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  June  30,  2002

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

              Class                     Shares outstanding as of August 13, 2002
--------------------------              ----------------------------------------
Common Stock, par value $.0024 per share                   10,064,161

<PAGE>

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

     This  report (particularly Item 2:  Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations)  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  which  could  cause  actual  results  to differ
materially from those suggested by the forward-looking statements include, among
other  things:

-     Changes  in the economic recovery in the United States, as well as abroad,
from  a  recent  downturn  may  cause  our sales to decrease or not to increase.
-     Favorable  trends  in  the  arts  and crafts industry may slow or reverse.
-     Although  the  Company  believes  that  it  has  fixed  recent  problems,
reoccurrence  of  problems  with  our  websites  could  result  in  lost  sales.
-     As  a  result of the terrorist activities on and after September 11, 2001,
consumer-buying  habits  could  change  and  decrease  our  sales.
-     If  terrorists  choose  to target livestock in the United States or abroad
for  chemical,  biological  or  other  attacks,  our sources of raw material and
inventory  could  decrease,  or  these  items  could  become  more  expensive.
-     The prices of hides and leathers also 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.
-     The  Company  currently  buys  in  22  countries  around the world.   War,
terrorism,  changes  in the internal affairs or international relations of these
countries  (such  as  events  that might affect their Most Favored Nation status
with  the  United  States  of  America)  and other uncertainties can disrupt our
purchases  from  abroad.
-     We  might  fail  to realize the anticipated benefits of the acquisition of
the assets of Tandy Leather, the opening of Tandy Leather retail stores or other
retail  initiatives  might  not  be  successful.
-     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.
-     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.
                                        2
<PAGE>
<TABLE>
<CAPTION>

                                THE LEATHER FACTORY, INC.

                                        FORM 10-Q

                       FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002


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



                                                                                 PAGE NO.
                                                                                 --------
<S>                                                                              <C>
PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

    Consolidated Balance Sheets
     June 30, 2002 and December 31, 2001 . . . . . . . . . . . . . . . . . . . . . . . .4

    Consolidated Statements of Income
     Three and six months ended June 30, 2002 and 2001. . . . . . . . . . . . . . . . . 5

    Consolidated Statements of Cash Flows
     Six months ended June 30, 2002 and 2001. . . . . . . . . . . . . . . . . . . . . . 6

    Consolidated Statements of Stockholders' Equity
     Six months ended June 30, 2002 and 2001. . . . . . . . . . . . . . . . . . . . . . 7

    Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . .8

  Item 2.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . 12

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . 17

PART II.  OTHER INFORMATION

  Item 4.  Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . .17

  Item 5.  Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

  Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 18


SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

</TABLE>

                                        3
<PAGE>
<TABLE>
<CAPTION>

                                     THE LEATHER FACTORY, INC.
                                    CONSOLIDATED BALANCE SHEETS



                                                                        June 30,     December 31,
                                                                          2002           2001
                                                                      -----------   --------------
                                                                      (UNAUDITED)
                                                                      -----------   --------------

<S>                                                                   <C>           <C>
ASSETS
CURRENT ASSETS:
  Cash                                                                $   187,696   $     409,040
  Cash restricted for payment on revolving credit facility                454,531         491,729
  Accounts receivable-trade, net of allowance for doubtful accounts
      of $180,000 and $191,000 in 2002 and 2001, respectively           2,608,314       2,297,953
  Inventory                                                             9,543,495       9,054,269
  Deferred income taxes                                                   178,680         128,111
  Other current assets                                                    960,227         479,390
                                                                      -----------   -------------
    Total current assets                                               13,932,943      12,860,492
                                                                      -----------   -------------

PROPERTY AND EQUIPMENT, at cost                                         4,448,856       4,201,368
  Less-accumulated depreciation and amortization                       (3,078,024)     (2,858,869)
                                                                       ----------      ----------
    Property and equipment, net                                         1,370,832       1,342,499

GOODWILL, net of accumulated amortization of $738,000
  and $1,583,000 in 2002 and 2001, respectively                           611,724       4,535,412
OTHER INTANGIBLES, net of accumulated amortization of
  $89,000 and $66,000, in 2002 and 2001, respectively                     486,159         476,908
OTHER assets                                                              298,993         333,012
                                                                      -----------     -----------
                                                                      $16,700,651     $19,548,323
                                                                      ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                    $ 1,894,202     $ 1,303,596
  Accrued expenses and other liabilities                                1,261,558       1,171,152
  Income taxes payable                                                     57,511          52,662
  Notes payable and current maturities of long-term debt                3,328,954       4,527,904
                                                                      -----------    ------------
    Total current liabilities                                           6,542,225       7,055,314
                                                                      -----------    ------------

DEFERRED INCOME TAXES                                                      82,354          61,647

NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities                 5,552           7,691

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, 10,064,161 and 9,991,161 shares issued
      and outstanding at 2002 and 2001, respectively                       24,154          23,979
  Paid-in capital                                                       4,106,828       4,030,508
  Retained earnings                                                     6,020,708       8,478,187
  Less: Notes receivable - secured by common stock                        (47,303)        (71,939)
  Accumulated other comprehensive loss                                    (33,867)        (37,064)
                                                                      -----------     ------------
    Total stockholders' equity                                         10,070,520      12,423,671
                                                                      -----------     -----------
                                                                      $16,700,651     $19,548,323
                                                                      ===========     ===========
</TABLE>

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

<TABLE>
<CAPTION>

                                      THE LEATHER FACTORY, INC.
                                  CONSOLIDATED STATEMENTS OF INCOME
                                             (UNAUDITED)
                          THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001


                                                         THREE MONTHS            SIX MONTHS
                                                         ------------            ----------

                                                     2002         2001         2002         2001
<S>                                               <C>          <C>         <C>           <C>
NET SALES                                         $10,052,036  $9,359,893  $20,255,987   $18,732,506

COST OF SALES                                       4,616,410   4,381,098    9,451,766     8,869,495
                                                   ----------  ----------  -----------   -----------
    Gross profit                                    5,435,626   4,978,795   10,804,221     9,863,011

OPERATING EXPENSES                                  4,224,477   3,802,056    8,399,613     7,710,932
                                                    ---------   ---------   ----------     ---------
INCOME FROM OPERATIONS                              1,211,149   1,176,739    2,404,608     2,152,079

OTHER EXPENSE:
  Interest expense                                     47,442     124,614      137,311       273,207
  Other, net                                           10,266       4,351       26,621        11,641
                                                    ---------   ---------    ---------     ---------
    Total other expense                                57,708     128,965      163,932       284,848
                                                    ---------   ---------    ---------     ---------

INCOME BEFORE INCOME TAXES and CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE            1,153,441   1,047,774    2,240,676     1,867,231

PROVISION FOR INCOME TAXES                            361,394     425,864      689,324       748,037
                                                    ---------   ---------    ---------     ---------

INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE                        792,047     621,910    1,551,352     1,119,194

CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF INCOME TAXES                   -           -   (4,008,831)            -
                                                  -----------  ----------  -----------   -----------

NET INCOME                                        $   792,047  $  621,910  $(2,457,479)  $ 1,119,194
                                                  ===========  ==========  ===========   ===========


NET INCOME PER COMMON SHARE - BASIC:
  INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
  IN ACCOUNTING PRINCIPLE                         $      0.08  $     0.06  $      0.15   $      0.11
  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE, NET                                            -           -        (0.40)            -
                                                  -----------  ----------  -----------   -----------

  NET INCOME PER COMMON SHARE                     $      0.08  $     0.06  $     (0.25)  $      0.11
                                                  ===========  ==========  ===========   ===========

NET INCOME PER COMMON SHARE - ASSUMING DILUTION:
  INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
  IN ACCOUNTING PRINCIPLE                         $      0.07  $     0.06  $      0.14   $      0.11
  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE, NET                                            -           -        (0.37)            -
                                                  -----------  ----------  -----------   -----------

  NET INCOME PER COMMON SHARE-DILUTED             $      0.07  $     0.06  $     (0.23)  $      0.11
                                                  ===========  ==========  ===========   ===========
</TABLE>

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

                                    THE LEATHER FACTORY, INC.
                               CONSOLIDATED STATEMENTS OF CASH FLOW
                                           (UNAUDITED)
                             SIX MONTHS ENDED JUNE 30, 2002 AND 2001


                                                                           2002          2001
<S>                                                                    <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                           $(2,457,479)  $ 1,119,194
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities-
     Depreciation & amortization                                           242,534       360,862
     Amortization of deferred financing costs                               37,038        26,823
     Other                                                                 (30,743)      (12,629)
    Cumulative effect of change in accounting principle                  4,008,831             -
     Net changes in assets and liabilities:
       Accounts receivable-trade, net                                     (310,362)     (469,559)
       Inventory                                                          (390,018)      212,740
       Income taxes                                                          4,849         1,170
       Other current assets                                               (480,041)      102,209
       Accounts payable                                                    590,605       454,403
       Accrued expenses and other liabilities                               90,406      (345,430)
                                                                       -----------     ---------
     Total adjustments                                                   3,763,099       330,589
                                                                       -----------     ---------
      Net cash provided by operating activities                          1,305,620     1,449,783
                                                                       -----------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                      (232,810)     (531,759)
  Payments in connection with businesses acquired                         (227,747)            -
  Increase in other assets                                                  (3,648)       (1,481)
                                                                       -----------     ----------
      Net cash used in investing activities                               (464,205)     (533,240)
                                                                       -----------     ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net decrease in revolving credit loans                                (1,177,152)   (1,188,008)
  Proceeds from notes payable and long-term debt                                 -        18,676
  Payments on notes payable and long-term debt                             (23,936)      (50,528)
  Change in cash restricted for payment on revolving credit facility        37,198       (22,144)
  Payments received on notes secured by common stock                        24,636        15,633
  Proceeds from issuance of common stock                                    76,495        75,974
                                                                        ----------    ----------
      Net cash used in financing activities                             (1,062,759)   (1,150,397)
                                                                        ----------    ----------
NET INCREASE (DECREASE) IN CASH                                           (221,344)     (233,854)

CASH, beginning of period                                                  409,040       234,141
                                                                       -----------   ----------
CASH, end of period                                                    $   187,696   $       287
                                                                       ===========   ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid during the period                                      $   106,843   $   250,536
  Income taxes paid during the period, net of (refunds)                $   732,091   $   571,601
</TABLE>

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


                                              THE LEATHER FACTORY, INC.
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                     (UNAUDITED)
                                       SIX MONTHS ENDED JUNE 30, 2002 AND 2001


                                            Common Stock                                    Notes        Accumulated
                                        --------------------                              Receivable       Other
                                          Number       Par     Paid-in      Retained      secured by     Cumulative
                                        of shares     value    capital      Earnings     common stock       Loss
<S>                                    <C>           <C>      <C>         <C>           <C>             <C>
BALANCE, December 31, 2000               9,908,161   $23,780  $3,946,608  $ 6,471,754   $    (120,339)  $   (26,166)

  Payments on notes receivable -
       secured by common stock                   -         -           -            -          15,633             -

  Shares issued - employee
       Stock options exercised              73,000       175      75,799            -               -             -

  Net Income                                     -         -           -    1,119,194               -             -

  Translation adjustment                         -         -           -            -               -        (4,050)
                                        ----------   -------  ----------  -----------   -------------   -----------

BALANCE, June 30, 2001                   9,981,161   $23,955  $4,022,407  $ 7,590,948   $    (104,706)  $   (30,216)
                                        ==========   =======  ==========  ===========   =============   ===========



BALANCE, December 31, 2001               9,991,161   $23,979  $4,030,508  $ 8,478,187   $     (71,939)  $   (37,064)

  Payments on notes receivable -
       secured by common stock                   -         -           -            -          24,636             -

  Shares issued - employee
       Stock options exercised              73,000       175      76,320            -               -             -

  Net Loss                                       -         -           -   (2,457,479)              -             -

  Translation adjustment                         -         -           -            -               -         3,197
                                        ----------   -------  ----------  -----------   -------------   -----------
BALANCE, June 30, 2002                  10,064,161   $24,154  $4,106,828  $ 6,020,708   $     (47,303)  $   (33,867)
                                        ==========   =======  ==========  ===========   =============   ===========



                                                        Comprehensive
                                            Total       Income (Loss)
<S>                                    <C>              <C>
BALANCE, December 31, 2000             $   10,295,637

  Payments on notes receivable -
       secured by common stock                 15,633

  Shares issued - employee
       Stock options exercised                 75,974

  Net Income                                1,119,194      1,119,194

  Translation adjustment                       (4,050)        (4,050)
                                       --------------     ----------
BALANCE, June 30, 2001                 $   11,502,388
                                       ==============
  Comprehensive income for
   the six months ended June 30, 2001                      $1,115,144
                                                           ==========



BALANCE, December 31, 2001             $   12,423,671

  Payments on notes receivable -
       secured by common stock                 24,636

  Shares issued - employee
       Stock options exercised                 76,495

  Net Loss                                 (2,457,479)    (2,457,479)

  Translation adjustment                        3,197          3,197
                                       --------------    -----------
BALANCE, June 30, 2002                 $   10,070,520
                                       ==============
  Comprehensive income for the
   six months ended June 30, 2002                        $(2,454,282)
                                                         ===========
</TABLE>

The  accompanying  notes  are  an  integral  part  of these financial statements
                                        7
<PAGE>

                            THE LEATHER FACTORY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS  OF  PRESENTATION

In  the  opinion  of  the  Company,  the  accompanying  consolidated  financial
statements  contain  all  adjustments (consisting of those of a normal recurring
nature) considered necessary to present fairly its financial position as of June
30, 2002 and December 31, 2001, and the results of operations and cash flows for
the  three  and  six month periods ended June 30, 2002 and 2001.  The results of
operations for the three and six month periods are not necessarily indicative of
the results to be expected for the full fiscal year.  The consolidated financial
statements  should  be  read  in  conjunction  with the financial statements and
disclosures  contained in the Company's 2001 Annual Report on Form 10-K ("Annual
Report").

In  June  2001,  the  FASB  issued  Statements of Financial Accounting Standards
("SFAS")  No. 142, Goodwill and Other Intangible Assets.  This standard requires
companies  to  stop  amortizing  goodwill  and  certain  intangible  assets with
indefinite useful lives.  Instead, goodwill and intangible assets deemed to have
indefinite  useful lives will be subject to an annual review of impairment.  The
new  standard  was  effective for The Leather Factory, Inc. ("TLF") in the first
quarter  of  2002.  Upon  adoption  of  SFAS  No.  142, TLF recorded a one-time,
noncash  charge  of approximately $4 million to reduce the carrying value of its
goodwill  relating  to its subsidiary, Roberts, Cushman & Co., Inc.  This charge
is  non-operational  in  nature  and  is  reflected as a cumulative effect of an
accounting change in the accompanying consolidated statement of operations.  For
additional  discussion  on  the  impact  of  adopting  SFAS No. 142, see Note 5.

Certain  reclassifications  have  been  made  to  conform  the  2001  financial
statements  to the presentation in 2002.  The reclassifications had no effect on
net  income.


2.  INVENTORY

The  components  of  inventory  consist  of  the  following:

<TABLE>
<CAPTION>

                                            AS OF
                                   -------------------------
                                    JUNE 30,    DECEMBER 31,
                                      2002          2001
                                   ----------  -------------
<S>                                <C>         <C>
Finished goods held for sale       $8,631,280  $   8,025,845
Raw materials and work in process     912,215      1,028,424
                                   ----------  -------------
                                   $9,543,495  $   9,054,269
                                   ==========  =============
</TABLE>

3.  EARNINGS  PER  SHARE
The following table sets forth the computation of basic and diluted earnings per
share  ("EPS"):

<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED          SIX MONTHS ENDED
                                                             JUNE 30,                    JUNE 30,
                                                         2002         2001          2002         2001
                                                      -----------  -----------  ------------  -----------
<S>                                                   <C>          <C>          <C>           <C>
Numerator:
  Net  income                                         $   792,047  $   621,910  $(2,457,479)  $ 1,119,194
                                                      -----------  -----------  -----------   -----------
  Numerator for basic and diluted earnings per share      792,047      621,910   (2,457,479)    1,119,194

Denominator:
  Weighted-average shares outstanding-basic            10,041,018    9,971,952   10,021,476     9,960,785
                                        8
<PAGE>

Effect of dilutive securities:
  Stock options                                           503,871      159,819      496,061       126,122
  Warrants                                                254,741      198,045      252,355       180,368
                                                      -----------  -----------  -----------   -----------
Dilutive potential common shares                          758,612      357,864      748,416       306,490
                                                      -----------  -----------  -----------   -----------

  Denominator for diluted earnings per share-
  weighted-average shares                              10,799,630   10,329,816   10,769,892    10,267,275
                                                      ===========   ==========   ==========    ==========

  Basic earnings per share                            $      0.08  $      0.06  $     (0.25)  $      0.11
                                                      ===========  ===========  ===========   ===========

  Diluted earnings per share                          $      0.07  $      0.06  $     (0.23)  $      0.11
                                                      ===========  ===========  ===========   ===========
</TABLE>


The  net effect of converting stock options to purchase 1,126,000 and 688,000 of
common  stock  at  option  prices  less  than the average market prices has been
included  in  the computation of diluted EPS for the three and six month periods
ended  June  30,  2002  and  2001,  respectively.


4.  SEGMENT  INFORMATION

The  Company  identifies  its segments based on the activities of three distinct
businesses:  The  Leather  Factory,  which  sells  product to both wholesale and
retail  customers and consists of a chain of sales/distribution units located in
the  United  States  and  Canada;  Tandy  Leather  Company,  which sells product
throughout the United States via retail stores, the Internet and mail-order, and
internationally  through  authorized  dealers;  and  Roberts, Cushman & Company,
which  manufactures  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.

<TABLE>
<CAPTION>

                                          THE LEATHER     TANDY LEATHER     ROBERTS,
                                            FACTORY          COMPANY      CUSHMAN & CO      TOTAL
                                        ---------------  ---------------  -------------  ------------
<S>                                     <C>              <C>              <C>            <C>
FOR THE QUARTER ENDED JUNE 30, 2002
Net Sales                               $    7,700,422   $    1,814,310   $     537,304  $10,052,036
Gross Profit                                 4,175,742        1,079,238         180,646    5,435,626
Operating earnings                           1,018,799           97,536          94,814    1,211,149
Interest expense                               (47,253)            (189)              -      (47,442)
Other, net                                     (10,134)            (132)              -      (10,266)
                                                                                         -----------
Income before income taxes                     961,412           97,215          94,814    1,153,441
                                                                                         -----------
     Depreciation and amortization              88,219           28,159           3,163      119,541
     Fixed asset additions                      56,840           77,390             958      135,188
     Total assets                       $   12,912,434   $    2,999,716   $     788,501  $16,700,651
                                        ==============   ==============   =============  ===========

FOR THE QUARTER ENDED JUNE 30, 2001
Net Sales                               $    7,015,765   $    1,787,525   $     556,603  $ 9,359,893
Gross Profit                                 3,783,271        1,003,657         191,867    4,978,795
Operating earnings                           1,057,274           74,144          45,321    1,176,739
Interest expense                              (124,614)               -               -     (124,614)
Other, net                                      (4,074)            (277)              -       (4,351)
                                                                                         ------------
Income before income taxes                     928,586           73,867          45,321    1,047,774
                                                                                         ------------
     Depreciation and amortization             125,691           18,723          38,190      182,604
     Fixed asset additions                      78,044                -             485       78,529
     Total assets                       $   11,970,568   $    2,744,853   $   5,066,000  $19,781,421
                                        ==============   ==============   =============  ===========

                                        9
<PAGE>

                                        THE LEATHER       TANDY LEATHER      ROBERTS,
                                           FACTORY           COMPANY       CUSHMAN & CO     TOTAL
                                        --------------   --------------   -------------  -----------
FOR THE SIX MONTHS ENDED JUNE 30, 2002
Net Sales                               $   15,524,939   $    3,692,183   $   1,038,865  $20,255,987
Gross Profit                                 8,302,614        2,152,817         348,790   10,804,221
Operating earnings                           1,994,526          239,037         171,045    2,404,608
Interest expense                              (136,908)            (403)              -     (137,311)
Other, net                                     (25,988)            (633)              -      (26,621)
                                                                                         -----------
Income before income taxes                   1,831,630          238,001         171,045    2,240,676
                                                                                         -----------
     Depreciation and amortization             221,165           51,862           6,545      279,572
     Fixed asset additions                     128,369          102,903           1,538      232,810
     Total assets                       $   12,912,434   $    2,999,716   $     788,501  $16,700,651
                                        ==============   ==============   =============  ===========

FOR THE SIX MONTHS ENDED JUNE 30, 2001
Net Sales                               $   14,119,557   $    3,562,641   $   1,050,308  $18,732,506
Gross Profit                                 7,547,690        1,981,967         333,354    9,863,011
Operating earnings                           2,060,975           54,481          36,623    2,152,079
Interest expense                              (273,207)               -               -     (273,207)
Other, net                                     (11,518)            (123)              -      (11,641)
                                                                                         -----------
Income before income taxes                   1,776,250           54,358          36,623    1,867,231
                                                                                         -----------
     Depreciation and amortization             273,735           37,584          76,366      387,685
     Fixed asset additions                     358,120          172,434           1,205      531,759
     Total assets                       $   11,970,568   $    2,744,853   $   5,066,000  $19,781,421
                                        ==============   ==============   =============  ===========
</TABLE>


<TABLE>
<CAPTION>

Net  sales  for  geographic  areas  was  as  follows:

                              QUARTER ENDED JUNE 30,
                                2002         2001
                             -----------  -----------
<S>                          <C>          <C>
United States                $ 9,448,686  $ 8,719,941
All other countries              603,350      639,952
                             -----------  -----------
                             $10,052,036  $ 9,359,893
                             ===========  ===========

                            SIX MONTHS ENDED JUNE 30,
                                 2002         2001
                             -----------  -----------
United States                $19,111,120  $17,516,958
All other countries            1,144,867    1,215,548
                             -----------  -----------
                             $20,255,987  $18,732,506
                             ===========  ===========
</TABLE>


5.  GOODWILL  AND  OTHER  INTANGIBLES

As  discussed  in  Note  1, in January 2002, the Company adopted SFAS 142, which
requires  companies  to  stop  amortizing goodwill and certain intangible assets
with indefinite lives.  Instead, it requires that goodwill and intangible assets
deemed  to have indefinite useful lives be reviewed for impairment upon adoption
(January  1,  2002)  and  annually  thereafter.

Under  SFAS 142, goodwill impairment is deemed to exist if the net book value of
a  reporting  unit  exceeds  its  estimated fair value.  The Company's reporting
units  are  generally  the same as the operating segments identified in Note 4 -
Segment Information.  The new methodology in SFAS 142 differs from the Company's
prior  policy,  which was permitted under earlier accounting standards, of using
undiscounted  cash  flows  of  the  acquired  asset  to determine if goodwill is
recoverable.
                                       10
<PAGE>

Upon  adoption  of SFAS 142, the Company recorded a one-time, non-cash charge of
approximately  $4  million  in  the first quarter of 2002 to reduce the carrying
value  of  its  goodwill.  This  charge  in  non-operational  in  nature  and is
reflected  as  a  cumulative  effect of an accounting change in the accompanying
consolidated  statements  of  operations.

The  SFAS  142  goodwill impairment is associated solely with goodwill resulting
from  the  acquisition of Roberts, Cushman & Co., Inc. ("Cushman") in 1995.  The
current  fair  value  of  Cushman and its assets was estimated by an independent
third  party using projected discounted future operating cash flows.  The amount
of  the  impairment  primarily reflects the decline in Cushman's sales since the
acquisition  occurred.

A summary of changes in the Company's goodwill during the six month period ended
June  30,  2002  as  follows:


<TABLE>
<CAPTION>

                  JANUARY 1,   ACQUISITIONS &                JUNE 30,
                     2002       ADJUSTMENTS    IMPAIRMENTS     2002
                  -----------  --------------  ------------  --------
<S>               <C>          <C>             <C>           <C>
Leather Factory   $   332,630       $   4,078            -   $336,708
Tandy Leather         193,951          81,065            -    275,016
Roberts, Cushman    4,008,831               -  $(4,008,831)         -
                  -----------  --------------  ------------  --------
Total             $ 4,535,412       $  85,143  $(4,008,831)  $611,724
                  ===========  ==============  ===========   ========
</TABLE>

As  of  June  30, 2002 and December 31, 2001, the Company's intangible assts and
related  accumulated  amortization  consisted  of  the  following:

<TABLE>
<CAPTION>

                                 AS OF JUNE 30, 2002
                                 -------------------
                                  ACCUMULATED
                         GROSS    AMORTIZATION     NET
                        --------  -------------  --------
<S>                     <C>       <C>            <C>
Trademarks, Copyrights  $542,744  $      83,919  $458,825
Non-Compete Agreements    32,000          4,666    27,334
                        --------  -------------  --------
                        $574,744  $      88,585  $486,159
                        ========  =============  ========
</TABLE>

<TABLE>
<CAPTION>

                               AS OF DECEMBER 31, 2001
                               -----------------------
                                  ACCUMULATED
                         GROSS    AMORTIZATION     NET
                        --------  -------------  --------
<S>                     <C>       <C>            <C>
Trademarks, Copyrights  $542,744  $      65,836  $476,908
                        ========  =============  ========

</TABLE>

The  Company  recorded amortization expense of $12,027 during the second quarter
of  2002  compared to $1,306 during the second quarter of 2001.  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  are as follows:

<TABLE>
<CAPTION>

       LEATHER   TANDY
       FACTORY   LEATHER   CUSHMAN    TOTAL
      --------  --------  --------  -------
<S>   <C>       <C>       <C>       <C>
2002  $  5,836  $ 40,337  $      0  $46,173
2003     5,809    41,004         0   46,813
2004     5,809    41,004         0   46,813
2005     5,809    31,004         0   36,813
2006     5,809    30,339         0   36,148
</TABLE>

During  2002,  the  Company  acquired  the  following  intangible  assets:

<TABLE>
<CAPTION>


                                      AMORTIZATION PERIOD
                                      -------------------
<S>                     <C>                 <C>
Non-Compete Agreements  $   32,000          3 years
</TABLE>
                                       11
<PAGE>

The 2001 results on a historical basis do not reflect the provision of SFAS 142.
Had  the  Company adopted SFAS 142 on January 1, 2001, the historical net income
and basic and diluted net income per common share would have been changed to the
adjusted  amounts  indicated  below:

<TABLE>
<CAPTION>

                                      THREE MONTHS ENDED JUNE 30, 2001
                               -----------------------------------------------
                                               EARNINGS PER    EARNINGS PER
                                NET INCOME    SHARE - BASIC   SHARE - DILUTED
                               -------------  --------------  ----------------
<S>                            <C>            <C>             <C>
Reported net income            $     621,910  $         0.06  $           0.06
Addback goodwill amortization         61,002            0.01              0.01
                               -------------  --------------  ----------------
Adjusted net income            $     682,912  $         0.07  $           0.07
                               =============  ==============  ================
</TABLE>


<TABLE>
<CAPTION>

                                     SIX MONTHS ENDED JUNE 30, 2001
                               -----------------------------------------------
                                               EARNINGS PER    EARNINGS PER
                                NET INCOME    SHARE - BASIC   SHARE - DILUTED
                               -------------  --------------  ----------------
<S>                            <C>            <C>             <C>
Reported net income            $   1,119,194  $         0.11  $           0.11
Addback goodwill amortization        112,284            0.01              0.01
                               -------------  --------------  ----------------
Adjusted net income            $   1,231,478  $         0.12  $           0.12
                               =============  ==============  ================

</TABLE>

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

GENERAL
-------

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"), and
Roberts,  Cushman  &  Company, Inc. ("Cushman").  See Note 4 to the Consolidated
Financial  Statements  for  additional  information  concerning  the  Company's
segments.

Leather Factory, founded in 1980 by Wray Thompson and Ron Morgan, is the premier
distributor  of  leather  products  to  customers  worldwide.  Products  are
distributed  primarily  through  29  sales  units  located  in twenty states and
Canada.  Products  include leather, leatherworking tools, buckles and adornments
for  belts,  leather  dyes  and  finishes, shoe repair supplies, saddle and tack
hardware,  and  do-it-yourself  kits.

Tandy,  which  was acquired in November 2000, is the most recognized supplier in
the leathercraft industry. From its founding in 1919, Tandy has been the primary
resource  for  leathercrafters  world  wide.  Products  include  quality  tools,
leather,  accessories,  kits  and teaching materials and are distributed through
nine  company-owned  retail  stores  and  its  central  distribution  facility.

Cushman,  whose  origins  date  back  to  the  mid-1800's,  custom  designs  and
manufactures  a product line of decorative hat trims for headwear manufacturers.
                                       12
<PAGE>

                              RESULTS OF OPERATIONS
                              ---------------------

The  following  tables  present selected financial data of each of the Company's
three  segments:

<TABLE>
<CAPTION>

               QUARTER ENDED JUNE 30, 2002         QUARTER ENDED JUNE 30, 2001
               ---------------------------         ---------------------------
                                OPERATING                            OPERATING
                     SALES       INCOME                   SALES       INCOME
                  -----------  ----------               ----------  ----------
<S>               <C>          <C>                      <C>         <C>
Leather Factory   $ 7,700,422  $1,018,799               $7,015,765  $1,057,274
Tandy               1,814,310      97,536                1,787,525      74,144
Cushman               537,304      94,814                  556,603      45,321
                  -----------  ----------               ----------  ----------
Total Operations  $10,052,036  $1,211,149               $9,359,893  $1,176,739
                  ===========  ==========               ==========  ==========
</TABLE>


<TABLE>
<CAPTION>

        SIX MONTHS ENDED JUNE 30, 2002          SIX MONTHS ENDED JUNE 30, 2001
        ------------------------------          ------------------------------
                                OPERATING                            OPERATING
                     SALES       INCOME                   SALES       INCOME
                  -----------  ----------              -----------  ----------
<S>               <C>          <C>                     <C>          <C>
Leather Factory   $15,524,939  $1,994,526              $14,119,557  $2,060,975
Tandy               3,692,183     239,037                3,562,641      54,481
Cushman             1,038,865     171,045                1,050,308      36,623
                  -----------  ----------              -----------  ----------
Total Operations  $20,255,987  $2,404,608              $18,732,506  $2,152,079
                  ===========  ==========              ===========  ==========

</TABLE>

Consolidated  net  sales for the quarter ended June 30, 2002 increased $692,000,
or  7.4%,  compared  to  the  same  period  in  2001.  Leather  Factory's  sales
contributed $684,000 to the increase with gains in sales to retail customers and
small  manufacturers.  Tandy  added  $27,000  while  Cushman's  sales  were down
$19,000.  Operating income increased $34,000 for the quarter ended 2002 compared
to the quarter ended 2001.  The increase in Tandy's operating income contributed
$23,000.  Cushman  contributed  $49,000  to the increase while Leather Factory's
operating  income  was  down  $38,000.

Consolidated  net  sales  for  the  six  months  ended  June  30, 2002 increased
$1,523,000,  or  8.1%,  compared  to  the  same  period in 2001. Leather Factory
contributed  $1,405,000 to the increase. Tandy added $129,000 in increased sales
and  Cushman's  sales were down $11,000. Operating income increased $252,000 for
the  first  half  of  2002  over the first six months of 2001. Tandy's increased
operating  income  contributed  $184,000;  Cushman  contributed  $134,000 to the
increase  while  Leather  Factory's  operating  income  was down for the year by
$66,000.

<TABLE>
<CAPTION>

                                                                                     % OF NET SALES
                                                                                   THREE MONTHS ENDED
                                                                                        JUNE  30,       CHANGE IN $ AND %
                                                                                   ------------------  --------------------
                                                                                      2002     2001     $CHANGE   % CHANGE
                                                                                     -------  -------  ---------  ---------
<S>                                                                                  <C>      <C>      <C>        <C>
Net sales                                                                            100.00%  100.00%  $692,143       7.39%
Cost of sales                                                                         45.93    46.81    235,312       5.37
                                                                                     ------   ------    -------       -----
Gross profit                                                                          54.07    53.19    456,831       9.18
Operating expenses                                                                    42.03    40.62    422,421      11.11
                                                                                     ------   ------    -------      ------
Income from operations                                                                12.04    12.57     34,410       2.92
Interest expense and other                                                             0.57     1.38    (71,257)    (55.25)
                                                                                     ------   ------    -------     -------
Income before income taxes and cumulative effect of change in accounting principle    11.47    11.19    105,667      10.08
Income tax provision                                                                   3.60     4.55    (64,470)    (15.14)
                                                                                     ------   ------    -------     -------
Net income before cumulative effect of change in accounting principle                  7.87     6.64    170,137      27.36
Cumulative effect of change in accounting principle                                       -        -          -          -
                                                                                     ------   ------    -------     -------
Net income (loss)                                                                      7.87%    6.64%  $170,137      27.36%
                                                                                     ======   ======   ========     =======
</TABLE>
                                       13
<PAGE>

<TABLE>
<CAPTION>

                                                                                     % OF NET SALES
                                                                                     SIX MONTHS ENDED
                                                                                         JUNE  30,        CHANGE  IN  $  AND  %
                                                                                     -----------------  -----------------------
                                                                                       2002     2001      $CHANGE     % CHANGE
                                                                                     --------  -------  ------------  ---------
<S>                                                                                  <C>       <C>      <C>           <C>
Net sales                                                                             100.00%  100.00%  $ 1,523,481       8.13%
Cost of sales                                                                          46.66    47.35       582,271       6.56
                                                                                     --------  -------  -----------   ---------
Gross profit                                                                           53.34    52.65       941,210       9.54
Operating expenses                                                                     41.47    41.16       688,681       8.93
                                                                                     --------  -------  -----------   ---------
Income from operations                                                                 11.87    11.49       252,529      11.73
Interest expense and other                                                              0.81     1.52      (120,916)    (42.45)
                                                                                     --------  -------  ------------  ---------
Income before income taxes and cumulative effect of change in accounting principle     11.06     9.97       373,445      20.00
Income tax provision                                                                    3.40     3.99       (58,713)     (7.85)
                                                                                     --------  -------  ------------  ---------
Net income before cumulative effect of change in accounting principle                   7.66     5.98       432,158      38.61
Cumulative effect of change in accounting principle                                   (19.79)       -    (4,008,831)        N/A
                                                                                     --------  -------  ------------  ---------
Net income (loss)                                                                    (12.13%)    5.98%  $(3,576,673)  (319.58%)
                                                                                     ========  =======  ===========   =========
</TABLE>


LEATHER  FACTORY  OPERATIONS

Net  sales from Leather Factory's 29 sales/distribution units increased 9.8% for
the  second  quarter of 2002.  The two units opened in the third quarter of 2001
contributed  28.0%  of the sales increase.  Same store sales increased 7.0% over
the  second  quarter  of  2001.

The  following  table  presents  TLF's  sales mix by customer categories for the
quarters  ended  June  30,  2002  and  2001:

<TABLE>
<CAPTION>


                                                                                                  QUARTER ENDED
CUSTOMER GROUP                                                                                   6/30/02   6/30/01
--------------                                                                                   -------   -------
<S>                                                                                              <C>       <C>
  RETAIL (end users, consumers, individuals)                                                         18%       16%
  INSTITUTION (prisons, prisoners, hospitals, schools, YMCA, Boy Scouts, etc.)                        8%       10%
  WHOLESALE (saddle & tack stores, resellers & distributors, shoe repair shops, dealers, etc.)       34%       34%
  CRAFT (craft and fabric stores)                                                                    25%       28%
  MIDAS (small manufacturers)                                                                         8%        5%
  ASC (Authorized Sales Centers)                                                                      7%        7%
                                                                                                 -------   -------
                                                                                                    100%      100%
                                                                                                 =======   =======
</TABLE>

As  the  table indicates, Leather Factory's sales mix this quarter varied little
from  the same quarter in 2001. Sales to all customer groups, with the exception
of  institutional,  increased  in  dollars  over the second quarter of 2001. The
institutional  business  has  been  softer  over the past six to nine months due
primarily  to  the additional security restrictions put in place at many prisons
after  September  11th  that  have  hindered  purchases  of  hobbycrafts.


Operating  income for Leather Factory decreased $38,600 or 3.6% of sales for the
current  quarter  compared to 2001.  Operating expenses as a percentage of sales
were  41.0%  compared  to 38.8% a year ago.  Personnel and related costs account
for  the  majority  of  the increase as the number of employees has increased 5%
over  the  past  year.  Increased advertising costs have also contributed to the
increase  in  operating  expenses.
                                       14
<PAGE>

TANDY  LEATHER  OPERATIONS

Net  sales  for  Tandy,  which  consisted  of  six  retail  stores and a central
distribution  center  as of June 30, 2002, increased 1.5% for the second quarter
of  2002  over  the same quarter last year.  The six retail stores opened so far
this  year added $517,400 in sales while the central distribution center's sales
decreased by $490,600 for the quarter.  This decrease reflects a policy decision
to  distribute  orders  received by the central distribution center to the Tandy
retail  stores.  Management believes that this will speed delivery of goods with
lower  freight  charges  and increased customer satisfaction and loyalty through
interaction  with  store  personnel.

Effective  April  1,  2002, a change of software allows Tandy to track its sales
mix  in  a  similar  fashion  as  that  of Leather Factory.  The following table
presents Tandy's sales mix by customer categories for the quarter ended June 30,
2002:

<TABLE>
<CAPTION>



<S>                                                                                             <C>
                                                                                                QUARTER ENDED
CUSTOMER GROUP                                                                                        6/30/02
--------------                                                                                  -------------
  RETAIL (end users, consumers, individuals)                                                               57%
  INSTITUTION (prisons, prisoners, hospitals, schools, YMCA, Boy Scouts, etc.)                             17%
  WHOLESALE (saddle & tack stores, resellers & distributors, shoe repair shops, dealers, etc.)             16%
  CRAFT (craft and fabric stores)                                                                           *
  MIDAS (small manufacturers)                                                                               1%
  ASC (Authorized Sales Centers)                                                                            9%
                                                                                                --------------
                                                                                                          100%
                                                                                                ==============
<FN>
     *  less  than  1%
</TABLE>

Tandy's institutional business is down, primarily as a result of the decrease in
orders  from  summer camps.  We believe the decline is attributable to decreased
camp  attendance  by  young  campers  in  the  wake  of  parental concerns about
traveling.

Operating  income for Tandy increased $23,500 in the current quarter as a result
of an increase in gross profit margin of 3.65% or $75,500, offset somewhat by an
increase  in  operating  expenses  of  $52,000.  Tandy's operating expenses were
54.55%  of  sales for the quarter ended June 30, 2002 compared to 52.01% for the
same  quarter  last  year.  The increase is the result of the new stores opening
(resulting  in  a  40%  increase  in  Tandy  personnel,  plus  additional rents,
telephone service, etc.) that was partially offset  by lower shipping costs.  As
more  retail  stores  are  opened, we believe that "over the counter" sales will
increase  as  mail  order  sales  decrease,  thereby continuing the reduction of
freight  costs  to  ship  product  to  customers.

Tandy has opened (or has announced plans to open) retail stores in the following
locations  during  2002:

<TABLE>
<CAPTION>



City, State              Month Opened  Sq Footage
-----------------------  ------------  ----------
<S>                      <C>           <C>

Oklahoma City, Oklahoma  January 2002       3,160
Boise, Idaho             March 2002         1,800
Sacramento, California   June 2002          1,600
Hartford, Connecticut    May 2002           1,200
Salt Lake City, Utah     June 2002          1,750
Fort Worth, Texas        July 2002          3,000
Austin, Texas **         June 2002          3,800
Dallas, Texas            August 2002        1,700
Albuquerque, New Mexico  August 2002        1,764
Las Vegas, Nevada        August 2002        1,350
<FN>

 **  converted  from  Leather  Factory  distribution  unit
</TABLE>
                                       15
<PAGE>

CUSHMAN  OPERATIONS

Net  sales  for  Cushman  decreased  $19,000  for  the second quarter of 2002, a
reduction  of  3.5%.  The gross profit margin also dropped by slightly less than
1%  for  the  quarter; however, the year-to-date margin is almost 2% higher than
last  year.  We  made several one-time sales in the second quarter of 2001 at an
unusually  high gross margin that were not repeated in the current quarter, thus
explaining  the  slight  sales decrease and gross profit margin fluctuation this
quarter.

Operating  income  for  Cushman  increased  $49,500.  The  adoption  of SFAS 142
(eliminating the amortization of goodwill beginning in 2002) produced $30,000 of
the  increase.  Shipping  decreased  slightly due to the reduction in sales, and
personnel  costs  were  down as well due to the slight decrease in the number of
employees  for  the  quarter  ended  June  30,  2002  compared to June 30, 2001.


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

The  change  in  accounting principle discussed above had significant effects on
our  consolidated  balance  sheet  at June 30, 2002.  Total goodwill was reduced
from  $4,535,412  at  the  end  of  2001  to  $611,724.  This  reduction was the
principal  cause of the reduction in total assets from $19,548,323 at the end of
2001  to  $16,700,651  at  the end of the second quarter of 2002 (a reduction of
14.6%).  Total stockholders' equity was reduced from $12,423,671 at December 31,
2001 to $10,070,520 at June 30, 2002 (a reduction of 18.9%).  This reduction was
also  attributable  to  the  change  in accounting principle, but the effect was
partially  offset  by  operating  results  from  the  first  half  of this year.

The  Company's  investment  in  accounts receivable was $2.6 million at June 30,
2002,  up  $310,000  from  $2.3  million  at year-end 2001.  The average days to
collect  accounts  improved from 46.4 days in the second quarter of 2001 to 44.3
days in the second quarter of 2002.  Tandy's average days to collect experienced
the  most  improvement,  from  55.8  days  in  2001 to 38.9 days for the current
quarter  of  2002.

Inventory  increased $489,000 to $9.5 million at June 30, 2002 from $9.1 million
at  year-end  2001.  Inventory  turnover increased to an annualized rate of 4.36
times for the first six months of 2002, an improvement over the turnover rate of
4.12  times  for  the  first  six months of 2001 and 4.08 times for all of 2001.

Other  current  assets  increased  $481,000  to  $960,000  at June 30, 2002 from
$479,000  at  year-end  2001  and  consisted  of  the  following:

<TABLE>
<CAPTION>

                                          June 30,   December 31,
                                            2002         2001
                                          ---------  -------------
<S>                                       <C>        <C>
Accounts receivable - employees           $  14,057  $      40,550
Accounts receivable - other                  91,763         29,546
Prepaid insurance                           188,872              -
Prepaid expenses - advertising and other    478,399        349,242
Downpayments on Fort Worth remodel project  127,420              -
Other                                        59,716         60,052
                                          ---------  -------------
                                          $ 960,227  $     479,390
                                          =========  =============

</TABLE>

The  Fort  Worth complex houses our corporate and administrative offices as well
as  our  central  Leather  Factory  warehouse  and  factory, and Tandy's central
distribution  center  (call  center  and  warehouse).  We  have negotiated a new
agreement  with  the  landlord  extending the lease term through March 2013.  In
conjunction  with  the  new  agreement,  we  have  begun a remodeling project to
consolidate  Leather  Factory and Tandy's warehouses, to relocate the factory in
closer proximity to the warehouse, and to remodel the Fort Worth Leather Factory
store  into  a more retail-oriented presentation.  We estimate the total cost of
the  project  to  be  $500,000  to  $600,000.  As  of June 30, 2002, we had paid
$127,420  as  downpayments  on  renovations.  The  project  is  expected  to  be
completed  by  the  end  of  2002.
                                       16
<PAGE>

Notes payable and current maturities of long-term debt decreased from $4,527,904
at  the  end of 2001 to $3,328,954 at June 30, 2002.  Accounts payable increased
$591,000  to $1.9 million at the end of the second quarter, due primarily to the
increase  in  inventory.  The  Company's  current  ratio  improved  from 1.82 at
December  31,  2001  to  2.13  at  June  30,  2002.

The  primary sources of liquidity and capital resources during the first half of
2002 were funds provided by operating activities in the amount of $1,305,000 and
the  Company's  Credit  and  Security Agreement with Wells Fargo Bank Minnesota,
N.A.  ("Wells  Fargo").  The Company used its operating cash flow and additional
funds  on  hand  at  the  beginning  of  the  quarter  to pay down loan balances
($1,201,088), purchase equipment ($232,810), purchase the assets of two existing
leathercraft  stores  ($227,747).

Approximately  27%  of  the  2002  capital  spending was for computer equipment,
software,  and fixtures for the new Tandy retail stores, 17% was for Tandy's new
point-of-sale  software,  16%  was  for  inventory  scanning  equipment  for the
existing  Leather  Factory  stores, 26% was for various computer workstation and
software upgrades in existing locations and departments, and 14% was for various
furniture  and  fixtures.

The  revolving  credit  facility with Wells Fargo is based upon the level of the
Company's  accounts  receivable  and inventory.  At June 30, 2002, the available
and  unused  portion  of  the  credit  facility  was  approximately  $3,201,000.

The Company believes that the current sources of liquidity and capital resources
will  be  sufficient to fund current operations and the opening of any potential
new  Tandy  retail stores or Leather Factory sales/distribution units.  In 2002,
the  funding  for the opening of any new locations is expected to be provided by
operating leases, cash flows from operating activities, and the revolving credit
facility.


ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

The  Company's Credit Facility includes loans with interest rates that vary with
changes  in  the  prime  rate.  An increase of one percentage point in the prime
rate  would  not  have  a  material  impact  on  the  Company's future earnings.


PART  II.  OTHER  INFORMATION

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

On  May 23, 2002, the Annual Meeting of the Stockholders of the Company was held
in the Superbowl Room at the Wyndham Hotel, Arlington, Texas to consider and act
on  the  election  of  the following individuals to serve as directors until the
Company's 2003 Annual Meeting of Stockholders or until their successors are duly
elected  and  qualified:

          Shannon  L. Greene     Michael A. Markwardt          Anthony C. Morton
          Joseph  R.  Mannes     Robin  L.  Morgan               Wray  Thompson
          H.W.  "Hub"  Markwardt     Ronald C. Morgan          William M. Warren
                                       17
<PAGE>

The  following table shows the votes cast for and against, as well as those that
abstained  from  voting,  the  election of these individuals as directors of the
Company:

<TABLE>
<CAPTION>

                         For     Against  Abstaining
                      ---------  -------  ----------
<S>                   <C>        <C>      <C>
Shannon L. Greene     8,926,606    4,979       2,500
Joseph R. Mannes      8,926,606    4,979       2,500
H.W. "Hub" Markwardt  8,926,522    5,063       2,500
Michael A. Markwardt  8,926,606    4,979       2,500
Robin L. Morgan       8,926,522    5,063       2,500
Ronald C. Morgan      8,926,606    4,979       2,500
Anthony C. Morton     8,926,606    4,979       2,500
Wray Thompson         8,926,606    4,979       2,500
William M. Warren     8,926,606    4,979       2,500
</TABLE>


The  Company's proxy statement dated April 23, 2002, for the 2002 Annual Meeting
of Stockholders, provided detailed information about this meeting and the action
to  be  taken  there.

ITEM  5.  OTHER  INFORMATION

On  June  17, 2002, Wray Thompson, the Company's Chairman of the Board and Chief
Executive  Officer,  and  Sally  Thompson,  his  wife,  entered  into  an Option
Agreement  with Arlington National Bank, as Trustee of The Leather Factory, Inc.
Employee  Stock  Ownership  Plan  and  Trust ("ESOP), pursuant to which the ESOP
trustee,  in  its  discretion,  may  purchase  from  Mr. and Mrs. Thompson up to
200,000  shares  of the Company's common stock at an exercise price equal to the
average  of  the closing trade price of the stock on the American Stock Exchange
over  the  previous  seven  days (disregarding days on which the exchange is not
open  for  trading);  provided, however, the exercise price shall not exceed the
trade  price for the Company's common stock for the second trade on the American
Stock Exchange on the day of exercise of the option.  However, no shares will be
sold  under  the  Option Agreement if the exercise price (computed in the manner
provided  in  the  preceding  sentence)  is  less  than  $2.75  per  share.

The  option  term  is  for one year, but Mr. and Mrs. Thompson may terminate the
option  after December 31, 2002 if the trustee has not purchased at least 75,000
shares  pursuant  to  the  Option  Agreement.  Earlier,  Mr.  Thompson  filed an
amendment  to  his  previously  filed  Schedule  13D  disclosing  this  matter.


ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits
     --------

     None

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

     None

                                       18
<PAGE>

                                   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:  August  13,  2002               By:   /s/  Wray  Thompson
                                             -------------------
                                             Wray  Thompson
                                             Chairman of the Board and
                                             Chief Executive Officer

Date:  August  13,  2002               By:   /s/  Shannon  L.  Greene
                                             ------------------------
                                             Shannon  L.  Greene
                                             Chief Financial Officer and
                                             Treasurer (Chief  Accounting
                                             Officer)


-----------------------------------------------------------

                                  CERTIFICATION

Pursuant  to Section 906 of the Sarbane-Oxley Act of 2002 and only to the extent
required  by  that  provision,  the  undersigned  certify that this report fully
complies  with  the  requirements  of  Section  13(a)  or  Section  15(d) of the
Securities  Exchange  Act  of  1934  and  that all information contained in this
report  fairly  presents  in  all  material respects the financial condition and
results  of  operations  of  the  issuer.

Date:  August  13,  2002

                    /s/ Wray Thompson
                   ------------------
                    Wray  Thompson,  Chief  Executive  Officer


                    /s/ Shannon L. Greene
                    ---------------------
                    Shannon  L.  Greene,  Chief  Financial  Officer


-----------------------------------------------------------
                                       19
<PAGE>