FORM
10-Q








UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





QUARTERLY
REPORT


PURSUANT
TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended June 30, 2010.





Commission
File No.  1-8129.





US 1 INDUSTRIES,
INC.


(Exact
name of registrant as specified in its charter)




Indiana
                95-3585609(State
      of Incorporation)
                (I.R.S.
      Employer Identification
No.)





336 W. US 30, Valparaiso,
      Indiana
                46385(Address
      of principal executive offices)
                (Zip
      Code)




Registrant's
telephone number, including area code: (219)476-1300





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 þ No o





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, large accelerated filer”,
and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large
accelerated filer o
Accelerated filer o
Non-accelerated filer  þ Smaller reporting
company


(Do not check if a smaller reporting
company)





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





As of
August 6, 2010 there were 14,243,409 shares of registrant’s common stock
outstanding.







US
1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


JUNE
30, 2010 (UNAUDITED) AND DECEMBER 31, 2009





Part
I  FINANCIAL INFORMATION





Item
1. FINANCIAL STATEMENTS.




June
      30, 2010
                              
                              
                              December
      31, 2009(Unaudited)ASSETSAccounts
      receivable-trade, less allowances fordoubtful
      accounts of $1,115,000 and$1,147,000,
      respectively
                              
                              $
                              30,885,890
                              
                              
                              $
                              26,614,970Other
      receivables, including receivables due fromaffiliated
      entities of $629,000 and $861,000,respectively
                              
                              
                              5,434,452
                              
                              
                              
                              4,427,027Prepaid
      expenses and other current assets
                              
                              
                              1,793,053
                              
                              
                              
                              1,623,808Current
      deferred income tax asset
                              
                              
                              975,178
                              
                              
                              
                              975,178Total
      current assets
                              
                              
                              39,088,573
                              
                              
                              
                              33,640,983FIXED
      ASSETS:Land
                              
                              
                              195,347
                              
                              
                              
                              195,347Equipment
                              
                              
                              1,809,047
                              
                              
                              
                              2,748,270Less
      accumulated depreciation and amortization
                              
                              
                              (895,489
                              )
                              
                              
                              (1,353,102
                              )Net
      property and equipment
                              
                              
                              1,108,905
                              
                              
                              
                              1,590,515Non-current
      deferred income tax asset
                              
                              
                              1,107,575
                              
                              
                              
                              1,107,575Notes
      receivable - long term
                              
                              
                              838,324
                              
                              
                              
                              833,651Intangible
      assets, net
                              
                              
                              2,429,351
                              
                              
                              
                              2,812,672Goodwill
                              
                              
                              1,391,741
                              
                              
                              
                              1,780,639Other
      assets
                              
                              
                              126,461
                              
                              
                              
                              126,461Total
      Assets
                              
                              $
                              46,090,930
                              
                              
                              $
                              41,892,496




The
accompanying notes are an integral part of the consolidated financial
statements.




2




US
1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


JUNE
30, 2010 (UNAUDITED) AND DECEMBER 31, 2009




June
      30, 2010
                      
                      
                      December
      31, 2009(Unaudited)LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIES:Revolving
      line of credit
                      
                      $
                      9,352,089
                      
                      
                      $
                      9,592,474Bank
      overdraft
                      
                      
                      2,035,440
                      
                      
                      
                      1,628,383Current
      portion of capital lease obligation
                      
                      
                      -
                      
                      
                      
                      30,246Current
      portion of long-term debt
                      
                      
                      22,828
                      
                      
                      
                      642,413Accounts
      payable
                      
                      
                      12,526,617
                      
                      
                      
                      9,538,918Insurance
      and claims
                      
                      
                      1,613,836
                      
                      
                      
                      1,435,924Other
      accrued expenses
                      
                      
                      2,121,893
                      
                      
                      
                      1,410,098Total
      current liabilities
                      
                      
                      27,672,703
                      
                      
                      
                      24,278,456LONG-TERM
      DEBT, less current portion
                      
                      
                      44,236
                      
                      
                      
                      146,878CAPITAL
      LEASE, less current portion
                      
                      
                      -
                      
                      
                      
                      56,241SHAREHOLDERS'
      EQUITY:Common
      stock, authorized 20,000,000 shares: no parvalue;
      14,838,657 shares issued at June 30, 2010, andDecember
      31, 2009, respectively
                      
                      
                      46,983,188
                      
                      
                      
                      46,978,349Treasury
      stock, 595,248 shares at both June 30, 2010and
      December 31, 2009, respectively
                      
                      
                      (952,513
                      )
                      
                      
                      (952,513
                      )Accumulated
      deficit
                      
                      
                      (28,124,784
                      )
                      
                      
                      (28,835,952
                      )Total
      US 1 Industries, Inc. shareholders' equity
                      
                      
                      17,905,891
                      
                      
                      
                      17,189,884Noncontrolling
      Interests
                      
                      
                      468,100
                      
                      
                      
                      221,037Total equity
                      
                      
                      18,373,991
                      
                      
                      
                      17,410,921Total
      liabilities and shareholders' equity
                      
                      $
                      46,090,930
                      
                      
                      $
                      41,892,496




The
accompanying notes are an integral part of the consolidated financial
statements.




3





US
1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME


THREE
AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)




Three Months Ended
                  
                  
                  Six Month endedJune 30,
                  
                  
                  June 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009(Unaudited)
                  
                  
                  (Unaudited)
                  
                  
                  (Unaudited)
                  
                  
                  (Unaudited)OPERATING
      REVENUES
                  
                  $
                  52,577,314
                  
                  
                  $
                  45,017,360
                  
                  
                  $
                  100,065,084
                  
                  
                  $
                  89,230,264OPERATING
      EXPENSES:Purchased
      transportation
                  
                  
                  36,384,819
                  
                  
                  
                  30,344,630
                  
                  
                  
                  69,244,739
                  
                  
                  
                  61,032,813Commissions
                  
                  
                  7,920,265
                  
                  
                  
                  6,496,286
                  
                  
                  
                  14,918,700
                  
                  
                  
                  12,325,797Insurance
      and claims
                  
                  
                  1,522,883
                  
                  
                  
                  1,157,472
                  
                  
                  
                  3,011,869
                  
                  
                  
                  2,724,414Salaries,
      wages and other
                  
                  
                  3,094,806
                  
                  
                  
                  4,043,764
                  
                  
                  
                  6,055,044
                  
                  
                  
                  8,208,573Other
      operating expenses
                  
                  
                  2,269,858
                  
                  
                  
                  2,762,016
                  
                  
                  
                  4,648,795
                  
                  
                  
                  5,566,336Total
      operating expenses
                  
                  
                  51,192,631
                  
                  
                  
                  44,804,168
                  
                  
                  
                  97,879,147
                  
                  
                  
                  89,857,933OPERATING
      INCOME (LOSS)
                  
                  
                  1,384,683
                  
                  
                  
                  213,192
                  
                  
                  
                  2,185,937
                  
                  
                  
                  (627,669
                  )NON-OPERATING
      INCOME (EXPENSE)Interest
      income
                  
                  
                  22,391
                  
                  
                  
                  36,394
                  
                  
                  
                  45,031
                  
                  
                  
                  45,555Interest
      expense
                  
                  
                  (121,703
                  )
                  
                  
                  (270,076
                  )
                  
                  
                  (331,777
                  )
                  
                  
                  (431,322
                  )Other
      income (expense)
                  
                  
                  82,241
                  
                  
                  
                  (4,397
                  )
                  
                  
                  81,026
                  
                  
                  
                  115,782Total
      non operating (expense) income
                  
                  
                  (17,071
                  )
                  
                  
                  (238,079
                  )
                  
                  
                  (205,720
                  )
                  
                  
                  (269,985
                  )NET
      INCOME (LOSS) BEFORE INCOME TAXES
                  
                  $
                  1,367,612
                  
                  
                  $
                  (24,887
                  )
                  
                  $
                  1,980,217
                  
                  
                  $
                  (897,654
                  )Income
      tax expense
                  
                  
                  309,813
                  
                  
                  
                  61,202
                  
                  
                  
                  498,442
                  
                  
                  
                  143,930NET
      INCOME (LOSS) BEFORE NONCONTROLLING INTEREST
                  
                  $
                  1,057,799
                  
                  
                  $
                  (86,089
                  )
                  
                  $
                  1,481,775
                  
                  
                  $
                  (1,041,584
                  )Income
      attributable to noncontrolling interest
                  
                  
                  553,038
                  
                  
                  
                  (337,343
                  )
                  
                  
                  871,535
                  
                  
                  
                  (313,798
                  )NET
      INCOME (LOSS) AVAILABLE TO COMMON SHARES
                  
                  $
                  504,761
                  
                  
                  $
                  251,254
                  
                  
                  $
                  610,240
                  
                  
                  $
                  (727,786
                  )Basic
      Net Income (Loss) Per Common Shares
                  
                  $
                  0.04
                  
                  
                  $
                  0.02
                  
                  
                  $
                  0.04
                  
                  
                  $
                  (0.05
                  )Diluted
      Net Income (Loss) Per Common Shares
                  
                  $
                  0.04
                  
                  
                  $
                  0.02
                  
                  
                  $
                  0.04
                  
                  
                  $
                  (0.05
                  )Weighted
      Average Shares Outstanding - Basic
                  
                  
                  14,243,409
                  
                  
                  
                  14,243,409
                  
                  
                  
                  14,243,409
                  
                  
                  
                  14,243,409Weighted
      Average Shares Outstanding - Diluted
                  
                  
                  14,290,025
                  
                  
                  
                  14,243,409
                  
                  
                  
                  14,309,172
                  
                  
                  
                  14,243,409




The
accompanying notes are an integral part of the consolidated financial
statements.





4





US
1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)


FOR
THE SIX MONTHS ENDED JUNE 30, 2010




TotalUS1
      Industries, Inc.Common
      Stock
                          
                          
                          Treasury
                          
                          
                          Accumulated
                          
                          
                          Stockholders'
                          
                          
                          NoncontrollingShares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          Deficit
                          
                          
                          Equity
                          
                          
                          InterestsBalance
      at January 1, 2010
                          
                          
                          14,838,657
                          
                          
                          $
                          46,978,349
                          
                          
                          
                          (595,248
                          )
                          
                          $
                          (952,513
                          )
                          
                          $
                          (28,835,952
                          )
                          
                          $
                          17,189,884
                          
                          
                          $
                          221,037Stock
      Compensation Expense
                          
                          
                          -
                          
                          
                          
                          4,839
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,839
                          
                          
                          
                          -Deconsolidation
      of Stoops Ferry
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          100,928
                          
                          
                          
                          100,928
                          
                          
                          
                          55,528Net
      income for the six months endedJune
      30, 2010
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          610,240
                          
                          
                          
                          610,240
                          
                          
                          
                          871,535Distribution
      to noncontrolling interests
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (680,000
                          )Balance
      at June 30, 2010
                          
                          
                          14,838,657
                          
                          
                          $
                          46,983,188
                          
                          
                          
                          (595,248
                          )
                          
                          $
                          (952,513
                          )
                          
                          $
                          (28,124,784
                          )
                          
                          $
                          17,905,891
                          
                          
                          $
                          468,100




The
accompanying notes are in integral part of the consolidated financial
statements.




5





US
1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


JUNE
30, 2010 AND JUNE 30, 2009 (UNAUDITED)




Six
      Months Ended June 30, 20102010
                    
                    
                    2009(Unaudited)
                    
                    
                    (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Income (Loss)
                    
                    
                    610,240
                    
                    
                    
                    (727,786
                    )Adjustments
      to reconcile net income (loss) to net cashprovided
      by operating activitiesDepreciation
      and amortization
                    
                    
                    474,366
                    
                    
                    
                    766,005(Gain)
      Loss on disposal of assets
                    
                    
                    (4,020
                    )
                    
                    
                    41,938Stock
      compensation expense
                    
                    
                    4,839
                    
                    
                    
                    53,224Provision
      for bad debts
                    
                    
                    228,679
                    
                    
                    
                    726,946Noncontrolling
      interest
                    
                    
                    871,535
                    
                    
                    
                    (313,798
                    )Changes
      in operating assets and liabilities:Accounts
      receivable - trade
                    
                    
                    (4,525,562
                    )
                    
                    
                    4,460,317Other
      receivables
                    
                    
                    (772,825
                    )
                    
                    
                    (360,695
                    )Notes
      receivable
                    
                    
                    (4,673
                    )
                    
                    
                    428,143Prepaid
      expenses and other current assets
                    
                    
                    (270,245
                    )
                    
                    
                    (157,019
                    )Accounts
      payable
                    
                    
                    3,376,261
                    
                    
                    
                    568,661Insurance
      and claims
                    
                    
                    177,912
                    
                    
                    
                    (201,753
                    )Other
      accrued expenses
                    
                    
                    711,795
                    
                    
                    
                    (439,974
                    )Net
      cash provided by operating activities
                    
                    
                    878,302
                    
                    
                    
                    4,844,209CASH
      FLOWS FROM INVESTING ACTIVITIES:Additions
      to equipment
                    
                    
                    (101,701
                    )
                    
                    
                    (219,426
                    )Goodwill
      purchase accounting adjustment
                    
                    
                    -
                    
                    
                    
                    (119,896
                    )Proceeds
      from sales of fixed assets
                    
                    
                    31,000
                    
                    
                    
                    -Net
      cash used in investing activities
                    
                    
                    (70,700
                    )
                    
                    
                    (339,322
                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      repayments under the line of credit
                    
                    
                    (240,385
                    )
                    
                    
                    (93,843
                    )Change
      in bank overdraft
                    
                    
                    382,366
                    
                    
                    
                    (3,090,613
                    )Capital
      lease payments
                    
                    
                    -
                    
                    
                    
                    (53,052
                    )Principal
      payments of long term debts
                    
                    
                    (269,583
                    )
                    
                    
                    (534,253
                    )Distributions
      to noncontrolling interests
                    
                    
                    (680,000
                    )
                    
                    
                    (611,179
                    )Net
      cash used in financing activities
                    
                    
                    (807,602
                    )
                    
                    
                    (4,382,940
                    )NET
      CHANGE IN CASH
                    
                    
                    -
                    
                    
                    
                    121,947CASH,
      BEGINNING OF PERIOD
                    
                    
                    -
                    
                    
                    
                    -CASH,
      END OF PERIOD
                    
                    $
                    -
                    
                    
                    $
                    121,947Cash
      paid for interest
                    
                    $
                    394,804
                    
                    
                    $
                    352,763Cash
      paid for income taxes
                    
                    $
                    287,907
                    
                    
                    $
                    442,445




The
accompanying notes are an integral part of the consolidated financial
statements.




6




US
1 INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


SIX
MONTHS ENDED JUNE 30, 2010 AND 2009





1.
BASIS OF PRESENTATION





The accompanying consolidated balance
sheet as of June 30, 2010 and the consolidated statements of income and cash
flows for the three and six month periods ended June 30, 2010 and 2009, and the
statement of shareholders’ equity for the six months ended June 30, 2010 are
unaudited, but, in the opinion of management, include all adjustments
(consisting of normal, recurring accruals) necessary for a fair presentation of
the financial position and the results of operations at such date and for such
periods.  The year-end balance sheet data was derived from audited
financial statements.  These statements should be read in conjunction with
US 1 Industries, Inc. and Subsidiaries (“the Company”) audited consolidated
financial statements for the year ended December 31, 2009, and the notes thereto
included in the Company's Annual Report on Form 10-K.  Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted, as
permitted by the requirements of the Securities and Exchange Commission,
although the Company believes that the disclosures included in these financial
statements are adequate to make the information not misleading.  The
results of operations for the three and six months ended June 30, 2010 and 2009
are not necessarily indicative of the results for a full
year.




2.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS




Accounting
Standards Codification (“ASC”) 605-25—In October 2009, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2009-13 for updated revenue recognition guidance under the provisions
of ASC 605-25, “Multiple-Element Arrangements”. The previous guidance has been
retained for criteria to determine when delivered items in a
multiple-deliverable arrangements should be considered separate units of
accounting, however the updated guidance removes the previous separation
criterion that objective and reliable evidence of fair value of any undelivered
items must exist for the delivered items to be considered a separate unit or
separate units of accounting. This guidance is effective for fiscal years
beginning on or after June 15, 2010. The Company does not expect that the
adoption of this guidance will have a material effect on the Company’s
consolidated results of operations, financial position or cash
flows.




ASC
815—In March 2010, the FASB issued ASU 2010-11, “Scope Exception Related to
Embedded Credit Derivatives” to address questions that have been raised in
practice about the intended breadth of the embedded credit derivative scope
exception in paragraphs 815-15-15-8 through 815-15-15-9 of ASC 815, “Derivatives
and Hedging”.  The amended guidance clarifies that the scope exception
applies to contracts that contain an embedded credit derivative that is only in
the form of subordination of one financial instrument to another. This guidance
is effective on July 1, 2010 for the Company.  The adoption of this
guidance is not expected to have a material impact on the Company’s consolidated
financial position, results of operations or cash flows.





ASC 810— On January 1, 2010 the Company
adopted the provisions of ASU No. 2009-17, Consolidations: Improvements to
Financial Reporting by Enterprises Involved with Variable Interest Entities,
which requires reporting entities to evaluate former qualifying special purpose
entities for consolidation, changes the approach to determining a VIE’s primary
beneficiary from a quantitative assessment to a qualitative assessment designed
to identify a controlling financial interest, and increases the frequency of
required reassessments to determine whether a company is the primary beneficiary
of a VIE. It also clarifies, but does not significantly change, the
characteristics that identify a VIE. As a result, the Company concluded that
Stoops Ferry, LLC no longer qualifies for consolidation into ARL; the net
assets, including goodwill, and retain earnings were removed from the Company’s
financial statements accordingly.  The impact of this deconsolidation was
not material to the Company’s financial statements.




7




3.
RECLASSIFICATIONS





Certain
reclassifications have been made to the previously reported 2009 financial
statements to conform to the 2010 presentation.





4.
EARNINGS PER SHARE





The
Company calculates earnings per share (“EPS”) in accordance with SFAS No. 128,
which was primarily codified into ASC 260-10.  Following is the
reconciliation of the numerators and denominators of basic and diluted
EPS.




Three
      Months Ended June 30,
                            
                            
                            Six
      Months Ended June 30,2010
                            
                            
                            2009
                            
                            
                            2010
                            
                            
                            2009NumeratorNet
      income (loss) availableto
      common shareholdersfor
      basic and diluted EPS
                            
                            $
                            504,761
                            
                            
                            $
                            251,254
                            
                            
                            $
                            610,240
                            
                            
                            $
                            (727,786
                            )DenominatorWeighted
      average commonshares
      outstanding forbasic
      EPS
                            
                            
                            14,243,409
                            
                            
                            
                            14,243,409
                            
                            
                            
                            14,243,409
                            
                            
                            
                            14,243,409Weighted
      average commonshares
      outstanding fordiluted
      EPS
                            
                            
                            14,290,025
                            
                            
                            
                            14,243,409
                            
                            
                            
                            14,309,172
                            
                            
                            
                            14,243,409





The
Company has no other options or warrants to purchase common stock
outstanding.





5.
REVENUE RECOGNITION





Revenue for freight is recognized upon delivery. The Company accounts for
its revenue in accordance with Emerging Issues Task Force (“EITF”) 99-19,
“Reporting Revenue Gross as a Principal Versus Net as an Agent,” which was
primarily codified into ASC topic 605. Amounts payable for purchased
transportation, commissions and insurance are accrued when incurred.  The
Company follows guidance of this standard and records revenues at the gross
amount billed to customers because the Company (1) determined it operates as the
primary obligor, (2) typically is responsible for damages to goods and (3) bears
the credit risk.





6.
BANK LINE OF CREDIT





The
Company and its subsidiaries have a $17.5 million line of credit that was
amended on March 11, 2010.  The amendment included (1) a redefinition of
the minimum debt service ratio, (2) the imposition of a covenant that the
Company’s current maturities of long term debt other than debt to the Lender
will not exceed $700,000, (3) a restriction on annual Capital Expenditures in
excess of $600,000, (4) a restriction on dividends, distributions or other
expenditures  to the Company’s capital stock ownership interest, (6) the
reduction of the minimum debt service ratio, and (5) an increase in the
Company’s limit of current maturities of Indebtedness for Borrowed Money other
than the Revolving Loan.  This line of credit matures on October 1,
2010.  Historically the revolving line of credit has been extended prior to
maturity and management anticipates that this will occur in 2010.  Advances
under this revolving line of credit are limited to 75% of eligible accounts
receivable.  Unused availability under the amended line of credit was $8.1
million at June 30, 2010.  Under the amended line of credit agreement, the
Company’s interest rate is based upon certain financial covenants and may range
from “One Month LIBOR” plus 3.35% to “One Month LIBOR” plus 4.35%.  As of
June 30, 2010, the interest rate on this line of credit was 3.725%.  The
Company’s accounts receivable, property, and other assets are collateral under
the agreement.  Borrowings up to $3.0 million are guaranteed by the Chief
Executive Officer and Chief Financial Officer of the Company. At June 30, 2010,
the outstanding borrowings on this line of credit were $9.4
million.





8


This line of credit is subject to
termination upon various events of default, including failure to remit timely
payments of interest, fees and principal, any adverse change in the business of
the Company or failure to meet certain financial covenants.  As of June 30,
2010, financial covenants include: minimum debt service ratio, maximum total
debt service coverage ratio, limits on capital expenditures, prohibition of
dividends and distributions that would put the Company out of compliance, and
prohibition of additional indebtedness without prior authorization.  At
June 30, 2010, the Company, and its subsidiaries were in compliance with these
financial covenants.





On
January 15, 2009, the Company and its subsidiaries entered into a no cost
Interest Rate Swap Agreement with U.S. Bank effective February 2, 2009 through
February 1, 2012.  This agreement is in the notional amount of $10.0
million from February 2, 2009 through January 31, 2010, then $7.0 million from
February 1, 2010 through January 31, 2011, then $4.0 million from February 1,
2011 to February 1, 2012.  The agreement provides for the Company to pay
interest at an annual rate of 1.64% times the notional amount of the swap
agreement, and U.S. Bank pay interest at the LIBOR rate times the notional
amount of the swap.  The Company did not enter into this agreement for
speculative purposes.  The Company recorded the fair value of the interest
rate swap resulting in interest expense of approximately $0.08 million for the
six months ended June 30, 2010.  The fair value of the interest rate swap
was minimal at December 31, 2009.




7.
EQUITY TRANSACTIONS





In
December 2008, as part of the acquisition of ARL, the Company granted two
employees a total of 300,000 options to purchase shares of common stock at an
exercise price of $0.80 per share.  These options vest over 4 years,
however 150,000 options vested early in 2009 due to one employee’s
termination.  All options expire by December 18, 2018.  The fair value
of these options of $0.1 million was calculated using a Black Scholes
Model.  During 2009, the Company recorded stock compensation expense of
$0.06 million and the remainder is to be recorded through 2012.  The
Company has no other options or warrants to purchase common stock outstanding as
of June 30, 2010.





8.
LEGAL PROCEEDINGS





The
Company and its subsidiaries are involved in certain litigation matters in the
normal course of its business. Management intends to vigorously defend these
cases. In the opinion of management, any negative outcome from litigation now
pending will not have a material adverse affect on the consolidated financial
statements of the Company.




9.
INCOME TAXES





The
Company files a consolidated US income tax return and tax returns in various
states and local jurisdictions.  Income tax expense increased $0.4 million
for the six months ended June 30, 2010 to $0.5 million, an effective tax rate of
45.0%, for the six months ended June 30, 2010 from $0.1 million for the six
months ended June 30, 2009.  In 2009, income tax expense is related to
state and local taxes, as each subsidiary of the Company is required to file
stand-alone state tax returns and pay taxes based on certain apportionment
factors.  As such, each subsidiary was not able to obtain state tax
benefits for the losses generated by the consolidated entity, and was required
to pay quarterly state taxes.  The Company is also required to file in
certain states that use a gross margin tax as opposed to an income tax.  As
a result, the effective tax rate in both 2010 and 2009 will vary from the
statutory rate because the state tax does not necessarily bear a direct
relationship to net income.





Each
subsidiary of the Company is required to file stand-alone state tax returns and
pay taxes based on certain apportionment factors.  As such, each subsidiary
is not able to obtain state tax benefits for the losses generated by the
consolidated entity, and is required to pay quarterly state taxes.  The
Company is also required to file in certain states that use a gross margin tax
as opposed to an income tax.  As a result, the effective tax rate will vary
from the statutory rate because the state tax does not necessarily bear a
direct relationship to net income.





9


Item
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.





Results
of Operations





You
should read the following discussion regarding the Company and its subsidiaries
along with the Company’s consolidated financial statements and related notes
included in this quarterly report.  The following discussion contains
forward-looking statements that are subject to risks, uncertainties and
assumptions.  The Company’s actual results, performance and achievements in
2010 and beyond may differ materially from those expressed in, or implied by,
these forward-looking statements.




The
financial statements and related notes contained elsewhere in this Form 10-Q as
of and for the three months and six months ended June 30, 2010 and 2009 and in
the Company’s Form 10-K for its fiscal year ended December 31, 2009, are
essential to an understanding of the comparisons and are incorporated by
reference into the discussion that follows.





Purchased
transportation represents the amount an independent contractor is paid to haul
freight and is primarily based on a contractually agreed-upon percentage of
revenue generated by the haul for truck capacity provided by independent
contractors.  Because the Operating Subsidiaries generally do not own their
own trucks, purchased transportation is the largest component of the Company’s
operating expenses and increases or decreases in proportion to the revenue
generated through independent contractors.  Commissions to agents and
brokers are similarly based on contractually agreed-upon percentages of
revenue.





A
majority of the Company’s insurance expense, through its subsidiaries, is based
on a percentage of revenue and, as a result, will increase or decrease with the
Company’s revenue.  Potential liability associated with accidents in the
trucking industry is severe and occurrences are unpredictable.  A material
increase in the frequency or severity of accidents or the unfavorable
development of existing claims could adversely affect the Company’s operating
income.





Historically
salaries, wages, fringe benefits, and other operating expenses had been
principally non-variable expenses and remained relatively fixed with slight
changes in relationship to revenue.  However, since the Company, through
its subsidiaries, has added certain operations, which utilize employees rather
than independent agents, these non-variable expenses may not be directly
comparable.





10


Six
months ended June 30, 2010 compared to the six months ended June 30,
2009





The
following table sets forth the percentage relationships of expense items to
revenue for the six months ended June 30, 2010 and June 30, 2009:





2010
                  
                  
                  2009Revenue
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Operating
      expenses:Purchased
      transportation
                  
                  
                  69.2
                  %
                  
                  
                  68.4
                  %Commissions
                  
                  
                  14.9
                  %
                  
                  
                  13.8
                  %Insurance
      and claims
                  
                  
                  3.0
                  %
                  
                  
                  3.1
                  %Salaries,
      wages and other
                  
                  
                  6.1
                  %
                  
                  
                  9.2
                  %Other
      operating expenses
                  
                  
                  4.6
                  %
                  
                  
                  6.2
                  %Total
      operating expenses
                  
                  
                  97.8
                  %
                  
                  
                  100.7
                  %Operating
      income (loss)
                  
                  
                  2.2
                  %
                  
                  
                  -0.7
                  %




The
Company's operating revenues increased by $10.8 million to $100.1 million for
the six months ended June 30, 2010 from $89.2 million for the same period in
2009.  This is an increase of 12.1%. The increase is primarily attributable
to the increase of load activity at several of the Company’s locations, which we
believe is attributable to an improvement of the general economy.




Purchased
transportation and commission expense generally increase or decrease in
proportion to the revenue generated through independent contractors.  Many
agents negotiate a combined percentage payable for purchased transportation and
commission.  Purchased transportation and commission together increased
1.9% as a percentage of revenue for the six months ended June 30, 2010 from the
same period of time in 2009.  Purchased transportation expense increased
0.8% as a percentage of operating revenue from 68.4% for the six months ended
June 30, 2009 to 69.2% for the six months ended June 30, 2010.  The mix
between the amounts of purchased transportation paid versus commissions paid may
vary slightly based on agent negotiations with independent owner
operators.  In addition, pay on certain types of revenue may be higher than
for other types of revenue.  Thus a change in the mix of revenue can cause
some variation in the percent paid out for purchased transportation and
commission.  However, in total, commissions and purchased transportation
would typically be expected to remain relatively consistent as a percentage of
revenue. Commission
expense increased 1.1% as a percentage of operating revenue from 13.8% for the
six months ended June 30, 2009 to 14.9% for the six months ended June 30,
2010.  The increase in purchased transportation and commissions is the
result of increased brokerage activity at one of the Company’s operations. 
Brokered loads pay a higher percentage of purchased transportation and
commission as carriers are responsible for paying their own liability
insurance.





Salaries expense is not directly
variable with revenue and has decreased $2.2 million for the six months ended
June 30, 2010 compared to the same period of time in 2009.  This decrease
in salaries expense is primarily attributable to subsidiaries of the Company
that have closed offices and restructured the workloads in order to cut
costs.  Salaries expense decreased 3.1% as a percentage of operating
revenue from 9.2% for the six months ended June 30, 2009 to 6.1% for the six
months ended June 30, 2010.




Insurance
and claims decreased to 3.0% of operating revenue for the six months ended June
30, 2010 from 3.1% for the same period of time in 2009.  This was a
decrease of 0.1% of operating revenue for the six months ended June 30, 2010
compared to the same period of time in 2009.  A majority of the insurance
and claims expense is based on a percentage of revenue and, as a result, will
increase or decrease on a consolidated basis with the Company’s revenue. 
Potential liability associated with accidents in the trucking industry is severe
and occurrences are unpredictable.  A material increase in the frequency or
severity of accidents or the unfavorable development of existing claims could
adversely affect the Company’s operating income.




11




Six
months ended June 30, 2010 compared to the six months ended June 30, 2009
(continued)




Other
operating expenses decreased to 4.6% of revenue for the six months ended June
30, 2010 from 6.2% of revenue for the six months ended June 30, 2009.  The
Company experienced a defalcation related to accounts receivable which resulted
in an increase in the Company’s bad debt expense of approximately $0.5 million
during the first six months of 2009. There was no such defalcation related
expenses during the first six months of 2010.  In addition, the Company
experienced a decrease in depreciation and amortization expense for the first
six months of 2010 related to the deconsolidation of Stoops Ferry.




Interest
expense decreased $0.1 million from $0.4 million for the six months ended June
30, 2009 to $0.3 million for the six months ended June 30, 2010.  This
decrease is primarily attributable to decreased borrowings on the Company’s line
of credit and decreased interest rates on the line of credit.  The
Company’s interest being charged on the line of credit decreased from 4.163% as
of June 30, 2009 to 3.725% as of June 30, 2010.  Under the amended line of
credit agreement, the Company’s interest rate is based upon certain financial
covenants and may range from “One Month LIBOR” plus 3.35% to “One Month LIBOR”
plus 4.35%.





Other
income includes income from rental property, storage and equipment usage fees
and other administrative fee income.  Other income decreased $0.03 million
from $0.12 million for the six months ended June 30, 2009 to $0.08 million for
the six months ended June 30, 2010.  This decrease in other income is the
result of the Company experiencing a decrease in administrative fee income for
the six months ended June 30, 2010.




The
Company also recognized noncontrolling interest expense of $0.9 million for the
six months ended June 30, 2010 compared to noncontrolling interest income of
($0.3 million) for the six months ended June 30, 2009 relating to the minority
shareholders’ portion of income or loss generated by our majority owned
subsidiaries, ARL Transport, LLC, Carolina National Transportation, LLC and US1
Logistics, LLC.  This increase in noncontrolling interest expense is a
result of increased net income of the subsidiaries who have minority
shareholders.




Income
tax expense increased $0.4 million for the six months ended June 30, 2010 to
$0.5 million, an effective tax rate of 45.0%, for the six months ended June 30,
2010 from $0.1 million for the six months ended June 30, 2009.  In 2009,
income tax expense is related to state and local taxes, as each subsidiary of
the Company is required to file stand-alone state tax returns and pay taxes
based on certain apportionment factors.  As such, each subsidiary was not
able to obtain state tax benefits for the losses generated by the consolidated
entity, and was required to pay quarterly state taxes.  The Company is also
required to file in certain states that use a gross margin tax as opposed to an
income tax.  As a result, the effective tax rate will vary in both 2010 and
2009 from the statutory rate because the state tax does not necessarily
bear a direct relationship to net income.





As a
result of the factors outlined above, net income attributed to US 1 Industries,
Inc. for the six months ended June 30, 2010 was $0.6 million compared to a net
loss attributed to US 1 Industries, Inc. of ($0.7 million) for the six months
ended June 30, 2009.




12




Three
months ended June 30, 2010 compared to the three months ended June 30,
2009.





The
following table sets forth the percentage relationships of expense items to
revenue for the three months ended June 30, 2010 and June 30, 2009:





2010
                  
                  
                  2009Revenue
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Operating
      expenses:Purchased
      transportation
                  
                  
                  69.2
                  %
                  
                  
                  67.4
                  %Commissions
                  
                  
                  15.1
                  %
                  
                  
                  14.4
                  %Insurance
      and claims
                  
                  
                  2.9
                  %
                  
                  
                  2.6
                  %Salaries,
      wages and other
                  
                  
                  5.9
                  %
                  
                  
                  9.0
                  %Other
      operating expenses
                  
                  
                  4.3
                  %
                  
                  
                  6.1
                  %Total
      operating expenses
                  
                  
                  97.4
                  %
                  
                  
                  99.5
                  %Operating
      income (loss)
                  
                  
                  2.6
                  %
                  
                  
                  0.5
                  %




The
Company's operating revenues increased by $7.6 million to $52.6 million for the
three months ended June 30, 2010 from $45.0 million for the same period in
2009.  This is an increase of 16.9%.  This increase is primarily
attributable to the increase of load activity at several of the Company’s
locations, which we believe is attributable to an improvement of the general
economy.




Purchased
transportation and commission expense generally increase or decrease in
proportion to the revenue generated through independent contractors.  Many
agents negotiate a combined percentage payable for purchased transportation and
commission.  Purchased transportation and commission together increased
2.5% as a percentage of revenue for the three months ended June 30, 2010 from
the same period of time in 2009.  Purchased transportation expense
increased 1.8% as a percentage of operating revenue from $30.3 million for the
three months ended June 30, 2009 to $36.4 million for the three months ended
June 30, 2010.  The mix between the amounts of purchased transportation
paid versus commissions paid may vary slightly based on agent negotiations with
independent owner operators.  In addition, pay on certain types of revenue
may be higher than for other types of revenue.  Thus a change in the mix of
revenue can cause some variation in the percent paid out for purchased
transportation and commission.  However, in total, commissions and
purchased transportation would typically be expected to remain relatively
consistent as a percentage of revenue.  Commission expense increased by
0.7% as a percentage of revenue for the three months ended June 30, 2010 from
$6.5 million for the three months ended June 30, 2009 to $7.9 million for the
same period in 2010.  This increase in purchased transportation and
commissions is the result of increased brokerage activity at one of the
Company’s operations.  Brokered loads pay a higher percentage of purchased
transportation and commission as carriers are responsible for paying their own
liability insurance.





Salaries
expense is not directly variable with revenue and decreased approximately $1.0
million or 3.1% as a percentage of operating revenue for the three months ended
June 30, 2010 compared to the same period of time in 2009.  Salaries
expense was $4.0 million for the three months ended June 30, 2009 compared to
$3.0 million for the three months ended June 30, 2010.  This decrease in
salaries expense is primarily attributable to subsidiaries of the company that
have closed offices and restructured the workloads in order to cut
costs.




Insurance
and claims increased by 0.3% of operating revenue for the three months ended
June 30, 2010 from 2.6% for the three months ended June 30, 2009 to 2.9% of
operating revenue for the same period of time in 2010.  A majority of the
insurance and claims expense is based on a percentage of revenue and, as a
result, will increase or decrease on a consolidated basis with the Company’s
revenue.  Potential liability associated with accidents in the trucking
industry is severe and occurrences are unpredictable.  A material increase
in the frequency or severity of accidents or the unfavorable development of
existing claims could adversely affect the Company’s operating
income.





13


Other
operating expenses decreased to 4.3% as a percentage of revenue for the three
months ended June 30, 2010 from 6.1% as a percentage of revenue for the three
months ended June 30, 2009.  The actual dollar amount decreased by
approximately $0.5 million to approximately $2.3 million for the three months
ended June 30, 2010 compared to approximately $2.8 million for the three months
ended June 30, 2009.  The decrease is largely attributable to the
deconsolidation of Stoops Ferry.




Interest
expense decreased approximately $0.1 million for the three months ended June 30,
2010.  This decrease is primarily attributable to decreased borrowings on
the Company’s line of credit along with decreased interest rates.  Under
the amended line of credit agreement, the interest rate is based upon certain
financial covenants and may range from “One Month LIBOR” plus 3.35% to “One
Month LIBOR” plus 4.35%.  The Company’s interest rate as of June 30, 2009
was 4.163%.  As of June 30, 2010 the interest rate on this line of credit
was 3.725%.





Other
income includes income from rental property, storage and equipment usage fees
and other administrative fee income. In 2009, other income was reduced by
expenses related to Stoops Ferry.  In the first quarter 2010, Stoops Ferry
was deconsolidated thus other income increased $0.05 million for the three
months ended June 30, 2010.





The
Company also recognized noncontrolling interest expense of $0.6 million for the
three months ended June 30, 2010 compared to income of ($0.3 million) expense
for the three months ended June 30, 2009 relating to the minority shareholders’
portion of income or (loss) generated by our majority owned subsidiaries, ARL
Transport, LLC,  Carolina National Transportation, LLC and US1 Logistics,
LLC.  This increase in noncontrolling interest expense is a result of
increased net income of the subsidiaries who have minority
shareholders.




The
Company files a consolidated US income tax return and tax returns in various
states and local jurisdictions. Federal Income tax expense is approximately $0.2
million and $0, an effective tax rate of 38.0%, for the three months ended June
30, 2010.  State tax is approximately $0.1 million for the three months
ended June 30, 2010 and 2009 respectively.  Each subsidiary of the Company
is required to file stand-alone state tax returns and pay taxes based on certain
apportionment factors.  As such, each subsidiary was not able to obtain
state tax benefits for the losses generated by the consolidated entity, and was
required to pay quarterly state taxes.  The Company is also required to
file in certain states that use a gross margin tax as opposed to an income
tax.  As a result, the effective tax rate will vary from the statutory rate
because the state tax does not necessarily bear a direct relationship to
net income.





As a result of the factors outlined
above, the Company experienced net income in the amount of $0.5 million for the
three months ended June 30, 2010 compared to net income of $0.3 million for the
three months ended June 30, 2009.





Liquidity
and Capital Resources





During the six months ended June 30,
2010, the Company’s financial position improved.  The Company had total
shareholders’ equity of $17.9 million at June 30, 2010 compared with $17.2
million at December 31, 2009.





Net cash
provided by operating activities decreased $3.9 million from providing cash of
$4.8 million for the six months ended June 30, 2009 to $0.9 million for the six
months ended June 30, 2010.  Working capital needs used cash of $1.3
million during the six months ended June 30, 2010.  For the six months
ended June 30, 2009, working capital needs provided cash of $4.3
million.




The
Company experienced an increase in accounts receivable for the six months ended
June 30, 2010 of $4.5 million due to an increase in revenues which was partially
offset by an increase in customer payments for the six months ended June 30,
2010.




Other
receivables used cash for the six months ended June 30, 2010 in the amount of
$0.8 million compared to $0.4 million for the same period in 2009. The largest
contributor to this change is an increase in owner operator advances associated
with the daily operations of the Company.





14


Liquidity
and Capital Resources (continued)





Notes
receivable used cash for the six months ended June 30, 2010 in the amount of $0
compared to providing cash of $0.4 million in the same period in 2009.  The
decrease in cash provided was primarily a result of additional notes to
agents.




Accounts
Payable provided $3.4 million in cash for the six months ended June 30, 2010
compared to $0.6 million for the same period in 2009.  This increase in
cash provided from accounts payable during the six months ended June 30, 2010 is
attributable to the timing of payables made to owner operators.





Net cash
used in investing activities was $0.1 million for the six months ended June 30,
2010 compared to $0.3 million for the same period in 2009.   The net
cash used in investing activities is primarily due to the purchase of fixed
assets.




Net cash
used by financing activities was $4.4 million for the six months ended June 30,
2009 compared to net cash used in financing activities of $0.8 million for the
six months ended June 30, 2010.  This is a decrease of $3.6 million. 
For the six months ended June 30, 2010, net repayments under the line of credit
were $0.02 million compared to repayments of $0.1 million for the six months
ended June 30, 2009.  For the six months ended June 30, 2010, the Company
distributed $0.7 million to minority shareholders of the Company’s majority
owned subsidiaries.  Net cash used in repayments of long term debt was $0.3
million for the six months ended June 30, 2010.  The reduction in bank
overdraft provided net cash of $0.4 million for the six months ended June 30,
2010 compare to using net cash of $3.1 million for the six months ended June 30,
2009.




The
Company and its subsidiaries have a $17.5 million line of credit that was
amended on March 11, 2010.  The amendment included (1) a redefinition of
the minimum debt service ratio, (2) the imposition of a covenant that the
Company’s current maturities of long term debt other than debt to the Lender
will not exceed $700,000, (3) a restriction on annual Capital Expenditures in
excess of $600,000, (4) a restriction on dividends, distributions or other
expenditures  to the Company’s capital stock ownership interest, (6) the
reduction of the minimum debt service ratio, and (5) an increase in the
Company’s limit of current maturities of Indebtedness for Borrowed Money other
than the Revolving Loan.  This line of credit matures on October 1,
2010.  Historically the revolving line of credit has been extended prior to
maturity and management anticipates that this will occur in 2010.  Advances
under this revolving line of credit are limited to 75% of eligible accounts
receivable.  Unused availability under the amended line of credit was $8.1
million at June 30, 2010.  Under the amended line of credit agreement, the
Company’s interest rate is based upon certain financial covenants and may range
from “One Month LIBOR” plus 3.35% to “One Month LIBOR” plus 4.35%.  As of
June 30, 2010, the interest rate on this line of credit was 3.725%.  The
Company’s accounts receivable, property, and other assets are collateral under
the agreement.  Borrowings up to $3.0 million are guaranteed by the Chief
Executive Officer and Chief Financial Officer of the Company. At June 30, 2010,
the outstanding borrowings on this line of credit were $9.4
million.





This line of credit is subject to
termination upon various events of default, including failure to remit timely
payments of interest, fees and principal, any adverse change in the business of
the Company or failure to meet certain financial covenants.  As of June 30,
2010, financial covenants include: minimum debt service ratio, maximum total
debt service coverage ratio, limits on capital expenditures, prohibition of
dividends and distributions that would put the Company out of compliance, and
prohibition of additional indebtedness without prior authorization.  At
June 30, 2010, the Company, and its subsidiaries were in compliance with these
financial covenants.





On
January 15, 2009, the Company and its subsidiaries entered into a no cost
Interest Rate Swap Agreement with U.S. Bank effective February 2, 2009 through
February 1, 2012.  This agreement is in the notional amount of $10.0
million from February 2, 2009 through January 31, 2010, then $7.0 million from
February 1, 2010 through January 31, 2011, then $4.0 million from February 1,
2011 to February 1, 2012.  The agreement provides for the Company to pay
interest at an annual rate of 1.64% times the notional amount of the swap
agreement, and U.S. Bank pay interest at the LIBOR rate times the notional
amount of the swap.  The Company did not enter into this agreement for
speculative purposes.  The Company recorded the fair value of the interest
rate swap resulting in interest expense of approximately $0.08 million for the
six months ended June 30, 2010.  The fair value of the interest rate swap
was minimal at December 31, 2009.




15


The
Company’s primary sources of liquidity consist of cash on hand generated through
operations and availability under the line of credit agreement.  The
Company believes these sources are sufficient to operate its business and meet
its obligations.




Certain
Relationships and Related Transactions.





One of the Company’s subsidiaries
provides safety, management, and accounting services to companies controlled by
the Chief Executive Officer and Chief Financial Officer of the Company. 
These services are priced to cover the cost of the employees providing the
services and the overhead.




The Company has approximately $0.6
million of other accounts receivable due from entities that could be deemed to
be under common control as of June 30, 2010.





One of the Company’s insurance
providers, American Inter-Fidelity Exchange (AIFE), is managed by a director of
the Company, and the Company has an investment of $126,461 in the provider. AIFE
provides auto liability and cargo insurance to several subsidiaries of the
Company as well as other entities related to the Company by common ownership.
For the years ended December 31, 2009 and 2008, cash paid to AIFE for insurance
premiums and deductibles was approximately $3.9 million and $4.9 million,
respectively.




The
Company has an investment in AIFE which is accounted for under the cost method
as the Company has not exercised control over AIFE.  Under the cost method,
the investment in AIFE is reflected at its original amount and income is
recognized only to the extent of dividends paid by the investee. There were no
dividends declared by AIFE payable to US1 Industries, Inc. or its subsidiaries
for the three months ended June 30, 2010 and 2009.  In the future, the
Company’s control over AIFE or the structure of AIFE could change, which might
require the Company to consolidated AIFE.  The Company has not determined
what, if any impact a change in its control over AIFE or AIFE’s structure and a
resulting consolidation of AIFE would have with respect to the market value of
the Company.




If AIFE incurs a net loss, the loss may
be allocated to the various policyholders based on each policyholder’s premium
as a percentage of the total premiums of AIFE for the related period. There has
been no such loss assessment for any of the three years in the period ended
December 31, 2009 or the six months ended June 30, 2010.





Mr.
Kibler, the Chief Executive Officer and a director of the Company, Mr. Antonson,
the Chief Financial Officer and a director of the Company, as well as Mr.
Venditti, a director of the Company, are the sole shareholders of American
Inter-Fidelity Corporation (“AIFC”), which serves as the attorney in fact of
AIFE. AIFC is entitled to receive a management fee from AIFE.  AIFE
incurred management fees of approximately $0.5 million for the years ended
December 31, 2009 and 2008, respectively.  These management fees are
available to be paid as dividends to these officers and directors of the
Company.





16


Item
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Interest
Rate Risk





The Company has a revolving line of credit
with US Bank which currently bears interest at the “One Month LIBOR” plus
3.35%  (at June 30, 2010 the interest rate was 3.725%).  The interest
rate was based on certain financial covenants.  A one percentage point
change in the LIBOR rate would result in approximately $0.1 million in
additional expense annually.





On
January 15, 2009, the Company and its subsidiaries entered into a no cost
Interest Rate Swap Agreement with US Bank effective February 2, 2009 through
February 1, 2012.  This agreement is in the notional amount of $10.0
million from February 2, 2009 through January 31, 2010, then $7.0 million from
February 1, 2010 through January 31, 2011, then $4.0 million from February 1,
2011 to February 1, 2012.  The agreement provides for the Company to pay
interest at an annual rate of 1.64% times the notional amount of the swap
agreement, and US Bank pay interest at the LIBOR rate times the notional amount
of the swap.  The Company did not enter into this agreement for speculative
purposes.  At June 30, 2010 the Company recorded the fair value of the
interest rate swap resulting in interest expense of approximately $0.08 million
for the six months ended June 30, 2010.  The fair value of the interest
rate swap was minimal at December 31, 2009.




Item
4.  CONTROLS AND PROCEDURES




The
Company and its subsidiaries maintain disclosure controls and procedures that
are designed to ensure that information required to be disclosed in the
Company's Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.




As
required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and the Company's Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures as of the end of the period covered by this report.
Based on the foregoing, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were effective at the reasonable assurance level.





Item
4T. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING





There
were no changes in the Company’s internal control over financial reports (as
such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred
during the quarterly period ended June 30, 2010 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.





Part
II  OTHER INFORMATION





Item
6.  EXHIBITS





The following exhibits, numbered in
accordance with Item 601 of Regulation S-K, are filed as part of this
report:





Exhibit
31.1  Certification 302 of Chief Executive Officer


Exhibit
31.2  Certification 302 of Chief Financial Officer


Exhibit
32.1  Certification 906 of Chief Executive Officer


Exhibit
32.2  Certification 906 of Chief Financial Officer




17




(b)(1)      Reports
on Form 8-K





Form 8-K
filed on July 29, 2009, furnishing information regarding the Company entering
into a Sixth Amendment to Amended and Restated Loan Agreement and Eleventh
Amendment to Revolving Loan Note (the "Amendment") with U.S. BANK, a national
banking association ("Lender").





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.





US 1
Industries, Inc.





Michael
E. Kibler


Chief
Executive Officer




Harold E.
Antonson


Chief
Financial Officer





August 9,
2010





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