10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2006

Commission File Number 0-18927

TANDY BRANDS ACCESSORIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	75-2349915
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

690 East Lamar Boulevard, Suite 200, Arlington, TX 76011
(Address of principal executive offices and zip code)

817-548-0090
(Registrant’s telephone number, including area code)

Former name, former address and former fiscal year, if changed since last report:

Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

	Number of shares outstanding
Class	at May 11, 2006
Common stock, $1.00 par value	6,692,837

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Form 10-Q
Quarter Ended March 31, 2006

TABLE OF CONTENTS

		Page No.
PART I — FINANCIAL INFORMATION
Item
1.	Financial Statements		3 – 16
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17 – 22
3.	Quantitative and Qualitative Disclosures About Market Risk		23
4.	Controls and Procedures		23
PART II — OTHER INFORMATION
Item
2.	Unregistered Sales of Equity Securities and Use of Proceeds		23
6.	Exhibits		23
SIGNATURES			24
EXHIBIT INDEX			25-30
Certification Pursuant to Rule 13a-14(a)/15d-14(a) (Chief Executive Officer)
Certification Pursuant to Rule 13a-14(a)/15d-14(a) (Chief Financial Officer)
Section 1350 Certifications — CEO & CFO
Amendment to Credit Agreement
Amendments to the Employees Investment Plan
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Certification of Chief Executive Officer and Chief Financial Officer

2

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
File Number 0-18927
Form 10-Q

Condensed Consolidated Statements Of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)

	Three Months						Nine Months
	Ended						Ended
	March 31,						March 31,
	2006			2005			2006			2005
Net sales	$	45,414		$	43,905		$	180,228		$	178,368
Cost of goods sold		30,613			27,839			120,192			112,211
Provision for discontinued product line inventory		6,900			—			6,900			—
		37,513			27,839			127,092			112,211
Gross margin		7,901			16,066			53,136			66,157
Selling, general and administrative expenses		15,625			16,112			49,999			51,832
Depreciation and amortization		1,307			1,393			3,836			3,713
Goodwill impairment		—			—			938			—
Total operating expenses		16,932			17,505			54,773			55,545
Operating (loss) income		(9,031	)		(1,439	)		(1,637	)		10,612
Interest expense		(477	)		(313	)		(1,591	)		(971	)
Royalty and other income		42			41			139			208
(Loss) income before income taxes		(9,466	)		(1,711	)		(3,089	)		9,849
Income taxes (benefit)		(3,545	)		(714	)		(671	)		3,741
Net (loss) income	$	(5,921	)	$	(997	)	$	(2,418	)	$	6,108
(Loss) earnings per common share	$	(0.89	)	$	(0.16	)	$	(0.37	)	$	0.97
(Loss) earnings per common share assuming dilution	$	(0.89	)	$	(0.16	)	$	(0.37	)	$	0.93
Common shares outstanding		6,619			6,374			6,586			6,317
Common shares outstanding assuming dilution		6,619			6,374			6,586			6,570
Cash dividends declared per common share	$	0.0275		$	0.0275		$	0.0825		$	0.0825

The accompanying notes are an integral part of these condensed financial statements.

3

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
File Number 0-18927
Form 10-Q

Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)

	March 31,			June 30,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	1,918		$	3,429
Accounts receivable, net		33,367			31,437
Inventories:
Raw materials and work in process		6,273			6,125
Finished goods		60,380			61,856
Income taxes		6,824			4,229
Other current assets		2,984			2,359
Total current assets		111,746			109,435
Property and equipment, at cost		38,078			37,742
Accumulated depreciation		(25,243	)		(23,896	)
Net property and equipment		12,835			13,846
Other assets:
Goodwill		16,228			17,101
Other intangibles, less accumulated amortization		5,844			6,403
Supplemental Executive Retirement Plan		—			1,702
Other assets		1,909			2,275
Total other assets		23,981			27,481
	$	148,562		$	150,762
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,644		$	15,908
Accrued expenses		5,221			6,902
Total current liabilities		17,865			22,810
Other liabilities:
Notes payable		21,000			16,055
Deferred income taxes		2,323			2,086
Supplemental Executive Retirement Plan		1,051			2,926
Other noncurrent liabilities		988			1,455
Total other liabilities		25,362			22,522
Stockholders’ equity:
Preferred stock, $1 par value, 1,000,000 shares authorized, none issued		—			—
Common stock, $1 par value, 10,000,000 shares authorized, 6,683,879 shares and 6,573,166 shares issued and outstanding as of March 31, 2006 and June 30, 2005, respectively		6,684			6,573
Additional paid-in capital		31,606			29,597
Cumulative other comprehensive income		659			77
Shares held by Benefit Restoration Plan Trust		(806	)		(981	)
Retained earnings		67,192			70,164
Total stockholders’ equity		105,335			105,430
	$	148,562		$	150,762

The accompanying notes are an integral part of these condensed financial statements.

4

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
File Number 0-18927
Form 10-Q

Condensed Consolidated Statements Of Cash Flows
(Dollars in thousands)
(Unaudited)

	Nine Months Ended
	March 31,
	2006			2005
Cash flows used for operating activities:
Net (loss) income	$	(2,418	)	$	6,108
Adjustments to reconcile net (loss) income to net cash used for operating activities:
Provision for discontinued product line inventory		6,900			—
Depreciation and amortization		4,002			3,834
Amortization of debt origination costs		102			87
Excess income tax benefit from stock option exercises		(71	)		—
Deferred income taxes		(172	)		404
Stock compensation expense		724			—
Goodwill impairment		938			—
Other		(157	)		(773	)
Change in assets and liabilities:
Accounts receivable		(1,930	)		(4,813	)
Inventories		(5,572	)		(3,862	)
Other assets		(1,951	)		(478	)
Accounts payable		(3,264	)		(2,805	)
Accrued expenses		(2,078	)		17
Net cash used for operating activities		(4,947	)		(2,281	)
Cash flows used for investing activities:
Purchases of property and equipment		(2,355	)		(2,806	)
Purchase of Superior Merchandise Company		—			(10,000	)
Net cash used for investing activities		(2,355	)		(12,806	)
Cash flows from financing activities:
Sale of stock to stock purchase program		969			1,219
Exercise of stock options		357			725
Excess income tax benefit from stock option exercises		71			—
Payment of dividends		(551	)		(512	)
Proceeds from borrowings net of repayments		4,945			9,765
Net cash provided by financing activities		5,791			11,197
Net decrease in cash and cash equivalents		(1,511	)		(3,890	)
Cash and cash equivalents at beginning of year		3,429			6,086
Cash and cash equivalents at end of period	$	1,918		$	2,196
Supplemental cash flow information:
Interest paid	$	1,411		$	803
Income taxes paid		1,675			3,190

The accompanying notes are an integral part of these condensed financial statements.

5

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 1 — Accounting Principles

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals, the provision for discontinued product line inventory, and the goodwill impairment described in Note 6) considered necessary for a fair presentation have been included. Our first and second quarter sales and net income normally reflect a seasonal increase compared to the third and fourth quarters of our fiscal year. Consequently, operating results for the three-month and nine-month periods ended March 31, 2006 are not necessarily indicative of the results that may be expected for the year ended June 30, 2006. The consolidated balance sheet at June 30, 2005 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in our 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

     Preparation of our financial statements requires the use of estimates that affect the reported value of assets, liabilities, revenues, and expenses. These estimates are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for our conclusions. We continually evaluate the information used to make these estimates as the business and economic environment changes. Actual results may differ from these estimates under different assumptions or conditions.

Note 2 — Impact Of New Accounting Standards

     On December 16, 2004 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” effective for most publicly-owned companies for annual periods beginning after June 15, 2005. This Statement requires companies to record compensation expense for all share-based payments, such as employee stock options, at fair value. We adopted this Statement on July 1, 2005 for fiscal 2006. The Statement permits adoption of its requirements using one of two methods. The “modified prospective” method requires compensation cost to be recognized for all share-based payments granted after the effective date and for all awards granted prior to the effective date that remain unvested as of the effective date. The other method is the “modified retrospective” method, which includes the requirements of the “modified prospective” method, but also permits companies to restate prior years’ income based on amounts previously recognized in the pro forma disclosures under SFAS No. 123 for all prior periods presented.

     In addition, SFAS No. 123R requires the benefits of tax deductions in excess of recognized compensation cost to be reported in the Statement of Cash Flows as a financing cash flow rather than an operating cash flow as previously reported. This results in reduced operating cash flows for any quarter in which stock options are exercised.

     We may, with the approval of our board of directors, grant stock options for a fixed number of shares to employees with an exercise price equal to the market value of the shares at the date of grant. Prior to July 1, 2005 we accounted for stock option grants using the intrinsic value method in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and recognized no compensation expense for the stock option grants.

6

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 2 — Impact Of New Accounting Standards (continued)

     The following table presents the pro forma impact on fiscal 2005 if we had applied the fair value recognition provisions of SFAS No. 123 to share-based compensation (in thousands, except per share amounts).

	Three Months				Nine Months
	Ended				Ended
	March 31, 2005				March 31, 2005
Net (loss) income:
As reported		$	(997	)		$	6,108
Add share-based compensation expense recognized, net of tax			58				141
As adjusted			(939	)			6,249
Less compensation expense per SFAS No. 123, net of tax			(120	)			(358	)
Pro forma		$	(1,059	)		$	5,891
(Loss) earnings per share:
As reported		$	(0.16	)		$	0.97
Pro forma		$	(0.17	)		$	0.93
(Loss) earnings per share assuming dilution:
As reported		$	(0.16	)		$	0.93
Pro forma		$	(0.17	)		$	0.90

     The pro forma information has been determined as if we had accounted for our stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for fiscal 2005: dividend yield of 1.0%; expected volatility of 0.388%; risk-free interest rate of 3.25%; and expected holding period of five years. Using these assumptions for the options granted during the first nine months of fiscal 2005, the weighted-average fair value of such options on the date of grant was $4.78 per share.

     The Black-Scholes valuation models are used in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and the average life of options. Because our stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in our opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our stock options.

     Effective July 1, 2005 we adopted the fair value recognition provisions of SFAS No. 123R using the “modified prospective” method. Under that transition method, we have recorded compensation expense for (i) all share-based grants awarded prior to, but not yet vested as of July 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123, and (ii) all share-based grants awarded subsequent to June 30, 2005 based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. Results for prior periods have not been restated.

7

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 2 — Impact Of New Accounting Standards (continued)

     As a result of adopting SFAS No. 123R on July 1, 2005, our loss before income taxes and net loss for the quarter ended March 31, 2006 are $144,000 and $90,000 greater, respectively, ($0.01 per basic and diluted share) than if we had continued to account for share-based compensation under APB No. 25. For the nine months ended March 31, 2006 our loss before income taxes and net loss are $409,000 and $282,000 greater, respectively, ($0.04 per basic and diluted share).

     Prior to our adoption of SFAS No. 123R we presented the tax benefits of deductions related to the exercise of stock options as operating cash flows in our Consolidated Statement of Cash Flows. Under the provisions of SFAS No. 123R we are required to present the cash flows resulting from tax benefits related to tax deductions in excess of compensation cost recognized for those options as financing cash flows. The $71,000 tax benefit classified as a financing cash inflow would have been classified under operating cash flows if we had not adopted SFAS No. 123R.

     Our officers and key management employees are eligible to receive options to purchase shares of our common stock under the Tandy Brands Accessories, Inc. 2002 Omnibus Plan (the “Omnibus Plan”). In addition, many of our officers and key management employees have received options under our prior stock option plans. All options are granted at the market price as of the date of grant and have a contractual life of ten years. Options are generally exercisable annually at a rate of one-third per year beginning one year after the grant date with expense recognized on the straight line basis.

     The following table presents employee stock option activity from June 30, 2005 to March 31, 2006.

				Weighted-Average			Aggregate
						Remaining	Intrinsic
	Number			Exercise		Contractual	Value
	of Shares			Price		Term	($000)
Outstanding at June 30, 2005		790,075		$	12.20
Granted		76,426		$	10.56
Exercised		(43,668	)	$	6.96		$	168
Canceled or expired		(201,759	)	$	13.70
Outstanding at March 31, 2006		621,074		$	11.88
Vested or expected to vest		587,197		$	11.88	5.7 Years	$	441
Exercisable at March 31, 2006		440,974		$	11.86	4.8 Years	$	441

     During the quarter ended March 31, 2006, 4,000 options were granted and no options vested or were exercised. The weighted-average grant-date fair value of employee options granted during the nine months ended March 31, 2006 was $3.88 per share. The total fair value of employee options vested during the nine-month period was $693,000. During the nine months ended March 31, 2006, cash in the amount of $304,000 was received from the exercise of options with exercise prices ranging from $5.63 to $8.13 per share.

8

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 2 — Impact Of New Accounting Standards (continued)

     The following table segregates outstanding employee options which are expected to vest and that are exercisable into groups based on price ranges of less than or greater than $10 per share as of March 31, 2006.

	$5.63 - $8.13		$10.45 - $17.56
Vested or expected to vest:
Number of shares		124,559		462,638
Weighted-average exercise price	$	6.76	$	13.26
Weighted-average remaining contractual life	4.1 years		6.1 years
Intrinsic value	$	441,000	$	—
Exercisable:
Number of shares		124,559		316,415
Weighted-average exercise price	$	6.76	$	13.86
Weighted-average remaining contractual life	4.1 years		5.0 years
Intrinsic value	$	441,000	$	—

     The following table presents employee nonvested stock option activity from June 30, 2005 to March 31, 2006.

				Weighted-Average
	Number			Grant-Date
	of Shares			Fair Value
Nonvested at June 30, 2005		288,648			$	4.74
Granted		76,426			$	3.88
Vested		(145,635	)		$	4.76
Canceled		(39,339	)		$	4.65
Nonvested at March 31, 2006		180,100			$	4.38

     On July 1, 2005 our executive officers were awarded stock options to purchase a total of 34,915 shares of our common stock and other key employees were awarded stock options to purchase a total of 37,511 shares. Compensation expense of $115,000 and $344,000 related to options granted in fiscal 2006 and options awarded during prior fiscal years but not fully vested as of July 1, 2005 was recorded during the quarter and nine months ended March 31, 2006, respectively. Tax benefits of $43,000 and $107,000 were also recorded for the quarter and nine months, respectively. Compensation expense of $470,000 remains to be recognized over the weighted-average period of 1.8 years.

     The fair value of options granted during fiscal 2006 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 1.0%; expected volatility of 0.39%; risk-free interest rates of 4.00% and 4.59%; and, expected holding period of five years. Expected volatility was calculated using historical volatility over the past five years. Estimated forfeiture rates of 16% and 22% were used for officers and employees, respectively, based on historical experience. No compensation cost was capitalized as part of an asset. Determining the fair value of share-based awards at the grant date requires judgment, including estimating expected dividends and the number of share-based awards that are expected to be forfeited.

9

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 2 — Impact Of New Accounting Standards (continued)

     On July 1, 2005 our executive officers were awarded a total of 21,088 shares of restricted stock which will become fully vested on July 1, 2008. Other key employees were awarded a total of 22,659 shares of restricted stock on July 1, 2005 which will also become fully vested on July 1, 2008. These shares of stock, while not transferable, bear rights of ownership, including voting and dividend rights, during the three-year vesting period. There are no performance requirements related to vesting, only continued employment through the vesting date. Compensation expense of $75,000 and $225,000 related to these restricted shares and the restricted shares awarded on July 1 of 2003 and 2004 was recorded during the quarter and nine-month periods ended March 31, 2006, respectively. Tax benefits of $28,000 and $84,000 were also recorded for the quarter and nine months, respectively. As of March 31, 2006 the total compensation cost related to restricted stock not yet expensed was $459,000, which is expected to be recognized over a weighted average period of two years. All restricted stock awarded to employees “cliff” vests on the three-year anniversary of the award. No shares vested during the nine-month period ended March 31, 2006.

     The following table presents nonvested employee restricted stock activity from June 30, 2005 to March 31, 2006.

			Weighted-Average
	Number		Grant-Date
	of Shares		Fair Value
Nonvested shares at June 30, 2005		34,400	$	12.66
Grants as of July 1, 2005:
To officers		21,088	$	10.57
To others		22,659	$	10.57
Nonvested shares at March 31, 2006		78,147	$	11.49

     Our non-employee directors are also eligible for awards under the Omnibus Plan. The Omnibus Plan provides that, when a non-employee director is first elected or appointed to the Board, the director will be granted a non-qualified stock option to purchase 3,500 shares of our common stock or, if the Board so elects, an alternative form of award, other than an incentive stock option, with a substantially equivalent value. The Omnibus Plan also provides that concurrently with each regular annual election of the Board of Directors, each continuing non-employee director, other than our Chairman, will receive a non-qualified stock option to purchase 2,500 shares of our common stock and our Chairman will receive a non-qualified stock option to purchase 4,425 shares of our common stock. If the Board so elects, non-employee directors and our Chairman may receive an alternative form of award, other than an incentive stock option, with a substantially equivalent value.

10

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 2 — Impact Of New Accounting Standards (continued)

     The following table presents non-employee directors stock option activity from June 30, 2005 to March 31, 2006.

				Weighted-Average			Aggregate
						Remaining	Intrinsic
	Number			Exercise		Contractual	Value
	of Shares			Price		Term	($000)
Outstanding at June 30, 2005		129,387		$	10.24
Granted		14,000		$	11.70
Exercised		(6,578	)	$	8.13		$	23
Canceled or expired		(750	)	$	17.75
Outstanding at March 31, 2006		136,059		$	10.45
Vested or expected to vest		136,059		$	10.45	5.5 Years	$	219
Exercisable at March 31, 2006		122,059		$	10.31	5.1 Years	$	219

     The non-employee members of our board of directors were awarded options to purchase a total of 14,000 shares of our common stock at an exercise price of $11.70 per share on October 18, 2005. Using the Black-Scholes option-pricing model and the same assumptions used to determine the fair value of options granted to executive officers and employees, the weighted-average grant-date fair value of options granted to non-employee directors during the nine months ended March 31, 2006 was $4.30 per share. Compensation expense of $29,000 and $65,000 related to these options was recorded during the quarter and nine months ended March 31, 2006 together with tax benefits of $11,000 and $20,000, respectively. Compensation expense of $5,000 remains to be recognized in the current fiscal year. These stock options will become fully vested six months after the date of grant. Due to the six-month vesting period, all director options are expected to vest. The total fair value of non-employee director options vested during the nine-month period was $18,000.

     The following table segregates outstanding non-employee director stock options which are expected to vest and that are exercisable into groups based on price ranges of less than or greater than $10 per share as of March 31, 2006.

	$6.09 - $9.23		$10.00 - $15.75
Vested or expected to vest:
Number of shares		68,999		67,060
Weighted-average exercise price	$	7.12	$	13.88
Weighted-average remaining contractual life	4.9 years		6.3 years
Intrinsic value	$	219,000	$	—
Exercisable:
Number of shares		68,999		53,060
Weighted-average exercise price	$	7.12	$	14.45
Weighted-average remaining contractual life	4.9 years		5.4 years
Intrinsic value	$	219,000	$	—

11

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 2 — Impact Of New Accounting Standards (continued)

     The following table presents non-employee directors nonvested stock option activity from June 30, 2005 to March 31, 2006.

				Weighted-Average
	Number			Grant-Date
	of Shares			Fair Value
Nonvested at June 30, 2005		3,500		$	5.21
Granted		14,000		$	4.30
Vested		(3,500	)	$	5.21
Nonvested at March 31, 2006		14,000		$	4.30

     Our non-employee directors are also eligible to receive restricted stock. On October 18, 2005 a total of 7,700 shares of restricted stock were awarded to the non-employee directors. As of March 31, 2006 a total of 20,790 shares of restricted stock had been awarded to our non-employee directors at a weighted-average price of $13.56 per share. One-third of restricted shares vest on the anniversary date of each grant. However, upon the death, disability, resignation, or termination of a director, that director’s shares become fully vested. As a result such grants are expensed when awarded as there is no requisite service period. Compensation expense of $90,000 was recorded during the nine months ended March 31, 2006 together with a tax benefit of $34,000. These shares of stock, while not transferable, bear rights of ownership, including voting and dividend rights, during the vesting period.

     The following table presents non-employee director’s restricted stock activity from June 30, 2005 to March 31, 2006.

				Weighted-Average
	Number			Grant-Date
	of Shares			Fair Value
Nonvested shares at June 30, 2005		11,420		$	14.51
Grants as of October 18, 2005		7,700		$	11.70
Vested		(4,148	)	$	14.60
Nonvested shares at March 31, 2006		14,972		$	13.04

     Under the Omnibus Plan 418,499 shares of common stock were available for option grants and restricted stock awards at March 31, 2006. We issue new shares to satisfy stock option exercises and restricted stock awards.

12

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 3 — Comprehensive Income (Loss)

     The following table presents the components of comprehensive income (loss), net of related tax (in thousands).

	Three Months						Nine Months
	Ended						Ended
	March 31,						March 31,
	2006			2005			2006			2005
Net (loss) income	$	(5,921	)	$	(997	)	$	(2,418	)	$	6,108
Foreign currency translation adjustments		(21	)		(52	)		313			540
Decrease in minimum pension liability		—			—			269			—
Comprehensive (loss) income	$	(5,942	)	$	(1,049	)	$	(1,836	)	$	6,648

Note 4 — Earnings (Loss) Per Share

     The following table presents the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts).

	Three Months						Nine Months
	Ended						Ended
	March 31,						March 31,
	2006			2005			2006			2005
Numerator for basic and diluted earnings (loss) per share:
Net (loss) income	$	(5,921	)	$	(997	)	$	(2,418	)	$	6,108
Denominator:
Weighted average shares outstanding		6,595			6,354			6,563			6,295
Contingently issuable shares		24			20			23			22
Denominator for basic earnings (loss) per share		6,619			6,374			6,586			6,317
Effect of dilutive securities:
Employee stock options and other		—			—			—			225
Director stock options		—			—			—			28
Potential dilutive shares		—			—			—			253
Denominator for diluted earnings (loss) per share		6,619			6,374			6,586			6,570
(Loss) earnings per common share	$	(0.89	)	$	(0.16	)	$	(0.37	)	$	0.97
(Loss) earnings per common share assuming dilution	$	(0.89	)	$	(0.16	)	$	(0.37	)	$	0.93

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 5 — Disclosures About Segments Of An Enterprise And Related Information

     We sell our products to a variety of retail outlets, including mass merchants, national chain stores, major department stores, men’s and women’s specialty stores, catalog retailers, grocery stores, drug stores, golf pro shops, sporting goods stores, and the retail exchange operations of the United States military. We and our corresponding customer relationships are organized along men’s and women’s product lines. As a result we have two reportable segments: (1) men’s accessories, consisting of belts, wallets and other small leather goods, neckwear, gifts, and sporting goods; and (2) women’s accessories, consisting of belts, small leather goods, handbags, and gift accessories. General corporate expenses are allocated to each segment based on the respective segment’s asset base. Depreciation and amortization expense related to assets recorded in our corporate accounting records are allocated to each segment as described above. Management measures each segment based upon income or loss before income taxes utilizing accounting policies consistent in all material respects with those described in Note 1 of our 2005 Annual Report. No inter-segment revenue is recorded.

     The following table presents operations and asset information by reportable segment (in thousands).

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2006			2005			2006			2005
Net sales to external customers:
Men’s accessories	$	26,052		$	25,910		$	107,048		$	106,271
Women’s accessories		19,362			17,995			73,180			72,097
	$	45,414		$	43,905		$	180,228		$	178,368
Operating (loss) income (1):
Men’s accessories	$	(525	)	$	79		$	7,713		$	10,196
Women’s accessories (2)		(8,506	)		(1,518	)		(9,350	)		416
		(9,031	)		(1,439	)		(1,637	)		10,612
Interest expense		(477	)		(313	)		(1,591	)		(971	)
Other income (3)		42			41			139			208
(Loss) income before income taxes	$	(9,466	)	$	(1,711	)	$	(3,089	)	$	9,849
Depreciation and amortization:
Men’s accessories	$	837		$	890		$	2,441		$	2,271
Women’s accessories		470			503			1,395			1,442
	$	1,307		$	1,393		$	3,836		$	3,713
Capital expenditures:
Men’s accessories	$	95		$	135		$	344		$	388
Women’s accessories		88			41			272			349
Corporate		262			573			1,739			2,069
	$	445		$	749		$	2,355		$	2,806

(1)	Operating (loss) income consists of net sales less cost of goods sold and specifically identifiable and allocated selling, general and administrative expenses.
(2)	Women’s accessories fiscal 2006 operating loss includes a $7.1 million restructuring charge for discontinued product line inventory and severance payments in the third quarter and a $938,000 charge for goodwill impairment in the second quarter.
(3)	Other income includes royalty income on corporate trade names and other income not specifically identifiable with a segment.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 6 — Restructuring, Goodwill Impairment And Effective Income Tax Rate

     Our women’s segment recorded a $6.9 million provision for discontinued product line inventory and incurred additional general and administrative payroll expenses of approximately $200,000 in the third quarter of fiscal 2006 and a $938,000 goodwill impairment charge in the second quarter.

     The $7.1 million in restructuring charges incurred to date resulted from a study during the quarter ended March 31, 2006 that concluded the women’s segment product offerings should be focused on its core competencies: women’s and children’s belts, small leather goods, handbags, and gift accessories. Consequently, other products and packaging were written down to our best estimate of the market value that we expect will be realized based on our experiences in selling through inventory liquidation channels and discussions with potential purchasers; however, amounts actually realized may differ from our estimates and such differences could have a material impact on our future results of operations, operating cash flows, and financial position.

     As part of the restructuring 33 positions in our women’s Dallas distribution facility were eliminated. Also our distribution facilities will be reconfigured requiring estimated fourth quarter expenditures of $118,000 to relocate inventories and $254,000 for additional warehouse racking and forklifts.

     The goodwill impairment charge was the result of assessing the fair value of the segment which was determined to be less than its carrying value. The assessment was triggered by changing business conditions for women’s mass merchant sales.

     The primary differences between the 34% federal statutory tax rate and the income tax benefit of 21.7% of the pretax loss for the nine months ended March 31, 2006 are 5.7% for the goodwill impairment charge that is not deductible for income tax purposes and 3.7% for state income taxes based on subsidiaries’ earnings that are not offset by the inventory write down.

Note 7 — Employee Benefit Plans

     On September 2, 2005 the Supplemental Executive Retirement Plan (the “SERP”) was terminated. As of the effective date of the termination only one officer was an actively employed participant in the SERP. On August 19, 2005 we entered into an agreement with that officer to waive his right to benefits which he had accrued under the SERP. Under the agreement the officer will receive (i) the balance (approximately $765,000) remaining in the rabbi trust established by us for the purpose of setting aside amounts to assist in satisfying our obligation under the SERP (the “trust”) as of the effective date of the termination of the SERP, plus (ii) beginning with the 2006 fiscal year, and continuing until June 30, 2008, an additional $330,593 which will be accrued if the officer remains employed by us on the last day of each such fiscal year. The funds remaining in the trust, as well as additional contributions to the trust, will continue to be invested under the terms of the trust. Any amounts that are not contributed to the trust, but are accrued, will accrue interest at an annual rate equal to our cost of borrowing. The officer may elect payment of benefits either as a lump sum payment after his retirement or a designated number of annual payments after that date. During the quarter and nine months ended March 31, 2006 we recorded expense of $83,000 and $248,000, respectively, related to this agreement.

     During the three months ended March 31, 2006 we recorded income of $119,000 related to our Benefit Restoration Plan for certain of our key executive officers due to a decline in the market value of our common stock. The expense arising from market value increases during the first half of the fiscal year resulted in a net of $38,000 in income being recorded for the nine months. Mark-to-market adjustments are recorded each quarter based on the value of our common stock on the last day of the quarter.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 8 — Credit Facility

     We currently have an $85,000,000 unsecured credit facility. The credit facility may be used for borrowings and letters of credit and requires the maintenance of certain financial covenants, which, if not met, could adversely impact our liquidity.

     During the quarter ended September 30, 2005 we were in violation of the funded indebtedness to EBITDA ratio and EBITDA to fixed charge ratio covenants of our credit facility. Shipping delays throughout the supply chain related to hurricane Katrina as well as an increase in sales of lower margin direct sales goods and nonrecurring legal and restructuring expenses incurred during the prior twelve months resulted in an EBITDA shortfall thereby causing us to breach such covenants in our credit facility. We believe that had the shipping delays not occurred in the first quarter, we would have been in compliance with the covenants under our credit facility. Our lenders agreed to an amendment to the credit facility to adjust certain financial covenant requirements. This fourth amendment to our credit facility, entered into on October 20, 2005 and effective as of September 30, 2005, among other things established applicable commitment fee percentages and applicable margins for LIBOR based borrowings at higher ratios of funded indebtedness to EBITDA.

     As a consequence of the $7.1 million charge in connection with restructuring of our women’s segment, we were in violation of certain covenants of the credit facility at March 31, 2006. Our lenders agreed to amend our credit facility to adjust certain financial covenant requirements. The fifth amendment, entered into on April 19, 2006 and effective as of March 31, 2006, among other things (i) increased the applicable margins for LIBOR based borrowings, (ii) amended the definition of EBITDA to exclude (a) up to $1.5 million in noncash goodwill or intangibles impairment charges during any four quarters and (b) a one-time charge of up to $9 million attributable to women’s segment inventory write-off, severance pay and related benefits, and men’s and women’s packaging inventory write-offs related to relocation of product lines, (iii) amended the definition of fixed charges to (a) include all payments related to the redemption, retirement, acquisition, or prepayment of capital stock or other equity interest, and (b) exclude revolving credit loan implied principal payments, and (iv) lowered permitted acquisitions to $10 million.

     Based on internal projections we anticipate compliance with all covenants related to the credit facility for the next twelve months. For the quarter ended March 31, 2006 we were in compliance with all debt covenants as amended.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

ITEM 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

OVERVIEW

     Tandy Brands Accessories, Inc. is a leading designer, manufacturer and marketer of branded men’s and women’s accessories, including belts and small leather goods, such as wallets. Our product line also includes handbags, sporting goods, neckwear, and gift accessories. Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names including DOCKERS^®, LEVI’S^®, LEVI STRAUSS SIGNATURE™, JONES NEW YORK^®, TOTES^®, ROLFS^®, HAGGAR^®, WOOLRICH^®, JORDACHE^®, CANTERBURY^®, PRINCE GARDNER^®, PRINCESS GARDNER^®, AMITY^®, COLETTA^®, STAGG^®, ACCESSORY DESIGN GROUP^®, TIGER^® and ETON^®, as well as private brands for major retail customers. We sell our products through all major retail distribution channels throughout the United States and Canada, including mass merchants, national chain stores, department stores, men’s and women’s specialty stores, catalog retailers, grocery stores, drug stores, golf pro shops, sporting goods stores, and the retail exchange operations of the United States military.

     Operating results for the third quarter of fiscal 2006 were impacted by several factors, including:

• A $6.9 million provision to write down inventory and packaging costs as the result of a decision to discontinue several specific women’s segment product lines that were no longer considered profitable;

• Approximately $200,000 in payroll costs related to staff reductions stemming from restructuring in the women’s segment; and

• Approximately $3 million fewer sales by the men’s segment due to a major customer’s decision to reduce its inventories.

     On April 26, 2006 we announced a dividend of $.0275 per share payable to stockholders of record as of June 30, 2006. This, our twelfth consecutive quarterly dividend, will be paid on July 20, 2006.

RESTRUCTURE OF WOMEN’S SEGMENT

     During the quarter ended March 31, 2006 we evaluated the level of contribution from each of our women’s product lines in order to improve operating performance. As a result we made the decision to exit from several women’s categories that were no longer profitable. Based on the findings of the study:

• The women’s segment will focus on our core competencies of women’s and children’s belts, small leather goods, handbags and gift accessories;

• All other product categories in the women’s segment, including socks, cold weather accessories, fashion scarves, evening bags, and children’s accessories (excluding belts), will be discontinued immediately, except for fulfilling current orders and programs;

• A $6.9 million provision was recorded in the third quarter ended March 31, 2006 to write down inventory and packaging to our best estimate of the market value that we expect will be realized; and

• Thirty-three positions in our women’s Dallas distribution facility were eliminated in the discontinued product areas resulting in one-time payroll costs of approximately $200,000 in the third quarter.

     The decision to exit several of the women’s segment product lines is expected to reduce our fiscal 2007 revenues by $30 million; however, we anticipate it will improve our margin performance, lower general and administrative expenses, and improve overall profitability going forward. As part of the restructuring our distribution facilities will be reconfigured requiring estimated fourth quarter expenditures of $118,000 to relocate inventories and $254,000 for additional warehouse racking and forklifts.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

2006 COMPARED TO 2005

Net Sales And Gross Margins

     The following table presents sales and gross margin data for our reportable segments (in thousands of dollars).

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2006			2005			2006			2005
Net sales:
Men’s accessories	$	26,052		$	25,910		$	107,048		$	106,271
Women’s accessories		19,362			17,995			73,180			72,097
	$	45,414		$	43,905		$	180,228		$	178,368
Gross margin:
Men’s accessories	$	9,604		$	10,027		$	40,640		$	42,844
Women’s accessories (1)		(1,703	)		6,039			12,496			23,313
	$	7,901		$	16,066		$	53,136		$	66,157
Gross margin as a percentage of sales:
Men’s accessories		36.9	%		38.7	%		38.0	%		40.3	%
Women’s accessories		-8.8	%		33.6	%		17.1	%		32.3	%
Total		17.4	%		36.6	%		29.5	%		37.1	%

(1) Gross margin for the quarter and nine months ended March 31, 2006 was reduced by a $6.9 million provision for discontinued product line inventory.

     For the three-month period ended March 31, 2006 net sales increased by $1,509,000, or 3.4%, compared to the same period in the prior year. Net sales of men’s accessories, which had been expected to be approximately $3 million greater, only increased by $142,000, or 0.6%, for the quarter compared to the same period last year because of a major customer’s decision to reduce its company-wide inventories. Net sales of women’s accessories were $1,367,000, or 7.6%, greater for the quarter ended March 31, 2006 compared to the prior year primarily from increased sales of belts and small leather goods.

     For the nine-month period ended March 31, 2006 net sales of men’s accessories were up $777,000, or 0.7%, compared to the same period in the prior year due to increased sales of gift accessories in the second quarter and the expansion of our neckwear business. These gains were partly offset by weather-related shipping delays and the effects of longer factory inspection times. For the nine months ended March 31, 2006 sales of our women’s accessories were $1,083,000, or 1.5%, greater than the prior year as competitive market pressures and weakened fashion accessory trends in the first half of the year offset the third quarter gains.

     The 17.4% gross margin for the three-month period ended March 31, 2006 was lower than the same period in the prior year by 15.2 percentage points as the result of the provision for discontinued product line inventory and 4 percentage points caused by other factors. The 1.8 percentage point decline in the men’s segment was attributable to more direct shipments of small leather goods which typically have lower margins. The women’s segment gross margin was impacted 35.7 percentage points by the inventory write-off and 6.7 percentage points from the effects of mass merchant sales at lower than normal margins in order to reduce excess inventory.

     Direct shipments have lower than average gross margins because these goods are shipped from our suppliers to our customers and are not handled in our distribution centers, thereby reducing the general and administrative costs related to the sales. Any material changes in sales mix, such as higher mass merchant accessory sales or direct shipments, could lower our gross margin percentages during a particular season.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

2006 COMPARED TO 2005 (continued)

Operating Expenses

     The following table presents expense data for our reportable segments (in thousands).

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2006		2005		2006		2005
Selling, general and administrative expense:
Men’s accessories	$	9,292	$	9,058	$	30,486	$	30,094
Women’s accessories		6,333		7,054		19,513		21,738
	$	15,625	$	16,112	$	49,999	$	51,832
Depreciation and amortization expense:
Men’s accessories	$	837	$	890	$	2,441	$	2,271
Women’s accessories		470		503		1,395		1,442
	$	1,307	$	1,393	$	3,836	$	3,713
Interest expense	$	477	$	313	$	1,591	$	971

     Selling, general and administrative expenses (“SG&A”) for the three-month and nine-month periods ended March 31, 2006 include share-based compensation of $144,000 and $409,000, respectively, due to our adoption of SFAS No. 123R on July 1, 2005 and payroll expenses of approximately $200,000 related to the third quarter restructuring of our women’s segment. Without these expenses, SG&A for the three-month and nine-month periods ended March 31, 2006 would have been $831,000, or 5.2%, and $2,442,000, or 4.7%, respectively, lower than the same periods last year. The lower costs relate to reduced expenses in our women’s segment due to consolidation of its mass merchant and department store businesses, as well as reduced legal, advertising, and travel expenses. SG&A expenses for our men’s segment increased $234,000 and $392,000 for the quarter and nine months, respectively, as higher distribution costs offset payroll, contract labor, and advertising savings.

     Depreciation and amortization expense, while slightly lower in the third quarter because of asset retirements, increased for the nine months compared to the same period the previous year primarily due to the addition of a module for our enterprise software, computer hardware purchases, and additions to the distribution software system in our Yoakum, Texas facility.

     Interest expense for the three and nine months ended March 31, 2006 increased $164,000 and $620,000, respectively, compared to the same periods in the previous year primarily due to increasing interest rates and additional loan fees in connection with the credit facility amendments, as well as higher debt levels in the first six months related to inventory purchases for the holiday season.

     A $938,000 goodwill impairment charge to the operating expenses of our women’s segment was recorded in the second quarter as a result of assessing the fair value of the segment which was determined to be less than its carrying value. The assessment was triggered by changing business conditions for women’s mass merchant sales. The impaired goodwill arose from the stock purchase of Accessory Design Group in April 1992.

     The effective income tax rates for the three and nine months ended March 31, 2006 were 37.4% and 21.7%, respectively. The primary differences between the 34% federal statutory tax rate and the income tax benefit of 21.7% of the pretax loss for the nine months ended March 31, 2006 are 5.7% for the goodwill impairment charge that is not deductible for income tax purposes and 3.7% for state income taxes based on subsidiaries’ earnings that are not offset by the inventory write down.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

2006 COMPARED TO 2005 (continued)

Summary

     The net loss for the three months ended March 31, 2006 was $5,921,000, or $0.89 per diluted share, compared to a loss of $997,000, or $0.16 per diluted share, for the same quarter last year. For the nine months ended March 31, 2006 the net loss was $2,418,000, or $0.37 per diluted share, compared to net income of $6,108,000, or $0.93 per diluted share, for the same period in the prior year.

LIQUIDITY AND CAPITAL RESOURCES

     For the nine months ended March 31, 2006 our operating activities used cash of $4,947,000, including the purchase of a $1,028,000 short-term investment included in other current assets, compared to $2,281,000 in the same period the previous year. This change is primarily due to increased inventory procurement. An increase in accounts receivable was offset by refundable income taxes arising from the current period loss. Also included in operating activities is a $71,000 use of cash related to the income tax benefits from the exercise of stock options now reported as financing proceeds in accordance with SFAS No. 123R. As part of restructuring the women’s segment, certain distribution facilities will be reconfigured requiring estimated fourth quarter expenditures of $118,000 to relocate inventories

     Our investing activities used cash of $2,355,000 for the nine months ended March 31, 2006 compared to $12,806,000 in the same period the previous year which includes our acquisition of Superior Merchandise Company for $10,000,000 on July 1, 2004. The purchase was funded entirely with cash, drawing on our existing credit line.

     Capital expenditures totaled $2,355,000 for the nine months ended March 31, 2006, a decrease of $451,000 from the same period the previous year. Capital expenditures this year relate primarily to the implementation of an additional software module for our enterprise software, computer hardware purchases, and additions to the distribution software system in our Yoakum, Texas facility. The first nine months of last year included capital expenditures related to additional leasehold improvements in our corporate offices, as well as the implementation of our distribution software application at our facility in Yoakum, Texas and the acquisition of computer hardware related to that project which was completed during the third quarter of fiscal 2005. During the fourth quarter of fiscal 2006 an estimated $254,000 will be expended for additional warehouse racking and forklifts needed to accommodate the reconfiguration of distribution facilities.

     Our primary sources of liquidity are cash flows from operating activities and our credit facility. We have a maximum commitment of $85,000,000 unsecured revolving credit which can be used for seasonal borrowings and letters of credit. In addition this facility contains an accordion feature to increase the facility by up to an additional $25,000,000 which permits adding an additional financial institution at a later date under the same terms. Although our credit facility is unsecured, it is guaranteed by all of our subsidiaries, except our Canadian subsidiary. The credit facility requires us to maintain certain financial covenants. If we do not comply with these covenants, our liquidity position could be adversely impacted.

     During the quarter ended September 30, 2005 we were in violation of the funded indebtedness to EBITDA ratio and EBITDA to fixed charge ratio covenants of our credit facility. Shipping delays throughout the supply chain related to hurricane Katrina as well as an increase in sales of lower margin direct sales goods and nonrecurring legal and restructuring expenses incurred during the prior twelve months resulted in an EBITDA shortfall thereby causing us to breach such covenants in our credit facility. We believe that had the shipping delays not occurred in the first quarter, we would have been in compliance with the covenants under our credit facility. Our lenders agreed to an amendment to the credit facility to adjust certain financial covenant requirements for both the first and second quarters of fiscal 2006. This fourth amendment to our credit facility, entered into on October 20, 2005 and effective as of September 30, 2005, among other things established applicable commitment fee percentages and applicable margins for LIBOR based borrowings at higher ratios of funded indebtedness to EBITDA.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

LIQUIDITY AND CAPITAL RESOURCES (continued)

     As a consequence of the $7.1 million charge in connection with restructuring of our women’s segment, we were in violation of certain covenants of the credit facility at March 31, 2006. Our lenders agreed to amend our credit facility to adjust certain financial covenant requirements. The fifth amendment, entered into on April 19, 2006 and effective as of March 31, 2006, among other things (i) increased the applicable margins for LIBOR based borrowings, (ii) amended the definition of EBITDA to exclude (a) up to $1.5 million in noncash goodwill or intangibles impairment charges during any four quarters and (b) a one-time charge of up to $9 million attributable to women’s segment inventory write-off, severance pay and related benefits, and men’s and women’s packaging inventory write-offs related to relocation of product lines, (iii) amended the definition of fixed charges to (a) include all payments related to the redemption, retirement, acquisition, or prepayment of capital stock or other equity interest, and (b) exclude revolving credit loan implied principal payments, and (iv) lowered permitted acquisitions to $10 million.

     Based on internal projections we anticipate compliance with all covenants related to the credit facility for the next twelve months. For the quarter ended March 31, 2006 we were in compliance with all debt covenants as amended.

     Borrowings under our credit facility were $21,000,000 and $20,571,000 as of March 31, 2006 and 2005, respectively. We also have an $856,900 Canadian line of credit secured by a letter of credit from a United States bank.

     At March 31, 2006 we had credit availability under our credit facility and our Canadian line of credit as follows:

Total credit facility	$	85,856,900
Less:
Outstanding debt		21,000,000
Letters of credit		2,366,316
Canadian standby letter of credit		856,900
	$	61,633,684

     During fiscal 2006 we declared the following cash dividends:

			Dividend
Declaration Date	Record Date	Payable Date	Per Share
August 16, 2005	September 30, 2005	October 20, 2005	$0.0275
October 18, 2005	December 30, 2005	January 20, 2006	$0.0275
January 12, 2006	March 31, 2006	April 20, 2006	$0.0275
April 18, 2006	June 30, 2006	July 20, 2006	$0.0275

     We believe we have adequate financial resources and access to sufficient credit lines to satisfy our future working capital needs.

CONTRACTUAL OBLIGATIONS AND CONTINGENT LIABILITIES AND COMMITMENTS

     There have been no material changes outside the ordinary course of our business in any of our contractual obligations, contingent liabilities, or commitments since June 30, 2005.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

OFF-BALANCE SHEET ARRANGEMENTS

     We do not have any off-balance sheet arrangements.

SEASONALITY

     Historically our quarterly sales and operating results reflect a seasonal increase during the first and second quarters of our fiscal year.

INFLATION

     Although our operations are affected by general economic trends, we do not believe inflation has had a material effect on our operating results.

WEBSITE ACCESS TO COMPANY REPORTS

     Our website address is www.tandybrands.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed by our officers, directors and stockholders holding 10% or more of our common stock, and all amendments to those reports are available free of charge through our website as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission.

FORWARD-LOOKING STATEMENTS

     This Form 10-Q contains forward-looking statements that are based on current expectations, estimates and projections about the industry in which we operate, management’s beliefs, and assumptions made by management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. Such factors as weather, fuel costs, general economic conditions, conditions within our industry, economic or political disruptions in Asia and other parts of the world from which we import goods, termination of key customer relationships, changes in consumer demands or spending patterns, inventory replenishment levels of our key customers and termination or non-renewal of certain key license agreements may impact future operating results. You are encouraged to consider all such factors in evaluating the information in this quarterly report. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

ITEM 3. Quantitative And Qualitative Disclosures About Market Risk

     We are subject to interest rate risk on our long-term debt. The effect of a one percentage point increase or decrease in the interest rate on our long-term debt could lower or increase our annual pretax operating results by approximately $210,000. Our current credit facility does not require us to enter into an interest rate swap agreement against the borrowings under the credit facility. Consequently we currently have no interest rate swap agreement in effect. We do not expect the potential impact of market conditions on the fair value of our indebtedness to be material.

     At March 31, 2006 our borrowings under our credit facility totaled $21,000,000 bearing a weighted-average interest rate of 6.83%

     In addition to interest rate risk on our long-term debt, we are also exposed to market risk with respect to changes in the global price level of certain commodities used in the production of our products. We routinely purchase leather hides during the year for use in the manufacture of men’s belts. We also purchase a substantial amount of leather items from third-party suppliers. An unanticipated material increase in the market price of leather could increase the cost of these products to us and, therefore, have a negative effect on our results of operations.

ITEM 4. Controls And Procedures

     We have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective in timely alerting them to material information (including information relating to our consolidated subsidiaries) required to be included in our Securities Exchange Act of 1934 filings. There has been no change in our internal control over financial reporting during the third quarter of fiscal 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 2. Unregistered Sales Of Equity Securities And Use Of Proceeds

     The following table provides information regarding repurchases of shares of common stock made by us during the quarter ended March 31, 2006. All such shares were purchased in the open market and are held in a rabbi trust established under our Benefit Restoration Plan.

				Total Number of		Maximum Number
	Total Number	Average		Shares Purchased as Part		of Shares that may
	of Shares	Price Paid		of Publicly Announced		yet be Purchased Under
Period	Purchased	Per Share		Plans or Programs		the Plans or Programs
January 1, 2006 to January 31, 2006	2,937	$	11.95		N/A		N/A
Total	2,937	$	11.95		N/A		N/A

ITEM 6. Exhibits

     A list of exhibits filed as part of this report is set forth in the Exhibit Index which immediately precedes such exhibits and is incorporated herein by reference.

23

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TANDY BRANDS ACCESSORIES, INC.

(Registrant)

/s/ J.S.B. Jenkins

J.S.B. Jenkins

President, Chief Executive Officer

(Principal Executive Officer)

/s/ Mark J. Flaherty

Mark J. Flaherty

Chief Financial Officer

(Principal Accounting and Financial Officer)

Date: May 11, 2006

24

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

				Incorporated by Reference
				(if applicable)
	Exhibit Number and Description			Form	Date	File No.	Exhibit
(3)	Articles of Incorporation and Bylaws
		3.1	Certificate of Incorporation of Tandy Brands Accessories, Inc.	S-1	11/02/90	33-37588		3.1
		3.2	Restated Bylaws of Tandy Brands Accessories, Inc.	10-Q	2/11/05	0-18927		3.2
(4)	Instruments defining the rights of security holders, including indentures
		4.1	Certificate of Designations, Powers, Preferences, and Rights of Series A Junior Participating Cumulative Preferred Stock of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588		4.1
		4.2	Form of Common Stock Certificate of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588		4.2
		4.3	Form of Preferred Share Purchase Rights Certificate of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588		4.3
		4.4	Form of Rights Certificate of Tandy Brands Accessories, Inc.	8-K	11/02/99	0-18927		4
		4.5	Amended and Restated Rights Agreement, dated October 19, 1999, between Tandy Brands Accessories, Inc. and Bank Boston, N.A.	8-K	11/02/99	0-18927		4
		4.6	Amendment to Rights Agreement, dated October 19, 1999, between Tandy Brands Accessories, Inc. and Fleet National Bank (f.k.a. Bank Boston, N.A.)	10-Q	5/10/02	0-18927		4.7
(10)	Material Contracts
		10.1	Tandy Brands Accessories, Inc. 1991 Stock Option Plan*	S-1	11/02/90	33-37588		10.8
		10.2	Form of Stock Option Agreement — 1991 Stock Option Plan*	S-1	11/02/90	33-37588		10.9
		10.3	Tandy Brands Accessories, Inc. Benefit Restoration Plan and related Trust Agreement and Amendments Nos. 1 and 2 thereto*	10-K	9/25/97	0-18927		10.14

25

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

			Incorporated by Reference
			(if applicable)
Exhibit Number and Description			Form	Date	File No.	Exhibit
	10.4	Amendment No. 3 to the Tandy Brands Accessories, Inc. Benefit Restoration Plan, effective as of July 1, 2003*	10-K	9/23/03	0-18927		10.32
	10.5	Succession Agreement, dated July 1, 2001, between Tandy Brands Accessories, Inc. and Chase Texas, N.A. (the Former Trustee) and Comerica Bank – Texas (the Trustee), relating to the Tandy Brands Accessories, Inc. Benefit Restoration Plan*	10-K	9/23/03	0-18927		10.34
	10.6	Form of Indemnification Agreement between Tandy Brands Accessories, Inc. and each of its Directors	S-1	12/17/90	33-37588		10.16
	10.7	Form of Indemnification Agreement between Tandy Brands Accessories, Inc. and each of its Officers	S-1	12/17/90	33-37588		10.17
	10.8	Tandy Brands Accessories, Inc. Non-Qualified Formula Stock Option Plan for Non-Employee Directors*	S-8	2/10/94	33-75114		28.1
	10.9	Amendment No. 4 to the Tandy Brands Accessories, Inc. Nonqualified Formula Stock Option Plan For Non-Employee Directors*	10-Q	5/10/02	0-18927		10.39
	10.10	Tandy Brands Accessories, Inc. 1993 Employee Stock Option Plan and form of Stock Option Agreement thereunder*	S-8	2/10/94	33-75114		28.2
	10.11	Tandy Brands Accessories, Inc. Non-Qualified Stock Option Plan for Non-Employee Directors*	S-8	2/10/94	33-75114		28.3
	10.12	Tandy Brands Accessories, Inc. 1995 Stock Deferral Plan for Non-Employee Directors*	S-8	6/03/96	33-08579		99.1
	10.13	Tandy Brands Accessories, Inc. 1997 Employee Stock Option Plan*	S-8	12/12/97	333-42211		99.1
	10.14	Amendment No. 2 to the Tandy Brands Accessories, Inc. 1997 Employee Stock Option Plan*	10-Q	5/10/02	0-18927		10.38

26

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

			Incorporated by Reference
			(if applicable)
Exhibit Number and Description			Form	Date	File No.	Exhibit
	10.15	Tandy Brands Accessories, Inc. Employees Investment Plan, as Amended and Restated effective July 1, 2000*	10-K	9/26/00	0-18927		10.39
	10.16	Mid-Market Trust Agreement, dated August 19, 2001, between Tandy Brands Accessories, Inc. and State Street Bank and Trust Company, relating to the Tandy Brands Accessories, Inc. Employees Investment Plan*	10-K	9/23/03	0-18927		10.28
	10.17	Amendments Nos. 1-3 to the Tandy Brands Accessories, Inc. Employees Investment Plan, as Amended and Restated effective July 1, 2000*	10-K	9/23/03	0-18927		10.31
	10.18	Succession Agreement, dated June 20, 2002, between Tandy Brands Accessories, Inc. and Comerica Bank – Texas, (the Trustee), relating to the Tandy Brands Accessories, Inc. Employees Investment Plan*	10-K	9/23/03	0-18927		10.35
	10.19	Amendment No. 4 to the Tandy Brands Accessories, Inc. Employees Investment Plan, dated December 22, 2003*	10-Q	2/12/04	0-18927		10.38
	10.20	Credit Agreement, dated as of June 27, 2001, among Tandy Brands Accessories, Inc. as the Borrower, Wells Fargo HSBC Trade Bank, N.A. as Administrative Agent and as Lender, certain Financial Institutions as Lenders and Wells Fargo Bank, N.A. as Arranger	10-K	9/25/01	0-18927		10.34
	10.21	ISDA Master Agreement, dated as of June 27, 2001, between Tandy Brands Accessories, Inc. and Wells Fargo Bank, N.A.	10-K	9/25/01	0-18927		10.35
	10.22	Limited Consent and Waiver, dated November 5, 2001, between Tandy Brands Accessories, Inc. and Wells Fargo HSBC Trade Bank, N.A. as Administrative Agent under the Agreement	10-Q	11/13/01	0-18927		10.37
	10.23	First Amendment to Credit Agreement, dated June 28, 2002, between Tandy Brands Accessories, Inc. and Wells Fargo HSBC Trade Bank, N.A.	10-K	9/27/02	0-18927		10.23

27

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

			Incorporated by Reference
			(if applicable)
Exhibit Number and Description			Form	Date	File No.	Exhibit
	10.24	Second Amendment to Credit Agreement, dated June 26, 2003, between Tandy Brands Accessories, Inc. and Wells Fargo HSBC Trade Bank, N.A.	10-K	9/23/03	0-18927		10.29
	10.25	Third Amendment to Credit Agreement, dated August 26, 2004, among Tandy Brands Accessories, Inc., Wells Fargo Bank, N.A., Comerica Bank, JPMorgan Chase Bank and Bank of America, N.A.	10-K	9/23/04	0-18927		10.38
	10.26	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Dr. James F. Gaertner*	S-8	5/15/02	33-88276		10.2
	10.27	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Marvin J. Girouard*	S-8	5/15/02	33-88276		10.3
	10.28	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Gene Stallings*	S-8	5/15/02	33-88276		10.4
	10.29	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Roger R. Hemminghaus*	S-8	5/15/02	33-88276		10.5
	10.30	Nonqualified Stock Option Agreement for Non-Employee Directors, dated October 16, 2001, by and between Tandy Brands Accessories, Inc. and Colombe M. Nicholas*	S-8	5/15/02	33-88276		10.6
	10.31	Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-Q	11/12/02	0-18927		10.24
	10.32	Form of Non-Employee Director Nonqualified Stock Option Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927		10.39

28

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

			Incorporated by Reference
			(if applicable)
Exhibit Number and Description			Form	Date	File No.	Exhibit
	10.33	Form of Employee Nonqualified Stock Option Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927		10.40
	10.34	Form of Non-Employee Director Restricted Stock Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927		10.41
	10.35	Form of Employee Restricted Stock Award Agreement pursuant to the Tandy Brands Accessories, Inc. 2002 Omnibus Plan*	10-K	9/23/04	0-18927		10.42
	10.36	Form of Severance Agreement between Tandy Brands Accessories, Inc. for Executive and Senior Officers*	10-K	9/23/03	0-18927		10.33
	10.37	Office Lease Agreement, dated January 31, 2004, between Koll Bren Fund VI, LP and Tandy Brands Accessories, Inc. relating to the corporate office	10-Q	2/12/04	0-18927		10.36
	10.38	Acknowledgement and Release Agreement between Tandy Brands Accessories, Inc. and J.S.B. Jenkins relating to the termination of the Supplemental Executive Retirement Plan*	8-K	8/22/05	0-18927		10.45
	10.39	Fourth Amendment to Credit Agreement, dated October 20, 2005, among Tandy Brands Accessories, Inc., Wells Fargo Bank, N.A., Comerica Bank, JPMorgan Chase Bank and Bank of America, N.A.	10-Q	1/10/05	0-18927		10.46
	10.40	Tandy Brands Accessories, Inc. Stock Purchase Program (As Amended And Restated Effective December 1, 2005)*	10-Q	2/10/06	0-18927		10.46
	10.41	Executive Officer Compensation Summary – Fiscal 2007 and 2006 and Non-Employee Director Compensation Summary – Fiscal 2007*	8-K	4/24/06	0-18927		10.1
	10.42	Summary of Incentive Bonus Plan for Executive Officers*	8-K	4/24/06	0-18927		10.2

29

TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES

EXHIBIT INDEX

				Incorporated by Reference
				(if applicable)
	Exhibit Number and Description			Form	Date	File No.	Exhibit
		10.43	Fifth Amendment to Credit Agreement, dated April 19, 2006, among Tandy Brands Accessories, Inc., Wells Fargo HSBC Trust Bank, N.A., Comerica Bank, JPMorgan Chase Bank and Bank of America, N.A.**	N/A	N/A	N/A		N/A
		10.44	Amendments Nos. 5-6 to the Tandy Brands Accessories, Inc. Employees Investment Plan, as Amended and Restated effective July 1, 2000* **	N/A	N/A	N/A		N/A
(31)	Rule 13a-14(a)/15d-14(a) Certifications
		31.1	Certification pursuant to Rule 13a-14(a)/15d-14(a) (Chief Executive Officer)**	N/A	N/A	N/A		N/A
		31.2	Certification pursuant to Rule 13a-14(a)/15d-14(a) (Chief Financial Officer)**	N/A	N/A	N/A		N/A
(32)	Section 1350 Certifications
		32.1	Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer)**	N/A	N/A	N/A		N/A

*	Management contract or compensatory plan
**	Filed herewith

30

EX-10.43

EXHIBIT 10.43
FIFTH AMENDMENT TO CREDIT AGREEMENT

     THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) made as of the 19^th day of April, 2006, by and among TANDY BRANDS ACCESSORIES, INC. (“Borrower”), WELLS FARGO HSBC TRADE BANK, N. A. (“Agent”), and the lenders specified herein (“Lenders”).

     WHEREAS, Borrower, Agent and certain lenders entered into a Credit Agreement dated as of June 27, 2001 (the “Original Credit Agreement”), as amended by that First Amendment to Credit Agreement dated as of June 28, 2002, (the “First Amendment”); as amended by that Second Amendment to Credit Agreement dated as of June 26, 2003 (the “Second Amendment”); as amended by that Third Amendment to Credit Agreement dated as of August 26, 2004 (the “Third Amendment”); as amended by that Fourth Amendment to Credit Agreement dated as of September 30, 2005 (the “Fourth Amendment”); the Original Credit Agreement, the First Amendment, the Second Amendment, the Third Amendment, and the Fourth Amendment together, the “Credit Agreement”); and

     WHEREAS, Borrower has requested that Agent and Lenders make certain amendments to the Credit Agreement, and Agent and Lenders are willing to do so subject to the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

     1. Defined Terms. All capitalized terms used but not otherwise defined in this Amendment shall have the meaning ascribed to them in the Credit Agreement. Unless otherwise specified, all section references herein refer to sections of the Credit Agreement.

     2. Amendments to Credit Agreement. The Credit Agreement is hereby amended as follows:

          2.1 Definitions

     (a) Applicable Commitment Fee. The chart in clause (b) in the definition of “Applicable Commitment Fee Percentage” is revised to read as follows:

Tandy Brands Accessories, Inc. — Fifth Amendment 1

	APPLICABLE
TOTAL FUNDED INDEBTEDNESS	COMMITMENT FEE
TO EBITDA RATIO	PERCENTAGE
Less than 1.00 to 1.00		0.20	%
Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00		0.25	%
Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00		0.30	%
Greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00		0.375	%
Greater than or equal to 3.00 to 1.00		0.375	%*

*Applicable from Effective Date of Fifth Amendment through Review Date.

     (b) Applicable Margin. The definition of “Applicable Margin” is revised to read as follows:

“‘Applicable Margin’ means, the following percentages per annum, which percentages shall be added to the applicable interest rates for purposes of calculating the interest rates payable to the Lenders, as more fully described by Section 2.8:

     (a) For the period from the Effective Date of the Fifth Amendment until receipt and satisfactory review of the financial statements for the fiscal quarter ending December 31, 2006 (the “Review Date”), the Applicable Margin for Alternate Base Borrowings shall be 0.0%, the Applicable Margin for Eurodollar Borrowings shall be 2.00%, and the Applicable Commitment Fee Percentage shall be 0.375%.

     (b) Following the Review Date, (i) the Applicable Margin for Alternate Base Borrowings shall be 0.0%; and (ii) the following Applicable Margins per annum for Eurodollar Borrowings shall apply, and shall be determined as a function of the Total Funded Indebtedness to EBITDA Ratio, as set forth on the most recent certificate showing compliance delivered to the Agent by the Borrower pursuant to Section 9.1(b), as follows:

Tandy Brands Accessories, Inc. — Fifth Amendment 2

	APPLICABLE
	MARGIN FOR
TOTAL FUNDED INDEBTEDNESS	EURODOLLAR
TO EBITDA RATIO	BORROWINGS
Less than 1.00 to 1.00		1.000	%
Greater than or equal to 1.00 to 1.00 but less than 1.50 to 1.00		1.125	%
Greater than or equal to 1.50 to 1.00 but less than 2.00 to 1.00		1.250	%
Greater than or equal to 2.00 to 1.00, but less than 2.50 to 1.00		1.500	%
Greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00		1.75	%
Greater than or equal to 3.00 to 1.00		2.00	%”*

*Applicable from Effective Date of Fifth Amendment through Review Date.

     (c) EBITDA. The definition of “EBITDA” is amended to read as follows:

“‘EBITDA’ means, for any period comprising the most recent four quarterly periods, the sum of (a) Consolidated Net Income for such period, plus (b) Interest Expense paid during such period which was deducted in determining such Consolidated Net Income, plus (c) all income taxes which were deducted in determining such Consolidated Net Income, plus (d) all depreciation and amortization which were deducted in determining such Consolidated Net Income, plus (e) Add-backs allowed pursuant to Article 11, Regulation S-X, of the Securities Act of 1933, plus (f) non-cash losses arising from the impairment of good will or intangibles under FASB 142, such additions to EBITDA not to exceed $1,500,000 during any four quarterly period; plus (g) a one-time charge of up to $9,000,000 attributable to the women’s segment inventory write-offs subsequent to February 28, 2006, severance or pay in lieu of notice and related benefit costs in connection with the restructure and write-offs of men’s and women’s packaging inventory related to relocation of product lines. Upon consummation of a Permitted Acquisition, EBITDA may be adjusted to include the financial results of the acquired entity or assets for the period comprising the four quarterly periods prior to the Permitted Acquisition, including any period of less than a full quarter, provided that the Borrower shall have provided Agent with (i) audited financial statements prepared not more than fifteen (15) months prior to the closing date of the Permitted Acquisition, or (ii) if such audited financial statements are not available, verification of the adjustments for such acquisition prepared by an accounting firm acceptable to Agent, such statements or verification, as the case may be, to be satisfactory to the Agent in its sole discretion.”

Tandy Brands Accessories, Inc. — Fifth Amendment 3

     (d) Effective Date of Fifth Amendment. The definition of “Effective Date of the Fifth Amendment” is added to the Credit Agreement as follows:

“‘Effective Date of the Fifth Amendment’ means March 31, 2006, the effective date of the Fifth Amendment to Credit Agreement dated as of April 19, 2006.”

     (e) Fixed Charge Coverage Ratio. The definition of “Fixed Charge Coverage Ratio” is amended to read as follows:

“‘Fixed Charge Coverage Ratio’, means, for the four consecutive fiscal quarterly periods ending on the date of determination for Borrower and its Subsidiaries, the ratio of (a) EBITDA determined on a consolidated basis minus Capital Expenditures minus federal, state, local and foreign income taxes divided by (b) Interest Expense plus payments made in respect of Capitalized Lease Obligations plus any cash dividend made by Borrower or any of its Subsidiaries, plus any payments made by Borrower or any of its Subsidiaries in respect of the redemption, retirement, acquisition, or prepayment of any Borrower’s capital stock, or any other equity interest during the term of this Agreement, plus any Investments in Sheldon.”

     (f) Permitted Acquisitions. The definition of “Permitted Acquisition” is revised to read as follows:

“‘Permitted Acquisition’ means an acquisition of a business entity or assets (i) provided the aggregate amount of all consideration for all such acquisitions from the Effective Date of the Fifth Amendment until the Termination Date does not exceed $10,000,000 or (ii) for which Borrower has received the prior written consent of the Required Lenders.”

          2.2 Leverage Ratio

Section 10.14 is amended to read as follows:

“10.14 Leverage Ratio. Borrower shall not permit the ratio of (a) Total Funded Indebtedness on a consolidated basis, as of the last day of each fiscal quarter of the Borrower to (b) EBITDA, on a consolidated basis, for the four (4) fiscal quarters ending on March 31, 2006 and June 30, 2006 to exceed 3:00 to 1:00, for the four (4) fiscal quarters ending on September 30, 2006 to exceed 3:25 to 1:00; and for any fiscal quarter thereafter to exceed 3:00 to 1:00.”

Tandy Brands Accessories, Inc. — Fifth Amendment 4

     3. Effectiveness of Amendment. This Amendment shall be effective as of March 31, 2006 upon receipt by Agent of:

(a) A copy or copies of this Amendment signed by each of the parties hereto;

(b) A Confirmation of Guaranty executed by each Guarantor (other than Sheldon);

(c) A Compliance Certificate executed by Borrower; and

(d) Payment for all other fees and expenses due and owing by the Borrower.

     4. Ratifications, Representations and Warranties.

(a) The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. Borrower, Agent and Lenders agree that the Credit Agreement and the Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

(b) To induce Agent and Lenders to enter into this Amendment, Borrower ratifies and confirms each representation and warranty set forth in the Credit Agreement as if such representations and warranties were made on the even date herewith, (except to the extent that such representations and warranties related solely to an earlier date and except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Credit Agreement) and further represents and warrants (i) that there has occurred since the date of the last financial statements delivered to Agent and Lenders no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Change, (ii) that after giving effect to this Amendment no Event of Default exists on the date hereof after giving effect to this Amendment, (iii) that Borrower is fully authorized to enter into this Amendment, and (iv) that the Guarantors signing the Confirmation of Guaranty attached hereto are all of the Borrower’s Subsidiaries as of the date of this Amendment (other than Sheldon).

     5. Benefits. This Amendment shall be binding upon and inure to the benefit and Borrower, Agent and Lenders and their respective successors and assigns; provided, however, that Borrower may not, without the prior written consent of Agent and Lenders, assign any rights, powers, duties or obligations under this Amendment, the Credit Agreement or any of the other Loan Documents.

Tandy Brands Accessories, Inc. — Fifth Amendment 5

     6. Construction. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas.

     7. Invalid Provisions. If any provision of this Amendment is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully several and the remaining provisions of this Amendment shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance.

     8. Entire Agreement. The Credit Agreement, as amended by this Amendment, contains the entire agreement among the parties regarding the subject matter hereof and supersedes all prior written and oral agreements and understandings among the parties hereto regarding same.

     9. Reference to Credit Agreement. The Credit Agreement and any and all other agreements, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby amended so that any reference in the Credit Agreement to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby.

     10. Counterparts. This Amendment may be separately executed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall be deemed to constitute one and the same agreement.

[The remainder of this page intentionally left blank.]

Tandy Brands Accessories, Inc. — Fifth Amendment 6

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

BORROWER:
TANDY BRANDS ACCESSORIES, INC.
By:	/s/ Mark J. Flaherty
Name:	Mark J. Flaherty
Title:	Chief Financial Officer
AGENT:
WELLS FARGO HSBC TRADE BANK, N.A.
By:	/s/ John R. Peloubet
Name:	John R. Peloubet
Title:	Vice President
WELLS FARGO BANK, N. A.
By:	/s/ John W. Johnson
Name:	John W. Johnson
Title:	Sr. Vice President

Tandy Brands Accessories, Inc. — Fifth Amendment

LENDERS:
WELLS FARGO HSBC TRADE BANK, N. A.
By:	/s/ John R. Peloubet
Name:           John R. Peloubet
Title:             Vice President
COMERICA BANK
By:	/s/ Corey R. Bailey
Name:           Corey R. Bailey
Title:             Vice President
BANK OF AMERICA, N.A.
By:	/s/ S.A. MacKenzie
Name:           Steven A. MacKenzie
Title:             Senior Vice President
JPMORGAN CHASE BANK
By:	/s/ Jerry Petrey
Name:           Jerry Petrey
Title:             Vice President

Tandy Brands Accessories, Inc. — Fifth Amendment

CONFIRMATION OF GUARANTY

     Reference is made to the Credit Agreement dated as of June 27, 2001 (as amended, the “Credit Agreement”) among Tandy Brands Accessories, Inc. (“Borrower”), Wells Fargo HSBC Trade Bank, N. A. (“Agent”), and the lenders specified therein (“Lenders”). The undersigned Guarantors hereby confirm that their guaranty under the Subsidiary Guaranty dated as of June 27, 2001 for the benefit of Agent, Lenders, and Wells Fargo Bank, N. A., continues in full force and effect notwithstanding the Fifth Amendment to Credit Agreement dated as of April 19, 2006, which Fifth Amendment is hereby accepted and consented to by each Guarantor. In accordance herewith, the aforesaid guaranty shall be deemed to cover and support the Obligations at any time due from Borrower to Lenders pursuant to the Credit Agreement as the latter has been modified by the Fifth Amendment. This Confirmation of Guaranty shall be governed by and construed in accordance with the laws of the State of Texas.

Dated as of the 19^th day of April, 2006.

ACCESSORY DESIGN GROUP, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer
AMITY/ROLFS, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer

Tandy Brands Accessories, Inc. — Fifth Amendment

TANDY BRANDS ACCESSORIES HANDBAGS, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer
TBAC INVESTMENTS, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer
TBAC GENERAL MANAGEMENT COMPANY
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer

TBAC MANAGEMENT COMPANY L.P.
	By:	TBAC General Management Company,
		its general partner
	By:	/s/ Mark J. Flaherty
	Name:           Mark J. Flaherty
	Title:             Chief Financial Officer

TBAC PRINCE GARDNER, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer

Tandy Brands Accessories, Inc. — Fifth Amendment

STAGG INDUSTRIES, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer
TBAC — TOREL, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer
TBAC — MASS MERCHANT QUALITY CONTROL, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer
TBAC INVESTMENT TRUST
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer
SUPERIOR MERCHANDISE COMPANY
By:	/s/ Mark J. Flaherty
Name:            Mark J. Flaherty
Title:             Chief Financial Officer
TBAC — ACQUISITION, INC.
By:	/s/ Mark J. Flaherty
Name:            Mark J. Flaherty
Title:             Chief Financial Officer

Tandy Brands Accessories, Inc. — Fifth Amendment

ACCEPTED as of the date first written above.
BORROWER:
TANDY BRANDS ACCESSORIES, INC.
By:	/s/ Mark J. Flaherty
Name: Mark J. Flaherty
Title: Chief Financial Officer

Tandy Brands Accessories, Inc. — Fifth Amendment

COMPLIANCE CERTIFICATE

As of April 19, 2006

     Reference is made to that certain Credit Agreement dated as of June 27, 2001 among Tandy Brands Accessories, Inc. (“Borrower”), Wells Fargo HSBC Trade Bank, N. A. (“Agent”), and the lenders specified therein (“Lenders”), by and among Borrower, Agent, and Lenders (as amended, the “Credit Agreement”). Terms which are defined in the Credit Agreement and which are used but not defined herein shall have the meanings given them in the Credit Agreement. The undersigned, Mark J. Flaherty_, Borrower’s _CFO___, hereby certifies in the name, and on behalf, of Borrower that Borrower has made a thorough inquiry into all matters certified herein and based upon such inquiry, experience, and the advice of counsel, does hereby further certify that:

     1. All representations and warranties made by Borrower in any Loan Document delivered on or before the date hereof (including, without limitation, the representations and warranties contained in Section 4 of the Fifth Amendment to Credit Agreement of even date herewith [“Fifth Amendment”]) are true in all material respects on and as of the date hereof (except to the extent that such representations and warranties related solely to an earlier date and except to the extent that the facts upon which such representations are based have been changed by the transactions contemplated in the Credit Agreement) as if such representations and warranties had been made as of the date hereof.

     2. After giving effect to the Fifth Amendment no Event of Default exists on the date hereof.

     3. Borrower has performed and complied with all agreements and conditions required in the Loan Documents to be performed or complied with by it on or prior to the date hereof.

     IN WITNESS WHEREOF, this instrument is executed by the undersigned as of the date first above written.

TANDY BRANDS ACCESSORIES, INC.
By:	/s/ Mark J. Flaherty
Name:           Mark J. Flaherty
Title:             Chief Financial Officer

Tandy Brands Accessories, Inc. — Fifth Amendment

EX-10.44

EXHIBIT 10.44
AMENDMENT FIVE TO THE
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN

     WHEREAS, Tandy Brands Accessories, Inc. (the “Company”) previously established the Tandy Brands Accessories, Inc. Employees Investment Plan (the “Plan”) effective as of January 1, 1991; and

     WHEREAS, the Plan provides at Section 15.1 that the Company reserves the right to amend the Plan; and

     WHEREAS, the Plan has been amended from time to time since its establishment; and

     WHEREAS the Company wishes to amend the Plan to simply administrative provisions relating to diversification of the Frozen Company Stock Fund in the Plan, pursuant to authority from the Board of Directors of the Company in a meeting held on October 14, 2004.

     NOW THEREFORE, the Plan is hereby amended effective as of the dates noted herein, as follows:

     1. Section 14.5(c) is hereby amended effective January 1, 2005 by replacing it in its entirety to read as follows:

     (c) Prior Plan Employee Contribution Account and Prior Plan Employer Contribution Account: Prior to July 1, 2000, the Prior Plan Employee Contribution Accounts and Prior Plan Employer contribution Accounts of Participants were invested solely in Company Stock. After July 1, 2000 and through December 31, 2004, all Prior Plan Employee Contribution Accounts and Prior Plan Employer Contribution Accounts were required to remain invested in Company Stock (such Company Stock fund hereinafter defined as the “Frozen Company Stock Fund”), and Participants could only convert such accounts into other investment options upon attainment of a specified age.

     Effective January 1, 2005, each Participant, regardless of age, may elect to direct the investment of all or a portion of his Prior Plan Employee Contribution Account and Prior Plan Employer Contribution Account from the Frozen Company Stock Fund into the other investment options designated by the Committee for investment in accordance with this Section 14.5.

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     IN WITNESS WHEREOF, this Amendment has been executed this 1st day of January      , 2005.

TANDY BRANDS ACCESSORIES, INC.
By:	/s/ J.S.B. Jenkins
Name:		J.S.B. Jenkins
Title:		President & CEO

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AMENDMENT SIX TO THE
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN

     WHEREAS, Tandy Brands Accessories, Inc. (the “Company”) previously established the Tandy Brands Accessories, Inc. Employees Investment Plan (the “Plan”) effective as of January 1, 1991; and

     WHEREAS, the Plan provides at Section 15.1 that the Company reserves the right to amend the Plan; and

     WHEREAS, the Plan has been amended from time to time since its establishment; and

     WHEREAS, the Plan requires amendment to incorporate legislative changes to lump sum payout provisions under the Plan, which are required to be adopted no later than December 31, 2005 with an effective date of March 28, 2005; and

     WHEREAS, the Company wishes to amend the Plan to increase the amount a participant can contribute as a salary reduction contribution.

     NOW THEREFORE, the Plan is hereby amended effective as of the dates noted herein, as follows:

     1. Section 4.1 is hereby amended effective January 1, 2006 by replacing it in its entirety to read as follows:

     4.1 Salary Reduction Contributions: Each Participant may elect to have contributed on his behalf to the Trust Fund, on a pre-tax basis, any whole percentage of his Annual Compensation which is not less than one percent (1%) and which does not exceed twenty-five percent (25%); provided, however, that such amount may not exceed the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year of the Participant, except to the extent permitted under Section 414(v) of the Code, if applicable. Salary Reduction Contributions shall be elected pursuant to a payroll withholding agreement, in accordance with Section 5.3 hereof. In the event that a payroll withholding agreement is not received for a Participant, a payroll withholding agreement is deemed to have been made and such Participant will be treated as if he elected one percent (1%) of his Annual Compensation to be contributed to the Trust Fund on his behalf as Salary Reduction Contributions. Salary Reduction Contributions are at all times one hundred percent (100%) vested and nonforfeitable. Salary Reduction Contributions made on behalf of a Participant shall be added to the Trust Fund as soon as practicable after deduction from a Participant’s paycheck, and shall be credited to the Salary Reduction Contribution Account of the Participant in accordance with Section 6.1.

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     2. Section 13.2 is hereby amended effective March 28, 2005 by replacing the first paragraph of such Section in its entirety to read as follows:

     13.2 Time of Payment: After a Participant, former Participant, former Participant or Beneficiary is entitled to receive benefits hereunder, as provided in Articles VII, VIII, IX or X, benefits shall commence for such Participant or Beneficiary, subject to the requirements herein, as soon as practicable following receipt by the Committee of the Participant’s or Beneficiary’s request for distribution. In the event that the vested portion of a Participant’s Individual Account does not exceed One Thousand Dollars ($1,000), distribution of such Participant’s benefits shall be made in a lump sum as soon as reasonably practicable following the Participant’s termination of employment. In the event that the vested portion of a Participant’s Individual Account exceeds (or at the time of any prior distribution exceeded) One Thousand Dollars ($1,000), no distributions may commence without the Participant’s written consent, as described below, until the Participant attains his Normal Retirement Age. Such consent must be obtained in writing within the ninety (90) day period ending on the date of distribution. The Committee shall notify the Participant of the right to defer any distribution until he attains Normal Retirement Age. Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code, and shall be provided no less than thirty (30) days and no more than ninety (90) days prior to the date of distribution. Notwithstanding the foregoing, the consent of the Participant shall not be required to the extent that a distribution is required to satisfy Section 415 or Sections 401(k)(8) or 401(m)(6) of the Code. In addition, upon termination of this Plan if the Plan does not then offer an annuity option, the Participant’s Individual Account may, without the consent of the Participant, be distributed to the Participant or transferred to another defined contribution plan within the same controlled group, as defined in Section 414(b) or (c) of the Code. Furthermore, if a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than thirty (30) days after the notice required under Section 1.411(a)-11(c) of the Treasury Regulations is given, provided that: (a) the Committee clearly informs the Participant that he has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (b) the Participant, after receiving the notice, affirmatively elects a distribution.

     3. Section 13.5 is hereby amended effective March 28, 2005 by replacing the first paragraph of such Section in its entirety to read as follows:

     13.5 Distributions Under Domestic Relations Orders: Nothing contained in this Plan shall prevent the Trustee, in accordance with the direction of the Committee, from complying with the provisions of a qualified domestic relations order (as defined in Section 414(p) of the Code). The Plan specifically permits distribution to an alternate payee under a qualified domestic relations order at any time, irrespective of whether the Participant has attained his earliest retirement age under the Plan, as defined in Section 414(p) of the Code. A distribution to an alternate payee prior to the Participant’s attainment of earliest retirement age is available only if (a) the order specifies distribution

2

at that time or permits an agreement between the Plan and the alternate payee to authorize an earlier distribution; (b) the order specifies such distribution to be in the form of a single, lump sum payment; and (c) if the amount to which the alternate payee is entitled under the Plan exceeds $1,000, and the order so requires, the alternate payee consents to any distribution occurring prior to the Participant’s attainment of earliest retirement age. Nothing in this Section 13.5 gives a Participant a right to receive distribution at a time otherwise not permitted under the Plan nor does it permit the alternate payee to receive a form of payment not otherwise permitted under the Plan.

     IN WITNESS WHEREOF, this Amendment has been executed this 24 day of October      , 2005.

TANDY BRANDS ACCESSORIES, INC.
By:	/s/ J.S.B. Jenkins
Name:		J.S.B. Jenkins
Title:		President and CEO

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a)

(CHIEF EXECUTIVE OFFICER)

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, J.S.B. Jenkins, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Tandy Brands Accessories, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) for the registrant and have:

     a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2006	/s/ J.S.B. Jenkins
	J.S.B. Jenkins
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a)

(CHIEF FINANCIAL OFFICER)

CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Mark J. Flaherty, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Tandy Brands Accessories, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d-15(e)) for the registrant and have:

     a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2006	/s/ Mark J. Flaherty
	Mark J. Flaherty
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, J.S.B. Jenkins and Mark J. Flaherty, Chief Executive Officer and Chief Financial Officer, respectively, of Tandy Brands Accessories, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J.S.B. Jenkins

J.S.B. Jenkins

President and Chief Executive Officer

/s/ Mark J. Flaherty

Mark J. Flaherty

Chief Financial Officer

May 11, 2006