##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
  for the fiscal year ended
December 31, 2008
 o
    
    Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934for the transition period from      to      .
 Commission file number 0-439
 American Locker Group Incorporated
  Delaware
    
    16-0338330(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)815 South Main Street
    
    76051Grapevine, Texas
    
    (Zip Code)(Address of principal executive offices)
 (817) 329-1600
 Title of each class
    
    Name of each exchange on which registered
 None   Common Stock, Par Value $1.00 Per Share
 o þ
 o þ
 o þ
 o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A(T). Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits, Financial Statement SchedulesEXHIBIT INDEXSIGNATURESEX-10.9EX-10.10EX-10.11EX-10.12EX-10.13EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1    Table of Contents  FORWARD-LOOKING INFORMATION
  
 PART I
 
 Item 1. Business.
 Overview
     Recreation lockers
 Coin operated keys and locks
 USPS approved multi-tenant mail distribution lockers
 Private mail delivery lockers
 Electronic distribution lockers
 Evidence lockers
 Laptop lockers
 Mini-check lockers
 1




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Selected end user types:
    
    Amusement parks
Water parks
Apartment buildings
Law enforcement
Health clubs
Ski resorts
Colleges and universities
Military
Post offices
 Selected customers:
    
    Walt Disney World
Sea World
Aspen Skiing Company
United States Department of Homeland Security
Charleston County, South Carolina
AT&T
United States Postal Service
The UPS Store
       2




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Business Segment Financial Information
  Competition
  Raw Materials
    Patents
  Employees
  Dependence on Material Customer
  3




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Geographic Areas
  Research and Development
  Compliance with Environmental Laws and Regulations
  Backlog and Seasonality
 .
 Available Information
   
 Item 1A. Risk Factors.
 The Companys results from continuing operations and its financial position could be adversely
affected in the future by known and unknown risks, uncertainties and other factors, many of which
the Company is unable to predict or control. Some of these factors are described in more detail in
this Annual Report on Form 10-K and in the Companys other filings with the SEC. Additional risks
and uncertainties not presently known to the Company or that the Company currently deems immaterial
may also impair its business operations. Should one or more of any of these risks or uncertainties
materialize, the Companys business, financial condition or results of operations could be
materially adversely affected.
 4




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The Company has implemented a series of operational changes intended to reduce operating expenses.
If the changes do not have the intended effects, the Companys ability to remain in business may be
adversely affected.
   The Companys results of operations are dependent on the price of raw materials, particularly steel
and aluminum. High raw material costs or cost increases could have a material adverse effect on
the Companys operating results.
  The Company must relocate to a new facility by December 31, 2010. Failure to locate an adequate
facility and relocate in a timely manner could have a materially adverse effect on the Companys
operating results.
  The global economic recession has resulted in weaker demand for the Companys products and may
create challenges for us that could have a material adverse effect on our business and results of
operations.
  Continuing disruptions in the financial markets or other factors could affect the Companys
liquidity
  5




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Terrorist attacks or international hostilities may adversely affect the Companys business,
financial condition and operating results.
  The global financial crisis may have an impact on the Companys business and financial condition in
ways that management cannot predict.
   If the Company experiences losses of senior management personnel and other key employees, operating
results could be adversely affected.
  The postal locker industry is subject to extensive regulation by the USPS, and new regulation might
negatively impact the Companys ability to continue to sell postal lockers or increase our
operating costs
   The Companys future success will depend, in large part, upon its ability to successfully introduce
new products.
  6




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##### Table of Contents



Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  ApproximateFloor SpaceLocation
    
    Subsidiary
    
    In Sq. Ft.
    
    UseEllicottville, NY
    
    American Locker Security Systems, Inc.Lock Shop and Service Center
    
    
    12,800
    
    
    Lock manufacturing, service and repairToronto, Ontario
    
    Canadian Locker Company, Ltd.
    
    
    4,000
    *
    
    Sales, service and repair of lockers
and locksToronto, Ontario
    
    Canadian Locker Company, Ltd.
    
    
    3,000
    *
    
    WarehouseGrapevine, TX
    
    Altreco, Inc. (Operated by
Security Manufacturing
Corporation)
    
    
    70,000
    
    
    Manufacturing and corporate
headquarters (1)TOTAL
    
    
    
    
    89,800
   (1)
    
    On September 18, 2009, the Company closed the sale of its Grapevine, Texas facility. Please
see Note 19 Subsequent Events to the Companys consolidated financial statements for further
information. 
 Item 3. Legal Proceedings.
   7




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Item 4. Submission of Matters to a Vote of Security Holders.
  Abstain/BrokerFor
    
    Against
    
    Non-VotesEdward F. Ruttenberg
    
    
    1,102,379
    
    
    
    245,518
    
    
    
    N/ACraig R. Frank
    
    
    1,109,949
    
    
    
    237,948
    
    
    
    N/AJohn E. Harris
    
    
    1,060,079
    
    
    
    287,818
    
    
    
    N/AAllen E. Tilley
    
    
    1,108,169
    
    
    
    239,728
    
    
    
    N/AJames T. Vanasek
    
    
    1,107,025
    
    
    
    240,872
    
    
    
    N/AAnthony B. Johnston
    
    
    1,226,307
    
    
    
    121,590
    
    
    
    N/AMary A. Stanford
    
    
    1,058,555
    
    
    
    289,342
    
    
    
    N/A
  Abstain/BrokerFor
    
    Against
    
    Non-VotesAppointment of Travis, Wolff & Company, L.L.P.
    
    
    1,144,843
    
    
    
    192,376
    
    
    
    10,678
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 Market Prices and Dividends
  8




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Market Price  Per Common Share
 2008
    
    High
    
    LowQuarter ended December 31, 2008
    
    $
    3.50
    
    
    $
    0.82Quarter ended September 30, 2008
    
    
    3.75
    
    
    
    2.75Quarter ended June 30, 2008
    
    
    4.00
    
    
    
    2.76Quarter ended March 31, 2008
    
    
    4.05
    
    
    
    3.40
 2007
    
    High
    
    LowQuarter ended December 31, 2007
    
    $
    5.40
    
    
    $
    3.60Quarter ended September 30, 2007
    
    
    5.65
    
    
    
    3.90Quarter ended June 30, 2007
    
    
    4.50
    
    
    
    4.00Quarter ended March 31, 2007
    
    
    4.82
    
    
    
    3.20
   Equity Compensation Plan Information
  Number of securitiesNumber of securities to be
    
    Weighted-average
    
    remaining availableissued upon exercise of
    
    exercise price of
    
    for future issuanceoutstanding options,
    
    outstanding options,
    
    under equitywarrants and rights
    
    warrants and rights
    
    compensation plansEquity
compensation plans
approved by
security holders(1)
    
    
    40,000
    
    
    
    6.82
    
    
    
    37,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    40,000
    
    
    
    6.82
    
    
    
    37,000
 
 (1)
    
    Includes the American Locker Group Incorporated 1999 Stock Incentive Plan. Please
see Note 10 Stock-Based Compensation to the Companys consolidated financial statements for
further information. 
 Item 6. Selected Financial Data.
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For the Years Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004Sales
    
    $
    14,129,807
    
    
    $
    20,242,803
    
    
    $
    25,065,090
    
    
    $
    32,303,689
    
    
    $
    49,653,129Income (loss) before income taxes
    
    
    (3,353,730
    )
    
    
    (2,749,743
    )
    
    
    845,224
    
    
    
    (9,512,121
    )
    
    
    4,682,147Income taxes
    
    
    (653,519
    )
    
    
    (845,626
    )
    
    
    300,904
    
    
    
    (1,272,006
    )
    
    
    1,874,567Net income (loss)
    
    
    (2,700,211
    )
    
    
    (1,904,117
    )
    
    
    544,320
    
    
    
    (8,240,115
    )
    
    
    2,807,580Earnings (loss) per sharebasic
    
    
    (1.73
    )
    
    
    (1.23
    )
    
    
    0.35
    
    
    
    (5.35
    )
    
    
    1.83Earnings (loss) per sharediluted
    
    
    (1.73
    )
    
    
    (1.23
    )
    
    
    0.35
    
    
    
    (5.35
    )
    
    
    1.80Weighted average common shares
outstandingbasic
    
    
    1,564,039
    
    
    
    1,549,516
    
    
    
    1,547,392
    
    
    
    1,540,179
    
    
    
    1,534,146Weighted average common shares
outstandingdiluted
    
    
    1,564,039
    
    
    
    1,549,516
    
    
    
    1,547,392
    
    
    
    1,540,179
    
    
    
    1,557,931Dividends declared
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00Interest expense
    
    
    159,380
    
    
    
    195,280
    
    
    
    184,257
    
    
    
    333,389
    
    
    
    456,865Depreciation and amortization
expense
    
    
    416,664
    
    
    
    386,430
    
    
    
    396,304
    
    
    
    562,078
    
    
    
    706,929Number of employees
    
    
    117
    
    
    
    126
    
    
    
    147
    
    
    
    132
    
    
    
    149Consolidated Balance SheetTotal assets
    
    
    10,810,038
    
    
    
    12,416,042
    
    
    
    14,517,522
    
    
    
    15,241,854
    
    
    
    29,152,613Long-term debt, including current
portion
    
    
    2,004,315
    
    
    
    2,143,765
    
    
    
    2,178,042
    
    
    
    2,316,210
    
    
    
    6,668,596Stockholders equity
    
    
    4,627,185
    
    
    
    7,758,161
    
    
    
    9,302,162
    
    
    
    8,614,629
    
    
    
    16,840,232Stockholders equity per share(1)
    
    
    2.94
    
    
    
    5.01
    
    
    
    6.00
    
    
    
    5.57
    
    
    
    10.98Common shares outstanding at
year-end
    
    
    1,571,849
    
    
    
    1,549,516
    
    
    
    1,549,516
    
    
    
    1,546,146
    
    
    
    1,534,146Expenditures for property, plant
and equipment
    
    
    334,902
    
    
    
    818,646
    
    
    
    98,591
    
    
    
    475,775
    
    
    
    280,562
 
 (1)
    
    Based on shares outstanding at December 31, 2008. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Critical Accounting Policies and Estimates
   Revenue Recognition
  10




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Allowance for Doubtful Accounts
  Inventories
   Property, Plant and Equipment
   Pension Assumptions
   Deferred Income Tax Assets
  11




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Results of OperationsYear Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Overall Results and Outlook
  Non-Renewal of USPS Contract and Other Events
   Net Sales
  12




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Percentage2008
    
    2007
    
    Increase (Decrease)Postal Lockers, excluding CBUs
    
    $
    5,260,616
    
    
    $
    5,331,601
    
    
    
    (1.3
    %)Non-Postal Lockers
    
    
    8,830,305
    
    
    
    9,151,957
    
    
    
    (3.5
    %)Total Non-CBU sales
    
    
    14,090,921
    
    
    
    14,483,558
    
    
    
    (2.7
    %)CBUs
    
    
    38,886
    
    
    
    5,759,245
    
    
    
    (99.3
    %)Total Net Sales
    
    $
    14,129,807
    
    
    $
    20,242,803
    
    
    
    (30.2
    %)
 Cost of Sales
  Selling, Administrative and General Expenses
  Asset Impairment
 Accounting
for the Impairment or Disposal of Long Lived Assets
 Other Income and ExpenseNet
  Interest Expense
  Income Taxes
  Results of OperationsYear Ended December 31, 2007 Compared to Year Ended December 31, 2006
 Overall Results and Outlook
  13




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Decertification of the Model E CBU
   Net Sales
   Percentage2007
    
    2006
    
    Increase (Decrease)Postal Lockers, excluding CBUs
    
    $
    5,331,601
    
    
    $
    6,336,513
    
    
    
    (15.9
    %)Non-Postal Lockers
    
    
    9,151,957
    
    
    
    9,569,776
    
    
    
    (4.4
    %)Total Non-CBU sales
    
    
    14,483,558
    
    
    
    15,906,289
    
    
    
    (8.9
    %)CBUs
    
    
    5,759,245
    
    
    
    9,158,801
    
    
    
    (37.1
    %)Total Net Sales
    
    $
    20,242,803
    
    
    $
    25,065,090
    
    
    
    (19.2
    %)
 Cost of Sales
  Selling, Administrative and General Expenses
  Other Income and ExpenseNet
  14




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Interest Expense
  Income Taxes
  Liquidity and Sources of Capital
 Cash Flows Summary
 Year ended December 31,2008
    
    
    2007
    
    
    2006Net cash (used in) provided by:Operating activities
    
    $
    (1,488,884
    )
    
    $
    (294,669
    )
    
    $
    1,443,757Investing activities
    
    
    (310,200
    )
    
    
    (818,646
    )
    
    
    (98,591
    )Financing activities
    
    
    613,173
    
    
    
    (34,277
    )
    
    
    (122,454
    )Effect of exchange rate changes on cash
    
    
    (96,056
    )
    
    
    201,319
    
    
    
    7,497Increase (Decrease) in cash and cash equivalents
    
    $
    (1,281,967
    )
    
    $
    (946,273
    )
    
    $
    1,230,209
 Operating Activities
   Investing Activities
   Financing Activities
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Effect of Exchange Rate Changes on Cash
  16




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Cash and Cash Equivalents
  Liquidity
  As of December 31,2008
    
    2007Current Ratio
    
    
    1.9  to 1
    
    
    
    3.5 to 1Working Capital
    
    $
    2,802,308
    
    
    $
    5,318,126
       Off-Balance Sheet Arrangements
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Contractual Obligations
  Payments due by periodTotal
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 yearsLong-term debt obligations
    
    $
    2,004,315
    
    
    $
    173,354
    
    
    $
    1,830,961
    
    
    $
    
    
    
    $
    Line of credit obligations
    
    
    752,623
    
    
    
    752,623
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    91,930
    
    
    
    57,296
    
    
    
    34,634
    
    
    
    
    
    
    
    Total
    
    $
    2,848,868
    
    
    $
    983,273
    
    
    $
    1,865,595
    
    
    $
    
    
    
    $
    
   Impact of Inflation and Changing Prices
   Market Risks
 Raw Materials
  Foreign Currency
  Interest Rate Risks
  18




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Effect of New Accounting Guidance
        19




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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  20




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Item 8. Financial Statements and Supplementary Data.
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
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American Locker Group Incorporated and Subsidiaries
 Consolidated Balance Sheets
 December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    279,984
    
    
    $
    1,561,951Accounts receivable, less allowance for
doubtful accounts of $180,000 in 2008 and
$233,000 in 2007
    
    
    1,315,536
    
    
    
    1,568,464Inventories, net
    
    
    2,396,185
    
    
    
    3,060,341Prepaid expenses
    
    
    212,867
    
    
    
    223,068Income tax receivable
    
    
    1,599,892
    
    
    
    44,467Deferred income taxes
    
    
    180,430
    
    
    
    987,538Total current assets
    
    
    5,984,894
    
    
    
    7,445,829Property, plant and equipment:Land
    
    
    500,500
    
    
    
    500,500Buildings and leasehold improvements
    
    
    3,503,515
    
    
    
    3,509,891Machinery and equipment
    
    
    7,756,607
    
    
    
    8,045,85911,760,622
    
    
    
    12,056,250Less allowance for depreciation and amortization
    
    
    (7,526,963
    )
    
    
    (7,543,465
    )4,233,659
    
    
    
    4,512,785Prepaid pension
    
    
    39,442
    
    
    
    Deferred income taxes
    
    
    552,043
    
    
    
    457,428Total assets
    
    $
    10,810,038
    
    
    $
    12,416,042
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American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets (continued)
 December 31,2008
    
    
    2007Liabilities and stockholders equityCurrent liabilities:Revolving line of credit
    
    $
    752,623
    
    
    $
    Current portion of long-term debt
    
    
    173,354
    
    
    
    96,530Accounts payable
    
    
    1,853,225
    
    
    
    1,236,316Commissions, salaries, wages and taxes thereon
    
    
    182,752
    
    
    
    285,759Income taxes payable
    
    
    68,791
    
    
    
    72,146Other accrued expenses and current liabilities
    
    
    151,841
    
    
    
    436,952Total current liabilities
    
    
    3,182,586
    
    
    
    2,127,703Long-term liabilities:Long-term debt, net of current portion
    
    
    1,830,961
    
    
    
    2,047,235Pension and other benefits
    
    
    1,169,306
    
    
    
    482,9433,000,267
    
    
    
    2,530,178Total liabilities
    
    
    6,182,853
    
    
    
    4,657,881Commitments and contingencies (Note 16)Stockholders equity:Common stock, $1 par value:Authorized shares4,000,000Issued shares1,763,849 and 1,741,516 in 2008 and 2007, respectivelyOutstanding shares1,571,849 and 1,549,516 in 2008 and 2007, respectively
    
    
    1,763,849
    
    
    
    1,741,516Other capital
    
    
    233,841
    
    
    
    184,988Retained earnings
    
    
    5,318,243
    
    
    
    8,018,454Treasury stock at cost (192,000 shares)
    
    
    (2,112,000
    )
    
    
    (2,112,000
    )Accumulated other comprehensive loss
    
    
    (576,748
    )
    
    
    (74,797
    )Total stockholders equity
    
    
    4,627,185
    
    
    
    7,758,161Total liabilities and stockholders equity
    
    $
    10,810,038
    
    
    $
    12,416,042
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American Locker Group Incorporated and Subsidiaries
 Consolidated Statements of Operations
 Year ended December 31,2008
    
    
    2007
    
    
    2006Net sales
    
    $
    14,129,807
    
    
    $
    20,242,803
    
    
    $
    25,065,090Cost of products sold
    
    
    10,954,020
    
    
    
    15,321,106
    
    
    
    16,619,734Gross profit
    
    
    3,175,787
    
    
    
    4,921,697
    
    
    
    8,445,356Selling, administrative and general expenses
    
    
    6,028,730
    
    
    
    7,464,087
    
    
    
    7,285,212Asset impairment
    
    
    275,685
    
    
    
    
    
    
    
    (3,128,628
    )
    
    
    (2,542,390
    )
    
    
    1,160,144Interest income
    
    
    10,891
    
    
    
    49,870
    
    
    
    29,070Other income (expense)net
    
    
    (76,613
    )
    
    
    (61,943
    )
    
    
    (159,733
    )Interest (expense)
    
    
    (159,380
    )
    
    
    (195,280
    )
    
    
    (184,257
    )Income (loss) before income taxes
    
    
    (3,353,730
    )
    
    
    (2,749,743
    )
    
    
    845,224Income tax expense (benefit)
    
    
    (653,519
    )
    
    
    (845,626
    )
    
    
    300,904Net income (loss)
    
    $
    (2,700,211
    )
    
    $
    (1,904,117
    )
    
    $
    544,320Weighted average common shares:Basic
    
    
    1,564,039
    
    
    
    1,549,516
    
    
    
    1,547,392Diluted
    
    
    1,564,039
    
    
    
    1,549,516
    
    
    
    1,547,392Earnings (loss) per share of common stock:Basic
    
    $
    (1.73
    )
    
    $
    (1.23
    )
    
    $
    0.35Diluted
    
    $
    (1.73
    )
    
    $
    (1.23
    )
    
    $
    0.35Dividends per share of common stock
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
  24




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American Locker Group Incorporated and Subsidiaries
 Consolidated Statements of Stockholders Equity
 AccumulatedCommon
    
    
    Other
    
    
    Retained
    
    
    
    
    
    
    Other Comprehensive
    
    
    Total StockholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Treasury Stock
    
    
    Income (Loss)
    
    
    EquityBalance at January 1, 2006
    
    $
    1,738,146
    
    
    $
    132,071
    
    
    $
    9,378,251
    
    
    $
    (2,112,000
    )
    
    $
    (521,838
    )
    
    $
    8,614,630Net income (loss)
    
    
    
    
    
    
    
    
    
    
    544,320
    
    
    
    
    
    
    
    
    
    
    
    544,320Other comprehensive income
(loss):Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,361
    
    
    
    7,361Minimum pension liability
adjustment, net of tax
benefit of $80,091
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,137
    
    
    
    120,137Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    671,818Common stock issued (3,370 shares)
    
    
    3,370
    
    
    
    12,344
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,714Balance at December 31, 2006
    
    $
    1,741,516
    
    
    $
    144,415
    
    
    $
    9,922,571
    
    
    $
    (2,112,000
    )
    
    $
    (394,340
    )
    
    $
    9,302,162Net income (loss)
    
    
    
    
    
    
    
    
    
    
    (1,904,117
    )
    
    
    
    
    
    
    
    
    
    
    (1,904,117
    )Other comprehensive income
(loss):Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249,491
    
    
    
    249,491Minimum pension liability
adjustment, net of tax
benefit of $46,707
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,052
    
    
    
    70,052Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,584,574
    )Stock-based compensation
    
    
    
    
    
    
    40,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,573Balance at December 31, 2007
    
    $
    1,741,516
    
    
    $
    184,988
    
    
    $
    8,018,454
    
    
    $
    (2,112,000
    )
    
    $
    (74,797
    )
    
    $
    7,758,161Net income (loss)
    
    
    
    
    
    
    
    
    
    
    (2,700,211
    )
    
    
    
    
    
    
    
    
    
    
    (2,700,211
    )Other comprehensive income
(loss):Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205,775
    )
    
    
    (205,775
    )Minimum pension liability
adjustment, net of tax
benefit of $197,451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (296,176
    )
    
    
    (296,176
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,202,162
    )Common stock issued (22,333 shares)
    
    
    22,333
    
    
    
    45,261
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,594Stock-based compensation
    
    
    
    
    
    
    3,592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,592Balance at December 31, 2008
    
    $
    1,763,849
    
    
    $
    233,841
    
    
    $
    5,318,243
    
    
    $
    (2,112,000
    )
    
    $
    (576,748
    )
    
    $
    4,627,185
  25




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##### Table of Contents



American Locker Group Incorporated and Subsidiaries
 Consolidated Statements of Cash Flows
 Year ended December 31,2008
    
    
    2007
    
    
    2006Operating activitiesNet income (loss)
    
    $
    (2,700,211
    )
    
    $
    (1,904,117
    )
    
    $
    544,320Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    416,664
    
    
    
    386,430
    
    
    
    396,304Provision for uncollectible accounts
    
    
    60,182
    
    
    
    61,000
    
    
    
    77,939Equity based compensation
    
    
    71,186
    
    
    
    40,573
    
    
    
    Loss on disposal of assets
    
    
    138
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    909,994
    
    
    
    (488,728
    )
    
    
    400,251Impairment of assets
    
    
    275,685
    
    
    
    
    
    
    
    Changes in assets and liabilities:Accounts and other receivables
    
    
    81,496
    
    
    
    1,343,848
    
    
    
    986,803Inventories
    
    
    545,510
    
    
    
    341,078
    
    
    
    (92,738
    )Prepaid expenses
    
    
    7,384
    
    
    
    (78,110
    )
    
    
    (92,610
    )Accounts payable and accrued expenses
    
    
    291,353
    
    
    
    (363,602
    )
    
    
    (928,210
    )Income taxes
    
    
    (1,561,991
    )
    
    
    602,857
    
    
    
    476,772Pension and other benefits
    
    
    113,726
    
    
    
    (235,898
    )
    
    
    (325,074
    )Net cash provided by (used in) operating activities
    
    
    (1,488,884
    )
    
    
    (294,669
    )
    
    
    1,443,757Investing activitiesPurchase of property, plant and equipment
    
    
    (334,902
    )
    
    
    (818,646
    )
    
    
    (98,591
    )Proceeds from sale of property, plant and equipment
    
    
    24,702
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (310,200
    )
    
    
    (818,646
    )
    
    
    (98,591
    )Financing activitiesLong-term debt payments
    
    
    (139,450
    )
    
    
    (2,234,277
    )
    
    
    (138,168
    )Long-term debt borrowings
    
    
    
    
    
    
    2,200,000
    
    
    
    Borrowings under revolving line of credit
    
    
    752,623
    
    
    
    
    
    
    
    Common stock issued
    
    
    
    
    
    
    
    
    
    
    15,714Net cash provided by (used in) financing activities
    
    
    613,173
    
    
    
    (34,277
    )
    
    
    (122,454
    )Effect of exchange rate changes on cash
    
    
    (96,056
    )
    
    
    201,319
    
    
    
    7,497Net increase (decrease) in cash and cash equivalents
    
    
    (1,281,967
    )
    
    
    (946,273
    )
    
    
    1,230,209Cash and cash equivalents at beginning of year
    
    
    1,561,951
    
    
    
    2,508,224
    
    
    
    1,278,015Cash and cash equivalents at end of year
    
    $
    279,984
    
    
    $
    1,561,951
    
    
    $
    2,508,224Supplemental cash flow information:Cash paid during the year for:Interest
    
    $
    152,343
    
    
    $
    195,502
    
    
    $
    183,708Income taxes
    
    $
    11,806
    
    
    $
    15,898
    
    
    $
    
  26




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##### Table of Contents



Notes to Consolidated Financial Statements
American Locker Group Incorporated and Subsidiaries
December 31, 2008
 1. Basis of Presentation
 Consolidation, Business Description and Current Operating Condition
      2. Summary of Significant Accounting Policies
 Cash and Cash Equivalents
  Accounts Receivable
   27




---



##### Table of Contents



Inventories
  Property, Plant and Equipment
  Accounting for the Disposal of Long Lived Assets
  Pensions and Postretirement Benefits
  Revenue Recognition
  Shipping and Handling Costs
  Advertising Expense
  Income Taxes
  28




---



##### Table of Contents



Research and Development
  Earnings Per Share
  Foreign Currency
  Fair Value of Financial Instruments
  Stock-Based Compensation
  29




---



##### Table of Contents



Comprehensive Income
  Use of Estimates
  New Accounting Pronouncements
 Fair
Value Measurements,
     30




---



##### Table of Contents



3. Inventories
  December 31,2008
    
    
    2007Finished products
    
    $
    77,665
    
    
    $
    333,653Work-in-process
    
    
    1,071,218
    
    
    
    898,620Raw materials
    
    
    1,247,302
    
    
    
    1,828,068Net inventories
    
    $
    2,396,185
    
    
    $
    3,060,341
 31




---



##### Table of Contents



4. Other Accrued Expenses and Current Liabilities
  December 31,2008
    
    
    2007Short-term pension liability
    
    $
    
    
    
    $
    177,987Restructuring liability
    
    
    
    
    
    
    11,941Accrued severance
    
    
    94,687
    
    
    
    200,000Accrued expenses, other
    
    
    57,154
    
    
    
    47,024Total accrued expenses
    
    $
    151,841
    
    
    $
    436,952
 5. Debt
  December 31,2008
    
    
    2007Mortgage payable to bank through January
2012 at $22,493 monthly including interest at
prime plus 75 basis points with a 5% floor
(5% at December 31, 2008) with payment for
remaining balance due February 1, 2012,
collateralized by real estate
    
    $
    2,004,315
    
    
    $
    2,143,765Less current portion
    
    
    (173,354
    )
    
    
    (96,530
    )Long-term portion
    
    $
    1,830,961
    
    
    $
    2,047,235
       32




---



##### Table of Contents



6. Operating Leases
  2009
    
    $
    57,2962010
    
    
    23,7732011
    
    
    10,8612012
    
    
    2013
    
    
    Total
    
    $
    91,930
  7. Income Taxes
  2008
    
    
    2007
    
    
    2006United States income (loss)
    
    $
    (3,064,985
    )
    
    $
    (2,881,400
    )
    
    $
    677,396Foreign income (loss)
    
    
    (288,745
    )
    
    
    131,657
    
    
    
    167,828$
    (3,353,730
    )
    
    $
    (2,749,743
    )
    
    $
    845,224
  2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    (1,589,218
    )
    
    $
    (217,023
    )
    
    $
    977State
    
    
    25,266
    
    
    
    (105,590
    )
    
    
    139Foreign
    
    
    439
    
    
    
    49,192
    
    
    
    65,453Total current
    
    
    (1,563,513
    )
    
    
    (273,421
    )
    
    
    66,569Deferred:Federal
    
    
    855,002
    
    
    
    (529,628
    )
    
    
    182,726State
    
    
    10,279
    
    
    
    (36,346
    )
    
    
    27,876Foreign
    
    
    44,713
    
    
    
    (6,231
    )
    
    
    23,733909,994
    
    
    
    (572,205
    )
    
    
    234,335$
    (653,519
    )
    
    $
    (845,626
    )
    
    $
    300,904
  2008
    
    2007
    
    2006Statutory income tax rate
    
    
    (34
    %)
    
    
    (34
    %)
    
    
    34
    %State and foreign income taxes, net of federal benefit
    
    
    (1
    )
    
    
    (1
    )
    
    
    3Change in valuation allowance
    
    
    13
    
    
    
    11
    
    
    
    Foreign earnings taxed at different rate
    
    
    
    
    
    
    (4
    )
    
    
    Change in estimated state income tax rate
    
    
    
    
    
    
    (4
    )
    
    
    Other permanent differences
    
    
    2
    
    
    
    1
    
    
    
    (1
    )(20
    %)
    
    
    (31
    %)
    
    
    36
    %
 33




---



##### Table of Contents



2008
    
    
    2007Deferred tax liabilities:Property, plant and equipment
    
    $
    4,933
    
    
    $
    Prepaid expenses and other
    
    
    4,609
    
    
    
    4,609Total deferred tax liabilities
    
    
    9,542
    
    
    
    4,609Deferred tax assets:Property, plant and equipment
    
    
    
    
    
    
    9,332Operating loss carryforwards
    
    
    839,244
    
    
    
    703,651Postretirement benefits
    
    
    23,471
    
    
    
    23,471Pension costs
    
    
    422,273
    
    
    
    257,401Allowance for doubtful accounts
    
    
    52,573
    
    
    
    73,194Other assets
    
    
    14,332
    
    
    
    16,626Accrued expenses
    
    
    22,532
    
    
    
    65,828Other employee benefits
    
    
    26,262
    
    
    
    31,381Inventory costs
    
    
    56,005
    
    
    
    564,342Total deferred tax assets
    
    
    1,456,692
    
    
    
    1,745,226Net
    
    
    1,447,150
    
    
    
    1,740,617Valuation allowance
    
    
    (714,677
    )
    
    
    (295,651
    )Net
    
    $
    732,473
    
    
    $
    1,444,966Current deferred tax asset
    
    $
    180,430
    
    
    $
    987,538Long-term deferred tax asset
    
    
    552,043
    
    
    
    457,428$
    732,473
    
    
    $
    1,444,966
     34




---



##### Table of Contents



8. Pension and Other Postretirement Benefits
 U.S. Pension Plan
   Canadian Pension Plan
     35




---



##### Table of Contents



Pension BenefitsU.S. Plan
    
    
    Canadian Plan2008
    
    
    2007
    
    
    2008
    
    
    2007Change in projected benefit obligationProjected benefit obligation at beginning of year
    
    $
    3,023,001
    
    
    $
    3,369,674
    
    
    $
    1,362,530
    
    
    $
    1,122,137Service cost
    
    
    21,300
    
    
    
    29,610
    
    
    
    33,704
    
    
    
    31,627Interest cost
    
    
    193,552
    
    
    
    191,828
    
    
    
    62,688
    
    
    
    60,727Benefit payments
    
    
    (485,490
    )
    
    
    (166,287
    )
    
    
    (84,403
    )
    
    
    (82,903
    )Administrative expenses
    
    
    (13,808
    )
    
    
    (18,174
    )
    
    
    
    
    
    
    Actuarial (gain) loss
    
    
    149,726
    
    
    
    (383,650
    )
    
    
    (166,162
    )
    
    
    17,591Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    (240,057
    )
    
    
    213,351Settlements
    
    
    
    
    
    
    
    
    
    
    (61,460
    )
    
    
    Projected benefit obligation at end of year
    
    
    2,888,281
    
    
    
    3,023,001
    
    
    
    906,840
    
    
    
    1,362,530Change in plan assetsFair value of plan assets at beginning of year
    
    
    2,608,288
    
    
    
    2,639,553
    
    
    
    1,184,543
    
    
    
    927,607Actual return on plan assets
    
    
    (395,204
    )
    
    
    52,447
    
    
    
    (76,661
    )
    
    
    (5,428
    )Benefit payments
    
    
    (485,490
    )
    
    
    (166,287
    )
    
    
    (84,403
    )
    
    
    (82,903
    )Employer contribution
    
    
    73,419
    
    
    
    100,749
    
    
    
    155,777
    
    
    
    164,122Administrative expenses
    
    
    (13,808
    )
    
    
    (18,174
    )
    
    
    
    
    
    
    Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    (232,974
    )
    
    
    181,145Fair value of plan assets at end of year
    
    
    1,787,205
    
    
    
    2,608,288
    
    
    
    946,282
    
    
    
    1,184,543Plan assets (less) greater than benefit obligation
    
    $
    (1,101,076
    )
    
    $
    (414,713
    )
    
    $
    39,442
    
    
    $
    (177,987
    )
  U.S. Plan
    
    
    Canadian Plan2008
    
    
    2007
    
    
    2008
    
    
    2007Non-current assets
    
    $
    
    
    
    $
    
    
    
    $
    39,442
    
    
    $
    Current liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (177,987
    )Non-current liabilities
    
    
    (1,101,076
    )
    
    
    (414,713
    )
    
    
    
    
    
    
    Net amount recognized
    
    $
    (1,101,076
    )
    
    $
    (414,713
    )
    
    $
    39,442
    
    
    
    (177,987
    )
  U.S. Plan
    
    
    Canadian Plan2008
    
    
    2007
    
    
    2008
    
    
    2007Unrecognized net loss
    
    $
    823,177
    
    
    $
    202,150
    
    
    $
    163,333
    
    
    $
    290,733$
    823,177
    
    
    $
    202,150
    
    
    $
    163,333
    
    
    $
    290,733
  36




---



##### Table of Contents



U.S. Plan
    
    
    Canadian Plan2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Components of net periodic
benefit cost:Service cost
    
    $
    21,300
    
    
    $
    29,610
    
    
    $
    30,487
    
    
    $
    33,704
    
    
    $
    31,627
    
    
    $
    29,198Interest cost
    
    
    193,552
    
    
    
    191,828
    
    
    
    184,377
    
    
    
    62,688
    
    
    
    60,727
    
    
    
    57,954Expected return on plan assets
    
    
    (197,021
    )
    
    
    (197,588
    )
    
    
    (178,868
    )
    
    
    (79,682
    )
    
    
    (73,078
    )
    
    
    (68,980
    )Net actuarial loss
    
    
    
    
    
    
    
    
    
    
    29,916
    
    
    
    9,535
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    9,384
    
    
    
    
    
    
    
    
    
    
    
    3,275
    
    
    
    3,087Net periodic benefit cost
    
    $
    17,831
    
    
    $
    33,234
    
    
    $
    65,912
    
    
    $
    26,245
    
    
    $
    22,551
    
    
    $
    21,259
  U.S. Plan
    
    Canadian Plan2009
    
    $
    105,000
    
    
    $
    72,0002010
    
    
    104,000
    
    
    
    310,0002011
    
    
    110,000
    
    
    
    67,0002012
    
    
    136,000
    
    
    
    65,0002013
    
    
    168,000
    
    
    
    62,0002014 through 2018
    
    
    867,000
    
    
    
    261,000
  U.S. Plan
    
    Canadian Plan2008
    
    2007
    
    2008
    
    2007Weighted average assumptions as of December 31:Discount rate
    
    
    6.10
    %
    
    
    6.50
    %
    
    
    6.75
    %
    
    
    5.00
    %Rate of compensation increase
    
    
    
    
    
    
    
    
    
    
    2.00
    %
    
    
    2.00
    %
  U.S. Plan
    
    Canadian Plan2008
    
    2007
    
    2008
    
    2007Weighted average assumptions as of December 31:Discount rate
    
    
    6.50
    %
    
    
    5.75
    %
    
    
    5.00
    %
    
    
    5.00
    %Expected return on plan assets
    
    
    7.50
    %
    
    
    7.50
    %
    
    
    7.00
    %
    
    
    7.00
    %Rate of compensation increase
    
    
    
    
    
    
    
    
    
    
    2.00
    %
    
    
    2.00
    %
  Death Benefit Plan
  37




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##### Table of Contents



Defined Contribution Plan
  9. Capital Stock
  10. Stock-Based Compensation
     2008
    
    
    2007
    
    
    2006Option term (years)
    
    
    
    
    
    
    10
    
    
    
    Volatility
    
    
    
    
    
    
    77.0
    %
    
    
    Risk-free interest rate
    
    
    
    
    
    
    4.5
    %
    
    
    Dividend yield
    
    
    
    
    
    
    0.0
    %
    
    
    Termination rate
    
    
    
    
    
    
    10.0
    %
    
    
    Weighted average fair value per option granted
    
    
    
    
    
    $
    4.08
    
    
    
    
  38




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##### Table of Contents



2008
    
    
    2007
    
    
    2006Weighted Average
    
    
    
    
    
    
    Weighted Average
    
    
    
    
    
    
    Weighted AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceOutstandingbeginning of
year
    
    
    64,000
    
    
    $
    6.12
    
    
    
    31,000
    
    
    $
    7.51
    
    
    
    33,600
    
    
    $
    7.43Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    36,000
    
    
    
    4.95
    
    
    
    
    
    
    
    Expired or forfeited
    
    
    (24,000
    )
    
    
    4.95
    
    
    
    (3,000
    )
    
    
    6.50
    
    
    
    (2,600
    )
    
    
    6.50Outstandingend of year
    
    
    40,000
    
    
    $
    6.82
    
    
    
    64,000
    
    
    $
    6.12
    
    
    
    31,000
    
    
    $
    7.51Exercisableend of year
    
    
    36,000
    
    
    
    
    
    
    
    32,000
    
    
    
    
    
    
    
    31,000
  Vested
    
    UnvestedRemaining
    
    
    
    
    
    
    
    
    
    
    
    
    
    RemainingYears of
    
    
    
    
    
    
    
    
    
    
    
    
    
    Years ofExercise
    
    Number of
    
    Intrinsic
    
    Contractual
    
    Exercise
    
    Number of
    
    Intrinsic
    
    ContractualPrice
    
    Options
    
    Value
    
    Life
    
    Price
    
    Options
    
    Value
    
    Life$4.95
    
    
    8,000
    
    
    
    
    
    
    
    8.7
    
    
    $
    4.95
    
    
    
    4,000
    
    
    
    
    
    
    
    8.7$6.50
    
    
    8,000
    
    
    
    
    
    
    
    0.9$7.25
    
    
    10,000
    
    
    
    
    
    
    
    1.2$8.88
    
    
    10,000
    
    
    
    
    
    
    
    0.436,000
    
    
    
    
  11. Shareholder Rights Plan
   39




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##### Table of Contents



12. Earnings Per Share
  2008
    
    
    2007
    
    
    2006Numerator:Net income (loss)
    
    $
    (2,700,211
    )
    
    $
    (1,904,117
    )
    
    $
    544,320Denominator:Denominator for basic earnings
per shareweighted average
shares outstanding
    
    
    1,564,039
    
    
    
    1,549,516
    
    
    
    1,547,392Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted earnings
per shareweighted average
shares outstanding and assumed
conversions
    
    
    1,564,039
    
    
    
    1,549,516
    
    
    
    1,547,392Basic earnings (loss) per share
    
    $
    (1.73
    )
    
    $
    (1.23
    )
    
    $
    0.35Diluted earnings (loss) per share
    
    $
    (1.73
    )
    
    $
    (1.23
    )
    
    $
    0.35
  13. Accumulated Other Comprehensive Loss
  2008
    
    
    2007Foreign currency translation adjustment
    
    $
    15,157
    
    
    $
    220,932Minimum pension liability adjustment, net of
tax effect of $394,605 in 2008 and $197,154 in
2007
    
    
    (591,905
    )
    
    
    (295,729
    )$
    (576,748
    )
    
    $
    (74,797
    )
 14. Geographical and Customer Concentration Data
  2008
    
    
    2007
    
    
    2006United States customers
    
    $
    11,333,442
    
    
    $
    17,574,065
    
    
    $
    21,476,311Canadian and other foreign customers
    
    
    2,796,365
    
    
    
    2,668,738
    
    
    
    3,588,779$
    14,129,807
    
    
    $
    20,242,803
    
    
    $
    25,065,090
    15. Related Parties
  40




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##### Table of Contents



16. Contingencies
     17. Asset Impairment
   41




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##### Table of Contents



Equipment depreciation
    
    $
    164,000Inventory obsolescence charge
    
    
    111,685Total asset impairment
    
    $
    275,685
 18. Post Employment Arrangements
  19. Subsequent Events
        42




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
  
 Item 9A(T). Controls and Procedures
 Disclosure Controls and Procedures
   Managements Report on Internal Control over Financial Reporting
     Material weakness previously identified as of December 31, 2007 that continues to exist as of December
31, 2008:
 
    
    Timeliness of Financial Reporting  Subsequent to the Company filing its September 30, 2008
quarterly report on Form 10-Q in a timely manner, the Company reduced its accounting staff as part of
its January 2009 restructuring.  In January 2009, management chose to delay the audit of the
Companys financial statements for the year ended December 31, 2008 in order to improve the
Companys liquidity position.  Additionally, the Company was impacted by the unplanned departure of
several key members of the accounting department after the restructuring was implemented.  Once the
decision was made to restore staffing levels in the accounting department to an adequate level, the
rebuilding of accounting function took longer than anticipated.  As a consequence of the foregoing, the
Company has been unable to file its required interim and annual reports with the SEC in a timely
manner.
   43




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  Actions to address previously reported material weaknesses that no longer exist as of December 31,
2008:
 
    
    Perpetual Inventory System  The Companys 2007 Annual Report on Form 10-K reported a material
weakness due to the Companys failure to maintain effective controls to ensure that the Companys
inventory systems completely and accurately processed and accounted for inventory movements on an
interim basis within the Companys manufacturing facilities and adjustments were necessary to adjust
interim financial statements.  To address this matter the Company implemented new policies and
procedures related to cycle counting, including performing root cause analysis of discrepancies as well
as implementing new policies and procedures to ensure inventory movements are completely and
accurately processed in a timely manner.  The Company now believes sufficient policies and
procedures are in place such that it is no longer reasonably possible that our consolidated financial
statements will be materially misstated as a result of ineffective controls over our perpetual inventory
system.
    
    Entity Level Controls  The Companys 2007 Annual Report on Form 10-K identified a material
weakness due to the Companys insufficient entity level controls , as defined by COSO, to ensure that
the Company meets its disclosure and reporting obligations.  Specifically, certain key financial
accounting and reporting personnel had an expansive scope of duties without the oversight of the
Board of Directors or Audit Committee that allowed for the creation, review, approval and processing
of financial data and authorization for the preparation of consolidation schedules and resulting
financial statements without independent review.  Additionally, certain documents lacked physical
documentation of management review and approval where such review and approval was required.  To
address this matter the Company implemented new policies and procedures related to the creation,
review, approval and processing of financial data and authorization for the preparation of consolidation
schedules and resulting financial statements to ensure that the scope of duties of key financial
accounting and reporting personnel are subject to appropriate oversight.  The Company now believes
sufficient policies and procedures are in place such that it is no
longer reasonably possible that our
consolidated financial statements will be materially misstated as a result of ineffective entity level
controls.
    
    Information Technology  The Companys 2007 Annual Report on Form 10-K identified a material
weakness due to the Companys lack of effective controls over the segregation of duties and access to
financial reporting systems.  Additionally, the Company lacked adequate personnel with relevant
expertise to maintain effective controls over information technology.  To address this matter the
Company hired new information technology personnel.  The Company also implemented new controls
over the segregation of duties and access to financial reporting systems.  The Company now believes
personnel are in place with an appropriate level of expertise and sufficient policies and procedures are
in place such that it is no longer reasonably possible that our consolidated financial statements will be
materially misstated as a result of ineffective information technology controls.
 Actions implemented or initiated after 2008 to address the material weakness described above that exists
as of December 31, 2008:
 
    
    The Company is taking the following actions to strengthen controls over financial reporting to ensure the timely filing of required interim
and annual financial reporting with the SEC include; (i) the hiring
of additional accounting and finance personnel, which will increase
the Companys ability to timely file interim and annual reports
with the SEC; and (ii) the filing of late interim and annual
financial reports with the SEC, which will reduce time spent by
accounting and finance personnel on these matters.
 
 Item 9B. Other Information
  44




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Directors and Executive Officers
  Name
    
    Age
    

    PositionJohn E. Harris (1)
    
    
    49
    
    
    Non-Executive Chairman of the BoardAllen D. Tilley (2)
    
    
    72
    
    
    Chief Executive Officer and DirectorPaul M. Zaidins (3)
    
    
    42
    
    
    President, Chief Operating Officer and
Chief Financial OfficerCraig R. Frank
    
    
    49
    
    
    DirectorAnthony B. Johnson
    
    
    49
    
    
    DirectorMary A. Stanford
    
    
    49
    
    
    DirectorJames T. Vanasek
    
    
    40
    
    
    Director
 
 (1)
    
    Mr. Harris was appointed Non-Executive Chairman in February 2008.(2)
    
    Mr. Tilley was appointed Chief Executive Officer in February 2008.(3)
    
    Mr. Zaidins was appointed to the additional positions of President and Chief Operating
Officer in February 2008. John E. Harris
 Allen D. Tilley.
 Paul M. Zaidins.
 Craig R. Frank.
 Anthony B. Johnston.
 45




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##### Table of Contents



Mary A. Stanford.
 James T. Vanasek.
  Audit Committee
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  Nominating and Governance Committee
    46




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##### Table of Contents



Item 11. Executive Compensation.
 Summary Compensation Table
  Stock
    
    Option
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Awards
    
    Awards (6)
    
    Compensation
    
    TotalPaul M. Zaidins
    
    
    2007
    
    
    $
    140,400
    
    
    $
    20,000
    
    
    
    
    
    
    $
    48,960
    
    
    
    
    
    
    $
    209,360President, Chief Operating
    
    
    2008
    
    
    
    166,698
    
    
    
    
    
    
    $
    3,000
    (4)
    
    
    
    
    
    $
    510
    (5)
    
    
    170,208Officer and Chief Financial
Officer (1)Edward F. Ruttenberg
    
    
    2007
    
    
    $
    160,000
    
    
    
    
    
    
    
    
    
    
    $
    32,640
    
    
    
    
    
    
    $
    192,800Director (2)
    
    
    2008
    
    
    
    18,462
    
    
    
    
    
    
    $
    3,400
    
    
    
    
    
    
    $
    126,977
    
    
    
    148,839Allen D. Tilley
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,840
    
    
    $
    1,840Chief Executive Officer and
    
    
    2008
    
    
    $
    85,141
    
    
    
    
    
    
    $
    20,400
    
    
    
    
    
    
    
    13,625
    
    
    
    119,166Director (3)
 
 (1)
    
    Mr. Zaidins served as the Companys controller before becoming the Companys Chief
Financial Officer in August 2007, and in February 2008 he was named the Companys President
and Chief Operating Officer.(2)
    
    Prior to January 31, 2008, Mr. Ruttenberg served as Chief Executive Officer, Chief Operating
Officer and Treasurer of the Company.Mr. Ruttenberg did not receive any separate compensation
for his services as a member of the Board of Directors in 2007. Amounts presented in Other
Compensation for 2008 represent cash compensation for service as a member of the Board of
Directors of $12,292 consulting fees of $48,000 for services rendered from February 1, 2008
through July 31, 2008 and deferred retirement payments of $66,667 from July 1, 2008 through
December 31, 2008 as well as $18 consisting of employer matching contributions to the 401(k)
plan.(3)
    
    Mr. Tilley was appointed as a director of the Company in October 2007 and was appointed as
Chief Executive Officer in February 2008. Amounts presented in Other Compensation for 2007
represent fees received by Mr. Tilley for his services as a member of the Board of Directors.
Amounts presented in Other Compensation for 2008, represent $85,141 for compensation for his
services as Chief Executive Officer as well as $13,625 received for his services as a member
of the Board of Directors.(4)
    
    Mr. Zaidins was awarded 3,333 shares of common stock at December 31, 2008 as part of a grant
of 10,000 shares that will vest over three years beginning December 31, 2008. Mr. Zaidins
will be awarded an additional 20,000 shares beginning with 10,000 shares on December 31, 2009
that will vest over three years and 10,000 shares on December 31, 2010 that will vest over
three years.(5)
    
    Consists of the Companys employer matching contribution to the 401(k) plan.(6)
    
    The valuation of stock option awards in this column represents the compensation cost of
awards recognized for financial statement purposes under Statement of Financial Accounting
Standards No. 123, as revised. The amounts include portions of stock option grants in 2007
that were expensed in 2007 based on the amortization schedule. See discussion under Note 10,
Stock-Based Compensationin the notes to the Companys consolidated financial statements under
Item 8 of this Annual Report on Form 10-K for a discussion of all assumptions made in
connection with determining the fair value of the awards. Employment Arrangements
  47




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##### Table of Contents



1999 Stock Incentive Plan
  Administration.
 Amount of Stock.
 Eligibility and Participation.
 Amendment or Termination.
 Stock Options.
    48




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##### Table of Contents



Stock Appreciation Rights.
  Change in Control.
 Outstanding Equity Awards at Fiscal Year-End
  Option Awards
    
    Stock AwardsNumber of SecuritesUnderlying UnexercisedOptions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity Incentive Plan AwardsMarket ValueNumber of
    
    of Shares or
    
    Number of
    
    Market ValueShares or Units
    
    Units of
    
    Unearned
    
    of UnearnedOption
    
    Option
    
    of Stock That
    
    Stock That
    
    Shares That
    
    Shares ThatGrant
    
    
    
    
    
    
    
    
    
    Exercise
    
    Expiration
    
    Have Not
    
    Have Not
    
    Have Not
    
    Have NotName
    
    Date
    
    Excercisable
    
    Unexerciseable
    
    Price
    
    Date
    
    Vested
    
    Vested
    
    Vested
    
    VestedPaul M. Zaidins
    
    
    09/06/07
    
    
    
    8,000
    
    
    
    4,000
    
    
    $
    4.95
    
    
    
    09/06/17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12/31/08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,667
    
    
    $
    10,667
    
    
    
    
    
    
    
    Edward F. Ruttenberg
    
    
    05/13/99
    
    
    
    10,000
    
    
    
    
    
    
    $
    8.875
    
    
    
    05/13/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11/18/99
    
    
    
    5,000
    
    
    
    
    
    
    
    6.50
    
    
    
    11/18/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    03/02/00
    
    
    
    10,000
    
    
    
    
    
    
    
    7.25
    
    
    
    03/02/10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Allen D.
Tilley
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Pension Benefits
  49




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##### Table of Contents



Present Value ofNumber of Years
    
    Accumulated
    
    Payments DuringName
    
    Plan Name
    
    Credited Service (#)
    
    Benefit
    
    Last Fiscal YearEdward F. Ruttenberg
    
    U.S. Pension Plan
    
    
    6.75
    
    
    $
    247,624
    
    
    
    Paul M. Zaidins
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Allen D. Tilley
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Pension benefit amounts listed in the table are not subject to deduction for Social Security
benefits.  Compensation of Directors
  Fees Earnedor Paid in
    
    Fees EarnedName
    
    Cash
    
    or Paid in Stock
    
    TotalCraig R. Frank
    
    $
    13,625
    
    
    $
    3,400
    
    
    $
    17,025John E. Harris
    
    
    31,958
    
    
    
    20,400
    
    
    
    52,358Anthony Johnston
    
    
    13,625
    
    
    
    3,400
    
    
    
    17,025Mary A. Stanford
    
    
    17,125
    
    
    
    10,200
    
    
    
    27,325James T. Vanasek
    
    
    13,625
    
    
    
    3,400
    
    
    
    17,025
  ,
  ,
 50




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  Amount andNature ofBeneficial
    
    Percent ofName and Address of Beneficial Owner
    
    Ownership(1)
    
    Class(2)VN Capital Fund I, L.P.(3)
    
    
    125,328
    
    
    
    7.9
    %198 Broadway, Suite 406
New York, New York 10038Santa Monica Partners, L.P.(4)
    
    
    121,478
    
    
    
    7.6
    %1865 Palmer Avenue
Larchmont, New York 10538Paul B. Luber
    
    
    104,627
    
    
    
    6.6
    %704 Tenth Avenue
Grafton, Wisconsin 53024Yorktown Avenue Capital, LLC (5)
    
    
    98,939
    
    
    
    6.2
    %15 East 5th Street, Suite 3200
Tulsa, OK 74103Edward F. Ruttenberg (6)
    
    
    55,841
    
    
    
    3.5
    %Paul M. Zaidins (7)
    
    
    34,499
    
    
    
    2.2
    %Craig R. Frank
    
    
    1,150
    
    
    
    *John E. Harris
    
    
    9,144
    
    
    
    *Anthony B. Johnston
    
    
    1,000
    
    
    
    *Mary A. Stanford
    
    
    3,644
    
    
    
    *Allen D. Tilley
    
    
    8,500
    
    
    
    *James T. Vanasek (8)
    
    
    127,272
    
    
    
    8.1
    %All directors and executive officers as a group (8 persons) (9)
    
    
    241,050
    
    
    
    15.2
    %
 
 *
    
    Less than 1%(1)
    
    Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934 and, unless otherwise indicated, represents securities for which the
beneficial owner has sole voting and investment power. Any securities held in the name of,
and under, the voting and investment power of a spouse of an executive officer or director
have been excluded.(2)
    
    Calculated based on 1,589,015 shares of common stock
outstanding on January 29, 2010, plus,
for each person or group, any securities that person or group has the right to acquire within
60 days pursuant to options, warrants, conversion privileges or other rights.(3)
    
    The general partners of VN Capital Fund I, L.P. are VN Capital Management, LLC and Joinville
Capital Management, LLC. VN Capital Management, LLC and Joinville Capital Management, LLC are
Delaware limited liability companies formed to be the general partners of VN Capital Fund I,
L.P. James T. Vanasek, a member of the Companys board of directors, and Patrick Donnell Noone
are the Managing Members of VN Capital Management, LLC and Joinville Capital Management, LLC.(4)
    
    The general partner of Santa Monica Partners, L.P. is SMP Asset Management LLC. Lawrence J.
Goldstein is the President and sole owner of SMP Asset Management, and may be deemed to
beneficially own these shares. Mr. Goldstein disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest therein. The amount listed does not include
4,288 shares owned directly by Mr. Goldstein and 5,600 shares owned by Lawrence J. Goldstein
IRA account (shares were rolled over from the L.J. Goldstein Company Incorporated Pension
Plan).(5)
    
    The managers of Yorktown Avenue Capital, LLC are Stephen J. Heyman and James F. Adelson. 51




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##### Table of Contents



(6)
    
    Includes 5,332 shares held by Rollform of Jamestown, Inc., a company in which Mr. Ruttenberg
and his immediate family own a 97% interest.(7)
    
    Includes 12,000 shares which Mr. Zaidins has the right to acquire under stock options at an
exercise price of $4.95.(8)
    
    Includes 1,944 shares held directly in Mr. Vanaseks name and 125,328 shares held by VN
Capital Management, LLC and Joinville Capital Management, LLC, of which Mr. Vanasek is a
Principal, with respect to which Mr. Vanasek disclaims beneficial ownership except to the
extent of his pecuniary interest, if any.(9)
    
    Includes 12,000 shares of common stock that may be acquired by the persons included in this
group within 60 days pursuant to options, warrants, conversion privileges or other rights.
Please see note (7) above. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services.
   2008
    
    
    2007Audit fees
    
    $
    194,000
    
    
    $
    299,000Audit-related fees
    
    
    41,000
    
    
    
    36,000Tax fees
    
    
    38,000
    
    
    
    69,000All other fees
    
    
    
    
    
    
    Total
    
    $
    273,000
    
    
    $
    404,000
 Audit Fees
  Audit-Related Fees
  Tax Fees
  Other Fees
  52




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Pre-Approval Policies and Procedures
  53




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules.
 The following documents are filed as part of this Annual Report on Form 10-K:1.
    
    The financial statements together with the report of Travis, Wolff & Company, LLP dated
February 1, 2010 are included in Item 8. Financial Statements and Supplementary Data in this
Annual Report on Form 10-K.2.
    
    Schedule IIValuation and Qualifying Accounts is included in this Annual Report on Form
10-K. 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.
    
    The following documents are filed or incorporated by reference as exhibits to this Annual
Report on Form 10-K:
 
 EXHIBIT INDEX
 Exhibit
    
    
    
    Prior Filing orNo.
    
    Document Description
    
    Notation of Filing Herewith3.1
    
    Certificate of Incorporation of American Locker Group Incorporated
    
    Exhibit to Form 10-K for
Year ended December 31,
19803.2
    
    Amendment to Certificate of Incorporation
    
    Form 10-C filed May 6, 19853.3
    
    Amendment to Certificate of Incorporation
    
    Exhibit to Form 10-K for
year ended December 31,
19873.4
    
    By-laws of American Locker Group Incorporated as amended and restated
    
    Exhibit to Form 10-K for
the year ended December
31, 20074.1
    
    Certificate of Designations of Series A Junior Participating Preferred Stock
    
    Exhibit to Form 10-K for
year ended December 31,
199910.1
    
    Form of Indemnification Agreement between American Locker Group
Incorporated and its directors and officers
    
    Exhibit to Form 8-K filed
May 18, 200510.2
    
    American Locker Group Incorporated 1999 Stock Incentive Plan
    
    Exhibit to Form 10-Q for
the quarter ended June 30,
199910.3
    
    Rights Agreement dated November 19, 1999 between American Locker Group
Incorporated and Chase Mellon Shareholder Services LLC
    
    Exhibit to Form 8-K filed
November 18, 199910.4
    
    Employment Agreement dated January 3, 2006 between American Locker Group
Incorporated and Edward F. Ruttenberg
    
    Exhibit to Form 8-K filed
January 4, 200610.5
    
    Form of Option Agreement under 1999 Stock Incentive Plan
    
    Exhibit to Form 10-K for
year ended December 31,
199910.6
    
    Loan Agreement dated March 6, 2007 between American Locker Group, F&M Bank
and Trust Company and Altreco, Inc., as Guarantor (Line of Credit)
    
    Exhibit to Form 10-K for
year ended December 31,
200510.7
    
    First Amended and Restated Loan Agreement dated March 5, 2008 between
American Locker Group, F&M Bank and Trust Company and Altreco, Inc., as
Guarantor (Line of Credit)
    
    Exhibit to Form 10-K for
the year ended December
31, 200710.8
    
    Loan Agreement dated March 6, 2007 between American Locker Group, F&M Bank
and Trust Company and Altreco, Inc., as Guarantor (Term Loan)
    
    Exhibit to Form 10-K for
year ended December 31,
200510.9
    
    Employment Agreement dated December 16, 2008 between American Locker Group
Incorporated and Paul M. Zaidins
    
    Filed herewith10.10
    
    Second Amended and Restated Loan Agreement dated March 5, 2009 between
American Locker Group, F&M Bank and Trust Company and Altreco, Inc., as
Guarantor (Line of Credit)
    
    Filed herewith
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##### Table of Contents



Exhibit
    
    
    
    Prior Filing orNo.
    
    Document Description
    
    Notation of Filing Herewith10.11
    
    Loan Agreement dated March 19, 2009 between American Locker Group and
F.F.F.C., Inc. (Mortgage)
    
    Filed herewith10.12
    
    Receivables Purchase Agreement dated July 28, 2009 between American Locker
Group and Gulf Coast Bank & Trust Co. (Factoring Agreement)
    
    Filed herewith10.13
    
    Contract of Sale in Lieu of Condemnation dated September 18, 2009 between
Altreco, Inc. and the City of Grapevine, Texas
    
    Filed herewith18.1
    
    Travis, Wolff & Company, LLP letter dated June 16, 2008 related to changes
in accounting principles
    
    Exhibit to Form 10-K for
the year ended December
31, 200721.1
    
    List of Subsidiaries
    
    Filed herewith23.1
    
    Consent of Travis, Wolff & Company, LLP
    
    Filed herewith31.1
    
    Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act of 1934
    
    Filed herewith31.2
    
    Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act of 1934
    
    Filed herewith32.1
    
    Certifications of Principal Executive Officer and Principal Financial
Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
    
    Filed herewith
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##### Table of Contents



SIGNATURES
  AMERICAN LOCKER GROUP INCORPORATEDFebruary 1, 2010
    By:
    /s/ Allen D. TilleyAllen D. TilleyChief Executive Officer  Signature
    
    Title
    
    Date/s/ John E. Harris

John E. Harris
    
    Non-Executive Chairman
    
    February 1, 2010/s/ Allen D. Tilley
    
    Chief Executive Officer
    
    February 1, 2010Allen D. Tilley
    
    (Principal Executive Officer)/s/ Paul M. Zaidins
    
    President, Chief Operating Officer and
    
    February 1, 2010Paul M. Zaidins
    
    Chief Financial Officer(Principal Financial and Accounting Officer)/s/ Craig R. Frank

Craig R. Frank
    
    Director
    
    February 1, 2010/s/ Anthony B. Johnston

Anthony B. Johnston
    
    Director
    
    February 1, 2010/s/ Mary A. Stanford

Mary A. Stanford
    
    Director
    
    February 1, 2010/s/ James T. Vanasek

James T. Vanasek
    
    Director
    
    February 1, 2010
 56




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##### Table of Contents



Schedule II
  Valuation and Qualifying Accounts
 AdditionsBalance at the
    
    Charged to CostsYear
    
    Description
    
    Beginning of Year
    
    and Expense
    
    Deductions
    
    Balance at End of YearYear ended 2008 
Allowance for Doubtful Accounts
    
    
    
    
    
    $
    233,000
    
    
    $
    60,000
    
    
    $
    (113,000
    )
    
    $
    180,000Reserve for Inventory Valuation
    
    
    
    
    
    
    1,435,000
    
    
    
    124,000
    
    
    
    (223,000
    )
    
    
    1,336,000Deferred income tax valuation allowance
    
    
    
    
    
    
    297,000
    
    
    
    418,000
    
    
    
    
    
    
    
    715,000Year ended 2007
Allowance for Doubtful Accounts
    
    
    
    
    
    $
    198,000
    
    
    $
    61,000
    
    
    $
    (26,000
    )
    
    $
    233,000Reserve for Inventory Valuation
    
    
    
    
    
    
    1,250,000
    
    
    
    185,000
    
    
    
    
    
    
    
    1,435,000Deferred income tax valuation allowance
    
    
    
    
    
    
    
    
    
    
    297,000
    
    
    
    
    
    
    
    297,000Year ended 2006
Allowance for Doubtful Accounts
    
    
    
    
    
    $
    120,000
    
    
    $
    87,000
    
    
    $
    (9,000
    )
    
    $
    198,000Reserve for Inventory Valuation
    
    
    
    
    
    
    1,003,000
    
    
    
    247,000
    
    
    
    
    
    
    
    1,250,000
 57