FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark  One)

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

For  the  quarterly  period  ended  March  31,  2004

or

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

For  the  transition  period  from      to

Commission  File  Number  1-12368

                            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
   Incorporation  or  organization)                     Identification  Number)

                3847 EAST LOOP 820 SOUTH, FT. WORTH, TEXAS  76119
               (Address of principal executive offices) (Zip code)

                                 (817) 496-4414
              (Registrant's telephone number, including area code)

     Indicate  by  check  mark  whether the registrant (1) has filed all reports
required  to  by  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.

                                  Yes ___X____  No _______

     Indicate  by  check  mark  whether  the registrant is an accelerated filer.

                                  Yes ________  No ___X___

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

                                                           Shares outstanding as
              Class                                          of  May  10,  2004
---------------------------------------------              ---------------------
Common  Stock,  par  value  $.0024  per share                    10,555,661
                                        1
<PAGE>


                            THE LEATHER FACTORY, INC.

                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004


                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>
<S>                                                                                 <C>
                                                                                    PAGE NO.
                                                                                    --------

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

    Consolidated Balance Sheets
     March 31, 2004 and December 31, 2003                                                  3

    Consolidated Statements of Income
     Three months ended March 31, 2004 and 2003                                            4

    Consolidated Statements of Cash Flows
     Three months ended March 31, 2004 and 2003                                            5

    Consolidated Statements of Stockholders' Equity
     Three months ended March 31, 2004 and 2003                                            6

    Notes to Consolidated Financial Statements                                             7

  Item 2.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations                                                  10

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk            .        15

  Item 4.  Controls and Procedures                                                        15

PART II.  OTHER INFORMATION

  Item 5.  Changes in Securities                                                          16

  Item 6.  Exhibits and Reports on Form 8-K                                               16

SIGNATURES                                                                                16

</TABLE>
                                        2
<PAGE>


                            THE LEATHER FACTORY, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                   March 31,     December 31,
                                                                                      2004           2003
                                                                                  -----------   -------------
                                                                                  (unaudited)
<S>                                                                               <C>           <C>
                                ASSETS
CURRENT ASSETS:
  Cash                                                                            $ 1,678,607   $   1,728,344
  Accounts receivable-trade, net of allowance for doubtful accounts
      of $63,000 and $31,000 in 2004 and 2003, respectively                         3,055,545       1,828,738
  Inventory                                                                        11,392,312      11,079,893
  Prepaid income taxes                                                                      -         206,023
  Deferred income taxes                                                               161,674         134,312
  Other current assets                                                              1,054,036         702,236
                                                                                  ------------  --------------
    Total current assets                                                           17,342,174      15,679,546
                                                                                  ------------  --------------

PROPERTY AND EQUIPMENT, at cost                                                     5,689,106       5,574,992
  Less-accumulated depreciation and amortization                                   (3,784,460)     (3,669,099)
                                                                                  ------------  --------------
    Property and equipment, net                                                     1,904,646       1,905,893

GOODWILL, net of accumulated amortization of $757,000 and
  $758,000 in 2004 and 2003, respectively                                             731,094         704,235
OTHER INTANGIBLES, net of accumulated amortization of
  $178,000 and $164,000, in 2004 and 2003, respectively                               439,493         432,549
OTHER assets                                                                          322,107         336,183
                                                                                  ------------  --------------
                                                                                  $20,739,514   $  19,058,406
                                                                                  ============  ==============

                   LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                                $ 2,355,092   $   1,545,079
  Accrued expenses and other liabilities                                            1,113,237       1,000,427
  Income taxes payable                                                                229,631               -
  Notes payable and current maturities of long-term debt                                    -           1,134
                                                                                  ------------  --------------
    Total current liabilities                                                       3,697,960       2,546,640
                                                                                  ------------  --------------

DEFERRED INCOME TAXES                                                                 216,877         209,289

NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities                         1,267,984       1,792,984

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, 10,525,661 and
      10,487,961 shares issued and outstanding at 2004 and 2003, respectively          25,261          25,171
  Paid-in capital                                                                   4,755,208       4,673,158
  Retained earnings                                                                10,775,685       9,804,719
  Less: Notes receivable - secured by common stock                                    (15,000)        (20,000)
  Accumulated other comprehensive income                                               15,539          26,445
                                                                                  ------------  --------------
    Total stockholders' equity                                                     15,556,693      14,509,493
                                                                                  ------------  --------------
                                                                                  $20,739,514   $  19,058,406
                                                                                  ============  ==============
</TABLE>
   The accompanying notes are an integral part of these financial statements.
                                        3
<PAGE>


                            THE LEATHER FACTORY, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>

                                                      2004          2003
                                                  -----------  ------------
<S>                                               <C>          <C>
NET SALES                                         $12,180,877  $10,560,085
COST OF SALES                                       5,455,964    4,914,581
                                                  -----------  ------------
    Gross profit                                    6,724,913    5,645,504
OPERATING EXPENSES                                  5,277,778    4,529,832
                                                  -----------  ------------
INCOME FROM OPERATIONS                              1,447,135    1,115,672

OTHER EXPENSE:
  Interest expense                                     13,638       63,352
  Other, net                                            1,737      (30,818)
                                                  -----------  ------------
    Total other expense                                15,375       32,534
                                                  -----------  ------------
INCOME BEFORE INCOME TAXES                          1,431,760    1,083,138
PROVISION FOR INCOME TAXES                            460,794      308,620
                                                  -----------  ------------
NET INCOME                                        $   970,966  $   774,518
                                                  ===========  ============

  NET INCOME PER COMMON SHARE - BASIC             $      0.09  $      0.08
                                                  ===========  ============

  NET INCOME PER COMMON SHARE - DILUTED           $      0.09  $      0.07
                                                  ===========  ============

  WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
    Basic                                          10,506,995   10,177,433
    Diluted                                        11,011,122   10,793,464
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        4
<PAGE>


                            THE LEATHER FACTORY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>

                                                                             2004          2003
                                                                         -----------   ------------
<S>                                                                      <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                             $   970,966   $   774,518
  Adjustments to reconcile net income to net
   cash provided by operating activities-
     Depreciation & amortization                                             129,418       125,031
     Loss on disposal of assets                                                    -         9,371
     Deferred income taxes                                                   (19,774)       24,479
     Other                                                                    (9,766)       10,609
     Net changes in assets and liabilities:
       Accounts receivable-trade, net                                     (1,226,807)     (829,103)
       Inventory                                                            (267,966)       22,759
       Income taxes                                                          435,654       187,386
       Other current assets                                                 (351,800)     (352,038)
       Accounts payable                                                      810,013       (90,543)
       Accrued expenses and other liabilities                                112,810    (1,507,392)
                                                                         -----------   ------------
     Total adjustments                                                      (388,218)   (2,399,441)
                                                                         -----------   ------------
      Net cash provided by (used in) operating activities                    582,748    (1,624,923)
                                                                         -----------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                         (82,115)      (93,972)
  Payments in connection with businesses acquired                           (125,452)            -
  Proceeds from sale of assets                                                     -         6,217
  Increase in other assets                                                    14,076       (17,197)
                                                                         -----------   ------------
      Net cash used in investing activities                                 (193,491)     (104,952)
                                                                         -----------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in revolving credit loans                         (525,000)    1,597,065
  Payments on notes payable and long-term debt                                (1,134)       (1,600)
  Decrease in cash restricted for payment on revolving credit facility             -        90,186
  Payments received on notes secured by common stock                           5,000             -
  Proceeds from issuance of common stock                                      82,140        47,655
                                                                         -----------   ------------
      Net cash provided by (used in) financing activities                   (438,994)    1,733,306
                                                                         -----------   ------------
NET CHANGE IN CASH                                                           (49,737)        3,431

CASH, beginning of period                                                  1,728,344       101,557
                                                                         -----------   ------------
CASH, end of period                                                      $ 1,678,607   $   104,988
                                                                         ===========   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid during the period                                        $    16,205   $    59,930
  Income taxes paid during the period, net of (refunds)                       44,914        41,620
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                        5
<PAGE>


                            THE LEATHER FACTORY, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003

<TABLE>
<CAPTION>

                                                     NUMBER OF SHARES   PAR VALUE   PAID-IN CAPITAL   RETAINED EARNINGS
<S>                                                  <C>                <C>         <C>               <C>
BALANCE, December 31, 2002                                 10,149,961  $   24,360  $      4,163,901   $       7,064,345

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

Shares issued - stock options exercised                        62,500         150            47,506                   -

Net income                                                          -           -                 -             774,518

Translation adjustment                                              -           -                 -                   -
                                                     ----------------  ----------  ----------------   -----------------
BALANCE, March 31, 2003                                    10,212,461  $   24,510  $      4,211,407   $       7,838,863
                                                     ================  ==========  ================   =================


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

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

Shares issued - stock options exercised                        37,700          90           82,050                    -

Net income                                                          -           -                -              970,966

Translation adjustment                                              -           -                -                    -
                                                     ----------------  ----------  ----------------   -----------------
BALANCE, March 31, 2004                                    10,525,661  $   25,261  $     4,755,208    $      10,775,685
                                                     ================  ==========  ================   =================

                                                         NOTES RECEIVABLE -      ACCUMULATED OTHER                   COMPREHENSIVE
                                                     SECURED BY COMMON STOCK  CUMULATIVE INCOME (LOSS)    TOTAL      INCOME (LOSS)
                                                     -----------------------  ------------------------  -----------  -------------
<S>                                                  <C>                      <C>                       <C>          <C>
BALANCE, December 31, 2002                           $              (44,003)  $               (38,541)  $11,170,062

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

Shares issued - stock options exercised                                   -                         -        47,656

Net income                                                                -                         -       774,518  $     774,518

Translation adjustment                                                    -                    10,609        10,609         10,609
                                                     -----------------------  ------------------------  -----------  -------------
BALANCE, March 31, 2003                              $              (44,003)  $               (27,932)  $12,002,845
                                                     =======================  ========================  ===========
Comprehensive income for the three months ended March 31, 2003                                                       $     785,127
                                                                                                                     =============

BALANCE, December 31, 2003                           $              (20,000)  $                26,445   $14,509,493

Payments on notes receivable-secured by common stock                  5,000                         -         5,000

Shares issued - stock options exercised                                   -                         -        82,140

Net income                                                                -                         -       970,966  $     970,966

Translation adjustment                                 -                                      (10,906)      (10,906)       (10,906)
                                                     -----------------------  ------------------------  -----------  -------------
BALANCE, March 31, 2004                              $              (15,000)  $                15,539   $15,556,693
                                                     =======================  ========================  ===========
Comprehensive income for the three months ended March 31, 2004                                                       $     960,060
                                                                                                                     =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        6
<PAGE>

                            THE LEATHER FACTORY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS  OF  PRESENTATION  AND  CERTAIN  SIGNIFICANT  ACCOUNTING  POLICIES

In the opinion of management, the accompanying consolidated financial statements
for  The  Leather  Factory, Inc. and its consolidated subsidiaries (TLF) contain
all  adjustments  (consisting  of  normal  recurring  adjustments)  necessary to
present  fairly  its  financial  position  as of March 31, 2004 and December 31,
2003,  and  its results of operations and cash flows for the three-month periods
ended  March  31,  2004  and 2003.  Operating results for the three-month period
ended  March  31, 2004 are not necessarily indicative of the results that may be
expected  for  the  year ending December 31, 2004.  These consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and accompanying notes included in our Annual Report on Form 10-K for
the  year  ended  December  31,  2003.

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

Recent  Accounting  Pronouncements

In  January 2003, the Financial Accounting Standards Board (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  (VIEs)  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 delayed the application of FIN 46 to TLF until the interim
period ended March 31, 2004, and provides additional technical clarifications to
implementation  issues.  The  application  of this interpretation did not have a
material  impact  on  the  Company's  consolidated  financial statements for the
quarter.
Revenue  Recognition

The  Company recognizes revenue for over-the-counter sales as transactions occur
and  other sales upon shipment of product provided that there are no significant
post-delivery  obligations to the customer and collection is reasonably assured,
which  generally  is  the case.  Net sales represent gross sales less negotiated
price  allowances,  product  returns,  and allowances for defective merchandise.

Inventory

Inventory  is  stated at the lower of cost or market and is accounted for on the
"first  in,  first  out"  method.  In  addition,  the  value  of  inventory  is
periodically reduced for slow-moving or obsolete inventory based on management's
review  of  items  on  hand  compared  to  their estimated future demand.    The
components  of  inventory  consist  of  the  following:
<TABLE>
<CAPTION>

                                                 AS OF
<S>                                <C>               <C>
                                   MARCH 31, 2004    DECEMBER 31, 2003
                                   --------------    -----------------
Finished goods held for sale       $   10,323,322        $   9,902,140
Raw materials and work in process       1,068,990            1,177,753
                                   --------------    -----------------
                                   $   11,392,312        $  11,079,893
                                   ==============    =================
</TABLE>
                                        7
<PAGE>

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
during  the  interim.  The  first phase screens for impairment, while the second
phase  (if  necessary)  measures  the  impairment.  The  Company  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.  No
indicators  of  impairment  were  identified  during  the first quarter of 2004.

Other  intangibles  consist  of  the  following:
<TABLE>
<CAPTION>



                                  AS OF MARCH 31, 2004                 AS OF DECEMBER 31, 2003
                        --------------------------------------    ---------------------------------
                                         ACCUMULATED                          ACCUMULATED
<S>                     <C>             <C>           <C>          <C>       <C>           <C>
                            GROSS       AMORTIZATION     NET         GROSS   AMORTIZATION   NET
                        --------------  ------------  --------     --------  ------------  --------
Trademarks, Copyrights  $      544,369  $    147,393  $396,976     $544,369  $    138,320  $406,049
Non-Compete Agreements          73,000        30,483    42,517       52,000        25,500    26,500
                        --------------  ------------  --------     --------  ------------  --------
                        $      617,369  $    177,876  $439,493     $596,369  $    163,820  $432,549
                        ==============  ============  ========     ========  ============  ========
</TABLE>

The Company recorded amortization expense of $14,056 during the first quarter of
2004  compared  to $12,740 during the first quarter of 2003.  The Company has no
intangible  assets  not  subject  to  amortization under SFAS 142.  Based on the
current  amount  of  intangible  assets  subject  to amortization, the estimated
amortization  expense  for  each  of  the  succeeding  5  years  is  as follows:

<TABLE>
<CAPTION>

                                        ROBERTS,
<C>   <S>               <C>             <C>       <C>
      LEATHER FACTORY   TANDY LEATHER   CUSHMAN    TOTAL
      ----------------  --------------  --------  -------
2004  $      5,954      $     54,004    $    0    $59,958
2005         5,954            38,004         0     43,958
2006         5,954            37,337         0     43,291
2007         5,954            36,504         0     42,458
2008         5,954            33,337         0     39,291
</TABLE>


2.  STOCK-BASED  COMPENSATION

The  Company  accounts  for stock options granted to its directors and employees
using  the  intrinsic  value  method  prescribed  by  APB  No. 25 which requires
compensation  expense  be  recognized  for  stock options when the quoted market
price  of  the  Company's common stock on the date of grant exceeds the option's
exercise  price.  No  compensation cost has been reflected in net income for the
granting  of  director  and employee stock options as all options granted had an
exercise price equal to the quoted market price of the Company's common stock on
the  date  the  options  were  granted.

Had compensation cost for the Company's stock options been determined consistent
with  the  SFAS 123 fair value approach, the Company's net income and net income
per  common  share  for the three months ended March 31, 2004 and 2003, on a pro
forma  basis,  would  have  been  as  follows:
<TABLE>
<CAPTION>
<S>                                                                          <C>       <C>
                                                                               2004      2003
                                                                             --------  --------
Net income, as reported                                                      $970,966  $774,518

Add: Stock-based compensation expense included in reported net income               -         -

Deduct: Stock-based compensation expense determined under fair value method    27,145    20,266
                                                                             --------  --------
Net income, pro forma                                                        $943,821  $754,252
                                                                             ========  ========

Net income per share:
Basic - as reported                                                          $   0.09  $   0.08
Basic - pro forma                                                            $   0.09  $   0.07

Diluted - as reported                                                        $   0.09  $   0.07
Diluted - pro forma                                                          $   0.09  $   0.07
</TABLE>
                                        8
<PAGE>

The  fair  values  of stock options granted were estimated on the dates of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:  risk-free  interest  rate  of  3.125% and 3.00% for 2004 and 2003,
respectively; dividend yields of 0% for both periods; volatility factors of .696
for  2004  and  .725  for  2003; and an expected life of the valued options of 5
years.

3.  EARNINGS  PER  SHARE

The following table sets forth the computation of basic and diluted earnings per
share  ("EPS"):
<TABLE>
<CAPTION>
                                                  Three Months Ended March 31,
<S>                                                 <C>          <C>
                                                       2004         2003
                                                    -----------  -----------
Net income                                          $   970,966  $   774,518
                                                    -----------  -----------
Numerator for basic and diluted earnings per share      970,966      774,518

Denominator for basic earnings per share -
  weighted-average shares                            10,506,995   10,177,433

Effect of dilutive securities:
Stock options                                           462,562      442,884
Warrants                                                 41,565      173,147
                                                    -----------  -----------
Dilutive potential common shares                        504,127      616,031
                                                    -----------  -----------
Denominator for diluted earnings per share -
  weighted-average shares                            11,011,122   10,793,464
                                                    ===========  ===========

Basic earnings per share                            $      0.09  $      0.08
                                                    ===========  ===========
Diluted earnings per share                          $      0.09  $      0.07
                                                    ===========  ===========
</TABLE>

The  net effect of converting stock options and warrants to purchase 825,200 and
747,200  shares  of common stock at exercise prices less than the average market
prices  has  been  included  in  the computations of diluted EPS for the quarter
ended  March  31,  2004  and  2003,  respectively.


4.  SEGMENT  INFORMATION

The  Company  identifies  its segments based on the activities of three distinct
businesses:

A.     THE LEATHER FACTORY, which sells primarily to wholesale customers through
a  chain  of  30  outlet  stores  located  in  the  United  States  and  Canada;

B.     TANDY  LEATHER COMPANY, which sells primarily to retail customers through
a  chain  of  retail  stores  located  in  the  United  States;  and

C.     ROBERTS,  CUSHMAN  &  COMPANY,  manufacturer of decorative hat trims sold
directly  to  hat  manufacturers  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.
                                        9
<PAGE>

<TABLE>
<CAPTION>

<S>                                   <C>                    <C>                      <C>                     <C>
                                      THE LEATHER FACTORY    TANDY LEATHER COMPANY    ROBERTS, CUSHMAN & CO      TOTAL
FOR THE QUARTER ENDED MARCH 31, 2004
Net sales                             $         8,443,091   $            3,166,738   $              571,048  $12,180,877
Gross profit                                    4,575,838                1,926,649                  222,426    6,724,913
Operating earnings                              1,078,409                  301,567                   67,159    1,447,135
Interest expense                                  (13,638)                       -                        -      (13,638)
Other, net                                         (1,803)                      66                        -       (1,737)
Income before income taxes                      1,062,968                  301,633                   67,159    1,431,760

     Depreciation and amortization                102,028                   25,153                    2,237      129,418
     Fixed asset additions                         39,737                   38,043                    4,335       82,115
     Total assets                     $        16,731,246   $            3,079,605   $              928,663  $20,739,514

FOR THE QUARTER ENDED MARCH 31, 2003
Net sales                             $         8,201,258   $            1,864,539   $              494,288  $10,560,085
Gross profit                                    4,297,502                1,181,332                  166,670    5,645,504
Operating earnings                                923,637                  146,993                   45,042    1,115,672
Interest expense                                  (63,352)                       -                        -      (63,352)
Other, net                                         31,290                     (472)                       -       30,818
Income before income taxes                        891,575                  146,521                   45,042    1,083,138

     Depreciation and amortization                106,367                   15,839                    2,825      125,031
     Fixed asset additions                         39,497                   54,475                        -       93,972
     Total assets                     $        17,364,513   $            2,447,611   $              845,938  $20,658,062
</TABLE>

Net  sales  for  geographic  areas  were  as  follows:

                           THREE  MONTHS  ENDED
<TABLE>
<CAPTION>

<S>                   <C>              <C>
                      MARCH 31, 2004   MARCH 31, 2003
                      --------------   --------------
United States         $   11,285,857   $    9,870,636
All other countries          895,020          689,449
                      --------------   --------------
                      $   12,180,877  $    10,560,085
                     ===============  ===============
</TABLE>

Geographic sales information is based on the location of the customer. No single
foreign country accounted for any material amounts of the Company's consolidated
net sales for the three-month periods ended March 31, 2004 and 2003. The Company
does  not  have  any significant long-lived assets outside of the United States.


ITEM  2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION
          AND  RESULTS  OF  OPERATIONS.

The  Leather  Factory,  Inc.  ("TLF" or the "Company") is a Delaware corporation
whose common stock trades on the American Stock Exchange under the symbol "TLF".
The  Company  is managed on a business entity basis, with those businesses being
The  Leather  Factory  ("Leather  Factory"),  Tandy  Leather Company ("Tandy" or
"Tandy  Leather"), and Roberts, Cushman & Company, Inc. ("Cushman").  See Note 4
to  the  Consolidated Financial Statements for additional information concerning
the  Company's  segments,  as  well  as  its  foreign  operations.
                                       10
<PAGE>

Leather  Factory,  founded  in 1980 by Wray Thompson and Ron Morgan, distributes
leather  and  related  products,  including  leatherworking  tools,  buckles and
adornments  for  belts, leather dyes and finishes, saddle and tack hardware, and
do-it-yourself  kits.  The  products are sold primarily through 30 company-owned
outlets  located  throughout  the  United  States  and  Canada.

Tandy  Leather  is  the  oldest  and  best-known supplier of leather and related
supplies  used  in  the leathercraft industry.  From its founding in 1919, Tandy
has  been the primary leathercraft resource worldwide.  Products include quality
tools,  leather,  accessories,  kits  and teaching materials.  In early 2002, we
initiated  a plan to expand Tandy Leather by opening retail stores.  As of April
15,  2004,  we have opened 30 Tandy Leather retail stores located throughout the
United  States.

Cushman,  whose  origins  date  back  to  the  mid-1800's,  custom  designs  and
manufactures  a product line of decorative hat trims for headwear manufacturers.

CRITICAL  ACCOUNTING  POLICIES

A  description of the Company's critical accounting policies appears in "Item 2.
Management's  Discussions  and  Analysis  of  Financial Condition and Results of
Operations"  in  the  Company's  Annual  Report  on Form 10-K for the year ended
December  31,  2003.

RESULTS  OF  OPERATIONS

The  following  tables  present selected financial data of each of the Company's
three  segments  for  the  quarters  ended  March  31,  2004  and  2003:

<TABLE>
<CAPTION>
                         QUARTER ENDED                  QUARTER ENDED
                         MARCH 31, 2004                 MARCH 31, 2003
                  --------------------------        -----------------------
                                   OPERATING                     OPERATING
<S>               <C>           <C>                 <C>          <C>
                     SALES          INCOME             SALES       INCOME
                  ------------  ------------        -----------  ----------
Leather Factory   $  8,443,091  $  1,078,409        $ 8,201,258  $  923,637
Tandy Leather        3,166,738       301,567          1,864,539     146,993
Roberts, Cushman       571,048        67,160            494,288      45,042
                  ------------  ------------        -----------  ----------
Total Operations  $ 12,180,877  $  1,447,135        $10,560,085  $1,115,672
                  ============  ============        ===========  ==========
</TABLE>

Consolidated  net  sales  for  the  quarter  ended March 31, 2004 increased $1.6
million,  or  15.4%,  compared  to  the  same  period  in 2003.  Leather Factory
contributed $242,000 to the increase, Tandy contributed $1.3 million and Cushman
recorded  a sales increase of $77,000.  Operating income on a consolidated basis
for  the  quarter  ended  March 31, 2004 was up 29.7% or $331,000 over the first
quarter  of  2003.

The  following  table  shows in comparative form our consolidated net income for
the  first  quarters  of  2004  and  2003:
<TABLE>
<CAPTION>
<S>                      <C>        <C>         <C>
                           2004       2003      % CHANGE
                         ---------  ---------   --------
Net income               $ 970,966  $ 774,518     25.4%
</TABLE>

While  our Leather Factory operation recorded 69.3% of our sales in the quarter,
the  continued  growth  and  expansion  of the Tandy Leather retail operation is
responsible  for the majority of the improvement in our consolidated net income.
                                       11
<PAGE>

LEATHER  FACTORY  OPERATIONS

Net  sales  from  Leather  Factory's  30  wholesale  centers increased 2.95%, or
$242,000,  for  the  first  quarter  of  2004.

The  following  table  presents  TLF's  sales mix by customer categories for the
quarters  ended  March  31,  2004  and  2003:
<TABLE>
<CAPTION>

                                                                                          QUARTER ENDED
<S>                                                                                    <C>             <C>
CUSTOMER GROUP                                                                         3/31/04         3/31/03
-------------------------------------------------------------------------------------  -------         --------
  RETAIL (end users, consumers, individuals)                                               23%              23%
  INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc.)           7%               8%
  WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc.)      45%              42%
  NATIONAL ACCOUNTS                                                                        19%              21%
  MANUFACTURERS                                                                             6%               6%
                                                                                       -------         --------
                                                                                          100%             100%
                                                                                       =======         ========
</TABLE>

Our  biggest sales gains were in our WHOLESALE and MANUFACTURER customer groups.
We believe that in both cases, new advertising programs begun in the second half
of 2003 contributed to these gains.  Sales to our small business customers (part
of  our  WHOLESALE  group)  were  up  approximately  30% over sales to that same
customer  group  a year ago.  Sales to small manufacturers were up 11% from last
year.  Although  the  percent  of  national account sales decreased in the first
quarter  of  2004  compared  to that same quarter in 2003, we renewed two of our
large accounts during the first quarter.  We anticipate that these renewals will
produce  increased  sales for our NATIONAL ACCOUNT customer group later in 2004.

Operating  income for Leather Factory increased $155,000 for the current quarter
compared to 2003, an improvement of 16.7%. Operating expenses as a percentage of
sales  were  41.4%,  slightly higher ($120,000) than our target of 40% of sales.
Advertising  and  marketing  expenses  were  up  slightly  this  quarter  due to
expanding  direct  mail  programs in an attempt to increase market awareness and
target  new  customer  sub-groups.  We  also  increased  our bad debt reserve by
$32,000  to  $63,000  at  the  end  of  the  first quarter, as a result of a few
customer  accounts  whose  collectability  appears  questionable.

TANDY  LEATHER  OPERATIONS

The  Tandy Leather retail store chain has grown from 19 stores at March 31, 2003
to  29  a year later.  Net sales for Tandy Leather were up approximately 70% for
the  first  quarter  of  2004  over  the  same  quarter  last  year.
<TABLE>
<CAPTION>

                                  QTR ENDED   QTR ENDED     $INCR      % INCR
<S>                               <C>         <C>         <C>         <C>
                                    3/31/04     3/31/03     (DECR)      (DECR)
                                  ----------  ----------  ----------  ---------
Same (existing) store sales       $1,832,591  $1,806,293  $   26,298      1.46%
New store sales                    1,334,147      57,187   1,276,960        N/A
Order fulfillment house - closed           -       1,059      (1,059)  (100.00)
                                  ----------  ----------  ----------  ---------
Total sales                       $3,166,738  $1,864,539  $1,302,199     69.84%
                                  ==========  ==========  ==========  =========
</TABLE>

A  store  is  categorized  as  "new"  if  it was operating less than half of the
comparable  period  in the prior year.  In the above table, the sales amount for
"new store sales" for the quarter ended March 31, 2003 represents the sales from
the  four  stores  opened  in  February  and  March  2003.

Sales in the current quarter were solid - although as the table above indicates,
our existing stores did not produce as strongly as we expected.  The results are
uneven,  with  existing  stores reporting sales gains ranging from 4% to 48% for
the  quarter.  We  produced  and mailed a sales flyer in a new format during the
quarter that failed to produce the sales that we expected.  We have gone back to
our  more  traditional  format  for  sales  flyers, expecting it to produce more
customer  interest.  The  retail  stores  that are at least three months old are
averaging  approximately  $38,000  in  sales  per  month.

The  following  table  presents Tandy Leather's sales mix by customer categories
for  the  quarters  ended  March  31,  2004  and  2003:
<TABLE>
<CAPTION>

                                                                                          QUARTER ENDED
<S>                                                                                    <C>             <C>
CUSTOMER GROUP                                                                         3/31/04         3/31/03
-------------------------------------------------------------------------------------  -------         -------
  RETAIL (end users, consumers, individuals)                                               74%             72%
  INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc.)           4               4
  WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc.)      20              23
  NATIONAL ACCOUNTS                                                                         -               -
  MANUFACTURERS                                                                             2               1
                                                                                       -------         -------
                                                                                          100%            100%
                                                                                       =======         =======
</TABLE>

Operating  income  as  a  percentage  of  sales increased from 7.9% in the first
quarter  of  2003  to  9.5%  in  the  first  quarter  of 2004.  Our gross margin
decreased  from  63.4% to 60.8% due to an increase in leather sales at the Tandy
stores during the current quarter.  As discussed in previous filings, leather is
our  lowest  gross  margin  category.  We  offset  that  low margin by the other
products  that  we  sell.  Operating expenses as a percentage of sales decreased
from  55.5%  to  51.3%  due  primarily to the increase in leverage obtained as a
result  of  the  significant  sales  increase.
                                       12
<PAGE>

ROBERTS,  CUSHMAN  OPERATIONS

Net  sales for Cushman increased $77,000 or 15.5% for the first quarter of 2004,
and  improved  its  gross  profit margin from 34% to 39%.   Operating income for
Cushman  increased  $22,000  or 49.1%.  We eliminated one management position in
the  operation at the beginning of 2004, which contributed to the improvement in
operating  income.

COSTS  AND  EXPENSES
Our  consolidated  gross profit as a percent of net sales increased to 55.2% for
the  first  quarter  of  2004,  compared with 53.5% for the same period in 2003.
Operating  expenses  ($5.3 million) were 43.3% of net sales in the first quarter
of  2004,  compared  with $4.5 million, or 42.9% of net sales in the first three
months  of  2003.

Interest  expense in the first quarter of 2004 ($14,000) was down 78.5% from the
first  quarter  of  2003  ($63,000)  due to the decrease in the outstanding debt
balance.

CAPITAL  RESOURCES,  LIQUIDITY  AND  FINANCIAL  CONDITION
---------------------------------------------------------

There  was  a  slight change (approximately 9%) in our consolidated total assets
from  December  31,  2003  to  March  31, 2004, increasing from $19.0 million at
year-end  to  $20.7  million at March 31.  Our accounts receivable accounted for
the  majority  of the increase.  Total stockholders' equity increased from $14.5
million  at  December  31, 2003 to $15.5 million at March 31, 2004.  Most of the
increase  was  from  earnings  in the first quarter of this year.  The Company's
current  ratio fell slightly from 6.16 at December 31, 2003 to 4.69 at March 31,
2004.

Inventory increased by $312,000 at March 31, 2004 from year-end 2003.  Inventory
turnover  increased to an annualized rate of 4.34 times during the first quarter
of 2004, from 3.47 times for the first quarter of 2003 and 3.51 times for all of
2003.  We  compute  our  inventory  turns as sales divided by average inventory.
Inventory  management  is  a  significant  factor in our financial position.  We
strive  to  maintain  the  optimal  amount of inventory throughout the system in
order  to fill customer orders timely without tying up too much working capital.
We  are  pleased  with our achievement in this area as of the end of the quarter
and  continue  to  monitor  our  inventory  levels  in order to maximize optimum
availability.

The  Company's  investment  in accounts receivable was $3.1 million at March 31,
2004,  up  $1.2 million from $1.8 million at year-end 2003.  This is a result of
an  increase  in  credit sales to our national accounts during the quarter ended
March  31, 2004 as compared to that of the quarter ended December 31, 2003.  The
average  days to collect accounts slowed slightly over the first quarter of 2003
from  45.0  days  to  47.2 days.  Cushman posted the most improvement in average
days  to  collect  accounts,  from  66.7 days in 2003 to 50.1 days for the first
quarter  of  2004,  respectively.  Leather  Factory  and Tandy Leather's days to
collect  were  44.7  and 39.0 days in the first quarter of 2004 compared to 41.1
and  39.6  days  in  the  first  quarter  of  2003,  respectively.

Accounts  payable  increased  $810,000  to  $2.4 million at the end of the first
quarter,  due  primarily  to  the increase in inventory purchases to support the
increased sales and the negotiations with some vendors for longer payment terms.
Accrued  expenses  and  other  liabilities  increased  $113,000.

During the first quarter of 2004, cash flow provided by operating activities was
$583,000.  The net income generated for the quarter and the increase in accounts
payable  contributed  to  the  cash  flow,  offset  somewhat  by the increase in
accounts  receivable.  Cash  flow used in investing activities totaled $193,000.
$125,000 of this was for the assets purchases of the Syracuse, NY and St. Louis,
MO  Tandy Leather retail stores.  Equipment purchased during the quarter totaled
$82,000.  Most  of the equipment purchased was for the new Tandy Leather stores.
Cash  flow  used by financing activities was $439,000, consisting of payments on
our  revolving  credit  facility  during  the  quarter totaling $525,000, offset
primarily  by  stock  option  exercises  by  employees.

At  March  31, 2003, our bank debt totaled $5.8 million.  At March 31, 2004, the
balance  was  $1.3  million,  a  decrease  of  77%.

We  expect  to  fund  our  operating  and liquidity needs as well as our current
expansion  of  Tandy  Leather's retail store chain from a combination of current
cash balances, internally generated funds and our revolving credit facility with
Wells  Fargo,  which  is based upon the level of the our accounts receivable and
inventory.    At  March 31, 2004, the available and unused portion of the credit
facility  was  approximately  $3.7  million.
                                       13
<PAGE>

FORWARD-LOOKING  STATEMENTS
---------------------------

This  report  (particularly  this Item 2) contains forward-looking statements of
management.  In  general,  these are predictions or suggestions of future events
and  statements  or  expectations  of  future  trends  or 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 that 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.
                                       14
<PAGE>

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

For  disclosures  about  market  risk  affecting  the  Company,  see  Item  7A
"Quantitative  and  Qualitative  Disclosures  About  Market  Risk" in our Annual
Report  on  Form  10-K for our fiscal year ended December 31, 2003.  The Company
believes  that  its exposure to market risks has not changed significantly since
December  31,  2003.

ITEM  4.  CONTROLS  AND  PROCEDURES

At  the end of the first quarter of 2004, 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 and 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 period specified in the results 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 or the Company's internal
controls  will  prevent all error and all fraud.  A well conceived and operating
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  II.  OTHER  INFORMATION

ITEM  5.  CHANGES  IN  SECURITIES

On  February  24,  2004,  the  Company  entered  into a Capital Markets Services
Engagement  Agreement  ("Services  Agreement")  with  Westminster  Securities
Corporation  ("Westminster"),  a  member  firm  of  the New York Stock Exchange.
Under  the  Services  Agreement,  Westminster agreed to provide the Company with
capital market services, including corporate finance advisory services, research
services,  and  sales  and  trading  services.

For  the  services  to  be  provided  during  the  two-year term of the Services
Agreement,  the  Company  agreed  to  pay $4,000 per month during the contract's
term.  Also,  the  Company  issued  to  Westminster  and certain named employees
warrants  to purchase 50,000 shares of the Company's common stock at an exercise
price  of  $5.00 per share, subject to adjustment for certain issuances at a per
share  price  below  $5.00  that  might  occur  during the five-year term of the
warrants.

The  issuance  of  the warrants was exempt from the registration requirements of
the  Securities  Act  of 1933 pursuant to Section 4(2) of that act.  The related
Financial  Advisor's Warrant Agreement, dated as of February 24, 2004, contained
representations  as to investment intent and restrictions on transfer.  Also the
warrant  certificates  contain  prominent  legends  stating  the restrictions on
transfer.

In  addition,  the  Financial  Advisor's  Warrant  Agreement  grants  demand and
piggyback  registration  rights  to  the  holders  of the warrants to facilitate
resale  of  the  Company's  common  stock  upon  exercise  of  the  warrants.
                                       15
<PAGE>

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits
     --------
<TABLE>
<CAPTION>
<S>             <C>
EXHIBIT NUMBER  EXHIBIT
--------------  ---------------------------------------------------------------------------------------------------------
     4.1        Financial Advisor's Warrant Agreement, dated February 24, 2004, between The Leather Factory, Inc.
                and Westminster Securities Corporation
     4.2        Capital Markets Services Engagement Agreement, dated February 24, 2004, between The Leather
                Factory, Inc. and Westminster Securities Corporation
    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 L. 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
</TABLE>

(b)  Reports  on  Form  8-K
     ----------------------

On  March  9, 2004, the Company filed a report on Form 8-K in which we furnished
under  Items  7  and  12.


                                   SIGNATURES

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

                              THE  LEATHER  FACTORY,  INC.
                                      (Registrant)

Date:  May  14,  2004         By:   /s/  Wray  Thompson
                                    --------------------
                              Wray  Thompson
                              Chairman of the Board and Chief Executive Officer

Date:  May  14,  2004         By:  /s/Shannon  L.  Greene
                                   ----------------------
                              Shannon  L.  Greene
                              Chief  Financial Officer and Treasurer
                              (Chief Accounting Officer)

                                       16
<PAGE>


EXHIBIT  4.1

     FINANCIAL  ADVISOR'S  WARRANT  AGREEMENT  dated  as  of  February 24, 2004,
("Engagement  Date")  between  THE LEATHER FACTORY, INC., a Delaware corporation
(the  "Company"), and WESTMINSTER SECURITIES CORPORATION, a New York corporation
and  its assignees or designees (hereinafter referred to variously as a "Holder"
or  "Financial  Advisor").

                              W I T N E S S E T H:

WHEREAS,  the  Financial  Advisor  has  agreed  pursuant  to the Engagement
Agreement  dated  as  of February 24, 2004 (the "Engagement Agreement"), between
the  Financial  Advisor  and  the  Company,  to  act as financial advisor to the
Company.

WHEREAS,  pursuant  to  the  Engagement  Agreement,  the Company agreed to issue
warrants  to  the  Financial  Advisor  to  purchase up to an aggregate of 50,000
shares  of  Common  Stock  (the  "Financial  Advisor's  Warrants");  and

WHEREAS,  the  Financial  Advisor's  Warrants  to  be  issued  pursuant  to this
Agreement  will  be issued to the Financial Advisor in consideration for, and as
part  of  the  compensation in connection with, the Financial Advisor's services
pursuant  to  the  Engagement  Agreement.

NOW,  THEREFORE,  in  consideration  of  the premises, the agreements herein set
forth  and other good and valuable consideration, the receipt and sufficiency of
which  are  hereby  acknowledged,  the  parties  hereto  agree  as  follows:

1.  GRANT. The Financial Advisor is hereby granted the right to purchase, at any
time  from  the  Engagement Date until 5:00 p.m., New York time, on February 24,
2009  (5  years  from  the  Engagement  Agreement),  at which time the Financial
Advisor's  Warrants  expire,  an  aggregate  of  50,000  shares of Common Stock,
subject to adjustment as provided in Section 11 hereof (the "Financial Advisor's
Securities").  Each Financial Advisor's Warrant shall entitle the holder thereof
to  purchase  one (1) share of common stock, $0.0024 par value per share, of the
Company  (the "Common Stock"), at an initial exercise price of $5.00 (as defined
in  Section  9.3(e))  (the  "Common  Stock  Exercise  Price").

2.  FINANCIAL  ADVISOR'S  WARRANT  CERTIFICATES. The Financial Advisor's warrant
certificates (the "Warrant Certificates") delivered and to be delivered pursuant
to  this  Agreement shall be in the form set forth in Exhibit A, attached hereto
and  made  a  part  hereof,  with  such  appropriate  insertions,  omissions,
substitutions,  and other variations as required or permitted by this Agreement.

3.  REGISTRATION  OF WARRANT. The Financial Advisor's Warrants shall be numbered
and  shall  be  registered  on  the  books  of  the  Company  when  issued.

4.  EXERCISE  OF  FINANCIAL  ADVISORS'S  WARRANT.

     4.1     METHOD OF EXERCISE.  The Financial Advisor's Warrants initially are
exercisable  at  the  Common  Stock  Exercise  Price  (subject  to adjustment as
provided  in  Section  11  hereof)  per Financial Advisor's Warrant set forth in
Section  8  hereof  payable  by  certified  or  official  bank check in New York
Clearing  House  funds.  Upon  surrender  of  a  Financial  Advisor's  Warrant
Certificate  with  the  annexed  Form  of  Election  to  Purchase duly executed,
together  with  payment  of the Common Stock Exercise Price for shares of Common
Stock  purchased  at  the  Company's principal offices presently located at 3827
East  Loop  820  South,  Fort  Worth,  Texas  76119  the  registered holder of a
Financial  Advisor's  Warrant  Certificate  ("Holder"  or  "Holders")  shall  be
entitled to receive a certificate or certificates for the shares of Common Stock
so  purchased.  The  purchase  rights  represented  by  each Financial Advisor's
Warrant  Certificate  are  exercisable  at  the option of the Holder thereof, in
whole  or  in  part  (but  not  as to fractional shares underlying the Financial
Advisor's Warrants) in increments of not less than 5,000 shares at one time.  In
the  case  of  the purchase of less than all of the shares purchasable under any
Financial Advisor's Warrant Certificate, the Company shall cancel said Financial
Advisor's  Warrant  Certificate upon the surrender thereof and shall execute and
deliver  a  new  Financial  Advisor's  Warrant Certificate of like tenor for the
balance  of  the  shares  purchasable  thereunder.

     4.2  CASHLESS  EXERCISE. In addition to the right to exercise the Financial
Advisor's Warrant for cash pursuant to Section 4.1, Financial Advisor shall have
the right to exercise the Financial Advisor's Warrant (in whole but not in part)
by  the  surrender  of the Financial Advisor's Warrant (with the annexed Form of
Election  of  Cashless Exercise) at the office of the Company at any time during
the  term  of  the  Financial  Advisor's Warrant, into shares of Common Stock as
provided for in this Section 4.2. Upon exercise of this cashless exercise right,
Financial  Advisor  shall be entitled to receive that number of shares of Common
Stock  of the Company equal to the quotient obtained by dividing [(A - B)(X)] by
(A),  where:

(A)     =     the  Market  Price  (as defined in Section 9.3(e)) of one share of
Common  Stock  on  the  date  of  exercise  of  the Financial Advisor's Warrant.

(B)     =     the  Common  Stock  Exercise  Price  for one share of Common Stock
under  the  Financial  Advisor's  Warrant.

(X) =     the number of Shares issuable upon exercise of the Financial Advisor's
Warrant.

If  the above calculation results in a negative number, then no shares of Common
Stock  shall  be  issued  or  issuable  upon  cashless exercise of the Financial
Advisor's  Warrant.

Upon  any  cashless  exercise  of the Financial Advisor's Warrant, the Financial
Advisor  shall  be entitled to receive a certificate for the number of shares of
Common  Stock  determined  under  this  Section  4.2.

5.     ISSUANCE  OF  CERTIFICATES.  Upon the exercise of the Financial Advisor's
Warrant,  the  issuance  of  certificates  for  securities, properties or rights
underlying  such Financial Advisor's Warrant shall be made forthwith (and in any
event  within  five  (5)  business days thereafter) without charge to the Holder
thereof  including,  without limitation, any tax which may be payable in respect
of  the issuance thereof, and such certificates shall (subject to the provisions
of Sections 7 and 9 hereof) be issued in the name of, or in such names as may be
directed  by,  the Holder thereof; provided, however, that the Company shall not
be  required  to  pay  any  tax  which may be payable in respect of any transfer
involved  in  the issuance and delivery of any such certificates in a name other
than  that  of  the  Holder  and  the  Company shall not be required to issue or
deliver  such  certificates unless or until the person or persons requesting the
issuance  thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.

6.     TRANSFER  OF  FINANCIAL  ADVISORS'S  WARRANT.  The  Financial  Advisor's
Warrant shall be transferable only on the books of the Company maintained at its
principal  office, where its principal office may then be located, upon delivery
thereof  duly  endorsed  by  the  Holder  or  by its duly authorized attorney or
Financial  Advisor  accompanied  by proper evidence of succession, assignment or
authority  to  transfer.  Upon  any  registration of transfer, the Company shall
execute  and  deliver the new Financial Advisor's Warrant to the person entitled
thereto.

7.     RESTRICTION  ON TRANSFER OF FINANCIAL ADVISOR'S WARRANT.  The Holder of a
Financial  Advisor's  Warrant  Certificate, by its acceptance thereof, covenants
and  agrees  that  the  Financial  Advisor's  Warrant  is  being  acquired as an
investment  and  not  with  a  view  to  the  distribution thereof, and that the
Financial Advisor's Warrant may not be sold, transferred, assigned, hypothecated
or  otherwise  disposed  of,  in whole or in part, for the term of the Financial
Advisor's  Warrant, except to officers or affiliates of the Financial Advisor or
by  operation  of  law.

8.     EXERCISE PRICE AND NUMBER OF SECURITIES.  Except as otherwise provided in
Section  11  hereof, each Financial Advisor's Warrant is exercisable to purchase
one share of Common Stock at an initial exercise price equal to the Common Stock
Exercise  Price.  The  Common Stock Exercise Price, and the number of shares for
which  the  Financial  Advisor's Warrant may be exercised shall be the price and
the  number  of  shares  which  shall  result from time to time from any and all
adjustments  in  accordance  with  the  provisions  of  Section  11  hereof.

9.     REGISTRATION  RIGHTS.

     9.1     REGISTRATION  UNDER  THE  SECURITIES  ACT  OF 1933.  Each Financial
Advisor's  Warrant  Certificate  and  each  certificate  representing securities
issuable  upon  exercise  of  the Financial Advisor's Warrant (collectively, the
"Warrant  Shares")  shall  bear  the  following legend unless (i) such Financial
Advisor's  Warrant or Warrant Shares are distributed to the public pursuant to a
registration  statement  filed under the Securities Act of 1933, as amended (the
"Act"),  or  (ii)  the  Company  has received an opinion of counsel, in form and
substance  reasonably  satisfactory to counsel for the Company, that such legend
is  unnecessary  for  any  such  certificate:

THE  FINANCIAL  ADVISOR'S  WARRANT REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES  ISSUABLE  UPON  EXERCISE  THEREOF  MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT  TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 (THE "ACT"), (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III)
AN  OPINION  OF  COUNSEL,  IF  SUCH  OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL  FOR  THE  ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.

THE  TRANSFER  OR EXCHANGE OF THE FINANCIAL ADVISOR'S WARRANT REPRESENTED BY THE
CERTIFICATE  IS  RESTRICTED  IN  ACCORDANCE WITH THE FINANCIAL ADVISOR'S WARRANT
AGREEMENT  REFERRED  TO  HEREIN.

     9.2     PIGGYBACK  REGISTRATION.  If,  at  any time the Company proposes to
register  any  of  its securities under the Act (other than in connection with a
merger  or  pursuant  to  Form  S-4 or Form S-8), it will give written notice by
registered  mail,  at  least  twenty  (20) days prior to the filing of each such
registration  statement,  to  the  Holders  of  the Financial Advisor's Warrants
and/or  the  Warrant Shares of its intention to do so.  If any of the Holders of
the Financial Advisor's Warrants and/or Warrant Shares notify the Company within
ten (10) days after mailing of any such notice of its or their desire to include
any  such  securities in such proposed registration statement, the Company shall
afford  such  Holders  of the Financial Advisor's Warrants and/or Warrant Shares
the  opportunity  to  have  any such Financial Advisor's Warrants and/or Warrant
Shares  registered  under  such  registration  statement.  In the event that the
managing  underwriter  for  said offering advises the Company in writing that in
its  opinion  the  number  of  securities  requested  to  be  included  in  such
registration  exceeds  the  number  which  can  be sold in such offering without
causing  a diminution in the offering price or otherwise adversely affecting the
offering,  the  Company  will  include  in  such  registration  (a)  FIRST,  the
securities  the Company proposes to sell, (b) SECOND, the securities held by the
entities  that  made  the  demand  for  registration,  (c)  THIRD, the Financial
Advisor's  Warrants  and/or  Warrant  Shares  requested  to  be included in such
registration  which  in  the  opinion  of such underwriter can be sold, PRO RATA
among  the  Holders of Financial Advisor's Warrants and/or Warrant Shares on the
basis  of  the  number  of  Financial  Advisor's  Warrants and/or Warrant Shares
requested  to  be  registered  by such Holders, and (d) FOURTH, other securities
requested  to  be  included  in  such  registration.

Notwithstanding  the  provisions of this Section 9.2, the Company shall have the
right  at  any  time  after  it shall have given written notice pursuant to this
Section 9.2 (irrespective of whether a written request for inclusion of any such
securities  shall  have  been  made)  to  elect  not  to  file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective  date  thereof.

     9.3     DEMAND  REGISTRATION.

(a)     At  any time after the Engagement Date and expiring five (5) years after
the  Engagement  Date,  the  Holders  of the Financial Advisor's Warrants and/or
Warrant  Shares  representing  a  "Majority"  (as hereinafter defined in Section
9.4(k)  hereof)  of the Financial Advisor's Warrants and/or Warrant Shares shall
have  the  right  (which  right  is in addition to the registration rights under
Section  9.2  hereof), exercisable by written notice to the Company, to have the
Company  prepare  and  file  with  the  Securities  and Exchange Commission (the
"Commission"),  on  one  occasion,  a  registration  statement  and  such  other
documents,  including  a  prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Holders, in order to comply with the
provisions  of  the  Act,  so  as  to  permit a public offering and sale by such
Holders  and any other Holders of the Financial Advisor's Warrant and/or Warrant
Shares  who  notify the Company within fifteen (15) days after the Company mails
notice  of  such  request  pursuant  to Section 9.3(b) hereof (collectively, the
"Requesting  Holders") of their respective Warrant Shares for the earlier of (i)
six  (6)  consecutive months or (ii) until the sale of all of the Warrant Shares
requested  to  be  registered  by  the  Requesting  Holders.

(b)     The  Company  covenants  and  agrees  to  give  written  notice  of  any
registration  request  under  this  Section  9.3  by  any  Holder  or  Holders
representing  a  Majority  of  the  Financial  Advisor's Warrants and/or Warrant
Shares  to  all other registered Holders of the Financial Advisor's Warrants and
the Warrant Shares within ten (10) days from the date of the receipt of any such
registration  request.

(c)     Intentionally  Omitted.

(d)     Notwithstanding  anything  to  the  contrary  contained  herein,  if the
Company  shall  not  have  filed a registration statement for the Warrant Shares
within  the  time  period  specified  in  Section  9.4(a) hereof pursuant to the
written  notice  specified in Section 9.3(a) of the Holders of a Majority of the
Financial  Advisor's Warrants and/or Warrant Shares, the Company, at its option,
may  repurchase (i) any and all Warrant Shares at the higher of the Market Price
(as  defined in Section 9.3(e)) per share of Common Stock on (x) the date of the
notice  sent  pursuant  to  Section  9.3(a)  or (y) the expiration of the period
specified  in Section 9.4(a) and (ii) any and all Financial Advisor's Warrant at
such  Market  Price less the exercise price of such Financial Advisor's Warrant.
Such  repurchase  shall be in immediately available funds and shall close within
two  (2)  days  after the later of (i) the expiration of the period specified in
Section  9.4(a) or (ii) the delivery of the written notice of election specified
in  this  Section  9.3(d).

     (e)     DEFINITION  OF  MARKET  PRICE.  As  used herein, the phrase "Market
Price"  at any date shall mean the fair value as determined in good faith by the
Company's  Board  of  Directors;  provided,  however,  that where there exists a
public  market for the Company's Common Stock at the time of Financial Advisor's
exercise  of  this  conversion right, the Market Price per share of Common Stock
shall  be  deemed  to be the last reported sale price of the Common Stock on the
trading  day  before  the  Financial  Advisor's Warrant, with attached Notice of
Conversion,  are  duly  surrendered to the Company for conversion thereof or, in
case  no  such  reported  sale  takes place on such day, the average of the last
reported closing sale prices for the last three (3) trading days, in either case
as  officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted  to  trading  on  any national securities exchange, the average closing
sale  price  as  furnished  by  the  NASD  through The NASDAQ Stock Market, Inc.
("NASDAQ")  or  similar  organization  if  NASDAQ  is  no  longer-reporting such
information,  or if the Common Stock is not quoted on NASDAQ, the OTC Electronic
Bulletin  Board,  or  as  determined in good faith by resolution of the Board of
Directors  of  the  Company,  based  on  the  best  information available to it.

     9.4     COVENANTS  OF  THE  COMPANY  WITH  RESPECT  TO  REGISTRATION.  In
connection  with  any registration under Sections 9.2 or 9.3 hereof, the Company
covenants  and  agrees  as  follows:

(a)     The  Company  shall  use  its  best  efforts to file a registration
statement  within sixty (60) days of receipt of any demand therefor, and to have
any  registration  statements  declared effective at the earliest possible time,
and  shall  furnish  each  Holder desiring to sell Warrant Shares such number of
prospectuses  as  shall  reasonably  be  requested.

(b)     The  Company  shall  pay  all  costs  (excluding  fees  and  expenses of
Holder(s)  counsel  and  any  underwriting  or  selling  commissions),  fees and
expenses  in  connection  with  all  registration  statements  filed pursuant to
Sections  9.2  and  9.3(a)  hereof  including, without limitation, the Company's
legal  and  accounting fees, printing expenses, blue sky fees and expenses.  The
Holder(s) will pay all costs, fees and expenses (including those of the Company)
in  connection with the registration statement filed pursuant to Section 9.3(c).

(c)     The  Company  will  take  all  necessary action which may be required in
qualifying  or  registering  the  Warrant  Shares  included  in  a  registration
statement  for  offering  and sale under the securities or blue sky laws of such
states  as  reasonably are requested by the Holder(s), provided that the Company
shall  not  be  obligated  to  execute or file any general consent to service of
process  or to qualify as a foreign corporation to do business under the laws of
any  such  jurisdiction.

(d)     The  Company  shall  indemnify the Holder(s) of the Warrant Shares to be
sold  pursuant  to  any  registration  statement  and  each  person, if any, who
controls  such  Holders  within  the meaning of Section 15 of the Act or Section
20(a)  of  the  Securities  Exchange  Act  of 1934, as amended ("Exchange Act"),
against  all  loss,  claim, damage, expense or liability (including all expenses
reasonably  incurred  in investigating, preparing or defending against any claim
whatsoever)  to which any of them may become subject under the Act, the Exchange
Act  or otherwise, arising from such registration statement but only to the same
extent  and with the same effect as the provisions pursuant to which the Company
has  agreed  to indemnify each of the Underwriters contained in Section 7 of the
Engagement  Agreement.

(e)      Intentionally  Omitted

(f)     Nothing  contained in this Agreement shall be construed as requiring the
Holder(s)  to  exercise  their  Financial Advisor's Warrant prior to the initial
filing  of  any  registration  statement  or  the  effectiveness  thereof.

(g)     The  Company shall not permit the inclusion of any securities other than
the  Warrant  Shares to be included in any registration statement filed pursuant
to  Section  9.3  hereof,  or  permit  any other registration statement to be or
remain  effective  during  the  effectiveness  of a registration statement filed
pursuant  to  Section  9.3 hereof, without the prior written consent of National
Securities  Corporation  or  as  otherwise required by the terms of any existing
registration  rights  granted prior to the date of this Agreement by the Company
to  the  holders  of  any  of  the  Company's  securities.

(h)     For purposes of this Agreement, the term "Majority" in reference to the
Financial  Advisor's  Warrants or Warrant Shares, shall mean in excess of 50,000
of  the  then  outstanding  Financial  Advisor's  Warrants  or  Warrant  Shares.

     10.     OBLIGATIONS  OF  HOLDERS.  It shall be a condition precedent to the
obligations  of the Company to take any action pursuant to SECTION 9 hereof that
each  of  the  selling  Holders  shall:

(a)     Furnish  to  the  Company  such  information  regarding  themselves, the
Warrant Shares held by them, the intended method of sale or other disposition of
such securities, the identity of and compensation to be paid to any underwriters
proposed  to  be employed in connection with such sale or other disposition, and
such  other information as may reasonably be required to effect the registration
of  their  Warrant  Shares.

(b)     Notify  the  Company,  at  any  time  when  a prospectus relating to the
Warrant  Shares  covered by a registration statement is required to be delivered
under the Act, of the happening of any event with respect to such selling Holder
as  a result of which the prospectus included in such registration statement, as
then  in  effect,  includes  an  untrue statement of a material fact or omits to
state  a  material  fact  required to be stated therein or necessary to make the
statements  therein  not  misleading  in  the  light  of  the circumstances then
existing.

(c)  The  Holder(s)  of  the  Warrant  Shares  to  be  sold  pursuant  to a
registration  statement,  and their successors and assigns, shall severally, and
not  jointly, indemnify the Company, its officers and directors and each person,
if  any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability  (including  all  expenses  reasonably  incurred  in  investigating,
preparing  or  defending  against any claim whatsoever) to which they may become
subject  under  the Act, the Exchange Act or otherwise, arising from information
furnished  by  or on behalf of such Holders, or their successors or assigns, for
specific  inclusion  in  such registration statement to the same extent and with
the  same  effect  as  the  provisions  contained in Section 7 of the Engagement
Agreement  pursuant  to  which  the  Underwriters  have  agreed to indemnify the
Company.

11.     ADJUSTMENTS  TO  COMMON  STOCK  EXERCISE  PRICE.  The  Common Stock
Exercise Price in effect at any time shall be subject to adjustment from time to
time  only  upon  the  happening  of  the  following  events:

11.1     STOCK DIVIDEND, SUBDIVISION AND COMBINATION.  In case the Company shall
(i)  declare  a  dividend  or  make  a distribution on its outstanding shares of
Common  Stock  in  shares  of  Common  Stock,  (ii)  subdivide or reclassify its
outstanding  shares  of  Common  Stock into a greater number of shares, or (iii)
combine  or  reclassify  its  outstanding  shares of Common Stock into a smaller
number  of  shares, the Common Stock Exercise Price in effect at the time of the
record  date  for such dividend or distribution or of the effective date of such
subdivision,  combination or reclassification shall be adjusted so that it shall
equal  the  price determined by multiplying the Common Stock Exercise Price by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which shall
be  the  number  of shares of Common Stock outstanding immediately prior to such
action.  Such  adjustment  shall  be made successively whenever any event listed
above  shall  occur.

11.2     DILUTIVE  ISSUANCES.     In  the event the Company issues any shares of
Common  Stock  (or Common Stock equivalents) during the period from February 24,
2004 until a Financial Advisor's Warrant is exercised, the Company shall compute
the weighted average issuance price for all issuances during the period, and, if
the  weighted  average  issuance price shall be less than $5.00, then the Common
Stock  Exercise Price shall, for that exercise, be equal to the weighted average
issuance  price  for  the  period.

11.3  Intentionally  Omitted

11.4     DEFINITION  OF  COMMON  STOCK.  For  the purpose of this Agreement, the
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in  the  Articles  of  Incorporation  of  the  Company as amended as of the date
hereof,  or  (ii)  any other class of stock resulting from successive changes or
reclassifications  of  such  Common  Stock  consisting  solely of changes in par
value,  or  from  par  value to no par value, or from no par value to par value.

11.5     MERGER  OR  CONSOLIDATION.  In case of any consolidation of the Company
with,  or  merger  of  the  Company  into,  another  corporation  (other  than a
consolidation  or merger which does not result in any reclassification or change
of  the  outstanding Common Stock), the corporation formed by such consolidation
or  merger  shall  execute  and  deliver  to  the  Holder a supplemental warrant
agreement  providing  that  the  Holder of each Financial Advisor's Warrant then
outstanding  or  to  be  outstanding  shall have the right thereafter (until the
expiration  of  such  Financial  Advisor's Warrant) to receive, upon exercise of
such  Financial  Advisor's  Warrant,  the kind and amount of shares of stock and
other  securities and property receivable upon such consolidation or merger by a
holder  of  the  number  of  shares  of  Common  Stock  for which such Financial
Advisor's  Warrant  might  have  been  exercised  immediately  prior  to  such
consolidation  or merger.  Such supplemental warrant agreement shall provide for
adjustments which shall be identical to the adjustments provided in this Section
11.  The  above provision of this subsection shall similarly apply to successive
consolidations  or  mergers.

11.6     NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES.  No adjustment of the
Common  Stock  Exercise  Price  shall  be  made:

(a)     Upon  the  issuance  or  sale  of the Financial Advisor's Warrant or the
Warrant  Shares;

(b)     Upon  the  issuance  or  sale of Common Stock (or any other Common Stock
equivalent) upon the direct or indirect conversion, exercise, or exchange of any
options,  rights,  warrants,  or other securities or indebtedness of the Company
outstanding  as  of  the date of this Agreement or granted pursuant to any stock
option  plan  of  the  Company  in  existence  as of the date of this Agreement,
pursuant  to  the  terms  thereof;  or

(c)     If  the  amount  of said adjustment shall be less than two cents ($0.02)
per  share,  provided,  however,  that  in  such  case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at  the time of and together with the next subsequent adjustment which, together
with  any  adjustment  so  carried  forward,  shall amount to at least two cents
($0.02)  per  Financial  Advisor's  Warrant.

12.     EXCHANGE  AND  REPLACEMENT  OF FINANCIAL ADVISOR'S WARRANT CERTIFICATES.
Each  Financial  Advisor's Warrant Certificate is exchangeable, without expense,
upon  the  surrender thereof by the registered Holder at the principal executive
office  of the Company for a new Financial Advisor's Warrant Certificate of like
tenor  and  date  representing  in  the aggregate the right to purchase the same
number  of  Warrant  Shares  in such denominations as shall be designated by the
Holder  thereof  at  the  time  of  such  surrender.
Upon  receipt  by  the  Company of evidence reasonably satisfactory to it of the
loss,  theft,  destruction  or  mutilation  of  any  Financial Advisor's Warrant
Certificate,  and,  in  case  of  loss,  theft  or  destruction, of indemnity or
security  reasonably  satisfactory to it and reimbursement to the Company of all
reasonable  expenses  incidental thereto, and upon surrender and cancellation of
the Financial Advisor's Warrant, if mutilated, the Company will make and deliver
a  new  Warrant  Certificate  of  like  tenor,  in  lieu  thereof.

13.     ELIMINATION  OF  FRACTIONAL INTERESTS. The Company shall not be required
to  issue certificates representing fractions of shares of Common Stock upon the
exercise  of  the Financial Advisor's Warrant, nor shall it be required to issue
scrip  or  pay  cash in lieu of fractional interests, it being the intent of the
parties  that  all  fractional  interests  shall  be  eliminated by rounding any
fraction  up  to  the  nearest  whole  number of shares of Common Stock or other
securities,  properties  or  rights.

14.     RESERVATION  AND  LISTING OF SECURITIES.  The Company shall at all times
reserve  and keep available out of its authorized shares of Common Stock, solely
for  the  purpose  of  issuance  upon  the  exercise  of the Financial Advisor's
Warrant,  such  number of shares of Common Stock or other securities, properties
or  rights  as  shall be issuable upon the exercise thereof.    The Company will
keep  a  copy of this Agreement on file with every Transfer Agent for the Common
Stock  and  other  securities  of  the Company issuable upon the exercise of the
Financial  Advisor's Warrant.  The Company will supply every such Transfer Agent
with  duly  executed  stock  and  other  certificates,  as appropriate, for such
purpose.  The  Company covenants and agrees that, upon exercise of the Financial
Advisor's  Warrant  and payment of the Common Stock Exercise Price therefor, all
shares of Common Stock and other securities issuable upon such exercise shall be
duly  and  validly  issued,  fully  paid,  non-assessable and not subject to the
preemptive  rights  of  any  stockholder.  As  long  as  the Financial Advisor's
Warrant  shall  be  outstanding, the Company shall use its best efforts to cause
all shares of Common Stock issuable upon the exercise of the Financial Advisor's
Warrant  to be listed (subject to official notice of issuance) on all securities
exchanges  on which the Common Stock issued to the public in connection herewith
may then be listed and/or quoted on Nasdaq or the OTC Electronic Bulletin Board.

15.     NOTICES  TO  FINANCIAL  ADVISOR'S WARRANT HOLDERS.  Nothing contained in
this  Agreement  shall  be construed as conferring upon the Holders the right to
vote  or  to  consent  or  to  receive notice as a stockholder in respect of any
meetings  of  stockholders for the election of directors or any other matter, or
as  having  any rights whatsoever as a stockholder of the Company.  If, however,
at  any  time  prior  to  the expiration of the Financial Advisor's Warrants and
their  exercise,  any  of  the  following  event  shall  occur:

(a)     the  Company  shall take a record of the holders of its shares of Common
Stock  for  the  purpose of entitling them to receive a dividend or distribution
payable  otherwise  than  in  cash,  or  a cash dividend or distribution payable
otherwise  than  out  of  current  or  retained  earnings,  as  indicated by the
accounting  treatment  of  such  dividend  or  distribution  on the books of the
Company;  or

(b)     the  Company  shall  offer  to  all  the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or  warrant  to  subscribe  therefor;  or

(c)     a  dissolution,  liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially all
of  its  property,  assets  and  business  as  an  entirety  shall  be proposed;
then in any one or more of said events, the Company shall give written notice of
such  event  at least fifteen (15) days prior to the date fixed as a record date
or  the  date  of  closing  the  transfer  books  for  the  determination of the
stockholders  entitled  to  such  dividend,  distribution,  convertible  or
exchangeable  securities  or  subscription  rights,  or entitled to vote on such
proposed  dissolution,  liquidation,  winding  up  or  sale.  Such  notice shall
specify  such record date or the date of closing the transfer books, as the case
may  be.  Failure to give such notice or any defect therein shall not affect the
validity  of  any  action taken in connection with the declaration or payment of
any  such  dividend,  or  the  issuance  of  any  convertible  or  exchangeable
securities,  or  subscription  rights,  options  or  warrants,  or  any proposed
dissolution,  liquidation,  winding  up  or  sale.

16.     NOTICES.  All  notices, requests, consents and other communications
hereunder  shall  be  in  writing and shall be deemed to have been duly made and
sent  when  delivered,  mailed  by  registered or certified mail, return receipt
requested,  or  received  via  facsimile:

(a)     if  to  the registered Holder of the Financial Advisor's Warrant, to the
address  of  such  Holder  as  shown  on  the  books  of  the  Company;  or

(b)     if  to  the  Company, to the address set forth in SECTION 4 hereof or to
such  other  address  as  the  Company  may  designate by notice to the Holders.

17.     SUPPLEMENTS;  AMENDMENTS;  ENTIRE  AGREEMENT.  This Agreement (including
the  Engagement Agreement to the extent portions thereof are referred to herein)
contains the entire understanding between the parties hereto with respect to the
subject  matter  hereof  and  may not be modified or amended except by a writing
duly  signed  by  the  party  against  whom  enforcement  of the modification or
amendment  is  sought.  The  Company  and the Financial Advisor may from time to
time  supplement  or amend this Agreement without the approval of any holders of
Financial  Advisor's  Warrant Certificates (other than the Financial Advisor) in
order  to  cure  any ambiguity, to correct or supplement any provision contained
herein  which may be defective or inconsistent with any provisions herein, or to
make  any  other  provisions in regard to matters or questions arising hereunder
which  the Company and the Financial Advisor may deem necessary or desirable and
which  the Company and the Financial Advisor deem shall not adversely affect the
interests  of  the  Holders  of
Financial  Advisor's  Warrant  Certificates.

18.     SUCCESSORS.  All of the covenants and provisions of this Agreement shall
be  binding  upon and inure to the benefit of the Company, the Holders and their
respective  successors  and  assigns  hereunder.

19.     SURVIVAL  OF  REPRESENTATIONS  AND  WARRANTIES.  All  statements  in any
schedule,  exhibit  or certificate or other instrument delivered by or on behalf
of  the  parties  hereto, or in connection with the transactions contemplated by
this  Agreement, shall be deemed to be representations and warranties hereunder.
Notwithstanding  any  investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties to
this  Agreement  or  pursuant  hereto  shall  survive.

20.     GOVERNING  LAW.  This  Agreement  and  each  Financial Advisor's Warrant
Certificate  issued  hereunder  shall  be deemed to be a contract made under the
laws  of  the  State  of  New  York  and  for all purposes shall be construed in
accordance  with  the  laws  of said State without giving effect to the rules of
said  State  governing  the  conflicts  of  laws.

21.     SEVERABILITY.  If  any  provision  of this Agreement shall be held to be
invalid  or  unenforceable, such invalidity or unenforceability shall not affect
any  other  provision  of  this  Agreement.

22.     CAPTIONS.  The  caption  headings  of the Sections of this Agreement are
for  convenience  of  reference  only  and  are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.

23.     BENEFITS  OF  THIS  AGREEMENT.  Nothing  in  this  Agreement  shall  be
construed  to  give  to any person or corporation other than the Company and the
Financial  Advisor and any other registered Holder(s) of the Financial Advisor's
Warrant  Certificates  or Warrant Shares any legal or equitable right, remedy or
claim  under  this  Agreement;  and  this  Agreement  shall  be for the sole and
exclusive benefit of the Company and the Underwriters and any other Holder(s) of
the  Financial  Advisor's  Warrant  Certificates  or  Warrant  Shares.

24.     COUNTERPARTS.  This  Agreement  may  be  executed  in  any  number  of
counterparts  and  each of such counterparts shall for all purposes be deemed to
be  an original, and such counterparts shall together constitute but one and the
same  instrument.

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

ATTEST:                         THE  LEATHER  FACTORY,  INC.
By:  /s/  Ronald  C.  Morgan               By:  /s/  Shannon  L.  Greene
Name:Mr.  Ronald  C.  Morgan               Name:Ns.  Shannon  L.  Greene
Title:     President                       Title:  CFO


     WESTMINSTER  SECURITIES  CORPORATION
     By:  /s/  John  O'Shea
          -----------------
     Name:      John  O'Shea
     Title:     President
                                       17
<PAGE>

                                    EXHIBIT A

                [FORM OF FINANCIAL ADVISOR'S WARRANT CERTIFICATE]

     THE  FINANCIAL  ADVISOR'S  WARRANT  REPRESENTED BY THIS CERTIFICATE AND THE
OTHER  SECURITIES  ISSUABLE  UPON  EXERCISE  THEREOF  MAY NOT BE OFFERED OR SOLD
EXCEPT  PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT  OF 1933 (THE "ACT"), (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT
(OR  ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY
TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.

THE  TRANSFER OR EXCHANGE OF THE FINANCIAL ADVISOR'S WARRANT REPRESENTED BY THIS
CERTIFICATE  IS  RESTRICTED  IN  ACCORDANCE WITH THE FINANCIAL ADVISOR'S WARRANT
AGREEMENT  REFERRED  TO  HEREIN.

                            EXERCISABLE ON OR BEFORE
                5:00 P.M., NEW YORK TIME BEFORE FEBRUARY 24, 2009
                         Financial Advisor's Warrant No.
                                  Issuable for
                          50,000 Shares of Common Stock

                               WARRANT CERTIFICATE

     This Warrant Certificate certifies that Westminster Securities Corporation,
a  New  York  corporation,  is  the  registered  holder  of Warrants to purchase
initially at any time from February  24, 2004 until 5:00 p.m., New York time on,
February  24,  2009  ("Expiration  Date"), up to 100,000 shares of Common Stock,
$0.0024 par value per share, of the Company (the "Common Stock"), at an exercise
price  of $5.00 per share (the "Common Stock Exercise Price"), upon surrender of
this  Financial  Advisor's  Warrant  Certificate and payment of the Common Stock
Exercise  Price  at  an  office  or  agency  of  the Company, but subject to the
conditions  set  forth  herein  and in the Financial Advisor's Warrant Agreement
dated  as  of  February  24,  2004  among the Company and Westminster Securities
Corporation  (the  "Warrant Agreement").  Payment of the Exercise Price shall be
made either by certified or official bank check in New York Clearing House funds
payable  to  the order of the Company or by surrender of the Financial Advisor's
Warrant  as  provided  in  the  Warrant  Agreement.

No  Warrant  may  be exercised after 5:00 p.m., New York time, on the Expiration
Date,  at  which  time  all Financial Advisor's Warrant evidenced hereby, unless
exercised  prior  thereto,  shall  thereafter  be  void.

The Financial Advisor's Warrant evidenced by this Warrant Certificate is part of
a  duly  authorized issue of Financial Advisor's Warrants issued pursuant to the
Warrant  Agreement,  which Warrant Agreement is hereby incorporated by reference
in  and  made  a  part  of  this  instrument  and  is  hereby  referred to for a
description  of  the  rights,  limitation  of  rights,  obligations,  duties and
immunities  thereunder  of  the  Company and the holders (the words "holders" or
"holder"  meaning  the registered holders or registered holder) of the Financial
Advisor's  Warrant.

The  Warrant  Agreement  provides that upon the occurrence of certain events the
Exercise  Price  and the type and/or number of the Company's securities issuable
thereupon  may,  subject to certain conditions, be adjusted.  In such event, the
Company  will,  at  the  request  of the holder, issue a new Warrant Certificate
evidencing  the  adjustment  in the Exercise Price and the number and/or type of
securities  issuable  upon  the  exercise  of  the  Financial Advisor's Warrant;
provided,  however,  that  the  failure of the Company to issue such new Warrant
Certificates  shall not in any way change, alter or otherwise impair, the rights
of  the  holder  as  set  forth  in  the  Warrant  Agreement.

Upon due presentment for registration of transfer of this Warrant Certificate at
an  office  or  agency  of  the  Company,  a  new Warrant Certificate or Warrant
Certificates  of  like  tenor  and  evidencing in the aggregate a like number of
Financial  Advisor's  Warrant shall be issued to the transferees in exchange for
this  Warrant Certificate, subject to the limitations provided herein and in the
Warrant  Agreement,  without any charge except for any tax or other governmental
charge  imposed  in  connection  with  such  transfer.

Upon  the exercise of less than all of the Financial Advisor's Warrant evidenced
by  this  Certificate,  the Company shall forthwith issue to the holder hereof a
new  Warrant  Certificate  representing  such  unexercised  Financial  Advisor's
Warrant.

In  addition to the right of exercise, the holder shall have the right to make a
cashless  exercise of this Warrant Certificate (in whole but not in part) by the
surrender  of  this  Warrant  Certificate (with the attached Form of Election to
Convert)  at  the  office of the Company at any time during the duration of this
Warrant,  into  shares  of  Common  Stock, as provided in the Warrant Agreement.
The  Company  may deem and treat the registered holder(s) hereof as the absolute
owner(s)  of this Warrant Certificate (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any exercise hereof,
and of any distribution to the holder(s) hereof, and for all other purposes, and
the  Company  shall  not  be  affected  by  any  notice  to  the  contrary.

All  terms  used  in  this  Warrant Certificate which are defined in the Warrant
Agreement  shall  have  the  meanings assigned to them in the Warrant Agreement.
This  Warrant  Certificate  does  not  entitle  any holder thereof to any of the
rights  of  a  shareholder  of  the  Company.

IN  WITNESS  WHEREOF, the Company has caused this Warrant Certificate to be duly
executed.

Dated  as  of  February  24,  2004.

ATTEST:                                 THE  LEATHER  FACTORY,  INC.

By:___________________________          By:_______________________________
     Name:                              Name:  Ms.  Shannon  Greene
Title:                                  Title:   CFO

                                       18
<PAGE>


             [FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 4.1]

     The  undersigned  hereby  irrevocably  elects  to  exercise  the  right,
represented  by  this  Warrant  Certificate, to purchase ______ shares of Common
Stock,  and  herewith  tenders  in  payment  for  such securities a certified or
official bank check payable in New York Clearing House Funds to the order of The
Leather  Factory,  Inc.  (the  "Company")  in  the  amount of $_________, all in
accordance  with  the  terms  of  Section 4.1 of the Financial Advisor's Warrant
Agreement  dated  as  of  February  24,  2004  among the Company and Westminster
Securities  Corporation.  The  undersigned  requests that a certificate for such
securities  be  registered in the name of ____________________, whose address is
__________________  and  that  such  certificate  to  be  delivered
to____________________  whose  address  is  _______________________, and if said
number  of  shares shall not be all the shares purchasable hereunder, that a new
Warrant  Certificate for the balance of  the shares purchasable under the within
Warrant  Certificate be registered in the name of the undersigned warrant holder
or  his  assignee  as below indicated and delivered to the address stated below.

Dated:_____________________________

Signature:____________________________

(Signature  must  conform  in  all
respects  to  name  of  holder  as  specified
on  the  face  of  the  Warrant  Certificate.)

Address:     ______________________________
             ______________________________

     ______________________________________
(Insert  Social  Security  or  Other  Identifying
Number  of  Holder)

                                       19
<PAGE>

                              [FORM OF ASSIGNMENT]

(TO  BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO TRANSFER THE
WARRANT  CERTIFICATE.)

FOR  VALUE  RECEIVED  ________________  hereby sells, assigns and transfers unto
[NAME  OF  TRANSFEREE)  this Warrant Certificate, together with all right, title
and  interest  therein,  and  does  hereby  irrevocably  constitute  and appoint
________________,  attorney,  to  transfer the within Warrant Certificate on the
books  of  the  within-named  Company,  with  full  power  of  substitution.

Dated:_____________________

Signature:______________________________
(Signature  must  conform  in  all  respects
to  name  of  holder  as  specified  on  the
face  of  the  Warrant  Certificate.)

Address:     ______________________________
             ______________________________

______________________________________
(Insert  Social  Security  or  Other  Identifying
Number  of  Holder)


                                       20
<PAGE>

      [FORM OF ELECTION TO MAKE CASHLESS EXERCISE PURSUANT TO SECTION 4.2]

     The  undersigned  hereby  irrevocably  elects  to  exercise  the  right,
represented  by  this  Warrant Certificate, to exercise this Warrant Certificate
for  ________  shares of Common Stock (assuming a Market Price calculated on the
basis of the last sale price for Common Stock on _________________, (the trading
day  immediately preceding surrender of the Warrant Certificate and this Form of
Election  to  Make  Cashless  Exercise)  of  $_________), all in accordance with
Section  4.2  of  the  Financial  Advisor's  Warrant  Agreement  dated  as  of
February  24,  2004  between the Company and Westminster Securities Corporation.
The undersigned requests that a certificate for such securities be registered in
the  name of ________________________, whose address is ________________________
and  ________________________(attach  separate  sheet  if  necessary).


Dated:________________________

Signature:_____________________________
(Signature  must  conform  in  all
respects  to  name  of  holder  as  specified
on  the  face  of  the  Warrant  Certificate.)

Address:      _______________________________
              _______________________________

______________________________________
(Insert  Social  Security  or  Other  Identifying
Number  of  Holder)

                                       21
<PAGE>

EXHIBIT  4.2

                       WESTMINSTER SECURITIES CORPORATION
                         MEMBER NEW YORK STOCK EXCHANGE
                         ------------------------------


February  24,  2004

Ms.  Shannon  L.  Greene
Chief  Financial  Officer
The  Leather  Factory,  Inc.
3827  East  Loop  820  South
Fort  Worth,  TX  76119

RE:  CAPITAL  MARKETS  SERVICES  ENGAGEMENT  AGREEMENT

Dear  Shannon,

     This  agreement  ("Agreement")  is  made  and entered into this 24th day of
February,  2004  between  The Leather Factory, Inc., a Delaware corporation (the
"Company"),  and  Westminster Securities Corporation, a registered broker/dealer
("Westminster").  Pursuant  to this Agreement, Westminster will provide services
to  the  Company  as  set  forth  below:

1.  PURPOSE
-----------

     Based  on the terms set forth in this Agreement, the Company hereby retains
Westminster  on  an  exclusive  basis  during  the Engagement Period (as defined
herein)  to  provide various capital markets services as set forth herein. It is
understood  and  acknowledged  by  the  parties  that the value of Westminster's
advice  is not measurable in any quantitative manner, and that Westminster shall
not  be  obligated  to  spend  any  specific  amount  of  time performing duties
hereunder.

2.  ENGAGEMENT  PERIOD
----------------------

     This  Agreement  shall  commence on March 1, 2004 and terminate on February
28,  2006  (the "Engagement Period") unless extended by mutual written agreement
of Westminster and the Company or earlier terminated as provided for in sections
12  or  15  (b)  hereof.

3.  SERVICES
------------

     Westminster  may  assist  the  Company  by  performing  the various capital
markets services ("Capital Markets Services or Services") that are listed below.
In  connection  with  Westminster providing such capital markets services to the
Company,  the  Company  shall  provide  Westminster  with  any  information that
Westminster  deems appropriate. The Company hereby acknowledges that Westminster
will  be  using and relying on said information without independent verification
and that Westminster assumes no responsibility for the accuracy and completeness
of  any  information  provided  to  it  by the Company.  In performance of these
duties,  Westminster  shall  provide  the  Company  with  the  benefits  of  its
commercially  reasonable  judgment  and  efforts.

A.  SERVICES
------------

     Westminster  will  provide  the  Company with the following Capital Markets
Services:
(a)  Corporate  Finance  Advisory  Services;
     (1)     Advise  on  financial  forecasting  model(s);
     (2)     Provide  sponsorship  to  investors;
     (3)     Advise  on  investor  communications  and  presentations;
     (4)     Advise  on  shareholder  value  strategy;  and
     (5)     Advise  on  shareholder  base  and  distribution

(b)  Research  Services  -  Publish  and  distribute research covering Company's
publicly-traded common shares. (All Investment Recommendations, Risk Ratings and
Target  Prices  included in such coverage to be determined solely by Westminster
Equity  Research  department.)

(c)  Sales  and  Trading  Services;
     (1) Advise  and  assist  with  exchange  specialist;
     (2) Advise  on  and  develop  institutional  sales;
     (3) Provide  institutional  research  sales  calls;
     (4) Advise and assist on shareholder data base information and management;
     (5) Advise and assist in block share transactions and redistributions; and
     (6) Advise and assist in  restricted  stock  and  ESOP  matters

B.  COMPENSATION
----------------

Upon  execution  of  this  Agreement,  the  Company  shall  pay  Westminster the
following  monthly  fees  on  or  before  the  15th day of each month during the
Engagement  Period.  Should  a sale, merger or other business combination of the
Company  occur,  all  sums  shall  be  immediately  due  and payable. Payment of
engagement  fees  shall  be  as  follows:

(1)     Capital  Markets  Advisory  Services - During the Engagement period, the
Company  shall pay Westminster $4,000 on the 15th of each month commencing March
15,  2004

(2)     Additionally,  the Company shall issue Westminster warrants ("Warrants")
to  purchase  50,000  shares  of  common  stock  of  the  Company which shall be
exercisable for a period of five years at an exercise price of $ 5.00 per share.
The  Warrants  shall  contain  customary  terms,  including, but not limited to,
demand  and piggyback registration rights, anti-dilution and a cashless exercise
price.

(3)   The  Company  agrees  to  pay  Westminster additional fees for any and all
services  performed  by  Westminster  at the request of the Company that are not
specifically  included  in  the  engagement as provided for in Section 3 of this
Agreement.  Such  additional  fees shall be customary and mutually agreeable and
shall  be  paid  in  full  by the Company on or before the 1st day of each month
after  which  the  Company  receives  an  invoice  from  Westminster.

4.  ADDITIONAL  SERVICES
------------------------

     Should  the Company desire Westminster to provide any service(s) not listed
above,  the  Company  agrees  to pay Westminster additional fees for any and all
Services  performed  by  Westminster  that  are not specifically included in the
Engagement  as  provided  for in Section 3 of this Agreement. Under the terms of
this  Agreement,  the  Company  and  Westminster  shall enter into an additional
engagement  letter  to  be executed by the parties hereto at the commencement of
the  additional  service(s) to be rendered by Westminster.  Such additional fees
shall  be  customary  and  mutually  agreeable  and shall be paid in full by the
Company  on or before the 1st day of each month after which the Company receives
an  invoice  from  Westminster.

5.  WESTMINSTER'S  RIGHTS  TO  PARTICIPATE  IN  FUTURE OFFERINGS OF THE COMPANY.
--------------------------------------------------------------------------------

     The Company hereby grants to Westminster a right of first refusal to act as
placement  agent or managing underwriter, as appropriate, during this engagement
and  in  any  subsequent  private  placement or public offering of the Company's
securities  for  a period of twelve months (12) following the termination of the
Engagement  Period. Westminster shall not be obligated to act as placement agent
or  managing  underwriter  with  respect  to  any  such  transaction.  Any  such
subsequent  public  offering  or  private  placement  shall  be  subject  to  an
additional  engagement  agreement  executed  by  the  parties  hereto  at  the
commencement  of  services  to  be  provided  by  Westminster.

6.     MERGER/ACQUISITION  SERVICES.
--     -----------------------------

     During  the  Engagement  Period,  Westminster shall have the right of first
refusal  to  provide  merger/acquisition  advisory  services  to  the  Company.
Westminster's  role  and  specific  compensation  with  respect to the Company's
consummation  of  an  acquisition  of  assets, merger or  other similar business
combination  with another business (a "Business Combination") or in assisting in
an  arrangement in a different form than as set forth herein, such as contracts,
licensing,  ventures  or  other  business  transaction  (Business Transactions")
during  the  Engagement  Period  shall  be set forth in an additional engagement
letter  to  be  executed  by  the parties hereto at the commencement of services
rendered by Westminster for the Business Combination or Business Transaction. If
the  Company  consummates  a Business Combination or Business Transaction during
the  Engagement Period, then Westminster shall receive mutually agreed upon fees
and  other  forms  of  compensation  as  are  customarily received by investment
bankers  in  similar  transactions.  This  may  include  fees  for such Business
Combination,  Business  Transactions,  financing  fees  and/or fees for fairness
opinion.

7.     EXPENSES.
--     ---------

     The  Company  shall  reimburse  Westminster  for  any  and  all  reasonable
out-of-pocket  expenses  incurred  in  connection  with services provided to the
Company  under  this Agreement including, but not limited to travel, legal fees,
printing,  and  other  expenses,  incurred  in  connection  with  Westminster's
providing  the services stated or contemplated herein. Westminster will not bear
any of the Company's legal, accounting, printing or other expenses in connection
with  any  transaction  considered or consummated hereby.  It also is understood
that  neither  Westminster,  nor  the  directors,  employees  and  agents  of
Westminster,  will  be  responsible  for  any fees or commissions payable to any
finder  or  to  any other financial or other advisor utilized or retained by the
Company.  With the exception of out of pocket expenses, Westminster shall obtain
prior  approval  from  the  Company.  All  expenses billed by Westminster to the
Company  will be invoice to the Company and reimbursed on a monthly basis within
ten  days  of  receipt.

8.     RELATIONSHIPS  WITH  OTHERS;  CONFIDENTIAL  INFORMATION.
--     --------------------------------------------------------

     Westminster  may  utilize  the fact of its engagement hereunder in a normal
tombstone  advertising,  news  release  or  in accordance with standard industry
practice.

     The  Company  acknowledges  that  Westminster  or its affiliates are in the
business  of  providing  investment  banking,  financial advisory and consulting
services  to  others.  Nothing  contained  herein shall be construed to limit or
restrict  Westminster  in conducting such business with respect to others, or in
rendering  such  advice  to others. In connection with the rendering of services
hereunder,  Westminster  has  been  or  will  be  furnished  with  confidential
information  concerning  the  Company  including,  but not limited to, financial
statements  and  information,  cost  and  expense  data,  production data, trade
secrets,  marketing  and customer data, and such other information not generally
obtained  from  public  or  published  information  or  trade  sources.  Such
information  shall be deemed "Confidential Material" and, except as specifically
provided  herein,  shall  not  be  disclosed  by  Westminster (except as used by
Westminster to perform services as contemplated by this Agreement) without prior
written consent of the Company. In the event it is required by applicable law or
legal  process  to  disclose any of the Confidential Material, it is agreed that
Westminster  will deliver to the Company prompt notice of such requirement prior
to  disclosure  of  same  so  as to permit the Company an opportunity to seek an
appropriate  protective order and/or waive compliance of this provision.  If, in
the  absence  of a protective order or receipt of written waiver, Westminster is
nonetheless,  in  the  written opinion of its counsel, compelled to disclose any
Confidential  Material,  Westminster  may  do  so  without  liability  hereunder
provided  that notice of such prospective disclosure is delivered to the Company
prior  to  actual disclosure.  Following the termination of this Agreement and a
written  request  by  the  Company, Westminster shall deliver to the Company all
Confidential  Material.  This  Section  shall  survive  the  termination of this
Agreement.

9.     LIMITATION  UPON  THE  USE  OF  ADVICE  AND  SERVICES.
--     ------------------------------------------------------

(a)  The  Company  acknowledges  that  the  advice (written or oral) rendered by
Westminster  pursuant  to  this Agreement is intended solely for the benefit and
use  of  the Company in considering the matters to which this agreement relates,
and  the Company agrees that such advice shall not be disclosed publicly or made
available  to  third  parties  without the prior written consent of Westminster.
Westminster  may  utilize  the  fact  of  its engagement hereunder in its normal
tombstone  advertising  or  in  accordance  with standard industry practice.  No
person or entity, other than the Company or any of its subsidiaries or directors
or  officers  of each of the foregoing, shall be entitled to make use of or rely
upon  the  advice  Westminster  to be given hereunder, and the Company shall not
transmit  such  advice  to,  or encourage or facilitate the use or reliance upon
such  advice  by  others  without  the  prior  consent  of  Westminster.

(b)     Research  reports  that  may  be  prepared  by  research  analysts  at
Westminster will, when and if prepared, be done solely on the merits or judgment
of  the  research  analysts of Westminster including but not limited to ratings,
price  targets  or  other  views  expressed  by  the  research  analyst.

(c)     Company  hereby  acknowledges  that  Westminster,  for services rendered
under  this Agreement, makes no commitment whatsoever to make a market in any of
the Company's securities on any stock exchange or in any electronic marketplace.
Any  decision by Westminster to make a market in any of the Company's securities
shall  be  based solely on the independent judgment of Westminster's management,
employees,  and  agents.

(d)     Use  of  the Westminster's name in annual reports or any other report of
the  Company  or releases by the Company must have the prior written approval of
Westminster  unless the Company is required by law to include Westminster's name
in  such  annual reports, other report or release of the Company, in which event
Westminster  will  be  furnished  with  copies  of  such annual reports or other
reports  or  releases  using Westminster's name in advance of publication by the
Company,  its  affiliates  or  assigns.

10.     LIMITATION  OF  LIABILITY.
---     --------------------------

     In  the  absence  of  gross negligence or willful misconduct on the part of
Westminster,  Westminster  shall not be liable to the Company or to any officer,
director,  employee,  agent,  representative,  stockholder  or  creditor  of the
Company  for  any  action  or  omission  of  Westminster or any of its officers,
directors,  employees, agents, representatives or stockholders in the course of,
or in connection with, rendering or performing any services contemplated hereby.

11.      INDEMNIFICATION.
---      ----------------

     The  Company  agrees  to  indemnify  Westminster  in  accordance  with  the
provisions of Annex A hereto, which is incorporated by reference and made a part
hereof.

12.     TERMINATION.
---     ------------

     This  Engagement Letter may be terminated at any time during the Engagement
Period by Westminster upon five (5) days prior written notice to the Company, in
the  event  that  Westminster becomes aware of (i) any change in the business or
operations  of  the  Company which Westminster reasonably believes may adversely
affect Westminster's ability to render the services contemplated hereunder, (ii)
any  misrepresentation  by  the Company with respect to its business operations,
assets,  condition  (financial or otherwise), results of operations or prospects
of the Company, or (iii) any breach by the Company of its obligations under this
Agreement.

     Unless  otherwise provided for herein, in the event of termination (i) this
Agreement shall become void, without liability on the part of Westminster or its
affiliates,  directors,  officers  or  stockholders,  (ii)  Westminster shall be
entitled  to  retain  or  receive  compensation  for  services  it has rendered,
including  payment  for  expenses  it  has  incurred  up  to  the  date  of such
termination,  or (iii) the Company's indemnification of  Westminster pursuant to
Annex  A  shall  remain  in  full  force  and  effect.

13.      DISCRETION.
---      -----------

     Nothing  contained  herein  shall  require  the  Company  to enter into any
transaction  presented  to  it  by  Westminster,  which decision shall be at the
Company's  sole  discretion.

14.     SEVERABILITY.
---     -------------

     Any  term  or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of  such  invalidity  or  unenforceability  without  rendering  invalid  or
unenforceable  the remaining terms and provisions of this Agreement or affecting
the  validity  or  enforceability  of  any  of  the  terms or provisions of this
Agreement  in  any other jurisdiction.  If any provision of this Agreement is so
broad  as  to be unenforceable, the provision shall be interpreted to be only so
broad  as  is  enforceable.

15.     MISCELLANEOUS.
---     --------------

(a)     Any notice or communication between parties hereto shall be sufficiently
given  if  sent  by  certified or registered mail, postage prepaid, or faxed and
confirmed  if  to the Company, addressed to it at 3827 East Loop 820 South, Fort
Worth,  TX 76119 or if to Westminster, addressed to it at Westminster Securities
Corporation,  100  Wall  Street,  7th Floor, New York, NY 10005.  Such notice or
other  communication  shall  be  deemed  to  be  given  on  the date of receipt.

(b)          If  Westminster  shall  cease to do business, the provisions hereof
relating  to duties of Westminster and compensation by the Company as it applies
to  Westminster  shall thereupon cease to be in effect, except for the Company's
obligation of payment for services rendered prior thereto.  This Agreement shall
survive  any  merger of, acquisition of, or acquisition by Westminster and after
any  such merger or acquisition shall be binding upon the Company and the entity
surviving  such  merger,  acquisition  or  similar  transaction.

(c)          This  Agreement  embodies  the  entire  agreement and understanding
between  the  Company  and  Westminster and supersedes any and all negotiations,
prior  discussions  and  preliminary  and  prior  agreements  and understandings
related  to  the  subject  matter  hereof, and may be modified only by a written
instrument  duly  executed  by  each  party.

(d)          This  Agreement has been duly authorized, executed and delivered by
and  on  behalf  of  the  Company  and  Westminster.

(e)          This  Agreement  shall  be deemed made in New York.  This Agreement
and  all  controversies  arising  from  or  relating  to  performance under this
Agreement shall be governed by and construed  in accordance with the laws of the
State  of  New  York,  without  giving  effect  to such state's rules concerning
conflicts  of  law.

The  Company  hereby  irrevocably consents to personal jurisdiction and venue in
any court of the State of New York or any Federal court sitting in the County of
New York for the purposes of any suit, action or other proceeding arising out of
this  Agreement  or  any  of the agreements or transactions contemplated hereby,
which is brought by or against the Company, and hereby agrees that all claims in
respect  of any such suit, action or proceeding shall be heard and determined in
any  such  court.  The  Company  hereby  irrevocably  consents to the service of
process  of  any  of  the  aforementioned  courts  in  any  such suit, action or
proceeding  by  the  mailing  of copies thereof by registered or certified mail,
postage  prepaid, to the Company at its address set forth above, such service to
become  effective ten (10) days after such mailing.  Each of the Company (on its
own  behalf  and,  to  the  extent permitted by applicable law, on behalf of its
shareholders)  and  Westminster  hereby  waive  any  right to trial by jury with
respect  to  any  claim,  proceeding, counterclaim or action arising out of this
Agreement then the prevailing party in such action or proceeding, whether or not
the  action  or  proceeding  proceeds  to  final  judgment.

(f)          There  is  no  relationship  of  partnership,  agency,  employment,
franchise or joint venture between the parties.  Neither party has the authority
to  bind  the  other  or  incur  any  obligation  on  its  behalf.

(g)          The Company hereby acknowledges that Westminster is not a fiduciary
of  the  Company  and  that  Westminster  makes no representations or warranties
regarding  Company's  ability to secure financing, whether now or in the future.

(h)          This  Agreement  and  the  rights  hereunder may not be assigned by
either party (except by operation of law) and shall be binding upon and inure to
the  benefit  of  the parties and their respective permitted successors, assigns
and  legal  representatives.

(i)          No  waiver, amendment or other modification of this Agreement shall
be  effective  unless in writing and signed by both parties.  This Agreement may
be executed in counterparts, each of which together shall be considered a single
document.

(j)          All  amounts  payable to Westminster by the Company hereunder which
are not paid with thirty (30) days of the dates payable shall accrue interest at
a  rate  of  twelve  (12%)  per  annum  from  the  date  due  until  paid.

If  you  are in agreement with the foregoing, please execute and return one copy
of  this  letter  of  intent to Westminster, along with a check or wire transfer
made  payable to Westminster Securities Corporation in the amount of 4,000.00 in
accordance  with  paragraphs  three  above.

                              Sincerely,

                              WESTMINSTER  SECURITIES  CORPORATION

                              By:  /s/  John  O'Shea
                                   -----------------
                              Name:  John  O'Shea
                              Title:     President

                              By:  /s/  Samuel  M.  Chase,  Jr.
                                   ----------------------------
                              Name:      Samuel  M.  Chase  Jr.
                              Title:    Managing  Director

Agreed  to  and  accepted  this  1st  day  of  March  2004.

THE  LEATHER  FACTORY,  INC.

By:  /s/  Shannon  L.  Greene
     ------------------------
Name:     Ms.  Shannon  L.  Greene
Title:  Chief  Financial  Officer



                                       22
<PAGE>


EXHIBIT  31.1
                           RULE 13A-4(A) CERTIFICATION

I,  WRAY  THOMPSON,  certify  that:

1.  I  have  reviewed this quarterly 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:     May  14,  2004
                                       /s/  Wray  Thompson
                                       -------------------
                                       Wray  Thompson
                                       President  and  Chief  Executive  Officer
                                       (principal  executive  officer)

                                       23
<PAGE>

EXHIBIT  31.2
                           RULE 13A-4(A) CERTIFICATION

I,  SHANNON  L.  GREENE,  certify  that:

1.  I  have  reviewed this quarterly 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:     May  14,  2004
                               /s/  Shannon  L.  Greene
                              -------------------------
                              Shannon  L.  Greene
                              Chief  Financial  Officer  and  Treasurer
                              (principal  financial  and  accounting  officer)

                                       24
<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  Quarterly Report on Form 10-Q of The Leather Factory,
Inc.  for  the  quarter  ended  March  31,  2004 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.


May  14,  2004              By:  /s/  Wray  Thompson
                                 -------------------
                            WRAY  THOMPSON
                            CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER


May  14,  2004              By:  /s/  Shannon  L.  Greene
                                 ------------------------
                            SHANNON  L.  GREENE
                            CHIEF  FINANCIAL  OFFICER  AND  TREASURER