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<SEC-DOCUMENT>0001026608-05-000015.txt : 20050318
<SEC-HEADER>0001026608-05-000015.hdr.sgml : 20050318
<ACCEPTANCE-DATETIME>20050317193731
ACCESSION NUMBER:		0001026608-05-000015
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20041231
FILED AS OF DATE:		20050318
DATE AS OF CHANGE:		20050317

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ACME UNITED CORP
		CENTRAL INDEX KEY:			0000002098
		STANDARD INDUSTRIAL CLASSIFICATION:	CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420]
		IRS NUMBER:				060236700
		STATE OF INCORPORATION:			CT
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-07698
		FILM NUMBER:		05690149

	BUSINESS ADDRESS:	
		STREET 1:		1931 BLACK ROCK TURNPIKE
		CITY:			FAIRFIELD
		STATE:			CT
		ZIP:			06825
		BUSINESS PHONE:		2033327330

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ACME SHEAR CO
		DATE OF NAME CHANGE:	19710713
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>acme_10k04.txt
<DESCRIPTION>FORM 10-K
<TEXT>

                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, 2004

       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.)

        1931 Black Rock Turnpike
         Fairfield, Connecticut                                     06825
        ------------------------                                    -----
(Address of principal executive offices)                         (Zip Code)

      Registrant's telephone number, including area code   (203) 332-7330

           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                            American Stock Exchange

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

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. (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 $20,843,160. Registrant had 3,577,671 shares
outstanding as of March 14, 2005 of its $2.50 par value Common Stock.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
YES [   ]     NO [ X ]

Documents Incorporated By Reference

(1) Proxy Statement for the annual meeting scheduled for April 25, 2005 is
incorporated into 2004 10-K, Part III.

                                        1
<PAGE>

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's operations are in the United States,
Canada, Europe (sited in Germany) and Asia (sited in Hong Kong). The operations
in the United States, Canada and Europe are primarily involved in product
development, manufacturing, marketing, sales, administrative and distribution
activities. The operation in Hong Kong is involved in sourcing, quality control
and sales activities. Net sales in 2004 were the following: United States -
$32.5 million, Canada - $6.0 million, Europe - $3.7 million and Hong Kong -
$1.2 million.

During the year ended December 31, 2002, the Company restructured its European
operations, closing its facility in England and moving those operations to
Germany.

Financial information concerning net sales and long-lived assets by geographic
area appears in Note 10 of the notes to consolidated financial statements.

The operations of the Company consist of a single reportable segment. The
Company sells cutting devices, measuring instruments and safety products for
school, office, home and industrial use in the United States, Canada, Europe and
Asia. The company competes with many companies in each market and geographic
area.

Principal products within the cutting device category are scissors, shears,
guillotine paper trimmers, rotary paper trimmers, rotary cutters, hobby knives
and blades, utility knives and medical cutting instruments. Products introduced
in 2003 and 2004 included proprietary titanium bonded scissors and trimmers.
Principal products within the measuring instrument category are rulers, math
tools and tape measures. Products introduced in 2004 included a new line of
Westcott math tools and professional grade aluminum rulers. Principal products
within the safety product category are first aid kits, personal protection
products and over-the-counter medication refills. Products introduced in 2004
included the Physicians Care(TM) branded line of over-the-counter medications.

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 and mass market retailers. The
Company had three customers with sales of 10% or more of total sales in 2004.
Net sales to the Company's three major customers, Staples, Inc., Office Max, and
United Stationers, Inc., represented approximately 43% in 2004, 46% in 2003 and
46% in 2002.

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

On May 28, 2004, the Company purchased the scissor and cutting business of
Clauss Cutlery, a division of Alco Industries, Inc. The purchase price was the
aggregate value of inventory, trademarks and brand names totaling $446,754.
Sales of Clauss products for seven months in 2004 were $1.7 million. Clauss
Cutlery was founded in 1877 in Fremont, Ohio and at one time was the largest
manufacturer of scissors in the world. Clauss products have a strong presence in
the industrial and floral markets. Its scissors and cutting tools are
distributed by most major industrial distributors and are sold to the auto,
textile, food processing, and electronic industries. The Clauss business has
been integrated into the Company's existing operations.

Other
- -----
Environmental Rules and Regulations - The Company believes that it is in
compliance with applicable environmental laws. The Company believes no major
financial impact is expected to result from current and future compliance with
these rules and regulations.

Employment - As of year-end 2004, the Company employed 103 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.

                                        2
<PAGE>

Item 2.  Properties

Acme United Corporation is headquartered at 1931 Black Rock Turnpike, Fairfield,
Connecticut in 5,700 square feet of leased space. The Company owns and leases
manufacturing and warehousing facilities in the United States totaling 80,000
square feet and leases 44,000 square feet of warehousing space in Canada.
Distribution for Europe is presently being conducted at a 48,000 square foot
owned facility in Solingen, Germany.

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 litigations in
the ordinary course of business including certain environmental and other
matters. The Company presently believes that there will not be a material
adverse impact on financial position, results of operations, or liquidity from
these matters.

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, 2004.

                                        3
<PAGE>

PART II

Item 5.  Market for the Registrant's Common Stock and Related Security Holder
         Matters

The Company's Common Stock is traded on the American Stock Exchange under the
symbol "ACU". The following table sets forth the high and low sale prices on the
American Stock Exchange for the Common Stock for the periods indicated:

                                                                     Dividends
  Year Ended December 31, 2004           High            Low         Declared
  --------------------------------- -------------- -------------- --------------
  Fourth Quarter                        $16.50         $ 8.58         $ .02
  --------------------------------- -------------- -------------- --------------
  Third Quarter                           9.28           6.66           .02
  --------------------------------- -------------- -------------- --------------
  Second Quarter                          7.74           5.31           .02
  --------------------------------- -------------- -------------- --------------
  First Quarter                           6.39           5.22
  --------------------------------- -------------- -------------- --------------

  --------------------------------- -------------- -------------- --------------
  Year Ended December 31, 2003
  --------------------------------- -------------- -------------- --------------
  Fourth Quarter                        $ 5.51         $ 5.09
  --------------------------------- -------------- -------------- --------------
  Third Quarter                           5.59           4.60
  --------------------------------- -------------- -------------- --------------
  Second Quarter                          4.03           3.50
  --------------------------------- -------------- -------------- --------------
  First Quarter                           3.40           3.03
  --------------------------------- -------------- -------------- --------------

As of March 14, 2005 there were approximately 1,300 holders of record of the
Company's Common Stock.

Issuer Purchases of Equity Securities

On July 23, 2003, the Company announced a stock repurchase program of 150,000
shares. The program does not have an expiration date. The following table
discloses the shares repurchased under the program for the quarter ended
December 31, 2004:

<TABLE>
<CAPTION>
                                                   Total Number of shares        Maximum Number of
                                                    Purchased as Part of      Shares that may yet be
           Total Number of      Average Price       Publicly Announced          Purchased Under the
Period     Shares Purchased     Paid per Share           Program                     Program
- ----------------------------------------------------------------------------------------------------
<S>             <C>                 <C>                   <C>                         <C>
October         2,000               $8.60                 82,330                      67,670
</TABLE>

Item 6. Selected Financial Data

<TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(All figures in thousands except per share data)
<CAPTION>
                                                           2004         2003         2002         2001         2000
- -------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>          <C>          <C>          <C>          <C>
Net Sales                                              $ 43,381     $ 34,975     $ 30,884     $ 33,082     $ 31,921
- -------------------------------------------------------------------------------------------------------------------
Net Income                                             $  3,238     $  1,222     $    660     $  1,280     $  1,061
- -------------------------------------------------------------------------------------------------------------------
Total Assets                                           $ 23,009     $ 19,743     $ 17,614     $ 20,173     $ 21,118
- -------------------------------------------------------------------------------------------------------------------
Long Term Debt, Less Current Portion                   $     55     $  2,752     $  2,032     $  2,875     $  4,925
- -------------------------------------------------------------------------------------------------------------------
Net Income
   Per Share (Basic)                                   $   0.96     $   0.37     $   0.19     $   0.37     $   0.30
   Per Share (Diluted)                                 $   0.85     $   0.34     $   0.19     $   0.36     $   0.30
</TABLE>

                                        4
<PAGE>

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

Forward-Looking Information
- ---------------------------
Forward-looking statements in this report, including without limitation,
statements related to the Company's plans, strategies, objectives, expectations,
intentions and adequacy of resources, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (ii) the Company's plans and
results of operations will be affected by the Company's ability to manage its
growth and inventory; and (iii) other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission.

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 Notes to Consolidated Financial
Statements. However, 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 effected by certain accounting estimates.
The most sensitive and significant accounting estimates in the financial
statements relate to customer rebates, asset valuation allowances for deferred
income tax assets, obsolete inventories, potentially uncollectible accounts
receivable, and accruals for income taxes. Accruals for customer rebates are
based on executed contracts and anticipated sales levels, which are monitored
monthly. Management critically evaluates the potential realization of deferred
income tax benefits as well as the likely usefulness of inventories and the
collectability of accounts receivable. Accruals for income taxes or benefits
often require interpretations of complex tax rules and regulations, which may be
subsequently challenged. There have been no significant changes in estimates for
any period presented by the accompanying financial statements nor have there
been any changes in accounting principles or practices.

Revenue Recognition. The Company recognizes revenue from sales of its products
when ownership transfers to the customers. Ownership transfers from the Company
to its customer upon shipment of the Company's products. When right of return
exists, the Company recognizes revenue in accordance with SFAS 48, Revenue
Recognition When Right of Return Exists.

Intangible Assets. Intangible assets with a finite useful life are recorded at
cost upon acquisition and amortized over the term of the related contract.
Intangible assets held by the Company with a finite useful life include deferred
financing costs, patents, and trademarks. Deferred financing costs are amortized
over the term of the related debt. Patents and trademarks are amortized over
their estimated useful life. The weighted average amortization period of
intangible assets at December 31, 2004 is 13 years. The Company reviews the
value recorded for intangibles to assess recoverability from future operations
using undiscounted cash flows. Impairments are recognized in operating results
to the extent the carrying value exceeds fair value determined based on the net
present value of estimated future cash flows. The projection of future cash
flows requires the Company to make estimates about the amount of future
revenues. The actual future results could differ significantly from these
estimates, and resulting changes in the estimates of future cash flows could be
significant and could affect the recoverability of intangible assets. During
2004, the Company's net book value of intangible assets increased from $252,960
to $559,646. This increase was primarily due to the acquisition of certain
trademarks as part of the Company's acquisition of Clauss Cutlery.

Accounting for Stock-Based Compensation. At December 31, 2004, the Company has
one stock-based employee compensation plan. The Company has elected to adopt the
disclosure only provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, and continues to measure costs for
its employee stock compensation plans by using the accounting methods prescribed
by APB Opinion No. 25, Accounting for Stock Issued to Employees, which allows
that no compensation cost be recognized unless the exercise price of the options
granted is less than the fair market value of the Company's stock at date of
grant.

                                        5
<PAGE>

Results of Operations 2004 Compared with 2003
- ---------------------------------------------
Net sales increased $8,405,988 or 24% in 2004 to $43,380,648 compared to
$34,974,660 in 2003. Excluding the favorable effect of currency gains in Canada
and Europe net sales increased 22%. The sales increase was mainly driven by a
23% growth in the U.S. due to the success of new products, market share gains
and the newly acquired Clauss Cutlery business. Clauss contributed approximately
$1,700,000 to 2004 net sales. Combined sales in Europe and Canada increased by
14% (5% in constant currency). The new business in Hong Kong generated
$1,230,000 in 2004. These were primarily shipments to global customers.

Gross profit was 45% of net sales in 2004 compared to 38% of net sales in 2003.
The increased percentage of new products coupled with positive impacts from
product rationalization efforts in Europe were the main reasons for the improved
gross margins. The Company also improved productivity due to higher volumes and
cost cutting measures.

Selling, general and administrative expenses were $14,162,082 in 2004 compared
with $10,646,395 in 2003, an increase of $3,515,687. SG&A expenses were 33% of
net sales in 2004 compared to 30% in 2003. Direct selling related expenses
increased by $516,000. Other major contributors to the increase in SG&A expenses
were market research, new product development, the new sourcing and quality
control office in Hong Kong and the addition of sales and marketing personnel in
North America and Europe.

Interest expense for 2004 was $157,335 compared with $235,265 for 2003, a
$77,930 decrease. This is attributable to the decline in average debt.

Net other income was $7,203 in 2004 compared to net other income of $91,172 in
2003. The change primarily relates to foreign currency transaction losses of
$110,519 the Company incurred in 2004, as opposed to a foreign currency gain of
$105,984 in 2003. The 2003 results were partially offset by the settlement of a
$175,000 lawsuit in Germany in March of 2003.

Income before income taxes was $5,340,316 in 2004 compared with $2,342,271 in
2003, an increase of $2,998,045. Pretax income for North America and Asia
increased by approximately $2.4 million. The European operations lost $470,000
in 2004 compared to a loss of $1,100,000 in 2003. The 2003 loss included one
time expenses of approximately $400,000.

The effective tax rate in 2004 was 39% compared to 48% in 2003. The improvement
is principally due to the lower losses in Europe, for which the benefit cannot
be utilized to offset taxable earnings in North America.

Results of Operations 2003 Compared with 2002
- ---------------------------------------------
Net sales increased $4,091,090, or 13% in 2003 to $34,974,660 compared to
$30,883,570 in 2002. Excluding the favorable effect of currency gains in Canada
and Europe net sales increased 10%. The sales increase was mainly driven by
growth in the U.S. due to the success of new products, market share gains and
new customers. International sales were down 9% in local currency principally
due to discontinuing certain product lines in the UK business and a generally
weak economy in Germany.

Gross profit was 38% of net sales in 2003 compared to 34% of net sales in 2002.
The introduction of new products coupled with improved product mix in the U.S.,
positive impacts from product rationalization efforts in Europe and overall
productivity gains were the main reasons for the improved gross margins.

Selling, general and administrative expenses were $10,646,395 in 2003 compared
with $9,528,080 in 2002, an increase of $1,118,315 or 12%. SG&A expenses were
30% of net sales in 2003 compared to 31% in 2002. Major contributors to the
increase were market research, new product development and the addition of sales
executives in Canada and Europe.

Interest expense for 2003 was $235,265 compared with $605,344 for 2002, a
$370,079 decrease. This is attributable to the decline in average debt and lower
interest rates.

Net other income was $91,172 in 2003 compared to net other income of $146,614 in
2002. The change from 2002 primarily relates to the settlement of a $175,000
lawsuit in Germany in March of 2003 partially offset by gains on the sale of
fixed assets.

Income before income taxes was $2,342,271 in 2003 compared with $97,276 in 2002,
an increase of $2,244,995. Pretax income for the U.S. business was $3,142,489
compared to $942,776 in 2002. Pretax income for the Canadian business increased
from $50,000 in 2002 to $298,000 in 2003. The European operations lost
$1,100,000 in 2003 compared to a loss of $500,000, excluding restructuring
charges (see Note 15) in 2002. The higher loss was principally due to lower
sales, a one-time expense of $175,000 for settlement of a lawsuit in Germany and
the adverse effect of a weaker dollar on translated results.

                                        6
<PAGE>

Income tax expense for 2003 was $1,120,440 compared to an income tax benefit of
$562,218 in 2002. In 2002, the Company recognized a significant one-time income
tax benefit associated with liquidating its UK business. The benefit recognized
was substantially in excess of income taxes computed at the statutory rate. In
2003, consolidated income before income taxes includes losses of foreign
subsidiaries with no income tax benefit, resulting in a high effective income
tax rate.

Contractual Obligations
- -----------------------
The following table summarizes the amounts of payments due during the periods
specified under the Company's contractual obligations as of December 31, 2004:

<TABLE>
<CAPTION>
                                                                             Payments Due by Period
dollars in thousands                                               ------------------------------------------
Contractual                                                        Less than     1--3       4--5    More than
  Obligations                                                        1 Year     Years      Years     5 Years
- -------------                                                      ---------  ---------  ---------  ---------
<S>                                                                   <C>        <C>        <C>        <C>
Long-Term Debt Obligations........................................    $1,379     $   10     $   10     $   35

Operating Lease Obligations.......................................       221        187         98          -
                                                                   ---------  ---------  ---------  ---------
Total.............................................................    $1,600     $  197     $  108     $   35
                                                                   =========  =========  =========  =========
</TABLE>

Off-Balance Sheet Transactions
- ------------------------------
The Company did not engage in any off-balance sheet transactions during
2004.

Liquidity and Capital Resources
- -------------------------------
The Company's working capital, current ratio and long-term debt to equity ratio
follow:

                                                            2004          2003
- -------------------------------------------------------------------------------
Working Capital                                      $11,548,809   $10,777,397
Current Ratio                                               2.37          2.76
Long-Term Debt to Equity Ratio                              0.4%         27.0%

The increase in working capital in 2004 is attributable to a 31% increase in
accounts receivables due to fourth quarter sales growth of 35%. Inventory
increased by only 3% due to improved inventory management. Days Sales
Outstanding (DSO) decreased from 64 in 2003 to 61 in 2004 due to improved
collection efforts. Operating activities generated net cash of approximately
$4.31 million in 2004 compared with $1.75 million in 2003.

During September 2004, the Company renewed its revolving loan agreement, which
originally allowed for borrowings up to a maximum of $10,000,000 based on a
borrowing base formula, which applied specific percentages to balances of
accounts receivable and inventory. The renewal modified several characteristics
of the original agreement, the most significant of which are reducing the
interest rate to LIBOR plus 1.50 percent from LIBOR plus 1.75%, eliminating the
borrowing base formula, allowing the Company to borrow up to $10,000,000,
regardless of its inventory and receivable levels, and extending the maturity of
the loan to June 30, 2007. As of December 31, 2004, $1,249,384 was outstanding
and $8,750,616 was available for borrowing under this agreement. It is estimated
that all long-term debt under this loan agreement will be paid off in 2005.
However, the Company may draw down additional funds under this loan agreement in
the future.

Due to the provisions of the revolving loan agreement, the Company, among other
things, is restricted with respect to additional borrowings, investments,
mergers and property and equipment purchases. Further, the Company is required
to maintain specific amounts of tangible net worth, and a specified debt service
coverage ratio, and a fixed charge coverage ratio, all as defined by the
agreement. The Company was in compliance with all covenants as of and through
December 31, 2004 and believes these financial covenants will continue to be met
for the remainder of the term of the debt.

                                       7
<PAGE>

Capital expenditures during 2004 were $443,330, which were, in part, financed
with debt. Capital expenditures in 2005 are not expected to differ materially
from recent years.

The Company believes that cash generated from operating activities together with
funds available under the revolving loan agreement, is expected, under current
conditions, to be sufficient to finance the Company's planned operations in
2005.

Recently Issued Accounting Standards
- ------------------------------------
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 (revised 2004) (Statement
123 (R)"), "Share-Based Payment", which revised SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement supercedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees". The revised statement addresses the
accounting for share-based payment transactions with employees and other third
parties, eliminates the ability to account for share-based compensation
transactions using APB 25 and requires that the compensation costs relating to
such transactions be recognized in the consolidated statement of operations. The
revised statement is effective as of the first interim period beginning after
June 15, 2005. Acme will adopt the statement on July 1, 2005 as required. The
impact of adoption of Statement 123 (R) cannot be predicted at this time because
it will depend on levels of share-based payments granted in the future. However,
had Acme adopted Statement 123 in prior periods, the impact of that standard
would have approximated the impact of Statement 123 as described in the
disclosure of pro forma net income (loss) and net income (loss) per share in the
stock-based compensation accounting policy note included in Note 2 to the
consolidated financial statements.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4," to clarify that abnormal amounts of idle facility
expense, freight, handling costs and wasted material (spoilage) should be
recognized as current period charges, and that fixed production overheads should
be allocated to inventory based on normal capacity of production facilities.
This statement is effective for Acme's fiscal year 2006. Acme is in the process
of evaluating whether the adoption of SFAS 151 will have a significant impact on
our overall results of operations or financial position.

Item 7A.  Qualitative and Quantitative Disclosure about Market Risk

The Company's debt portfolio and associated interest rates follow:

<TABLE>
<CAPTION>
(dollars in thousands)
                             2005      2006      2007      2008      2009     Thereafter    Total    Fair Value
- ----------------------------------------------------------------------------------------------------------------
<S>                           <C>        <C>       <C>       <C>       <C>         <C>        <C>           <C>
Current Liabilities:
Notes payable                 $42        $0        $0        $0        $0          $0         $42           $42
Average interest rate        3.9%      0.0%      0.0%      0.0%      0.0%        0.0%        3.9%          3.9%

Long-term Debt (including current portion):
Amount at fixed rate         $171        $5        $5        $5        $5         $35        $226          $226
Average interest rate        7.4%      7.0%      7.0%      7.0%      7.0%        7.0%        7.3%
Amount at variable rate    $1,208        $0        $0        $0        $0          $0      $1,208        $1,208
Average interest rate        3.9%      0.0%      0.0%      0.0%      0.0%        0.0%        3.9%
</TABLE>

Interest Rate Risk:
- -------------------
The Company's interest expense on debt is most sensitive to changes in the level
of United States interest rates. To mitigate the impact of these fluctuations,
the Company periodically evaluates alternative interest rate arrangements. In
2000, the Company entered into an interest rate swap agreement with a bank to
minimize exposure to interest rate changes for $3.5 million of debt. The swap
agreement expired on January 19, 2003.

Foreign Currency Risk:
- ----------------------
The Company's currency exposures vary, but are concentrated in the Canadian
dollar, British pound, and Euro. Purchases by the Hong Kong office are in U.S.
dollars.

                                       8
<PAGE>

At times, the Company utilizes forward foreign exchange contracts to hedge
specific transactions with third parties denominated in foreign currencies. The
terms of these forward foreign exchange contracts are typically 90 days to a
year. Because the contracts are acquired for specific transactions, they are an
effective hedge against fluctuations in the value of the foreign currency
underlying the transaction. At December 31, 2004, the Company's Canadian
subsidiary had entered into a forward foreign exchange contract to reduce the
risk of the Company's Canadian subsidiary's purchases of inventory in a currency
other than the Canadian subsidiary's functional currency, the Canadian dollar.
The Company has hedged the risk of foreign currency fluctuations for
approximately $1.5 million of inventory purchases in 2005 by the Canadian
subsidiary. The fair value of the foreign exchange contract totaled
approximately $82,000 at December 31, 2004 and is reported as a liability and a
component of accumulated other comprehensive loss in the statement of
stockholders' equity.

The Company does not enter into financial instruments for speculation or trading
purposes.

The Company and its foreign subsidiaries utilize bank loans to finance their
operations. To mitigate foreign currency risk, foreign loans are denominated in
the local currency of the foreign subsidiary wherever possible.

Inflation
- ---------
Inflation had a negligible effect on the Company's operations during 2004 and
2003. The Company estimates that inflationary effects, in the aggregate, were
generally recovered or offset through increased pricing or cost reductions in
both years.

                                       9
<PAGE>

Item 8.  Financial Statements and Supplementary Data

<TABLE>
Acme United Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2004, 2003 and 2002
<CAPTION>
                                                                            2004           2003           2002
- ------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>            <C>
Net Sales                                                              $ 43,380,648   $ 34,974,660   $ 30,883,570

Costs and Expenses:
  Cost of Goods Sold:
    Before inventory write-off related to restructuring                  23,728,118     21,841,901     20,244,139
    Inventory write-off related to restructuring                                  -              -        206,133
- ------------------------------------------------------------------------------------------------------------------
                                                                         23,728,118     21,841,901     20,450,272
  Selling, General and Administrative Expenses                           14,162,082     10,646,395      9,528,080
  Restructuring charges                                                           -              -        349,212
- ------------------------------------------------------------------------------------------------------------------
Income before Non Operating Items                                         5,490,448      2,486,364        556,006

Non Operating Items:
  Interest Expense                                                          157,335        235,265        605,344
  Other Income (Expense)-Net                                                  7,203         91,172        146,614
- ------------------------------------------------------------------------------------------------------------------
  Income before Income Taxes                                              5,340,316      2,342,271         97,276
  Income Taxes (Benefit)                                                  2,101,911      1,120,440       (562,218)
- ------------------------------------------------------------------------------------------------------------------
Net Income                                                             $  3,238,405   $  1,221,831   $    659,494
==================================================================================================================

Earnings Per Share:
    Basic                                                              $       0.96   $       0.37   $       0.19
    Diluted                                                            $       0.85   $       0.34   $       0.19

See accompanying notes.
</TABLE>

                                       10
<PAGE>
<TABLE>
Acme United Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,  2004 and 2003
<CAPTION>
                                                                         2004            2003
- ----------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                     $  1,930,394    $  1,390,641
   Accounts receivable, less allowance                              8,884,807       6,795,212
   Inventories                                                      8,389,228       8,179,081
   Deferred income taxes                                              279,201         286,213
   Prepaid expenses and other current assets                          484,532         259,972
- ----------------------------------------------------------------------------------------------
Total current assets                                               19,968,162      16,911,119

Plant, Property and Equipment:
   Land                                                               250,692         234,866
   Buildings                                                        2,796,286       2,643,608
   Machinery and equipment                                          6,101,802       5,772,432
- ----------------------------------------------------------------------------------------------
Total plant, property and equipment                                 9,148,780       8,650,906
Less accumulated depreciation                                       6,853,349       6,266,115
- ----------------------------------------------------------------------------------------------
Net plant, property and equipment                                   2,295,431       2,384,791
Goodwill                                                               88,828          88,828
Intangible assets, less accumulated amortization                      559,646         252,960
Intangible pension asset                                               96,536         105,312
- ----------------------------------------------------------------------------------------------
Total Assets                                                     $ 23,008,603    $ 19,743,010
==============================================================================================

LIABILITIES
Current Liabilities:
   Notes payable                                                 $     41,884    $    141,113
   Accounts payable                                                 2,316,480       1,742,655
   Other accrued liabilities                                        4,682,360       2,214,605
   Current portion of long-term debt                                1,378,629       2,035,349
- ----------------------------------------------------------------------------------------------
Total current liabilities                                           8,419,353       6,133,722
Deferred income taxes                                                 131,228         155,829
Long-term debt, less current portion                                   55,307       2,751,960
Other                                                                 420,251         522,875
- ----------------------------------------------------------------------------------------------
Total Liabilities                                                   9,026,139       9,564,386

STOCKHOLDERS' EQUITY
Common Stock, par value $2.50: authorized 8,000,000
  shares; issued - 3,849,512 shares in 2004 and 3,652,812
  shares in 2003, including treasury stock                          9,623,780       9,132,030
Treasury Stock, at cost, 436,091 shares in 2004 and
  387,261 shares in 2003                                           (1,874,611)     (1,621,813)
Additional paid-in capital                                          2,231,003       2,028,574
Accumulated other comprehensive loss                               (1,031,587)     (1,370,441)
Retained earnings                                                   5,033,879       2,010,274
- ----------------------------------------------------------------------------------------------
Total Stockholders' Equity                                         13,982,464      10,178,624
- ----------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                       $ 23,008,603    $ 19,743,010
==============================================================================================

See accompanying notes.
</TABLE>

                                       11
<PAGE>
<TABLE>
Acme United Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 2004, 2003 and 2002
<CAPTION>
                                                                                       Accumulated
                              Outstanding                                Additional       Other
                               Shares of       Common       Treasury       Paid-In    Comprehensive    Retained
                             Common Stock       Stock         Stock        Capital    Income (Loss)    Earnings       Total
- ------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>          <C>            <C>           <C>             <C>          <C>
Balances, December 31, 2001     3,410,051   $ 9,033,280  $  (936,996)   $ 2,037,823   $ (1,591,157)   $  128,949   $ 8,671,899
Net Income                                                                                               659,494       659,494
Translation Adjustment                                                                     119,864                     119,864
Change in Fair Value of
   Derivative Financial
   Instruments                                                                             163,735                     163,735
Income Taxes Relating
   to Derivative Financial
   Instruments                                                                             (60,500)                    (60,500)
Change in
   Minimum Pension
   Liability                                                                            (1,509,574)                 (1,509,574)
Income Taxes Relating
   to Minimum Pension
   Liability                                                                               560,818                     560,818
                                                                                                                   -----------
      Comprehensive Loss                                                                                               (66,163)
Issuance of Common Stock           39,000        97,500                      (8,718)                                    88,782
Purchase of Treasury Stock        (65,800)                  (214,713)                                                 (214,713)
- ------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 2002     3,383,251   $ 9,130,780  $(1,151,709)   $ 2,029,105   $ (2,316,814)   $  788,443   $ 8,479,805
Net Income                                                                                             1,221,831     1,221,831
Translation Adjustment                                                                     670,941                     670,941
Change in Fair Value of
   Derivative Financial
   Instruments                                                                              26,974                      26,974
Income Taxes Relating
   to Derivative Financial
   Instruments                                                                              (9,401)                     (9,401)
Change in
   Minimum Pension
   Liability                                                                               412,912                     412,912
Income Taxes Relating
   to Minimum Pension
   Liability                                                                              (155,053)                   (155,053)
                                                                                                                   -----------
      Comprehensive Income                                                                                           2,168,204
Issuance of Common Stock              500         1,250                        (531)                                       719
Purchase of Treasury Stock       (118,200)                  (470,104)                                                 (470,104)
- ------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 2003     3,265,551   $ 9,132,030  $(1,621,813)   $ 2,028,574   $ (1,370,441)   $2,010,274   $10,178,624
Net Income                                                                                             3,238,405     3,238,405
Translation Adjustment                                                                     328,028                     328,028
Change in Fair Value of
   Derivative Financial
   Instruments                                                                             (82,268)                    (82,268)
Change in
   Minimum Pension
   Liability                                                                               132,463                     132,463
Income Taxes Relating
   to Minimum Pension
   Liability                                                                               (39,369)                    (39,369)
                                                                                                                   -----------
      Comprehensive Income                                                                                           3,577,259
Distribution to Shareholders                                                                            (214,800)     (214,800)
Issuance of Common Stock          196,700       491,750                     202,429                                    694,179
Purchase of Treasury Stock        (48,830)                  (252,798)                                                 (252,798)
- ------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 2004     3,413,421   $ 9,623,780  $(1,874,611)   $ 2,231,003   $ (1,031,587)   $5,033,879   $13,982,464

See accompanying notes.
</TABLE>

                                       12
<PAGE>
<TABLE>
Acme United Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOW
Years ended December 31, 2004, 2003 and 2002
<CAPTION>
                                                                           2004           2003           2002
- -----------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>            <C>
Operating activities:
Net income                                                             $ 3,238,405    $ 1,221,831    $   659,494
Adjustments to reconcile net income to net
  cash provided by operating activities
    Depreciation                                                           492,361        433,645        482,880
    Amortization                                                            29,986         24,406         79,607
    Deferred income taxes                                                  (56,958)       540,600       (548,467)
    (Gain) Loss on disposal of plant, property and equipment                59,156       (174,528)        25,464
    Non-cash restructuring charges                                               -              -        293,153
    Changes in operating assets and liabilities
      Accounts receivable                                               (1,974,964)      (342,197)       133,698
      Inventories                                                          (64,949)    (1,017,075)     2,103,118
      Prepaid expenses and other current assets                           (213,326)       286,147         75,120
      Other assets                                                               -              -        (33,738)
      Accounts payable                                                     540,792        311,798       (786,147)
      Other accrued liabilities                                          2,260,338        468,000       (841,939)
- -----------------------------------------------------------------------------------------------------------------
Total adjustments                                                        1,072,436        530,796        982,748
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                4,310,841      1,752,627      1,642,242
- -----------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of plant, property and equipment                                 (443,330)      (424,537)      (484,088)
Purchase of patents and trademarks                                        (336,673)      (115,615)      (114,216)
Proceeds from sales of plant, property and equipment                        51,583        250,196         58,597
- -----------------------------------------------------------------------------------------------------------------
Net cash used by investing activities                                     (728,420)      (289,956)      (539,707)
- -----------------------------------------------------------------------------------------------------------------
Financing activities:
Net (repayments)  borrowings on notes payable and
  revolving credit facilities                                             (855,458)       108,297       (554,495)
Payments of long term debt                                              (2,612,137)      (305,548)       (13,254)
Debt issuance costs                                                              -              -         11,209
Distributions to shareholders                                             (143,007)             -              -
Purchase of treasury stock                                                (252,798)      (470,247)      (214,713)
Issuance of Common Stock                                                   694,179            862         88,782
- -----------------------------------------------------------------------------------------------------------------
Net cash used by financing activities                                   (3,169,221)      (666,636)      (682,471)
Effect of exchange rate changes                                            126,553         (3,064)         6,069
- -----------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents                                    539,753        792,971        426,134
Cash and cash equivalents at beginning of year                           1,390,641        597,670        171,536
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                               $ 1,930,394    $ 1,390,641    $   597,670
=================================================================================================================

See accompanying notes.
</TABLE>

                                       13
<PAGE>

Acme United Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Operations

The operations of Acme United Corporation (the Company) consist of a single
reportable segment, which operates in the United States, Canada, Germany and
Hong Kong. Principal products are scissors, shears, rulers, 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 and mass market retailers.

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. 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. 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 operations. Foreign
currency transaction gains (losses), which are included in other income
(expense), were ($110,519) in 2004, $105,984 in 2003, and $57,000 in 2002.

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 $210,914 in 2004 and $199,102 in 2003.

Inventories - Inventories are stated at the lower of cost, determined by the
first in, first out method, or market.

Plant, Property and Equipment and Depreciation - Plant, property 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.

Asset Impairments - The Company evaluates the propriety of the carrying amounts
of its long-lived assets, including goodwill, at least annually, or when current
events and circumstances indicate a potential impairment. The Company believes
that there are no significant impairments of the carrying amounts of such assets
and no reduction in their estimated useful lives is warranted.

Intangible Assets - Intangible assets with a finite useful life are recorded at
cost upon acquisition and amortized over the term of the related contract.
Intangible assets held by the Company with a finite useful life include deferred
financing costs, patents, and trademarks. Deferred financing costs are amortized
over the term of the related debt. Patents and trademarks are amortized over
their estimated useful life. The weighted average amortization period of
intangible assets at December 31, 2004 is 13 years.

Goodwill - As of January 1, 2002, the Company adopted Financial Accounting
Standards Board Statement No. 142, Goodwill and Other Intangible Assets (FAS
142) and as such no longer amortizes goodwill but rather tests it annually for
impairment. There was no impairment of goodwill at December 31, 2004 and
December 31, 2003.

Deferred Income Taxes - Deferred income taxes are provided on the differences
between the financial statement and tax bases of assets and liabilities, and on
operating loss carryovers, using enacted tax rates in effect in years in which
the differences are expected to reverse.

                                       14
<PAGE>

Accounting for Stock-Based Compensation - At December 31, 2004, the Company has
one stock-based employee compensation plan, which is described more fully in
Note 11. The Company has elected to adopt the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, and continues to measure costs for its employee stock compensation
plans by using the accounting methods prescribed by APB Opinion No. 25,
Accounting for Stock Issued to Employees, which allows that no compensation cost
be recognized unless the exercise price of the options granted is less than the
fair market value of the Company's stock at date of grant. Accordingly, no
stock-based employee compensation cost is reflected in net income, as all
options granted had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following table illustrates
the effect on net income and earnings per share as if the Company had applied
the fair value method under SFAS No. 123, Accounting for Stock Based
Compensation, to stock based employee compensation.

<TABLE>
<CAPTION>
                                                     2004             2003             2002
==============================================================================================
<S>                                              <C>              <C>              <C>
Net income, as reported                          $ 3,238,405      $ 1,221,831      $   659,494
Deduct: Total stock-based employee
  compensation expense determined
  under fair value based method for all
  awards, net of related tax effects                 (76,929)         (84,985)         (88,646)
- -----------------------------------------------------------------------------------------------
Pro forma net income                             $ 3,161,476      $ 1,136,846      $   570,848
===============================================================================================

Basic-as reported                                $      0.96      $      0.37      $      0.19
Basic-pro forma                                  $      0.94      $      0.34      $      0.17

Diluted-as reported                              $      0.85      $      0.34      $      0.19
Diluted-pro forma                                $      0.83      $      0.32      $      0.16
</TABLE>

Revenue Recognition - The Company recognizes revenue from sales of its products
when ownership transfers to the customers. Ownership transfers from the Company
to its customer upon shipment of the Company's products. When right of return
exists, the Company recognizes revenue in accordance with SFAS 48, Revenue
Recognition When Right of Return Exists.

Research and Development - Research and development costs ($456,905 in 2004,
$347,130 in 2003 and $385,066 in 2002) are charged to operations as incurred.

Shipping Costs - Shipping costs ($1,684,448 in 2004, $1,439,615 in 2003 and
$1,272,115 in 2002) are included in selling, general and administrative
expenses.

Advertising Costs - The Company expenses the production costs of advertising the
first time the advertising takes place. Advertising costs ($1,109,217 in 2004,
$669,065 in 2003 and $766,058 in 2002) are included in selling, general and
administrative expenses.

Concentrations - The Company performs ongoing credit evaluations of its
customers and generally does not require collateral. Allowances for credit
losses are provided and have been within management's expectations. Net sales to
the Company's three major customers, Staples, Inc., Office Max, and United
Stationers, Inc., represented approximately 43% in 2004, 46% in 2003 and 46% in
2002.

Consideration paid to a reseller - As of January 1, 2002, the Company adopted
the Emerging Issues Task Force consensus No. 00-25, Vendor Income Statement
Characterization of Consideration Paid to a Reseller of a Vendor's Products
(EITF 00-25). As such, the Company recognizes consideration paid to a reseller
of its product as a reduction of the selling price of its products and,
therefore, reduces revenue in the Company's statement of operations.

                                       15
<PAGE>

Derivatives - The Company accounts for derivative financial instruments
consistent with the requirements of Financial Accounting Standards Board (FASB)
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
(Statement 133) and its amendments Statements 137, Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133, and Statement No. 138, Accounting for Derivative Instruments
and Certain Hedging Activities. The Company recognizes all derivative financial
instruments, such as interest rate swap contracts, forward foreign exchange
contracts, and foreign currency option contracts, in the consolidated financial
statements at fair value regardless of the purpose or intent for holding the
instrument. Changes in the fair value of derivative financial instruments are
either recognized periodically in operations or in stockholders' equity as a
component of accumulated other comprehensive income (loss) depending on whether
the derivative financial instrument qualifies for hedge accounting, and if so,
whether it qualifies as a fair value hedge or cash flow hedge. Generally,
changes in fair values of derivatives accounted for as fair value hedges are
recorded in operations along with the portions of the changes in the fair values
of the hedged items that relate to the hedged risk(s). Changes in fair values of
derivatives accounted for as cash flow hedges, to the extent they are effective
as hedges, are recorded in other comprehensive (loss) income net of deferred
income taxes. Changes in fair value of derivatives used as hedges of the net
investment in foreign operations are reported in other comprehensive income
(loss) as part of the cumulative translation adjustment. Changes in fair values
of derivatives not qualifying as hedges are reported in operations.

Reclassifications - Certain prior year amounts have been reclassified to conform
to the current year presentation.

3.  Inventories

Inventories consist of:                          2004           2003
- ------------------------------------------------------------------------
Finished goods                               $ 7,739,109    $ 7,252,114
Work in process                                   91,697        119,796
Materials and supplies                           558,422        807,171
- ------------------------------------------------------------------------
                                             $ 8,389,228    $ 8,179,081
========================================================================

Inventories are stated net of valuation allowances for obsolescence of $620,538
in 2004 and $374,665 in 2003.

4.  Intangible Assets

Intangible assets consist of:             2004        2003
- --------------------------------------------------------------
Deferred financing costs                $  70,577   $  70,577
Patents                                   283,866     216,869
Trademarks                                282,637      12,962
- --------------------------------------------------------------
                                          637,080     300,408
Accumulated amortization                   77,434      47,448
- --------------------------------------------------------------
                                        $ 559,646   $ 252,960
==============================================================

During the year ended December 31, 2002, the Company refinanced its revolving
loan and wrote-off unamortized deferred financing costs of $53,380. The Company
capitalized additional financing costs of $48,773 on the new loan. Amortization
expense for deferred financing costs for the years ended December 31, 2004,
2003, and 2002, was $13,615, $21,262 and $139,589, respectively. Amortization
expense for patents and trademarks for the years ended December 31, 2004 and
2003 was $16,371 and $3,144, respectively. There was no amortization expense in
2002 on patents and trademarks. The estimated aggregate amortization expense for
each of the next five succeeding years are as follows: 2005 - $52,994; 2006
- -$43,315; 2007 - $43,315; 2008 - $43,315 and 2009 - $43,315.

5.  Other Accrued Liabilities

Other accrued liabilities consist of:            2004            2003
- --------------------------------------------------------------------------
Vendor rebates                               $ 2,517,666      $ 1,756,973
Other                                          2,584,945          980,507
- --------------------------------------------------------------------------
                                             $ 5,102,611      $ 2,737,480
==========================================================================

The increase in the other portion of Other Accrued liabilities primarily relates
to a higher tax liability in the U.S.A. as the Company utilized all outstanding
tax loss carry forwards in 2003.

                                       16
<PAGE>

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 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 ceasing 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.

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

Asset Category                                      2004             2003
- --------------------------------------------------------------------------------
Equity                                               71%              67%
Fixed Income                                         25%              28%
Other                                                 4%               5%
- --------------------------------------------------------------------------------
Total                                               100%             100%
================================================================================

The Company's investment policy is to minimize risk by balancing investments
between equity and fixed income, utilizing a weighted average approach of 65%
equity securities, 30% fixed income funds, and 5% cash investments. Plan funds
are invested in long term obligations with a history of moderate to low risk.

At December 31, 2004 and 2003, equity securities include 30,000 shares of the
Company's Common Stock having a market value of $471,000 and $162,000 at those
dates, respectively.

Other disclosures related to the pension plan follow:
<TABLE>
<CAPTION>
                                                                        2004             2003
                                                             ---------------------------------
<S>                                                             <C>              <C>
Assumptions used to determine benefit obligation:
  Discount rate                                                        5.75%            6.00%
Changes in benefit obligation:
Benefit obligation at beginning of year                         $ (3,527,592)    $ (3,710,070)
Interest cost                                                       (206,327)        (221,265)
Service cost                                                         (35,000)         (35,000)
Actuarial loss                                                      (173,813)          22,957
Benefits and plan expenses paid                                      461,299          415,786
- ----------------------------------------------------------------------------------------------
Benefit obligation at end of year                                 (3,481,433)      (3,527,592)
- ----------------------------------------------------------------------------------------------

Changes in plan assets:
Fair value of plan assets at beginning of year                     3,418,066        3,278,460
Actual return on plan assets                                         495,728          555,392
Benefits and plan expenses paid                                     (461,299)        (415,786)
- ----------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                           3,452,495        3,418,066
- ----------------------------------------------------------------------------------------------
Funded status                                                        (28,938)        (109,525)
Unrecognized actuarial loss                                          964,199        1,096,662
Unrecognized prior service costs                                      96,536          105,312
Minimum pension liability, including intangible
  pension asset of $96,536 in 2004 and $105,312 in 2003           (1,060,735)      (1,201,974)
- ----------------------------------------------------------------------------------------------
Accrued benefit costs                                           $    (28,938)    $   (109,525)
==============================================================================================
</TABLE>

Accrued benefits costs are included in other accrued liabilities.

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                      2004             2003            2002
==============================================================================================================
<S>                                                                <C>              <C>             <C>
Assumptions used to determine net periodic benefit cost:
  Discount rate                                                        6.00%            6.50%           6.50%
  Expected return on plan assets                                       8.00%            8.00%           8.50%
- --------------------------------------------------------------------------------------------------------------
Components of net benefit (expense) income:
Interest cost                                                      $ 206,327        $ 221,265       $ 253,046
Service cost                                                          35,000           35,000          35,000
Expected return on plan assets                                      (257,424)        (246,124)       (339,765)
Amortization of prior service costs                                    8,776            8,776           8,776
Amortization of actuarial gain                                        67,972           80,687           9,205
- --------------------------------------------------------------------------------------------------------------
                                                                   $  60,651        $  99,604       $ (33,738)
==============================================================================================================
</TABLE>

Acme United Corporation 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 equities and fixed income are
preserved congruent with the widely-accepted capital market principle that
assets with higher volatility generate return over the long run. Current market
factors such as inflation and interest rates are evaluated before long-term
capital market assumptions are determined.

The following table discloses the change in other comprehensive income:

<TABLE>
<CAPTION>
                                                                      2004            2003            2002
                                                             -------------------------------------------------
<S>                                                              <C>             <C>             <C>
Decrease (increase) in minimum liability included in
  other comprehensive income, excluding
  income tax effect                                              $    132,463    $    412,912    $ (1,509,514)
</TABLE>

The following benefits, which reflect expected future service, as appropriate,
are expected to be paid:

2005                                                      $   386,763
2006                                                          373,162
2007                                                          359,629
2008                                                          362,522
2009                                                          351,383
Years 2010 - 2014                                           1,471,356

The Company also has a qualified, non-contributory profit sharing plan covering
substantially all United States employees. Annual Company contributions are
determined by the Compensation Committee. For the years ended December 31, 2004,
2003 and 2002, contributions amounted to a 50% match up to the first 6% of
employee contributions. Total contribution expense under this plan approximated
$63,000, $61,000, $57,000 for 2004, 2003 and 2002, respectively.

                                       18
<PAGE>

7.  Income Taxes

The amounts of income taxes (benefit) reflected in operations follow:

                                         2004           2003           2002
- -------------------------------------------------------------------------------
Current:
  Federal                            $ 1,714,456    $   513,057    $   (31,751)
    State                                211,927         66,783         18,000
    Foreign                              232,486              -              -
- -------------------------------------------------------------------------------
                                       2,158,869        579,840        (13,751)
- -------------------------------------------------------------------------------
Deferred:
  Federal                                (70,436)       557,886       (437,330)
    State                                  4,397          2,813       (116,519)
    Foreign                                9,081        (20,099)         5,382
- -------------------------------------------------------------------------------
                                         (56,958)       540,600       (548,467)
- -------------------------------------------------------------------------------
                                     $ 2,101,911    $ 1,120,440    $  (562,218)
===============================================================================

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.

A summary of United States and foreign income (loss) before income taxes
follows:

                                         2004           2003           2002
- -------------------------------------------------------------------------------
United States                        $ 4,927,741    $ 3,142,489    $   942,776
Foreign                                  412,575       (800,218)      (845,500)
- -------------------------------------------------------------------------------
                                     $ 5,340,316    $ 2,342,271    $    97,276
===============================================================================

The following schedule reconciles the amounts of income taxes (benefit) computed
at the United States statutory rate to the actual amounts reported in
operations.

                                         2004           2003           2002
- -------------------------------------------------------------------------------
Federal income
  taxes at
  34% statutory rate                 $ 1,815,707    $   796,372    $    33,074
State and local
  taxes, net of
  federal income
  tax effect                             147,373         80,199        (29,123)
Permanent items                          (31,907)       (25,710)        (2,709)
Write-off
  intercompany
  investment                                   -              -       (567,438)
Non-recognition
  of foreign tax loss
  carryforwards                          170,738        269,579          3,978
- -------------------------------------------------------------------------------
Provision (benefit)
  for income taxes                   $ 2,101,911    $ 1,120,440    $  (562,218)
===============================================================================

Income taxes paid, net of refunds received, were $1,390,967 in 2004, $850,600 in
2003, and $24,501 in 2002.

                                       19
<PAGE>

                                         2004          2003
- ---------------------------------------------------------------
Deferred income tax liabilities:
Plant, property
  and equipment                       $  156,227    $  174,939
Other                                                   26,440
- ---------------------------------------------------------------
                                         156,227       201,379

Deferred income tax assets:
Asset valuations                         195,048       188,979
Operating loss
  carryforwards and credits            1,418,433     1,278,341
Pension                                   24,999         1,545
Other                                      1,627         2,773
- ---------------------------------------------------------------
                                       1,640,107     1,471,638
- ---------------------------------------------------------------
Net deferred
  income tax asset before
  valuation allowance                  1,483,880     1,270,259
Valuation allowance                   (1,335,907)   (1,139,875)
- ---------------------------------------------------------------
Net deferred
  income tax asset                    $  147,973    $  130,384
===============================================================

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 $2,189,000 and
$1,666,000 are considered permanently reinvested as of December 31, 2004 and
2003, respectively, and the amount of deferred income taxes thereon cannot be
reasonably determined.

In December 2004, the FASB issued FSP No. FAS 109-2, Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation provision within the American
Jobs Creation Act of 2004 ("AJCA"). The AJCA provides a one-time 85% dividends
received deduction for certain foreign earnings that are repatriated under a
plan for reinvestment in the United States, provided certain criteria are met.
FSP No. 109-2 is effective immediately and provides accounting and disclosure
guidance for the repatriation provision. FSP No. 109-2 allows companies
additional time to evaluate the effects of the law on its unremitted earnings
for the purpose of applying the "indefinite reversal criteria" under APB Opinion
No. 23, Accounting for Income Taxes - Special Areas, and requires explanatory
disclosures from companies that have not yet completed the evaluation. The
Company is currently evaluating the effects of the provision and its impact on
the consolidated financial statements. The Company is currently analyzing this
evaluation for 2005. The range of possible amounts of unremitted earnings that
is being considered for repatriation under this provision is between zero and
$2,189,000. The related potential range of income tax is between zero and
$745,000.

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, 2004, the Company has tax operating loss carry forwards
aggregating $4,453,024, all of which are applicable to Germany, and can be
carried forward indefinitely.

                                       20
<PAGE>

8. Debt

Long term debt consists of:
                                                       2004          2003
- -----------------------------------------------------------------------------
Notes payable:
  North American arrangements                      $ 1,207,500   $ 4,493,729
  Other                                                226,436       293,580
- -----------------------------------------------------------------------------
                                                     1,433,936     4,787,309
Less current portion                                 1,378,629     2,035,349
- -----------------------------------------------------------------------------
                                                   $    55,307   $ 2,751,960
=============================================================================

During September 2004, the Company renewed its revolving loan agreement, which
originally allowed for borrowings up to a maximum of $10,000,000 based on a
borrowing base formula, which applied specific percentages to balances of
accounts receivable and inventory. The renewal modified several characteristics
of the original agreement, the most significant of which are reducing the
interest rate to LIBOR plus 1.50% from LIBOR plus 1.75%, eliminating the
borrowing base formula, allowing the Company to borrow up to $10,000,000,
regardless of its inventory and receivable levels, and extending the maturity of
the loan to June 30, 2007. As of December 31, 2004, $1,249,384 was outstanding
and $8,750,616 was available for borrowing under this agreement. It is estimated
that all long-term debt will be paid off in 2005. Amounts outstanding under the
Agreement bear interest at the LIBOR rate plus 1.50% (3.90% at December 31,
2004).

The Company had maintained an interest rate swap agreement, which fixed the
effective interest rate at 7.18% for $3,500,000 of debt under the previous
revolving loan agreement. The swap agreement expired January 19, 2003.

On August 22, 2000 the Company borrowed $700,000 under a loan agreement with a
bank to refinance a mortgage. The loan was payable in monthly installments of
$6,928, including interest at the Federal Home Loan Bank of Seattle fixed
advanced rate, plus 3.0%, adjusting every five years, through August 1, 2020 and
a final installment of $500,800, plus interest, due on August 1, 2020. During
the year ended December 31, 2003, the Company made prepayments on the loan
amounting to $279,999. During the year ended December 31, 2004, the Company paid
the final balance on the loan amounting to $364,117.

The Company, among other things, is restricted with respect to additional
borrowings, investments, mergers, and property and equipment acquisitions.
Further, the Company is required to maintain specific amounts of tangible net
worth, a specified debt service coverage ratio, and a fixed charge coverage
ratio, all as defined in the revolving loan agreement. The Company is in
compliance with these financial covenants at December 31, 2004.

Maturities of long-term debt for the next five years follow: 2005 - $1,378,629;
2006- $4,837; 2007 - $4,837; 2008 - $4,837; and 2009 - $4,837.

Interest paid was $157,335 in 2004, $235,265 in 2003 and $605,344 in 2002.

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
$309,107 in 2004, $252,294 in 2003 and $165,854 in 2002. Minimum annual rental
commitments under non-cancelable leases with initial or remaining terms of one
year or more as of December 31, 2004 to their expiration follow: 2005 -
$221,491; 2006 - $133,511; 2007 - $53,157; 2008 - $49,542; and 2009 - $48,496.

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 there will not be a material
adverse impact on financial position, results of operations, or liquidity from
these matters.

                                       21
<PAGE>

10.  Geographic Data

Net sales of the Company's continuing operations by geographic area follow
(000's omitted):

                                         2004           2003           2002
- -------------------------------------------------------------------------------
United States                           $ 32,511       $ 26,482       $ 22,773
Canada                                     5,986          5,611          5,098
Europe                                     3,654          2,882          3,013
Hong Kong                                  1,230              -              -
- ------------------------------------------------------------------------------
                                        $ 43,381       $ 34,975       $ 30,884
==============================================================================

Long-lived assets by geographic area follow (000's omitted):

                                         2004           2003           2002
- -------------------------------------------------------------------------------
United States                           $  1,189       $  1,300       $  1,326
Canada                                       182            156            157
Europe                                       874            854            798
Hong Kong                                     50             75              -
- -------------------------------------------------------------------------------
                                        $  2,295       $  2,385       $  2,281
===============================================================================

11.  Stock Option Plans

The Company's amended and restated stock option plan, which provides incentive
and nonqualified stock options for up to 790,000 shares of the Company's Common
Stock to officers and key employees (the Employee's Plan), terminated on
February 24, 2002. Options previously granted under the Employee's Plan continue
to vest and to be exercisable in accordance with their terms, however, no new
options may be granted under the Employee's Plan. The Employee's Plan provided
for the purchase of shares of the Company's Common Stock at a price of not less
than 100% of its fair market value at the date of grant. Generally, options
granted under the Employee's Plan prior to June 24, 1996 vested immediately or
within a year; after June 24, 1996, 25% of options granted vest immediately with
the balance vesting over the next three years. The term of options issued cannot
exceed 10 years from the date of grant.

Effective February 26, 2002, the Company adopted a new officers' and key
employee's stock option plan which provides incentive and nonqualified stock
options for up to 150,000 shares of the Company's Common Stock to officers and
key employees (the New Employee's Plan). The New Employee's Plan provided for
the purchase of shares of the Company's Common Stock at a price of not less than
100% of its fair market value at the date of grant. The term of options issued
cannot exceed 10 years from the date of grant.

The Company also has a stock option plan which provides nonqualified stock
options for up to 160,000 shares of the Company's Common Stock to non-salaried
directors (the Director's Plan). The original Director's Plan, as approved at
the 1996 Annual Meeting, granted 10,000 options to new directors elected to the
Board at the 1996 Annual Meeting, which vested one year after the grant date.
The Director's Plan was amended in 1997 to grant 10,000 options to directors
elected at the 1997 Annual Meeting, who were first elected prior to the 1996
Annual Meeting, which vested immediately. The Director's Plan was amended again
in 1998 to grant 2,500 options to each director re-elected to the Board at the
annual meeting. These options vest immediately.

During 2003 and 2002, an additional 2,500 options were granted to each director.
Also during 2003, 10,000 options were issued to one new director. The Director's
Plan provides for the purchase of shares of the Company's Common Stock at a
price of not less than 100% of its fair value at the date of grant.

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

                                       22
<PAGE>

                                         2004           2003           2002
- -------------------------------------------------------------------------------
Options outstanding  at the
  beginning of the year                  867,150        766,850        830,350
Options granted                            6,500        102,500         30,500
Options forfeited                         (3,750)        (1,700)       (55,000)
Options exercised                       (196,700)          (500)       (39,000)
- -------------------------------------------------------------------------------
Options outstanding at
  the end of the year                    673,200        867,150        766,850
===============================================================================
Options exercisable at the
  end of the year                        622,263        747,940        635,000
===============================================================================
Common stock available for future
  grants at the end of the year           60,500         64,500        167,000
===============================================================================
Weighted average price of options:
 Granted                               $    5.50      $    3.89      $    3.94
 Forfeited                                  4.33           2.67           3.35
 Exercised                                  3.53           2.53           2.28
 Outstanding                                3.27           3.31           3.23
 Exercisable                                3.19           3.26           3.29

A summary of options outstanding at December 31, 2004 follows:

<TABLE>
<CAPTION>
                                                             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
- -------------------------------------------------------------------------------------------------------------------------------
<C>                                                  <C>              <C>         <C>                     <C>           <C>
$1.25 to $2.49                                       204,600          4           $ 2.13                  204,600       $ 2.13
$2.50 to $3.65                                       265,850          7             3.05                  257,850         3.04
$3.66 to $5.00                                       118,250          4             4.01                   84,188         4.03
$5.01 to $7.25                                        84,500          3             5.65                   75,625         5.68
- ----------------------------------------------------------------------------------------------     ----------------------------
                                                     673,200                                              622,263
                                             ================                                      ===============
</TABLE>

The weighted average remaining contractual life of outstanding stock options is
5 years.

The Company applies APB Opinion No. 25, Accounting for Stock Issued to Employees
and related interpretations to recognize compensation expense under its stock
option plans. As such, no expense is recognized if, at the date of grant, the
exercise price of the option is at least equal to the fair market value of the
Company's Common Stock. No compensation expense related to the Company's stock
option plans was required to be recognized for its plans in 2004, 2003 and 2002
except as discussed in Note 17.

The weighted average fair value at the date of grant for options granted during
2004, 2003, and 2002 was $2.59, $1.79, $1.82 per option, respectively.

The fair value of options at the date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:

                                          2004             2003            2002
                                  ----------------------------------------------
Expected Life in Years                       5                5               5
Interest Rate                            3.84%            3.00%           3.00%
Volatility                               0.527            0.480           0.491
Dividend Yield                           1.09%               0%              0%

                                       23
<PAGE>

12.  Earnings Per Share

The calculation of earnings per share follows:
<TABLE>
<CAPTION>
                                                                             2004          2003          2002
- -----------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>           <C>           <C>
Numerator:
   Net income                                                            $ 3,238,405   $ 1,221,831   $   659,494
- -----------------------------------------------------------------------------------------------------------------
Denominator:
   Denominator for basic earnings per share
      Weighted average shares outstanding                                  3,364,033     3,317,231     3,400,151
   Effect of dilutive employee stock options                                 442,995       240,663       155,575
- -----------------------------------------------------------------------------------------------------------------
   Denominator for dilutive earnings per share                             3,807,028     3,557,894     3,555,726
- -----------------------------------------------------------------------------------------------------------------
   Basic earnings per share                                              $      0.96   $      0.37   $      0.19
- -----------------------------------------------------------------------------------------------------------------
   Dilutive earnings per share                                           $      0.85   $      0.34   $      0.19
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

For 2003 and 2002, 87,000 and 79,000 stock options, respectively, were excluded
from diluted earnings per share calculations because they would have been
anti-dilutive.

13.    Accumulated Other Comprehensive Loss

The components of the accumulated other comprehensive loss follow:
<TABLE>
<CAPTION>
                                                              Derivative             Minimum
                                          Translation          Financial             Pension
                                          Adjustment          Instruments           Liability           Total
- -----------------------------------------------------------------------------------------------------------------
<S>                                      <C>                  <C>               <C>                 <C>
Balances, January 1, 2003                $ (1,350,485)        $  (17,573)       $   (948,756)       $ (2,316,814)
Change in Fair Value of
   Derivative Financial
   Instruments                                                    26,974                                  26,974
Income Taxes Relating
   to Derivative Financial
   Instruments                                                    (9,401)                                 (9,401)
Change in Fair Value of
   Minimum Pension
   Liability                                                                         412,912             412,912
Income Taxes Relating
   to Minimum Pension
   Liability                                                                        (155,053)           (155,053)
Translation Adjustment                        670,941                                                    670,941
- -----------------------------------------------------------------------------------------------------------------
Balances, December 31, 2003                  (679,544)                 0            (690,897)         (1,370,441)
Change in Fair Value of
   Derivative Financial
   Instruments                                                   (82,268)                                (82,268)
Change in Fair Value of
   Minimum Pension
   Liability                                                                         132,463             132,463
Income Taxes Relating
   to Minimum Pension
   Liability                                                                         (39,369)            (39,369)
Translation Adjustment                        328,028                                                    328,028
- -----------------------------------------------------------------------------------------------------------------
Balances, December 31, 2004              $   (351,516)        $  (82,268)       $   (597,803)       $ (1,031,587)
=================================================================================================================
</TABLE>

                                       24
<PAGE>

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.

Forward foreign exchange contracts and interest rate swaps: The fair values of
the Company's forward foreign currency contracts and interest rate swaps are
estimated based on dealer quotes.

The carrying amounts and fair values of the Company's financial instruments
follow (000's omitted):
<TABLE>
<CAPTION>
                                                      2004                            2003
                                          -------------------------       -------------------------
                                            Carrying        Fair            Carrying        Fair
                                             Amount         Value            Amount         Value
- ---------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>                <C>          <C>
Cash and cash equivalent                     $ 1,930      $ 1,930            $ 1,391      $ 1,391
Accounts receivable                            8,885        8,885              6,795        6,795
Accounts payable                              (2,316)      (2,316)            (1,743)      (1,743)
Short term notes payable                         (42)         (42)              (141)        (141)
Long term debt                                (1,434)      (1,434)            (4,787)      (4,787)
Forward foreign exchange contract                (82)         (82)
</TABLE>

Derivative Financial Instruments
- --------------------------------
The Company uses derivatives for cash flow hedging purposes as part of its risk
management strategy. Following is a summary of the Company's risk management
strategies and derivatives and the effect of them on the Company's consolidated
financial statements.

The Company and its foreign subsidiaries utilize bank loans to finance their
operations. To mitigate foreign currency risk, foreign loans are denominated in
the local currency of the foreign subsidiary wherever possible.

In September 2004, the Company entered into a forward foreign currency contract
to hedge forecasted 2005 inventory purchases by the Company's Canadian
subsidiary in a foreign currency other than the Canadian subsidiary's functional
currency, the Canadian dollar. The fair value of the forward foreign
currency contract totaled $82,268 and is reflected as a liability and component
of accumulated other comprehensive loss in the accompanying consolidated balance
sheet.

In 2000, the Company entered into an interest-rate swap agreement that
effectively converted a portion of its floating-rate debt to a fixed-rate basis
through January 19, 2003, the agreement maturity date, thus reducing the impact
of interest-rate changes on future income. During 2003 and 2002, the Company
recognized expense of $26,874 and $174,122 respectively, related to the net
amounts paid and accrued on interest rate swaps, which are included in interest
expense in each year's respective consolidated statements of income.

                                       25
<PAGE>

15.  Restructuring Charges

In 2002, restructuring charges of approximately $555,000 were recorded as a
result of certain strategic and operating changes initiated by the Company's
management related to liquidating Acme United Limited (AUL), a United Kingdom
subsidiary. The restructuring charges consisted of a write-down of inventories
of $206,000, accounting and legal costs of $95,000, lease cancellation costs of
$90,000, a write-off of goodwill of $69,000, severance costs of $55,000, other
closing costs of $22,000, a write-off of uncollectible accounts receivable of
$9,000 and write-offs of equipment of $9,000. As of December 31, 2002, the
restructuring was substantially complete and approximately $36,000 remained in
accrued restructuring charges, primarily related to accounting and legal costs.
The Company terminated five employees as part of the restructuring.


16. Quarterly Data (unaudited)

<TABLE>
<CAPTION>
                                                                   Quarters (000's omitted, except per share data)

2004                                                        First        Second        Third         Fourth         Total
- ---------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>          <C>            <C>           <C>
Net Sales                                                 $  8,567      $ 12,298     $ 11,595       $ 10,921      $ 43,381
- ---------------------------------------------------------------------------------------------------------------------------
Cost of Goods Sold                                           4,848         6,779        6,142          5,959        23,728
- ---------------------------------------------------------------------------------------------------------------------------
Net Income                                                     392         1,075        1,017            754         3,238
- ---------------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                                  $   0.12      $   0.32     $   0.30       $   0.22      $   0.96
Diluted Earnings Per Share                                $   0.11      $   0.29     $   0.26       $   0.19      $   0.85


2003                                                        First        Second        Third         Fourth         Total
- ---------------------------------------------------------------------------------------------------------------------------
Net Sales                                                 $  7,189      $ 10,142     $  9,538       $  8,106      $ 34,975
- ---------------------------------------------------------------------------------------------------------------------------
Cost of Goods Sold                                           4,307         6,221        6,367          4,946        21,842
- ---------------------------------------------------------------------------------------------------------------------------
Net Income                                                      78           615          302            227         1,222
- ---------------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                                  $   0.02      $   0.18     $   0.09       $   0.07      $   0.37
Diluted Earnings Per Share                                $   0.02      $   0.17     $   0.08       $   0.06      $   0.34
</TABLE>

Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not
necessarily equal the total for the year.

17.  Capital Structure

In 2004, the Company issued 196,700 shares of common stock with proceeds of
$694,179 upon the exercise of outstanding stock options. The Company also
repurchased 48,830 shares of common stock for treasury. The shares were
purchased at fair market value, with a total cost to the Company of $252,798.
During the first quarter, an additional $31,225 of compensation expense was
charged to operating results as a result of the Company's repurchase of 16,000
shares within six months of exercise of certain options by a terminated
employee.

18.  Business Combination

On May 28, 2004, the Company purchased Clauss Cutlery, a division of Alco
Industries, Inc. The purchase price was the aggregate value of inventory,
trademarks and brand names totaling $446,754. Included in the purchase price was
a stand-by letter of credit the Company issued in the amount of $230,000 for a
trademark from Alco Industries, Inc. that was renewed by the U.S. Patent and
Trademark Office on July 13, 2004. The letter of credit was set-up to expire on
May 28, 2005, if the trademark was not renewed. Since the trademark was renewed
prior to the expiration date, Alco Industries, Inc. enforced the letter of
credit and drew down the funds. Included in the accompanying Statement of
Operations are the operations of the acquired business since the date of
acquisition. Proforma operating information for the periods prior to the
acquisition is not provided because of the immateriality of the transaction on a
proforma basis.

19.  Impairment of Equipment

During the second quarter of 2004, the Company abandoned its ruler manufacturing
equipment. In accordance with FASB 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the Company recorded an impairment loss of
$84,820, or $0.02 a share, for the full amount of the assets at the time of
abandonment.

                                       26
<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Acme United Corporation

We have audited the accompanying consolidated balance sheets of Acme United
Corporation and subsidiaries as of December 31, 2004 and 2003, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2004. Our
audits also included the financial statement schedule listed in the Index at
Item 15(a). 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. An audit includes 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, 2004 and 2003, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2004, 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.


                                                  /s/ Ernst & Young LLP


Hartford, Connecticut
February 14, 2005

                                       27
<PAGE>

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 2004.


Item 9A.  Controls and Procedures

(a)  Evaluation of Internal Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have reviewed and
evaluated the effectiveness of our disclosure controls and procedures, which
included inquiries made to certain other of our employees. Based on their
evaluation, our Chief Executive Officer and Chief Financial Officer have each
concluded that, as of December 31, 2004, our disclosure controls and procedures
were effective and sufficient to ensure that we record, process, summarize and
report information required to be disclosed by us in our periodic reports filed
under the Securities and Exchange Commission's rules and forms.

(b)  Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2004, there were no changes in our
internal control over financial reporting that materially affected, or was
reasonably likely to materially affect, this control.

PART III

Item 10.  Directors and Executive Officers of the Registrant

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            54        President, Chief Executive Officer and
                                       Director
Gary D. Penisten             73        Chairman of the Board and Director
Brian S. Olschan             48        Executive Vice President, Chief Operating
                                       Officer and Director
Paul G. Driscoll             44        Vice President, Chief Financial Officer,
                                       Secretary and Treasurer
George R. Dunbar             81        Director
Richmond Y. Holden, Jr.      51        Director
Wayne R. Moore               73        Director
Stevenson E. Ward III        59        Director
Susan H. Murphy              53        Director

Walter C. Johnsen has served as director since 1995 and as President and Chief
Executive Officer since November 30, 1995. Prior to that he was Executive Vice
President since January 24, 1995. He also was Chief Financial Officer from March
26, 1996 until June 30, 1996. Before joining the Company he was Vice Chairman
and a principal of Marshall Products, Inc., a medical supply distributor.

Gary D. Penisten has served as director since 1994 and Chairman of the Board
since February 27, 1996. From 1977 to 1988, he was Senior Vice President of
Finance, Chief Financial Officer and a Director of Sterling Drug Inc. in New
York City. From 1974 to 1977 he served as Assistant Secretary of the United
States Navy. Prior to that he was employed by General Electric for twenty-one
years.

Brian S. Olschan served as Senior Vice President-Sales and Marketing from
September 10, 1996 until February 22, 1999. Effective January 23, 1999, he was
promoted to Executive Vice President and Chief Operating Officer. From 1984 to
1996, he was employed by General Cable Corporation in various executive
positions including Vice President and General Manager of the Cordset and
Assembly Business from 1994 to 1996.

                                       28
<PAGE>

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 two years in Japan as
Director of Finance and Operations. Prior to Gallo he served in several
increasingly responsible positions in Sterling Winthrop Inc. in New York City
and Sanofi S.A. in France.

George R. Dunbar has served as director since 1977. He is currently President of
The U.S. Baird Corporation and Dunbar Associates, a municipal management
consulting firm. He is a former Chief Administrative Officer for the City of
Bridgeport and served as President (1972-1987) of the Bryant Electric Division
of Westinghouse Electric Corporation, manufacturer of electrical distribution
and utilization products, Bridgeport, Connecticut.

Richmond Y. Holden, Jr. has served as director since 1998. He has served as
President and Chief Executive Officer of J.L. Hammett Co. since 1992; Executive
Vice President from 1989 to 1992. J.L. Hammett Co. is a distributor and online
retailer of educational products throughout the United States, and is one of the
largest distributors to the K-12 educational marketplace.

Wayne R. Moore has served as director since 1976. He is presently Chairman
Emeritus of The Producto Machine Company, manufacturer of machine tools, special
machines, and tool die and mold components. He was Chairman of the Board of The
Producto Machine Company and the Moore Special Tool Company, manufacturer of
machine tools, measuring machines and metrology products. Mr. Moore was Chairman
of the U.S. Machine Tool Builders/ Association for Manufacturing Technology
(1985-1986) and Committee Member of U.S. Eximbank (1984). He is a Trustee of the
American Precision Museum and on the Board of advisors of the Fairfield
University School of Engineering.

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.

Susan H. Murphy has served as director since 2003. She is presently Vice
President for Student and Academic Services at Cornell University. From 1985
through 1994, Ms. Murphy served as Dean of Admissions and Financial Aid. Ms.
Murphy has been employed at Cornell since 1978.

The Company has adopted a Code of Conduct that is applicable to our employees,
including the Chief Executive Officer, Chief Financial Officer and Controller.
The Code of Conduct is available in the investor relations section on our
website at www.acmeunited.com

If we make any substantive amendments to the Code of Conduct which apply to our
Chief Executive Officer, Chief Financial Officer or Controller or grant any
waiver, including any implicit waiver, from a provision of the Code of Conduct
to our executive officers, we will disclose the nature of the amendment or
waiver on our website or in a report on Form 8-K.

Item 11.  Executive Compensation

          The information contained in Acme United Corporations
          Proxy Statement Dated March 28, 2005, with respect to executive
          compensation, is incorporated here in by reference in response to this
          item.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

          The information contained in Acme United Corporations
          Proxy Statement Dated March 28, 2005, with respect to security
          ownership of certain beneficial owners and management, is incorporated
          here in by reference in response to this item.

Item 13.  Certain Relationships and Related Transactions

          (None)

                                       29
<PAGE>

Item 14.  Principal Accountant Fees and Services

          The information contained in Acme United Corporations
          Proxy Statement Dated March 28, 2005, with respect to principal
          accountant fees and services, is incorporated here in by reference in
          response to this item.

                                       30
<PAGE>
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 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)       Bylaws of the Company
- ----------- --------------------------------------------------------------------
4           Specimen of Common Stock certificate (2)
- ----------- --------------------------------------------------------------------
10.1        Non-Salaried Director Stock Option Plan dated April 22, 1996* (3)
- ----------- --------------------------------------------------------------------

                                       31
<PAGE>

- ----------- --------------------------------------------------------------------
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*
- ----------- --------------------------------------------------------------------
10.4        Severance Pay Plan dated September 28, 2004*
- ----------- --------------------------------------------------------------------
10.5        Salary Continuation Plan dated September 28, 2004*
- ----------- --------------------------------------------------------------------
21          Subsidiaries of the Registrant
- ----------- --------------------------------------------------------------------
23          Consent of Ernst & Young, Independent Auditors
- ----------- --------------------------------------------------------------------
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.

     (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.

                                       32
<PAGE>
<TABLE>

SCHEDULE II
Acme United Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2004, 2003 and 2002
<CAPTION>
                                                           Balance at     Charged to        Deductions    Balance at
                                                          Beginning of    Costs and          and Other      End of
                                                             Period        Expenses         Adjustments     Period
- --------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>               <C>         <C>
2004
Allowance for doubtful accounts                           $   199,102     $ 123,809         $ 111,997    $  210,914
Allowance for inventory obsolescence                          374,665       425,127           179,253       620,538
Deferred income tax asset valuation allowance               1,139,875       196,032                 -     1,335,907
- --------------------------------------------------------------------------------------------------------------------
2003
Allowance for doubtful accounts                           $   205,213     $  61,924         $  68,035    $  199,102
Allowance for inventory obsolescence                          407,881       273,447           306,663       374,665
Deferred income tax asset valuation allowance               1,130,777         9,098                 -     1,139,875
- --------------------------------------------------------------------------------------------------------------------
2002
Allowance for doubtful accounts                           $   209,508     $  71,998         $  76,293    $  205,213
Allowance for inventory obsolescence                          273,260       216,512            81,891       407,881
Deferred income tax asset valuation allowance               1,552,666             -           421,889     1,130,777
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       33
<PAGE>

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 totally held:

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


            Consent of 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, and 333-70346) pertaining to the
Acme United Corporation Amended and Restated Stock Option Plan, the Registration
Statements (Form S-8 Nos. 333-84505, 333-26739, and 333-70348) 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 February
14, 2005, 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, 2004.

                                                  /s/ Ernst & Young LLP

Hartford, Connecticut
March 15, 2005

                                       34
<PAGE>

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, 2004 (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
                 President and
             Chief Executive Officer

Dated: March 17, 2005


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.

                                       35
<PAGE>

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, 2004 (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 17, 2005


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.

                                       36
<PAGE>

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 17, 2005.


ACME UNITED CORPORATION
(Registrant)

Signatures                                Titles

s/ Walter C. Johnsen
- --------------------------------
Walter C. Johnsen                         President, Chief Executive Officer
                                          and Director

s/ Gary D. Penisten
- --------------------------------
Gary D. Penisten                          Chairman of the Board and Director

s/ Brian S. Olschan
- --------------------------------
Brian S. Olschan                          Executive Vice President, Chief
                                          Operating Officer and Director

s/ Paul G. Driscoll
- --------------------------------
Paul G. Driscoll                          Vice President, Chief Financial
                                          Officer, Secretary and Treasurer

s/ George R. Dunbar
- --------------------------------
George R. Dunbar                          Director

s/ Richmond Y. Holden, Jr.
- --------------------------------
Richmond Y. Holden, Jr.                   Director

s/ Wayne R. Moore
- --------------------------------
Wayne R. Moore                            Director

s/ Susan H. Murphy
- --------------------------------
Susan H. Murphy                           Director

s/ Stevenson E. Ward III
- --------------------------------
Stevenson E. Ward III                     Director

                                       37
<PAGE>
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)) 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) 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


         (c) 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 (the registrant's fourth fiscal quarter in
         the case of an annual report) 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
                 President and
             Chief Executive Officer

Dated:  March 17, 2005

                                       38
<PAGE>
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)) 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) 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


         (c) 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 (the registrant's fourth fiscal quarter in
         the case of an annual report) 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 17, 2005

                                       39
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(II)
<SEQUENCE>2
<FILENAME>acme_10k04ex3ii.txt
<DESCRIPTION>EXHIBIT 3(II)
<TEXT>
Exhibit 3(ii)

                                 Adopted April 25, 1961,
                                 Amended September 26, 1977
                                 Further Amended April 22, 1980,
                                 January 25, 1982, April 23, 1990,
                                 June 29, 1993, October 24, 1994,
                                 December 20, 1994 and December 20,1995

                             ACME UNITED CORPORATION
                                 INDEX - BY-LAWS

Page              Article    Section
- ----              -------    -------
  1                  1                     Location of Principal Office
                                           ----------------------------

                     2                     Shareholders
                                           ------------
                                1          Annual Meeting
                                2          Special Meetings
                                3          Place of Meetings
                                4          Notice of Meetings
  2                             5          Closing of Transfer Books or
                                           Fixing of Record Date
                                6          Voting Lists
  3                             7          Quorum
                                8          Proxies
                                9          Voting of Shares
3 & 4                           10         Voting of Shares by Certain Holders
  4                             11         Notification of Nominations

  4                  3                     Board of Directors
                                           ------------------
                                1          General Powers
  5                             2          Number, Tenure and Qualifications
                                3          Vacancies
                                4          Regular Meetings
                                5          Special Meetings
                                6          Notice
                                7          Quorum
  6                             8          Manner of Acting
                                9          Compensation
                                10         Presumption of Assent
                                11         Annual Reports
                                12         Executive Committee
  7                             13         Audit Committee
                                14         Nominating Committee
                                15         Compensation Committee

  7                  4                     Officers
                                           --------
                                1          Number
                                2          Election and Term in
                                           Office
                                3          Removal
                                4          Vacancies
  8                             5          Chairman
                                6          President
                                7          Vice Chairman
  9                             8          The Executive Vice President
                                9          The Senior Vice Presidents
                                10         Vice Presidents

<PAGE>

                             ACME UNITED CORPORATION
                                 INDEX - BY-LAWS


Page              Article    Section
- ----              -------    -------
                                           Officers.  (Continued)
                                           ---------
  9                  4          11         Secretary
  10                            12         Treasurer
                                13         Assistant Secretaries and Assistant
                                           Treasurers
                                14         Salaries

  10                 5                     Contracts, Loans, Checks and
                                           -----------------------------
                                           Deposits
                                           --------
                                 1         Contracts
                                 2         Loans
                                 3         Checks, Drafts, etc.
                                 4         Deposits

  11                 6                     Certificates for Shares and
                                           ----------------------------
                                           Their Transfer
                                           --------------
                                 1         Certificates for Shares
                                 2         Transfer of Shares

  11                 7                     Fiscal Year
                                           -----------

  11                 8                     Dividends
                                           ---------

  11                 9                     Seal
                                           ----

  11                 10                    Waiver of Notice
                                           ----------------

  11                 11                    Amendments
                                           ----------

<PAGE>

                            Adopted on April 25, 1961
                             by Common Shareholders
                                at Annual Meeting
                           Amended September 26, 1977,
                         Further Amended April 22, 1980,
                        January 25, 1982, April 23, 1990,
                        June 29, 1993, October 24, 1994,
                     December 20, 1994 and December 20, 1995


                                     BY-LAWS
                                       OF
                             ACME UNITED CORPORATION


         ARTICLE 1. Offices. The principal office of the Corporation in the
State of Connecticut shall be located in the Town of Fairfield, County of
Fairfield, Connecticut. The Corporation may have such other offices, either
within or without the State of Connecticut, as the Board of Directors may
designate or as the business of the Corporation may require from time to time.

         ARTICLE 2. Shareholders.

         Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the fourth Monday of April in each year, for the purpose of electing
Directors and for the transaction of such-other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday in the
State of Connecticut, such meeting shall be held on the next succeeding business
day. If the election of Directors shall not be held on the day designated herein
for any annual meeting of the shareholders, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a special meeting of
the shareholders as soon thereafter as conveniently may be.

         Section 2. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth (1/10) of all
the outstanding shares of the Corporation entitled to vote at the meeting.

         Section 3. Place of Meetings. Meetings of shareholders shall be held at
the offices of the Corporation in Fairfield or at such other place as may be
designated by the President or the Board of Directors of the Corporation.

         Section 4. Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given by or at the
direction of the President or Secretary to each shareholder of record entitled
to vote at such meeting, by leaving such notice with him or at his residence or
usual place of business, or by mailing a copy thereof addressed to him at his
last known post office address as last shown on the stock records of the
Corporation, postage prepaid, not less than ten (10) days before the date of
such meeting.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 2
         ---------------------------------------------------------------------

         ARTICLE 2. Shareholders (continued)

         Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books shall be
closed for a stated period but not to exceed, in any case, fifty days. If the
stock transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date in
any case to be not more than fifty days and, in case of a meeting of the
shareholders, not less than ten days prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken. If the
stock transfer books are not closed and no record date is fixed for the
determination of the shareholders entitled to notice of or to vote at a meeting
of shareholders, the date on which notice of the meeting is mailed shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.

         Section 6. Voting Lists. The officers or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least five
days before each meeting of shareholders of which at least ten (10) days' notice
is given a complete list or other equivalent record of the shareholders entitled
to vote at such meeting, arranged in alphabetical order, with the address of,
and the number and class of shares held by each. Such list or other equivalent
record shall, for a period of five days prior to such meeting, be kept on file
at the principal office of the Corporation and shall be subject to inspection by
any shareholder during usual business hours for any proper purpose in the
interest of the shareholder as such or of the Corporation and not for
speculative or trading purposes, or for any purpose inimical to the interest of
the Corporation or of its shareholders. Such list or other equivalent record
shall also be produced and kept open at the time and place of the meeting and
shall be subject for any such proper purpose to such inspection during the whole
time of the meeting. The original share transfer books shall be prima facie
evidence as to who are the shareholders entitled to inspect such list or other
equivalent record.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 3
         ---------------------------------------------------------------------

         ARTICLE 2. Shareholders (continued)

         Section 7. Quorum. A majority of the outstanding shares of the
Corporation, entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.

         Section 8. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless it specifies the length of
time for which it is to continue in force or limits its use to a particular
meeting not yet held.

         Section 9. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one vote upon each matter submitted to a vote at a meeting
of shareholders.

         Section 10. Voting of Shares By Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.

         Shares held by an administrator, executor, a guardian or conservator
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.

         Shares standing in the name of a receiver may be voted by such receiver
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.

         A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 4
         ---------------------------------------------------------------------

         ARTICLE 2. Shareholders (continued)

         Section 10. Voting of Shares By Certain Holders (continued)

         Shares of its own stock belonging to the Corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.

         At all shareholders' meetings, any vote, if so requested by any
shareholder, shall be by ballot, and the name of each shareholder so voting
shall be written upon each ballot with the number of shares held by him.

         Section 11. Notification of Nominations.

         Nominations for the election of Directors may be made by the Board of
Directors or by any shareholder entitled to vote for the election of Directors.
Any shareholder entitled to vote for the election of Directors at a meeting may
nominate persons for election as Directors only if written notice of such
shareholder's intent to make such nomination is given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Company not later than (i) with respect to an election to be held at an annual
meeting of shareholders, 60 days in advance of such meeting, and (ii) with
respect to an election to be held at a special meeting of shareholders for the
election of Directors, the close of business of the seventh day following the
date on which notice of such meeting is first given to shareholders. Each such
notice shall set forth: (a) the name and address of the shareholder who intends
to make the nomination and of the person or persons to be nominated, (b) a
representation that such shareholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice
(c) a description of all arrangements or understandings between such shareholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
shareholders, (d) Such other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated by the Board of
Directors, and (e) the consent of each nominee to serve as a Director of the
Company if elected. The chairman of a shareholder meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.

         ARTICLE 3. Board of Directors.

         Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 5
         ---------------------------------------------------------------------

         ARTICLE 3. Board of Directors (continued)

         Section 2. Number, Tenure and Qualifications. The number of Directors
of the Corporation shall be not less than five nor more than nine. The Directors
shall be elected at the annual meeting of shareholders and each Director shall
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the State of Connecticut or shareholders of the Corporation.

         In the event that a total of nine Directors are not elected at the
annual meeting of the shareholders, an additional Director or additional
Directors may be elected at any special meeting of the shareholders to hold
office until the next annual meeting of the shareholders, or until a successor
or successors shall be elected and shall have qualified, provided that the total
number of Directors elected shall at no time exceed nine.

         Section 3. Vacancies. Vacancies in the Board of Directors, because of
death, resignation or for any other reason, shall be filled by the remaining
Directors.

         Section 4. Regular Meetings. A regular meeting of the Board of
Directors shall be held after the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Connecticut, for the holding of additional regular meetings
without other notice than such resolution.

         Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or any two Directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place, either within or without the State of Connecticut, as the
place for holding any special meeting of the Board of Directors called by them.

         Section 6. Notice. Notice of any special meeting shall be given at
least two days prior thereto by written notice delivered personally or mailed to
each Director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any Director may waive notice of any meeting. The attendance
of a Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. The notice shall give the time and place of the meeting, and in the
case of a special meeting, the objects thereof.

         Section 7. Quorum. A majority of the Board of Directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such majority is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 6
         ---------------------------------------------------------------------

         ARTICLE 3. Board of Directors (continued)

         Section 8. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.

         Section 9. Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors and/or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefore.

         Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the Minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.

         Section 11. Annual Reports. At the annual meeting of the shareholders,
the Chairman or the President shall submit a report on the condition of the
Corporation's business.

         Section 12. Executive Committee. The Board of Directors may elect from
its membership an executive committee having such number of members as may be
prescribed from time to time by the Board of Directors, which members of the
executive committee may be elected for such terms as may be prescribed by the
Board of Directors provided, however, that the term of office of any member of
the executive committee shall not extend beyond the term for which such member
is elected a Director of the Corporation.

         The Board of Directors may fill any vacancy in the executive committee,
or any other committee.

         During the intervals between the meetings of the Board of Directors,
the executive committee shall possess and may exercise all the powers of the
Board of Directors in the management and direction of the affairs of the
Corporation in all matters in which specific directions shall not be given by
the Board of Directors.

         All action by the executive committee shall be reported to the Board of
Directors at the next meeting succeeding such action, and shall be subject to
review and alteration by the Board of Directors provided that no rights of third
parties shall be affected by such review, or alteration.

         Regular minutes of the proceedings of the executive committee shall be
kept in a book provided for that purpose.

         The executive committee shall determine and fix its rules with respect
to meetings and of procedure, and the number required for a quorum and shall
meet and conduct business as provided by such rules.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 7
         ---------------------------------------------------------------------

         ARTICLE 3. Board of Directors (continued).

         Section 13. Audit Committee. This committee shall consist of not less
than three nor more than five members, all of whom shall be non-employee members
of the Board of Directors. The main function of this committee is to maintain a
direct and separate line of communication between the Board of Directors and the
Company's independent auditors.

         Section 14. Nominating Committee. All members of the Board of Directors
shall serve as a nominating committee to prepare a slate of nominees for
election to the Board of Directors at the annual meeting of shareholders or such
special meeting of shareholders as may be duly called.

         Section 15. Compensation Committee. This committee shall consist of not
less than three or more than seven members all of whom shall be non-employee
members of the Board. The main function of this committee is to establish the
rate of compensation of officers and other employees at or above certain minimum
levels established by the Board of Directors.

         ARTICLE 4. Officers.

         Section 1. Number. The officers of the Corporation shall be a Chairman,
a President, a Vice Chairman, one or more Executive Vice Presidents (the number
thereof to be determined by the Board of Directors), one or more Senior Vice
Presidents (the number thereof to be determined by the Board of Directors), one
or more Vice Presidents (the number thereof to be determined by the Board of
Directors), a Secretary and a Treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or more
offices may be held by the same person, except the offices of Chairman,
President, Vice Chairman, Executive Vice President and Secretary.

         Section 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed as hereinafter provided.

         Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but such
removal shall be without prejudice of the contract rights, if any, of the person
so removed.

         Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 8
         ---------------------------------------------------------------------

         ARTICLE 4. Officers (continued)

         Section 5. Chairman. The Chairman shall be chosen from the Board of
Directors of the Corporation. He shall, when present, preside at all meetings of
the Board of Directors and at all meetings of the shareholders at which the
President is not present. In the absence of the President, the Chairman shall
perform the duties of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President. He may
sign, with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts, or other instruments, which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-Laws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties incident to the
office of Chairman and such other duties as may be prescribed by the Board of
Directors.

         Section 6. President. The President shall be chosen from the Board of
Directors. He shall be the principal executive officer of the Corporation and,
subject to the control of the Board of Directors, shall in general supervise and
control all of the business and affairs of the Corporation. He shall, when
present, preside at all meetings of the shareholders and at all meetings of the
Board of Directors at which the Chairman is not present. He may sign, with the
Secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments, which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors.

         Section 7. Vice Chairman. The Vice Chairman shall be chosen from the
Board of Directors of the Corporation. In the absence of the President and the
Chairman, the Vice Chairman shall perform the duties of the President, and when
so acting, shall have all the powers and be subject to all the restrictions upon
the President. He may sign, with the Secretary or any other proper officer of
the Corporation thereunto authorized by the Board of Directors, any deeds,
mortgages, bonds, contracts, or other instruments, which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of Vice Chairman and such other duties as may be
prescribed by the Board of Directors.

<PAGE>

         By-Laws of Acme United Corporation                              pg. 9
         ---------------------------------------------------------------------

         ARTICLE 4. Officers (continued)

         Section 8. The Executive Vice Presidents. In the absence of the
President and the Vice Chairman, the Executive Vice President (or in the event
there be more than one Executive Vice President, the Executive Vice Presidents
in the order designated at the time of their election, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Executive Vice President may
sign, with the Secretary or any Assistant Secretary, certificates for shares of
the Corporation; and shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.

         Section 9. The Senior Vice Presidents. In the absence of the President,
the Vice Chairman and the Executive Vice President, the Senior Vice President
(or in the event there be more than one Senior Vice President, the Senior Vice
Presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Senior Vice
President may sign, with the Secretary or an Assistant Secretary, certificates
for shares of the Corporation, and shall perform such other duties as from time
to time may be assigned to him by the President, or by the Board of Directors.

         Section 10. Vice Presidents. The Vice Presidents shall perform such
duties as shall be assigned to them by the President, the Executive Vice
President, or a Senior Vice President.

         Section 11. Secretary. The Secretary shall: (a) keep the minutes of the
shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized; (d) keep a register of the
post office address of each shareholder which shall be furnished to the
Secretary by such shareholder; (e) sign with the President, the Executive Vice
President, or a Senior Vice President, certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the Corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President, or by the Board of Directors.

<PAGE>

         By-Laws of Acme United Corporation                              pg.10
         ---------------------------------------------------------------------

         ARTICLE 4. Officers (continued)

         Section 12. Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of ARTICLE 5
of these By-Laws; and (b) in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the President, or by the Board of Directors.

         Section 13. Assistant Secretaries and Assistant Treasurer. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President, the Executive Vice President, or a Senior Vice President,
certificates for shares of the Corporation the issuance of which shall have been
authorized by a resolution of the Board of Directors. The Assistant Treasurers
shall respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties as shall be assigned to them
by the Secretary or the Treasurer, respectively, or by the President, or the
Board of Directors.

         Section 14. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.

         ARTICLE 5. Contracts, Loans, Checks and Deposits.

         Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the names of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.

         Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.

         Section 3. Checks, Drafts, etc. All checks, drafts or orders for
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.

         Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.

<PAGE>

         By-Laws of Acme United Corporation                             pg. 11
         ---------------------------------------------------------------------

         ARTICLE 6. Certificates for Shares and Their Transfer.

         Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or the Executive
Vice President or a Senior Vice President and by the Secretary or any Assistant
Secretary. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except and in the
case of a lost, destroyed or mutilated certificate a new one may be issued
therefore upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.

         Section 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
or record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by a
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of the certificate for such shares. The
person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.

         ARTICLE 7. Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of January and end on the thirty-first day of December in each
year.

         ARTICLE 8. Dividends. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and its Articles of
Incorporation.

         ARTICLE 9. Seal. The Corporation shall have a common seal, which shall
contain the words "Acme United Corporation, Bridgeport, Conn., U.S.A." in a
circle, within which the words and figures "Bridgeport 1882" shall be contained.

         ARTICLE 10. Waiver of Notice. Whenever any notice is required to be
given to any shareholder or Director of the Corporation under the provisions of
these By-Laws or under the provisions of the Articles of Incorporation or under
the provisions of the Connecticut Stock Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.

         ARTICLE 11. Amendments. These By-Laws may be altered, amended or
repealed and new By-Laws may be adopted by the Board of Directors at any regular
or special meeting of the Board of Directors provided that notice of the
proposed action is contained in the written notice of such meeting.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>acme_10k04ex103.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
Exhibit 10.3

                             ACME UNITED CORPORATION
                           EMPLOYEE STOCK OPTION PLAN

     1. PURPOSE

         The purpose of this plan (the "Plan") is to promote the interests of
         Acme United Corporation (the "Corporation") by enabling its key
         employees to acquire an increased proprietary interest in the
         Corporation and thus to share in the future success of the
         Corporation's business. Accordingly, the Plan is intended as a means
         not only of attracting and retaining outstanding management personnel
         but also of promoting a closer identity of interests between employees
         and stockholders. Since the employees eligible to receive Options under
         the Plan will be those who are in a position to make important and
         direct contributions to the success of the Corporation, the Directors
         believe that the grant of the Options under the Plan will be in the
         best interests of the Corporation.

     2. DEFINITIONS

         Unless the context clearly indicates otherwise, the following terms
         when used in the Plan, shall have the meanings set forth in this
         Section 2.

         (a)      "Beneficiary" means the person or persons who shall acquire
                  the right to exercise an option by bequest or inheritance.

         (b)      "Board of Directors" or "Board" means the Board of the
                  Directors of the Corporation.

         (c)      "Code" means the Internal Revenue Code of 1986, as amended
                  from time to time.

         (d)      "Committee" means the Compensation Committee of the Board of
                  Directors, consisting of select Board members who are not
                  employees of the Corporation, but in no event fewer than two
                  (2) such Board members.

         (e)      "Common Stock" shall mean common stock, par value S2.50 per
                  share, of the Corporation.

         (f)      "Disability" means a disability as defined in the
                  Corporation's Long-Term Disability Plan, as amended from time
                  to time.

         (g)      "Fair Market Value" shall mean the closing price for the
                  Common Stock on the date immediately preceding the date on
                  which the option is granted.

         (h)      "Incentive Stock Option" shall mean a stock option granted
                  pursuant to this Plan and intended to satisfy the requirements
                  of Section 422 of the Code.

         (i)      "Option" shall mean a stock option granted pursuant to the
                  Plan.

         (j)      "Optionee" shall mean a person to whom an Option has been
                  granted under the Plan.

         (k)      "Option Agreement" shall mean the written agreement to be
                  entered into by the Corporation and the Optionee, as provided
                  in Section 6 hereof.

         (l)      "Retirement" shall mean retirement pursuant to the Retirement
                  Plan for Employees of Acme United Corporation, as amended from
                  time to time.

         (m)      "Share" shall mean the Common Stock of the Corporation, as
                  adjusted in accordance with Section 16 of the Plan.

         (n)      "Subsidiary" shall mean any subsidiary corporation of the
                  Corporation within the meaning of Section 424(f)of the Code
                  (or a successor provision of similar import).

              Where used herein, unless the context indicates otherwise, words
              in the masculine form shall be deemed to refer to females as well
              as to males.

<PAGE>

     3. SHARES SUBJECT TO THE PLAN

        (a) The stock to be covered by the Options is the Common Stock of the
            Corporation. The aggregate number of shares of Common Stock which
            may be delivered on exercise of the Options is 150,000 shares,
            subject to adjustment pursuant to Section 16.

        (b) As determined by the Board from time to time, such shares may be
            previously issued shares reacquired by the Corporation or authorized
            but unissued shares. If any Option expires or terminates for any
            reason without having been exercised in full, the Shares covered by
            the unexercised portion of such Option shall again be available for
            Options, within the limits specified above.

     4. ADMINISTRATION OF THE PLAN

        (a) The Plan shall be administered by the Board of Directors of the
            Corporation, which shall accept, amend, or reject recommendations
            made by the Committee. In addition to its duties with respect to the
            Plan stated elsewhere in the Plan, Board shall have full authority,
            consistent with the Plan, to interpret the Plan, to promulgate such
            rules and regulations with respect to the Plan as it deems desirable
            and to make all other determinations necessary or desirable for the
            administration of the Plan. All decisions, determinations, and
            interpretations of the Board shall be binding upon all persons.

            No member of the Board of Directors or the Committee and no employee
            of the Corporation shall be liable for any act or action hereunder,
            whether of omission or commission, by any other member or employee
            or by any agent to whom duties in connection with the administration
            of the plan have been delegated in accordance with the provisions of
            the Plan or, except in circumstances involving his bad faith, for
            anything done or omitted to be done by himself.

        (b) Except as provided in Section 7, it is intended that the stock
            options granted pursuant to the Plan constitute Incentive Stock
            Options within the meaning of Section 422 of the Code. The Board
            shall administer the Plan in such a manner as to establish and
            maintain such Options as Incentive Stock Options.

        (c) The Board may, with the consent of the Optionee, substitute Options
            which are not intended to be Incentive Stock Options for outstanding
            Incentive Stock Options. Any such substitution shall not constitute
            the grant of a new Option for the purposes of this Plan, and shall
            not require a revaluation of the Option exercised prior to the
            substituted Option. Any such substitution shall be implemented by an
            amendment to the applicable Option Agreement or in such other manner
            as the Board in its discretion shall determine.

        (d) The Committee, subject to the approval of the Board, shall make such
            provision as it deems necessary or appropriate for the withholding
            of any federal, state, local or other tax required to be withheld
            with regard to the exercise of an Option under the Plan.

     5. EMPLOYEES ELIGIBLE TO RECEIVE OPTIONS

        (a) The Board, upon the recommendation of the Committee, shall from time
            to time in its discretion select the employees to whom the options
            shall be granted from among the key employees of the Corporation and
            any Subsidiary.

        (b) Members of the Board of Directors who are not regular salaried
            employees of the Corporation or a Subsidiary shall not be eligible
            to receive Options.

        (c) An individual employee may receive more than one Option.

<PAGE>

     6. OPTION AGREEMENT

        (a) No Option shall be exercised by an Optionee unless he or she shall
            have executed and delivered an Option Agreement.

        (b) Appropriate officers of the Corporation are hereby authorized to
            execute and deliver Option Agreements in the name of the Corporation
            as directed from time to time by the Board.

     7. GRANTS OF OPTIONS

        (a) The Board, acting upon the recommendation of the Committee, shall in
            it discretion determine the time or times when Options shall be
            granted and the number of shares of Common Stock to be subject to
            each Option.

        (b) The aggregate fair market value (determined as of the date the
            Option is granted) of the stock with respect to which Incentive
            Stock Options are exercisable for the first time by an individual
            during any calendar year (under all stock option plans of the
            Corporation and its Subsidiaries) shall not exceed $100,000.00.

        (c) No Incentive Stock Option shall be granted to an employee who, at
            the time the Option is granted, owns (within the meaning of Section
            422(b)(6) of the code) stock possessing more than ten percent of the
            total combined voting power of all classes of stock of the
            Corporation unless the following requirements are satisfied: (i)
            notwithstanding the provisions of Section 8, the purchase price for
            each share of common stock subject to an Option shall be at least
            110 percent of the fair market value of the Common Stock subject to
            the Option at the time the Option is granted; and (ii) the Option is
            not exercisable after the expiration of five (5) years from the date
            such Option is granted.

        (d) The Board may in its discretion grant Options that are not intended
            to constitute Incentive Stock Options.

        (e) Each Option shall be evidenced by an Option Agreement, in such form
            as the Board shall from time to time approve, which shall state the
            terms and conditions of the Option in accordance with the Plan, and
            also shall contain such additional provisions as may be necessary or
            appropriate under applicable laws, regulations, and rules.

     8. OPTION PRICE

        Subject to Section 7(c), the purchase price for each share of Common
        Stock subject to an Option shall be one hundred percent (100%) of the
        Fair Market Value of the Common Stock on the date the Option is granted
        provided, however, that the purchase price shall not be less than the
        par value of the Common Stock which is the subject of the Option.

     9. OPTION PERIOD; EXERCISE RIGHTS

        a)  Each Option shall be for such term as the Board shall determine, but
            not more than ten years from the date it is granted, and shall be
            subject to earlier termination as provided in Section 1O.

        b)  Options shall be exercisable in accordance with the following
            schedule: 25% one day after date of grant; 25% one day after first
            year anniversary of date of grant; 25% one day after second year
            anniversary of date of grant; 25% one day after third year
            anniversary of date of grant.

        c)  Upon the purchase of shares of Common Stock under an Option, the
            Stock certificate or certificates may, at the request of the
            purchaser, be issued in his name and the name of another person as
            joint tenants with the right of survivorship.

<PAGE>

        d)  The exercise of each Option granted under the Plan shall be subject
            to the condition that if at any time the Corporation shall determine
            in its discretion that the listing, registration, or qualification
            of any shares of Common Stock otherwise deliverable upon such
            exercise upon any securities exchange or under any State or Federal
            law, or the consent or approval of any regulatory body, is necessary
            or desirable as a condition of, or in connection with, such exercise
            or the delivery or purchase of shares thereunder, then in any such
            event such exercise shall not be effective unless such listing,
            registration, qualification, consent or approval shall have been
            effected or obtained free of any conditions not acceptable to the
            Corporation. Any such postponement shall not extend the time within
            which the Option may be exercised; and neither the Corporation nor
            its directors or officers shall have any obligation or liability to
            the Optionee or to a Beneficiary with respect to any shares of
            Common Stock as to which the Option shall lapse because of such
            postponement.

    10. EXERCISE RIGHTS UPON TERMINATION OF EMPLOYMENT

        (a) Retirement
            Except as provided in paragraph (e) of this section 10, if an
            Optionee retires under a retirement or pension plan of the
            Corporation or of a Subsidiary, the Optionee's Option shall
            terminate one year after the date of such retirement but in no event
            later than the date on which it would have expired if the Optionee
            had not retired, provided, however, that if the Option is exercised
            later than three months from the date of such retirement such Option
            shall not constitute an Incentive Stock Option. During such period
            the Optionee may exercise the Option in whole or in part
            notwithstanding the limitations of Section 9(b) or any limitation
            that may have been set by the Board pursuant thereto.

        (b) Disability
            Except as provided in paragraph (e) of this section 10, if an
            Optionee becomes disabled, the Optionee may exercise the Option (i)
            within one year after the date of Disability, but in no event later
            than the date on which it would have expired if the Optionee had not
            become disabled, or (ii) within such other period, not exceeding
            three years after the date of Disability, as shall be prescribed in
            the Option Agreement; provided, however, that if the Option is
            exercised later than one year after the date of Disability, it shall
            not constitute an Incentive Stock Option. During such period the
            Optionee may exercise the Option in whole or in part notwithstanding
            the limitations of Section 9(b) or any limitation that may have been
            set by the Board pursuant thereto.

        (c) Death
            If an Optionee dies during a period in which he or she is entitled
            to exercise an Option (including the period referred to in
            paragraphs (a),(b),(d),and (e)of this Section 1O), the Option may be
            exercised at any time within one year from the date of the
            Optionee's death, but in no event later than the date on which it
            would have expired if the Optionee had lived, by the Optionee's
            Beneficiary, in whole or in part notwithstanding the limitations of
            Section 9(b) or any limitation that may have been set by the Board
            pursuant thereto.

        (d) Termination of Employment for Any Other Reason
            Except as provided in paragraph (e) of this section 10, if an
            Optionee ceases to be employed by the Corporation or a Subsidiary
            for any reason other than retirement, disability, or death, the
            Optionee's Option shall terminate 30 days after the date of such
            cessation of employment, but in no event later than the date on
            which it would have expired if such cessation of employment had not
            occurred. During such period the option may be exercised only to the
            extent that the Optionee was entitled to do so under Section 9(b) at
            the date of cessation of employment unless the Board, in its sole
            and nonreviewable discretion, permits exercise of the Option to a
            greater extent. Except to the extent required by law, the employment
            of an Optionee shall not be deemed to have ceased upon his or her
            absence from the Corporation or a Subsidiary on a leave of absence
            granted in accordance with the usual procedure of the Corporation or
            Subsidiary.

<PAGE>

        (e) Notwithstanding any language of the Plan to the contrary, if an
            Optionee ceases to be employed by the Corporation or a Subsidiary
            and becomes, or continues to be, a member of the Board of Directors
            prior to the time the Optionee's Option(s) would have otherwise
            expired pursuant to this Section 10, the Optionee's Option(s) shall
            continue to vest in accordance with Section 8(b) hereof and shall
            continue to be exercisable for the remainder of the term of the
            Option(s); provided, that, if an Optionee described in this Section
            10(e) ceases to be a member of the Board of Directors for any
            reason, the Optionee's Option(s) shall terminate in accordance with
            the provisions of Section 2.4(a) of the Amended and Restated Acme
            United Corporation Non-Salaried Director Stock Option Plan. Any
            Option which is not exercised by the Optionee within the three-month
            period immediately following the Optionee's termination of
            employment, or, in the case of termination of employment on account
            of Disability, within one year after the date of Disability, shall
            cease to be an Incentive Stock Option.

    11. METHOD OF EXERCISE

        (a) Each exercise of an Option shall be by written notice to the
            Secretary of the Corporation, stating the number of shares to be
            purchased. An Option may be exercised with respect to all, or any
            part of, the Shares of Common Stock as to which it is exercisable at
            the time.

        (b) The purchase price of the shares being purchased shall be paid in
            full at the time the Option is exercised. Such payment shall be made
            in cash in United States currency.

    12. NONTRANSFERABILITY OF OPTIONS

        Each Option shall be nonassignable and nontransferable by the Optionee
        other than by will or by the laws of descent and distribution. Each
        Option shall be exercisable during the Optionee's lifetime only by the
        Optionee.

    13. SHAREHOLDER RIGHTS

        No person shall have any rights of a shareholder by virtue of an Option
        except with respect to shares actually issued to him and registered on
        the transfer books of the Corporation, and the issuance of shares shall
        confer no retroactive right to dividends.

    14. USE OF PROCEEDS

        The proceeds received by the Corporation from the sale by it of shares
        of Common Stock to persons exercising an Option pursuant to the Plan
        will be used for the general purposes of the Corporation or any
        Subsidiary.

    15. GENERAL PROVISIONS

        The grant of an Option in any year shall not give the Optionee any right
        to similar grants in future years or any right to be retained in the
        employ of the Corporation or any Subsidiary.

    16. ADJUSTMENT UPON CHANGES IN CAPITALIZATION

        If there is a change in the number or kind of outstanding shares of the
        Corporation's stock by reason of a stock dividend, stock split,
        recapitalization, merger, consolidation, combination, or other similar
        event, appropriate adjustments shall be made by the Board to the number
        and kind of shares subject to the Plan, the number and kind of shares
        under Options then outstanding, the maximum number of shares available
        for Options or the Option Price and other relevant provisions.

    17. EFFECT OF MERGER OR OTHER REORGANIZATION

        If the Corporation shall be the surviving corporation in a merger or
        other reorganization, an Option shall extend to stock and securities of
        the Corporation to the same extent that a holder of that number of
        Shares immediately before the merger or consolidation corresponding to
        the number of Shares covered by the Option would be entitled to have or
        obtain stock and securities of the Corporation under the terms of the
        merger or consolidation. If the Corporation dissolves, sells
        substantially all of its assets, is acquired in a stock for stock or
        securities exchange, or is a party to a merger or other reorganization
        in which it is not the surviving corporation, then each Option shall be
        exercisable within the period of sixty (60) days commencing upon the
        date of the action of the shareholders (or the Board if shareholders'
        action is not required) is taken to approve the transaction and upon the
        expiration of that period all Options and all rights thereto shall
        automatically terminate.

<PAGE>

    18. TERMINATION; AMMENDMENTS

        (a) The Board may at any time terminate the Plan. Unless the Plan shall
            previously have been terminated by the Board, it shall terminate on
            February 26, 2012. No Option may be granted after such termination.

        (b) The Board may at any time or times amend the Plan or amend any
            outstanding Option for the purpose of satisfying the requirements of
            any changes in applicable laws or regulations or for any other
            purpose which at the time may be permitted by law.

        (c) Except as provided in Section 16, no such amendment shall, without
            the approval of the shareholders of the Corporation: (i) increase
            the maximum number of shares of Common Stock for which the Options
            may be granted under the Plan; (ii) reduce the Option price of
            outstanding Options; (iii) extend the period during, which Options
            may be granted; (iv) materially increase in any other way the
            benefits accruing to Optionees; or (v) change the class of persons
            eligible to be Optionees.

        (d) No termination or amendment of the Plan shall without the consent of
            an Optionee or Beneficiary, adversely affect the Optionee's or
            Beneficiary's right under any Option previously granted, but it
            shall be conclusively presumed that any adjustment for changes in
            capitalization in accordance with Section 16 hereof does not
            adversely affect any such right.

     19. EFFECTIVE DATE

         The effective date of the Plan is February 26, 2002.

     20. GOVERNING LAW

         The Plan shall be construed and its provisions enforced and
         administered in accordance with and under the laws of Connecticut
         except to the extent that such laws may be superseded by any Federal
         law.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>acme_10k04ex104.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
Exhibit 10.4

                             ACME UNITED CORPORATION

                               Severance Pay Plan

         This Severance Pay Plan shall apply to each officer of the Company at
the level of Vice President or above under the age of 65.

         The Policy pertains to the termination of employment or the equivalent
by the Company for any other reason than gross misconduct or having reached the
age of 65, the normal retirement age. This Plan applies unless the Salary
Continuation Plan applies. For purposes of this Policy, termination or
equivalent shall mean any of the following conditions:

         1. Employment is terminated involuntarily, including termination as a
            result of death but excluding termination as a result of disability.
         2. The equivalent of termination means: 1) that the responsibility,
            status, or compensation of the person is reduced or 2) transfer of
            the person to any unreasonably distant location from the current
            location.

         The severance benefit for any reason other than death shall be
determined on the basis of one month's salary for each year of service to the
Company. Except that the minimum number of months applies if it produces a
larger benefit. The severance benefit as a result of death of the Officer is one
months' salary times the number of months indicated below.

         Schedule of Benefits
                                                                Termination
         Officer level                          Death       Minimum     Maximum

         Director of the Company who            9 mos.      9 mos.      30 mos.
         is also an Officer of the Company
         at the level of Executive Vice
         President or above

         Senior Vice President and Vice         6 mos.      6 mos.      18 mos.
         President

                                       END

         Revised September 28, 2004
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>acme_10k04ex105.txt
<DESCRIPTION>EXHIBIT 10.5
<TEXT>
Exhibit 10.5

                             ACME UNITED CORPORATION

                            Salary Continuation Plan

This Salary Continuation Plan shall apply to each Officer of the Company at the
level of Corporate Vice President or above, under the age of 65.

This Plan shall apply to such Officers only in the event of the disposition of
the Company. A disposition of the Company for purposes of this Plan shall
include: 1) a sale of substantially all the assets of the Company or a successor
or of a Division with more than 50% of the sales of the Company in the preceding
full year of operations, such that shareholder approval is required pursuant to
state law or corporate charter, 2) the acquisition by any person or group of
persons, acting in concert, of legal or beneficial ownership of fifty percent
(50%) or more of the voting stock of the Company, or its successor.

Benefits under this Plan shall be paid to any Officer in the event that he or
she resigns or is discharged within one (1) year of the disposition of the
Company. An Officer may resign and qualify for the benefits of this policy if
the disposition description above has occurred. An Officer shall be deemed to be
discharged if: 1) the Officer's employment is terminated involuntarily; 2) the
responsibility, status, or compensation of an Officer is reduced; 3) the Officer
is transferred to a location unreasonably distant from his or her current
location. Such benefits shall be payable as follows:

         Base salary: The monthly salary rate being paid to the officer at the
         date of disposition times the number of "months of compensation
         payable" in the schedule below.

         Incentive Bonus: The average monthly payment for the prior three
         taxable years times the number of "months of compensation payable" in
         the schedule.

         Insurance benefits: Continuation into the future medical, life and AD&D
         insurance which was in effect at the date of disposition for the number
         of "months of compensation payable" in the schedule.

     The amounts due the Officer(s) under the Plan for Base Salary and Incentive
     Bonus shall be paid in a lump sum no later than thirty (30) days after the
     date that such an Officer submits a notice to the Board (or its successor)
     that he or she is entitled to and wishes to exercise his or her right to
     benefits within the meaning of the Plan. The same level of insurance extant
     at the time of disposition, or at time of notification if greater, will be
     made available to the Officer over the number of months in the schedule.

                                                                 Months of
         Officer Title                                      compensation payable

         Director of the Company who is also an                  36 months
         Officer of the Company at the level of
         Executive Vice President or above

         Senior Vice President and Vice President                24 months

     Notwithstanding the above, such benefits will be available to any Director
     of the Company who is also an Officer of the Company at the level of
     Executive Vice President or above within two (2) years following the date
     of disposition.

This Plan will remain in effect until modified or terminated by action of the
Board of Directors provided that benefits payable to any Officer shall not be
reduced, nor shall any rights accruing to any Officer hereunder be diminished.

<PAGE>

Nothing contained in the Plan shall be deemed to provide benefits to any such
Officer in the event of resignation or discharge in the absence of a disposition
of substantially all, of the Company, nor shall this Plan be deemed an
employment contract.

The Company shall reimburse any Officer for reasonable legal fees incurred in
enforcing the terms of this Plan provided such Officer prevails in such action.

                                       END

Revised September 28, 2004



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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