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 December 31, 2008

Commission File Number 0-18927

TANDY BRANDS ACCESSORIES, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 75-2349915
(I.R.S. Employer
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.

þYes      oNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o  Accelerated filer o  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller Reporting Company þ 

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

oYes      þNo

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 February 3, 2009
Common stock, $1.00 par value	6,990,380

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1 Financial Statements	4 - 9
Item 2 Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	10-13
Item 4T Controls And Procedures	13
PART II — OTHER INFORMATION
Item 1A Risk Factors	13-14
Item 2 Unregistered Sales Of Equity Securities And Use Of Proceeds	14
Item 4 Submission Of Matters To A Vote Of Security Holders	14
Item 6 Exhibits	14
SIGNATURES	15
EX-10.1
EX-10.2
EX-10.3
EX-10.6
EX-10.7
EX-31.1
EX-31.2
EX-32.1

2

References in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” or the “Company” refer to Tandy Brands Accessories, Inc. and its subsidiaries unless the context requires otherwise.

This Form 10-Q contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, and other characterizations of future events or circumstances are forward-looking statements. We have based these forward-looking statements on our current expectations about future events, estimates and projections about the industry in which we operate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including those identified under “Risk Factors” included in our 2008 Annual Report on Form 10-K. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. Except as required under federal securities laws and the rules and regulations of the United States Securities and Exchange Commission, we do not undertake, and specifically decline, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions, or otherwise.

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PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

Tandy Brands Accessories, Inc. And Subsidiaries
Unaudited Consolidated Statements Of Operations
(in thousands except per share amounts)

	Three Months Ended						Six Months Ended
	December 31						December 31
	2008			2007			2008			2007
Net sales	$	42,944		$	49,617		$	77,561		$	89,081
Cost of goods sold		27,183			32,538			49,790			59,172
Inventory write-down		—			18,725			—			18,725
		27,183			51,263			49,790			77,897
Gross margin (loss)		15,761			(1,646	)		27,771			11,184
Selling, general and administrative expenses		14,047			16,401			26,448			30,842
Depreciation and amortization		474			919			1,043			1,895
Goodwill and other intangibles impairment		—			17,774			—			17,774
Total operating expenses		14,521			35,094			27,491			50,511
Operating income (loss)		1,240			(36,740	)		280			(39,327	)
Interest expense		(220	)		(830	)		(368	)		(1,110	)
Other income		44			4			105			49
Income (loss) before income taxes		1,064			(37,566	)		17			(40,388	)
Income taxes		112			3,124			345			2,038
Net income (loss)	$	952		$	(40,690	)	$	(328	)	$	(42,426	)
Earnings (loss) per common share	$	0.14		$	(5.94	)	$	(0.05	)	$	(6.20	)
Earnings (loss) per common share assuming dilution	$	0.14		$	(5.94	)	$	(0.05	)	$	(6.20	)
Cash dividends declared per common share	$	—		$	0.04		$	0.04		$	0.08
Common shares outstanding		6,934			6,855			6,961			6,841
Common shares outstanding assuming dilution		7,040			6,855			6,961			6,841

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

4

Tandy Brands Accessories, Inc. And Subsidiaries
Unaudited Consolidated Balance Sheets
(in thousands)

	December 31			June 30
	2008			2008
Assets
Current assets:
Cash and cash equivalents	$	3,577		$	2,855
Accounts receivable		24,634			22,147
Inventories		38,625			35,535
Other current assets		6,641			8,783
Total current assets		73,477			69,320
Property and equipment		4,577			5,382
Other assets:
Intangibles		2,904			3,069
Other assets		2,340			1,617
Total other assets		5,244			4,686
	$	83,298		$	79,388
Liabilities And Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,479		$	10,312
Accrued expenses		4,332			5,361
Note payable		8,422			363
Total current liabilities		22,233			16,036
Other liabilities:
Supplemental executive retirement obligation		1,671			1,893
Other liabilities		3,276			3,581
Total other liabilities		4,947			5,474
Stockholders’ equity:
Preferred stock, $1.00 par value, 1,000 shares authorized, none issued		—			—
Common stock, $1.00 par value, 10,000 shares authorized, 7,037 shares and 7,049 shares issued and outstanding		7,037			7,049
Additional paid-in capital		34,782			34,840
Retained earnings		14,728			15,337
Other comprehensive income		663			1,666
Shares held by Benefit Restoration Plan Trust		(1,092	)		(1,014	)
Total stockholders’ equity		56,118			57,878
	$	83,298		$	79,388

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

5

Tandy Brands Accessories, Inc. And Subsidiaries
Unaudited Consolidated Statements Of Cash Flows
(in thousands)

	Six Months Ended
	December 31
	2008			2007
Cash flows (used) provided by operating activities:
Net loss	$	(328	)	$	(42,426	)
Adjustments to reconcile net loss to net cash (used) provided by operating activities:
Inventory write-down		—			18,725
Goodwill and other intangibles impairment		—			17,774
Doubtful accounts receivable provision		1,117			—
Depreciation and amortization		1,056			1,898
Stock compensation expense		28			240
Amortization of debt costs		90			237
Deferred income taxes		—			3,065
Other		(959	)		602
Changes in assets and liabilities:
Accounts receivable		(3,604	)		4,689
Inventories		(3,090	)		4,198
Other assets		2,178			(614	)
Accounts payable		(229	)		(4,894	)
Accrued expenses		(1,004	)		(178	)
Net cash (used) provided by operating activities		(4,745	)		3,316
Cash flows used for investing activities:
Purchases of equipment		(219	)		(302	)
Funding supplemental executive retirement plan trust		(1,060	)		—
Net cash used for investing activities		(1,279	)		(302	)
Cash flows provided by financing activities:
Stock purchase program (withdrawals)		(145	)		520
Stock options exercised		—			66
Dividends paid		(564	)		(553	)
Change in cash overdrafts		(604	)		(175	)
Net note borrowings		8,059			2,931
Net cash provided by financing activities		6,746			2,789
Net increase in cash and cash equivalents		722			5,803
Cash and cash equivalents beginning of year		2,855			4,076
Cash and cash equivalents end of period	$	3,577		$	9,879
Supplemental cash flow information:
Interest paid	$	158		$	567
Income taxes paid	$	238		$	178

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

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Accounting Principles

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 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 and a fiscal 2009 second quarter $1.1 million provision for doubtful accounts receivable) considered necessary for a fair presentation have been included. During the quarter ended December 31, 2007 we recorded noncash charges ($18.7 million inventory write-down, $16.5 million goodwill impairment, and $1.3 million intangibles impairment) and restructuring charges of $438,000 included in selling, general and administrative expenses.

The preparation of our consolidated 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 we believe 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. Such differences could have a material impact on our future financial position, results of operations, and cash flows.

The consolidated balance sheet at June 30, 2008 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 consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Historically our first and second quarter sales and operating results reflect a seasonal increase compared to the third and fourth quarters of our fiscal year. However, sales for the first and second quarters of fiscal 2009 and 2008 were not consistent with historical patterns due to the very difficult retail environment in both years, deliveries to customers shifting from the first to the second quarter of fiscal 2009, and curtailed replenishment orders by one of our largest customers in fiscal 2008. Consequently, operating results for the three- and six-month periods ended December 31, 2008 are not necessarily indicative of the results that may be expected for the year ended June 30, 2009.

Note 2 — Recent Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS 159”) permits choosing to measure certain financial assets and liabilities at fair value. We have not elected to measure any assets or liabilities at fair value which were not being so measured prior to our adopting SFAS 159 on July 1, 2008.

Effective July 1, 2008, we adopted the disclosure requirements of SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”) issued by the FASB in September 2006, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance for carrying instruments at fair value. FASB Staff Position No. 157-2 issued in February 2008 allows us to delay application of SFAS 157 for nonfinancial assets and liabilities until the first quarter of fiscal 2010.

Note 3 — Business Segments And Related Information

We sell our products through all major retail distribution channels throughout North America, 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, automobile and tire 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, gifts, wallets and other small leather goods, suspenders, and sporting goods; and (2) women’s accessories, consisting of belts, small leather goods, and gifts. General corporate expenses and depreciation and amortization related to assets recorded in our corporate accounting records are allocated to each segment based on the respective segment’s asset base. 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 2 of the notes to consolidated

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financial statements included in our 2008 Annual Report of Form 10-K filed with the Securities and Exchange Commission. No inter-segment revenue is recorded.

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

	Three Months Ended						Six Months Ended
	December 31						December 31
	2008			2007			2008			2007
Net sales:
Men’s accessories	$	34,440		$	39,908		$	60,845		$	70,120
Women’s accessories		8,504			9,709			16,716			18,961
	$	42,944		$	49,617		$	77,561		$	89,081
Operating income (loss): (1)
Men’s accessories (2)	$	1,334		$	(27,203	)	$	461		$	(29,236	)
Women’s accessories (3)		(94	)		(9,537	)		(181	)		(10,091	)
		1,240			(36,740	)		280			(39,327	)
Interest expense (4)		(220	)		(830	)		(368	)		(1,110	)
Other income		44			4			105			49
Income (loss) before income taxes	$	1,064		$	(37,566	)	$	17		$	(40,388	)
Depreciation and amortization:
Men’s accessories	$	301		$	666		$	677		$	1,373
Women’s accessories		173			253			366			522
	$	474		$	919		$	1,043		$	1,895
Capital expenditures:
Men’s accessories	$	21		$	33		$	69		$	66
Corporate		117			85			150			236
	$	138		$	118		$	219		$	302

(1)	Operating income (loss) consists of net sales less cost of goods sold and specifically identifiable and allocated selling, general and administrative expenses.
(2)	Men’s accessories’ fiscal 2008 operating loss includes charges of $27.4 million: goodwill impairment ($16.5 million); write-down of out-of-program and slow-moving inventory ($9.6 million); and intangibles impairment ($1.3 million).
(3)	Women’s accessories’ fiscal 2008 operating loss includes a $9.1 million write-down of out-of-program and slow-moving inventory.
(4)	Interest expense for fiscal 2008 includes $196,000 of costs related to a debt covenant waiver we received for the first quarter and $176,000 related to costs previously capitalized for the credit facility with our previous lenders.

Note 4 — Income Taxes

The fiscal 2009 income tax provisions relate to earnings of our Canadian subsidiary (second quarter - $49,000; six months — $189,000) and taxes, interest, and penalties for uncertain tax positions (second quarter — $63,000; six months — $156,000). Income tax expense of approximately $300,000 for the fiscal 2009 second quarter was offset by an operating loss carryforward. The approximately $200,000 deferred tax benefit of our domestic pretax loss for the six-month period was offset by a valuation allowance provision as our operating results over the past three years and projections of future operating results do not currently indicate it is more likely than not the deferred tax benefits will ultimately be realized.

The fiscal 2008 six-month tax provision includes an $8.2 million deferred tax benefit, a $1.4 million estimated net operating loss carryback, and a $1.0 million estimated net operating loss carryforward, reduced by a $12.3 million deferred tax valuation allowance. It also includes $129,000 of taxes, interest, and penalties for uncertain tax positions.

Note 5 — Credit Arrangements

We have a $35 million credit facility for borrowings and letters of credit based on accounts receivable and inventory levels. At December 31, 2008 we had outstanding borrowings under the facility of $8.4 million bearing interest at 3.5%, outstanding letters of credit totaling $1.2 million, and $23.6 million borrowing availability. Borrowings

8

under the facility, which are due on the facility’s expiration date in February 2010, bear interest at the lender’s prime rate plus 0.25% or LIBOR plus 2.75% as designated by the Company. The effect of a 1% increase or decrease in the interest rate on the amount borrowed at December 31, 2008 could lower or increase our annual pretax operating results by $84,000.

The credit facility is guaranteed by substantially all of our subsidiaries and is secured by substantially all of our assets and those of our subsidiaries. It requires the maintenance of a tangible net worth financial ratio as of the end of each fiscal quarter which, if not met, could adversely impact our liquidity. The facility contains customary representations and warranties and we have agreed to certain affirmative covenants, including reporting requirements. The facility also limits our ability to engage in certain actions without the lender’s consent, including, repurchasing our common stock, entering into certain mergers or consolidations, guaranteeing or incurring certain debt, engaging in certain stock or asset acquisitions, paying dividends, making certain investments in other entities, prepaying debt, and making certain property transfers.

We were in compliance with the credit agreement tangible net worth financial ratio covenant at December 31, 2008, but we currently expect a waiver or modification of the covenant will be necessary at March 31, 2009 as we will not be in compliance with the covenant if we incur more than a minimal net loss in the third quarter of fiscal 2009. We cannot be assured the lender will agree to any waiver or modification, or that the terms will be acceptable. If we cannot obtain a waiver or modification, our borrowing capacity and liquidity could be negatively impacted.

Our Canadian subsidiary has a CAD $1 million credit facility (direct advances limited to US $830,000) secured by its cash, credit balances, and deposit instruments with interest at the lender’s prime or US base rates. There have been no borrowings under this line of credit.

Note 6 — Fair Value Measurements

The only account we measure at fair value is the rabbi trust established to set aside amounts to assist in satisfying our supplemental executive retirement obligation. The trust’s assets (December 31, 2008 — $1.7 million) are measured at their quoted prices in active markets (Level 1 of the SFAS 157 fair value hierarchy).

Note 7 — Comprehensive Income

The following presents the components of comprehensive income (loss) (in thousands).

	Three Months Ended						Six Months Ended
	December 31						December 31
	2008			2007			2008			2007
Net income (loss)	$	952		$	(40,690	)	$	(328	)	$	(42,426	)
Currency translation adjustments		(772	)		50			(1,003	)		578
Comprehensive income (loss)	$	180		$	(40,640	)	$	(1,331	)	$	(41,848	)

Note 8 — Earnings Per Share

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

	Three Months Ended					Six Months Ended
	December 31					December 31
	2008		2007			2008			2007
Numerator for basic and diluted earnings per share:
Net income (loss)	$	952	$	(40,690	)	$	(328	)	$	(42,426	)
Denominators:
Weighted-average shares outstanding		6,931		6,851			6,958			6,837
Contingently issuable shares		3		4			3			4
Denominator for basic earnings per share		6,934		6,855			6,961			6,841
Effect of dilutive share-based compensation		106		—			—			—
Denominator for diluted earnings per share		7,040		6,855			6,961			6,841
Earnings (loss) per common share	$	0.14	$	(5.94	)	$	(0.05	)	$	(6.20	)
Earnings (loss) per common share assuming dilution	$	0.14	$	(5.94	)	$	(0.05	)	$	(6.20	)

9

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Item 2 should be read in the context of the information included in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission and elsewhere in this Quarterly Report, including our consolidated financial statements and accompanying notes in Item 1 of this Quarterly Report.

BUSINESS

We are a leading designer and marketer of branded men’s, women’s and children’s accessories, including belts, small leather goods, and gift accessories. Our product line also includes handbags and sporting goods. Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names, including DOCKERS^®, LEVI’S^®, LEVI STRAUSS SIGNATURE™, TOTES^®, ROLFS^®, WOOLRICH^®, CANTERBURY^®, PRINCE GARDNER^®, PRINCESS GARDNER^®, AMITY^®, COLETTA^®, STAGG^®, ACCESSORY DESIGN GROUP^®, TIGER^®, ETON^®, SURPLUS^®, EILEEN WEST™, GOODYEAR™, GENO D’LUCCA™, DR. MARTENS^®, and DR. MARTENS AIRWAIR^®, as well as private brands for major retail customers. We sell our products through all major retail distribution channels throughout North America, 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, automobile and tire stores, and the retail exchange operations of the United States military.

The overall negative retail environment and general economic conditions which the global economy began to experience over a year ago have continued to worsen, and there seems to be little consensus on when there will be a turnaround. Like most companies in the retail industry, our net sales, and resulting profitability, have been severely impacted beginning in fiscal 2008 and, across the board, our customers have indicated they are taking a very conservative approach toward replenishing inventory in this environment. We are making the necessary adjustments internally to respond to these measures, and we continue to work closely with our retail partners to develop products and programs to help them through these difficult times.

Our operating results for the first half of fiscal 2009 were not only affected by lower net sales, but also the need to recognize that $1.1 million of accounts receivable may not be collectible due to bankruptcy filings by several of our customers. These customers accounted for approximately 1.9% to 2.8% of our net sales in fiscal 2008 and each of the first two quarters of fiscal 2009. Additional future charges may be required if we determine there is no current market for customer-specific and odd-lot inventories.

We have identified more than $3 million in potential annualized savings resulting from an organizational restructuring plan we announced on January 20, 2009. The plan is designed to focus our product development efforts, build critical capabilities, increase flexibility to better serve our retail partners’ needs, and reduce operating expenses as a first step in stabilizing our platform to position us for profitable growth in the future. We estimate the pretax termination charges in the third quarter of fiscal 2009 relating to an approximately 17% salaried employee headcount reduction in connection with the organizational restructuring will be between $550,000 and $650,000.

10

FISCAL 2009 COMPARED TO FISCAL 2008

Net Sales And Gross Margin

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

	Three Months Ended						Six Months Ended
	December 31						December 31
	2008			2007			2008			2007
Net sales:
Men’s accessories	$	34,440		$	39,908		$	60,845		$	70,120
Women’s accessories		8,504			9,709			16,716			18,961
	$	42,944		$	49,617		$	77,561		$	89,081
Gross margin (loss):
Men’s accessories	$	12,792		$	3,734		$	21,711		$	13,043
Women’s accessories		2,969			(5,380	)		6,060			(1,859	)
	$	15,761		$	(1,646	)	$	27,771		$	11,184
Gross margin percent of sales:
Men’s accessories		37.1	%		9.4	%		35.7	%		18.6	%
Women’s accessories		34.9			(55.4	)		36.3			(9.8	)
Total		36.7			(3.3	)		35.8			12.6

Net sales were lower this year (quarter — $6.7 million; six months — $11.5 million) as the difficult retail environment, which began to affect our sales over a year ago, accelerated its decline. Approximately $4.5 million and $6.6 million of the men’s accessories sales declines in the second quarter and first half of fiscal 2009, respectively, were partly offset by lower discounts and allowances for returns primarily for our gift products. The first half of fiscal 2008 included more than $2.5 million in men’s belt and small leather goods sales to two customers as part of their closeout programs as they shifted to new private labels, one of which we replaced with a new program.

Our overall gross margin percentages of net sales in the current year (quarter — 36.7%; six months - 35.8%) included benefits of approximately 1.8 percentage points from sales of out-of-program inventory at prices exceeding the inventory’s previously reduced carrying value. The fiscal 2008 overall margin percentages for the quarter and six months were impacted 37.7 and 21.0 percentage points, respectively, by an inventory write-down. For men’s accessories products, other than gifts, the fiscal 2009 six-month margin percentage improved 5.0 percentage points over the prior year. This improvement included a 1.4 percentage point benefit from sales of inventory having reduced carrying values and lower product costs from overseas suppliers. Increased costs together with lower discounts and allowances compared to last year reduced the men’s gift accessories 2009 six-month margin by 2.6 percentage points. This margin reduction was offset by 2.3 percentage points from out-of-program inventory sales. Similarly, the 4.5 percentage point decrease in women’s accessories 2009 six-month margin resulting from increased costs was mitigated by 2.7 percentage points from sales of out-of-program inventory.

Expenses And Taxes

The following presents expense data by reportable segment (in thousands).

	Three Months Ended				Six Months Ended
	December 31				December 31
	2008		2007		2008		2007
Selling, general and administrative expenses:
Men’s accessories	$	11,157	$	12,497	$	20,573	$	23,132
Women’s accessories		2,890		3,904		5,875		7,710
	$	14,047	$	16,401	$	26,448	$	30,842
Depreciation and amortization:
Men’s accessories	$	301	$	666	$	677	$	1,373
Women’s accessories		173		253		366		522
	$	474	$	919	$	1,043	$	1,895
Interest expense	$	220	$	830	$	368	$	1,110

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Selling, general and administrative (“SG&A”) expenses in the second quarter of fiscal 2009 included a $1.1 million provision for doubtful accounts receivable and in the second quarter last year they included restructuring charges totaling $438,000. Other SG&A expenses, including lower selling and marketing costs, in fiscal 2009 were more than $2.3 million and $4.4 million less than the second quarter and six-month periods of the prior year, respectively. The major fiscal 2009 SG&A reductions compared to fiscal 2008 were derived from lower employment expenses (quarter — $1.1 million; six months — $1.9 million) resulting from workforce reductions and reduced distribution costs (quarter — $304,000; six months — $1.2 million) including closing our men’s accessories distribution facility in West Bend, Wisconsin in the second half of fiscal 2008.

Depreciation and amortization was lower this year primarily as the result of equipment and software reaching the end of their estimated depreciable lives and a $158,000 reduction in each quarter attributable to last year’s closing of the West Bend facility and writing off customer lists.

Interest expense in fiscal 2009 was more than 50% less than the expense in the same periods of fiscal 2008 as both our borrowings and the interest rates were lower in the current year. The fiscal 2008 second quarter includes $196,000 of costs related to a debt covenant waiver we received for the first quarter and $176,000 related to costs previously capitalized for the credit facility with our previous lenders.

Information about our income taxes is incorporated herein by reference to Note 4 of the notes to consolidated financial statements in Item 1 of this Quarterly Report.

SEASONALITY

Historically our first and second quarter sales and operating results reflect a seasonal increase compared to the third and fourth quarters of our fiscal year. However, sales for the first and second quarters of fiscal 2009 and 2008 were not consistent with historical patterns due to the very difficult retail environment in both years, deliveries to customers shifting from the first to the second quarter of fiscal 2009, and curtailed replenishment orders by one of our largest customers in fiscal 2008.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity have been cash flows from operating activities and our credit facilities ($24.4 million borrowing availability at December 31, 2008). Historically our first quarter operating activities result in net cash outflows due to procurement of holiday inventory shipped in the second quarter (fiscal 2009 — $14.3 million; fiscal 2008 — $7.6 million). We believe these liquidity sources will provide adequate financial resources for our foreseeable working capital needs; however, while we were in compliance with the tangible net worth financial ratio covenant of our credit agreement at December 31, 2008, we currently expect a waiver or modification of the covenant will be necessary at March 31, 2009 as we will not be in compliance with the covenant if we incur more than a minimal net loss in the third quarter of fiscal 2009. If we cannot obtain a waiver or modification, our borrowing capacity and liquidity could be negatively impacted. Information about our credit facilities is incorporated herein by reference to Note 5 of the notes to consolidated financial statements included in Item 1 of this Quarterly Report.

Operating cash flows for the first half of fiscal 2009 were a negative $4.7 million as accounts receivable, exclusive of the provision for doubtful accounts, increased $3.6 million and inventories increased $3.1 million from their levels at June 30, 2008. The increase in receivables was primarily due to deliveries to customers shifting from the first to the second quarter while, in the first half of fiscal 2008, more products were shipped and the receivables collected. Inventories did not decline in fiscal 2009 due to lower than anticipated sales. In fiscal 2008, more inventory was shipped, but later returns exceeded estimates. Part of the fiscal 2009 increases was offset by a $1.2 million tax refund included in other current assets at June 30, 2008.

Investing activities included nominal amounts of capital expenditures in the first half of both years and $1.1 million funding in fiscal 2009 of the rabbi trust established to set aside amounts to assist in satisfying our supplemental executive retirement obligation. Financing activities included the payment of dividends (2009 — $564,000; 2008 — $553,000) and stock purchase program transactions (2009 — $145,000 net cash distributions in lieu of issuing shares as the result of the program being suspended; 2008 — $520,000 net contributions). Seasonal borrowings funded the fiscal 2009 cash outflows while fiscal 2008 net borrowings were lower due to the $6.1 million in outstanding loans at June 30, 2007.

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In light of the ongoing decline in economic conditions, we suspended the payment of quarterly dividends in December 2008 in an effort to preserve capital and enhance our financial flexibility for investing in key growth initiatives as we implement our organizational restructuring plan. The dividend suspension will be reassessed on an ongoing basis. During fiscal 2009 we declared the following cash dividend:

Declaration Date	Record Date	Payable Date	Per Share
August 19, 2008	September 30, 2008	October 17, 2008	$0.04

CRITICAL ACCOUNTING POLICIES

There have been no significant changes in the critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended June 30, 2008.

ITEM 4T — CONTROLS AND PROCEDURES

Disclosure Controls And Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2008 in alerting them in a timely manner to material information required to be disclosed by us in the reports we file with or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934.

Changes In Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the second quarter of fiscal 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1A — RISK FACTORS

In addition to the information in this Quarterly Report on Form 10-Q, consideration should be given to the risk factors in Part I, “Item 1A — Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2008 which could materially and adversely affect our business, results of operations, and financial condition. There have been no significant changes in the risk factors disclosed in our 2008 Annual Report on Form 10-K, other than the updates set forth below.

Our industry is highly subject to economic cycles and retail industry conditions.
Our business is highly subject to general economic cycles and retail industry conditions. When general economic conditions are lower, consumers are often hesitant to use discretionary income to purchase fashion accessories. Any significant declines in general economic conditions or uncertainties regarding future economic prospects that may affect consumer spending habits could adversely affect our business.

The current volatility and disruption in the capital and credit markets have reached unprecedented levels and are having a significantly adverse impact on global economic conditions resulting in significant recessionary pressures and declines in consumer confidence and economic growth. The economic crisis has had and may continue to have a negative impact on our business which could result in:

• reduced consumer spending and demand for our products;

• increased consolidation in the retail industry;

• increased price competition for our products;

• increased risk of unsaleable inventories; and

• increased risk in the collectibility of accounts receivable from our customers.

These potential effects are difficult to forecast and mitigate. As a consequence, our operating results for a particular period are difficult to predict and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing effects could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect the market price of our common stock.

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We extend unsecured credit to our customers and are subject to potential financial difficulties they may face.

We extend credit to our department and retail store customers based on an evaluation of their financial condition and generally do not require collateral from our customers. If a customer experiences financial difficulties, we may need to curtail our sales to that customer or be subject to increased risk of nonpayment. This risk increases if distressed customers are forced to file for bankruptcy. If we are unable to collect our accounts receivable from a financially distressed or bankrupt customer, our operating results would be negatively impacted.

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases Of Equity Securities

The following provides information about repurchases of shares of common stock made by us during the quarter ended December 31, 2008. Of the total shares purchased, 441 were withheld from employees’ restricted stock awards for employment taxes due when the stock vested. The remaining 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				Shares Purchased		Of Shares That May
	Number		Average		As Part Of Publicly		Yet Be Purchased As
	Of Shares		Price Paid		Announced Plans		Part Of The Plans
Period	Purchased		Per Share		Or Programs		Or Programs
October 1, 2008 to October 31, 2008		6,913	$	3.89		N/A		N/A
November 1, 2008 to November 30, 2008		4,476		2.45		N/A		N/A
December 1, 2008 to December 31, 2008		2,619		1.93		N/A		N/A
Total		14,008		3.07		N/A		N/A

ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At our 2008 Annual Meeting of Stockholders on October 30, 2008, our stockholders voted on proposals to (1) elect two directors to our board of directors, and (2) ratify the appointment of Ernst & Young LLP as our independent auditor for fiscal 2009. NSL Capital Management, LLC (“NSL”) initiated a proxy contest and solicited proxies from our stockholders to elect Nicholas S. Levis and Evan Kagan to our board of directors instead of our Company’s nominees. No representatives of NSL attended the Annual Meeting and, as a result, NSL did not present its nominees for election and no proxies for NSL’s nominees were voted.

Mr. J.S.B. Jenkins and Mr. George C. Lake were re-elected to our board of directors to serve until the 2009 annual meeting of stockholders, or until their successors are elected and qualified. The number of votes cast for and withheld for each nominee was as follows:

Nominee	For	Withheld
J.S.B. Jenkins	3,740,711	1,417,257
George C. Lake	5,052,948	105,020

Votes on the proposal to ratify the appointment of Ernst & Young LLP as our independent auditor for fiscal 2009 were as follows:

For 5,136,485 Against 15,014 Abstain 6,469

Following the Annual Meeting, Dr. James F. Gaertner, Roger R. Hemminghaus, Gene Stallings, and newly-appointed N. Roderick McGeachy, III, having terms expiring in 2009, and Colombe M. Nicholas, W. Grady Rosier, and William D. Summitt, having terms expiring in 2010, continued as members of our board.

ITEM 6 — EXHIBITS

The Exhibit Index immediately preceding the exhibits required to be filed is incorporated herein by reference.

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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)
February 4, 2009	/s/ N. Roderick McGeachy, III N. Roderick McGeachy, III
	President and Chief Executive Officer (principal executive officer)
	/s/ M.C. Mackey M.C. Mackey
	Chief Financial Officer
	(principal financial officer and
	principal accounting officer)

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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      Certificate of Amendment of the Certificate of Incorporation of Tandy Brands Accessories, Inc.	8-K	11/02/07	0-18927	3.1
3.3      Amended and Restated Bylaws of Tandy Brands Accessories, Inc., effective July 2007	8-K	7/13/07	0-18927	3.01
3.4      Amendment No. 1 to Amended and Restated Bylaws of Tandy Brands Accessories, Inc.	8-K	11/02/07	0-18927	3.2
(4)     Instruments Defining the Rights of Security Holders, Including Indentures
4.1      Form of Common Stock Certificate of Tandy Brands Accessories, Inc.	S-1	12/17/90	33-37588	4.2
4.2      Certificate of Elimination of Series A Junior Participating Cumulative Preferred Stock of Tandy Brands Accessories, Inc.	8-K	10/24/07	01-18927	3.1
4.3      Credit Agreement by and between Tandy Brands Accessories, Inc. and Comerica Bank dated as of February 12, 2008	10-Q	2/14/08	0-18927	4.3
(10)      Material Contracts
10.1      Amendment No. 5 to the Tandy Brands Accessories, Inc. Benefit Restoration Plan dated December 31, 2008* **	N/A	N/A	N/A	N/A
10.2      Amendment No. 2 to the Tandy Brands Accessories, Inc. 1995 Stock Deferral Plan for Non-Employee Directors dated December 31, 2008* **	N/A	N/A	N/A	N/A
10.3      Amendment No. 8 to the Tandy Brands Accessories, Inc. Employees Investment Plan effective as of January 1, 2009* **	N/A	N/A	N/A	N/A
10.4      Summary of Fiscal 2009 Management Incentive Plan for Tandy Brands Accessories, Inc.*	8-K	12/24/08	0-18927	10.1
10.5      Summary of 2009 Long-Term Incentive Program for Tandy Brands Accessories, Inc.*	8-K	12/24/08	0-18927	10.2

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	Incorporated by Reference
	(if applicable)
Exhibit Number and Description	Form	Date	File No.	Exhibit
10.6      Form of Tandy Brands Accessories, Inc. 2009 Performance Unit Award Agreement* **	N/A	N/A	N/A	N/A
10.7      First Amendment to Lease dated January 22, 2009 by and between Enterprise Centre Operating Associates, LP and Tandy Brands Accessories, Inc. relating to the corporate office**	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

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