10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2012

¨ 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.)
2701 Regent Blvd., Suite 200 DFW Airport, TX	75261
(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  x    No  ¨

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  x    No  ¨

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	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller Reporting Company	x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 1,683,985 shares of common stock, par value $1.00, issued and outstanding as of November 14, 2012.

TABLE OF CONTENTS

	Page No.
FORWARD-LOOKING INFORMATION		3
PART I — FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
Consolidated Balance Sheets (Unaudited) as of September 30, 2012 and December 31, 2011		4
Consolidated Statements of Operations (Unaudited) for the Nine Months Ended September  30, 2012 and 2011		6
Consolidated Statements of Operations (Unaudited) for the Three Months Ended September  30, 2012 and 2011		7
Consolidated Statements of Comprehensive Income (Unaudited) for the Nine and Three Months Ended September 30, 2012 and 2011		8
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September  30, 2012 and 2011		9
Notes to Consolidated Financial Statements		10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		20
Item 4. Controls and Procedures		20
PART II — OTHER INFORMATION		21
Item 6. Exhibits		21
SIGNATURES		22

2

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, 2011 presented in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2012.

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

3

American Locker Group Incorporated and Subsidiaries

Consolidated Balance Sheets

	September 30,			December 31,
	2012 (Unaudited)			2011
Assets
Current assets:
Cash and cash equivalents	$	275,907		$	525,632
Accounts receivable, less allowance for doubtful accounts of approximately $166,000 in 2012 and $149,000 in 2011		2,046,314			1,754,959
Inventories, net		2,703,780			2,845,563
Prepaid expenses		459,626			330,403
Deferred income taxes		336,951			278,437
Total current assets		5,822,578			5,734,994
Property, plant and equipment:
Land		500			500
Buildings and leasehold improvements		953,055			754,922
Machinery and equipment		10,989,557			10,891,820
		11,943,112			11,647,242
Less allowance for depreciation and amortization		(8,689,152	)		(8,087,988	)
		3,253,960			3,559,254
Other noncurrent assets		47,269			47,259
Deferred income taxes		720,620			727,118
Total assets	$	9,844,427		$	10,068,625

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

4

American Locker Group Incorporated and Subsidiaries

Consolidated Balance Sheets (continued)

	September 30,			December 31,
	2012 (Unaudited)			2011
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,689,808		$	1,627,489
Customer deposits		202,587			398,167
Commissions, salaries, wages, and taxes thereon		111,516			162,507
Income taxes payable		3,397			69,718
Revolving line of credit		1,050,000			700,000
Current portion of long-term debt		200,000			200,000
Other accrued expenses		669,143			491,188
Total current liabilities		3,926,451			3,649,069
Long-term liabilities:
Long-term debt, net of current portion		450,000			600,000
Pension and other benefits		1,937,185			2,051,054
		2,387,185			2,651,054
Total liabilities		6,313,636			6,300,123
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $1.00 par value:
Authorized shares – 4,000,000
Issued shares – 1,875,985 in 2012 and 1,871,999 in 2011; Outstanding shares – 1,683,985 in 2012 and 1,679,999 in 2011		1,875,985			1,871,999
Other capital		285,994			284,478
Retained earnings		4,771,254			5,001,097
Treasury stock at cost, 192,000 shares		(2,112,000	)		(2,112,000	)
Accumulated other comprehensive loss		(1,290,442	)		(1,277,072	)
Total stockholders’ equity		3,530,791			3,768,502
Total liabilities and stockholders’ equity	$	9,844,427		$	10,068,625

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

5

American Locker Group Incorporated and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Net sales	$	9,937,688		$	9,775,502
Cost of products sold		7,025,060			6,668,041
Gross profit		2,912,628			3,107,461
Selling, general and administrative expenses		2,903,564			3,091,276
Restructuring costs		283,924			—
Total operating loss		(274,860	)		16,185
Other income (expense):
Interest income		13,637			82
Other income (expense) – net		9,611			129,187
Interest expense		(84,945	)		(46,541	)
Total other income (expense)		(61,697	)		82,728
Loss before income taxes		(336,557	)		98,913
Income tax benefit (expense)		106,713			(45,282	)
Net loss	$	(229,844	)	$	53,631
Weighted average common shares:
Basic		1,682,661			1,652,422
Diluted		1,682,661			1,652,422
Loss per share of common stock:
Basic	$	(0.14	)	$	0.03
Diluted	$	(0.14	)	$	0.03

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

6

American Locker Group Incorporated and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended September 30,
	2012			2011
Net sales	$	3,538,830		$	3,616,451
Cost of products sold		2,582,726			2,456,846
Gross profit		956,104			1,159,605
Selling, general and administrative expenses		949,480			1,040,455
Restructuring costs		66,185			—
Total operating (loss) profit		(59,561	)		119,150
Other income (expense):
Interest income		13,630			8
Other income (expense) – net		24,327			(1,483	)
Interest expense		(28,155	)		(18,680	)
Total other income (expense)		9,802			(20,155	)
Net (loss) income before income taxes		(49,759	)		98,995
Income tax benefit		49,737			24,496
Net (loss) income	$	(22	)	$	123,491
Weighted average common shares:
Basic		1,683,985			1,660,440
Diluted		1,683,985			1,660,440
(Loss) income per share of common stock:
Basic	$	(0.00	)	$	0.07
Diluted	$	(0.00	)	$	0.07

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

7

American Locker Group Incorporated and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Net loss	$	(229,844	)	$	53,631
Other comprehensive income:
Foreign currency translation adjustment		976			(23,860	)
Adjustment to minimum pension liability, net of tax effect of $(5,648) in 2012 and $(2,985) in 2011		(14,346	)		5,845
Other comprehensive income		(13,370	)		(18,015	)
Total comprehensive loss	$	(243,214	)	$	35,616

	Three Months Ended September 30,
	2012			2011
Net (loss) income	$	(22	)	$	123,491
Other comprehensive income:
Foreign currency translation adjustment		(3,574	)		(37,004	)
Adjustment to minimum pension liability, net of tax effect of $(6,417) in 2012 and $550 in 2011		(16,299	)		10,188
Other comprehensive loss		(19,873	)		(26,816	)
Total comprehensive (loss) income	$	(19,895	)	$	96,675

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

8

American Locker Group Incorporated and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Operating activities
Net loss	$	(229,844	)	$	53,631
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		553,574			494,003
Provision for uncollectible accounts		39,000			31,500
Equity based compensation		5,500			37,600
Deferred income taxes		(55,383	)		31,650
Changes in assets and liabilities:
Accounts receivable		(263,803	)		691,427
Inventories		142,015			(416,887	)
Prepaid expenses		(128,363	)		1,866
Deferred revenue		—			(341,000	)
Accounts payable, customer deposits and accrued expenses		(67,915	)		118,768
Pension and other benefits		(116,482	)		(174,358	)
Income taxes		(66,321	)		5,520
Net cash (used in) provided by operating activities		(188,022	)		533,720
Investing activities
Purchase of property, plant and equipment		(241,511	)		(997,293	)
Net cash used in investing activities		(241,511	)		(997,293	)
Financing activities
Long-term debt payments		(150,000	)		(150,000	)
Borrowing on line of credit		350,000			500,000
Net cash provided by financing activities		200,000			350,000
Effect of exchange rate changes on cash		(20,192	)		4,531
Net decrease in cash and cash equivalents		(249,725	)		(109,042	)
Cash and cash equivalents at beginning of period		525,632			649,952
Cash and cash equivalents at end of period	$	275,907		$	540,910
Supplemental cash flow information:
Cash paid for:
Interest	$	74,898		$	47,036
Income taxes	$	15,210		$	12,241

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

9

American Locker Group Incorporated and Subsidiaries

Notes to Consolidated Financial Statements

1. 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 consolidated financial statements, have been included. Operating results for the three and nine-month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

The consolidated balance sheet at December 31, 2011 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, 2011.

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.

Certain 2011 financial statement line items have been reclassified to conform to the current year’s presentation.

2. Sale of Property

During May 2011, the Company relocated its corporate headquarters and Texas manufacturing facility from Grapevine, Texas to a new 100,500 sq. ft. building in DFW Airport, Texas. The Company sold its prior location to the City of Grapevine (the “City”) in 2009 and, as part of that transaction, the City provided a $341,000 relocation allowance to offset the moving costs. This relocation allowance was recorded as “Deferred revenue” in the Company’s consolidated balance sheet as of December 31, 2010. The Company offset $211,768 of moving expense against such deferred revenue in the second quarter of 2011 and the remaining $129,232 in relocation allowance was recorded as “Other income” in the second quarter of 2011. Proceeds of the sale were used to pay off the $2 million mortgage secured by the property and for general working capital purposes.

The Company invested approximately $875,000 during 2011 for leasehold improvements and machinery and equipment related to relocating.

3. Disneyland Concession Agreement

On September 24, 2010, the Company entered into an agreement (the “Disney Agreement”) with Disneyland Resort, a division of Walt Disney Parks and Resorts U.S., Inc., and Hong Kong International Theme Parks Limited, (collectively referred to as “Disney”) to provide locker services under a concession arrangement. Under the Disney Agreement, the Company installed, operates and maintains electronic lockers at Disneyland Park and Disney’s California Adventure Park in Anaheim, California and at Hong Kong Disneyland Park in Hong Kong.

The Company installed approximately 4,300 electronic lockers under the Disney Agreement. The Company retains ownership of the lockers and receives a portion of the revenue generated by the locker operations. The term of the Disney Agreement is five years, with an option to renew for one year at Disney’s option, and operations began in late November 2010. The Agreement contains a buyout option at the end of each contract year and a provision to compensate the Company in the event Disney terminates the Agreement without cause.

Under appropriate accounting guidance, the Company capitalized its costs related to the Disney Agreement and the Company is depreciating such costs over the five year term of the agreement. The Company recognizes revenue for its portion of the revenue as it is collected.

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4. 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, 2012		December 31, 2011
Finished products	$	482,221	$	321,378
Work-in-process		699,359		862,000
Raw materials		1,522,200		1,662,185
Net inventories	$	2,703,780	$	2,845,563

5. Income Taxes

Provision for income taxes is based upon the estimated annual effective tax rate. The effective tax rate for the nine months ended September 30, 2012 and 2011 was (31.7%) and 45.8%, respectively. The difference in the effective rate from the statutory rate is primarily due to permanent timing differences between expenses recorded for financial and tax reporting, increases in the valuation allowance of approximately $178,000 and $39,000 for the nine months ended September 30, 2012 and 2011, respectively, and the reversal of a previously accrued tax provision. During the first nine months of 2012, certain statutes of limitations expired. As a result, in the first nine months of 2012, the Company reduced its income tax payable and tax provision by a net favorable amount of $69,791.

6. Stockholders’ Equity

On March 31, 2012, the Company issued 3,986 shares of common stock to non-employee directors and increased other capital by $1,516, which represents a compensation expense of $5,500.

Effective May 25, 2012, the board of directors will no longer have the option of receiving common stock in lieu of cash compensation as director’s fees. As a result, the Company did not issue any shares of common stock to directors in the second or third quarter of 2012.

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 three and nine months ended September 30, 2012 and 2011:

	Nine Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2012			2011			2012			2011
Service cost	$	15,750		$	15,825		$	—		$	—
Interest cost		127,500			129,150			56,789			58,309
Expected return on plan assets		(120,750	)		(106,575	)		(62,319	)		(63,987	)
Net actuarial loss		—			—			10,312			10,588
Amortization		70,500			38,475			—			—
Net periodic benefit cost	$	93,000		$	76,875		$	4,782		$	4,910

	Three Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2012			2011			2012			2011
Service cost	$	5,250		$	5,275		$	—		$	—
Interest cost		42,500			43,050			18,949			19,426
Expected return on plan assets		(40,250	)		(35,525	)		(20,794	)		(21,317	)
Net actuarial loss		—			—			3,441			3,527
Amortization		23,500			12,825			—			—
Net periodic benefit cost	$	31,000		$	25,625		$	1,596		$	1,636

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.

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The Fair Value Measurements and Disclosure Topic of the ASC requires the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. The various values of the Fair Value Measurements and Disclosure Topic of the ASC fair value hierarchy are described as follows:

Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.

Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

The fair value hierarchy of the plan assets are as follows:

		September 30, 2012
		US Plan		Canadian Plan
Cash and cash equivalents	Level 1	$	306,742	$	59,343
Mutual funds	Level 1		268,290		1,259,339
Corporate/Government Bonds	Level 1		682,731		—
Equities	Level 1		1,039,299		—
Total		$	2,297,062	$	1,318,682

On April 15, 2012, the Company transferred its US pension plan assets to Bank of America Merrill Lynch (“BAML”). It was previously being managed by Metlife. As a result of this change, $2,203,978 of Level 2 assets were transferred to Level 1.

For additional information on the defined benefit pension plans, please refer to Note 10 of the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

8. Earnings Per Share

The Company reports earnings per share in accordance with appropriate accounting guidance. The following table sets forth the computation of basic and diluted earnings per common share:

	Nine Months Ended September 30,
	2012			2011
Numerator:
Net (loss) income	$	(229,844	)	$	53,361
Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,682,661			1,652,422
(Loss) income per common share (basic and diluted):	$	(0.14	)	$	0.03

	Three Months Ended September 30,
	2012			2011
Numerator:
Net(loss) income	$	(22	)	$	123,491
Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,683,985			1,660,440
(Loss) income per common share (basic and diluted):	$	(0.00	)	$	0.07

The Company had 12,000 stock options outstanding at September 30, 2012 and at September 30, 2011. These options were not included in the common share computation for loss per share, as the common stock equivalents were anti-dilutive.

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9. Debt

On December 8, 2010, the Company entered into a credit agreement (the “Loan Agreement”) with BAML, pursuant to which the Company obtained a $1 million term loan (the “Term Loan”) and a $2.5 million revolving line of credit (the “Line of Credit”). On November 4, 2011, the Company entered into an amendment to the Loan Agreement (the “Amendment”) that extended the maturity date of the Line of Credit through December 8, 2012. The Amendment also included the addition of a $500,000 draw note (the “Draw Note”).

On November 9, 2012, the Company entered into a second amendment to the Loan Agreement, which extended availability under the Draw Note, and the maturity date of the Line of Credit, to October 31, 2013.

The Draw Note is to be used to fund the Company’s investment in future concession contracts. The Company can draw up to $500,000 on the Draw Note before October 31, 2013. The Company will pay interest only on the Draw Note through November 26, 2013, after which the Company will pay interest and principal so that the balance will be paid in full as of October 27, 2016. As of September 30, 2012, there were no borrowings on the Draw Note.

The proceeds of the Term Loan were used to fund the Company’s investment in lockers used in the Disney Agreement. The proceeds of the Line of Credit will be used primarily for working capital needs in the ordinary course of business and for general corporate purposes.

The Company can borrow, repay and re-borrow principal under the Line of Credit from time to time during its term, but the outstanding principal balance of the Line of Credit may not exceed the lesser of the borrowing base or $2,500,000. For purposes of the Line of Credit, “borrowing base” is calculated by multiplying eligible accounts receivable of the Company by 80% and eligible raw material and finished goods by 50%. As of September 30, 2012, there was $1,050,000 outstanding on the Line of Credit.

The outstanding principal balances of the Line of Credit, the Draw Note and the Term Loan bear interest at the one-month LIBOR rate plus 375 basis points (3.75%). Accrued interest payments on the outstanding principal balance of the Line of Credit are due monthly, and all outstanding principal payments under the Line of Credit, together with all accrued but unpaid interest, is due at maturity, or October 31, 2013. Payments on the Term Loan, consisting of $16,667 in principal plus accrued interest, began in 2011. The entire outstanding balance of the Term Loan is due on December 8, 2015.

The Loan Agreement is secured by a first priority lien on all of the Company’s accounts receivable, inventory and equipment pursuant to a Security Agreement between the Company and BAML (the “Credit Security Agreement”).

The Credit Security Agreement and Loan Agreement contain covenants, including financial covenants, with which the Company must comply, including a debt service coverage ratio and a funded debt to EBITDA ratio. Subject to the Lender’s consent, the Company is prohibited under the Credit Security Agreement and the Loan Agreement, except under certain circumstances, from incurring or assuming additional debt and from permitting liens to be placed upon any of its property, assets or revenues. Additionally, the Company is prohibited from entering into certain transactions, including a merger or consolidation, without the Lender’s consent.

10. Restructuring

In 2009, the Company restructured its business operations to rationalize its cost structure in an uncertain economic environment. The restructuring included plans for the relocation and consolidation of its Ellicottville, New York operations into its Texas facility. This planned relocation resulted in severance and payroll charges during the year ended December 31, 2009 of $264,000. At December 31, 2011 the balance remaining of such payments was $123,000 and the Company expects to make such payment before December 31, 2012.

During the second quarter of 2012, the Company commenced the Ellicottville relocation, resulting in the realization of expense for discontinued inventory, severance and professional fees to complete the move. As a result, the Company recorded a restructuring charge in June 2012 of approximately $174,000. Additionally, in the nine months ended September 30, 2012, the Company expensed approximately $109,900 of related moving expense, bringing the total expense recorded in 2012 to approximately $283,900.

The Company incurred approximately $66,200 in relocation expenses during the third quarter of 2012, which was not accrued at June 30, 2012.

When completed, the restructuring and relocation is expected to result in approximately $240,000 in annual savings. Accrued restructuring expenses of $130,800 are included in “Other accrued expenses” in the Company’s consolidated balance sheet, while the $89,000 increase to inventory obsolescence is included in “Inventory reserve.”

The following table analyzes the changes in the Company’s reserve with respect to the restructuring plan for the nine months ended September 30, 2012:

	December 31, 2011		2012 Expense		Payment			September 30, 2012
Severance	$	111,000	$	64,000	$	(56,200	)	$	118,800
Professional fees		—		42,000		(42,000	)		—
Inventory		—		89,000		—			89,000
Other		12,000		88,900		(88,900	)		12,000
Total	$	123,000	$	283,900	$	(187,100	)	$	219,800

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The following table analyzes the changes in the Company’s reserve with respect to the restructuring plan for the three months ended September 30, 2012:

	June 30, 2012		2012 Expense		Payment			September 30, 2012
Severance	$	138,700	$	21,000	$	(40,900	)	$	118,800
Professional fees		42,000		—		(42,000	)		—
Inventory		89,000		—					89,000
Other		55,700		45,200		(88,900	)		12,000
Total	$	325,400	$	66,200	$	(171,800	)	$	219,800

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. To the Company’s knowledge, the NYSDEC has not commenced implementation of the remediation plan and has not indicated when construction will start, if ever. Based upon currently available information, the Company is unable to estimate timing with respect to the resolution of this matter. 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 and continuing through the date of filing of this Annual Report on Form 10-K, the Company has been named as an additional defendant in approximately 191 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 33 cases with funds authorized and provided by the Company’s insurance carrier. Further, over 120 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 March 8, 2012, the most recent date information is available, is approximately 38 cases.

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

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.

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

Effect of New Accounting Guidance

In June 2011, the FASB issued amendments to guidance regarding the presentation of comprehensive income. The amendments eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments require that comprehensive income be presented in either a single continuous statement or in two separate but consecutive statements. In a single continuous statement, the entity would present the components of net income and total net income, the components of other comprehensive income and a total of other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, the entity would present components of net income and total net income in the statement of net income and a statement of other comprehensive income would immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. The amendments also require the entity to present on the face of the financial statements any reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The amendments do not change the items that must be reported in other comprehensive income, when an item of other comprehensive income must be re-classed to net income or the option to present components of other comprehensive income either net of related tax effects or before related tax effects. The amendments, excluding the specific requirement to present on the face of the financial statements any reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented which was deferred by the FASB in December 2011, are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and are to be applied retrospectively. The Company adopted ASU 2011-05 in the first quarter of 2012. Upon adoption, the Company elected the two-statement approach and presents a separate consolidated statement of comprehensive loss.

Results of Operations — the Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

Overall Results

Consolidated net sales for the first nine months of 2012 reflect an increase of $162,186, as compared to 2011, to $9,937,688, representing a 1.7% increase. This increase was primarily attributable to increases in contract manufacturing revenue as well as increased concession revenue. Pre-tax operating results declined to a pre-tax loss of $(336,557) for the first nine months of 2012 from pre-tax income of $98,913 for the first nine months of 2011. After tax operating results declined to a net loss of $(229,844) for the first nine months of 2012 from a net income of $53,631 for the first nine months of 2011. Net loss per share (basic and diluted) was $0.14 in the first nine months of 2012, a $0.17 decline from a net income per share (basic and diluted) of $0.03 for the first nine months of 2011.

Net Sales

Consolidated net sales for the nine months ended September 30, 2012 were $9,937,688, an increase of $162,186, or 1.7%, compared to net sales of $9,775,502 for the same period of 2011. Sales of lockers for the nine months ended September 30, 2012 were $6,169,950, a decrease of $851,638, or 12.1%, compared to locker sales of $7,021,588 for the same period of 2011. The decrease was primarily driven by decreased sales of Ambassador and Mini-Check lockers.

Sales of mailboxes were $1,647,121 for the nine months ended September 30, 2012, a decrease of $64,603, or 3.8%, compared to mailbox sales of $1,711,724 for the same period of 2011. Decreased mailbox sales were the result of decreased sales of Horizontal 4c and 2b+ mailboxes to distributors.

Sales of contract manufacturing services were $1,209,726 for the nine months ended September 30, 2012, an increase of $975,833, or 417.2%, compared to $233,893 for the same period of 2011. This increase was primarily due to increased sales of electrical enclosures and fabricated parts to existing and new customers.

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Concession revenue for the nine months ended September 30, 2012 was $910,891, an increase of $102,594 or 12.7% from concession revenue of $808,297 for the same period of 2011. The concession revenue increase was driven by the inception of the Ocean Park concession contract in November 2011.

	Nine Months Ended September 30,				Dollar			Percentage
	2012		2011		Increase/(Decrease)			Increase/(Decrease)
Lockers	$	6,169,950	$	7,021,588		(851,638	)		(12.1	)%
Mailboxes		1,647,121		1,711,724		(64,603	)		(3.8	)%
Contract manufacturing		1,209,726		233,893		975,833			417.2	%
Concession revenues		910,891		808,297		102,954			12.7	%
Total	$	9,937,688	$	9,775,502		(162,186	)		1.7	%

Gross Margin

Consolidated gross margin for the nine months ended September 30, 2012 was $2,912,628, or 29.3% of net sales, compared to $3,107,461, or 31.8% of net sales, for the same period of 2011, a decrease of $194,833, or 6.3%. Gross margin as a percentage of net sales decreased by 250 basis points from 2011 due to higher material costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 30, 2012 were $2,903,564 or 29.2% of net sales, compared to $3,091,276 or 31.6% of net sales for the same period of 2011, a decrease of $187,712, or 6.1%. The decrease was primarily due to decreases in marketing, travel, bonus accrual and audit expenses of approximately $43,000, $58,000, $58,000 and $32,000 respectively for the nine months ended September 30, 2012, as compared to the same period in 2011.

Restructuring Costs

During the first nine months of 2012, the Company commenced the Ellicottville relocation, resulting in expenses related to discontinued inventory, severance and professional fee expenses to complete the move and recognize the anticipated cost savings. As a result, the Company recorded a restructuring charge of approximately $283,900. See Note 10, Restructuring.

Interest Expense

Interest expense for the nine months ended September 30, 2012 was $84,945, an increase of $38,404, or 82.5%, compared to interest expense of $46,541 for the same period of 2011. This increase is due to a larger average outstanding balance on the line of credit with Bank of America Merrill Lynch compared to the same period in 2011.

Other Income (expense) - net

During May 2011 the Company relocated its corporate headquarters and Texas manufacturing facility from Grapevine, TX to a new 100,500 sq. ft. building in DFW Airport, TX.

The Company sold its prior location to the City of Grapevine (“the City”) in 2009, and as part of the transaction, the City provided a $341,000 relocation allowance to offset the moving costs. This relocation allowance was recorded as “Deferred revenue” in the Company’s consolidated balance sheet as of December 31, 2010. The Company offset $211,768 of moving expense against deferred revenue in 2011 and the remaining $129,232 was recorded as an increase to “Other Income”. See Note 2 to the consolidated financial statements.

Income Taxes

For the nine months ended September 30, 2012, the Company recorded an income tax benefit of $106,713, compared to an income tax expense of $45,282 for the same period of 2011. The Company’s effective tax rate differs from the statutory rate primarily due to an increase in the valuation allowance of approximately $178,000 in 2012 and a decrease of $39,000 in 2011, as well as permanent timing differences between expenses recorded for financial and tax reporting. In addition, during the first quarter of 2012, certain statutes of limitations expired resulting in a decrease in income tax payable and a favorable tax provision of $69,791.

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

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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:

• 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; 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,
	2012			2011
Net loss	$	(229,844	)	$	53,631
Income tax expense (benefit)		(106,713	)		45,282
Interest expense		84,945			46,541
Other income (move allowance in excess of expense)		—			(129,232	)
Restructuring costs		283,924			—
Depreciation and amortization expense		553,574			494,003
Equity based compensation		5,500			37,600
Adjusted EBITDA	$	591,386		$	547,825
Adjusted EBITDA as a percentage of revenues		6.0	%		5.6	%

Results of Operations — Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

Overall Results

Consolidated net sales for the third quarter of 2012 reflect a decrease in net sales of $77,621 to $3,538,830 when compared to net sales of $3,616,451 for the same period of 2011, representing a 2.1% decrease. Pre-tax operating results declined to a pre-tax loss of $(49,759) for the third quarter of 2012 from a pre-tax profit of $98,995 for the third quarter of 2011. After tax operating results declined to a net loss of $(22) for the third quarter of 2012 from a net income of $123,491 for the third quarter of 2011. Net loss per share (basic and diluted) was $0.00 in the third quarter of 2012, a decline from a net income per share (basic and diluted) of $0.07 for the second quarter of 2011.

Net Sales

Consolidated net sales for the three months ended September 30, 2012 were $3,538,830, a decrease of $77,621, or 2.1%, compared to net sales of $3,616,451 for the same period of 2011. This was primarily due to a decrease in locker sales.

Sales of lockers for the three months ended September 30, 2012 were $1,866,736, a decrease of $756,147, or 28.8%, compared to sales of $2,622,883 for the same period of 2011.

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Sales of mailboxes were $730,093 for the three months ended September 30, 2012, an increase of $80,870, or 12.5%, compared to sales of $649,223 for the same period of 2011.

Sales of contract manufacturing services were $683,174 for the three months ended September 30, 2012 compared to $97,275 for the same period of 2011. This increase was primarily due to increased sales of electrical enclosures and fabricated parts to existing and new customers. The Company began to see much larger revenue growth this quarter in the contract manufacturing sector, as evidenced by the fact that third quarter sales of $683,174 accounts for 56.45% of year-to-date revenue for that product line.

Concession revenue for the three months ended September 30, 2012 was $258,827, an increase of $11,757 or 4.8% from concession revenue of $247,070 for the same period of 2011. The concession revenue increase was driven by the inception of Ocean Park in November 2011.

	Three Months Ended September 30,				Dollar			Percentage
	2012		2011		Increase/Decrease			Increase/(Decrease)
Lockers	$	1,866,736	$	2,622,883		(756,147	)		(28.8	)%
Mailboxes		730,093		649,223		80,870			12.5	%
Contract Manufacturing		683,174		97,275		585,899			602.3	%
Concession Revenues		258,827		247,070		11,757			4.8	%
Total	$	3,538,830	$	3,616,451		(77,621	)		(2.1	)%

Gross Margin

Consolidated gross margin for the three months ended September 30, 2012 was $956,104, or 27.0% of net sales, compared to $1,159,605, or 32.1% of net sales, for the same period of 2011, a decrease of $203,501, or 17.5%. The decrease in gross margin as a percentage of sales was primarily due to increased labor costs, as well as increased material costs as a percentage of revenues. Gross margin as a percentage of sales decreased by 510 basis points.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2012 were $949,480 or 26.8% of net sales, compared to $1,040,455, or 28.8% of net sales for the same period of 2011, a decrease of $90,975, or 8.7%. The decrease in SG&A as a percentage of sales is primarily a result of decreased audit expense and bonus accrual of approximately $12,000 and $40,000, respectively.

Restructuring Costs

During the second quarter of 2012, the Company commenced the Ellicottville relocation, resulting in expenses related to discontinued inventory, severance and professional fee expenses to complete the move. As a result, the Company recorded a restructuring charge of approximately $217,700 in the second quarter, with an additional approximately $66,200 being recorded in the third quarter. See Note 10, Restructuring.

Interest Expense

Interest expense for the three month period ended September 30, 2012 was $28,155, an increase of $9,475, or 50.7%, compared to interest expense of $18,680 for the same period of 2011. This increase is due to larger average borrowings on the line of credit with Bank of America Merrill Lynch.

Other Income (expense) - net

As a result of the relocation and consolidation of the Ellicottville location, the Company disposed of obsolete inventory and equipment resulting in a gain of approximately $19,000, which was recorded as an increase to “Other Income” in the third quarter.

Income Taxes

For the third quarter of 2012, the Company recorded an income tax benefit of $49,737 compared to an income tax benefit of $24,496 for the same period of 2011. The Company’s effective tax rate on earnings was (100.0)% and (24.7)% in the third quarter of 2012 and 2011, respectively. The Company’s effective tax rate differs from the statutory rate primarily due to a increase in the valuation allowance of approximately $83,000 in the third quarter of 2012 and approximately $85,000 for the same period of 2011.

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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 believe 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:

• 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;

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

• Excludes onetime expenses and equity compensation.

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,
	2012			2011
Net (loss) income	$	(22	)	$	123,491
Income tax benefit		(49,737	)		(24,496	)
Interest expense		28,155			18,680
Other income (move allowance in excess of expense)		—			(5,549	)
Restructuring costs		66,185			—
Depreciation and amortization expense		189,949			171,398
Equity based compensation		—			7,500
Adjusted EBITDA	$	234,530		$	291,024
Adjusted EBITDA as a percentage of revenues		6.6	%		8.1	%

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,
	2012		2011
Current Ratio		1.48 to 1		1.57 to 1
Working Capital	$	1,896,127	$	2,085,925

The Company’s capital expenditures were $241,511 and $997,293 for the nine months ended September 30, 2012 and twelve months ended December 31, 2011, respectively. The significant decrease in capital expenditures was a result of larger 2011 capital expenditures due to the relocation of our headquarters and required equipment to support concession contracts.

In addition to cash flow from operations, the Company’s primary sources of liquidity include available cash and cash equivalents and borrowings available under the Line of Credit.

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Expected uses of cash in fiscal 2012 include funds required to support the Company’s operating activities, capital expenditures and contributions to the Company’s defined benefit pension plans.

The Company has considered the impact of the financial outlook on its liquidity and has performed an analysis of the key assumptions in its forecast. Based upon these analyses and evaluations, the Company expects that its anticipated sources of liquidity will be sufficient to meet its obligations without disposition of assets outside of the ordinary course of business or significant revisions of the Company’s planned operations through 2012.

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.

Unregistered Sale of Equity Securities

In March 2012, the Company granted a total of 3,986 shares of common stock to non-employee directors and an officer. The shares were granted in consideration of services, and were valued at the market value on the date of grant. The issuance of the shares was exempt from registration pursuant to Section 4(2) of the Securities Act, as the issuance did not involve a public offering of securities.

The Company did not grant any shares of common stock to non-employee directors in the second or third quarters of 2012.

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 and Hong Kong operations subject the Company to foreign currency risk, though it is not considered a significant risk since the foreign operations’ net assets represented only 10.3% of the Company’s aggregate net assets at September 30, 2012. 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, 2012. 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, the principal executive officer and principal accounting officer of the Company have concluded that the Company’s disclosure controls and procedures as of September 30, 2012 were 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. There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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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.
101.INS *	XBRL Instance Document
101.SCH *	XBRL Taxonomy Extension Schema Document
101.CAL *	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB *	XBRL Taxonomy Extension Label Linkbase Document
101.PRE *	XBRL Taxonomy Extension Presentation Linkbase Document

* In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AMERICAN LOCKER GROUP INCORPORATED
November 14, 2012	By:	/s/ Paul M. Zaidins
		Paul M. Zaidins
		Chief Executive Officer
November 14, 2012	By:	/s/ David C. Shiring
		David C. Shiring
		Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Paul M. Zaidins, certify that:

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) 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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(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.

Date: November 14, 2012	By:	/s/ Paul M. Zaidins
		Paul M. Zaidins
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, David C. Shiring, certify that:

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) 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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(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.

Date: November 14, 2012	By:	/s/ David C. Shiring
		David C. Shiring
		Chief Financial Officer

EX-32.1

Exhibit 32.1

Certifications Pursuant to 18 U.S.C. Section 1350

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of American Locker Group Incorporated (the “Company”) on Form 10-Q for the quarter ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the respective capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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.

Dated: November 14, 2012

/s/ Paul M. Zaidins

Paul M. Zaidins

Chief Executive Officer

/s/ David C. Shiring

David C. Shiring

Chief Financial Officer

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Debt (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012
Debt (Textual) [Abstract]
Balance payment date	Dec. 08, 2015
Maturity date of Line of credit facility	Dec. 08, 2012
Debt (Additional Textual) [Abstract]
Entering date of credit agreement	Dec. 08, 2010
Term loan	$ 1,000,000
Revolving line of credit	2,500,000
Amendment date of Loan agreement	Nov. 04, 2011
Advance amount of draw note	500,000
Principal balance of line of credit	2,500,000
Outstanding amount of Line of credit	1,050,000
Interest rate terms	One month LIBOR rate plus 375 basis points (3.75%)
Percentage of interest rate	3.75%
Payments on the Term loan consisting of principal plus accrued interest	16,667
Notes Payable to Banks [Member]
Debt (Textual) [Abstract]
Maturity date of Draw note	Oct. 31, 2013
Period of interest	through November 26, 2013
Balance payment date	Oct. 27, 2016
Borrowings on the Draw note	$ 0
Second Amendment [Member]
Debt (Textual) [Abstract]
Maturity date of Line of credit facility	Oct. 31, 2013
Accounts Receivable [Member]
Debt (Textual) [Abstract]
Eligible accounts receivable, raw materials and finished goods of the company	80.00%
Raw Material And Finished Goods [Member]
Debt (Textual) [Abstract]
Eligible accounts receivable, raw materials and finished goods of the company	50.00%

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Inventories (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Inventories
Finished products	$ 482,221	$ 321,378
Work-in-process	699,359	862,000
Raw materials	1,522,200	1,662,185
Net inventories	$ 2,703,780	$ 2,845,563

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Sale of Property

9 Months Ended

Sep. 30, 2012

Sale of Property [Abstract]

Sale of Property

2. Sale of Property

During May 2011, the Company relocated its corporate headquarters and Texas manufacturing facility from Grapevine, Texas to a new 100,500 sq. ft. building in DFW Airport, Texas. The Company sold its prior location to the City of Grapevine (the “City”) in 2009 and, as part of that transaction, the City provided a $341,000 relocation allowance to offset the moving costs. This relocation allowance was recorded as “Deferred revenue” in the Company’s consolidated balance sheet as of December 31, 2010. The Company offset $211,768 of moving expense against such deferred revenue in the second quarter of 2011 and the remaining $129,232 in relocation allowance was recorded as “Other income” in the second quarter of 2011. Proceeds of the sale were used to pay off the $2 million mortgage secured by the property and for general working capital purposes.

The Company invested approximately $875,000 during 2011 for leasehold improvements and machinery and equipment related to relocating.

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Pension Benefits (Details 1) (USD $)	Sep. 30, 2012
US Plan [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	$ 2,297,062
Canadian Plan [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	1,318,682
Cash and cash equivalents [Member] | US Plan [Member] | Level 1 [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	306,742
Cash and cash equivalents [Member] | Canadian Plan [Member] | Level 1 [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	59,343
Mutual funds [Member] | US Plan [Member] | Level 1 [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	268,290
Mutual funds [Member] | Canadian Plan [Member] | Level 1 [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	1,259,339
Corporate/Government Bonds [Member] | US Plan [Member] | Level 1 [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	682,731
Equities [Member] | US Plan [Member] | Level 1 [Member]
Fair value hierarchy of plan assets
Fair value of plan assets	$ 1,039,299

XML

Pension Benefits (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
U.S. Plan [Member]
Components of net periodic benefit cost
Service cost	$ 5,250	$ 5,275	$ 15,750	$ 15,825
Interest cost	42,500	43,050	127,500	129,150
Expected return on plan assets	(40,250)	(35,525)	(120,750)	(106,575)
Amortization	23,500	12,825	70,500	38,475
Net periodic benefit cost	31,000	25,625	93,000	76,875
Canadian Plan [Member]
Components of net periodic benefit cost
Interest cost	18,949	19,426	56,789	58,309
Expected return on plan assets	(20,794)	(21,317)	(62,319)	(63,987)
Net actuarial loss	3,441	3,527	10,312	10,588
Net periodic benefit cost	$ 1,596	$ 1,636	$ 4,782	$ 4,910

XML

Pension Benefits (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012	Apr. 15, 2012 Level 2 [Member]
Fair value hierarchy of plan assets
Amount of Level 2 assets transferred to Level 1		$ 2,203,978
Pension Benefits (Textual) [Abstract]
Maximum contribution of employee compensation	5.00%
Contribution of employee compensation	3.00%
Employees elective contribution	50.00%

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Earnings Per Share (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Numerator:
Net (loss) income	$ (22)	$ 123,491	$ (229,844)	$ 53,631
Denominator:
Denominator for earnings per share (basic and diluted) - weighted average shares	1,683,985	1,660,440	1,682,661	1,652,422
(Loss) income per common share (basic and diluted):	$ 0.00	$ 0.07	$ (0.14)	$ (0.03)

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

1. 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 consolidated financial statements, have been included. Operating results for the three and nine-month periods ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

The consolidated balance sheet at December 31, 2011 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, 2011.

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.

Certain 2011 financial statement line items have been reclassified to conform to the current year’s presentation.

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Earnings Per Share (Details Textual)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Earnings Per Share (Textual) [Abstract]
Employee stock options	12,000	12,000

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Consolidated Balance Sheets (USD $)	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 275,907	$ 525,632
Accounts receivable, less allowance for doubtful accounts of approximately $166,000 in 2012 and $149,000 in 2011	2,046,314	1,754,959
Inventories, net	2,703,780	2,845,563
Prepaid expenses	459,626	330,403
Deferred income taxes	336,951	278,437
Total current assets	5,822,578	5,734,994
Property, plant and equipment:
Land	500	500
Buildings and leasehold improvements	953,055	754,922
Machinery and equipment	10,989,557	10,891,820
Total property, plant and equipment	11,943,112	11,647,242
Less allowance for depreciation and amortization	(8,689,152)	(8,087,988)
Net property, plant and equipment	3,253,960	3,559,254
Other noncurrent assets	47,269	47,259
Deferred income taxes	720,620	727,118
Total assets	9,844,427	10,068,625
Current liabilities:
Accounts payable	1,689,808	1,627,489
Customer deposits	202,587	398,167
Commissions, salaries, wages, and taxes thereon	111,516	162,507
Income taxes payable	3,397	69,718
Revolving line of credit	1,050,000	700,000
Current portion of long-term debt	200,000	200,000
Other accrued expenses	669,143	491,188
Total current liabilities	3,926,451	3,649,069
Long-term liabilities:
Long-term debt, net of current portion	450,000	600,000
Pension and other benefits	1,937,185	2,051,054
Total long-term liabilities	2,387,185	2,651,054
Total liabilities	6,313,636	6,300,123
Commitments and contingencies (Note 11)
Stockholders' equity:
Common stock, $1.00 par value: Authorized shares - 4,000,000 Issued shares - 1,875,985 in 2012 and 1,871,999 in 2011; Outstanding shares - 1,683,985 in 2012 and 1,679,999 in 2011	1,875,985	1,871,999
Other capital	285,994	284,478
Retained earnings	4,771,254	5,001,097
Treasury stock at cost, 192,000 shares	(2,112,000)	(2,112,000)
Accumulated other comprehensive loss	(1,290,442)	(1,277,072)
Total stockholders' equity	3,530,791	3,768,502
Total liabilities and stockholders' equity	$ 9,844,427	$ 10,068,625

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Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Tax effect on adjustment to minimum pension liability	$ (6,417)	$ 550	$ (5,648)	$ (2,985)

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Restructuring (Details Textual) (USD $)	3 Months Ended		9 Months Ended	12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2009	Dec. 31, 2011
Restructuring (Textual) [Abstract]
Restructuring Reserve	$ 219,800	$ 325,400	$ 219,800		$ 123,000
Restructuring cost	66,185	174,000	283,924
Restructuring (Additional Textual) [Abstract]
Severance and payroll charges				264,000
Related moving expense related to relocation			109,900
Relocation expenses	66,200
Expected savings on restructuring and relocation			240,000
Other [Member]
Restructuring (Textual) [Abstract]
Restructuring Reserve	12,000	55,700	12,000		12,000
Restructuring cost	45,200		88,900
Inventory [Member]
Restructuring (Textual) [Abstract]
Restructuring Reserve	89,000	89,000	89,000
Restructuring cost			89,000
Facility Relocation One [Member]
Restructuring (Textual) [Abstract]
Restructuring Reserve					123,000
Facility Relocation Two [Member]
Restructuring (Textual) [Abstract]
Restructuring cost			$ 283,900

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Restructuring (Tables)

9 Months Ended

Sep. 30, 2012

Restructuring [Abstract]

Changes in the Company's reserve with respect to the restructuring plan

	December 31, 2011		2012 Expense		Payment			September 30, 2012
Severance	$	111,000	$	64,000	$	(56,200	)	$	118,800
Professional fees		—		42,000		(42,000	)		—
Inventory		—		89,000		—			89,000
Other		12,000		88,900		(88,900	)		12,000
Total	$	123,000	$	283,900	$	(187,100	)	$	219,800

	June 30, 2012		2012 Expense		Payment			September 30, 2012
Severance	$	138,700	$	21,000	$	(40,900	)	$	118,800
Professional fees		42,000		—		(42,000	)		—
Inventory		89,000		—					89,000
Other		55,700		45,200		(88,900	)		12,000
Total	$	325,400	$	66,200	$	(171,800	)	$	219,800

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Commitments and Contingencies (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012 LinearFeet	Mar. 08, 2012 Case
Commitments and Contingencies (Additional Textual) [Abstract]
Installation of a reactive iron wall covering area	250
Estimated plan cost for initial construction	$ 688,000
Expected operation and maintenance expenses	$ 1,997,000
Estimated Period	30 years
Unresolved cases		38
Massachusetts [Member]
Commitments and Contingencies (Textual) [Abstract]
Number of cases pending	191
Number of cases terminated	120
Settlement agreements, cases	33
Washington [Member]
Commitments and Contingencies (Textual) [Abstract]
Number of cases pending	1

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Disneyland Concession Agreement (Details) (Long Term Supply Commitment [Member])	9 Months Ended
	Sep. 30, 2012 ElectronicLocker
Long Term Supply Commitment [Member]
Disneyland Concession Agreement (Textual) [Abstract]
Number of lockers installed	4,300
Duration of Agreement	5 years
Option for renewal at Disney's discretion	1 year
Term of amortization	5 years

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating activities
Net loss	$ (229,844)	$ 53,631
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	553,574	494,003
Provision for uncollectible accounts	39,000	31,500
Equity based compensation	5,500	37,600
Deferred income taxes	(55,383)	31,650
Changes in assets and liabilities:
Accounts receivable	(263,803)	691,427
Inventories	142,015	(416,887)
Prepaid expenses	(128,363)	1,866
Deferred revenue		(341,000)
Accounts payable, customer deposits and accrued expenses	(67,915)	118,768
Pension and other benefits	(116,482)	(174,358)
Income taxes	(66,321)	5,520
Net cash (used in) provided by operating activities	(188,022)	533,720
Investing activities
Purchase of property, plant and equipment	(241,511)	(997,293)
Net cash used in investing activities	(241,511)	(997,293)
Financing activities
Long-term debt payments	(150,000)	(150,000)
Borrowing on line of credit	350,000	500,000
Net cash provided by financing activities	200,000	350,000
Effect of exchange rate changes on cash	(20,192)	4,531
Net decrease in cash and cash equivalents	(249,725)	(109,042)
Cash and cash equivalents at beginning of period	525,632	649,952
Cash and cash equivalents at end of period	275,907	540,910
Cash paid for:
Interest	74,898	47,036
Income taxes	$ 15,210	$ 12,241

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 166,000	$ 149,000
Common stock, par value	$ 1.00	$ 1.00
Common stock, shares authorized	4,000,000	4,000,000
Common stock, shares issued	1,875,985	1,871,999
Common stock, shares outstanding	1,683,985	1,679,999
Treasury stock, shares	192,000	192,000

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Restructuring

9 Months Ended

Sep. 30, 2012

Restructuring [Abstract]

Restructuring

10. Restructuring

In 2009, the Company restructured its business operations to rationalize its cost structure in an uncertain economic environment. The restructuring included plans for the relocation and consolidation of its Ellicottville, New York operations into its Texas facility. This planned relocation resulted in severance and payroll charges during the year ended December 31, 2009 of $264,000. At December 31, 2011 the balance remaining of such payments was $123,000 and the Company expects to make such payment before December 31, 2012.

During the second quarter of 2012, the Company commenced the Ellicottville relocation, resulting in the realization of expense for discontinued inventory, severance and professional fees to complete the move. As a result, the Company recorded a restructuring charge in June 2012 of approximately $174,000. Additionally, in the nine months ended September 30, 2012, the Company expensed approximately $109,900 of related moving expense, bringing the total expense recorded in 2012 to approximately $283,900.

The Company incurred approximately $66,200 in relocation expenses during the third quarter of 2012, which was not accrued at June 30, 2012.

When completed, the restructuring and relocation is expected to result in approximately $240,000 in annual savings. Accrued restructuring expenses of $130,800 are included in “Other accrued expenses” in the Company’s consolidated balance sheet, while the $89,000 increase to inventory obsolescence is included in “Inventory reserve.”

The following table analyzes the changes in the Company’s reserve with respect to the restructuring plan for the nine months ended September 30, 2012:

	December 31, 2011		2012 Expense		Payment			September 30, 2012
Severance	$	111,000	$	64,000	$	(56,200	)	$	118,800
Professional fees		—		42,000		(42,000	)		—
Inventory		—		89,000		—			89,000
Other		12,000		88,900		(88,900	)		12,000
Total	$	123,000	$	283,900	$	(187,100	)	$	219,800

The following table analyzes the changes in the Company’s reserve with respect to the restructuring plan for the three months ended September 30, 2012:

	June 30, 2012		2012 Expense		Payment			September 30, 2012
Severance	$	138,700	$	21,000	$	(40,900	)	$	118,800
Professional fees		42,000		—		(42,000	)		—
Inventory		89,000		—					89,000
Other		55,700		45,200		(88,900	)		12,000
Total	$	325,400	$	66,200	$	(171,800	)	$	219,800

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 14, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	AMERICAN LOCKER GROUP INC
Entity Central Index Key	0000008855
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,683,985

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

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. To the Company’s knowledge, the NYSDEC has not commenced implementation of the remediation plan and has not indicated when construction will start, if ever. Based upon currently available information, the Company is unable to estimate timing with respect to the resolution of this matter. 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 and continuing through the date of filing of this Annual Report on Form 10-K, the Company has been named as an additional defendant in approximately 191 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 33 cases with funds authorized and provided by the Company’s insurance carrier. Further, over 120 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 March 8, 2012, the most recent date information is available, is approximately 38 cases.

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

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.

XML

Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Operations [Abstract]
Net sales	$ 3,538,830	$ 3,616,451	$ 9,937,688	$ 9,775,502
Cost of products sold	2,582,726	2,456,846	7,025,060	6,668,041
Gross profit	956,104	1,159,605	2,912,628	3,107,461
Selling, general and administrative expenses	949,480	1,040,455	2,903,564	3,091,276
Restructuring cost	66,185		283,924
Total operating (loss) profit	(59,561)	119,150	(274,860)	16,185
Other income (expense):
Interest income	13,630	8	13,637	82
Other income (expense) - net	24,327	(1,483)	9,611	129,187
Interest expense	(28,155)	(18,680)	(84,945)	(46,541)
Total other income (expense)	9,802	(20,155)	(61,697)	82,728
Net (loss) income before income taxes	(49,759)	98,995	(336,557)	98,913
Income tax benefit	49,737	24,496	106,713	(45,282)
Net (loss) income	$ (22)	$ 123,491	$ (229,844)	$ 53,631
Weighted average common shares:
Basic	1,683,985	1,660,440	1,682,661	1,652,422
Diluted	1,683,985	1,660,440	1,682,661	1,652,422
(Loss) income per share of common stock:
Basic	$ 0.00	$ 0.07	$ (0.14)	$ 0.03
Diluted	$ 0.00	$ 0.07	$ (0.14)	$ 0.03

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

5. Income Taxes

Provision for income taxes is based upon the estimated annual effective tax rate. The effective tax rate for the nine months ended September 30, 2012 and 2011 was (31.7%) and 45.8%, respectively. The difference in the effective rate from the statutory rate is primarily due to permanent timing differences between expenses recorded for financial and tax reporting, increases in the valuation allowance of approximately $178,000 and $39,000 for the nine months ended September 30, 2012 and 2011, respectively, and the reversal of a previously accrued tax provision. During the first nine months of 2012, certain statutes of limitations expired. As a result, in the first nine months of 2012, the Company reduced its income tax payable and tax provision by a net favorable amount of $69,791.

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Inventories

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Inventories

4. 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, 2012		December 31, 2011
Finished products	$	482,221	$	321,378
Work-in-process		699,359		862,000
Raw materials		1,522,200		1,662,185
Net inventories	$	2,703,780	$	2,845,563

XML

Sale of Property (Details) (Disposal Group [Member], USD $)	1 Months Ended	3 Months Ended	12 Months Ended
	May 31, 2011 sqft	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Disposal Group [Member]
Sale of Property (Textual) [Abstract]
Facility occupied to relocate corporate headquarters and Texas manufacturing facility from Grapevine, TX to DFW Airport	100,500
Relocation allowance to offset the moving costs				$ 341,000
Moving expense against deferred revenue		211,768
Other income		129,232
Pay off the mortgage secured by the property	2,000,000
Invested for leasehold improvements and machinery and equipment			$ 875,000

XML

Inventories (Tables)

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Inventories

	September 30, 2012		December 31, 2011
Finished products	$	482,221	$	321,378
Work-in-process		699,359		862,000
Raw materials		1,522,200		1,662,185
Net inventories	$	2,703,780	$	2,845,563

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Earnings Per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

8. Earnings Per Share

The Company reports earnings per share in accordance with appropriate accounting guidance. The following table sets forth the computation of basic and diluted earnings per common share:

	Nine Months Ended September 30,
	2012			2011
Numerator:
Net (loss) income	$	(229,844	)	$	53,361
Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,682,661			1,652,422
(Loss) income per common share (basic and diluted):	$	(0.14	)	$	0.03

	Three Months Ended September 30,
	2012			2011
Numerator:
Net(loss) income	$	(22	)	$	123,491
Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,683,985			1,660,440
(Loss) income per common share (basic and diluted):	$	(0.00	)	$	0.07

The Company had 12,000 stock options outstanding at September 30, 2012 and at September 30, 2011. These options were not included in the common share computation for loss per share, as the common stock equivalents were anti-dilutive.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

6. Stockholders’ Equity

On March 31, 2012, the Company issued 3,986 shares of common stock to non-employee directors and increased other capital by $1,516, which represents a compensation expense of $5,500.

Effective May 25, 2012, the board of directors will no longer have the option of receiving common stock in lieu of cash compensation as director’s fees. As a result, the Company did not issue any shares of common stock to directors in the second or third quarter of 2012.

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Pension Benefits

9 Months Ended

Sep. 30, 2012

Pension Benefits [Abstract]

Pension Benefits

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 three and nine months ended September 30, 2012 and 2011:

	Nine Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2012			2011			2012			2011
Service cost	$	15,750		$	15,825		$	—		$	—
Interest cost		127,500			129,150			56,789			58,309
Expected return on plan assets		(120,750	)		(106,575	)		(62,319	)		(63,987	)
Net actuarial loss		—			—			10,312			10,588
Amortization		70,500			38,475			—			—
Net periodic benefit cost	$	93,000		$	76,875		$	4,782		$	4,910

	Three Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2012			2011			2012			2011
Service cost	$	5,250		$	5,275		$	—		$	—
Interest cost		42,500			43,050			18,949			19,426
Expected return on plan assets		(40,250	)		(35,525	)		(20,794	)		(21,317	)
Net actuarial loss		—			—			3,441			3,527
Amortization		23,500			12,825			—			—
Net periodic benefit cost	$	31,000		$	25,625		$	1,596		$	1,636

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.

The Fair Value Measurements and Disclosure Topic of the ASC requires the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. The various values of the Fair Value Measurements and Disclosure Topic of the ASC fair value hierarchy are described as follows:

Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.

Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

The fair value hierarchy of the plan assets are as follows:

		September 30, 2012
		US Plan		Canadian Plan
Cash and cash equivalents	Level 1	$	306,742	$	59,343
Mutual funds	Level 1		268,290		1,259,339
Corporate/Government Bonds	Level 1		682,731		—
Equities	Level 1		1,039,299		—
Total		$	2,297,062	$	1,318,682

On April 15, 2012, the Company transferred its US pension plan assets to Bank of America Merrill Lynch (“BAML”). It was previously being managed by Metlife. As a result of this change, $2,203,978 of Level 2 assets were transferred to Level 1.

For additional information on the defined benefit pension plans, please refer to Note 10 of the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

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Debt

9 Months Ended

Sep. 30, 2012

Debt [Abstract]

Debt

9. Debt

On December 8, 2010, the Company entered into a credit agreement (the “Loan Agreement”) with BAML, pursuant to which the Company obtained a $1 million term loan (the “Term Loan”) and a $2.5 million revolving line of credit (the “Line of Credit”). On November 4, 2011, the Company entered into an amendment to the Loan Agreement (the “Amendment”) that extended the maturity date of the Line of Credit through December 8, 2012. The Amendment also included the addition of a $500,000 draw note (the “Draw Note”).

On November 9, 2012, the Company entered into a second amendment to the Loan Agreement, which extended availability under the Draw Note, and the maturity date of the Line of Credit, to October 31, 2013.

The Draw Note is to be used to fund the Company’s investment in future concession contracts. The Company can draw up to $500,000 on the Draw Note before October 31, 2013. The Company will pay interest only on the Draw Note through November 26, 2013, after which the Company will pay interest and principal so that the balance will be paid in full as of October 27, 2016. As of September 30, 2012, there were no borrowings on the Draw Note.

The proceeds of the Term Loan were used to fund the Company’s investment in lockers used in the Disney Agreement. The proceeds of the Line of Credit will be used primarily for working capital needs in the ordinary course of business and for general corporate purposes.

The Company can borrow, repay and re-borrow principal under the Line of Credit from time to time during its term, but the outstanding principal balance of the Line of Credit may not exceed the lesser of the borrowing base or $2,500,000. For purposes of the Line of Credit, “borrowing base” is calculated by multiplying eligible accounts receivable of the Company by 80% and eligible raw material and finished goods by 50%. As of September 30, 2012, there was $1,050,000 outstanding on the Line of Credit.

The outstanding principal balances of the Line of Credit, the Draw Note and the Term Loan bear interest at the one-month LIBOR rate plus 375 basis points (3.75%). Accrued interest payments on the outstanding principal balance of the Line of Credit are due monthly, and all outstanding principal payments under the Line of Credit, together with all accrued but unpaid interest, is due at maturity, or October 31, 2013. Payments on the Term Loan, consisting of $16,667 in principal plus accrued interest, began in 2011. The entire outstanding balance of the Term Loan is due on December 8, 2015.

The Loan Agreement is secured by a first priority lien on all of the Company’s accounts receivable, inventory and equipment pursuant to a Security Agreement between the Company and BAML (the “Credit Security Agreement”).

The Credit Security Agreement and Loan Agreement contain covenants, including financial covenants, with which the Company must comply, including a debt service coverage ratio and a funded debt to EBITDA ratio. Subject to the Lender’s consent, the Company is prohibited under the Credit Security Agreement and the Loan Agreement, except under certain circumstances, from incurring or assuming additional debt and from permitting liens to be placed upon any of its property, assets or revenues. Additionally, the Company is prohibited from entering into certain transactions, including a merger or consolidation, without the Lender’s consent.

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Restructuring (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Sep. 30, 2012
Changes in the Company's reserve with respect to the restructuring plan
Beginning Balance	$ 325,400		$ 123,000
2012 Expense	66,185	174,000	283,924
Payment	(171,800)		187,100
Ending Balance	219,800	325,400	219,800
Severance [Member]
Changes in the Company's reserve with respect to the restructuring plan
Beginning Balance	138,700		111,000
2012 Expense	21,000		64,000
Payment	(40,900)		(56,200)
Ending Balance	118,800		118,800
Professional fees [Member]
Changes in the Company's reserve with respect to the restructuring plan
Beginning Balance	42,000
2012 Expense			42,000
Payment	(42,000)		(42,000)
Inventory [Member]
Changes in the Company's reserve with respect to the restructuring plan
2012 Expense			89,000
Ending Balance	89,000	89,000	89,000
Other [Member]
Changes in the Company's reserve with respect to the restructuring plan
Beginning Balance	55,700		12,000
2012 Expense	45,200		88,900
Payment	(88,900)		88,900
Ending Balance	$ 12,000		$ 12,000

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Computation of basic and diluted earnings per common share

	Nine Months Ended September 30,
	2012			2011
Numerator:
Net (loss) income	$	(229,844	)	$	53,361
Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,682,661			1,652,422
(Loss) income per common share (basic and diluted):	$	(0.14	)	$	0.03

	Three Months Ended September 30,
	2012			2011
Numerator:
Net(loss) income	$	(22	)	$	123,491
Denominator:
Denominator for earnings per share (basic and diluted) — weighted average shares		1,683,985			1,660,440
(Loss) income per common share (basic and diluted):	$	(0.00	)	$	0.07

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Income Taxes (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Income Taxes (Textual) [Abstract]
Effective tax rate	(31.70%)	45.80%
Increases in the valuation allowance	$ 178,000	$ 39,000
Change in income tax payable and provision	$ 69,791

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Comprehensive Income [Abstract]
Net loss	$ (22)	$ 123,491	$ (229,844)	$ 53,631
Other comprehensive income:
Foreign currency translation adjustment	(3,574)	(37,004)	976	(23,860)
Adjustment to minimum pension liability, net of tax effect of $(5,648) and $ (2985) for the Nine Months Ended September 30, 2012 and Nine Months Ended September 30, 2011 respectively and $(6417) and $ 550 for the Three Months Ended September 30, 2012 and Three Months Ended September 30, 2011 respectively	(16,299)	10,188	(14,346)	5,845
Other comprehensive loss	(19,873)	(26,816)	(13,370)	(18,015)
Total comprehensive (loss) Income	$ (19,895)	$ 96,675	$ (243,214)	$ 35,616

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Disneyland Concession Agreement

9 Months Ended

Sep. 30, 2012

Disneyland Concession Agreement [Abstract]

Disneyland Concession Agreement

3. Disneyland Concession Agreement

On September 24, 2010, the Company entered into an agreement (the “Disney Agreement”) with Disneyland Resort, a division of Walt Disney Parks and Resorts U.S., Inc., and Hong Kong International Theme Parks Limited, (collectively referred to as “Disney”) to provide locker services under a concession arrangement. Under the Disney Agreement, the Company installed, operates and maintains electronic lockers at Disneyland Park and Disney’s California Adventure Park in Anaheim, California and at Hong Kong Disneyland Park in Hong Kong.

The Company installed approximately 4,300 electronic lockers under the Disney Agreement. The Company retains ownership of the lockers and receives a portion of the revenue generated by the locker operations. The term of the Disney Agreement is five years, with an option to renew for one year at Disney’s option, and operations began in late November 2010. The Agreement contains a buyout option at the end of each contract year and a provision to compensate the Company in the event Disney terminates the Agreement without cause.

Under appropriate accounting guidance, the Company capitalized its costs related to the Disney Agreement and the Company is depreciating such costs over the five year term of the agreement. The Company recognizes revenue for its portion of the revenue as it is collected.

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Stockholders' Equity (Details) (USD $)	1 Months Ended
	Mar. 31, 2012
Stockholders' Equity (Textual) [Abstract]
Shares of common stock issued	3,986
Increase in other capital	$ 1,516
Compensation expense	$ 5,500

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Pension Benefits (Tables)

9 Months Ended

Sep. 30, 2012

Pension Benefits [Abstract]

Components of net periodic benefit cost

	Nine Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2012			2011			2012			2011
Service cost	$	15,750		$	15,825		$	—		$	—
Interest cost		127,500			129,150			56,789			58,309
Expected return on plan assets		(120,750	)		(106,575	)		(62,319	)		(63,987	)
Net actuarial loss		—			—			10,312			10,588
Amortization		70,500			38,475			—			—
Net periodic benefit cost	$	93,000		$	76,875		$	4,782		$	4,910

	Three Months Ended September 30,
	Pension Benefits
	U.S. Plan						Canadian Plan
	2012			2011			2012			2011
Service cost	$	5,250		$	5,275		$	—		$	—
Interest cost		42,500			43,050			18,949			19,426
Expected return on plan assets		(40,250	)		(35,525	)		(20,794	)		(21,317	)
Net actuarial loss		—			—			3,441			3,527
Amortization		23,500			12,825			—			—
Net periodic benefit cost	$	31,000		$	25,625		$	1,596		$	1,636

Fair value hierarchy of plan assets

		September 30, 2012
		US Plan		Canadian Plan
Cash and cash equivalents	Level 1	$	306,742	$	59,343
Mutual funds	Level 1		268,290		1,259,339
Corporate/Government Bonds	Level 1		682,731		—
Equities	Level 1		1,039,299		—
Total		$	2,297,062	$	1,318,682