Note 5 - Balance Sheet Components

12 Months Ended

Dec. 31, 2011

Supplemental Balance Sheet Disclosures [Text Block]

5. BALANCE SHEET COMPONENTS

	December 31, 2011			December 31, 2010
INVENTORY
On hand:
Finished goods held for sale	$	17,742,298		$	17,847,002
Raw materials and work in process		479,686			518,422
Inventory in transit		1,718,267			1,870,604
TOTAL	$	19,940,251		$	20,236,028

PROPERTY AND EQUIPMENT
Building	$	6,412,861		$	6,330,593
Land		1,451,132			1,451,132
Leasehold improvements		636,526			609,715
Equipment and machinery		3,851,697			3,762,040
Furniture and fixtures		2,576,593			2,191,203
Vehicles		71,017			45,979
		14,999,826			14,390,662
Less: accumulated depreciation		(4,700,476	)		(4,106,121	)
TOTAL	$	10,299,350		$	10,284,541

OTHER CURRENT ASSETS
Accounts receivable – employees	$	53,282		$	30,631
Accounts receivable – other		5,689			10,532
Prepaid expenses		744,679			982,916
Payments for merchandise not received		144,809			32,122
TOTAL	$	948,459		$	1,056,201

OTHER ASSETS
Security deposits - utilities, locations, etc.	$	89,240		$	67,533
Leather art collection		252,000			252,000
TOTAL	$	341,240		$	319,533

ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued bonuses	$	1,955,012		$	1,558,404
Accrued payroll		527,540			430,935
Deferred revenue		747,335			597,546
Sales and payroll taxes payable		293,155			375,041
Inventory in transit		799,647			1,599,344
Other		318,502			331,966
TOTAL	$	4,641,191		$	4,893,236

Depreciation expense was $971,628, $895,988, and $1,073,718 for the years ended December 31, 2011, 2010 and 2009, respectively.

In 2009, we recorded an impairment loss due to the discontinued use and abandonment of specific computer software. The software was purchased in 2004 for the purpose of upgrading and replacing our current point-of-sale and accounting systems. We had been using the software in a limited capacity for several years and amortizing the cost of the system accordingly. However, we made the decision in the fourth quarter of 2009 that we would not continue its use due to inconsistencies and incompatibility with our current systems and discontinued use accordingly. Due to licensing restrictions, we are unable to sell the software to a third party. The resulting fair value of $0 for the asset is considered a Level 3 valuation. The impairment loss totaled $343,543 and is included in operating expenses. The amortization to date and the impairment loss is reported in our Wholesale Leathercraft segment.

Also, in 2009, we recorded a loss on disposal of equipment due to the abandonment and/or disposal of obsolete equipment. The disposal consisted of numerous pieces of various computer equipment purchased between 2002 and 2006. The loss totaled $21,540 and is included in Operating expenses, $5,393 of which is reported in our Retail Leathercraft and $16,147 which is reported in our Wholesale Leathercraft segment.

The 2010 loss from abandonment and/or disposal of obsolete equipment totaled $49,154. The loss is included in Operating expenses, $11,849 of which is reported in our Retail Leathercraft and $37,305 which is reported in our Wholesale Leathercraft segment.

The 2011 loss from abandonment and/or disposal of obsolete equipment totaled $84,168. The loss is included in Operating expenses, $13,884 of which is reported in our Retail Leathercraft and $70,284 which is reported in our Wholesale Leathercraft segment.