10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number 1-12368

TANDY LEATHER FACTORY, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	75-2543540
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1900 Southeast Loop 820, Fort Worth, Texas  76140

(Address of Principal Executive Offices) (Zip Code)

(817) 872-3200

(Registrant’s Telephone Number, Including Area Code)

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.  Yes [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for a shorter period that the registrant was required to submit and post such files). Yes [X]  No [  ]

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 definition of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Check one:  Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [  ] No [X]

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

Class	Shares outstanding as of May 10, 2014
Common Stock, par value $0.0024 per share	10,233,334

TANDY LEATHER FACTORY, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014

TABLE OF CONTENTS

	PAGE NO.
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
Consolidated Balance Sheets	1
Consolidated Statements of Income	2
Consolidated Statements of Comprehensive Income	3
Consolidated Statements of Cash Flows	4
Consolidated Statements of Stockholders' Equity	5
Notes to Consolidated Financial Statements	6
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.  Controls and Procedures	12
PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings	12
Item 6.  Exhibits	13
SIGNATURES	13

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

Tandy Leather Factory, Inc.

Consolidated Balance Sheets

					March 31,  2014 (unaudited)	December 31,  2013 (audited)
ASSETS
CURRENT ASSETS:
	Cash				$8,949,915	$11,082,679
	Accounts receivable-trade, net of allowance for doubtful accounts
			of $0 and $1,000 in 2014 and 2013, respectively		886,644	762,405
	Inventory				30,532,522	26,300,830
	Deferred income taxes				327,922	309,533
	Prepaid expenses				1,640,122	1,609,644
	Other current assets				160,543	478,593
				Total current assets	42,497,668	40,543,684
PROPERTY AND EQUIPMENT, at cost					20,869,036	20,290,990
Less accumulated depreciation and amortization					(6,138,879)	(5,863,280)
					14,730,157	14,427,710
GOODWILL					977,351	981,985
OTHER INTANGIBLES, net of accumulated amortization of approximately $633,000 and $622,000 in 2014 and 2013, respectively					91,860	103,228
OTHER assets					332,945	341,959
TOTAL ASSETS					$58,629,981	$56,398,566
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable-trade				$2,728,051	$1,884,637
	Accrued expenses and other liabilities				5,230,206	5,808,882
	Income taxes payable				604,777	272,198
	Current maturities of long-term debt				202,500	202,500
				Total current liabilities	8,765,534	8,168,217
DEFERRED INCOME TAXES					1,172,276	1,212,557
LONG-TERM DEBT, net of current maturities					2,345,625	2,396,250
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
	Preferred stock, $0.10 par value; 20,000,000 shares authorized;
		none issued or outstanding; attributes to be determined on issuance			-	-
	Common stock, $0.0024 par value; 25,000,000 shares authorized;
		11,226,957 and 11,192,356 shares issued at 2014 and 2013, respectively;
		10,233,334 and 10,198,733 shares outstanding at 2014 and 2013			26,945	26,862
	Paid-in capital				5,892,824	5,892,907
	Retained earnings				43,362,004	41,507,592
	Treasury stock at cost (993,623 shares at 2014 and 2013)				(2,894,068)	(2,894,068)
	Accumulated other comprehensive income				(41,159)	88,249
				Total stockholders’ equity	46,346,546	44,621,542
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY					$58,629,981	$56,398,566

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

1

Tandy Leather Factory, Inc.

Consolidated Statements of Income

(Unaudited)

For the Three Months Ended March 31, 2014 and 2013

		2014	2013
NET SALES		$19,838,466	$19,237,827
COST OF SALES		7,122,743	7,306,998
	Gross profit	12,715,723	11,930,829
OPERATING EXPENSES		9,749,060	9,309,969
INCOME FROM OPERATIONS		2,966,663	2,620,860
OTHER (INCOME) EXPENSE:
Interest expense		45,828	56,094
Other, net		(1,344)	(26,739)
	Total other (income) expense	44,484	29,355
INCOME BEFORE INCOME TAXES		2,922,179	2,591,505
PROVISION FOR INCOME TAXES		1,067,767	1,005,184
NET INCOME		$1,854,412	$1,586,321
NET INCOME PER COMMON SHARE:
BASIC		$0.18	$0.16
DILUTED		$0.18	$0.16
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC		10,198,733	10,162,442
DILUTED		10,239,505	10,194,219

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

2

Tandy Leather Factory, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

For the Three Months Ended March 31, 2014 and 2013

	2014	2013
NET INCOME	$1,854,412	$1,586,321
Foreign currency translation adjustments, net of tax	(129,408)	(188,351)
COMPREHENSIVE INCOME	$1,725,004	$1,397,970

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

3

Tandy Leather Factory, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

For the Three Months Ended March 31, 2014 and 2013

					2014	2013
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income				$1,854,412	$1,586,321
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation and amortization			346,555	263,102
		Loss on disposal or abandonment of assets			3,600	21,003
		Non-cash stock-based compensation			-	5,843
		Deferred income taxes			(58,670)	45,873
		Other			(124,726)	(176,925)
		Net changes in assets and liabilities:
			Accounts receivable-trade, net		(124,239)	(112,121)
			Inventory		(4,231,692)	503,792
			Prepaid expenses		(30,478)	(614,298)
			Other current assets		318,050	(263,284)
			Accounts payable-trade		843,414	163,265
			Accrued expenses and other liabilities		(578,676)	(1,447,527)
			Income taxes payable		332,579	520,257
	Total adjustments				(3,304,283)	(1,091,020)
	Net cash provided by (used in) operating activities				(1,449,871)	495,301
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property and equipment				(641,282)	(982,553)
	Decrease (increase) in other assets				9,014	(3,124)
				Net cash used in investing activities	(632,268)	(985,677)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Payments on notes payable and long-term debt				(50,625)	(50,625)
				Net cash used in financing activities	(50,625)	(50,625)
NET DECREASE IN CASH					(2,132,764)	(541,001)
CASH, beginning of period					11,082,679	7,705,182
CASH, end of period					$8,949,915	$7,164,181
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period					$45,828	$56,094
Income tax paid during the period, net of (refunds)					$791,137	$384,652

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

4

Tandy Leather Factory, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

For the Three Months Ended March 31, 2014 and 2013

	Number of Shares	Par Value	Paid-in Capital	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Income	Total
BALANCE, December 31, 2012	10,162,442	$26,775	$5,767,508	$(2,894,068)	$34,241,875	$378,927	$37,521,017
Stock-based compensation	-	-	5,843	-	-	-	5,843
Net  income	-	-	-	-	1,586,321	-	1,586,321
Translation adjustment	-	-	-	-	-	(188,351)	(188,351)
BALANCE, March 31, 2013	10,162,442	$26,775	$5,773,351	$(2,894,068)	$35,828,196	$190,576	$38,924,830
	Number of Shares	Par Value	Paid-in Capital	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Income	Total
BALANCE, December 31, 2013	10,198,733	$26,862	$5,892,907	$(2,894,068)	$41,507,592	$88,249	$44,621,542
Stock-based compensation	34,601	83	(83)	-	-	-	-
Net  income	-	-	-	-	1,854,412	-	1,854,412
Translation adjustment	-	-	-	-	-	(129,408)	(129,408)
BALANCE, March 31, 2014	10,233,334	$26,945	$5,892,824	$(2,894,068)	$43,362,004	$(41,159)	$46,346,546

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

5

TANDY LEATHER FACTORY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying consolidated financial statements for Tandy Leather Factory, Inc. and its consolidated subsidiaries contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly its financial position as of March 31, 2014 and December 31, 2013, and its results of operations and cash flows for the three-month periods ended March 31, 2014 and 2013.  Operating results for the three-month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.  These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2013.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.

Inventory.  Inventory is stated at the lower of cost or market and is accounted for on the “first in, first out” method.  Based on negotiations with vendors, title generally passes to us when merchandise is put on board.  Merchandise to which we have title but which have not yet received is recorded as inventory in transit.  In addition, the value of inventory is periodically reduced for slow-moving or obsolete inventory based on management’s review of items on hand compared to their estimated future demand.

The components of inventory consist of the following:

	As of
	March 31, 2014	December 31, 2013
Inventory on hand:
Finished goods held for sale	$26,633,088	$24,546,771
Raw materials and work in process	884,798	853,200
Inventory in transit	3,014,636	900,859
	$30,532,522	$26,300,830

Goodwill and Other Intangibles.  Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is required to be evaluated for impairment on an annual basis, absent indicators of impairment during the interim.  Application of the goodwill impairment test requires exercise of judgment, including the estimation of future cash flows, determination of appropriate discount rates and other important assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.

A two-step process is used to test for goodwill impairment.  The first phase screens for impairment, while the second phase (if necessary) measures the impairment.  We have elected to perform the annual analysis during the fourth calendar quarter of each year.  As of December 31, 2013, management determined that the present value of the discounted estimated future cash flows of the stores associated with the goodwill is sufficient to support their respective goodwill balances.  No indicators of impairment were identified during the first quarter of 2014.

A summary of changes in our goodwill for the periods ended March 31, 2014 and 2013 is as follows:

	Leather Factory	Tandy Leather	Total
Balance, December 31, 2012	$607,319	$383,406	$990,725
Acquisitions and adjustments	-	-	-
Foreign exchange gain/loss	(3,186)	-	(3,186)
Impairments	-	-	-
Balance, March 31, 2013	$604,133	$383,406	$987,539
	Leather Factory	Tandy Leather	Total
Balance, December 31, 2013	$598,579	$383,406	$981,985
Acquisitions and adjustments	-	-	-
Foreign exchange gain/loss	(4,634)	-	(4,634)
Impairments	-	-	-
Balance, March 31, 2014	$593,945	$383,406	$977,351

Other intangibles consist of the following:

	As of March 31, 2014			As of December 31, 2013
	Gross	Accumulated Amortization	Net	Gross	Accumulated Amortization	Net
Trademarks, Copyrights	$544,369	$495,592	$48,777	$544,369	$487,891	$56,478
Non-Compete Agreements	180,156	137,073	43,083	181,216	134,466	46,750
	$724,525	$632,665	$91,860	$725,585	$622,357	$103,228

We recorded amortization expense of $11,368 during the first quarter of 2014 compared to $8,526 during the first quarter of 2013.  All of our intangible assets, other than goodwill, are subject to amortization under U.S. GAAP.  Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding 5 years is as follows:

	Wholesale Leathercraft	Retail Leathercraft	Total
2014	$455	$33,337	$33,792
2015	-	28,635	28,635
2016	-	2,000	2,000
2017	-	-	-
2018	-	-	-

Revenue Recognition.  Our sales generally occur via two methods:  (1) at the counter in our stores, and (2) shipment by common carrier.  Sales at the counter are recorded and title passes as transactions occur.  Otherwise, sales are recorded and title passes when the merchandise is shipped to the customer.  Our shipping terms are FOB shipping point.

We offer an unconditional satisfaction guarantee to our customers and accept all product returns.  Net sales represent gross sales less negotiated price allowances, product returns, and allowances for defective merchandise.

6

Comprehensive Income (loss) and Accumulated Other Comprehensive Income (loss).Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-stockholder sources and includes all changes in equity during a period except those resulting from investments by and dividends to stockholders.  Our comprehensive income (loss) consists of our net income and foreign currency translation adjustments from our international operations.

Recent Accounting Pronouncements.  In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The objective of ASU 2013-02 is to improve reporting by requiring entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the statement of operations.  The amendments in ASU 2013-02 are required to be applied retrospectively and are effective for reporting periods beginning after December 15, 2012.  The adoption of the standard did not have any impact on our consolidated financial statements.

In July 2013, FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or Tax Credit Carryforward Exists” to eliminate the diversity in practice associated with the presentation of unrecognized tax benefits in instances where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 generally requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard did not have a material impact on our consolidated financial statements.

In April 2014, FASB issued Accounting Standards Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. This guidance also changes an entity’s requirements when presenting, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation. A discontinued operation may include a component of an entity, or a business or nonprofit activity. The guidance is effective for interim and annual reporting periods beginning after December 15, 2014. The adoption of the new requirements is not expected to have a material impact on our consolidated earnings, financial position or cash flows.

2.  NOTES PAYABLE AND LONG-TERM DEBT

On July 31, 2007, we entered into a Credit Agreement and Line of Credit Note with JPMorgan Chase Bank, N.A., pursuant to which the bank agreed to provide us with a credit facility of up to $5,500,000 to facilitate our purchase of real estate consisting of a 191,000 square foot building situated on 30 acres of land located at 1900 SE Loop 820 in Fort Worth, Texas.  Under the terms of the Line of Credit Note, we could borrow from time to time until April 30, 2008, up to the lesser of $5,500,000 or 90% of the cost of the property and make monthly payments. Proceeds in the amount of $4,050,000 were used to fund the purchase of the property from Standard Motor Products, Inc. under an Agreement of Purchase and Sale, dated June 25, 2007, which closed on July 31, 2007.  No further borrowings were drawn.  On April 30, 2008, the principal balance was rolled into a 10-year term note with an interest rate of 7.10% per annum.

At March 31, 2014 and December 31, 2013, the amount outstanding under the above agreement consisted of the following:

	March 31, 2014	December 31, 2013
Credit Agreement with JPMorgan Chase Bank – collateralized by real estate; payable as follows:
Line of Credit Note dated July 31, 2007, converted to a 10-year term note on April 30, 2008; $16,875 monthly principal payments plus interest at 7.1% per annum; matures April 30, 2018	$2,548,125	$2,598,750
	2,548,125	2,598,750
Less - Current maturities	(202,500)	(202,500)
	$2,345,625	$2,396,250

On July 12, 2012, we executed a Line of Credit Note with JPMorgan Chase Bank, N.A., pursuant to which the bank agreed to provide us with a revolving credit facility of up to $4 million. The revolver bears interest at LIBOR plus 2% (2.15% at March 31, 2014) and was to mature on June 30, 2013.  On June 25, 2013, we executed a Note Modification Agreement which extended the maturity date of the Line of Credit Note to June 30, 2014.  All other terms remain unchanged.  Interest is paid monthly. The note was obtained for working capital purposes and is secured by the real estate and improvements located at 1900 Southeast Loop 820, Fort Worth Texas.  No amounts were outstanding under this Line of Credit Note as of March 31, 2014.

3.  STOCK-BASED COMPENSATION

We have one stock option plan which provides for annual stock option grants to non-employee directors with an exercise price equal to the fair market value of the shares at the date of grant.  Under this plan, 12,000 options were awarded to directors during the quarter ended March 31, 2013.  These options vest and become exercisable six months from the option grant date.  Options outstanding and exercisable were granted at a stock option price which was not less than the fair market value of our common stock on the date the option was granted and no option has a term in excess of ten years.  No options were granted during the quarter ended March 31, 2014.  We recognized share based compensation expense of $0 and $5,843 for the quarters ended March 31, 2014 and 2013, respectively, as a component of operating expenses.  During the three months ended March 31, 2014 and 2013, the stock option activity under our stock option plans was as follows:

	Weighted Average Exercise Price	# of shares	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding, January 1, 2013	$4.53	121,600
Granted	6.87	12,000
Cancelled	-	-
Exercised	-	-
Outstanding, March 31, 2013	$4.74	133,600	4.97	$218,446
Exercisable, March 31, 2013	$4.53	121,600	4.83	$206,760
Outstanding, January 1, 2014	$5.04	84,600
Granted	-	-
Cancelled	-	-
Exercised	-	-
Outstanding, March 31, 2014	$5.04	84,600	6.72	$104,656
Exercisable, March 31, 2014	$5.04	84,600	6.72	$104,656

Other information pertaining to option activity during the three-month periods ended March 31, 2014 and 2013 are as follows:

	March 31, 2014	March 31, 2013
Weighted average grant-date fair value of stock options granted	N/A	$11,686
Total fair value of stock options vested	N/A	N/A
Total intrinsic value of stock options exercised	N/A	N/A

The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:

	2014	2013
Volatility	N/A	19.1%
Expected option life	N/A	3 years
Interest rate (risk free)	N/A	0.80%
Dividends	None	None

As of March 31, 2014 and 2013, there was unrecognized compensation cost related to non-vested stock options of $0 and $5,843, respectively.

7

We have a restricted stock plan that was adopted by our Board of Directors in January 2013 and approved by our stockholders in June 2013.  The plan reserves up to 300,000 shares of our common stock for restricted stock awards to our executive officers, non-employee directors and other key employees.  Awards granted under the plan may be stock awards or performance awards, and may be subject to a graded vesting schedule with a minimum vesting period of four years.

In February 2014, our Chief Executive Officer, Chief Financial Officer and Senior Vice President were awarded restricted stock grants consisting of 9,375 shares each. In addition, four of our independent directors were awarded restricted stock grants consisting of 1,619 shares each. The grants will vest in equal annual amounts over a four-year period.  The fair value of nonvested restricted common stock awards is the market value of our common stock on the date of grant.  Compensation costs for these awards will be recognized on a straight-line basis over the four year vesting period.

A summary of the activity for nonvested restricted common stock awards as of March 31, 2014 is presented below:

	Shares	Grant Fair Value
Balance, January 1, 2014	-	-
Granted	34,601	$8.96
Forfeited	-	-
Vested	-	-
Balance, March 31, 2014	34,601	$8.96

Total unrecognized compensation expense for the nonvested restricted stock awards as of March 31, 2014 totals $310,025 and is expected to be recognized in equal annual amounts over a period of four years.

4.  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the three months ended March 31, 2014 and 2013:

		2014	2013
Net income		$1,854,412	$1,586,321
Numerator for basic and diluted earnings per share		$1,854,412	$1,586,321
Denominator for basic earnings per share –  weighted-average shares		10,198,733	10,162,442
Effect of dilutive securities:
	Stock options	39,193	31,777
	Restricted stock	1,579	-
Dilutive potential common shares		40,772	31,777
Denominator for diluted earnings per share –  weighted-average shares		10,239,505	10,194,219
	Basic earnings per share	$0.18	$0.16
	Diluted earnings per share	$0.18	$0.16

The net effect of converting stock options and restricted stock to purchase 119,201 and 121,600 shares of common stock at exercise prices less than the average market prices has been included in the computations of diluted EPS for the quarters ended March 31, 2014 and 2013, respectively.

5.  COMMITMENTS AND CONTINGENCIES

Legal Proceedings.  On March 16, 2011, two former employees of ours filed a lawsuit, entitled Mark Barnes and Jerry Mercante on behalf of themselves and all other similarly situated v. Tandy Leather Company, Inc., Tandy Leather Factory, and Does 1-50, in the US District Court for the District of Nevada.  The lawsuit was subsequently transferred to the United States District Court, Northern District of Texas, Fort Worth Division (“Court”), and an amended complaint was filed on May 9, 2011 by plaintiffs to add another former employee, Donna Cavota, as a third named plaintiff.  The suit alleged that we violated requirements of the Fair Labor Standards Act (FLSA) as well as various state wage laws.  Plaintiffs sought to represent themselves and all similarly situated U.S. current and former store managers of ours.   A Settlement Agreement was reached between the parties, and on September 24, 2012, the Court issued an Order Preliminarily Approving the Settlement of all federal and state claims asserted by the plaintiffs in the litigation.  We continue to deny any violation of any statute, law, rule or regulation, any liability or wrongdoing, and the truth of plaintiffs’ allegations. We agreed to enter into the Settlement Agreement to avoid further expense and inconvenience, end the disruption and burden of the litigation, avoid any other present or future litigation arising out of the facts that gave rise to the litigation, avoid the risk inherent in uncertain complex litigation, and to put to rest the controversy underlying the litigation.

The Settlement Agreement preliminarily approved by the Court required us to establish a fund designated as a Qualified Settlement Fund (Escrow Account) in the amount of $993,386 to fund (1) settlement payments to the plaintiffs, (2) settlement payments to the other members of the settlement class who joined the case, (3) plaintiffs’ attorneys’ fees and expenses, and (4) and the claim administrator (Escrow Agent’s) fees and expenses.   The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Settlement Agreement which was attached as Exhibit 10.1 to a Current Report on Form 8-K, as filed with the Securities and Exchange Commission on October 1, 2012.

The deadline established by the Court for any persons employed by us as store managers between November 23, 2008 and September 24, 2012 to join the lawsuit as class members expired on May 24, 2013.  On June 28, 2013, the Court issued two orders: (1) an Order Approving Class and Collective Action Settlement and Dismissing Case with Prejudice, and (2) a Final Judgment, Approving Class and Collective Action Settlement and Dismissing Case with Prejudice.  Pursuant to the Court’s June 28, 2013 orders, the claims administrator (Escrow Agent) was required to make payments to the plaintiffs and those existing and former store managers who joined the lawsuit by signing and returning Consent to Join Forms, which contained a release of us from the claims asserted in plaintiffs’ lawsuit.

The settlement payments to the class members and the plaintiffs were made from the Escrow Account pursuant to the formula set forth in the Settlement Agreement by the claims administrator, as well as the payment of the plaintiffs’ attorney’s fees and the fees and expenses of the claims administrator (Escrow Agent).  The total payment from the Escrow Account, including our required FICA payments based on the settlement payments, was $744,273 from the total Escrow Account of $993,386.  All payments were made by the claims administrator and the balance of the Escrow Account (approximately $249,000) was returned to us in the first quarter of 2014.

In connection with the settlement, we recorded a charge to operations of $993,386 during the quarter ended September 30, 2012 as this amount, as ordered by the Court, covered the full settlement of all claims of the plaintiffs and the class members, plaintiffs’ attorneys’ fees, and the fees and expenses of the claims administrator (Escrow Agent) in accordance with the terms of the Settlement Agreement. In the quarter ended June 30, 2013, we recorded a benefit of approximately $312,000, which was the expected remaining balance in the Escrow Account after all payments have been made.  Payroll taxes associated with the payments to claimants of approximately $63,000 was recorded in the fourth quarter of 2013.

We are periodically involved in various other litigation that arises in the ordinary course of business and operations.  There are no such matters pending that we expect to have a material impact on our financial position and operating results.  Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred.

8

6.  SEGMENT INFORMATION

We identify our segments based on the activities of three distinct operations:

a.   Wholesale Leathercraft, which consists of a chain of wholesale stores operating under the name, The Leather Factory, located in North America;

b.   Retail Leathercraft, which consists of a chain of retail stores operating under the name, Tandy Leather Company, located in North America; and

c.   International Leathercraft, which sells to both wholesale and retail customers.  We have three stores operating in this segment:  one in Northampton, United Kingdom, one in Sydney, Australia, and one in Jerez, Spain.  These stores carry the same products as our North American stores.

Our reportable operating segments have been determined as separately identifiable business units, and we measure segment earnings as operating earnings, defined as income before interest and income taxes.

	Wholesale Leathercraft	Retail Leathercraft	Int’l Leathercraft	Total
For the quarter ended March 31, 2014
Net sales	$6,823,968	$11,956,354	$1,058,144	$19,838,466
Gross profit	4,530,209	7,498,416	687,098	12,715,723
Income from operations	1,372,637	1,472,703	121,323	2,966,663
Interest expense	45,828	-	-	45,828
Other, net	(9,776)	-	8,432	(1,344)
Income before income taxes	1,336,585	1,472,703	112,891	2,922,179
Depreciation and amortization	225,855	104,441	16,259	346,555
Fixed asset additions	236,211	356,198	48,873	641,282
Total assets	$41,806,750	$13,903,814	$2,919,417	$58,629,981
For the quarter ended March 31, 2013
Net sales	$6,729,734	$11,559,861	$948,232	$19,237,827
Gross profit	4,165,155	7,161,228	604,446	11,930,829
Income from operations	1,012,965	1,514,839	93,056	2,620,860
Interest expense	56,094	-	-	56,094
Other, net	(14,493)	(10)	(12,236)	(26,739)
Income before income taxes	971,364	1,514,849	105,292	2,591,505
Depreciation and amortization	191,533	57,429	14,140	263,102
Fixed asset additions	738,736	242,149	1,668	982,553
Total assets	$36,244,560	$10,474,588	$2,959,476	$49,678,624

Net sales for geographic areas were as follows for the three months ended March 31, 2014 and 2013:

	2014	2013
United States	$16,645,886	$16,196,394
Canada	1,913,512	1,919,723
All other countries	1,279,068	1,121,710
	$19,838,466	$19,237,827

Geographic sales information is based on the location of the customer.  No single foreign country, except for Canada, accounted for any material amount of our consolidated net sales for the three-month periods ended March 31, 2014 and 2013.  We do not have any significant long-lived assets outside of the United States.

Item 2.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our Business

We are the world’s largest specialty retailer and wholesale distributor of leather and leathercraft related items.  We market our products to our growing list of customers through company-owned retail and wholesale stores.  We are a Delaware corporation, and our common stock trades on the NASDAQ Global Market under the symbol “TLF.”  We operate our business in three segments:  Wholesale Leathercraft, which operates wholesale stores in North America under the trade name, The Leather Factory, Retail Leathercraft, which operates retail stores in North America under the trade name, Tandy Leather Company, and International Leathercraft, which operates combination retail/wholesale stores outside of North America under the trade name, Tandy Leather Factory.  See Note 6 to the Consolidated Financial Statements for additional information concerning our segments, as well as our foreign operations.

Our Wholesale Leathercraft segment operates 29 company-owned wholesale stores in 19 states and three Canadian provinces.  These stores are engaged in the wholesale distribution of leather and related items, including leatherworking tools, buckles and belt adornments, leather dyes and finishes, saddle and tack hardware, and do-it-yourself kits, to retailers, manufacturers, and end users.  Our Wholesale Leathercraft segment also includes our National Account sales group, whose only customers are national craft chains.

Our Retail Leathercraft segment operates company-owned Tandy Leather Company retail stores in 37 states and six Canadian provinces.  Tandy Leather Company, one of the best-known suppliers of leather and related supplies used in the leathercraft industry, has been a primary leathercraft resource for decades.  Tandy Leather Company’s products include quality tools, leather, accessories, kits and teaching materials.  In 2002, we began expanding Tandy Leather Company’s industry presence by opening retail stores.  As of May 1, 2014, we were operating 80 Tandy Leather Company retail stores located throughout the United States and Canada.

Our International Leathercraft segment operates 3 company-owned stores, all located outside of North America.  These stores operate as combination retail / wholesale stores and consist of one store in Northampton, United Kingdom, one store in Sydney, Australia, and one store in Jerez, Spain.  We expect to continue opening international stores in the future, but do not intend to open any new stores in 2014.

Critical Accounting Policies

A description of our critical accounting policies appears in Item 7 “Management's Discussions and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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Forward-Looking Statements

Certain statements contained in this report and other materials we file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made or to be made by us, other than statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements generally are accompanied by words such as “may,” “will,” “could,” “should,” “anticipate,” “believe,” “budgeted,” “expect,” “intend,” “plan,” “project,” “potential,” “estimate,” “continue,” or “future” variations thereof or other similar statements. There are certain important risks that could cause results to differ materially from those anticipated by some of the forward-looking statements. Some, but not all, of the important risks, including, without limitation, those described below, could cause actual results to differ materially from those suggested by the forward-looking statements.  Please refer also to our Annual Report on Form 10-K for fiscal year ended December 31, 2013 for additional information concerning these and other uncertainties that could negatively impact the Company.

Ø   Our business may be negatively impacted by general economic conditions in the United States and abroad.

Our performance is subject to worldwide economic conditions and their impact on levels of consumer spending that affect not only the ultimate consumer, but also small businesses and other retailers.  Specialty retail, and retail in general, is heavily influenced by general economic cycles.  Purchases of non-essential products tend to decline in periods of recession or uncertainty regarding future economic prospects, as disposable income declines.  During periods of economic uncertainty, we may not be able to maintain or increase our sales to existing customers, make sales to new customers, open and operate new stores, maintain sales levels at our existing stores, maintain or increase our international operations on a profitable basis, or maintain our earnings from operations as a percentage of net sales.  The United States and global economies have suffered from economic uncertainty for the past several years.  Consumer spending in the United States appears to have stabilized recently, but could deteriorate in the future.  As a result, our operating results may be adversely and materially affected by downward trends or uncertainty in the United States or global economies.

Ø   Our profitability may decline as a result of increasing pressure on margins.

Our industry is subject to significant pricing pressure caused by many factors, including fluctuations in the cost of the leather and metal products that we purchase and changes in consumer spending patterns and acceptance of our products.  Changes in consumers’ product preferences or lack of acceptance of our products with respect to which costs have increased may prohibit us from passing cost increases on to customers which could cause our gross margin to decline.  If our product costs increase and our sale prices do not, our future operating results could be adversely affected unless we are able to offset such gross margin declines with comparable reductions in operating costs.

Ø   We may be unsuccessful in implementing our planned international expansion, which could impair the value of our brand, harm our business and negatively affect our results of operation.

We plan to grow our net sales and net earnings from our International Leathercraft segment by opening store in various international markets.  As we expand outside of North America, we may incur significant costs relating to starting up, maintaining and expanding foreign operations.  Such costs may include, but are not limited to, obtaining locations for stores, hiring personnel, and travel expenses.  We may be unable to open and operate new stores successfully and as a results, our growth may be limited, unless we are able to identify desirable sites for store locations, negotiate acceptable lease terms, hire, train and retain competent store personnel; manage inventory effectively to meet the needs and demands of customers on a timely basis, manage foreign currency risk effectively, and achieve acceptable operating margins from the new stores.  We cannot be sure that we can successfully open new stores or that those new stores will be profitable. If we are unable to successfully open new stores or our new stores are not profitable, our business and our results of operations could be adversely affected.

As we continue to increase our international operations, we face the possibility of greater losses from a number of risks inherent in doing business in international markets and from a number of factors which are beyond our control, such as political instability or acts of terrorism, which disrupt trade with the countries in which our suppliers or customers are located; local business practices that do not conform to legal or ethical guidelines; restrictions or regulations relating to imports or exports; additional or increased customs duties, tariffs, taxes and other charges on imports; significant fluctuations in the value of the dollar against foreign currencies; social, legal or economic instability in the foreign markets in which we do business, which could influence our ability to sell our products in these markets; and restrictions on the transfer of funds between the United States and foreign jurisdictions.  The occurrence of any of these events could adversely affect our business and our results of operations.

We assume no obligation to update or otherwise revise our forward-looking statements even if experience or future changes make it clear that any projected results, express or implied, will not be realized.

Results of Operations

The following tables present selected financial data of each of our three segments for the quarters ended March 31, 2014 and 2013.

	Quarter Ended March 31, 2014		Quarter Ended March 31, 2013
	Sales	Income from Operations	Sales	Income from Operations
Wholesale Leathercraft	$6,823,968	$1,372,637	$6,729,734	$1,012,965
Retail Leathercraft	11,956,354	1,472,703	11,559,861	1,514,839
Int’l Leathercraft	1,058,144	121,323	948,232	93,056
Total Operations	$19,838,466	$2,966,663	$19,237,827	$2,620,860

Consolidated net sales for the quarter ended March 31, 2014 increased $600,000, or 3.1%, compared to the same period in 2013.  International Leathercraft reported the largest percentage sales gain of 11.6%, followed by Retail Leathercraft, reporting a sales gain of 3.4%.  Wholesale Leathercraft reported a sales increase of 1.4%.  Income from operations on a consolidated basis for the quarter ended March 31, 2014 increased 13.2%, or $346,000, from the first quarter of 2013 due to the improvement in gross profit margin.

The following table shows in comparative form our consolidated net income for the first quarters of 2014 and 2013:

	2014	2013	% change
Net income	$1,854,412	$1,586,321	16.9%

All segments contributed to our consolidated net income.  Additional information appears below for each segment.

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Wholesale Leathercraft

Our Wholesale Leathercraft operation consists of 29 wholesale stores and our National Account sales group.  The National Account sales group’s customers consist of national craft chains only.  The following table presents the combined sales mix by customer categories for the quarters ended March 31, 2014 and 2013:

	Quarter ended
Customer Group	03/31/14	03/31/13
RETAIL (end users, consumers, individuals)	43%	35%
INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc.)	4%	6%
WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc.)	40%	46%
MANUFACTURERS	7%	7%
NATIONAL ACCOUNTS	6%	6%
	100%	100%

Net sales increased 1.4%, or $94,000, for the first quarter of 2014 compared to the first quarter of 2013 as follows:

	# Stores	Qtr Ended 03/31/14	# Stores	Qtr Ended 03/31/13	$ Change	% Change
Same store sales	29	$6,481,121	29	$6,444,321	$36,800	0.6%
National account group		342,847		285,413	57,434	20.1%
Total sales	29	$6,823,968	29	$6,729,734	$94,234	1.4%

Sales to our retail and manufacturing customers increased in the first quarter of 2014 compared to the first quarter of 2013, while sales to our wholesale and institution group customers were down slightly.  Sales to our national account customers, while declining over time due to the elimination of certain products from our product line that these customers were buying (as these products have not historically provided an acceptable gross profit margin), increased this quarter due to one-time sales of certain close-out items.  Income from operations for Wholesale Leathercraft during the current quarter increased by $360,000 from the comparative 2013 quarter, an increase of 35%.

An increase in gross profit of $365,000 contributed to the improvement in income from operations, while operating expenses held steady against last year’s first quarter expenses.  Gross profit as a percentage of sales increased from 61.9% in the first quarter of 2013 to 66.4% in the first quarter of 2014, due to an increase in sales to our retail customers, which brings higher gross profit margins, and more sales of non-leather products, which also brings higher gross profit margins than that of leather sales.  Operating expenses increased slightly as a percentage of sales, increasing only $5,000 compared to last year’s comparable period.  Expense increases occurred in legal and professional fees, supplies, repairs/maintenance, and depreciation.  This was offset by a decrease in advertising and marketing expenses.

Retail Leathercraft

Our Retail Leathercraft operation consists of 80 Tandy Leather Company retail stores at March 31, 2014 compared to 78 stores at March 31, 2013.  Net sales increased 3.4% for the first quarter of 2014 over the same quarter last year.  A store is categorized as “new” until it is operating for the full comparable period in the prior year.

	# Stores	Qtr Ended 03/31/14	# Stores	Qtr Ended 03/31/13	$ Change	% Change
Same store sales	76	$11,610,085	76	$11,394,666	$215,419	1.9%
New store sales	4	346,269	-	-	346,269	N/A
Closed store sales	2	-	2	165,195	(165,195)	N/A
Total sales	80	$11,956,354	78	$11,559,861	$396,493	3.4%

The following table presents sales mix by customer categories for the quarters ended March 31, 2014 and 2013 for our Retail Leathercraft operation:

	Quarter ended
Customer Group	03/31/14	03/31/13
RETAIL (end users, consumers, individuals)	62%	62%
INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc.)	3%	3%
WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc.)	33%	33%
NATIONAL ACCOUNTS	-	-
MANUFACTURERS	2%	2%
	100%	100%

Sales to retail, wholesale, and manufacturer customer groups increased over the first quarter of 2013, while sales to our institution customer group declined slightly over the same period.

Income from operations decreased $42,000, or 2.8%, from the comparative 2013 quarter due to an increase in operating expenses offset partially by an increase in gross profit.  Our gross profit increased by $337,000 from the prior period primarily due to higher sales.  Operating expenses as a percentage of sales rose from 48.8% in the first quarter of 2013 to 50.4% in the first quarter of 2014.  The increase in operating expenses of $379,000 compared to the first quarter of 2013 was caused by increases in employee compensation and benefits ($163,000), rent and utilities expense ($95,000), depreciation ($47,000), and travel expenses ($40,000).  A portion of these expense increases were attributable to the four new stores opened since November 2013.

International Leathercraft

International Leathercraft consists of all stores located outside of North America.  As of March 31, 2014 and 2013, the segment contained three stores located in United Kingdom, Australia, and Spain. This segment’s sales totaled $1,058,000 for the first quarter of 2014, compared to $948,000 in the first quarter of 2013, an improvement of 11.6%.  Operating expenses totaled $566,000 in the first quarter of 2014, up from $511,000 in the first quarter of 2013.  Employee compensation is this segment’s largest expense, followed by advertising and marketing expenses, rent, travel, and shipping costs to customers.

Other Expenses

We paid $46,000 in interest on our bank debt in the first quarter of 2014, compared to $56,000 in the first quarter of 2013.  We recorded an expense of $8,000 for currency fluctuations in the first quarter of 2014.  Comparatively, in the first quarter of 2013, we recorded income of $13,000 for currency fluctuations.

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Capital Resources, Liquidity and Financial Condition

On our consolidated balance sheet, total assets increased from $56.4 million at year-end 2013 to $58.6 million at March 31, 2014.  Total stockholders’ equity increased from $44.6 million at December 31, 2013 to $46.3 million at March 31, 2014, the increase being attributable to our net income earned in the first quarter of 2014.  Our current ratio decreased slightly from 5.0 at December 31, 2013 to 4.9 at March 31, 2014 due primarily to the increase in accounts payable during the first quarter of 2014.

As of March 31, 2014, our investment in inventory increased by $4.2 million from year-end 2013.  Inventory turnover reached an annualized rate of 2.8 times during the first quarter of 2014, decreasing from 3.0 times for the first quarter of 2013.  Inventory turnover was 3.0 times for all of 2013.  We compute our inventory turns as sales divided by average inventory.  

Trade accounts receivable was approximately $887,000 at March 31, 2014, up $124,000 from $762,000 at year-end 2013.  The average days to collect accounts decreased to 36 days for the first quarter of 2014, an improvement from the average days to collect accounts in the first quarter of 2013 of 40 days.  We are constantly monitoring our customer accounts very closely in order to minimize the risk of uncollectible accounts in the current economic environment.  Our allowance for doubtful accounts decreased from year-end 2013 to March 31, 2014 as a result of our collecting a number of various older accounts, which also contributed to the reduction in the days outstanding.

Accounts payable increased approximately $843,000 to $2.7 million at March 31, 2014 compared to $1.9 million at year-end 2013 due to the increase in inventory during the quarter.  Accrued expenses decreased from $5.8 million at December 31, 2013 to $5.2 million at March 31, 2014.  The payment of the 2013 manager bonuses during the first quarter of 2014 accounted for the reduction.

During the first quarter of 2014, cash flow used by operating activities was $1.4 million.  The increase in inventory of $4.2 million, offset by net income of $1.9 million and the increase in accounts payable of approximately $843,000 accounted for the use of operating cash during the first quarter of 2014.

By comparison, during the first quarter of 2013, cash flow provided by operating activities was approximately $495,000.  Net income of $1.6 million and the reduction of inventory of approximately $504,000, offset by the reduction in accrued expenses of $1.4 million accounted for the majority of the operating cash provided in the first quarter of 2013.

Cash flow used by investing activities totaled approximately $632,000 in the first quarter of 2014, consisting primarily of the purchase of store fixtures, factory equipment, and computer equipment.  In the first quarter of 2013, cash used by investing activities totaled approximately $986,000, consisting primarily of building construction in progress of our flagship store, which opened in June 2013, and store fixture purchases.

Cash flow used by financing activities totaled $51,000 in both the first quarters of 2014 and 2013, consisting entirely of debt repayments.

We expect to fund our operating and liquidity needs as well as our store growth from a combination of current cash balances and internally generated funds.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

For disclosures about market risk affecting us, see Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for fiscal year ended December 31, 2013.  We believe that our exposure to market risks has not changed significantly since December 31, 2013.  We expect that our exposure to foreign currency exchange risk will increase as our international presence increases.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the last day of the fiscal period covered by this report, March 31, 2014. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of March 31, 2014, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

The information contained in Note 5 to the consolidated financial statements included in Item 1 of this Report is hereby incorporated into this Item 1 by reference.

12

Item 6. Exhibits.

Exhibit Number	Description
3.1	Certificate of Incorporation of The Leather Factory, Inc., and Certificate of Amendment to Certificate of Incorporation of The Leather Factory, Inc. filed as Exhibit 3.1 to Tandy Leather Factory, Inc.’s Form 10-Q filed with the Securities and Exchange Commission on August 12, 2005 and incorporated by reference herein.
3.2	Bylaws of The Leather Factory, Inc. (n/k/a Tandy Leather Factory, Inc.), filed as Exhibit 3.5 to the Current Report on Form 8-K (Commission File No. 001-12368) filed by Tandy Leather Factory, Inc (f/k/a The Leather Factory, Inc.) with the Securities and Exchange Commission on July 14, 2004 and incorporated by reference herein.
3.3	Certificate of Designations of Series A Junior Participating Preferred Stock of Tandy Leather Factory, Inc. filed as Exhibit 3.1 to Tandy Leather Factory’s Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 10, 2013 and incorporated by reference herein.
10.1	Form of Non-Employee Director Restricted Stock Agreement under Tandy Leather Factory, Inc.’s 2013 Restricted Stock Plan, filed as Exhibit 10.1 to Tandy Leather Factory, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 14, 2014 and incorporated by reference herein.
10.2	2007 Director Non-Qualified Stock Option Plan, filed as Exhibit A to Tandy Leather Factory, Inc.’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 18, 2007 and incorporated by reference herein.
10.3	First Amendment to 2007 Director Non-Qualified Stock Option Plan dated May 3, 2010, filed as Exhibit 10.2 to Tandy Leather Factory Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2010 and incorporated by reference herein.
10.4	Second Amendment to 2007 Director Non-Qualified Stock Option Plan dated October 7, 2010, filed as Exhibit 10.3 to Tandy Leather Factory Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 12, 2010 and incorporated by reference herein.
10.5	Third Amendment to 2007 Director Non-Qualified Stock Option Plan dated February 11, 2014, filed as Exhibit 10.5 to Tandy Leather Factory Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 14, 2014 and incorporated by reference herein.
10.6	Form of Employee Restricted Stock Agreement under Tandy Leather Factory, Inc.’s 2013 Restricted Stock Plan, filed as Exhibit 10.6 to Tandy Leather Factory, Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 14, 2014 and incorporated by reference herein.
*31.1	13a-14(a) or 15d-14(a) Certification by Jon Thompson, Chief Executive Officer and President.
*31.2	13a-14(a) or 15d-14(a) Certification by Shannon Greene, Chief Financial Officer and Treasurer.
*32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS^	XBRL Instance Document.
101.SCH^	XBRL Taxonomy Extension Schema Document.
101.CAL^	XBRL Taxonomy Extension Calculation Document.
101.DEF^	XBRL Taxonomy Extension Definition Document.
101.LAB^	XBRL Taxonomy Extension Labels Document.
101.PRE^	XBRL Taxonomy Extension Presentation Document.
____________
*Filed herewith.

^ XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

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

	TANDY LEATHER FACTORY, INC.
	(Registrant)
Date:  May 14, 2014	By:  /s/ Jon Thompson
	Jon Thompson
	Chief Executive Officer and President
Date:  May 14, 2014	By:  /s/ Shannon L. Greene
	Shannon L. Greene
	Chief Financial Officer and Treasurer (Chief Accounting Officer)

13

EX-31.1

EXHIBIT 31.1

RULE 13a-14(a) CERTIFICATION

I, Jon Thompson, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Tandy Leather Factory, 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(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   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

d.   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's first fiscal quarter 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 controls over financial reporting.

Date:  May 14, 2014
	/s/ Jon Thompson
	Jon Thompson
	Chief Executive Officer and President
	(principal executive officer)

EX-31.2

EXHIBIT 31.2

RULE 13a-14(a) CERTIFICATION

I, Shannon L. Greene, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Tandy Leather Factory, 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(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   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

d.   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's first fiscal quarter 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 controls over financial reporting.

Date:  May 14, 2014
	/s/ Shannon L. Greene
	Shannon L. Greene
	Treasurer and Chief Financial Officer
	(principal accounting 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 of Tandy Leather Factory, Inc. (the “Company”) for the quarter ended March 31, 2014 as filed with the United States Securities and Exchange Commission on the date hereof (the "Report"), Jon Thompson, as Chief Executive Officer and President of the Company, and Shannon L. Greene, as Treasurer and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

ii.   The information contained in the Report fully presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

May 14, 2014	By: /s/ Jon Thompson
	Jon Thompson
	Chief Executive Officer and President
May 14, 2014	By: /s/ Shannon L. Greene
	Shannon L. Greene
	Chief Financial Officer and Treasurer

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Note 4 - Earnings Per Share (Details) - Computation of Basic and Diluted Earnings Per Share (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Note 4 - Earnings Per Share (Details) - Computation of Basic and Diluted Earnings Per Share [Line Items]
Net income (in Dollars)	$ 1,854,412	$ 1,586,321
Numerator for basic and diluted earnings per share (in Dollars)	$ 1,854,412	$ 1,586,321
Denominator for basic earnings per share – weighted-average shares	10,198,733	10,162,442
Effect of dilutive securities:
Dilutive potential common shares	40,772	31,777
Denominator for diluted earnings per share – weighted-average shares	10,239,505	10,194,219
Basic earnings per share (in Dollars per share)	$ 0.18	$ 0.16
Diluted earnings per share (in Dollars per share)	$ 0.18	$ 0.16
Employee Stock Option [Member]
Effect of dilutive securities:
Dilutive securities	39,193	31,777
Restricted Stock [Member]
Effect of dilutive securities:
Dilutive securities	1,579

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Note 2 - Notes Payable and Long-Term Debt (Details) - Summary of Credit Agreement and Line of Credit Note (USD $)	Mar. 31, 2014	Dec. 31, 2013
Credit Agreement with JPMorgan Chase Bank – collateralized by real estate; payable as follows:
Line of Credit Note dated July 31, 2007, converted to a 10-year term note on April 30, 2008; $16,875 monthly principal payments plus interest at 7.1% per annum; matures April 30, 2018	$ 2,548,125	$ 2,598,750
	2,548,125	2,598,750
Less - Current maturities	(202,500)	(202,500)
	$ 2,345,625	$ 2,396,250

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Note 6 - Segment Information (Details) - Net Sales for Geographic Areas (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues from External Customers and Long-Lived Assets [Line Items]
Geographic locations	$ 19,838,466	$ 19,237,827
UNITED STATES
Revenues from External Customers and Long-Lived Assets [Line Items]
Geographic locations	16,645,886	16,196,394
CANADA
Revenues from External Customers and Long-Lived Assets [Line Items]
Geographic locations	1,913,512	1,919,723
All Other Countries [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Geographic locations	$ 1,279,068	$ 1,121,710

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Note 2 - Notes Payable and Long-Term Debt

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

2. NOTES PAYABLE AND LONG-TERM DEBT

On July 31, 2007, we entered into a Credit Agreement and Line of Credit Note with JPMorgan Chase Bank, N.A., pursuant to which the bank agreed to provide us with a credit facility of up to $5,500,000 to facilitate our purchase of real estate consisting of a 191,000 square foot building situated on 30 acres of land located at 1900 SE Loop 820 in Fort Worth, Texas. Under the terms of the Line of Credit Note, we could borrow from time to time until April 30, 2008, up to the lesser of $5,500,000 or 90% of the cost of the property and make monthly payments. Proceeds in the amount of $4,050,000 were used to fund the purchase of the property from Standard Motor Products, Inc. under an Agreement of Purchase and Sale, dated June 25, 2007, which closed on July 31, 2007. No further borrowings were drawn. On April 30, 2008, the principal balance was rolled into a 10-year term note with an interest rate of 7.10% per annum.

At March 31, 2014 and December 31, 2013, the amount outstanding under the above agreement consisted of the following:

	March 31, 2014			December 31, 2013
Credit Agreement with JPMorgan Chase Bank – collateralized by real estate; payable as follows:
Line of Credit Note dated July 31, 2007, converted to a 10-year term note on April 30, 2008; $16,875 monthly principal payments plus interest at 7.1% per annum; matures April 30, 2018	$	2,548,125		$	2,598,750
		2,548,125			2,598,750
Less - Current maturities		(202,500	)		(202,500	)
	$	2,345,625		$	2,396,250

On July 12, 2012, we executed a Line of Credit Note with JPMorgan Chase Bank, N.A., pursuant to which the bank agreed to provide us with a revolving credit facility of up to $4 million. The revolver bears interest at LIBOR plus 2% (2.15% at March 31, 2014) and was to mature on June 30, 2013. On June 25, 2013, we executed a Note Modification Agreement which extended the maturity date of the Line of Credit Note to June 30, 2014. All other terms remain unchanged. Interest is paid monthly. The note was obtained for working capital purposes and is secured by the real estate and improvements located at 1900 Southeast Loop 820, Fort Worth Texas. No amounts were outstanding under this Line of Credit Note as of March 31, 2014.

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Note 3 - Stock-Based Compensation (Details) - Other Information Pertaining to Option Activity (USD $)	3 Months Ended
	Mar. 31, 2013
Other Information Pertaining to Option Activity [Abstract]
Weighted average grant-date fair value of stock options granted	$ 11,686

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Note 3 - Stock-Based Compensation (Details) - Summary of Stock Option Activity (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Sep. 30, 2013	Sep. 30, 2012
Summary of Stock Option Activity [Abstract]
Weighted Average Exercise Price			$ 5.04	$ 4.53
# of shares			84,600	121,600
Weighted Average Exercise Price		$ 6.87
# of shares	34,601	12,000
Weighted Average Exercise Price	$ 5.04	$ 4.74	$ 5.04	$ 4.53
# of shares	84,600	133,600	84,600	121,600
Weighted Average Remaining Contractual Term (in years)	6 years 262 days	4 years 354 days
Aggregate Intrinsic Value	$ 104,656	$ 218,446
Weighted Average Exercise Price	$ 5.04	$ 4.53
# of shares	84,600	121,600
Weighted Average Remaining Contractual Term (in years)	6 years 262 days	4 years 302 days
Aggregate Intrinsic Value	$ 104,656	$ 206,760

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Note 3 - Stock-Based Compensation (Details) - Fair Value of Options	3 Months Ended
	Mar. 31, 2013
Fair Value of Options [Abstract]
Volatility	19.10%
Expected option life (years)	3 years
Interest rate (risk free)	0.80%

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Note 3 - Stock-Based Compensation (Details) - Activity for Nonvested Restricted Common Stock Awards (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Activity for Nonvested Restricted Common Stock Awards [Abstract]
Balance, January 1, 2014	0
Balance, January 1, 2014	$ 0
Granted	34,601	12,000
Granted	$ 8.96
Forfeited	0
Forfeited	$ 0
Vested	0
Vested	$ 0
Balance, March 31, 2014	34,601
Balance, March 31, 2014	$ 8.96

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Note 1 - Basis of Presentation and Certain Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Disclosure Text Block [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

1. BASIS OF PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES

In the opinion of management, the accompanying consolidated financial statements for Tandy Leather Factory, Inc. and its consolidated subsidiaries contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly its financial position as of March 31, 2014 and December 31, 2013, and its results of operations and cash flows for the three-month periods ended March 31, 2014 and 2013. Operating results for the three-month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2013.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Inventory. Inventory is stated at the lower of cost or market and is accounted for on the “first in, first out” method. Based on negotiations with vendors, title generally passes to us when merchandise is put on board. Merchandise to which we have title but which have not yet received is recorded as inventory in transit. In addition, the value of inventory is periodically reduced for slow-moving or obsolete inventory based on management’s review of items on hand compared to their estimated future demand.

The components of inventory consist of the following:

	As of
	March 31, 2014		December 31, 2013
Inventory on hand:
Finished goods held for sale	$	26,633,088	$	24,546,771
Raw materials and work in process		884,798		853,200
Inventory in transit		3,014,636		900,859
	$	30,532,522	$	26,300,830

Goodwill and Other Intangibles. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is required to be evaluated for impairment on an annual basis, absent indicators of impairment during the interim. Application of the goodwill impairment test requires exercise of judgment, including the estimation of future cash flows, determination of appropriate discount rates and other important assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.

A two-step process is used to test for goodwill impairment. The first phase screens for impairment, while the second phase (if necessary) measures the impairment. We have elected to perform the annual analysis during the fourth calendar quarter of each year. As of December 31, 2013, management determined that the present value of the discounted estimated future cash flows of the stores associated with the goodwill is sufficient to support their respective goodwill balances. No indicators of impairment were identified during the first quarter of 2014.

A summary of changes in our goodwill for the periods ended March 31, 2014 and 2013 is as follows:

	Leather Factory			Tandy Leather		Total
Balance, December 31, 2012	$	607,319		$	383,406	$	990,725
Acquisitions and adjustments		-			-		-
Foreign exchange gain/loss		(3,186	)		-		(3,186	)
Impairments		-			-		-
Balance, March 31, 2013	$	604,133		$	383,406	$	987,539

	Leather Factory			Tandy Leather		Total
Balance, December 31, 2013	$	598,579		$	383,406	$	981,985
Acquisitions and adjustments		-			-		-
Foreign exchange gain/loss		(4,634	)		-		(4,634	)
Impairments		-			-		-
Balance, March 31, 2014	$	593,945		$	383,406	$	977,351

Other intangibles consist of the following:

	As of March 31, 2014						As of December 31, 2013
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Trademarks, Copyrights	$	544,369	$	495,592	$	48,777	$	544,369	$	487,891	$	56,478
Non-Compete Agreements		180,156		137,073		43,083		181,216		134,466		46,750
	$	724,525	$	632,665	$	91,860	$	725,585	$	622,357	$	103,228

We recorded amortization expense of $11,368 during the first quarter of 2014 compared to $8,526 during the first quarter of 2013. All of our intangible assets, other than goodwill, are subject to amortization under U.S. GAAP. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding 5 years is as follows:

	Wholesale Leathercraft		Retail Leathercraft		Total
2014	$	455	$	33,337	$	33,792
2015		-		28,635		28,635
2016		-		2,000		2,000
2017		-		-		-
2018		-		-		-

Revenue Recognition. Our sales generally occur via two methods: (1) at the counter in our stores, and (2) shipment by common carrier. Sales at the counter are recorded and title passes as transactions occur. Otherwise, sales are recorded and title passes when the merchandise is shipped to the customer. Our shipping terms are FOB shipping point.

We offer an unconditional satisfaction guarantee to our customers and accept all product returns. Net sales represent gross sales less negotiated price allowances, product returns, and allowances for defective merchandise.

Comprehensive Income (loss) and Accumulated Other Comprehensive Income (loss). Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-stockholder sources and includes all changes in equity during a period except those resulting from investments by and dividends to stockholders. Our comprehensive income (loss) consists of our net income and foreign currency translation adjustments from our international operations.

Recent Accounting Pronouncements.  In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” The objective of ASU 2013-02 is to improve reporting by requiring entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the statement of operations. The amendments in ASU 2013-02 are required to be applied retrospectively and are effective for reporting periods beginning after December 15, 2012. The adoption of the standard did not have any impact on our consolidated financial statements.

In July 2013, FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or Tax Credit Carryforward Exists” to eliminate the diversity in practice associated with the presentation of unrecognized tax benefits in instances where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 generally requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard did not have a material impact on our consolidated financial statements.

In April 2014, FASB issued Accounting Standards Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. This guidance also changes an entity’s requirements when presenting, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation. A discontinued operation may include a component of an entity, or a business or nonprofit activity. The guidance is effective for interim and annual reporting periods beginning after December 15, 2014. The adoption of the new requirements is not expected to have a material impact on our consolidated earnings, financial position or cash flows.

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Note 4 - Earnings Per Share (Details)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants	119,201	121,600

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Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Mar. 31, 2014	Dec. 31, 2013
CURRENT ASSETS:
Cash	$ 8,949,915	$ 11,082,679
Accounts receivable-trade, net of allowance for doubtful accounts of $0 and $1,000 in 2014 and 2013, respectively	886,644	762,405
Inventory	30,532,522	26,300,830
Deferred income taxes	327,922	309,533
Prepaid expenses	1,640,122	1,609,644
Other current assets	160,543	478,593
Total current assets	42,497,668	40,543,684
PROPERTY AND EQUIPMENT, at cost	20,869,036	20,290,990
Less accumulated depreciation and amortization	(6,138,879)	(5,863,280)
	14,730,157	14,427,710
GOODWILL	977,351	981,985
OTHER INTANGIBLES, net of accumulated amortization of approximately $633,000 and $622,000 in 2014 and 2013, respectively	91,860	103,228
OTHER assets	332,945	341,959
TOTAL ASSETS	58,629,981	56,398,566
CURRENT LIABILITIES:
Accounts payable-trade	2,728,051	1,884,637
Accrued expenses and other liabilities	5,230,206	5,808,882
Income taxes payable	604,777	272,198
Current maturities of long-term debt	202,500	202,500
Total current liabilities	8,765,534	8,168,217
DEFERRED INCOME TAXES	1,172,276	1,212,557
LONG-TERM DEBT, net of current maturities	2,345,625	2,396,250
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance	0	0
Common stock, $0.0024 par value; 25,000,000 shares authorized; 11,226,957 and 11,192,356 shares issued at 2014 and 2013, respectively; 10,233,334 and 10,198,733 shares outstanding at 2014 and 2013, respectively	26,945	26,862
Paid-in capital	5,892,824	5,892,907
Retained earnings	43,362,004	41,507,592
Treasury stock at cost (993,623 shares at 2014 and 2013)	(2,894,068)	(2,894,068)
Accumulated other comprehensive income	(41,159)	88,249
Total stockholders’ equity	46,346,546	44,621,542
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 58,629,981	$ 56,398,566

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,854,412	$ 1,586,321
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	346,555	263,102
Loss on disposal or abandonment of assets	3,600	21,003
Non-cash stock-based compensation	0	5,843
Deferred income taxes	(58,670)	45,873
Other	(124,726)	(176,925)
Net changes in assets and liabilities:
Accounts receivable-trade, net	(124,239)	(112,121)
Inventory	(4,231,692)	503,792
Prepaid expenses	(30,478)	(614,298)
Other current assets	318,050	(263,284)
Accounts payable-trade	843,414	163,265
Accrued expenses and other liabilities	(578,676)	(1,447,527)
Income taxes payable	332,579	520,257
Total adjustments	(3,304,283)	(1,091,020)
Net cash provided by (used in) operating activities	(1,449,871)	495,301
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(641,282)	(982,553)
Decrease (increase) in other assets	9,014	(3,124)
Net cash used in investing activities	(632,268)	(985,677)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable and long-term debt	(50,625)	(50,625)
Net cash used in financing activities	(50,625)	(50,625)
NET DECREASE IN CASH	(2,132,764)	(541,001)
CASH, beginning of period	11,082,679	7,705,182
CASH, end of period	8,949,915	7,164,181
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period	45,828	56,094
Income tax paid during the period, net of (refunds)	$ 791,137	$ 384,652

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Note 6 - Segment Information (Details)	3 Months Ended
	Mar. 31, 2014
Note 6 - Segment Information (Details) [Line Items]
Number of Operating Segments	3
International Leathercraft [Member]
Note 6 - Segment Information (Details) [Line Items]
Number of Stores	3
Northampton United Kingdom [Member]
Note 6 - Segment Information (Details) [Line Items]
Number of Stores	1
Sydney Australia [Member]
Note 6 - Segment Information (Details) [Line Items]
Number of Stores	1
Jerez Spain [Member]
Note 6 - Segment Information (Details) [Line Items]
Number of Stores	1

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Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) - Other Intangibles (USD $)	Mar. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Gross	$ 724,525	$ 725,585
Accumulated Amortization	633,000	622,000
Net	91,860	103,228
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	544,369	544,369
Accumulated Amortization	495,592	487,891
Net	48,777	56,478
Noncompete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Gross	180,156	181,216
Accumulated Amortization	137,073	134,466
Net	$ 43,083	$ 46,750

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Note 6 - Segment Information (Details) - Summary of Reportable Operating Segments (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Net sales	$ 19,838,466	$ 19,237,827
Gross profit	12,715,723	11,930,829
Operating earnings	2,966,663	2,620,860
Interest (expense)	45,828	56,094
Other income (expense), net	(1,344)	(26,739)
Income before income taxes	2,922,179	2,591,505
Depreciation and amortization	346,555	263,102
Fixed asset additions	641,282	982,553
Total assets	58,629,981	49,678,624	56,398,566
Wholesale Leathercraft [Member]
Segment Reporting Information [Line Items]
Net sales	6,823,968	6,729,734
Gross profit	4,530,209	4,165,155
Operating earnings	1,372,637	1,012,965
Interest (expense)	45,828	56,094
Other income (expense), net	(9,776)	(14,493)
Income before income taxes	1,336,585	971,364
Depreciation and amortization	225,855	191,533
Fixed asset additions	236,211	738,736
Total assets	41,806,750	36,244,560
Retail Leathercraft [Member]
Segment Reporting Information [Line Items]
Net sales	11,956,354	11,559,861
Gross profit	7,498,416	7,161,228
Operating earnings	1,472,703	1,514,839
Other income (expense), net		(10)
Income before income taxes	1,472,703	1,514,849
Depreciation and amortization	104,441	57,429
Fixed asset additions	356,198	242,149
Total assets	13,903,814	10,474,588
Int’l Leathercraft [Member]
Segment Reporting Information [Line Items]
Net sales	1,058,144	948,232
Gross profit	687,098	604,446
Operating earnings	121,323	93,056
Other income (expense), net	8,432	(12,236)
Income before income taxes	112,891	105,292
Depreciation and amortization	16,259	14,140
Fixed asset additions	48,873	1,668
Total assets	$ 2,919,417	$ 2,959,476

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Note 2 - Notes Payable and Long-Term Debt (Details) (USD $)	1 Months Ended					0 Months Ended	3 Months Ended	0 Months Ended	1 Months Ended
	Jul. 31, 2007	Mar. 31, 2014	Dec. 31, 2013	Jul. 31, 2007 Building [Member] Credit Agreement with JPMorgan Chase Bank, N.A. [Member] sqft	Jul. 31, 2007 Land [Member] Credit Agreement with JPMorgan Chase Bank, N.A. [Member] acre	Jul. 12, 2012 London Interbank Offered Rate (LIBOR) [Member] Line of Credit Note with JPMorgan Chase Bank, N.A.[Member]	Mar. 31, 2014 London Interbank Offered Rate (LIBOR) [Member] Line of Credit Note with JPMorgan Chase Bank, N.A.[Member]	Apr. 30, 2008 Term Note [Member] Credit Agreement with JPMorgan Chase Bank, N.A. [Member]	Jul. 31, 2007 Credit Agreement with JPMorgan Chase Bank, N.A. [Member]	Jul. 12, 2012 Line of Credit Note with JPMorgan Chase Bank, N.A.[Member]
Note 2 - Notes Payable and Long-Term Debt (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity (in Dollars)									$ 5,500,000	$ 4,000,000
Area of Real Estate Property				191,000	30
Line of Credit Facility Maximum Borrowing Capacity Percentage of Property									90.00%
Proceeds from Bank Debt (in Dollars)	$ 4,050,000
Debt Instrument, Term								10 years
Debt Instrument, Interest Rate, Stated Percentage		7.10%	7.10%					7.10%
Debt Instrument, Basis Spread on Variable Rate						2.00%	2.15%
Debt Instrument Amortization Period								820 years

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Consolidated Statements of Stockholders’ Equity (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2012
BALANCE,	$ 46,346,546	$ 38,924,830	$ 44,621,542	$ 37,521,017
BALANCE, (in Shares)	11,226,957		11,192,356
Stock-based compensation	0	5,843
Net income	1,854,412	1,586,321
Translation adjustment	(129,408)	(188,351)
Common Stock [Member]
BALANCE,	26,945	26,775	26,862	26,775
BALANCE, (in Shares)	10,233,334	10,162,442	10,198,733	10,162,442
Stock-based compensation	83
(in Shares)	34,601
Additional Paid-in Capital [Member]
BALANCE,	5,892,824	5,773,351	5,892,907	5,767,508
Stock-based compensation	(83)	5,843
Treasury Stock [Member]
BALANCE,	(2,894,068)	(2,894,068)	(2,894,068)	(2,894,068)
Retained Earnings [Member]
BALANCE,	43,362,004	35,828,196	41,507,592	34,241,875
Net income	1,854,412	1,586,321
Accumulated Other Comprehensive Income (Loss) [Member]
BALANCE,	(41,159)	190,576	88,249	378,927
Translation adjustment	$ (129,408)	$ (188,351)

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Accounts receivable-trade, net allowance for doubtful accounts (in Dollars)	$ 0	$ 1,000
OTHER INTANGIBLES, net of accumulated amortization (in Dollars)	$ 633,000	$ 622,000
Preferred stock par value (in Dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in Dollars per share)	$ 0.0024	$ 0.0024
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	11,226,957	11,192,356
Common stock, shares outstanding	10,233,334	10,198,733
Treasury stock shares	993,623	993,623

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Note 4 - Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	2014		2013
Net income	$	1,854,412	$	1,586,321
Numerator for basic and diluted earnings per share	$	1,854,412	$	1,586,321
Denominator for basic earnings per share – weighted-average shares		10,198,733		10,162,442
Effect of dilutive securities:
Stock options		39,193		31,777
Restricted stock		1,579		-
Warrants		-		-
Dilutive potential common shares		40,772		31,777
Denominator for diluted earnings per share – weighted-average shares		10,239,505		10,194,219
Basic earnings per share	$	0.18	$	0.16
Diluted earnings per share	$	0.18	$	0.16

XML

Document And Entity Information	3 Months Ended
	Mar. 31, 2014	May 10, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	TANDY LEATHER FACTORY INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		10,198,733
Amendment Flag	false
Entity Central Index Key	0000909724
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

XML

Note 6 - Segment Information (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Wholesale Leathercraft			Retail Leathercraft			Int’l Leathercraft			Total
For the quarter ended March 31, 2014
Net sales	$	6,823,968		$	11,956,354		$	1,058,144		$	19,838,466
Gross profit		4,530,209			7,498,416			687,098			12,715,723
Income from operations		1,372,637			1,472,703			121,323			2,966,663
Interest expense		45,828			-			-			45,828
Other, net		(9,776	)		-			8,432			(1,344	)
Income before income taxes		1,336,585			1,472,703			112,891			2,922,179
Depreciation and amortization		225,855			104,441			16,259			346,555
Fixed asset additions		236,211			356,198			48,873			641,282
Total assets	$	41,806,750		$	13,903,814		$	2,919,417		$	58,629,981
For the quarter ended March 31, 2013
Net sales	$	6,729,734		$	11,559,861		$	948,232		$	19,237,827
Gross profit		4,165,155			7,161,228			604,446			11,930,829
Income from operations		1,012,965			1,514,839			93,056			2,620,860
Interest expense		56,094			-			-			56,094
Other, net		(14,493	)		(10	)		(12,236	)		(26,739	)
Income before income taxes		971,364			1,514,849			105,292			2,591,505
Depreciation and amortization		191,533			57,429			14,140			263,102
Fixed asset additions		738,736			242,149			1,668			982,553
Total assets	$	36,244,560		$	10,474,588		$	2,959,476		$	49,678,624

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas [Table Text Block]

	2014		2013
United States	$	16,645,886	$	16,196,394
Canada		1,913,512		1,919,723
All other countries		1,279,068		1,121,710
	$	19,838,466	$	19,237,827

XML

Consolidated Statements of Income (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
NET SALES	$ 19,838,466	$ 19,237,827
COST OF SALES	7,122,743	7,306,998
Gross profit	12,715,723	11,930,829
OPERATING EXPENSES	9,749,060	9,309,969
INCOME FROM OPERATIONS	2,966,663	2,620,860
OTHER (INCOME) EXPENSE:
Interest expense	45,828	56,094
Other, net	(1,344)	(26,739)
Total other (income) expense	44,484	29,355
INCOME BEFORE INCOME TAXES	2,922,179	2,591,505
PROVISION FOR INCOME TAXES	1,067,767	1,005,184
NET INCOME	$ 1,854,412	$ 1,586,321
BASIC (in Dollars per share)	$ 0.18	$ 0.16
DILUTED (in Dollars per share)	$ 0.18	$ 0.16
BASIC (in Shares)	10,198,733	10,162,442
DILUTED (in Shares)	10,239,505	10,194,219

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Note 5 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

5. COMMITMENTS AND CONTINGENCIES

Legal Proceedings. On March 16, 2011, two former employees of ours filed a lawsuit, entitled Mark Barnes and Jerry Mercante on behalf of themselves and all other similarly situated v. Tandy Leather Company, Inc., Tandy Leather Factory, and Does 1-50, in the US District Court for the District of Nevada. The lawsuit was subsequently transferred to the United States District Court, Northern District of Texas, Fort Worth Division (“Court”), and an amended complaint was filed on May 9, 2011 by plaintiffs to add another former employee, Donna Cavota, as a third named plaintiff. The suit alleged that we violated requirements of the Fair Labor Standards Act (FLSA) as well as various state wage laws. Plaintiffs sought to represent themselves and all similarly situated U.S. current and former store managers of ours. A Settlement Agreement was reached between the parties, and on September 24, 2012, the Court issued an Order Preliminarily Approving the Settlement of all federal and state claims asserted by the plaintiffs in the litigation. We continue to deny any violation of any statute, law, rule or regulation, any liability or wrongdoing, and the truth of plaintiffs’ allegations. We agreed to enter into the Settlement Agreement to avoid further expense and inconvenience, end the disruption and burden of the litigation, avoid any other present or future litigation arising out of the facts that gave rise to the litigation, avoid the risk inherent in uncertain complex litigation, and to put to rest the controversy underlying the litigation.

The Settlement Agreement preliminarily approved by the Court required us to establish a fund designated as a Qualified Settlement Fund (Escrow Account) in the amount of $993,386 to fund (1) settlement payments to the plaintiffs, (2) settlement payments to the other members of the settlement class who joined the case, (3) plaintiffs’ attorneys’ fees and expenses, and (4) and the claim administrator (Escrow Agent’s) fees and expenses.   The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Settlement Agreement which was attached as Exhibit 10.1 to a Current Report on Form 8-K, as filed with the Securities and Exchange Commission on October 1, 2012.

The deadline established by the Court for any persons employed by us as store managers between November 23, 2008 and September 24, 2012 to join the lawsuit as class members expired on May 24, 2013. On June 28, 2013, the Court issued two orders: (1) an Order Approving Class and Collective Action Settlement and Dismissing Case with Prejudice, and (2) a Final Judgment, Approving Class and Collective Action Settlement and Dismissing Case with Prejudice. Pursuant to the Court’s June 28, 2013 orders, the claims administrator (Escrow Agent) was required to make payments to the plaintiffs and those existing and former store managers who joined the lawsuit by signing and returning Consent to Join Forms, which contained a release of us from the claims asserted in plaintiffs’ lawsuit.

The settlement payments to the class members and the plaintiffs were made from the Escrow Account pursuant to the formula set forth in the Settlement Agreement by the claims administrator, as well as the payment of the plaintiffs’ attorney’s fees and the fees and expenses of the claims administrator (Escrow Agent). The total payment from the Escrow Account, including our required FICA payments based on the settlement payments, was $744,273 from the total Escrow Account of $993,386. All payments were made by the claims administrator and the balance of the Escrow Account (approximately $249,000) was returned to us in the first quarter of 2014.

In connection with the settlement, we recorded a charge to operations of $993,386 during the quarter ended September 30, 2012 as this amount, as ordered by the Court, covered the full settlement of all claims of the plaintiffs and the class members, plaintiffs’ attorneys’ fees, and the fees and expenses of the claims administrator (Escrow Agent) in accordance with the terms of the Settlement Agreement. In the quarter ended June 30, 2013, we recorded a benefit of approximately $312,000, which was the expected remaining balance in the Escrow Account after all payments have been made. Payroll taxes associated with the payments to claimants of approximately $63,000 was recorded in the fourth quarter of 2013.

We are periodically involved in various other litigation that arises in the ordinary course of business and operations. There are no such matters pending that we expect to have a material impact on our financial position and operating results. Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred.

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Note 4 - Earnings Per Share

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

4. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the three months ended March 31, 2014 and 2013:

	2014		2013
Net income	$	1,854,412	$	1,586,321
Numerator for basic and diluted earnings per share	$	1,854,412	$	1,586,321
Denominator for basic earnings per share – weighted-average shares		10,198,733		10,162,442
Effect of dilutive securities:
Stock options		39,193		31,777
Restricted stock		1,579		-
Warrants		-		-
Dilutive potential common shares		40,772		31,777
Denominator for diluted earnings per share – weighted-average shares		10,239,505		10,194,219
Basic earnings per share	$	0.18	$	0.16
Diluted earnings per share	$	0.18	$	0.16

The net effect of converting stock options and restricted stock to purchase 119,201 and 121,600 shares of common stock at exercise prices less than the average market prices has been included in the computations of diluted EPS for the quarters ended March 31, 2014 and 2013, respectively.

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Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) - Summary of Amortization Expense. (USD $)	Mar. 31, 2014
Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) - Summary of Amortization Expense. [Line Items]
2014	$ 33,792
2015	28,635
2016	2,000
Wholesale Leathercraft [Member]
Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) - Summary of Amortization Expense. [Line Items]
2014	455
Retail Leathercraft [Member]
Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) - Summary of Amortization Expense. [Line Items]
2014	33,337
2015	28,635
2016	$ 2,000

XML

Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Disclosure Text Block [Abstract]
Prior Period Reclassification Adjustment	$ 11,368	$ 8,526

XML

Note 2 - Notes Payable and Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

	March 31, 2014			December 31, 2013
Credit Agreement with JPMorgan Chase Bank – collateralized by real estate; payable as follows:
Line of Credit Note dated July 31, 2007, converted to a 10-year term note on April 30, 2008; $16,875 monthly principal payments plus interest at 7.1% per annum; matures April 30, 2018	$	2,548,125		$	2,598,750
		2,548,125			2,598,750
Less - Current maturities		(202,500	)		(202,500	)
	$	2,345,625		$	2,396,250

XML

Note 6 - Segment Information

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

6. SEGMENT INFORMATION

We identify our segments based on the activities of three distinct operations:

a. Wholesale Leathercraft, which consists of a chain of wholesale stores operating under the name, The Leather Factory, located in North America;

b. Retail Leathercraft, which consists of a chain of retail stores operating under the name, Tandy Leather Company, located in North America; and

c. International Leathercraft, which sells to both wholesale and retail customers. We have three stores operating in this segment: one in Northampton, United Kingdom, one in Sydney, Australia, and one in Jerez, Spain. These stores carry the same products as our North American stores.

Our reportable operating segments have been determined as separately identifiable business units, and we measure segment earnings as operating earnings, defined as income before interest and income taxes.

	Wholesale Leathercraft			Retail Leathercraft			Int’l Leathercraft			Total
For the quarter ended March 31, 2014
Net sales	$	6,823,968		$	11,956,354		$	1,058,144		$	19,838,466
Gross profit		4,530,209			7,498,416			687,098			12,715,723
Income from operations		1,372,637			1,472,703			121,323			2,966,663
Interest expense		45,828			-			-			45,828
Other, net		(9,776	)		-			8,432			(1,344	)
Income before income taxes		1,336,585			1,472,703			112,891			2,922,179
Depreciation and amortization		225,855			104,441			16,259			346,555
Fixed asset additions		236,211			356,198			48,873			641,282
Total assets	$	41,806,750		$	13,903,814		$	2,919,417		$	58,629,981
For the quarter ended March 31, 2013
Net sales	$	6,729,734		$	11,559,861		$	948,232		$	19,237,827
Gross profit		4,165,155			7,161,228			604,446			11,930,829
Income from operations		1,012,965			1,514,839			93,056			2,620,860
Interest expense		56,094			-			-			56,094
Other, net		(14,493	)		(10	)		(12,236	)		(26,739	)
Income before income taxes		971,364			1,514,849			105,292			2,591,505
Depreciation and amortization		191,533			57,429			14,140			263,102
Fixed asset additions		738,736			242,149			1,668			982,553
Total assets	$	36,244,560		$	10,474,588		$	2,959,476		$	49,678,624

Net sales for geographic areas were as follows for the three months ended March 31, 2014 and 2013:

	2014		2013
United States	$	16,645,886	$	16,196,394
Canada		1,913,512		1,919,723
All other countries		1,279,068		1,121,710
	$	19,838,466	$	19,237,827

Geographic sales information is based on the location of the customer. No single foreign country, except for Canada, accounted for any material amount of our consolidated net sales for the three-month periods ended March 31, 2014 and 2013. We do not have any significant long-lived assets outside of the United States.

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Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure Text Block [Abstract]

Schedule of Inventory, Current [Table Text Block]

	As of
	March 31, 2014		December 31, 2013
Inventory on hand:
Finished goods held for sale	$	26,633,088	$	24,546,771
Raw materials and work in process		884,798		853,200
Inventory in transit		3,014,636		900,859
	$	30,532,522	$	26,300,830

Schedule of Goodwill [Table Text Block]

	Leather Factory			Tandy Leather		Total
Balance, December 31, 2012	$	607,319		$	383,406	$	990,725
Acquisitions and adjustments		-			-		-
Foreign exchange gain/loss		(3,186	)		-		(3,186	)
Impairments		-			-		-
Balance, March 31, 2013	$	604,133		$	383,406	$	987,539

	Leather Factory			Tandy Leather		Total
Balance, December 31, 2013	$	598,579		$	383,406	$	981,985
Acquisitions and adjustments		-			-		-
Foreign exchange gain/loss		(4,634	)		-		(4,634	)
Impairments		-			-		-
Balance, March 31, 2014	$	593,945		$	383,406	$	977,351

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	As of March 31, 2014						As of December 31, 2013
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Trademarks, Copyrights	$	544,369	$	495,592	$	48,777	$	544,369	$	487,891	$	56,478
Non-Compete Agreements		180,156		137,073		43,083		181,216		134,466		46,750
	$	724,525	$	632,665	$	91,860	$	725,585	$	622,357	$	103,228

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

	Wholesale Leathercraft		Retail Leathercraft		Total
2014	$	455	$	33,337	$	33,792
2015		-		28,635		28,635
2016		-		2,000		2,000
2017		-		-		-
2018		-		-		-

XML

Note 3 - Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Weighted Average Exercise Price		# of shares		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding, January 1, 2013	$	4.53		121,600
Granted		6.87		12,000
Cancelled		-		-
Exercised		-		-
Outstanding, March 31, 2013	$	4.74		133,600		4.97	$	218,446
Exercisable, March 31, 2013	$	4.53		121,600		4.83	$	206,760
Outstanding, January 1, 2014	$	5.04		84,600
Granted		-		-
Cancelled		-		-
Exercised		-		-
Outstanding, March 31, 2014	$	5.04		84,600		6.72	$	104,656
Exercisable, March 31, 2014	$	5.04		84,600		6.72	$	104,656

Schedule of Share-based Compensation, Activity [Table Text Block]

	March 31, 2014		March 31, 2013
Weighted average grant-date fair value of stock options granted		N/A	$	11,686
Total fair value of stock options vested		N/A		N/A
Total intrinsic value of stock options exercised		N/A		N/A

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2014		2013
Volatility		N/A		19.1%
Expected option life (years)		N/A		3
Interest rate (risk free)		N/A		0.80%
Dividends		None		None

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

	Shares		Grant Fair Value
Balance, January 1, 2014		-		-
Granted		34,601	$	8.96
Forfeited		-		-
Vested		-		-
Balance, March 31, 2014		34,601	$	8.96

XML

Note 5 - Commitments and Contingencies (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Sep. 30, 2012
Note 5 - Commitments and Contingencies (Details) [Line Items]
Litigation Settlement, Amount	$ 993,386
Loss Contingency, Escrow Deposit	993,386
Litigation Settlement, Expense				993,386
Loss Contingency, Benefit			312,000
Litigation Settlement Payroll Taxes		63,000
Scenario, Forecast [Member]
Note 5 - Commitments and Contingencies (Details) [Line Items]
Payments for Legal Settlements	744,273
Loss Contingency, Escrow Account Balance	$ 249,000

XML

Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) - Summary of Changes in Goodwill (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Leather Factory [Member]	Mar. 31, 2013 Leather Factory [Member]	Mar. 31, 2014 Tandy Leather [Member]	Dec. 31, 2013 Tandy Leather [Member]	Mar. 31, 2013 Tandy Leather [Member]	Dec. 31, 2012 Tandy Leather [Member]
Goodwill [Line Items]
Balance,	$ 981,985	$ 990,725	$ 598,579	$ 607,319	$ 383,406	$ 383,406	$ 383,406	$ 383,406
Foreign exchange gain/loss	(4,634)	(3,186)	(4,634)	(3,186)
Balance,	$ 977,351	$ 987,539	$ 593,945	$ 604,133	$ 383,406	$ 383,406	$ 383,406	$ 383,406

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Note 2 - Notes Payable and Long-Term Debt (Details) - Summary of Credit Agreement and Line of Credit Note (Parentheticals) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Summary of Credit Agreement and Line of Credit Note [Abstract]
Line of Credit Note term	10 years	10 years
Line of Credit Note monthly principal payments	$ 16,875	$ 16,875
Line of Credit Note interest	7.10%	7.10%

XML

Consolidated Statements of Comprehensive Income (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
NET INCOME	$ 1,854,412	$ 1,586,321
Foreign currency translation adjustments, net of tax	(129,408)	(188,351)
COMPREHENSIVE INCOME	$ 1,725,004	$ 1,397,970

XML

Note 3 - Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

3. STOCK-BASED COMPENSATION

We have one stock option plan which provides for annual stock option grants to non-employee directors with an exercise price equal to the fair market value of the shares at the date of grant. Under this plan, 12,000 options were awarded to directors during the quarter ended March 31, 2013. These options vest and become exercisable six months from the option grant date. Options outstanding and exercisable were granted at a stock option price which was not less than the fair market value of our common stock on the date the option was granted and no option has a term in excess of ten years. No options were granted during the quarter ended March 31, 2014. We recognized share based compensation expense of $0 and $5,843 for the quarters ended March 31, 2014 and 2013, respectively, as a component of operating expenses. During the three months ended March 31, 2014 and 2013, the stock option activity under our stock option plans was as follows:

	Weighted Average Exercise Price		# of shares		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding, January 1, 2013	$	4.53		121,600
Granted		6.87		12,000
Cancelled		-		-
Exercised		-		-
Outstanding, March 31, 2013	$	4.74		133,600		4.97	$	218,446
Exercisable, March 31, 2013	$	4.53		121,600		4.83	$	206,760
Outstanding, January 1, 2014	$	5.04		84,600
Granted		-		-
Cancelled		-		-
Exercised		-		-
Outstanding, March 31, 2014	$	5.04		84,600		6.72	$	104,656
Exercisable, March 31, 2014	$	5.04		84,600		6.72	$	104,656

Other information pertaining to option activity during the three-month periods ended March 31, 2014 and 2013 are as follows:

	March 31, 2014		March 31, 2013
Weighted average grant-date fair value of stock options granted		N/A	$	11,686
Total fair value of stock options vested		N/A		N/A
Total intrinsic value of stock options exercised		N/A		N/A

The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:

	2014		2013
Volatility		N/A		19.1%
Expected option life (years)		N/A		3
Interest rate (risk free)		N/A		0.80%
Dividends		None		None

As of March 31, 2014 and 2013, there was unrecognized compensation cost related to non-vested stock options of $0 and $5,843, respectively.

We have a restricted stock plan that was adopted by our Board of Directors in January 2013 and approved by our stockholders in June 2013. The plan reserves up to 300,000 shares of our common stock for restricted stock awards to our executive officers, non-employee directors and other key employees. Awards granted under the plan may be stock awards or performance awards, and may be subject to a graded vesting schedule with a minimum vesting period of four years.

In February 2014, our Chief Executive Officer, Chief Financial Officer and Senior Vice President were awarded restricted stock grants consisting of 9,375 shares each. In addition, four of our independent directors were awarded restricted stock grants consisting of 1,619 shares each. The grants will vest in equal annual amounts over a four-year period. The fair value of nonvested restricted common stock awards is the market value of our common stock on the date of grant. Compensation costs for these awards will be recognized on a straight-line basis.

A summary of the activity for nonvested restricted common stock awards as of March 31, 2014 is presented below:

	Shares		Grant Fair Value
Balance, January 1, 2014		-		-
Granted		34,601	$	8.96
Forfeited		-		-
Vested		-		-
Balance, March 31, 2014		34,601	$	8.96

Total unrecognized compensation expense for the nonvested restricted stock awards as of March 31, 2014 totals $310,025 and is expected to be recognized in equal annual amounts over a period of four years.

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Note 3 - Stock-Based Compensation (Details) (USD $)	3 Months Ended				1 Months Ended		1 Months Ended	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Stock Option Plan [Member] Non-employee Directors [Member]	Mar. 31, 2013 Stock Option Plan [Member] Non-employee Directors [Member]	Feb. 28, 2014 Restricted Stock [Member] Executive Officers, Non-employee Directors and Other Key Employees [Member]	Mar. 31, 2014 Restricted Stock [Member] Executive Officers, Non-employee Directors and Other Key Employees [Member]	Feb. 28, 2014 Restricted Stock [Member] Director [Member]	Mar. 31, 2014 Restricted Stock [Member]	Mar. 31, 2014 Restricted Stock [Member] Minimum [Member]	Mar. 31, 2014 1995 Stock Option Plans [Member] Maximum [Member]
Note 3 - Stock-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures			0	12,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			6 years		4 years				4 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period										10 years
Share-based Compensation	$ 0	$ 5,843
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 0	$ 5,843						$ 310,025
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized						300,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period					9,375		1,619
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition								4 years

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Note 1 - Basis of Presentation and Certain Significant Accounting Policies (Details) - Components of Inventory (USD $)	Mar. 31, 2014	Dec. 31, 2013
Inventory on hand:
Finished goods held for sale	$ 26,633,088	$ 24,546,771
Raw materials and work in process	884,798	853,200
Inventory in transit	3,014,636	900,859
	$ 30,532,522	$ 26,300,830