XML 21 R8.htm IDEA: XBRL DOCUMENT
v3.21.2

RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS | 12 Months Ended
--- | ---
Dec. 31, 2019
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS [Abstract] |
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS |
2. | RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
We are filing this comprehensive annual report on Form 10-K for the fiscal years ended December 31, 2019, 2018 and 2017 (the “Comprehensive Form 10-K”) as part of our efforts to become current in our filing obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This Comprehensive Form 10-K is our first periodic filing with the Securities and Exchange Commission (the “SEC”) since the filing of our quarterly report on Form 10-Q for the quarter ended March 31, 2019. This Comprehensive Form 10-K contains our audited Consolidated Financial Statements as of and for the year ended December 31, 2019 and our restated audited Consolidated Financial Statements as of and for the years ended December 31, 2018 and 2017, our unaudited Consolidated Financial Statements as of and for the quarters ended March 31, June 30, September 30, 2018, and March 31, 2019, our unaudited Statements of Comprehensive Income (Loss) and Statements of Cash Flows for the six months ended June 30, 2018 and the nine months ended September 30, 2018 as well as restatements of our unaudited consolidated quarterly financial data for the quarters ended March 31, 2018, June 30, 2018, September 30, 2018, and December 31, 2018, and March 31, 2019. See Note 14 of the Notes to the Consolidated Financial Statements, Quarterly Financial Data (Unaudited). Restatement Background As previously disclosed, on October 14, 2019, as a result of the findings of the Independent Investigation and the Company’s ongoing reviews, the Company, in consultation with the Audit Committee, determined that Tandy’s previously issued Consolidated Financial Statements as of and for (i) the years ended December 31, 2018 and 2017, (ii) the three and six-month periods ended June 30, 2018, (iii) the three and nine-month periods ended September 30, 2018, and (iv) the three-month period ended March 31, 2019, should no longer be relied upon due to misstatements related to our accounting processes for inventory transactions, and we would make the necessary accounting corrections and restate such financial statements. In addition to inventory misstatements, management identified additional areas that required restatement adjustments as described below, with all such restatement items constituting the “Restatement Process.” The restatement adjustments described below pertain to all restatement periods noted above, and restatement adjustments specific to the periods reported in this Comprehensive Form 10-K are reflected in the tables below. Such errors included: (i) methods used by the Company in the valuation and expensing of costs related to inventory which was not correctly stated and was not consistent with the first-in, first-out (“FIFO”) methodology, (ii) warehousing and handling expenditures which were not properly capitalized during the first and third quarters but were subsequently corrected on a semi-annual basis in the second and fourth quarters resulting in the understatement of inventory and net income in the first and third quarters and the overstatement of net income in the second and fourth quarters, (iii) warehouse and handling expenditures which were improperly classified in operating expenses in all quarters resulting in an overstatement of operating expenses in all restated periods, (iv) freight-in, warehousing and handling expenditures, factory labor and overhead, and freight-out costs which were being capitalized to inventory using historical standard rates that were not based on the actual costs incurred in each period resulting in misstatements of inventory value, (v) inventory reserve levels which did not reflect the Company’s accounting policy of carrying inventory at the lower of cost or net realizable value resulting in misstatements of inventory value, (vi) sales returns were not accounted for until November 2018, and through year end 2017 gift cards were initially recorded to net sales causing net sales to be overstated, (vii) lease accounting errors upon the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”) on January 1, 2019, which resulted in the understatement of operating lease assets and operating lease liabilities, (viii) the income tax effect of pre-tax restatement adjustments as well as correction of income tax misstatements related to tax effected items recognized in the 2018 income tax provision but related to the previous 2017 tax year, including adjustments related to the Tax Cuts and Jobs Act (“TCJA”) and recognition of uncertain tax position (“UTP”) liability and related interest expense, and (ix) other smaller matters described further below. Description of Restatement Adjustments Inventory Under the Company’s inventory accounting policy, inventory is stated using the FIFO methodology for cost, and such cost includes merchandise purchases, the costs to bring the merchandise to its Texas distribution center (freight-in), warehousing and handling expenditures, factory labor and overhead for items that are internally manufactured, and distributing and delivering merchandise to stores (freight-out). The Company carries inventory at the lower of this cost or net realizable value. The inventory restatement adjustments below were first identified by management as a result of a deeper analysis of legacy systems and practices that were in place for many years and which the Company is working to replace. Management identified the following areas in which the accounting for inventory did not adhere to the Company’s inventory accounting policy:
(1) | FIFO adjustment: inventory was not correctly stated and was not consistent with the FIFO methodology;
(2) | Freight-in, warehousing and handling expenditures, factory labor and overhead, and freight-out adjustment:
| i. | warehousing and handling expenditures were not properly capitalized during the first and third quarters but were subsequently corrected on a semi-annual basis in the second and fourth quarters resulting in the understatement of inventory and net income in the first and third quarters and the overstatement of net income in the second and fourth quarters; and
| ii. | freight-in, warehousing and handling expenditures, factory labor and overhead, and freight-out costs were being capitalized to inventory using historical standard rates that were not based on the actual costs incurred in each period resulting in misstatements;
(3) | Inventory reserve adjustment: Tandy’s accounting policy is to carry inventory at the lower of cost or net realizable value. Management noted inventory reserve levels did not reflect the Company’s accounting policy of carrying inventory at the lower of cost or net realizable value. This resulted in cumulative understatements of inventory.
Sales Returns, Gift Card Liabilities and Class Fees
(4) | Sales returns: management noted estimates for sales returns had not been accounted for until November 2018. Using historical sales return trends for 2017 and 2018, management has estimated a sales return liability along with a corresponding inventory asset for all restatement periods. In addition, estimated sales returns previously recorded in the fourth quarter of 2018 were incorrectly presented on a net basis in cost of sales and have since been restated to reflect accounting on a gross basis in both net sales and cost of sales.
Gift cards: for the restatement year 2017, management noted sales of gift cards were initially recorded to net sales causing net sales to be overstated. Management has estimated a gift card liability for the year ended December 31, 2017 based on historical gift card issuances and the redemption activity. Starting January 1, 2018, management noted the Company had begun to account for the sale of gift cards properly by recording a gift card liability on the date a gift card is issued to a customer and recognizing revenue with a corresponding reduction to the gift card liability as the customer redeems the gift card. Class fees: for the restatement year 2018, management noted fees paid to instructors for in-store classes were initially netted against net sales causing operating expense and net sales to be understated. These fees incurred have been properly recorded to operating expense. There was no impact to net income (loss) related to this reclassification. Warehouse and Handling Reclassifications
(5) | Warehousing and handling expenditures were classified as operating expenses, resulting in overstatement of operating expenses in all periods. These costs have been reclassified to cost of sales since the inventory restatement in adjustment (2) above is properly adjusting the inventory balance for such costs with the offset recorded to cost of sales. There was no impact to net income (loss) related to this reclassification.
Income Tax
(6) | Management noted the 2018 income tax provision included tax effected items related to the previous 2017 tax year, including adjustments related to the TCJA which was enacted on December 22, 2017, among other smaller tax correcting adjustments. Management noted the 2017 income tax provision had misstatements related not only to TCJA but also related to the recognition of UTP liability and related interest expense among other smaller tax correcting adjustments. Also, income tax restatement adjustments were made to reflect the tax effect of the pre-tax restatement adjustments for 2018 and 2017.
The 2018 tax provision restatement adjustments consisted of a $0.6 million increase to income tax expense for the tax effect of pre-tax restatement adjustments and offset by a $0.5 million decrease to income tax expense primarily for the correction of the 2017 tax related items noted above ($0.4 million) along with smaller adjustments to correct return to provision amounts and correction of tax on income earned from wholly-owned foreign subsidiaries ($0.1 million). The 2017 provision restatement adjustments consisted of a $0.2 million decrease to income tax expense for the tax effect of pre-tax restatement adjustments and a $1.3 million increase to income tax expense for the correction of the TCJA misstatement noted above ($0.9 million) and other corrections such as uncertain tax position (UTP) liability and related interest expense ($0.2 million), correction of taxable income on the return of our Canada and Spain foreign subsidiaries ($0.2 million), and other smaller correcting adjustments. Accruals and Other
(7) | There were misstatements related to the recognition of accrued paid-time-off (“PTO”) resulting in understatement of accrued expenses and other liabilities as well as other misstatements primarily related to recognition of other accrued operating expenses, payroll related costs, long-term debt classification, cash cutoff for outstanding checks, break out of impairment expense previously included in operating expenses, and reclass of leasehold improvements from prepaid expenses to property and equipment, all of which are being corrected in connection with the restatement of previously issued financial statements.
Leases
(8) | During the first quarter of 2019, we adopted the new lease accounting standard under Topic 842. Management noted as part of the adoption that the Company did not ensure the appropriateness of inputs being used to calculate the present value of lease payments over the lease terms. This resulted in the misstatement of operating lease assets, and the current and long-term portion of operating lease liabilities upon initial recognition on January 1, 2019.
Foreign Currency Gains & Losses and Cumulative Translation Adjustments
(9) | Foreign currency gains and losses associated with the activity of the Company’s Canadian subsidiary were incorrectly classified as a component of accumulated other comprehensive income (loss). These gains and losses have been restated and are included in net income (loss).
Cumulative translation adjustments (“CTA”) included in accumulated other comprehensive income (loss) were not tax effected. Management has corrected this error by tax effecting CTA and by presenting CTA net of tax within accumulated other comprehensive income (loss). Common Stock
(10) | A number of shares of the Company’s common stock were repurchased by the Company and cancelled prior to 2010. Management noted these repurchases were incorrectly accounted for as treasury stock. The number of shares issued, and the number of shares held in treasury, were both overstated by 993,623 shares. The number of shares outstanding has been properly presented in all periods. This correction will not result in any change to net stockholders’ equity, nor will it affect any weighted average shares outstanding calculations used in the determination of earnings per share.
The net effect of the adjustments on the Consolidated Statements of Comprehensive Income (Loss) was to increase net income by $2.4 million for the year ended December 31, 2018, and to decrease net income by $2.0 million for the year ended December 31, 2017.
Increase (Decrease) in Net income: |  | 2018 |  |  | 2017 |
Inventory adjustments (1) |  | $ | 255,372 |  |  | $ | (3,127,495 | )
Sales returns, gift cards and class fees |  |  | 105,382 |  |  |  | 99,327 |
Operating expenses (2) |  |  | 2,059,463 |  |  |  | 2,163,065 |
Impairment expense |  |  | (285,477 | ) |  |  | - |
Other expense |  |  | 373,382 |  |  |  | 40,255 |
Total adjustments before tax |  |  | 2,508,122 |  |  |  | (824,848 | )
Income tax expense from adjustments |  |  | 73,585 |  |  |  | 1,148,459 |
Increase (decrease) in net income |  | $ | 2,434,537 |  |  | $ | (1,973,307 | )
(1) Inventory adjustments due to: |  |  |  |  |  |  |  |
FIFO adjustment |  | $ | 843,598 |  |  | $ | (88,548 | )
Freight-in, warehousing and handling expenditures, factory labor and overhead, and freight-out |  |  | 503,078 |  |  |  | (619,172 | )
Inventory reserve |  |  | 980,000 |  |  |  | - |
Sales returns |  |  | 104,105 |  |  |  | (19,999 | )
Other |  |  | 19,710 |  |  |  | (223,895 | )
Warehouse and handling reclass |  |  | (2,195,119 | ) |  |  | (2,175,881 | )
|  | $ | 255,372 |  |  | $ | (3,127,495 | )
(2) Operating expense adjustments due to: |  |  |  |  |  |  |  |
Warehouse and handling reclass |  | $ | 2,195,119 |  |  | $ | 2,175,881 |
Reclass to impairment expense |  |  | 285,477 |  |  |  | - |
Accrued expenses |  |  | (377,912 | ) |  |  | 51,375 |
PTO Accrual |  |  | (16,930 | ) |  |  | (38,647 | )
Other |  |  | (26,291 | ) |  |  | (25,544 | )
|  | $ | 2,059,463 |  |  | $ | 2,163,065 |
The decrease to retained earnings from the adjustments as of December 31, 2018, is as follows:
FIFO adjustment |  | $ | (786,690 | )
Freight-in, warehousing and handling expenditures, factory labor and overhead, and freight-out |  |  | (442,150 | )
Inventory reserve |  |  | 980,000 |
Sales returns |  |  | (172,494 | )
Income tax benefit |  |  | 33,823 |
Accruals and other |  |  | (852,872 | )
Decrease to retained earnings |  | $ | (1,240,383 | )
Restatement Reconciliation Tables The following tables present a reconciliation of our Consolidated Balance Sheets as previously reported as of December 31, 2018 and 2017 to the restated amounts shown in this filing. We have also presented a reconciliation of our Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017, as previously reported to the restated amounts shown in this filing. The following restatement adjustment footnote numbers correspond to the restatement adjustment descriptions above. Tandy Leather Factory, Inc. Consolidated Balance Sheet
|  | December 31, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 24,070,351 |  |  | $ | - |  |  |  |  | $ | 24,070,351 |
Accounts receivable-trade, net of allowance for doubtful accounts of $15,703 |  |  | 408,170 |  |  |  | - |  |  |  |  |  | 408,170 |
Inventory |  |  | 33,867,276 |  |  |  | (564,727 | ) |  |  | (1) (2)(3)(4)(7) |  |  | 33,302,549 |
Prepaid income taxes |  |  | 383,478 |  |  |  | 36,430 |  |  |  | (6) |  |  | 419,908 |
Prepaid expenses |  |  | 1,244,754 |  |  |  | 39,041 |  |  |  | (7) |  |  | 1,283,795 |
Other current assets |  |  | 161,208 |  |  |  | 170,597 |  |  |  | (7) |  |  | 331,805 |
Total current assets |  |  | 60,135,237 |  |  |  | (318,659 | ) |  |  |  |  |  | 59,816,578 |
Property and equipment, at cost |  |  | 28,005,563 |  |  |  | 134,782 |  |  |  | (7) |  |  | 28,140,345 |
Less accumulated depreciation |  |  | (13,606,266 | ) |  |  | (18,995 | ) |  |  | (7) |  |  | (13,625,261 | )
Property and equipment, net |  |  | 14,399,297 |  |  |  | 115,787 |  |  |  |  |  |  | 14,515,084 |
Deferred income taxes |  |  | 248,228 |  |  |  | 844,065 |  |  |  | (6) |  |  | 1,092,293 |
Goodwill |  |  | 954,765 |  |  |  | - |  |  |  |  |  |  | 954,765 |
Other intangibles, net of accumulated amortization of $690,869 |  |  | 16,500 |  |  |  | - |  |  |  |  |  |  | 16,500 |
Other assets |  |  | 386,107 |  |  |  | - |  |  |  |  |  |  | 386,107 |
TOTAL ASSETS |  | $ | 76,140,134 |  |  | $ | 641,193 |  |  |  |  |  | $ | 76,781,327 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable-trade |  | $ | 1,978,840 |  |  | $ | 175,554 |  |  |  | (7) |  | $ | 2,154,394 |
Accrued expenses and other liabilities |  |  | 4,176,479 |  |  |  | 1,225,029 |  |  |  | (4)(7) |  |  | 5,401,508 |
Current maturities of long-term debt |  |  | 747,335 |  |  |  | (227,819 | ) |  |  | (7) |  |  | 519,516 |
Total current liabilities |  |  | 6,902,654 |  |  |  | 1,172,764 |  |  |  |  |  |  | 8,075,418 |
Uncertain tax positions |  |  | - |  |  |  | 1,415,715 |  |  |  | (6) |  |  | 1,415,715 |
Deferred income taxes |  |  | 1,556,493 |  |  |  | (1,556,493 | ) |  |  | (6)(9) |  |  | - |
Other non-current liabilities |  |  | - |  |  |  | 555,296 |  |  |  | (6) |  |  | 555,296 |
Long-term debt, net of current maturities |  |  | 8,220,683 |  |  |  | 227,819 |  |  |  | (7) |  |  | 8,448,502 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
STOCKHOLDERS’ EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance |  |  | - |  |  |  | - |  |  |  |  |  |  | - |
Common stock, $0.0024 par value; 25,000,000 shares authorized; 10,353,155 shares issued |  |  | 27,232 |  |  |  | (2,384 | ) |  |  | (10) |  |  | 24,848 |
Paid-in capital |  |  | 7,158,821 |  |  |  | (2,891,683 | ) |  |  | (10) |  |  | 4,267,138 |
Retained earnings |  |  | 65,716,761 |  |  |  | (1,240,383 | ) |  |  | (1)(2)(3)(4)(6)(7)(9) |  |  | 64,476,378 |
Treasury stock at cost (1,292,594 shares) |  |  | (11,931,850 | ) |  |  | 2,894,067 |  |  |  | (10) |  |  | (9,037,783 | )
Accumulated other comprehensive loss (net of tax) |  |  | (1,510,660 | ) |  |  | 66,475 |  |  |  | (9) |  |  | (1,444,185 | )
Total stockholders’ equity |  |  | 59,460,304 |  |  |  | (1,173,908 | ) |  |  |  |  |  | 58,286,396 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 76,140,134 |  |  | $ | 641,193 |  |  |  |  |  | $ | 76,781,327 |
Tandy Leather Factory, Inc. Consolidated Statement of Comprehensive Income
|  | For the Year Ended December 31, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 83,098,187 |  |  | $ | 105,382 |  |  |  | (4)(7) |  | $ | 83,203,569 |
Cost of sales |  |  | 32,517,996 |  |  |  | (255,372 | ) |  |  | (1)(2)(3)(4)(5)(7) |  |  | 32,262,624 |
Gross profit |  |  | 50,580,191 |  |  |  | 360,754 |  |  |  |  |  |  | 50,940,945 |
Operating expenses |  |  | 46,751,728 |  |  |  | (2,059,463 | ) |  |  | (5)(7) |  |  | 44,692,265 |
Impairment expense |  |  | - |  |  |  | 285,477 |  |  |  | (7) |  |  | 285,477 |
Income from operations |  |  | 3,828,463 |  |  |  | 2,134,740 |  |  |  |  |  |  | 5,963,203 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 304,957 |  |  |  | - |  |  |  |  |  |  | 304,957 |
Other, net |  |  | (180,191 | ) |  |  | (373,382 | ) |  |  | (9) |  |  | (553,573 | )
Total other (income) expense |  |  | 124,766 |  |  |  | (373,382 | ) |  |  |  |  |  | (248,616 | )
Income before income taxes |  |  | 3,703,697 |  |  |  | 2,508,122 |  |  |  |  |  |  | 6,211,819 |
Provision for income taxes |  |  | 1,739,869 |  |  |  | 73,585 |  |  |  | (6) |  |  | 1,813,454 |
Net income |  | $ | 1,963,828 |  |  | $ | 2,434,537 |  |  |  |  |  | $ | 4,398,365
Foreign currency translation adjustments, net of tax |  |  | (548,557 | ) |  |  | (133,315 | ) |  |  | (9) |  |  | (681,872 | )
Comprehensive income |  | $ | 1,415,271 |  |  | $ | 2,301,222 |  |  |  |  |  | $ | 3,716,493 |
Net income per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.21 |  |  | $ | 0.27 |  |  |  |  |  | $ | 0.48 |
Diluted |  | $ | 0.21 |  |  | $ | 0.26 |  |  |  |  |  | $ | 0.48 |
Weighted average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,185,203 |  |  |  | 9,185,203 |  |  |  |  |  |  | 9,185,203 |
Diluted |  |  | 9,185,662 |  |  |  | 9,205,008 |  |  |  |  |  |  | 9,205,008 |
Tandy Leather Factory, Inc. Consolidated Statement of Cash Flows
|  | For the Year Ended December 31, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 1,963,828 |  |  | $ | 2,434,537 |  |  |  |  | $ | 4,398,365 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 1,797,281 |  |  |  | 1,481 |  |  |  | (7) |  |  | 1,798,762 |
Impairment of goodwill and long-lived assets |  |  | 285,477 |  |  |  | - |  |  |  |  |  |  | 285,477 |
Loss on disposal of assets |  |  | 1,321 |  |  |  | - |  |  |  |  |  |  | 1,321 |
Stock-based compensation |  |  | 327,629 |  |  |  | - |  |  |  |  |  |  | 327,629 |
Deferred income taxes |  |  | (90,997 | ) |  |  | 348,246 |  |  |  | (6)(9) |  |  | 257,249 |
Exchange (gain) loss |  |  | 27,984 |  |  |  | (434,816 | ) |  |  | (9) |  |  | (406,832 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable - trade |  |  | 53,042 |  |  |  | (3,887 | ) |  |  | (7) |  |  | 49,155 |
Inventory |  |  | 3,443,921 |  |  |  | (2,409,491 | ) |  |  | (1)(2)(3)(4) |  |  | 1,034,430 |
Prepaid expenses |  |  | 239,082 |  |  |  | (167,167 | ) |  |  | (6)(7) |  |  | 71,915 |
Other current assets |  |  | 27,821 |  |  |  | (27,821 | ) |  |  | (7) |  |  | - |
Accounts payable - trade |  |  | (197,960 | ) |  |  | 49,620 |  |  |  | (7) |  |  | (148,340 | )
Accrued expenses and other liabilities |  |  | (181,959 | ) |  |  | 496,896 |  |  |  | (4)(7) |  |  | 314,937 |
Income taxes |  |  | (308,129 | ) |  |  | (487,480 | ) |  |  | (6) |  |  | (795,609 | )
Other assets |  |  | (3,690 | ) |  |  | 586,971 |  |  |  | (7) |  |  | 583,281 |
Total adjustments |  |  | 5,420,823 |  |  |  | (2,047,448 | ) |  |  |  |  |  | 3,373,375 |
Net cash provided by operating activities |  |  | 7,384,651 |  |  |  | 387,089 |  |  |  |  |  |  | 7,771,740 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (1,091,433 | ) |  |  | 3,105 |  |  |  | (7) |  |  | (1,088,328 | )
Proceeds from sale of assets |  |  | 27,396 |  |  |  | 543 |  |  |  | (7) |  |  | 27,939 |
Net cash used in (provided by) investing activities |  |  | (1,064,037 | ) |  |  | 3,648 |  |  |  |  |  |  | (1,060,389 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from long-term debt |  |  | 1,596,288 |  |  |  | - |  |  |  |  |  |  | 1,596,288 |
Repurchase of treasury stock |  |  | (1,653,266 | ) |  |  | - |  |  |  |  |  |  | (1,653,266 | )
Net cash used in financing activities |  |  | (56,978 | ) |  |  | - |  |  |  |  |  |  | (56,978 | )
Effect of exchange rate changes on cash and cash equivalents |  |  | (530,543 | ) |  |  | (136,336 | ) |  |  | (9) |  |  | (666,879 | )
Net increase in cash and cash equivalents |  |  | 5,733,093 |  |  |  | 254,401 |  |  |  |  |  |  | 5,987,494 |
Cash and cash equivalents, beginning of period |  |  | 18,337,258 |  |  |  | (254,401 | ) |  |  |  |  |  | 18,082,857 |
Cash and cash equivalents, end of period |  | $ | 24,070,351 |  |  | $ | - |  |  |  |  |  | $ | 24,070,351 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest paid during the period |  | $ | 304,957 |  |  | $ | - |  |  |  |  |  | $ | 304,957 |
Income tax paid during the period, net of refunds |  | $ | 2,138,995 |  |  | $ | (777,595 | ) |  |  |  |  | $ | 1,361,400 |
Tandy Leather Factory, Inc. Consolidated Balance Sheet
|  | December 31, 2017 |
|  | As Reported |  |  | Adjustments |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 18,337,258 |  |  | $ | (254,401 | ) |  |  | (7) |  | $ | 18,082,857 |
Accounts receivable-trade, net of allowance for doubtful accounts of $22,642 |  |  | 461,212 |  |  |  | - |  |  |  |  |  |  | 461,212 |
Inventory |  |  | 37,311,197 |  |  |  | (2,765,113 | ) |  |  | (1)(2)(4)(5)(7) |  |  | 34,546,084 |
Prepaid income taxes |  |  | 41,307 |  |  |  | (41,307 | ) |  |  | (6) |  |  | - |
Prepaid expenses |  |  | 1,473,147 |  |  |  | (80,869 | ) |  |  | (7) |  |  | 1,392,278 |
Other current assets |  |  | 189,029 |  |  |  | 139,493 |  |  |  | (7) |  |  | 328,522 |
Total current assets |  |  | 57,813,150 |  |  |  | (3,002,197 | ) |  |  |  |  |  | 54,810,953 |
Property and equipment, at cost |  |  | 27,218,481 |  |  |  | 113,818 |  |  |  | (7) |  |  | 27,332,299 |
Less accumulated depreciation |  |  | (11,750,639 | ) |  |  | (14,777 | ) |  |  | (7) |  |  | (11,765,416 | )
Property and equipment, net |  |  | 15,467,842 |  |  |  | 99,041 |  |  |  |  |  |  | 15,566,883 |
Deferred income taxes |  |  | 271,738 |  |  |  | 859,167 |  |  |  | (6) |  |  | 1,130,905 |
Goodwill |  |  | 962,949 |  |  |  | - |  |  |  |  |  |  | 962,949 |
Other intangibles, net of accumulated amortization of $688,147 |  |  | 19,222 |  |  |  | - |  |  |  |  |  |  | 19,222 |
Other assets |  |  | 379,695 |  |  |  | - |  |  |  |  |  |  | 379,695 |
TOTAL ASSETS |  | $ | 74,914,596 |  |  | $ | (2,043,989 | ) |  |  |  |  | $ | 72,870,607 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable-trade |  | $ | 2,480,593 |  |  | $ | (70,748 | ) |  |  | (7) |  | $ | 2,409,845 |
Accrued expenses and other liabilities |  |  | 3,886,334 |  |  |  | 1,158,681 |  |  |  | (4)(7) |  |  | 5,045,015 |
Income taxes payable |  |  | - |  |  |  | 354,629 |  |  |  | (6) |  |  | 354,629 |
Current maturities of long-term debt |  |  | 614,311 |  |  |  | - |  |  |  |  |  |  | 614,311 |
Total current liabilities |  |  | 6,981,238 |  |  |  | 1,442,562 |  |  |  |  |  |  | 8,423,800 |
Uncertain tax position |  |  | - |  |  |  | 1,197,078 |  |  |  | (6) |  |  | 1,197,078 |
Deferred income taxes |  |  | 1,636,958 |  |  |  | (1,636,958 | ) |  |  | (6)(9) |  |  | - |
Other non-current liabilities |  |  | - |  |  |  | 596,770 |  |  |  | (6) |  |  | 596,770 |
Long-term debt, net of current maturities |  |  | 6,757,419 |  |  |  | - |  |  |  |  |  |  | 6,757,419 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
STOCKHOLDERS’ EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance |  |  | - |  |  |  | - |  |  |  |  |  |  | - |
Common stock, $0.0024 par value; 25,000,000 shares authorized; 10,320,069 shares issued |  |  | 27,153 |  |  |  | (2,385 | ) |  |  | (10) |  |  | 24,768 |
Paid-in capital |  |  | 6,831,271 |  |  |  | (2,891,682 | ) |  |  | (10) |  |  | 3,939,589 |
Retained earnings |  |  | 63,921,244 |  |  |  | (3,843,231 | ) |  |  | (1) (2)(4)(6)(7)(9) |  |  | 60,078,013 |
Treasury stock at cost (1,049,207 shares) |  |  | (10,278,584 | ) |  |  | 2,894,067 |  |  |  | (10) |  |  | (7,384,517 | )
Accumulated other comprehensive loss (net of tax) |  |  | (962,103 | ) |  |  | 199,790 |  |  |  | (9) |  |  | (762,313 | )
Total stockholders’ equity |  |  | 59,538,981 |  |  |  | (3,643,441 | ) |  |  |  |  |  | 55,895,540 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 74,914,596 |  |  | $ | (2,043,989 | ) |  |  |  |  | $ | 72,870,607 |
Tandy Leather Factory, Inc. Consolidated Statement of Comprehensive Income (Loss)
|  | For the Year Ended December 31, 2017 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 82,321,268 |  |  | $ | 99,327 |  |  |  | (4)(7) |  | $ | 82,420,595 |
Cost of sales |  |  | 30,207,439 |  |  |  | 3,127,495 |  |  |  | (1)(2)(4)(5) |  |  | 33,334,934 |
Gross profit (loss) |  |  | 52,113,829 |  |  |  | (3,028,168 | ) |  |  |  |  |  | 49,085,661 |
Operating expenses |  |  | 44,872,007 |  |  |  | (2,163,065 | ) |  |  | (5)(7) |  |  | 42,708,942 |
Income (loss) from operations |  |  | 7,241,822 |  |  |  | (865,103 | ) |  |  |  |  |  | 6,376,719 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 205,555 |  |  |  | - |  |  |  |  |  |  | 205,555 |
Other, net |  |  | (126,857 | ) |  |  | (40,255 | ) |  |  | (9) |  |  | (167,112 | )
Total other (income) expense |  |  | 78,698 |  |  |  | (40,255 | ) |  |  |  |  |  | 38,443 |
Income (loss) before income taxes |  |  | 7,163,124 |  |  |  | (824,848 | ) |  |  |  |  |  | 6,338,276 |
Provision for income taxes |  |  | 2,711,373 |  |  |  | 1,148,459 |  |  |  | (6) |  |  | 3,859,832 |
Net income (loss) |  | $ | 4,451,751 |  |  | $ | (1,973,307 | ) |  |  |  |  | $ | 2,478,444 |
Foreign currency translation adjustments, net of tax |  |  | 931,026 |  |  |  | (519,599 | ) |  |  | (9) |  |  | 411,427 |
Comprehensive income (loss) |  | $ | 5,382,777 |  |  | $ | (2,492,906 | ) |  |  |  |  | $ | 2,889,871 |
Net income (loss) per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.48 |  |  | $ | (0.21 | ) |  |  |  |  | $ | 0.27 |
Diluted |  | $ | 0.48 |  |  | $ | (0.21 | ) |  |  |  |  | $ | 0.27 |
Weighted average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,242,092 |  |  |  | 9,242,092 |  |  |  |  |  |  | 9,242,092 |
Diluted |  |  | 9,256,810 |  |  |  | 9,245,537 |  |  |  |  |  |  | 9,245,537 |
Tandy Leather Factory, Inc. Consolidated Statement of Cash Flows
|  | For the Year Ended December 31, 2017 |
|  | 2017 As Reported |  |  | 2017 Adjustments |  | 2017 As Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | 4,451,751 |  |  | $ | (1,973,307 | ) |  |  |  | $ | 2,478,444 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 1,875,102 |  |  |  | 8,941 |  |  |  | (7) |  |  | 1,884,043 |
Loss on disposal of assets |  |  | 3,139 |  |  |  | - |  |  |  |  |  |  | 3,139 |
Stock-based compensation |  |  | 239,599 |  |  |  | - |  |  |  |  |  |  | 239,599 |
Deferred income taxes |  |  | (215,576 | ) |  |  | 853,632 |  |  |  | (6)(9) |  |  | 638,056 |
Exchange loss |  |  | 29,848 |  |  |  | 3,151 |  |  |  | (9) |  |  | 32,999 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable - trade |  |  | 99,772 |  |  |  | (11,327 | ) |  |  | (7) |  |  | 88,445 |
Inventory |  |  | (4,133,658 | ) |  |  | 1,155,373 |  |  |  | (1)(2)(4) |  |  | (2,978,285 | )
Prepaid expenses |  |  | 135,713 |  |  |  | (68,901 | ) |  |  | (6)(7) |  |  | 66,812 |
Other current assets |  |  | (48,797 | ) |  |  | 48,797 |  |  |  | (7) |  |  | - |
Accounts payable - trade |  |  | (208,434 | ) |  |  | 973,323 |  |  |  | (7) |  |  | 764,889 |
Accrued expenses and other liabilities |  |  | (983,710 | ) |  |  | (1,282,591 | ) |  |  | (4)(7) |  |  | (2,266,301 | )
Income taxes |  |  | 923,016 |  |  |  | 225,297 |  |  |  | (6) |  |  | 1,148,313 |
Other assets |  |  | (43,669 | ) |  |  | 409,291 |  |  |  | (7) |  |  | 365,622 |
Total adjustments |  |  | (2,327,655 | ) |  |  | 2,314,986 |  |  |  |  |  |  | (12,669 | )
Net cash provided by (used in) operating activities |  |  | 2,124,096 |  |  |  | 341,679 |  |  |  |  |  |  | 2,465,775 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (1,689,645 | ) |  |  | (2,354 | ) |  |  | (7) |  |  | (1,691,999 | )
Proceeds from sale of assets |  |  | 35,963 |  |  |  | - |  |  |  |  |  |  | 35,963 |
Net cash used in investing activities |  |  | (1,653,682 | ) |  |  | (2,354 | ) |  |  |  |  |  | (1,656,036 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payments on capital lease obligations |  |  | (72,686 | ) |  |  | - |  |  |  |  |  |  | (72,686 | )
Proceeds from exercise of stock options |  |  | 223,404 |  |  |  | - |  |  |  |  |  |  | 223,404 |
Net cash provided by financing activities |  |  | 150,718 |  |  |  | - |  |  |  |  |  |  | 150,718 |
Effect of exchange rate changes on cash and cash equivalents |  |  | 853,822 |  |  |  | (593,726 | ) |  |  | (9) |  |  | 260,096 |
Net (decrease) increase in cash and cash equivalents |  |  | 1,474,954 |  |  |  | (254,401 | ) |  |  |  |  |  | 1,220,553 |
Cash and cash equivalents, beginning of period |  |  | 16,862,304 |  |  |  | - |  |  |  |  |  |  | 16,862,304 |
Cash and cash equivalents, end of period |  | $ | 18,337,258 |  |  | $ | (254,401 | ) |  |  |  |  | $ | 18,082,857 |
Supplemental disclosures of cash flow information: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest paid during the period |  | $ | 205,555 |  |  | $ | - |  |  |  |  |  | $ | 205,555 |
Income tax paid during the period, net of refunds |  | $ | 1,788,357 |  |  | $ | 454,661 |  |  |  |  |  | $ | 2,243,018 |
Tandy Leather Factory, Inc. Consolidated Balance Sheet (Unaudited)
|  | March 31, 2019 |
|  | As Reported |  |  | Adjustments |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 12,679,373 |  |  | $ | - |  |  |  |  | $ | 12,679,373 |
Short-term investments |  |  | 4,999,750 |  |  |  | 6,828 |  |  |  | (7) |  |  | 5,006,578 |
Accounts receivable-trade, net of allowance for doubtful accounts of $12,940 |  |  | 456,537 |  |  |  | - |  |  |  |  |  |  | 456,537 |
Inventory |  |  | 30,564,322 |  |  |  | (389,839 | ) |  |  | (1)(2)(3)(4) |  |  | 30,174,483 |
Prepaid income taxes |  |  | 272,028 |  |  |  | 36,430 |  |  |  | (6) |  |  | 308,458 |
Prepaid expenses |  |  | 1,537,367 |  |  |  | 54,676 |  |  |  | (7) |  |  | 1,592,043 |
Other current assets |  |  | 174,043 |  |  |  | 106,363 |  |  |  | (4) |  |  | 280,406 |
Total current assets |  |  | 50,683,420 |  |  |  | (185,542 | ) |  |  |  |  |  | 50,497,878 |
Property and equipment, at cost |  |  | 27,863,939 |  |  |  | 38,268 |  |  |  | (7) |  |  | 27,902,207 |
Less accumulated depreciation |  |  | (13,921,523 | ) |  |  | (20,007 | ) |  |  | (7) |  |  | (13,941,530 | )
Property and equipment, net |  |  | 13,942,416 |  |  |  | 18,261 |  |  |  |  |  |  | 13,960,677 |
Operating lease assets |  |  | 6,389,561 |  |  |  | 10,379,823 |  |  |  | (8) |  |  | 16,769,384 |
Deferred income taxes |  |  | - |  |  |  | 908,500 |  |  |  | (6) |  |  | 908,500 |
Goodwill |  |  | 956,945 |  |  |  | - |  |  |  |  |  |  | 956,945 |
Other intangibles, net of accumulated amortization of $714,000 |  |  | 15,833 |  |  |  | - |  |  |  |  |  |  | 15,833 |
Other assets |  |  | 379,661 |  |  |  | - |  |  |  |  |  |  | 379,661 |
TOTAL ASSETS |  | $ | 72,367,836 |  |  | $ | 11,121,042 |  |  |  |  |  | $ | 83,488,878 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable-trade |  | $ | 897,196 |  |  | $ | - |  |  |  |  |  | $ | 897,196 |
Accrued expenses and other liabilities |  |  | 3,752,711 |  |  |  | 354,568 |  |  |  | (4)(7) |  |  | 4,107,279 |
Operating lease liabilities |  |  | 3,340,843 |  |  |  | 707,318 |  |  |  | (8) |  |  | 4,048,161 |
Total current liabilities |  |  | 7,990,750 |  |  |  | 1,061,886 |  |  |  |  |  |  | 9,052,636 |
Uncertain tax position |  |  | - |  |  |  | 1,415,715 |  |  |  | (6) |  |  | 1,415,715 |
Deferred income taxes |  |  | 1,258,721 |  |  |  | (1,258,721 | ) |  |  | (6)(8)(9) |  |  | - |
Other non-current liabilities |  |  | - |  |  |  | 555,778 |  |  |  | (6) |  |  | 555,778 |
Operating lease liabilities, non-current |  |  | 3,427,705 |  |  |  | 9,806,954 |  |  |  | (8) |  |  | 13,234,659 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
STOCKHOLDERS’ EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance |  |  | - |  |  |  | - |  |  |  |  |  |  | - |
Common stock, $0.0024 par value; 25,000,000 shares authorized; 10,354,563 shares issued |  |  | 27,234 |  |  |  | (2,383 | ) |  |  | (10) |  |  | 24,851 |
Paid-in capital |  |  | 7,344,644 |  |  |  | (2,891,684 | ) |  |  | (10) |  |  | 4,452,960 |
Retained earnings |  |  | 66,188,614 |  |  |  | (554,243 | ) |  |  | (1) (2)(3)(4)(6)(7)(8)(9) |  |  | 65,634,371 |
Treasury stock at cost (1,420,539 shares) |  |  | (12,646,467 | ) |  |  | 2,894,067 |  |  |  | (10) |  |  | (9,752,400 | )
Accumulated other comprehensive loss (net of tax) |  |  | (1,223,365 | ) |  |  | 93,673 |  |  |  | (9) |  |  | (1,129,692 | )
Total stockholders’ equity |  |  | 59,690,660 |  |  |  | (460,570 | ) |  |  |  |  |  | 59,230,090 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 72,367,836 |  |  | $ | 11,121,042 |  |  |  |  |  | $ | 83,488,878 |
Tandy Leather Factory, Inc. Consolidated Statement of Comprehensive Income Unaudited
|  | For the Three Months Ended March 31, 2019 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 20,784,652 |  |  | $ | 156,670 |  |  |  | (4) |  | $ | 20,941,322 |
Cost of sales |  |  | 8,333,847 |  |  |  | 362,805 |  |  |  | (1) (2)(3)(4)(5)(7) |  |  | 8,696,652 |
Gross profit |  |  | 12,450,805 |  |  |  | (206,135 | ) |  |  |  |  |  | 12,244,670 |
Operating expenses |  |  | 11,281,377 |  |  |  | (1,249,724 | ) |  |  | (5)(7)(8) |  |  | 10,031,653 |
Income (loss) from operations |  |  | 1,169,428 |  |  |  | 1,043,589 |  |  |  |  |  |  | 2,213,017 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 32,383 |  |  |  | - |  |  |  |  |  |  | 32,383 |
Other, net |  |  | (33,041 | ) |  |  | 142,659 |  |  |  | (7)(9) |  |  | 109,618 |
Total other (income) expense |  |  | (658 | ) |  |  | 142,659 |  |  |  |  |  |  | 142,001 |
Income (loss) before income taxes |  |  | 1,170,086 |  |  |  | 900,930 |  |  |  |  |  |  | 2,071,016 |
Provision (benefit) for income taxes |  |  | 301,123 |  |  |  | 250,082 |  |  |  | (6) |  |  | 551,205 |
Net income (loss) |  | $ | 868,963 |  |  | $ | 650,848 |  |  |  |  |  | $ | 1,519,811 |
Foreign currency translation adjustments, net of tax |  |  | 287,295 |  |  |  | 27,198 |  |  |  | (9) |  |  | 314,493 |
Comprehensive income (loss) |  | $ | 1,156,258 |  |  | $ | 678,049 |  |  |  |  |  | $ | 1,843,304 |
Net income (loss) per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.10 |  |  | $ | 0.07 |  |  |  |  |  | $ | 0.17 |
Diluted |  | $ | 0.10 |  |  | $ | 0.07 |  |  |  |  |  | $ | 0.17 |
Basic |  |  | 9,009,752 |  |  |  | 9,009,752 |  |  |  |  |  |  | 9,009,752 |
Diluted |  |  | 9,010,037 |  |  |  | 9,011,107 |  |  |  |  |  |  | 9,011,107 |
Tandy Leather Factory, Inc. Consolidated Statement of Cash Flows Unaudited
|  | For the Three Months Ended March 31, 2019 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | 868,963 |  |  | $ | 650,848 |  |  |  |  | $ | 1,519,811 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 495,449 |  |  |  | (1,154 | ) |  |  | (7) |  |  | 494,295 |
Right-of-use asset amortization |  |  | - |  |  |  | 865,050 |  |  |  | (8) |  |  | 865,050 |
(Gain) loss on disposal of assets |  |  | (3,794 | ) |  |  | - |  |  |  |  |  |  | (3,794 | )
Stock-based compensation |  |  | 185,825 |  |  |  | - |  |  |  |  |  |  | 185,825 |
Deferred income taxes |  |  | (33,861 | ) |  |  | 217,654 |  |  |  | (6)(9) |  |  | 183,793 |
Exchange (gain) loss |  |  | 2,154 |  |  |  | 134,113 |  |  |  | (7)(9) |  |  | 136,267 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable-trade |  |  | (48,367 | ) |  |  | (7,696 | ) |  |  | (7) |  |  | (56,063 | )
Inventory |  |  | 3,302,954 |  |  |  | (130,791 | ) |  |  | (1)(2)(3)(4) |  |  | 3,172,163 |
Prepaid expenses |  |  | (292,613 | ) |  |  | 325,165 |  |  |  | (7) |  |  | 32,552 |
Other current assets |  |  | (12,835 | ) |  |  | (180,812 | ) |  |  | (7) |  |  | (193,647 | )
Accounts payable-trade |  |  | (318,294 | ) |  |  | (962,853 | ) |  |  | (7) |  |  | (1,281,147 | )
Accrued expenses and other liabilities |  |  | (1,205,241 | ) |  |  | 49,346 |  |  |  | (4)(7) |  |  | (1,155,895 | )
Income taxes |  |  | 95,767 |  |  |  | 12,943 |  |  |  | (6) |  |  | 108,710 |
Other assets |  |  | 6,446 |  |  |  | (48,416 | ) |  |  | (7) |  |  | (41,970 | )
Operating lease liability |  |  | - |  |  |  | (833,690 | ) |  |  | (8) |  |  | (833,690 | )
Total adjustments |  |  | 2,173,590 |  |  |  | (561,141 | ) |  |  |  |  |  | 1,612,449 |
Net cash provided by operating activities |  |  | 3,042,553 |  |  |  | 89,707 |  |  |  |  |  |  | 3,132,260 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (30,893 | ) |  |  | (7 | ) |  |  | (7) |  |  | (30,900 | )
Purchase of short-term investments |  |  | (4,999,750 | ) |  |  | - |  |  |  |  |  |  | (4,999,750 | )
Proceeds from sales of assets |  |  | 12,552 |  |  |  | - |  |  |  |  |  |  | 12,552 |
Net cash used in investing activities |  |  | (5,018,091 | ) |  |  | (7 | ) |  |  |  |  |  | (5,018,098 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payments on long-term debt |  |  | (8,968,018 | ) |  |  | - |  |  |  |  |  |  | (8,968,018 | )
Repurchase of treasury stock |  |  | (714,617 | ) |  |  | - |  |  |  |  |  |  | (714,617 | )
Net cash used in financing activities |  |  | (9,682,635 | ) |  |  | - |  |  |  |  |  |  | (9,682,635 | )
Effect of exchange rate changes on cash and cash equivalents |  |  | 267,195 |  |  |  | (89,700 | ) |  |  | (9) |  |  | 177,495 |
Net (decrease) increase in cash and cash equivalents |  |  | (11,390,978 | ) |  |  | - |  |  |  |  |  |  | (11,390,978 | )
Cash and cash equivalents, beginning of period |  |  | 24,070,351 |  |  |  | - |  |  |  |  |  |  | 24,070,351 |
Cash and cash equivalents, end of period |  | $ | 12,679,373 |  |  | $ | - |  |  |  |  |  | $ | 12,679,373 |
Tandy Leather Factory, Inc. Consolidated Balance Sheet Unaudited
|  | September 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 16,814,972 |  |  | $ | - |  |  |  |  | $ | 16,814,972 |
Short-term investments |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable-trade, net of allowance for doubtful accounts of $9,839 |  |  | 418,612 |  |  |  | - |  |  |  |  |  |  | 418,612 |
Inventory |  |  | 40,720,630 |  |  |  | (2,308,873 | ) |  |  | (1)(2)(3)(4) |  |  | 38,411,757 |
Prepaid income taxes |  |  | 452,389 |  |  |  | (386,595 | ) |  |  | (6) |  |  | 65,794 |
Prepaid expenses |  |  | 1,348,113 |  |  |  | 64,393 |  |  |  | (7) |  |  | 1,412,506 |
Other current assets |  |  | 290,028 |  |  |  | 93,308 |  |  |  | (7) |  |  | 383,336 |
Total current assets |  |  | 60,044,744 |  |  |  | (2,537,767 | ) |  |  |  |  |  | 57,506,977 |
Property and equipment, at cost |  |  | 27,950,353 |  |  |  | 33,314 |  |  |  | (7) |  |  | 27,983,667 |
Less accumulated depreciation |  |  | (12,976,025 | ) |  |  | (17,940 | ) |  |  | (7) |  |  | (12,993,965 | )
Property and equipment, net |  |  | 14,974,328 |  |  |  | 15,374 |  |  |  |  |  |  | 14,989,702 |
Deferred income taxes |  |  | 281,721 |  |  |  | 1,139,475 |  |  |  | (6) |  |  | 1,421,196 |
Goodwill |  |  | 960,304 |  |  |  | - |  |  |  |  |  |  | 960,304 |
Other intangibles, net of accumulated amortization of $712,000 |  |  | 17,166 |  |  |  | - |  |  |  |  |  |  | 17,166 |
Other assets |  |  | 387,487 |  |  |  | - |  |  |  |  |  |  | 387,487 |
Other assets |  | $ | 76,665,750 |  |  | $ | (1,382,918 | ) |  |  |  |  | $ | 75,282,832 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable-trade |  | $ | 3,718,393 |  |  |  | - |  |  |  |  |  | $ | 3,718,393 |
Accrued expenses and other liabilities |  |  | 2,235,793 |  |  |  | 1,174,004 |  |  |  | (4)(7) |  |  | 3,409,797 |
Current maturities of long-term debt |  |  | 174,056 |  |  |  | - |  |  |  |  |  |  | 174,056 |
Total current liabilities |  |  | 6,128,242 |  |  |  | 1,174,004 |  |  |  |  |  |  | 7,302,246 |
Uncertain tax positions |  |  | - |  |  |  | 1,197,078 |  |  |  | (6) |  |  | 1,197,078 |
Deferred income taxes |  |  | 1,467,481 |  |  |  | (1,467,481 | ) |  |  | (6)(9) |  |  | - |
Other non-current liabilities |  |  | - |  |  |  | 598,188 |  |  |  | (6) |  |  | 598,188 |
Long-term debt, net of current maturities |  |  | 8,180,613 |  |  |  | - |  |  |  |  |  |  | 8,180,613 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
STOCKHOLDERS’ EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance |  |  | - |  |  |  | - |  |  |  | - |  |  | - |
Common stock, $0.0024 par value; 25,000,000 shares authorized; 10,336,717 shares issued |  |  | 27,193 |  |  |  | (2,385 | ) |  |  | (10) |  |  | 24,808 |
Paid-in capital |  |  | 6,907,678 |  |  |  | (2,891,682 | ) |  |  | (10) |  |  | 4,015,996 |
Retained earnings |  |  | 66,345,110 |  |  |  | (2,983,997 | ) |  |  | (1)(2)(3)(4)(6)(7)(9) |  |  | 63,361,113 |
Treasury stock at cost (1,182,509 shares) |  |  | (11,273,822 | ) |  |  | 2,894,067 |  |  |  | (10) |  |  | (8,379,755 | )
Accumulated other comprehensive loss (net of tax) |  |  | (1,116,745 | ) |  |  | 99,290 |  |  |  | (9) |  |  | (1,017,455 | )
Total stockholders’ equity |  |  | 60,889,414 |  |  |  | (2,884,707 | ) |  |  |  |  |  | 58,004,707 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 76,665,750 |  |  | $ | (1,382,918 | ) |  |  |  |  | $ | 75,282,832 |
Tandy Leather Factory, Inc. Consolidated Statement of Comprehensive Income (Loss) Unaudited
|  | Three Months Ended September 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 18,887,099 |  |  | $ | (8,836 | ) |  |  | (4) |  |  | 18,878,263 |
Cost of sales |  |  | 7,040,266 |  |  |  | (57,886 | ) |  |  | (1)(2)(3)(4)(5) |  |  | 6,982,380 |
Gross profit |  |  | 11,846,833 |  |  |  | 49,050 |  |  |  |  |  |  | 11,895,883 |
Operating expenses |  |  | 11,531,389 |  |  |  | (535,400 | ) |  |  | (5)(7) |  |  | 10,995,989 |
Income from operations |  |  | 315,444 |  |  |  | 584,450 |  |  |  |  |  |  | 899,894 |
Other expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 80,710 |  |  |  | - |  |  |  |  |  |  | 80,710 |
Other, net |  |  | (40,846 | ) |  |  | - |  |  |  |  |  |  | (40,846 | )
Total other expense |  |  | 39,864 |  |  |  | - |  |  |  |  |  |  | 39,864 |
Income before income taxes |  |  | 275,580 |  |  |  | 584,450 |  |  |  |  |  |  | 860,030 |
Provision (benefit) for income taxes |  |  | 397,114 |  |  |  | (145,785 | ) |  |  | (6) |  |  | 251,329 |
Net income (loss) |  | $ | (121,534 | ) |  | $ | 730,235 |  |  |  |  |  | $ | 608,701 |
Foreign currency translation adjustments, net of tax |  |  | 118,165 |  |  |  | (29,541 | ) |  |  | (9) |  |  | 88,624 |
Comprehensive income (loss) |  | $ | (3,369 | ) |  | $ | 700,694 |  |  |  |  |  | $ | 697,325 |
Net income (loss) per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.01 | ) |  | $ | 0.08 |  |  |  |  |  | $ | 0.07 |
Diluted |  | $ | (0.01 | ) |  | $ | 0.08 |  |  |  |  |  | $ | 0.07 |
Weighted average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,154,209 |  |  |  | 9,154,215 |  |  |  |  |  |  | 9,154,215 |
Diluted |  |  | 9,155,031 |  |  |  | 9,160,022 |  |  |  |  |  |  | 9,160,022 |
Tandy Leather Factory, Inc. Consolidated Statement of Comprehensive Income Unaudited
|  | Nine Months Ended September 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 58,353,784 |  |  | $ | 212,279 |  |  |  | (4) |  | $ | 58,566,063 |
Cost of sales |  |  | 20,545,547 |  |  |  | 1,202,081 |  |  |  | (1)(2)(3)(4)(5)(7) |  |  | 21,747,628 |
Gross profit |  |  | 37,808,237 |  |  |  | (989,802 | ) |  |  |  |  |  | 36,818,435 |
Operating expenses |  |  | 33,742,351 |  |  |  | (1,460,053 | ) |  |  | (5)(7) |  |  | 32,282,298 |
Income from operations |  |  | 4,065,886 |  |  |  | 470,251 |  |  |  |  |  |  | 4,536,137 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 223,534 |  |  |  | - |  |  |  |  |  |  | 223,534 |
Other, net |  |  | (126,459 | ) |  |  | (199,607 | ) |  |  | (9) |  |  | (326,066 | )
Total other (income) expense |  |  | 97,075 |  |  |  | (199,607 | ) |  |  |  |  |  | (102,532 | )
Income before income taxes |  |  | 3,968,811 |  |  |  | 669,858 |  |  |  |  |  |  | 4,638,669 |
Provision (benefit) for income taxes |  |  | 1,376,634 |  |  |  | (21,065 | ) |  |  | (6) |  |  | 1,355,569 |
Net income |  | $ | 2,592,177 |  |  | $ | 690,923 |  |  |  |  |  | $ | 3,283,100 |
Foreign currency translation adjustments, net of tax |  |  | (154,642 | ) |  |  | (100,500 | ) |  |  | (9) |  |  | (255,142 | )
Comprehensive income |  | $ | 2,437,535 |  |  | $ | 590,423 |  |  |  |  |  | $ | 3,027,958 |
Net income per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.28 |  |  | $ | 0.08 |  |  |  |  |  | $ | 0.36 |
Diluted |  | $ | 0.28 |  |  | $ | 0.08 |  |  |  |  |  | $ | 0.36 |
Weighted average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,199,173 |  |  |  | 9,199,173 |  |  |  |  |  |  | 9,199,173 |
Diluted |  |  | 9,199,959 |  |  |  | 9,201,577 |  |  |  |  |  |  | 9,201,577 |
Tandy Leather Factory, Inc. Consolidated Statement of Cash Flows Unaudited
|  | For the Nine Months Ended September 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 2,592,177 |  |  | $ | 690,923 |  |  |  |  | $ | 3,283,100 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 1,310,774 |  |  |  | 2,056 |  |  | (7) |  |  | 1,312,830 |
(Gain) loss on disposal of assets |  |  | 4,556 |  |  |  | - |  |  |  |  |  | 4,556 |
Stock-based compensation |  |  | 76,447 |  |  |  | - |  |  |  |  |  | 76,447 |
Deferred income taxes |  |  | (115,460 | ) |  |  | (174,831 | ) |  |  | (6)(9) |  |  | (290,291 | )
Exchange (gain) loss |  |  | (93,163 | ) |  |  | (43,735 | ) |  |  | (9) |  |  | (136,898 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable-trade |  |  | 42,600 |  |  |  | (53,500 | ) |  |  | (7) |  |  | (10,900 | )
Inventory |  |  | (3,409,433 | ) |  |  | (552,298 | ) |  |  | (1)(2)(4) |  |  | (3,961,731 | )
Prepaid expenses |  |  | 125,034 |  |  |  | (90,533 | ) |  |  | (6)(7) |  |  | 34,501 |
Other current assets |  |  | (111,688 | ) |  |  | 111,688 |  |  |  | (7) |  |  | - |
Accounts payable-trade |  |  | 28,525 |  |  |  | 1,374,694 |  |  |  | (7) |  |  | 1,403,219 |
Accrued expenses and other liabilities |  |  | (609,577 | ) |  |  | (1,043,249 | ) |  |  | (4)(7) |  |  | (1,652,826 | )
Income taxes |  |  | (475,082 | ) |  |  | 56,112 |  |  |  | (6) |  |  | (418,970 | )
Other assets |  |  | (5,736 | ) |  |  | 358,049 |  |  |  | (7) |  |  | 352,313 |
Total adjustments |  |  | (3,232,203 | ) |  |  | (55,547 | ) |  |  |  |  |  | (3,287,750 | )
Net cash provided (used) by operating activities |  |  | (640,026 | ) |  |  | 635,376 |  |  |  |  |  |  | (4,650 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (887,679 | ) |  |  | - |  |  |  |  |  |  | (887,679 | )
Proceeds from sales of assets |  |  | 17,718 |  |  |  | - |  |  |  |  |  |  | 17,718 |
Net cash used in investing activities |  |  | (869,961 | ) |  |  | - |  |  |  |  |  |  | (869,961 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from long-term debt |  |  | 982,939 |  |  |  | - |  |  |  |  |  |  | 982,939 |
Repurchase of treasury stock |  |  | (995,238 | ) |  |  | - |  |  |  |  |  |  | (995,238 | )
Net cash used in financing activities |  |  | (12,299 | ) |  |  | - |  |  |  |  |  |  | (12,299 | )
Effect of exchange rate changes on cash and cash equivalents |  |  | - |  |  |  | (380,975 | ) |  |  | (9) |  |  | (380,975 | )
Net (decrease) increase in cash and cash equivalents |  |  | (1,522,286 | ) |  |  | 254,401 |  |  |  |  |  |  | (1,267,885 | )
Cash and cash equivalents, beginning of period |  |  | 18,337,258 |  |  |  | (254,401 | ) |  |  |  |  |  | 18,082,857 |
Cash and cash equivalents, end of period |  | $ | 16,814,972 |  |  | $ | - |  |  |  |  |  | $ | 16,814,972 |
Tandy Leather Factory, Inc. Consolidated Balance Sheet Unaudited
|  | June 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 18,955,328 |  |  | $ | - |  |  |  |  | $ | 18,955,328 |
Accounts receivable-trade, net of allowance for doubtful accounts of $9,911 |  |  | 496,255 |  |  |  | - |  |  |  |  |  | 496,255 |
Inventory |  |  | 38,020,269 |  |  |  | (2,897,936 | ) |  |  | (1)(2)(3)(4) |  |  | 35,122,333 |
Prepaid income taxes |  |  | 233,002 |  |  |  | (233,002 | ) |  |  | (6) |  |  | - |
Prepaid expenses |  |  | 1,374,944 |  |  |  | 64,393 |  |  |  | (7) |  |  | 1,439,337 |
Other current assets |  |  | 75,459 |  |  |  | 87,557 |  |  |  | (7) |  |  | 163,016 |
Total current assets |  |  | 59,155,257 |  |  |  | (2,978,988 | ) |  |  |  |  |  | 56,176,269 |
Property and equipment, at cost |  |  | 27,551,811 |  |  |  | 33,314 |  |  |  | (7) |  |  | 27,585,125 |
Less accumulated depreciation |  |  | (12,552,648 | ) |  |  | (16,886 | ) |  |  | (7) |  |  | (12,569,534 | )
Property and equipment, net |  |  | 14,999,163 |  |  |  | 16,428 |  |  |  |  |  |  | 15,015,591 |
Deferred income taxes |  |  | 269,512 |  |  |  | 1,016,036 |  |  |  | (6) |  |  | 1,285,548 |
Goodwill |  |  | 958,464 |  |  |  | - |  |  |  |  |  |  | 958,464 |
Other intangibles, net of accumulated amortization of $712,000 |  |  | 18,083 |  |  |  | - |  |  |  |  |  |  | 18,083 |
Other assets |  |  | 384,744 |  |  |  | - |  |  |  |  |  |  | 384,744 |
TOTAL ASSETS |  | $ | 75,785,223 |  |  |  | (1,946,524 | ) |  |  |  |  | $ | 73,838,699 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable-trade |  | $ | 3,115,778 |  |  |  | - |  |  |  |  |  | $ | 3,115,778 |
Accrued expenses and other liabilities |  |  | 1,971,026 |  |  |  | 1,165,165 |  |  |  | (4)(7) |  |  | 3,136,191 |
Income taxes payable |  |  | - |  |  |  | 153,593 |  |  |  | (6) |  |  | 153,593 |
Current maturities of long-term debt |  |  | 1,740,556 |  |  |  | - |  |  |  |  |  |  | 1,740,556 |
Total current liabilities |  |  | 6,827,360 |  |  |  | 1,318,758 |  |  |  |  |  |  | 8,146,118 |
Uncertain tax positions |  |  | - |  |  |  | 1,197,078 |  |  |  | (6) |  |  | 1,197,078 |
Deferred income taxes |  |  | 1,474,675 |  |  |  | (1,474,675 | ) |  |  | (6)(9) |  |  | - |
Other non-current liabilities |  |  | - |  |  |  | 597,716 |  |  |  | (6) |  |  | 597,716 |
Long-term debt, net of current maturities |  |  | 6,614,112 |  |  |  | - |  |  |  |  |  |  | 6,614,112 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
STOCKHOLDERS’ EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance |  |  | - |  |  |  | - |  |  |  |  |  |  | - |
Common stock, $0.0024 par value; 25,000,000 shares authorized; 10,336,717 shares issued |  |  | 27,193 |  |  |  | (2,385 | ) |  |  | (10) |  |  | 24,808 |
Paid-in capital |  |  | 6,883,919 |  |  |  | (2,891,682 | ) |  |  | (10) |  |  | 3,992,237 |
Retained earnings |  |  | 66,466,644 |  |  |  | (3,714,232 | ) |  |  | (2)(3)(4)(6)(7)(9) |  |  | 62,752,412 |
Treasury stock at cost (1,182,502 shares) |  |  | (11,273,770 | ) |  |  | 2,894,067 |  |  |  | (10) |  |  | (8,379,703 | )
Accumulated other comprehensive loss |  |  | (1,234,910 | ) |  |  | 128,831 |  |  |  | (9) |  |  | (1,106,079 | )
Total stockholders’ equity |  |  | 60,869,076 |  |  |  | (3,585,401 | ) |  |  |  |  |  | 57,283,675 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 75,785,223 |  |  |  | (1,946,524 | ) |  |  |  |  | $ | 73,838,699 |
Consolidated Statement of Comprehensive Income (Loss) Unaudited
|  | Three Months Ended June 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 19,177,767 |  |  | $ | 9,455 |  |  |  | (4) |  | $ | 19,187,222 |
Cost of sales |  |  | 6,059,325 |  |  |  | 894,405 |  |  |  | (1)(2)(3)(4)(5) |  |  | 6,953,730 |
Gross profit (loss) |  |  | 13,118,442 |  |  |  | (884,950 | ) |  |  |  |  |  | 12,233,492 |
Operating expenses |  |  | 11,136,961 |  |  |  | (485,575 | ) |  |  | (5)(7) |  |  | 10,651,386 |
Income (loss) from operations |  |  | 1,981,481 |  |  |  | (399,375 | ) |  |  |  |  |  | 1,582,106 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 78,182 |  |  |  | - |  |  |  |  |  |  | 78,182 |
Other, net |  |  | (46,741 | ) |  |  | (85,101 | ) |  |  | (9) |  |  | (131,842 | )
Total other (income) expense |  |  | 31,441 |  |  |  | (85,101 | ) |  |  |  |  |  | (53,660 | )
Income (loss) before income taxes |  |  | 1,950,040 |  |  |  | (314,274 | ) |  |  |  |  |  | 1,635,766 |
Provision (benefit) for income taxes |  |  | 509,948 |  |  |  | (31,925 | ) |  |  | (6) |  |  | 478,023 |
Net income (loss) |  | $ | 1,440,092 |  |  | $ | (282,349 | ) |  |  |  |  | $ | 1,157,743 |
Foreign currency translation adjustments, net of tax |  |  | (294,598 | ) |  |  | 9,824 |  |  |  | (9) |  |  | (284,774 | )
Comprehensive income (loss) |  | $ | 1,145,494 |  |  | $ | (272,525 | ) |  |  |  |  | $ | 872,969 |
Net income (loss) per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.15 |  |  | $ | (0.02 | ) |  |  |  |  | $ | 0.13 |
Diluted |  | $ | 0.15 |  |  | $ | (0.02 | ) |  |  |  |  | $ | 0.13 |
Basic |  |  | 9,180,076 |  |  |  | 9,180,076 |  |  |  |  |  |  | 9,180,076 |
Diluted |  |  | 9,180,727 |  |  |  | 9,182,527 |  |  |  |  |  |  | 9,182,527 |
Tandy Leather Factory, Inc. Consolidated Statement of Comprehensive Income (Loss) Unaudited
|  | Six Months Ended June 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 39,466,685 |  |  | $ | 221,115 |  |  |  | (4) |  | $ | 39,687,800 |
Cost of sales |  |  | 13,505,281 |  |  |  | 1,259,967 |  |  |  | (1)(2)(3)(4)(5)(7) |  |  | 14,765,248 |
Gross profit (loss) |  |  | 25,961,404 |  |  |  | (1,038,852 | ) |  |  |  |  |  | 24,922,552 |
Operating expenses |  |  | 22,210,962 |  |  |  | (924,653 | ) |  |  | (5)(7) |  |  | 21,286,309 |
Income (loss) from operations |  |  | 3,750,442 |  |  |  | (114,199 | ) |  |  |  |  |  | 3,636,243 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 142,824 |  |  |  | - |  |  |  |  |  |  | 142,824 |
Other, net |  |  | (85,613 | ) |  |  | (199,607 | ) |  |  | (9) |  |  | (285,220 | )
Total other (income) expense |  |  | 57,211 |  |  |  | (199,607 | ) |  |  |  |  |  | (142,396 | )
Income (loss) before income taxes |  |  | 3,693,231 |  |  |  | 85,408 |  |  |  |  |  |  | 3,778,639 |
Provision (benefit) for income taxes |  |  | 979,520 |  |  |  | 124,720 |  |  |  | (6) |  |  | 1,104,240 |
Net income (loss) |  | $ | 2,713,711 |  |  | $ | (39,312 | ) |  |  |  |  | $ | 2,674,399 |
Foreign currency translation adjustments, net of tax |  |  | (272,807 | ) |  |  | (70,959 | ) |  |  | (9) |  |  | (343,766 | )
Comprehensive income (loss) |  | $ | 2,440,904 |  |  | $ | (110,271 | ) |  |  |  |  | $ | 2,330,633 |
Net income (loss) per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.29 |  |  | $ | 0.01 |  |  |  |  |  | $ | 0.29 |
Diluted |  | $ | 0.29 |  |  | $ | 0.01 |  |  |  |  |  | $ | 0.29 |
Weighted average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,222,028 |  |  |  | 9,222,028 |  |  |  |  |  |  | 9,222,028 |
Diluted |  |  | 9,222,533 |  |  |  | 9,223,086 |  |  |  |  |  |  | 9,223,086 |
Tandy Leather Factory, Inc. Consolidated Statement of Cash Flows Unaudited
|  | Six Months Ended June 30, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | 2,713,711 |  |  | $ | (39,312 | ) |  |  |  | $ | 2,674,399 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 878,955 |  |  |  | 1,139 |  |  |  | (7) |  |  | 880,094 |
(Gain) loss on disposal of assets |  |  | 4,556 |  |  |  | - |  |  |  |  |  |  | 4,556 |
Stock-based compensation |  |  | 52,688 |  |  |  | - |  |  |  |  |  |  | 52,688 |
Deferred income taxes |  |  | (96,057 | ) |  |  | (58,586 | ) |  |  | (6)(9) |  |  | (154,643 | )
Exchange (gain) loss |  |  | (268,321 | ) |  |  | 52,455 |  |  |  | (9) |  |  | (215,866 | )
Changes in operating assets and liablities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable-trade |  |  | (35,043 | ) |  |  | 12,509 |  |  |  | (7) |  |  | (22,534 | )
Inventory |  |  | (709,072 | ) |  |  | 20,638 |  |  |  | (1)(2)(4) |  |  | (688,434 | )
Prepaid expenses |  |  | 98,203 |  |  |  | 67,654 |  |  |  | (6)(7) |  |  | 165,857 |
Other current assets |  |  | 113,570 |  |  |  | (113,570 | ) |  |  | (7) |  |  | - |
Accounts payable-trade |  |  | (189,928 | ) |  |  | 911,645 |  |  |  | (7) |  |  | 721,717 |
Accrued expenses and other liabilities |  |  | (1,258,506 | ) |  |  | (662,391 | ) |  |  | (4)(7) |  |  | (1,920,897 | )
Income taxes |  |  | (255,695 | ) |  |  | 53,044 |  |  |  | (6) |  |  | (202,651 | )
Other assets |  |  | (3,910 | ) |  |  | 426,212 |  |  |  | (7) |  |  | 422,302 |
Total adjustments |  |  | (1,668,560 | ) |  |  | 710,749 |  |  |  |  |  |  | (957,811 | )
Net cash provided by operating activities |  |  | 1,045,151 |  |  |  | 671,437 |  |  |  |  |  |  | 1,716,588 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (421,861 | ) |  |  | - |  |  |  |  |  |  | (421,861 | )
Proceeds from sales of assets |  |  | 7,028 |  |  |  | - |  |  |  |  |  |  | 7,028 |
Net cash used in investing activities |  |  | (414,833 | ) |  |  | - |  |  |  |  |  |  | (414,833 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from long-term debt |  |  | 982,938 |  |  |  | - |  |  |  |  |  |  | 982,938 |
Repurchase of treasury stock |  |  | (995,186 | ) |  |  | - |  |  |  |  |  |  | (995,186 | )
Net cash used in financing activities |  |  | (12,248 | ) |  |  | - |  |  |  |  |  |  | (12,248 | )
Effect of exchange rate changes on cash and cash equivalents |  |  | - |  |  |  | (417,036 | ) |  |  | (9) |  |  | (417,036 | )
Net (decrease) increase in cash and cash equivalents |  |  | 618,070 |  |  |  | 254,401 |  |  |  |  |  |  | 872,471 |
Cash and cash equivalents, beginning of period |  |  | 18,337,258 |  |  |  | (254,401 | ) |  |  |  |  |  | 18,082,857 |
Cash and cash equivalents, end of period |  | $ | 18,955,328 |  |  | $ | - |  |  |  |  |  | $ | 18,955,328 |
Tandy Leather Factory, Inc. Consolidated Balance Sheet (Unaudited)
|  | March 31, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 19,252,878 |  |  | $ | - |  |  |  |  | $ | 19,252,878 |
Accounts receivable-trade, net of allowance for doubtful accounts of $16,075 |  |  | 503,322 |  |  |  | - |  |  |  |  |  | 503,322 |
Inventory |  |  | 36,771,860 |  |  |  | (2,494,226 | ) |  |  | (1)(2)(3)(4) |  |  | 34,277,634 |
Prepaid expenses |  |  | 1,576,205 |  |  |  | 64,393 |  |  |  | (7) |  |  | 1,640,598 |
Other current assets |  |  | 78,412 |  |  |  | 91,150 |  |  |  | (7) |  |  | 169,562 |
Total current assets |  |  | 58,182,677 |  |  |  | (2,338,683 | ) |  |  |  |  |  | 55,843,994 |
Property and equipment, at cost |  |  | 27,403,608 |  |  |  | 33,314 |  |  |  | (7) |  |  | 27,436,922 |
Less accumulated depreciation |  |  | (12,162,066 | ) |  |  | (15,831 | ) |  |  | (7) |  |  | (12,177,897 | )
Property and equipment, net |  |  | 15,241,542 |  |  |  | 17,483 |  |  |  |  |  |  | 15,259,025 |
Deferred income taxes |  |  | 265,456 |  |  |  | 782,684 |  |  |  | (6) |  |  | 1,048,140 |
Goodwill |  |  | 960,353 |  |  |  | - |  |  |  |  |  |  | 960,353 |
Other intangibles, net of accumulated amortization of $711,000 |  |  | 18,667 |  |  |  | - |  |  |  |  |  |  | 18,667 |
Other assets |  |  | 379,292 |  |  |  | - |  |  |  |  |  |  | 379,292 |
TOTAL ASSETS |  | $ | 75,047,987 |  |  | $ | (1,538,516 | ) |  |  |  |  | $ | 73,509,471 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable-trade |  | $ | 2,922,764 |  |  | $ | - |  |  |  |  |  | $ | 2,922,764 |
Accrued expenses and other liabilities |  |  | 2,372,090 |  |  |  | 1,174,621 |  |  |  | (4)(7) |  |  | 3,546,711 |
Income taxes payable |  |  | 105,176 |  |  |  | 386,595 |  |  |  | (6) |  |  | 491,771 |
Current maturities of long-term debt |  |  | 1,153,931 |  |  |  | - |  |  |  |  |  |  | 1,153,931 |
Total current liabilities |  |  | 6,553,961 |  |  |  | 1,561,216 |  |  |  |  |  |  | 8,115,177 |
Uncertain tax position |  |  | - |  |  |  | 1,197,078 |  |  |  | (6) |  |  | 1,197,078 |
Deferred income taxes |  |  | 1,581,178 |  |  |  | (1,581,178 | ) |  |  | (6)(9) |  |  | - |
Other non-current liabilities |  |  | - |  |  |  | 597,243 |  |  |  | (6) |  |  | 597,243 |
Long-term debt, net of current maturities |  |  | 6,758,739 |  |  |  | - |  |  |  |  |  |  | 6,758,739 |
COMMITMENTS AND CONTINGENCIES (Note 10) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
STOCKHOLDERS’ EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance |  |  | - |  |  |  | - |  |  |  |  |  |  | - |
Common stock, $0.0024 par value; 25,000,000 shares authorized; 10,336,717 shares issued |  |  | 27,193 |  |  |  | (2,385 | ) |  |  | (10) |  |  | 24,808 |
Paid-in capital |  |  | 6,860,200 |  |  |  | (2,891,682 | ) |  |  | (10) |  |  | 3,968,518 |
Retained earnings |  |  | 65,026,552 |  |  |  | (3,431,882 | ) |  |  | (1)(2)(3)(4)(6)(7)(9) |  |  | 61,594,670 |
Treasury stock at cost (1,121,607 shares) |  |  | (10,819,524 | ) |  |  | 2,894,067 |  |  |  | (10) |  |  | (7,925,457 | )
Accumulated other comprehensive loss (net of tax of $240,045) |  |  | (940,312 | ) |  |  | 119,007 |  |  |  | (9) |  |  | (821,305 | )
Total stockholders’ equity |  |  | 60,154,109 |  |  |  | (3,312,875 | ) |  |  |  |  |  | 56,841,234 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 75,047,987 |  |  | $ | (1,538,516 | ) |  |  |  |  | $ | 73,509,471 |
Tandy Leather Factory, Inc. Consolidated Statement of Comprehensive Income (Unaudited)
|  | For the Three Months Ended March 31, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Net sales |  | $ | 20,288,918 |  |  | $ | 211,660 |  |  |  | (4) |  | $ | 20,500,578 |
Cost of sales |  |  | 7,445,956 |  |  |  | 365,562 |  |  |  | (1)(2)(3)(4)(5)(7) |  |  | 7,811,518 |
Gross profit |  |  | 12,842,962 |  |  |  | (153,902 | ) |  |  |  |  |  | 12,689,060 |
Operating expenses |  |  | 11,074,001 |  |  |  | (439,078 | ) |  |  | (5)(7) |  |  | 10,634,923 |
Income from operations |  |  | 1,768,961 |  |  |  | 285,176 |  |  |  |  |  |  | 2,054,137 |
Other (income) expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | 64,642 |  |  |  | - |  |  |  |  |  |  | 64,642 |
Other, net |  |  | (38,872 | ) |  |  | (114,506 | ) |  |  | (9) |  |  | (153,378 | )
Total other (income) expense |  |  | 25,770 |  |  |  | (114,506 | ) |  |  |  |  |  | (88,736 | )
Income before income taxes |  |  | 1,743,191 |  |  |  | 399,682 |  |  |  |  |  |  | 2,142,873 |
Provision for income taxes |  |  | 469,572 |  |  |  | 156,645 |  |  |  | (6) |  |  | 626,217 |
Net income |  | $ | 1,273,619 |  |  | $ | 243,037 |  |  |  |  |  | $ | 1,516,656 |
Foreign currency translation adjustments, net of tax |  |  | 21,791 |  |  |  | (80,783 | ) |  |  | (9) |  |  | (58,992 | )
Comprehensive income |  | $ | 1,295,410 |  |  | $ | 162,254 |  |  |  |  |  | $ | 1,457,664 |
Net income per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.14 |  |  | $ | 0.03 |  |  |  |  |  | $ | 0.16 |
Diluted |  | $ | 0.14 |  |  | $ | 0.03 |  |  |  |  |  | $ | 0.16 |
Weighted average number of shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,264,446 |  |  |  | 9,264,446 |  |  |  |  |  |  | 9,264,446 |
Diluted |  |  | 9,264,811 |  |  |  | 9,264,604 |  |  |  |  |  |  | 9,264,604 |
Tandy Leather Factory, Inc. Consolidated Statement of Cash Flows (Unaudited)
|  | For the Three Months Ended March 31, 2018 |
|  | As Reported |  |  | Adjustments |  | As Restated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 1,273,619 |  |  | $ | 243,037 |  |  |  |  | $ | 1,516,656 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 465,522 |  |  |  | 1,111 |  |  |  | (7) |  |  | 466,633 |
Loss on disposal of assets |  |  | 798 |  |  |  | 1,131 |  |  |  | (7) |  |  | 1,929 |
Stock-based compensation |  |  | 28,969 |  |  |  | - |  |  |  |  |  |  | 28,969 |
Deferred income taxes |  |  | (49,498 | ) |  |  | 132,263 |  |  |  | (6) |  |  | 82,765 |
Exchange (gain) loss |  |  | 2,994 |  |  |  | (124,717 | ) |  |  | (9) |  |  | (121,723 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable - trade |  |  | (42,110 | ) |  |  | (256,048 | ) |  |  | (4)(7) |  |  | (298,158 | )
Inventory |  |  | 539,337 |  |  |  | (17,812 | ) |  |  | (1)(2)(3)(4)(6) |  |  | 521,525 |
Prepaid expenses |  |  | (103,058 | ) |  |  | 1,723,149 |  |  |  | (7) |  |  | 1,620,091 |
Other current assets |  |  | 110,617 |  |  |  | (1,307,715 | ) |  |  | (7) |  |  | (1,197,098 | )
Accounts payable - trade |  |  | 6,055 |  |  |  | (1,018,467 | ) |  |  | (7) |  |  | (1,012,412 | )
Accrued expenses and other liabilities |  |  | (1,246,439 | ) |  |  | 714,239 |  |  |  | (4)(7) |  |  | (532,200 | )
Income taxes |  |  | 146,483 |  |  |  | (9,979 | ) |  |  | (6) |  |  | 136,504 |
Other assets |  |  | 957 |  |  |  | 76,218 |  |  |  | (7) |  |  | 77,175 |
Total adjustments |  |  | (139,373 | ) |  |  | (86,627 | ) |  |  |  |  |  | (226,000 | )
Net cash provided by operating activities |  |  | 1,134,246 |  |  |  | 156,410 |  |  |  |  |  |  | 1,290,656 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (240,020 | ) |  |  | 222,399 |  |  |  | (7) |  |  | (17,621 | )
Net cash used in (provided by) investing activities |  |  | (240,020 | ) |  |  | 222,399 |  |  |  |  |  |  | (17,621 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from long-term debt |  |  | 540,940 |  |  |  | - |  |  |  |  |  |  | 540,940 |
Repurchase of treasury stock |  |  | (540,940 | ) |  |  | - |  |  |  |  |  |  | (540,940 | )
Net cash used in financing activities |  |  | - |  |  |  | - |  |  |  |  |  |  | - |
Effect of exchange rate changes on cash and cash equivalents |  |  | 21,394 |  |  |  | (124,408 | ) |  |  | (9) |  |  | (103,014 | )
Net increase in cash and cash equivalents |  |  | 915,620 |  |  |  | 254,401 |  |  |  |  |  |  | 1,170,021 |
Cash and cash equivalents, beginning of period |  |  | 18,337,258 |  |  |  | (254,401 | ) |  |  |  |  |  | 18,082,857 |
Cash and cash equivalents, end of period |  | $ | 19,252,878 |  |  | $ | - |  |  |  |  |  | $ | 19,252,878 |

X
- References No definition available. + Details
Name: | us-gaap_AccountingChangesAndErrorCorrectionsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for reporting error correction. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=124431687&loc=d3e22644-107794 + Details
Name: | us-gaap_ErrorCorrectionTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration