UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


__________________




FORM
10-Q


____________________________________




[X] QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934




For the
quarterly period ended March
31, 2010




OR




[  
]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE


SECURITIES
EXCHANGE ACT OF 1934




For the
transition period from ______ to ______




__________________




Commission
file number 001-07698




ACME
UNITED CORPORATION


(Exact
name of registrant as specified in its charter)


__________________




CONNECTICUT
            06-0236700(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)60
      ROUND HILL ROAD,  FAIRFIELD, CONNECTICUT
            06824(Address
      of principal executive offices)
            (Zip
      Code)





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





Indicate
by check mark whether the registrant (1) 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 whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2
of the Exchange Act (Check one).


Large
accelerated filer  [   ]     Accelerated
filer  [   ]     Non-accelerated filer 
[   ]     Smaller reporting
company  [X]




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.45 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  [  
]     No  [   ]




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




As of
April 22, 2010 the registrant had outstanding 3,174,109 shares of its $2.50 par
value Common Stock.





ACME
UNITED CORPORATION




Part I — FINANCIAL INFORMATION
              
              PageItem 1.
      Financial Statements (Unaudited)Condensed
      Consolidated Balance Sheets as of March 31, 2010 andDecember
      31, 2009
              
              3Condensed
      Consolidated Statements of Operations for the three months
                ended
      March 31, 2010 and 2009
              
              5Condensed
      Consolidated Statements of Cash Flows for the three
      months
                ended
      March 31, 2010 and 2009
              
              6Notes to Condensed
      Consolidated Financial Statements
              
              7Item 2.
      Management’s Discussion and Analysis of Financial Conditionand
      Results of Operations
              
              10Item 3. Quantitative
      and Qualitative Disclosure About Market Risk
              
              13Item 4T. Controls
      and Procedures
              
              13Part II — OTHER
      INFORMATIONItem 1.   Legal
      Proceedings
              
              14Item 1A. Risk
      Factors
              
              14Item 2.   Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              14Item 3.   Defaults
      Upon Senior Securities
              
              14Item 4.   Removed
      and Reserved
              
              14Item 5.   Other
      Information
              
              14Item 6.  
      Exhibits
              
              14Signatures
              
              15




2


ACME
UNITED CORPORATION
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (all
amounts in thousands, except share data)


March
      31,
              
              
              December
      31,2010
              
              
              2009(unaudited)
              
              
              (Note
      1)ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              5,468
              
              
              $
              6,519Accounts
      receivable, less allowance
              
              
              10,230
              
              
              
              10,704Inventories:Finished
      goods
              
              
              17,319
              
              
              
              16,337Work
      in process
              
              
              340
              
              
              
              97Raw
      materials and supplies
              
              
              838
              
              
              
              96618,497
              
              
              
              17,400Prepaid
      expenses and other current assets
              
              
              1,229
              
              
              
              1,133Total
      current assets
              
              
              35,424
              
              
              
              35,756Property,
      plant and equipment:Land
              
              
              162
              
              
              
              172Buildings
              
              
              2,491
              
              
              
              2,558Machinery
      and equipment
              
              
              8,234
              
              
              
              8,17010,887
              
              
              
              10,900Less
      accumulated depreciation
              
              
              8,838
              
              
              
              8,8122,049
              
              
              
              2,088Note
      receivable
              
              
              1,879
              
              
              
              1,891Other
      assets
              
              
              2,556
              
              
              
              2,574Total
      assets
              
              $
              41,908
              
              
              $
              42,309


See notes
to condensed consolidated financial statements.




3





ACME
UNITED CORPORATION


CONDENSED
CONSOLIDATED BALANCE SHEETS (continued)


(all
amounts in thousands, except share data)


March
      31,
            
            
            December
      31,2010
            
            
            2009(unaudited)
            
            
            (Note
      1)LIABILITIESCurrent
      liabilities:Accounts
      payable
            
            $
            4,030
            
            
            $
            3,546Other
      accrued liabilities
            
            
            2,580
            
            
            
            3,257Total
      current liabilities
            
            
            6,610
            
            
            
            6,803Long-term
      debt, less current portion
            
            
            8,908
            
            
            
            9,154Other
            
            
            1,815
            
            
            
            1,811Total
      liabilities
            
            
            17,333
            
            
            
            17,768STOCKHOLDERS'
      EQUITYCommon
      stock, par value $2.50:authorized
      8,000,000 shares;issued
      - 4,329,274 shares in 2010and
      4,313,024 shares in 2009,including
      treasury stock
            
            
            10,823
            
            
            
            10,782Additional
      paid-in capital
            
            
            4,274
            
            
            
            4,208Retained
      earnings
            
            
            20,613
            
            
            
            20,508Treasury
      stock, at cost - 1,155,165 sharesin
      2010 and 2009
            
            
            (10,144
            )
            
            
            (10,144
            )Accumulated
      other comprehensive income:Minimum
      pension liability
            
            
            (1,134
            )
            
            
            (1,134
            )Translation
      adjustment
            
            
            143
            
            
            
            321(991
            )
            
            
            (813
            )Total
      stockholders’ equity
            
            
            24,575
            
            
            
            24,541Total
      liabilities and stockholders’ equity
            
            $
            41,908
            
            
            $
            42,309




See notes
to condensed consolidated financial statements.





4


ACME
UNITED CORPORATION
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 (all
amounts in thousands, except per share amounts)


Three
      Months EndedMarch
      312010
              
              
              2009Net
      sales
              
              $
              13,121
              
              
              $
              11,297Cost
      of goods sold
              
              
              8,008
              
              
              
              7,000Gross
      profit
              
              
              5,113
              
              
              
              4,297Selling,
      general and administrative expenses
              
              
              4,812
              
              
              
              4,216Operating
      income
              
              
              301
              
              
              
              82Non-operating
      items:Interest:Interest
      expense
              
              
              52
              
              
              
              42Interest
      income
              
              
              (32
              )
              
              
              (35
              )Interest
      expense, net
              
              
              20
              
              
              
              7Other
      expense, net
              
              
              14
              
              
              
              12Total
      other expense, net
              
              
              34
              
              
              
              19Income
      before income taxes
              
              
              267
              
              
              
              63Income
      tax expense
              
              
              53
              
              
              
              21Net
      income
              
              $
              214
              
              
              $
              42Basic
      earnings per share
              
              $
              0.07
              
              
              $
              0.01Diluted
      earnings per share
              
              $
              0.07
              
              
              $
              0.01Weighted
      average number of common shares outstanding-denominator
      used for basic per share computations
              
              
              3,170
              
              
              
              3,343Weighted
      average number of dilutive stock optionsoutstanding
              
              
              104
              
              
              
              59Denominator
      used for diluted per share computations
              
              
              3,274
              
              
              
              3,402Dividends
      declared per share
              
              $
              0.05
              
              
              $
              0.05See
      notes to condensed consolidated financial statements.  5


ACME
UNITED CORPORATION


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)


(all
amounts in thousands)


Three
      Months EndedMarch
      31,2010
            
            
            2009Operating
      Activities:Net
      income
            
            $
            214
            
            
            $
            42Adjustments
      to reconcile net incometo
      net cash used by operating activities:Depreciation
            
            
            206
            
            
            
            183Amortization
            
            
            29
            
            
            
            28Stock
      compensation expense
            
            
            77
            
            
            
            52Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            448
            
            
            
            855Inventories
            
            
            (1,208
            )
            
            
            (200
            )Prepaid
      expenses and other assets
            
            
            (87
            )
            
            
            (109
            )Accounts
      payable
            
            
            520
            
            
            
            (809
            )Other
      accrued liabilities
            
            
            (653
            )
            
            
            (1,333
            )Total
      adjustments
            
            
            (668
            )
            
            
            (1,333
            )Net
      cash used by operating activities
            
            
            (454
            )
            
            
            (1,291
            )Investing
      Activities:Purchase
      of property, plant, and equipment
            
            
            (189
            )
            
            
            (275
            )Purchase
      of patents and trademarks
            
            
            (11
            )
            
            
            (33
            )Net
      cash used by investing activities
            
            
            (200
            )
            
            
            (308
            )Financing
      Activities:(Repayments)
      borrowing of long-term debt
            
            
            (246
            )
            
            
            129Proceeds
      from issuance of common stock
            
            
            30
            
            
            
            21Distributions
      to stockholders
            
            
            (158
            )
            
            
            (167
            )Purchase
      of treasury stock
            
            
            -
            
            
            
            (215
            )Net
      cash used by financing activities
            
            
            (375
            )
            
            
            (232
            )Effect
      of exchange rate changes
            
            
            (22
            )
            
            
            (111
            )Net
      change in cash and cash equivalents
            
            
            (1,051
            )
            
            
            (1,942
            )Cash
      and cash equivalents at beginning of period
            
            
            6,519
            
            
            
            5,225Cash
      and cash equivalents at end of period
            
            $
            5,468
            
            
            $
            3,283See
      notes to condensed consolidated financial statements.


6


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




(UNAUDITED)




Note
1 — Basis of Presentation




In the
opinion of management, the accompanying condensed consolidated financial
statements include all adjustments necessary to present fairly the financial
position, results of operations and cash flows of Acme United Corporation (the
“Company”).  These adjustments are of a normal, recurring
nature.  However, the financial statements do not include all of the
disclosures normally required by accounting principles generally accepted in the
United States of America or those normally made in the Company's Annual Report
on Form 10-K. Please refer to the Company's Annual Report on Form 10-K for the
year ended December 31, 2009 for such disclosures.  The condensed
consolidated balance sheet as of December 31, 2009 was derived from the audited
consolidated balance sheet as of that date.  The results of operations
for interim periods are not necessarily indicative of the results to be expected
for the full year.  The information included in this Quarterly Report
on Form 10-Q should be read in conjunction with the Management’s Discussion and
Analysis of Financial Condition and Results of Operations and financial
statements and notes thereto, included in the Company’s 2009 Annual Report on
Form 10-K.




The
Company has evaluated events and transactions subsequent to March 31, 2010 and
through the date these consolidated financial statements were included in this
Form 10-Q and filed with the SEC.




Note
2 — Contingencies




The
Company is involved from time to time in disputes and other litigation in the
ordinary course of business and may encounter other contingencies, which may
include environmental and other matters.  The Company presently
believes that none of these matters, individually or in the aggregate, would be
likely to have a material adverse impact on its financial position, results of
operations or liquidity, as set forth in these financial
statements.





In
December 2008, the Company sold property it owned in Bridgeport, Connecticut to
B&E Juices, Inc. for $2.5 million, of which $2.0 million is secured by a
mortgage on the property.  The property consists of approximately four
acres of land and 48,000 sq. feet of warehouse space.  The property
was the site of the original Acme United scissor factory which opened in 1887
and was closed in 1996.




Under the
terms of the sale agreement, and as required by the Connecticut Transfer Act,
the Company is required to remediate any environmental contamination on the
property. During 2008, the Company hired an independent environmental consulting
firm to conduct environmental studies in order to identify the extent of the
environmental contamination on the property and to develop a remediation plan.
As a result of those studies and the estimates prepared by the independent
environmental consulting firm, the Company recorded an undiscounted liability of
approximately $1.8 million related to the remediation of the property. This
accrual includes the costs of required investigation, remedial activities, and
post-remediation operating and maintenance.





Remediation
work on the project began in the third quarter of 2009 and a major portion of
the work has been completed. At March 31, 2010, the Company had approximately
$670,000 remaining in its accrual for environmental remediation, of which
approximately $350,000 was classified as a current liability at that date. The
Company expects to pay approximately $200,000 in the quarter ending June 30,
2010 for the ongoing remediation and monitoring work on the site.





In
addition to the remediation work, the Company, with the assistance of its
independent environmental consulting firm, must continue to monitor contaminant
levels on the property to ensure they comply with set governmental standards.
The Company expects that the monitoring period could last a minimum of three
years from the completion of the remediation work.





In
connection with the remediation work completed in the third quarter of 2009, the
environmental study was updated by the independent environmental consulting
firm. The results of this study produced a remedial action plan with a more
narrow scope which allowed the Company, along with its environmental consulting
firm, to refine the original project plan resulting in a new estimate of costs
to complete the project. The change in estimated costs resulted in a benefit of
approximately $460,000 which the Company recorded as other non-operating income
during the three months ended September 30, 2009.





7





The
change in the accrual for environmental remediation for the three months ended
March 31, 2010 follows (in thousands):





Balance
      at
              December
      31, 2009
            Payments
            Balance
      at
              March
      31, 2010$  681
            $  (11)
            $  670





Also, as
part of the sale, the Company has provided the buyer with a mortgage of $2.0
million at six percent interest. The mortgage is payable in monthly installments
with the outstanding balance due in full, one year after
remediation  and monitoring on the property have been completed. It is
estimated that the remediation project will be completed within five years from
the date of the sale.





Note 3 — Pension





Components
of net periodic pension cost are as follows (in thousands):




Three
      Months EndedMarch
      31
              
              
              March
      312010
              
              
              2009Components
      of net periodic benefit cost:Interest
      cost
              
              $
              31
              
              
              $
              38Service
      cost
              
              
              6
              
              
              
              6Expected
      return on plan assets
              
              
              (24
              )
              
              
              (24
              )Amortization
      of prior service costs
              
              
              2
              
              
              
              2Amortization
      of actuarial loss
              
              
              39
              
              
              
              42$
              54
              
              
              $
              65


The
Company’s funding policy with respect to its qualified plan is to contribute at
least the minimum amount required by applicable laws and regulations. In 2010,
the Company is required to contribute approximately $250,000.  During
the first three months of 2010, the Company contributed approximately $41,000 to
the plan. Remaining contributions to the plan will be made as required during
the year.





Note 4 — Long Term Debt and
Shareholders Equity





The
Company’s revolving loan agreement, as amended, provides for borrowings up to
$18 million, with all principal amounts outstanding thereunder required to be
repaid in a single amount on February 1, 2012. In addition, the Company’s
revolving loan agreement requires monthly interest payments.  As of
March 31, 2010 and December 31, 2009, the Company had outstanding borrowings of
$8,908,000 and $9,154,000, respectively, under the revolving loan
agreement.





During
the first three months of 2010, the Company issued 16,250 shares of common stock
and received proceeds of $29,875 upon the exercise of outstanding stock
options.




Note
5— Segment Information





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




8





The chief
operating decision maker evaluates the performance of each operating segment
based on segment revenues and operating income. Segment amounts are presented
after converting to U.S. dollars and consolidating eliminations.









Financial
data by segment (in thousands):




Three
      months ended
                March
      312010
              
              
              2009Sales
      to external customers:United
      States
              
              $
              9,628
              
              
              $
              8,484Canada
              
              
              1,570
              
              
              
              1,293Europe
              
              
              1,923
              
              
              
              1,520Consolidated
              
              $
              13,121
              
              
              $
              11,297Operating
      income:United
      States
              
              $
              378
              
              
              $
              342Canada
              
              
              70
              
              
              
              (12
              )Europe
              
              
              (147
              )
              
              
              (248
              )Consolidated
              
              $
              301
              
              
              $
              82Interest
      expense, net
              
              
              20
              
              
              
              7Other
      expense, net
              
              
              14
              
              
              
              12Consolidated
      income before taxes
              
              $
              267
              
              
              $
              63March
      31
              
              
              December
      312010
              
              
              
              2009Assets
      by segmentUnited
      States
              
              $
              31,257
              
              
              $
              31,377Canada
              
              
              5,239
              
              
              
              5,606Europe
              
              
              5,412
              
              
              
              5,326Consolidated
              
              $
              41,908
              
              
              $
              42,309






Note
6 – Stock Based Compensation




The Company
recognizes share-based compensation at fair value of the equity instrument on
the grant date.  Compensation expense is recognized over the required
service period.   Share-based compensation expense was $77,100
and $52,000 for the quarters ended March 31, 2010 and March 31, 2009,
respectively. During the three months ended March 31, 2010, the Company issued
70,000 options with a weighted average fair value of $2.86.  The
Company did not issue options during the three months ended March 31, 2009. As
of March 31, 2010, there was $637,625 of unrecognized compensation cost,
adjusted for estimated forfeitures, related to non-vested share –based payments
granted to the Company’s employees.




Note
7 – Comprehensive Income / (Loss)





Comprehensive
income for the three months ended March 31, 2010 and 2009 consisted of the
following (in thousands):




9




Three
      Months EndedMarch
      312010
              
              
              2009Net
      income
              
              $
              214
              
              
              $
              42Other
      comprehensive (loss) / income -Foreign
      currency translation
              
              
              (126
              )
              
              
              (366
              )Comprehensive
      income / (loss)
              
              $
              88
              
              
              $
              (324
              )


Note
8 – Fair Value Measurements





The
carrying value of the Company’s bank debt and note receivable approximates fair
value. Fair value was determined using a discounted cash flow
analysis.




MANAGEMENT’S
DISCUSSION AND ANALYSIS OF




FINANCIAL
CONDITION AND RESULTS OF OPERATIONS




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




Forward-Looking
Information





The
Company may from time to time make written or oral “forward-looking statements”
including statements contained in this report and in other communications by the
Company, which are made in good faith by the Company pursuant to the “safe
harbor” provisions of the Private Securities Litigation Reform Act of
1995.





These forward-looking statements
include statements of the Company’s plans, objectives, expectations, estimates
and intentions, which are subject to change based on various important factors
(some of which are beyond the Company’s control). The following factors, in
addition to others not listed, could cause the Company’s actual results to
differ materially from those expressed in forward looking statements: the
strength of the domestic and local economies in which the Company conducts
operations, the impact of current uncertainties in global economic conditions
and the ongoing financial crisis affecting the domestic and foreign banking
system and financial markets, including the impact of the Company’s supplier and
customers, changes in client needs and consumer spending habits, the impact of
competition and technological change on the Company, the Company’s ability to
manage its growth effectively, including its ability to successfully integrate
any business which it might acquire, and currency fluctuations. A more detailed
discussion of risk factors is set forth in Item 1A, “Risk Factors”, included in
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2009.  Allforward-looking
statements in this report are based upon information available to the Company on
the date of this report.  The Company undertakes no obligation to
publicly update or revise any
forward-looking statement, whether as a result of new information, future
events, or otherwise, except as required by law.





Critical
Accounting Policies




There
have been no material changes to the Company’s critical accounting policies and
estimates from the information provided in Item 7, Management’s Discussion and
Analysis of Financial Condition and Results of Operations, included in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2009.




Results
of Operations




Net
Sales




Consolidated
net sales for the three months ended March 31, 2010 were $13,121,000, compared
with $11,297,000 in the same period in 2009, a 16% increase (13% in local
currency). Net sales in the U.S increased 13% principally due to increased sales
of new products, including the iPoint pencil sharpener, proprietary non-stick
scissors and the SpeedPak utility knife. During the first quarter, the Company
also added a number of new customers including major hardware and industrial
accounts.  Net sales in the Canadian operating segment increased 21%
(2% in local currency).  Net sales in Europe increased by 27% in U.S.
dollars (20% in local currency) primarily due to new business in the mass market
channel and growth in the office product channel.





10





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




Gross
Profit




Gross
profit for the three months ended March 31, 2010 was $5,113,000 (39% of net
sales), compared to $4,297,000 (38% of net sales) for the same period in 2009,
an increase of 19%.  The increase in gross profit as a percentage of
sales for the first quarter was principally due to the leverage of fixed costs
over higher sales, a stronger Canadian dollar which reduces the cost of goods in
the Canadian operating segment and a favorable product mix in
Europe.




Selling,
General and Administrative Expenses




Selling,
general and administrative ("SG&A") expenses for the three months ended
March 31, 2010 were $4,812,000 (36.7% of net sales), compared with $4,216,000
(37.3% of net sales) for the same period of 2009, an increase of $596,000. The
increase in SG&A expenses for the three months ended March 31, 2010,
compared to the same period in 2009, was primarily due to higher freight and
commission costs which resulted from higher sales. In addition, the Company
began to scale-back on certain temporary cost reduction programs implemented in
the first quarter of 2009.




Operating
Income




Operating
income for the three months ended March 31, 2010 was $301,000, compared with
$82,000 in the same period of 2009, an increase of $219,000. Operating income in
the U.S. and Canadian segments increased by $36,000 and $82,000, respectively in
the first quarter of 2010, compared to the same period of 2009. The operating
loss in Europe decreased by approximately $100,000 in the first quarter of 2010
compared to the same period in 2009. The improvement in operating income in all
three of the Company’s operating segments is principally due to higher sales and
gross profits.




Interest
Expense, net




Interest
expense, net for the three months ended March 31, 2010 was $20,000, compared
with $7,000 for the same period of 2009, an increase of $13,000.  The
increase in interest expense, net during the first three months of 2010 over the
comparable period in 2009 was primarily the result of higher average interest
rates on the Company’s debt outstanding under its revolving credit
facility.




Other
income (expense), net




Net other
expense, consisting primarily of foreign currency transaction losses, was
$14,000 in the first quarter of 2010, compared to $12,000 in the first quarter
of 2009.




Income
Taxes




The
effective tax rate in the first quarter of 2010 was 20%, compared to 33% in the
first quarter of 2009.  The decrease in the effective tax rate for the
three months ended March 31, 2010 was primarily the result of higher proportion
of earnings in a foreign tax jurisdiction with a lower tax rate.




11


Financial
Condition




Liquidity
and Capital Resources




During
the first three months of 2010, working capital remained essentially constant
compared to December 31, 2009. Inventory increased by approximately $1.1 million
at March 31, 2010 compared to December 31, 2009. The increase was principally
due to the buildup in advance of the back to school season. Inventory turnover,
calculated using a twelve month average inventory balance, remained constant at
1.9 at March 31, 2010 and December 31, 2009.  Receivables decreased by
approximately $500,000 at March 31, 2010 compared to December 31, 2009. The
average number of days sales outstanding in accounts receivable was 60 days at
March 31, 2010 compared to 61 days at December 31, 2009.




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




March 31, 2010
            
            
            December 31,
    2009Working
      capital
            
            $
            28,813,974
            
            
            $
            28,952,854Current
      ratio
            
            
            5.36
            
            
            
            5.26Long
      term debt to equity ratio
            
            
            36.2
            %
            
            
            37.4
            %





During
the first three months of 2010, total debt outstanding under the Company’s
recently modified credit facility, decreased by $246,000 compared to total debt
at December 31, 2009. As of March 31, 2010, $8,908,000 was outstanding and
$9,092,000 was available for borrowing under the Company’s credit
facility.




On
January 26, 2010, the Company modified its revolving loan agreement with
Wachovia Bank; the amendments include (a) a decrease in the maximum borrowing
amount from $20 million to $18 million; (b) an extension of the maturity date of
the loan from June 30, 2010 to February 1, 2012; (c) an increase in the interest
rate to LIBOR plus 2% (from LIBOR plus 7/8%) and (d) modification of certain
covenant restrictions.  Funds borrowed under the credit facility may
be used for working capital, general operating expenses, share repurchases and
certain other purposes.





As
discussed in Note 2, at March 31, 2010 the Company had approximately $670,000
remaining in its accrual for environmental remediation, with approximately
$350,000 classified as a current liability. The Company intends to use cash flow
from operations or borrowings under its revolving credit facility to pay for
these costs. The Company does not believe that payment of such remediation costs
will have a material adverse affect on the Company’s ability to implement its
business plan. In addition, the Company has provided the buyer with a $2.0
million mortgage at 6 percent interest. Payments on the mortgage are due monthly
and will also help fund the remediation.





Cash
expected to be generated from operating activities, together with funds
available under the Company’s revolving credit facility are expected, under
current conditions, to be sufficient to finance the Company’s planned operations
over the next twelve months.




12





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF




FINANCIAL
CONDITION AND RESULTS OF OPERATIONS-Continued







Item
3. Quantitative and Qualitative Disclosure About Market Risk




Not
applicable for smaller reporting companies.







Item
4T. Controls and Procedures




(a)
            Evaluation
      of Disclosure Controls and
Procedures





Under the
supervision and with the participation of our management, including the Chief
Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of our disclosure controls and procedures as required by Exchange
Act Rule 13a-15(b) as of March 31, 2010. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures are effective.





(b)
            Changes
      in Internal Control over Financial
Reporting





During
the quarter ended March 31, 2010, there were no changes in the Company’s
internal control over financial reporting that materially affected, or was
reasonably likely to materially affect, our internal control over financial
reporting.





13


PART
II.  OTHER INFORMATION




Item
1 — Legal Proceedings




The
Company is involved from time to time in disputes and other litigation in the
ordinary course of business, including certain environmental and other
matters.  The Company presently believes that none of these matters,
individually or in the aggregate, would be likely to have a material adverse
impact on its financial position, results of operations, or
liquidity.




Item
1A – Risk Factors




See Risk
Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2009.




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




None.




Item
3.  — Defaults Upon Senior Securities




None.




Item
4 — Removed and Reserved




None.




Item
5 — Other Information




None.






Item
6 — Exhibits




Documents
filed as part of this report.




Exhibit 31.1 Certification of Walter C.
Johnsen pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




Exhibit 31.2 Certification of Paul G. Driscoll
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




Exhibit 32.1 Certification Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002




Exhibit 32.2 Certification Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002







14




SIGNATURES




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






By
              /s/  Walter C.
      JohnsenWalter C.
      JohnsenChairman of
      the Board andChief
      Executive OfficerDated:  May
      10, 2010By
              /s/  Paul
      G. DriscollPaul G.
      DriscollVice
      President andChief
      Financial OfficerDated:  May
      10, 2010





15