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,June 30, 2011

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)

(Address of Principal Executive Offices) (Zip Code)

(Registrant’s Telephone Number, Including Area Code)

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

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31,JUNE 30, 2011

Tandy Leather Factory, Inc.

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

(Unaudited)

For the Three and Six Months Ended March 31,June 30, 2011 and 2010

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

Tandy Leather Factory, Inc.

(Unaudited)

For the ThreeSix Months Ended March 31,June 30, 2011 and 2010

For the ThreeSix Months Ended March 31,June 30, 2011 and 2010

 

The accompanying notes are an integral part of these 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,June 30, 2011 and December 31, 2010, and its results of operations and cash flows for the three-monththree and/or six-month periods ended March 31,June 30, 2011 and 2010.  Operating results for the three-month periodthree and six-month periods ended March 31,June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.  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, 2010.

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.

The components of inventory consist of the following:

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, 2010, 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 quarterhalf of 2011.

A summary of changes in our goodwill for the periods ended March 31,June 30, 2011 and 2010 is as follows:

Other intangibles consist of the following:

We recorded amortization expense of $11,079$22,139 during the first quartersix months of 2011 compared to $15,178$30,312 during the first quarterhalf of 2010.  All of our intangible assets 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:

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.

In April 2010, FASB issued ASU 2010-13 "Compensation-Stock Compensation (Topic 718) Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades" (ASU 2010-13). Topic 718 is amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity securities trades shall not be considered to contain a market, performance, or service condition. Therefore, such an award is not to be classified as a liability if it otherwise qualifies as equity classification. The amendments in this standard are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The guidance should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings for all outstanding awards as of the beginning of the fiscal year in which the amendments are initially applied. The adoption of the standard did not have a material impact on our consolidated results of operations and financial condition.

In December 2010, FASB issued ASU 2010-28 “Intangibles - Goodwill and Other (Topic 350)” (ASU 2010-28). Topic 350 is amended to clarify the requirement to test for impairment of goodwill. Topic 350 has required that goodwill be tested for impairment if the carrying amount of a reporting unit exceeds its fair value. Under ASU 2010-28, when the carrying amount of a reporting unit is zero or negative an entity must assume that it is more likely than not that a goodwill impairment exists, perform an additional test to determine whether goodwill has been impaired and calculate the amount of that impairment. The modifications to ASC Topic 350 resulting from the issuance of ASU 2010-28 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. The adoption of the standard did not have a material impact on our consolidated results of operations and financial condition.

In December 2010, FASB issued ASU 2010-29 “Business Combinations (Topic 805) - Disclosure of Supplementary Pro Forma Information for Business Combinations” (ASU 2010-29). This standard update clarifies that, when presenting comparative financial statements, SEC registrants should disclose revenue and earnings of the combined entity as though the current period business combinations had occurred as of the beginning of the comparable prior annual reporting period only. The update also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU 2010-29 is effective prospectively for material (either on an individual or aggregate basis) business combinations entered into in fiscal years beginning on or after December 15, 2010. The adoption of the standard did not have a material impact on our consolidated financial statements.

Classification of the financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.  We classify our certificates of deposit as level 2 assets and have maintained consistency in valuation techniques during the period ended March 31,June 30, 2011.

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 195,000 square foot building situated on 30 acres of land located at 1900 SE Loop 820 in Fort Worth, Texas.  Proceeds in the amount of $4,050,000 were used to fund the purchase of the property.  On April 30, 2008, the principal balance was rolled into a 10-year term note with a 20-year amortization andthat accrues interest at a rate of 7.10% per annum.

On July 15, 2010, we entered into a Credit Agreement and Line of Credit Note with Comerica Bank, pursuant to which the bank agreed to provide us with a revolving credit facility of up to $2,500,000.  The revolver bears interest at LIBOR plus 2.0% and maturesagreement expired on June 29, 2011.  At March 31, 2011 no borrowings had occurred and no amounts were outstanding under the above agreement.

At March 31,June 30, 2011 and December 31, 2010, the amount outstanding under the above agreements consisted of the following:

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, 42,60012,000 and 9,000 options were awarded to directors in 2010.the first half of 2011 and 2010, respectively.  These options vest and become exercisable six months from the option grant date.  We had two other stock option plans from 1995 which provided for stock option grants to officers, key employees and non-employee directors.  These plans expired in 2005.  The expiration of the plans has no effect on the options previously granted.  Options outstanding and exercisable were granted at a stock option price which was not less than the fair market value of our common stock as of closing on the date the option was granted and no option has a term in excess of ten years.  We recognized share based compensation expense of approximately $18,900$7,130 and $0$18,388 for each of the quarters ended March 31,June 30, 2011 and 2010, respectively, and $26,030 and $18,388 for each of the six month periods ended June 30, 2011 and 2010, respectively, as a component of operating expenses.

During the threesix months ended March 31,June 30, 2011 and 2010, the stock option activity under our stock option plans was as follows:

Other information pertaining to option activity during the three-monthsix-month periods ended March 31,June 30, 2011 and 2010 are as follows:

As of March 31,June 30, 2011 all granted stock options have vested and all2010 unrecognized compensation cost has been recognized.was $7,129 and $0, respectively.

5.         EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the three and six months ended March 31,June 30, 2011 and 2010:

The net effect of converting stock options and warrants to purchase 90,600102,600 and 136,700173,700 shares of common stock at exercise prices less than the average market prices has been included in the computations of diluted EPS for the quarter ended March 31,June 30, 2011 and 2010, respectively.

6.           CASH DIVIDEND

 

In May 2010, our Board of Directors authorized a $0.75 per share special one-time cash dividend that was paid to shareholdersstockholders of record at the close of business on June 3, 2010. We released the funds used to pay for the special one-time cash dividend on July 1, 2010 and the dividend, totaling $7.7 million, was paid to shareholdersstockholders on July 5, 2010. Our Board will determine future cash dividends after giving consideration to our then existing levels of profit and cash flow, capital requirements, current and forecasted liquidity, as well as financial and other business conditions existing at the time.

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-monththree or six-month periods ended March 31,June 30, 2011 and 2010.  We do not have any significant long-lived assets outside of the United States.

8.  LITIGATION

9.  STORE CLOSING

On October 15, 2010, we announced the closing of Mid-Continent Leather Sales, a wholesale store located in Coweta, Oklahoma, due to its unsatisfactory sales and earnings performance.  All related one-time expenses associated with the store closing have beenwere expensed in 2010 as part of operating expenses.  The store closing did not result in an impairment of goodwill.

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 customers are only national craft chains.

Our Retail Leathercraft segment operates company-owned Tandy Leather Company retail stores in 35 states and six Canadian provinces.  Tandy Leather Company, the oldest and 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’sLeather Company’s products include quality tools, leather, accessories, kits and teaching materials.  In 2002, we began expanding Tandy Leather’sLeather Company’s industry presence by opening retail stores.  As of MayAugust 1, 2011, we were operating 7677 Tandy Leather Company retail stores located throughout the United States and Canada.

Our International Leathercraft segment operates one company-owned store in Northampton, United Kingdom.  The store, which opened in February 2008, operates as a combination retail and wholesale store.  In 2011, we intend to open a new store in Australia and one to two stores in Spain.  While the opening dates have not been determined yet, we are estimating the Australia store to open in the third quarter and the Spain store(s) to open in the fourth quarter.

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, 2010.

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 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, 2010 for additional information concerning these and other uncertainties that could negatively impact the Company.

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.  The United States and global economies have suffered from a prolonged recession for the past several years and as a result consumer spending has remained depressed, and may be subject to further deterioration for the foreseeable future.   Specialty retail, and retail in general, are 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.  As a result, our operating results may be adversely and materially affected by continued downward trends or uncertainly in the United States or global economies.

Our industry is subject to significant pricing pressure caused by many factors, including fluctuations in the cost of the leathers and metal products that we purchase and changes in consumer spending patterns and acceptance of our products.  These factors 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.

The following tables present selected financial data of each of our three segments for the quarters ended March 31,June 30, 2011 and 2010.

Consolidated net sales for the quarter ended March 31,June 30, 2011 increased $1.3$1.6 million, or 8.8%11.0%, compared to the same period in 2010.  All three segments achieved sales gains, ranging from 2%4% to 32%34%.  Operating income on a consolidated basis for the quarter ended March 31,June 30, 2011 was up 24.5%22.5%, or $376,000,$325,000, from the firstsecond quarter of 2010.

The following table shows in comparative form our consolidated net income for the firstsecond quarters of 2011 and 2010:

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

Our Wholesale Leathercraft operation consists of 29 wholesale stores and our National Account sales group.  The National Account sales group’s customers consist of only national craft chains.  The following table presents the combined sales mix by customer categories for the quarters ended March 31,June 30, 2011 and 2010:

Net sales increased 2.0%3.6%, or $133,000,$223,000, for the firstsecond quarter of 2011 as follows:

Our same store sales increased 6.4% in the second quarter of 2011, as compared with the same period in 2010.  Compared to the second quarter of 2010, we achieved sales increases in our retail and wholesale customer categories, which were offset somewhat by decreases in our manufacturing and national account customer categories.  We believe our wholesale customers are beginning to stabilize which has resulted in an increase in purchases.  However, it is too early to tell whether this trend will continue.  We have lowered our discounts to our manufacturer customer group in an attempt to protect gross margins, which has affected sales to this group somewhat.  Sales to our retail, wholesale and small manufacturerNational Account customers were up indown 7.5% for the first quarter, of 2011 compared to the firstsame quarter of 2010, whilelast year.  Our sales to these customers will depend on products we develop specifically for this group and the level of inventory we are willing to house in anticipation of orders.  Therefore, it is possible we will experience further sales declines to our institutionNational Account group if the product we stock is not what these customers want to purchase.   Our primary focus is on sales through our stores, rather than National Accounts, as we believe our stores represent the greatest potential for continued and national account group customers were down slightly.  consistent sales growth.

Operating income for Wholesale Leathercraft during the current quarter increasedended June 30, 2011 decreased by $274,000$15,000 from the comparative 2010 quarter, an improvementa decrease of 51%2.4%.

Our Retail Leathercraft operation consists of 77 and 76 Tandy Leather Company retail stores at March 31,June 30, 2011 and 2010.2010, respectively.  Net sales increased 13.6%15.9% for the firstsecond quarter of 2011 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.

The following table presents sales mix by customer categories for the quarters ended March 31,June 30, 2011 and 2010 for our Retail Leathercraft operation:

Sales to each customer group increased slightly over the firstsecond quarter of 2010, with the exception of our institution customer group.2010.  Operating income increased $81,000,$269,000, or 9%34.9%, from the comparative 2010 quarter.  Operating income as a percentage of sales also increased from 10.0% in the second quarter of 2010 to 11.6% in the second quarter of 2011.  Our gross profit increased by $431,000 primarily duemargin improved slightly from 59.3% to higher sales.60.3%.  Operating expenses as a percentage of sales decreased 2% from 49.4% to 48.6% as sales grew at a faster rate than that of expenses during the first quarter of 2010 to 49.3% for the first quarter of 2011.quarter.  Operating expenses increased $349,000$541,000 over the firstsecond quarter of 2010.  The new store opened in June 2011 accounted for additional operating expenses of $19,000.  Employee compensation and benefits increased $140,000.  In addition, freight out (shipping to customers) and credit card fees increased $17,000 and $15,000, respectively, due to increased sales. Rent expense increased by $20,000 and postage expense increased by $10,000$241,000. Advertising and marketing expenses increased by $75,000 due to retail signage and displays being added to the stores, one-time mailings$86,000. Expenses associated with store relocations, and the increase in mailing pieces as a result of new customers.moves added $50,000 this quarter.

Consisting of one store located in the UK, this division’s sales totaled $509,000$529,000 for the firstsecond quarter of 2011, compared to $384,000$396,000 in the firstsecond quarter of 2010, an improvement of 32%34%. Gross profit margin decreased 3as a percentage pointsof sales increased significantly from the firstsecond quarter of 2010 due to the impact of the currency conversion rate on the selling prices in our UK store.2010.  We determine UK selling prices taking into consideration the currency conversion between the U.S. dollar and the Great Britain pound.  Even so, our UK store generates higher profit margins than that of a comparable U.S. store due to a beneficial product mix, selling more higher margin tools and supplies and less lower margin leather.  Operating expenses totaled $233,000 in the second quarter of 2011, up from $186,000 in the second quarter of 2010 for our UK store.  Advertising expense is this division’s largest expense, followed by employee compensation, shipping costs to customers, and rent.

Consisting of one store located in the UK, this division’s sales totaled $1,038,000 for the first six months of 2011, compared to $780,000 in the first six months of 2010, an improvement of 33.0%.  Gross profit margin was 64.6% for the first half of this year, an increase of two percentage points from 62.6% in the second half of 2010.  UK selling prices are determined based on the currency conversion between the U.S. dollar and the Great Britain pound.  Even so, the store generates higher profit margins than that of a comparable U.S. store as it sells a heavier mix of higher margin tools and supplies and less lower margin leather.  Operating expenses totaled $215,000$448,000 in the first quarterhalf of 2011, up from $172,000$358,000 in the first quarterhalf of 2010.  Employee compensation is this segment’s largest expense, followed by advertising and marketing expenses, shipping costs to customers, and rent.

Other Expenses

We paid $62,000$124,000 in interest on our bank debt in the first quartersix months of 2011, compared to $66,000$131,000 in the first quartersix months of 2010.  Due to the reduction in cash on hand compared to last year, we recorded $8,000$17,000 in interest income on our cash balances duringin the quartersix months ended June 30, 2011 compared to $35,000$58,000 a year ago.  We recorded an expense of $72,000$138,000 for currency fluctuations in the first quarterhalf of 2011.  Comparatively, in the first quarterhalf of 2010, we recorded an expense of $92,000$74,000 for currency fluctuations.

On our consolidated balance sheet, total assets remained steadywere $40.9 million at June 30, 2011, up $300,000 from $40.6 million at year-end and March 31, 2011.2010.  Total stockholders’ equity increased from $29.8 million at December 31, 2010 to $31.0$32.1 million at March 31,June 30, 2011, the increase being attributable to earnings in the first quarterhalf of this year.  Our current ratio increased from 4.2 at December 31, 2010 to 5.36.2 at March 31,June 30, 2011 due primarily to a decrease in accrued expenses and income taxes payable during the first quarterhalf of 2011.

Our investment in inventory decreasedincreased by $26,000$24,000 from year-end 2010 to March 31,June 30, 2011.  While total inventory only declinedincreased minimally from year end, we held approximately $1 million in extra inventory in anticipation of our new stores to be opened overseas this year and for an “Open House” event in all of our stores held in the first week of April.overseas.  Inventory turnover reached an annualized rate of 3.14 times during the first quarterhalf of 2011, only slightly less than 3.393.31 times for the first quarterhalf of 2010.  Inventory turnover was 3.23 times for all of 2010.  We compute our inventory turns as sales divided by average inventory.  At the endAs of the first quarter,June 30, 2011, our total inventory on hand was approximately 12%14% over our internal targets for optimal inventory levels.  However, the extraThe inventory held for our anticipated new stores at the end of the quarterperiod accounted for half of what would be considered excess inventory.  Further, while sales remain strong and leather prices remain high, we will continue to buy large quantities of our stock leathers at special prices as those opportunities present themselves in order to relieve pressure on our gross margins.

Trade accounts receivable was $1.4$1.3 million at March 31,June 30, 2011, up $180,000$100,000 from $1.2 million at year-end 2010.  The average days to collect accounts for the first quarterhalf of 2011 were 48 days, up slightly from the first half quarter of 2010 of 4647 days.  We are monitoring our customer accounts very closely in order to minimize the risk of uncollectible accounts in the current economic environment.

Accounts payable increased to $2.0$1.5 million at March 31,June 30, 2011 compared to $1.2 million at year-end 2010, primarily due to the increase in inventory purchases during the first quarterhalf of 2011 in response to our sales increase.  Accrued expenses decreased $2,186,000$1.9 million from December 31, 2010 to March 31,June 30, 2011 due to the semi-annual payment of manager bonuses and a reduction in inventory in transit compared to year-end 2010.

During the first quartersix months of 2011, cash flow usedprovided by operating activities was $496,000.  The$529,000.  Net income of $2.2 million was offset by a reduction in accrued liabilities of $2.2$1.9 million and increase in other current assets of $614,000, offset by net income of $1.2 million and the increase in accounts payable of $777,000, accounted for the majority of the operating cash usedprovided in the first quarter.six months.  Accrued liabilities decreased from December 31, 2010 to March 31,June 30, 2011 due to the payment of manager bonuses in the first quarter and the reduction in inventory in transit.  The increase in other current assets is due to an increase in prepaid insurance, inventory, and pre-opening store expenses.

By comparison, during the first quartersix months of 2010, cash flow provided by operating activities was $224,000.$368,000.  Net income of $948,000,$2.0 million and an increase in accounts payable of $517,000, offset by the increase in inventory of $1.2 million and other current assets of $707,000$1.1 million, accounted for the majority of the operating cash provided.  Prepaid insurance, postage and inventory accounted for the increase in other current assets.

Cash flow used inprovided by investing activities totaled $142,000$176,000 in the first quarterhalf of 2011, consisting primarily of new purchasematurities of certificates of deposit, offset by purchases of store fixtures and computer equipment.  In the first quarterhalf of 2010, cash used inprovided by investing activities totaled $2.1$2.3 million, consisting primarily of certificate of deposit purchases, offset somewhat by the sale or maturities of the same.certificates of deposit.

Cash flow used by financing activities totaled $51,000$101,000 in the first quartersix months of 2011, consisting of debt repayments.  In the first quartersix months of 2010, cash flow usedprovided by financial activities totaled $59,000,$57,000, consisting of proceeds from issuance of common stock of $166,000, offset by debt repayments of $51,000$101,000 and the purchase of treasury stock of $8,000.

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.

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, 2010.  We believe that our exposure to market risks has not changed significantly since December 31, 2010.

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,June 30, 2011. 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,June 30, 2011, our disclosure controls and procedures were effective at a reasonable assurance level.

There have been no changes in our internal control over financial reporting during the fiscal quarter ended March 31,June 30, 2011 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.