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:

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
	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