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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Tandy Leather Factory Inc (PK) | USOTC:TLFA | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 5.48 | 5.02 | 5.70 | 0.00 | 01:00:00 |
|
Delaware
|
75-2543540
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
Common Stock, par value $0.0024
|
TLFA
|
N/A*
|
Large accelerated filer ☐
|
Non-accelerated filer ☒
|
|
Accelerated filer ☐
|
Smaller reporting company ☒
|
|
Emerging growth company ☐
|
|
|||
2
|
|||
2
|
|||
6
|
|||
18
|
|||
26
|
|||
31
|
|||
31
|
|||
31
|
|||
31
|
|||
32
|
|||
34
|
Item 1. |
Three Months Ended March 31,
|
||||||||
2021
|
2020
|
|||||||
Net sales
|
$
|
21,394
|
$
|
17,145
|
||||
Cost of sales
|
9,208
|
7,279
|
||||||
Gross profit
|
12,186
|
9,866
|
||||||
Operating expenses
|
11,221
|
11,096
|
||||||
Impairment expense
|
-
|
1,069
|
||||||
Income (loss) from operations
|
965
|
(2,299
|
)
|
|||||
Other (income) expense:
|
||||||||
Interest expense
|
5
|
-
|
||||||
Other, net
|
(8
|
)
|
(53
|
)
|
||||
Total other (income) expense
|
(3
|
)
|
(53
|
)
|
||||
Income (loss) before income taxes
|
968
|
(2,246
|
)
|
|||||
Provision (benefit) for income taxes
|
223
|
(508
|
)
|
|||||
Net income (loss)
|
$
|
745
|
$
|
(1,738
|
)
|
|||
Foreign currency translation adjustments, net of tax
|
(33
|
)
|
(346
|
)
|
||||
Comprehensive income (loss)
|
$
|
712
|
$
|
(2,084
|
)
|
|||
Net income (loss) per common share:
|
||||||||
Basic
|
$
|
0.08
|
$
|
(0.19
|
)
|
|||
Diluted
|
$
|
0.08
|
$
|
(0.19
|
)
|
|||
Weighted average number of shares outstanding:
|
||||||||
Basic
|
8,811,752
|
9,029,212
|
||||||
Diluted
|
8,811,752
|
9,029,212
|
For the Three Months Ended March 31,
|
||||||||
2021
|
2020
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$
|
745
|
$
|
(1,738
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
254
|
335
|
||||||
Operating lease asset amortization
|
832
|
898
|
||||||
Impairment of long-lived assets
|
-
|
1,069
|
||||||
Loss on disposal of assets
|
-
|
6
|
||||||
Stock-based compensation
|
183
|
228
|
||||||
Deferred income taxes
|
19
|
(264
|
)
|
|||||
Exchange gain
|
-
|
(3
|
)
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable-trade
|
(65
|
)
|
88
|
|||||
Inventory
|
(2,101
|
)
|
(5,302
|
)
|
||||
Prepaid expenses
|
(321
|
)
|
27
|
|||||
Other current assets
|
7
|
46
|
||||||
Accounts payable-trade
|
2,041
|
3,107
|
||||||
Accrued expenses and other liabilities
|
316
|
(385
|
)
|
|||||
Income taxes, net
|
1,198
|
(293
|
)
|
|||||
Other assets
|
-
|
(952
|
)
|
|||||
Operating lease liabilities
|
(903
|
)
|
(890
|
)
|
||||
Total adjustments
|
1,460
|
(2,285
|
)
|
|||||
Net cash provided by (used in) operating activities
|
2,205
|
(4,023
|
)
|
|||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(116
|
)
|
(184
|
)
|
||||
Purchase of short-term investments
|
-
|
(1,697
|
)
|
|||||
Proceeds from sales of assets
|
-
|
1
|
||||||
Proceeds from sales of short-term investments
|
-
|
1,700
|
||||||
Net cash used in investing activities
|
(116
|
)
|
(180
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Payment of finance lease obligations
|
(3
|
)
|
-
|
|||||
Repurchase of common stock
|
(1,675
|
)
|
-
|
|||||
Net cash used in financing activities
|
(1,678
|
)
|
-
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
21
|
(279
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
432
|
(4,482
|
)
|
|||||
Cash and cash equivalents, beginning of period
|
10,329
|
15,905
|
||||||
Cash and cash equivalents, end of period
|
$
|
10,761
|
$
|
11,423
|
Number of
Shares
Common
Stock
Outstanding
|
Par Value
|
Additional
Paid-in
Capital
|
Treasury Stock
|
Retained Earnings
|
Accumulated
Other Comprehensive Income (Loss) |
Total
|
||||||||||||||||||||||
BALANCE, December 31, 2020
|
9,150,806
|
$
|
25
|
$
|
5,924
|
$
|
(9,773
|
)
|
$
|
57,310
|
$
|
(1,292
|
)
|
$
|
52,194
|
|||||||||||||
Stock-based compensation expense
|
-
|
-
|
183
|
-
|
-
|
-
|
183
|
|||||||||||||||||||||
Issuance of restricted stock
|
16,080
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Repurchase of common stock
|
(500,000
|
)
|
(1
|
)
|
(1,674
|
)
|
-
|
-
|
-
|
(1,675
|
)
|
|||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
745
|
-
|
745
|
|||||||||||||||||||||
Foreign currency translation adjustments, net of tax
|
-
|
-
|
-
|
-
|
-
|
(33
|
)
|
(33
|
)
|
|||||||||||||||||||
Balance, March 31, 2021
|
8,666,886
|
$
|
24
|
$
|
4,433
|
$
|
(9,773
|
)
|
$
|
58,055
|
$
|
(1,325
|
)
|
$
|
51,414
|
|||||||||||||
Balance, December 31, 2019
|
9,022,187
|
$
|
25
|
$
|
5,037
|
$
|
(9,773
|
)
|
$
|
62,211
|
$
|
(1,081
|
)
|
$
|
56,419
|
|||||||||||||
Stock-based compensation expense
|
-
|
-
|
228
|
-
|
-
|
-
|
228
|
|||||||||||||||||||||
Issuance of restricted stock
|
20,804
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
(1,738
|
)
|
-
|
(1,738
|
)
|
|||||||||||||||||||
Foreign currency translation adjustments, net of tax
|
-
|
-
|
-
|
-
|
-
|
(346
|
)
|
(346
|
)
|
|||||||||||||||||||
Balance, March 31, 2020
|
9,042,991
|
25
|
$
|
5,265
|
$
|
(9,773
|
)
|
$
|
60,473
|
$
|
(1,427
|
)
|
$
|
54,563
|
(in thousands)
|
Three Months Ended March 31,
|
|||||||
2021
|
2020
|
|||||||
United States
|
$
|
18,752
|
$
|
15,333
|
||||
Canada
|
2,157
|
1,493
|
||||||
Spain
|
485
|
319
|
||||||
Net sales
|
$
|
21,394
|
$
|
17,145
|
(in thousands)
|
March 31, 2021
|
December 31, 2020
|
||||||
On hand:
|
||||||||
Finished goods held for sale
|
$
|
33,937
|
$
|
32,654
|
||||
Raw materials and work in process
|
831
|
828
|
||||||
Inventory in transit
|
4,123
|
3,297
|
||||||
TOTAL
|
$
|
38,891
|
$
|
36,779
|
•
|
Level 1 – observable inputs that reflect quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 – significant observable inputs other than quoted prices in active markets for similar assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are
not active; or other inputs that are observable or can be corroborated by observable market data.
|
•
|
Level 3 – significant unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.
|
(in thousands)
|
March 31, 2021
|
|||||||||||
Gross
|
Accumulated Amortization
|
Net
|
||||||||||
Trademarks/copyrights
|
$
|
554
|
$
|
548
|
$
|
6
|
||||||
TOTAL
|
$
|
554
|
$
|
548
|
$
|
6
|
December 31, 2020
|
||||||||||||
Gross
|
Accumulated Amortization
|
Net
|
||||||||||
Trademarks/copyrights
|
$
|
554
|
$
|
548
|
$
|
6
|
||||||
TOTAL
|
$
|
554
|
$
|
548
|
$
|
6
|
Shares
(in thousands) |
Weighted Average
Share Price |
|||||||
Balance, December 31, 2020
|
522
|
$
|
7.11
|
|||||
Granted
|
22
|
3.85
|
||||||
Forfeited
|
(11
|
)
|
3.53
|
|||||
Vested
|
(16
|
)
|
5.28
|
|||||
Balance, March 31, 2021
|
517
|
$
|
7.10
|
|||||
Balance, December 31, 2019
|
606
|
$
|
7.27
|
|||||
Granted
|
24
|
4.78
|
||||||
Vested
|
(19
|
)
|
6.61
|
|||||
Balance, March 31, 2020
|
611
|
$
|
7.20
|
(in thousands)
|
||||
2021
|
$
|
613
|
||
2022
|
780
|
|||
2023
|
534
|
|||
2024
|
21
|
|||
2025
|
3
|
|||
Unrecognized Expense
|
$
|
1,951
|
Item 2. |
◾
|
Accelerating implementation of our new web platform which supported a significantly improved consumer experience (look-and-feel, searchability, relevant content including video, and product and pricing
information) integration of inventory, shipping and other systems, and substantial reduction in the time, manual effort and need for outside resources to make additions and changes;
|
◾
|
Accelerating centralization of our web fulfillment activities to our Fort Worth warehouse which provided significant improvement in fulfillment rates and shipping times, and supported early product testing,
an increase in product breadth by offering online-only items that required limited inventory investment, and other inventory efficiencies;
|
◾
|
Shifting marketing resources from print and in-store activities to digital, with increased investments in SEO, SEM, email, digital advertising, social media, SMS/MMS, and affiliate links;
|
◾
|
Accelerating the retail employee training program in the areas of product knowledge, leathercrafting knowledge and selling tools while stores were closed;
|
◾
|
Continuing to drive the Commercial Program, through a dedicated team focused on the Company’s largest customers with a business model that meets these customers’ unique needs including dedicated sales
representatives, clear and competitive volume-based pricing, personalized service and sourcing, shipping directly to customers from our distribution center, and improved product consistency, quality and availability;
|
◾
|
Continuing to improve the quality and assortment of the product offering to better appeal to more advanced leather-crafters and business customers; and
|
◾
|
Continuing to build the organization, processes, infrastructure, tools and systems to efficiently execute these strategies.
|
(in thousands)
|
Three Months Ended March 31,
|
|||||||||||||||
2021
|
2020
|
$ Change
|
% Change
|
|||||||||||||
Sales
|
$
|
21,394
|
$
|
17,145
|
$
|
4,249
|
24.8
|
%
|
||||||||
Gross profit
|
12,186
|
9,866
|
2,320
|
23.5
|
%
|
|||||||||||
Gross margin percentage
|
57.0
|
%
|
57.5
|
%
|
(0.5
|
%)
|
||||||||||
Operating expenses
|
11,221
|
11,096
|
125
|
1.1
|
%
|
|||||||||||
Impairment expenses
|
-
|
1,069
|
(1,069
|
)
|
(100.0
|
%)
|
||||||||||
Income (loss) from operations
|
$
|
965
|
$
|
(2,299
|
)
|
$
|
3,264
|
(142.0
|
%)
|
(in thousands)
|
Three Months Ended March 31,
|
|||||||
2021
|
2020
|
|||||||
Operating expenses
|
$
|
11,221
|
$
|
11,096
|
||||
Non-routine items related to restatement
|
(707
|
)
|
(668
|
)
|
||||
Non-routine items related to CFO transition
|
-
|
(192
|
)
|
|||||
Adjusted operating expenses
|
$
|
10,514
|
$
|
10,236
|
||||
Operating expenses % of sales
|
52.4
|
%
|
64.7
|
%
|
||||
Adjusted Operating expenses % of sales
|
49.1
|
%
|
59.7
|
%
|
(in thousands)
|
Three Months Ended March 31,
|
|||||||
2021
|
2020
|
|||||||
Net cash provided by (used in) operating activities
|
$
|
2,205
|
$
|
(4,023
|
)
|
|||
Net cash used in investing activities
|
(116
|
)
|
(180
|
)
|
||||
Net cash used in financing activities
|
(1,678
|
)
|
-
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
21
|
(279
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
$
|
432
|
$
|
(4,482
|
)
|
Item 4. |
•
|
Inventory was not stated on a FIFO basis nor was it stated at the lower of FIFO cost or net realizable value;
|
•
|
Freight-in, warehousing and handling expenditures, factory labor and overhead and freight-out costs were not correctly capitalized;
|
•
|
Warehousing and handling expenditures were incorrectly classified as operating expenses;
|
•
|
Allowance for sales returns was incorrectly calculated and accounted for;
|
•
|
Net gift card liability was not correctly accounted for in 2017;
|
•
|
Lease asset and liability under ASC Topic 842 was incorrectly calculated;
|
•
|
PTO related accrued liabilities were incorrectly calculated;
|
•
|
Provision for income taxes, including adjustments related to the Tax Cuts and Jobs Act (the “Tax Act”), uncertain tax position (UTP) liability and related interest expense,
and correction of taxable income on the return of our Canada and Spain foreign subsidiaries; Foreign currency gains and losses associated with the Company’s Canadian subsidiary were incorrectly classified as a component of
accumulated other comprehensive loss and the cumulative translation adjustments included in accumulated other comprehensive loss were not tax effected; and
|
•
|
Shares repurchased and subsequently cancelled were incorrectly accounted for as treasury stock
|
i.
|
Hired a new, highly-qualified CFO in January 2021 with extensive public-company experience;
|
ii.
|
Replaced critical roles within our accounting team with contract accounting resources and ultimately (ongoing) full-time employees with expertise in GAAP accounting, SEC reporting and disclosure, internal
audit and internal controls;
|
iii.
|
Replaced our legacy accounting systems with an integrated enterprise resource planning (“ERP”) solution which includes general ledger, warehouse management and factory production modules designed to calculate
inventory on a FIFO basis;
|
iv.
|
Made improvements to our accounting close process, including a formalized accounting close checklist establishing accountability for oversight and review;
|
v.
|
Documented process narratives in the following areas: (i) financial reporting, (ii) inventory, (iii) purchasing and accounts payable, (iv) revenue, (v) fixed assets and lease accounting,
(vi) general accounting, treasury and financial planning & analysis, (vii) tax, (viii) information technology (IT) governance, and (ix) HR and payroll; and
|
vi.
|
Created a risk controls matrix which includes, among other things, a comprehensive list of key and mitigating controls, a description of the risk the control is designed to mitigate, the
individual responsible for each control, the frequency in which the control is performed, and a mapping of each control to the five COSO Framework components (control environment, risk assessment, control activities, information and
communication, or monitoring activities).
|
i.
|
Ongoing recruitment and hiring of permanent, qualified public-company accounting personnel;
|
ii.
|
Point-of-sale systems implementation that will be fully integrated with our new ERP system;
|
iii.
|
Redesigning our accounting procedures and activities to align with our new ERP system that will include built-in controls to improve upon the reliability of financial reporting and the preparation of
financial statements in accordance with GAAP;
|
iv.
|
Reporting the progress and results of our remediation plan to the Audit Committee on a recurring basis, including the identification, status, and resolution of internal control
deficiencies; and
|
v.
|
Creating a comprehensive approach to regularly evaluate the operating effectiveness of our disclosure controls and procedures and our internal control over financial reporting using the COSO Framework as a
guide.
|
◾
|
Recurring meetings with leadership, finance and accounting and other key functional areas to train staff on processes for oversight and emphasize each individual’s accountability for internal control
compliance, and to create a pattern of regular discussion of such controls.
|
◾
|
Periodic communications from the CEO, CFO and other key senior leaders on the Company’s mission, core values, Code of Business Conduct and Ethics, whistleblower policies, and each employee’s individual
responsibility for internal control compliance.
|
◾
|
Reorganization of the finance and accounting team to ensure appropriate segregation of duties, oversight and review of work, and recruiting and hiring qualified, competent employees with relevant experience
for the roles.
|
◾
|
Regular performance evaluations to include position-specific criteria for functional competence.
|
◾
|
New systems designed to calculate inventory at FIFO and create efficiency and accuracy through integration: we implemented the warehouse management, factory production system and general ledger systems
modules as part of our new ERP system implementation which went live on September 1, 2020. We are still in the process of implementing our new point-of-sale system, which will be fully integrated with our ERP system and with a phased
implementation across our fleet of stores throughout 2021.
|
◾
|
Creation and implementation of newly-designed processes, structures, delegation of authority and controls, in accordance with the COSO Framework, including:
|
o
|
The creation of a risk controls matrix;
|
o
|
Driving a greater sense of accountability by requiring sub-certifications below the CEO and CFO level for certain key accounting, finance and operations personnel;
|
o
|
Quarterly updates for the CFO regarding upcoming accounting pronouncement and proposed changes to GAAP accounting standards, tax regulations, and other requirements that may impact the Company’s financial
reporting;
|
o
|
Quarterly reviews of the most significant accounting estimates and judgements;
|
o
|
Validation of results through detailed variance analyses and reconciliation of account balances;
|
o
|
Monthly business review of actual financial performance compared to forecasts with participation from leadership across the organization; and
|
o
|
Establishing a disclosure committee comprised of key management throughout the different areas of the organization to evaluate the appropriateness of disclosures in the Company’s periodic filings on Forms
10-K and 10-Q and to support the CEO and CFO with the certification process.
|
Item 1. |
Item 1A. |
Item 2. |
ISSUER PURCHASES OF EQUITY SECURITIES
|
||||||||||||||||
Period (2)
|
(a) Total
number of
shares
purchased
(3)
|
(b)
Average
price paid
per share
|
(c) Total number of
shares purchased as
part of publicly
announced plans or
programs
|
(d) Maximum value
of shares that may
yet be purchased
under the plans or
programs (1)
|
||||||||||||
January 1 – January 31, 2021
|
—
|
—
|
—
|
$
|
5,000,000
|
|||||||||||
February 1 – February 28, 2021
|
500,000
|
$
|
3.35
|
—
|
5,000,000
|
|||||||||||
March 1 – March 31, 2021
|
—
|
—
|
—
|
5,000,000
|
||||||||||||
Total
|
500,000
|
$
|
3.35
|
—
|
(1)
|
Represents shares which may be purchased through our stock repurchase program, adopted by the Company’s Board of Directors on August 9, 2020, which established a new stock repurchase program allowing the Company to repurchase up to $5
million value of shares of our common stock on or prior to July 31, 2022.
|
(2)
|
The Company suspended repurchasing any shares under its program beginning in July 2019, because of the lack of publicly-available financial information of the Company during this period. Management expects
to resume the Company’s repurchase program (as conditions allow) with the completion of our financial restatement and our continued efforts to file all outstanding periodic filings with the SEC.
|
(3)
|
On January 28, 2021, we entered into an agreement with an institutional shareholder of the Company to repurchase 500,000 shares of our common stock in a private transaction separate from our share repurchase
program. The purchase price was $3.35 per share for a total of $1.7 million. The closing of the repurchase took place on February 1, 2021, and these shares were subsequently cancelled. Prior to the repurchase, the shares represented
approximately 5.5% of our outstanding common stock.
|
Item 6. |
Exhibit
Number
|
Description | |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
10.4 |
|
|
|
|
|
10.5 |
|
|
|
|
|
10.6 |
|
|
|
|
|
10.7 |
|
10.8
|
||
10.9
|
||
10.10
|
||
10.11
|
||
10.12
|
||
14.1
|
||
21.1
|
||
13a-14(a) or 15d-14(a) Certification by Janet Carr, Chief Executive Officer.
|
||
13a-14(a) or 15d-14(a) Certification by Michael Galvan, Chief Financial Officer.
|
||
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
||
*101.INS
|
XBRL Instance Document.
|
|
*101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
*101.CAL
|
XBRL Taxonomy Extension Calculation Document.
|
|
*101.DEF
|
XBRL Taxonomy Extension Definition Document.
|
|
*101.LAB
|
XBRL Taxonomy Extension Labels Document.
|
|
*101.PRE
|
XBRL Taxonomy Extension Presentation Document.
|
TANDY LEATHER FACTORY, INC.
|
||
(Registrant)
|
||
Date: September 21, 2021
|
By:
|
/s/ Janet Carr
|
Janet Carr
|
||
Chief Executive Officer
|
||
Date: September 21, 2021
|
By:
|
/s/ Michael Galvan
|
Michael Galvan
|
||
Chief Financial Officer
|
1 Year Tandy Leather Factory (PK) Chart |
1 Month Tandy Leather Factory (PK) Chart |
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