|  |
|--|

| Delaware                                                            | 75-2543540                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation of organization) | (IRS      Employer Identification Number) |

| Class                                          | Shares outstanding as of May 7,      2010 |
|------------------------------------------------|-------------------------------------------|
| Common      Stock, par value $0.0024 per share | 10,141,222                                |

----

|                                                                                                 | PAGE NO.      |
|------------------------------------------------------------------------------------------------------|---------------|
|                                                                                                 |          |
| PART      I.  FINANCIAL INFORMATION                                                        |          |
|                                                                                                 |          |
|   Item      1.  Financial Statements                                             |          |
|                                                                                                 |          |
|     Consolidated      Balance Sheets                                             |          |
|      March      31, 2010 and December 31, 2009                              | 1             |
|                                                                                                 |          |
|     Consolidated      Statements of Income                                       |          |
|      Three      months ended March 31, 2010 and 2009                        | 2             |
|                                                                                                 |          |
|     Consolidated      Statements of Cash Flows                                   |          |
|      Three      months ended March 31, 2010 and 2009                        | 3             |
|                                                                                                 |          |
|     Consolidated      Statements of Stockholders' Equity                         |          |
|      Three      months ended March 31, 2010 and 2009                        | 4             |
|                                                                                                 |          |
|     Notes      to Consolidated Financial Statements                              | 5             |
|                                                                                                 |          |
|   Item      2.  Management's Discussion and Analysis of      Financial           |        7 |
|    Condition and      Results of Operations                                           |          |
|                                                                                                 |          |
|   Item      3.  Quantitative and Qualitative Disclosures About Market      Risk  | 9             |
|                                                                                                 |          |
|   Item      4.  Controls and Procedures                                          | 9             |
|                                                                                                 |          |
| PART      II.  OTHER INFORMATION                                                           |          |
|                                                                                                 |          |
|   Item      2.  Unregistered Sales of Equity Securities and Use of      Proceeds | 10            |
|                                                                                                 |          |
|   Item      6.  Exhibits                                                         | 10            |
|                                                                                                 |          |
| SIGNATURES                                                                                           |          |
|                                                                                                 |          |

----

|                                                       | March      31,  2010(unaudited)                              |                                                                        | December      31,  2009(audited)                   |
|------------------------------------------------------------|------------------------------------------------------------------------|-----------------------------------------------------------------------------|--------------------------------------------------------------|
| ASSETS                                                     |                                                                   |                                                                        |                                                         |
| CURRENT      ASSETS:                                       |                                                                   |                                                                        |                                                         |
|                                                       | Cash                                                                   | $5,976,396                                                                  |                                                         | $7,891,962 |
|                                                       | Short-term      investments, including certificates of deposit         | 6,995,598                                                                   |                                                         | 5,017,000 |
|                                                       | Accounts      receivable-trade, net of allowance for doubtful accounts |                                                                        |                                                         |   |
|                                                       |                                                                   |                                                                        | of      $174,000 and $136,000 in 2010 and 2009, respectively | 1,459,075 |   | 1,202,811 |
|                                                       | Inventory                                                              | 17,538,853                                                                  |                                                         | 16,865,826 |
|                                                       | Deferred      income taxes                                             | 289,556                                                                     |                                                         | 271,481 |
|                                                       | Other      current assets                                              | 1,499,080                                                                   |                                                         | 791,884 |
|                                                       |                                                                   |                                                                        |                                                         | Total      current assets | 33,758,558 |   | 32,040,964 |
|                                                       |                                                                   |                                                                        |                                                         |
| PROPERTY      AND EQUIPMENT, at cost                       | 14,513,146                                                             |                                                                        | 15,111,497                                                   |
| Less      accumulated depreciation and amortization        | (4,953,970)                                                            |                                                                        | (5,431,776)                                                  |
|                                                       | 9,559,176                                                              |                                                                        | 9,679,721                                                    |
|                                                       |                                                                   |                                                                        |                                                         |
| GOODWILL                                                   | 987,812                                                                |                                                                        | 983,823                                                      |
| OTHER      INTANGIBLES, net of accumulated amortization of |                                                                   |                                                                        |                                                         |
|                                                       | $433,000      and $418,000 in 2010 and 2009, respectively              | 293,401                                                                     |                                                         | 307,802 |
| OTHER      assets                                          | 318,218                                                                |                                                                        | 314,921                                                      |
|                                                       | $44,917,165                                                            |                                                                        | $43,327,231                                                  |
|                                                       |                                                                   |                                                                        |                                                         |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                  |                                                                   |                                                                        |                                                         |
| CURRENT      LIABILITIES:                                  |                                                                   |                                                                        |                                                         |
|                                                       | Accounts      payable-trade                                            | $1,613,639                                                                  |                                                         | $1,185,032 |
|                                                       | Accrued      expenses and other liabilities                            | 4,116,620                                                                   |                                                         | 3,988,144 |
|                                                       | Income      taxes payable                                              | 434,827                                                                     |                                                         | 399,536 |
|                                                       | Current      maturities of long-term debt                              | 202,500                                                                     |                                                         | 202,500 |
|                                                       |                                                                   |                                                                        |                                                         | Total      current liabilities | 6,367,586 |   | 5,775,212 |
|                                                       |                                                                   |                                                                        |                                                         |
| DEFERRED      INCOME TAXES                                 | 706,222                                                                |                                                                        | 682,364                                                      |
|                                                       |                                                                   |                                                                        |                                                         |
| LONG-TERM      DEBT, net of current maturities             | 3,459,375                                                              |                                                                        | 3,510,000                                                    |
|                                                       |                                                                   |                                                                        |                                                         |
| COMMITMENTS      AND CONTINGENCIES                         |                                                                   |                                                                        |                                                         |
|                                                       |                                                                   |                                                                        |                                                         |
| STOCKHOLDERS'      EQUITY:                                 |                                                                   |                                                                        |                                                         |
|                                                       | Preferred      stock, $0.10 par value; 20,000,000 shares authorized;   |                                                                        |                                                         |   |
|                                                       |                                                                   | none      issued or outstanding; attributes to be determined on    issuance | -                                                            |   | - |
|                                                       | Common      stock, $0.0024 par value; 25,000,000 shares authorized;    |                                                                        |                                                         |   |
|                                                       |                                                                   | 11,034,845      and 11,021,951 shares issued at 2010 and 2009;              |                                                         |   |   |
|                                                       |                                                                   | 10,141,222      and 10,130,628 shares outstanding at 2010 and 2009          | 26,484                                                       |   | 26,453 |
|                                                       | Paid-in      capital                                                   | 5,491,705                                                                   |                                                         | 5,491,736 |
|                                                       | Retained      earnings                                                 | 30,908,023                                                                  |                                                         | 29,959,910 |
|                                                       | Treasury      stock at cost (893,623 shares at 2010, 891,323 at 2009)  | (2,461,068)                                                                 |                                                         | (2,452,649) |
|                                                       | Accumulated      other comprehensive income                            | 418,838                                                                     |                                                         | 334,205 |
|                                                       |                                                                   |                                                                        |                                                         | Total      stockholders' equity | 34,383,982 |   | 33,359,655 |
|                                                       | $44,917,165                                                            |                                                                        | $43,327,231                                                  |

----

|                                                                   | 2010                              |      | 2009        |
|------------------------------------------------------------------------|-----------------------------------|-----------|-------------|
|                                                                   |                              |      |        |
| NET      SALES                                                         | $14,588,538                       |      | $13,183,095 |
| COST      OF SALES                                                     | 5,611,942                         |      | 5,442,649   |
|                                                                   | Gross      profit                 | 8,976,596 |        | 7,740,446 |
|                                                                   |                              |      |        |
| OPERATING      EXPENSES                                                | 7,440,228                         |      | 6,742,915   |
| INCOME      FROM OPERATIONS                                            | 1,536,368                         |      | 997,531     |
|                                                                   |                              |      |        |
| OTHER      (INCOME) EXPENSE:                                           |                              |      |        |
| Interest      expense                                                  | 65,604                            |      | 77,409      |
| Other,      net                                                        | (1,467)                           |      | (77,272)    |
|                                                                   | Total      other (income) expense | 64,137    |        | 137 |
|                                                                   |                              |      |        |
| INCOME      FROM CONTINUING OPERATIONS BEFORE INCOME TAXES             | 1,472,231                         |      | 997,394     |
|                                                                   |                              |      |        |
| PROVISION      FOR INCOME TAXES                                        | 524,654                           |      | 324,336     |
|                                                                   |                              |      |        |
| NET      INCOME FROM CONTINUING OPERATIONS                             | 947,577                           |      | 673,058     |
|                                                                   |                              |      |        |
| INCOME      FROM DISCONTINUED OPERATIONS, NET OF TAX                   | 536                               |      | 24,859      |
|                                                                   |                              |      |        |
| NET      INCOME                                                        | $948,113                          |      | $697,917    |
|                                                                   |                              |      |        |
|                                                                   |                              |      |        |
| NET      INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE:           |                              |      |        |
| BASIC                                                                  | $0.09                             |      | $0.06       |
| DILUTED                                                                | $0.09                             |      | $0.06       |
|                                                                   |                              |      |        |
| INCOME      FROM DISCONTINUED OPERATIONS, NET OF TAX PER COMMON SHARE: |                              |      |        |
| BASIC                                                                  | $0.00                             |      | $0.00       |
| DILUTED                                                                | $0.00                             |      | $0.00       |
|                                                                   |                              |      |        |
| NET      INCOME PER COMMON SHARE:                                      |                              |      |        |
| BASIC                                                                  | $0.09                             |      | $0.06       |
| DILUTED                                                                | $0.09                             |      | $0.06       |
|                                                                   |                              |      |        |
| WEIGHTED      AVERAGE NUMBER OF SHARES OUTSTANDING:                    |                              |      |        |
| BASIC                                                                  | 10,137,715                        |      | 10,670,111  |
| DILUTED                                                                | 10,213,677                        |      | 10,721,954  |

----

|                                                     | 2010                                                                                        |                                                                                     | 2009                                        |
|----------------------------------------------------------|---------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|---------------------------------------------|
| CASH      FLOWS FROM OPERATING ACTIVITIES:               |                                                                                        |                                                                                     |                                        |
|                                                     | Net      income                                                                             | $948,113                                                                                 |                                        | $697,917 |
|                                                     | Income      from discontinued operations                                                    | 536                                                                                      |                                        | 24,859 |
|                                                     |                                                                                        | 947,577                                                                                  |                                        | 673,058 |
|                                                     | Adjustments      to reconcile net income to net cash provided by operating      activities: |                                                                                     |                                        |   |
|                                                     |                                                                                        | Depreciation      and amortization                                                       | 234,026                                     |   | 279,290 |
|                                                     |                                                                                        | Loss      on disposal or abandonment of assets                                           | 246                                         |   | - |
|                                                     |                                                                                        | Non-cash      stock-based compensation                                                   | -                                           |   | 2,540 |
|                                                     |                                                                                        | Deferred      income taxes                                                               | 5,113                                       |   | 40,555 |
|                                                     |                                                                                        | Other                                                                                    | 80,343                                      |   | (70,127) |
|                                                     |                                                                                        | Net      changes in assets and liabilities, net of effect of business      acquisitions: |                                        |   |   |
|                                                     |                                                                                        |                                                                                     | Accounts      receivable-trade, net         | (262,172) |   | (344,850) |
|                                                     |                                                                                        |                                                                                     | Inventory                                   | (513,681) |   | 388,805 |
|                                                     |                                                                                        |                                                                                     | Income      taxes                           | 35,575 |   | (382,586) |
|                                                     |                                                                                        |                                                                                     | Other      current assets                   | (707,195) |   | (672,852) |
|                                                     |                                                                                        |                                                                                     | Accounts      payable-trade                 | 428,607 |   | 1,188,804 |
|                                                     |                                                                                        |                                                                                     | Accrued      expenses and other liabilities | (30,870) |   | 30,609 |
|                                                     | Total      adjustments                                                                      | (730,008)                                                                                |                                        | 460,188 |
|                                                     | Net      cash provided by continuing operating activities                                   | 217,569                                                                                  |                                        | 1,133,246 |
|                                                     | Cash      provided from discontinued operations                                             | 6,831                                                                                    |                                        | 35,540 |
|                                                     | Net      cash provided by operating activities                                              | 224,400                                                                                  |                                        | 1,168,786 |
|                                                     |                                                                                        |                                                                                     |                                        |
| CASH      FLOWS FROM INVESTING ACTIVITIES:               |                                                                                        |                                                                                     |                                        |
|                                                     | Purchase      of property and equipment                                                     | (99,117)                                                                                 |                                        | (278,224) |
|                                                     | Purchase      of certificates of deposit                                                    | (2,572,598)                                                                              |                                        | (4,048,000) |
|                                                     | Proceeds      from maturities of certificates of deposit                                    | 594,000                                                                                  |                                        | 1,081,000 |
|                                                     | Proceeds      from sale of assets                                                           | 90                                                                                       |                                        | - |
|                                                     | Decrease      (increase) in other assets                                                    | (3,297)                                                                                  |                                        | 1,198 |
|                                                     |                                                                                        |                                                                                     |                                        | Net      cash used in investing activities | (2,080,922) |   | (3,244,026) |
|                                                     |                                                                                        |                                                                                     |                                        |
| CASH      FLOWS FROM FINANCING ACTIVITIES:               |                                                                                        |                                                                                     |                                        |
|                                                     | Payments      on capital lease obligations                                                  | -                                                                                        |                                        | (64,880) |
|                                                     | Payments      on notes payable and long-term debt                                           | (50,625)                                                                                 |                                        | (50,625) |
|                                                     | Proceeds      from issuance of common stock                                                 | -                                                                                        |                                        | 23,437 |
|                                                     | Repurchase      of common stock (treasury stock)                                            | (8,419)                                                                                  |                                        | - |
|                                                     |                                                                                        |                                                                                     |                                        | Net      cash used in financing activities | (59,044) |   | (92,068) |
|                                                     |                                                                                        |                                                                                     |                                        |
| NET      DECREASE IN CASH                                | (1,915,566)                                                                                 |                                                                                     | (2,167,308)                                 |
|                                                     |                                                                                        |                                                                                     |                                        |
| CASH,      beginning of period                           | 7,891,962                                                                                   |                                                                                     | 7,810,298                                   |
|                                                     |                                                                                        |                                                                                     |                                        |
| CASH,      end of period                                 | $5,976,396                                                                                  |                                                                                     | $5,642,990                                  |
|                                                     |                                                                                        |                                                                                     |                                        |
|                                                     |                                                                                        |                                                                                     |                                        |
| SUPPLEMENTAL      DISCLOSURES OF CASH FLOW INFORMATION:  |                                                                                        |                                                                                     |                                        |
| Interest      paid during the period                     | $65,604                                                                                     |                                                                                     | $77,409                                     |
| Income      tax paid during the period, net of (refunds) | 477,177                                                                                     |                                                                                     | 369,180                                     |

----

|                               |  Number      of Shares |   |  Par      Value |   |  Paid-in      Capital |   |  Treasury      Stock |   |  Retained      Earnings |   | Accumulated      Other Comprehensive Income (Loss) |   |  Total |   | ComprehensiveIncome      (Loss) |
|------------------------------------|-----------------------------|--------|----------------------|--------|----------------------------|--------|---------------------------|--------|------------------------------|--------|----------------------------------------------------|--------|-------------|--------|---------------------------------|
| BALANCE,      December 31, 2008    | 10,664,555                  |   | $26,388              |   | $5,464,443                 |   | $(828,385)                |   | $26,641,853                  |   | $(39,537)                                          |   | $31,264,762 |   |                            |
|                               |                        |   |                 |   |                       |   |                      |   |                         |   |                                               |   |        |   |                            |
| Shares      issued - stock options | 25,000                      |   | 60                   |   | 23,377                     |   | -                         |   | -                            |   | -                                                  |   | 23,437      |   |                            |
| Stock-based      compensation      | -                           |   | -                    |   | 2,540                      |   | -                         |   | -                            |   | -                                                  |   | 2,540       |   |                            |
| Net  income              | -                           |   | -                    |   | -                          |   | -                         |   | 697,917                      |   | -                                                  |   | 697,917     |   | $697,917                        |
| Translation      adjustment        | -                           |   | -                    |   | -                          |   | -                         |   | -                            |   | (79,056)                                           |   | (79,056)    |   | (79,056)                        |
| BALANCE,      March 31, 2009       | 10,689,555                  |   | $26,448              |   | $5,490,360                 |   | $(828,385)                |   | $27,339,770                  |   | $(118,593)                                         |   | $31,909,600 |   |                            |

| Comprehensive      income for the three months ended March 31, 2009 | $618,861 |
|---------------------------------------------------------------------|----------|

|                               |  Number      of Shares |   |  Par      Value |   |  Paid-in      Capital |   |  Treasury      Stock |   |  Retained      Earnings |   | Accumulated      Other Comprehensive Income (Loss) |   |  Total |   | ComprehensiveIncome      (Loss) |
|------------------------------------|-----------------------------|--------|----------------------|--------|----------------------------|--------|---------------------------|--------|------------------------------|--------|----------------------------------------------------|--------|-------------|--------|---------------------------------|
| BALANCE,      December 31, 2009    | 10,130,628                  |   | $26,453              |   | $5,491,736                 |   | $(2,452,649)              |   | $29,959,910                  |   | $334,205                                           |   | $33,359,655 |   |                            |
|                               |                        |   |                 |   |                       |   |                      |   |                         |   |                                               |   |        |   |                            |
| Shares      issued - stock options | 12,894                      |   | 31                   |   | (31)                       |   | -                         |   | -                            |   | -                                                  |   | -           |   |                            |
| Purchase      of treasury stock    | (2,300)                     |   | -                    |   | -                          |   | (8,419)                   |   | -                            |   | -                                                  |   | (8,419)     |   |                            |
| Net  income              | -                           |   | -                    |   | -                          |   | -                         |   | 948,113                      |   | -                                                  |   | 948,113     |   | $948,113                        |
| Translation      adjustment        | -                           |   | -                    |   | -                          |   | -                         |   | -                            |   | 84,633                                             |   | 84,633      |   | 84,633                          |
| BALANCE,      March 31, 2010       | 10,141,222                  |   | $26,484              |   | $5,491,705                 |   | $(2,461,068)              |   | $30,908,023                  |   | $418,838                                           |   | $34,383,982 |   |                            |

| Comprehensive      income for the three months ended March 31, 2010 | $1,032,746 |
|---------------------------------------------------------------------|------------|

----

|                                   | As      of          |
|----------------------------------------|---------------------|
|                                   | March      31, 2010 |   | December      31, 2009 |
| Inventory      on hand:                |                |   |   |
| Finished      goods held for sale      | $15,650,318         |   | $14,861,855 |
| Raw      materials and work in process | 334,219             |   | 609,002 |
| Inventory      in transit              | 1,554,316           |   | 1,394,969 |
|                                   | $17,538,853         |   | $16,865,826 |

|                              | Leather      Factory | Tandy      Leather | Total    |
|-----------------------------------|----------------------|--------------------|----------|
| Balance,      December 31, 2008   | $583,259             | $383,406           | $966,665 |
| Acquisitions      and adjustments | -                    | -                  | -        |
| Foreign      exchange gain/loss   | (3,998)              | -                  | (3,998)  |
| Impairments                       | -                    | -                  | -        |
| Balance,      March 31, 2009      | $579,261             | $383,406           | $962,667 |
|                              |                 |               |     |
| Balance,      December 31, 2009   | $600,417             | $383,406           | $983,823 |
| Acquisitions      and adjustments | -                    | -                  | -        |
| Foreign      exchange gain/loss   | 3,989                | -                  | 3,989    |
| Impairments                       | -                    | -                  | -        |
| Balance,      March 31, 2010      | $604,406             | $383,406           | $987,812 |

|                        | As      of March 31, 2010 |                          | As      of December 31, 2009 |
|-----------------------------|---------------------------|-------------------------------|------------------------------|
|                        | Gross                     | Accumulated      Amortization | Net                          |   | Gross | Accumulated      Amortization | Net |
| Trademarks,      Copyrights | $544,369                  | $365,093                      | $179,276                     |   | $544,369 | $356,067 | $188,302 |
| Non-Compete      Agreements | 182,549                   | 68,424                        | 114,125                      |   | 181,636 | 62,136 | 119,500 |
|                        | $726,918                  | $433,517                      | $293,401                     |   | $726,005 | $418,203 | $307,802 |

|   | Wholesale Leathercraft | Retail Leathercraft | Total   |
|--------|------------------------|---------------------|---------|
| 2010   | $29,190                | $30,337             | $59,527 |
| 2011   | 28,263                 | 30,337              | 58,600  |
| 2012   | 7,427                  | 30,337              | 37,764  |
| 2013   | -                      | 30,337              | 30,337  |
| 2014   | -                      | 30,337              | 30,337  |

----

| Due      within one year                  | $2,809,000 |
|-------------------------------------------|------------|
| Due      between one and five years       | 3,988,598  |
| Due      between five and ten years       | -          |
| Due      between ten and fifteen years    | 99,000     |
| Due      between fifteen and twenty years | 99,000     |
|                                      | $6,995,598 |

|                                                                                                                                                                                                   | March 31, 2010 |   | December 31, 2009 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------|-------------------|
| Credit      Agreement with JPMorgan Chase Bank – collateralized by real estate;      payable as follows:                                                                                         |           |   |              |
| Line      of Credit Note dated July 31, 2007, converted to a 10-year term note on      April 30, 2008; $16,875 monthly principal payments plus interest at 7.1%      per annum; matures April 30, 2018 | $3,661,875     |   | $3,712,500        |
|                                                                                                                                                                                                   | 3,661,875      |   | 3,712,500         |
| Less      - Current maturities                                                                                                                                                                         | (202,500)      |   | (202,500)         |
|                                                                                                                                                                                                   | $3,459,375     |   | $3,510,000        |

|                              | Weighted      Average Exercise Price | #      of      shares | Weighted      Average Remaining Contractual Term (in years) |  Aggregate      Intrinsic Value |
|-----------------------------------|--------------------------------------|-----------------------|-------------------------------------------------------------|--------------------------------------|
| Outstanding,      January 1, 2009 | $2.16                                | 224,700               |                                                        |                                 |
| Granted                           | -                                    | -                     |                                                        |                                 |
| Cancelled                         | -                                    | -                     |                                                        |                                 |
| Exercised                         | 0.9375                               | 25,000                |                                                        |                                 |
| Outstanding,      March 31, 2009  | $2.31                                | 199,700               | 3.09                                                        | $247,123                             |
| Exercisable,      March 31, 2009  | $2.30                                | 197,700               | 3.07                                                        | $244,583                             |
|                              |                                 |                  |                                                        |                                 |
| Outstanding,      January 1, 2010 | $2.33                                | 197,700               |                                                        |                                 |
| Granted                           | -                                    | -                     |                                                        |                                 |
| Cancelled                         | -                                    | -                     |                                                        |                                 |
| Exercised                         | 1.35                                 | 20,000                |                                                        |                                 |
| Outstanding,      March 31, 2010  | $2.44                                | 177,700               | 2.28                                                        | $230,030                             |
| Exercisable,      March 31, 2010  | $2.44                                | 177,700               | 2.28                                                        | $230,030                             |

|                                                                 | 2010    |  2009 |
|----------------------------------------------------------------------|---------|------------|
| Weighted      average grant-date fair value of stock options granted | N/A     | N/A        |
| Total      fair value of stock options vested                        | N/A     | $2,540     |
| Total      intrinsic value of stock options exercised                | $16,058 | $14,878    |

|                                                                                            |                            | 2010   |       | 2009   |
|-------------------------------------------------------------------------------------------------|---------------------------------|--------|------------|--------|
| Net      income                                                                                 | $948,113                        |   | $697,917   |
| Numerator      for basic and diluted earnings per share                                         | $948,113                        |   | $697,917   |
|                                                                                            |                            |   |       |   |
| Denominator      for basic earnings per share –  weighted-average      shares   | 10,137,715                      |   | 10,670,111 |
|                                                                                            |                            |   |       |   |
| Effect      of dilutive securities:                                                             |                            |   |       |
|                                                                                            | Stock      options              | 75,962 |       | 51,843 |
|                                                                                            | Warrants                        | -      |       | -      |
| Dilutive      potential common shares                                                           | 75,962                          |   | 51,843     |
|                                                                                            |                            |   |       |   |
| Denominator      for diluted earnings per share –  weighted-average      shares | 10,213,677                      |   | 10,721,954 |
|                                                                                            |                            |   |       |   |
|                                                                                            | Basic      earnings per share   | $0.09  |       | $0.06  |
|                                                                                            | Diluted      earnings per share | $0.09  |       | $0.06  |

----

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

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

| c.   | International      Leathercraft, which sells to both wholesale and retail      customers.  It carries the same products as North American      stores.  We started this operation in February 2008 and have one      store located in Northampton, UK. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                             | Wholesale      Leathercraft | Retail      Leathercraft | Int’l      Leathercraft | Discontinued      Operations | Total       |
|------------------------------------------------------------------|-----------------------------|--------------------------|-------------------------------|------------------------------|-------------|
| For      the quarter ended March 31, 2010                        |                        |                     |                          |                         |        |
| Net      sales                                                   | $6,587,804                  | $7,616,296               | $384,438                      |                         | $14,588,538 |
| Gross      profit                                                | 3,887,902                   | 4,837,294                | 251,400                       |                         | 8,976,596   |
| Operating      earnings                                          | 534,196                     | 922,738                  | 79,434                        |                         | 1,536,368   |
| Interest      expense                                            | 65,604                      | -                        | -                             |                         | 65,604      |
| Other,      net                                                  | (20,143)                    | (2,086)                  | 20,762                        |                         | (1,467)     |
| Income      before income taxes                                  | 488,735                     | 924,824                  | 58,672                        |                         | 1,472,231   |
|                                                             |                        |                     |                          |                         |        |
|      Depreciation      and amortization | 197,787                     | 32,784                   | 3,455                         |                         | 234,026     |
|      Fixed      asset additions         | 70,707                      | 28,410                   | -                             |                         | $99,117     |
|      Total      assets                  | $38,622,176                 | $5,680,489               | $614,500                      | -                            | $44,917,165 |
|                                                             |                        |                     |                          |                         |        |
| For      the quarter ended March 31, 2009                        |                        |                     |                          |                         |        |
| Net      sales                                                   | $6,286,701                  | $6,603,522               | $292,872                      |                         | $13,183,095 |
| Gross      profit                                                | 3,567,923                   | 3,950,164                | 222,359                       |                         | 7,740,446   |
| Operating      earnings                                          | 366,247                     | 550,168                  | 81,116                        |                         | 997,531     |
| Interest      expense                                            | 77,409                      | -                        | -                             |                         | 77,409      |
| Other,      net                                                  | (94,008)                    | 191                      | 16,545                        |                         | (77,272)    |
| Income      before income taxes                                  | 382,846                     | 549,977                  | 64,571                        |                         | 997,394     |
|                                                             |                        |                     |                          |                         |        |
|      Depreciation      and amortization | 247,102                     | 29,024                   | 3,164                         |                         | 279,290     |
|      Fixed      asset additions         | 253,786                     | 24,438                   | -                             |                         | $278,224    |
|      Total      assets                  | $35,839,248                 | $5,510,987               | $989,159                      | $139,296                     | $42,478,690 |

|                     | 2010        | 2009        |
|--------------------------|-------------|-------------|
| United      States       | $12,613,850 | $11,454,831 |
| Canada                   | 1,344,596   | 1,242,484   |
| All      other countries | 630,092     | 485,780     |
|                     | $14,588,538 | $13,183,095 |

----

| Ø   | We      believe that a rise in oil and natural gas prices will increase the costs      of the goods that we sell, including the costs of shipping those goods      from the manufacturer to our stores and  customers. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | Continued      weakness 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.  Furthermore, negative trends in      general consumer-spending levels, including the impact of the availability      and level of consumer debt and levels of consumer confidence could      adversely affect our sales. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          | Quarter      Ended March 31, 2010 |   | Quarter      Ended March 31, 2009 |
|-------------------------------|-----------------------------------|--------|-----------------------------------|
|                          | Sales                             |   | Operating      Income             |   | Sales |   | Operating      Income |
| Wholesale      Leathercraft   | $6,587,804                        |   | $534,196                          |   | $6,286,701 |   | $366,247 |
| Retail      Leathercraft      | 7,616,296                         |   | 922,738                           |   | 6,603,522 |   | 550,168 |
| Int’l      Leathercraft | 384,438                           |   | 79,434                            |   | 292,872 |   | 81,116 |
| Total      Operations         | $14,588,538                       |   | $1,536,368                        |   | $13,183,095 |   | $997,531 |

|            | 2010     |   | 2009     | % change |
|-----------------|----------|--------|----------|----------|
| Net      income | $948,113 |   | $697,917 | 35.9%    |

|                                                                                                                   | Quarter      ended |
|------------------------------------------------------------------------------------------------------------------------|--------------------|
| Customer Group                                                                                                         | 03/31/10           |   | 03/31/09 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 30%                |   | 29% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 6%                 |   | 7% |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 42%                |   | 41% |
|   MANUFACTURERS                                                                                              | 7%                 |   | 7% |
|   NATIONAL      ACCOUNTS                                                                                     | 15%                |   | 16% |
|                                                                                                                   | 100%               |   | 100% |

|                        | Quarter      Ended  03/31/10 |   | Quarter      Ended  03/31/09 |   | $ change | % change |
|-----------------------------|----------------------------------------|--------|----------------------------------------|--------|----------|----------|
| Same      store sales (30)  | $5,783,176                             |   | $5,414,997                             |   | $368,179 | 6.8%     |
| National      account group | 804,628                                |   | 871,704                                |   | (67,076) | (7.7)%   |
|                        | $6,587,804                             |   | $6,286,701                             |   | $301,103 | 4.8%     |

|                             | #      Stores | Qtr      ended 03/31/10 | Qtr      ended 03/31/09 | $      Change | %      Change |
|----------------------------------|---------------|-------------------------|-------------------------|---------------|---------------|
| Same      (existing) store sales | 74            | $7,527,635              | $6,603,522              | $924,113      | 14.0%         |
| New      store sales             | 2             | 88,661                  | -                       | 88,661        | N/A           |
| Total      sales                 | 76            | $7,616,296              | $6,603,522              | $1,012,774    | 15.3%         |

----

|                                                                                                                   | Quarter      ended |
|------------------------------------------------------------------------------------------------------------------------|--------------------|
| Customer Group                                                                                                         | 03/31/10           |   | 03/31/09 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 65%                |   | 65% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 6%                 |   | 7% |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 28%                |   | 27% |
|   NATIONAL      ACCOUNTS                                                                                     | -                  |   | - |
|   MANUFACTURERS                                                                                              | 1%                 |   | 1% |
|                                                                                                                   | 100%               |   | 100% |

----

| ISSUER      PURCHASES OF EQUITY SECURITIES |
|--------------------------------------------|
| Period                                     | (a)      Total Number of Shares  Purchased | (b)      Average Price Paid per Share | (c)      Total Number of Shares Purchased as Part of Publicly Announced Plans or      Programs | (d)      Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be      Purchased Under the Plans or Programs |
| January      1 - January 31                | - | - | - | 964,300 |
| February      1- February 28               | 2,300(1) | $3.66 | 2,300 | 962,000 |
| March      1 - March 31                    | - | - | - | 962,000 |
| Total                                      | 2,300 | $3.66 | 2,300 | 962,000 |

| (1)   | Represents      shares purchased through a stock repurchase program permitting us to      repurchase up to one million shares of our common stock at prevailing      market prices not to exceed $3.70 per share.  We announced the      program on December 9, 2009, such program replacing our previous stock      repurchase program which permitted us, on the date of its termination, to      repurchase up to 974,773 shares of our common stock at prevailing prices      not to exceed $2.85 per share.  Purchases under the program      commenced on December 9, 2009 and will terminate on December 10,      2010. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ExhibitNumber    |  Description                                                                                                                                                                                                                                                                                                                                               |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                   | Certificate      of Incorporation of The Leather Factory, Inc., and Certificate of      Amendment to Certificate of Incorporation of The Leather Factory, Inc.      filed as Exhibit 3.1 to Form 10-Q filed by Tandy Leather Factory, Inc.      with the Securities and Exchange Commission on August 12, 2005 and      incorporated by reference herein.  |
| 3.2                   | Bylaws      of The Leather Factory, Inc., filed as Exhibit 3.5 to the Current Report      on Form 8-K (Commission File No. 001-12368) filed by Tandy Leather      Factory, Inc (f/k/a The Leather Factory, Inc.) with the Securities and      Exchange Commission on July 14, 2004 and incorporated by reference      herein.                              |
| 10.1                  | Consulting      Agreement, dated January 1, 2010, by and between Tandy Leather Factory,      Inc. and J. Wray Thompson, filed as Exhibit 10.1 to Form 8-K filed by      Tandy Leather Factory, Inc. with the Securities and Exchange Commission on      January 5, 2010 and incorporated by reference herein.                                              |
| *31.1                 | 13a-14(a)      Certification by Jon Thompson, Chief Executive Officer and      President.                                                                                                                                                                                                                                                                  |
| *31.2                 | 13a-14(a)      Certification by Shannon Greene, Chief Financial Officer and      Treasurer.                                                                                                                                                                                                                                                                |
| *32.1                 | Certification      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of      the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                               |
| ____________          |                                                                                                                                                                                                                                                                                                                                                            |
| *Filed      herewith. |                                                                                                                                                                                                                                                                                                                                                            |

|                               | TANDY      LEATHER FACTORY, INC.                                       |
|------------------------------------|------------------------------------------------------------------------|
|                               | (Registrant)                                                           |
|                               |                                                                   |
| Date:  May      14, 2010 | By:  /s/ Jon Thompson                                        |
|                               | Jon      Thompson                                                      |
|                               | Chief      Executive Officer and President                             |
|                               |                                                                   |
| Date:  May      14, 2010 | By:  /s/ Shannon L. Greene                                   |
|                               | Shannon      L. Greene                                                 |
|                               | Chief      Financial Officer and Treasurer (Chief Accounting  Officer) |