SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

(Mark  One)
[X]     ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE  ACT  OF  1934
        For  the  fiscal  year  ended  December  31,  2003

                                       OR

[  ]     TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d) OF THE
         SECURITIES  EXCHANGE  ACT  OF    1934  [NO  FEE  REQUIRED]
         For  the  transition  period  ________  to  ________

                         Commission File Number 1-12368

                            THE LEATHER FACTORY, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                 75-2543540
(STATE OR OTHER JURISDICTION OF         (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
  INCORPORATION OR ORGANIZATION)

     3847  East  Loop  820  South
          Fort  Worth,  Texas                           76119
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)             (ZIP  CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (817) 496-4414

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

  TITLE  OF  EACH  CLASS             NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $.0024             American  Stock  Exchange

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE

 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 if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  [  ]

Indicate by check mark whether registrant is an accelerated filer (as defined in
Exchange  Act  Rule  12b-2).  [  ]

The  aggregate  market  value  of the common stock held by non-affiliates of the
registrant was approximately $19,806,561 at March 10, 2004.  At that date, there
were  10,525,661  shares  of  Common  Stock  outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain  portions  of  the  Registrant's definitive Proxy Statement for the
Annual  Meeting  of Stockholders to be held on May 26, 2004, are incorporated by
reference  in  Part  III  of  this  report.

                                        1
<PAGE>

                                     PART I

ITEM  1.  BUSINESS

GENERAL

We  are  a  retailer  and  wholesale  distributor of a broad line of leather and
related  products,  including  leather,  leatherworking  tools,  buckles  and
adornments  for  belts, leather dyes and finishes, saddle and tack hardware, and
do-it-yourself  kits. We also manufacture leather lacing and kits.  During 2003,
our  consolidated  sales  totaled $41.7 million of which approximately 6.6% were
export  sales.  We  maintain  our principal offices at 3847 East Loop 820 South,
Fort Worth, Texas 76119.  Our common stock trades on the American Stock Exchange
under  the  symbol  "TLF".

Our  company was founded in 1980 as Midas Leathercraft Tool Company ("Midas"), a
Texas  corporation.  Midas'  original  business  activity  focused  on  the
distribution  of certain leathercraft tools.  In addition, the founders of Midas
entered  into  a  consulting  agreement with Brown Group, Inc., a major footwear
retailer,  as  a  result  of their proposal to develop a multi-location chain of
wholesale  distribution  centers known as "The Leather Factory."  In 1985, Midas
purchased  the  assets  of The Leather Factory from Brown Shoe Group, which then
consisted  of  six  distribution  centers.

In  1993,  Midas  changed  its  name  to  "The  Leather  Factory,  Inc.",  then
reincorporated  in  the  state  of  Delaware  in  1994.

THE  DEVELOPMENT  OF  OUR  COMPANY  IN  RECENT  YEARS

Our  expansion of the wholesale chain occurred via the opening of new centers as
well  as  numerous  acquisitions  of  small  businesses  in strategic geographic
locations  including  the  acquisition  of our Canadian distributor, The Leather
Factory of Canada, Ltd., in 1996.  By 2000, we had grown to twenty-seven Leather
Factory  centers located in the United States and two Leather Factory centers in
Canada.   In November 2000, we acquired the operating assets of two subsidiaries
of  Tandycrafts,  Inc. to form Tandy Leather Company.  In 2002, we began opening
retail  stores  under the "Tandy Leather" name.  During that year, Tandy Leather
purchased  four  independent  leathercraft  retail  stores.  We  also opened our
thirtieth  Leather  Factory  center  -  our  third  in  Canada.

At  December 31, 2003, we operated thirty Leather Factory wholesale distribution
centers  and  twenty-six  Tandy  Leather retail stores.  We also own and operate
Roberts,  Cushman  and  Company,  Inc.,  a  manufacturer  of  custom  hat trims.

Our growth, measured both by our net sales and net income, occurs as a result of
the  increase in the number of stores we have and the increase from year to year
of  the  sales  in  our  existing  stores.  The following tables provide summary
information  concerning  the  additions  of  facilities  for our Leather Factory
wholesale  centers  and  Tandy Leather retail stores in each of our fiscal years
from  1999  to  2003.

                                   STORE COUNT
                   YEARS ENDED DECEMBER 31, 1999 THROUGH 2003
<TABLE>
<CAPTION>

             LEATHER FACTORY WHOLESALE CENTERS       TANDY LEATHER RETAIL STORES
             ---------------------------------       ----------------------------
<S>          <C>       <C>               <C>         <C>         <C>        <C>
Year Ended   Opened    Conversions(1)    Total       Opened(2)  Closed     Total
             ------    --------------    -----       ---------  ------     -----
Balance Fwd                                 22                               N/A
1999             4            0             26                               N/A
2000             2            0             28           1*        0           1
2001             2            0             30           0         0           1
2002             1           (1)            30          14         1*         14
2003             0            0             30          12         0          26
<FN>

(1)  Leather  Factory  wholesale  center  converted  to  a  Tandy  Leather  retail  store.
(2)  Includes  conversions  of  Leather  Factory  wholesale  centers  to  Tandy  Leather  retail  stores.
(*)  The Tandy Leather operation began as a central mail-order fulfillment center in 2000 that we closed in
2002.
</TABLE>

                                        2
<PAGE>

No  single  customer's  purchases represent more than 10% of the Company's total
sales in 2003.  Sales to the Company's five largest customers represented 13.8%,
15.1%  and  14.4%,  respectively, of consolidated sales in 2003, 2002, and 2001.
While  management does not believe the loss of one of these customers would have
a  significant  negative  impact  on our operations, it does believe the loss of
several  of  these  customers simultaneously or a substantial reduction in sales
generated  by  them  could  temporarily  affect  our  operating  results.

OUR  INDUSTRY  SEGMENTS

We  service our customers primarily through the operation of three segments.  We
identify  those  segments based on management responsibility and customer focus.
The  Leather  Factory centers segment consists of thirty Leather Factory centers
of  which  27  are located in the United States and three are located in Canada.
The  Tandy  Leather  segment consists of 26 retail stores as of the end of 2003.
Both of these segments sell leather and leathercraft-related products.  Roberts,
Cushman is our third business segment.  You will find information concerning the
financial  results  of  our  operating  segments and the total assets of each of
these  segments in Note 11 of the Notes to Consolidated Financial Statements and
in  Management's Discussion and Analysis of Financial Condition and Results of
Operations.

LEATHER  FACTORY  OPERATING  SEGMENT

The  Leather  Factory  distributes  its  broad  product  line  of  leather  and
leathercraft-related  products  in the United States and internationally.   This
segment  had  net  sales  of $30.7 million, $30.3 million, and $28.7 million for
2003,  2002  and  2001,  respectively.

GENERAL      We operate Leather Factory wholesale centers in 20 states and three
Canadian  provinces.  The centers range in size from 2,600 square feet to 19,800
square  feet, with the average size of a center being approximately 6,000 square
feet.    The  type  of  premises  utilized  for  Leather  Factory  locations  is
generally  light  industrial  office/warehouse  space  in  proximity  to a major
freeway  or  with  other similar access.  This type of location typically offers
lower  rents  compared  to  other  more  retail-oriented  locations.

BUSINESS  STRATEGY     The  Leather  Factory business concept centers around the
wholesale  distribution  of  leather  and  related  accessories  to  retailers,
manufacturers,  and end users.  Our strategy is that a customer can purchase the
leather  and  related accessories and supplies necessary to complete his project
from  one  place.  The size and layout of the centers are planned to allow large
quantities  of  product  to  be  displayed  in an easily accessible and visually
appealing manner.  Leather is displayed by the pallet where the customer can see
and  touch  it,  assessing  first-hand  the  numerous  sizes, styles, and grades
offered.  The  location  of  the  centers  is  selected based on the location of
customers,  so  that delivery time to customers is minimized.  A two-day maximum
delivery  time  for  phone,  Internet  and  mail  orders  is  our  goal.

Leather  Factory centers serve customers through various means including walk-in
traffic, phone and mail order.  We also employ a distinctive marketing tactic in
that we maintain an internally-developed target customer mailing list for use in
our  aggressive  direct  mail  advertising  campaigns.  We staff Leather Factory
wholesale  centers  with  experienced managers whose compensation is tied to the
operating  profit of the center they manage.  Sales are generated by the selling
efforts  of  the  store  personnel,  our  direct  mail  advertising, our website
(www.leatherfactory.com),  our  participation  at  trade shows and, on a limited
basis,  the  use  of  sales  representative  organizations.

CUSTOMERS     Leather Factory's customer base consists of individuals, wholesale
distributors,  tack  and  saddle  shops,  institutions  (prisons  and prisoners,
schools,  hospitals), western stores, craft stores and craft store chains, other
large  volume  purchasers, manufacturers, and retailers dispersed geographically
throughout  the  world.  Wholesale  sales constitute the majority of our Leather
Factory  business,  although retail customers may purchase products from Leather
Factory  centers.  Leather  Factory  sales  generally do not reflect significant
seasonal  patterns.
                                        3
<PAGE>

Our  Authorized  Sales Center ("ASC") program was developed to create a presence
in  geographical areas where we do not have a distribution center.  An unrelated
person  operating  an  existing business who desires to become an ASC must apply
with  Leather  Factory  and upon approval, place a minimum initial order.  There
are  also  minimum  annual  purchase  amounts the ASC must adhere to in order to
maintain  ASC status.  In exchange, the benefits to the ASC are free advertising
in  certain  sale  flyers,  price breaks on many products, advance notice of new
products,  and  priority  shipping  and handling on all orders.  Leather Factory
centers service approximately 115 U.S.-based ASC's, 35 Canadian-based ASC's, and
17  international  ASC's  located  in  13  foreign  countries.

MERCHANDISE     Our  products  are generally organized into thirteen categories.
We  carry  a  wide  assortment  of products including leather, lace, hand tools,
kits,  and  craft  supplies.  We  operate a light manufacturing facility in Fort
Worth  whose processes generally involve cutting leather into various shapes and
patterns  using  metal  dies.  The  factory  produces  approximately  20% of our
products  and  also  assembles  and  repackages  product  as  needed.  Products
manufactured in our factory are distributed through our stores under the TejasTM
brand  name.  We  also  distribute  product  under  the  Tandy LeatherTM and Dr.
Jackson'sTM  brands.  We develop new products through the ideas and referrals of
customers  and  store  personnel  as  well as the tracking of fads and trends of
interest  in  the  market.  Our personnel walk trade shows and various specialty
stores  with  the  purpose  of  obtaining  product ideas that are then developed
in-house.

We  offer  an  unconditional  satisfaction  guarantee  to our customers.  Simply
stated,  we will accept product returns for any reason.  We believe this liberal
policy  promotes  customer  loyalty.  We  offer  credit  terms to our non-retail
customers,  upon  receipt  of  a  credit  application and approval by our credit
manager.  Generally,  our  open  accounts  are  net  30  days.

During  2003,  sales  in  the  Leather  Factory  distribution centers by product
category  were  as  follows:
<TABLE>
<CAPTION>

<S>                      <C>             <C>                  <C>
                         SALES                                SALES
PRODUCT CATEGORY          MIX            PRODUCT CATEGORY      MIX
-----------------------  ------           ----------------    -----
Belts strips and straps    2%            Hand tools            12%
Books, patterns, videos    2%            Hardware               6%
Buckles                    3%            Kits                   9%
Conchos                    3%            Lace                  15%
Craft supplies             7%            Leather               32%
Tools and Hardware         1%            Stamping tools         3%
Dyes, finishes, glues      5%            TOTAL                100%
</TABLE>

In  addition  to  meeting ordinary operational requirements, our working capital
needs  are  a  product  of  the need to maintain inventory at a level we feel is
adequate  to  fill  customer orders as they are received with minimal backorders
and  the time required to collect our accounts receivable.  Because availability
of  merchandise  and  prompt delivery time are important competitive factors for
us,  we  maintain  higher levels of inventory than our smaller competitors.  For
additional  information regarding our cash, inventory and accounts receivable at
the  end  of 2003 and 2002, see "Item 7. Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations."

SUPPLIERS     We  currently  purchase  merchandise  and  raw  materials  from
approximately  200  vendors  dispersed  throughout the United States and in more
than  20  foreign  countries.  In  2003,  our  ten largest vendors accounted for
approximately  67%  of  our  inventory  purchases.

Because  leather is sold internationally, market conditions abroad are likely to
affect  the  price  of  leather  in the United States.  Outbreaks of mad cow and
hoof-and-mouth disease (or foot-and-mouth disease) in certain parts of the world
can influence the price of leather we purchase.  As such an occurrence is beyond
the  control  of the Company, we cannot predict when and to what extent we could
be  affected  in the future.  Aside from increasing purchases when we anticipate
price  increases  (or possibly delaying purchases if we foresee price declines),
we  do  not  attempt  to  hedge  our  inventory  costs.
                                        4
<PAGE>

Overall,  we believe that our relationships with suppliers are strong and do not
anticipate  any  material changes in these supplier relationships in the future.
Due  to  the  number  of alternative sources of supply, the loss of any of these
principal  suppliers  would  not  have  a  material  impact  on  our operations.

OPERATIONS     Hours  of  operations  vary by location, but generally range from
8:00  am  to  6:00  pm  Monday  through  Friday,  and from 9:00 am to 4:00 pm on
Saturdays.  The distribution centers maintain uniform prices, except where lower
prices  are  necessary  to  meet  local  competition.

COMPETITION     Most  of  our  competition  comes  in  the  form  of  small,
independently-owned  retailers  who  in  most  cases are also our customers.  We
estimate that there are several hundred of these small independent stores in the
United States and Canada.  We compete on price, availability of merchandise, and
delivery  time.  While there is competition in connection with certain products,
to  our  knowledge  there  is no direct competition affecting our entire product
line.  Our size relative to most competitors creates an advantage in our ability
to  stock  a  full  range  of  products  as  well  as  in  volume  purchasing.

DISTRIBUTION     The  Leather  Factory distribution centers receive the majority
of  their  inventory  from  our  central warehouse located in Fort Worth, Texas,
although  occasionally,  merchandise  is  shipped  directly  from  the  vendor.
Inventory is shipped to the distribution centers from our central warehouse once
a  week  to  meet customer demand without sacrificing inventory turns.  Customer
orders  are  filled  as  received,  and  we  do  not  have  backlogs.

We  attempt  to  maintain  the  optimum  number  of items in our product line to
minimize  out-of-stock  situations  against carrying costs involved with such an
inventory  level.  We  generally maintain higher inventories of certain imported
items to ensure a continuous supply.  The number of products offered through the
various  distribution channels changes every year due to the introduction of new
items  and  the discontinuance of others.  We carry approximately 2,800 items in
the  current  lines  of leather and leather-related merchandise.  In most cases,
all 2,800 items are offered in both the Leather Factory distribution centers and
the  Tandy  Leather  retail  stores.

EXPANSION     Leather  Factory's  expansion  across  the  United States has been
fairly  consistent  since  we purchased the original six distribution centers in
1985.  The  newest  center  opened  in  August  2002,  bringing  the  number  of
distribution  centers to thirty.  While we do not believe there is a significant
and  immediate  opportunity  for  expansion  of the Leather Factory distribution
system  in  terms of opening additional locations, we do believe expansion could
be  achieved  by  acquiring  companies  in  related  areas/markets  which  offer
synergistic  aspects  based on the local markets and/or the product lines of the
businesses.

TANDY  LEATHER  OPERATING  SEGMENT

Tandy  Leather Company, established in 1919 as Hinkley-Tandy Leather Company, is
the  oldest  and best-known supplier of leather and related supplies used in the
leathercraft  industry.  We  offer  a  product  line  of quality tools, leather,
accessories,  kits  and  teaching materials via a chain of retail stores located
throughout the United States.   This segment had net sales of $9.2 million, $7.4
million,  and  $6.6  million  for  2003,  2002  and  2001,  respectively.

GENERAL     The  Tandy Leather retail chain currently has 29 stores (as of March
15,  2004)  located in 22 states with plans to reach 100 stores as opportunities
arise  over  the  next  five  years  or so.  The stores range in size from 1,200
square  feet  to  3,800  square  feet,  with  the  average size of a store being
approximately  2,000  square  feet.   The  type of premises utilized for a Tandy
Leather  store is generally an older strip shopping center located at well-known
crossroads,  making  the  store  easy  to find.  Our products are sold in Canada
through  the  three  Leather  Factory  stores  located  there.
                                        5
<PAGE>

BUSINESS  STRATEGY     Tandy  Leather  has long been known for its reputation in
the  leathercraft  industry  and  its  commitment to the furthering of the craft
through  education  and customer development.  We are committed to this strategy
as  evidenced  by  our re-establishment of the retail store chain throughout the
United  States  following  the  2000  acquisition.  We  continue  to broaden our
customer base by working with various youth organizations and institutions where
people are introduced to leathercraft, as well as hosting classes in the stores.

The  retail  stores  serve  walk-in,  mail  and phone order customers as well as
orders  generated  from its website, www.tandyleather.com.  Tandy Leather stores
are  staffed by knowledgeable sales people whose compensation is based, in part,
upon  the  profitability  of  their  store.  Sales  by  Tandy Leather are driven
through  the  efforts  of  the store staff, trade shows, and our direct mail and
e-mail  marketing  program.

CUSTOMERS     Individual  retail  customers  are  our  largest  customer  group,
representing  more than 70% of Tandy Leather's 2003 sales.  Youth groups, summer
camps,  schools,  and  a  limited  number  of  wholesale  customers complete our
customer  base.  Like  Leather Factory, Tandy fills orders as they are received,
and  there is no order backlog.  Tandy maintains reasonable amounts of inventory
to  fill  these  orders.  Tandy  Leather's  retail store operations historically
generate  slightly more sales in the 4th quarter of each year (30-35%) while the
other  three  quarters  remain  fairly  even.

MERCHANDISE     Our  products  are generally organized into thirteen categories.
We carry a wide assortment of products including leather, hand tools, kits, dyes
&  finishes,  and  stamping  tools.

During  2003,  sales  at  the  Tandy  Leather stores by product category were as
follows:
<TABLE>
<CAPTION>

<S>                      <C>              <C>               <C>
PRODUCT CATEGORY         SALES MIX        PRODUCT CATEGORY  SALES MIX
-----------------------  ----------       ----------------  ----------
Belts strips and straps      5%           Hand tools            16%
Books, patterns, videos      3%           Hardware               4%
Buckles                      2%           Kits                  15%
Conchos                      3%           Lace                   5%
Craft supplies               5%           Leather               28%
Tools and Hardware           1%           Stamping tools         6%
Dyes, finishes, glues        7%           TOTAL                100%
</TABLE>

Many  of  the  products  sold  in  our Tandy Leather stores are also sold by our
Leather  Factory  segment.  Therefore,  the  discussion  above regarding Leather
Factory  products,  their  sources and the working capital requirements for that
segment  also  apply to the Tandy Leather stores.  Retail sales at Tandy Leather
stores  are generally cash transactions or through national credit cards.  We do
sell on open account to selected wholesale customers including schools and other
institutions  and  small  retailers.  Our terms are generally net 30 days.  Like
Leather  Factory,  Tandy  Leather  has  an  unconditional  return  policy.

OPERATIONS     Hours  of  operations  vary by location, but generally range from
9:00  am  to  6:00  pm  Monday  through  Friday,  and from 9:00 am to 4:00 pm on
Saturdays.  In  addition, most of the stores stay open late one night a week for
leathercrafting  classes  taught  in  the  stores.  Selling  prices  are uniform
throughout  the  Tandy  Leather  store  system.

COMPETITION     Our  competitors  are  generally  small  local craft stores that
carry  a  limited line of leathercraft products.  Several national retail chains
that  are customers of The Leather Factory also carry leathercraft products on a
very  small scale relative to their overall product line.  To our knowledge, our
retail  store  chain  is  the  only  one  in  existence  solely  specializing in
leathercraft.

DISTRIBUTION     The  Tandy  Leather  stores  receive  their  inventory from the
Leather  Factory  central  warehouse  located  in Fort Worth, Texas.  The stores
generally  restock  their  inventory  once  a  week  with  a  shipment  from the
warehouse.  Tandy  Leather's  inventory  turns are higher than Leather Factory's
because the Leather Factory calculation includes its warehouse inventory whereas
Tandy  Leather's  calculation  is  based  strictly  on  its  stores.

EXPANSION     The Company intends to expand the Tandy Leather retail store chain
to  100  stores throughout the United States at an average rate of approximately
twelve stores per year.  Fourteen stores were opened in 2002; twelve stores were
opened  in  2003.  Six  of  the  26  stores opened through 2003 were independent
leathercraft  stores  that  we acquired.  Separately, these acquisitions are not
material.  The  other  twenty  stores  have  been  de  novo stores opened by us.
Management's  plans  for 2004 are to open 10-15 retail stores.  Three new stores
opened  in  the  first  two  months  of  2004.
                                        6
<PAGE>

ROBERTS,  CUSHMAN  OPERATING  SEGMENT

Roberts,  Cushman,  founded  in  1856,  produces made-to-order trimmings for the
headwear  industry.  This  segment  had net sales of $1.8 million, $2.0 million,
and  $1.9  million  for  2003,  2002  and  2001,  respectively.

BUSINESS  STRATEGY     Roberts,  Cushman  has  long  been  considered one of the
leaders  in  the  field  of  headwear  trimmings.  It  designs  and manufactures
exclusive  trimmings for all types of hats.  Trims are sold to hat manufacturers
directly. We do not employ an outside sales force.  Instead, customers visit our
facilities  in  New  York and, with an on-site designer, incorporate their ideas
into  a  customized product.  The customer is provided samples or photographs of
each design before they leave the premises.  These samples can then be used as a
sales  tool  to  obtain  hat orders from their customers.  This "design-on-site"
process  is  unique  in  the  industry.

CUSTOMERS     We  design  and  manufacture  trims  for  over  75 of the headwear
manufacturers  worldwide, supplying customized trims, ribbons, buckle sets, name
pins,  feathers,  etc.  Our  success in developing and maintaining long-standing
relationships  with  our  customers  is  due primarily to our ability to deliver
quality  products  in  a  timely  manner.  Our  backlog  of in-house orders from
customers  as  of  March 10, 2004 was $315,000, which approximates forty-five to
sixty  days  of  sales.  Roberts,  Cushman's  sales  generally  do  not  reflect
significant  seasonal  patterns.

The  working  capital  requirements  of this segment are dictated by the amounts
needed  to  meet  current  obligations,  purchase  raw  material  and  allow for
collection  of  accounts  receivable.  Roberts, Cushman provides sufficient cash
flow  to  satisfy  these  requirements.

MERCHANDISE     Our  hat  bands  are generally produced from leather, ribbon, or
woven  fabrics,  depending  on  the  style  of hat.  They are created by cutting
leather  and/or  other  materials  into  strips,  and then enhancing the trim by
attaching conchos and/or three-piece buckle sets, braiding with other materials,
and  finishing  the  end or borders by stitching or by lacing with leather lace.
We also supply custom-designed buckles and conchos, feathers for dress hats, and
name  pins, separate from hat bands.  Roberts, Cushman purchases components from
over  25  vendors, located predominately in the United States.  In 2003, our top
10  vendors  (in  dollars  purchased) represented approximately 40% of its total
purchases.  Products  are  sold on terms that generally range from net 30 to net
90  days.  Because  our  products  are custom-designed, we do not accept product
returns,  except  in  the  case  of  defective  merchandise.

EXPANSION     Cushman has been successful providing a very specific product line
directly  to  headwear manufacturers.  Given the current industry conditions, we
do  not  believe  there  is  much potential for expansion, other than to capture
additional  market  share.  We  have  considered  the  possibility  of expanding
production to other leather products, but have concluded that is not feasible at
present.

ADDITIONAL  INFORMATION

COMPLIANCE  WITH  ENVIRONMENTAL LAWS     Compliance by the Company with federal,
state  and  local environmental protection laws has not had, and is not expected
to  have,  a  material  effect  upon  capital  expenditures,  earnings  or  the
competitive  position  of  the  Company.

EMPLOYEES     As of December 31, 2003, the Company employed 330 people, with 304
on  a  full-time basis.  The Company is not a party to any collective bargaining
agreement.  Overall, management believes that relations with employees are good.

INTELLECTUAL  PROPERTY  We  hold  approximately  twenty  registered  trademarks,
including  federal trade name registrations for "The Leather Factory" and "Tandy
Leather  Company".  The trademarks expire at various times through 2012, but can
be renewed indefinitely.  We hold approximately 500 copyrights covering over 600
registered works, applicable to various products.  These begin expiring in 2062.
We  also hold patents on several belt buckles and leather-working equipment that
expire  in  2011.  These  rights  are  valuable  assets  and  we  defend them as
necessary.
                                        7
<PAGE>

INTERNATIONAL  OPERATIONS  Information  regarding  our  revenues from the United
States  and  abroad  and  our  long-lived  assets  are  found  in Note 11 to our
Consolidated  Financial  Statements,  Segment  Information.

OUR  WEBSITE  AND  AVAILABILITY  OF  SEC  REPORTS     We  file  reports with the
Securities  and  Exchange  Commission ("SEC").  These reports include our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and  any  amendments to these filings.  The public may read any of these filings
at  the  SEC's  Public  Reference  Room  at 450 Fifth Street, NW, Washington, DC
20549.  In  addition,  the public may obtain information on the operation of the
Public  Reference  Room  by calling the SEC at 1/800-SEC-0330.  Further, the SEC
maintains  an  Internet  site  that  contains  reports,  proxy  and  information
statements and other information concerning us.  You can connect to this site at
http://www.sec.gov.

Our  corporate  website  is  located  at http://www.leatherfactory.com.  We make
copies  of  our  Annual  Report  on  Form  10-K, Quarterly Reports on Form 10-Q,
Current  Reports  on Form 8-K, proxy statements and any amendments filed with or
furnished  to  the  SEC available to investors on or through our website free of
charge  as soon as reasonably practicable after we electronically file them with
or  furnish  them  to  the  SEC.  Our  SEC  filings can be found on the Investor
Relations  page  of  our  website  through the "SEC Filings" link.  In addition,
certain other corporate governance documents are or will shortly be available on
this  website  through  the  "Corporate  Governance"  link.
                                        8
<PAGE>

EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

The  following  table  sets  forth  certain information concerning the executive
officers  of  the  Company.

<TABLE>
<CAPTION>

<S>                           <C>                                     <C>
NAME AND AGE                  POSITION AND BUSINESS EXPERIENCE        SERVED AS
                                  DURING PAST FIVE YEARS            OFFICER SINCE

J. Wray Thompson, 72          Chief Executive Officer.  President
                              from June 1993 to January 2001.                1993

Ronald C. Morgan, 56          President since January 2001.  Chief
                              Operating Officer                              1993

Robin L. Morgan, 53           Vice President of Administration               1993

Shannon L. Greene, 38         Chief Financial Officer since May 2000.
                              Controller from January 1998 to May 2000.
                              Assistant Controller from September 1997 to
                              January 1998.                                  2000
</TABLE>

WRAY  THOMPSON  has  served  as  our  Chairman  of the Board and Chief Executive
Officer  since June 1993.  He also served as President from June 1993 to January
2001.  Mr.  Thompson  was  a  co-founder  of  the  company.

SHANNON  L. GREENE has served as our Chief Financial Officer and Treasurer since
May 2000.  She was appointed to serve on the Board of Directors in January 2001.
Ms.  Greene  is  also  our chief accounting officer.  From September 1997 to May
2000,  Ms. Greene served as our controller and assistant controller.  Ms. Greene
also  is  a  member  of  the  company's  Employees'  Stock Ownership Plan (ESOP)
Committee  and  is a certified public accountant.  Her professional affiliations
include  the  American  Institute  of  Certified  Public  Accountants, the Texas
Society  of  Certified  Public  Accountants and its Fort Worth chapter, the Fort
Worth  Association  for  Financial  Professionals,  and  the  National  Investor
Relations  Institute.

ROBIN L. MORGAN has served as our Vice President of Administration and Assistant
Secretary  since  June 1993.  Ms. Morgan is responsible for import, banking, and
procurement for our import product lines and maintains all inventory costs.  She
also  administers  special  projects,  employee  benefit  plans,  and  insurance
programs.  Ms.  Morgan  also serves as chairman of the Company's ESOP committee.
Ms.  Morgan  is  married  to  Ronald  C.  Morgan,  the  Company's  President.

RONALD  C.  MORGAN has served as our President since January 2001 and has served
as  Chief Operating Officer and director since June 1993.  Mr. Morgan was also a
co-founder  of  the  company.  Mr.  Morgan  is  married  to Robin L. Morgan, the
Company's  Vice  President.

All  officers  are  elected  annually by the Board of Directors to serve for the
ensuing  year.

Under our 1995 Stock Option Plan, there were 60,000 unoptioned shares on January
1,  2003 and no unoptioned shares at December 31, 2003.  Under our 1995 Director
Non-qualified  Stock Option plan, there were 46,000 unoptioned shares on January
1,  2003  and  40,000  unoptioned  shares  at  December 31, 2003.  There were no
changes  to the exercise prices of the outstanding options under these two plans
during  2003.
                                        9
<PAGE>

ITEM  2.   PROPERTIES

The  Company  leases  all of its premises.  The Company believes that all of its
properties  are  adequately  covered  by  insurance.  The  Company's  Fort Worth
location  includes  the  Fort  Worth  Leather  Factory  distribution center, the
Company's  central  warehouse  and  manufacturing  facility,  and  the  sales,
advertising,  administrative,  and executive offices.  The Company also leases a
284  square-foot  showroom  in  the Denver Merchandise Mart for $5,376 per year.
This  lease will expire in October 2005.  Roberts, Cushman's facility is located
in  Long Island City, New York and leased for $85,000 per year.  This lease will
expire  in  June  2006.
<TABLE>
<CAPTION>

<S>          <C>              <C>            <C>             <C>           <C>
             LEATHER          TANDY                          LEATHER        TANDY
STATE        FACTORY         LEATHER         STATE           FACTORY       LEATHER
-----        -------         -------         -----           -------       -------
Arizona         2               1            Missouri           1              2
California      3               2            Montana            1              -
Colorado        1               1            Nebraska           -              1
Connecticut     -               1            Nevada             -              2
Florida         1               1            New Mexico         1              1
Georgia         -               1            New York           -              1
Idaho           -               1            North Carolina     1              -
Illinois        1               1            Ohio               1              -
Indiana         -               1            Oklahoma           0              2
Iowa            1               -            Oregon             1              -
Kansas          1               -            Pennsylvania       1              1
Louisiana       1               -            Tennessee          1              1
Maryland        -               1            Texas              5              3
Michigan        1               -            Utah               1              1
Minnesota       -               1            Washington         1              2
</TABLE>

<TABLE>
<CAPTION>
<S>                  <C>              <C>
CANADIAN LOCATIONS:  LEATHER FACTORY  TANDY LEATHER
-------------------  ---------------  -------------
Alberta                     1              -
Manitoba                    1              -
Ontario                     1              -
</TABLE>

ITEM  3.   LEGAL  PROCEEDINGS

The Company is involved in litigation in the ordinary course of its business but
is  not  currently  a  party  to  any  material  pending  legal  proceedings.

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

There  were  no  matters  submitted  to a vote of the Company's security holders
during  the fourth quarter of the Company's fiscal year ended December 31, 2003.
                                       10
<PAGE>

                                     PART II

ITEM  5.  MARKET  FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  Common  Stock of the Company is traded on the American Stock Exchange using
the  symbol  TLF.  The  high and low prices for each calendar quarter during the
last  two  fiscal  years  are  as  follows:

<TABLE>
<CAPTION>
                                      2003           2002
                                --------------  --------------
<S>                              <C>     <C>     <C>     <C>
QUARTER ENDED                    HIGH    LOW     HIGH    LOW
-------------                    ----    ---     ----    ---
March 31                        $3.450  $2.800  $3.850  $2.010
June 30                         $3.420  $2.900  $3.500  $2.850
September 30                    $4.580  $3.250  $3.240  $2.450
December 31                     $4.850  $3.970  $3.500  $2.800
</TABLE>

There  were  approximately  625  stockholders  of  record  on  March  10,  2004.

There  have  been  no  cash dividends paid on the shares of the Company's Common
Stock  and  currently  dividends  cannot  be  declared or paid without the prior
written  consent  of Wells Fargo Bank, N.A., the Company's lender.  The Board of
Directors  has historically followed a policy of reinvesting the earnings of the
Company  in  the  expansion  of  its business.  This policy is subject to change
based  on  future  industry  and  market  conditions,  as well as other factors.

The  following  table  sets  forth information regarding our equity compensation
plans  (including  individual  compensation  arrangements)  that  authorize  the
issuance  of  shares  of our common stock.  The information is aggregated in two
categories:  plans  previously  approved  by  our  stockholders  and  plans  not
approved  by  our  stockholders.  The  table  includes information for officers,
directors,  employees  and non-employees.  All information is as of December 31,
2003.
<TABLE>
<CAPTION>

<S>                          <C>                          <C>                    <C>
                                   COLUMN (A)                COLUMN (B)                      COLUMN (C)
PLAN CATEGORY                NUMBER OF SECURITIES TO BE    WEIGHTED-AVERAGE             NUMBER OF SECURITIES
                              ISSUED UPON EXERCISE OF      EXERCISE PRICE OF      AVAILABLE FOR FUTURE ISSUANCE UNDER
                                OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,   EQUITY COMPENSATION PLANS (EXCLUDING
                                WARRANTS AND RIGHTS       WARRANTS AND RIGHTS     SECURITIES REFLECTED IN COLUMN (A)
                             --------------------------   --------------------   -------------------------------------
Equity compensation plans
approved by stockholders             775,200                  $      1.74                    40,000

Equity compensation plans not
 approved by stockholders               -                            -                         -
                             --------------------------   --------------------   -------------------------------------
TOTAL                                775,200                  $      1.74                    40,000
                             ==========================   ====================   =====================================
</TABLE>

For additional information, see Note 8 to our Consolidated Financial Statements,
Stockholders'  Equity.

On August 4, 2003, we issued 200,000 shares of our common stock to the Schlinger
Foundation  of  Santa  Ynez,  California  pursuant  to  the exercise of warrants
originally issued in 1998 in connection with a consulting agreement entered into
with  Evert  I.  Schlinger.  The  exercise price of the warrants was $0.4375 per
share  or  $87,500.  We  added  the  exercise  payment  to  our working capital.

We  believe  that  the issuance of these shares was exempt from the registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) of that act.
Mr.  Schlinger  signed an agreement in 1998 acknowledging that the shares issued
upon  exercise  of  the warrants would not be registered.  The stock certificate
representing  the  shares  issued  bears  a  restrictive legend stating that the
shares  have  not been registered under the Securities Act of 1933 and cannot be
transferred  except  pursuant to an effective registration statement filed under
that  act  or  an  exemption  from  the  act's  registration  requirements.
                                       11
<PAGE>

ITEM  6.  SELECTED  FINANCIAL  DATA

The  selected financial data presented below are derived from and should be read
in  conjunction with the Company's Consolidated Financial Statements and related
notes.  This  information  should  also  be  read  in  conjunction with Item 7 -
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations."  In  particular, see the information there relating to the adoption
of  a  new  accounting  pronouncement in 2002.  Data in prior years has not been
restated  to  reflect  acquisitions,  if any, that occurred in subsequent years.
<TABLE>
<CAPTION>

INCOME STATEMENT DATA                       Years Ended December 31,
                                     --------------------------------------
<S>                                  <C>           <C>               <C>
                                         2003          2002          2001
                                     ------------  -----------  -----------
Net sales                            $ 41,712,191  $39,728,615  $37,279,262
Cost of sales                          19,020,292   18,393,914   17,934,935
                                     ------------  -----------  -----------
Gross profit                           22,691,899   21,334,701   19,344,327

Operating expenses                     18,594,240   17,202,927   15,442,359
                                     ------------  -----------  -----------
Operating income                        4,097,659    4,131,774    3,901,968

  Operating income per share - basic       $ 0.40       $ 0.41       $ 0.39
  Operating income per shares - diluted    $ 0.38       $ 0.38       $ 0.37

Other expense                             125,169      311,917      533,482
                                     ------------  -----------  -----------
Income (loss) before income taxes       3,972,490    3,819,857    3,368,486
Income tax provision (benefit)          1,232,116    1,224,868    1,362,053
                                     ------------  -----------  -----------
Income (loss) before cumulative effect
 of change in accounting principle.     2,740,374    2,594,989    2,006,433

Cumulative effect of change in
 accounting principle                           -   (4,008,831)           -
                                     ------------  -----------  -----------
Net income (loss)                    $  2,740,374  $(1,413,842) $ 2,006,433
                                     ============  ============ ===========

Earnings (loss) per share                  $ 0.27       $(0.14)      $ 0.20
Earnings (loss) per share-assuming dilution$ 0.25       $(0.13)      $ 0.19

Weighted average common shares outstanding for:
Basic EPS                              10,323,549   10,063,581    9,976,181
Diluted EPS                            10,861,305   10,761,670   10,449,306

INCOME STATEMENT DATA                Years Ended December 31,
                                     -------------------------
<S>                                  <C>           <C>
                                         2000          1999
                                     ------------  -----------
Net sales                            $ 30,095,264  $27,164,399
Cost of sales                          15,147,547   14,907,768
                                     ------------  -----------
Gross profit                           14,947,717   12,256,631

Operating expenses                     11,702,633   10,346,420
                                     ------------  -----------
Operating income                        3,245,084    1,910,211

  Operating income per share - basic       $ 0.33       $ 0.19
  Operating income per shares - diluted    $ 0.32       $ 0.19

Other expense                             653,779      900,304
                                     ------------  -----------
Income (loss) before income taxes       2,591,305    1,009,907
Income tax provision (benefit)          1,049,985      574,851
                                     ------------  -----------
Income (loss) before cumulative effect
 of change in accounting principle.     1,541,320      435,056

Cumulative effect of change in
 accounting principle                           -            -
                                     ------------  -----------
Net income (loss)                    $  1,541,320  $   435,056
                                     ============  ===========

Earnings (loss) per share                  $ 0.16       $ 0.04
Earnings (loss) per share-assuming dilution$ 0.15       $ 0.04

Weighted average common shares outstanding for:
Basic EPS                               9,875,606    9,853,161
Diluted EPS                            10,182,803    9,890,098

</TABLE>

<TABLE>
<CAPTION>

BALANCE SHEET DATA                                     As of December 31,
<S>                              <C>          <C>          <C>          <C>          <C>
                                     2003        2002         2001         2000         1999
                                 -----------  -----------  -----------  -----------  -----------

Total assets                     $19,058,406  $19,675,602  $19,548,323  $19,686,079  $18,220,775

Notes payable and current
 maturities of long term debt          1,134    4,218,968    4,527,904    5,759,626    6,061,735

Notes payable and long-term debt,
 net of current maturities         1,792,984        2,256        7,691       13,025      121,686

Total Stockholders' Equity       $14,509,493  $11,170,062  $12,423,671  $10,295,637  $ 8,680,425
</TABLE>
                                       12
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

We intend for the following discussion to provide you with information that will
assist you in understanding our financial statements, the changes in certain key
items  in  those financial statements from year to year, and the primary factors
that  accounted  for those changes, as well as how certain accounting principles
affect  our  financial  statements.  This  discussion  also provides information
about  the  financial results of the various segments of our business so you may
better  understand  how  those  segments  and their results affect the financial
condition and results of operations of the Company as a whole.  Finally, we have
identified  and  discussed trends known to management that we believe are likely
to  have  a  material  effect.

This  discussion  should be read in conjunction with our financial statements as
of  December  31,  2003  and  2002  and the three years then ended and the notes
accompanying  those  financial  statements.  You  are also urged to consider the
information  under  the  caption  "Summary  of  Critical  Accounting  Policies."

SUMMARY

The  Leather Factory, Inc. and its subsidiaries is the world's largest specialty
retailer  and  wholesale  distributor of leather and leathercraft-related items.
Our  operations  are  centered  on  operating  retail  stores  and  warehouse
distribution  centers.  We  have  built  our  business by offering our customers
quality  products in one location at competitive prices.  The key to our success
is  our ability to grow our base business.  We grow that business by opening new
locations  and  by  increasing  sales  in  our existing locations.  We intend to
continue to expand both domestically, in the short-term, and internationally, in
the  long-term.

We operate in three segments.  First, our Leather Factory warehouse distribution
centers are the largest source of revenues ($30.7 million in 2003).  The Leather
Factory  centers  have  generally  offered steady but modest increases in sales.
Sales  in  2003  grew  slightly  more  than 1% from 2002, which did not meet our
target  of  annual  sales  growth of 2% to 4%.  We attribute this shortfall to a
decrease in sales to national accounts at the end of 2003.  We believe that this
drop  reflects  a temporary re-assessment of the mix of goods purchased by these
customers  and  that  sales  volume  to  these  customers will increase in 2004.

Since  acquiring  its  assets  in 2000, we have focused on re-establishing Tandy
Leather,  our  second  segment,  as  the operator of retail leathercraft stores.
Because  of  growth here, this segment has experienced the greatest increases in
sales  ($9.2  million in 2003, up from $7.4 million in 2002).  Our business plan
calls  for  opening an average of 12 stores annually as we work toward a goal of
100  stores  from  26  stores  at  the  end  of  2003.

Our third segment is Roberts, Cushman, a manufacturer of trimmings for headwear.
Its  operations  are  not  material  to  the Company.  In 2002, we wrote off the
goodwill  related  to  our  investment in Roberts, Cushman in connection with an
accounting  change.

On  a consolidated basis, a key indicator of costs, gross margin as a percent of
total  net  sales,  increased  in 2002 and again in 2003, reflecting a number of
factors  including  more  retail  sales  with  higher  profit margins.  However,
opening additional Tandy Leather stores and more dollars spent on advertising in
2003  resulted  in  an 1.3% increase in operating expenses as a percent of total
net  sales  in  2003.  Operating  expenses  also were up 1.9% as a percentage of
total net sales in 2002 when compared with 2001.  In 2004, we will be working to
manage  these  costs  in  the  hope  of  reversing  this  trend.

We  reported  consolidated  net  income  for 2003 of  $2.7 million.  In 2001, we
reported  a  consolidated net income of 2.0 million, but an accounting change in
2002  resulted  in  a  net loss of $1.4 million for that year.  We have used our
cash  flow  to  fund  our  operations,  to fund the opening of new Tandy Leather
stores  and  to reduce our bank debt.  In 2003, we reduced our bank debt by $2.4
million,  and,  at  the  end  of 2003, our stockholders' equity had increased to
$14.5  million  from  $11.2  million  the  previous  year.
                                       13
<PAGE>

Comparing  the  December  31,  2003  balance  sheet  with  the  prior year's, we
decreased  our  investments  in inventory ($11.1 million from $12.7 million) and
accounts receivable ($1.8 million from $1.9 million), while total cash increased
to  $1.7  million  from  $655,000.  In  addition  to  cash on hand, we have a $5
million  bank  line  of  credit, of which $1.8 million was drawn on December 31,
2003.

NET  SALES

Net  sales  for  the  three  years  ended  December  31,  2003  were as follows:
<TABLE>
<CAPTION>

<S>   <C>               <C>             <C>         <C>             <C>
                                                                    Total Company Increase
Year  Leather Factory   Tandy Leather   Cushman     Total Company       from Prior Year
----  ----------------  --------------  ----------  --------------  -----------------------
2003  $     30,684,092  $    9,216,838  $1,811,261  $   41,712,191            5.0%
2002        30,313,478       7,387,874   2,027,263      39,728,615            6.6%
2001        28,711,006       6,606,090   1,962,166      37,279,262           23.9%
</TABLE>

Our  net  sales  grew  by  5%  in  2003  when compared with 2002.  That increase
resulted  primarily  from  our  Tandy  Leather expansion program.  The net sales
increase of 6.6% in 2002, when compared with 2001, resulted primarily from solid
sales  gains  in  the  retail  market  in both Leather Factory and Tandy Leather
operations.

COSTS  AND  EXPENSES

In  general,  our  gross  profit  as  a percentage of sales (our "gross margin")
fluctuates  based  on the mix of customers we serve, the mix of product we sell,
and our ability to source product globally.  Our negotiations with suppliers for
lower  pricing  is an on-going process and we have varying degrees of success in
those endeavors.  Sales to retail customers tend to produce higher gross margins
than  sales  to  wholesale  customers  due  to the difference in pricing levels.
Therefore,  as  retail  sales  increase  in  the overall sales mix, higher gross
margins  tend  to  follow.  Finally,  there  is significant fluctuation in gross
margins  between  the various merchandise categories we offer.  As a result, our
gross  margins  can  vary depending on the mix of products sold during any given
time  period.

For  2003,  our  cost of sales decreased as a percentage of total net sales when
compared  to  2002,  resulting  in  an overall increase of 0.7% in the Company's
gross  margin  from  53.7%  in  2002  to  54.4%  in  2003.

Similarly,  our  total  cost of sales as a percentage of our total net sales had
decreased  for  2002  when  compared to 2001 resulting in an overall increase in
gross  margin  of 1.8% from 51.9% for 2001 to 53.7% in 2002.  These increases in
gross  margin were primarily due to increased retail sales over the three years.

Our  gross  margins for the three years ended December 31, 2003 were as follows:
<TABLE>
<CAPTION>

<S>   <C>               <C>             <C>       <C>
Year  Leather Factory   Tandy Leather   Cushman   Total Company
----  ----------------  --------------  --------  --------------
2003       53.23%          62.98%        30.62%      54.40%
2002       53.56%          59.49%        34.64%      53.70%
2001       52.50%          56.14%        28.61%      51.89%
</TABLE>

Our  operating  expenses  increased  1.3%  as a percentage of total net sales to
44.6% in 2003 when compared with 43.3% in 2002.  This increase was primarily due
to  operating  costs  associated  with the twelve Tandy stores opened in 2003 as
well  as  an  increase  in  advertising expenses and investor relation expenses.
Management  believes that our advertising efforts - particularly our direct mail
campaigns  -  are  effective  at increasing sales.  With increased interest from
customers  and  potential customers as we open stores in new markets, the number
of  direct  mail pieces produced and distributed increases.  As our focus on the
retail  customer  continues  to increase, we are producing more colorful mailing
pieces.  While  we  are  monitoring  our  advertising costs with great scrutiny,
management  believes that the trend of increased advertising and marketing costs
could  continue  for  at  least  the  near  future.
                                       14
<PAGE>

Our  investor  relation  expenses, while necessary to inform investors about our
company,  can  fluctuate  greatly.  In  2003,  expenditures  were  approximately
$350,000.  While  we have generated positive responses from investors during the
past  year,  management  believes  that,  with  a  more focused approach, we can
continue  to perform this necessary service at a lesser cost to the Company, and
we  will be monitoring this expense category very closely in 2004.  However, the
effects of the changes in securities regulation and corporate governance brought
about  by  recent  legislation and rule-making by the SEC and the American Stock
Exchange  may  add  to  these  costs  in  2004.

For  2002,  operating expenses increased 1.9% as a percentage of total net sales
to  43.3%  in  2002 when compared with 2001.  This increase was primarily due to
increases  in  payroll  and  payroll-related  costs including employee insurance
programs,  advertising  expenses,  and  the  operating costs associated with the
fourteen  Tandy  stores  opened  in  2002.

OTHER  EXPENSES  (NET)

Other  expenses (net), which consists primarily of interest expense and currency
exchange  gain  and  loss,  was $125,000 in 2003 compared to $312,000 in 2002, a
decrease  of  approximately 60%.  Our interest expense continues to decrease due
to  the  reduction in our outstanding bank debt.  The currency exchange gain and
loss,  resulting  from  our  Canadian  operation, was a gain of $102,000 in 2003
compared  to  a  gain  of  $10,000  in  2002.

In 2002, other expenses (net) was $312,000 in 2002 compared to $533,000 in 2001,
a  decrease of approximately 40%.  This decrease is attributable to the interest
paid  on  our  outstanding  debt.  While  there  was  only  a slight drop in the
interest rate during 2002 compared to 2001, the average outstanding debt balance
dropped  from  $4.9  million  in  2001  to  $3.6  million  in  2002.

NET  INCOME

During  2003, we earned net income of $2.74 million, a substantial increase over
our net loss of $1.4 million for 2002.  (As discussed in previous filings, a new
accounting pronouncement required us to record a $4.0 charge against earnings as
a result of the write-off of the goodwill of Roberts, Cushman in 2002, resulting
in  a  net loss.  This charge was reported as a cumulative effect of a change in
accounting  principle.  Net  income  before  the change was $2.6 million.)  As a
result  of  the increase in our overall gross margin and a reduction in interest
and  other  expenses,  our  profits  in  2003  grew at a rate faster than sales.
Partially  offsetting gross margin and other expense improvements were increased
operating  expenses  in  2003  as  discussed  above.

In 2002, we incurred a net loss of $1.4 million due to the write-off of Roberts,
Cushman's  goodwill  mentioned  above, compared to net income of $2.0 million in
2001.  Our  2002  net  income  (before  the  cumulative effect of the accounting
change)  also increased at a faster rate than 2002 total net sales growth.  This
was  the  result  of  the increase in our overall gross margin and a substantial
reduction  in our interest expense, partially offset by an increase in operating
expenses  in  2002  as  discussed  above.

LEATHER  FACTORY  SEGMENT
<TABLE>
<CAPTION>

<S>      <C>                      <C>                 <C>
           Segment Net Sales          Segment           Segment Operating Income
Year     Increase from Prior Yr   Operating Income    Incr (Decr) from Prior Year
----  -------------------------   ----------------    ---------------------------
2003            1.2%                $  3,462,457                 (7.5)%
2002            5.6%                $  3,742,844                  0.6%
2001            6.1%                $  3,719,517                 24.3%

<S>           <C>
                Operating Income as a
Year          Percentage of Segment Sales
----          ---------------------------
2003                    11.3%
2002                    12.3%
2001                    12.9%
</TABLE>

The  Leather  Factory  segment accounted for 73.5% of total Company net sales in
2003,  which  compares  to  76.3%  in  2002  and 77.0% in 2001.  The decrease in
Leather  Factory's  contribution  to  our  total  net sales is the result of the
growth  in  the  Tandy  Leather  segment  and  we expect this trend to continue.
                                       15
<PAGE>

The segment net sales increase in 2003 resulted from an increase in retail sales
partially  offset  by a drop in sales to our national accounts.  Sales to retail
customers  were  up  approximately  20%  over  2002 due to increased advertising
efforts to that customer group.  Several of the larger customers in our national
account  group  re-set  their  programs  with us during the last half of 2003, a
normal  part  of  doing  business  with  these customers.   We believe that this
decrease is temporary and will not have a long-term effect on our sales for this
customer  group.

Our  sales  mix  by  customer  group  for  2003  was  as  follows:
<TABLE>
<CAPTION>

<S>                      <C>
CUSTOMER GROUP
-----------------
Retail                     23%
Institution                 8%
Wholesale                  42%
National Accounts          20%
Manufacturers               7%
                         -----
                          100%
                         =====
</TABLE>

The  2003 decrease in operating income as a percentage of segment sales resulted
from a 0.33% decrease in gross margin (as a percentage of sales) and an increase
of  0.72%  in  operating expenses (as a percentage of sales) compared with 2002.
The  gross  margin decline was driven primarily by an increase in the quantities
of  leather sold during the year.  Given that leather is our lowest gross margin
item,  an  increase in leather sales, all other factors being equal, will result
in  a  lower overall gross margin.  Our freight costs (shipping merchandise from
vendors  to  us)  were  up  in 2003 as well due an increase in the number of air
shipments  versus  ocean shipments.  The operating expense increase as a percent
of  sales  in  2003 was higher than 2002.  Advertising and marketing costs are a
significant expense in our operation as we believe there is a direct correlation
between  how  much  we  advertise and how much product we sell.  Our increase in
investor  outreach programs in 2003 also contributed to the decline in operating
income this year.  As our largest segment, Leather Factory bears the majority of
the  pro  rata  allocation  of  corporate  expenses.

An  increase  in  gross  margin  partially  offset  by  an increase in operating
expenses  resulted in the slight increase in operating income as a percentage of
segment  sales  in 2002 when compared to 2001.  The gross margin improvement was
the  result  of  the increase in retail sales for the year.  Segment expenses in
2002 as a percent of sales were higher than 2001 due to an increase in personnel
costs  (wages  and health insurance) as well as additional advertising expenses.

TANDY  LEATHER  SEGMENT
<TABLE>
<CAPTION>

<S>      <C>                      <C>                 <C>
           Segment Net Sales          Segment           Segment Operating Income
Year     Increase from Prior Yr   Operating Income    Incr (Decr) from Prior Year
----  -------------------------   ----------------    ---------------------------
2003            24.7%                $  604,291                  62.7%
2002            11.8%                $  371,372                  31.7%
2001             N/A*                $  281,998                   N/A*

<S>           <C>
                Operating Income as a
Year          Percentage of Segment Sales
----          ---------------------------
2003                    6.6%
2002                    5.0%
2001                    4.3%
<FN>
________________________
*Comparison to prior year is meaningless.  Because Tandy was acquired by the Company in November 2000, there is only one month of
data  for  that  year.
</TABLE>

Reflecting  the growth previously discussed, the Tandy Leather segment accounted
for  22.1%  of total Company net sales in 2003, up from  18.6% in 2002 and 17.7%
in  2001.

Growth  in  net  sales  for  the Tandy Leather segment in 2003 and 2002 resulted
primarily  from  our  expansion program.  Segment expansion during 2003 and 2002
consisted  of  the  opening  of  12  and  14 new stores, respectively.  The 2002
expansion  was  partially  offset  by  the  closing  of  the  central mail order
operation  in  September  of  that  year.

Our  sales  mix  by  customer  group  for  2003  was  as  follows:
<TABLE>
<CAPTION>
<S>                     <C>
CUSTOMER GROUP
-----------------
Retail                  72%
Institution              6%
Wholesale               21%
National Accounts        0%
Manufacturers            1%
                       ----
                       100%
                       ====
</TABLE>
                                       16
<PAGE>

Operating  income  as  a  percentage of sales increased in 2003 when compared to
2002.  Segment gross margin increased from 59.5% in 2002 to 63.0% in 2003 due to
increased  retail  sales  and more efficient purchasing of product from vendors.
Segment  operating  expenses  as  a percent of sales increased by 1.95% in 2003.
Expanded  advertising  initiatives  and  rent  for store space accounted for the
operating  expense  increase,  offset  partially  by a decrease in costs to ship
merchandise  to  customers.  The  decrease  in shipping is a result of the store
expansion  as  more  sales occur in the stores as compared to ordering via mail,
phone  or  the  Internet.

Segment  gross  margin as a percent of sales increased by 3.4% in 2002 over 2001
while  operating  expenses as a percent of sales increased 2.6%.  The comparison
between  2002 and 2001 is somewhat convoluted as this segment operated solely as
a  central  mail order operation in 2001 but began opening retail stores in 2002
and  closed  the  central  mail  order operation in September 2002.  The opening
expenses  associated  with  the  new  stores as well as new advertising programs
contributed  to  the  increase  in  operating  expenses  in  2002 but was offset
somewhat  with  reductions  in shipping costs and central facility operation and
maintenance  costs.

We  intend  to  continue  the expansion of Tandy Leather's retail store chain in
2004 by opening a total of 10-15 new stores throughout the year.  As of March 1,
2004, we have opened three stores in 2004:  the Syracuse, NY and Minneapolis, MN
stores  opened  in  January, and the St. Louis, MO store opened in February.  We
remain  committed  to  a  conservative  expansion  plan  for  this  segment that
minimizes  risks  to  the  Company's  profits and maintains financial stability.

CUSHMAN  SEGMENT
<TABLE>
<CAPTION>
<S>      <C>                      <C>                  <C>
           Segment Net Sales      Segment  Operating    Segment Operating Income
Year     Increase from Prior Yr    Income (Loss)       Incr (Decr) from Prior Year
----  -------------------------   ----------------     ---------------------------
2003            (10.6)%               $  30,911                  76.1%
2002              3.3%                $  17,558                 117.6%
2001            (20.2)%               $ (99,547)               (133.5)%

<S>           <C>
                Operating Income as a
Year          Percentage of Segment Sales
----          ---------------------------
2003                    1.7%
2002                    0.9%
2001                   (5.1)%
</TABLE>

The  Cushman  segment  accounted  for  4.4%  of  the total Company sales in 2003
compared  with  5.1%  and  5.3%  in  2002  and  2001,  respectively.

The 2003 decrease in Cushman's net sales resulted from the continued slowdown in
the  headwear  industry  overall.  Several  of  Cushman's  customers  (hat
manufacturers)  are  on  shortened  work  weeks  due  to  the decline in orders.
Segment  gross  margin  as  a  percentage  of  sales  decreased  4.0% from 2002.
However,  operating  income  improved  modestly.

For  2002,  Cushman's  sales  were up modestly (3.3%) while gross profit margins
increased  from  28.6% to 34.6%.  Operating income increased from a $99,000 loss
in 2001 to income of $17,000 for 2002.  The elimination of goodwill amortization
accounted  for  the  improvement.

See  "Financial  Condition"  section below for detailed discussion regarding the
effect  of  the  change  in accounting principle and the resulting write-down of
Cushman's  goodwill  in  2002.

The  sales and profits from the Cushman segment are immaterial to our company as
a whole, and the segment does not fit our business model for the future.  We are
still  assessing  our  long  term  strategic  options  for  this  segment.

FINANCIAL  CONDITION

At  December  31,  2002,  we  held $655,000 of cash, $12.7 million of inventory,
accounts receivable of $1.9 million, and $2.0 million of property and equipment.
Goodwill  and  other  intangibles  (net  of  amortization and depreciation) were
$686,000  and $483,000, respectively.  We also own a leather artwork collection,
most  of which was created by Al Stohlman, a legendary leathercrafter, valued on
our  balance  sheet  at $250,000.  Net total assets were $19.7 million.  Current
liabilities  were  $8.3 million (including $4.2 million of current maturities of
long-term debt), while long-term debt was $2,000.  Total stockholders' equity at
the  end  of  2002  was  $11.2  million.
                                       17
<PAGE>

At  December  31,  2003, our net total assets were $19.1 million.  We held $11.1
million  of  inventory  and  $1.9  million  of property and equipment.  Our cash
totaled $1.7 million and our receivables were $1.8 million.  Current liabilities
were  $2.5  million,  while  our  long-term  debt  was  $1.8  million.  Total
stockholders'  equity  at  the  end  of  2003  had  increased  to $14.5 million,
primarily  as  a  result  of  the $2.7 million net income recorded in 2003.  The
increase  in  cash  from  2002 to 2003 was due primarily to the increase in cash
sales  at  Tandy  Leather  (as opposed to sales on open account), as well as the
decrease in cash tied up in inventory owned at the end of 2003 compared to 2002.
While  we  have  no required payment schedule prior to maturity on our revolving
line  of  credit, management strives to apply as much available cash as possible
to  our  outstanding  debt balance.  Generally speaking, the majority of cash on
our  balance  sheet  is  funds  held  in  depository accounts with various banks
awaiting  collectibility  for transfer either to our operating account or to the
line  of  credit.

Also  at  the end of 2003, the Company's ratio of debt to equity was 0.12%.  Our
ratio of current assets to current liabilities was 6.16 to 1 at the end of 2003,
and  1.94  to  1 at the end of 2002.  The significant improvement in the current
ratio is due to the reclassification of our bank debt from current to long-term.
This  reclassification occurred as a result of the elimination of the restricted
cash  requirement  in  our new credit agreement with Wells Fargo Bank, N.A. that
went  into  effect  in  November  2003  (discussed  below).

CAPITAL  RESOURCES  AND  LIQUIDITY

On  November  3,  2003, the Company entered into a Credit and Security Agreement
with  Wells  Fargo  Bank,  N.A. ("Wells Fargo"), which replaced a line of credit
with  another  bank affiliated with Wells Fargo.    The current facility matures
in November 2005 and is secured by all assets of the Company.  Also, in November
2003, we opted to reduce the maximum amount that may be borrowed under this line
of  credit to $5.0 million, thus reducing fees on the un-borrowed portion of the
credit  line.

The  Company  is  currently  in  compliance  with  all  covenants and conditions
contained  in  the Credit Facility and has no reason to believe that it will not
continue  to  operate  in  compliance  with  the  provisions  of these financing
arrangements.  The  principal  terms  and  conditions of the Credit Facility are
described  in further detail in Note 4 to the Consolidated Financial Statements,
Notes  Payable  and  Long-Term  Debt.

The  Company  borrows  and  repays funds under revolving credit terms as needed.
Principal  balances  at  the  end  of  each  quarter  are  shown  below:
<TABLE>
<CAPTION>

<S>           <C>           <C>           <C>           <C>
4TH QTR. '02  1ST QTR. '03  2ND QTR. '03  3RD QTR. '03  4TH QTR. '03
------------  ------------  ------------  ------------  ------------
 $4,213,533    $5,810,598    $4,763,734    $2,669,116    $1,792,984
</TABLE>

Total  bank  indebtedness  at  the  end  of  2002  and  2003  are  shown  below:
<TABLE>
<CAPTION>

                                           DECEMBER 31,
<S>             <C>            <C>               <C>            <C>
                              2002                          2003
                -------------------------------  -------------------------------
                  PRINCIPAL    ACCRUED INTEREST    PRINCIPAL    ACCRUED INTEREST
--------------  -------------  ----------------  -------------  ----------------
Revolving Line   $ 4,213,533     $   15,706       $ 1,792,984       $6,374
                 ===========     ==========       ===========       ======
</TABLE>

Reflecting  the  reduction of bank indebtedness during the period, our financing
activities  for 2003, 2002 and 2001 had net cash requirements (deficits) of $1.3
million,  $214,000  and  $1.2  million,  respectively.

The  primary source of liquidity and capital resources during 2003 was cash flow
provided  by  operating activities.  Cash flow from operations for 2003 was $3.3
million.  The  largest portion of the operating cash flow was generated from net
income  and  the  reduction of inventory.  Cash flow from operations in 2002 was
$1.4  million, reflecting a larger investment in inventory in 2002 than in 2003.
Cash  flow  from  operations  in  2001  was  $2.0  million.
                                       18
<PAGE>

Consolidated  accounts receivable decreased to $1.8 million at December 31, 2003
compared to $1.9 million at December 31, 2002.  Average days to collect accounts
improved  from 43.54 days in 2002 to 41.46 days in 2003 on a consolidated basis.

By  segment,  the  days  to  collect  were  as  follows:
<TABLE>
<CAPTION>

<S>                      <C>       <C>       <C>
SEGMENT                  2003      2002      IMPROVEMENT
---------------          -----     -----     -----------
Leather Factory          39.43     41.52       2.09 days
Tandy Leather            38.88     34.09     (4.79) days
Cushman                  58.37     63.26       4.89 days
</TABLE>

Inventory  decreased  from  $12.7 million at the end of 2002 to $11.1 million at
December 31, 2003.  We expect our inventory will begin to slowly trend upward as
we  continue  our  expansion  of the Tandy Leather store chain.  However, we are
pleased  with  our  reduced investment in inventory at the end of 2003 as it was
within  3%  of  our  internal targets of optimum inventory levels.  We intend to
continue  managing  our  inventory  levels  to avoid tying up excessive capital.

Consolidated inventory turned 3.51 times during 2003, a slight slowdown from the
3.65  times  turned  in  2002.  We compute our inventory turnover rates as sales
divided  by  average  inventory.

By  segment,  inventory  turns  are  as  follows:
<TABLE>
<CAPTION>

<S>                                          <C>      <C>
SEGMENT                                      2003     2002
-------------------------------------------  ----     ----
Leather Factory                              2.97     3.20
Tandy Leather                                8.69     8.10
Cushman                                      3.71     4.12

Leather Factory - distribution centers only  8.26     7.96
</TABLE>

Tandy  Leather's  inventory  turns  are  significantly  higher  than that of the
Leather  Factory  because  its  inventory  consists only of the inventory at the
stores.  Tandy  Leather has no warehouse (backstock) inventory to include in the
turnover  computation  as  the stores get their product from the Leather Factory
central  warehouse.  Leather  Factory's  turns  are  always  slower  because the
central  warehouse  inventory  supports  the  stores  and  distribution centers.

Accounts payable was virtually unchanged from the end of 2002 at $1.5 million to
the  end  of  2003  at  $1.6  million.

As  shown  above,  the  largest  use  of  operating  cash  in  2003 was for debt
reduction.  Capital expenditures totaled $360,000 and $1.0 million for the years
ended  December  31, 2003 and 2002, respectively.  The 2003 capital expenditures
occurred  primarily  due  to  the expansion of the Tandy Leather segment and the
construction  of  the  Stohlman  Leather  Museum and Gallery located at our Fort
Worth  corporate  complex.  Capital  expenditures in 2002 included approximately
$600,000  in  leasehold  improvements  for  the  central  warehouse  and factory
consolidation  and  remodeling of the Fort Worth Leather Factory store.  Also in
2002, we made expenditures of $436,000 to purchase four independent leathercraft
stores  for  conversion  to  Tandy  Leather stores.  Since we intend to continue
opening  or  acquiring  new  Tandy  Leather stores, expenditures related to this
expansion  should continue into 2004.  In 2001, we recorded capital expenditures
of  $630,000  for  computer  equipment  and software, and other equipment needed
after  the  acquisition  of  Tandy  Leather.

We  believe  that  cash  flow  from  operations  will  be  adequate  to fund our
operations  in  2004,  while  also  funding  expansion  and  debt reduction.  In
addition,  we  anticipate  that  this  cash  flow  will  enable  us  to meet the
contractual  obligations  and  commercial  commitments as shown in the following
table.  However,  if cash flows should decrease or uses of cash increase, we may
defer debt reduction or increase our borrowings on our line of credit as needed.
We  believe that, if desired, our present financial condition would permit us to
increase  the  maximum  amount that could be borrowed from lenders.  Further, we
could defer expansion plans if required by unanticipated drops in cash flow.  In
particular,  because  of  the  relatively  small investment required by each new
Tandy  Leather  store,  we  have  flexibility  in  when  we  make most expansion
expenditures.
                                       19
<PAGE>

OFF-BALANCE  SHEET  ARRANGEMENTS

We  have  not had any off-balance sheet arrangements during 2003, 2002 and 2001,
and  we  do  not  currently  have  any  such  arrangements.

CONTRACTUAL  OBLIGATIONS

The  following  table  summarizes  by  years  our  contractual  obligations  and
commercial  commitments  as of December 31, 2003 (not including related interest
expense):
<TABLE>
<CAPTION>

                                                PAYMENTS DUE BY PERIODS
<S>                             <C>          <C>         <C>         <C>       <C>
                                             LESS THAN      1-3        4-5      AFTER
CONTRACTUAL OBLIGATIONS            TOTAL      1 YEAR        YEARS     YEARS    5 YEARS
                                -----------  ----------  ----------    ----    -------
LONG-TERM DEBT(1)               $ 1,792,984           -  $1,792,984       -        -
CAPITAL LEASE OBLIGATIONS             1,134  $    1,134          -        -        -
OPERATING LEASES(2)               6,748,288   1,843,650   4,371,281   533,357      -
                                -----------  ----------  ----------  --------  -------
TOTAL CONTRACTUAL OBLIGATIONS   $ 8,542,406  $1,844,784  $6,164,265  $533,357  $   -
                                ===========  ==========  ==========  ========  =======
<FN>
____________________
(1)  Our  loan  from  Wells  Fargo  matures  in  November  2005.  The loan's maturity can be accelerated in the event of a
material  adverse  change  or  upon  other  occurrences  described  in  the  related  credit  agreement.
(2)  These  are  our  leased  facilities.
</TABLE>

SUMMARY  OF  CRITICAL  ACCOUNTING  POLICIES

Management strives to report the financial results of the Company in a clear and
understandable  manner,  although  in some cases accounting and disclosure rules
are  complex  and  require us to use technical terminology.  We follow generally
accepted  accounting  principles  in  the  U.S.  in  preparing  our consolidated
financial statements.  These principles require us to make certain estimates and
apply  judgments  that  affect our financial position and results of operations.
Management continually reviews its accounting policies, how they are applied and
how they are reported and disclosed in our financial statements.  Following is a
summary  of our more significant accounting policies and how they are applied in
preparation  of  the  financial  statements.

BASIS  OF  CONSOLIDATION.  We report our financial information on a consolidated
basis.  Therefore,  unless  there  is  an  indication to the contrary, financial
information  is  provided for the parent company, The Leather Factory, Inc., and
its  subsidiaries  as  a whole.  Transactions between the parent company and any
subsidiaries  are  eliminated for this purpose.  We own all of the capital stock
of  our  subsidiaries,  and  we  do  not  have  any  subsidiaries  that  are not
consolidated.  None  of  our  subsidiaries  are  "off  balance  sheet".

REVENUE  RECOGNITION.  We  recognize revenue for retail (over the counter) sales
as  transactions  occur  and  other sales upon shipment of our products provided
that  there  are  no  significant  post-delivery obligations to the customer and
collection  is  reasonably  assured,  which generally occurs upon shipment.  Net
sales  represent  gross sales less negotiated price allowances, product returns,
and  allowances  for  defective  merchandise.

ALLOWANCE  FOR  ACCOUNTS  RECEIVABLE.  We  reduce  accounts  receivable  by  an
allowance  for  amounts  that  may  become  uncollectible  in  the future.  This
allowance  is  an  estimate  based primarily on our evaluation of the customer's
financial  condition, past collection history, and the aging of the account.  If
the  financial  condition  of any of our customers deteriorates, resulting in an
impairment or inability to make payments, additional allowances may be required.

INVENTORY.  Inventory  is stated at the lower of cost or market and is accounted
for  on  the  "first  in, first out" method.  This means that sales of inventory
treat  the  oldest  item  of  identical  inventory  as being the first sold.  In
addition,  we  periodically reduce the value of our inventory for slow-moving or
obsolete  inventory.  This reduction is based on management's review of items on
hand compared to their estimated future demand.  If actual future demand is less
favorable  than  those  projected  by  management, additional write-downs may be
necessary.  Goods  shipped  to us are recorded as inventory owned by us when the
risk  of  loss  shifts  to  us  from  the  supplier.

GOODWILL.  We  have  indicated  above  that  a  change  in  the accounting rules
necessitated  a  change  in 2002 in how we report goodwill on our balance sheet.
As  a  result, we incurred an impairment write-down in 2002 of our investment in
Cushman  in  the  amount of $4.0 million.  The remaining goodwill on our balance
sheet is analyzed by management periodically to determine the appropriateness of
its  carry  value.  As  of December 31, 2003, management has 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.  If  actual  results  of  these  stores  differs  significantly  from
management's  projections,  such  difference  could  affect  the  present  value
calculation  in  the  future  resulting  in  an impairment of all or part of the
goodwill  currently  carried  on  the  Company's  balance  sheet.
                                       20
<PAGE>

FORWARD-LOOKING  STATEMENTS

     "Item  1.  Business"  and  "Item 7. Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations"  of  this  report  contain
forward-looking  statements of management.  In general, these are predictions or
suggestions  of  future  events  and  statements  or  expectations  of  future
occurrences.  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 which could cause actual
results  to  differ  materially  from  those  suggested  by  the forward-looking
statements  include,  among  other  things:

-     We  might fail to realize the anticipated benefits of the opening of Tandy
Leather  retail  stores or we might be unable to obtain sufficient new locations
on  acceptable  terms  to meet our growth plans.  Also, other retail initiatives
might  not  be  successful.

-     Political  considerations  here  and  abroad  could disrupt our sources of
supplies  from  abroad  or  affect  the  prices  we  pay  for  goods.

-     Continued  involvement  by  the  United  States  in war and other military
operations in the Middle East and other areas abroad could disrupt international
trade  and  affect  the  Company's  inventory  sources.

-     The  recent  slump in the economy in the United States, as well as abroad,
may  cause  our  sales  to  decrease  or not to increase or adversely affect the
prices  charged  for our products.  Also, hostilities, terrorism or other events
could  worsen  this  condition.

-     As  a  result  of  the  on-going threat of terrorist attacks on the United
States,  consumer  buying  habits  could  change  and  decrease  our  sales.

-     Livestock  diseases such as mad cow could reduce the availability of hides
and  leathers  or  increase  their cost.  Also, the prices of hides and leathers
fluctuate  in  normal  times,  and  these  fluctuations  can affect the Company.

-     If,  for  whatever  reason,  the  costs of our raw materials and inventory
increase,  we  may  not  be  able  to  pass  those  costs  on  to our customers,
particularly  if  the  economy  has  not  recovered  from  its  downturn.

-     Other  factors  could  cause  either  fluctuations  in  buying patterns or
possible  negative  trends in the craft and western retail markets. In addition,
our  customers may change their preferences to products other than ours, or they
may  not  accept  new  products  as  we  introduce  them.

-     Tax  or  interest rates might increase.  In particular, interest rates are
likely to increase at some point from their present low levels.  These increases
will  increase  our  costs  of  borrowing  funds  as  needed  in  our  business.

-     Any  change  in  the  commercial banking environment may affect us and our
ability  to  borrow  capital  as  needed.

-     Other  uncertainties, which are difficult to predict and many of which are
beyond  the  control  of  the  Company,  may  occur  as  well.

The  Company  does  not  intend  to  update  forward-looking  statements.
                                       21
<PAGE>

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

We  face  exposure  to  financial  market  risks,  including adverse movement in
foreign  current  exchange rates and changes in interest rates.  These exposures
may  change over time and could have a material impact on our financial results.
We  do  not  use  or invest in market risk sensitive instruments to hedge any of
these  risks  or  for  any  other  purpose.

FOREIGN  CURRENCY  EXCHANGE  RATE  RISK

Our  primary  foreign  currency exposure is related to our subsidiary in Canada.
The Leather Factory of Canada, Ltd. has local currency (Canadian dollar) revenue
and  local  currency  operating expenses.  Changes in the currency exchange rate
impacts  the  U.S.  dollar  amount  of revenue and expenses.  See Note 11 to the
Consolidated  Financial  Statements,  Segment  Information,  for  financial
information  concerning  the  Company's  foreign  activities.

INTEREST  RATE  RISK

We  are  subject  to  market  risk  associated  with  interest rate movements on
outstanding  debt.  Our  borrowings  under  the credit facility with Wells Fargo
accrue  interest  at  a  rate  that changes with fluctuations in the prime rate.
Based  on  the  Company's  level  of  debt  at March 5, 2004, an increase of one
percent  in  the  prime  rate  would  result  in  additional interest expense of
approximately  $18,000  during  a  twelve-month  period.

                                       22
<PAGE>

ITEM  8.  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

THE  LEATHER  FACTORY,  INC.
CONSOLIDATED  BALANCE  SHEETS
DECEMBER  31,  2003  AND  2002
<TABLE>
<CAPTION>

                                                                      DECEMBER 31,    DECEMBER 31,
<S>                                                                  <C>             <C>
                                                                          2003            2002
                                                                     -------------   --------------
                             ASSETS
CURRENT ASSETS:
Cash                                                                 $   1,728,344   $     101,557
Cash restricted for payment on revolving credit facility                         -         553,839
Accounts receivable-trade, net of allowance for doubtful accounts
of $31,000 and $78,000 in 2003 and 2002, respectively                    1,828,738       1,938,698
Inventory                                                               11,079,893      12,695,344
Prepaid income taxes                                                       206,023          55,644
Deferred income taxes                                                      134,312         159,090
Other current assets                                                       702,236         672,117
                                                                     -------------   --------------
Total current assets                                                    15,679,546      16,176,289
                                                                     --------------  --------------

PROPERTY AND EQUIPMENT, at cost                                          5,574,992       5,321,749
Less accumulated depreciation and amortization                          (3,669,099)     (3,301,898)
                                                                     --------------  --------------
                                                                         1,905,893       2,019,851

GOODWILL, net of accumulated amortization of $758,000 and
734,000 in 2003 and 2002, respectively                                     704,235         686,484
OTHER INTANGIBLES, net of accumulated amortization of
164,000 and $113,000 in 2003 and 2002, respectively                        432,549         483,507
OTHER assets                                                               336,183         309,471
                                                                     --------------  --------------
                                                                     $  19,058,406   $  19,675,602
                                                                     ==============  ==============

                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-trade                                               $   1,545,079   $   1,594,909
Accrued expenses and other liabilities                                   1,000,427       2,503,331
Notes payable and current maturities of long-term debt                       1,134       4,218,968
                                                                     --------------  --------------
Total current liabilities                                                2,546,640       8,317,208
                                                                     --------------  --------------

DEFERRED INCOME TAXES                                                      209,289         186,076

NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities              1,792,984           2,256

COMMITMENTS AND CONTINGENCIES                                                    -               -

STOCKHOLDERS' EQUITY:
Preferred stock, $0.10 par value; 20,000,000 shares
authorized, none issued or outstanding                                           -               -
Common stock, $0.0024 par value; 25,000,000 shares
authorized, 10,487,961 and 10,149,961 shares issued
and outstanding at 2003 and 2002, respectively                              25,171          24,360
Paid-in capital                                                          4,673,158       4,163,901
Retained earnings                                                        9,804,719       7,064,345
Less:  Notes receivable-secured by common stock                            (20,000)        (44,003)
Accumulated other comprehensive income (loss)                               26,445         (38,541)
                                                                     --------------  --------------
Total stockholders' equity                                              14,509,493      11,170,062
                                                                     --------------  --------------
                                                                     $  19,058,406   $  19,675,602
                                                                     ==============  ==============
</TABLE>

The  accompanying  notes  are  an  integral  part of these financial statements.
                                       23
<PAGE>

THE  LEATHER  FACTORY,  INC.
CONSOLIDATED  STATEMENTS  OF  INCOME
FOR  THE  YEARS  ENDED  DECEMBER  31,  2003,  2002  AND  2001

<TABLE>
<CAPTION>
<S>                                                        <C>           <C>           <C>
                                                              2003          2002          2001
                                                           -----------   -----------   -----------
NET SALES                                                  $41,712,191   $39,728,615   $37,279,262
COST OF SALES                                               19,020,292    18,393,914    17,934,935
                                                           -----------   -----------   -----------
Gross Profit                                                22,691,899    21,334,701    19,344,327

OPERATING EXPENSES                                          18,594,240    17,202,927    15,442,359
                                                           -----------   -----------   -----------
INCOME FROM OPERATIONS                                       4,097,659     4,131,774     3,901,968

OTHER (INCOME) EXPENSE:
Interest expense                                               206,942       246,878       458,558
Other, net                                                     (81,773)       65,039        74,924
                                                           -----------   -----------   -----------
Total other expense                                            125,169       311,917       533,482
                                                           -----------   -----------   -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
 OF CHANGE IN ACCOUNTING PRINCIPLE                           3,972,490     3,819,857     3,368,486

PROVISION FOR INCOME TAXES                                   1,232,116     1,224,868     1,362,053
                                                           -----------   -----------   -----------
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
 ACCOUNTING PRINCIPLE                                        2,740,374     2,594,989     2,006,433

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
 NET OF INCOME TAXES                                                 -    (4,008,831)            -
                                                           -----------   -----------   -----------
NET INCOME (LOSS)                                          $ 2,740,374   $(1,413,842)  $ 2,006,433
                                                           ===========   ============  ===========

NET INCOME (LOSS) PER COMMON SHARE - BASIC:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
 ACCOUNTING PRINCIPLE                                      $      0.27   $      0.26   $      0.20
CUMULATIVE EFFECT OF CHANGE IN ACCTG PRINCIPLE, NET OF TAX           -         (0.40)            -
                                                           -----------   -----------   -----------
                                                           $      0.27   $     (0.14)  $      0.20
                                                           ===========   ============  ===========

NET INCOME (LOSS) PER COMMON SHARE - DILUTED:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
 ACCOUNTING PRINCIPLE                                      $      0.25   $      0.24   $      0.19
CUMULATIVE EFFECT OF CHANGE IN ACCTG PRINCIPLE, NET OF TAX           -         (0.37)            -
                                                           -----------   -----------   -----------
                                                           $      0.25   $     (0.13)  $      0.19
                                                           ===========   ============  ===========

Weighted Average Number of Shares Outstanding:
  Basic                                                     10,323,549    10,063,581     9,976,181
  Diluted                                                   10,861,305    10,761,670    10,449,306
</TABLE>

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

                                       24
<PAGE>

THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
<TABLE>
<CAPTION>

<S>                                                              <C>           <C>           <C>
                                                                     2003          2002          2001
                                                                 -----------   -----------   ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                $ 2,740,374   $(1,413,842)  $ 2,006,433
Adjustments to reconcile net income (loss) to net cash
 Provided by operating activities -
   Depreciation and amortization                                     529,262       491,312       730,153
   Loss on disposal of assets                                         (9,103)            -         5,588
   Amortization of deferred financing costs                                -        37,038        45,753
   Deferred income taxes                                              47,991       (30,184)       (8,135)
   Other                                                              47,235        (2,502)      (10,898)
   Cumulative effect of change in accounting principle                     -     4,008,831             -
   Net changes in assets and liabilities, net of effect of
    business acquisitions:
      Accounts receivable-trade, net                                 109,960       359,255      (105,957)
      Inventory                                                    1,615,451    (3,463,866)      151,629
      Income taxes                                                  (150,379)       16,124       (42,133)
      Other current assets                                           (30,119)     (192,726)      230,695
      Accounts payable-trade                                         (49,830)      291,311      (856,314)
      Accrued expenses and other liabilities                      (1,502,904)    1,332,179      (119,461)
                                                                 -----------   -----------   ------------
Total adjustments                                                    607,564     2,846,772        20,920
                                                                 -----------   -----------   ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                          3,347,938     1,432,930     2,027,353
                                                                 -----------   -----------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                  (360,202)   (1,073,515)     (629,773)
Payments in connection with businesses acquired                            -      (435,747)            -
Proceeds from sale of assets                                           6,217             -         3,200
Increase in other assets                                             (27,970)      (14,754)       (1,386)
Other intangible costs                                                     -        (1,625)            -
                                                                 -----------   -----------   ------------
NET CASH USED IN INVESTING ACTIVITIES                               (381,955)   (1,525,641)     (627,959)
                                                                 -----------   -----------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in revolving credit loans                            (2,420,550)     (286,889)   (1,150,543)
Payments on notes payable and long-term debt                          (6,556)      (27,483)     (105,189)
Decrease (increase) in cash restricted for payment on revolver       553,839       (62,110)     (101,262)
Payments received on notes secured by common stock                    24,003        27,936        48,400
Proceeds from issuance of common stock and warrants                  510,068       133,774        84,099
                                                                 -----------   -----------   ------------
NET CASH USED IN FINANCING ACTIVITIES                             (1,339,196)     (214,772)   (1,224,495)
                                                                 -----------   -----------   ------------
NET INCREASE (DECREASE) IN CASH                                    1,626,787      (307,483)      174,899

CASH, beginning of period                                            101,557       409,040       234,141
                                                                 -----------   -----------   ------------
CASH, end of period                                              $ 1,728,344   $   101,557   $   409,040
                                                                 ===========   ===========   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period                                  $   216,275   $   213,791   $   443,925
Income tax paid during the period, net of (refunds)                1,138,799     1,254,679     1,414,404

NON-CASH INVESTING ACTIVITIES:
Equipment acquired under capital lease financing arrangements              -             -   $    18,676

</TABLE>

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

                                       25
<PAGE>

THE  LEATHER  FACTORY,  INC.
CONSOLIDATED  STATEMENTS  OF  STOCKHOLDERS'  EQUITY
FOR  THE  YEARS  ENDED  DECEMBER  31,  2003,  2002  AND  2001

<TABLE>
<CAPTION>

<S>                                                        <C>                 <C>         <C>               <C>
                                                           NUMBER OF SHARES    PAR VALUE   PAID-IN CAPITAL   RETAINED EARNINGS
                                                           ----------------    ---------   ---------------   -----------------
BALANCE, December 31, 2000                                        9,908,161    $  23,780   $     3,946,608   $      6,471,754

Payments on notes receivable-secured by common stock                      -            -                 -                  -

Shares issued - stock options exercised                              83,000          199            83,900                  -

Net Income                                                                -            -                 -          2,006,433

Translation adjustment                                                    -            -                 -                  -
                                                           ----------------    ---------   ---------------   -----------------
BALANCE, December 31, 2001                                        9,991,161   $   23,979  $      4,030,508  $       8,478,187
                                                           ================   ==========  ================  ==================

Comprehensive income for the year ended December 31, 2001


Payments on notes receivable-secured by common stock                      -            -                 -                   -

Shares issued - stock options exercised                             158,800          381           133,393                   -

Net loss                                                                  -            -                 -          (1,413,842)

Translation adjustment                                                    -            -                 -                   -
                                                           ----------------    ---------   ---------------   ------------------
BALANCE, December 31, 2002                                       10,149,961   $   24,360  $      4,163,901  $        7,064,345
                                                           ================   ==========  ================  ===================

Comprehensive income for the year ended December 31, 2002


Payments on notes receivable-secured by common stock                      -            -                 -                   -

Shares issued - stock options and warrants exercised                338,000          811           442,016                   -

Warrants to acquire 100,000 shares of common stock issued                 -            -            67,241                   -

Net  income                                                               -            -                 -           2,740,374

Translation adjustment                                                    -            -                 -                   -
                                                           ----------------    ---------   ---------------   ------------------
BALANCE, December 31, 2003                                       10,487,961    $  25,171  $      4,673,158  $        9,804,719
                                                           ================    =========  ================  ===================

Comprehensive income for the year ended December 31, 2003


<S>                                                        <C>                 <C>           <C>           <C>
                                                               NOTES           ACCUMULATED
                                                             RECEIVABLE -         OTHER
                                                             SECURED BY         CUMULATIVE                 COMPREHENSIVE
                                                            COMMON STOCK       INCOME (LOSS)    TOTAL       INCOME (LOSS)
                                                           -------------       -------------  -----------  --------------
BALANCE, December 31, 2000                                 $   (120,339)       $    (26,166)  $10,295,637

Payments on notes receivable-secured by common stock             48,400                   -        48,400

Shares issued - stock options exercised                               -                   -        84,099

Net Income                                                            -                   -     2,006,433   $  2,006,433

Translation adjustment                                                -             (10,898)      (10,898)       (10,898)
                                                           -------------       -------------  -----------  --------------
BALANCE, December 31, 2001                                 $    (71,939)       $    (37,064)  $12,423,671
                                                           =============       =============  ===========
Comprehensive income for the year ended December 31, 2001                                                   $  1,995,433
                                                                                                           ==============

Payments on notes receivable-secured by common stock             27,936                   -        27,936

Shares issued - stock options exercised                               -                   -       133,774

Net loss                                                              -                   -    (1,413,842)  $ (1,413,842)

Translation adjustment                                                -              (1,477)       (1,477)        (1,477)
                                                           -------------       -------------  -----------  --------------
BALANCE, December 31, 2002                                 $    (44,003)       $    (38,541)  $11,170,062
                                                           =============       =============  ===========
Comprehensive income for the year ended December 31, 2002                                                   $ (1,415,319)
                                                                                                           ==============

Payments on notes receivable-secured by common stock             24,003                   -        24,003

Shares issued - stock options and warrants exercised                  -                   -       442,827

Warrants to acquire 100,000 shares of common stock issued             -                   -        67,241

Net  income                                                           -                   -     2,740,374   $  2,740,374

Translation adjustment                                                -              64,986        64,986         64,986
                                                           -------------       -------------  -----------  --------------
BALANCE, December 31, 2003                                 $    (20,000)       $     26,445   $14,509,493
                                                           =============       =============  ===========
Comprehensive income for the year ended December 31, 2003                                                   $  2,805,360
                                                                                                           ==============
</TABLE>

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

                                       26
<PAGE>

                            THE LEATHER FACTORY, INC.
                              NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

                        DECEMBER 31, 2003, 2002, AND 2001

 1.  SIGNIFICANT  ACCOUNTING  POLICIES

(a)     Business

Our  primary line of business is the sale of leather, leather crafts and related
supplies.  We  sell  our products via company-owned stores throughout the United
States  and  Canada.  Numerous  customers  including  retailers,  wholesalers,
assemblers,  distributors  and  other manufacturers are geographically disbursed
throughout  the  world.  The  Company also has light manufacturing facilities in
Texas  and  New  York.

(b)     Management  estimates  and  reporting

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United States of America requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and  disclosure of contingent assets and liabilities at the date of
the  financial  statements  and reported amounts of revenues and expenses during
the  periods  presented.  Actual  results  could  differ  from  those estimates.
Significant  assets  and  liabilities  with  reported amounts based on estimates
include  trade  accounts  receivables  and  deferred  income  taxes.

(c)      Principles  of  consolidation

The  consolidated  financial  statements  include  the  accounts  of The Leather
Factory,  Inc.  and  its wholly owned subsidiaries, The Leather Factory, L.P. (a
Texas  limited  partnership)  and its corporate partners, Tandy Leather Company,
L.P.  (a Texas limited partnership) and its corporate partners, Roberts, Cushman
&  Company,  Inc.  (a  New York corporation), and The Leather Factory of Canada,
Ltd.  (a Canadian corporation).  All intercompany accounts and transactions have
been  eliminated  in  consolidation.

(d)     Foreign  currency  translation

Foreign  currency translation adjustments arise from activities of the Company's
Canadian  operations.  Results  of  operations  are translated into U.S. dollars
using the average exchange rates during the period, while assets and liabilities
are  translated  using  period-end exchange rates.  Foreign currency translation
adjustments  of  assets  and  liabilities  are recorded in stockholders' equity.

(e)     Revenue  recognition

Retail  (over  the  counter)  sales are recorded as transactions occur and other
sales  are  recorded when goods are shipped to customers provided that there are
no  significant  post-delivery  obligations  to  the  customer and collection is
reasonably  assured,  which generally occurs upon shipment.  Net sales represent
gross  sales  less  negotiated price allowances, product returns, and allowances
for  defective  merchandise.

(f)     Property and equipment, net of accumulated depreciation and amortization

Property  and  equipment are stated at cost.  Depreciation is computed using the
straight-line  method  over  the estimated useful lives of the assets, which are
five to ten years for equipment, five to seven years for furniture and fixtures,
and  five  years  for  vehicles.  Leasehold  improvements are amortized over the
lesser  of  the  life of the lease or the useful life of the asset.  Repairs and
maintenance  costs  are  expensed  as  incurred.

(g)     Inventory

Inventory  is  valued  at  the  lower of first-in, first-out cost or market.  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.


(h)     Impairment  of  long-lived  assets

The  Company  adopted SFAS No. 144, Accounting for the Impairment or Disposal of
Long-lived Assets, effective January 1, 2002.  The statement supersedes SFAS No.
121,  Accounting  for  the  Impairment  of  Long-Lived Assets and for Long-Lived
Assets  to  be  Disposed  of,  and  the  accounting  and reporting provisions of
Accounting  Principles  Board  (APB)  Opinion  No.  30, Reporting the Results of
Operations  for a Disposal of a Segment of a Business.  The adoption of SFAS No.
144  did  not  affect  the  financial  condition or results of operations of the
Company.
                                       27
<PAGE>

(i)     Earnings  per  share

Basic  earnings  per  share are computed based on the weighted average number of
common  shares  outstanding  during  the  period.  Diluted  earnings  per  share
includes,  to  the extent inclusion of such shares would be dilutive to earnings
per  share,  the  effect of outstanding options and warrants, computed using the
treasury  stock  method.  Unearned  shares, if any, held by the Employees' Stock
Ownership  Plan  (ESOP) are deemed not to be outstanding for earnings per shares
calculations.
<TABLE>
<CAPTION>
<S>                                                             <C>          <C>           <C>
BASIC                                                               2003         2002          2001
                                                                -----------  ------------  -----------
Net income (loss)                                               $ 2,740,374  $(1,413,842)  $ 2,006,433

Weighted average common shares outstanding                       10,323,549   10,063,581     9,976,181

EARNINGS PER SHARE - BASIC                                      $      0.27  $     (0.14)  $      0.20
------------------------------------------------------------------------------------------------------
DILUTED
Net income (loss)                                               $ 2,740,374  $(1,413,842)  $ 2,006,433

Weighted average common shares outstanding                       10,323,549   10,063,581     9,976,181
Effect of assumed exercise of stock options and warrant             537,756      698,089       473,125
                                                                -----------  ------------  -----------
Weighted average common shares outstanding, assuming dilution.   10,861,305   10,761,670    10,449,306
                                                                -----------  ------------  -----------

EARNINGS PER SHARE - DILUTED                                    $      0.25  $     (0.13)  $      0.19
------------------------------------------------------------------------------------------------------
Outstanding options excluded as impact would be anti-dilutive        60,000            -         2,000
</TABLE>

For  additional  disclosures  regarding  the  employee  stock  options  and  the
warrants,  see  Note  9.  The net effect of converting stock options to purchase
792,700  and  762,000  shares  of  common  stock  at option prices less than the
average  market  prices has been included in the computations of diluted EPS for
the  years  ended  December  31,  2003  and  2002,  respectively.

(j)     Goodwill  and  other  intangibles

Statement  of  Financial  Accounting  Standards  ("SFAS") No. 142, "Goodwill and
Other  Intangible Assets," prescribes a two-phase process for impairment testing
of  goodwill, which is performed once annually, absent indicators of impairment.
The  first  phase  screens for impairment, while the second phase (if necessary)
measures  the  impairment.  As  a  result  of SFAS 142, an impairment write-down
occurred  in the first quarter of 2002 of the investment in subsidiary, Roberts,
Cushman  &  Company, Inc., in the amount of $4.0 million.  Goodwill remaining on
the  balance  sheet  is  analyzed  by  management  periodically to determine the
appropriateness  of  its  carrying value.  Management has elected to perform the
annual analysis during the fourth calendar quarter of each year.  As of December
31,  2003,  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.

Under  SFAS 142, goodwill impairment is deemed to exist if the net book value of
a  reporting  unit  exceeds  its  estimated fair value.  The Company's reporting
units  are  generally the same as the operating segments identified in Note 11 -
Segment Information.  The new methodology in SFAS 142 differs from the Company's
prior  policy,  which was permitted under earlier accounting standards, of using
undiscounted  cash  flows  of  the  acquired  asset  to determine if goodwill is
recoverable.

A  summary  of changes in the Company's goodwill for the year ended December 31,
2003  is  as  follows:
<TABLE>
<CAPTION>

                  JANUARY 1,                              DECEMBER 31,
<S>              <C>          <C>             <C>           <C>
                              ACQUISITIONS &
                     2003       ADJUSTMENTS   IMPAIRMENTS     2003
                 -----------  --------------  ------------  --------
Leather Factory  $   333,655  $       17,751             -  $351,406
Tandy Leather        352,829               -             -   352,829
                 -----------  --------------  ------------  --------
Total            $   686,484  $       17,751  $          -  $704,235
                 ===========  ==============  ============  ========
</TABLE>
                                       28
<PAGE>

As  of  December  31, 2003 and 2002, the Company's intangible assets and related
accumulated  amortization  consisted  of  the  following:
<TABLE>
<CAPTION>

                                     AS OF DECEMBER 31, 2003
                        ------------------------------------------------------
<S>                     <C>          <C>                               <C>
                           GROSS     ACCUMULATED AMORTIZATION             NET
                        -----------  ------------------------          --------
Trademarks, Copyrights  $   544,369  $                138,320          $406,049
Non-Compete Agreements       52,000                    25,500            26,500
                        -----------  ------------------------          --------
                        $   596,369  $                163,820          $432,549
                        ===========  ========================          ========
</TABLE>

<TABLE>
<CAPTION>

                                     AS OF DECEMBER 31, 2002
                        -------------------------------------------------------
<S>                     <C>          <C>                                <C>
                           GROSS     ACCUMULATED AMORTIZATION              NET
                        -----------  ------------------------           --------
Trademarks, Copyrights  $   544,369  $                102,029           $442,340
Non-Compete Agreements       52,000                    10,833             41,167
                        -----------  ------------------------          ---------
                        $   596,369  $                112,862           $483,507
                        ===========  ========================          =========
</TABLE>

Excluding  goodwill,  the  Company  has  no  intangible  assets  not  subject to
amortization  under  SFAS  142.  Amortization of intangible assets of $52,215 in
2003,  $48,283  in 2002, and $40,443 in 2001 was recorded in operating expenses.
Based  on  the  current amount of intangible assets subject to amortization, the
estimated  amortization  expense  for  each  of  the  succeeding  5 years are as
follows:
<TABLE>
<CAPTION>

<C>        <S>               <C>                  <C>
           LEATHER FACTORY   TANDY LEATHER         TOTAL
           ----------------  -------------        -------
2004            5,954        $      45,004        $50,958
2005            5,954               35,004         40,958
2006            5,954               34,337         40,291
2007            5,954               33,504         39,458
2008            5,954               30,337         36,291
</TABLE>

During  2002,  the  Company  acquired  the  following  intangible  assets:
<TABLE>
<CAPTION>

<S>                     <C>                   <C>
                                              AMORTIZATION
                                                 PERIOD
                                              ------------
Non-Compete Agreements  $      52,000          3 - 5 years
Copyright                       1,625            15 years
</TABLE>

The 2001 results on a historical basis do not reflect the provision of SFAS 142.
Had  the  Company adopted SFAS 142 on January 1, 2001, the historical net income
and  basic and diluted net income per common share (without giving effect to the
charge  relating  to  the  reduction of goodwill) would have been changed to the
adjusted  amounts  indicated  below:
<TABLE>
<CAPTION>

<S>                            <C>              <C>             <C>
                                       YEAR ENDED DECEMBER 31, 2001
                               ------------------------------------------------
                                NET INCOME      EARNINGS PER     EARNINGS PER
                                                SHARE - BASIC   SHARE - DILUTED
                               ------------     -------------   ---------------
Reported net income            $  2,006,433     $        0.20   $          0.19
Addback goodwill amortization       223,894              0.02              0.02
                               ------------     -------------   ---------------
Adjusted net income            $  2,230,327     $        0.22   $          0.21
                               ============     =============   ===============
</TABLE>

(k)     Fair  value  of  financial  Instruments

The  principal  financial  instruments  held  consist  of  accounts  receivable,
accounts  payable,  notes  payable  and  long-term  debt.  The carrying value of
accounts receivable and accounts payable approximate their fair value due to the
relatively  short-term  nature  of  the  accounts.  The  interest  rates  on the
Company's  notes  payable and long-term debt fluctuate with changes in the prime
rate  and  are  the  rates  currently  available  to the Company; therefore, the
carrying  amount  of  those  instruments  approximates  their  fair  value.

(l)     Deferred  taxes

Deferred  income  taxes  result  from  temporary differences in the bases of our
assets  and  liabilities  reported  for  book  and  tax  purposes.

(m)     Stock  options

We  periodically  grant  stock options for a fixed number of shares to employees
and non-employee directors with an exercise price equal to the fair market value
of  the  shares  at  the  date  of grant.  We account for stock option grants to
employees  and directors using the intrinsic value method and intend to continue
to  do so.  Under the intrinsic value method, compensation associated with stock
awards  to  employees  and  directors  is  determined as the difference, if any,
between  the  current  fair  value  of  the  underlying common stock on the date
compensation  is  measured  and  the  price the employee or director must pay to
exercise  the  award.  The measurement date for employee awards is generally the
date  of  grant.
                                       29
<PAGE>

At  December  31,  2003,  we  had  two stock-based compensation plans, which are
described  more  fully in Note 9.  No stock-based compensation cost is reflected
in  net  income  in 2003, 2002 or 2001, as all options granted under those plans
had  an  exercise price equal to the market value of the underlying common stock
on  the date of grant.  The following table illustrates the effect on net income
and  earnings  per share if we had applied the fair value recognition provisions
of  FASB  Statement  No.  123,  Accounting  for  Stock-Based  Compensation,  to
stock-based  compensation.
<TABLE>
<CAPTION>

                                                    YEARS ENDED DECEMBER 31,
                                           ---------------------------------------
<S>                                        <C>            <C>           <C>
                                               2003          2002          2001
                                           ------------   -----------   ----------
Net income (loss), as reported             $  2,740,374   $(1,413,842)  $2,006,433

Plus: Stock -based employee compensation
expense included in reported net income,
net of tax                                            -             -            -

Less:  Total stock-based compensation
expense determined under fair value based
method for all awards, net of related
tax effects                                      98,186       103,619       28,539
                                           ------------   -----------   ----------
     Pro forma net income (loss)           $  2,642,188   $(1,517,461)  $1,977,894
                                           ============   ===========   ==========

Earnings (loss) per share:
     Basic - as reported                   $       0.27   $     (0.14)  $     0.20
     Basic - pro forma                     $       0.26   $     (0.15)  $     0.20

     Diluted - as reported                 $       0.25   $     (0.13)  $     0.19
     Diluted - pro forma                   $       0.24   $     (0.14)  $     0.19
</TABLE>

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:
<TABLE>
<CAPTION>

<S>                        <C>    <C>    <C>
                           2003   2002   2001
                           -----  -----  -----
Volatility                 69.6%  73.6%  78.0%
Expected option life          5      5      5
Interest rate (risk free)  3.25%  3.00%  3.50%
Dividends                   None   None   None
</TABLE>

The  effect  on  2003,  2002  and  2001 pro forma net income (loss) and earnings
(loss) per share of the estimated fair value of stock options and shares are not
necessarily  representative  of  the effects on the results of operations in the
future.  In  addition,  the estimates made utilize a pricing model developed for
traded  options  with relatively short lives; our option grants typically have a
life  of  up  to ten years and are not transferable.  Therefore, the actual fair
value  of  a stock option grant may be different from our estimates.  We believe
that  our  estimates  incorporate  all  relevant  information  and  represent  a
reasonable  approximation  in  light  of  the  difficulties  involved in valuing
non-traded  stock  options.

(n)     Comprehensive  income

Comprehensive  income  represents all changes in stockholders' equity, exclusive
of  transactions with stockholders.  The accumulated balance of foreign currency
translation adjustments is presented in the consolidated financial statements as
"accumulated  other  comprehensive  income  or  loss".

(o)  Shipping  and  handling  costs

All  shipping  and  handling  costs  incurred  by  the  Company  are included in
operating  expenses  on  the  statements  of  income.  These  costs  totaled
approximately  $1,206,000,  $1,284,000,  and  $1,343,000  for  the  years  ended
December  31,  2003,  2002  and  2001,  respectively.

(p)  Advertising  Costs

With  the exception of catalog costs, advertising costs are expense as incurred.
Catalog costs are capitalized and expensed over the estimated useful life of the
particular  catalog  in  question, which is typically twelve to eighteen months.
Such capitalized costs are included in other current assets and totaled $102,304
and  $116,611  at  December  31, 2003 and 2002, respectively.  Total advertising
expense  was  $2,399,879  in  2003;  $2,265,659 in 2002; and $2,023,527 in 2001.

(q)  Cash  flows  presentation

For  purposes  of  the statement of cash flows, the Company considers all highly
liquid investments with initial maturities of three months or less from the date
of  purchase  to  be  cash  equivalents.
                                       30
<PAGE>

2.  VALUATION  AND  QUALIFYING  ACCOUNTS

We maintain allowances for bad debts based on factors such as the composition of
accounts  receivable,  the  age of the accounts, historical bad debt experience,
and  management's  evaluation  of  the  financial  condition and past collection
history  of  each customer.  Our allowance for doubtful accounts was $31,469 and
$77,657,  respectively,  at  December 31, 2003 and 2002.  Reductions in 2003 and
2002  are  due  to  improvements in trade accounts receivable and collections of
accounts  for which reserves had been provided.  The following is a roll forward
of  the  allowance  for  doubtful  accounts:
<TABLE>
<CAPTION>

<S>                           <C>                 <C>                      <C>               <C>          <C>
                                                  ADDITIONS (REDUCTIONS)
                                 BALANCE AT          CHARGED TO COSTS      FOREIGN EXCHANGE               BALANCE AT
                              BEGINNING OF YEAR       AND EXPENSES             GAIN/LOSS     WRITE-OFFS   END OF YEAR
                              -----------------   ----------------------   ----------------  ----------   -----------
Year ended December 31, 2003  $          77,657               87,175              967         (134,330)       $31,469
Year ended December 31, 2002  $         190,890              (30,197)              24          (83,060)       $77,657
Year ended December 31, 2001  $         208,014               37,572             (116)         (54,580)      $190,890
</TABLE>

3.  BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
                                         DECEMBER 31,
<S>                                <C>           <C>
                                      2003          2002
                                   -----------   ------------
INVENTORY
Finished goods held for sale       $ 9,902,140   $11,693,868
Raw materials and work in process    1,177,753     1,001,476
                                   -----------   ------------
  TOTAL                            $11,079,893   $12,695,344
                                   ===========   ============

PROPERTY AND EQUIPMENT
Leasehold improvements             $ 1,100,785   $ 1,043,076
Equipment                            3,572,506     3,407,332
Furniture and fixtures                 843,851       839,326
Vehicles                                57,850        32,015
                                   -----------   ------------
                                     5,574,992     5,321,749
Less:  accumulated depreciation     (3,669,099)   (3,301,898)
                                   -----------   ------------
  TOTAL                            $ 1,905,893   $ 2,019,851
                                   ===========   ============
</TABLE>

Depreciation  expense  was  $477,047, $443,029, and $460,741 for the years ended
December  31,  2003,  2002  and  2001,  respectively.
<TABLE>
<CAPTION>

                                       DECEMBER 31,
<S>                                <C>         <C>
                                     2003        2002
                                   ----------  ----------
OTHER CURRENT ASSETS
Accounts receivable - employees    $   23,375  $   21,977
Accounts receivable - other            24,691      23,364
Prepaid expenses                      495,334     362,698
Payments on merchandise not rec'd     158,836     264,078
                                   ----------  ----------
  TOTAL                            $  702,236  $  672,117
                                   ==========  ==========

ACCR EXPS AND OTHER LIABILITIES
Accrued bonuses                    $  527,880  $  934,191
Accrued payroll                       220,055     226,501
Accrued ESOP contribution                   -      28,100
Sales and payroll taxes payable       154,948      95,849
Inventory in transit                        -   1,000,000
Other                                  97,544     218,690
                                   ----------  ----------
  TOTAL                            $1,000,427  $2,503,331
                                   ==========  ==========
</TABLE>
                                       31
<PAGE>

4.  NOTES  PAYABLE  AND  LONG-TERM  DEBT

On  November  3,  2003, the Company entered into a Credit and Security Agreement
with  Wells  Fargo Bank Texas, N.A.  ("WFB-TX"), pursuant to which WFB-TX agreed
to  provide a revolving credit facility of up to $6,000,000.  The revolver bears
interest  at  prime  less  .5% and matures on November 3, 2005.  Proceeds of the
closing of the Credit Facility were used to pay all amounts due and owing by the
Company  pursuant  to  the  Credit  and  Security  Agreement, as amended, by and
between  the  Company  and  Wells  Fargo  Bank  Minnesota,  N.A. ("WFB-MN").  At
closing,  the  Company's  revolving  line of credit with WFB-MN in the principal
amount  of  $2,054,549  was  satisfied  in  its  entirety.

On November 26, 2003, the Company entered into the First Amendment to the Credit
and  Security Agreement ("Amendment 1") with WFB-TX.  There, WFB-TX approved the
Company's  request  for  a reduction in the maximum loan amount to $5,000,000, a
reduction  of  $1,000,000.  Also,  Amendment 1 modified the original restriction
regarding  the  repurchase  of  treasury  stock  to  allow  for  treasury  stock
repurchases  under  $150,000.

At  December  31,  2003  and  2002,  the  amounts  outstanding  under  the above
agreements  and  other  long-term  debt  consisted  of  the  following:

<TABLE>
<CAPTION>

<S>                                                                       <C>         <C>
                                                                             2003        2002
                                                                          ----------  ----------
Credit and Security Agreement with WFB-TX - collateralized by all of the
 assets of the Company; payable as follows:

Revolving Note, as amended, dated November 3, 2003 in the maximum
principal amount of $5,000,000 with revolving features as more fully
described below - interest due monthly at prime less 0.5% (3.5% at
December 31, 2003); matures November 2005                                 $1,792,984          -

Credit and Security Agreement with WFB-MN - collateralized by all of the
 assets of the Company; payable as follows:

Revolving Note dated March 20, 2002 in the maximum principal amount
of $7,500,000 - interest due monthly at prime (4.25% at December 31,
2002); original maturity November 30, 2004 - retired                               -  $4,213,533

Capital Lease secured by equipment - total monthly principal and
interest payments of $572 at approximately 12% interest; maturing
February 2004.  Assets subject to capital lease agreements totaling $18,651
and related accumulated depreciation of $6,262 and $4,885 are included in
property and equipment as of December 31, 2003 and 2002, respectively          1,134       7,691
                                                                          ----------  ----------
                                                                           1,794,118   4,221,224
Less - Current maturities (see below)                                          1,134   4,218,968
                                                                          ----------  ----------
                                                                          $1,792,984  $    2,256
                                                                          ==========  ==========
</TABLE>

Pursuant  to the Credit and Security Agreement with WFB-TX, total borrowings are
subject  to  a  percentage of trade accounts receivable and inventory reduced by
any  required  reserves.  The  unused portion of the credit facility at December
31,  2003  was  $3,207,016.

The  terms  of  the Credit Facility contain various covenants which, among other
things,  require  the Company to maintain a certain level of tangible net worth,
meet  a  specific  debt  service coverage ratio, and limit capital expenditures.
Other  covenants  prohibit  the  Company  from  incurring indebtedness except as
permitted  by  the  terms  of the Credit Facility, from declaring or paying cash
dividends  upon  any  of  its  stock  and from entering into any new business or
making material changes in any of the Company's business objectives, purposes or
operations.

Scheduled  maturities  of  the Company's notes payable and long-term debt are as
follows:
<TABLE>
<CAPTION>

<S>                    <C>
2004            $    1,134
2005             1,792,984
2006                     -
2007                     -
                ----------
                $1,794,118
                ==========
</TABLE>
                                       32
<PAGE>

5.  EMPLOYEE  BENEFIT  PLAN

The Company has an Employee Stock Ownership Plan (the "Plan") for employees with
at least one year of service (as defined by the Plan) and who have reached their
21st  birthday.  Under  the  Plan,  the  Company  makes  annual  cash  or  stock
contributions  to a trust for the benefit of eligible employees.  As of December
31,  2003,  229  employees  and  former  employees  were  participants  in  or
beneficiaries  of the ESOP.  The trust invests in shares of the Company's common
stock.  The  amount  of  the  Company's  annual  contribution  is discretionary.
Benefits  under  the  Plan  are 100% vested after three years of service and are
payable  upon death, disability or retirement.  Vested benefits are payable upon
termination  of  employment.

The  Company  applies  Statement  of  Position  93-6  (SOP  93-6),  "Employers'
Accounting  for  Employee  Stock  Ownership  Plans," of the Accounting Standards
Division  of  the  American  Institute  of  CPAs.   During 2003, 2002, and 2001,
respectively,  the  Company contributed $221,400; $345,312; and $277,892 in cash
as  current  year  contributions to the plan and recognized compensation expense
related  to  these  payments.

The  following  table  summarizes  the number of shares held by the Plan and the
market  value  as  of  December  31,  2003,  2002,  and  2001:
<TABLE>
<CAPTION>

                   NUMBER OF SHARES                        MARKET VALUE
              -----------------------------     ------------------------------------
<S>           <C>        <C>       <C>          <C>          <C>          <C>
                2003       2002      2001          2003        2002          2001
              --------   --------  --------     ----------   ----------   ----------
Allocated      981,540    956,320   895,928     $4,750,654   $3,232,362   $1,863,530
Unearned             -          -         -              -            -            -
              --------   --------  --------     ----------   ----------   ----------
Total          981,540    956,320   895,928     $4,750,654   $3,232,362   $1,863,530
              ========   ========  ========     ==========   ==========   ==========
</TABLE>

The Company currently offers no postretirement or postemployment benefits to its
employees.

6.  INCOME  TAXES

The  provision  for  income  taxes  consists  of  the  following:
<TABLE>
<CAPTION>

<S>                            <C>         <C>         <C>
                                  2003        2002        2001
                               ----------  ----------  -----------
Current provision:
  Federal                      $1,144,763  $1,078,146  $1,154,847
  State                            40,267      51,556     218,717
                               ----------  ----------  -----------
                                1,185,030   1,129,702   1,373,564
                               ----------  ----------  -----------

Deferred provision (benefit):
  Federal                          46,850      82,014     (11,299)
  State                               236      13,152        (212)
                               ----------  ----------  -----------
                                   47,086      95,166     (11,511)
                               ----------  ----------  -----------
                               $1,232,116  $1,224,868  $1,362,053
                               ==========  ==========  ===========
</TABLE>

Income  (loss) before income taxes is earned in the following tax jurisdictions:
<TABLE>
<CAPTION>

<S>            <C>         <C>         <C>
                   2003        2002        2001
               ----------  ----------  -----------
United States  $3,744,550  $3,794,256  $3,403,545
Canada            227,940      25,601     (35,059)
               ----------  ----------  -----------
               $3,972,490  $3,819,857  $3,368,486
               ==========  ==========  ===========
</TABLE>

The  income  tax  effects of temporary differences that give rise to significant
portions  of  deferred  income  tax  assets  and  liabilities  are  as  follows:

Deferred  income  tax  assets:
<TABLE>
<CAPTION>
<S>                                                           <C>        <C>
          Allowance for doubtful accounts                     $  9,782   $ 28,780
          Capitalized inventory costs                          103,605    115,590
          Accrued expenses, reserves, and other                 20,925     14,720
                                                              --------   --------
          Total deferred income tax assets                     134,312    159,090
                                                              --------   --------
</TABLE>
Deferred income tax liabilities:
<TABLE>
<CAPTION>
<S>                                                            <C>        <C>
          Property and equipment depreciation                  204,482    171,601
          Goodwill and other intangible assets amortization      4,807     15,380
          Tax effect of translation adjustment and other             -       (905)
                                                              --------   --------
Total deferred income tax liabilities                          209,289    186,076
                                                              --------   --------
Net deferred tax asset (liability)                            ($74,977)  $(26,986)
                                                              ========   ========
</TABLE>

The  effective  tax  rate  differs  from  the  statutory  rate  as  follows:
<TABLE>
<CAPTION>
<S>                                   <C>    <C>    <C>
                                      2003   2002   2001
                                      -----  -----  -----
Statutory rate                          34%    34%    34%
State and local taxes                    1%     1%     3%
Non-deductible goodwill amortization     0%     0%     2%
Other                                  (4%)   (3%)     1%
                                      -----  -----  -----
Effective rate                          31%    32%    40%
                                      =====  =====  =====
</TABLE>
                                       33
<PAGE>

7.  COMMITMENTS  AND  CONTINGENCIES

Operating  Leases

The Company's primary office facility and warehouse are leased under a five-year
lease  agreement  that  expires in March 2008.  Rental agreements for the stores
and warehouse distribution units expire on dates ranging from April 2004 to June
2009.  The  Company's  lease  agreement  for  the manufacturing facility in Long
Island  City,  New  York,  expires  on  June  30,  2006.

Rent  expense  on  all  operating  leases for the years ended December 31, 2003,
2002,  and  2001,  was  $1,814,457,  $1,465,577,  and  $1,299,582, respectively.

Commitments

Future  minimum  lease payments under noncancelable operating leases at December
31, 2003 were as follows:
<TABLE>
<CAPTION>

                                            OPERATING
                                              LEASES
                                            ----------
<S>                                         <C>
Year ending December 31:
2004                                        $1,843,650
2005                                         1,742,603
2006                                         1,496,189
2007                                         1,132,489
2008                                           461,003
2009 and thereafter                             72,354
                                            ----------
Total minimum lease payments                $6,748,288
                                            ==========
</TABLE>

Litigation

The  Company is involved in various litigation that arise in the ordinary course
of  its  business  and  operations.  There  are no such matters pending that the
Company  expects to have a material impact on its financial position and results
of  operations.

8.  SIGNIFICANT  BUSINESS  CONCENTRATIONS  AND  RISK

Major  Customers

The  Company's  revenues are derived from a diverse group of customers primarily
involved  in  the  sale of leather crafts. While no single customer accounts for
more  than  10%  of  the Company's consolidated revenues in 2003, 2002 and 2001,
sales  to  the  Company's  five  largest  customers represented 13.8%, 15.1% and
14.4%,  respectively,  of consolidated revenues in those years. While management
does  not  believe  the  loss of one of these customers would have a significant
negative impact on the Company's operations, it does believe the loss of several
of  these customers simultaneously or a substantial reduction in sales generated
by  them  could  temporarily  affect  the  Company's  operating  results.

Major  Vendors

The  Company  purchases  a  significant  portion  of  its  inventory through one
supplier.  Due  to  the  number  of  alternative sources of supply, loss of this
supplier  would  not  have  an  adverse  impact  on  the  Company's  operations.

Credit  Risk

Due  to  the  large  number of customers comprising the Company's customer base,
concentrations  of credit risk with respect to customer receivables are limited.
At  December  31, 2003 and 2002, 20.6% and 20.1%, respectively, of the Company's
consolidated  accounts  receivable  were  due  from  three nationally recognized
retail  chains.  The  Company does not generally require collateral for accounts
receivable,  but  performs  periodic  credit  evaluations  of  its customers and
believes  the  allowance  for doubtful accounts is adequate.  It is management's
opinion  that  if  any  one or a group of customer receivable balances should be
deemed  uncollectable,  it  would  not  have  a  material  adverse effect on the
Company's  results  of  operations  and  financial  condition.
                                       34
<PAGE>

9.  STOCKHOLDERS'  EQUITY

(a)     Stock  Option  Plans

-     1995  Stock  Option  Plan

In  connection  with  its 1995 Stock Option Plan for officers and key management
employees,  the  Company  has  outstanding options to purchase its common stock.
The  plan  provides for the granting of either qualified incentive stock options
or  non-qualified options at the discretion of the Compensation Committee of the
Board  of  Directors.  Options  are  granted  at  the  fair  market value of the
underlying  common  stock at the date of grant and vest over a five-year period.
The  Company  has  reserved  1,000,000 shares of common stock for issuance under
this  plan.

-     1995  Director  Non-Qualified  Stock  Option  Plan

In  connection  with  its  1995  Director  Non-qualified  Stock  Option Plan for
non-employee  directors,  the  Company  has  outstanding options to purchase its
common  stock.  The  plan  provides for the granting of non-qualified options at
the discretion of the Compensation Committee of the Board of Directors.  Options
are  granted at the fair market value of the underlying common stock at the date
of  grant and vest after six months.  The Company has reserved 100,000 shares of
common  stock  for  issuance  under  this  plan.

-     Stock  Option  Summary

All  options  expire ten years from the date of grant and are exercisable at any
time  after  vesting.  Of  the  combined 1,100,000 shares available for issuance
under  the  two  plans,  at December 31, 2003, 2002 and 2001, there were 40,000;
106,000;  and  116,000; respectively, in un-optioned shares available for future
grants.

The following table summarizes information about stock options outstanding as of
December  31,  2003:
<TABLE>
<CAPTION>

<S>              <C>                  <C>                <C>                  <C>          <C>
                                       WEIGHTED AVERAGE    WEIGHTED AVERAGE    NUMBER OF     WEIGHTED AVERAGE
   RANGE OF           NUMBER OF         REMAINING LIFE    EXERCISE PRICE OF     OPTIONS    PRICE OF EXERCISABLE
EXERCISE PRICES  OUTSTANDING OPTIONS       IN YEARS      OUTSTANDING OPTIONS  EXERCISABLE       OPTIONS
---------------  -------------------  -----------------  -------------------  -----------  --------------------
$0.50 - $0.9375        150,500               3.62               $0.840          130,500           $0.820
$1.0625 - $1.90        450,700               7.38               $1.356          171,700           $1.360
$2.72 - $4.24           74,000               9.64               $4.080            6,000           $2.720
---------------  -------------------  -----------------  -------------------  -----------  --------------------
$0.50 - $4.24          675,200               6.79               $1.540          308,200           $1.158
---------------  -------------------  -----------------  -------------------  -----------  --------------------
</TABLE>

Further  information  concerning  the  options  is  as  follows:
<TABLE>
<CAPTION>
<S>                           <C>        <C>             <C>                <C>
                                          OPTION PRICE   WEIGHTED AVERAGE
                               SHARES       PER SHARE     PRICE PER SHARE     TOTAL
                              ---------  --------------  ----------------   ----------
December 31, 2000              458,000   $0.500-$3.0625     $     0.814     $  372,900
Options granted                477,000   $1.125-$1.9000     $     1.361        649,000
Options forfeited               (6,000)  $0.500-$1.0625     $     0.751         (4,505)
Options exercised              (83,000)  $0.500-$1.0625     $     0.761        (63,193)
                              ---------  --------------  ----------------   ----------
DECEMBER 31, 2001              846,000   $0.500-$3.0625     $     1.128     $  954,202
(251,000 shares exercisable)
                              ---------  --------------  ----------------   ----------
Options granted                 10,000   $   2.720          $     2.720         27,200
Options forfeited                    -           -                    -              -
Options exercised             (108,800)  $0.500-$1.3500     $     0.810        (88,123)
                              ---------  --------------  ----------------   ----------
DECEMBER 31, 2002              747,200   $0.500-$3.0625     $     1.196     $  893,279
(325,200 shares exercisable)
                              ---------  --------------  ----------------   ----------
Options granted                 68,000   $3.900-$4.240      $     4.200        285,600
Options forfeited               (2,000)  $   2.720          $     2.720         (5,440)
Options exercised             (138,000)  $0.500-$3.0625     $     0.972       (134,088)
                              ---------  --------------  ----------------   ----------
DECEMBER 31, 2003              675,200   $0.500-$4.2400     $     1.540     $1,039,351
(308,200 shares exercisable)
                              ---------  --------------  ----------------   ----------
</TABLE>
                                       35
<PAGE>

(b)     Warrants

Warrants to acquire up to 100,000 shares of common stock at $3.10 per share were
issued  in  conjunction  with  a  consulting agreement to an unrelated entity in
February  2003.  The  warrants  may  be exercised at anytime until expiration on
February  12,  2008.

A  summary  of warrant transactions for the years ended December 31, 2002, 2001,
and  2000,  is  as  follows:
<TABLE>
<CAPTION>

                                      2003                2002               2001
                                -----------------   -----------------   -----------------
<S>                             <C>      <C>        <C>      <C>        <C>      <C>
                                         WEIGHTED            WEIGHTED            WEIGHTED
                                          AVERAGE             AVERAGE            AVERAGE
                                OPTION   EXERCISE   OPTION   EXERCISE   OPTION   EXERCISE
                                SHARES     PRICE    SHARES     PRICE    SHARES     PRICE
                                -------  --------   -------  --------   -------  --------
Outstanding at January 1        200,000    $0.4375  300,000   $0.4727   300,000   $0.4727
Granted                         100,000     3.1000        -         -         -         -
Forfeited or expired                  -          -  (50,000)   0.5430         -         -
Exchanged                             -          -        -         -         -         -
Exercised                      (200,000)    0.4375  (50,000)   0.5430         -         -
                                -------  --------   -------  --------   -------  --------
Outstanding at December 31      100,000    $3.1000  200,000   $0.4375   300,000   $0.4727
                                =======    =======  =======   =-=====   =======   =======
Exercisable at end of year      100,000    $3.1000  200,000   $0.4375   300,000   $0.4727
                                =======    =======  =======   =======   =======   =======
Weighted-average fair value of
 warrants granted during year   $  0.67               N/A                 N/A
                                =======             =======             =======
</TABLE>

The  following  table  summarizes  outstanding  options  into  groups based upon
exercise  price  ranges  at  December  31,  2003:
<TABLE>
<CAPTION>
                            WARRANTS OUTSTANDING          WARRANTS EXERCISABLE
                         ----------------------------   ----------------------------
<S>                      <C>       <C>       <C>        <C>       <C>       <C>
                                   WEIGHTED  WEIGHTED             WEIGHTED  WEIGHTED
                                    AVERAGE   AVERAGE              AVERAGE   AVERAGE
                                   EXERCISE  MATURITY             EXERCISE  MATURITY
Exercise Price Range     WARRANT     PRICE    (YEARS)   WARRANT     PRICE    (YEARS)
---------------------    -------   --------  --------   -------   --------  --------
$3.00 or Less               -         -          -         -          -         -

More than $3.00 and
Less Than  $5.00         100,000    $3.100     4.12     100,000     $3.100     4.12

More than $5.00             -         -         -          -          -         -
                         -------   --------  --------   -------   --------  --------
                         100,000    $3.100     4.12     100,000     $3.100     4.12
                         =======   ========  ========   =======   ========  ========
</TABLE>

(c)     Notes  Receivable  Secured  by  Common  Stock

During  1996,  the  Company purchased certain notes from a financial institution
that  are  collateralized  by the Company's common stock.  These notes relate to
shares  issued  under  the  Company's  1993 Non-Qualified Incentive Stock Option
Plan.  These  notes,  as  renewed  in  2000,  are  due  from  certain members of
management  and  have  maturity  dates  of  December  31,  2004.
                                       36
<PAGE>

10.  BUSINESS  ACQUISITIONS

During 2002, the company acquired certain assets of the following entities for a
total  purchase  price  of  $435,747:
<TABLE>
<CAPTION>
<S>                      <C>                      <C>
ENTITY                   LOCATION                 DATE OF ACQUISITION
-----------------------  -----------------------  -------------------
Oklahoma Leather Supply  Oklahoma City, Oklahoma  January 2002
Heritage Leather         Boise, Idaho             March 2002
The Leather Shop         Memphis, Tennessee       October 2002
Copper Saguaro           Tempe, Arizona           November 2002
</TABLE>

All  of  the  acquired  entities  were  formerly  operated as independent retail
leathercraft  stores.  The  assets  purchased  in  these  acquisitions consisted
primarily  of  inventory, store furniture and fixtures, and equipment.  Goodwill
recognized  in  these  transactions amounted to $158,878, and is reported in the
Tandy Leather Company segment.  All of the goodwill is deductible for income tax
purposes.  The  Company also entered into non-compete agreements with the former
owners  totaling  $52,000  for  periods  ranging  from  three  to  five  years.

In  the  first  quarter  of  2004,  the  Company  acquired certain assets of the
following  entities  for  a  total  purchase  price  of  $125,452:
<TABLE>
<CAPTION>
<S>                           <C>            <C>
ENTITY                        LOCATION       DATE OF ACQUISITION
----------------------------  -------------  -------------------
Robyn's LLC                   Syracuse, NY   January 2004
Hawkins Handcrafted Leathers  St. Louis, MO  February 2004
</TABLE>

All  of  the  acquired  entities  were  formerly  operated as independent retail
leathercraft  stores.  The  assets  purchased  in  these  acquisitions consisted
primarily  of  inventory, store furniture and fixtures, and equipment.  Goodwill
recognized  in  these  transactions  amounted to $28,000, and is reported in the
Tandy Leather Company segment.  All of the goodwill is deductible for income tax
purposes.  The  Company also entered into non-compete agreements with the former
owners  totaling  $21,000  for  periods  ranging  from  one  to  three  years.

11.  SEGMENT  INFORMATION

The  Company  identifies  its segments based on the activities of three distinct
businesses:  The  Leather  Factory,  which  sells  product to both wholesale and
retail customers, consists of a chain of warehouse distribution units located in
the  United  States  and Canada; Tandy Leather Company, which sells primarily to
retail customers and consists of a chain of stores located in the United States;
and  Roberts,  Cushman  &  Company, which manufactures decorative hat trims sold
directly  to  hat  manufactures  and  distributors.

The  Company's  reportable operating segments have been determined as separately
identifiable business units.  The Company measures segment earnings as operating
earnings,  defined  as  income  before  interest  and  income  taxes.
                                       37
<PAGE>
<TABLE>
<CAPTION>

<S>                                    <C>               <C>                      <C>      <C>
                                       THE LEATHER       TANDY LEATHER      ROBERTS,
                                         FACTORY            COMPANY        CUSHMAN & CO       TOTAL
                                       -----------       -------------     ------------    -----------
For the year ended December 31, 2003
Net Sales                              $30,684,092       $   9,216,838     $  1,811,261    $41,712,191
Gross Profit                            16,332,776           5,804,504          554,619     22,691,899
Operating earnings                       3,462,457             604,291           30,911      4,097,659
Interest expense                           206,942                   -                -        206,942
Other, net                                 (81,839)                 65                -        (81,773)
                                                                                           -----------
Income before income taxes               3,337,354             604,225           30,911      3,972,490
                                                                                           -----------
   Depreciation and amortization           443,623              75,854            9,785        529,262
   Fixed asset additions                   214,256             137,115            8,831        360,202
     Total assets                      $15,409,084       $   2,908,429     $    740,893    $19,058,406
                                       ---------------------------------------------------------------
For the year ended December 31, 2002
Net Sales                              $30,313,478       $   7,387,874     $  2,027,263    $39,728,615
Gross Profit                            16,237,143           4,395,384          702,175     21,334,701
Operating earnings                       3,742,844             371,372           17,558      4,131,774
Interest expense                          (246,316)               (562)               -       (246,878)
Other, net                                 (64,071)               (968)               -        (65,039)
                                                                                           -----------
Income before income taxes               3,432,457             369,842           17,558      3,819,857
                                                                                           -----------
   Depreciation and amortization           367,218             111,013           13,081        491,312
   Fixed asset additions                   888,491             180,522            4,502      1,073,515
     Total assets                      $16,205,347       $   2,562,737     $    907,518    $19,675,602
                                       ---------------------------------------------------------------
For the year ended December 31, 2001
Net Sales                              $28,711,006       $   6,606,090     $  1,962,166    $37,279,262
Gross Profit                            15,074,323           3,708,691          561,313     19,344,327
Operating earnings (loss)                3,719,517             281,998          (99,547)     3,901,968
Interest expense                          (457,549)             (1,009)               -       (458,558)
Other, net                                 (74,799)               (125)               -        (74,924)
                                                                                           -----------
Income (loss) before income taxes        3,187,169             280,864          (99,547)     3,368,486
                                                                                           -----------
   Depreciation and amortization           474,114             103,118          152,921        730,153
   Fixed asset additions                   454,809             172,434            2,530        629,773
     Total assets                      $12,322,754       $   2,333,639     $  4,891,930    $19,548,323
                                       ---------------------------------------------------------------
</TABLE>
                                       38
<PAGE>
Net  sales  for  geographic  areas  was  as  follows:
<TABLE>
<CAPTION>

<S>                  <C>          <C>          <C>
                        2003         2002         2001
                     -----------  -----------  -----------
United States        $38,934,923  $37,510,567  $35,193,935
All other countries    2,777,268    2,218,048    2,085,327
                     -----------  -----------  -----------
                     $41,712,191  $39,728,615  $37,279,262
                     ===========  ===========  ===========
</TABLE>

Geographic  sales  information  is  based  on the location of the customer.  Net
sales  from no single foreign country was material to the Company's consolidated
net  sales  for  the years ended December 31, 2003, 2002, and 2001.  The Company
does  not  have  any significant long-lived assets outside of the United States.

12.  RECENT  ACCOUNTING  PRONOUNCEMENTS

In  April  2002, the FASB issued Statement of Financial Accounting Standards No.
145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No.  13,  and  Technical  Corrections.  This  statement provides guidance on the
classification  of  gains  and losses from the extinguishment of debt and on the
accounting  for  certain  specified  lease  transactions.  The  adoption of this
statement  did  not  have  a  material impact on the Company's current financial
position  and  results  of  operations.

In  July  2002,  the FASB issued Statement of Financial Accounting Standards No.
146,  Accounting for Costs Associated with Exit or Disposal Activities (SFAS No.
146).  SFAS 146 nullifies FASB Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to  Exit  an Activity (including Certain Costs Incurred in a Restructuring)". It
requires  that a liability be recognized for those costs only when the liability
is  incurred, that is, when it meets the definition of a liability in the FASB's
conceptual  framework. SFAS No. 146 also establishes fair value as the objective
for  initial  measurement of liabilities related to exit or disposal activities.
SFAS  146  is effective for exit or disposal activities that are initiated after
December 31, 2002, with earlier adoption encouraged. The Company does not expect
that  the  adoption  of  SFAS  146  will have a material impact on its financial
position  or  results  from  operations.

In  December  2002,  the FASB issued Statement of Financial Accounting Standards
148,  Accounting  for  Stock-Based Compensation - Transition and Disclosure - an
amendment  of  FASB  Statement  123  ("SFAS  148").  SFAS 148 amends SFAS 123 to
provide  alternative  transition methods for an entity's voluntary change in its
accounting  for  stock-based  compensation from the intrinsic method to the fair
value  method  under  SFAS  123.  In  addition,  SFAS  148 amends the disclosure
requirements  of  SFAS  123  to require prominent disclosures in both annual and
interim financial statements about the method of accounting used for stock-based
employee  compensation  and  the  effect of the method used on reported results.

In  January  2003,  the  FASB issued FIN 46, "Consolidation of Variable Interest
Entities"  (VIE's),  an  Interpretation  of Accounting Research Bulletin No. 51.
FIN  46  requires  certain  variable interest entities to be consolidated by the
primary  beneficiary  of the entity if the equity investors in the entity do not
have  the  characteristics  of  a  controlling financial interest or do not have
sufficient  equity  at  risk  for  the  entity to finance its activities without
additional subordinated financial support from other parties.  In December 2003,
the  FASB issued FIN 46R (revised December 2003) which delays the effective date
of  the  application  of FIN 46 to non-special purpose VIE's acquired or created
before  February  1,  2003,  to the interim period ending on March 31, 2004, and
provides  additional  technical  clarifications to implementation issues.  We do
not  anticipate  the adoption of this interpretation will have a material impact
on  our  consolidated  financial  statements.
                                       39
<PAGE>

13.  QUARTERLY  FINANCIAL  DATA  (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                                    <C>          <C>          <C>          <C>
                                                          FIRST        SECOND       THIRD       FOURTH
                    2003                                 QUARTER      QUARTER      QUARTER      QUARTER
-----------------------------------------------------  -----------  -----------  -----------  -----------
Net sales                                              $10,560,085  $10,460,675  $10,119,070  $10,572,361
Gross profit                                             5,645,504    5,721,054    5,589,812    5,735,528
Net income                                                 774,518      778,704      601,680      585,472
Net income per common share:
    Basic                                                    $0.08        $0.08        $0.06        $0.06
    Diluted                                                  $0.07        $0.07        $0.06        $0.05
Weighted average number of common shares outstanding:
    Basic                                               10,177,433   10,234,054   10,394,374   10,484,184
    Diluted                                             10,793,464   10,805,019   10,902,794   10,941,853
</TABLE>
<TABLE>
<CAPTION>
<S>                                                    <C>          <C>          <C>          <C>
                                                          FIRST        SECOND       THIRD       FOURTH
                     2002                                QUARTER      QUARTER      QUARTER      QUARTER
-----------------------------------------------------  -----------  -----------  -----------  -----------
Net sales                                              $10,203,951  $10,052,036  $ 9,484,730  $ 9,987,898
Gross profit                                             5,368,595    5,435,626    5,088,398    5,442,082
Net income                                                 759,305      792,047      534,092      509,545
Net income per common share:
    Basic                                                    $0.08        $0.08        $0.05        $0.05
    Diluted                                                  $0.07        $0.07        $0.05        $0.05
Weighted average number of common shares outstanding:
      Basic                                             10,001,717   10,041,018   10,064,249   10,145,749
      Diluted                                           10,731,712   10,799,630   10,723,403   10,791,694
</TABLE>

                                       40
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


The  Board  of  Directors  and  Stockholders
The  Leather  Factory,  Inc.

     We have audited the accompanying consolidated balance sheet of The Leather
Factory,  Inc.  as of December 31, 2003, and the related consolidated statements
of  income, stockholders' equity, and cash flows for the year then ended.  These
financial  statements  are  the responsibility of the Company's management.  Our
responsibility  is  to express an opinion on these financial statements based on
our  audit.

     We  conducted  our  audit  in  accordance with auditing standards generally
accepted  in the United States of America.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audit  provides  a
reasonable  basis  for  our  opinion.

     In  our  opinion,  the  consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The  Leather Factory, Inc. at December 31, 2003, and the consolidated results of
its  operations  and  its  cash  flows  for the year ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.


Weaver  &  Tidwell  LLP


Fort  Worth,  Texas
February  17,  2004

                                       41
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


The  Board  of  Directors
The  Leather  Factory,  Inc.

     We have audited the accompanying consolidated balance sheets of The Leather
Factory,  Inc.  as of December 31, 2002, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the two years in
the  period  ended  December  31,  2002.  These  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audits.

     We  conducted  our  audits  in accordance with auditing standards generally
accepted  in the United States of America.  Those standards require that we plan
and  perform  the  audits  to  obtain  reasonable  assurance  about  whether the
financial  statements  are  free  of  material  misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial statement presentation.  We believe that our
audits  provide  a  reasonable  basis  for  our  opinion.

     In  our  opinion,  the  consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The  Leather Factory, Inc. at December 31, 2002, and the consolidated results of
its  operations and its cash flows for each of the two years in the period ended
December  31,  2002, in conformity with accounting principles generally accepted
in  the  United  States  of  America.


Hein  +  Associates  LLP


Dallas,  Texas
February  6,  2003

                                       42
<PAGE>

ITEM  9.  CHANGE  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL  DISCLOSURE

A.     Change  in Accountants - During the quarter ended September 30, 2003, the
Company  filed  a  Current Report on Form 8-K dated August 18, 2003 to disclose,
pursuant  to  item  4,  a  change  in  the Company's independent accountant.  No
financial  statements  were  filed.

B.     Disagreements  with  Accountants  -  None

ITEM  9A.  CONTROLS  AND  PROCEDURES

At  the  end of 2003, our President, Chief Executive Officer and Chief Financial
Officer  evaluated  the  effectiveness  of  the  design  and  operation  of  our
disclosure  controls  and  procedures  pursuant  to  Rule  13a-15(b)  under  the
Securities  Exchange  Act  of 1934, as amended (the "Exchange Act").  Based upon
this  evaluation,  they  concluded  that,  subject  to the limitations described
below,  the  Company's  disclosure  controls  and  procedures  offer  reasonable
assurance  that  the  information required to be disclosed by the Company in the
reports  it files under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms adopted by the
Securities  and  Exchange  Commission.

During  the  period  covered  by  this  report,  there has been no change in the
Company's  internal  controls over financial reporting that materially affected,
or  is  reasonably  likely  to  materially  affect,  these  controls.

Limitations  on  the  Effectiveness  of Controls.  Our management, including the
President,  Chief Executive Officer and Chief Financial Officer, does not expect
that the Company's disclosure controls and procedures will prevent all error and
all  fraud.  A  well conceived and operated control system is based in part upon
certain  assumptions  about the likelihood of future events and can provide only
reasonable,  not  absolute,  assurance that the objectives of the control system
are  met.  Further,  the  design  of a control system must reflect the fact that
there  are resource constraints, and the benefits of controls must be considered
relative  to  their  costs.

                                    PART III

Certain  information  required by Part III is omitted from this annual report as
we  will file a proxy statement for our Annual Meeting of Stockholders, pursuant
to  Regulation 14A of the Securities Exchange Act of 1934, as amended, not later
than  120  days  after  the  end  of our fiscal year covered by this Report, and
certain  information  included in that proxy statement is incorporated herein by
reference.
                                       43
<PAGE>

ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

The  information required by this item is contained under the heading "Executive
Officers  of  the  Registrant" in Part I of this Annual Report on Form 10-K, and
the remainder is contained in our proxy statement for our 2004 Annual Meeting of
Stockholders  under  the  heading  "Election  of Directors," and is incorporated
herein by reference.  Information relating to certain filings on Forms 3, 4, and
5 will be contained in our 2004 proxy statement under the heading "Section 16(a)
Beneficial  Ownership  Reporting  Compliance,"  and  is  incorporated  herein by
reference.  Information  required by this item pursuant to Items 401(h), 401(i),
and  401(j)  of  Regulation S-K relating to an audit committee financial expert,
the  identification  of  the  audit  committee  of  our  board  of directors and
procedures  of  security holders to recommend nominees to our board of directors
will  be  contained  in  our  2004  proxy statement under the heading "Corporate
Governance"  and  is  incorporated  herein  by  reference.

We  have  adopted  a  written  code  of  ethics  that  applies to our employees,
including  our  principal  executive  officer,  principal  financial  officer,
principal  accounting  officer,  controller,  or  persons  performing  similar
functions,  and  have filed it as Exhibit 14 to this Annual Report on Form 10-K.
It  will  also  be  available  on  our  website  (http://www.leatherfactory.com)
shortly.

ITEM  11.  EXECUTIVE  COMPENSATION

The  information  required  by this item is contained in our proxy statement for
our  2004  Annual  Meeting  of  Stockholders  under  the  heading  "Executive
Compensation",  which  is  incorporated  herein  by  reference.

ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED  STOCKHOLDER  MATTERS

The  information  required  by this item is contained in our proxy statement for
our 2004 Annual Meeting of Stockholders under the heading "Security Ownership of
Certain  Beneficial  Owners  and  Management",  which  is incorporated herein by
reference.

ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

The  information  required  by this item is contained in our proxy statement for
our  2004 Annual Meeting of Stockholders under the heading "Certain Transactions
and  Related  Transactions"  and  is  incorporated  herein  by  reference.

ITEM  14.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

The  information  required  by this item is contained in our proxy statement for
our  2004 Annual Meeting of Stockholders under the heading "Independent Auditors
Fees  and  Other  Matters"  and  is  incorporated  herein  by  reference.
                                       44
<PAGE>

                                     PART IV

ITEM  15.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  REPORTS  ON FORM 8-K

(a)     The  following  are  filed  as  part of this Annual Report on Form 10-K:

     1.  Financial  Statements

     The  following  consolidated  financial  statements are included in Item 8:

-     Consolidated  Balance  Sheets  at  December  31,  2003  and  2002
-     Consolidated  Statements  of Income for the years ended December 31, 2003,
        2002  and  2001
-     Consolidated  Statements  of  Cash  Flows for the years ended December 31,
        2003,  2002  and  2001
-     Consolidated  Statements  of  Stockholders'  Equity  for  the  years ended
        December  31,  2003,  2002  and  2001

          2.  Financial  Statement  Schedules

All  financial  statement schedules are omitted because the required information
is not present or not present in sufficient amounts to require submission of the
schedule  or  because the information is reflected in the consolidated financial
statements  or  notes  thereto.

     3.  Exhibits

The exhibits listed in the Exhibit Index immediately preceding such exhibits are
filed  as  part  of  this  Annual  Report  on  Form  10-K.

(b)  Reports  on  Form  8-K

On October 29, 2003, we furnished a Current Report on Form 8-K under Items 7 and
12  containing  a press release announcing our financial results for the quarter
ended  September  30,  2003.

On November 7, 2003, we furnished a Current Report on Form 8-K under Items 5 and
7  describing  our  Credit  Agreement  with  Wells  Fargo  Bank,  N.A.

On  December  8,  2003,  we  furnished a Current Report on Form 8-K under Item 9
announcing  the  addition  of  Michael  A.  Nery  to  our  Board  of  Directors.

                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934, the Registrant has duly caused this Annual Report on Form 10-K to
be  signed  on  its  behalf  by  the  undersigned,  thereunto  duly  authorized.

                         THE  LEATHER  FACTORY,  INC.

                         By:  /s/  Wray  Thompson
                              -------------------
                              WRAY  THOMPSON
                              CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

                         By:  /s/  Shannon  L.  Greene
                              ------------------------
                              SHANNON  L.  GREENE
                              CHIEF FINANCIAL OFFICER, CHIEF ACCOUNTING OFFICER
                                AND TREASURER
Dated:  March  29,  2004
                                       45
<PAGE>

                                POWER OF ATTORNEY

By  signing  this  Form  10-K  below, I hereby appoint each of Wray Thompson and
Shannon  L.  Greene  as  my attorney-in-fact to sign all amendments to this Form
10-K  on my behalf, and to file this Form 10-K (including all exhibits and other
documents  related  to  the  Form  10-K)  with  the United States Securities and
Exchange  Commission.  I authorize each of my attorneys-in-fact to (1) appoint a
substitute  attorney-in-fact  for  himself  and  (2) perform any actions that he
believes  are necessary or appropriate to carry out the intention and purpose of
this  Power of Attorney.  I ratify and confirm all lawful actions taken directly
or  indirectly  by my attorneys-in-fact and by any properly appointed substitute
attorneys-in-fact.

In  accordance  with  the  Securities Exchange Act of 1934, this Report has been
signed  below  by  the  following  persons  on  behalf of the Company and in the
capacities  and  on  the  dates  indicated.
<TABLE>
<CAPTION>


<S>                       <C>                                                           <C>
SIGNATURE                 TITLE                                                         DATE
------------------------  ------------------------------------------------------------  --------------
/s/ Wray Thompson         Chairman of the Board, Chief Executive Officer and Director   March 29, 2004
WRAY THOMPSON

/s/ Shannon L. Greene     Chief Financial Officer, Chief Accounting Officer, Treasurer  March 29, 2004
SHANNON L. GREENE         and Director

/s/ T. Field Lange        Director                                                      March 29, 2004
T. FIELD LANGE

/s/ Joseph R. Mannes      Director                                                      March 29, 2004
JOSEPH R. MANNES

/s/ H.W. Markwardt        Director                                                      March 29, 2004
H.W. MARKWARDT

/s/ Michael A. Markwardt  Director                                                      March 29, 2004
MICHAEL A. MARKWARDT

/s/ Ronald C. Morgan      President and Director                                        March 29, 2004
RONALD C. MORGAN

/s/ Robin L. Morgan       Vice President and Assistant Secretary                        March 29, 2004
ROBIN L. MORGAN

/s/ Michael A. Nery       Director                                                      March 29, 2004
MICHAEL A. NERY

/s/ William M. Warren     Secretary                                                     March 29, 2004
WILLIAM M. WARREN
</TABLE>
                                       46
<PAGE>

<TABLE>
<CAPTION>
                               THE LEATHER FACTORY, INC. AND SUBSIDIARIES
                                              EXHIBIT INDEX

EXHIBIT
 NUMBER    DESCRIPTION
-------  -------------------------------------------------------------------------------------------
<S>      <C>
3.1      Certificate of Incorporation of The Leather Factory, Inc., filed as Exhibit
         3.1 to the Registration Statement on Form SB-2 of The Leather Factory, Inc.
         (Commission  File  No.  33-81132)  filed  with  the Securities and Exchange
         Commission  on  July  5,  1994,  And  incorporated  by  reference  herein.

3.2      Bylaws  of  The  Leather  Factory,  Inc.,  filed  as  Exhibit  3.2  to  the
         Registration  Statement  on  Form  SB-2  of  The  Leather  Factory,  Inc.
         (Commission  File  No.  33-81132)  filed  with  the Securities and Exchange
         Commission  on  July  5,  1994,  and  incorporated  by  reference  herein.

4.1      Financial Advisor's Warrant Agreement, dated February 12, 2003, between The
         Leather  Factory,  Inc.  and  Westminster  Securities  Corporation filed as
         Exhibit  4.1  to  Form  10-Q  filed  by  The Leather Factory, Inc. with the
         Securities  and Exchange Commission on May 14, 2003, and incorporated by
         reference  herein.

4.2      Capital  Markets  Services  Engagement  Agreement, dated February 12, 2003,
         between  The  Leather  Factory, Inc. and Westminster Securities Corporation
         filed  as  Exhibit 4.2 to Form 10-Q filed by The Leather Factory, Inc. with
         the Securities and Exchange Commission on May 14, 2003, and incorporated by
         reference  herein.

10.1     Credit  Agreement,  dated  as  of  November  3, 2003, made by and among The
         Leather  Factory, Inc., a Delaware corporation; Roberts, Cushman & Company,
         Inc.,  a  New  York corporation; Hi-Line Leather & Manufacturing Company, a
         California  corporation, The Leather Factory of Nevada Investments, Inc., a
         Nevada  corporation,  The  Leather Factory, Inc., a Nevada corporation; The
         Leather  Factory,  L.P.,  a Texas limited partnership; The Leather Factory,
         Inc.,  an  Arizona  corporation; Tandy Leather Company Investments, Inc., a
         Nevada  corporation;  Tandy  Leather  Company,  Inc., a Nevada corporation;
         Tandy  Leather  Company, L.P., a Texas limited partnership; and Wells Fargo
         Bank  Texas,  National  Association  filed  as  Exhibit 10.1 to the Current
         Report  on  Form  8-K  of  The  Leather  Factory, Inc. (Commission File No.
         1-12368)  filed  with the Securities and Exchange Commission on November 7,
         2003  and  incorporated  by  reference  herein.

10.2     Revolving  Line  of  Credit  Note, dated November 3, 2003, in the principal
         amount  of  up  to  $6,000,000.00  given  by  The  Leather Factory, Inc., a
         Delaware  corporation;  Roberts,  Cushman  &  Company,  Inc.,  a  New  York
         corporation;  Hi-Line  Leather  &  Manufacturing  Company,  a  California
         corporation,  The  Leather  Factory  of  Nevada Investments, Inc., a Nevada
         corporation,  The  Leather Factory, Inc., a Nevada corporation; The Leather
         Factory,  L.P.,  a Texas limited partnership; The Leather Factory, Inc., an
         Arizona  corporation;  Tandy  Leather  Company  Investments, Inc., a Nevada
         corporation;  Tandy  Leather  Company,  Inc.,  a  Nevada corporation; Tandy
         Leather  Company,  L.P., a Texas limited partnership, as borrowers, payable
         to  the  order  of  Wells  Fargo  Bank Texas, National Association filed as
         Exhibit 10.2 to the Current Report on Form 8-K of The Leather Factory, Inc.
         (Commission  File  No.  1-12368)  filed  with  the  Securities and Exchange
         Commission  on  November  7,  2003  and  incorporated  by reference herein.
..

10.3*    First  Amendment to Credit Agreement, dated as of November 26, 2003, made
         by  and  among  The Leather Factory, Inc., a Delaware corporation; Roberts,
         Cushman  &  Company,  Inc.,  a  New  York  corporation;  Hi-Line  Leather &
         Manufacturing  Company,  a  California  corporation, The Leather Factory of
         Nevada  Investments, Inc., a Nevada corporation, The Leather Factory, Inc.,
         a  Nevada  corporation;  The  Leather  Factory,  L.P.,  a  Texas  limited
         partnership;  The  Leather  Factory,  Inc.,  an  Arizona corporation; Tandy
         Leather  Company  Investments,  Inc.,  a  Nevada corporation; Tandy Leather
         Company,  Inc.,  a Nevada corporation; Tandy Leather Company, L.P., a Texas
         limited  partnership; and Wells Fargo Bank, National Association, successor
         by  merger  to  Wells  Fargo  Bank  Texas,  National  Association.

10.4*    First Modification to Promissory Note, dated as of November 26, 2003, made by
         and  among  The  Leather  Factory,  Inc.,  a Delaware corporation; Roberts,
         Cushman  &  Company,  Inc.,  a  New  York  corporation;  Hi-Line  Leather &
         Manufacturing  Company,  a  California  corporation, The Leather Factory of
         Nevada  Investments, Inc., a Nevada corporation, The Leather Factory, Inc.,
         a  Nevada  corporation;  The  Leather  Factory,  L.P.,  a  Texas  limited
         partnership;  The  Leather  Factory,  Inc.,  an  Arizona corporation; Tandy
         Leather  Company  Investments,  Inc.,  a  Nevada corporation; Tandy Leather
         Company,  Inc.,  a Nevada corporation; Tandy Leather Company, L.P., a Texas
         Limited  partnership; and Wells Fargo Bank, National Association, successor
         by  merger  to  Wells  Fargo  Bank  Texas,  National  Association.

10.5     Asset Purchase Agreement dated November 30, 2000, by Tandy Leather Company,
         Inc.  (f/k/a  Leather  Tan  Acquisition,  Inc.),  a  Texas corporation, TLC
         Direct,  Inc., a Texas corporation, and Tandy Leather Dealer, Inc., a Texas
         corporation,  filed as Exhibit No. 2.1 to the Current Report on Form 8-K of
         The  Leather  Factory,  Inc.  (Commission  File No. 1-12368) filed with the
         Securities  and  Exchange Commission on December 15, 2000, and incorporated
         herein  by reference.

14.1*    Code of Business Conduct and Ethics of The Leather Factory, Inc., adopted by
         the Board of Directors on February 26, 2004

21.1     Subsidiaries  of  the Company filed as Exhibit 21.1 to the Annual Report on
         Form 10-K of The Leather Factory, Inc. for the year ended December 31, 2002
         filed  with  the  Securities and Exchange Commission on March 28, 2003, and
         incorporated  by  reference  herein.

23.1*    Consent of Hein + Associates LLP dated March 24, 2004.

23.2*    Consent of Weaver & Tidwell LLP dated March 24, 2004

31.1*    13a-4(a) Certification by Wray Thompson, Chairman of the Board and Chief Executive Officer

31.2*    13a-4(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
<FN>
________________
*Filed herewith.
</TABLE>

                                       47
<PAGE>

EXHIBIT  10.3
                       FIRST AMENDMENT TO CREDIT AGREEMENT

THIS  FIRST  AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as
of  November  26,  2003,  by  and  between THE LEATHER FACTORY, INC., a Delaware
corporation,  ROBERTS,  CUSHMAN & COMPANY, INC., a New York corporation, HI-LINE
LEATHER  &  MANUFACTURING COMPANY, a California corporation, THE LEATHER FACTORY
OF  NEVADA INVESTMENTS, INC., a Nevada corporation, THE LEATHER FACTORY, INC., a
Nevada  corporation,  THE LEATHR FACTORY, L.P., a Texas limited partnership, THE
LEATHER  FACTORY,  INC.,  an  Arizona  corporation,  TANDY  LEATHER  COMPANY
INVESTMENTS,  INC.,  a Nevada corporation, TANDY LEATHER COMPANY, INC., a Nevada
corporation,  TANDY  LEATHER  COMPANY,  L.P.,  a  Texas  limited  partnership
(collectively  and  individually  referred  to  herein as "Borrower"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION, successor by merger to Wells Fargo Bank Texas,
National  Association.  ("Bank").

                                    RECITALS

     WHEREAS,  Borrower  is currently indebted to Bank pursuant to the terms and
conditions  of  that certain Credit Agreement between Borrower and Bank dated as
of  November  3,  2003,  as  amended  from  time  to  time ("Credit Agreement").

     WHEREAS,  Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the Credit
Agreement  to  reflect  said  changes.

     NOW,  THEREFORE, for valuable consideration, the receipt and sufficiency of
which  are  hereby  acknowledged,  the  parties  hereto  agree  that  the Credit
Agreement  shall  be  amended  as  follows:

     1.  Section  1.1(a)  is  hereby  amended  by  deleting "Six Million Dollars
($6,000,000.00)"  as  the  maximum  principal amount available under the Line of
Credit  and  by  substituting  for  said  amount  "Five  Million  Dollars
($5,000,000.00),"  with  such  change  to  be  effective  upon the execution and
delivery  to  Bank  of  a promissory note substantially in the form of Exhibit A
attached  hereto  (which promissory note shall replace and be deemed the Line of
Credit  Note defined in and made pursuant to the Credit Agreement) and all other
contracts,  instruments  and documents required by Bank to evidence such change.

     2.  Section  5.7  is  hereby  deleted  in  its  entirety, and the following
substituted  therefore:

     "SECTION  5.7.     TREASURY STOCK.  Redeem, retire, repurchase or otherwise
acquired  any  shares  of  any  class  of  Borrower's  stock  now  or  hereafter
outstanding, except the repurchase of treasury stock in an aggregate of not more
than  $150,000.00."

     3.  Except as specifically provided herein, all terms and conditions of the
Credit  Agreement  remain  in  full  force  and  effect,  without  waiver  or
modification.  All  terms  defined  in  the Credit Agreement shall have the same
meaning  when  used  in this Amendment.  This Amendment and the Credit Agreement
shall  be  read  together,  as  one  document.

     4.  Borrower hereby remakes all representations and warranties contained in
the  Credit  Agreement  and reaffirms all covenants set forth therein.  Borrower
further certifies that as of the date of this Amendment there exists no Event of
Default  as  defined  in  the  Credit Agreement, nor any condition, act or event
which  with the giving of notice or the passage of time or both would constitute
any  such  Event  of  Default.

NOTICE:  THIS  DOCUMENT  AND  ALL  OTHER  DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE  A WRITTEN LOAN AGREMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT  ORAL  AGREEMENTS  OF  THE  PARTIES.  THERE  ARE  NO  UNWRITTEN  ORAL
AGREEMENTS  BETWEEN  THE  PARTIES  RELATING  TO  THE  INDEBTEDNESS.

     IN  WITNESS  WHEREOF,  the  parties hereto have caused this Agreement to be
executed  as  of  the  day  and  year  first  written  above.

                                              WELLS  FARGO  BANK,
THE  LEATHER  FACTORY,  INC.,                 NATIONAL  ASSOCIATION
A  Delaware  corporation
                                              By:  /s/  Luis  F.  Ramirez
By:  /s/  Wray  Thompson                          Luis  F.  Ramirez
     Wray  Thompson                               Relationship  Manager
     Chief  Executive  Officer

THE  LEATHER  FACTORY,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

HI-LINE  LEATHER  &  MANUFACTURING  COMPANY,
A  California  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

ROBERTS,  CUSHMAN  &  COMPANY,  INC.,
A  New  York  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

TANDY  LEATHER  COMPANY,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer


TANDY  LEATHER  COMPANY  INVESTMENTS,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

TANDY  LEATHER  COMPANY,  L.P.,
A  Texas  limited  partnership

By:  Tandy  Leather  Company,  Inc.
     A  Nevada  corporation,  General  Partner

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

THE  LEATHER  FACTORY,  INC.,
An  Arizona  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

THE  LEATHER  FACTORY,  L.P.,
A  Texas  limited  partnership

By:  The  Leather  Factory,  Inc.
     A  Nevada  corporation,  General  Partner

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

THE  LEATHER  FACTORY  OF  NEVADA  INVESTMENTS,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer



        SEE FOLLOWING PAGE FOR ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
                                       48
<PAGE>

                    ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

     The  undersigned,  a  guarantor of the indebtedness of The Leather Factory,
Inc.,  a  Delaware  corporation,  Roberts,  Cushman  & Company, Inc., a New York
corporation,  Hi-Line Leather & Manufacturing Company, a California corporation,
The  Leather  Factory  Of  Nevada  Investments,  Inc., a Nevada corporation, The
Leather  Factory, Inc., a Nevada corporation, The Leather Factory, L.P., a Texas
limited  partnership,  The  Leather Factory, Inc., an Arizona corporation, Tandy
Leather  Company Investments, Inc., a Nevada corporation, Tandy Leather Company,
Inc.,  a  Nevada  corporation,  Tandy  Leather  Company,  L.P.,  a Texas limited
partnership,  to  Wells Fargo Bank, National Association, successor by merger to
Wells Fargo Bank Texas, National Association pursuant to an Amended and Restated
Guaranty  dated  November  3, 2003, hereby (i) acknowledges receipt of a copy of
the  foregoing  Amendment  (the  "Amendment")  and  (ii)  consents  to the terms
(including  without  limitation  the  release  set  forth in Section 7.15 of the
Credit  Agreement)  and  execution  thereof.

Dated:     November  26,  2003.

THE  LEATHER  FACTORY  OF  CANADA  LTD.

By:     /s/  Wray  Thompson
        Wray  Thompson
        Chief  Executive  Officer
                                       49
<PAGE>

EXHIBIT  10.4
                      FIRST MODIFICATION TO PROMISSORY NOTE


THIS FIRST MODIFICATION TO PROMISSORY NOTE (this "Modification") is entered into
as  of  November  26, 2003, by and between THE LEATHER FACTORY, INC., a Delaware
corporation,  ROBERTS,  CUSHMAN & COMPANY, INC., a New York corporation, HI-LINE
LEATHER  &  MANUFACTURING COMPANY, a California corporation, THE LEATHER FACTORY
OF  NEVADA INVESTMENTS, INC., a Nevada corporation, THE LEATHER FACTORY, INC., a
Nevada  corporation,  THE LEATHR FACTORY, L.P., a Texas limited partnership, THE
LEATHER  FACTORY,  INC.,  an  Arizona  corporation,  TANDY  LEATHER  COMPANY
INVESTMENTS,  INC.,  a Nevada corporation, TANDY LEATHER COMPANY, INC., a Nevada
corporation,  TANDY  LEATHER  COMPANY,  L.P.,  a  Texas  limited  partnership
(collectively  and  individually  referred  to  herein as "Borrower"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION, successor by merger to Wells Fargo Bank Texas,
National  Association.  ("Bank").

                                    RECITALS

     WHEREAS,  Borrower  is currently indebted to Bank pursuant to the terms and
conditions  of  that  certain promissory note in the maximum principal amount of
$6,000,000.00,  executed  by Borrower and payable to the order of Bank, dated as
of  November  3,  2003  (the  "Note"),  which  Note  is subject to the terms and
conditions  of  a  loan  agreement  between  Borrower  and Bank to the terms and
conditions of a loan agreement between Borrower and Bank dated as of November 3,
2003,  as  amended  from  time  to  time  (the  "Loan  Agreement").

     WHEREAS,  Bank and Borrower have agreed to certain changes in the terms and
conditions  set  forth in the Note and have agreed to modify the Note to reflect
said  changes.

     NOW,  THEREFORE, for valuable consideration, the receipt and sufficiency of
which  are  hereby acknowledged, the parties hereto agree that the Note shall be
modified  as  follows:

     1.  The  maximum  principal  amount  available  under  the  Note  is hereby
modified  to  be  Five  Million  Dollars  ($5,000,000.00).

     2.  The  effective  date  of the changes set forth herein shall be November
26,  2003.

     3.  Except as specifically provided herein, all terms and conditions of the
Note remain in full force and effect, without waiver or modification.  All terms
defined  in the Note or the Loan Agreement shall have the same meaning when used
in  this Modification.  This Modification and the Credit Agreement shall be read
together,  as  one  document.

     4.  Borrower  certifies  that  as  of  the  date of this Modification there
exists no Event of Default under the Note, nor any condition, act or event which
with  the  giving  of notice or the passage of time or both would constitute any
such  Event  of  Default.



NOTICE:  THIS  DOCUMENT  AND  ALL  OTHER  DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE  A WRITTEN LOAN AGREMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT  ORAL  AGREEMENTS  OF  THE  PARTIES.  THERE  ARE  NO  UNWRITTEN  ORAL
AGREEMENTS  BETWEEN  THE  PARTIES  RELATING  TO  THE  INDEBTEDNESS.

     IN  WITNESS WHEREOF, the parties hereto have caused this Modification to be
executed  as  of  the  day  and  year  first  written  above.

                                              WELLS  FARGO  BANK,
THE  LEATHER  FACTORY,  INC.,                 NATIONAL  ASSOCIATION
A  Delaware  corporation
                                              By:  /s/  Luis  F.  Ramirez
By:  /s/  Wray  Thompson                          Luis  F.  Ramirez
     Wray  Thompson                               Relationship  Manager
     Chief  Executive  Officer

THE  LEATHER  FACTORY,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

HI-LINE  LEATHER  &  MANUFACTURING  COMPANY,
A  California  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

ROBERTS,  CUSHMAN  &  COMPANY,  INC.,
A  New  York  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

TANDY  LEATHER  COMPANY,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer


TANDY  LEATHER  COMPANY  INVESTMENTS,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

TANDY  LEATHER  COMPANY,  L.P.,
A  Texas  limited  partnership

By:  Tandy  Leather  Company,  Inc.
     A  Nevada  corporation,  General  Partner

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

THE  LEATHER  FACTORY,  INC.,
An  Arizona  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

THE  LEATHER  FACTORY,  L.P.,
A  Texas  limited  partnership

By:  The  Leather  Factory,  Inc.
     A  Nevada  corporation,  General  Partner

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

THE  LEATHER  FACTORY  OF  NEVADA  INVESTMENTS,  INC.,
A  Nevada  corporation

By:  /s/  Wray  Thompson
     Wray  Thompson
     Chief  Executive  Officer

                                       50
<PAGE>


EXHIBIT  14.1
                            THE LEATHER FACTORY, INC.
                       CODE OF BUSINESS CONDUCT AND ETHICS
             ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 26, 2004
             ------------------------------------------------------

                                  INTRODUCTION

This  Code  of  Business Conduct and Ethics (this "Code") applies to The Leather
Factory,  Inc.  and its consolidated subsidiaries (collectively, the "Company").

We  expect the Company's employees and officers ("employees") and members of its
Board  of  Directors  ("directors")  to  use  sound judgment to help us maintain
appropriate compliance procedures and to carry out our business with honesty and
in  compliance  with laws and high ethical standards. Each employee and director
is  expected  to  read  this  Code  and  demonstrate  personal commitment to the
standards set forth in this Code. Employees and directors who do not comply with
the  standards  set  forth in this Code may be subject to discipline in light of
the  nature  of  the  violation,  including  termination  of  employment.

Any  questions  about  this  Code  or  the  appropriate  course  of conduct in a
particular situation should be directed to the Company's Corporate Counsel named
below.  Any evidence of improper conduct, violations of laws, rules, regulations
or  this  Code  should  be  reported  immediately.  The  Company  will not allow
retaliation  against  an  employee  or director for a report made in good faith.

Any waiver of the provisions of this Code for executive officers or directors of
the  Company  may  be made only by our Board of Directors or a committee thereof
and  must  be  promptly  disclosed  to  our  stockholders.

This  Code  is  not  a  contract and is not intended as a detailed guide for all
situations  you  may  face.  You  are  also expected to comply with our Employee
Handbook  and other workplace rules we may from time to time communicate, all of
which  supplement  this  Code.

                                RESPONSIBILITIES

I.  COMPLIANCE  WITH  LAWS,  RULES  AND  REGULATIONS

All  employees  and  directors  must respect and obey all laws applicable to our
business,  including  state  and  local  laws  in the areas in which the Company
operates. Any questions as to the applicability of any law should be directed to
the  Company's  Corporate  Counsel.

II.  INSIDER  TRADING

No employees or directors may buy or sell shares of the Company when they are in
possession  of  material,  non-public information. They also are prohibited from
passing  on  such  information  to  others who might make an investment decision
based  thereon.  Employees  and  directors also may not trade in stocks of other
companies  about  which  they learn material, non-public information through the
course of their employment or service.  Persons who violate these rules not only
violate  this  Code  but  also  commit  a  serious crime under federal law.  Any
questions as to whether information is material or has been adequately disclosed
should  be  directed  to  the  Company's  Corporate  Counsel.

In  addition,  directors,  officers and the key employees named below (and their
family  members)  are prohibited from trading in the Company's securities during
the  period  that  runs from the fifteenth (15th) day of the third month of each
fiscal  quarter  until  two  (2)  trading  days  after  the  Company's  earnings
announcement  of  its  quarterly earnings or (in the case of the fourth quarter)
annual  earnings.  In  addition,  the  Company  may impose other "black-outs" on
trading  as circumstances dictate or as required by law.  Nothing contained here
shall  preclude  trades  by  these  persons  during  these  times  pursuant  to
arrangements  properly  made  at  other  times in accordance with Securities and
Exchange  Commission (SEC) Rule 10b5-1.  These "blackout periods" shall apply to
directors,  officers  and  persons  who  hold  the  following  offices:

                  Controller
                  Accounting  Manager

III.  INVESTOR  AND  MEDIA  COMMUNICATIONS

The  Company  is  a  public company that is subject to securities laws regarding
disclosures  concerning  itself.  These  laws prohibit disclosure of information
that  is  false, misleading or incomplete.  Also, the Company cannot selectively
disclose  information  about  itself.  In order to assure that the Company meets
these  requirements,  the only employees of the Company who may communicate with
investors  or members of the media regarding the Company are the Chief Executive
Officer,  Chief  Operating  Officer and the Chief Financial Officer.  If another
employee  receives a request from an investor or a member of the media regarding
the  Company,  the  employee  should  decline  to  give a response and refer the
inquiry  to  one  of  the  three  officers  named  in  this  paragraph.

IV.  CONFLICTS  OF  INTEREST

A  conflict  of  interest  occurs  when  the  private interest of an employee or
director  interferes, or appears to interfere, with the interests of the Company
as  a  whole. Conflicts of interest can occur when an employee or director takes
action  or  has interests that could reasonably be expected to make it difficult
to  make  objective  decisions on behalf of the Company or to perform his or her
duties  objectively  and  effectively.  Conflicts of interest also arise when an
employee  or  director,  or  a  member  of  his or her family, receives improper
personal  benefits  as  a  result of his or her position with the company, other
than  gifts  with  a  value  of  less  than  One  Hundred  Dollars ($100.00) and
occasional,  non-extravagant,  business-related  entertainment  such  as  meals,
attending  performances  or  sporting  events,  golf  and other similar outings.

Except  as  pre-approved  by  our  Audit  Committee, transactions that involve a
conflict  of  interest  are  prohibited  as  a  matter  of corporate policy. Any
employee  or  director who becomes aware of a conflict or potential conflict, or
who  has  a  question  about  whether  a conflict exists, should bring it to the
attention  of  the  Company's  Corporate  Counsel.

V.  CORPORATE  OPPORTUNITIES

Employees and directors are prohibited from (a) taking for themselves personally
any  opportunities that arise through the use of corporate property, information
or  position, (b) using corporate property, information or position for personal
gain,  and  (c) directly or indirectly competing with the Company. Employees and
directors  owe  a  duty  to  the  Company  to  advance  the Company's legitimate
interests  when  the  opportunity  to  do  so  arises.

VI.  CONFIDENTIALITY

Employees  and  directors  should  maintain  the  confidentiality of information
entrusted  to  them  by  the  Company or its customers and suppliers that is not
known  to  the  general  public, except when disclosure is authorized or legally
mandated.  "Confidential  information"  includes all non-public information that
might  be  of use to competitors, or harmful to the company or its customers, if
disclosed.  This  obligation  to protect confidential information does not cease
when  an  employee  or  director leaves the Company. Any questions about whether
information  is  confidential  should  be  directed  to  the Company's Corporate
Counsel.

VII.  FAIR  DEALING

Each  employee and director shall endeavor to deal fairly with our stockholders,
competitors,  suppliers,  customers and employees. No employee or director shall
take  unfair  advantage  of  any other person through manipulation, concealment,
abuse  of  privileged  information,  misrepresentation of material facts, or any
other  unfair  practice.

VIII.  PROTECTION  AND  PROPER  USE  OF  THE  COMPANY'S  ASSETS

All  employees  and  directors  have  a duty to protect the Company's assets and
ensure  the  assets'  efficient use. Theft, carelessness and waste have a direct
impact  on the Company's profitability. The Company's assets should be used only
for  legitimate  business  purposes  and  employees  and  directors  should take
measures  to  ensure against their theft, damage or misuse. These assets include
intellectual  property  such as trademarks, business and marketing plans, salary
information and any unpublished financial data and reports. Any unauthorized use
or  distribution  of  this  information  is  a  violation  of  this  Code.

IX.  ACCURACY  OF  RECORDS  AND  REPORTING

All  of  the Company's books, records, accounts and financial statements must be
maintained in reasonable detail, must appropriately reflect the matters to which
they  relate  and  must conform both to applicable legal requirements and to the
Company's system of internal controls. The making of false or misleading records
or  documentation is strictly prohibited. The Company complies with all laws and
regulations regarding the preservation of records. Records should be retained or
destroyed  only  in  accordance with the Company's document retention practices.
Also, in certain cases when litigation is pending or can reasonably be foreseen,
the  Company  may  be  required  to  preserve  documents  and records (including
computer records) at times when they might otherwise be destroyed. Any questions
about  these  policies  should  be  directed to the Company's Corporate Counsel.

X.  DISCLOSURE  CONTROLS  AND  PROCEDURES

We  are  required  by  SEC  rules to maintain effective "disclosure controls and
procedures"  so  that financial and non-financial information we are required to
report  to  the  SEC  is  timely  and  accurately  reported  both  to our senior
management  and  in  the filings we make. All employees are expected, within the
scope of their employment duties, to support the effectiveness of our disclosure
controls  and  procedures.  To  that  end, it is our policy to promote the full,
fair,  accurate,  timely  and understandable disclosure in reports and documents
that  we  file  or furnish with the SEC and otherwise communicate to the public.

XI.  INTERACTION  WITH  PUBLIC  OFFICIALS

When  dealing  with  public  officials,  employees  and directors must avoid any
activity that is or appears illegal or unethical. The giving of gifts, including
meals, entertainment, transportation and lodging, to government officials in the
various  branches of U.S. government, as well as state and local governments, is
restricted  by  law.  Employees  and directors must obtain pre-approval from the
Company's  Corporate  Counsel before providing anything of value to a government
official  or employee. The foregoing does not apply to personal lawful political
contributions.

In addition, the U.S. Foreign Corrupt Practices Act prohibits giving anything of
value,  directly  or  indirectly, to officials of foreign governments or foreign
political  candidates in order to obtain or retain business. Illegal payments to
government  officials  of  any  country  are  strictly  prohibited.

The  Company's policy is to cooperate with any inquiries by government officials
to  the  full  extent  required  by  law.  Should  you  receive any inquiries by
government  officials regarding the Company or your activities as an employee of
the  Company,  you  should  immediately  direct  those  inquiries to the Company
Corporate Counsel.  In most instances, the Corporate Counsel shall advise you on
how  to  respond  to  these  inquiries.

                                   COMPLIANCE

We  understand that no code or policy can address every scenario or answer every
question.  To  ensure that all employees and directors can obtain prompt answers
to their questions and inquiries, we have implemented the following policies and
procedures.

I.  CORPORATE  COUNSEL

The  Company Corporate Counsel is an outside attorney, William M. Warren, of the
firm  Loe,  Warren,  Rosenfield,  Kaitcer  & Hibbs, P.C. The Company's Corporate
Counsel  has  been  designated with responsibility for overseeing and monitoring
compliance  with  this  Code.  He  makes periodic reports to the Company's Audit
Committee regarding the implementation and effectiveness of this Code as well as
the  Company's  policies  and  procedures  to  ensure compliance with this Code.

The  Company's  Corporate  Counsel  may  be  reached  at  (817)  377-0060  or
bwarren@loewarren.com.  If  you  wish  to communicate any matter anonymously, we
will  maintain  the confidentiality of your communication to the extent possible
under  applicable  laws.  Communications  intended  to be confidential should be
mailed  in writing without indicating your name or address to William M. Warren,
Loe,  Warren,  Rosenfield,  Kaitcher & Hibbs, P.O. Box 100609, Fort Worth, Texas
76185-0069.

II.  REPORTING  VIOLATIONS

A  special  procedure  for handling complaints about accounting matters has been
established.  Complaints  regarding  accounting, internal accounting controls or
auditing  matters,  including  questionable  accounting  or  auditing,  shall be
reported  by  calling  800-869-9607.  Employees  are  not required to give their
names,  and  the  reports  will  be  handled  anonymously.  In  other cases, all
employees  are  encouraged  to  speak  with their supervisors, managers or other
appropriate  personnel  when  in  doubt  about  the  best  course of action in a
particular  situation.  In  most  other  non-accounting  cases,  employees  and
directors  should  address  any  questions  regarding this Code to the Company's
Corporate  Counsel.

We  encourage all employees to report promptly any actual or apparent violations
of  this  Code. The Company does not permit retaliation or discrimination of any
kind against employees who reasonably believe there has been possible illegal or
unethical conduct and who in good faith report these concerns to us. However, it
is  a  violation of our policy for any employee to communicate a report claiming
illegal  or  unethical  conduct  which  the  employee  knows  to  be  false.

III.  INVESTIGATIONS

Reported  violations  will  be  promptly  investigated. The person reporting the
violation  should  not  conduct  an  investigation  on  his or her own. However,
employees  and  directors are expected to cooperate fully with any investigation
made  by  the  Company  or  any  of  its  representatives.

IV.  ACCOUNTABILITY

Employees  and  directors  who  violate this Code may be subject to disciplinary
action,  including  termination  of  employment.  Knowledge  of  a violation and
failure to promptly report or correct the violation may also subject an employee
or director to disciplinary action. Some violations of this Code are illegal and
may  subject  the  employee  or  director  to  civil  and  criminal  liability.

                                       51
<PAGE>

                            THE LEATHER FACTORY, INC.
          SUPPLEMENTAL CODE OF ETHICS FOR THE SENIOR FINANCIAL OFFICERS
                            ADOPTED FEBRUARY 26, 2004

INTRODUCTION:  The Board of Directors (the "Board") of The Leather Factory, Inc.
or  "Company"  has  adopted  the  following  Supplemental  Code  of  Ethics (the
"Supplemental  Code")  that  applies  to  the Company's Chief Executive Officer,
Chief  Financial  Officer  and the Controller (the "Senior Financial Officers").
This  Supplemental  Code  sets  forth  the  ethical  standards  that  the Senior
Financial  Officers  shall follow and is intended to constitute a code of ethics
within  Item  406  of  Regulation S-K of the Securities and Exchange Commission.
This Supplemental Code is in addition to the Company Code of Conduct and Ethics,
which  continues  to apply to all employees of the Company, including the Senior
Financial  Officers.

PURPOSE:  The  Board  of  Directors  has developed and adopted this Supplemental
Code  for  the  Senior Financial Officers to promote honest and ethical conduct;
full,  fair, accurate, timely and understandable disclosure; and compliance with
applicable  governmental  rules  and  regulations.

RESPONSIBILITIES:  The  Senior  Financial  Officers  are  expected  to:

-     Promote  honest  and  ethical  conduct,  including the ethical handling of
actual  or  apparent  conflicts  of  interest  between personal and professional
relationships;

-     Promote  a reporting and disclosure system designed to provide full, fair,
accurate, timely and understandable disclosure in reports and documents that the
Company files with, or submits to, the Securities and Exchange Commission and in
the  Company's  other  public  communications;

-     Promote compliance with applicable laws, rules and regulations of federal,
state  and  local  governmental  entities;

-     Be  an  example  of  ethical  behavior as a responsible leader in the work
environment  and  the  community;

-     Share  knowledge  and  maintain  skills  important  and  relevant  to
stockholders'  needs;

-     Create an environment at the Company that (a) encourages employees to talk
to supervisors, managers and other appropriate personnel when in doubt about the
best  course  of  action  in a particular situation; (b) encourages employees to
report  violations  of laws, rules and regulations to appropriate personnel; and
(c) informs employees that the Company will not allow retaliation for good faith
reports;  and

-     Act  in  a  manner that promotes employee behavior that is consistent with
these  responsibilities  and  reasonably  deters  wrongdoing.

VIOLATIONS:  Any  deviation  from  the  Supplemental  Code  is  grounds  for
disciplinary  action,  up  to  and  including  dismissal.

A  copy  of this is delivered to all employees of the Company.  Any employee may
report  violations  of  this  Supplemental  Code  in  the manner provided in the
Company's  Code of Business Conduct and Ethics.  It is against Company policy to
retaliate  against  any  employee for good faith reporting of violations of this
Supplemental  Code,  violations  of  the law or financial or ethical misconduct.
                                       52
<PAGE>

EXHIBIT  23.1

                         CONSENT OF INDEPENDENT AUDITORS



     We  consent to the incorporation by reference in the Registration Statement
(Form  S-8  No.  33-81214)  pertaining  to the Employee Stock Ownership Plan and
Trust  of The Leather Factory, Inc. and the Registration Statement (Form S-8 No.
333-07147) pertaining to the 1995 Stock Option Plan of The Leather Factory, Inc.
of our report dated February 6, 2003, with respect to the consolidated financial
statements  and  schedule  of  The  Leather Factory, Inc. included in the Annual
Report  (Form  10-K)  for  the  year  ended  December  31,  2003.


/s/  Hein  +  Associates  LLP

HEIN  +  ASSOCIATES  LLP


Dallas,  Texas
March  24,  2004

                                       53
<PAGE>

EXHIBIT  23.2


                         CONSENT OF INDEPENDENT AUDITORS

     We  consent to the incorporation by reference in the Registration Statement
(Form  S-8  No.  33-81214)  pertaining  to the Employee Stock Ownership Plan and
Trust  of The Leather Factory, Inc. and the Registration Statement (Form S-8 No.
333-07147) pertaining to the 1995 Stock Option Plan of The Leather Factory, Inc.
of  our  report  dated  February  17,  2004,  with  respect  to the consolidated
financial  statements  and schedule of The Leather Factory, Inc. included in the
Annual  Report  (Form  10-K)  for  the  year  ended  December  31,  2003.


/s/  Weaver  &  Tidwell  LLP

WEAVER  &  TIDWELL  LLP


Fort  Worth,  Texas
March  24,  2004
                                       54
<PAGE>

EXHIBIT  31.1
                           RULE 13A-4(A) CERTIFICATION

I,  WRAY  THOMPSON,  certify  that:

1.  I  have  reviewed  this  annual  report on Form 10-K of The 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  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)) [language intentionally omitted SEC
Rel.  33-8238]  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)  [Left  blank  intentionally  SEC  Rel.  No.  33-8238];

     (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 fourth
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:     March  29,  2004
                                         /s/  Wray  Thompson
                                         Wray  Thompson
                                         Chief  Executive  Officer
                                         (principal  executive  officer)

                                       55
<PAGE>

EXHIBIT  31.2
                           RULE 13A-4(A) CERTIFICATION

I,  SHANNON  L.  GREENE,  certify  that:

1.  I  have  reviewed  this  annual  report on Form 10-K of The 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  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)) [language intentionally omitted SEC
Rel.  33-8238]  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)  [Left  blank  intentionally  SEC  Rel.  No.  33-8238];

     (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 fourth
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:     March  29,  2004
                                   /s/  Shannon  L.  Greene
                                   Shannon  L.  Greene
                                   Chief  Financial  Officer  and  Treasurer
                                   (principal financial and accounting officer)
                                       56
<PAGE>


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 Annual Report on Form 10-K of The Leather Factory, Inc.
for  the  fiscal  year  ended  December 31, 2003 as filed with the United States
Securities  and  Exchange  Commission  on  the  date hereof (the "Report"), Wray
Thompson,  as  Chairman  and  Chief Executive Officer, and Shannon L. Greene, as
Treasurer  and  Chief  Financial  Officer, 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.


March  29,  2004             By:  /s/  WRAY  THOMPSON
                             WRAY  THOMPSON
                             CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER


March  29,  2004             By:  /s/  SHANNON  L.  GREENE
                             SHANNON  L.  GREENE
                             CHIEF  FINANCIAL OFFICER AND TREASURER
                                       57
<PAGE>