10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                       to                 

Commission file number: 01-07698

ACME UNITED CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Connecticut	06-0236700
State or Other Jurisdiction of	I.R.S. Employer Identification No.
Incorporation or Organization
1 Waterview Drive, Shelton, Connecticut	06484
Address of Principal Executive Offices	Zip Code

Registrant's telephone number, including area code: (203) 254-6060

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
$2.50 par value Common Stock	ACU	NYSE American

Indicate by check mark whether the registrant (l) 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  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒     No  ☐

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller Reporting Company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(s) of the Exchange Act ☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes  ☒     No  ☐

Registrant had 3,559,687 shares of its $2.50 par value Common Stock outstanding as of November 5, 2021.

ACME UNITED CORPORATION

INDEX

		Page Number
Part I — FINANCIAL INFORMATION:
Item 1:	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020	6
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4:	Controls and Procedures	20
Part II — OTHER INFORMATION:
Item 1:	Legal Proceedings	21
Item 1A:	Risk Factors	21
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3:	Defaults Upon Senior Securities	21
Item 4:	Mine Safety Disclosures	21
Item 5:	Other Information	21
Item 6:	Exhibits	21
Signatures		22

2

Part I - FINANCIAL INFORMATION

Item 1: Financial Statements

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(all amounts in thousands)

	September 30,		December 31,
	2021		2020
	(unaudited)		(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	5,306	$	4,167
Accounts receivable, less allowance of $1,079 in 2021 and $1,152 in 2020		36,088		27,173
Inventories		48,795		50,704
Prepaid expenses and other current assets		2,458		1,642
Total current assets		92,647		83,686
Property, plant and equipment:
Land		1,764		1,770
Buildings		12,800		12,899
Machinery and equipment		29,532		24,524
		44,096		39,193
Less: accumulated depreciation		20,914		18,954
Net property, plant and equipment		23,182		20,239
Operating lease right-of-use asset, net		3,187		2,422
Goodwill		4,800		4,800
Intangible assets, less accumulated amortization		17,615		18,721
Total assets	$	141,431	$	129,868

See Notes to Condensed Consolidated Financial Statements

3

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(all amounts in thousands, except share amounts)

	September 30,			December 31,
	2021			2020
	(unaudited)			(Note 1)
LIABILITIES
Current liabilities:
Accounts payable	$	6,695		$	7,601
Operating lease liability - current portion		945			873
Current portion of mortgage payable		267			267
Other accrued liabilities		11,215			11,460
Total current liabilities		19,122			20,201
Non-current liabilities:
Long-term debt		40,454			38,767
Long-term debt - PPP Loan		-			3,508
Mortgage payable, net of current portion		2,711			2,911
Operating lease liability - non-current portion		2,485			1,654
Other non-current liabilities		111			110
Total liabilities		64,883			67,151
Commitments and Contingencies (see note 2)
STOCKHOLDERS' EQUITY
Common stock, par value $2.50:
authorized 8,000,000 shares;
5,061,345 shares issued and 3,559,687 shares outstanding in 2021 and
4,840,571 shares issued and 3,338,913 shares outstanding in 2020		12,653			12,101
Additional paid-in capital		11,575			7,931
Retained earnings		67,998			58,033
Treasury stock, at cost - 1,501,658 shares in 2021 and 2020		(14,522	)		(14,522	)
Accumulated other comprehensive loss:
Translation adjustment		(1,156	)		(826	)
Total stockholders’ equity		76,548			62,717
Total liabilities and stockholders’ equity	$	141,431		$	129,868

See Notes to Condensed Consolidated Financial Statements

4

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(all amounts in thousands, except per share amounts)

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Net sales	$	47,923		$	43,316		$	136,295		$	123,133
Cost of goods sold		30,918			28,360			87,550			78,594
Gross profit		17,005			14,956			48,745			44,539
Selling, general and administrative expenses		14,044			12,832			39,028			36,023
Operating income		2,961			2,124			9,717			8,516
Non-operating items:
Interest:
Interest expense		(230	)		(173	)		(682	)		(742	)
Interest income		2			5			11			20
Interest expense, net		(228	)		(168	)		(671	)		(722	)
PPP loan forgiveness					-			3,508			-
Other (expense) income, net		(68	)		35			(213	)		(2	)
Total other (expense) income, net		(68	)		35			3,295			(2	)
Income before income tax expense		2,665			1,991			12,341			7,792
Income tax expense		619			412			1,019			1,737
Net income	$	2,046		$	1,579		$	11,322		$	6,055
Basic earnings per share	$	0.58		$	0.47		$	3.28		$	1.81
Diluted earnings per share	$	0.50		$	0.46		$	2.85		$	1.75
Weighted average number of common shares outstanding-denominator used for basic    per share computations		3,542			3,340			3,449			3,343
Weighted average number of dilutive stock options outstanding		516			122			520			111
Denominator used for diluted per share computations		4,058			3,462			3,969			3,454
Dividends declared per share	$	0.13		$	0.12		$	0.39		$	0.36

See Notes to Condensed Consolidated Financial Statements

5

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(all amounts in thousands)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021			2020		2021			2020
Net income	$	2,046		$	1,579	$	11,322		$	6,055
Other comprehensive (loss) income:
Foreign currency translation adjustment		(310	)		270		(330	)		142
Comprehensive income	$	1,736		$	1,849	$	10,993		$	6,197

See Notes to Condensed Consolidated Financial Statements

6

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(all amounts in thousands, except share amounts)

For the three months ended September 30, 2020

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total
Balances, June 30, 2020		3,336,413	$	12,094	$	(14,522	)	$	8,304		$	(2,116	)	$	55,247		$	59,007
Net income															1,579			1,579
Other comprehensive income												270						270
Stock compensation expense									327									327
Distributions to shareholders															(401	)		(401	)
Issuance of common stock		2,500		7					52									59
Cash settlement of stock options									(245	)								(245	)
Balances September 30, 2020		3,338,913	$	12,101	$	(14,522	)	$	8,438		$	(1,846	)	$	56,425		$	60,596

For the three months ended September 30, 2021

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total
Balances, June 30, 2021		3,529,208	$	12,576	$	(14,522	)	$	10,829	$	(846	)	$	66,415		$	74,452
Net income														2,046			2,046
Other comprehensive loss											(310	)					(310	)
Stock compensation expense									455								455
Distributions to shareholders														(463	)		(463	)
Issuance of common stock		30,479		77					291								368
Balances September 30, 2021		3,559,687	$	12,653	$	(14,522	)	$	11,575	$	(1,156	)	$	67,998		$	76,548

For the nine months ended September 30, 2020  

	Outstanding Shares of Common Stock			Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total
Balances, December 31, 2019		3,350,833		$	12,094	$	(14,235	)	$	8,262		$	(1,988	)	$	51,571		$	55,704
Net income																6,055			6,055
Other comprehensive income													142						142
Stock compensation expense										929									929
Distributions to shareholders																(1,201	)		(1,201	)
Issuance of common stock		2,500			7					52									59
Cash settlement of stock options										(805	)								(805	)
Purchase of treasury stock		(14,420	)				(287	)											(287	)
Balances September 30, 2020		3,338,913		$	12,101	$	(14,522	)	$	8,438		$	(1,846	)	$	56,425		$	60,596

7

For the nine months ended September 30, 2021

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total
Balances, December 31, 2020		3,338,913	$	12,101	$	(14,522	)	$	7,931		$	(826	)	$	58,033		$	62,717
Net income															11,322			11,322
Other comprehensive loss												(330	)					(330	)
Stock compensation expense									1,341									1,341
Distributions to shareholders															(1,357	)		(1,357	)
Issuance of common stock		220,774		552					2,514									3,066
Cash settlement of stock options									(211	)								(211	)
Balances September 30, 2021		3,559,687	$	12,653	$	(14,522	)	$	11,575		$	(1,156	)	$	67,998		$	76,548

See Notes to Condensed Consolidated Financial Statements.

8

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(all amounts in thousands)

	Nine Months Ended
	September 30,
	2021			2020
Cash flows from operating activities:
Net income	$	11,322		$	6,055
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,809			1,830
Amortization of intangible assets		1,111			991
Non-cash lease expense		170			57
Stock compensation expense		1,341			929
Provision for bad debt		79			910
PPP loan forgiveness		(3,508	)		-
Changes in operating assets and liabilities:
Accounts receivable		(9,060	)		(7,293	)
Inventories		1,678			(8,544	)
Prepaid expenses and other current assets		(859	)		121
Accounts payable		(959	)		2,040
Other accrued liabilities		(145	)		4,645
Total adjustments		(8,343	)		(4,314	)
Net cash provided by operating activities		2,979			1,741
Cash flows from investing activities:
Purchase of property, plant and equipment		(4,792	)		(2,081	)
Acquisition of First Aid Central		-			(2,074	)
Net cash used in investing activities		(4,792	)		(4,155	)
Cash flows from financing activities:
Net borrowings of long-term debt		1,687			(2,537	)
Proceeds from PPP Loan		-			3,508
Cash settlement of stock options		(211	)		(805	)
Repayments on mortgage		(200	)		(200	)
Proceeds from issuance of common stock		3,066			59
Distributions to shareholders		(1,329	)		(1,201	)
Purchase of treasury shares		-			(287	)
Net cash provided by (used in) financing activities		3,013			(1,463	)
Effect of exchange rate changes on cash and cash equivalents		(61	)		86
Net change in cash and cash equivalents		1,139			(3,791	)
Cash and cash equivalents at beginning of period		4,167			6,822
Cash and cash equivalents at end of period	$	5,306		$	3,031
Supplemental cash flow information:
Cash paid for income taxes	$	1,070		$	415
Cash paid for interest	$	660		$	751

See Notes to Condensed Consolidated Financial Statements

9

ACME UNITED CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The accompanying condensed consolidated financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows of Acme United Corporation (the “Company”). These adjustments are of a normal, recurring nature. However, the financial statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the Company's Annual Report on Form 10-K. Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for such disclosures. The condensed consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated balance sheet as of that date. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

The Company has evaluated events and transactions subsequent to September 30, 2021 and through the date these condensed consolidated financial statements were issued.

Recently Issued and Adopted Accounting Standards

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update eliminates, clarifies and modifies certain guidance related to the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, i.e. commencing with our current fiscal year.  The adoption of ASU 2019-12 did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this update eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.  The Company adopted this standard on January 1, 2020. The adoption of this standard has not had an impact on the financial statements of the Company.

2. Commitment and Contingencies

There are no pending material legal proceedings to which the Company is a party, or, to the actual knowledge of the Company, contemplated by any governmental authority.

3. Revenue from Contracts with Customers

Nature of Goods and Services

The Company recognizes revenue from the sales of a broad line of products that are grouped into two main categories: (a) cutting, sharpening and measuring; and (b) first aid and safety. The cutting, sharpening and measuring category includes scissors, knives, paper trimmers, pencil sharpeners and other sharpening tools. The first aid and safety category includes first aid kits and refills, over-the-counter medications and a variety of safety products. Revenue recognition is evaluated through the following five steps: (i) identification of the contract or contracts with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Revenue is generated by the sale of the Company’s products to its customers.  Sales contracts (purchase orders) generally have a single performance obligation that is satisfied at a point in time, with shipment or delivery, depending on the terms of the underlying contract. Revenue is measured based on the consideration specified in the contract. The amount of consideration we receive and revenue we recognize is impacted by incentives ("customer rebates"), including sales rebates, which are generally tied to sales volume levels, in-store promotional allowances, shared media and customer catalogue allowances and other cooperative advertising arrangements; freight allowance programs offered to our customers; and allowance for returns and discounts. We generally recognize customer rebate costs as a deduction to gross sales at the time that the associated revenue is recognized.

10

Significant Payment Terms

Payment terms for each customer are dependent on the agreed upon contractual repayment terms. Payment terms typically are between 30 and 90 days and vary depending on the size of the customer and its risk profile to the Company. Some customers receive discounts for early payment.

Product Returns

The Company accepts product returns in the normal course of business. The Company estimates reserves for returns and the related refunds to customers based on historical experience. Reserves for returned merchandise are included as a component of “Accounts receivable” in the condensed consolidated balance sheets.

Practical Expedient Usage and Accounting Policy Elections

For the Company’s contracts that have an original duration of one year or less, the Company uses the practical expedient in ASC 606-10-32-18 applicable to such contracts and does not consider the time value of money in relation to significant financing components.  The effect of applying this practical expedient election did not have an impact on the Company’s condensed consolidated financial statements.  

Per ASC 606-10-25-18B, the Company has elected to account for shipping and handling activities that occur after the customer has obtained control as a fulfilment activity instead of a performance obligation. Furthermore, shipping and handling activities performed before transfer of control of the product also do not constitute a separate and distinct performance obligation. The effect of applying this practical expedient election did not have an impact on the Company’s condensed consolidated financial statements.  

The Company has elected to exclude from the transaction price those amounts which relate to sales and other taxes that are assessed by governmental authorities and that are imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer.

Applying the practical expedient in ASC 340-40-25-4, Other Assets and Deferred Costs, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred. These costs are included in “Selling, general and administrative expenses.” The effect of applying this practical expedient did not have an impact on the Company’s condensed consolidated financial statements.

Disaggregation of Revenues

The following table represents external net sales disaggregated by product category, by segment (amounts in thousands):

For the three months ended September 30, 2021

	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,769	$	1,932	$	2,863	$	23,564
First Aid and Safety		22,278		1,653	$	428		24,359
Total Net Sales	$	41,047	$	3,585	$	3,291	$	47,923

For the three months ended September 30, 2020

	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,656	$	2,199	$	3,013	$	23,868
First Aid and Safety		18,000		1,174		274		19,448
Total Net Sales	$	36,656	$	3,373	$	3,287	$	43,316

For the nine months ended September 30, 2021

	U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,494	$	5,572	$	10,283	$	66,349
First Aid and Safety		63,441		5,336		1,169		69,946
Total Net Sales	$	113,935	$	10,908	$	11,452	$	136,295

11

For the nine months ended September 30, 2020

	U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,088	$	4,860	$	8,505	$	63,453
First Aid and Safety		55,488		3,315		877		59,680
Total Net Sales	$	105,576	$	8,175	$	9,382	$	123,133

4. Debt and Shareholders’ Equity

Long-term debt consists of borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. The agreement provides for borrowings of up to $50 million at Prime Rate less 1.25%. The credit facility has an expiration date of May 24, 2023. The Company must pay a facility fee, payable quarterly, in an amount equal to two tenths of one percent (.20%) per annum of the average daily unused portion of the revolving credit line.  The facility is intended to provide liquidity for working capital, growth, dividends, acquisitions, share repurchases and other business activities.  Under the revolving loan agreement, the Company is required to maintain specific amounts of tangible net worth, a specified debt to net worth ratio and a fixed charge coverage ratio and must have annual net income greater than zero, measured as of the end of each fiscal year. As of September 30, 2021, the Company was in compliance with the covenants then in effect under the loan agreement.  

As of September 30, 2021, and December 31, 2020, the Company had outstanding borrowings of $40,454,000 and $38,767,000, respectively, under the Company’s revolving loan agreement with HSBC.

On October 26, 2017, the Company exercised its option to purchase its First Aid Only manufacturing and distribution center in Vancouver, WA for $4.0 million. The property consists of 53,000 square feet of office, manufacturing, and warehouse space on 2.86 acres. The purchase was financed by a variable rate mortgage with HSBC Bank, N.A. at an interest rate of LIBOR plus 2.5%. Commencing on December 1, 2017, principal payments of $22,222 are due monthly, with all amounts outstanding due on maturity on October 31, 2024.

During the three months ended September 30, 2021, the Company issued a total of 30,479 shares of common stock and received aggregate proceeds of approximately $368,000 upon exercise of employee stock options. During the nine months ended September 30, 2021, the Company issued a total of 220,774 shares of common stock and received aggregate proceeds of approximately $3,066,000 upon exercise of employee stock options. Also during the nine months ended September 30, 2021, the Company, at its discretion, paid approximately $211,000 to optionees who had elected (subject to the approval of the Company) a net cash settlement of their respective options.  

Also included in long term debt at December 31, 2020 was the amount then outstanding under a Paycheck Protection Program (PPP) loan; the loan was forgiven in the quarter ended June 30, 2021. See Note 9 – Paycheck Protection Program Loan for additional details.   

5. Segment Information

The Company reports financial information based on the organizational structure used by the Company’s chief operating decision makers for making operating and investment decisions and for assessing performance. The Company’s reportable business segments consist of: (1) United States; (2) Canada; and (3) Europe. As described below, the activities of the Company’s Asian operations are closely linked to those of the U.S. operations; accordingly, the Company’s chief operating decision makers review the financial results of both on a consolidated basis, and the results of the Asian operations have been aggregated with the results of the United States operations to form one reportable segment called the “United States segment” or “U.S. segment”. Each reportable segment derives its revenue from the sales of cutting and sharpening devices, measuring instruments and first aid and safety products for school, office, home, hardware, sporting and industrial use.

Domestic sales orders are filled primarily from the Company’s distribution centers in North Carolina, Washington, Massachusetts, Tennessee, Florida and California. The Company is responsible for the costs of shipping, insurance, customs clearance, duties, storage and distribution related to such products. Orders filled from the Company’s inventory are generally for less than container-sized lots.

Direct import sales are products sold by the Company’s Asian subsidiary, directly to major U.S. retailers, who take ownership of the products in Asia. These sales are completed by delivering product to the customers’ common carriers at the shipping points in Asia. Direct import sales are made in larger quantities than domestic sales, typically full containers. Direct import sales represented approximately 7% and 8% of the Company’s total net sales for the three and nine months ended September 30, 2021, compared to 12% and 11% for the comparable period in 2020.

The Chief Operating Decision Maker evaluates the performance of each operating segment based on segment revenues and operating income. Segment revenues are defined as total revenues, including both external customer revenue and inter-segment revenue. Segment operating earnings are defined as segment revenues, less cost of goods sold and operating expenses. Identifiable assets by segment are those assets used in the respective reportable segment’s operations. Inter-segment amounts are eliminated to arrive at consolidated financial results.

12

The following table sets forth certain financial data by segment for three and nine months ended September 30, 2021 and 2020:

Financial data by segment:

(in thousands)

	Three months ended September 30,						Nine months ended September 30,
Sales to external customers:	2021			2020			2021			2020
United States	$	41,060		$	36,656		$	113,948		$	105,576
Canada		3,585			3,373			10,907			8,175
Europe		3,278			3,287			11,440			9,382
Consolidated	$	47,923		$	43,316		$	136,295		$	123,133
Operating income:
United States	$	2,425		$	1,189		$	7,231		$	6,442
Canada		418			600			1,452			1,173
Europe		118			335			1,034			901
Consolidated	$	2,961		$	2,124		$	9,717		$	8,516
Interest expense, net		(228	)		(168	)		(671	)		(722	)
Other (expense) income, net		(68	)		35			3,295			(2	)
Consolidated income before income taxes	$	2,665		$	1,991		$	12,341		$	7,792

Assets by segment:

(in thousands)

	September 30,		December 31,
	2021		2020
United States	$	122,620	$	113,831
Canada		9,294		7,432
Europe		9,517		8,605
Consolidated	$	141,431	$	129,868

6. Stock Based Compensation

The Company recognizes share-based compensation at the fair value of the equity instrument on the grant date. Compensation expense is recognized over the required service period, which is generally the vesting period of the equity instrument. Share-based compensation expense was approximately $455,000 and $1,341,000 for the three and nine months ended September 30, 2021, respectively, compared to approximately $327,000 and $929,000 for the three and nine months ended September 30, 2020, respectively.

As of September 30, 2021, there was a total of $4,347,695 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested share-based payments granted to the Company’s employees. As of that date, the remaining unamortized expense was expected to be recognized over a weighted average period of approximately three years.

7. Fair Value Measurements

The carrying value of the Company’s bank debt is a reasonable estimate of fair value because of the nature of its payment terms and maturity.

8. Leases

The Company has operating leases for office and warehouse space and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists of operating leases which expire at various dates through 2026.

Certain of the Company’s lease arrangements contain renewal provisions, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with right-of-use (“ROU”) assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

13

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. As most of our leases do not provide an implicit rate, the present value of lease payments is determined primarily using our incremental borrowing rate based on the information available at the lease commencement date. The incremental borrowing rate is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term on an amount equal to the lease payments in a similar economic environment.  Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term.  For the three months ended September 30, 2021, lease expense in the amount of $0.1 million was included in cost of goods sold and $0.3 million was included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations. For the nine months ended September 30, 2021, lease expense in the amount of $0.2 million was included in cost of goods sold and $0.6 million was included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations.                             

Information related to leases (in thousands):

	Three months ended		Three months ended
Operating cash flow information:	September 30, 2021		September 30, 2020
Operating lease cost	$	297	$	284
Operating lease - cash flow	$	236	$	272
Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	-	$	-
	Nine months ended		Nine months ended
Operating cash flow information:	September 30, 2021		September 30, 2020
Operating lease cost	$	994	$	899
Operating lease - cash flow	$	796	$	839
Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	1,575	$	-

	September 30, 2021			September 30, 2020
Weighted-average remaining lease term	4.0 years			4.0 years
Weighted-average discount rate		5	%		5	%

Future minimum lease payments under non-cancellable leases as of September 30, 2021:

2021 (remaining)	$	270
2022		1,081
2023		961
2024		702
2025		613
Thereafter		140
Total future minimum lease payments	$	3,767
Less: imputed interest		(337	)
Present value of lease liabilities - current		945
Present value of lease liabilities - non-current	$	2,485

9. Paycheck Protection Program Loan

On May 7, 2020, the Company received a two-year loan (the “PPP Loan”) from HSBC Bank USA, N.A., the lender, in the amount of $3,508,047 under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act).    

Under the CARES Act, all or a portion of the PPP Loan was eligible to be forgiven by the U.S. Small Business Administration (“SBA”) and the lender, upon application by the Company, provided that the Company shall have used the loan proceeds for certain eligible purposes.  The PPP Loan was fully forgiven by the SBA and on June 9, 2021, payment in the amount of $3,508,047 was made by the SBA to the lender.   The Company recorded the amount forgiven as income in the quarter ended June 30, 2021.

14

10. Other Accrued Liabilities

Other current accrued liabilities consisted of (in thousands):

	September 30,		December 31,
	2021		2020
Customer Rebates	$	6,321	$	6,068
Accrued Compensation		1,915		3,072
Dividend Payable		463		435
Other		2,516		1,885
Total:	$	11,215	$	11,460

15

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Forward-Looking Information

The Company may from time to time make written or oral “forward-looking statements” including statements contained in this report and in other communications by the Company, which are made in good faith pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on our beliefs as well as assumptions made by and information currently available to us. When used in this document, words like “may,” “might,” “will,” “except,” “anticipate,” “believe,” “potential,” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from our current expectations.

Forward-looking statements in this report, including without limitation, statements related to the Company’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Investors are cautioned that such forward-looking statements involve risks and uncertainties that may impact the Company’s business, operations and financial results, including the global COVID-19 pandemic, future waves of COVID-19, including through the Delta variant and any new variant strains of the underlying virus; any future pandemics; the continuing effectiveness, global availability,  and public acceptance of existing vaccines; the effectiveness, availability, and public acceptance of vaccines against variant strains of potential new viruses; the strength of economic recovery and accelerating inflation, and the heightened impact the pandemic has on many of the risks described herein, including, without limitation, risks relating to disruptions in our supply chain and labor force, any of which could materially adversely impact the Company’s ability to manufacture, source or distribute its products, both domestically and internationally.    

These risks and uncertainties further include, without limitation, the following:  (i) changes in the Company’s plans, strategies, objectives, expectations and intentions,  which may be made at any time at the discretion of the Company; (ii) the impact of uncertainties in global economic conditions, whether caused by COVID-19 or otherwise, including the impact on the Company’s suppliers and customers; (iii) the potential disruptions in the Company’s supply chains, whether caused by COVID-19 or otherwise; (iv) changes in client needs and consumer spending habits; (v) the impact of competition; (vi) the impact of technological changes including, specifically, the growth of online marketing and sales activity; (vii) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; (viii) the Company’s ability to effectively manage its inventory in a rapidly changing business environment, including additional inventory acquired to respond to COVID-19 related uncertainties; (ix) rising wages and benefits; (x) labor shortages; (xi) the impact of rising inflation rates; (xii) currency fluctuations;  (xiii) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; and (xiv) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

For a more detailed discussion of these and other factors affecting the Company, see the Risk Factors described in Item 1A included in the Company’s Annual Report on Form 10-K for the fiscal year December 31, 2020 and below under “Financial Condition”. All forward-looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Critical Accounting Policies

We discuss our critical accounting policies and estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

COVID-19 Pandemic and Macroeconomic Related Considerations

As noted above under “Forward-Looking Statements”, COVID-19 and the various problems directly or indirectly caused or exacerbated by COVID-19 continue to present certain significant risks and uncertainties to the Company and its operations. Commencing late in the first quarter of 2020 and continuing through the filing of this report, the COVID-19 pandemic and certain related challenges have affected the Company’s financial results and business operations.    These challenges include: difficulties in hiring employees for its manufacturing and distribution centers due to current domestic labor shortages, increased labor costs, and higher employee turnover compared to pre-pandemic levels.  

In addition, the Company has experienced and continues to experience domestic and international disruptions in its supply chain due to port delays, container shortages, and trucking shortages which have been exacerbated by COVID-19.  As a result, the Company has been acquiring and subsequently maintaining additional inventory to minimize the impact of any potential disruption to its supply chain. The Company believes that it has sufficient inventory of its products to meet anticipated demand in the near future. However, any further increase in the duration or severity of the COVID-19 pandemic or a resurgence of the pandemic and the continuation of related supply chain and labor issues, might adversely affect the Company’s ability to manufacture, source or distribute its products both domestically and internationally. The occurrence of any of these factors could have a material adverse effect on the Company’s business, operations and financial condition.  

16

Results of Operations

Traditionally, the Company’s sales are stronger in the second and third quarters and weaker in the first and fourth quarters of the fiscal year, due to the seasonal nature of the back-to-school market.

Net sales

Consolidated net sales for the three months ended September 30, 2021 were $47,923,000 compared with $43,316,000 in the same period in 2020, a 11% increase. Consolidated net sales for nine months ended September 30, 2021 were $136,295,000 compared with $123,133,000 in the same period in 2020, a 11% increase.

Sales in the U.S. for the three and nine months ended September 30, 2021 increased 12% and increased 8%, respectively, compared to the same periods in 2020. The increase in sales for the three and nine months was primarily due to strong sales of first aid and medical products.

Net sales in Canada for the three months ended September 30, 2021, increased 6% and were constant in local currency compared to the same period in 2020. Higher sales of First Aid Central products were offset by lower sales of school and office products. In 2020, back-to-school shipments were delayed from the second to the third quarter due to the COVID-19 lockdowns in the second quarter of 2020.  Net sales in the nine months ended September 30, 2021, increased 33% in U.S. dollars and 23% in local currency compared to the first nine months of 2020 primarily due to higher sales of First Aid Central products.       

European net sales for the third quarter of 2021 were constant in both U.S. dollars and local currency compared to the third quarter of 2020 due to the timing of several large orders in 2020.  Net sales for the nine months ended September 30, 2021, increased 22% in U.S. dollars and 15% in local currency compared to the first nine months of 2020, mainly due to sales growth in the ecommerce channel across all product lines and market share gains in Westcott school and office products.

Gross profit

Gross profit for the three months ended September 30, 2021 was $17,005,000 (35.5% of net sales) compared to $14,956,000 (34.5% of net sales) in the same period in 2020. Gross profit for the nine months ended September 30, 2021 was $48,745,000 (35.8% of net sales) compared to $44,539,000 (36.2% of net sales) for the same period in 2020.

Selling, general and administrative expenses

Selling, general and administrative ("SG&A") expenses for the three months ended September 30, 2021 were $14,044,000 (29.3% of net sales) compared with $12,832,000 (29.6% of net sales) in the same period in 2020, an increase of $1,212,000. SG&A expenses for the nine months ended September 30, 2021 were $39,028,000 (28.6% of net sales) compared with $36,023,000 (29.3% of net sales) for the same periods of 2020, an increase of $3,005,000. The increases in SG&A expenses for three and nine months ended September 30, 2021, compared to the same period in 2020 were primarily due to higher personnel related costs, higher commissions and shipping costs related to higher sales and personnel and other additional costs resulting from the acquisition of Med Nap.

Operating income

Operating income for the three months ended September 30, 2021 was $2,961,000 compared with $2,124,000 in the same period of 2020. Operating income for the nine months ended September 30, 2021 was $9,717,000 compared with $8,516,000 in the same period of 2020.

Operating income in the U.S. segment increased by $1,236,000 and $789,000 for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

Operating income in the Canadian segment decreased by $182,000 and increased by $279,000 in U.S. dollars for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

Operating income in the European segment decreased by $217,000 and increased $133,000 in U.S. dollars for the three and nine months ended September 30, 2021, respectively, compared to the same period in 2020.

Interest expense, net

17

Interest expense, net for the three months ended September 30, 2021 was $228,000 compared with $168,000 in the same period of 2020, a $60,000 increase. The increase in interest expense is due to higher average debt outstanding.  Interest expense, net for the nine months ended September 30, 2021 was $671,000 compared with $722,000 for the same period of 2020, a $51,000 decrease.

Other (expense) income, net

Total other (expense), net was $68,000 in the three months ended September 30, 2021 compared to other income of $35,000 in the same period of 2020. Total other income, net was $3,295,000 in the nine months ended September 30, 2021 compared to other expense of $2,000 in the same period of 2020.  The increase in other income, net for the nine months ended September 30, 2021, was primarily due to $3,508,047 of income related to the forgiveness of the PPP Loan.  

Income taxes

Income tax expense for the nine months ended September 30, 2021, included a $0.9 million tax credit for stock-based compensation. The Company’s effective tax rates for the three and nine months ended September 30, 2021, excluding the tax credit and the income from the PPP loan forgiveness, were 23% and 22%, respectively, compared to 21% and 22%, respectively, in the same periods in 2020.

Financial Condition

Liquidity and Capital Resources

During the first nine months of 2021, working capital increased approximately $10.0 million compared to December 31, 2020. Inventory decreased approximately $2.0 million at September 30, 2021 compared to December 31, 2020. Inventory turnover, calculated using a twelve-month average inventory balance, was 2.4 at September 30, 2021 compared to 2.4 at December 31, 2020.  Receivables increased by approximately $8.9 million at September 30, 2021 compared to December 31, 2020.  The average number of days sales outstanding in accounts receivable was 60 days at each of September 30, 2021 and December 31, 2020.  Accounts payable and other current liabilities decreased by approximately $.9 million at September 30, 2021 compared to December 31, 2020.

The Company's working capital, current ratio and long-term debt to equity ratio are as follows (dollar amounts in thousands):

	September 30,			December 31,
	2021			2020
Working capital	$	73,525		$	63,485
Current ratio		4.84			4.14
Long term debt to equity ratio		56.4	%		72.0	%

Long-term debt consists of borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. The revolving loan agreement provides for borrowings of up to $50 million at Prime Rate less 1.25%. The credit facility has an expiration date of May 24, 2023. The Company must pay a facility fee, payable quarterly, in an amount equal to two tenths of one percent (.20%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for working capital, growth, dividends, acquisitions, share repurchases and other business activities.  Under the revolving loan agreement, the Company is required to maintain specific amounts of tangible net worth, a specified debt to net worth ratio and a fixed charge coverage ratio and must have annual net income greater than zero, measured as of the end of each fiscal year. At September 30, 2021, the Company was in compliance with the covenants then in effect under the loan agreement.  

During the first nine months of 2021, total debt outstanding under the Company’s revolving credit facility increased by approximately $1.7 million, compared to total debt thereunder at December 31, 2020. As of September 30, 2021, $40,454,000 was outstanding and $9,546,000 was available for borrowing under the Company’s credit facility.

Also included in long-term debt are amounts outstanding under the variable rate mortgage related on the Company’s manufacturing and distribution facility in Vancouver, WA. At September 30, 2021, there was approximately $3.0 million outstanding on the mortgage.

As described above, commencing late in the first quarter of 2020, the Company has encountered challenges as a result of the COVID-19 pandemic that could have material adverse consequences for our liquidity as a result of a number of factors.  Additionally, as noted above, the Company has incurred and continues to incur increased operational and other expenses due to labor shortages and supply chain issues as a result of the COVID-19 pandemic.  In order to address problems that may arise as a result of any such potential disruption, the Company has increased its inventory of its principal products above customary levels.

18

On May 7, 2020, the Company received a two-year loan (the “PPP Loan”) from HSBC Bank USA, N.A., the lender, in the amount of $3,508,047 under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act).  

Under the CARES Act, all or a portion of the PPP Loan was eligible to be forgiven by the U.S. Small Business Administration (“SBA”) and the lender, upon application by the Company, provided that the Company shall have used the loan proceeds for certain eligible purposes.  The PPP Loan was fully forgiven by the SBA and on June 9, 2021, payment in the amount of $3,508,047 was made by the SBA to the lender.   The Company recorded the amount forgiven as income in the quarter ended June 30, 2021.

The Company believes that cash generated from operating activities, together with funds available under its revolving credit facility, will, under current conditions, be sufficient to finance the Company’s operations over the next twelve months from the filing of this report.

19

Item 3: Quantitative and Qualitative Disclosure about Market Risk

Not applicable.

Item 4: Controls and Procedures

(a) Evaluation of Internal Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2021. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were not effective as of September 30, 2021 as a result of an identified material weakness.  As described in the Company's Form 10-K for the year ended December 31, 2020, the Company’s controls related to the existence of inventory at the Rocky Mount, NC warehouse (the “Warehouse”) were not effective as the cycle count program used did not demonstrate that inventory quantities were sufficiently counted. The Company's remediation efforts related to this material weakness are ongoing. Except as described below, there were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

This material weakness did not result in any misstatement of the Company's consolidated financial statements for any period presented.  Our independent public accounting firm, Marcum LLP, audited our consolidated financial statements at December 31, 2020, and for each of the two years in the period ended December 31, 2020, and their report expressed an unqualified opinion on our consolidated financial statements.

(b) Changes in Internal Control over Financial Reporting

In response to the material weakness identified above, the Company has implemented changes to its internal control over financial reporting, including:

●  The Company has evaluated the processes, procedures and controls related to the Warehouse cycle count program and has commenced making changes as considered appropriate, including those changes described below, to address the control deficiency.

●  In the second quarter of 2021, the Company completed the installation of a new inventory management system at the warehouse.  The new software is intended to enable the Company to conduct its inventory cycle count program more efficiently and effectively.

●  The Company continues to allocate additional resources to the implementation of its inventory count program, including the hiring of additional personnel for the program.  The Company will conduct a full physical inventory count at the Warehouse to provide evidence on existence of its inventory for the year ended December 31, 2021.

As stated in the Company’s Form 10-K for the year ended December 31, 2020, we believe that these ongoing actions will remediate the material weakness. However, due to the nature of the material weakness, it will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed as of December 31, 2021.

20

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

There are no pending material legal proceedings to which the registrant is a party, or, to the actual knowledge of the Company, contemplated by any governmental authority.

Item 1A — Risk Factors

See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 — Defaults upon Senior Securities

None.

Item 4 — Mine Safety Disclosures

Not applicable.

Item 5 — Other Information

None.

Item 6 — Exhibits

Documents filed as part of this report:

Exhibit 31.1	Certification of Walter C. Johnsen pursuant to 18 U.S.C. Section 1350, as adopted pursuant Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Paul G. Driscoll pursuant to 18 U.S.C. Section 1350, as adopted pursuant Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Walter C. Johnsen pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Paul G. Driscoll pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
104	The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

21

SIGNATURES

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

ACME UNITED CORPORATION
By	/s/ Walter C. Johnsen
	Walter C. Johnsen
	Chairman of the Board and
	Chief Executive Officer
Dated: November 9, 2021

By	/s/ Paul G. Driscoll
	Paul G. Driscoll
	Vice President and
	Chief Financial Officer
Dated: November 9, 2021

22

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, WALTER C. JOHNSEN, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Acme United Corporation;

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

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

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

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

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

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

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

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

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

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

By	/s/ Walter C. Johnsen
	Walter C. Johnsen
	Chairman of the Board and
	Chief Executive Officer

Dated: November 9, 2021

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, PAUL G. DRISCOLL, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Acme United Corporation;

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

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

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

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

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

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

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

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

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

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

By	/s/ Paul G. Driscoll
	Paul G. Driscoll
	Vice President and
	Chief Financial Officer

Dated: November 9, 2021

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Acme United Corporation (the “Company”) hereby certifies to my knowledge that the Company’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2021 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report or “filed” for any purpose whatsoever.

By	/s/ Walter C. Johnsen
	Walter C. Johnsen
	Chairman of the Board and
	Chief Executive Officer

Dated: November 9, 2021

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Acme United Corporation and will be retained by Acme United Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officer of Acme United Corporation (the “Company”) hereby certifies to my knowledge that the Company’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2021 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This certification is provided solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report or “filed” for any purpose whatsoever.

By	/s/ Paul G. Driscoll
	Paul G. Driscoll
	Vice President and
	Chief Financial Officer

Dated: November 9, 2021

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Acme United Corporation and will be retained by Acme United Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2021	Nov. 05, 2021
Cover [Abstract]
Entity Registrant Name	ACME UNITED CORP
Entity Central Index Key	0000002098
Document Type	10-Q
Document Period End Date	Sep. 30, 2021
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		3,559,687
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Trading Symbol	ACU
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity File Number	01-07698
Entity Tax Identification Number	06-0236700
Entity Address, Address Line One	1 Waterview Drive
Entity Address, City or Town	Shelton
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06484
City Area Code	203
Local Phone Number	254-6060
Entity Interactive Data Current	Yes
Title of 12(b) Security	$2.50 par value Common Stock
Security Exchange Name	NYSEAMER
Entity Incorporation, State or Country Code	CT
Document Quarterly Report	true
Document Transition Report	false

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 5,306	$ 4,167
Accounts receivable, less allowance of $1,079 in 2021 and $1,152 in 2020	36,088	27,173
Inventories	48,795	50,704
Prepaid expenses and other current assets	2,458	1,642
Total current assets	92,647	83,686
Property, plant and equipment:
Land	1,764	1,770
Buildings	12,800	12,899
Machinery and equipment	29,532	24,524
Total property, plant and equipment	44,096	39,193
Less: accumulated depreciation	20,914	18,954
Net property, plant and equipment	23,182	20,239
Operating lease right-of-use asset, net	3,187	2,422
Goodwill	4,800	4,800
Intangible assets, less accumulated amortization	17,615	18,721
Total assets	141,431	129,868
Current liabilities:
Accounts payable	6,695	7,601
Operating lease liability - current portion	945	873
Current portion of mortgage payable	267	267
Other accrued liabilities	11,215	11,460
Total current liabilities	19,122	20,201
Long-term debt	40,454	38,767
Mortgage payable, net of current portion	2,711	2,911
Operating lease liability - non-current portion	2,485	1,654
Other non-current liabilities	111	110
Total liabilities	64,883	67,151
Commitments and Contingencies (see note 2)
STOCKHOLDERS' EQUITY
Common stock, par value $2.50: authorized 8,000,000 shares; 5,061,345 shares issued and 3,559,687 shares outstanding in 2021 and 4,840,571 shares issued and 3,338,913 shares outstanding in 2020	12,653	12,101
Additional paid-in capital	11,575	7,931
Retained earnings	67,998	58,033
Treasury stock, at cost - 1,501,658 shares in 2021 and 2020	(14,522)	(14,522)
Accumulated other comprehensive loss:
Translation adjustment	(1,156)	(826)
Total stockholders’ equity	76,548	62,717
Total liabilities and stockholders’ equity	$ 141,431	129,868
PPP Loan
Current liabilities:
Long-term debt		$ 3,508

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
STOCKHOLDERS' EQUITY
Accounts receivable, allowance	$ 1,079	$ 1,152
Common stock, par value	$ 2.50	$ 2.50
Common stock, shares authorized	8,000,000	8,000,000
Common stock, shares issued	5,061,345	4,840,571
Common stock, shares outstanding	3,559,687	3,338,913

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Condensed Consolidated Statements Of Operations
Net sales	$ 47,923	$ 43,316	$ 136,295	$ 123,133
Cost of goods sold	30,918	28,360	87,550	78,594
Gross profit	17,005	14,956	48,745	44,539
Selling, general and administrative expenses	14,044	12,832	39,028	36,023
Operating income	2,961	2,124	9,717	8,516
Non-operating items:
Interest expense	(230)	(173)	(682)	(742)
Interest income	2	5	11	20
Interest expense, net	(228)	(168)	(671)	(722)
PPP loan forgiveness			3,508
Other (expense) income, net	(68)	35	(213)	(2)
Total other (expense) income, net	(68)	35	3,295	(2)
Income before income tax expense	2,665	1,991	12,341	7,792
Income tax expense	619	412	1,019	1,737
Net income	$ 2,046	$ 1,579	$ 11,322	$ 6,055
Basic earnings per share	$ 580	$ 470	$ 3,280	$ 1,810
Diluted earnings per share	$ 0.50	$ 0.46	$ 2.85	$ 1.75
Weighted average number of common shares outstanding-denominator used for basic per share computations	3,542,000	3,340,000	3,449,000	3,343,000
Weighted average number of dilutive stock options outstanding	516,000	122,000	520,000	111,000
Denominator used for diluted per share computations	4,058,000	3,462,000	3,969,000	3,454,000
Dividends declared per share	$ 0.13	$ 0.12	$ 0.39	$ 0.36

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Condensed Consolidated Statements Of Comprehensive Loss Income [Abstract]
Net income	$ 2,046	$ 1,579	$ 11,322	$ 6,055
Other comprehensive (loss) income:
Foreign currency translation adjustment	(310)	270	(330)	142
Comprehensive income	$ 1,736	$ 1,849	$ 10,993	$ 6,197

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Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Treasury Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Retained Earnings
Beginning Balance at Dec. 31, 2019	$ 55,704	$ 12,094	$ (14,235)	$ 8,262	$ (1,988)	$ 51,571
Beginning Balance, shares at Dec. 31, 2019		3,350,833
Net income	6,055					6,055
Other comprehensive income (loss)	142				142
Stock compensation expense	929			929
Distributions to shareholders	(1,201)					(1,201)
Issuance of common stock	59	$ 7		52
Issuance of common stock (shares)		2,500
Cash settlement of stock options	(805)			(805)
Purchase of treasury stock	(287)		(287)
Purchase of treasury stock (shares)		(14,420)
Ending Balance at Sep. 30, 2020	60,596	$ 12,101	(14,522)	8,438	(1,846)	56,425
Ending Balance, shares at Sep. 30, 2020		3,338,913
Beginning Balance at Jun. 30, 2020	59,007	$ 12,094	(14,522)	8,304	(2,116)	55,247
Beginning Balance, shares at Jun. 30, 2020		3,336,413
Net income	1,579					1,579
Other comprehensive income (loss)	270				270
Stock compensation expense	327			327
Distributions to shareholders	(401)					(401)
Issuance of common stock	59	$ 7		52
Issuance of common stock (shares)		2,500
Cash settlement of stock options	(245)			(245)
Ending Balance at Sep. 30, 2020	60,596	$ 12,101	(14,522)	8,438	(1,846)	56,425
Ending Balance, shares at Sep. 30, 2020		3,338,913
Beginning Balance at Dec. 31, 2020	$ 62,717	$ 12,101	(14,522)	7,931	(826)	58,033
Beginning Balance, shares at Dec. 31, 2020	3,338,913	3,338,913
Net income	$ 11,322					11,322
Other comprehensive income (loss)	(330)				(330)
Stock compensation expense	1,341			1,341
Distributions to shareholders	(1,357)					(1,357)
Issuance of common stock	3,066	$ 552		2,514
Issuance of common stock (shares)		220,774
Cash settlement of stock options	(211)			(211)
Ending Balance at Sep. 30, 2021	$ 76,548	$ 12,653	(14,522)	11,575	(1,156)	67,998
Ending Balance, shares at Sep. 30, 2021	3,559,687	3,559,687
Beginning Balance at Jun. 30, 2021	$ 74,452	$ 12,576	(14,522)	10,829	(846)	66,415
Beginning Balance, shares at Jun. 30, 2021		3,529,208
Net income	2,046					2,046
Other comprehensive income (loss)	(310)				(310)
Stock compensation expense	455			455
Distributions to shareholders	(463)					(463)
Issuance of common stock	368	$ 77		291
Issuance of common stock (shares)		30,479
Ending Balance at Sep. 30, 2021	$ 76,548	$ 12,653	$ (14,522)	$ 11,575	$ (1,156)	$ 67,998
Ending Balance, shares at Sep. 30, 2021	3,559,687	3,559,687

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Condensed Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net income	$ 11,322,000	$ 6,055,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,809,000	1,830,000
Amortization of intangible assets	1,111,000	991,000
Non-cash lease expense	170,000	57,000
Stock compensation expense	1,341,000	929,000
Provision for bad debt	79,000	910,000
PPP loan forgiveness	(3,508,000)
Changes in operating assets and liabilities:
Accounts receivable	(9,060,000)	(7,293,000)
Inventories	1,678,000	(8,544,000)
Prepaid expenses and other current assets	(859,000)	121,000
Accounts payable	(959,000)	2,040,000
Other accrued liabilities	(145,000)	4,645,000
Total adjustments	(8,343,000)	(4,314,000)
Net cash provided by operating activities	2,979,000	1,741,000
Cash flows from investing activities:
Purchase of property, plant and equipment	(4,792,000)	(2,081,000)
Net cash used in investing activities	(4,792,000)	(4,155,000)
Cash flows from financing activities:
Net borrowings of long-term debt	1,687,000	(2,537,000)
Cash settlement of stock options	(211,000)	(805,000)
Repayments on mortgage	(200,000)	(200,000)
Proceeds from issuance of common stock	3,066,000	59,000
Distributions to shareholders	(1,329,000)	(1,201,000)
Purchase of treasury shares		(287,000)
Net cash provided by (used in) financing activities	3,013,000	(1,463,000)
Effect of exchange rate changes on cash and cash equivalents	(61,000)	86,000
Net change in cash and cash equivalents	1,139,000	(3,791,000)
Cash and cash equivalents at beginning of period	4,167,000	6,822,000
Cash and cash equivalents at end of period	5,306,000	3,031,000
Supplemental cash flow information:
Cash paid for income taxes	1,070,000	415,000
Cash paid for interest	$ 660,000	751,000
PPP Loan
Cash flows from financing activities:
Proceeds from PPP Loan		3,508,000
First Aid Central
Cash flows from investing activities:
Acquisition of First Aid Central		$ (2,074,000)

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Basis of Presentation

9 Months Ended

Sep. 30, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

1. Basis of Presentation

The accompanying condensed consolidated financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows of Acme United Corporation (the “Company”). These adjustments are of a normal, recurring nature. However, the financial statements do not include all the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the Company's Annual Report on Form 10-K. Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for such disclosures. The condensed consolidated balance sheet as of December 31, 2020 was derived from the audited consolidated balance sheet as of that date. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

The Company has evaluated events and transactions subsequent to September 30, 2021 and through the date these condensed consolidated financial statements were issued.

Recently Issued and Adopted Accounting Standards

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update eliminates, clarifies and modifies certain guidance related to the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, i.e. commencing with our current fiscal year.  The adoption of ASU 2019-12 did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this update eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.  The Company adopted this standard on January 1, 2020. The adoption of this standard has not had an impact on the financial statements of the Company.

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Commitment and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitment and Contingencies

2. Commitment and Contingencies

There are no pending material legal proceedings to which the Company is a party, or, to the actual knowledge of the Company, contemplated by any governmental authority.

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Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2021

Revenue From Contract With Customer [Abstract]

Revenue from Contracts with Customers

3. Revenue from Contracts with Customers

Nature of Goods and Services

The Company recognizes revenue from the sales of a broad line of products that are grouped into two main categories: (a) cutting, sharpening and measuring; and (b) first aid and safety. The cutting, sharpening and measuring category includes scissors, knives, paper trimmers, pencil sharpeners and other sharpening tools. The first aid and safety category includes first aid kits and refills, over-the-counter medications and a variety of safety products. Revenue recognition is evaluated through the following five steps: (i) identification of the contract or contracts with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Revenue is generated by the sale of the Company’s products to its customers.  Sales contracts (purchase orders) generally have a single performance obligation that is satisfied at a point in time, with shipment or delivery, depending on the terms of the underlying contract. Revenue is measured based on the consideration specified in the contract. The amount of consideration we receive and revenue we recognize is impacted by incentives ("customer rebates"), including sales rebates, which are generally tied to sales volume levels, in-store promotional allowances, shared media and customer catalogue allowances and other cooperative advertising arrangements; freight allowance programs offered to our customers; and allowance for returns and discounts. We generally recognize customer rebate costs as a deduction to gross sales at the time that the associated revenue is recognized.

Significant Payment Terms

Payment terms for each customer are dependent on the agreed upon contractual repayment terms. Payment terms typically are between 30 and 90 days and vary depending on the size of the customer and its risk profile to the Company. Some customers receive discounts for early payment.

Product Returns

The Company accepts product returns in the normal course of business. The Company estimates reserves for returns and the related refunds to customers based on historical experience. Reserves for returned merchandise are included as a component of “Accounts receivable” in the condensed consolidated balance sheets.

Practical Expedient Usage and Accounting Policy Elections

For the Company’s contracts that have an original duration of one year or less, the Company uses the practical expedient in ASC 606-10-32-18 applicable to such contracts and does not consider the time value of money in relation to significant financing components.  The effect of applying this practical expedient election did not have an impact on the Company’s condensed consolidated financial statements.  

Per ASC 606-10-25-18B, the Company has elected to account for shipping and handling activities that occur after the customer has obtained control as a fulfilment activity instead of a performance obligation. Furthermore, shipping and handling activities performed before transfer of control of the product also do not constitute a separate and distinct performance obligation. The effect of applying this practical expedient election did not have an impact on the Company’s condensed consolidated financial statements.  

The Company has elected to exclude from the transaction price those amounts which relate to sales and other taxes that are assessed by governmental authorities and that are imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer.

Applying the practical expedient in ASC 340-40-25-4, Other Assets and Deferred Costs, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred. These costs are included in “Selling, general and administrative expenses.” The effect of applying this practical expedient did not have an impact on the Company’s condensed consolidated financial statements.

Disaggregation of Revenues

The following table represents external net sales disaggregated by product category, by segment (amounts in thousands):

For the three months ended September 30, 2021

	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,769	$	1,932	$	2,863	$	23,564
First Aid and Safety		22,278		1,653	$	428		24,359
Total Net Sales	$	41,047	$	3,585	$	3,291	$	47,923

For the three months ended September 30, 2020

	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,656	$	2,199	$	3,013	$	23,868
First Aid and Safety		18,000		1,174		274		19,448
Total Net Sales	$	36,656	$	3,373	$	3,287	$	43,316

For the nine months ended September 30, 2021

	U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,494	$	5,572	$	10,283	$	66,349
First Aid and Safety		63,441		5,336		1,169		69,946
Total Net Sales	$	113,935	$	10,908	$	11,452	$	136,295

For the nine months ended September 30, 2020

	U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,088	$	4,860	$	8,505	$	63,453
First Aid and Safety		55,488		3,315		877		59,680
Total Net Sales	$	105,576	$	8,175	$	9,382	$	123,133

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Debt and Shareholders' Equity

9 Months Ended

Sep. 30, 2021

Long Term Debt And Stockholders Equity [Abstract]

Debt and Shareholders' Equity

4. Debt and Shareholders’ Equity

Long-term debt consists of borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. The agreement provides for borrowings of up to $50 million at Prime Rate less 1.25%. The credit facility has an expiration date of May 24, 2023. The Company must pay a facility fee, payable quarterly, in an amount equal to two tenths of one percent (.20%) per annum of the average daily unused portion of the revolving credit line.  The facility is intended to provide liquidity for working capital, growth, dividends, acquisitions, share repurchases and other business activities.  Under the revolving loan agreement, the Company is required to maintain specific amounts of tangible net worth, a specified debt to net worth ratio and a fixed charge coverage ratio and must have annual net income greater than zero, measured as of the end of each fiscal year. As of September 30, 2021, the Company was in compliance with the covenants then in effect under the loan agreement.  

As of September 30, 2021, and December 31, 2020, the Company had outstanding borrowings of $40,454,000 and $38,767,000, respectively, under the Company’s revolving loan agreement with HSBC.

On October 26, 2017, the Company exercised its option to purchase its First Aid Only manufacturing and distribution center in Vancouver, WA for $4.0 million. The property consists of 53,000 square feet of office, manufacturing, and warehouse space on 2.86 acres. The purchase was financed by a variable rate mortgage with HSBC Bank, N.A. at an interest rate of LIBOR plus 2.5%. Commencing on December 1, 2017, principal payments of $22,222 are due monthly, with all amounts outstanding due on maturity on October 31, 2024.

During the three months ended September 30, 2021, the Company issued a total of 30,479 shares of common stock and received aggregate proceeds of approximately $368,000 upon exercise of employee stock options. During the nine months ended September 30, 2021, the Company issued a total of 220,774 shares of common stock and received aggregate proceeds of approximately $3,066,000 upon exercise of employee stock options. Also during the nine months ended September 30, 2021, the Company, at its discretion, paid approximately $211,000 to optionees who had elected (subject to the approval of the Company) a net cash settlement of their respective options.  

Also included in long term debt at December 31, 2020 was the amount then outstanding under a Paycheck Protection Program (PPP) loan; the loan was forgiven in the quarter ended June 30, 2021. See Note 9 – Paycheck Protection Program Loan for additional details.   

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Segment Information

9 Months Ended

Sep. 30, 2021

Segment Information [Abstract]

Segment Information

5. Segment Information

The Company reports financial information based on the organizational structure used by the Company’s chief operating decision makers for making operating and investment decisions and for assessing performance. The Company’s reportable business segments consist of: (1) United States; (2) Canada; and (3) Europe. As described below, the activities of the Company’s Asian operations are closely linked to those of the U.S. operations; accordingly, the Company’s chief operating decision makers review the financial results of both on a consolidated basis, and the results of the Asian operations have been aggregated with the results of the United States operations to form one reportable segment called the “United States segment” or “U.S. segment”. Each reportable segment derives its revenue from the sales of cutting and sharpening devices, measuring instruments and first aid and safety products for school, office, home, hardware, sporting and industrial use.

Domestic sales orders are filled primarily from the Company’s distribution centers in North Carolina, Washington, Massachusetts, Tennessee, Florida and California. The Company is responsible for the costs of shipping, insurance, customs clearance, duties, storage and distribution related to such products. Orders filled from the Company’s inventory are generally for less than container-sized lots.

Direct import sales are products sold by the Company’s Asian subsidiary, directly to major U.S. retailers, who take ownership of the products in Asia. These sales are completed by delivering product to the customers’ common carriers at the shipping points in Asia. Direct import sales are made in larger quantities than domestic sales, typically full containers. Direct import sales represented approximately 7% and 8% of the Company’s total net sales for the three and nine months ended September 30, 2021, compared to 12% and 11% for the comparable period in 2020.

The Chief Operating Decision Maker evaluates the performance of each operating segment based on segment revenues and operating income. Segment revenues are defined as total revenues, including both external customer revenue and inter-segment revenue. Segment operating earnings are defined as segment revenues, less cost of goods sold and operating expenses. Identifiable assets by segment are those assets used in the respective reportable segment’s operations. Inter-segment amounts are eliminated to arrive at consolidated financial results.

The following table sets forth certain financial data by segment for three and nine months ended September 30, 2021 and 2020:

Financial data by segment:

(in thousands)

	Three months ended September 30,						Nine months ended September 30,
Sales to external customers:	2021			2020			2021			2020
United States	$	41,060		$	36,656		$	113,948		$	105,576
Canada		3,585			3,373			10,907			8,175
Europe		3,278			3,287			11,440			9,382
Consolidated	$	47,923		$	43,316		$	136,295		$	123,133
Operating income:
United States	$	2,425		$	1,189		$	7,231		$	6,442
Canada		418			600			1,452			1,173
Europe		118			335			1,034			901
Consolidated	$	2,961		$	2,124		$	9,717		$	8,516
Interest expense, net		(228	)		(168	)		(671	)		(722	)
Other (expense) income, net		(68	)		35			3,295			(2	)
Consolidated income before income taxes	$	2,665		$	1,991		$	12,341		$	7,792

Assets by segment:

(in thousands)

	September 30,		December 31,
	2021		2020
United States	$	122,620	$	113,831
Canada		9,294		7,432
Europe		9,517		8,605
Consolidated	$	141,431	$	129,868

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Stock Based Compensation

9 Months Ended

Sep. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation

6. Stock Based Compensation

The Company recognizes share-based compensation at the fair value of the equity instrument on the grant date. Compensation expense is recognized over the required service period, which is generally the vesting period of the equity instrument. Share-based compensation expense was approximately $455,000 and $1,341,000 for the three and nine months ended September 30, 2021, respectively, compared to approximately $327,000 and $929,000 for the three and nine months ended September 30, 2020, respectively.

As of September 30, 2021, there was a total of $4,347,695 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested share-based payments granted to the Company’s employees. As of that date, the remaining unamortized expense was expected to be recognized over a weighted average period of approximately three years.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Measurements [Abstract]

Fair Value Measurements

7. Fair Value Measurements

The carrying value of the Company’s bank debt is a reasonable estimate of fair value because of the nature of its payment terms and maturity.

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Leases

9 Months Ended

Sep. 30, 2021

Leases [Abstract]

Leases

8. Leases

The Company has operating leases for office and warehouse space and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists of operating leases which expire at various dates through 2026.

Certain of the Company’s lease arrangements contain renewal provisions, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with right-of-use (“ROU”) assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. As most of our leases do not provide an implicit rate, the present value of lease payments is determined primarily using our incremental borrowing rate based on the information available at the lease commencement date. The incremental borrowing rate is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term on an amount equal to the lease payments in a similar economic environment.  Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term.  For the three months ended September 30, 2021, lease expense in the amount of $0.1 million was included in cost of goods sold and $0.3 million was included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations. For the nine months ended September 30, 2021, lease expense in the amount of $0.2 million was included in cost of goods sold and $0.6 million was included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations.                             

Information related to leases (in thousands):

	Three months ended		Three months ended
Operating cash flow information:	September 30, 2021		September 30, 2020
Operating lease cost	$	297	$	284
Operating lease - cash flow	$	236	$	272
Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	-	$	-
	Nine months ended		Nine months ended
Operating cash flow information:	September 30, 2021		September 30, 2020
Operating lease cost	$	994	$	899
Operating lease - cash flow	$	796	$	839
Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	1,575	$	-

	September 30, 2021			September 30, 2020
Weighted-average remaining lease term	4.0 years			4.0 years
Weighted-average discount rate		5	%		5	%

Future minimum lease payments under non-cancellable leases as of September 30, 2021:

2021 (remaining)	$	270
2022		1,081
2023		961
2024		702
2025		613
Thereafter		140
Total future minimum lease payments	$	3,767
Less: imputed interest		(337	)
Present value of lease liabilities - current		945
Present value of lease liabilities - non-current	$	2,485

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Paycheck Protection Program Loan

9 Months Ended

Sep. 30, 2021

Paycheck Protection Program Loans [Abstract]

Paycheck Protection Program Loan

9. Paycheck Protection Program Loan

On May 7, 2020, the Company received a two-year loan (the “PPP Loan”) from HSBC Bank USA, N.A., the lender, in the amount of $3,508,047 under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act).    

Under the CARES Act, all or a portion of the PPP Loan was eligible to be forgiven by the U.S. Small Business Administration (“SBA”) and the lender, upon application by the Company, provided that the Company shall have used the loan proceeds for certain eligible purposes.  The PPP Loan was fully forgiven by the SBA and on June 9, 2021, payment in the amount of $3,508,047 was made by the SBA to the lender.   The Company recorded the amount forgiven as income in the quarter ended June 30, 2021.

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Other Accrued Liabilities

9 Months Ended

Sep. 30, 2021

Payables And Accruals [Abstract]

Other Accrued Liabilities

10. Other Accrued Liabilities

Other current accrued liabilities consisted of (in thousands):

	September 30,		December 31,
	2021		2020
Customer Rebates	$	6,321	$	6,068
Accrued Compensation		1,915		3,072
Dividend Payable		463		435
Other		2,516		1,885
Total:	$	11,215	$	11,460

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Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2021

Revenue From Contract With Customer [Abstract]

Disaggregation of Revenues

The following table represents external net sales disaggregated by product category, by segment (amounts in thousands):

For the three months ended September 30, 2021

	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,769	$	1,932	$	2,863	$	23,564
First Aid and Safety		22,278		1,653	$	428		24,359
Total Net Sales	$	41,047	$	3,585	$	3,291	$	47,923

For the three months ended September 30, 2020

	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,656	$	2,199	$	3,013	$	23,868
First Aid and Safety		18,000		1,174		274		19,448
Total Net Sales	$	36,656	$	3,373	$	3,287	$	43,316

For the nine months ended September 30, 2021

	U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,494	$	5,572	$	10,283	$	66,349
First Aid and Safety		63,441		5,336		1,169		69,946
Total Net Sales	$	113,935	$	10,908	$	11,452	$	136,295

For the nine months ended September 30, 2020

	U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,088	$	4,860	$	8,505	$	63,453
First Aid and Safety		55,488		3,315		877		59,680
Total Net Sales	$	105,576	$	8,175	$	9,382	$	123,133

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2021

Segment Information Tables [Abstract]

Financial Data By Segment Table

The following table sets forth certain financial data by segment for three and nine months ended September 30, 2021 and 2020:

Financial data by segment:

(in thousands)

	Three months ended September 30,						Nine months ended September 30,
Sales to external customers:	2021			2020			2021			2020
United States	$	41,060		$	36,656		$	113,948		$	105,576
Canada		3,585			3,373			10,907			8,175
Europe		3,278			3,287			11,440			9,382
Consolidated	$	47,923		$	43,316		$	136,295		$	123,133
Operating income:
United States	$	2,425		$	1,189		$	7,231		$	6,442
Canada		418			600			1,452			1,173
Europe		118			335			1,034			901
Consolidated	$	2,961		$	2,124		$	9,717		$	8,516
Interest expense, net		(228	)		(168	)		(671	)		(722	)
Other (expense) income, net		(68	)		35			3,295			(2	)
Consolidated income before income taxes	$	2,665		$	1,991		$	12,341		$	7,792

Assets by segment:

(in thousands)

	September 30,		December 31,
	2021		2020
United States	$	122,620	$	113,831
Canada		9,294		7,432
Europe		9,517		8,605
Consolidated	$	141,431	$	129,868

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Leases (Tables)

9 Months Ended

Sep. 30, 2021

Leases Tables [Abstract]

Information Related to Leases

Information related to leases (in thousands):

	Three months ended		Three months ended
Operating cash flow information:	September 30, 2021		September 30, 2020
Operating lease cost	$	297	$	284
Operating lease - cash flow	$	236	$	272
Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	-	$	-
	Nine months ended		Nine months ended
Operating cash flow information:	September 30, 2021		September 30, 2020
Operating lease cost	$	994	$	899
Operating lease - cash flow	$	796	$	839
Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	1,575	$	-

	September 30, 2021			September 30, 2020
Weighted-average remaining lease term	4.0 years			4.0 years
Weighted-average discount rate		5	%		5	%

Future Minimum Lease Payments

Future minimum lease payments under non-cancellable leases as of September 30, 2021:

2021 (remaining)	$	270
2022		1,081
2023		961
2024		702
2025		613
Thereafter		140
Total future minimum lease payments	$	3,767
Less: imputed interest		(337	)
Present value of lease liabilities - current		945
Present value of lease liabilities - non-current	$	2,485

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Other Accrued Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Payables And Accruals [Abstract]

Accrued Liabilities

Other current accrued liabilities consisted of (in thousands):

	September 30,		December 31,
	2021		2020
Customer Rebates	$	6,321	$	6,068
Accrued Compensation		1,915		3,072
Dividend Payable		463		435
Other		2,516		1,885
Total:	$	11,215	$	11,460

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Revenue from Contracts with Customers (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Net sales	$ 47,923	$ 43,316	$ 136,295	$ 123,133
Cutting, Sharpening and Measuring
Net sales	23,564	23,868	66,349	63,453
First Aid and Safety
Net sales	24,359	19,448	69,946	59,680
United States
Net sales	41,047	36,656	113,935	105,576
United States | Cutting, Sharpening and Measuring
Net sales	18,769	18,656	50,494	50,088
United States | First Aid and Safety
Net sales	22,278	18,000	63,441	55,488
Canada
Net sales	3,585	3,373	10,908	8,175
Canada | Cutting, Sharpening and Measuring
Net sales	1,932	2,199	5,572	4,860
Canada | First Aid and Safety
Net sales	1,653	1,174	5,336	3,315
Europe
Net sales	3,291	3,287	11,452	9,382
Europe | Cutting, Sharpening and Measuring
Net sales	2,863	3,013	10,283	8,505
Europe | First Aid and Safety
Net sales	$ 428	$ 274	$ 1,169	$ 877

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Debt and Shareholders' Equity (Details Narrative)		3 Months Ended		9 Months Ended
	Oct. 26, 2017 USD ($) ft²	Sep. 30, 2021 USD ($) shares	Sep. 30, 2020 shares	Sep. 30, 2021 USD ($) shares	Sep. 30, 2020 USD ($) shares	Dec. 31, 2020 USD ($)	Oct. 26, 2017 a
Long Term Debt And Stockholders Equity [Line Items]
Outstanding borrowings under revolving loan agreement		$ 40,454,000,000		$ 40,454,000,000		$ 38,767,000,000
Aggregate proceeds from exercise of employee stock options		$ 368,000		3,066,000
Cash settlement of stock options				$ 211,000	$ 805,000
Common Stock
Long Term Debt And Stockholders Equity [Line Items]
Issuance of common stock (shares) | shares		30,479	2,500	220,774	2,500
HSBC Bank
Long Term Debt And Stockholders Equity [Line Items]
Credit facility borrowing capacity		$ 50,000,000		$ 50,000,000
Credit facility interest rate				Prime Rate less 1.25%
Credit facility expiration date				May 24, 2023
Facility fee per annum				20.00%
HSBC Bank | Prime Rate
Long Term Debt And Stockholders Equity [Line Items]
Interest rate				1.25%
First Aid Only Distribution Center
Long Term Debt And Stockholders Equity [Line Items]
Covenant terms and compliance				Under the revolving loan agreement, the Company is required to maintain specific amounts of tangible net worth, a specified debt to net worth ratio and a fixed charge coverage ratio and must have annual net income greater than zero, measured as of the end of each fiscal year. As of September 30, 2021, the Company was in compliance with the covenants then in effect under the loan agreement
Purchase price	$ 4,000,000.0
Area of real estate property	53,000						2.86
Variable rate mortgage interest rate				interest rate of LIBOR plus 2.5%
Monthly payment	$ 22,222
Mortgage maturity date				October 31, 2024
First Aid Only Distribution Center | LIBOR Rate
Long Term Debt And Stockholders Equity [Line Items]
Interest rate	2.50%

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Segment Information (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment Information Details Narrative [Abstract]
Direct import sales to total net sales ratio	7.00%	12.00%	8.00%	11.00%

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Segment Information - Financial Data by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Sales to external customers	$ 47,923	$ 43,316	$ 136,295	$ 123,133
Operating income	2,961	2,124	9,717	8,516
Interest expense, net	(228)	(168)	(671)	(722)
Other (expense) income, net	(68)	35	3,295	(2)
Consolidated income before income taxes	2,665	1,991	12,341	7,792
Assets	141,431		141,431		$ 129,868
United States Segment
Sales to external customers	41,060	36,656	113,948	105,576
Operating income	2,425	1,189	7,231	6,442
Assets	122,620		122,620		113,831
Canada Segment
Sales to external customers	3,585	3,373	10,907	8,175
Operating income	418	600	1,452	1,173
Assets	9,294		9,294		7,432
Europe Segment
Sales to external customers	3,278	3,287	11,440	9,382
Operating income	118	$ 335	1,034	$ 901
Assets	$ 9,517		$ 9,517		$ 8,605

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Stock Based Compensation (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Share-based compensation expense	$ 455,000	$ 327,000	$ 1,341,000	$ 929,000
Unrecognized compensation cost	$ 4,347,695		$ 4,347,695
Unrecognized compensation cost recognition period			3 years

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Leases (Details Narrative) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2021
Cost of Goods Sold
Lessee Lease Description [Line Items]
Operating lease expense	$ 0.1	$ 0.2
Selling, General and Administrative Expenses
Lessee Lease Description [Line Items]
Operating lease expense	$ 0.3	$ 0.6

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Leases - Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Operating cash flow information:
Operating lease cost	$ 297	$ 284	$ 994	$ 899
Operating lease - cash flow	$ 236	$ 272	796	$ 839
Non-cash activity:
ROU assets obtained in exchange for lease liabilities			$ 1,575
Weighted-average remaining lease term	4 years	4 years	4 years	4 years
Weighted-average discount rate	5.00%	5.00%	5.00%	5.00%

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Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Future Minimum Lease Payments:
2021 (remaining)	$ 270
2022	1,081
2023	961
2024	702
2025	613
Thereafter	140
Total future minimum lease payments	3,767
Less: imputed interest	(337)
Present value of lease liabilities - current	945	$ 873
Present value of lease liabilities - non-current	$ 2,485	$ 1,654

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Paycheck Protection Program Loan (Details Narrative) - USD ($)			9 Months Ended
	Jun. 09, 2021	May 07, 2020	Sep. 30, 2021	Sep. 30, 2020
Paycheck Protection Program Loans [Line Items]
PPP loan forgiveness			$ 3,508,000
PPP Loan
Paycheck Protection Program Loans [Line Items]
Proceeds from PPP Loan		$ 3,508,047		$ 3,508,000
Maturity period		2 years
PPP loan forgiveness	$ 3,508,047

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Other Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Payables And Accruals [Abstract]
Customer Rebates	$ 6,321	$ 6,068
Accrued Compensation	1,915	3,072
Dividend Payable	463	435
Other	2,516	1,885
Total:	$ 11,215	$ 11,460