What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-30 compared with 2021-03-31 · 79 added, 194 removed, 510 unchanged (35% of the section changed)

10 unchanged sentences

Interest expense, net

PPP loan forgiveness

Other expense

Total other expense, net

Total other income (expense), net

Income before income tax expense

8 unchanged sentences

Change in net prior service credit and actuarial gains, net of income

Total other comprehensive income (loss)

Total other comprehensive (loss) income

Comprehensive income

8 unchanged sentences

Property, plant and equipment:

Buildings and building improvements

Machinery and equipment

15 unchanged sentences

Deferred income taxes

Other non-current liabilities

Total liabilities

1 unchanged sentence

Common stock, par value $ 2.50 :

authorized 8,000,000 shares;

4,840,571 shares in 2020 and 4,838,071 in 2019, including treasury stock

- 5,065,518 shares issued and 3,520,646 shares outstanding in 2021;

4,840,571 shares issued and 3,338,913 shares outstanding in 2020,

Treasury stock, at cost, 1,544,872 in 2021 and 1,501,658 shares in 2020

11 unchanged sentences

Other comprehensive Income

Adoption of ASU 2018-02

Stock compensation expense

Distribution to shareholders

Issuance of common stock

Cash settlement of stock options

Purchase of treasury stock

Balances, December 31, 2020

Other comprehensive income

Other comprehensive loss

Stock compensation expense

15 unchanged sentences

Pension settlement

PPP Loan Forgiveness

Changes in operating assets and liabilities

11 unchanged sentences

Financing activities:

Net borrowings (repayments) of long-term debt

Net (repayments) borrowings of long-term debt

Proceeds from PPP Loan

Repayments on mortgage

Borrowing on mortgage

Distributions to stockholders

2 unchanged sentences

Issuance of common stock

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Effect of exchange rate changes

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

21 unchanged sentences

Foreign currency transaction gains and losses are recognized in operating results.

Included in other expense were foreign currency transaction gains of $ 96,372 in 2020 and foreign currency transaction losses of $ 38,988 in 2019 .

Included in other expense were foreign currency transaction losses of $ 239,753 in 2021 and foreign currency transaction gains of $ 96,372 in 2020 .

Cash Equivalents – Investments with an original maturity of three months or less, as well as time deposits and certificates of deposit that are readily redeemable at the date of purchase, are considered cash equivalents.

36 unchanged sentences

Refer to Note 9 – Revenue from Contracts with Customers, in the notes to consolidated financial statements in this report for a more detailed discussion.

Research and Development – Research and development costs ($ 251,000 in 2020 and $ 596,000 in 2019) are included in selling, general and administrative expenses and expensed as incurred.

Shipping Costs – The costs of shipping product to our customers ($ 10,071,710 in 2021 and $ 7,486,600 in 2020) are included in selling, general and administrative expenses.

The increase in shipping costs is primarily related to higher sales volume, increased shipping rates and incremental expedited costs related the installation of the new warehouse management system in our Rocky Mount distribution center.

Advertising Costs – The Company expenses the production costs of advertising the first time that the related advertising takes place.

3 unchanged sentences

Allowances for credit losses are provided and have been within management's expectations.

The Company had two customers in 2020 and one customer in 2019 that individually exceeded 10% of consolidated net sales.

Net sales to these customers were approximately 18 % and 13 % of consolidated net sales in 2020 and 17 % in 2019.

The Company had two customers in 2021 and 2020, respectively, that individually exceeded 10% of consolidated net sales.

Net sales to these customers were approximately 17 % and 11 % of consolidated net sales in 2021 and 18 % and 12 % in 2020.

Recently Issued and Adopted Accounting Standards

4 unchanged sentences

ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020.

The Company does not expect the adoption of ASU 2019-12 to have a material effect on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework - Changes to the Disclosures Requirements for Defined Benefit Plans Income Statement - Reporting Comprehensive Income (Topic 220) .

This ASU removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant.

ASU 2018-14 is effective for fiscal years ending after December 15, 2020.

The Company does not expect the adoption of ASU 2018-14 to have a material impact on its consolidated financial statements.

In June 2018, the FASB issued ASU No.

2018-07, Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting .

ASU 2018-07 aligns the accounting for share-based payment awards issued to employees and non-employees.

ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period.

The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements.

In February 2018, the FASB issued ASU No.

2018-02, Income Statement — Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

2018-02 provides companies with an option to reclassify stranded tax effects within accumulated other comprehensive income (“AOCI”) to retained earnings in each period in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

2018-02 also requires disclosure of a description of the accounting policy for releasing income tax effects from AOCI and whether an election was made to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act.

2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

Companies can adopt the provisions of ASU No.

2018-02 in either the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S.

federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.

This ASU was adopted effective January 1, 2019 and result ed in a reclassification between retained earnings and accumulated other comprehensive loss .

The impact from this ASU increase d retained earnings by approximately $0.1 million, with an offsetting increase to accumulated other comprehensive loss for the same amount.

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 did not have an impact to the financial statements of the Company.

The adoption of ASU 2019-12 did not have a material effect on the Company’s consolidated financial statements.

Inventories consisted of:

28 unchanged sentences

Customer Rebates

Pension Liability

Accrued Compensation

1 unchanged sentence

Income Taxes Payable

Pension and Profit Sharing

United States employees, hired prior to July 1, 1993, are covered by a funded, defined benefit pension plan.

The benefits of this pension plan are based on years of service and the average compensation of the highest three consecutive years during the last ten years of employment.

In December 1995, the Company's Board of Directors approved an amendment to the United States pension plan that terminated all future benefit accruals as of February 1, 1996, without terminating the pension plan.

In 2020, the Company entered into agreements with an insurance company to transfer future benefit obligations and annuity administration for retirees (or their beneficiaries) in the Company’s defined benefit pension plan.

As a result of this agreement, the Company recorded pension settlement charges of $ 793,524 .

The Company’s funding policy with respect to its qualified plan was to contribute at least the minimum amount required by applicable laws and regulations.

In 2020, the Company contributed $ 222,857 to the plan.

The plan asset weighted average allocation at December 31, 2019, by asset category, were as follows:

Asset Category:

Equity Securities

Fixed Income Securities

Other Securities / Investments

The Company’s investment policy for the pension plan is to minimize risk by balancing investments between equity securities and fixed income securities.

Plan funds are invested in long-term obligations with a history of moderate to low risk.

The pension plan asset information included below is presented at fair value.

ASC 820 establishes a framework for measuring fair value and requires disclosures about assets and liabilities measured at fair value.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 – Inputs to the valuation methodology based on unadjusted quoted market prices in active markets that are accessible at the measurement date.

Level 2 – Inputs to the valuation methodology that include quoted market prices that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following tables present the pension plan assets by level within the fair value hierarchy as of December 31, 2019:

Money Market Fund

Equity Common and Collected Funds

Fixed Income Common and Collected Funds

Other disclosures related to the pension plan follow:

Assumptions used to determine benefit obligation:

Discount rate

Changes in benefit obligation:

Benefit obligation at beginning of year

Interest cost

Actuarial loss

Benefits and plan expenses paid

Curtailments, settlements and special termination benefits

Benefit obligation at end of year:

Changes in plan assets:

Fair value of plan assets at beginning of year

Actual return on plan assets

Employer contribution

Benefits and plan expenses paid

Fair value of plan assets at end of year

Funded status:

Amounts recognized in accumulated other comprehensive income:

Net actuarial loss

Prior service cost

Accrued benefits costs are included in other accrued liabilities (non-current).

Assumptions used to determine net periodic benefit cost:

Discount rate

Expected return on plan assets

Components of net benefit expense:

Interest cost

Expected return on plan assets

Settlement cost

Amortization of prior service costs

Amortization of actuarial loss

Net periodic benefit cost:

The Company employed a building block approach in determining the long-term rate of return for plan assets.

Historical markets are studied and long-term historical relationships between equity securities and fixed income securities are preserved consistent with the widely-accepted capital market principle that assets with higher volatility generate higher returns over the long run.

Our expected 6 % long-term rate of return on plan assets is determined based on long-term historical performance of plan assets, current asset allocation and projected long-term rates of return.

The following table discloses the change recorded in other comprehensive income related to benefit costs:

Balance at beginning of the year

Change in net loss

Amortization of actuarial loss

Amortization of prior service cost

Change recognized in other comprehensive income

Total recognized in other comprehensive income

The Company also has a qualified, 401k plan covering substantially all of its United States employees.

Profit Sharing

The Company has a qualified, 401k plan covering substantially all of its United States employees.

Annual Company contributions to this plan are determined by the Company’s Compensation Committee.

1 unchanged sentence

Total contribution expense under this 401k plan was $ 419,298 in 2021 and $ 369,890 in 2020.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted, which included provisions, which among others, provide temporary relief for those retirement plan participants affected by the coronavirus disease (COVID-19).

Participants who met certain criteria could take a penalty-free hardship withdrawal, borrow from their accounts at higher limits and suspend making payments on their participant loans until 2021.

During the period between March 27, 2020 and September 22, 2020, participants impacted by COVID-19 (as defined in the Plan document) could borrow from their account up to the lesser of $ 100,000 or the vested account balance and could suspend loan repayments due during that period until January 2021.

The CARES Act also removed the 10 % early withdrawal penalty for a coronavirus-related distribution up to $ 100,000 made during 2020.

Participants who took a coronavirus-related distribution could spread the income over a three-year period for income tax purposes or avoid

income taxes if the distribution is repaid with the three-year period following the distribution.

The voluntary adoption of this provision by the Plan was effective March 27, 2020.

As of December 31, 2020, the Plan has not been formally amended, as a formal amendment is not required until the plan year ended December 31, 2022.

The Plan intends to formally adopt the amendment upon a future restatement of the Plan, prior to this date.

The amounts of income tax expense (benefit) reflected in operations is as follows:

11 unchanged sentences

Foreign tax rate difference

Change in deferred income tax valuation allowance

Provision for income taxes:

15 unchanged sentences

Long-Term 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 % .

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 related to the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA.

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 .

5 unchanged sentences

As of December 31, 2021, $ 33,037,172 was outstanding and $ 16,962,828 was available for borrowing under the Company’s revolving loan agreement.

The Company’s First Aid Only manufacturing and distribution center in Vancouver, WA 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 .

The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, 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.

Commencing on January 1, 2022, payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031 .

Long-term debt consisted of the following at December 31, 2021:

Mortgage payable - HSBC Bank N.A.

Less debt issuance costs

Less current maturities

Long-term mortgage payable, less current maturities

Minimum annual mortgage payments are due as follows:

7 unchanged sentences

The program does not have an expiration date.

During the twelve months ended December 31, 2020, the Company repurchased 14,420 shares of its Common Stock.

As of December 31, 2020, a total of 203,579 shares may be purchased in the future under the repurchase programs announced in 2010 and 2019.

On May 7, 2020, the Company received a loan (the “PPP Loan”) from HSBC Bank, N.A.

in the amount of $ 3,508,047 under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act.

Subject to potential forgiveness, as described below, the PPP Loan matures in two years on May 8, 2022 , bears interest at a rate of 1.00 % per year and is evidenced by a promissory note dated May 7, 2020 (the “Note”).

Monthly payments of principal and interest are deferred until after any application for forgiveness submitted by the Company has been acted upon, as described below.

The PPP Loan is unsecured and federally guaranteed.

The Note contains customary events of default relating to, among other things, failure to make payments of principal and interest and breaches of representations and warranties.

The Company may prepay the PPP Loan at any time prior to maturity with no penalty.

All or a portion of the PPP Loan may be 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 eligible purposes, including the payment of payroll, benefits, rent, mortgage interest and utilities, during the 24 week period beginning on the date of funding of the loan (the “covered period”).

Not more than 40 % of the amount forgiven may be for non-payroll costs.

Consistent with the requirements of the PPP for loan forgiveness, the Company used the loan proceeds solely for payment of payroll and otherwise in a manner which it believes satisfy the requirements for loan forgiveness.

In August 2020, the Company submitted an application for forgiveness of the entire amount of the PPP loan to HSBC Bank, N.A.

(the Lender).

The lender approved the forgiveness application and, on August 26, 2020, submitted the Company’s application to the SBA for its approval.

The SBA subsequently asked the Company to provide certain additional information and documentation in connection with it review of the Company’s forgiveness application and the Company has done so.

The application is presently pending.

No assurance can be given that the Company’s application for loan forgiveness will be approved by the SBA, in whole or in part.

The SBA reserves the right to audit any PPP loan, regardless of size.

These audits may occur after forgiveness has been granted.

Under the CARES Act, all borrowers are required to maintain their loan documentation for six years after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request

During the twelve months ended December 31, 2021, the Company repurchased 43,214 shares of its Common Stock, 3,579 shares under the repurchase program announced in 2010 and 39,635 shares under the repurchase plan announced in 2019.

As of December 31, 2021, a total of 160,365 shares may be purchased in the future under the repurchase program announced in 2019.

On May 7, 2020, the Company received a two-year loan (the “PPP Loan”) from HSBC Bank, 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 for the year ending December 31, 2021.

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.

2 unchanged sentences

The Company recognizes revenue from the sales of a broad line of products that are grouped into two main categories:

(i) cutting, sharpening and measuring;

and (ii) first aid and safety.

The cutting and sharpening category includes scissors, knives, paper trimmers, pencil sharpeners and other sharpening tools.

(i) first aid and safety;

and (ii) cutting, sharpening and measuring.

The first aid and safety category includes first aid kits and refills, over-the-counter medications and a variety of safety products.

The cutting and sharpening category includes scissors, knives, paper trimmers, pencil sharpeners and other sharpening tools.

Revenue recognition is evaluated through the following five steps:

35 unchanged sentences

United States

Cutting, Sharpening and Measuring

First Aid and Safety

Cutting, Sharpening and Measuring

Total Net Sales

2 unchanged sentences

United States

Cutting, Sharpening and Measuring

First Aid and Safety

Cutting, Sharpening and Measuring

Total Net Sales

36 unchanged sentences

Interest expense, net

Other expense

Other (income) expense

Consolidated income before taxes

8 unchanged sentences

The Company also has two plans under which the Company no longer grants options but under which certain options remain outstanding:

the 2002 Employee stock Option Plan and the 2005 Non-Salaried Director Stock Option Plan (the “2005 Director Plan”).

the 2005 Non-Salaried Director Stock Option Plan (the “2005 Director Plan”).

The 2012 Employee Plan, which became effective April 23, 2012, provides for the issuance of incentive and nonqualified stock options at an exercise price equal to the fair market value of the Common Stock on the date the option is granted.

4 unchanged sentences

Options outstanding under the Company’s 2002 Employee Stock Option Plan have the same vesting schedule as the 2012 Employee Plan.

On February 22, 2022, the Board of Directors, approved the Acme United 2022 Employee Stock Option Plan (the “2022 Plan”), with the adoption and effectiveness of the 2022 Plan being subject to the approval of the shareholders of the Company at the April 25, 2022 Annual Meeting .

The 2017 Director Plan provides for the issuance of stock options for up to a total of 50,000 shares of the Company's common stock to non-salaried directors.

5 unchanged sentences

As provided in the Director Plan, no options may be granted under the 2017 Director Plan after the tenth anniversary of the adoption of the Plan, i.e., after April 24, 2027.

As of December 31, 2020, there were 25,000 shares available for grant under the 2017 Director Plan.

As of December 31, 2021, there were no shares available for grant under the 2017 Director Plan.

The 2005 Director Plan, as amended, provided for the issuance of stock options for up to a total of 180,000 shares of the Company's common stock to non-salaried directors.

6 unchanged sentences

The Company has amended certain of its stock option plans for both employees and directors to permit options to be exercised on a net basis and receive either cash or shares of the Company’s Common Stock.

Common Stock subject to the option (or portion thereof) that is being exercised multiplied by the excess of (a) the fair market value per share over (b) the exercise price per share of the option (a “net cash settlement”);

Specifically, optionees may, at the time of exercise of an option and subject to the consent of the Company, elect either (i) to receive from the Company cash in an amount equal to the number of shares of Common Stock subject to the option (or portion thereof) that is being exercised multiplied by the excess of (a) the fair market value per share over (b) the exercise price per share of the option (a “net cash settlement”);

or (ii) to make payment of the exercise price of the option by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of such option by the number of shares having an aggregate fair market value equal to the total exercise price of the option (or portion thereof).

In 2021 and 2020, the Company paid a total of approximately $ 342,285 and $ 1,644,118 respectively, to optionees who had elected a net cash settlement of their respective share options.

In 2021, the Company issued 7,726 shares to optionees who had elected a net share settlement.

There were no such elections in 2020.

A summary of changes in options issued under the Company’s stock option plans follows:

55 unchanged sentences

actuarial losses

Balances, January 1, 2019

Balances, December 31, 2019

Change in net prior service credit and actuarial losses, net of tax

Adoption of ASU 2018-02

Translation adjustment

Balances, December 31, 2020

Change in net prior service credit and actuarial losses, net of tax

Translation adjustment

12 unchanged sentences

The Company’s operating lease expense is recognized on a straight-line basis over the lease term.

Operating lease cost was $ 1.1 million for the twelve-months ended December 31, 2020.

Operating lease cost was $ 1.3 million for the twelve-months end ed December 31, 20 2 1 .

For the twelve months ended December 31, 20 2 1 , $ 0.5 million was included in cost of goods sold and $ 0.8 million was included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations .

4 unchanged sentences

Operating lease - cash flow

Non-cash activity:

ROU assets obtained in exchange for lease liabilities

December 31, 2021

6 unchanged sentences

Present value of lease liabilities - non-current

Business Combinations

On December 16, 2020, the Company purchased the assets of Med-Nap LLC., located in Brooksville, Florida for $ 9.3 million.

Med-Nap is a leading manufacturer of alcohol prep pads, alcohol wipes, benzalkonium chloride wipes (BZK), antiseptic wipes, castile soap, and lens cleaning products.

The purchase price was allocated to assets acquired and liabilities assumed as follows (in thousands):

Prepaid expense

Land & buildings

Intangible assets

Accounts payable

Total considerations

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 US segment.

First Aid Central:

On January 7, 2020, the Company purchased the assets of First Aid Central, a Canadian first aid and safety supplier, based in Laval, Canada for approximately $ 2.1 million in cash.

First Aid Central products consist of a broad line of first aid kits, refills, and safety products that are sold to a wide range of industries and end users.

The products meet federal Health Canada and provincial regulatory requirements.

The purchase price was allocated to assets acquired as follows (in thousands):

Accounts receivable

Prepaid Expense

Intangible assets

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 Canada segment.

Net sales for the year ended December 31, 2020 attributable to the sales of First Aid Central products were approximately $ 4.6 million.

Net income for the year ended December 31, 2020 attributable to First Aid Central products was approximately $ 0.3 million.

Assuming First Aid Central assets were acquired on January 1, 2019, unaudited proforma combined net sales for the year ended December 31, 2019 for the Company would have been approximately $ 145.9 million.

Unaudited proforma combined net income for the year ended December 31, 2019 for the Company would have been approximately $ 5.9 million.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Acme United Corporation and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the period ended December 31, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the period ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2020, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 31, 2021, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weakness.

We have audited the accompanying consolidated balance sheets of Acme United Corporation and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 30, 2022 , expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

We have served as the Company’s auditor since 2008;

2 unchanged sentences

March 30, 2022

PCAOB Firm ID # 688

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

1 unchanged sentence

Acme United Corporation

Adverse Opinion on Internal Control over Financial Reporting

Opinion on Internal Control over Financial Reporting

We have audited Acme United Corporation and Subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2021 , based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, because of the effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in “Management's Annual Report on Internal Control over Financial Reporting”:

The Company’s controls related to the existence of inventory at the Rocky Mount, NC warehouse were not effective as the cycle count program used did not demonstrate inventory quantities were sufficiently counted.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the consolidated financial statements for the year ended December 31, 2020, and this report does not affect our report dated March 31, 2021 on those consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2020 and 2019 and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows and the related notes for each of the two years in the period ended December 31, 2020, and our report dated March 31, 2021 expressed an unqualified opinion on those consolidated financial statements.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2021 and 2020 and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows and the related notes for each of the years in the two-year period ended December 31, 2021, of the Company, and our report dated March 30, 2022 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying "Management’s Annual Report on Internal Control over Financial Reporting." Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on Internal Control over Financial Reporting”.

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

12 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

/s/ Marcum llp

New Haven, Connecticut

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data