SecProbe.io

November 2, 2010

Edward R. Cameron President and Chief Executive Officer Appliance Recycling Centers of America, Inc. 7400 Excelsior Boulevard
Minneapolis, Minnesota 55426-4517

Re: Appliance Recycling Centers of America, Inc.  Form 10-K for Fiscal Year Ended January 2, 2010
Filed March 18, 2010 Definitive Proxy Statement on Schedule 14A Filed April 1, 2010 Forms 10-Q for Fiscal Quarters Ended April 3, 2010 and July 3, 2010 Filed May 18, 2010 and August 16, 2010 File No. 000-19621
 Dear Mr. Cameron:
 We have reviewed your filing and have the following comments.  In some of our
comments, we may ask you to provide us with  information so we may better understand your
disclosure.
 You should comply with the comments in all future filings, as applicable.  Please confirm
in writing that you will do so and also explain to us in sufficient detail for an understanding of
the disclosure how you intend to comply by providing us with your proposed revisions.
 Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advi sing us when you will provide the requested
response.  If you do not believe our comments apply to your fact s and circumstances or do not
believe an amendment is appropriate, pl ease tell us why in your response.
 After reviewing any amendment to your filing and the information you provide in
response to these comments, we ma y have additional comments.
 Form 10-K for Fiscal Year Ended January 2, 2010

Management’s Discussion and Analysis of Financ ial Condition and Results of Operations, page
22

1. Please expand this section to elaborate on know n material trends a nd uncertainties that
will have, or are reasonably likely to have, a material impact on your net sales or income
from continuing operations or result in your  liquidity decreasing or increasing in any

Edward R. Cameron  Appliance Recycling Centers of America, Inc.
November 2, 2010 Page 2

material way.  In doing so, please provide additional information a bout the quality and
variability of your earnings and cash flows so that investors can as certain the likelihood
of the extent past performance is indicative of future performance.  In addition, please
discuss in reasonable detail:

• economic or industry-wide factors relevant to your company, and

• material opportunities, challe nges and risks in short and long term and the actions you
are taking to address them.

See Item 303(a) of Regulation S-K and SEC Release No. 33-8350.

Results of Operations, page 24

2. Please expand your discussion under results of ope rations for all periods to quantify each
factor you cite as impacting your operations.  For example, you disclose that the decrease in recycling revenues for 2009 was due primarily to a planned volume reduction for one contract in California and lower recycling vo lumes on other contracts, combined with a
later-than-anticipated start and a lower level of sign-ups from a major utility’s annual
appliance replacement program in 2009, without qua ntifying the impact a ttributed to each
component.  Also describe unusual or infre quent events, significant economic changes,
and significant components of revenue and expenses.  For example, your discussion of
the decrease in recycling revenues for 2009 does not explain why there are lower
recycling volumes on your contr acts, a later-than-anticipated start and a lower level of
sign-ups.  See Item 303(a)(3) of Regulation S-K.
 Liquidity and Capital Resources, page 27

3. Please disclose the specific terms of materi al debt covenants in your debt agreement.
Also disclose the required ratios as well as th e actual ratios as of each reporting date to
allow investors to understand how much cush ion there is between these ratios.  See
Sections I.D and IV.C of SE C Interpretive Release No. 33-8350.

4. Please disclose the financial covenants that you were not in compliance with and describe
the waiver you received from the lender.  Disclose whether y ou are currently in
compliance with your debt agreement.

5. Please identify the lender and the date of your debt agreement.  We also note that your
line of credit was increased from $16 million to $18 million on February 5, 2008.  Please
tell us where you have filed the exhibit for this amendment to your debt agreement.

Edward R. Cameron  Appliance Recycling Centers of America, Inc.
November 2, 2010 Page 3

Note 3. Significant Accounting Policies, page 41

Depreciation and Amortization Expense, page 42

6. You state that depreciation a nd amortization expense relate d to building and equipment
from your recycling centers is presented in co st of revenues. With a view to enhance the
disclosures, please also disclo se the amount of such expenses  classified within cost of
revenues.

Note 6. Investments, page 46

7. Please explain to us and disclose how you reasonably determined the October 21, 2009
recycling agreement you entered into  to be an intangible asset.

Note 9. Line of Credit, page 47

8. Please reconcile for us the amount of outst anding borrowings on your line of credit on the
face of the balance sheet to your disclosure s of the total line and the unused borrowing
capacity as disclosed here.

9. In future filings please revise to state the amount of the obligations under which you have
received waivers from your lender and the period of each applicable waiver.

Note 13. Shareholders’ Equity, page 52

10. We note you recorded as equity a warrant to  purchase 248 shares of common stock with
settlement terms that are not fixed, allowing th e exercise price to be reduced if you issue
and sell additional common shares at a price lo wer than the then current warrant exercise
price and that it will trigger an increase in the number of shares to be issued. Please
explain how you reasonably concluded equity  classification rather than derivative
liability classification was appropriate under GAAP.  Reference is made to FASB ASC
815-40-15-5 through 15-7 and the example provided in FASB ASC 815-40-55-33
through 55-34.
 Index to Exhibits, page 64

11. It appears that you have not provided all of the schedules and exhibits to Exhibit 10.5 –
Line of credit dated August 30, 1996 a nd Exhibit 10.20 – Loan Agreement dated
September 10, 1998.  While Item 601(b)(2) of  Regulation S-K permits you to provide
omitted information supplementally, there is not a similar provision in Item 601(b)(10) of
Regulation S-K.  Please file the complete  agreements, including all schedules and
exhibits, with your amended Form 10-K.

Edward R. Cameron  Appliance Recycling Centers of America, Inc.
November 2, 2010 Page 4

12. Please file a list of all of your  subsidiaries, including the st ate or other jurisdiction of
incorporation or organization, and the names under which such  subsidiaries do business.
See Item 601(b)(21) of Regulation S-K.
 Exhibits 31.1 and 31.2

13. The certifications filed as Exhibits 31.1 a nd 31.2 do not conform to the form of such
certifications set forth in Item 601(b)(31)(i) of Regulation S-K.  For example, you should
not include the title of the individual in th e introductory paragraph; you should not refer
to your “annual” report in paragraph 2; you shoul d state that your certifying officers are
responsible for establishing and maintaining internal control over fi nancial reporting in
the introductory language in paragraph 4; and the statements included as paragraph 4(d)
should be included as paragraph 4(b).  Please file an amendment to the Form 10-K that
consists of the cover page, an explanator y note, full Item 9A disclosure, financial
statements, the signature page and the certifi cations, with such paragraphs conforming to
the form set forth in Item 601(b)(31)(i) of Regulation S-K.
 Definitive Proxy Statement on Schedule 14A

 Proposal One – Election of  Directors, page 6

 Nominees, page 7

14. Please briefly discuss the specific experience, qua lifications, attributes or skills that led to
your conclusion that each nominee for director should serve as your di rector, in light of
your business and structure.  If  material, this disclosure should cover more than the past
five years, including information about such nominee’s particular ar eas of expertise or
other relevant qualifications.  See Item 401(e)(1) of Regulation S-K.
 Form 10-Q for Fiscal Quarter Ended April 3, 2010

 Controls and Procedures, page 22

 Evaluation of Disclosure Cont rols and Procedures, page 22

15. You state in the first paragraph, second sent ence that “controls and procedures, no matter
how well designed and operated, can provide only reasonable assura nce of achieving the
desired control objectives.”  Please confirm to us and revise future filings to clarify, if
true, that your disclosure controls and procedures are desi gned to provid e reasonable
assurance of achieving their objectives and that your principal executive officer and
principal financial officer c oncluded that your disclosure controls and procedures are
effective at that reasonable assurance level.

Edward R. Cameron  Appliance Recycling Centers of America, Inc.
November 2, 2010 Page 5

16. You state in the second paragraph that your “management, including the principal
executive officer and principal financial officer…have concluded that the design and
operation of [your] disclosure controls and procedures were effective to ensure information required to be disclosed by [you] in the reports [you] f ile or submit under the
Exchange Act is processed, recorded, summarized and reported with in the time periods
specified in [our] rules and forms.” This is an  incomplete definition of disclosure controls
and procedures per Rules 13a- 15(e) and 15d-15(e) of the Exch ange Act.   Please confirm
to us and revise future filings to also cl arify, if true, that you r management, including
your principal executive officer and principal financial officer, has concluded that your
disclosure controls and proce dures are also effective to ensure that information required
to be disclosed in the reports that you file or submit under the Exchange Act is
accumulated and communicated to your mana gement, including your principal executive
and principal financial officers, or persons pe rforming similar functions, as appropriate to
allow timely decisions regarding required disc losure.   Otherwise please simply conclude
that your disclosure controls a nd procedures are effective.
 Exhibits 31.1 and 31.2

17. In future filings, please revise  the certifications  filed as Exhibits 31.1 and 31.2 so that
such certifications conform to the form set forth in Item 601( b)(31)(i) of Regulation S-K.
 Form 10-Q for Fiscal Quarter Ended July 3, 2010

18. Please provide the confirmations requested  by comments 15 and 16, as such comments
apply to your Form 10-Q for fiscal quar ter ended July 3, 2010, and comply with
comments 15, 16 and 17 in future filings.
 Note 6. Variable Interest Entity, page 10

19. We note your disclosure that you contribu ted cash in the amount of $1,969 for your
ownership interests in AAP on February 8, 2010. However, we cannot locate where you
reflected the payout in your cash flow statement on page five. Please explain.
Unregistered Sales of Equity Securities and Use of Proceeds, page 24

20. Please tell us whether you have filed a Fo rm D for the warrants issued on May 13, 2010
pursuant to Rule 506 of Regulation D.

We urge all persons who are responsible for th e accuracy and adequacy of the disclosure
in the filing to be certain that the filing include s the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules requir e.  Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.

Edward R. Cameron  Appliance Recycling Centers of America, Inc. November 2, 2010 Page 6

 In responding to our comments, please provi de a written statement from the company
acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclo sure in the filing;

• staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

• the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federa l securities laws of  the United States.

You may contact Scott String er, Staff Accountant, at ( 202) 551-3272 or Andrew Mew,
Accounting Branch Chief, at (202) 551-3377 if you have questions regarding comments on the financial statements and related matters.  Please  contact Charles Lee, A ttorney-Advisor, at (202)
551-3427, Brigitte Lippmann, Special Counsel, at (202) 551-3713 or me at (202) 551-3720 with
any other questions.
Sincerely,

H. Christopher Owings Assistant Director
cc: Jeff Cammerrer