UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December  31, 2010

o		Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to _______.

Commission file number 0-439

American Locker Group Incorporated

(Exact Name of registrant as specified in its charter)

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

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

(817) 329-1600
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:

Title of each class		Name of each exchange on which registered

None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $1.00 Per Share
(Title of class)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by 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 such shorter period that the registrant was required to submit and post such files). Yes o No o

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

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

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

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

     The aggregate market value of the Common Stock held by non-affiliates was approximately $ 1,579,803 based on the $1.40 price at which the Common Stock was last sold on June 30, 2010, the last business day of the registrant’s most recently completed second quarter. Shares of Common Stock known by the Registrant to be beneficially owned by directors and officers of the Registrant and other persons known to the Registrant to have beneficial ownership of 5% or more of the outstanding Common Stock are not included in the computation. The Registrant, however, has made no determination that such persons are “affiliates” within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934.

     As of March 14, 2011, 1,642,108 shares of Common Stock, $1.00 par value per share, were outstanding.

     The information required to be furnished pursuant to Part III of this Annual Report on Form 10-K will be set forth in, and is incorporated by reference to, the registrant’s Definitive Proxy Statement for the Annual Meeting of Stockholders (2011 Proxy Statement), which will be filed no later than 120 days after the end of the registrant’s 2010 fiscal year.

 

 

TABLE OF CONTENTS

PART I
Item 1. Business			1
Item 1A			5
Item 1B. Unresolved Staff Comments			7
Item 2. Properties			7
Item 3. Legal Proceedings			7
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			8
Item 6. Selected Financial Data			9
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			20
Item 8. Financial Statements and Supplementary Data			21
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			42
Item 9A(T). Controls and Procedures			42
Item 9B. Other Information			43
PART III
Item 10. Directors, Executive Officers and Corporate Governance			43
Item 11. Executive Compensation			43
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			44
Item 13. Certain Relationships and Related Transactions, and Director Independence			44
Item 14. Principal Accountant Fees and Services			44
PART IV
Item 15. Exhibits, Financial Statement Schedules			44
EXHIBIT INDEX			44
SIGNATURES			45
EX-10.6
EX-10.7
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1

FORWARD-LOOKING INFORMATION

     This Annual Report on Form 10-K 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 1. Business,” “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” When used in this Annual Report on Form 10-K, 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 and 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

Item 1. Business.

Overview

     American Locker Group Incorporated, a Delaware corporation (the “Company”), is a leading manufacturer of lockers, locks and keys with a wide-range of applications for use in numerous industries. The Company is best known for manufacturing and servicing the widely-utilized key and lock system with the iconic plastic orange cap. The Company serves customers in a variety of industries in all 50 states, Canada, Mexico, Europe, Asia and South America.

     The Company’s products can be categorized as either mailboxes or lockers. Mailboxes are used for the delivery of mail, packages and other parcels to multi-tenant facilities. Lockers are used for applications other than mail delivery, and most of our lockers are key controlled checking lockers.

     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, 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 and operations began in late November 2010.

     On November 16, 2010, the Company entered into an agreement with BV DFW I, LP, an affiliate of General Electric Company, to lease (the “Lease”) approximately 100,000 square feet (the “Premises”) within a building located at the Dallas-Fort Worth Airport.

     The Company will be relocating its corporate headquarters and manufacturing facility from its current location in Grapevine, Texas to the Premises during the second quarter of 2011. The term of the Lease is for 91 months and was effective February 1, 2011.

     On December 8, 2010, the Company entered into a credit agreement with Bank of America Merrill Lynch, 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”).

     The proceeds of the Term Loan will be 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 following table sets forth selected products of the Company, the primary industries we serve, and some of our representative customers:

Selected products/service:

Recreation lockers - stainless steel, painted steel or aluminum and plastic lockers typically secured by a mechanical lock for storage by patrons of amusement parks, water parks, ski resorts and swimming pools.

Coin operated keys and locks - manufactured in the Company’s Ellicottville, New York facility for use in new lockers or for replacement in existing lockers.

USPS approved multi-tenant mailboxes — are typically installed in apartment and commercial buildings and consist of the USPS-approved Horizontal 4c, Horizontal 4b+ and Vertical 4b+ models. The Horizontal 4c provides for lay flat mail delivery and was mandated by the USPS to replace the 4b+ for use in new construction after October 5, 2006.

Private mail delivery mailboxes — used for the internal distribution of mail in colleges and universities as well as large corporate offices.

Electronic distribution lockers — used to distribute items such as industrial supplies, documents and library books using an electronic locking mechanism.

Evidence lockers — used by law enforcement agencies to securely store evidence.

Laptop lockers — used by large corporations, libraries and schools to recharge laptop computers in a secure storage environment.

Mini-check lockers — used by health clubs, law enforcement, the military and intelligence agencies to securely store small items such as cell phones, wallets and keys.

Selected end user types:		Amusement parks
		Water parks
		Apartment buildings
		Law enforcement
		Health clubs
		Ski resorts
		Colleges and universities
		Military
		Post offices
Selected customers:		Disneyland Resort
		Sea World
		Vail Resorts, Inc.
		United States Department of Homeland Security
		LA Fitness
		Mammoth Mountain Ski Area
		Research In Motion United States Postal Service
		The UPS Store

     The Company was incorporated as the Automated Voting Machine Corporation on December 15, 1958, as a subsidiary of Rockwell Manufacturing Company (“Rockwell”). In April 1964, the Company’s shares were distributed to the stockholders of Rockwell, and it thereby became a publicly held corporation. From 1965 to 1989, the Company acquired and disposed of a number of businesses, including the

disposition of its original voting machine business. In 1985, the Company’s name was changed to American Locker Group Incorporated.

     In July 2001, the Company acquired Security Manufacturing Corporation (“SMC”). SMC manufactures aluminum multi-tenant mailboxes, which historically have been sold to the United States Postal Service (“USPS”) and private markets. SMC, a wholly-owned subsidiary, manufactures painted steel and stainless steel lockers for the Company, and manufactures and sells the Company’s aluminum mailboxes.

Business Segment Financial Information

     The Company, including its foreign subsidiaries, is engaged primarily in one business: the sale of lockers, including coin, key-only and electronically controlled checking lockers and related locks and aluminum centralized mail and parcel distribution mailboxes. Please see the Company’s consolidated financial statements included in this Annual Report on Form 10-K under Item 8.

Competition

     While the Company is not aware of any reliable trade statistics, it believes that its wholly-owned subsidiaries, American Locker Security Systems, Inc. and Canadian Locker Co., Ltd. are the leading suppliers of key/coin controlled checking lockers in the United States and Canada. The Company faces active competition from several manufacturers of mailbox products sold in the private market. USPS specifications limit the Company’s ability to develop mailboxes that have significant product differentiation from competitors. As a result, the Company differentiates itself in the mailboxes market by offering a higher level of quality and service coupled with competitive prices. To the Company’s knowledge, it is the only company that manufactures both the lock and locker components featured in the products the Company sells in the locker markets in which the Company competes. Additionally, the Company believes that its recreation lockers possess a reputation for high quality and reliability. The Company believes this integrated secured storage solution, when combined with the Company’s high level of service and quality, and the reliability of its products, is a competitive advantage that differentiates the Company from its competitors in the locker markets.

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, aluminum and plastic, the Company expects that any raw material price changes would be reflected in adjusted sales prices and passed on to customers. 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 metal, aluminum and plastic lockers and locks are generally considered to be adequate and are currently available in the marketplace.

     Price fluctuations of raw material and other components are factors in the general economy, and the Company continues to seek ways to mitigate its impact. For example, the prices of steel and aluminum, the two primary raw materials utilized in the Company’s operations, have fluctuated widely in recent years, with higher prices in 2007 and 2008 and relatively lower prices in 2009 and 2010. To the extent permitted by competition, the Company passes increased costs on to its customers by increasing sales prices over time.

Patents and Trademarks

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

Employees

     The Company and its subsidiaries actively employed 103 individuals on a full-time basis as of December 31, 2010, of whom two were based in Canada, and one was based in Hong Kong. The Company considers its relations with its employees to be satisfactory. None of the Company’s employees are represented by a union.

Dependence on Material Customer

     The Company is not substantially dependent on any one customer and its largest customer accounted for less than 10% of consolidated revenue in 2010.

Distribution and Geographic Areas

     The Company sells its lockers directly to end users. Postal lockers are sold through a nationwide distributor network. The Company sells lockers in foreign countries including Canada, Chile, Greece, Hong Kong, India, Peru, and the United Kingdom. During 2010, 2009 and 2008, sales in foreign countries accounted for 23.4%, 17.6% and 19.8% respectively of consolidated net sales.

Research and Development

     The Company engages in research and development activities relating to new and improved products. It expended $108,124, $139,307 and $199,553, in 2010, 2009 and 2008, respectively, for such activity in its continuing businesses.

Impact of Government Regulations

     A majority of the Company’s postal locker sales come from products, including the Horizontal 4c and Horizontal 4b+ mailboxes, which require USPS approval. The USPS may change product specifications and supplier approval requirements in the future. Any changes to USPS product specifications or supplier approval requirements may impact the Company’s ability to sell these products.

Compliance with Environmental Laws and Regulations

     The Company’s facilities and operations are subject to various federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose strict, joint and several liabilities on certain persons for the cost of investigation or remediation of contaminated properties. These persons may include former, current or future owners or operators of properties and persons who arranged for the disposal of hazardous substances. The Company’s owned and leased real property may give rise to such investigation, remediation and monitoring liabilities under applicable environmental laws. In addition, anyone disposing of hazardous substances on such sites must comply with applicable environmental laws. Based on the information available to it, the Company believes that, with respect to its currently owned and leased properties, it is in material compliance with applicable federal, state and local environmental laws and regulations. See “Item 3. Legal Proceedings” and Note 16 to the Company’s consolidated financial statements included under “Item 8. Financial Statements and Supplementary Data” for further discussion with respect to the settlement of certain environmental litigation.

Backlog and Seasonality

     Backlog of orders is not significant in the Company’s business, as shipments usually are made shortly after orders are received. Sales of lockers are greatest during the spring and summer months and lowest during the fall and winter months. The Company generally experiences lower sales and net income in the first and fourth quarters ending in March and December, respectively.

Available Information

     The Company files with the U.S. Securities and Exchange Commission (the “SEC”) quarterly and annual reports on Forms 10-Q and 10-K, respectively, current reports on Form 8-K, and proxy statements pursuant to the Securities Exchange Act of 1934, in addition to other information as required. The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. The Company files this information with the SEC electronically, and the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding

issuers that file electronically with the SEC at http://www.sec.gov. The Company also maintains a website at http://www.americanlocker.com. The contents of the Company’s website are not part of this Annual Report on Form 10-K.

     Also, copies of the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Exchange Act are available, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC, through a link on the Company’s website. The Company will also provide electronic copies or paper copies free of charge upon written request to the Company.

Item 1A. Risk Factors.

     The Company’s results from continuing operations and its financial position could be adversely affected in the future by known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control. Some of these factors are described in more detail in this Annual Report on Form 10-K and in the Company’s other filings with the SEC. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial may also impair its business operations. Should one or more of any of these risks or uncertainties materialize, the Company’s business, financial condition or results of operations could be materially adversely affected.

The Company’s results of operations are dependent on the price of raw materials, particularly steel and aluminum. High raw material costs or cost increases could have a material adverse effect on the Company’s operating results.

     Volatility in raw material and other prices has become an increasing factor in the general economy, and the Company continues to seek ways to mitigate its impact. For example, the Company experienced significant volatility in steel and aluminum prices from 2008 to 2010. To the extent permitted by competition, the Company seeks to mitigate the adverse impact of rising costs of raw materials through product price increases. However, the Company’s ability to implement price increases is dependent on market conditions, economic factors, raw material costs and availability, competitive factors, operating costs and other factors, some of which are beyond the Company’s control. Further, the benefits of any implemented price increases may be delayed due to manufacturing lead times and the terms of existing contracts. If the Company is not able to successfully mitigate the effects of rising raw materials costs, the Company’s results of operations, business and financial condition may be materially adversely affected.

The Company must relocate to a new facility during 2011. Failure to relocate in a timely manner could have a materially adverse effect on the Company’s operating results.

     As a result of the sale of the Company’s headquarters and primary manufacturing facility to the City of Grapevine, the Company must relocate to a new headquarters and primary manufacturing facility during 2011. The Company manufactures all of its postal and non-postal lockers at this facility and any delays or disruptions during the relocation would negatively impact the Company’s ability to manufacture product. If this were to happen it would have a material adverse effect on the Company’s operating results and liquidity.

The global economic recession has resulted in weaker demand for the Company’s products and may create challenges for us that could have a material adverse effect on our business and results of operations.

     The global economic recession has affected our domestic and international markets, and we continue to experience weaker demand for our products. Management believes the weak global economic conditions in 2010 and beyond will result in subdued customer demand across all customer segments, particularly in construction, travel and recreational industries. As a result, customers may reduce their purchases of the Company’s products or delay the timing of their purchases from the Company, either of which may have a material adverse effect on the Company’s results of operations, business and financial condition.

Continuing disruptions in the financial markets or other factors could affect the Company’s liquidity.

     U.S. credit markets continue to experience significant dislocations and liquidity disruptions. These factors have materially impacted debt markets, making financing terms for borrowers less attractive, and in certain cases have resulted in the unavailability of certain types of debt financing. Continued uncertainty in the credit markets may negatively impact the Company’s ability to access additional debt financing or to refinance existing indebtedness on favorable terms, or at all. The credit market disruptions could impair the Company’s ability to fund operations, limit the Company’s ability to expand the business or increase interest expense, which could have a material adverse effect on the Company’s financial results.

Terrorist attacks or international hostilities may adversely affect the Company’s business, financial condition and operating results.

     The terrorist attacks of September 11, 2001 caused a significant slowdown in the tourism industry. Additional terrorist attacks or fear of such attacks would negatively affect the tourism industry and, due to the nature of our business, the Company. The Company’s financial resources might not be sufficient to absorb the adverse effects of any further terrorist attacks or other international hostilities.

The global financial crisis may have an impact on the Company’s business and financial condition in ways that management cannot predict.

     The continuing credit crisis and related turmoil in the global financial system has had and may continue to have an impact on the Company’s business and financial condition. For example, the Company’s ability to access the capital and credit markets may be severely restricted which could have an impact on our flexibility to react to changing economic and business conditions.

     The financial crisis and economic downturn have also resulted in broadly lower investment asset returns and values, including in the defined benefit pension plans that we sponsor for eligible employees and retirees. Our funding obligations for the US Plan, which have been frozen for future benefit accruals, are governed by the Employee Retirement Income Security Act (“ERISA”). Our funding obligations for the Canadian Plan, which have been frozen for future benefit accruals, are governed by the Pension Benefits Act. Estimates of pension plan funding requirements can vary materially from actual funding requirements because the estimates are based on various assumptions concerning factors outside our control, including, among other things, the market performance of assets, statutory requirements, and demographic data for participants. Due primarily to the decline in the investment markets in 2008 coupled with a decline in long term interest rates, we currently expect our contributions to these plans to significantly increase for 2011 and thereafter, which could have a material adverse effect on our financial condition.

If the Company experiences losses of senior management personnel and other key employees, operating results could be adversely affected.

     We are dependent on the experience and industry knowledge of our officers and other key employees to execute our business plans. If we experience a substantial turnover in our leadership and other key employees, our performance could be materially adversely impacted. Furthermore, we may be unable to attract and retain additional qualified executives as needed in the future.

The postal locker industry is subject to extensive regulation by the USPS, and new regulation might negatively impact the Company’s ability to continue to sell postal lockers or increase our operating costs

     A material portion of the Company’s postal locker sales come from products, including the Horizontal 4c and Horizontal 4b+ mailboxes, which require continued USPS approval. If the USPS were to withdraw approval for these products or change the requirements for approval, it may materially adversely affect the Company’s results of operations, business and financial condition. A change in the USPS’s requirements might also materially increase the Company’s operating costs.

The Company’s future success will depend, in large part, upon its ability to successfully introduce new products.

     The Company believes that its future success will depend, in large part, upon its ability to develop, manufacture and successfully introduce new products. The Company’s ability to successfully develop, introduce and sell new products depends upon a variety of factors, including new product selection, timely and efficient completion of product design and development, timely and efficient implementation of manufacturing and assembly processes and effective sales and marketing initiatives related to the new products. Given the Company’s current financial position, the Company may not have enough capital on hand to develop, manufacture and successfully introduce new products, and a failure to do so or to obtain the necessary capital in order to do so would have a material adverse effect on the Company.

Item 1B. Unresolved Staff Comments.

     None.

Item 2. Properties.

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

				Approximate
				Floor Space
Location		Subsidiary		In Sq. Ft.				Use
Anaheim, CA		American Locker Security Systems, Inc.			100*			Manage Disneyland Resort Lockers
Ellicottville, NY		American Locker Security Systems, Inc. Lock Shop and Service Center			12,800			Lock manufacturing, service and repair
Toronto, Ontario		Canadian Locker Company, Ltd.			1,000*			Sales, service and repair of lockers and locks
Grapevine, TX		Operated by Security Manufacturing Corporation			70,000*			Manufacturing and corporate headquarters (1)
DFW Airport, TX		Security Manufacturing Corporation			100,000*			Future manufacturing and corporate headquarters
TOTAL					183,900

     The Company believes that its facilities, which are of varying ages and types of construction, and the machinery and equipment utilized in such facilities, are in good condition and are adequate for the Company’s presently contemplated needs.

(1)

On September 18, 2009, the Company closed the sale of its Grapevine, Texas facility. Please see Note 3 “Sale of Property” to the Company’s consolidated financial statements for further information.

Item 3. Legal Proceedings.

     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 226 cases pending in state court in Massachusetts and one 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 31 cases with funds authorized and provided by the Company’s insurance carrier. Further, over 157 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 9, 2011, the most recent date information is available, is approximately 39 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 routine 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.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Prices and Dividends

     The Company’s common stock, par value $1.00 per share, is not currently listed on any exchange. The Company’s common stock currently is quoted on OTCQB under the symbol “ALGI”. The OTCQB marketplace identifies companies that are reporting to the SEC and are current in their reporting obligations. The following table shows the range of the low and high sale prices and bid information, as applicable, for the Company’s common stock in each of the calendar quarters indicated. Such information reflects inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.

Market Price
Per Common Share

2010		High				Low
Quarter ended December 31, 2010		$	1.50			$	1.05
Quarter ended September 30, 2010			1.75				1.06
Quarter ended June 30, 2010			1.90				1.40
Quarter ended March 31, 2010			3.00				1.25

2009		High				Low
Quarter ended December 31, 2009		$	2.00			$	0.40
Quarter ended September 30, 2009			0.75				0.25
Quarter ended June 30, 2009			0.35				0.15
Quarter ended March 31, 2009			1.05				0.15

     The last reported sales price of the Company’s common stock as of March 14, 2011 was $1.65. The Company had 793 security holders of record as of that date.

     The Company has not paid dividends on its common stock in the two most recent fiscal years, or since then, and does not presently plan to pay dividends in the foreseeable future. The Company currently expects that earnings will be retained and reinvested to support either business growth or debt reduction.

Equity Compensation Plan Information

     The following table summarizes as of December 31, 2010, the shares of common stock authorized for issuance under our equity compensation plans:

										Number of securities
		Number of securities to be				Weighted-average				remaining available
		issued upon exercise of				exercise price of				for future issuance
		outstanding options,				outstanding options,				under equity
		warrants and rights				warrants and rights				compensation plans
Equity compensation plans approved by security holders(1)			12,000			$	4.95				37,000
Equity compensation plans not approved by security holders			—				—				—
Total			12,000			$	4.95				37,000

Item 6. Selected Financial Data.

     The following table sets forth selected historical financial data of the Company and its consolidated subsidiaries as of, and for the years ended December 31, 2010, 2009, 2008, 2007 and 2006. The historical selected financial information derived from the Company’s audited financial information may not be indicative of the Company’s future performance and should be read in conjunction with the information contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Item 8. Financial Statements and Supplementary Data,” and “Item 1. Description of Business.”

		For the Years Ended December 31,
		2010				2009				2008				2007				2006
Sales		$	12,099,012			$	12,515,433			$	14,129,807			$	20,242,803			$	25,065,090
Income (loss) before income taxes			200,165				(618,945	)			(3,353,730	)			(2,749,743	)			845,224
Income tax (benefit)			131,796				(196,339	)			(653,519	)			(845,626	)			300,904
Net income (loss)			68,369				(422,606	)			(2,700,211	)			(1,904,117	)			544,320
Earnings (loss) per share—basic			0.04				(0.27	)			(1.73	)			(1.23	)			0.35
Earnings (loss) per share—diluted			0.04				(0.27	)			(1.73	)			(1.23	)			0.35
Weighted average common shares outstanding—basic			1,605,769				1,572,511				1,564,039				1,549,516				1,547,392
Weighted average common shares outstanding—diluted			1,605,769				1,572,511				1,564,039				1,549,516				1,547,392
Dividends declared			0.00				0.00				0.00				0.00				0.00
Interest expense			16,232				255,973				159,380				195,280				184,257
Depreciation and amortization expense			336,037				337,507				416,664				386,430				396,304
Number of employees			103				137				117				126				147
Consolidated Balance Sheet Total assets			9,495,197				8,894,726				10,810,038				12,416,042				14,517,522
Long-term debt, including current portion			1,000,000				0				2,004,315				2,143,765				2,178,042
Stockholders’ equity			4,302,559				4,265,782				4,627,185				7,758,161				9,302,162
Stockholders’ equity per share (1)			2.62				2.68				2.94				5.01				6.00
Common shares outstanding at year-end			1,642,108				1,589,015				1,571,849				1,549,516				1,549,516
Expenditures for property, plant and equipment			1,968,592				97,118				334,902				818,646				98,591

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

Critical Accounting Policies and Estimates

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

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

Revenue Recognition

     The Company recognizes revenue at the point of passage of title, which occurs at the time of shipment to the customer. The Company derived approximately 19.4% of its revenue in 2010 from sales to distributors. These distributors do not have a right to return unsold products; however, returns may be permitted in specific situations. Historically, returns have not had a significant impact on the Company’s results of operations.

     For concession operations, the Company recognizes revenue when receipts are collected. Revenue is recognized for the Company’s proportional share of receipts with the remaining amounts collected recorded as an accrued liability until they are remitted to the concession contract counterparty.

Allowance for Doubtful Accounts

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

Inventories

     Inventories are stated at the lower of cost or market value using the FIFO method and are categorized as raw materials, work-in-progress or finished goods.

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

Property, Plant and Equipment

     Property, plant and equipment is stated at historical cost. Depreciation is computed by the straight-line and declining balance methods for financial reporting purposes and by accelerated methods for income tax purposes. Estimated useful lives for financial reporting purposes are 20 to 40 years for buildings and 3 to 12 years for machinery and equipment. Leasehold improvements are amortized over the shorter of the life of the building or the lease term. Expenditures for repairs and maintenance are expensed as incurred. Gains and losses resulting from the sale or disposal of property and equipment are included in other income.

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

Pension Assumptions

     The Company maintains a defined benefit plan covering its U.S. employees and a separate defined contribution plan covering its Canadian employees. The accounting for the plans is based in part on certain assumptions that are uncertain and that could have a material impact on the financial statements if different reasonable assumptions were used. The assumptions for return on assets reflect the rates of earnings expected on funds invested or to be invested to provide for benefits included in the projected benefit obligation. The assumed rates of return of 7.5% and 7.0% used in 2010 for the U.S. and Canadian plans, respectively, were determined based on a forecasted rate of return for a portfolio invested 50% in equities and 50% in bonds. In addition to the assumptions related to the expected return on assets, discount rates were also assumed. The discount rates used in determining the 2010 pension costs were 6.0% and 6.75% for the U.S. and Canadian plans, respectively. Consistent with prior years, for both plans the Company uses a discount rate that approximates the average AA corporate bond rate.

     Effective July 15, 2005, the Company froze the accrual of any additional benefits under the U.S. plan. Effective January 1, 2009, the Company converted the Canadian plan from a defined benefit plan to a defined contribution plan. 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.

Deferred Income Tax Assets

     The Company had net deferred tax assets of approximately $896,116 at December 31, 2010. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The ultimate realization of the deferred income tax assets are primarily dependent on generating sufficient future taxable income or being able to carryback any taxable losses and claim refunds against previously paid income taxes. The Company has historically had taxable income and believes its net deferred income tax assets at December 31, 2010, are more likely than not realizable. If future operating results continue to generate taxable losses, it may be necessary to increase the valuation allowances to reduce the amount of the deferred income tax assets to realizable value.

Results of Operations—Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Overall Results

     The financial market and economic turmoil and related disruption of the credit markets has caused a significant slowdown in new construction of multifamily and commercial buildings beginning in the second half of 2008 and continuing through 2010. The economic crisis also negatively impacted our customers in the travel and recreation industries. New construction in these markets is a key driver of revenue for the Company. Consolidated net sales for the twelve months ended December 31, 2010 decreased $416,421 to $12,099,012, when compared to net sales of $12,515,433 for the same period of 2009, representing a 3.3% decline. This decrease was attributable primarily to decreases in contract manufacturing and sales of mailboxes partially offset by an increase in sales of lockers. Pre-tax operating results improved to pre-tax income of $200,165 for the twelve months ended December 31, 2010 from a reported pre-tax loss of $618,945 for the same period of 2009. After tax operating results improved to a net income of $68,369 for the twelve months ended December 31, 2010 compared to a net loss of $422,606 for the twelve months ended December 31, 2009. Net income per share (basic and diluted) was $0.04 for the year ended December 31, 2010, an improvement from a net loss per share (basic and diluted) of $0.27 for the same period in 2009.

Net Sales

     Consolidated net sales in 2010 were $12,099,012, a decrease of $416,421, or 3.3% from net sales of $12,515,433 in 2009. Sales of lockers for the year ended December 31, 2010 were $9,272,432, an increase of $2,227,672, or 31.6%, compared to sales of $7,044,760 for the same period of 2009. The locker increase is primarily attributable to increased market share resulting from the Company reorganization of its outside sales efforts to focus on larger projects and inside sales to focus on facilitating smaller orders and servicing distributors. In particular the Company sold large electronic locker systems to Breckenridge and Mammoth Mountain ski areas in 2010. Foreign sales increased $635,860 or 28.9% to $2,832,815 in 2010 from $2,196,955 in 2009. The foreign sales increase was driven by increased demand from Chile caused by the need to replace lockers damaged in the February 27, 2010 earthquake.

     Concession revenue in 2010 was $311,251, an increase of $148,808 or 92% from concession revenue of $162,443 in 2009. The concession revenue increase was driven by the Disneyland Resort and Hong Kong Disneyland concessions commencing operations in late November 2010.

     Sales of mailboxes were $2,374,682 for the twelve months ended December 31, 2010, a decrease of $1,548,928, or 39.5%, compared to sales of $3,923,610 for the same period of 2009. Lower mailbox sales were due primarily to the lack of new multifamily and commercial construction activity in the United States. The majority of the Company’s historical mailbox sales have come from new construction and the lack of new construction activity has greatly reduced the overall market for mailboxes.

     The Company generated $451,898 in revenue from contract manufacturing in 2010 as compared to $1,547,063 in 2009. This decrease was primarily due to the refocusing of sales efforts from bid based, short duration contracts to sustainable relationships with Fortune 1000 customers as described below. As part of this process, the Company dramatically reduced its business with the customer that accounted for most of its contract manufacturing revenue in 2009.

     Contract manufacturing includes the manufacture of metal furniture, electrical enclosures and other metal products for third party customers. Revenue from contract manufacturing is volatile and should be expected to vary substantially from quarter to quarter. In order to increase the stability and growth of contract manufacturing revenue, the Company has refocused its contract manufacturing efforts on selling electrical enclosures and components to Fortune 1000 customers. This will allow the Company to benefit from the trend of bringing the manufacturing of items back to the United States that were previously manufactured in Asia. This process improves quality, reduces lead time and reduces total costs for the end user.

     Sales by general product group for the last two years were as follows:

										Percentage
		2010				2009				Increase (Decrease)
Lockers		$	9,272,432			$	7,044,760				31.6	%
Mailboxes			2,374,682				3,923,610				(39.5	)%
Contract Manufacturing			451,898				1,547,063				(70.8	)%
Total		$	12,099,012			$	12,515,433				(3.3	)%

Gross Margin

     Consolidated gross margin as a percentage of sales was 36.4% in 2010 as compared to 31.3% in 2009. The increase in gross margin as a percentage of sales was primarily due to continuing improvement in manufacturing efficiency from the Company’s LEAN manufacturing initiatives, reorganization, select product redesign, cost cutting and improved internal controls.

Selling, Administrative and General Expenses

     Selling, administrative and general expenses in 2010 totaled $4,242,855, an increase of $369,440 compared to $3,873,415 in 2009. This increase was primarily due to increased freight expenses of approximately $167,000 for the year ended December 31, 2010, as compared to the same period in 2009, as a result of higher freight rates. Additionally, incentive compensation expenses increased approximately $114,000 due to the adoption of a companywide incentive compensation plan for 2010.

Restructuring Costs

     As a result of the economic crisis, the Company implemented a restructuring in January 2009 to lower its cost structure in an uncertain economic environment. The restructuring included the elimination of approximately 50 permanent and temporary positions (a reduction of approximately 40%) as well as an across-the-board 10% reduction in wages. These resulted in severance and payroll tax charges during the twelve months ended December 31, 2009 of approximately $296,000. As of December 31, 2010, the remaining balance of these payments is expected to be made over the next twelve months. Additionally, the Company expects to relocate its Ellicottville, New York operations to Texas during 2011. The relocation is expected to result in approximately $240,000 in annual savings. To implement the restructuring plan, management anticipates incurring aggregate impairment charges and costs of $396,000. Refer to Note 18 to the Company’s consolidated financial statements for more detail related to restructure costs incurred during 2010.

Pension Settlement Charge

     As a consequence of the Company’s staff reductions at its Canadian subsidiary, the Company recorded a non-cash pension settlement charge of approximately $186,069 during the twelve months ended December 31, 2009. No settlement charges were recorded in 2010. Refer to Note 10 to the Company’s consolidated financial statements for detail related to pension benefit costs incurred during 2010.

Other Income (Expense)—Net

     Other income, net in 2010 totaled $61,087, a decrease of $28,895 compared to other income of $89,982 in 2009. This decrease was due to the decrease in 2010 of the number of accounts payable settled with unsecured creditors for less than the amount owed as compared to 2009.

Interest Expense

     Interest expense in 2010 totaled $16,232, a decrease of $239,741 compared to $255,973 in 2009. The decrease is due to the Company paying off all of its interest bearing debt in the first quarter of 2010.

Income Taxes

     In 2010, the Company recorded an income tax expense of $131,796 compared to income tax benefit of $196,339 in 2009. The effective tax rate determined as the percentage of the tax benefit or expense to the pre-tax loss was a 65.8% expense in 2010 compared to a 31.7% benefit in 2009. The effective tax rate in 2010 was higher than the US federal statutory rate due to a change in the valuation allowance of approximately $46,000 due to the Company’s inability to record a tax benefit for losses from its foreign subsidiaries.

Non-GAAP Financial Measure — Adjusted EBITDA

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

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

	•		Does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
	•		Does not reflect changes in, or cash requirements for, our working capital needs;
	•		Does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
	•		Excludes tax payments that represent a reduction in available cash;
	•		Excludes non-cash equity based compensation;
	•		Excludes one-time restructuring costs and pension settlement costs;
	•		Excludes one-time expenses and equity compensation; and
	•		Does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.

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

		Twelve Months Ended December 31,
		2010				2009
Net income (loss)			68,369				(422,606	)
Income tax expense (benefit)			131,796				(196,339	)
Interest expense			16,232				255,973
Depreciation and amortization expense			336,037				337,507
Loss on sale of equipment			—				14,299
Equity based compensation			75,516				26,171
Restructuring charge			—				296,118
Pension settlement charge			—				186,069
Adjusted EBITDA			627,950				497,192
Adjusted EBITDA as a percentage of revenues			5.0	%			4.0	%

Results of Operations—Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Overall Results

     Consolidated net sales for the twelve months ended December 31, 2009 decreased $1,614,374 to $12,515,433 when compared to net sales of $14,129,807 for the same period of 2008, representing an 11.4% decline.

This decrease was attributable primarily to the negative effects of the credit crisis as described above. Pre-tax operating results improved to a pre-tax loss of $618,945 for the twelve months ended December 31, 2009 from a reported pre-tax loss of $3,353,730 for the same period of 2008. After tax operating results improved to a net loss of $422,606 for the twelve months ended December 31, 2009 compared to a net loss of $2,700,211 for the first twelve months ended December 31, 2008. Net loss per share (basic and diluted) was $0.27 for the year ended December 31, 2009, an improvement from a net loss per share (basic and diluted) of $1.73 for the same period in 2008.

Net Sales

     Consolidated net sales in 2009 were $12,515,433, a decrease of $1,614,374, or 11.4% from net sales of $14,129,807 in 2008. Sales of lockers for the year ended December 31, 2009 were $7,044,760, a decrease of $1,785,545, or 20.2%, compared to sales of $8,830,305 for the same period of 2008. The locker decrease is primarily attributable to lower revenue from the Company’s Canada Locker Company, Ltd. (“Canadian Locker”) subsidiary. Canadian Locker revenue for the twelve months ended December 31, 2009 was approximately $1.1 million less than revenue during the same period in 2008. The remaining decrease in locker sales is attributable to lower revenue from replacement keys, locks and parts which were approximately $600,000 less in 2009 than in 2008. Sales of mailboxes were $3,923,610 for the twelve months ended December 31, 2009, a decrease of $1,375,892, or 26.0%, compared to sales of $5,299,502 for the same period of 2008. Lower mailbox sales were due primarily to reduced new construction activity as a result of the economic crisis described above. Decreases in mailbox and locker sales were partially offset by the Company’s entry into contract manufacturing in 2009. The Company generated $1,547,063 in revenue from contract manufacturing in 2009 as compared to $0 in 2008. Contract manufacturing includes the manufacture of metal furniture, electrical junction boxes and other metal products for third party customers. Revenue from contract manufacturing is volatile and should be expected to vary substantially from quarter to quarter.

     Sales by general product group for the last two years were as follows:

										Percentage
		2009				2008				Increase (Decrease)
Mailboxes		$	3,923,610			$	5,299,502				(26.0	)%
Contract Manufacturing			1,547,063				—				—
Lockers			7,044,760				8,830,305				(20.2	)%
Total		$	12,515,433			$	14,129,807				(11.4	)%

Gross Margin

Consolidated gross margin as a percentage of sales was 31.3% in 2009 as compared to 22.5% in 2008. The increase in gross margin as a percentage of sales was primarily due to reduced overhead expenses as a result of the Company’s restructuring plan as well as reduced raw material costs. The transition to the lower cost second generation Horizontal 4c mailbox also contributed to the decrease in cost of sales as a percentage of sales.

Selling, Administrative and General Expenses

     Selling, administrative and general expenses in 2009 totaled $3,873,415, a decrease of $2,155,315 compared to $6,028,730 in 2008. This decrease was primarily due to reduced personnel costs related to the Company’s restructuring plan. Freight expenses decreased approximately $370,000 for the twelve month period ended December 31, 2009, as compared to the same period in 2008, as a result of the decreased net sales coupled with lower negotiated freight rates.

Loss on Sales of Property, Plant and Equipment

Loss on sales of property, plant and equipment for the year ended December 31, 2009 was $14,299. The loss is primarily attributable to the loss the Company recorded on the sale of its property in Grapevine, Texas.

Other Income (Expense)—Net

     Other income, net in 2009 totaled $89,982, an improvement of $155,754 compared to other expense in excess of other income of $65,772 in 2008. This improvement in 2009 was the result of agreements reached by the Company with its unsecured creditors to settle certain accounts payable for amounts less than the amount owed. The Company realized other income for the difference between the amount owed and the settlement amount.

Interest Expense

     Interest expense in 2009 totaled $255,973, an increase of $96,593 compared to $159,380 in 2008. The increase is due to higher interest rates on the F.F.F.C., Inc. mortgage and the higher interest rate on the Gulf Coast Bank & Trust Company receivables purchase agreement as well as loan origination costs in 2009 as compared to the interest rate on the F&M Bank & Trust Co. loans in 2008.

Income Taxes

     In 2009, the Company recorded an income tax benefit of $196,339 compared to income tax benefit of $653,519 in 2008. The effective tax rate determined as the percentage of the tax benefit or expense to the pre-tax loss was a 31.7% benefit in 2009 compared to a 19.5% benefit in 2008.

Liquidity and Sources of Capital

Cash Flows Summary

		Year ended December 31,
		2010				2009				2008
Net cash (used in) provided by:
Operating activities		$	1,517,669			$	(70,463	)		$	(1,488,884	)
Investing activities			(1,968,592	)			2,649,882				(310,200	)
Financing activities			571,412				(2,328,350	)			613,173
Effect of exchange rate changes on cash			2,711				(4,301	)			(96,056	)
Increase (Decrease) in cash and cash equivalents		$	123,200			$	246,768			$	(1,281,967	)

Cash Flows — Year ended December 31, 2010 Compared to Year Ended December 31, 2009

Operating Activities

     In 2010, net cash provided by operating activities was $1,517,669 compared with net cash used in operating activities of $70,463 in 2009. The change was due primarily to the collection of the $1,409,696 income tax receivable during 2010.

Investing Activities

     Net cash used by investing activities was $1,968,592 in 2010 compared with net cash provided by investing activities of $2,649,882 in 2009. The increase was mainly due to the capitalization of the cost of Disneyland concession lockers in 2010. (See Note 4 “Disneyland Concession Agreement” to the Company’s consolidated financial statements for further information.

Financing Activities

     Net cash provided by financing activities was $571,412 in 2010 compared with net cash used in financing activities of $2,328,350 in 2009. The change is due the Company’s borrowings of $1,000,000 under its Bank of America Merrill Lynch (“BAML”) Term Loan (defined below) and the repayment of the Company’s factoring agreement.

Cash Flows — Year ended December 31, 2009 Compared to Year Ended December 31, 2008

Operating Activities

     In 2009, net cash used in operating activities was $70,463 compared with net cash used in operating activities of $1,488,884 in 2008. The change was due primarily to the decreased net loss of $564,016 in 2009 partially offset by an increase in income taxes receivable of $197,581, an increase in pension benefits of $135,126, and depreciation of $337,507 compared with a net loss of $2,700,212 in 2008.

Investing Activities

     Net cash provided by investing activities was $2,649,882 in 2009 compared with net cash used in investing activities of $310,200 in 2008. The increase was due to the sale of the Company’s facility in Grapevine, Texas which resulted in proceeds of $2,747,000 in 2009.

Financing Activities

     Net cash used in financing activities was $2,328,350 in 2009 compared with net cash provided by financing activities of $613,173 in 2008. The change is due to repayment of the Company’s borrowings of $757,081 under its F&M Line of Credit (defined below) and the repayment of the Company’s long term debt.

Capital Resources and Debt Obligations

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

     The Receivables Agreement called for the Company to pay a daily variable discount rate, which was the greater of prime plus 1.50% or 6.5% per annum, computed on the amount of outstanding receivables held by GCBT, for the period during which such receivables were outstanding. The Company would also pay a fixed discount percentage of 0.2% for each ten-day period during which receivables held by GCBT were outstanding. The Receivables Agreement was terminated in December 2010 at the time the Company entered into a line of credit with Bank of America/Merrill Lynch (“BAML”) as further described below.

     On September 18, 2009, the Company closed on the sale of its headquarters and primary manufacturing facility to the City of Grapevine. The Company was entitled to continue to occupy the facility, through December 31, 2010, at no cost. The City subsequently agreed to allow the Company to continue to occupy the facility beyond December 31, 2010. The City has further agreed to pay the Company’s relocation costs within the Dallas-Fort Worth area and to pay the Company’s real property taxes for the facility through December 31, 2010. The City paid a purchase price of $2,747,000. The Company estimates the total value of this transaction at $3,500,000.

     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”).

     The proceeds of the Term Loan were used to fund the Company’s investment in lockers used in the Disneyland concession 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%.

     The outstanding principal balances of the Line of Credit 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 December 8, 2011, the maturity date of the loan. Payments on the Term Loan,

consisting of $16,667 in principal plus accrued interest, are due monthly beginning January 8, 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.

Effect of Exchange Rate Changes on Cash

     Net cash provided by the effect of exchange rate changes on cash was $2,711 in 2010 as compared to net cash used of $4,301 in 2009. The change was primarily due to the increase in value of the Canadian Dollar (“CAD”) as compared to the United States Dollar (“USD”), which caused an increase in the value of the Company’s Canadian operation’s net assets. The CAD to USD exchange rate increased 4.9% from $0.9532 to $1.0001 between December 31, 2009 and 2010.

     Net cash used by the effect of exchange rate changes on cash was $4,301 in 2009 as compared to net cash used of $96,056 in 2008. The change was primarily due to the increase in value of the Canadian Dollar (“CAD”) as compared to the United States Dollar (“USD”), which caused an increase in the value of the net assets of the Company’s Canadian operation’s net assets. The CAD to USD exchange rate increased 16.5% from $0.8183 to $0.9532 between December 31, 2008 and 2009.

Cash and Cash Equivalents

     On December 31, 2010, the Company had cash and cash equivalents of $649,952 compared with $526,752 on December 31, 2009. The change was due primarily to the Company’s net income of $68,369 in 2010.

Liquidity

     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 December 31,
		2010				2009
Current Ratio			1.96 to 1				2.1 to 1
Working Capital		$	3,011,293			$	3,757,669

     The Company’s primary sources of liquidity include available cash and cash equivalents and borrowing under the Line of Credit.

     Expected uses of cash in fiscal 2011 include funds required to support the Company’s operating activities, capital expenditures, relocation of the Company’s facilities in Texas and New York and contributions to the Company’s defined benefit pension plans. Although the Company expects capital expenditures in 2011 to be lower than in 2010 they will be higher than expenditures in previous years.

     The Company has taken steps to enhance the Company’s liquidity position by entering into the new Loan Agreement which expands its ability to leverage accounts receivable and inventory. The Company’s plans to manage its liquidity position in 2011 by maintaining an intense focus on controlling expenses, reducing capital expenditures, continuing the Company’s implementation of LEAN manufacturing processes and reducing inventory levels by increasing sales and using excess capacity to manufacture products for third parties.

     The Company has considered the impact of its financial outlook on the Company’s 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 2011.

     On November 6, 2009, President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 (HR 3548) into law. The law includes a provision that allowed the Company to carry back its net operating loss for federal income tax purposes from 2008 for up to five years and obtain a refund to the extent that taxes were paid in the previous five years. As a result of this law, the Company received a refund in the amount of approximately $1,400,000 during the first quarter of 2010.

     Over the last three years, credit markets have experienced significant dislocations and liquidity disruptions. These factors have materially impacted debt markets, making financing terms for borrowers less attractive, and in certain cases have resulted in the unavailability of certain types of debt financing. Continued uncertainty in the credit markets may negatively impact the Company’s ability to access additional debt financing on favorable terms, or at all. The credit market disruptions could impair the Company’s ability to fund operations, limit the Company’s ability to expand the business or increase interest expense, which could have a material adverse effect on the Company’s financial results.

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’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Market Risks

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, aluminum and plastic, the Company expects that any raw material price changes would be reflected in adjusted sales prices and passed on to customers. 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 represent only 12.2% of the Company’s consolidated assets at December 31, 2010. Presently, the Company does not hedge its foreign currency risk.

Effect of New Accounting Guidance

     In January 2010 the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. ASU 2010-06 amends Codification Subtopic 820-10 to now require a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances and settlements. In addition, ASU 2010-06 clarifies the disclosures for reporting fair value measurement for each class of assets and liabilities and the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15,

2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact on the Company’s disclosures for reporting fair value measurements.

     In February 2010 the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 reiterates that an SEC filer is required to evaluate subsequent events through the date that the financial statements are issued and eliminates the required disclosure of the date through which subsequent events have been evaluated. The updated guidance was effective upon issuance and its adoption had no impact on the Company’s consolidated financial statements.

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

     Not applicable.

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
American Locker Group Incorporated

We have audited the accompanying consolidated balance sheets of American Locker Group Incorporated and Subsidiaries (the Company) as of December 31, 2010 and 2009 and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for each of the years in the three year period ended December 31, 2010. Our audits also included the financial statement schedule listed in the index at Item 15(a). These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the consolidated financial position of American Locker Group Incorporated and Subsidiaries as of December 31, 2010 and 2009 and the consolidated results of their operations and cash flows for each of the years in the three year period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Travis Wolff, LLP

Dallas, Texas
March 15, 2011

American Locker Group Incorporated and Subsidiaries

Consolidated Balance Sheets

		December 31,
		2010				2009
Assets
Current assets:
Cash and cash equivalents		$	649,952			$	526,752
Accounts receivable, less allowance for doubtful accounts of $134,000 in 2010 and $216,000 in 2009			2,370,642				2,319,440
Inventories, net			2,545,200				2,378,017
Prepaid expenses			227,570				95,489
Income tax receivable			—				1,409,696
Deferred income taxes			358,481				416,713
Total current assets			6,151,845				7,146,107
Property, plant and equipment:
Land			500				500
Buildings and leasehold improvements			397,136				394,739
Machinery and equipment			10,050,517				7,907,732
			10,448,153				8,302,971
Less allowance for depreciation and amortization			(7,442,888	)			(7,066,629	)
			3,005,265				1,236,342
Other noncurrent assets			41,545				—
Deferred income taxes			510,635				512,277
Total assets		$	9,709,290			$	8,894,726

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

American Locker Group Incorporated and Subsidiaries

Consolidated Balance Sheets (continued)

		December 31,
		2010				2009
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	1,992,819			$	2,068,289
Commissions, salaries, wages and taxes thereon			193,006				127,444
Income taxes payable			65,203				76,176
Secured borrowings from factoring agreement			—				428,588
Revolving line of credit			—				—
Current portion of long-term debt			200,000				—
Deferred revenue			341,000				341,000
Other accrued expenses			348,524				346,941
Total current liabilities			3,140,552				3,388,438
Long-term liabilities:
Long-term debt, net of current portion			800,000				—
Pension and other benefits			1,466,179				1,240,506
			2,266,179				1,240,506
Total liabilities			5,406,731				4,628,944
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock, $1 par value:
Authorized shares—4,000,000 Issued shares—1,834,106 and 1,781,015 in 2010 and 2009, respectively Outstanding shares—1,642,106 and 1,589,015 in 2010 and 2009, respectively			1,834,106				1,781,015
Other capital			265,271				242,846
Retained earnings			4,964,006				4,895,637
Treasury stock at cost (192,000 shares)			(2,112,000	)			(2,112,000	)
Accumulated other comprehensive loss			(648,824	)			(541,716	)
Total stockholders’ equity			4,302,559				4,265,782
Total liabilities and stockholders’ equity		$	9,709,290			$	8,894,726

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

American Locker Group Incorporated and Subsidiaries

Consolidated Statements of Operations

		Year ended December 31,
		2010				2009				2008
Net sales		$	12,099,012			$	12,515,433			$	14,129,807
Cost of products sold			7,700,847				8,598,486				10,954,020
Gross profit			4,398,165				3,916,947				3,175,787
Selling, administrative and general expenses			4,242,855				3,873,415				6,028,730
Restructuring charge			—				296,118				—
Pension settlement charge			—				186,069				—
Asset impairment			—				—				275,685
Total operating expenses			4,242,855				4,355,602				6,304,415
Total operating income (loss)			155,310				(438,655	)			(3,128,628	)
Interest income			—				36				10,891
Loss on sale of property, plant and equipment			—				(14,299	)			(138	)
Other income (expense)—net			61,087				89,946				(76,475	)
Interest expense			(16,232	)			(255,973	)			(159,380	)
Net income (loss) before income taxes			200,165				(618,945	)			(3,353,730	)
Income tax expense (benefit)			131,796				(196,339	)			(653,519	)
Net income (loss)		$	68,369			$	(422,606	)		$	(2,700,211	)
Weighted average common shares:
Basic			1,605,769				1,572,511				1,564,039
Diluted			1,605,769				1,572,511				1,564,039
Income (loss) per share of common stock:
Basic		$	0.04			$	(0.27	)		$	(1.73	)
Diluted		$	0.04			$	(0.27	)		$	(1.73	)
Dividends per share of common stock		$	0.00			$	0.00			$	0.00

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

American Locker Group Incorporated and Subsidiaries

Consolidated Statements of Stockholders’ Equity

																		Accumulated
																		Other Comprehensive				Total Stockholders’
		Common Stock				Other Capital				Retained Earnings				Treasury Stock				Income (Loss)				Equity
Balance at December 31, 2007		$	1,741,516			$	184,988			$	8,018,454			$	(2,112,000	)		$	(74,797	)		$	7,758,161
Net income (loss)			—				—				(2,700,211	)			—				—				(2,700,211	)
Other comprehensive income (loss):
Foreign currency translation			—				—				—				—				(205,775	)			(205,775	)
Minimum pension liability adjustment, net of tax benefit of $197,451			—				—				—				—				(296,176	)			(296,176	)
Total comprehensive loss																							(3,202,162	)
Common stock issued as compensation (22,333 shares)			22,333				45,261				—				—				—				67,594
Stock-based compensation			—				3,592				—				—				—				3,592
Balance at December 31, 2008		$	1,763,849			$	233,841			$	5,318,243			$	(2,112,000	)		$	(576,748	)		$	4,627,185
Net income (loss)			—				—				(422,606	)			—				—				(422,606	)
Other comprehensive income (loss):
Foreign currency translation			—				—				—				—				37,293				37,293
Minimum pension liability adjustment, net of tax benefit of $1,506			—				—				—				—				(2,261	)			(2,261	)
Total comprehensive loss																							(387,574	)
Common stock issued as compensation (17,166 shares)			17,166				4,210				—				—				—				21,376
Stock-based compensation			—				4,795				—				—				—				4,795
Balance at December 31, 2009		$	1,781,015			$	242,846			$	4,895,637			$	(2,112,000	)		$	(541,716	)		$	4,265,782
Net income (loss)			—				—				68,369				—				—				68,369
Other comprehensive income (loss):
Foreign currency translation			—				—				—				—				11,925				11,925
Minimum pension liability adjustment, net of tax benefit of $79,354			—				—				—				—				(119,033	)			(119,033	)
Total comprehensive loss																							(38,739	)
Common stock issued as compensation (53,091 shares)			53,091				22,425				—				—				—				75,516
Balance at December 31, 2010		$	1,834,106			$	265,271			$	4,964,006			$	(2,112,000	)		$	(648,824	)		$	4,302,559

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

American Locker Group Incorporated and Subsidiaries

Consolidated Statements of Cash Flows

		Year ended December 31,
		2010				2009				2008
Operating activities
Net income (loss)		$	68,369			$	(422,606	)		$	(2,700,211	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			336,037				337,507				416,664
Provision for uncollectible accounts			31,290				36,000				60,182
Equity based compensation			75,516				26,171				71,186
Loss on disposal of assets			686				14,299				138
Deferred income taxes			(36,088	)			(204,628	)			909,994
Impairment of assets			—				—				275,685
Changes in assets and liabilities:
Accounts and other receivables			1,526,273				(1,162,825	)			81,496
Inventories			(297,059	)			18,440				545,510
Prepaid expenses			(131,793	)			118,835				7,384
Deferred revenue			—				341,000				—
Accounts payable and accrued expenses			(214,132	)			491,171				291,353
Income taxes			(10,973	)			197,581				(1,561,991	)
Pension and other benefits			169,543				138,592				113,726
Net cash provided by (used in) operating activities			1,517,669				(70,463	)			(1,488,884	)
Investing activities
Purchase of property, plant and equipment			(1,968,592	)			(97,118	)			(334,902	)
Proceeds from sale of property, plant and equipment			—				2,747,000				24,702
Net cash provided by (used in) investing activities			(1,968,592	)			2,649,882				(310,200	)
Financing activities
Long-term debt payments			—				(4,004,315	)			(139,450	)
Long-term debt borrowings			1,000,000				2,000,000				—
Borrowings under revolving line of credit			—				4,458				752,623
Repayment of factoring agreement			(428,588	)			(757,081	)			—
Borrowings under factoring agreement			—				428,588				—
Net cash provided by (used in) financing activities			571,412				(2,328,350	)			613,173
Effect of exchange rate changes on cash			2,711				(4,301	)			(96,056	)
Net increase (decrease) in cash and cash equivalents			123,200				246,768				(1,281,967	)
Cash and cash equivalents at beginning of year			526,752				279,984				1,561,951
Cash and cash equivalents at end of year		$	649,952			$	526,752			$	279,984
Supplemental cash flow information:
Cash paid during the year for:
Interest		$	15,447			$	267,227			$	152,343
Income taxes		$	20,311			$	—			$	11,806

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

Notes to Consolidated Financial Statements
American Locker Group Incorporated and Subsidiaries
December 31, 2010

1. Basis of Presentation

Consolidation and Business Description

     The consolidated financial statements include the accounts of American Locker Group Incorporated and its subsidiaries (the “Company”), all of which are wholly owned. Intercompany accounts and transactions have been eliminated in consolidation. The Company is a leading manufacturer and distributor of lockers, locks and keys. The Company’s lockers can be categorized as either postal lockers or non-postal lockers. Postal lockers are used for the delivery of mail. Most non-postal lockers are key controlled checking lockers. The Company is best known for manufacturing and servicing the key and lock system with the plastic orange cap. The Company serves customers in a variety of industries in all 50 states, Canada, Mexico, Europe, Asia and South America.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

     Cash and cash equivalents include currency on hand and demand deposits with financial institutions. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalents on deposit in amounts in excess of federally insured limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant risk.

Accounts Receivable

     The Company grants credit to its customers and generally does not require collateral. Accounts receivable are reported at net realizable value and do not accrue interest. Management uses judgmental factors such as a customer’s payment history and the general economic climate, as well as considering the age of and past due status of invoices in assessing collectability and establishing allowances for doubtful accounts. Accounts receivable are written off after all collection efforts have been exhausted.

     Estimated losses for bad debts are provided for in the consolidated financial statements through a charge to expense of approximately $31,000, $36,000 and $60,000 for 2010, 2009 and 2008, respectively. The net charge-off of bad debts was approximately $113,000, $0 and $113,000 for 2010, 2009 and 2008, respectively.

Inventories

     Inventories are stated at the lower of cost or market value using the FIFO method and are categorized as raw materials, work-in-progress or finished goods.

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

Property, Plant and Equipment

     Property, plant and equipment are stated at historical cost. Depreciation is computed by the straight-line and declining-balance methods for financial reporting purposes and by accelerated methods for income tax purposes. Estimated useful lives for financial reporting purposes are 20 to 40 years for buildings and 3 to 12 years for machinery and equipment. Leasehold improvements are amortized over the shorter of the life of the building or the

lease term. Expenditures for repairs and maintenance are expensed as incurred. Gains and losses resulting from the sale or disposal of property and equipment are included in other income.

     Long-lived assets, including intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of those assets may not be recoverable in accordance with appropriate guidance. The Company uses undiscounted cash flows to determine whether impairment exists and measures any impairment loss using discounted cash flows. The Company recorded an equipment impairment charge of approximately $164,000 in 2008 related to the decision to redesign the Horizontal 4c product line, please refer to Note 17 “Asset Impairment” for further information. The Company recorded asset impairment charges related to property, plant and equipment of $0, $0 and $164,000 in 2010, 2009 and 2008, respectively.

     Depreciation expense was $336,037 in 2010, of which $251,933 was included in cost of products sold, and $84,104 was included in selling, administrative and general expenses. Depreciation expense was $337,507 in 2009, of which $207,308 was included in cost of products sold, and $130,199 was included in selling, administrative and general expenses. Depreciation expense was $416,664 in 2008, of which $254,754 was included in cost of products sold, and $161,910 was included in selling, administrative and general expenses.

Pensions and Postretirement Benefits

     The Company has two defined benefit plans which recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income (loss) to report the funded status of the plans. The plan assets and obligations are measured at their year-end balance sheet date. Refer to Note 10 ‘Pensions and Other Postretirement Benefits,” for further detail on the plans.

Revenue Recognition

     The Company recognizes revenue upon passage of title, which occurs at the time of shipment to the customer. The Company derived approximately 19.4% of its revenue in 2010 from sales to distributors. These distributors do not have a right to return unsold products; however, returns may be permitted in specific situations. Historically, returns have not had a significant impact on the Company’s results of operations. Revenues are reported net of discounts and returns and net of sales tax.

     For concession operations, the Company recognizes revenue when receipts are collected. Revenue is recognized for the Company’s proportional share of receipts with the remaining amounts collected recorded as an accrued liability until they are remitted to the concession contract counterparty.

Shipping and Handling Costs

     Shipping and handling costs are expensed as incurred and are included in selling, administrative and general expenses in the accompanying consolidated statements of operations. These costs were approximately $579,000, $412,000 and $866,000 during 2010, 2009 and 2008, respectively.

Advertising Expense

     The cost of advertising is generally expensed as incurred. The cost of catalogs and brochures are recorded as a prepaid cost and expensed over their useful lives, generally one year. The Company incurred approximately $134,000, $150,000 and $219,000 in advertising costs during 2010, 2009 and 2008, respectively.

Income Taxes

     The Company and its domestic subsidiaries file a consolidated U.S. income tax return. Canadian operations file income tax returns in Canada. The Company accounts for income taxes using the liability method in accordance with appropriate accounting guidance. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be

recovered or settled. A valuation allowance is recorded to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.

     Pursuant to appropriate accounting guidance when establishing a valuation allowance, the Company considers future sources of taxable income such as “future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards” and “tax planning strategies.” Appropriate accounting guidance defines a tax planning strategy as “an action that: is prudent and feasible; an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused; and would result in realization of deferred tax assets.” In the event the Company determines that the deferred tax assets will not be realized in the future, the valuation adjustment to the deferred tax assets is charged to earnings in the period in which the Company makes such a determination. If it is later determined that it is more likely than not that the deferred tax assets will be realized, the Company will release the valuation allowance to current earnings.

     The amount of income taxes the Company pays is subject to ongoing audits by federal, state and foreign tax authorities. The Company’s estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time, pursuant to appropriate accounting guidance. Appropriate accounting guidance requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured pursuant to appropriate accounting guidance and tax position taken or expected to be taken on the tax return. To the extent that the Company’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related interest and penalties as a component of income tax expense.

Research and Development

     The Company engages in research and development activities relating to new and improved products. It expended approximately $108,000, $140,000 and $200,000 in 2010, 2009 and 2008, respectively, for such activity in its continuing businesses. Research and development costs are included in selling, administrative and general expenses.

Earnings Per Share

     The Company reports earnings per share in accordance with appropriate accounting guidance. Under appropriate accounting guidance basic earnings per share excludes any dilutive effects of stock options, whereas diluted earnings per share assumes exercise of stock options, when dilutive, resulting in an increase in outstanding shares. Please refer to Note 13 for further information.

Foreign Currency

     In accordance with appropriate accounting guidance the Company translates the financial statements of the Canadian and Hong Kong subsidiaries from its functional currency into the U.S. dollar. Assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Income statement amounts are translated using the average exchange rate for the year. All translation gains and losses resulting from the changes in exchange rates from year to year have been reported in other comprehensive income. Foreign currency gains and losses resulting from current year exchange rate transactions are insignificant for all years presented.

Fair Value of Financial Instruments

     The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt approximate fair value.

Stock-Based Compensation

     On January 1, 2006, the Company adopted the modified-prospective-transition method. Under this method, the Company’s prior periods do not reflect any restated amounts. The Company recognized no compensation expense related to stock options during the year ended December 31, 2006, as a result of the adoption of appropriate accounting guidance. Prior to January 1, 2006, the Company had applied the intrinsic value method. Accordingly, the compensation expense of any employee stock options granted was the excess, if any, of the quoted market price of the Company’s common stock at the grant date over the amount the employee must pay to acquire the stock. Net income for 2010, 2009 and 2008 includes pretax stock option expense of $0, $4,795 and $3,592, respectively. These expenses were included in selling, administrative and general expense.

     Net income for 2010, 2009 and 2008 includes equity based compensation expense for compensation to directors, officers and other employees of $75,516, $21,376 and $67,594, respectively. These expenses were included in selling, administrative and general expense.

Comprehensive Income

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

Use of Estimates

     The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include allowance for doubtful accounts, inventory obsolescence, product returns, pension, post-retirement benefits, contingencies, and deferred tax asset valuation allowance. Actual results could differ from those estimates.

New Accounting Pronouncements

     In January 2010 the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. ASU 2010-06 amends Codification Subtopic 820-10 to now require a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances and settlements. In addition, ASU 2010-06 clarifies the disclosures for reporting fair value measurement for each class of assets and liabilities and the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the impact on the Company’s disclosures for reporting fair value measurements.

     In February 2010 the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 reiterates that an SEC filer is required to evaluate subsequent events through the date that the financial statements are issued and eliminates the required disclosure of the date through which subsequent events have been evaluated. The updated guidance was effective upon issuance and its adoption had no impact on the Company’s consolidated financial statements.

3. Sale of Property

     On September 18, 2009, the Company closed on the sale of its headquarters and primary manufacturing facility to the City of Grapevine. The Company estimates the total value of the Agreement at $3,500,000. Under the Agreement, the City paid a purchase price of $2,747,000. At the time of the sale, the Company had a net book value in the land and building of $2,759,396 and recorded a loss on the sale of $12,396.

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

4. 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 herein 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 and operations began in late November 2010. The Agreement contains an option for a one year renewal at Disney’s discretion. The Agreement contains a buyout option at the end of each contract year as well as 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 is depreciating the cost over the five year term of the agreement. The Company recognizes revenue for its portion of the revenue as it is collected.

5. Inventories

     Inventories consist of the following:

		December 31,
		2010				2009
Finished products		$	80,329			$	76,303
Work-in-process			857,044				1,020,838
Raw materials			1,607,827				1,280,876
Net inventories		$	2,545,200			$	2,378,017

6. Other Accrued Expenses and Current Liabilities

     Accrued expenses consist of the following at December 31:

		December 31,
		2010				2009
Restructuring liability		$	144,000			$	169,000
Accrued severance			—				—
Accrued expenses, other			204,524				177,941
Total accrued expenses		$	348,524			$	346,941

7. Debt

     Long-term debt consists of the following:

		December 31,
		2010				2009
Term loan payable to Bank of America Merrill Lynch through December 2015 at $16,667 monthly plus interest at LIBOR rate plus 375 basis points (4.015% at December 31, 2010) collateralized by accounts receivable, inventory, and equipment		$	1,000,000			$	—
Secured borrowings from factoring agreement			—				428,588
Less current portion			(200,000	)			(428,588	)
Long-term portion		$	800,000			$	—

     On March 5, 2009, the Company renewed its $750,000 revolving line of credit with F&M Bank and Trust Company (“F&M Bank”). The loan accrued interest at prime plus 75 basis points (0.75%). The revolving line of credit matured on June 5, 2009. The line of credit was secured by all accounts receivable, inventory and equipment as well as a Deed of Trust covering the primary manufacturing and headquarters facility in Grapevine, Texas. The credit agreement underlying the revolving line of credit required compliance with certain covenants.

     On March 19, 2009, the Company obtained a new $2 million mortgage loan from F.F.F.C., Inc. which was used to repay the existing mortgage loan with F&M Bank. Interest on the loan was 12% per annum and was payable monthly. This loan was prepaid with the proceeds of the sale of the Grapevine, Texas facility.

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

     The receivables purchase agreement called for the Company to pay a daily variable discount rate, which was the greater of prime plus 1.50% or 6.5% per annum, computed on the amount of outstanding receivables held by GCBT, for the period during which such receivables are outstanding. The Company also paid a fixed discount percentage of 0.2% for each ten-day period during which receivables held by GCBT are outstanding. Fees related to the receivables purchase agreement of $10,520 and $36,648 are recorded in interest expense in the 2010 and 2009 Consolidated Statement of Operations.

     Secured borrowings at December 31, 2009 of $428,588 represented the Company’s liability on the sale of accounts receivables with recourse. When the Company sold accounts receivable with recourse, the receivables remain recorded in accounts receivable, and an equivalent liability is recorded in short-term secured borrowings on the Company’s balance sheet until the customers pay the receivables outstanding.

     Proceeds from the sales of receivables under the receivables purchase agreement were used to repay the Company’s existing $750,000 revolving line of credit with F&M Bank. The Company granted to GCBT a security interest in certain assets to secure its obligations under the receivables purchase agreement. The receivables purchase agreement was terminated to facilitate the Loan Agreement (defined below) with Bank of America Merrill Lynch (“BAML”) on December 8, 2010.

     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”).

     The proceeds of the Term Loan were used to fund the Company’s investment in lockers used in the Disneyland concession 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%.

     The outstanding principal balances of the Line of Credit 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 December 8, 2011. Payments on the Term Loan, consisting of

$16,667 in principal plus accrued interest, are due monthly beginning January 8, 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.

8. Operating Leases

     The Company leases several operating facilities, vehicles and equipment under non-cancelable operating leases. The Company accounts for operating leases on a straight line basis over the lease term. Future minimum lease payments consist of the following at December 31, 2010:

2011		$	177,626
2012			267,880
2013			326,140
2014			409,252
2015			412,056
Thereafter			1,102,166
Total		$	2,695,120

     Rent expense amounted to approximately $34,000, $46,000 and $80,000 in 2010, 2009 and 2008, respectively.

9. Income Taxes

     For financial reporting purposes, income before income taxes includes the following during the years ended December 31:

		2010				2009				2008
United States income (loss)		$	225,555			$	(525,995	)		$	(3,064,985	)
Foreign income (loss)			(25,390	)			(92,950	)			(288,745	)
		$	200,165			$	(618,945	)		$	(3,353,730	)

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

		2010				2009				2008
Current:
Federal		$	(13,280	)		$	—			$	(1,589,218	)
State			—				—				25,266
Foreign			9,334				8,229				439
Total current			(3,946	)			8,229				(1,563,513	)
Deferred:
Federal			114,738				(182,605	)			855,002
State			21,534				(530	)			10,279
Foreign			(530	)			(21,433	)			44,713
			135,742				(204,568	)			909,994
		$	131,796			$	(196,339	)		$	(653,519	)

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

		2010				2009				2008
Statutory income tax rate			34	%			(34	%)			(34	%)
State and foreign income taxes, net of federal benefit			1				(1	)			(1	)
Change in valuation allowance			23				—				13
Foreign earnings taxed at different rate			—				—				—
Change in estimated state income tax rate			—				—				—
Other permanent differences			8				3				2
Effective tax rate			66	%			(32	)%			(20	)%

     Differences between the application of accounting principles and tax laws cause differences between the bases of certain assets and liabilities for financial reporting purposes and tax purposes. The tax effects of these differences, to the extent they are temporary, are recorded as deferred tax assets and liabilities. Significant components of the Company’s deferred tax assets and liabilities at December 31 are as follows:

		2010				2009
Deferred tax liabilities:
Property, plant and equipment		$	(48,286	)		$	(49,555	)
Prepaid expenses and other			(4,600	)			(4,609	)
Total deferred tax liabilities			(52,886	)			(54,164	)
Deferred tax assets:
Operating loss carryforwards			809,214				843,484
Postretirement benefits			22,734				22,783
Pension costs			547,997				473,473
Allowance for doubtful accounts			38,023				63,409
Deferred revenues			117,048				118,852
Other assets			9,724				12,039
Accrued expenses			52,160				61,902
Other employee benefits			16,412				24,169
Inventory costs			66,904				75,627
Total deferred tax assets			1,680,216				1,695,738
Net			1,627,330				1,641,574
Valuation allowance			(758,214	)			(712,584	)
Net		$	869,116			$	928,990
Current deferred tax asset		$	358,481			$	416,713
Long-term deferred tax asset			510,635				512,277
		$	869,116			$	928,990

     As of December 31, 2010 and 2009, the Company’s gross deferred tax assets are reduced by a valuation allowance of $758,214 and $712,584, respectively, due to negative evidence, primarily continued operating losses, indicating that a valuation allowance is required. Increases in the valuation allowance in 2010 are primarily due to net operating losses incurred by the Company’s foreign subsidiaries during 2010. Increases in the valuation allowance in 2009 are primarily due to net operating losses incurred during 2009.

     As of December 31, 2010, the Company had U.S. net operating loss carry forwards for federal and state income tax purposes of approximately $1,796,000 and $5,624,000, respectively. These net operating losses are available to offset future federal and state income, if any, through 2028.

     The Company has not provided deferred taxes for taxes that could result from the remittance of undistributed earnings of the Company’s foreign subsidiary since it has generally been the Company’s intention to reinvest these earnings indefinitely. Undistributed earnings that could be subject to additional income taxes if remitted were approximately $122,000 at December 31, 2010.

     The Company files an income tax return in the U.S. federal jurisdiction, Texas, and a number of other U.S. state and local jurisdictions. Tax returns for the years 2005 through 2010 remain open for examination in various tax

jurisdictions in which it operates. The Company adopted the provisions of a new accounting pronouncement that addresses the accounting for uncertainty in income taxes recognized in the financial statements, on January 1, 2007. As a result of the implementation of this pronouncement, the Company recognized no material adjustment in the liability for unrecognized income tax benefits. At the adoption date of January 1, 2007, and at December 31, 2010, there were no unrecognized tax benefits. As of December 31, 2010, no interest related to uncertain tax positions had been accrued.

10. Pension and Other Postretirement Benefits

U.S. Pension Plan

     The Company maintains a defined benefit pension plan (the “U.S. Plan”) for its domestic employees, which was frozen effective July 15, 2005. Accordingly, no new benefits are being accrued under the U.S. Plan. Participant accounts are credited with interest at the federally mandated rates. Company contributions are based on computations by independent actuaries.

     The plan’s assets are invested in a balanced index fund (the “Fund”) where the assets were invested during 2008, 2009 and 2010. The principal investment objective of the Fund is to provide an incremental risk adjusted return compared to a portfolio invested 50% in stocks and 50% in bonds over a full market cycle. Under normal market conditions, the average asset allocation for the Fund is expected to be approximately 50% in stocks and 50% in bonds. This benchmark allocation may be adjusted by up to 20% based on economic or market conditions and liquidity needs. Therefore, the stock allocation may fluctuate from 30% to 70% of the total portfolio, with a corresponding bond allocation of from 70% to 30%. Fund reallocation may take place at any time.

Canadian Pension Plan

     Effective January 1, 2009, the Company converted its pension plan (the “Canadian Plan”) for its Canadian employees 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 Canadian Plan’s assets are invested in various pooled funds (the “Canadian Funds”) managed by a third party fund manager. The principal investment objective of the Canadian Funds is to provide an incremental risk adjusted return compared to a portfolio invested 50% in stocks and 50% in bonds over a full market cycle. Under normal market conditions, the average asset allocation for the Canadian Funds is expected to be approximately 50% in stocks and 50% in bonds. This benchmark allocation may be adjusted based on economic or market conditions and liquidity needs.

     In August 2006, the Pension Protection Act of 2006 was signed into law. The major provisions of the statute took effect January 1, 2008. Among other things, the statute is designed to ensure timely and adequate funding of pension plans by shortening the time period within which employers must fully fund pension benefits. Contributions to be made to the plan in 2011 are expected to approximate $220,000 for the U.S. plan and $70,000 for the Canadian plan. However, contributions for 2012 and beyond have not been quantified at this time.

     The change in projected benefit obligation, change in plan assets and reconciliation of funded status for the plans were as follows:

		Pension Benefits
		U.S. Plan								Canadian Plan
		2010				2009				2010				2009
Change in projected benefit obligation
Projected benefit obligation at beginning of year		$	2,951,717			$	2,888,281			$	1,193,120			$	906,840
Service cost			21,200				21,220				—				—
Interest cost			174,649				173,030				78,845				63,206
Benefit payments			(150,469	)			(302,150	)			(95,741	)			(78,699	)
Administrative expenses			(23,928	)			(30,118	)			—				—
Actuarial (gain) loss			203,500				201,454				27,285				36,620
Plan amendments			—				—				—				105,196
Currency translation adjustment			—				—				59,016				159,957
Settlements			—				—				—				—
Projected benefit obligation at end of year			3,176,669				2,951,717				1,262,525				1,193,120
Change in plan assets
Fair value of plan assets at beginning of year			1,777,441				1,787,205				1,152,228				946,282
Actual return on plan assets			187,405				273,542				21,653				63,382
Benefit payments			(150,469	)			(302,150	)			(95,741	)			(78,699	)
Employer contribution			44,877				48,962				69,232				61,445
Administrative expenses			(23,928	)			(30,118	)			—				—
Currency translation adjustment			—				—				56,547				159,818
Fair value of plan assets at end of year			1,835,326				1,777,441				1,203,919				1,152,228
Plan assets (less) greater than benefit obligation		$	(1,341,343	)		$	(1,174,276	)		$	(58,606	)		$	(40,892	)

The net amounts recognized on the consolidated balance sheets were as follows:

		U.S. Plan								Canadian Plan
		2010				2009				2010				2009
Current liabilities		$	—			$	—			$	—			$	(40,892	)
Non-current liabilities			(1,341,343	)			(1,174,276	)			(58,606	)			—
Net amount recognized		$	(1,341,343	)		$	(1,174,276	)		$	(58,606	)		$	(40,892	)

     Amounts in accumulated other comprehensive loss at year end, consist of:

		U.S. Plan								Canadian Plan
		2010				2009				2010				2009
Unrecognized net loss		$	883,234			$	777,237			$	305,431			$	213,040
		$	883,234			$	777,237			$	305,431			$	213,040

     The estimated net loss that will be amortized from accumulated other comprehensive income for net periodic pension cost over the next year is $49,000 and $13,400 for the U.S. Plan and Canadian Plan, respectively.

     Net pension expense is included in selling, administrative and general expenses on the consolidated statements of operations. The components of net pension expense for the plans were as follows:

		U.S. Plan												Canadian Plan
		2010				2009				2008				2010				2009				2008
Components of net periodic benefit cost:
Service cost		$	21,200			$	21,220			$	21,300			$	—			$	5,810			$	33,704
Interest cost			174,649				173,030				193,552				78,845				63,206				62,688
Expected return on plan assets			(132,093	)			(134,666	)			(197,021	)			(81,273	)			(70,688	)			(79,682	)
Net actuarial loss			42,191				45,251				—				—				—				—
Amortization of prior service cost			—				—				—				7,380				5,282				9,535
Net periodic benefit cost		$	105,947			$	104,835			$	17,831			$	4,952			$	3,609			$	26,245