and Subsidiaries
December 31, 2003

1. Basis of Presentation

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 consolidated  financial  statements include the accounts and
results of  Security  Manufacturing  Corporation  since its  acquisition  by the
Company on July 6, 2001. The Company is primarily engaged in one business,  sale
of lockers. This includes coin, key-only and electronically  controlled checking
lockers and locks and sale of plastic and aluminum  centralized  mail and parcel
distribution lockers. The Company sells to customers throughout North America as
well as internationally.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash includes currency on hand and demand deposits with financial  institutions.
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

Accounts and Notes Receivable

The  Company  grants  credit to its  customers  and  generally  does not require
collateral.  Accounts receivable are reported at net realizable value and do not
accrue interest. The Company has secured, interest-bearing notes receivable from
certain customers under time payment arrangements of approximately  $344,000 and
$521,000,  net of  reserves,  at December 31, 2003 and 2002,  respectively.  The
amounts  not  scheduled  to be repaid  within  one year have  been  recorded  as
long-term on the accompanying balance sheet.

Management  uses judgmental  factors such as customer's  payment history and the
general economic climate,  as well as considering the age of and past due status
of invoices in assessing collectibility and establishing allowances for doubtful
accounts.  Accounts receivable are written off after all collection efforts have
been exhausted.

Inventories

Inventories  are  valued  principally  at the  lower  of  cost or  market,  cost
determined by the last-in,  first-out method (LIFO) for approximately 79% of the
Company's  inventories at December 31, 2003 (76% at December 31, 2002).  For the
remaining  inventories,  cost is determined  by the  first-in,  first out method
(FIFO).



                                     - 28 -
<PAGE>

2. Summary of Significant Accounting Policies (continued)

Property, Plant and Equipment

Property,  plant and equipment are stated at cost.  Depreciation  is computed by
the straight-line and declining-balance methods for financial reporting purposes
and by accelerated  methods for income tax purposes.  Estimated useful lives for
financial  reporting  purposes are 30 years for  buildings and 3 to 12 years for
machinery and equipment.  Expenditures  for repairs and maintenance are expensed
as incurred.

Long-lived  assets,  including  intangible  assets,  are reviewed for impairment
whenever events or changes in  circumstances  indicate that the carrying amounts
of those assets may not be recoverable. The Company uses undiscounted cash flows
to determine  whether  impairment  exists and measures any impairment loss using
discounted cash flows.

Acquisition

On July 6, 2001, the Company purchased 100% of the outstanding  capital stock of
B.L.L. Corporation,  d/b/a Security Manufacturing Corporation (SMC), a privately
held Texas  corporation,  for $9,100,000.  SMC is engaged in the manufacture and
sale of postal unit lockers. The Company also purchased related real estate from
the owners of SMC for cash  consideration  of $3,500,000.  The purchase price of
the stock and the related real estate was funded with cash on hand, a three-year
note payable to the sellers of $960,000 and the proceeds of additional term loan
borrowings of approximately  $11,000,000.  Goodwill of approximately  $6,155,000
has been recorded in connection with the acquisition.  The operating  results of
SMC have been  included in the  accompanying  consolidated  statements of income
from the July 6, 2001 acquisition date.

Goodwill and Other Intangible Assets

The Company has adopted the  provision  of  Statement  of  Financial  Accounting
Standards  No. 142  Goodwill  and Other  Intangible  Assets  (SFAS  142),  which
prohibits the amortization of goodwill  associated with  acquisitions made after
June 30,  2001.  SFAS 142 also  requires  an  impairment  test for  goodwill  be
performed annually or more frequently if an event occurs or circumstances change
that would more likely than not reduce the fair value of a reporting  unit below
its carrying amount. The impairment test consists of comparing the fair value of
a  reporting  unit with its  carrying  amount  including  goodwill,  and, if the
carrying  amount of the  reporting  unit exceeds its fair value,  comparing  the
implied fair value of goodwill with its carrying  amount.  An impairment loss is
recognized  for the  carrying  amount of goodwill in excess of its implied  fair
value. The Company  performed the required annual goodwill tests during 2002 and
2003; no impairment  of goodwill was  calculated.  The Company has one reporting
unit for purposes of the goodwill impairment test. The fair value of the Company
was estimated based on earnings multiples and market analysis. Since the Company
did not have any  goodwill  recorded  prior to the SMC  acquisition,  on July 6,
2001, the provision of SFAS 142 requiring  companies to stop amortizing goodwill
had  no  impact  on  the  ongoing  operating  results  of  the  Company  or  the
comparability of such results with prior periods.



                                     - 29 -
<PAGE>

2. Summary of Significant Accounting Policies (continued)

Other intangible assets consist of a covenant  not-to-compete in connection with
the SMC  acquisition and an intangible  pension asset.  The asset related to the
covenant  not-to-compete  is being  amortized  over the  three-year  term of the
agreement.  The covenant  not-to-compete  is recorded at $58,333 at December 31,
2003  which  consists  of  its  original  value  of  $350,000  less  accumulated
amortization of $291,667. Amortization expense was $116,667 during 2003 and 2002
and will be $58,333 in 2004.

Revenue Recognition

Revenue is recognized at the point of passage of title,  which is at the time of
shipment  to the  customer.  The  Company  does  derive  revenue  from  sales to
distributors,  however  no  distributor  has the right to return  product to the
Company.

Shipping and Handling Costs

Shipping  and  handling  costs are  expensed  as  incurred  and are  included in
selling,  administrative  and general expenses in the accompanying  consolidated
statements of income.  These costs were approximately  $538,000,  $370,000,  and
$276,000 during 2003, 2002, and 2001, respectively.

Advertising Expense

The cost of advertising is expensed as incurred.  The Company incurred $239,000,
$333,000,  and  $215,000 in  advertising  costs  during  2003,  2002,  and 2001,
respectively.

Income Taxes

The Company  accounts for income taxes using the liability  method in accordance
with Statement of Financial  Accounting Standards No. 109, Accounting for Income
Taxes (SFAS 109).

Research and Development

The Company engages in research and development  activities  relating to new and
improved products. It expended $431,000, $174,000, and $91,000 in 2003, 2002 and
2001, respectively, for such activity in its continuing businesses.

Earnings Per Share

The Company reports earnings per share in accordance with Statement of Financial
Accounting  Standards  No. 128,  Earnings  per Share (SFAS 128).  Under SFAS 128
basic earnings per share excludes any dilutive effects of stock options, whereas
diluted  earnings per share assumes  exercise of stock  options,  when dilutive,
resulting in an increase in outstanding shares.


                                     - 30 -
<PAGE>

2. Summary of Significant Accounting Policies (continued)

Foreign Currency

The assets and liabilities of the Company's  Canadian  subsidiary are translated
to U.S.  dollars  at  current  exchange  rates.  Income  statement  amounts  are
translated  using the average  exchange rate for the year.  The gains and losses
resulting  from the  changes  in  exchange  rates  from  year to year  have been
reported in other  comprehensive  income. The effect on the statements of income
of transaction gains and losses is insignificant for all years presented.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable,  and accrued  liabilities  approximate fair value due to the short-term
maturities  of these  assets  and  liabilities.  The  carrying  amount  of notes
receivable  approximates  fair value since these are interest bearing notes. The
fair value of the Company's  long-term debt has been  estimated  using cash flow
methods and applying  current  interest  rates for similar term  instruments  in
place of the actual fixed interest rates.  Based on these  calculations the fair
value of long-term  debt is  approximately  $8,480,000 and the carrying value is
$8,305,487 at December 31, 2003.

Stock-Based Compensation

In  accordance  with the  provisions  of SFAS No. 123 the Company has elected to
continue  applying the provisions of Accounting  Principles Board Opinion No. 25
and related  interpretations  in  accounting  for its  stock-based  compensation
plans.  Accordingly,  the Company does not  recognize  compensation  expense for
stock  options  when the stock  option  price at the  grant  date is equal to or
greater than the fair market value of the stock at that date.

No stock  options were granted in 2003,  2002, or 2001.  All options  granted in
2000 or in prior years were fully vested as of December 31, 2000,  as such there
was no pro forma impact in 2003, 2002, or 2001 for stock options.

Comprehensive Income

Comprehensive  income consists of net income,  foreign currency  translation and
minimum  pension  liability  adjustments  and is  reported  in the  consolidated
statements of stockholders' equity.

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.


                                     - 31 -
<PAGE>

2. Summary of Significant Accounting Policies (continued)

New Accounting Pronouncements

There are no recently issued accounting  pronouncements not yet adopted that are
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

3. Inventories

Inventories consist of the following:
<TABLE>
<CAPTION>
                                                                               December 31
                                                                         2003               2002
                                                                    --------------------------------

    <S>                                                                <C>               <C>
    Finished products                                                  $  1,760,657      $  1,572,946
    Work-in-process                                                       1,689,774         1,901,263
    Raw materials                                                         2,271,930         2,965,023
                                                                    ----------------------------------
                                                                          5,722,361         6,439,232
    Less allowance to reduce to LIFO basis                                 (263,496)         (418,266)
                                                                    ----------------------------------
    Net inventories                                                    $  5,458,865      $  6,020,966
                                                                    ==================================
</TABLE>

4. Debt

Long-term debt consists of the following:
<TABLE>
<CAPTION>

                                                                                 December 31
                                                                            2003            2002
                                                                    ----------------------------------
   <S>                                                                <C>                <C>
    Bank note payable through July 6, 2008 at $225,000
      quarterly plus interest at the 3-month LIBOR rate
      plus 2% (3.15% at December 31, 2003)                             $   4,050,000     $ 4,950,000
    Bank note payable through July 6, 2008 at $25,000
      monthly plus interest at 8.07%                                       1,375,000       1,675,000
    Mortgage payable to bank through July 2006 at $26,823
      monthly including interest at 8.04% with payment for
      remaining balance due August 1, 2006                                 2,560,487       2,668,813
    Note payable in annual installments of $320,000 through
      July 6, 2004 plus interest at 6.50%                                    320,000         640,000
                                                                   -----------------------------------
    Total long-term debt                                                   8,305,487       9,933,813
    Less current portion                                                   1,641,316       1,630,000
                                                                   -----------------------------------
    Long-term portion                                                  $   6,664,171     $ 8,303,813
                                                                   ===================================
</TABLE>

The bank notes are secured by all equipment,  accounts  receivable,  inventories
and general intangibles.  The credit agreement underlying the bank notes payable
requires  compliance with certain  covenants and has restrictions on the payment
of dividends.  The Company was in compliance  with the terms of the agreement in
connection with the notes payable at December 31, 2003.


                                     - 32 -
<PAGE>

4. Debt (continued)

Based upon the outstanding balances at December 31, 2003, the required principal
payments on long-term obligations for the next five years are as follows:

     2004                                                    $     1,641,316
     2005                                                          1,331,438
     2006                                                          3,507,733
     2007                                                          1,200,000
     2008                                                            625,000
                                                           -------------------
                                                              $    8,305,487
                                                           ===================

The Company has a $3,000,000 unsecured line of credit agreement with a bank with
interest at the prime rate (4.0% at December 31, 2003). There was $0 outstanding
under the line of credit at December 31, 2003.

5. Operating Leases

The Company leases several operating facilities and vehicles under noncancelable
operating  leases.  Future  minimum lease  payments  consist of the following at
December 31, 2003:

     2004                                                     $      259,741
     2005                                                            156,835
     2006                                                            146,100
     2007                                                            133,925

Rent expense amounted to approximately $340,000, $368,000, and $340,000 in 2003,
2002, and 2001, respectively.

6. Income Taxes

For  financial  reporting  purposes,  income  before  income taxes  includes the
following:
<TABLE>
<CAPTION>

                                           2003              2002              2001
                                    ------------------------------------------------------
<S>                                 <C>               <C>               <C>
United States                       $    3,592,061    $    4,925,308    $    4,845,146
Foreign income (loss)                      (48,682)           46,999            94,800
                                    ------------------------------------------------------
                                    $    3,543,379    $    4,972,307    $    4,939,946
                                    ======================================================

</TABLE>


                                     - 33 -
<PAGE>


6. Income Taxes (continued)

Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>

                                           2003             2002              2001
                                     -----------------------------------------------------
<S>                                  <C>               <C>              <C>
Current:

   Federal                           $    1,273,089    $   1,517,532    $   1,624,225
   State                                    221,690          255,669          304,028
   Foreign                                  (15,056)          23,257           45,010
                                     -----------------------------------------------------
Total current                             1,479,723        1,796,458        1,973,263
Deferred:

   Federal                                  (69,256)         130,068          (79,626)
   State                                    (12,220)          22,953          (14,052)
                                     -----------------------------------------------------
                                            (81,476)         153,021          (93,678)
                                     -----------------------------------------------------
                                     $    1,398,247    $   1,949,479    $   1,879,585
                                     =====================================================
</TABLE>

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

                                             2003          2002          2001
                                          --------------------------------------
Statutory income tax rate                     34%           34%           34%
State and foreign income taxes,
  net of federal benefit                       4             4             4
Other permanent differences                    1             1             -
                                          --------------------------------------
                                              39%           39%           38%
                                          ======================================




                                     - 34 -
<PAGE>


6. Income Taxes (continued)

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.  Significant
components of the Company's  deferred tax assets and  liabilities at December 31
are as follows:

<TABLE>
<CAPTION>
                                                       2003            2002
                                                  ----------------------------
     <S>                                          <C>             <C>
     Deferred tax liabilities:

        Property, plant and equipment              $   16,869      $   41,807
        Prepaid expenses and other                    111,737         127,435
                                                  ----------------------------
     Total deferred tax liabilities                   128,606         169,242

     Deferred tax assets:

        Postretirement benefits                        47,292          47,292
        Pension costs                                 156,132          63,158
        Allowance for doubtful accounts               148,569         111,038
        Other assets                                   23,333          12,667
        Accrued expenses                               90,821         119,810
        Other employee benefits                        54,343          37,148
        Inventory costs                               391,418         375,418
                                                  ----------------------------
     Total deferred tax assets                        911,908         766,531
                                                  ----------------------------
     Net deferred tax assets                       $  783,302      $  597,289
                                                  ============================

     Current deferred tax asset                    $  729,546      $  579,137
     Long-term deferred tax asset                      53,756          18,152
                                                  ----------------------------
                                                   $  783,302      $  597,289
                                                  ============================
</TABLE>

The Company does not provide deferred taxes for taxes that could result from the
remittance of undistributed  earnings of the Company's foreign  subsidiary since
it is generally the Company's intention to reinvest these earnings indefinitely.
Undistributed  earnings  that  could be subject to  additional  income  taxes if
remitted were  approximately  $1,000,000 at December 31, 2003.  Determination of
the amount of unrecognized deferred U.S. income tax liability is not practicable
because  of the  complexities  associated  with  its  hypothetical  calculation;
however  unrecognized  foreign tax  credits  would be  available  to reduce some
portion of the U.S. tax liability.

7. Pension and Other Postretirement Benefits

The Company and its  subsidiaries  have a defined  benefit pension plan covering
substantially  all employees.  Benefits for the salaried  employees are based on
specified  percentages of the employees  annual  compensation.  The benefits for
hourly employees are based on stated amounts for each year of service.


                                     - 35 -
<PAGE>

7. Pension and Other Postretirement Benefits (continued)

The plan's assets were invested in fixed  interest rate group annuity  contracts
with an insurance  company  during 2001 and 2002,  but were  transferred  into a
balanced index fund (the Fund) during 2003. The principal  investment  objective
of the Fund is to provide an  incremental  risk  adjusted  return  compared to a
portfolio  invested  50% in stocks  and 50% in bonds over a full  market  cycle.
Under normal market  conditions,  the average asset  allocation  for the Fund is
expected  to be  approximately  50% in stocks and 50% in bonds.  This  benchmark
allocation  may be adjusted by up to 20% based on economic or market  conditions
and liquidity needs.  Therefore,  the stock allocation may fluctuate from 30% to
70% of the total portfolio,  with a corresponding bond allocation of from 70% to
30%. Fund reallocation may take place at any time.

The  following  table sets forth the changes in benefit  obligation,  changes in
plan assets,  the funded  status,  the accrued  benefit cost  recognized  in the
consolidated  balance sheets at December 31, 2003 and 2002, and the net periodic
cost  and  assumptions.  The  measurement  date  for all  presented  assets  and
liabilities  is December  31.  Contributions  to be made to the plan in 2004 are
expected to approximate $300,000.

<TABLE>
<CAPTION>
                                                                          Pension Benefits
                                                                      2003               2002
                                                                ----------------------------------
   <S>                                                            <C>             <C>
   Change in benefit obligation

      Benefit obligation at beginning of year                     $  3,119,222     $  2,482,076
      Service cost                                                     247,315          220,751
      Interest cost                                                    206,350          183,742
      Actuarial loss                                                   406,001          294,643
      Plan amendments                                                        -           17,530
      Benefits and expenses paid                                       (77,957)         (79,520)
                                                                ----------------------------------
      Benefit obligation at end of year                              3,900,931        3,119,222
   Change in plan assets

      Fair value of plan assets as beginning of year                 2,476,487        2,113,406
      Actual return on plan assets                                     196,019          102,955
      Employer contribution                                            335,428          339,646
      Benefits and expenses paid                                       (77,957)         (79,520)
                                                                ----------------------------------
   Fair value of plan assets at end of year                          2,929,977        2,476,487
                                                                ----------------------------------

   Funded status                                                      (970,954)        (642,735)
   Unrecognized net actuarial loss                                   1,091,487          733,012
   Unrecognized prior service cost                                      15,941           17,447
                                                                ----------------------------------
   Net amount recognized - prepaid benefit cost                   $    136,474     $    107,724
                                                                ==================================

</TABLE>



                                     - 36 -
<PAGE>


7. Pension and Other Postretirement Benefits (continued)

Amounts are recognized in the consolidated balance sheet as follows:

                                                             December 31
                                                          2003         2002
                                                     --------------------------

    Intangible asset                                  $   15,941   $   17,447
    Other accrued expenses - current                    (275,162)    (175,188)
    Other long-term liabilities                         (131,109)           -
    Accumulated other comprehensive income (loss)        526,804      265,465
                                                     --------------------------
                                                      $  136,474   $  107,724
                                                     ==========================

<TABLE>
<CAPTION>
                                                               Pension Benefits
                                                      2003           2002          2001
                                                -------------------------------------------
    <S>                                          <C>            <C>           <C>
    Components of net periodic benefit cost
    Service cost                                 $  247,315     $  220,751     $  182,135
    Interest cost                                   206,350        183,742        172,969
    Expected return on plan assets                 (181,164)      (159,462)      (149,779)
    Amortization of unrecognized net
       transition asset                                   -       (104,892)      (106,041)
    Net actuarial loss                               32,671         10,516          1,869
    Amortization of prior service cost                1,506          1,506            425
                                                ------------------------------------------
    Net periodic benefit cost                    $  306,678     $  152,161     $  101,578
                                                ==========================================
</TABLE>


                                                            Pension Benefits
                                                           2003         2002
                                                        -----------------------
    Weighted average assumptions as of December 31

    Discount rate                                          6.0%        6.75%
    Expected return on plan assets                         7.0%         7.0%
    Rate of compensation increase                          5.5%         5.5%

The expected return on plan assets is based upon anticipated  returns  generated
by the investment vehicle.  Any shortfall in the actual return has the effect of
increasing  the  benefit  obligation.  The  benefit  obligation  represents  the
actuarial  present value of benefits  attributed to employee  service  rendered,
assuming future  compensation  levels are used to measure the  obligation.  FASB
Statement No. 87  Employers'  Accounting  for Pensions,  requires the Company to
recognize a minimum pension  liability  equal to the actuarial  present value of
the  accumulated  benefit  obligation in excess of plan assets.  The accumulated
benefit  obligation was $3,336,248 and $2,651,675 at December 31, 2003 and 2002,
respectively.  An  intangible  asset is  required  and has been  recorded to the
extent  that the  excess of the  accumulated  benefit  obligation  over the plan
assets relates to prior service costs.



                                     - 37 -
<PAGE>


7. Pension and Other Postretirement Benefits (continued)

The Company also provides a life insurance  benefit for retired former employees
of the Company.  Effective in 2000,  the Company  discontinued  this benefit for
active  employees.  The life insurance benefit is not a funded plan. The Company
pays the benefit upon the death of the retiree.  The Company has fully  recorded
its liability in  connection  with this plan.  The  liability was  approximately
$118,000 at December 31, 2003 and 2002, and is recorded as long-term pension and
other benefits in the  accompanying  balance sheets.  No expense was recorded in
2003, 2002, or 2001, related to the life insurance benefit.

Effective  January 1, 1998,  the Company  implemented a  Supplemental  Executive
Retirement Plan. The Plan provides for retirement benefits for select executives
and  spouses.  During  2002,  as a  result  of the  death  of the  only  current
beneficiary  under the Plan,  the Company  removed  the  recorded  liability  of
$319,000. This was recorded as a reduction to administrative expenses. There are
no  participants  accruing or receiving  benefits under the Plan at December 31,
2002.

During  1999,  the  Company  established  a 401(k)  plan for the  benefit of its
full-time employees. Under the plan, employees may contribute a portion of their
salary  up to IRS  limits.  The  Company  matches a  portion  of the  employees'
contribution.  The Company recorded expense of approximately  $21,000,  $15,000,
and $15,000 in connection with its  contribution to the plan during 2003,  2002,
and 2001, respectively.

8. Capital Stock

The Certificate of  Incorporation,  as amended,  authorizes  4,000,000 shares of
common stock and 1,000,000  shares of preferred  stock,  200,000 shares of which
have been designated as Series A Junior Participating Preferred Stock.

9. Stock Options

In 1999,  the Company  adopted the  American  Locker  Group  Incorporated  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 not be 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  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. Prior to 1999, the Company issued stock
options and stock  appreciation  rights under a 1988 plan. The 1988 plan expired
in 1999, as such no further options can be granted under the 1988 plan.  Options
with respect to 12,000 shares remain outstanding under the 1988 plan.



                                     - 38 -
<PAGE>


9. Stock Options (continued)

At  December  31,  2003  and  2002,  there  were no  stock  appreciation  rights
outstanding.

The  following  table sets forth the  activity  related to the  Company's  stock
options for the years ended December 31:

<TABLE>
<CAPTION>

                                            2003                         2002                       2001
                                            ----                         ----                       ----
                                                  Weighted                    Weighted                   Weighted
                                                  Average                      Average                    Average
                                                  Exercise                    Exercise                   Exercise
                                    Options        Price        Options         Price        Options       Price
                                 -----------------------------------------------------------------------------------

<S>                                 <C>           <C>            <C>        <C>                <C>       <C>
Outstanding - beginning
  of year                            97,600       $   5.72       120,600    $    5.41        120,600   $    5.41
Exercised                           (17,000)          2.81       (18,000)        3.43              -           -
Granted                                   -              -             -            -              -           -
Expired or forfeited                      -              -        (5,000)        6.50              -           -
                                 -------------- ------------- ------------- ------------ ------------- -------------
Outstanding - end of year
                                     80,600       $   6.34        97,600    $    5.72        120,600   $    5.41
                                 ============== ============= ============= ============ ============= =============
Exercisable - end of year
                                     80,600                       97,600                     120,600
                                 ==============               =============              =============
</TABLE>

The  exercise  prices for options  outstanding  as of December  31, 2003 were as
follows:  $2.81 - 12,000 shares,  $6.50 - 48,600 shares,  $ 7.25 - 10,000 shares
and $8.88 - 10,000 shares. The  weighted-average  remaining  contractual life of
those options is 5.6 years.

At December 31, 2003,  73,000 options remain available for future issuance under
the 1999 plan.

10. Shareholder Rights Plan

In November  1999,  the  Company  adopted a  Shareholder  Rights  Agreement  and
declared  a dividend  distribution  of one Right for each  outstanding  share of
common stock. Under certain conditions,  each right may be exercised to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock at
a price of $40  (Purchase  Price),  subject  to  adjustment.  The Right  will be
exercisable  only if a person  or  group  (an  Acquiring  Person)  has  acquired
beneficial  ownership  of 20%  or  more  of the  outstanding  common  stock,  or
following the commencement of a tender or exchange offer for 20% or more of such
outstanding  common stock. The Rights Plan includes certain  exceptions from the
definitions of Acquiring  Person and  beneficial  ownership to take into account
the existing  ownership of common shares by members of one family. If any person
becomes an Acquiring Person, each Right will entitle its holder to receive, upon
exercise  of  the  Right,  such  number  of  common  shares  determined  by  (A)
multiplying the current purchase price by the number of one  one-hundredths of a
preferred  share for which a right is now  exercisable and dividing that product
by (B) 50% of the current market price of the common shares.


                                     - 39 -
<PAGE>

10. Shareholder Rights Plan (continued)

In  addition,  if  the  Company  is  acquired  in a  merger  or  other  business
combination  transaction,  each Right will  entitle its holder to receive,  upon
exercise,  that number of the acquiring  Company's common shares having a market
value of twice the exercise price of the Right.  The Company will be entitled to
redeem  the  Rights at $.01 per Right at any time  prior to the  earlier  of the
expiration of the Rights in November  2009 or the time that a person  becomes an
Acquiring  Person.  The Rights do not have voting or dividend rights,  and until
they become exercisable, have no dilutive effect on the Company's earnings.

11. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share for the years ended December 31:
<TABLE>
<CAPTION>

                                                                2003            2002           2001
                                                          ---------------------------------------------
<S>                                                        <C>            <C>               <C>
Numerator:

   Net income                                              $  2,147,132   $   3,022,828    $  3,060,361
Denominator:

   Denominator for basic earnings per share
     - weighted average shares outstanding                    1,523,429       1,921,612       2,053,838

   Effect of dilutive securities:
     Employee stock options                                      30,899          35,949          29,646
                                                          ----------------------------------------------

   Denominator for diluted earnings per share -
     weighted average shares out- standing and assumed
     conversions                                              1,554,328       1,957,561       2,083,484
                                                          ==============================================
Basic earnings per share                                  $        1.41   $        1.57    $       1.49
                                                          ==============================================
Diluted earnings per share                                $        1.38   $        1.54    $       1.47
                                                          ==============================================

</TABLE>

12. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:
<TABLE>
<CAPTION>

                                                                       December 31
                                                                   2003           2002
                                                             -------------------------------

<S>                                                            <C>           <C>
     Foreign currency translation adjustment                   $  (51,816)   $  (234,106)
     Minimum pension liability adjustment, net of tax            (316,082)      (159,279)
                                                             -------------------------------
                                                               $ (367,898)   $  (393,385)
                                                             ===============================


</TABLE>


                                     - 40 -
<PAGE>


13. Geographic and Customer Concentration Data

The Company is primarily  engaged in one  business,  sale and rental of lockers.
This includes coin, key-only and electronically  controlled checking lockers and
related  locks and sale of  plastic  centralized  mail and  parcel  distribution
lockers.  The Company sells to customers in the United States,  Canada and other
foreign locations. Net sales to external customers are as follows:

<TABLE>
<CAPTION>

                                        2003             2002              2001
                                  ---------------- ----------------- ----------------

<S>                                <C>              <C>               <C>
United States customers            $  37,557,289    $  38,242,845     $  36,742,001
Foreign customers                      1,699,149        2,427,876         2,885,215
                                  ---------------- ----------------- ----------------
                                   $  39,256,438    $  40,670,721     $  39,627,216
                                  ================ ================= ================
</TABLE>

Sales to the U.S.  Postal Service  represented  52.7%,  56.4%,  and 63.1% of net
sales in 2003, 2002, and 2001, respectively.

At December 31, 2003 and 2002, the Company had unsecured trade  receivables from
governmental  agencies of $1,648,000 and $1,867,000,  respectively.  At December
31, 2003 and 2002, the Company had secured notes  receivable  totaling  $515,000
and $694,000, respectively and trade receivables from customers considered to be
distributors of $1,642,000 and $1,125,000, respectively.

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 industries.















                                     - 41 -
<PAGE>


14. Quarterly Results of Operations (Unaudited)

The following is a tabulation of the unaudited  quarterly  results of operations
for the years ended December 31, 2003 and 2002:

<TABLE>
<CAPTION>

                                                                        2003
                                       -----------------------------------------------------------------------
                                                                 Three Months Ended
<S>                                     <C>                <C>              <C>               <C>

                                           March 31          June 30        September 30       December 31
                                       -----------------------------------------------------------------------
Net sales                                $   8,831,748     $   9,831,534    $   9,514,300     $  11,078,856
                                       =======================================================================
Gross profit                             $   2,742,336     $   2,920,419    $   2,854,473     $   3,376,805
                                       =======================================================================
Net income                               $     429,060     $     548,409    $     459,502     $     710,161
                                       =======================================================================
Earnings per share - Basic               $         .28     $         .36    $         .30     $         .46
                                       =======================================================================
Earnings per share - Diluted             $         .28     $         .35    $         .30     $         .46
                                       =======================================================================


                                                                               2002
                                       -----------------------------------------------------------------------
                                                                 Three Months Ended

                                           March 31          June 30        September 30       December 31
                                       -----------------------------------------------------------------------
Net sales                                $   9,254,050     $  11,008,835    $   9,975,928     $  10,431,908
                                       =======================================================================
Gross profit                             $   2,858,113     $   3,432,768    $   3,138,508     $   3,211,163
                                       =======================================================================
Net income                               $     776,797     $     847,201    $     766,987     $     631,843
                                       =======================================================================
Earnings per share - Basic               $        0.38     $        0.42    $        0.40     $         .37
                                       =======================================================================
Earnings per share - Diluted             $        0.37     $        0.42    $        0.39     $         .36
                                       =======================================================================

</TABLE>

The  Company's  accounting  practice for interim  periods  provides for possible
accounting  adjustments  in the fourth  quarter or at  year-end.  In 2003,  such
adjustments  resulted in increasing  fourth quarter pretax income by $36,000 for
inventory  costs and  decreasing  fourth  quarter  pretax  income by $43,000 for
employee related and administrative  expense accruals. In 2002, such adjustments
resulted in  increasing  fourth  quarter  pretax income by $57,000 for inventory
costs and  decreasing  fourth  quarter  pretax  income by  $87,000  for bad debt
expense.

15. Related Parties

The Chairman and Chief  Executive  Officer of the Company is a  stockholder  and
director  of Rollform of  Jamestown  Inc.,  a  rollforming  company.  One of the
Company's subsidiaries purchased $151,000,  $183,000, and $215,000 of fabricated
parts from Rollform of Jamestown, Inc. in 2003, 2002, and 2001, respectively, at
prices that the Company believes are at arms length.

During  2002,  the  Company  purchased  425,000  shares of its common  stock for
$4,342,000 from the estate of its former chief executive officer and his spouse.
The purchases were made at prices the Company  believes  represent fair value of
the common stock.



                                     - 42 -
<PAGE>

16. Contingencies

As previously  reported,  in December 1998, the Company was named as a defendant
in a lawsuit titled Roberta  Raiport,  et al. v. Gowanda  Electronics  Corp. And
American  Locker  Group,  Inc.  pending in the State of New York Supreme  Court,
County of Cattaraugus.  The suit involves property located in Gowanda, New York,
which was sold by the Company to Gowanda  Electronics  Corp.  prior to 1980. The
plaintiffs,  current or former property owners in Gowanda, New York, assert that
defendants  each  operated  machine  shops at the site during  their  respective
periods  of  ownership  and  that  as a  result  of  such  operation,  soil  and
groundwater  contamination  occurred which has adversely affected the plaintiffs
and the  value of  plaintiffs'  properties.  The  plaintiffs  assert a number of
causes of action and seek compensatory  damages of $5,000,000 related to alleged
diminution of property values, $3,000,000 for economic losses and "disruption to
plaintiffs' lives," $10,000,000 for "nuisance,  inconveniences and disruption to
plaintiffs'  lives,"  $25,000,000  in  punitive  damages,   and  $15,000,000  to
establish  a "trust  account"  for  monitoring  indoor  air  quality  and  other
remedies." In June 2003,  Gowanda  Electronics  Corp. filed a motion for summary
judgment  seeking to be dismissed  from the suit. The plaintiffs and the Company
have  filed  objections  to such  motion  and the  court  has yet to rule on the
motion.  The Company believes that its potential  liability with respect to this
site, if any, is not material.  Therefore,  based on the  information  currently
available,  management  does not  believe  the  outcome of this suit will have a
material  adverse  impact on the Company's  operations  or financial  condition.
Defense  of this  case has been  assumed  by the  Company's  insurance  carrier,
subject to a reservation of rights.

As previously reported, on July 30, 2001, the Company received a letter from the
New York State  Department of Environmental  Conservation  (the NYSDEC) advising
the Company  that it is a  potentially  responsible  party (PRP) with respect to
environmental  contamination at the site mentioned above located in Gowanda, New
York which was sold by the Company to Gowanda  Electronics  Corp. prior to 1980.
In March  2001,  the  NYSDEC  issued a Record of  Decision  with  respect to the
Gowanda site in which it sets forth a remedy which includes continued  operation
of an existing  extraction  well and air stripper,  installation  of groundwater
pumping wells and a collection  trench,  construction of a treatment system in a
separate building on the site, installation of a reactive iron wall covering 250
linear feet  intended to intercept any  contaminates  and  implementation  of an
on-going  monitoring  system. The NYSDEC has estimated that the remediation plan
selected by NYSDEC will cost approximately $688,000 for initial construction and
a total of  $1,997,000  with  respect  to  expected  operation  and  maintenance
expenses over a thirty-year period after completion of initial construction. The
Company has not  conceded to the NYSDEC that the Company is liable with  respect
to this  matter and has not agreed  with the NYSDEC  that the  remediation  plan
selected by NYSDEC is the most  appropriate.  This matter has not been litigated
and at the  present  time the  Company has only been  identified  as a PRP.  The
Company also believes  other  parties may have been  identified by the NYSDEC as
PRPs and the allocation of financial responsibility of such parties has not been
litigated. Based upon currently available information,  the Company is unable to
estimate  timing with respect to the  resolution of this matter.  The NYSDEC has
not  commenced  construction  of the remedial  plan and has not  indicated  when
construction  will start, if ever. The Company's  primary  insurance carrier has
assumed  the  cost  of the  Company's  defense  in  this  matter,  subject  to a
reservation  of rights,  and to date the  Company has not  experienced  any cost
associated with this matter.



                                     - 43 -
<PAGE>

16. Contingencies (continued)

In September 1998 and subsequent  months, the Company was named as an additional
defendant in  approximately  140 cases pending in state court in  Massachusetts.
The  plaintiffs in each case assert that a division of the Company  manufactured
and furnished to various  shipyards  components  containing  asbestos during the
period  from  1948 to 1972 and that  injuries  resulted  from  exposure  to such
products.  The assets of this division were sold by the Company in 1973.  During
the process of discovery  in certain of these  actions,  documents  from sources
outside the Company have been produced which  indicate that the Company  appears
to have been  included  in the  chain of title for  certain  wall  panels  which
contained  asbestos  and which were  delivered to the  Massachusetts  shipyards.
Defense of these  cases has been  assumed by the  Company's  insurance  carrier,
subject  to a  reservation  of  rights.  As of  February  19,  2004,  settlement
agreements  have been entered in 15 cases with funds  authorized and provided by
the Company's insurance carrier. Further, over 90 cases originally filed in 1995
through  2000  against  other  defendants  to which the Company was joined as an
additional defendant have been terminated as to the Company without liability to
the Company under  Massachusetts  procedural  rules.  Therefore,  the balance of
unresolved cases against the Company as of February 19, 2004 is approximately 35
cases originally filed against other defendants in 2001 through 2003.

While the Company cannot predict what the ultimate  resolution of these asbestos
cases may be because the  discovery  proceedings  on the cases are not complete,
based upon the Company's  experience to date with similar cases,  as well as the
assumption that insurance  coverage will continue to be provided with respect to
these case, at the present  time,  the Company does not believe that the outcome
of  these  cases  will  have a  significant  adverse  impact  on  the  Company's
operations or financial condition.

The Company is involved in other claims and litigation  from time to time in the
normal course of business.  The Company does not believe these matters will have
a significant adverse impact on the Company's operations or financial condition.













                                     - 44 -
<PAGE>


Item 9.  Changes  In  and  Disagreements  With  Accountants  on  Accounting and
Financial Disclosure

None.

Item 9A. Controls and Procedures

         The Company's management, with the participation of the Company's chief
executive  officer  and  principal   accounting   officer,   has  evaluated  the
effectiveness of the Company's disclosure controls and procedures as of December
31, 2003.  Based on that evaluation,  the Company's chief executive  officer and
principal  accounting officer concluded that the Company's  disclosure  controls
and procedures  were  effective as of December 31, 2003.  There were no material
changes in the Company's  internal  control over financial  reporting during the
fourth quarter of 2003.

PART III
--------

Item  10,  11,  12,  13 and 14  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 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

       (a)     The documents filed as part of this report are as follows:

               1.   Financial Statements

               2.   Financial Statement Schedules

          See Index to Financial Statements and Financial Statement Schedules
          All other  consolidated  financial  schedules are omitted because they
          are  inapplicable,   not  required  or  the  information  is  included
          elsewhere  in the  consolidated  financial  statements  or  the  notes
          thereto.

               3.   Exhibits

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

                    (b)  Reports  on Form 8-K  filed in the  fourth  quarter  of
                         2003.

                         (i)   None






                                     - 45 -
<PAGE>


                       American Locker Group Incorporated

         Index to Financial Statements and Financial Statement Schedules

The  financial  statements  together  with the report of Ernst & Young LLP dated
February 24, 2004, is included in Item 8 Financial  Statements and Supplementary
Data in the Annual Report on Form 10-K.

Financial Schedules for the years 2003, 2002, and 2001:

         Valuation and Qualifying Accounts

Schedule II

<TABLE>
                       American Locker Group Incorporated

                        Valuation and Qualifying Accounts
                        ---------------------------------
<CAPTION>

                                                           Additions
                                          Balance at the   Charged to
                                           Beginning of    Costs and                     Balance at
Year           Description                     Year         Expense       Deductions     End of Year
-------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>           <C>           <C>

Year ended 2003

   Allowance for Doubtful Accounts          $333,000     $    94,000      $ (56,000)     $   371,000
   Reserve for Inventory Valuation           357,000         100,000              -          457,000

Year ended 2002

   Allowance for Doubtful Accounts          $249,000     $   111,000      $ (27,000)     $   333,000
   Reserve for Inventory Valuation           406,000         (49,000)             -          357,000

Year ended 2001

   Allowance for Doubtful Accounts          $324,000     $    15,000      $ (90,000)     $   249,000
   Reserve for Inventory Valuation           252,000         154,000              -          406,000


</TABLE>








                                     - 46 -
<PAGE>


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                       AMERICAN LOCKER GROUP INCORPORATED


                             /s/Edward F. Ruttenberg
              -----------------------------------------------------
                              Edward F. Ruttenberg
                          Chairman and Chief Executive
                                     Officer

                               /s/Wayne L. Nelson
              -----------------------------------------------------
                                 Wayne L. Nelson
              Principal Accounting Officer and Assistant Secretary

                                 March 26, 2004
                            -----------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, 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/Edward F. Ruttenberg         Chairman, Chief Executive       March 26, 2004
---------------------------     Officer and Director
Edward F. Ruttenberg

/s/Roy J. Glosser               President, Chief Operating      March 26, 2004
---------------------------     Officer, Treasurer and
Roy J. Glosser                  Director

/s/Alan H. Finegold             Director                        March 26, 2004
---------------------------
Alan H. Finegold

/s/Thomas Lynch, IV             Director                        March 26, 2004
---------------------------
Thomas Lynch, IV

/s/Jeffrey C. Swoveland         Director                        March 26, 2004
---------------------------
Jeffrey C. Swoveland

/s/Donald I. Dussing, Jr.       Director                        March 26, 2004
---------------------------
Donald I. Dussing, Jr.






                                     - 47 -
<PAGE>

<TABLE>


                                             EXHIBIT INDEX
<CAPTION>

                                                                       Prior Filing or Sequential
Exhibit No.                                                            Page No. Herein
-----------                                                            -------------------------------

<S>            <C>                                                     <C>
 3.1           Certificate of Incorporation of                         Exhibits to Form 10-K for Year
               American Locker Group Incorporated                      ended December 31, 1980

 3.2           Amendment to Certificate of Incorporation               Form 10-C filed May 6, 1985
               changing name of company

 3.3           Amendment to Certificate of Incorporation               Exhibit to Form 10-K for year ended
               limiting liability of Directors and Officers            December 31, 1987

 3.4           By-laws of American Locker Group Incorporated           Exhibit to Form 10-K for year ended
               as amended and restated                                 December 31, 1985

 3.5           Certificate of Designations of Series                   Exhibit to Form 10-K for year ended
               A Junior Participating Preferred Stock                  December 31, 1999

 3.6           Amendment to By-laws of American Locker Group           Exhibit to Form 10-K for year ended
               Incorporated dated January 15, 1992                     December 31, 1991

 3.7           Amendment to Bylaws dated March 3, 1999                 Exhibit to Form 10-K for year ended
                                                                       December 31, 1998

 3.8           Amendment to Bylaws dated November 19, 1999             Exhibit to Form 10-K for year ended
                                                                       December 31, 1999

10.1           American Locker Group Incorporated 1988 Stock           Exhibit to Form 10-K for year ended
               Incentive Plan                                          December 31, 1988

10.2           First Amendment dated March 28, 1990 to American        Exhibit to Form 10-K for year ended
               Locker Group Incorporated  1988 Stock Incentive         December 31, 1989
               Plan

10.3           Form of Indemnification Agreement between American      Exhibit to Form 10-K for year ended
               Locker Group Incorporated  and its directors and        December 31, 1987
               officers

                                     - 48 -
<PAGE>

10.4           Corporate Term Loan Agreement between American          Exhibit to Form 10-K for year ended
               Locker Group Incorporated and Manufacturers and         December 31, 1991
               Traders Trust Company covering $2,400,000 loan

10.5           Approved Line of Credit from Manufacturers and          Exhibit to Form 10-K for year ended
               Traders Trust Company to American Locker Group          December 31, 1990
               Incorporated in the amount of $1,000,000

10.6           Amendment Agreement dated May 1, 1994 between           Exhibit to Form 10-KSB for year
               Manufacturing and Traders Trust Company and             ended December 31, 1994
               American Locker Group Incorporated [Increase in

               Term Loan to $1,850,000]
10.7           Amendment Agreement dated March 12, 1996 between        Exhibit to Form 10-KSB for year
               Manufacturing and Traders Trust Company and             ended December 31, 1995
               American Locker Group Incorporated [Increase in

               Term Loan to $1,800,000]
10.8           Employment Agreement between American Locker Group      Exhibit to Form 10-QSB for quarter
               Incorporated and  Roy J. Glosser                        ended June 30, 1996

10.9           Amendment dated as of March 3, 1999 to Employment       Exhibit to Form 10-KSB for year
               Agreement between American Locker Group                 ended December 31, 1998
               Incorporated and Roy J. Glosser

10.10          Second Amendment dated May 20, 2002 to Employment       Exhibit to Form 10Q for quarter
               Agreement between American Locker Group                 ended June 30, 2002
               Incorporated and Roy J. Glosser

10.11          Manufacturing Agreement dated as of October 1,          Exhibit to Form 10-K for year ended
               2000 between American Locker Security Systems Inc.      December 31, 2000
               and Signore, Inc.

10.12          Second Amendment dated as of May 13, 2004 to            Exhibit to Form 10-Q for the
               Manufacturing Agreement dated as of October 1,          quarter ended June 30, 2003
               2000 between American Locker Security Systems Inc.
               and Signore Inc.

10.13          Contract dated March 27, 1996 between the U.S.          Exhibit to Form 10-QSB for the
               Postal Service and American Locker Security             quarter ended March 31, 1996
               Systems, Inc.


                                     - 49 -
<PAGE>

10.14          Modification #MO3 to USPS Contract                      Exhibits to Form 10-QSB for the
               #072368-96-B-0741 dated April 16, 1997                  quarter ended March 31, 1997

10.15          Amendment dated August 22, 1997 to Corporate Term       Exhibit to Form 10-QSB for the
               Loan Agreement dated August 30, 1991 between            quarter ended September 30, 1997
               American Locker Group Incorporated and
               Manufacturers and Traders Trust Company

10.16          Modification M05 to USPS Contract                       Exhibit to Form 10-QSB for the
               #072368-96-B-0741, dated October 9, 1997, which         quarter ended September 30, 1997
               replaces steel pedestals with aluminum pedestals
               for American Locker Outdoor Parcel Lockers
10.17          Modification M06 to USPS Contract                       Exhibit to Form 10-QSB for the
               #072368-96-B-0741, dated October 23, 1997               quarter ended September 30, 1997
               regarding prices and minimum quantities through
               April 14, 1998

10.18          Modification M07 to USPS Contract                       Exhibit to Form 10-QSB for quarter
               #072368-96-B-0741, dated April 14, 1998 regarding       ended March 31, 1998
               prices and minimum quantities

10.219         Modification #M010 to USPS Contract                     Exhibit to Form 10-QSB for the
               #072368-96-B-0741, dated May 6, 1999                    quarter ended March 31, 1999

10.20          American Locker Group Incorporated 1999 Stock           Exhibit to Form 10-QSB for the
               Incentive Plan                                          quarter ended June 30, 1999

10.21          Amendment dated June 9, 1999 between American           Exhibit to Form 10-QSB for the
               Locker Group Incorporated and Manufacturers and         quarter ended June 30, 1999
               Traders Trust Company

10.22          Rights Agreement dated November 19, 1999 between        Exhibit to Form 8-K dated
               American Locker Group Incorporated and Chase            November 18, 1999
               Mellon Shareholder Services LLC

10.23          Form of American Locker Group Incorporated              Exhibit to Form 10-QSB for year
               Supplemental Executive Retirement Benefit Plan          ending December 31, 1998


                                     - 50 -
<PAGE>

10.24          Employment Agreement dated November 19, 1999            Exhibit to Form 10-K for year
               between American Locker Group Incorporated and          ended December 31, 1999
               Edward F. Ruttenberg

10.25          Amendment dated May 20, 2002 to Employment              Exhibit to Form 10Q for quarter
               Agreement between American Locker Group                 ending June 30, 2002
               Incorporated and Edward F. Ruttenberg

10.26          Form of Option Agreement under 1999 Stock               Exhibit to Form 10-K for
               Incentive Plan                                          year ended December 31, 1999

10.27          Promissory Note dated July 6, 2001 made by              Exhibit to Form 8-K filed
               American Locker Group Incorporated in favor of          July 12, 2001
               Janie D'Addio

10.28          Amendment Agreement dated as of July 5, 2001            Exhibit to Form 8-K filed
               between American Locker Group Incorporated and          July 12, 2001
               Manufacturers and Traders Trust Company

10.29          Deed of Trust Note dated as of July 5, 2001 made        Exhibit to Form 8-K filed
               by ALTRECO, Incorporated in favor of M&T Real           July 12, 2001
               Estate, Inc.

14.1           Code of Ethics                                          Page ____

22.1           List of Subsidiaries                                    Page ____

23.1           Consent of Ernst & Young LLP                            Page ____

31.1           Certification of Chief Executive Officer pursuant       Page ____
               to Rule 13a-14(a) and Rule 15d-14(a) of the
               Securities Exchange Act, as amended.

31.2           Certification of  Principal Accounting Officer          Page ____
               pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
               the Securities Exchange Act, as amended.

32             Certification of Chief Executive Officer and Chief      Page ____
               Financial  Officer Pursuant to 18 U.S.C.
               Section 1350 as adopted pursuant to Section 906
               of the Sarbanes-Oxley Act of 2002.

</TABLE>



                                     - 51 -