|  |
|--|

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

| Class                                          | Shares outstanding as of August 10,      2009 |
|------------------------------------------------|-----------------------------------------------|
| Common      Stock, par value $0.0024 per share | 10,664,328                                    |

----

|                                                                                                                              | PAGE NO.       |
|-----------------------------------------------------------------------------------------------------------------------------------|----------------|
|                                                                                                                              |           |
| PART      I.  FINANCIAL INFORMATION                                                                                     |           |
|                                                                                                                              |           |
|   Item      1.  Financial Statements                                                                          |           |
|                                                                                                                              |           |
|     Consolidated      Balance Sheets as of June 30, 2009 and December 31, 2008                                |        1  |
|                                                                                                                              |           |
|     Consolidated      Statements of Income for the three and six months ended June 30, 2009 and      2008     |        2  |
|                                                                                                                              |           |
|     Consolidated      Statements of Cash Flows for the six months ended June 30, 2009 and      2008           |        3  |
|                                                                                                                              |           |
|     Consolidated      Statements of Stockholders' Equity for the six months ended June 30, 2009      and 2008 |        4  |
|                                                                                                                              |           |
|     Notes      to Consolidated Financial Statements                                                           |        5  |
|                                                                                                                              |           |
|   Item      2.  Management's Discussion and Analysis of Financial Condition      and Results of Operations    |        9  |
|                                                                                                                              |           |
|   Item      3.  Quantitative and Qualitative Disclosures About Market      Risk                               |        12 |
|                                                                                                                              |           |
|   Item      4.  Controls and Procedures                                                                       |        12 |
|                                                                                                                              |           |
| PART      II.  OTHER INFORMATION                                                                                        |           |
|                                                                                                                              |           |
|   Item      2.  Changes in Securities, Use of Proceeds and Issuer Purchases      of Equity Securities         |        13 |
|                                                                                                                              |           |
|   Item      4.  Submission of Matters to a Vote of Security      Holders                                      |        13 |
|                                                                                                                              |           |
|   Item      6.  Exhibits                                                                                      |        13 |
|                                                                                                                              |           |
| SIGNATURES                                                                                                                        |           |
|                                                                                                                              |           |

----

|                                                       | June      30,  2009(unaudited) |                                                                   | December      31,  2008(audited)                                                  |
|------------------------------------------------------------|------------------------------------------|------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
| CURRENT      ASSETS:                                       |                                     |                                                                   |                                                                                        |
|                                                       |                                     | Cash                                                                   | $5,618,813                                                                                  |   | $7,810,298 |
|                                                       |                                     | Short-term      investments, including certificates of deposit         | 5,572,000                                                                                   |   | 3,011,000 |
|                                                       |                                     | Accounts      receivable-trade, net of allowance for doubtful accounts |                                                                                        |   |   |
|                                                       |                                     |                                                                   |                                                                                        | of      $35,000 and $43,000 in 2009 and 2008, respectively | 1,657,816 |   | 1,180,349 |
|                                                       |                                     | Inventory                                                              | 15,789,292                                                                                  |   | 16,011,147 |
|                                                       |                                     | Deferred      income taxes                                             | 229,162                                                                                     |   | 229,501 |
|                                                       |                                     | Other      current assets                                              | 1,072,512                                                                                   |   | 777,550 |
|                                                       |                                     | Total      current assets                                              | 29,939,595                                                                                  |   | 29,019,845 |
|                                                       |                                     |                                                                   |                                                                                        |
| PROPERTY      AND EQUIPMENT, at cost                       | 15,807,808                               |                                                                   | 15,340,732                                                                                  |
| Less      accumulated depreciation and amortization        | (5,570,565)                              |                                                                   | (5,019,885)                                                                                 |
|                                                       | 10,237,243                               |                                                                   | 10,320,847                                                                                  |
|                                                       |                                     |                                                                   |                                                                                        |
| GOODWILL                                                   | 971,464                                  |                                                                   | 966,655                                                                                     |
| OTHER      INTANGIBLES, net of accumulated amortization of |                                     |                                                                   |                                                                                        |
|                                                       |                                     | $392,000      and $367,000 in 2009 and 2008, respectively              | 330,856                                                                                     |   | 355,492 |
| OTHER      assets                                          | 312,022                                  |                                                                   | 313,074                                                                                     |
|                                                       | $41,791,180                              |                                                                   | $40,975,913                                                                                 |
|                                                       |                                     |                                                                   |                                                                                        |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                  |                                     |                                                                   |                                                                                        |
| CURRENT      LIABILITIES:                                  |                                     |                                                                   |                                                                                        |
|                                                       |                                     | Accounts      payable-trade                                            | $1,514,288                                                                                  |   | $1,148,577 |
|                                                       |                                     | Accrued      expenses and other liabilities                            | 2,979,974                                                                                   |   | 3,182,194 |
|                                                       |                                     | Income      taxes payable                                              | 53,805                                                                                      |   | 271,122 |
|                                                       |                                     | Current      maturities of capital lease obligation                    | -                                                                                           |   | 265,111 |
|                                                       |                                     | Current      maturities of long-term debt                              | 202,500                                                                                     |   | 202,500 |
| Total      current liabilities                             | 4,750,567                                |                                                                   | 5,069,504                                                                                   |
|                                                       |                                     |                                                                   |                                                                                        |
| DEFERRED      INCOME TAXES                                 | 644,896                                  |                                                                   | 600,309                                                                                     |
|                                                       |                                     |                                                                   |                                                                                        |
| LONG-TERM      DEBT, net of current maturities             | 3,611,250                                |                                                                   | 3,712,500                                                                                   |
| CAPITAL      LEASE OBLIGATION, net of current maturities   | -                                        |                                                                   | 328,838                                                                                     |
|                                                       |                                     |                                                                   |                                                                                        |
| COMMITMENTS      AND CONTINGENCIES                         |                                     |                                                                   |                                                                                        |
|                                                       |                                     |                                                                   |                                                                                        |
|                                                       | STOCKHOLDERS'      EQUITY:               |                                                                   |                                                                                        |   |
|                                                       |                                     |                                                                   | Preferred      stock, $0.10 par value; 20,000,000 shares authorized;                        |   |   |   |
|                                                       |                                     |                                                                   | none      issued or outstanding; attributes to be determined on    issuance                 | - |   | - |
|                                                       |                                     |                                                                   | Common      stock, $0.0024 par value; 25,000,000 shares authorized;                         |   |   |   |
|                                                       |                                     |                                                                   |     11,019,951      and 10,994,951 shares issued at 2009 and 2008;      |   |   |   |
|                                                       |                                     |                                                                   |     10,665,281      and 10,664,555 shares outstanding at 2009 and 2008, | 26,448 |   | 26,388 |
|                                                       |                                     |                                                                   | Paid-in      capital                                                                        | 5,490,360 |   | 5,464,443 |
|                                                       |                                     |                                                                   | Retained      earnings                                                                      | 28,101,021 |   | 26,641,853 |
|                                                       |                                     |                                                                   | Treasury      stock (354,670 and 330,396 shares at cost at 2009 and    2008))               | (893,282) |   | (828,385) |
|                                                       |                                     |                                                                   | Accumulated      other comprehensive income                                                 | 59,920 |   | (39,537) |
| Total      stockholders' equity                            | 32,784,467                               |                                                                   | 31,264,762                                                                                  |
|                                                       | $41,791,180                              |                                                                   | $40,975,913                                                                                 |

----

|                                                                                                                        | THREE      MONTHS                                           |   | SIX      MONTHS                                             |
|-----------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------|--------|-------------------------------------------------------------|
|                                                                                                                        | 2009                                                        |   | 2008                                                        |   | 2009 |   | 2008 |
| NET      SALES                                                                                                              | $13,214,940                                                 |   | $13,847,964                                                 |   | $26,575,930 |   | $27,108,124 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| COST      OF SALES                                                                                                          | 5,473,058                                                   |   | 5,836,312                                                   |   | 11,017,602 |   | 11,355,450 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
|           Gross      profit                                               | 7,741,882                                                   |   | 8,011,652                                                   |   | 15,558,328 |   | 15,752,674 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| OPERATING      EXPENSES                                                                                                     | 6,599,484                                                   |   | 6,920,134                                                   |   | 13,378,621 |   | 13,939,773 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| INCOME      FROM OPERATIONS                                                                                                 | 1,142,398                                                   |   | 1,091,518                                                   |   | 2,179,707 |   | 1,812,901 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| OTHER      INCOME (EXPENSE):                                                                                                |                                                        |   |                                                        |   |   |   |   |
|           Interest      expense                                           | (83,575)                                                    |   | (87,912)                                                    |   | (160,984) |   | (169,653) |
|           Other,      net                                                 | 142,915                                                     |   | 26,293                                                      |   | 220,187 |   | 306,683 |
|                Total      other income (expense) | 59,340                                                      |   | (61,619)                                                    |   | 59,203 |   | 137,030 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| INCOME      BEFORE INCOME TAXES                                                                                             | 1,201,738                                                   |   | 1,029,899                                                   |   | 2,238,910 |   | 1,949,931 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| PROVISION      FOR INCOME TAXES                                                                                             | 440,487                                                     |   | 374,649                                                     |   | 779,742 |   | 710,183 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| NET      INCOME                                                                                                             | $761,251                                                    |   | $655,250                                                    |   | $1,459,168 |   | $1,239,748 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| NET      INCOME PER COMMON SHARE-BASIC                                                                                      | $         0.07 |   | $         0.06 |   | $         0.14 |   | $         0.11 |
| NET      INCOME PER COMMON SHARE-DILUTED                                                                                    | $         0.07 |   | $         0.06 |   | $         0.14 |   | $         0.11 |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
|                                                                                                                        |                                                        |   |                                                        |   |   |   |   |
| Weighted      Average Number of Shares Outstanding:                                                                         |                                                        |   |                                                        |   |   |   |   |
|   Basic                                                                                                           | 10,673,245                                                  |   | 10,981,378                                                  |   | 10,650,573 |   | 10,979,235 |
|   Diluted                                                                                                         | 10,731,998                                                  |   | 11,076,340                                                  |   | 10,705,871 |   | 11,072,102 |

----

|                                                                                  | 2009        |   | 2008        |
|---------------------------------------------------------------------------------------|-------------|--------|-------------|
| CASH      FLOWS FROM OPERATING ACTIVITIES:                                            |        |   |        |
|   Net      income                                                           | $1,459,168  |   | $1,239,748  |
|   Adjustments      to reconcile net income to net                           |        |   |        |
|    cash      provided by operating activities-                         |        |   |        |
|      Depreciation      & amortization                    | 561,253     |   | 509,324     |
|      Loss      on disposal of assets                         | -           |   | 14,760      |
|      Non-cash      stock-based compensation                  | 2,540       |   | 15,250      |
|      Deferred      income taxes                              | 44,926      |   | 358,413     |
|      Other                                                   | 84,037      |   | (36,354)    |
|      Net      changes in assets and liabilities:             |        |   |        |
|        Accounts      receivable-trade, net         | (477,467)   |   | 183,169     |
|        Inventory                                   | 221,855     |   | 2,162,406   |
|        Income      taxes                           | (217,317)   |   | (184,140)   |
|        Other      current assets                   | (294,962)   |   | 262,063     |
|        Accounts      payable                       | 365,711     |   | 292,114     |
|        Accrued      expenses and other liabilities | (202,220)   |   | 720,975     |
|      Total      adjustments                                  | 88,356      |   | 4,297,980   |
|                                                                                  |        |   |        |
|       Net      cash provided by operating activities    | 1,547,524   |   | 5,537,728   |
|                                                                                  |        |   |        |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                                            |        |   |        |
|   Purchase      of property and equipment                                   | (442,402)   |   | (3,098,638) |
|   Purchase      of certificates of deposit                                  | (5,336,000) |   | (396,000)   |
|   Proceeds      from maturities of certificates of deposit                  | 2,775,000   |   | -           |
|   Proceeds      from sale of assets                                         | -           |   | 38,181      |
|   Decrease      (increase) in other assets                                  | 1,052       |   | 721,907     |
|                                                                                  |        |   |        |
|       Net      cash used in investing activities        | (3,002,350) |   | (2,734,550) |
|                                                                                  |        |   |        |
| CASH      FLOWS FROM FINANCING ACTIVITIES:                                            |        |   |        |
|   Payments      on long-term debt and notes payable                         | (101,250)   |   | (33,750)    |
|   Payments      on capital lease obligations                                | (593,949)   |   | (103,647)   |
|   Repurchase      of common stock (treasury stock)                          | (64,897)    |   | -           |
|   Proceeds      from issuance of common stock                               | 23,437      |   | 13,500      |
|                                                                                  |        |   |        |
|       Net      cash used in financing activities        | (736,659)   |   | (123,897)   |
|                                                                                  |        |   |        |
| NET      CHANGE IN CASH                                                               | (2,191,485) |   | 2,679,281   |
|                                                                                  |        |   |        |
| CASH,      beginning of period                                                        | 7,810,298   |   | 6,310,396   |
|                                                                                  |        |   |        |
| CASH,      end of period                                                              | $5,618,813  |   | $8,989,677  |
|                                                                                  |        |   |        |
| SUPPLEMENTAL      DISCLOSURES OF CASH FLOW INFORMATION:                               |        |   |        |
|   Interest      paid during the period                                      | $160,487    |   | $169,653    |
|   Income      taxes paid during the period, net of (refunds)                | 884,425     |   | 534,957     |
|                                                                                  |        |   |        |
| NON-CASH      INVESTING ACTIVITIES:                                                   |        |   |        |
|   Equipment      acquired under capital lease financing arrangements        | -           |   | 803,712     |

----

|                                                                | Number      of Shares |   | Par      Value |   | Paid-in      Capital |   | TreasuryStock |   | Retained      Earnings |   | Accumulated      Other Comprehensive Income      (Loss) |   |  Total |   | ComprehensiveIncome      (Loss) |
|---------------------------------------------------------------------|-----------------------|--------|----------------|--------|----------------------|--------|---------------|--------|------------------------|--------|---------------------------------------------------------|--------|-------------|--------|---------------------------------|
| BALANCE,      December 31, 2007                                     | 10,977,092            |   | $26,359        |   | $5,419,477           |   | $(25,487)     |   | $24,037,672            |   | $357,483                                                |   | $29,815,504 |   |                            |
|                                                                |                  |   |           |   |                 |   |          |   |                   |   |                                                    |   |        |   |                            |
| Shares      issued - stock options and warrants      exercised | 10,000                |   | 24             |   | 13,476               |   | -             |   | -                      |   | -                                                       |   | 13,500      |   |                            |
| Stock-based      compensation                                       | -                     |   | -              |   | 15,250               |   | -             |   | -                      |   | -                                                       |   | 15,250      |   |                            |
| Net  income                                               | -                     |   | -              |   | -                    |   | -             |   | 1,239,748              |   | -                                                       |   | 1,239,748   |   | $1,239,748                      |
| Translation      adjustment                                         | -                     |   | -              |   | -                    |   | -             |   | -                      |   | (39,362)                                                |   | (39,362)    |   | (39,362)                        |
| BALANCE,      June 30, 2008                                         | 10,987,092            |   | $26,383        |   | $5,448,203           |   | $(25,487)     |   | $25,277,420            |   | $318,121                                                |   | $31,044,640 |   |                            |

| Comprehensive      income for the six months ended June 30, 2008 | $1,200,386 |
|------------------------------------------------------------------|------------|

| BALANCE,      December 31, 2008                   | 10,664,555 |   | $26,388 |   | $5,464,443 |   | $(828,385) |   | $26,641,853 |   | $(39,537) |   | $31,264,762 |   |       |
|---------------------------------------------------|------------|--------|---------|--------|------------|--------|------------|--------|-------------|--------|-----------|--------|-------------|--------|------------|
|                                              |       |   |    |   |       |   |       |   |        |   |      |   |        |   |       |
| Shares      issued - stock options exercised | 25,000     |   | 60      |   | 23,377     |   | -          |   | -           |   | -         |   | 23,437      |   |       |
| Purchase      of treasury stock                   | (24,274)   |   | -       |   | -          |   | (64,897)   |   | -           |   | -         |   | (64,897)    |   |       |
| Stock-based      compensation                     | -          |   | -       |   | 2,540      |   | -          |   | -           |   | -         |   | 2,540       |   |       |
| Net  income                             | -          |   | -       |   | -          |   | -          |   | 1,459,168   |   | -         |   | 1,459,168   |   | $1,459,168 |
| Translation      adjustment                       | -          |   | -       |   | -          |   | -          |   | -           |   | 99,457    |   | 99,457      |   | 99,457     |
| BALANCE,      June 30, 2009                       | 10,665,281 |   | $26,448 |   | $5,490,360 |   | $(893,282) |   | $28,101,021 |   | $59,920   |   | $32,784,467 |   |       |

| Comprehensive      income for the six months ended June 30, 2009 | $1,558,625 |
|------------------------------------------------------------------|------------|

----

|                                   | As      of         |
|----------------------------------------|--------------------|
|                                   | June      30, 2009 |   | December      31, 2008 |
| Inventory      on hand:                |               |   |   |
| Finished      goods held for sale      | $14,402,833        |   | $14,867,830 |
| Raw      materials and work in process | 591,329            |   | 415,644 |
| Inventory      in transit              | 795,130            |   | 727,673 |
|                                   | $15,789,292        |   | $16,011,147 |

|                              | Leather Factory | Tandy Leather | Total    |
|-----------------------------------|-----------------|---------------|----------|
| Balance,      December 31, 2007   | $607,130        | $383,406      | $990,536 |
| Acquisitions      and adjustments | -               | -             | -        |
| Foreign      exchange gain (loss) | (3,010)         | -             | (3,010)  |
| Impairments                       | -               | -             | -        |
| Balance,      June 30, 2008       | $604,120        | $383,406      | $987,526 |

|                              | Leather Factory | Tandy Leather | Total    |
|-----------------------------------|-----------------|---------------|----------|
| Balance,      December 31, 2008   | $583,259        | $383,406      | $966,665 |
| Acquisitions      and adjustments | -               | -             | -        |
| Foreign      exchange gain (loss) | 4,799           | -             | 4,799    |
| Impairments                       | -               | -             | -        |
| Balance,      June 30, 2009       | $588,058        | $383,406      | $971,464 |

|                        | As      of June 30, 2009 |                          | As      of December 31, 2008 |
|-----------------------------|--------------------------|-------------------------------|------------------------------|
|                        | Gross                    | Accumulated      Amortization | Net                          |   | Gross | Accumulated      Amortization | Net |
| Trademarks,      Copyrights | $544,369                 | $337,921                      | $206,448                     |   | $544,369 | $319,776 | $224,593 |
| Non-Compete      Agreements | 178,808                  | 54,400                        | 124,408                      |   | 177,708 | 46,809 | 130,899 |
|                        | $723,177                 | $392,321                      | $330,856                     |   | $722,077 | $366,585 | $355,492 |

|   | Wholesale Leathercraft | Retail Leathercraft | Total   |
|--------|------------------------|---------------------|---------|
| 2009   | $20,954                | $30,337             | $51,291 |
| 2010   | 20,954                 | 30,337              | 51,291  |
| 2011   | 20,027                 | 30,337              | 50,364  |
| 2012   | 1,250                  | 30,337              | 31,587  |
| 2013   | -                      | 30,337              | 30,337  |

----

| Due      within one year                  | $4,383,000 |
|-------------------------------------------|------------|
| Due      between one and five years       | 892,000    |
| Due      between five and ten years       | 99,000     |
| Due      between ten and fifteen years    | 99,000     |
| Due      between fifteen and twenty years | 99,000     |
|                                      | $5,572,000 |

|                                                                                                                                                                                                             | June 30, 2009                |   | December 31, 2008 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------|--------|-------------------|
| Credit      Agreement with JPMorgan Chase Bank – collateralized by real estate;      payable as follows:                                                                                                   |                         |   |              |
| Line      of Credit Note dated July 31, 2007, converted to a 10-year term note on      April 30, 2008; $16,875      monthly principal payments plus interest at 7.1% per annum; matures April      30, 2018      |  $  3,813,750 |   |  $3,915,000  |
|                                                                                                                                                                                                             |                         |   |              |
| Capital      lease secured by HVAC equipment – total monthly principal and interest      payments of $24,328 at approximately 5.7% interest per annum,matures      February 2011; paid in full in May 2009 |  -                      |   |  593,949     |
|                                                                                                                                                                                                             | 3,813,750                    |   | 4,508,949         |
| Less      - Current maturities                                                                                                                                                                                   | (202,500)                    |   | (467,611)         |
|                                                                                                                                                                                                             | $3,611,250                   |   | $4,041,338        |

----

|                              | Weighted      Average Exercise      Price | #of      shares | Weighted      Average Remaining Contractual      Term (in      years) | Aggregate      Intrinsic      Value |
|-----------------------------------|-------------------------------------------|-----------------|----------------------------------------------------------------------------|-------------------------------------|
| Outstanding,      January 1, 2008 | $2.11                                     | 236,700         |                                                                       |                                |
| Granted                           | -                                         | -               |                                                                       |                                |
| Cancelled                         | -                                         | -               |                                                                       |                                |
| Exercised                         | 1.35                                      | 10,000          |                                                                       |                                |
| Outstanding,      June 30, 2008   | $2.15                                     | 226,700         | 3.70                                                                       | $262,751                            |
| Exercisable,      June 30, 2008   | $2.00                                     | 210,700         | 3.56                                                                       | $229,711                            |
|                              |                                      |            |                                                                       |                                |
| Outstanding,      January 1, 2009 | $2.16                                     | 224,700         |                                                                       |                                |
| Granted                           | -                                         | -               |                                                                       |                                |
| Cancelled                         | -                                         | -               |                                                                       |                                |
| Exercised                         | 0.94                                      | 25,000          |                                                                       |                                |
| Outstanding,      June 30, 2009   | $2.31                                     | 199,700         | 2.77                                                                       | $247,123                            |
| Exercisable,      June 30, 2009   | $2.30                                     | 210,700         | 2.75                                                                       | $244,583                            |

|                                                                 | June 30, 2009 | June 30, 2008 |
|----------------------------------------------------------------------|---------------|---------------|
| Weighted      average grant-date fair value of stock options granted | N/A           | N/A           |
| Total      fair value of stock options vested                        | N/A           | N/A           |
| Total      intrinsic value of stock options exercised                | $14,878       | $8,029        |

|                             | Three      Months Ended                                                      |       | Six      Months Ended |
|---------------------------------------|------------------------------------------------------------------------------|------------|-----------------------|
|                                  | June      30,                                                                |       | June      30,         |
|                                  |                                                                         | 2009       |                  | 2008 |   | 2009 |   | 2008 |
| Numerator:                            |                                                                         |       |                  |   |   |   |   |   |
|                                  | Net  income                                                        | $761,251   |                  | $655,250 |   | $1,459,168 |   | $1,239,748 |
|                                  | Numerator      for basic and diluted earnings per share                      | 761,251    |                  | 655,250 |   | 1,459,168 |   | 1,239,748 |
| Denominator:                          |                                                                         |       |                  |   |   |   |   |   |
|                                  | Weighted-average      shares outstanding-basic                               | 10,673,245 |                  | 10,981,378 |   | 10,650,573 |   | 10,979,235 |
|                                  |                                                                         |       |                  |   |   |   |   |   |
| Effect      of dilutive securities:   |                                                                         |       |                  |   |   |   |   |   |
|                                  | Stock      options                                                           | 58,753     |                  | 94,962 |   | 55,298 |   | 92,867 |
| Dilutive      potential common shares |                                                                         | 58,753     |                  | 94,962 |   | 55,298 |   | 92,867 |
|                                  | Denominator      for diluted earnings per share-weighted-average      shares | 10,731,998 |                  | 11,076,340 |   | 10,705,871 |   | 11,072,102 |
|                                  |                                                                         |       |                  |   |   |   |   |   |
|                                  | Basic      earnings per share                                                | $0.07      |                  | $0.06 |   | $0.14 |   | $0.11 |
|                                  | Diluted      earnings per share                                              | $0.07      |                  | $0.06 |   | $0.14 |   | $0.11 |

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

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

| c.   | International      Leathercraft, sells to both wholesale and retail      customers.  It carries the same products as our North American      stores.  This operation started in February 2008 with one store      located in Northampton, United Kingdom;and |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Other,      which consists of Roberts, Cushman & Co., a distributor of decorative      hat trims sold directly to hatmanufacturers. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                             | Wholesale      Leathercraft | Retail      Leathercraft | InternationalLeathercraft | Other    | Total       |
|------------------------------------------------------------------|-----------------------------|--------------------------|---------------------------|----------|-------------|
| For      the quarter ended June 30, 2009                         |                        |                     |                      |     |        |
| Net      sales                                                   | $6,112,421                  | $6,626,225               | $307,852                  | $168,442 | $13,214,940 |
| Gross      profit                                                | 3,502,921                   | 4,026,569                | 146,551                   | 65,841   | 7,741,882   |
| Operating      earnings                                          | 513,527                     | 646,307                  | (12,062)                  | (5,374)  | 1,142,398   |
| Interest      (expense)                                          | (83,575)                    | -                        | -                         | -        | (83,575)    |
| Other      income (expense), net                                 | (6,877)                     | 1,081                    | 148,711                   | -        | 142,915     |
| Income      before income taxes                                  | 423,075                     | 647,388                  | 136,649                   | (5,374)  | 1,201,738   |
|                                                             |                        |                     |                      |     |        |
|      Depreciation      and amortization | 250,296                     | 27,848                   | 3,401                     | 209      | 281,754     |
|      Fixed      asset additions         | 132,139                     | 32,039                   | -                         | -        | 164,178     |
|      Total      assets                  | $34,880,109                 | $5,499,948               | $1,238,393                | $172,730 | $41,791,180 |
|                                                             |                        |                     |                      |     |        |
| For      the quarter ended June 30, 2008                         |                        |                     |                      |     |        |
| Net      sales                                                   | $7,218,197                  | $6,235,427               | $193,822                  | $200,518 | $13,847,964 |
| Gross      profit                                                | 3,901,648                   | 3,898,022                | 112,284                   | 99,698   | 8,011,652   |
| Operating      earnings                                          | 524,619                     | 571,869                  | (7,456)                   | 2,486    | 1,091,518   |
| Interest      (expense)                                          | (87,912)                    | -                        | -                         | -        | (87,912)    |
| Other      income (expense), net                                 | 33,420                      | (134)                    | (6,993)                   | -        | 26,293      |
| Income      before income taxes                                  | 470,127                     | 571,735                  | (14,449)                  | 2,486    | 1,029,899   |
|                                                             |                        |                     |                      |     |        |
|      Depreciation      and amortization | 248,425                     | 31,732                   | 3,744                     | -        | 283,901     |
|      Fixed      asset additions         | 150,013                     | 6,660                    | 2,007                     | -        | 158,680     |
|      Total      assets                  | $34,790,281                 | $5,423,423               | $501,521                  | $132,470 | $40,847,695 |

|                                                             | Wholesale      Leathercraft | Retail      Leathercraft | InternationalLeathercraft | Other    | Total       |
|------------------------------------------------------------------|-----------------------------|--------------------------|---------------------------|----------|-------------|
| For      the six months ended June 30, 2009                      |                        |                     |                      |     |        |
| Net      sales                                                   | $12,399,123                 | $13,229,746              | $600,724                  | $346,337 | $26,575,930 |
| Gross      profit                                                | 7,070,843                   | 7,976,733                | 368,911                   | 141,841  | 15,558,328  |
| Operating      earnings                                          | 879,774                     | 1,196,475                | 69,054                    | 34,404   | 2,179,707   |
| Interest      (expense)                                          | (160,984)                   | -                        | -                         | -        | (160,984)   |
| Other      income (expense), net                                 | 87,132                      | 889                      | 132,166                   | -        | 220,187     |
| Income      before income taxes                                  | 805,922                     | 1,197,364                | 201,220                   | 34,404   | 2,238,910   |
|                                                             |                        |                     |                      |     |        |
|      Depreciation      and amortization | 497,398                     | 56,872                   | 6,565                     | 418      | 561,253     |
|      Fixed      asset additions         | 383,179                     | 59,223                   | -                         | -        | 442,402     |
|      Total      assets                  | $34,880,109                 | $5,499,948               | $1,238,393                | $172,730 | $41,791,180 |
|                                                             |                        |                     |                      |     |        |
| For      the six months ended June 30, 2008                      |                        |                     |                      |     |        |
| Net      sales                                                   | $13,956,408                 | $12,506,201              | $235,559                  | $409,956 | $27,108,124 |
| Gross      profit                                                | 7,620,702                   | 7,806,491                | 142,008                   | 183,473  | 15,752,674  |
| Operating      earnings                                          | 648,574                     | 1,186,321                | (48,917)                  | 26,923   | 1,812,901   |
| Interest      expense                                            | (169,653)                   | -                        | -                         | -        | (169,653)   |
| Other      income (expense), net                                 | 314,028                     | (401)                    | (6,944)                   | -        | 306,683     |
| Income      before income taxes                                  | 792,949                     | 1,185,920                | (55,861)                  | 26,923   | 1,949,931   |
|                                                             |                        |                     |                      |     |        |
|      Depreciation      and amortization | 438,114                     | 63,757                   | 6,391                     | 1,062    | 509,324     |
|      Fixed      asset additions         | 3,006,764                   | 21,920                   | -                         | 69,954   | 3,098,638   |
|      Total      assets                  | $34,790,281                 | $5,423,423               | $501,521                  | $132,470 | $40,847,695 |

| Three      months ended June 30, | 2009        | 2008        |
|----------------------------------|-------------|-------------|
| United      States               | $11,526,193 | $12,081,267 |
| Canada                           | 1,080,061   | 1,229,723   |
| All      other countries         | 608,686     | 536,974     |
|                             | $13,214,940 | $13,847,964 |

| Six      months ended June 30, | 2009        | 2008        |
|--------------------------------|-------------|-------------|
| United      States             | $23,261,903 | $23,613,163 |
| Canada                         | 2,131,135   | 2,472,207   |
| All      other countries       | 1,182,892   | 1,022,754   |
|                           | $26,575,930 | $27,108,124 |

----

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

| Ø   | Continued      weakness in the economy in the United States, as well as abroad, may cause      our sales to decrease or not to increase or adversely affect the prices      charged for our products.  Furthermore, negative trends in      general consumer-spending levels, including the impact of the availability      and level of consumer debt and levels of consumer confidence could      adversely affect our sales. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            | Quarter      Ended June 30, 2009 |   | Quarter      Ended June 30, 2008 |
|---------------------------------|----------------------------------|--------|----------------------------------|
|                            | Sales                            |   | Operating      Income            |   | Sales |   | Operating      Income |
| Wholesale      Leathercraft     | $6,112,421                       |   | $513,527                         |   | $7,218,197 |   | $524,619 |
| Retail      Leathercraft        | 6,626,225                        |   | 646,307                          |   | 6,235,427 |   | 571,869 |
| International      Leathercraft | 307,852                          |   | (12,064)                         |   | 193,822 |   | (7,456) |
| Other                           | 168,442                          |   | (5,374)                          |   | 200,518 |   | 2,486 |
| Total      Operations           | $13,214,940                      |   | $1,142,398                       |   | $13,847,964 |   | $1,091,518 |

|            | 2009     |   | 2008     | % Change |
|-----------------|----------|--------|----------|----------|
| Net      income | $761,251 |   | $655,250 | 16.2%    |

----

|                                                                                                                   | Quarter      ended |
|------------------------------------------------------------------------------------------------------------------------|--------------------|
| Customer Group                                                                                                         | 06/30/09           |   | 06/30/08 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 27%                |   | 25% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 8%                 |   | 10% |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 43%                |   | 41% |
|   MANUFACTURERS                                                                                              | 8%                 |   | 9% |
|   NATIONAL      ACCOUNTS                                                                                     | 14%                |   | 15% |
|                                                                                                                   | 100%               |   | 100% |

|                        | Quarter      Ended 06/30/09 |   | Quarter      Ended 06/30/08 |   | $ change     | % change |
|-----------------------------|----------------------------------|--------|----------------------------------|--------|--------------|----------|
| Same      store sales (30)  | $5,327,001                       |   | $6,069,076                       |   | $(742,075)   | (12.2%)  |
| National      account group | 785,420                          |   | 1,149,121                        |   | (363,701)    | (31.7%)  |
|                        | $6,112,421                       |   | $7,218,197                       |   | $(1,105,776) | (15.3%)  |

|                             | #      Stores | Qtr      Ended 06/30/09 | Qtr      Ended 06/30/08 | $      Incr (Decr) | %      Incr (Decr) |
|----------------------------------|---------------|-------------------------|-------------------------|--------------------|--------------------|
| Same      (existing) store sales | 72            | $6,501,086              | $6,235,427              | $265,659           | 4.3%               |
| New      store sales             | 3             | 125,139                 | -                       | 125,139            | N/A                |
| Total      sales                 | 75            | $6,626,225              | $6,235,427              | $390,798           | 6.3%               |

|                                                                                                                   | Quarter      Ended |
|------------------------------------------------------------------------------------------------------------------------|--------------------|
| Customer Group                                                                                                         | 06/30/09           |   | 06/30/08 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 60%                |   | 60% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 11%                |   | 11% |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 28%                |   | 28% |
|   NATIONAL      ACCOUNTS                                                                                     | -                  |   | - |
|   MANUFACTURERS                                                                                              | 1%                 |   | 1% |
|                                                                                                                   | 100%               |   | 100% |

----

|                            | Six      Months Ended June 30, 2009 |   | Six      Months Ended June 30, 2008 |
|---------------------------------|-------------------------------------|--------|-------------------------------------|
|                            | Sales                               |   | Operating      Income               |   | Sales |   | Operating      Income |
| Wholesale      Leathercraft     | $12,399,123                         |   | $879,774                            |   | $13,956,408 |   | $648,574 |
| Retail      Leathercraft        | 13,229,746                          |   | 1,196,475                           |   | 12,506,201 |   | 1,186,321 |
| International      Leathercraft | 600,724                             |   | 69,054                              |   | 235,559 |   | (48,917) |
| Other                           |   346,337                 |   | 34,404                              |   |   409,956 |   | 26,923 |
| Total      Operations           | $26,575,930                         |   | $2,179,707                          |   | $27,108,124 |   | $1,812,901 |

|            | 2009       |   | 2008       | % change |
|-----------------|------------|--------|------------|----------|
| Net      income | $1,459,168 |   | $1,239,748 | 17.7%    |

|                        | Six      Months Ended  06/30/09 |   | Six      Months Ended 06/30/08 |   | $ Change    | % Change |
|-----------------------------|-------------------------------------------|--------|--------------------------------|--------|-------------|----------|
| Same      store sales (29)  | $10,741,998                               |   | $12,061,028                    |   | (1,319,030) | (10.9%)  |
| National      account group | 1,657,125                                 |   | 1,895,380                      |   | (238,255)   | (12.6%)  |
|                        | $12,399,123                               |   | $13,956,408                    |   | (1,557,285) | (11.2%)  |

|                                                                                                                   | Six      Months Ended |
|------------------------------------------------------------------------------------------------------------------------|-----------------------|
| Customer Group                                                                                                         | 06/30/09              |   | 06/30/08 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 30%                   |   | 27% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 7%                    |   | 8% |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 41%                   |   | 44% |
|   MANUFACTURERS                                                                                              | 7%                    |   | 9% |
|   NATIONAL      ACCOUNTS                                                                                     | 15%                   |   | 12% |
|                                                                                                                   | 100%                  |   | 100% |

|                             |  #      Stores | Six      Months Ended 06/30/09 | Six      Months Ended 06/30/08 | $      Incr (Decr) | %      Incr (Decr) |
|----------------------------------|---------------------|--------------------------------|--------------------------------|--------------------|--------------------|
| Same      (existing) store sales | 72                  | $12,969,259                    | $12,506,201                    | $463,058           | 3.7%               |
| New      store sales             | 3                   | 260,487                        | -                              | 260,487            | N/A                |
| Total      sales                 | 75                  | $13,229,746                    | $12,506,201                    | $723,545           | 5.8%               |

|                                                                                                                   | Six      Months Ended |
|------------------------------------------------------------------------------------------------------------------------|-----------------------|
| Customer Group                                                                                                         | 06/30/09              |   | 06/30/08 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 63%                   |   | 62% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 9%                    |   | 9% |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 27%                   |   | 28% |
|   NATIONAL      ACCOUNTS                                                                                     | -                     |   | - |
|   MANUFACTURERS                                                                                              | 1%                    |   | 1% |
|                                                                                                                   | 100%                  |   | 100% |

----

----

|                  | Total      Number of Shares      Purchased | Average      Price Paid per Share | Total      Number of Shares Purchased as Part of Publicly Announced Plans or      Programs | Maximum      Number of Shares that may yet be Purchased Under the Plans or      Programs |
|-----------------------|--------------------------------------------|-----------------------------------|--------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|
| April      1-30, 2009 | 14,837                                     | $2.73                             | 14,837                                                                                     | 985,163                                                                                  |
| May      1-31, 2009   | 6,937                                      | $2.66                             | 21,774                                                                                     | 978,226                                                                                  |
| June      1-30, 2009  | 2,500                                      | $2.38                             | 24,274                                                                                     | 975,726                                                                                  |

|                      | For       | Against | Abstaining |
|---------------------------|-----------|---------|------------|
| Shannon      L. Greene    | 7,824,236 | 425,541 | -          |
| T.      Field Lange       | 7,837,913 | 411,864 | -          |
| Joseph      R. Mannes     | 7,825,326 | 424,451 | -          |
| L.      Edward Martin III | 8,128,470 | 121,307 | -          |
| Michael      A. Nery      | 8,017,483 | 232,294 | -          |
| Jon      Thompson         | 8,126,470 | 123,307 | -          |
| Wray      Thompson        | 7,970,112 | 279,665 | -          |

| ExhibitNumber         |  Description                                                                                                                                                                                                                                                                                                                                         |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                   | Certificate      of Incorporation of The Leather Factory, Inc., and Certificate of      Amendment to Certificate of Incorporation of The Leather Factory, Inc.      filed as Exhibit 3.1 to Form 10-Q filed by Tandy Leather Factory, Inc.      with the Securities and Exchange Commission on August 12, 2005 and      incorporated by reference herein. |
| 3.2                   | Bylaws      of The Leather Factory, Inc., filed as Exhibit 3.2 to the Registration      Statement on Form SB-2 of The Leather Factory, Inc. (Commission File No.      33-81132), filed with the Securities and Exchange Commission on July 5,      1994 and incorporated by reference herein.                                                             |
| 10.1                  | Consulting      Agreement, dated January 1, 2009, by and between Tandy Leather Factory,      Inc. and J. Wray Thompson, filed as Exhibit 10.1 to Form 8-K filed by      Tandy Leather Factory, Inc. with the Securities and Exchange Commission on      February 17, 2009 and incorporated by reference herein.                                           |
| *31.1                 | 13a-14(a)      Certification by Jon Thompson, Chief Executive Officer and      President.                                                                                                                                                                                                                                                                 |
| *31.2                 | 13a-14(a)      Certification by Shannon Greene, Chief Financial Officer and      Treasurer.                                                                                                                                                                                                                                                               |
| *32.1                 | Certification      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of      the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                         |
| ____________          |                                                                                                                                                                                                                                                                                                                                                      |
| *Filed      herewith. |                                                                                                                                                                                                                                                                                                                                                      |

|                             | TANDY      LEATHER FACTORY, INC.                                       |
|----------------------------------|------------------------------------------------------------------------|
|                             | (Registrant)                                                           |
|                             |                                                                   |
| Date:       August 11, 2009 | By:  /s/ Jon Thompson                                        |
|                             | Jon      Thompson                                                      |
|                             | Chief      Executive Officer and President                             |
|                             |                                                                   |
| Date:       August 11, 2009 | By:  /s/ Shannon L. Greene                                   |
|                             | Shannon      L. Greene                                                 |
|                             | Chief      Financial Officer and Treasurer (Chief Accounting  Officer) |