UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K

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

          For the fiscal year ended December 31, 2008

          OR

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

                         Commission file number 01-07698
                             ACME UNITED CORPORATION
              Exact name of registrant as specified in its charter

             Connecticut                                         06-0236700
   (State or other jurisdiction of                            (I.R.S. Employer
    incorporation or organization)                           Identification No.)

          60 Round Hill Road
        Fairfield, Connecticut                                     06824
(Address of principal executive offices)                         (Zip Code)

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

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

                                                        Name of each exchange on
Title of each class                                         which registered
- -------------------                                     ------------------------
$2.50 par value Common Stock                                   NYSE AMEX

        Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. YES |_| NO |X|

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. YES |_| NO |X|

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 |X| NO |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES |X| NO |_|

                                                                             (1)

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. YES |_| NO |X| Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one). Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_| Smaller Reporting Company |X| The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second fiscal quarter was $39,690,678. Registrant had 3,353,368 shares outstanding as of March 2, 2009 of its $2.50 par value Common Stock. Documents Incorporated By Reference (1) Proxy Statement for the annual meeting scheduled for April 20, 2009 is incorporated into the Company's 2008 Annual Report on Form 10-K, Part III. (2)

Page ---- Part I Item 1. Business 4 Item 1A. Risk Factors 6 Item 1B. Unresolved Staff Comments 8 Item 2. Properties 9 Item 3. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 10 Item 6. Selected Financial Data 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 17 Item 8. Financial Statements and Supplementary Data 18 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 37 Item 9A(T). Controls and Procedures 37 Item 9B. Other Information 38 Part III Item 10. Directors, Executive Officers and Corporate Governance 38 Item 11. Executive Compensation 39 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 39 Item 13. Certain Relationships and Related Transactions, and Director Independence 39 Item 14. Principal Accountant Fees and Services 39 Part IV Item 15. Exhibits and Financial Statement Schedules 40 Schedule II - Valuation and Qualifying Accounts Signatures 43 (3)

PART I ITEM 1. BUSINESS GENERAL Acme United Corporation (together with its subsidiaries, the "Company") was organized as a partnership in l867 and incorporated in l882 under the laws of the State of Connecticut. The Company is a leading worldwide supplier of innovative cutting, measuring and safety products to the school, home, office, hardware and industrial markets. The Company's operations are in the United States, Canada, Europe (located in Germany) and Asia (located in Hong Kong and China). The operations in the United States, Canada and Europe are primarily involved in product development, manufacturing, marketing, sales, administrative and distribution activities. The operations in Asia consist of sourcing, quality control and sales activities. Net sales in 2008 were: United States (including Asia) - $53.5 million, Canada - $8.1 million, and Europe - $7.1 million. The Company has grouped its operations into three reportable segments based on the Company's geographical organization and structure: (1) United States (which includes its Asian operations); (2) Canada and (3) Europe. Refer to Note 10 of the Notes to Consolidated Financial Statements for additional segment information. Business Strategy The Company's business strategy includes the following key elements: o a commitment to technological innovation achieved through consumer insight, creativity and speed to market; o a broad selection of products in both brand and private label; o prompt response and same-day shipping; o superior customer service; and o value pricing. The Company markets and sells under three main brands - Westcott(TM), Clauss(TM) and PhysiciansCare(TM). Principal Products Cutting Principal products within the cutting device category are scissors, shears, guillotine paper trimmers, rotary paper trimmers, rotary cutters, hobby knives and blades, utility knives, manicure products, medical cutting instruments and pencil sharpeners. Products introduced in 2007 and 2008 included Westcott(TM) Ultra Soft Handle anti-microbial scissors, a new family of KleenEarth recycled scissors, proprietary titanium-bonded scissors and trimmers, mechanical-assisted scissors, a new line of Clauss(TM) hot forged scissors and high performance titanium shears, and electric and manual iPoint pencil sharpeners. Other new Clauss(TM) products sold in 2007 and 2008 included True Professional(TM) sewing shears, utility knives, chef shears, hobby knives and craft implements and the titanium-bonded spring-assisted pruner. Also in 2008 the Company began shipping the Clauss(TM) Speedpak utility knife with replaceable cartridges. Measuring Principal products within the measuring instrument category are rulers, math tools and tape measures. Products introduced in 2008 included Westcott(TM) anti-microbial rulers and math kits. Products introduced in 2007 included Westcott(TM) branded erasers, compasses and protractors. Safety Principal products within the safety product category are first aid kits, personal protection products and over-the-counter medication refills. Products introduced in 2008 included PhysiciansCare(TM) Ready Care Kits and Triage First Aid Stations. New PhysiciansCare(TM) products introduced in 2007 included a one-stop relief station featuring pre-packaged two-packs of analgesics, stomach remedies, cough and cold, and allergy/sinus medications. Also introduced were an innovative hand sanitizer and the soft-sided E-Z Care(TM) First Aid Kit. (4)

Product Development Our strong commitment to understanding our consumers and defining products that fulfill their needs through innovation drives our product development strategy, which we believe is and will be a key contributor to our success. The Company incurred research and development costs of $254,685 in 2008 and $236,064 in 2007. Intellectual Property The Company has many patents and trademarks that are important to its business. The Company's success, to some extent, depends on its ability to maintain patent protection for its products, to preserve its proprietary technology and to operate without infringing upon the patents or proprietary rights of others. The Company generally files patent applications in the United States and foreign countries where patent protection for its technology is appropriate and available. The Company also considers its trademarks important to the success of its business. The more significant trademarks include Westcott, Clauss and PhysiciansCare. Product Distribution Independent manufacturer representatives and direct sales are primarily used to sell the Company's line of consumer products to wholesale, contract and retail stationery distributors, office supply super stores, school supply distributors, industrial distributors, wholesale florists, mass market retailers and hardware chains. In 2008 the Company had three customers that individually exceeded 10% of consolidated net sales and two customers that individually exceeded 10% of consolidated net sales in 2007 and 2006. Net sales to these customers amounted to approximately 19%, 15% and 10% in 2008, 17% and 10% in 2007 and 19% and 10%, in 2006. Sales to no other customer exceeded 10% of consolidated net sales in 2008, 2007 and 2006. Competition The Company competes with many companies in each market and geographic area. The major competitor in the cutting category is Fiskars Corporation. The major competitor in the measuring category is Helix International Ltd. The major competitor in the safety category is Johnson and Johnson. Traditionally, the Company's sales are stronger in the second and third quarters of the fiscal year due to the seasonal nature of the back-to-school business. OTHER Compliance with Environmental Laws - The Company believes that it is in compliance with applicable environmental laws. The Company believes that there are no environmental matters that could have a significant financial impact. The Company believes that no major adverse financial impact is expected to result from compliance with current environmental rules and regulations. In December 2008, the Company sold property it owned in Bridgeport, CT. Under the terms of the sales agreement, the Company is responsible for the environmental remediation on the property in accordance with the Connecticut Transfer Act. Please refer to Note 17 of the Notes to Consolidated Financial Statements for additional information regarding the sale of the property. Employment - As of December 31, 2008, the Company employed 137 people, all of whom are full time and none of whom are covered by union contracts. Employee relations are considered good and no foreseeable problems with the work force are evident. AVAILABLE INFORMATION The Company files its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC electronically. The public may read or copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. (5)

You may obtain a free copy of the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the Company's website at http://www.acmeunited.com or by contacting the Investor Relations Department at the Company's corporate offices by calling (203) 254-6060. Such reports and other information are made available as soon as reasonably practicable after such material is filed with or furnished to the SEC. ITEM 1A. RISK FACTORS THE COMPANY IS SUBJECT TO A NUMBER OF SIGNIFICANT RISKS THAT MIGHT CAUSE THE COMPANY'S ACTUAL RESULTS TO VARY MATERIALLY FROM ITS FORECASTS, TARGETS OR PROJECTIONS, INCLUDING: o achieving planned revenue and profit growth in each of the Company's business segments; o changes in customer requirements and in the volume of sales to principal customers; o the timing of orders and shipments; o emergence of new competitors or consolidation of existing competitors; and o industry demand fluctuations. The Company's expectations for both short- and long-term future net revenues are based on the Company's estimates of future demand. Orders from the Company's principal customers are ultimately based on demand from end-users and end-user demand can be difficult to predict. Low end-user demand would negatively affect orders the Company receives from distributors and other principal customers which could, in turn adversely affect the Company's revenues in any fiscal period. If the Company's estimates of sales are not accurate and the Company experiences unforeseen variability in its revenues and operating results, the Company may be unable to adjust its expense levels accordingly and its profit margins could be adversely affected. A number of the Company's products are sold through distributors and large retailers. No assurances can be given that any or all of such distributors or retailers will continue their relationships with the Company. Distributors and other significant retail customers cannot easily be replaced and the loss of revenues and the Company's inability to reduce expenses to compensate for the loss of revenues could adversely affect the Company's net revenues and profit margins. ADVERSE CONDITIONS IN THE GLOBAL ECONOMY AND DISRUPTION OF FINANCIAL MARKETS COULD NEGATIVELY IMPACT OUR ABILITY TO OBTAIN FINANCING. Financial markets in the United States, Europe and Asia have experienced significant disruption in recent months, including, among other things, reduced consumer spending, fluctuations in foreign currency exchange rates significant volatility in security prices, severely diminished liquidity and credit availability, and declines in asset valuation. While currently these conditions have not impaired our ability to access credit markets and finance our operations, there can be no assurance that there will not be a further deterioration in financial markets in major economies. THE CURRENT GLOBAL ECONOMIC CRISIS COULD NEGATIVELY IMPACT OUR BUSINESS. The current global economic crisis could adversely affect our customers and our suppliers and businesses such as ours. In addition, they could have a variety of negative effects on the Company such as reduction in revenues, increased costs, lower gross margin percentages, increased allowances for doubtful accounts and/or write-offs of accounts receivable and could otherwise have material adverse effects on our business, results of operations, financial condition and cash flows. LOSS OF A MAJOR CUSTOMER COULD RESULT IN A DECREASE IN THE COMPANY'S FUTURE SALES AND EARNINGS. In 2008 the Company had three customers that individually exceeded 10% of consolidated net sales and two customers in 2007 and 2006 that individually exceeded 10% of consolidated net sales. Net sales to these customers amounted to approximately 19%, 15% and 10% in 2008, 17% and 10% in 2007 and 19% and 10%, in 2006. The Company anticipates that a limited number of customers may account for a substantial portion of its total net revenues for the foreseeable future. The loss of a major customer or a disruption in sales to such a customer could result in a decrease of the Company's future sales and earnings. (6)

RELIANCE ON FOREIGN SUPPLIERS COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS. The Company purchases the majority of its products from foreign manufacturing partners and, as a result, its business is exposed to risks due to: o Increases in transportation costs; o New or increased import duties; o Transportation delays; o Work stoppages; o Capacity constraints; o Poor quality; and o Inflation and exchange rate fluctuations that could increase the cost of foreign manufactured goods. THE LOSS OF KEY MANAGEMENT COULD ADVERSELY AFFECT THE COMPANY'S ABILITY TO RUN ITS BUSINESS. The Company's success depends, to a large extent, on the continued service of its executive management team, operating officers and other key personnel. The Company must therefore continue to recruit, retain and motivate management and operating personnel sufficient to maintain its current business and support its projected growth. The company's inability to meet its staffing requirements in the future could adversely affect its results of operations. FAILURE TO PROTECT THE COMPANY'S PROPRIETARY RIGHTS OR THE COSTS OF PROTECTING THESE RIGHTS COULD ADVERSELY AFFECT ITS BUSINESS. The Company's success depends in part on its ability to obtain patents and licenses and to preserve other intellectual property rights covering its products and processes. The Company obtained certain domestic and foreign patents, and intends to continue to seek patents on its inventions when appropriate. The process of seeking patent protection can be time consuming and expensive. There can be no assurance that pending patents related to any of the Company's products will be issued, in which case the Company may not be able to legally prevent others from producing similar and/or compatible competing products. If other companies were to sell similar and/or compatible products, the Company's results of operations could be adversely affected. Furthermore, there can be no assurance that the Company's efforts to protect its intellectual property will be successful. Any infringement of the Company's intellectual property or legal defense of such action could have a material adverse effect on the Company. THE COMPANY MAY NEED TO RAISE ADDITIONAL CAPITAL TO FUND ITS OPERATIONS. The Company's management believes that, under current conditions, the Company's current cash and cash equivalents, cash generated by operations, together with the borrowing availability under its revolving loan agreement with Wachovia Bank, will be sufficient to fund planned operations for the next twelve months. However, if the Company is unable to generate sufficient cash from operations, it may be required to find additional funding sources. If adequate financing is unavailable or is unavailable on acceptable terms, the Company may be unable to maintain, develop or enhance its operations, products and services, take advantage of future opportunities or respond to competitive pressures. THE COMPANY MAY NOT BE ABLE TO MAINTAIN OR TO RAISE PRICES IN RESPONSE TO INFLATION AND INCREASING COSTS. Future market and competitive pressures may prohibit the Company from raising prices to offset increased product costs, freight costs and other inflationary items. The inability to pass these costs through to the Company's customers could have a negative effect on its results of operations. THE COMPANY IS SUBJECT TO INTENSE COMPETITION IN ALL OF THE MARKETS IN WHICH IT COMPETES. The Company's products are sold in highly competitive markets. The Company believes that the principal points of competition in these markets are product innovation, quality, price, merchandising, design and engineering capabilities, product development, timeliness and completeness of delivery, conformity to customer specifications and post-sale support. Competitive conditions may require the Company to match or better competitors' prices to retain business or market shares. The Company believes that its competitive position will depend on continued investment in innovation and product development, manufacturing and sourcing, quality standards, marketing and customer service and support. The Company's success will depend in part on its ability to anticipate and offer products that appeal to the changing needs and preferences of our customers in the various market categories in which it competes. The Company may not have sufficient resources to make the investments that may be necessary to anticipate those changing needs and the Company may not anticipate, identify, develop and market products successfully or otherwise be successful in maintaining its competitive position. There are no significant barriers to entry into the markets for most of the Company's products. (7)

PRODUCT LIABILITY CLAIMS OR REGULATORY ACTIONS COULD ADVERSELY AFFECT THE COMPANY'S FINANCIAL RESULTS AND REPUTATION. Claims for losses or injuries allegedly caused by some of the Company's products arise in the ordinary course of its business. In addition to the risk of substantial monetary judgments, product liability claims or regulatory actions could result in negative publicity that could harm the Company's reputation in the marketplace or the value of its brands. The Company also could be required to recall possible defective products, which could result in adverse publicity and significant expenses. Although the Company maintains product liability insurance coverage, potential product liability claims are subject to a deductible or could be excluded under the terms of the policy. THE COMPANY'S BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH SEASONALITY WHICH COULD ADVERSELY AFFECT ITS CASH FLOW, FINANCIAL CONDITION, OR RESULTS OF OPERATIONS. The Company's business, historically, has experienced higher sales volume in the second and third quarters of the calendar year, when compared to the first and fourth quarters. The Company is a major supplier of products related to the "back-to-school" season, which occurs principally during the months of May, June, July and August. If this typical seasonal increase in sales of certain portions of the Company's product line does not materialize, the Company could experience a material adverse effect on its business, financial condition and results of operations. TO COMPETE SUCCESSFULLY, THE COMPANY MUST DEVELOP AND COMMERCIALIZE A CONTINUING STREAM OF INNOVATIVE NEW PRODUCTS THAT CREATE CONSUMER DEMAND. The Company's long-term success in the current competitive environment depends on its ability to develop and commercialize a continuing stream of innovative new products that create and maintain consumer demand. The Company also faces the risk that its competitors will introduce innovative new products that compete with the Company's products. The Company's strategy includes increased investment in new product development and increased focus on innovation. There are, nevertheless, numerous uncertainties inherent in successfully developing and commercializing innovative new products on a continuing basis, and new product launches may not provide expected growth results. THE COMPANY IS SUBJECT TO ENVIRONMENTAL REGULATION AND ENVIRONMENTAL RISKS. The Company is subject to national, state, provincial and/or local environmental laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, certain materials and waste. These environmental laws and regulations also impose liability for the costs of investigating and cleaning up sites, and certain damages resulting from present and past spills, disposals, or other releases of hazardous substances or materials. Environmental laws and regulations can be complex and may change often. Capital and operating expenses required to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties. In addition, environmental laws and regulations, such as the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, in the United States impose liability on several grounds for the investigation and cleanup of contaminated soil, ground water and buildings and for damages to natural resources on a wide range of properties. For example, contamination at properties formerly owned or operated by the Company, as well as at properties it will own and operate, and properties to which hazardous substances were sent by the Company, may result in liability for the Company under environmental laws and regulations. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future could have a material adverse effect on the Company's financial condition or results of operations. Please refer to Note 17 - Sale of Property for further discussion on the environmental costs related to the sale of property. ITEM 1B. UNRESOLVED STAFF COMMENTS Not Applicable to Smaller Reporting Companies. (8)

ITEM 2. PROPERTIES The Company is headquartered at 60 Round Hill Road, Fairfield, Connecticut in 7,500 square feet of leased space. The Company also leases 1,825 square feet of office space in Bentonville, Arkansas. The Company owns and leases manufacturing and warehousing facilities in the United States totaling 205,000 square feet, and leases 44,000 square feet of warehousing space in Canada. The Company also leases approximately 2,000 square feet of office space in Canada. Distribution for Europe is presently being conducted at a 35,000 square foot facility owned by the Company in Solingen, Germany. The Company also leases 2,100 square feet of office space in Hong Kong, and 1,500 square feet of office space in Guangzhou, China. Management believes that the Company's facilities, whether leased or owned, are adequate to meet its current needs and should continue to be adequate for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS The Company is involved, from time to time, in disputes and other litigation in the ordinary course of business and may encounter other contingencies, which may include environmental and other matters. The Company presently believes that none of these matters, individually or in the aggregate, would be likely to have a material adverse impact on its financial position, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the security holders of the Company through the solicitation of proxies or otherwise during the fourth quarter of the year ended December 31, 2008. (9)

PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. The Company's Common Stock is traded on the NYSE AMEX under the symbol "ACU". The following table sets forth the high and low sale prices on the NYSE AMEX for the Common Stock for the periods indicated: Dividends Year Ended December 31, 2008 High Low Declared - ------------------------------------ -------------- -------------- ------------- Fourth Quarter $12.30 $ 5.33 $ .05 - ------------------------------------ -------------- -------------- ------------- Third Quarter 14.10 12.10 .05 - ------------------------------------ -------------- -------------- ------------- Second Quarter 14.87 12.92 .04 - ------------------------------------ -------------- -------------- ------------- First Quarter 14.40 12.60 .04 - ------------------------------------ -------------- -------------- ------------- - ------------------------------------ -------------- -------------- ------------- Year Ended December 31, 2007 - ------------------------------------ -------------- -------------- ------------- Fourth Quarter $16.84 $13.85 $ .04 - ------------------------------------ -------------- -------------- ------------- Third Quarter 15.20 13.50 .04 - ------------------------------------ -------------- -------------- ------------- Second Quarter 15.18 13.85 .04 - ------------------------------------ -------------- -------------- ------------- First Quarter 15.69 13.30 .04 - ------------------------------------ -------------- -------------- ------------- As of February 22, 2009 there were approximately 1,218 holders of record of the Company's Common Stock. PERFORMANCE GRAPH The graph compares the yearly cumulative total shareholder return on the Company's Common Stock with the yearly cumulative total return of the following for the period 2003 to 2008: (a) the NYSE AMEX Index and (b) a peer group of companies that, like the Company, (i) are currently listed on the NYSE AMEX, and (ii) have a market capitalization of $30 million to $35 million. The Company does not believe that it can reasonably identify a peer group of companies, on an industry or line-of-business basis, for the purpose of developing a comparative performance index. While the Company is aware that some other publicly-traded companies market products in the Company's line-of-business, none of these other companies provide most or all of the products offered by the Company, and many offer products or services not offered by the Company. Moreover, some of these other companies that engage in the Company's line-of-business do so through divisions or subsidiaries that are not publicly-traded. Furthermore, many of these other companies are substantially more highly capitalized than the Company. For these reasons, any such comparison would not, in the opinion of the Company, provide a meaningful index of comparative performance. The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, the possible future performance of the Company's Common Stock. (10)

(Printer: Insert Graph) COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG ACME UNITED CORP., NYSE AMEX MARKET INDEX AND PEER GROUP INDEX - --------------------------------FISCAL YEAR ENDING------------------------------ 2003 2004 2005 2006 2007 2008 ACME UNITED CORP. 100.00 292.21 261.53 272.18 271.90 136.35 PEER GROUP INDEX 100.00 106.04 97.10 97.81 59.50 16.56 NYSE AMEX MARKET INDEX 100.00 114.51 126.29 141.39 158.74 94.93 ASSUMES $100 INVESTED ON JAN. 1, 2004 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING DEC. 31, 2008 ISSUER PURCHASES OF EQUITY SECURITIES During 2008, the Company announced two stock repurchase programs of 150,000 shares each. These programs do not have expiration dates. During the twelve months ended December 31, 2008, the Company repurchased 235,265 shares of its common stock at an average price of $10.53, of which 89,600 were purchased under a previously announced plan and 145,665 were purchased under the plans announced in 2008. As of December 31, 2008, there were 154,335 shares that may be purchased under these stock repurchase programs. Total Number of Maximum Number of shares Purchased as Shares that may yet Total Number of Average Price Part of Publicly be Purchased Under Period Shares Purchased Paid per Share Announced Program the Program - ----------------------------------------------------------------------------------------------------------- October 60,237 $10.49 60,237 105,889 November 80,304 $ 8.67 80,304 25,585 December 21,250 $ 6.95 21,250 154,335 (11)

ITEM 6. SELECTED FINANCIAL DATA FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA (All figures in thousands except per share data) 2008 2007 2006 2005 2004 - --------------------------------------------------------------------------------------------------------------- Net sales $ 68,719 $ 63,173 $ 56,863 $ 49,947 $ 43,381 - --------------------------------------------------------------------------------------------------------------- Net income $ 4,467 $ 4,022 $ 3,886 $ 2,937 $ 3,238 - --------------------------------------------------------------------------------------------------------------- Total assets $ 45,424 $ 42,222 $ 35,021 $ 28,194 $ 22,967 - --------------------------------------------------------------------------------------------------------------- Long-term debt, less current portion $ 11,749 $ 10,187 $ 10,218 $ 5,577 $ 1,434 - --------------------------------------------------------------------------------------------------------------- Net income Per share (Basic) $ 1.28 $ 1.14 $ 1.11 $ 0.84 $ 0.96 Per share (Diluted) $ 1.24 $ 1.09 $ 1.05 $ 0.78 $ 0.85 Dividends per share $ 0.18 $ 0.16 $ 0.12 $ 0.11 $ 0.06 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING INFORMATION The Company may from time to time make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements of the Company's plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, in addition to others not listed, could cause the Company's actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact on the Company's suppliers and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on the Company, the Company's ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. All forward-looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. CRITICAL ACCOUNTING POLICIES The following discussion and analysis of financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company's significant accounting policies are more fully described in Note 2 of the Notes to Consolidated Financial Statements. Certain accounting estimates are particularly important to the understanding of the Company's financial position and results of operations and require the application of significant judgment by the Company's management or can be materially affected by changes from period to period in economic factors or conditions that are outside the control of management. The Company's management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on historical operations, future business plans and projected financial results, the terms of existing contracts, the observance of trends in the industry, information provided by customers and information available from other outside sources, as appropriate. The following discusses the Company's critical accounting policies and estimates. Estimates. Operating results may be affected by certain accounting estimates. The most sensitive and significant accounting estimates in the financial statements relate to customer rebates, valuation allowances for deferred income tax assets, obsolete and slow moving inventories, potentially uncollectible accounts receivable, and accruals for income taxes. Although the Company's management has used available information to make judgments on the appropriate estimates to account for the above matters, there can be no assurance that future events will not significantly affect the estimated amounts related to these areas where estimates are required. However, historically, actual results have not been materially different than original estimates. (12)

Revenue Recognition. The Company recognizes revenue from sales of its products when ownership transfers to the customers, which occurs either at the time of shipment or upon delivery based upon contractual terms with the customer. When the right of return exists, the Company recognizes revenue in accordance with FASB Statement No. 48, Revenue Recognition When Right of Return Exists. The Company recognizes customer program costs, including rebates, cooperative advertising, slotting fees and other sales related discounts, as a reduction to sales in accordance with EITF 01-09. Allowance for doubtful accounts. The Company provides an allowance for doubtful accounts based upon a review of outstanding accounts receivable, historical collection information and existing economic conditions. The allowance for doubtful accounts represents estimated uncollectible accounts receivables associated with potential customer defaults on contractual obligations, usually due to potential insolvencies. The allowance includes amounts for certain customers where a risk of default has been specifically identified. In addition, the allowance includes a provision for customer defaults based on historical experience. The Company actively monitors its accounts receivable balances and its historical experience of annual accounts receivable write offs has been negligible. Customer Rebates. Customer rebates and incentives are a common practice in the office products industry. We incur customer rebate costs to obtain favorable product placement, to promote sell-through of products and to maintain competitive pricing. Customer rebate costs and incentives, including volume rebates, promotional funds, catalog allowances and slotting fees, are accounted for as a reduction to gross sales. These costs are recorded at the time of sale and are based on individual customer contracts. Management periodically reviews accruals for these rebates and allowances, and adjusts accruals when appropriate. Obsolete and Slow Moving Inventory. Inventories are stated at the lower of cost, determined on the first-in, first-out method, or market. A reserve is established to adjust the cost of inventory to its net realizable value. Inventory reserves are recorded for obsolete or slow moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions and specific identification of items, such as discontinued products. These estimates could vary significantly from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from expectations. Income Taxes. Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets to an amount that is more likely than not to be realized. Intangible Assets and Goodwill. Intangible assets with finite useful lives are recorded at cost upon acquisition and amortized over the term of the related contract, if any, or useful life, as applicable. Intangible assets held by the Company with finite useful lives include patents and trademarks. Patents and trademarks are amortized over their estimated useful life. The weighted average amortization period for intangible assets at December 31, 2008 was 14 years. The Company periodically reviews the values recorded for intangible assets to assess recoverability from future operations whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. During 2008, the net book value of the Company's intangible assets increased to $1,934,219 as of December 31, 2008, from $1,747,708 as of December 31, 2007. Accounting for Stock-Based Compensation. The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123R. Share Based Payments ("SFAS 123R"). The Company uses the Black-Scholes option - pricing model, which involves certain subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them ("expected term"), the estimated volatility of the Company's common stock price over the expected term ("volatility") and the number of options for which vesting requirements will not be completed ("forfeitures"). Changes in the subjective assumptions can materially affect estimates of fair value stock-based compensation, and the related amount recognized on the consolidated statements of operations. Refer to Note 11 "Stock Option Plans" in the Notes to Consolidated Financial Statements in this report for a more detailed discussion of the effects of SFAS 123R on the Company's results of operations and financial condition. (13)

RESULTS OF OPERATIONS 2008 COMPARED WITH 2007 NET SALES Net sales increased by $5,546,007 or 9% (8% in constant currency) in 2008 to $68,719,012 compared to $63,173,005 in 2007. The U.S. segment sales increased by $4,847,000 or 10% in 2008 compared to 2007. Sales in Canada remained relatively constant in U.S. dollars but declined 3% in local currency in 2008 compared to 2007. European sales increased by $733,000 or 12% (4% in local currency) in 2008 compared to 2007. The increase in sales in the U.S. segment is principally the result of market share gains in all channels of distribution and market acceptance of new anti-microbial school scissors, rulers and math kits and iPoint pencil sharpeners. Sales of other new products included a new family of KleenEarth recycled scissors, the UltraSmooth(TM) spring-assisted scissors and the new Clauss(TM) high performance ExtemeEdge(TM) titanium shears. Net sales in Canada were negatively impacted by the soft demand in the overall office products market as a result of a slow down in the economy. The 4% sales increase in Europe was mainly due to higher sales of manicure items to a major European retailer and expansion in the office trade channel. GROSS PROFIT Gross profit was 40% of net sales in 2008 compared to 42% of net sales in 2007. The gross margin decline in 2008 was primarily due to strong growth in a highly competitive school market. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses were $20,778,093 in 2008 compared to $19,741,166 in 2007, an increase of $1,036,927. SG&A expenses were 30% of net sales in 2008 compared to 31% in 2007. Higher sales commission and freight costs associated with higher sales amounted to $200,000 of the increase. Other major contributors to the increase in SG&A expenses were the costs associated with the addition of sales, marketing and logistic personnel. OPERATING INCOME Operating income was $6,878,794 in 2008, compared to $6,751,764 in 2007, an increase of $127,030. Operating income in the U.S. segment declined by approximately $100,000 due to higher personnel related costs. Operating income increased in Canada by $52,000 or 7% due to improved gross margins mainly as the result of strong buying power of the Canadian dollar. The European operating loss decreased by approximately $175,000 mainly due to sales growth and improved gross margins as a result of a better product mix. INTEREST EXPENSE, NET Interest expense for 2008 was $395,548, compared to $655,466 for 2007, a decrease of $259,898. The decrease in interest expense was primarily the result of lower average interest rates under the Company's bank revolving loan agreement. OTHER INCOME, NET Net other income was $192,855 in 2008 compared to $206,357 in 2007. Net other income in 2008 included a gain on the sale of our Bridgeport property of approximately $265,000, offset by losses from foreign currency transactions. INCOME TAX The effective tax rate in 2008 was 33%, compared to 36% in 2007. The decrease in the effective tax rate for the year ended December 31, 2008 was primarily caused by a higher proportion of earnings in foreign tax jurisdictions with a lower tax rate. (14)

RESULTS OF OPERATIONS 2007 COMPARED WITH 2006 NET SALES Net sales increased by $6,310,013 or 11% (10% in constant currency) in 2007 to $63,173,005, compared to $56,862,992 in 2006. The U.S. segment sales increased by $4,419,000 or 10% in 2007 compared to 2006. Sales increased in Canada by $784,000 or 11% (5% in local currency). European sales increased by $1,107,000 or 21% (11% in local currency) in 2007 compared to 2006. The increase in sales in the U.S. segment was principally the result of sales of new products, including the iPoint electric pencil sharpener and market share gains. Additionally, the Company expanded its product line, including rotary paper trimmers with a major office superstore. Sales of other new products included the UltraSmooth(TM) spring-assisted scissors and the new Clauss(TM) high performance ExtemeEdge(TM) titanium shears. The sales increase in Canada was mainly due to sales of the new iPoint electric pencil sharpeners, other new office products and further penetration into the Canadian retail segment. The 21% sales increase in Europe was mainly due to higher sales of manicure items to a major European retailer and expansion in the office trade channel. GROSS PROFIT Gross profit was 42% of net sales in 2007 compared to 43% of net sales in 2006. The gross margin decline in 2007 was due to greater sales of lower margin products, increased raw material and labor costs in China and higher costs as the result of the appreciation of the Chinese currency against the U.S. dollar. Costs also increased due to the reduction of an export tax credit in China. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses were $19,741,166 in 2007 compared with $17,869,753 in 2006, an increase of $1,871,413. SG&A expenses were 31% of net sales in both 2007 and 2006. Higher sales commission and freight costs associated with higher sales amounted to $420,000. Other major contributors to the increase in SG&A expenses were the costs associated with the addition of sales, marketing and logistic personnel and consulting costs associated with the Company's compliance with Section 404 of the Sarbanes Oxley Act. Additionally, in 2006, there was a one-time benefit related to settlement of a lawsuit. OPERATING INCOME Operating income was $6,751,764 in 2007, compared with $6,713,020 in 2006, an increase of $38,744. Operating income in the U.S. segment declined by approximately $500,000 due to higher personnel related costs, increased consulting costs associated with the Company's compliance with Section 404 of the Sarbanes Oxley Act (approximately $200,000) and a one time benefit related to settlement of a lawsuit in 2006 (approximately $200,000). Operating income increased in Canada by $147,000 or 25%. The European operating loss decreased by approximately $400,000 mainly due to sales growth and improved gross margins as a result of lower packaging and airfreight expenses. INTEREST EXPENSE, NET Interest expense for 2007 was $655,466, compared with $615,500 for 2006, a $39,966 increase. The increase in interest expense was primarily the result of higher borrowings under the Company's bank revolving loan agreement. OTHER INCOME, NET Net other income was $206,357 in 2007, compared to $251,557 in 2006. INCOME TAX The effective tax rate in 2007 was 36%, compared to 39% in 2006. The effective tax rate improved mainly due to the lower losses in Europe in 2007, as compared to 2006 for which there is no recorded tax benefit because losses in Europe cannot be utilized to offset earnings in other countries. OFF-BALANCE SHEET TRANSACTIONS The Company did not engage in any off-balance sheet transactions during 2008. (15)

LIQUIDITY AND CAPITAL RESOURCES The recent global economic crisis has had a negative impact on all of the markets into which the Company sells its products. As demand has declined, our customers have been negatively affected, which, has negatively impacted the Company. Management believes that the recent slowdown in customer orders could continue as its customers take action, including adjusting inventory levels to match current demand, to deal with this economic crisis. Management also has taken necessary actions to adjust its cost structure as a response to the slow down in demand and in anticipation of future decline. To date, the Company does not believe that it has excess inventory issues, potentially unrecoverable accounts receivable balances or supply issues with its third party manufacturers as a result of the current economic crisis. During 2008, working capital remained essentially constant compared to 2007 primarily due to a 15% increase in inventory offset by a 17% decrease in accounts receivables. The increase in inventory was in anticipation of product demand and an increase in customer specific inventory. Given the lengthy lead times associated with product availability and customer requirements for complete and on-time delivery, the Company's management decided to increase inventory levels. Inventory turnover, calculated using a twelve month average inventory balance, decreased to 2.0 in 2008 from 2.1 in 2007. Receivables decreased as a result of a sales decline in the fourth quarter of 2008. The average number of days sales outstanding in accounts receivable was 64 days in 2008 and 66 days in 2007. The Company's working capital, current ratio and long-term debt to equity ratio follow: 2008 2007 - --------------------------------------------------------------------------- Working Capital $29,819,680 $29,377,847 Current Ratio 4.38 4.46 Long-Term Debt to Equity Ratio 51.3% 44.2% On June 23, 2008, the Company modified its revolving loan agreement (the "Modified Loan Agreement") with Wachovia Bank. The Modified Loan Agreement amended certain provisions of the original revolving loan agreement. The amendments include (a) an increase in the maximum borrowing amount from $15 million to $20 million; (b) an extension of the maturity date of the loan from June 30, 2009 to June 30, 2010; (c) a decrease in the interest rate to LIBOR plus 7/8% (from LIBOR plus 1.0%) and (d) modification of certain covenant restrictions. Funds borrowed under the Modified Loan Agreement are used for working capital, general operating expenses, share repurchases and certain other purposes. As of December 31, 2008, $11,719,000 was outstanding and $8,281,000 was available for borrowing under the Modified Loan Agreement. Total debt in 2008 increased by $1,563,097, compared to total debt at December 31, 2007. Under the provisions of the Modified Loan Agreement, the Company, among other things, is restricted with respect to outside borrowings, investments and mergers. Further, the Modified Loan Agreement requires the Company to maintain specific amounts of tangible net worth, a specified debt service coverage ratio and a fixed charge coverage ratio. The Company was in compliance with all financial covenants under the Modified Loan Agreement as of and through December 31, 2008, and believes it will be able to continue to comply with these covenants for the remainder of the term of the credit facility. Capital expenditures during 2008 and 2007 were $742,429 and $672,913, respectively, which were, in part, financed with debt. Capital expenditures in 2009 are not expected to differ materially from recent years. The Company believes that cash generated from operating activities, together with funds available under its current loan agreement, are expected, under current conditions, to be sufficient to finance the Company's planned operations for the next twelve months. (16)

RECENTLY ISSUED ACCOUNTING STANDARDS In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements." This statement, which became effective January 1, 2008, defines fair value, establishes a framework for measuring fair value and expands disclosure requirements regarding fair value measurements. The FASB has provided a one-year deferral for the implementation of FASB 157 for other non-financial assets and liabilities. The adoption did not have an effect on the Company's financial statements. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities; Including an Amendment of FASB Statement No. 115" ("SFAS 159"). SFAS 159 gives entities the option to measure eligible items at fair value at specified dates. Unrealized gains and losses on the eligible items for which the fair value option has been elected should be reported in earnings. SFAS 159 is effective for the Company's 2008 fiscal year beginning January 1, 2008. The adoption of SFAS 159 did not have a material effect on the Company's financial statements. In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations ("SFAS 141(R)"), and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements ("SFAS 160"). SFAS 141 (R) requires an acquirer to measure identifiable assets acquired, liabilities assumed and any noncontrolling interest an acquired business at their fair values on the acquisition date, with goodwill being measured and recorded at the excess of the amount paid over the net identifiable assets acquired. SFAS 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS 141 (R) and SFAS 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company expects that the adoption of SFAS 141(R) and SFAS 160 will not have a material effect on its financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable to Smaller Reporting Companies. (17)

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Acme United Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended December 31, ---------------------------------------------- 2008 2007 2006 ---------------------------------------------- Net sales $ 68,719,012 $ 63,173,005 $ 56,862,992 Cost of goods sold 41,062,125 36,680,075 32,280,219 ---------------------------------------------- Gross Profit 27,656,887 26,492,930 24,582,773 Selling, general and administrative expenses 20,778,093 19,741,166 17,869,753 ---------------------------------------------- Operating income 6,878,794 6,751,764 6,713,020 Non operating items: Interest expense, net 395,548 655,446 615,500 Other income, net 192,855 206,357 251,557 ---------------------------------------------- Income before income taxes 6,676,101 6,302,675 6,349,077 Income tax expense 2,209,030 2,280,417 2,463,415 ---------------------------------------------- Net income $ 4,467,071 $ 4,022,258 $ 3,885,662 ============================================== Earnings per share: Basic $ 1.28 $ 1.14 $ 1.11 Diluted $ 1.24 $ 1.09 $ 1.05 See accompanying Notes to Consolidated Financial Statements. (18)

Acme United Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, December 31, 2008 2007 -------------------------------- ASSETS Current assets: Cash and cash equivalents $ 5,224,564 $ 4,987,991 Accounts receivable, less allowance 10,564,097 12,726,647 Inventories 21,769,304 18,934,977 Deferred income taxes 209,172 61,127 Prepaid expenses and other current assets 879,222 1,149,417 -------------------------------- Total current assets 38,646,359 37,860,159 Property, plant and equipment: Land 167,003 174,840 Buildings 2,965,641 2,971,451 Machinery and equipment 7,454,662 8,050,383 -------------------------------- Total property, plant and equipment 10,587,306 11,196,674 Less: accumulated depreciation 8,317,863 8,717,316 -------------------------------- Net property, plant and equipment 2,269,443 2,479,358 Note receivable 2,000,000 - Intangible assets, less accumulated amortization 1,934,219 1,747,708 Deferred income taxes 574,051 135,168 -------------------------------- Total assets $ 45,424,072 $ 42,222,393 ================================ LIABILITIES Current liabilities: Accounts payable $ 3,668,689 $ 4,575,118 Other accrued liabilities 5,157,990 3,907,194 -------------------------------- Total current liabilities 8,826,679 8,482,312 Long-term debt, less current portion 11,749,191 10,186,721 Other 1,960,539 506,617 -------------------------------- Total liabilities 22,536,409 19,175,650 STOCKHOLDERS' EQUITY Common stock, par value $2.50: authorized 8,000,000 shares; issued - 4,293,024 shares in 2008 and 4,267,274 shares in 2007, including treasury stock 10,732,555 10,668,185 Treasury stock, at cost, 949,656 shares in 2008 and 714,391 shares in 2007 (8,406,722) (5,929,999) Additional paid-in capital 3,906,000 3,550,053 Accumulated other comprehensive (loss) income (1,663,361) 285,842 Retained earnings 18,319,191 14,472,662 -------------------------------- Total stockholders' equity 22,887,663 23,046,743 -------------------------------- Total liabilities and stockholders' equity $ 45,424,072 $ 42,222,393 ================================ See accompanying Notes to Consolidated Financial Statements. (19)

Acme United Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Accumulated Outstanding Additional Other Shares of Common Treasury Paid-In Comprehensive Retained Common Stock Stock Stock Capital Income (Loss) Earnings Total - -------------------------------------------------------------------------------------------------------------------------------- Balances, December 31, 2005 3,482,833 $ 10,404,560 $(5,438,776) $ 2,623,887 $ (1,071,236) $ 7,546,559 $ 14,064,994 Net income 3,885,662 3,885,662 Translation adjustment 52,438 52,438 Change in pension liability and the effect of the adoption of SFAS No. 158 125,413 125,413 Income taxes relating to pension liability liability (47,657) (47,657) ------------- Comprehensive income 4,015,856 Stock compensation expense 275,539 275,539 Tax benefit from exercise of employee stock options 82,986 82,986 Distribution to shareholders (416,770) (416,770) Issuance of common stock 31,000 77,500 31,255 108,755 - -------------------------------------------------------------------------------------------------------------------------------- Balances, December 31, 2006 3,513,833 10,482,060 (5,438,776) 3,013,667 (941,042) 11,015,450 18,131,359 Net income 4,022,258 4,022,258 Translation adjustment 1,049,444 1,049,444 Change in pension plan net prior service credit and actuarial losses, net of tax 177,441 177,441 ------------- Comprehensive income 5,249,143 Stock compensation expense 330,859 330,859 Tax benefit from exercise of employee stock options 22,825 22,825 Distribution to shareholders (565,046) (565,046) Issuance of common stock 74,450 186,125 182,701 368,826 Purchase of treasury stock (35,400) (491,223) (491,223) - -------------------------------------------------------------------------------------------------------------------------------- Balances, December 31, 2007 3,552,883 10,668,185 (5,929,999) 3,550,053 285,842 14,472,662 23,046,743 Net income 4,467,071 4,467,071 Translation adjustment (1,309,018) (1,309,018) Change in pension plan net prior service credit and actuarial losses, net of tax benefit of $373,575 (640,185) (640,185) ------------- Comprehensive income 2,517,868 Stock compensation expense 277,577 277,577 Tax benefit from exercise of employee stock options 9,928 9,928 Distribution to shareholders (620,542) (620,542) Issuance of common stock 25,750 64,370 68,443 132,813 Purchase of treasury stock (235,265) (2,476,723) (2,476,723) - -------------------------------------------------------------------------------------------------------------------------------- Balances, December 31, 2008 3,343,368 $ 10,732,555 $(8,406,722) $ 3,906,000 $ (1,663,361) $ 18,319,191 $ 22,887,663 ================================================================================================================================ See accompanying Notes to Consolidated Financial Statements. (20)

Acme United Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOW For the years ended December 31, --------------------------------------------------- 2008 2007 2006 --------------------------------------------------- Operating activities: Net income $ 4,467,071 $ 4,022,258 $ 3,885,662 Adjustments to reconcile net income to net cash provided (used) by operating activities Depreciation 899,142 811,570 800,449 Amortization 108,828 59,678 34,679 Stock compensation expense 277,577 330,859 275,540 Deferred income taxes (213,353) 104,859 442,033 (Gain) / loss on disposal of property, plant and equipment (260,984) - 4,378 Tax benefit on stock options 9,928 22,825 82,986 Changes in operating assets and liabilities Accounts receivable 1,842,262 (1,812,504) (1,546,848) Inventories (3,473,436) (2,645,310) (2,940,755) Prepaid expenses and other current assets 254,127 (268,276) (329,249) Accounts payable (854,450) 2,107,704 146,571 Other accrued liabilities 208,919 (27,805) (1,678,844) --------------------------------------------------- Total adjustments (1,201,439) (1,316,400) (4,709,060) --------------------------------------------------- Net cash provided (used) by operating activities 3,265,632 2,705,858 (823,398) --------------------------------------------------- Investing activities: Purchase of property, plant and equipment (742,429) (672,913) (564,887) Purchase of patents and trademarks (295,339) (840,762) (142,623) Proceeds from sale of property, plant and equipment - - 12,854 --------------------------------------------------- Net cash used by investing activities (1,037,767) (1,513,675) (694,656) --------------------------------------------------- Financing activities: Net (repayments) borrowings of long-term debt 1,568,825 (37,070) 4,634,611 Distributions to shareholders (594,631) (529,329) (428,934) Purchase of treasury stock (2,476,723) (491,223) - Issuance of common stock 132,813 368,826 108,755 --------------------------------------------------- Net cash (used) provided by financing activities (1,369,716) (688,796) 4,314,432 Effect of exchange rate changes (621,574) 646,432 (34,695) --------------------------------------------------- Net change in cash and cash equivalents 236,573 1,149,819 2,761,683 Cash and cash equivalents at beginning of year 4,987,991 3,838,172 1,076,489 --------------------------------------------------- Cash and cash equivalents at end of year $ 5,224,564 $ 4,987,991 $ 3,838,172 =================================================== Supplemental cash flow information Cash paid for income taxes $ 1,700,324 $ 2,819,016 $ 2,180,324 Cash paid for interest $ 495,113 $ 741,698 $ 617,645 See accompanying Notes to Consolidated Financial Statements. (21)

Acme United Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. OPERATIONS The operations of Acme United Corporation (the "Company") consist of three reportable segments. The operations of the Company are structured and evaluated based on geographic location. The three reportable segments operate in the United States (including Asian operations), Canada and Germany. Principal products across all segments are scissors, shears, knives, rulers, pencil sharpeners, first aid kits, and related products which are sold primarily to wholesale, contract and retail stationery distributors, office supply super stores, school supply distributors, drug store retailers, industrial distributors, wholesale florists, mass market retailers and hardware chains. 2. ACCOUNTING POLICIES Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most sensitive and significant accounting estimates relate to customer rebates, valuation allowances for deferred income tax assets, obsolete and slow-moving inventories, potentially uncollectible accounts receivable and accruals for income taxes. Actual results could differ from those estimates. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned by the Company. All significant intercompany accounts and transactions are eliminated in consolidation. Translation of Foreign Currency - For foreign operations, assets and liabilities are translated at rates in effect at the end of the year; revenues and expenses are translated at average rates in effect during the year. Resulting translation adjustments are made directly to accumulated other comprehensive loss. Foreign currency transaction gains and losses are recognized in operating results. Foreign currency transaction gains (losses), which are included in other income, net, were ($101,355) in 2008, $159,877 in 2007 and $149,791, in 2006. Cash Equivalents - Investments with an original maturity of three months or less at the date of purchase are considered cash equivalents. Accounts Receivable - Accounts receivable are shown less an allowance for doubtful accounts of $64,105 in 2008 and $89,856 in 2007. Inventories - Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market. Property, Plant and Equipment and Depreciation - Property, plant and equipment is recorded at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the assets, which range from 3 to 30 years. Intangible Assets and Goodwill- Intangible assets with finite useful lives are recorded at cost upon acquisition, and amortized over the term of the related contract or useful life, as applicable. Intangible assets held by the Company with finite useful lives include patents and trademarks. Patents and trademarks are amortized over their estimated useful lives. The weighted average amortization period for intangible assets at December 31, 2008 is 14 years. The Company periodically reviews the values recorded for intangible assets to assess recoverability from future operations whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. At December 31, 2008 and 2007, the Company assessed the recoverability of its long-lived assets, including goodwill, and believed that there were no events or circumstances present that would that would require a test of recoverability on those assets. As a result, there was no impairment of the carrying amounts of such assets and no reduction in their estimated useful lives. (22)

Deferred Income Taxes - Deferred income taxes are provided for the differences between the financial statement and tax bases of assets and liabilities, and on operating loss carryovers, using tax rates in effect in years in which the differences are expected to reverse. Revenue Recognition - The Company recognizes revenue from sales of its products when ownership transfers to customers, which occurs either at the time of shipment or upon delivery based upon contractual terms with the customer. When the right of return exists, the Company recognizes revenue in accordance with FASB Statement No. 48, Revenue Recognition When Right of Return Exists. The Company recognizes customer program costs, including rebates, cooperative advertising, slotting fees and other sales related discounts, as a reduction to sales in accordance with EITF 01-09. Research and Development - Research and development costs ($254,685 in 2008, $236,064 in 2007 and $306,422 in 2006) are expensed as incurred. Shipping Costs - Shipping costs ($3,073,673 in 2008, $2,974,205 in 2007 and $2,496,981 in 2006) are included in selling, general and administrative expenses. Advertising Costs - The Company expenses the production costs of advertising the first time that the related advertising takes place. Advertising costs ($1,159,462 in 2008, $1,060,523 in 2007 and $1,292,250 in 2006) are included in selling, general and administrative expenses. Concentrations - The Company performs ongoing credit evaluations of its customers and generally does not require collateral for the extension of credit. Allowances for credit losses are provided and have been within management's expectations. In 2008 the Company had three customers with net sales exceeding 10% of consolidated net sales and two customers in 2007 and 2006 with net sales to each that exceeded 10% of consolidated sales in those years. Net sales to these customers amounted to approximately 19%, 15% and 10% in 2008, 17% and 10% in 2007 and 19% and 10%, in 2006. 3. INVENTORIES Inventories consist of: 2008 2007 - ------------------------------------------------------------------------ Finished goods $ 20,824,717 $ 18,069,060 Work in process 21,151 112,727 Materials and supplies 923,436 753,190 - ------------------------------------------------------------------------ $ 21,769,304 $ 18,934,977 ======================================================================== Inventories are stated net of valuation allowances for slow moving and obsolete inventory of $498,887 as of December 31, 2008 and $461,466 as of December 31, 2007. 4. INTANGIBLE ASSETS Intangible assets consist of: 2008 2007 - ------------------------------------------------------------------------ Patents $ 1,577,580 $ 1,334,133 Trademarks 520,115 468,224 Goodwill 88,828 88,828 - ------------------------------------------------------------------------ 2,186,523 1,891,185 Accumulated amortization 252,304 143,477 - ------------------------------------------------------------------------ $ 1,934,219 $ 1,747,708 ======================================================================== Amortization expense for patents and trademarks for the years ended December 31, 2008, 2007 and 2006 were $108,828, $59,678 and $34,679, respectively. The estimated aggregate amortization expense for each of the next five succeeding years, calculated on a similar basis, is as follows: 2009 - $111,106; 2010 - $110,398; 2011 - $108,995; 2012 - $108,410; and 2013 - $96,852. Refer to Note 16 of the accompanying Notes to the Financial Statements for further information regarding the acquisition of intangible assets. (23)

5. OTHER ACCRUED LIABILITIES Other current and long-term accrued liabilities consist of: 2008 2007 - ------------------------------------------------------------------------ Customer rebates $ 2,506,807 $ 2,792,411 Remediation liability 1,724,000 - Pension Liability 1,380,890 287,134 Other 1,506,832 1,334,266 - ------------------------------------------------------------------------ $ 7,118,529 $ 4,413,811 ======================================================================== 6. 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. The Company uses a December 31 measurement date for the pension plan. On December 31, 2006, the Company adopted the recognition and disclosure provisions of FASB Statement of Financial Accounting Standards 158 ("SFAS"). SFAS 158 required the Company to recognize the funded status of its pension plan in the December 31, 2006 statement of financial position, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The plan asset weighted average allocation at December 31, 2008 and December 31, 2007, by asset category, are as follows: Asset Category 2008 2007 - ------------------------------------------------------------------------ Equity Securities 67% 69% Fixed Income Securities 30% 28% Other Securities / Investments 3% 3% - ------------------------------------------------------------------------ Total 100% 100% ======================================================================== The Company's investment policy for the pension plan is to minimize risk by balancing investments between equity securities and fixed income securities, utilizing a weighted average approach of 65% equity securities, 30% fixed income securities, and 5% cash investments. Plan funds are invested in long-term obligations with a history of moderate to low risk. As of each December 31, 2008 and 2007, equity securities in the pension plan included 10,000 shares of the Company's Common Stock, having a market value of $70,500 and $142,501, respectively. (24)

Other disclosures related to the pension plan follow: 2008 2007 --------------------------------- Assumptions used to determine benefit obligation: Discount rate 6.19% 5.75% Changes in benefit obligation: Benefit obligation at beginning of year $ (2,919,276) $ (3,327,730) Interest cost (175,481) (181,599) Service cost (25,000) (30,000) Amendment (6,508) 1,313 Actuarial loss (159,484) 85,078 Benefits and plan expenses paid 643,823 533,662 - ---------------------------------------------------------------------------------------------------- Benefit obligation at end of year (2,641,926) (2,919,276) - ---------------------------------------------------------------------------------------------------- Changes in plan assets: Fair value of plan assets at beginning of year 2,632,142 2,910,484 Actual return on plan assets (727,283) 233,376 Employer Contribution - 21,944 Benefits and plan expenses paid (643,823) (533,662) - ---------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 1,261,036 2,632,142 - ---------------------------------------------------------------------------------------------------- Funded status $ (1,380,890) $ (287,134) ==================================================================================================== Amounts recognized in Accumulated Other Comprehensive Income: Net actuarial loss $ 2,082,006 $ 1,063,979 Prior service cost 66,791 68,895 - ---------------------------------------------------------------------------------------------------- Total $ 2,148,797 $ 1,132,874 ==================================================================================================== Accrued benefits costs are included in other accrued liabilities (non-current). 2008 2007 2006 ==================================================================================================== Assumptions used to determine net periodic benefit cost: Discount rate 6.25% 5.75% 5.50% Expected return on plan assets 8.25% 8.25% 8.00% - ---------------------------------------------------------------------------------------------------- Components of net benefit expense: Interest cost $ 175,481 $ 181,599 $ 187,284 Service cost 25,000 30,000 30,000 Expected return on plan assets (202,570) (225,913) (230,819) Amortization of prior service costs 8,612 8,776 8,776 Amortization of actuarial gain 71,310 74,815 89,363 - ---------------------------------------------------------------------------------------------------- Net periodic benefit cost $ 77,833 $ 69,277 $ 84,604 ==================================================================================================== The Company employs 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. Current market factors, such as inflation and interest rates, are evaluated before long-term capital market assumptions are determined. (25)

The following table discloses the change recorded in other comprehensive income related to benefit costs: 2008 2007 --------------------------------- Balance at beginning of the year $ 1,132,874 $ 1,310,319 Net (gain) / loss 1,089,337 (92,541) Prior service cost / (credit) 6,508 (1,313) Amortization of net loss (71,310) (74,815) Amortization of prior service cost (8,612) (8,776) --------------------------------- Change recognized in other comprehensive income 1,015,923 (177,445) --------------------------------- Total recognized in other comprehensive income $ 2,148,797 $ 1,132,874 ================================= Increase in Accumulated Other Comprehensive Income to reflect the Adoption of SFAS 158 in 2006, net of income tax effect $ 78,984 The following benefits are expected to be paid: 2009 $ 332,188 2010 317,310 2011 301,578 2012 287,469 2013 271,534 Years 2014 - 2018 1,134,658 The Company also has a qualified, non-contributory profit sharing plan covering substantially all of its United States employees. Annual Company contributions to this profit sharing plan are determined by the Company's Compensation Committee. For the years ended December 31, 2008, 2007 and 2006, the Company contributed 50% of employee's contributions, up to the first 6% of each employee's contribution. Total contribution expense under this profit sharing plan was $97,666 in 2008, $96,939 in 2007 and $77,673 in 2006. 7. INCOME TAXES The amounts of income tax expense (benefit) reflected in operations follow: 2008 2007 2006 - --------------------------------------------------------------------------------------- Current: Federal $ 1,403,689 $ 1,450,808 $ 1,341,284 State 216,320 188,847 159,972 Foreign 813,298 543,730 540,103 - --------------------------------------------------------------------------------------- 2,433,307 2,183,385 2,041,359 - --------------------------------------------------------------------------------------- Deferred: Federal (200,126) 93,798 401,738 State (12,911) 11,109 40,892 Foreign (11,240) (7,875) (20,574) - --------------------------------------------------------------------------------------- (224,277) 97,032 422,056 - --------------------------------------------------------------------------------------- $ 2,209,030 $ 2,280,417 $ 2,463,415 ======================================================================================= The current state tax provision is comprised of taxes on income, the minimum capital tax and other franchise taxes related to the jurisdictions in which the Company's facilities are located. (26)

A summary of United States and foreign income before income taxes follows: 2008 2007 2006 - --------------------------------------------------------------------------------------- United States $ 3,373,597 $ 4,593,844 $ 5,150,322 Foreign 3,302,504 1,708,828 1,198,756 - --------------------------------------------------------------------------------------- $ 6,676,101 $ 6,302,675 $ 6,349,077 ======================================================================================= The following schedule reconciles the amounts of income taxes computed at the United States statutory rates to the actual amounts reported in operations. 2008 2007 2006 - --------------------------------------------------------------------------------------- Federal income taxes at 34% statutory rate $ 2,269,874 $ 2,142,908 $ 2,158,687 State and local taxes, net of federal income tax effect 135,059 132,132 128,243 Permanent items 255,332 (2,621) 53,822 Foreign tax rate difference (175,726) (271,403) (217,158) (Recognition) Non-recognition of foreign tax loss carryforwards and credits (275,509) 279,401 339,821 - --------------------------------------------------------------------------------------- Provision for income taxes $ 2,209,030 $ 2,280,417 $ 2,463,415 ======================================================================================= 2008 2007 - ------------------------------------------------------------------------- Deferred income tax liabilities: Plant, property and equipment $ 203,727 $ 133,177 - ------------------------------------------------------------------------- 203,727 133,177 Deferred income tax assets: Asset valuations 209,172 61,127 Operating loss carryforwards and credits 1,617,114 2,034,623 Pension 561,964 158,735 Foreign Tax Credit 242,000 - Other 115,814 109,610 - ------------------------------------------------------------------------- 2,746,064 2,364,095 - ------------------------------------------------------------------------- Net deferred income tax asset before valuation allowance 2,542,337 2,230,918 Valuation allowance (1,759,114) (2,034,623) - ------------------------------------------------------------------------- Net deferred income tax asset $ 783,223 $ 196,295 ========================================================================= (27)

The Company adopted the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109" ("FIN 48"), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement 109, "Accounting for Income Taxes", and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. In 2008, the Company evaluated its tax positions, for years which remain subject to examination by major tax jurisdictions, in accordance with the requirements of FIN 48 and as a result, there was no effect on the Company's financial statements. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company's evaluation of FIN 48 was performed for the tax years ended December 31, 2005, 2006, 2007 and 2008, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2008. In accordance with the Company's accounting policies, any interest and penalties related to uncertain tax positions are recognized as a component of income tax expense. The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently reinvested. Earnings permanently reinvested would become taxable upon the sale or liquidation of a foreign subsidiary or upon the remittance of dividends. Foreign subsidiary earnings of $5,729,313 and $6,025,762 are considered permanently reinvested as of December 31, 2008 and 2007, respectively, and no deferred income taxes have been provided on these foreign earnings. Due to the uncertain nature of the realization of the Company's deferred income tax assets based on past performance and carry forward expiration dates, the Company has recorded a valuation allowance for the amount of deferred income tax assets which are not expected to be realized. This valuation allowance is subject to periodic review, and if the allowance is reduced, the tax benefit will be recorded in future operations as a reduction of the Company's tax expense. At December 31, 2008, the Company has tax operating loss carry forwards aggregating $5,390,380, all of which are applicable to Germany, and can be carried forward indefinitely. 8. DEBT Long term debt consists of: 2008 2007 - ------------------------------------------------------------------------------ Notes payable: North American arrangements $ 11,719,000 $ 10,150,175 Other 34,223 39,955 - ------------------------------------------------------------------------------ 11,753,223 10,190,130 Less current portion 4,032 3,410 - ------------------------------------------------------------------------------ $ 11,749,191 $ 10,186,720 ============================================================================== On June 23, 2008, the Company modified its revolving loan agreement (the "Modified Loan Agreement") with Wachovia Bank. The Modified Loan Agreement amended certain provisions of the original revolving loan agreement. The amendments include (a) an increase in the maximum borrowing amount from $15 million to $20 million; (b) an extension of the maturity date of the loan from June 30, 2009 to June 30, 2010; (c) a decrease in the interest rate to LIBOR plus 7/8% (from LIBOR plus 1.0%) and (d) modification of certain covenant restrictions. Funds borrowed under the Modified Loan Agreement are used for working capital, general operating expenses, share repurchases and certain other purposes. As of December 31, 2008, $11,719,000 was outstanding and $8,281,000 was available for borrowing under the Modified Loan Agreement. (28)

Under the Modified Loan Agreement, the Company is required to maintain specific amounts of tangible net worth, a specified debt service coverage ratio, and a fixed charge coverage ratio. The Company was in compliance with these financial covenants at December 31, 2008. Maturities of long-term debt for the next five years follow: 2009 - $4,032; 2010 - $11,723,193; 2011 - $4,193; 2012 - $4,193; and 2013 - $4,193. 9. COMMITMENTS AND CONTINGENCIES The Company leases certain office, manufacturing and warehouse facilities and various equipment under non-cancelable operating leases. Total rent expense was $643,162 in 2008, $573,190 in 2007 and $527,208 in 2006. Minimum annual rental commitments under non-cancelable leases with remaining terms of one year or more as of December 31, 2008: 2009 - $553,937; 2010 - $435,614; 2011 - $24,800; and 2012 - $4,596;. The Company is involved, from time to time, in disputes and other litigation in the ordinary course of business, including certain environmental and other matters. The Company presently believes that none of these matters, individually or in the aggregate, would be likely to have a material adverse effect on financial position, results of operations, or liquidity of the Company. 10. SEGMENT INFORMATION The Company reports financial information based on the organizational structure used by management for making operating and investment decisions and for assessing performance. The Company's reportable business segments include (1) United States; (2) Canada and (3) Europe. The financial results of the Company's Asian operations have been aggregated with the results of its United States operations to form one reportable segment called the "United States segment". The determination of reportable segments is based on the guidance set forth in FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information. Each reportable segment derives its revenue from the sales of cutting devices, measuring instruments and safety products for school, office, home and industrial use. The Chief Operating Decision Maker evaluates the performance of each operating segment based on segment revenues and operating income. Segment revenues are defined as total revenues, including both external customer revenue and intersegment 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. Intersegment amounts are eliminated to arrive at consolidated financial results. In 2008 the Company had three customers that individually exceeded 10% of consolidated net sales and two customers in 2007 and 2006 that individually exceeded 10% of consolidated net sales. Net sales to these customers amounted to approximately 19%, 15% and 10% in 2008, 17% and 10% in 2007 and 19% and 10%, in 2006. Sales to no other customer exceeded 10% of consolidated net sales in 2008, 2007 and 2006. (29)

FINANCIAL DATA BY SEGMENT: (000's omitted) United States Canada Europe Consolidated - ------------------------------------------------------------------------------------------------- 2008 ---- Sales to unaffiliated customers $ 53,548 $ 8,095 $ 7,076 $ 68,719 Operating income 6,648 787 (556) 6,879 Assets 33,719 5,890 5,815 45,424 Additions to property, plant and equipment 656 49 37 742 Depreciation and amortization 856 65 87 1,008 2007 ---- Sales to unaffiliated customers $ 48,702 $ 8,128 $ 6,343 $ 63,173 Operating income 6,748 735 (731) 6,752 Assets 28,350 7,886 5,986 42,222 Additions to property, plant and equipment 575 31 67 673 Depreciation and amortization 724 59 88 871 2006 ---- Sales to unaffiliated customers $ 44,283 $ 7,344 $ 5,236 $ 56,863 Operating income 7,262 588 (1,137) 6,713 Assets 24,516 6,286 4,219 35,021 Additions to property, plant and equipment 474 28 63 565 Depreciation and amortization 704 51 80 835 11. STOCK OPTION PLANS The Company has two stock option plans: (1) the 2002 Employee Stock Option Plan, as amended (the "Employee Plan") and (2) the 2005 Non-Salaried Director Stock Option Plan (the "Director Plan"). The Employee Plan 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. The terms of the options granted are subject to the provisions of the Employee Plan. As of December 31, 2008, the number of shares available for grant under the Employee Plan was 40,438. The Director Plan provides for the issuance of stock options for up to 50,000 shares of the Company's common stock to non-salaried directors. Under the Director Plan, Directors elected on April 25, 2005 and at subsequent Annual Meetings who have not received any prior grant under this or previous plans receive an initial grant of an option to purchase 5,000 shares of Common Stock (the "Initial Option"). Each year, each elected Director not receiving an Initial Option will receive a 2,500 share option (the "Annual Option"). The Initial Option vests 25% on the date of grant and 25% on the anniversary of the grant date in each of the following 3 years. Each Annual Option becomes fully exercisable one day after the date of grant. The exercise price of all options granted equals the fair market value of the common stock on the date the option is granted and expires ten (10) years from the date of grant. As of December 31, 2008, the number of shares available for grant under the Director Plan was 42,500. (30)

A summary of changes in options issued under the Company's stock option plans follows: 2008 2007 2006 - -------------------------------------------------------------------------------------------- Options outstanding at the beginning of the year 565,750 543,950 471,450 Options granted 80,500 98,250 113,500 Options forfeited (12,000) (2,000) (10,000) Options exercised (25,750) (74,450) (31,000) - -------------------------------------------------------------------------------------------- Options outstanding at the end of the year 608,500 565,750 543,950 ============================================================================================ Options exercisable at the end of the year 439,688 396,125 407,888 ============================================================================================ Common stock available for future grants at the end of the year 82,938 151,438 47,688 ============================================================================================ Weighted average price of options: Granted $ 13.24 $ 14.86 $ 14.42 Forfeited 14.64 15.15 14.24 Exercised 5.19 4.95 3.51 Outstanding 10.38 9.82 8.27 Exercisable 8.91 7.63 6.04 A summary of options outstanding at December 31, 2008 is as follows: Options Outstanding Options Exercisable - ------------------------------------------------------------------------------------ ----------------------------- Weighted- Average Weighted- Remaining Weighted- Average Number Contractual Average Number Exercise Range of Exercise Prices Outstanding Life (Years) Exercise Price Exercisable Price - ------------------------------------------------------------------------------------ ----------------------------- $1.25 to $2.49 40,300 1 $ 2.04 40,300 $ 2.04 $2.50 to $3.65 125,200 3 3.10 125,200 3.10 $3.66 to $5.00 53,750 3 3.99 53,750 3.99 $5.01 to $7.25 8,000 5 5.40 8,000 5.40 $7.26 to $17.02 381,250 8 14.66 212,438 15.02 ---------------------------------------------- ----------------------------- 608,500 439,688 ============= ============= The weighted average remaining contractual life of all outstanding stock options is 6 years. STOCK BASED COMPENSATION Effective January 1, 2006, the Company adopted the provisions of, and accounted for stock-based compensation in accordance with, FASB Statement of Financial Accounting Standards No. 123(R), Share-Based Payments ("SFAS 123R"), which replaced FASB Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123") and superseded APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). Under the fair value recognition provisions of SFAS 123R, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. The Company adopted SFAS 123R using the modified-prospective method, under which prior periods are not restated for comparative purposes. The valuation provisions of SFAS 123R apply to new grants and awards granted prior to, but not vested as of December 31, 2005. Estimated compensation for awards granted prior to, but not vested as of December 31, 2005 will be recognized over the remaining service period using the compensation cost estimated for pro forma disclosures under SFAS 123. (31)

The Company uses the Black-Scholes option pricing model to determine the fair value of employee and non-employee director stock options. The determination of the fair value of stock-based payment awards on the date of grant, using an option-pricing model, is affected by the Company's stock price as well as assumptions regarding a number of complex and subjective variables. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them ("expected term"), the estimated volatility of the Company's common stock price over the expected term ("volatility") and the number of options that will not fully vest in accordance with applicable vesting requirements ("forfeitures"). The Company estimates the expected term of options granted by evaluating various factors, including the vesting period, historical employee information, as well as current and historical stock prices and market conditions. The Company estimates the volatility of its common stock by calculating historical volatility based on the closing stock price on the last day of each of the 60 months leading up to the month the option was granted. The risk-free interest rate that the Company uses in the option valuation model is the interest rate on U.S. Treasury zero-coupon bond issues with remaining terms similar to the expected term of the options granted. Historical information was the basis for calculating the dividend yield. The Company is required to estimate forfeitures at the time of grant and to revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company used a mix of historical data and future assumptions to estimate pre-vesting option forfeitures and to record stock-based compensation expense only for those awards that are expected to vest. All stock-based payment awards are amortized over the requisite service periods of the awards, which are generally the vesting periods. In the third quarter of 2006, the Company modified its vesting schedule for new grants. Grants issued after June 30, 2006 vest 25% one day after the first anniversary of the grant date and 25% one day after each of the next three anniversaries. Options granted prior to July 1, 2006 vest 25% one day after the date of grant, and 25% on the day after the anniversary of the grant date in each of the next three years. The assumptions used to value option grants for the twelve months ended December 31, 2008 and December 31, 2007 are as follows: ---------------------------------- 2008 2007 ---------------------------------- Expected life in years 5 5 Interest rate 2.95 - 3.30% 4.50 - 5.18% Volatility .28-.31 .32 Dividend yield 1.17 - 1.20% 1.08 - 1.10% Total stock-based compensation recognized in the Company's consolidated statement of operations for the years ended December 31, 2008 and 2007 was $277,577 and $330,859, respectively. As of December 31, 2008, there was approximately $483,691 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based payments granted to the Company's employees. As of December 31, 2008, the remaining unamortized expense is expected to be recognized over a weighted average period of 3 years. The weighted average fair value at the date of grant for options granted during 2008, 2007 and 2006 was $3.66, $4.95 and $4.86 per option, respectively. The aggregate intrinsic value of outstanding options was $873,936 at December 31, 2008. The aggregate intrinsic value of exercisable options was $873,936 million at December 31, 2008. (32)

12. EARNINGS PER SHARE The calculation of earnings per share follows: 2008 2007 2006 - ----------------------------------------------------------------------------------------------------------------- Numerator: Net income $ 4,467,071 $ 4,022,258 $ 3,885,662 - ----------------------------------------------------------------------------------------------------------------- Denominator: Denominator for basic earnings per share Weighted average shares outstanding 3,486,370 3,535,687 3,494,833 Effect of dilutive employee stock options 125,503 161,155 217,217 - ----------------------------------------------------------------------------------------------------------------- Denominator for dilutive earnings per share 3,611,873 3,696,842 3,712,050 - ----------------------------------------------------------------------------------------------------------------- Basic earnings per share $ 1.28 $ 1.14 $ 1.11 Dilutive earnings per share $ 1.24 $ 1.09 $ 1.05 For 2008, 2007 and 2006, respectively, 381,250, 284,250 and 190,000 stock options were excluded from diluted earnings per share calculations because they would have been anti-dilutive. 13. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME The components of the accumulated other comprehensive (loss) income follow: Net prior Foreign service Currency credit and Translation actuarial Adjustment losses Total - -------------------------------------------------------------------------------- Balances, December 31, 2006 $ (128,646) $ (812,396) $ (941,042) Change in net prior service credit and actuarial losses, 177,441 177,441 Translation adjustment 1,049,444 1,049,444 - -------------------------------------------------------------------------------- Balances, December 31, 2007 920,798 (634,955) 285,842 Change in net prior service credit and actuarial losses, net of tax benefit of $373,575, (640,185) (640,185) Translation adjustment (1,309,018) (1,309,018) - -------------------------------------------------------------------------------- Balances, December 31, 2008 $ (388,220) $ (1,275,140) $ (1,663,361) ================================================================================ 14. FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value. Accounts receivable and accounts payable: The carrying amounts reported in the balance sheet for accounts receivable and accounts payable approximate fair value. Long-and short-term debt: The carrying amounts of the Company's borrowings under its short-term notes payable and revolving credit arrangements approximate their fair value. The fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. (33)

15. QUARTERLY DATA (UNAUDITED) Quarters (000's omitted, except per share data) 2008 First Second Third Fourth Total - -------------------------------------------------------------------------------------------------------- Net sales $ 14,269 $ 22,708 $ 19,158 $ 12,584 $ 68,719 - -------------------------------------------------------------------------------------------------------- Cost of goods sold 8,283 13,790 11,288 7,701 41,062 - -------------------------------------------------------------------------------------------------------- Net income 753 1,730 1,351 634 4,467 - -------------------------------------------------------------------------------------------------------- Basic earnings per share $ 0.21 $ 0.49 $ 0.38 $ 0.19 $ 1.28 Diluted earnings per share $ 0.21 $ 0.47 $ 0.37 $ 0.18 $ 1.24 Dividends per share $ 0.04 $ 0.04 $ 0.05 $ 0.05 $ 0.18 2007 First Second Third Fourth Total - -------------------------------------------------------------------------------------------------------- Net sales $ 12,241 $ 18,999 $ 17,081 $ 14,852 $ 63,173 - -------------------------------------------------------------------------------------------------------- Cost of goods sold 6,907 11,020 9,700 9,053 36,680 - -------------------------------------------------------------------------------------------------------- Net income 650 1,522 1,305 545 4,022 - -------------------------------------------------------------------------------------------------------- Basic earnings per share $ 0.18 $ 0.43 $ 0.37 $ 0.15 $ 1.14 Diluted earnings per share $ 0.17 $ 0.41 $ 0.35 $ 0.15 $ 1.09 Dividends per share $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.16 Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the four quarterly earnings per share amounts may not necessarily equal the earnings per share for the year. 16. BUSINESS COMBINATION On September 18, 2007, the Company purchased certain assets of the Camillus Cutlery Company ("Camillus Cutlery") for $246,000, consisting primarily of trademarks, brand names and patents. Camillus Cutlery, founded in 1873, is one of the oldest knife companies in the United States. Camillus Cutlery's products include many types of folding knives, as well as those for hunting and fishing. On September 25, 2007, the Company purchased certain assets of Tiger Sharp Technologies Inc. ("Tiger Sharp") for $355,000, consisting primarily of trademarks, brand names and patents. The purchase agreement also included a royalty arrangement whereby the Company will, for a period of three years, pay Tiger Sharp a 5% royalty on the Company's sales of Tiger Sharp patented products and a 1% royalty on the Company's sales of a certain product which is currently in development. Tiger Sharp was founded in 2002 in Dallas, Texas to commercialize its unique replaceable blade technology. The Company has pioneered many extremely sharp replaceable blade folding knives. Proforma operating information for the periods prior to these acquisitions is not provided because of the immateriality of these transactions on a proforma basis. 17. SALE OF PROPERTY In December 2008, the Company sold property it owned in Bridgeport, Connecticut to B&E Juices, Inc. (the "buyer") for $2.5 million. The property consists of approximately four acres of land and 48,000 sq. feet of warehouse space. The property was the site of the original Acme United scissor factory which opened in 1887 and was closed in 1996. Under the terms of the sale agreement, and as required by the Connecticut Transfer Act, the Company will be responsible to remediate any environmental contamination on the property. During 2008, the Company hired an independent environmental consulting firm and incurred costs of approximately $200,000 related to environmental studies to identify the extent of the environmental contamination to the property and develop a remediation plan. As a result of those studies and the estimates prepared by an independent environmental consulting firm, the Company has recorded an undiscounted liability of approximately $1.8 million related to the remediation of the property. The accrual includes estimated costs of required investigation, remedial activities, and post-remediation operating and maintenance. At December 31, 2008, $1.4 million was classified as current and is expected to be paid in 2009. The remaining balance is expected to be paid over the two years following. Based on currently available information, we believe that our accrual for environmental remediation costs is adequate, although our accrual could be adjusted in the future due to new information or changed circumstances. However, we do not expect these items to materially affect our results of operations, financial condition or liquidity. (34)

Also, as part of the sale, the Company has provided the buyer with a mortgage of $2.0 million at six percent interest The mortgage is due in full, one year after remediation and monitoring on the property have been completed. It is estimated that the remediation project will be completed in five years. The Company also recorded legal, transaction and other expenses of approximately $235,000 resulting in a gain on the sale of approximately $265,000. Report of UHY LLP, Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Acme United Corporation We have audited the accompanying consolidated balance sheet of Acme United Corporation and subsidiaries (the "Company") as of December 31, 2008, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the year then ended. Our audit also included the 2008 financial statement schedule listed in the Index at Item 15(a)(2). These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2008, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related 2008 financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ UHY LLP Hartford, Connecticut March 10, 2009 (35)

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Acme United Corporation We have audited the accompanying consolidated balance sheet of Acme United Corporation and subsidiaries as of December 31, 2007, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2007. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Acme United Corporation and subsidiaries at December 31, 2007, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 11 to the consolidated financial statements effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. /s/ Ernst & Young LLP Hartford, Connecticut March 6, 2008 (36)

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with accountants related to accounting and financial disclosures in 2008. Item 9A(T). CONTROLS AND PROCEDURES Evaluation of Internal Controls and Procedures Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. Management's Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. The Company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected in a timely manner. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control-Integrated Framework." Based on management's assessment using the COSO criteria, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2008. This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this Annual Report. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING During the quarter ended December 31, 2008, there were no changes in the Company's internal control over financial reporting that materially affected, or was reasonably likely to materially affect, this control. (37)

Item 9B. OTHER INFORMATION None. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth certain information with respect to the directors and executive officers of the Company. All directors of the Company hold office until the next annual meeting of the shareholders or until their successors have been elected and qualified. Executive officers are elected by the Board of Directors to hold office until their successors are elected and qualified. Name Age Position Held with Company - -------------------------- ----- --------------------------------------------- Walter C. Johnsen 58 Chairman of the Board and Chief Executive Officer Brian S. Olschan 52 President, Chief Operating Officer and Director Paul G. Driscoll 48 Vice President, Chief Financial Officer, Secretary and Treasurer Rex L. Davidson 59 Director Richmond Y. Holden, Jr. 55 Director Susan H. Murphy 57 Director Stevenson E. Ward III 63 Director WALTER C. JOHNSEN has served as Chairman of the Board and Chief Executive Officer of the Company since January 1, 2007; President and Chief Executive Officer of the Company from November 30, 1995 to December 31, 2006. He formerly served as Vice Chairman and a principal of Marshall Products, Inc., a medical supply distributor. BRIAN S. OLSCHAN has served as President and Chief Operating Officer of the Company since January 1, 2007; Executive Vice President and Chief Operating Officer of the Company from January 25, 1999 to December 31, 2006; Senior Vice President - Sales and Marketing of the Company from September 12, 1996 to January 24, 1999; formerly served as Vice President and General Manager of the Cordset and Assembly Business of General Cable Corporation, an electrical wire and cable manufacturer. PAUL G. DRISCOLL has served as Vice President and Chief Financial Officer, Secretary and Treasurer since October 2, 2002. Mr. Driscoll joined Acme as Director International Finance on March 19, 2001. From 1997 to 2001 he was employed by Ernest and Julio Gallo Winery including Director of Finance and Operations in Japan. Prior to Gallo he served in several increasingly responsible positions in Sterling Winthrop Inc. in New York City and Sanofi S.A. in France. REX L. DAVIDSON has served as director since April, 2006. He is currently President and Chief Executive Officer of Goodwill Industries of Greater New York and Northern New Jersey, Inc. and President of Goodwill Industries Housing Corporation since 1982. He was appointed by Mayor Bloomberg to the New York City Workforce Investment Board in 2002. He serves on the Board of the Better Business Bureau Education and Research Foundation and Research Foundation and also serves on the Stony Brook University MBA Advisory Board. . RICHMOND Y. HOLDEN, JR. has served as director since 1998. Since 2007, President of Educators Publishing Service, a supplementary publisher of education materials and a subsidiary of School Specialty Inc. Previously, President and Chief Executive Officer of J.L. Hammett Co. from 1992 to 2006, a reseller, of educational products. SUSAN H. MURPHY has served as director since 2003. She is presently Vice President for Student and Academic Services at Cornell University since 1994. From 1985 through 1994, Ms. Murphy served as Dean of Admissions and Financial Aid. Ms. Murphy has been employed at Cornell since 1978. Ms. Murphy received a Ph.D. from Cornell University. (38)

STEVENSON E. WARD III has served as director since 2001. He is presently Vice President and Chief Financial Officer of Triton Thalassic Technologies, Inc. From 1999 through 2000, Mr. Ward served as Senior Vice President - Administration of Sanofi-Synthelabo, Inc. He also served as Executive Vice President (1996 - 1999) and Chief Financial Officer (1994 - 1995) of Sanofi, Inc. and Vice President, Pharmaceutical Group, Sterling Winthrop, Inc. (1992 - 1994). Prior to joining Sterling he was employed by General Electric with assignments in Purchasing, Corporate Audit and Financial Management. The Company has adopted a Code of Conduct that is applicable to its employees, including the Chief Executive Officer, Chief Financial Officer and Controller. The Code of Conduct is available in the investor relations section on the Company's website at www.acmeunited.com If the Company makes any substantive amendments to the Code of Conduct which apply to its Chief Executive Officer, Chief Financial Officer or Controller, or grants any waiver, including any implicit waiver, from a provision of the Code of Conduct to the Company's executive officers, the Company will disclose the nature of the amendment or waiver on its website or in a report on Form 8-K. Item 11. EXECUTIVE COMPENSATION Information with respect to executive compensation is incorporated herein by reference to the section entitled "Executive Compensation" contained in the Company's Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Company's 2009 Annual Meeting of Shareholders. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners, directors and executive officers is incorporated herein by reference to the information in the section entitled "Security Ownership of Directors and Officers" contained in the Company's Proxy Statement to be filed with the Securities and Exchange Commission in connection with its 2009 Annual Meeting of Shareholders. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE None. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information regarding principal accountant fees and services is incorporated herein by reference to the section entitled "Fees to Auditors" contained in the Company's Proxy Statement to be filed with the Securities and Exchange Commission in connection with its 2009 Annual Meeting of Shareholders. (39)

PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements. o Consolidated Balance Sheets o Consolidated Statements of Operations o Consolidated Statements of Changes in Stockholders' Equity o Consolidated Statements of Cash Flows o Notes to Consolidated Financial Statements o Report of UHY LLP, Independent Registered Public Accounting Firm o Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (a)(2) Financial Statement Schedules o Schedule 2--Valuation and Qualifying Accounts o Schedules other than those listed above have been omitted because of the absence of conditions under which they are required or because the required information is presented in the Financial Statements or Notes thereto. (a)(3) The exhibits listed under Item 15(b) are filed or incorporated by reference herein. (b) Exhibits. The exhibits listed below are filed as part of this Annual Report on Form 10-K. Certain of the exhibits, as indicated, have been previously filed and are incorporated herein by reference. - ------------ ------------------------------------------------------------------- Exhibit No. Identification of Exhibit - ------------ ------------------------------------------------------------------- 3(i) Certificate of Organization of the Company (1) - ------------ ------------------------------------------------------------------- Amendment to Certificate of Organization of Registrant dated September 24, 1968 (1) - ------------ ------------------------------------------------------------------- Amendment to Certificate of Incorporation of the Company dated April 27, 1971 (2) - ------------ ------------------------------------------------------------------- Amendment to Certificate of Incorporation of the Company dated June 29, 1971 (2) - ------------ ------------------------------------------------------------------- 3(ii) Amendment to the Company's Bylaws (10) - ------------ ------------------------------------------------------------------- 4 Specimen of Common Stock certificate (2) - ------------ ------------------------------------------------------------------- 10.1 Non-Salaried Director Stock Option Plan dated April 22, 1996* (3) - ------------ ------------------------------------------------------------------- (40)

- ------------ ------------------------------------------------------------------- 10.1(a) Amendment No. 1 to the Non-Salaried Director Stock Option Plan *(4) - ------------ ------------------------------------------------------------------- 10.1(b) Amendment No. 2 to the Non-Salaried Director Stock Option Plan *(5) - ------------ ------------------------------------------------------------------- 10.2 1992 Amended and Restated Stock Option Plan* (6) - ------------ ------------------------------------------------------------------- 10.2(a) Amendment No. 1 to the Amended and Restated Stock Option Plan* (7) - ------------ ------------------------------------------------------------------- 10.2(b) Amendment No. 2 to the Amended and Restated Stock Option Plan* (8) - ------------ ------------------------------------------------------------------- 10.2(c) Amendment No. 3 to the Amended and Restated Stock Option Plan* (9) - ------------ ------------------------------------------------------------------- 10.2(d) Amendment No. 4 to the Amended and Restated Stock Option Plan* (9) - ------------ ------------------------------------------------------------------- 10.3 Acme United Employee Stock Option Plan dated February 26, 2002* as amended (11) - ------------ ------------------------------------------------------------------- 10.4 Severance Pay Plan dated September 28, 2004* - ------------ ------------------------------------------------------------------- 10.5 Salary Continuation Plan dated September 28, 2004* - ------------ ------------------------------------------------------------------- 10.6 2005 Non-Salaried Director Stock Option Plan (12) - ------------ ------------------------------------------------------------------- 10.8 Deferred Compensation Plan dated October 2, 2007 - ------------ ------------------------------------------------------------------- 21 Subsidiaries of the Registrant - ------------ ------------------------------------------------------------------- 23.1 Consent of UHY LLP, Independent Registered Public Accounting Firm - ------------ ------------------------------------------------------------------- 23.2 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm - ------------ ------------------------------------------------------------------- 31.1 Certification of Walter Johnsen pursuant to Rule 13a-14(a) and 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002 - ------------ ------------------------------------------------------------------- 31.2 Certification of Paul Driscoll pursuant to Rule 13a-14(a) and 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002 - ------------ ------------------------------------------------------------------- 32.1 Certification of Walter Johnsen pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - ------------ ------------------------------------------------------------------- 32.2 Certification of Paul Driscoll pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - ------------ ------------------------------------------------------------------- * Indicates a management contract or a compensatory plan or arrangement (1) Previously filed in S-1 Registration Statement No. 230682 filed with the Commission on November 7, 1968 and amended by Amendment No. 1 on December 31, 1968 and by Amendment No. 2 on January 31, 1969. (2) Previously filed as an exhibit to the Company's Form 10-K filed in 1971. (3) Previously filed in the Company's Form S-8 Registration Statement No. 333-26739 filed with the Commission on May 9, 1997. (4) Previously filed in the Company's Form S-8 Registration Statement No. 333-84505 filed with the Commission on August 4, 1999. (41)

(5) Previously filed in the Company's Form S-8 Registration Statement No. 333-70348 filed with the Commission on September 21, 2000. (6) Previously filed as an exhibit to the Company's Proxy Statement filed on March 29, 1996. (7) Previously filed in the Company's Form S-8 Registration Statement No. 333-26737 filed with the Commission on May 9, 1997. (8) Previously filed in the Company's Form S-8 Registration Statement No. 333-84499 filed with the Commission on August 4, 1999. (9) Previously filed in the Company's Form S-8 Registration Statement No. 333-70346 filed with the Commission on September 27, 2001. (10) Previously filed in the Company's form 8-K filed on February 28, 2006. (11) Previously filed in the Company's Proxy statement for the 2005 Annual Meeting of Shareholders. (12) Previously filed in the Company's Form S-8 Registration Statement No. 333-126478 filed with the Commission on July 8, 2005. SCHEDULE II Acme United Corporation and Subsidiaries VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 2008, 2007 and 2006 Balance at Charged to Deductions Balance at Beginning of Costs and and Other End of Period Expenses Adjustments Period - ------------------------------------------------------------------------------------------------------------------- 2008 Allowance for doubtful accounts $ 89,856 $ 6,033 $ 31,784 $ 64,105 Allowance for inventory obsolescence 461,467 76,909 39,489 498,887 Deferred income tax asset valuation allowance 2,034,623 142,000 417,509 1,759,114 - -------------------------------------------------------------------------------------------------------------------- 2007 Allowance for doubtful accounts $ 116,811 $ 54,182 $ 81,137 $ 89,856 Allowance for inventory obsolescence 405,963 106,938 51,434 461,467 Deferred income tax asset valuation allowance 1,755,222 279,401 - 2,034,623 - -------------------------------------------------------------------------------------------------------------------- 2006 Allowance for doubtful accounts $ 136,050 $ 51,256 $ 70,495 $ 116,811 Allowance for inventory obsolescence 453,369 99,234 146,640 405,963 Deferred income tax asset valuation allowance 1,415,401 339,821 - 1,755,222 - -------------------------------------------------------------------------------------------------------------------- (42)

Pursuant to the requirements of Section 13 or 15(d) 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, on March 10, 2009. ACME UNITED CORPORATION (Registrant) Signatures Titles /s/ Walter C. Johnsen - -------------------------- Walter C. Johnsen Chairman and Chief Executive Officer /s/ Brian S. Olschan - -------------------------- Brian S. Olschan President, Chief Operating Officer and Director /s/ Paul G. Driscoll - -------------------------- Paul G. Driscoll Vice President, Chief Financial Officer, Secretary and Treasurer /s/ Rex L. Davidson - -------------------------- Rex L. Davidson Director /s/ Richmond Y. Holden, Jr. - -------------------------- Richmond Y. Holden, Jr. Director /s/ Susan H. Murphy - -------------------------- Susan H. Murphy Director /s/ Stevenson E. Ward III - -------------------------- Stevenson E. Ward III Director (43)

EXHIBIT 21

                            PARENTS AND SUBSIDIARIES

The Company was organized as a partnership in 1867 and incorporated in 1882
under the laws of the State of Connecticut as The Acme Shear Company. The
corporate name was changed to Acme United Corporation in 1971.

There is no parent of the registrant.

Registrant has the following subsidiaries, all of which are wholly owned by the
registrant:

NAME                                             COUNTRY OF INCORPORATION
Acme United Limited                              Canada
Acme United Europe GmbH                          Germany
Acme United (Asia Pacific) Limited               Hong Kong

All subsidiaries are active and included in the consolidated financial
statements.
EXHIBIT 23.1

       Consent of UHY LLP, Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-84499, 33-98918, 333-26737, 333-70346, 333-126478 and
333-145516) pertaining to the Acme United Corporation Amended and Restated
Employee Stock Option Plan, the Registration Statements (Form S-8 Nos.
333-84505, 333-26739, 333-70348, 333-126478 and 333-145516) pertaining to the
Acme United Corporation Non-Salaried Director Stock Option Plan and the
Registration Statement (Form S-8 No. 333-84509) pertaining to the Acme United
Corporation Deferred Compensation Plan for Directors and Acme United Corporation
Deferred Compensation Plan for Walter C. Johnsen of our report dated March 10,
2009, with respect to the consolidated financial statements and schedule of Acme
United Corporation and subsidiaries included in the Annual Report (Form 10-K)
for the year ended December 31, 2008.


/s/ UHY LLP

Hartford, Connecticut
March 10, 2009
EXHIBIT 23.2

   Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 333-84499, 33-98918, 333-26737, 333-70346, and 333-126478)
pertaining to the Acme United Corporation Amended and Restated Stock Option
Plan, the Registration Statements (Form S-8 Nos. 333-84505, 333-26739,
333-70348, and 333-126478) pertaining to the Acme United Corporation
Non-Salaried Director Stock Option Plan and the Registration Statement (Form S-8
No. 333-84509) pertaining to the Acme United Corporation Deferred Compensation
Plan for Directors and Acme United Corporation Deferred Compensation Plan for
Walter C. Johnsen of our report dated March 6, 2008, with respect to the
consolidated financial statements and schedule of Acme United Corporation and
subsidiaries as of and for each of the two years in the period ended December
31, 2007 included in this Annual Report (Form 10-K) for the year ended December
31, 2008.

                                                /s/ Ernst & Young LLP

Hartford, Connecticut
March 9, 2009

Exhibit 31.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


The undersigned officer of Acme United Corporation (the "Company") hereby
certifies to my knowledge that the Company's annual report on Form 10-K for the
annual period ended December 31, 2008 (the "Report"), as filed with the
Securities and Exchange Commission on the date hereof, fully complies with the
requirements of section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended, and that the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This certification is provided solely
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report
or "filed" for any purpose whatsoever.


By          /s/ WALTER C. JOHNSEN
         ------------------------------
                Walter C. Johnsen
                  Chairman and
             Chief Executive Officer

Dated: March 10, 2009


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

Exhibit 31.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


The undersigned officer of Acme United Corporation (the "Company") hereby
certifies to my knowledge that the Company's annual report on Form 10-K for the
annual period ended December 31, 2008 (the "Report"), as filed with the
Securities and Exchange Commission on the date hereof, fully complies with the
requirements of section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended, and that the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This certification is provided solely
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report
or "filed" for any purpose whatsoever.


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

Dated: March 10, 2009


A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Acme United Corporation and will
be retained by Acme United Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
Exhibit 32.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, WALTER C. JOHNSEN, certify that:

    I have reviewed this annual report on Form 10-K of Acme United Corporation;

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

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

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

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

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

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

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

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

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

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

By          /s/ WALTER C. JOHNSEN
         ------------------------------
                Walter C. Johnsen
                  Chairman and
             Chief Executive Officer

Dated:  March 10, 2009
Exhibit 32.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, PAUL G. DRISCOLL, certify that:

    I have reviewed this Annual Report on Form 10-K of Acme United Corporation;

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

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

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

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

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

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

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

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

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

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

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

Dated:  March 10, 2009