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).

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~~3,525,002 shares of its $2.50 par value Common Stock outstanding as of ~~November~~August 5, ~~2021.~~2022.

	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
	(unaudited)		(Note 1)		(unaudited)		(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	5,306	$	4,167	$	1,760	$	4,843
Accounts receivable, less allowance of $1,079 in 2021 and $1,152 in 2020		36,088		27,173
Accounts receivable, less allowance of $922 in 2022 and $1,007 in 2021						46,991		34,221
Inventories		48,795		50,704		65,039		53,552
Prepaid expenses and other current assets		2,458		1,642		3,647		2,635
Total current assets		92,647		83,686		117,437		95,251
Property, plant and equipment:
Land		1,764		1,770		1,977		1,761
Buildings		12,800		12,899		16,088		13,456
Machinery and equipment		29,532		24,524		30,493		29,760
		44,096		39,193		48,558		44,977
Less: accumulated depreciation		20,914		18,954		22,281		20,950
Net property, plant and equipment		23,182		20,239		26,277		24,027

Operating lease right-of-use asset, net		3,187		2,422		2,787		3,130
Goodwill		4,800		4,800		8,189		4,800
Intangible assets, less accumulated amortization		17,615		18,721		21,625		17,231
Other assets - restricted cash						1,500		-
Total assets	$	141,431	$	129,868	$	177,815	$	144,439

	September 30,			December 31,			June 30,			December 31,
	2021			2020			2022			2021
	(unaudited)			(Note 1)			(unaudited)			(Note 1)
LIABILITIES
Current liabilities:
Accounts payable	$	6,695		$	7,601		$	21,421		$	8,977
Operating lease liability - current portion		945			873			1,080			1,000
Current portion of mortgage payable		267			267			389			389
Other accrued liabilities		11,215			11,460			10,129			9,909
Total current liabilities		19,122			20,201			33,019			20,275
Non-current liabilities:
Long-term debt		40,454			38,767			50,263			33,037
Long-term debt - PPP Loan		-			3,508
Mortgage payable, net of current portion		2,711			2,911			10,897			11,081
Operating lease liability - non-current portion		2,485			1,654			1,944			2,365
Other non-current liabilities		111			110			1,869			599
Total liabilities		64,883			67,151			97,992			67,357

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
5,066,245 shares issued and 3,521,373 shares outstanding in 2022 and
5,065,518 shares issued and 3,520,646 shares outstanding in 2022 and 2021								12,657			12,655
Additional paid-in capital		11,575			7,931			12,598			11,930
Retained earnings		67,998			58,033			72,491			69,873
Treasury stock, at cost - 1,501,658 shares in 2021 and 2020		(14,522	)		(14,522	)
Treasury stock, at cost - 1,544,872 shares in 2022 and 2021								(15,996	)		(15,996	)
Accumulated other comprehensive loss:
Translation adjustment		(1,156	)		(826	)		(1,927	)		(1,380	)
Total stockholders’ equity		76,548			62,717			79,823			77,082
Total liabilities and stockholders’ equity	$	141,431		$	129,868		$	177,815		$	144,439


	Three months ended September 30,						Nine months ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Net sales	$	47,923		$	43,316		$	136,295		$	123,133		$	56,773		$	44,847		$	100,106		$	88,372
Cost of goods sold		30,918			28,360			87,550			78,594			38,225			28,694			66,590			56,632

Gross profit		17,005			14,956			48,745			44,539			18,548			16,153			33,516			31,740

Selling, general and administrative expenses		14,044			12,832			39,028			36,023			14,572			12,364			28,169			24,983

Operating income		2,961			2,124			9,717			8,516			3,976			3,789			5,347			6,757

Non-operating items:
Interest:
Interest expense		(230	)		(173	)		(682	)		(742	)		428			226			737			452
Interest income		2			5			11			20			(5	)		(3	)		(8	)		(9	)
Interest expense, net		(228	)		(168	)		(671	)		(722	)		423			223			729			443
PPP loan forgiveness					-			3,508			-			-			(3,508	)		-			(3,508	)
Other (expense) income, net		(68	)		35			(213	)		(2	)
Total other (expense) income, net		(68	)		35			3,295			(2	)
Other expense (income), net														148			68			147			145
Total other expense (income), net														148			(3,440	)		147			(3,363	)
Income before income tax expense		2,665			1,991			12,341			7,792			3,405			7,006			4,471			9,677
Income tax expense		619			412			1,019			1,737
Income tax expense (benefit)														667			(224	)		903			400
Net income	$	2,046		$	1,579		$	11,322		$	6,055		$	2,738		$	7,230		$	3,568		$	9,277

Basic earnings per share	$	0.58		$	0.47		$	3.28		$	1.81		$	0.78		$	2.16		$	1.01		$	2.72

Diluted earnings per share	$	0.50		$	0.46		$	2.85		$	1.75		$	0.71		$	1.82		$	0.93		$	2.34

Weighted average number of common shares outstanding-denominator used for basic per share computations		3,542			3,340			3,449			3,343			3,521			3,347			3,521			3,410
Weighted average number of dilutive stock options outstanding		516			122			520			111			320			617			323			551
Denominator used for diluted per share computations		4,058			3,462			3,969			3,454			3,841			3,964			3,844			3,961

Dividends declared per share	$	0.13		$	0.12		$	0.39		$	0.36		$	0.14		$	0.13		$	0.27		$	0.26

	Three Months Ended					Nine Months Ended					Three Months Ended					Six Months Ended
	September 30,					September 30,					June 30,					June 30,
	2021			2020		2021			2020		2022			2021		2022			2021
Net income	$	2,046		$	1,579	$	11,322		$	6,055	$	2,738		$	7,230	$	3,568		$	9,277
Other comprehensive (loss) income:
Other comprehensive (loss) income :
Foreign currency translation adjustment		(310	)		270		(330	)		142		(574	)		168		(547	)		(20	)
Comprehensive income	$	1,736		$	1,849	$	10,993		$	6,197	$	2,164		$	7,398	$	3,021		$	9,257

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

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total			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
Balances, March 31, 2021																				3,356,614	$	12,145	$	(14,522	)	$	8,375		$	(1,014	)	$	59,643			64,627
Net income														2,046			2,046																7,230			7,230
Other comprehensive loss											(310	)					(310	)
Other comprehensive income																														168						168
Stock compensation expense									455								455										580									580
Distributions to shareholders														(463	)		(463	)															(458	)		(458	)
Issuance of common stock		30,479		77					291								368			172,594		431					2,085									2,516
Balances September 30, 2021		3,559,687	$	12,653	$	(14,522	)	$	11,575	$	(1,156	)	$	67,998		$	76,548


Cash settlement of stock options																											(211	)								(211	)
Balances June 30, 2021																				3,529,208	$	12,576	$	(14,522	)	$	10,829		$	(846	)	$	66,415		$	74,452

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total
Balances, March 31, 2022		3,520,646	$	12,655	$	(15,996	)	$	12,222	$	(1,353	)	$	70,245		$	77,773
Net income														2,738			2,738
Other comprehensive loss											(574	)					(574	)
Stock compensation expense									368								368
Distributions to shareholders														(492	)		(492	)
Issuance of common stock		727		2					8								10
Balances June 30, 2022		3,521,373	$	12,657	$	(15,996	)	$	12,598	$	(1,927	)	$	72,491		$	79,823

	Outstanding Shares of Common Stock			Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total			Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balances, December 31, 2019		3,350,833		$	12,094	$	(14,235	)	$	8,262		$	(1,988	)	$	51,571		$	55,704
Balances, December 31, 2020																						3,338,913	$	12,101	$	(14,522	)	$	7,931		$	(826	)	$	58,033		$	62,717
Net income																6,055			6,055																9,277			9,277
Other comprehensive income													142						142													(20	)					(20	)
Stock compensation expense										929									929										886									886
Distributions to shareholders																(1,201	)		(1,201	)															(895	)		(895	)
Issuance of common stock		2,500			7					52									59			190,295		475					2,223									2,698
Cash settlement of stock options										(805	)								(805	)									(211	)								(211	)
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
Balances June 30, 2021																						3,529,208	$	12,576	$	(14,522	)	$	10,829		$	(846	)	$	66,415		$	74,452

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total			Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balances, December 31, 2020		3,338,913	$	12,101	$	(14,522	)	$	7,931		$	(826	)	$	58,033		$	62,717
Balances, December 31, 2021																					3,520,646	$	12,655	$	(15,996	)	$	11,930		$	(1,380	)	$	69,873		$	77,082
Net income															11,322			11,322																3,568			3,568
Other comprehensive loss												(330	)					(330	)												(547	)					(547	)
Stock compensation expense									1,341									1,341										768									768
Distributions to shareholders															(1,357	)		(1,357	)															(950	)		(950	)
Issuance of common stock		220,774		552					2,514									3,066			727		2					8									10
Cash settlement of stock options									(211	)								(211	)									(108	)								(108	)
Balances September 30, 2021		3,559,687	$	12,653	$	(14,522	)	$	11,575		$	(1,156	)	$	67,998		$	76,548
Balances June 30, 2022																					3,521,373	$	12,657	$	(15,996	)	$	12,598		$	(1,927	)	$	72,491		$	79,823

	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2021			2020			2022			2021
Cash flows from operating activities:
Net income	$	11,322		$	6,055		$	3,568		$	9,277
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		1,809			1,830			1,339			1,176
Amortization of intangible assets		1,111			991			744			742
Non-cash lease expense		170			57			-			43
Stock compensation expense		1,341			929			768			886
Provision for bad debt		79			910			50			54
PPP loan forgiveness		(3,508	)		-			-			(3,508	)
Amortization of deferred financing costs								8			-
Changes in operating assets and liabilities:
Accounts receivable		(9,060	)		(7,293	)		(12,468	)		(9,072	)
Inventories		1,678			(8,544	)		(11,021	)		2,007
Prepaid expenses and other current assets		(859	)		121
Prepaid expenses and other assets								(991	)		(593	)
Accounts payable		(959	)		2,040			12,651			346
Other accrued liabilities		(145	)		4,645			182			(1,215	)
Total adjustments		(8,343	)		(4,314	)		(8,739	)		(9,134	)
Net cash provided by operating activities		2,979			1,741
Net cash (used in) provided by operating activities								(5,171	)		143

Cash flows from investing activities:
Purchase of property, plant and equipment		(4,792	)		(2,081	)		(2,761	)		(3,351	)
Acquisition of First Aid Central		-			(2,074	)
Acquisition of Safety Made								(9,609	)		-
Net cash used in investing activities		(4,792	)		(4,155	)		(12,370	)		(3,351	)

Cash flows from financing activities:
Net borrowings of long-term debt		1,687			(2,537	)		17,225			782
Proceeds from PPP Loan		-			3,508
Cash settlement of stock options		(211	)		(805	)		(108	)		(211	)
Repayments on mortgage		(200	)		(200	)		(192	)		(133	)
Proceeds from issuance of common stock		3,066			59			10			2,698
Distributions to shareholders		(1,329	)		(1,201	)		(915	)		(871	)
Purchase of treasury shares		-			(287	)
Net cash provided by (used in) financing activities		3,013			(1,463	)
Net cash provided by financing activities								16,020			2,265

Effect of exchange rate changes on cash and cash equivalents		(61	)		86			(62	)		16
Net change in cash and cash equivalents		1,139			(3,791	)		(1,583	)		(927	)

Cash and cash equivalents at beginning of period		4,167			6,822
Cash, cash equivalents and restricted cash at beginning of period								4,843			4,167

Cash and cash equivalents at end of period	$	5,306		$	3,031
Cash, cash equivalents and restricted cash at end of period							$	3,260		$	3,240

Supplemental cash flow information:
Cash paid for income taxes	$	1,070		$	415		$	242		$	952
Cash paid for interest	$	660		$	751		$	661		$	440
Non-cash investing activities
Safety Made acquisition contingent consideration							$	1,270

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~~2021 for such disclosures. The condensed consolidated balance sheet as of December 31, ~~2020~~2021 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~~2021 Annual Report on Form 10-K.

The Company has evaluated events and transactions subsequent to ~~September~~June 30, ~~2021~~2022 and through the date these condensed consolidated financial statements were issued.

~~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.~~

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.

The Company recognizes revenue from the sales of a broad line of products that are grouped into two main categories: (a) first aid and medical; and (b) cutting, sharpening and ~~measuring; and (b) first aid and safety.~~measuring. The cutting, sharpening and measuring category includes scissors, knives, paper trimmers, pencil sharpeners and other sharpening tools. The first aid and ~~safety~~medical category includes first aid kits and refills, over-the-counter medications and a variety of ~~safety~~medical 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.

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.

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.

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.

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.

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

	United States		Canada		Europe		Total		United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,769	$	1,932	$	2,863	$	23,564	$	21,954	$	2,192	$	3,555	$	27,701
First Aid and Safety		22,278		1,653	$	428		24,359
First Aid and Medical										26,951		1,684	$	437		29,072

Total Net Sales	$	41,047	$	3,585	$	3,291	$	47,923	$	48,905	$	3,876	$	3,992	$	56,773

	United States		Canada		Europe		Total		United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	18,656	$	2,199	$	3,013	$	23,868	$	16,162	$	2,091	$	3,677	$	21,930
First Aid and Safety		18,000		1,174		274		19,448
First Aid and Medical										20,678		1,899		340		22,917

Total Net Sales	$	36,656	$	3,373	$	3,287	$	43,316	$	36,840	$	3,990	$	4,017	$	44,847

	U.S.		Canada		Europe		Total		U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,494	$	5,572	$	10,283	$	66,349	$	37,287	$	3,785	$	7,113	$	48,185
First Aid and Safety		63,441		5,336		1,169		69,946
First Aid and Medical										47,359		3,706		856		51,921

Total Net Sales	$	113,935	$	10,908	$	11,452	$	136,295	$	84,646	$	7,491	$	7,969	$	100,106

	U.S.		Canada		Europe		Total		U.S.		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	50,088	$	4,860	$	8,505	$	63,453	$	31,726	$	3,640	$	7,420	$	42,786
First Aid and Safety		55,488		3,315		877		59,680
First Aid and Medical										41,162		3,683		741		45,586

Total Net Sales	$	105,576	$	8,175	$	9,382	$	123,133	$	72,888	$	7,323	$	8,161	$	88,372

Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. and (ii) amounts outstanding under the fixed rate mortgage on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. On May 31, 2022, the Company amended its revolving loan agreement with HSBC Bank, N.A. The amended agreement ~~provides~~increases the amount available for ~~borrowings of up~~borrowing to $65 million from $50 million, at ~~Prime Rate less 1.25%. The credit facility has~~ an interest rate of SOFR plus 1.75%; interest is payable monthly. In addition, the expiration date of the credit facility was extended to May ~~24, 2023.~~31, 2026. The Company must pay a facility fee, payable quarterly, in an amount equal to ~~two tenths~~one eighth of one percent ~~(.20%~~(.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for ~~working capital,~~ growth, share repurchases, 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~~funded debt to ~~net worth ratio and~~EBITDA, a fixed charge coverage ratio and must have annual net income greater than ~~zero,~~$0, measured as of the end of each fiscal year. As of ~~September~~June 30, ~~2021,~~2022, the Company was in compliance with the covenants then in effect under the loan agreement.

As of ~~September~~June 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, the Company had outstanding borrowings of ~~$40,454,000~~$50,263,000 and ~~$38,767,000,~~$33,037,000, 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~~The Company’s manufacturing and distribution ~~center~~facilities in Rocky Mount, NC and 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~~were financed by a ~~variable~~fixed rate mortgage with HSBC Bank, N.A. at ana fixed interest rate of ~~LIBOR plus 2.5%~~3.8%. ~~Commencing~~The Company entered into the agreement on December 1, ~~2017, principal~~2021. Commencing on January 1, 2022, payments of ~~$22,222~~principal and interest are due monthly, with all amounts outstanding due on maturity on ~~October~~December 1, 2031. As of June 30, 2022 and December 31, ~~2024.~~2021, long-term debt related to the mortgage consisted of the following (amounts in ‘000’s):

During the three and six months ended ~~September~~June 30, ~~2021,~~2022, the Company issued a total of ~~30,479~~727 shares of common stock and received aggregate proceeds of ~~approximately $368,000~~$10,000 upon exercise of employee stock options. During the ~~nine~~six months ended ~~September~~June 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, 2021,2022, the Company, at its discretion, paid approximately ~~$211,000~~$108,000 to optionees who had elected (subject to the approval of the Company) a net cash settlement of certain 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.

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 ofover 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 first aid and medical products, cutting and sharpening devices and 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%12% and 8%9% of the Company’s total net sales for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, compared to ~~12%~~10% and ~~11%~~8% respectively, for the comparable ~~period~~periods in ~~2020.~~2021.

The ~~Chief Operating Decision Maker~~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~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

	Three months ended September 30,						Nine months ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
Sales to external customers:	2021			2020			2021			2020			2022		2021			2022		2021
United States	$	41,060		$	36,656		$	113,948		$	105,576		$	48,905	$	36,840		$	84,646	$	72,888
Canada		3,585			3,373			10,907			8,175			3,876		3,990			7,491		7,322
Europe		3,278			3,287			11,440			9,382			3,992		4,017			7,969		8,162
Consolidated	$	47,923		$	43,316		$	136,295		$	123,133		$	56,773	$	44,847		$	100,106	$	88,372

Operating income:
United States	$	2,425		$	1,189		$	7,231		$	6,442		$	3,454	$	2,675		$	4,287	$	4,807
Canada		418			600			1,452			1,173			474		662			830		1,034
Europe		118			335			1,034			901			48		452			230		916
Consolidated	$	2,961		$	2,124		$	9,717		$	8,516		$	3,976	$	3,789		$	5,347	$	6,757

Interest expense, net		(228	)		(168	)		(671	)		(722	)		423		223			729		443
Other (expense) income, net		(68	)		35			3,295			(2	)
Other expense (income) , net														148		(3,440	)		147		(3,363	)
Consolidated income before income taxes	$	2,665		$	1,991		$	12,341		$	7,792		$	3,405	$	7,006		$	4,471	$	9,677

	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
United States	$	122,620	$	113,831	$	157,623	$	125,521
Canada		9,294		7,432		10,494		9,100
Europe		9,517		8,605		9,698		9,818
Consolidated	$	141,431	$	129,868	$	177,815	$	144,439

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~~$368,000 and ~~$1,341,000~~$768,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, compared to approximately ~~$327,000~~$580,000 and ~~$929,000~~$886,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively.

As of ~~September~~June 30, ~~2021,~~2022, there was a total of ~~$4,347,695~~$3,237,101 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.

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. The Company’s contingent liability related to the acquisition of Safety Made is recorded at it’s acquisition date fair value of approximately $1.3 million and is recorded in other non-current liabilities on the condensed consolidated balance sheet. Changes in the fair value of the liability are recorded in earnings. There is 0 change during the three month period ended June 30, 2022.

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 and six months ended ~~September~~June 30, 2022 and 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~~respectively, were included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations.

	Three months ended		Three months ended		Three Months Ended		Three Months Ended
Operating cash flow information:	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021
Operating lease cost	$	297	$	284	$	308	$	336
Operating lease - cash flow	$	236	$	272	$	322	$	294

Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	-	$	-	$	-	$	-

	Nine months ended		Nine months ended		Six Months Ended		Six Months Ended
Operating cash flow information:	September 30, 2021		September 30, 2020		June 30, 2022		June 30, 2021
Operating lease cost	$	994	$	899	$	618	$	672
Operating lease - cash flow	$	796	$	839	$	645	$	588


Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	1,575	$	-	$	211	$	1,575

	September 30, 2021			September 30, 2020			June 30, 2022			June 30, 2021
Weighted-average remaining lease term	4.0 years			4.0 years			3.0 years			4.0 years
Weighted-average discount rate		5	%		5	%		5	%		5	%

Future minimum lease payments under non-cancellable leases as of ~~September~~June 30, ~~2021:~~2022:

2021 (remaining)	$	270
2022		1,081
2022 (remaining)				$	629
2023		961			1,076
2024		702			738
2025		613			649
2026					155
Thereafter		140			-

Total future minimum lease payments	$	3,767		$	3,247
Less: imputed interest		(337	)		(223	)
Present value of lease liabilities - current		945			1,080
Present value of lease liabilities - non-current	$	2,485		$	1,944

On ~~May 7, 2020,~~June 1, 2022, the Company ~~received~~ purchased the assets of Live Safely Products, LLC (d/b/a ~~two-year~~ ~~loan (the “PPP Loan”~~“Safety Made”) for approximately $11 million, including $1.5 million which is contingent upon meeting certain financial targets. Based in Keene, NH, Safety Made is a leading manufacturer of first aid kits for the promotional products industry.

The acquisition was accounted for as a business combination, pursuant to ASC 805 – Business Combinations. All assets acquired in the acquisition are included in the Company’s United States operating segment. Management’s assessment of the valuation of intangible assets is preliminary and finalization of the Company’s purchase price accounting assessment may result in changes to the valuation of the identified intangible assets. Intangible assets include Customer List, Trade Names, Non-Compete Agreements, and Goodwill. The useful lives of the identified intangible assets range from ~~HSBC Bank USA, N.A.,~~5 years to 15 years.

The $1.5 million contingent payment that is being held in escrow is considered restricted cash and is reported in other long-term assets on the ~~lender, in~~consolidated balance sheet.

The Company has not disclosed the amount of ~~$3,508,047 under~~revenue and earnings from the ~~Paycheck Protection Program established by~~sales of Safety Made products since 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 andacquisition on June ~~9, 2021, payment in the amount of $3,508,047 was made by the SBA~~1, 2022 because these amounts are not significant to the ~~lender. The Company recorded the amount forgiven as income in the quarter ended June 30, 2021.~~Company’s financial statements.

	September 30,		December 31,		June 30,		December 31,
	2021		2020		2022		2021
Customer Rebates	$	6,321	$	6,068	$	5,892	$	5,414
Accrued Compensation		1,915		3,072		603		1,586
Dividend Payable		463		435		493		458
Income Tax Payable						1,203		564
Other		2,516		1,885		1,938		1,887
Total:	$	11,215	$	11,460	$	10,129	$	9,909

Restricted cash, which is reported within other long term assets in the condensed consolidated balance sheets consists of the contingent payment held in escrow related to the acquisition of Safety Made.

Intangible assets include Customer List, Tradenames, Non-Compete Agreements and Goodwill. The useful lives of the identified intangible assets range from 5 years to 15 years.

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

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 those risks and uncertainties resulting from the global COVID-19 pandemic, future waves of COVID-19, including through the Delta ~~variant~~and Omicron variants 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 domestic and global supply ~~chain~~chains, and labor ~~force,~~shortages, 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~~additional disruptions in the Company’s supply chains, whether caused by COVID-19, the war in Ukraine, or ~~otherwise;~~otherwise, including trucker shortages, port closures and delays, and delays with container ships themselves; (iv) labor shortages and related costs the Company has and may continue to incur, including costs of acquiring and training new employees and rising wages and benefits; (v) the continuing adverse impact of inflation, including product costs, and transportation costs; (vi) currency fluctuations including, for example, the increasing strength of the dollar against the euro: the Company’s ability to effectively manage its inventory in a rapidly changing business environment, including the additional inventory the Company has acquired in anticipation of supply chain disruptions and uncertainties; (vii) changes in client needs and consumer spending habits; ~~(v)~~(viii) the impact of competition; ~~(vi)~~(ix) the impact of technological changes including, specifically, the growth of online marketing and sales activity; ~~(vii)~~(x) 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)~~(xiii) 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~~2021 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.

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.~~2021.

There have been no material changes to the Company’s critical accounting estimates as previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

As noted above under “Forward-Looking Statements”, in response to the COVID-19 pandemic U.S. federal, state, local, and foreign governments adopted mitigation measures, creating significant uncertainties in the U.S. and global economies, including the shutdown of large portions of, or imposition of restrictions on, the U.S. and global economies. While there has been a general improvement in conditions and reduction of adverse effects from the pandemic, as of the present there continues to be significant uncertainty around the scope, severity, and duration of the pandemic, as well as the breadth and duration of business disruptions related to it and the ~~various problems directly or indirectly caused or exacerbated by COVID-19 continue to present certain significant risks~~overall impact on the U.S., global economies, and ~~uncertainties to the Company and its operations.~~ our operating results in future periods.

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,~~During the six months ended June 30, 2022, the Company ~~has~~ experienced ~~and continues to experience domestic and international disruptions in its~~significant supply chain ~~due to port delays, container shortages, and trucking shortages which have been exacerbated by COVID-19. As~~issues as a result of Omicron outbreaks which surfaced in China. These outbreaks occurred in February 2022 and led to factory closures and slowdowns, mass quarantines in certain Chinese cities, and the complete shutdown of two if its largest ports. While the Company ~~has been acquiring~~had previously purchased and ~~subsequently maintaining additional~~maintained surplus inventory in the United States to minimize the impact of any ~~potential~~ disruption in our supply chain, certain of our largest customers take delivery of large shipments directly at ports in China and we were unable to fulfill certain of these orders in the first quarter of 2022 due to the new COVID outbreak in China and the resulting factory and port shutdowns. However, we were able to fulfil these orders in the second quarter of 2022

The resurgence of the pandemic in China exacerbated the global supply chain issues that we had already been experiencing in recent quarters. As economies have re-opened, global supply chains have struggled to keep up with increasing demand, and the resulting supply chain disruptions were already, in certain cases, affecting our ability to ship products in a timely manner. Specifically, in the first and second quarter of 2022 we experienced significant delays in U.S. ports on both the East Coast and West Coast. These factors have also contributed to increased freight, labor and product costs, which in turn had an adverse effect on our operating margin in the first six months of 2022, and those disruptions and increased costs are likely to persist in the near term and potentially for the foreseeable future.

While we anticipate that the Company and its business partners will continue to experience supply ~~chain. The~~chain disruptions, the Company believes that it has sufficient inventory of its products in the U.S. to ~~meet~~at least partially offset near term supply chain disruptions against 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.

Both domestic and international economies are experiencing significant inflation. In addition, the war in Ukraine is causing a slowdown in the European economy. The impact of these developments together with the continuing impact of the COVID-19 pandemic is highly uncertain and cannot be predicted.

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.

Consolidated net sales for the three months ended ~~September~~June 30, ~~2021~~2022 were ~~$47,923,000~~$56,773,000 compared with ~~$43,316,000~~$44,847,000 in the same period in ~~2020,~~2021, a ~~11%~~27% increase. Consolidated net sales for ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 were ~~$136,295,000~~$100,106,000 compared with ~~$123,133,000~~$88,372,000 in the same period in ~~2020,~~2021, a ~~11%~~13% increase.

Sales in the U.S. for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 increased ~~12%~~33% and ~~increased 8%~~16%, respectively, compared to the same periods in ~~2020.~~2021. The increase in sales for the three months compared to the same period in 2021 was due to a combination of higher sales prices, increased volume and ~~nine~~the carryover of orders from our first quarter of 2022 which were unfilled because of supply chain disruptions. The increase in sales for the six months was primarily ~~due~~attributable to strong sales of first aid products and ~~medical~~Westcott school and office products.

Net sales in Canada for the three and six months ended ~~September~~June 30, ~~2021,~~2022 decreased 3% (constant in local currency) and increased ~~6% and were constant~~2% (4% in local currency), respectively, compared to the same periods last year.

European net sales for the three months ended June 30, 2022 decreased 1% in U.S. dollars but increased 12% 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 2020.2021. Net sales infor the ~~nine~~six months ended ~~September~~June 30, ~~2021, increased 33%~~2022 decreased 2% in U.S. dollars ~~and 23%~~but increased 7% in local currency compared to the ~~first nine months of 2020 primarily due to higher sales of First Aid Central products.~~

~~European~~same period in 2021. The increase in net sales for the ~~third quarter of 2021 were constant in both U.S. dollars~~three 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~~six months ~~ended September 30, 2021, increased 22% in U.S. dollars and 15% in local currency compared to the first nine months of 2020,~~was mainly due to ~~sales growth in the ecommerce channel across all product lines and~~ market share gains in ~~Westcott school and~~the office ~~products.~~channel.

Gross profit for the three months ended ~~September~~June 30, ~~2021~~2022 was ~~$17,005,000 (35.5%~~$18,548,000 (32.7% of net sales) compared to ~~$14,956,000 (34.5%~~$16,153,000 (36.0% of net sales) in the same period in ~~2020.~~2021. Gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$48,745,000 (35.8%~~$33,516,000 (33.5% of net sales) compared to ~~$44,539,000 (36.2%~~$31,740,000 (35.9% of net sales) for the same period in ~~2020.~~2021. The decline in the gross margin as a percentage of sales for the three and six months was primarily due to product cost inflation pressures as well as higher transportation and labor costs. Price increases partially offset cost increases.

Selling, general and administrative ("SG&A") expenses for the three months ended ~~September~~June 30, ~~2021~~2022 were ~~$14,044,000 (29.3%~~$14,572,000 (25.7% of net sales) compared with ~~$12,832,000 (29.6%~~$12,364,000 (27.6% of net sales) in the same period in ~~2020,~~2021, an increase of ~~$1,212,000.~~$2,208,000. SG&A expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 were ~~$39,028,000 (28.6%~~$28,169,000 (28.1% of net sales) compared with ~~$36,023,000 (29.3%~~$24,983,000 (28.3% of net sales) for the same periods of ~~2020,~~2021, an increase of ~~$3,005,000.~~$3,186,000. The increases in SG&A expenses for three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, compared to the same period in ~~2020~~2021 were primarily due to higher personnel related costs ~~higher~~and increased commissions and shipping costs related to higher ~~sales and personnel and other additional costs resulting from the acquisition of Med Nap.~~sales.

Operating income for the three months ended ~~September~~June 30, ~~2021~~2022 was ~~$2,961,000~~$3,976,000 compared with ~~$2,124,000~~$3,789,000 in the same period of ~~2020.~~2021. Operating income for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$9,717,000~~$5,347,000 compared with ~~$8,516,000~~$6,757,000 in the same period of ~~2020.~~

2021. Operating income in the U.S. segment increased by ~~$1,236,000 and $789,000~~$779,000 for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021,~~2022 and decreased by $520,000 for the six months ended June 30, 2022, respectively, compared to the same periods in ~~2020.~~2021.

Operating income in the Canadian segment decreased by ~~$182,000~~$188,000 and ~~increased by $279,000 in U.S. dollars~~$204,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, compared to the same periods in ~~2020.~~2021.

Operating income in the European segment decreased by ~~$217,000~~$404,000 and ~~increased $133,000 in U.S. dollars~~$686,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively, compared to the same period in ~~2020.~~2021.

Interest expense, net for the three months ended ~~September~~June 30, ~~2021~~2022 was ~~$228,000~~$423,000 compared with ~~$168,000~~$223,000 in the same period of ~~2020,~~2021, a ~~$60,000~~$200,000 increase. ~~The increase in interest expense is due to higher average debt outstanding.~~ Interest expense, net for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$671,000~~$729,000 compared with ~~$722,000~~$443,000 for the same period of ~~2020,~~2021, a ~~$51,000 decrease.~~$286,000 increase. The increases in interest expense resulted from a higher average debt outstanding under the Company’s revolving credit facility as well as higher average interest rate on the outstanding debt.

~~Total other (expense),~~Other expense, net was ~~$68,000~~$148,000 in the three months ended ~~September~~June 30, ~~2021~~2022 compared to ~~other income of $35,000~~$68,000 in the same period of ~~2020. Total other income,~~2021. Other expense, net was ~~$3,295,000~~$147,000 in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to other expense of ~~$2,000~~$145,000 in the same period of ~~2020.~~2021. The increase in other ~~income,~~expense, net ~~for~~in the ~~nine~~three and six months ended ~~September~~June 30, ~~2021,~~2022, was primarily due to ~~$3,508,047 of income related to the forgiveness of the PPP Loan.~~ losses from foreign currency transactions.

The effective income tax rate for the three and six months ended June 30, 2022 was 20%. Income tax expense for the ~~nine~~three and six months ended ~~September~~June 30, 2021 included a $0.9 million tax credit for ~~stock-based~~stock based compensation. The Company’s effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, 2021, excluding the tax credit and the income from the PPP loan forgiveness, were ~~23%~~19% and ~~22%, respectively, compared to~~ 21% ~~and 22%, respectively, in the same periods in 2020.~~.

During the first ~~nine~~six months of ~~2021,~~2022, working capital increased approximately ~~$10.0~~$9.5 million compared to December 31, ~~2020.~~2021. Inventory ~~decreased~~increased approximately ~~$2.0~~$11.4 million at ~~September~~June 30, ~~2021~~2022 compared to December 31, ~~2020.~~2021. We increased inventory during that period to anticipate our continued growth and to be positioned to offset the impact of potential supply chain disruptions related to COVID-19. The increase also reflects higher product costs. Inventory turnover, calculated using a twelve-month average inventory balance, was ~~2.4~~2.1 at ~~September~~June 30, ~~2021~~2022 compared to ~~2.4~~2.3 at December 31, ~~2020.~~2021. Receivables increased by approximately ~~$8.9~~$12.8 million at ~~September~~June 30, ~~2021~~2022 compared to December 31, ~~2020.~~2021. The average number of days sales outstanding in accounts receivable was 60 days at each of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Accounts payable and other current liabilities ~~decreased~~increased by approximately ~~$.9~~$12.7 million at ~~September~~June 30, ~~2021~~2022 compared to December 31, ~~2020.~~2021. The increase in accounts payable is primarily related to the increase in inventory.

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,			June 30,			December 31,
	2021				2020			2022			2021
Working capital	$	73,525			$	63,485		$	84,434		$	74,976
Current ratio		4.84				4.14			3.56			4.70
Long term debt to equity ratio		56.4	%			72.0	%		76.6	%		57.2	%

Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. ~~The~~and (ii) amounts outstanding under the fixed rate mortgage related on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. On May 31, 2022, the Company amended its revolving loan agreement ~~provides~~with HSBC Bank, N.A. The amended agreement increases the amount available for ~~borrowings of up~~borrowing to $65 million from $50 million, at ~~Prime Rate less 1.25%. The credit facility has~~ an interest rate of SOFR plus 1.75%; interest is payable monthly. In addition, the expiration date of the credit facility was extended to May ~~24, 2023.~~31, 2026. The Company must pay a facility fee, payable quarterly, in an amount equal to ~~two tenths~~one eight of one percent ~~(.20%~~(.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for ~~working capital,~~ growth, share repurchases, 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~~funded debt to ~~net worth ratio and~~EBITDA, a fixed charge coverage ratio and must have annual net income greater than ~~zero,~~$0, measured as of the end of each fiscal year. At ~~September~~June 30, ~~2021,~~2022, the Company was in compliance with the covenants then in effect under the loan agreement.

During the first ~~nine~~six months of ~~2021,~~2022, total debt outstanding under the Company’s revolving credit facility increased by approximately ~~$1.7~~$17.2 million, compared to total debt thereunder at December 31, ~~2020.~~2021. As of ~~September~~June 30, ~~2021, $40,454,000~~2022, $50,263,000 was outstanding and ~~$9,546,000~~$14,737,000 was available for borrowing under the Company’s credit facility. The increase in debt outstanding was primarily related to the acquisition of Safety Made and the increase in inventory.

~~Also included in long-term debt are amounts outstanding under the variable rate mortgage related on the~~The Company’s manufacturing and distribution ~~facility~~facilities in Rocky Mount, NC and Vancouver, ~~WA.~~WA were financed by a fixed rate mortgage with HSBC Bank, N.A. at a fixed interest rate of 3.8%. The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. At ~~September~~June 30, ~~2021,~~2022, there was approximately ~~$3.0~~$11.4 million outstanding on the mortgage.

~~As described above, commencing late in the first quarter of 2020,~~On June 1, 2022, the Company ~~has encountered challenges as~~ purchased the assets of Live Safely Products, LLC (d/b/a ~~result~~“Safety Made”) for approximately $11 million, including $1.5 million which is contingent upon meeting certain financial targets. Based in Keene, NH, Safety Made is a leading manufacturer of first aid kits for 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 principalpromotional products ~~above customary levels.~~

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). industry.

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.

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~~June 30, ~~2021.~~2022. 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.effective.

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.

~~In response to~~During the ~~material weakness identified above, the Company has implemented~~quarter ended June 30, 2022, there were no changes ~~to its~~in our internal control over financial reporting ~~including:~~that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

● 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.

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.

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.~~2021.

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.

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

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

		Page Number

Part I — FINANCIAL INFORMATION:		3
Item 1:	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	3
	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	5
	Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	6
	Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	7
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1617
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	2021
Item 4:	Controls and Procedures	2021

Part II — OTHER INFORMATION:		22
Item 1:	Legal Proceedings	2122
Item 1A:	Risk Factors	2122
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	2122
Item 3:	Defaults Upon Senior Securities	2122
Item 4:	Mine Safety Disclosures	2122
Item 5:	Other Information	2122
Item 6:	Exhibits	2122
Signatures		2223

	June 30, 2022			December 31, 2021

Mortgage Payable - HSBC Bank N.A.		11,428			11,620
Less debt issuance costs		(142	)		(150	)
		11,286			11,470
Less current maturities		389			389
Long-term mortgage payable less current maturities		10,897			11,081

	June 30		December 31
	2022		2021
Customer List	$	18,370,118	$	16,137,118
Tradenames		9,984,698		7,994,698
Patents		2,271,980		2,271,980
Non-Compete		1,170,111		250,111
License Agreement		379,921		379,921
Subtotal		32,176,828		27,033,828
Less: Accumulated Amortization		10,552,204		9,803,299
Intangible Assets	$	21,624,624	$	17,230,529

Goodwill	$	8,188,829	$	4,799,829
Total:	$	29,813,452	$	22,030,358

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller Reporting Company	☒

Emerging growth company	☐

Assets:
Accounts receivable	$	512
Inventory		944
Prepaid Expense		14
Property, plant and equipment		877
Intangible assets		5,143
Goodwill		3,389
Total assets	$	10,879

Exhibit 10.10(i)		Amendment No.8 to Revolving Loan Agreement with HSBC dated May 31, 2022

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

ACME UNITED CORPORATION

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

Dated: ~~November 9, 2021~~August 8, 2022

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

Dated: ~~November 9, 2021~~August 8, 2022