e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2009


o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

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 incorporation or organization)		(I.R.S. Employer Identification No.)

815 South Main Street, Grapevine, Texas		76051
(Address of principal executive offices)		(Zip code)

(817) 329-1600

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by a check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for a shorter period that the registrant was required to submit and post such files.) Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 1,589,015 shares of common stock, par value $1.00, issued and outstanding as of February 10, 2010

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve certain known and unknown risks and uncertainties, including, among others, those contained in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When used in this Quarterly Report on Form 10-Q, the words “anticipates,” “plans,” “believes,” “estimates,” “intends,” “expects,” “projects,” “will” and similar expressions may identify forward-looking statements, although not all forward-looking statements contain such words. Such statements, including, but not limited to, the Company’s statements regarding business strategy, implementation of its restructuring plan, competition, new product development, liquidity and capital resources are based on management’s beliefs, as well as on assumptions made by, and information currently available to, management, and involve various risks and uncertainties, some of which are beyond the Company’s control. The Company’s actual results could differ materially from those expressed in any forward-looking statement made by or on the Company’s behalf. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will in fact prove to be accurate. The Company has undertaken no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

The interim financial statements included herein are unaudited but reflect, in management’s opinion, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of financial position and the results of our operations for the interim periods presented.

The interim financial statements should be read in conjunction with the financial statements of American Locker Group Incorporated (the “Company”) and the notes thereto contained in the Company’s audited financial statements for the year ended December 31, 2008 presented in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (the “SEC”) on February 2, 2010.

Interim results are not necessarily indicative of results for the full fiscal year.

American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets


	September 30,			December 31,
	2009 (Unaudited)			2008
Assets
Current assets:
Cash and cash equivalents	$	537,277		$	279,984
Accounts receivable, less allowance for doubtful accounts of approximately $215,000 in 2009 and $180,000 in 2008		1,450,144			1,315,536
Inventories, net		2,210,782			2,396,185
Prepaid expenses		109,964			212,867
Income taxes receivable		1,409,696			1,599,892
Deferred income taxes		273,800			180,430

Total current assets		5,991,663			5,984,894

Property, plant and equipment:
Land		500			500,500
Buildings		393,098			3,503,515
Machinery and equipment		7,845,798			7,756,607

		8,239,396			11,760,622
Less allowance for depreciation and amortization		(6,962,207	)		(7,526,963	)

		1,277,189			4,233,659

Prepaid pension asset		—			39,442
Deferred income taxes		554,567			552,043


Total assets	$	7,823,419		$	10,810,038

The accompanying notes are an integral part of these consolidated financial statements.

American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets (continued)


	September 30,			December 31,
	2009 (Unaudited)			2008
Liabilities and stockholders’ equity
Current liabilities:
Line of credit	$	—		$	752,623
Current portion of long-term debt		—			173,354
Accounts payable		1,333,840			1,853,225
Accrued payroll and taxes		98,161			182,752
Income taxes payable		71,513			68,791
Deferred revenue		341,000			—
Other accrued expenses		544,344			151,841

Total current liabilities		2,388,858			3,182,586

Long-term liabilities:
Long-term debt, net of current portion		—			1,830,961
Pension, benefits and other long-term liabilities		1,217,179			1,169,306

		1,217,179			3,000,267

Total liabilities		3,606,037			6,182,853

Commitments and contingencies (Note 10)

Stockholders’ equity:
Common stock, $1.00 par value:
Authorized shares — 4,000,000
Issued shares — 1,763,849 in 2009 and 2008; Outstanding shares — 1,571,849 in 2009 and 2008		1,763,849			1,763,849
Other capital		238,636			233,841
Retained earnings		4,888,309			5,318,243
Treasury stock at cost, 192,000 shares		(2,112,000	)		(2,112,000	)
Accumulated other comprehensive loss		(561,412	)		(576,748	)

Total stockholders’ equity		4,217,382			4,627,185


Total liabilities and stockholders’ equity	$	7,823,419		$	10,810,038

The accompanying notes are an integral part of these consolidated financial statements.

American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Operations
(Unaudited)


	Nine Months Ended September 30,
	2009			2008

Net sales	$	8,654,627		$	11,230,060

Cost of products sold		5,581,190			8,219,261

Gross profit		3,073,437			3,010,799

Selling, general and administrative expenses		2,871,705			4,454,181
Restructuring charge		296,118			—
Pension settlement charge		209,807			—
Asset impairment		—			250,052

Total selling, general and administrative		3,377,630			4,704,233

Total operating loss		(304,193	)		(1,693,434	)

Other income (expense):
Interest income		33			11,020
Loss on sale of property, plant and equipment		(13,352	)		—
Other income (expense) — net		44,049			(23,487	)
Interest expense		(244,191	)		(112,287	)

Total other income (expense)		(213,461	)		(124,754	)

Loss before income taxes		(517,654	)		(1,818,188	)
Income tax (expense) benefit		87,720			(49,503	)

Net loss	$	(429,934	)	$	(1,867,691	)


Weighted average common shares:
Basic		1,571,849			1,562,483


Diluted		1,571,849			1,562,483


Loss per share of common stock:
Basic	$	(0.27	)	$	(1.20	)


Diluted	$	(0.27	)	$	(1.20	)


Dividends per share of common stock	$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Operations
(Unaudited)


	Three Months Ended September 30,
	2009			2008

Net sales	$	2,890,719		$	3,796,548

Cost of products sold		1,815,192			2,669,916

Gross profit		1,075,527			1,126,632

Selling, general and administrative expenses		903,218			1,342,399
Asset impairment		—			22,052

Total selling, general and administrative		903,218			1,364,451

Total operating income (loss)		172,309			(237,819	)

Other income (expense):
Interest income		—			1,808
Loss on sale of property, plant and equipment		(12,396	)		—
Other income (expense) — net		26,322			(7,536	)
Interest expense		(132,960	)		(37,931	)

Total other income (expense)		(119,034	)		(43,659	)

Income (loss) before income taxes		53,275			(281,478	)
Income tax expense		(21,264	)		(103,944	)

Net income (loss)	$	32,011		$	(385,422	)


Weighted average common shares:
Basic		1,571,849			1,568,516


Diluted		1,571,849			1,568,516


Income (loss) per share of common stock:
Basic	$	0.02		$	(0.25	)


Diluted	$	0.02		$	(0.25	)


Dividends per share of common stock	$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)


	Nine Months Ended September 30,
	2009			2008
Operating activities
Net loss		(429,934	)		(1,867,691	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		272,562			320,171
Loss on sale of property, plant and equipment		13,352			138
Asset impairment		—			250,052
Provision for uncollectible accounts		31,500			(17,796	)
Equity based compensation		4,795			62,903
Deferred income taxes		(99,494	)		104,176
Changes in assets and liabilities:
Accounts receivable		(283,540	)		(325,060	)
Inventories		185,578			17,534
Prepaid expenses		14,101			14,455
Accounts payable and accrued expenses		341,068			424,147
Pension and other benefits		97,446			(114,457	)
Income taxes		192,918			(14,437	)

Net cash provided by (used in) in operating activities		340,352			(1,145,865	)

Investing activities
Proceeds from sale of property, plant & equipement		2,747,000			24,702
Purchase of property, plant and equipment		(73,019	)		(293,531	)

Net cash provided by (used in) in investing activities		2,673,981			(268,829	)

Financing activities
Repayment of line of credit		(757,081	)		—
Long term debt borrowings		2,000,000			—
Long-term debt payments		(4,004,315	)		(99,350	)
Borrowings under line of credit		4,458			625,804

Net cash provided by (used in) financing activities		(2,756,938	)		526,454
Effect of exchange rate changes on cash		(102	)		(53,693	)

Net increase (decrease) in cash and cash equivalents		257,293			(941,933	)
Cash and cash equivalents at beginning of period		279,984			1,561,951

Cash and cash equivalents at end of period	$	537,277		$	620,018


Supplemental cash flow information:
Cash paid for:
Interest	$	206,139		$	117,260

Income taxes	$	—		$	6,973

The accompanying notes are an integral part of these consolidated financial statements.

American Locker Group Incorporated and Subsidiaries
Notes to Consolidated Financial Statements

Basis of Presentation

The accompanying unaudited consolidated financial statements of American Locker Group Incorporated (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company’s management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of such condensed financial statements, have been included. Operating results for the nine-month period ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.

The consolidated balance sheet at December 31, 2008 has been derived from the Company’s audited financial statements at that date, but does not include all of the financial information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the Company’s consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Additional risks and uncertainties not presently known or that the Company currently deems immaterial may also impair its business operations. Should one or more of these risks or uncertainties materialize, the Company’s business, financial condition or results of operations could be materially adversely affected.

Sale of Property

The Company is entitled to continue to occupy the facility, through December 31, 2010, at no cost. The City has further agreed to pay the Company’s relocation costs within the Dallas-Fort Worth area and to pay the Company’s real property taxes for the Facility through December 31, 2010. The Company received a $341,000 payment towards the moving costs at close which is recorded as “deferred revenue” in the Company’s consolidated balance sheet as of December 31, 2009. Proceeds of the sale were used to pay off the $2 million mortgage and for general working capital purposes.

Inventories

Inventories are valued at the lower of cost or market value. Cost is determined using the first-in first-out method (FIFO).

Inventories consist of the following:


	September 30, 2009		December 31, 2008
Finished products	$	109,040	$	77,665
Work-in-process		665,421		1,071,218
Raw materials		1,436,321		1,247,302

Net inventories	$	2,210,782	$	2,396,185

Income Taxes

Provision for income taxes is based upon the estimated annual effective tax rate. The effective tax rate for the three and nine months ended September 30, 2009 was 39.9% and 16.9%, respectively. The difference in the statutory rate and the effective rate is primarily due to a change in the valuation allowance of approximately $78,000 and $637,000 in 2009 and 2008 respectively.

Stockholders’ Equity

Changes in stockholders equity were due to changes in comprehensive loss as well as stock option compensation expense in 2009. Stock option compensation expense was recorded as an increase in other capital of $4,795. Changes in stockholders’ equity were also due to changes in comprehensive loss of $414,778.

6.		Comprehensive Income (Loss)

		The following table summarizes net income (loss) plus changes in accumulated other comprehensive loss, a component of stockholders’ equity in the consolidated balance sheet.


	Nine Months Ended September 30,
	2009			2008


Net loss	$	(429,934	)	$	(1,867,691	)
Foreign currency translation adjustments		27,467			(80,751	)
Minimum pension liability adjustments, net of tax effect of $(8,208) in 2009 and $6,366 in 2008		(12,311	)		9,549

Total comprehensive loss	$	(414,778	)	$	(1,938,893	)


	Three Months Ended September 30,
	2009			2008


Net loss	$	32,011		$	(385,422	)
Foreign currency translation adjustments		15,580			(27,694	)
Minimum pension liability adjustments, net of tax effect of $(4,440) in 2009 and $3,012 in 2008		(6,658	)		4,518

Total comprehensive income (loss)	$	40,933		$	(408,598	)

7.		Pension Benefits

		The following sets forth the components of net periodic employee benefit cost of the Company’s defined benefit pension plans for the nine and three months ended September 30, 2009 and 2008:


	Nine Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2009			2008			2009			2008

Service cost	$	15,570		$	15,750		$	—		$	26,525
Interest cost		126,750			145,500			39,238			49,336
Expected return on plan assets		(101,250	)		(147,750	)		(47,473	)		(62,488	)
Net actuarial loss		41,250			—			3,743			7,505
Pension settlement charge		—			—			209,807			—

Net periodic benefit cost	$	82,320		$	13,500		$	205,315		$	20,878


	Three Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2009			2008			2009			2008

Service cost	$	5,250		$	5,250		$	—		$	8,771
Interest cost		42,250			48,500			13,495			16,314
Expected return on plan assets		(33,750	)		(49,250	)		(16,327	)		(20,663	)
Net actuarial loss		13,750			—			1,287			—

Net periodic benefit cost	$	27,500		$	4,500		$	(1,545	)	$	6,904

		The Company has frozen the accrual of any additional benefits under the U.S. defined benefit pension plan effective July 15, 2005.

		Effective January 1, 2009, the Company converted its pension plan for its Canadian employees the (“Canadian Plan”) from a noncontributory defined benefit plan to a defined contribution plan. Until the conversion, benefits for the salaried employees were based on specified percentages of the employees’ monthly compensation. The conversion of the Canadian plan has the effect of freezing the accrual of future defined benefits under the plan. Under the defined contribution plan, the Company will contribute 3% of employee compensation plus 50% of employee elective contributions up to a maximum contribution of 5% of employee compensation.

		As a consequence of the Company’s staff reductions at its Canadian subsidiary, the Company recorded a non-cash pension settlement charge of $209,807 in the first quarter of 2009.

		For additional information on the defined benefit pension plans, please refer to Note 8 of the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

8.		Earnings Per Share

		The Company reports earnings per share in accordance with the Statement of Financial Accounting Standards No. 128, “Earnings Per Share.” The following table sets forth the computation of basic and diluted earnings per common share:


	Nine Months Ended September 30,
	2009			2008


Numerator:
Net loss	$	(429,934	)	$	(1,867,691	)


Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,571,849			1,562,483


Loss per common share (basic and diluted):	$	(0.27	)	$	(1.20	)


	Three Months Ended September 30,
	2009		2008


Numerator:
Net income (loss)	$	32,011	$	(385,422	)


Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,571,849		1,568,516


Income (loss) per common share (basic and diluted):	$	0.02	$	(0.25	)

The Company had 15,000 and 40,000 stock options outstanding at September 30, 2009 and 2008, respectively, which were not included in the common share computation for loss per share, as the common stock equivalents were anti-dilutive.

9.		Debt

		On March 5, 2009, the Company renewed its $750,000 revolving line of credit with F&M Bank and Trust Company. The loan accrued interest at prime plus 75 basis points (0.75%). The revolving line of credit matured on June 5, 2009 and was secured by all accounts receivable, and inventory. The credit agreement underlying the revolving line of credit required compliance with certain covenants.

		On March 19, 2009, the Company obtained a new $2 million mortgage loan from F.F.F.C., Inc. which was used to repay the existing mortgage loan with the F&M Bank & Trust Co. Interest on the loan was 12% per annum and payable monthly. The loan was scheduled to mature on March 20, 2011. This mortgage loan was paid in full on September 18, 2009 in conjunction with the sale of the Company’s headquarters and primary manufacturing facility to the City of Grapevine.

		On July 29, 2009, the Company entered into a receivables purchase agreement (the “Agreement”) with Gulf Coast Bank and Trust Company (“GCBT”), pursuant to which the Company will sell certain of its accounts receivable to GCBT. GCBT will not purchase receivables from the Company if the total of all outstanding receivables held by it, at any time, exceeds $2,500,000. In addition, if a receivable is determined to be uncollectible or otherwise ineligible, GCBT may require the Company to repurchase the receivable.

		The Agreement calls for the Company to pay a daily variable discount rate, which is the greater of prime plus one and one-half of one percent (1.50%) or six and one-half of one percent (6.5%) per annum, computed on the amount of outstanding receivables held by GCBT, for the period during which such receivables are outstanding. The Company will also pay a fixed discount percentage of 0.2% for each ten-day period during which receivables held by GCBT are outstanding.

		Proceeds from the sales of receivables under the Agreement were used to repay the Company’s existing $750,000 revolving line of credit with the F&M Bank & Trust Co. The Company has granted to GCBT a security interest in certain assets to secure its obligations under the Agreement. The Agreement is terminable at any time by either the Company or GCBT upon the giving of notice. The Agreement expires on July 29, 2010.

10.		Restructuring

		As a result of the economic crisis, the Company implemented a restructuring in January 2009 to rationalize its cost structure in an uncertain economic environment. The restructuring included the elimination of approximately 50 permanent and temporary positions as well as an across the board 10% reduction in wages and a 15% reduction in the base fee paid to members of the Company’s Board of Directors. These reductions (representing approximately 40% of the Company’s workforce) resulted in severance and payroll charges during the nine months ended September 30, 2009 of approximately $264,000. These payments are expected to be made over the next fifteen months. Additionally, the Company expects to incur $100,000 which has not been accrued for when it relocates its Ellicottville, New York operations to Texas in the first half of 2011. The restructuring and relocation is expected to result in approximately $1,400,000 in annual savings. To implement the restructuring plan, management anticipates incurring aggregate impairment charges and costs of $396,000. Accrued restructuring expenses are included in “Other accrued liabilities” in the Company’s consolidated balance sheet.

		The following table analyzes the changes incurred related to the Company’s reserve with respect to the restructuring plan which are included in “other accrued liabilities” in the Company’s consolidated balance sheet as of December 31, 2008 to September 30, 2009:


	December							September
	31, 2008		Expense		Payment/Charges			30, 2009
Severance	$	—	$	264,000	$	(96,000	)	$	168,000
Professional fees		—		20,000		—		$	20,000
Other		—		12,000		—		$	12,000


Total	$	—	$	296,000	$	(96,000	)	$	200,000

The following table analyzes the changes in the Company’s reserve with respect to the restructuring plan for the three months ended September 30, 2009:


	June 30,							September
	2009		Expense		Payment/Charges			30, 2009
Severance	$	180,000	$	—	$	(12,000	)	$	168,000
Professional fees		20,000		—		—		$	20,000
Other		12,000		—		—		$	12,000


Total	$	212,000	$	—	$	(12,000	)	$	200,000

11.		Commitments and Contingencies

		In July 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 and alleged migration from property located in Gowanda, New York which was sold by the Company to Gowanda Electronics Corporation prior to 1980. In March 2001, the NYSDEC issued a Record of Decision with respect to the Gowanda site in which it set forth a remedy, including 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, which is intended to intercept any contaminates, and implementation of an on-going monitoring system. The NYSDEC has estimated that its selected remediation plan 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 30-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 plan. This matter has not been litigated, and at the present time the Company has only been identified as a PRP. The Company also believes that 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 implementation 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.

		Beginning in September 1998 the Company has been named as an additional defendant in approximately 200 cases pending in state court in Massachusetts and 1 in the state of Washington. The plaintiffs in each case assert that a division of the Company manufactured and furnished components containing asbestos to a shipyard during the period from 1948 to 1972 and that injury 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. Settlement agreements have been entered in approximately 27 cases with funds authorized and provided by the Company’s insurance carrier. Further, over 125 cases 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 September 8, 2009, the most recent date data is available, is approximately 56 cases.

		While the Company cannot estimate potential damages or predict the ultimate resolution of these asbestos cases as 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.

		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.

12.		Subsequent Events

		Management has evaluated subsequent events through February 12, 2010 the date the consolidated financial statements were issued.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Effect of New Accounting Guidance

In June 2009 the SEC released “Update of codification of Staff Accounting Bulletins”. This update amends or rescinds existing portions of the interpretive guidance included in the SEC’s Staff Accounting Bulletin Series to be consistent with the authoritative accounting guidance of SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”), primarily codified into Topic 805 in the ASC and SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”), primarily codified

into ASC 810-10-65. This update is effective for the Company beginning with the first fiscal quarter of 2010 and will be utilized in conjunction with future business combinations and non-controlling interests.

Results of Operations — the Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008

Overall Results and Outlook

The financial market and economic turmoil and related disruption of the credit markets has caused a significant slowdown in new construction of multifamily and commercial buildings during the second half of 2008 and continuing through 2009. The economic crisis has also negatively impacted our customers in the travel and recreation industries. New construction in these markets is a key driver of revenue for the Company. Consolidated net sales for the first nine months of 2009 decreased $2,575,433 to $8,654,627 when compared to net sales of $11,230,060 for the same period of 2008, representing a 22.9% decline. This decrease was attributable primarily to the negative effects of the credit crisis as described above. Pre-tax operating results improved to a pre-tax loss of $517,654 for the first nine months of 2009 from a reported pre-tax loss of $1,818,188 for the first nine months of 2008. After tax operating results improved to a net loss of $429,934 for the first nine months of 2009 compared to a net loss of $1,867,691 for the first nine months of 2008. Net loss per share (basic and diluted) was $(0.27) for the first nine months of 2009, an improvement from a net loss per share (basic and diluted) of $1.20 for the same period in 2008.

Net Sales

Consolidated net sales for the nine months ended September 30, 2009 were $8,654,627, a decrease of $2,575,433, or 22.9% compared to net sales of $11,230,060 for the same period of 2008. Sales of non-postal lockers for the nine months ended September 30, 2009 were $5,344,263, a decrease of $1,757,180, or 24.7%, compared to sales of $7,101,443 for the same period of 2008. The non-postal locker decrease is primarily attributable to lower revenue from the Company’s Canada Locker Company, Ltd. (“Canadian Locker”) subsidiary. Canadian Locker revenue for the first nine months of 2009 was approximately $894,000 less than revenue during the same period in 2008. The remaining decrease in non-postal locker sales is attributable to the effects of the economic crisis described above. Sales of postal lockers were $3,310,364 for the nine months ended September 30, 2009, a decrease of $818,253, or 19.8%, compared to sales of $4,128,617 for the same period of 2008. Lower postal locker sales were due primarily to lower sales of post office boxes to the United States Postal Service (“USPS”) and private customers. Post office box sales were negatively impacted by fewer USPS post office openings as well as fewer private mail store openings in 2009 as compared to 2008.


	Nine Months Ended September 30,				Percentage
	2009		2008		Decrease
Postal Lockers	$	3,310,364	$	4,128,617		(19.8	)%
Non-Postal Lockers		5,344,263		7,101,443		(24.7	)%

Total		8,654,627		11,230,060		(22.9	)%

Cost of Products Sold

Cost of products sold for the nine months ended September 30, 2009 was $5,581,190 or 64.5% of net sales compared to $8,219,261, or 73.2% of net sales for the same period of 2008, a decrease of $2,638,071, or 32.1%. The decrease in the cost of sales as a percentage of sales was primarily due to reduced overhead expenses as a result of the Company’s restructuring plan as well as reduced raw material costs. The transition to the lower cost second generation Horizontal 4c mailbox also contributed to the decrease in cost of sales as a percentage of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2009 were $2,871,705 or 33.2% of net sales, compared to $4,454,181 or 39.7% of net sales for the same period of 2008, a reduction of $1,582,476, or 35.5%. This decrease was primarily due to reduced personnel costs related to the Company’s restructuring plan. Freight expenses decreased approximately $319,000 for the nine month period ended September, 2009, as compared to the same period in 2008, as a result of the decreased net sales coupled with lower negotiated freight rates.

Restructuring Costs

As a result of the economic crisis, the Company implemented a restructuring in January 2009 to rationalize its cost structure in an uncertain economic environment. The restructuring included the elimination of approximately 50 permanent and temporary positions

as well as an across the board 10% reduction in wages. These reductions were approximately 40% of the Company’s workforce, resulted in severance and payroll tax charges during the nine months ended September 30, 2009 of approximately $264,000. These payments are expected to be made over the next fifteen months. Additionally, the Company will relocate its Ellicottville, New York operations to be co-located with its Grapevine, Texas operations in the first half of 2011. The restructuring will result in approximately $1,400,000 in annual savings. To implement the restructuring plan, management anticipates incurring aggregate impairment charges and costs of $396,000. Refer to note 10 in Item 1 of the Quarterly Report on Form 10-Q for more detail related to restructuring costs incurred during the first nine months of 2009.

Pension Settlement Charge

As a consequence of the Company’s staff reductions at its’ Canadian subsidiary, the Company recorded a non-cash pension settlement charge of $209,807 during the first nine months of 2009. Refer to note 7 in Item 1 of the Quarterly Report on Form 10-Q for detail related to pension benefit costs incurred during 2009.

Asset Impairment

Due to the inadequate profitability of the current Horizontal 4c design, management decided during the second quarter of 2008 to redesign the Horizontal 4c to reduce manufacturing costs. Management determined that the decision to redesign the Horizontal 4c impaired the Company’s investment in tooling and inventory related to the current Horizontal 4c design. Therefore, the Company, in accordance with the provisions of Financial Accounting Standards Board Statement 144,“Accounting for the Impairment or Disposal of Long Lived Assets,”, primarily codified into ASC 360, recorded impairment charges totaling $250,052 during the second and third quarters of 2008.

Loss on Sale of Property, Plant and Equipment

Loss on sale of property, plant and equipment for the nine months ended September 30, 2009 was $13,352. The loss is primarily attributable to the Company recorded on the sale of its property in Grapevine, Texas. Refer to Note 2 in Item 1 of the Quarterly Report on Form 10-Q for detail related to the sale of property.

Interest Expense

Interest expense for the nine months ended September 30, 2009 was $244,191, an increase of $131,904, or 117.5% compared to interest expense of $112,287 for the same period of 2008. Increased interest expense was due to the higher interest rate of 12% on the F.F.F.C., Inc. mortgage and the higher interest rate on the Gulf Coast Bank & Trust Company receivables purchase agreement as well as loan origination costs in 2009 as compared to the interest rate on the F&M Bank & Trust Co. loans in 2008.

Income Taxes

For the nine months ended September 30, 2009, the Company recorded an income tax benefit of $87,720 compared to an income tax expense of $49,503 for the same period of 2008. The Company’s effective tax rate on earnings was approximately 16.9% for the first nine months of 2009 and 2.7% in the first nine months of 2008.

Non-GAAP Financial Measure — Adjusted EBITDA

The Company presents the non-GAAP financial performance measure of Adjusted EBITDA because management uses this measure to monitor and evaluate the performance of the business and believes the presentation of this measure will enhance investors’ ability to analyze trends in the Company’s business, evaluate the Company’s performance relative to other companies, and evaluate the Company’s ability to service debt.

Adjusted EBITDA is not a presentation made in accordance with GAAP and our computation of Adjusted EBITDA may vary from other companies. Adjusted EBITDA should not be considered as an alternative to operating earnings or net income as a measure of operating performance. In addition, Adjusted EBITDA is not presented as and should not be considered as an alternative to cash flows as a measure of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA (as computed by the Company):

	•		Does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

	•		Does not reflect changes in, or cash requirements for, our working capital needs;

	•		Does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

	•		Excludes tax payments that represent a reduction in available cash;

	•		Excludes non-cash equity based compensation;

	•		Excludes one-time restructuring costs and pension settlement costs;

	•		Excludes one-time expenses and equity compensation; and

	•		Does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.

The following table reconciles earnings as reflected in our condensed consolidated statements of operations prepared in accordance with GAAP to Adjusted EBITDA:


	Nine Months Ended September 30,
	2009			2008
Net loss	$	(429,934	)	$	(1,867,691	)
Income tax expense (benefit)		(87,720	)		49,503
Interest expense		244,191			112,287
Depreciation and amortization expense		272,562			320,171
Loss on sale of property		13,352			—
Equity based compensation		4,795			62,903
Asset impairment		—			250,052
Restructuring costs		296,118			—
Pension settlement costs		209,807			—

Adjusted EBITDA	$	523,171		$	(1,072,637	)
Adjusted EBITDA as a percentage of revenues		6.0	%		(9.6	%)

Results of Operations — Three Months Ended September 30, 2009 Compared to the Three Months Ended September 30, 2008

Overall Results and Outlook

Consolidated net sales for the third quarter of 2009 reflect a decline in net sales of $905,829 to $2,890,719 when compared to net sales of $3,796,548 for the same period of 2008, representing a 23.9% decline. This decrease was attributable primarily to the negative effects of the credit crisis as described above. Pre-tax operating results improved to pre-tax income of $53,275 for the three months ended September 30, 2009 from a reported pre-tax loss of $281,478 for the three months ended September 30, 2008. After tax operating results improved to net income of $32,011 for the three months ended September 30, 2009 compared to a net loss of $385,422 for the three months ended September 30, 2008. Net income per share (basic and diluted) was $0.02 for the three months ended September 30, 2009, up from a net loss per share (basic and diluted) of $0.25 for the same period in 2008.

Net Sales

Consolidated net sales for the three month period ended September 30, 2009 were $2,890,719, a decrease of $905,829, or 23.9%, compared to net sales of $3,796,548 for the same period of 2008. The non-postal locker decrease is primarily attributable to lower revenue from the Company’s Canada Locker Company, Ltd. (“Canadian Locker”) subsidiary. Canadian Locker revenue for the three months ended September 30, 2009 was approximately $280,000 less than revenue during the same period in 2008. Additionally, sales of replacement parts and keys decreased approximately $323,000 for the three months ended September 30, 2009 as compared to the same period in 2008. Sales of postal lockers were $1,159,954 for the three months September 30, 2009, a decrease of $252,974, or 17.9%, compared to sales of $1,412,928 for the same period of 2008. Lower postal locker sales were due primarily to lower sales of post office boxes to the United States Postal Service (“USPS”) and private customers. Post office box sales were negatively impacted by fewer USPS post office openings as well as fewer private mail store openings in 2009 as compared to 2008.


	Three Months Ended
	September 30,				Percentage
	2009		2008		Decrease
Postal Lockers	$	1,159,954	$	1,412,928		(17.9	)%
Non-Postal Lockers		1,730,765		2,383,620		(27.4	)%

Total		2,890,719		3,796,548		(23.9	)%

Cost of Products Sold

Cost of products sold for the third quarter of 2009 was $1,815,192, or 62.8% of net sales, compared to $2,669,916 or 70.3% of net sales, for the same period of 2008, a decrease of $854,724 or 32.0%. The decrease in the cost of sales as a percentage of sales was primarily due to reduced overhead expenses as a result of the Company’s restructuring plan as well as reduced raw material costs. The transition to the lower cost second generation Horizontal 4c mailbox also contributed to the decrease in cost of sales as a percentage of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the third quarter of 2009 totaled $903,218 or 31.2% of net sales, compared to $1,342,399 or 35.4% during the same period of 2008, a reduction of $439,181 or 32.8%. This decrease was primarily due to reduced personnel costs related to the Company’s restructuring plan. Freight expenses decreased approximately $110,000 for the three month period ended September 30, 2009, as compared to the same period in 2008, as a result of the decreased net sales coupled with lower negotiated freight rates.

Asset Impairment

Due to the inadequate profitability of the Horizontal 4c design, management decided during the second quarter of 2008 to redesign the Horizontal 4c to reduce manufacturing costs. Management determined that the decision to redesign the Horizontal 4c impaired the Company’s investment in tooling and inventory related to the current Horizontal 4c design. The Company updated their impairment analysis as of September 30, 2008 impairing an additional $22,052 of inventory related to the 4c. In total, the Company has recorded impairment of $250,052 in accordance with accounting guidance regarding,“Accounting for the Impairment or Disposal of Long Lived Assets”, primarily codified into ASC 360.

Loss on Sale of Property, Plant and Equipment

Loss on sale of property, plant and equipment for the nine months ended September 30, 2009 was $12,396. The loss is attributable to the Company recorded on the sale of its property in Grapevine, Texas. Refer to Note 2 in Item 1 of the Quarterly Report on Form 10-Q for detail related to the sale of property.

Interest Expense

Interest expense for the third quarter of 2009 was $132,960 compared to $37,931 for the same period of 2008. Increased interest expense was due to the higher interest rate of 12% on the F.F.F.C., Inc. mortgage and the higher interest rate on the Gulf Coast Bank & Trust Company receivables purchase agreement as well as loan organization costs in 2009 as compared to the interest rate on the F&M Bank & Trust Co. loans in 2008.

Income Taxes

For the third quarter of 2009, the Company recorded an income tax expense of $21,264 compared to an income tax expense of $103,944 for the same period of 2008. The Company’s effective tax rate on earnings was approximately 39.9% and 37% in the third quarter of 2009 and 2008, respectively.

Non-GAAP Financial Measure — Adjusted EBITDA

flows as a measure of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA (as computed by the Company):

	•		Does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

	•		Does not reflect changes in, or cash requirements for, our working capital needs;

	•		Does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

	•		Excludes tax payments that represent a reduction in available cash;

	•		Excludes non-cash equity based compensation;

	•		Excludes one-time restructuring costs and pension settlement costs;

	•		Excludes one-time expenses and equity compensation; and

	•		Does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.

The following table reconciles earnings as reflected in our condensed consolidated statements of operations prepared in accordance with GAAP to Adjusted EBITDA:


	Three Months Ended
	September 30,
	2009			2008
Net income (loss)	$	32,011		$	(385,422	)
Income tax expense		21,264			103,944
Interest expense		132,960			37,931
Depreciation and amortization expense		85,663			97,357
Loss on sale of equipment		12,396			1,282
Equity based compensation		1,201			5,283
Asset impairment		—			22,052

Adjusted EBITDA	$	285,495		$	(117,573	)
Adjusted EBITDA as a percentage of revenues		9.9	%		(3.1	%)

Liquidity and Sources of Capital

The Company’s liquidity is reflected by its current ratio, which is the ratio of current assets to current liabilities, and its working capital, which is the excess of current assets over current liabilities. These measures of liquidity were as follows:


	As of September 30,		As of December 31,
	2009		2008
Current Ratio		2.5 to 1		1.9 to 1
Working Capital .	$	3,602,805	$	2,802,308

The increase in working capital of $800,497 relates primarily to the sale of the Company’s facility in Grapevine, Texas and the resulting payoff of short term debt.

On March 5, 2009, the Company renewed its $750,000 revolving line of credit with F&M Bank and Trust Company. The loan accrued interest at prime plus 75 basis points (0.75%). The revolving line of credit matured on June 5, 2009 and was secured by all accounts receivable, and inventory. The credit agreement underlying the revolving line of credit required compliance with certain covenants.

On March 19, 2009, the Company obtained a new $2 million mortgage loan from F.F.F.C., Inc. which was used to repay the existing mortgage loan with the F&M Bank & Trust Co. Interest on the loan was 12% per annum and is payable monthly. The loan was scheduled to mature on March 20, 2011. This mortgage loan was paid in full on September 18, 2009 in conjunction with the sale of the Company’s headquarters and primary manufacturing facility to the City of Grapevine.

On July 29, 2009, the Company entered into a receivables purchase agreement (the “Agreement”) with Gulf Coast Bank and Trust Company (“GCBT”), pursuant to which the Company will sell certain of its accounts receivable to GCBT. GCBT will not purchase

receivables from the Company if the total of all outstanding receivables held by it, at any time, exceeds $2,500,000. In addition, if a receivable is determined to be uncollectible or otherwise ineligible, GCBT may require the Company to repurchase the receivable.

The Agreement calls for the Company to pay a daily variable discount rate, which is the greater of prime plus one and one-half of one percent (1.50%) or six and one-half of one percent (6.5%) per annum, computed on the amount of outstanding receivables held by GCBT, for the period during which such receivables are outstanding. The Company will also pay a fixed discount percentage of 0.2% for each ten-day period during which receivables held by GCBT are outstanding.

Proceeds from the sales of receivables under the Agreement were used to repay the Company’s existing $750,000 revolving line of credit with the F&M Bank & Trust Co. The Company has granted to GCBT a security interest in certain assets to secure its obligations under the Agreement. The Agreement is terminable at any time by either the Company or GCBT upon the giving of notice. The Agreement expires July 29, 2010.

On September 18, 2009, the Company closed on the sale of its headquarters and primary manufacturing facility to the City of Grapevine. The Company estimates the total value of the Agreement at $3,500,000. Under the Agreement, the City paid a purchase price of $2,747,000. In addition, the Company is entitled to continue to occupy the facility, through December 31, 2010, at no cost. The City has further agreed to pay the Company’s relocation costs within the Dallas-Fort Worth area and to pay the Company’s real property taxes for the Facility through December 31, 2010. Proceeds of the sale were used to pay off the $2 million mortgage and for general working capital purposes.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Raw Materials

The Company does not have any long-term commitments for the purchase of raw materials. With respect to its products that use steel and aluminum, 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. Present sources of supplies and raw materials incorporated into the Company’s products are generally considered to be adequate and are currently available in the marketplace.

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 represented only 14.4% of the Company’s aggregate net assets at September 30, 2009. Presently, management does not hedge its foreign currency risk.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including its principal executive officer and principal accounting officer, of the effectiveness of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of September 30, 2009. These disclosure controls and procedures are designed to provide reasonable assurance to the Company’s management and board of directors that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to its management, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, including consideration of the existence of the material weaknesses discussed below, the principal executive officer and principal accounting officer of the Company have concluded that the Company’s disclosure controls and procedures as of March 31, 2009 were not effective, at the reasonable assurance level, to ensure that (a) material information relating to the Company is accumulated and made known to the Company’s management, including its principal executive officer and principal accounting officer, to allow timely decisions regarding required disclosure and (b) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

In connection with the preparation of the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2008, which was filed late with the SEC on February 2, 2010, a material weaknesses was identified in Item 9A(T) of that Form 10-K.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Taking into account the communication dated February 1, 2010 by the Company’s independent registered

public accounting firm to the Audit Committee of the Board of Directors, management has identified the following material weakness in the Company’s 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.

Based on management’s assessment, and because of the material weakness described above, we have concluded that our internal control over financial reporting was not effective as of December 31, 2008.

Changes in Internal Control over Financial Reporting

We have developed and are implementing remediation plans to address our material weakness. We have taken the following actions to improve our internal control over financial reporting:

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 which include; (i) the hiring of additional accounting and finance personnel 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 will reduce time spent by accounting and finance personnel on these matters.

PART II — OTHER INFORMATION

Item 6. Exhibits.

Except as otherwise indicated, the following documents are filed as part of this Quarterly Report on Form 10-Q:


Exhibit
Number		Description

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.

32.1		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.


	AMERICAN LOCKER GROUP INCORPORATED
February 12, 2010	By:	/s/ Allen D. Tilley
		Allen D. Tilley
		Chief Executive Officer


February 12, 2010	By:	/s/ Paul M. Zaidins
		Paul M. Zaidins
		President, Chief Operating Officer and Chief Financial Officer

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and



Date: February 12, 2010	By:	/s/ Allen D. Tilley
		Allen D. Tilley
		Chief Executive Officer

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and



Date: February 12, 2010	By:	/s/ Paul M. Zaidins
		Paul M. Zaidins
		President, Chief Operating Officer and Chief Financial Officer

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	Page No.

FORWARD-LOOKING INFORMATION		3

PART I — FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
Consolidated Balance Sheets as of September 30, 2009(Unaudited) and December 31, 2008		4
Consolidated Statements of Operations (Unaudited) for the Nine Months Ended September 30, 2009 and September 30, 2008		6
Consolidated Statements of Operations (Unaudited) for the Three Months Ended September 30, 2009 and September 30, 2008		7
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2009 and September 30, 2008		8
Notes to Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk		19
Item 4. Controls and Procedures		19

PART II — OTHER INFORMATION		20
Item 6. Exhibits		20

SIGNATURES		21
EX-31.1
EX-31.2
EX-32.1

	1.		I have reviewed this Quarterly Report on Form 10-Q of American Locker Group Incorporated;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably like to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	1)		the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.