|  |
|--|

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

| Class                                          | Shares outstanding as of May 7,      2008 |
|------------------------------------------------|-------------------------------------------|
| Common      Stock, par value $0.0024 per share | 10,977,092                                |

----

TABLE OFCONTENTS

|                                                                                           | PAGE NO. |
|------------------------------------------------------------------------------------------------|----------|
|                                                                                           |     |
| PART      I.  FINANCIAL INFORMATION                                                  |     |
|                                                                                           |     |
|   Item 1.  Financial    Statements                                         |     |
|                                                                                           |     |
|     Consolidated      Balance Sheets                                       |     |
|      March      31, 2008 and December 31, 2007                        | 1        |
|                                                                                           |     |
|     Consolidated      Statements of Income                                 |     |
|      Three      months ended March 31, 2008 and 2007                  | 2        |
|                                                                                           |     |
|     Consolidated      Statements of Cash Flows                             |     |
|      Three      months ended March 31, 2008 and 2007                  | 3        |
|                                                                                           |     |
|     Consolidated      Statements of Stockholders' Equity                   |     |
|      Three      months ended March 31, 2008 and 2007                  | 4        |
|                                                                                           |     |
|     Notes to Consolidated Financial      Statements                        | 5        |
|                                                                                           |     |
|   Item 2.  Management's Discussion and Analysis of      Financial          |     |
|    Condition and Results of      Operations                                     | 8        |
|                                                                                           |     |
|   Item 3.  Quantitative and Qualitative Disclosures      About Market Risk | 11       |
|                                                                                           |     |
|   Item 4.  Controls and      Procedures                                    | 11       |
|                                                                                           |     |
| PART      II.  OTHER INFORMATION                                                     |     |
|                                                                                           |     |
|   Item 6.  Exhibits                                                        | 11       |
|                                                                                           |     |
|                                                                                           |     |
| SIGNATURES                                                                                     | 11       |
|                                                                                           |     |

----

Item 1. Financial Statements

|                                                       | March      31, 2008(unaudited)                                     |                                                                        | December      31, 2007(audited)                         |
|------------------------------------------------------------|-------------------------------------------------------------------------|-----------------------------------------------------------------------------|--------------------------------------------------------------|
| ASSETS                                                     |                                                                    |                                                                        |                                                         |
| CURRENT      ASSETS:                                       |                                                                    |                                                                        |                                                         |
|                                                       | Cash                                                                    | $8,610,331                                                                  |                                                         | $6,810,396 |
|                                                       | Accounts      receivable-trade, net of allowance for doubtful accounts  |                                                                        |                                                         |   |
|                                                       |                                                                    |                                                                        | of      $137,000 and $104,000 in 2008 and 2007, respectively | 2,044,119 |   | 2,538,816 |
|                                                       | Inventory                                                               | 16,227,628                                                                  |                                                         | 17,473,352 |
|                                                       | Deferred      income taxes                                              | 251,665                                                                     |                                                         | 256,938 |
|                                                       | Other      current assets                                               | 1,246,771                                                                   |                                                         | 1,102,836 |
|                                                       |                                                                    |                                                                        |                                                         | Total      current assets | 28,380,514 |   | 28,182,338 |
|                                                       |                                                                    |                                                                        |                                                         |
| PROPERTY      AND EQUIPMENT, at cost                       | 14,220,027                                                              |                                                                        | 11,793,317                                                   |
| Less      accumulated depreciation and amortization        | (4,497,550)                                                             |                                                                        | (4,794,505)                                                  |
|                                                       | 9,722,477                                                               |                                                                        | 6,998,812                                                    |
|                                                       |                                                                    |                                                                        |                                                         |
| GOODWILL                                                   | 986,281                                                                 |                                                                        | 990,536                                                      |
| OTHER      INTANGIBLES, net of accumulated amortization of |                                                                    |                                                                        |                                                         |
|                                                       | $328,000      and $313,000 in 2008 and 2007, respectively               | 368,783                                                                     |                                                         | 384,134 |
| OTHER      assets                                          | 405,126                                                                 |                                                                        | 1,095,686                                                    |
|                                                       | $39,863,181                                                             |                                                                        | $37,651,506                                                  |
|                                                       |                                                                    |                                                                        |                                                         |
| LIABILITIES      AND STOCKHOLDERS' EQUITY                  |                                                                    |                                                                        |                                                         |
| CURRENT      LIABILITIES:                                  |                                                                    |                                                                        |                                                         |
|                                                       | Accounts      payable-trade                                             | $1,485,783                                                                  |                                                         | $1,497,564 |
|                                                       | Accrued      expenses and other liabilities                             | 2,647,416                                                                   |                                                         | 2,072,640 |
|                                                       | Income      taxes payable                                               | 270,712                                                                     |                                                         | 67,150 |
|                                                       | Current      maturities of long-term debt and capital lease obligations | 419,103                                                                     |                                                         | 135,000 |
|                                                       |                                                                    |                                                                        |                                                         | Total      current liabilities | 4,823,014 |   | 3,772,354 |
|                                                       |                                                                    |                                                                        |                                                         |
| DEFERRED      INCOME TAXES                                 | 293,743                                                                 |                                                                        | 148,648                                                      |
|                                                       |                                                                    |                                                                        |                                                         |
| LONG-TERM      DEBT, net of current maturities             | 3,864,375                                                               |                                                                        | 3,915,000                                                    |
| CAPITAL      LEASE OBLIGATION, net of current maturities   | 525,275                                                                 |                                                                        | -                                                            |
|                                                       |                                                                    |                                                                        |                                                         |
| 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;     |                                                                        |                                                         |   |
|                                                       |                                                                    | 10,982,951      shares issued at 2008 and 2007;                             |                                                         |   |   |
|                                                       |                                                                    | 10,977,092      shares outstanding at 2008 and 2007                         | 26,359                                                       |   | 26,359 |
|                                                       | Paid-in      capital                                                    | 5,427,102                                                                   |                                                         | 5,419,477 |
|                                                       | Retained      earnings                                                  | 24,622,170                                                                  |                                                         | 24,037,672 |
|                                                       | Treasury      stock (5,859 shares at cost)                              | (25,487)                                                                    |                                                         | (25,487) |
|                                                       | Accumulated      other comprehensive income                             | 306,630                                                                     |                                                         | 357,483 |
|                                                       |                                                                    |                                                                        |                                                         | Total      stockholders' equity | 30,356,774 |   | 29,815,504 |
|                                                       | $39,863,181                                                             |                                                                        | $37,651,506                                                  |

----

TABLE OF CONTENTS

|                                                | 2008                              |      | 2007        |
|-----------------------------------------------------|-----------------------------------|-----------|-------------|
|                                                |                              |      |        |
| NET      SALES                                      | $13,260,160                       |      | $14,507,805 |
| COST      OF SALES                                  | 5,519,138                         |      | 5,909,852   |
|                                                | Gross      profit                 | 7,741,022 |        | 8,597,953 |
|                                                |                              |      |        |
| OPERATING      EXPENSES                             | 7,019,638                         |      | 6,643,172   |
| INCOME      FROM OPERATIONS                         | 721,384                           |      | 1,954,781   |
|                                                |                              |      |        |
| OTHER      (INCOME) EXPENSE:                        |                              |      |        |
| Interest      expense                               | 81,741                            |      | -           |
| Other,      net                                     | (280,390)                         |      | (48,996)    |
|                                                | Total      other (income) expense | (198,649) |        | (48,996) |
|                                                |                              |      |        |
| INCOME      BEFORE INCOME TAXES                     | 920,033                           |      | 2,003,777   |
|                                                |                              |      |        |
| PROVISION      FOR INCOME TAXES                     | 335,535                           |      | 657,422     |
|                                                |                              |      |        |
| NET      INCOME                                     | $584,498                          |      | $1,346,355  |
|                                                |                              |      |        |
|                                                |                              |      |        |
| NET      INCOME PER COMMON SHARE – BASIC      | $0.05                             |      | $0.12       |
|                                                |                              |      |        |
| NET      INCOME PER COMMON SHARE – DILUTED    | $0.05                             |      | $0.12       |
|                                                |                              |      |        |
| Weighted      Average Number of Shares Outstanding: |                              |      |        |
|   Basic                                   | 10,977,092                        |      | 10,893,359  |
|   Diluted                                 | 11,067,863                        |      | 11,150,246  |

----

TABLE OF CONTENTS

|                                                              | 2008                                                 |                                    | 2007                                                                                     |
|-------------------------------------------------------------------|------------------------------------------------------|-----------------------------------------|------------------------------------------------------------------------------------------|
| CASH      FLOWS FROM OPERATING ACTIVITIES:                        |                                                 |                                    |                                                                                     |
|                                                              | Net      income                                      | $584,498                                |                                                                                     | $1,346,355 |
|                                                              | Adjustments      to reconcile net income to net cash |                                    |                                                                                     |   |
|                                                              |                                                 | provided      by operating activities - |                                                                                     |   |   |
|                                                              |                                                 |                                    | Depreciation      and amortization                                                       | 225,424 |   | 105,739 |
|                                                              |                                                 |                                    | Gain      on disposal of assets                                                          | (12,109) |   | - |
|                                                              |                                                 |                                    | Non-cash      stock-based compensation                                                   | 7,625 |   | 7,626 |
|                                                              |                                                 |                                    | Deferred      income taxes                                                               | 150,368 |   | (15,281) |
|                                                              |                                                 |                                    | Other                                                                                    | (46,598) |   | 11,092 |
|                                                              |                                                 |                                    | Net      changes in assets and liabilities, net of effect of business      acquisitions: |   |   |   |
|                                                              |                                                 |                                    |                                                                                     | Accounts      receivable-trade, net | 494,697 |   | (239,162) |
|                                                              |                                                 |                                    |                                                                                     | Inventory | 1,245,724 |   | (824,948) |
|                                                              |                                                 |                                    |                                                                                     | Income      taxes | 203,562 |   | 368,418 |
|                                                              |                                                 |                                    |                                                                                     | Other      current assets | (143,935) |   | (396,474) |
|                                                              |                                                 |                                    |                                                                                     | Accounts      payable-trade | (11,781) |   | 726,168 |
|                                                              |                                                 |                                    |                                                                                     | Accrued      expenses and other liabilities | 574,776 |   | (939,387) |
|                                                              | Total      adjustments                               | 2,687,753                               |                                                                                     | (1,196,209) |
|                                                              |                                                 |                                    |                                                                                     |   | Net      cash provided by operating activities | 3,272,251 |   | 150,146 |
|                                                              |                                                 |                                    |                                                                                     |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                        |                                                 |                                    |                                                                                     |
|                                                              | Purchase      of property and equipment              | (2,136,246)                             |                                                                                     | (200,097) |
|                                                              | Payments      in connection with businesses acquired | -                                       |                                                                                     | (650,000) |
|                                                              | Proceeds      from sale of assets                    | -                                       |                                                                                     | 25,339 |
|                                                              | Decrease      (increase) in other assets             | 690,560                                 |                                                                                     | (81,063) |
|                                                              |                                                 |                                    |                                                                                     |   | Net      cash used in investing activities | (1,445,686) |   | (905,821) |
|                                                              |                                                 |                                    |                                                                                     |
| CASH      FLOWS FROM FINANCING ACTIVITIES:                        |                                                 |                                    |                                                                                     |
|                                                              | Payments      on capital lease obligations           | (44,959)                                |                                                                                     | (33,517) |
|                                                              | Proceeds      from sale of assets                    | 18,329                                  |                                                                                     | 50,910 |
|                                                              |                                                 |                                    |                                                                                     |   | Net      cash provided by (used in) financing activities | (26,630) |   | 17,393 |
|                                                              |                                                 |                                    |                                                                                     |
| NET      INCREASE (DECREASE) IN CASH                              | 1,799,935                                            |                                    | (738,294)                                                                                |
|                                                              |                                                 |                                    |                                                                                     |
| CASH,      beginning of period                                    | 6,810,396                                            |                                    | 6,739,891                                                                                |
|                                                              |                                                 |                                    |                                                                                     |
| CASH,      end of period                                          | $8,610,331                                           |                                    | $6,001,607                                                                               |
|                                                              |                                                 |                                    |                                                                                     |
|                                                              |                                                 |                                    |                                                                                     |
| SUPPLEMENTAL      DISCLOSURES OF CASH FLOW INFORMATION:           |                                                 |                                    |                                                                                     |
| Interest      paid during the period                              | $81,741                                              |                                    | -                                                                                        |
| Income      tax paid during the period, net of (refunds)          | $60,210                                              |                                    | $304,908                                                                                 |
|                                                              |                                                 |                                    |                                                                                     |
| NON-CASH      INVESTING ACTIVITIES:                               |                                                 |                                    |                                                                                     |
| Equipment      acquired under capital lease financing arrangement | $803,712                                             |                                    | -                                                                                        |

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TABLE OF CONTENTS

|                                                                                                          |   Number      of Shares |   |   Par      Value |   |   Paid-in      Capital |   |   TreasuryStock |   |   Retained      Earnings |   | Accumulated      Other      Comprehensive Income (Loss) |   |   Total |   |   ComprehensiveIncome      (Loss) |
|---------------------------------------------------------------------------------------------------------------|-----------------------------------|--------|----------------------------|--------|----------------------------------|--------|---------------------------|--------|------------------------------------|--------|---------------------------------------------------------|--------|-------------------|--------|---------------------------------------------|
| BALANCE,      December 31, 2006                                                                               | 10,885,068                        |   | $26,124                    |   | $5,292,591                       |   | $(25,487)                 |   | $20,949,540                        |   | $80,475                                                 |   | $26,323,243       |   |                                        |
|                                                                                                          |                              |   |                       |   |                             |   |                      |   |                               |   |                                                    |   |              |   |                                        |
| Shares      issued - stock options and        warrants      exercised |  34,500                      |   |  83                   |   |  50,827                     |   |  -                   |   |  -                            |   |  -                                                 |   |  50,910      |   |                                        |
|  Stock-based      compensation                                                                           | -                                 |   | -                          |   | 7,626                            |   | -                         |   | -                                  |   | -                                                       |   | 7,626             |   |                                        |
|  Net  income                                                                                   | -                                 |   | -                          |   | -                                |   | -                         |   | 1,346,355                          |   | -                                                       |   | 1,346,355         |   | $1,346,355                                  |
|  Translation      adjustment                                                                             | -                                 |   | -                          |   | -                                |   | -                         |   | -                                  |   | 12,181                                                  |   | 12,181            |   | 12,181                                      |
| BALANCE,      March 31, 2007                                                                                  | 10,919,568                        |   | $26,207                    |   | $5,351,044                       |   | $(25,487)                 |   | $22,295,895                        |   | $92,656                                                 |   | $27,740,315       |   |                                        |

| Comprehensive      income for the three months ended March 31, 2007 | $1,358,536 |
|---------------------------------------------------------------------|------------|

| 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 |  -    |   |  - |   |  -    |   |  -   |   |  -     |   |  -  |   |  -     |   |     |
|  Stock-based      compensation                                                                           | -          |   | -       |   | 7,625      |   | -         |   | -           |   | -        |   | 7,625       |   |     |
|  Net  income                                                                                   | -          |   | -       |   | -          |   | -         |   | 584,498     |   | -        |   | 584,498     |   | $584,498 |
|  Translation      adjustment                                                                             | -          |   | -       |   | -          |   | -         |   | -           |   | (50,853) |   | (50,853)    |   | (50,853) |
| BALANCE,      March 31, 2008                                                                                  | 10,977,092 |   | $26,359 |   | $5,427,102 |   | $(25,487) |   | $24,622,170 |   | $306,630 |   | $30,356,774 |   |     |

| Comprehensive      income for the three months ended March 31, 2008 | $533,645 |
|---------------------------------------------------------------------|----------|

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TABLE OF CONTENTS

1.  BASIS OF PRESENTATION AND CERTAIN SIGNIFICANTACCOUNTING POLICIES

|                                   | As      of          |
|----------------------------------------|---------------------|
|                                   | March      31, 2008 |   | December      31, 2007 |
| Inventory      on hand:                |                |   |   |
| Finished      goods held for sale      | $14,703,432         |   | $16,482,845 |
| Raw      materials and work in process | 477,378             |   | 633,188 |
| Inventory      in transit              | 1,046,818           |   | 357,319 |
|                                   | $16,227,628         |   | $17,473,352 |

|                              | Leather      Factory | Tandy      Leather | Total    |
|-----------------------------------|----------------------|--------------------|----------|
| Balance,      December 31, 2006   | $362,733             | $383,406           | $746,139 |
| Acquisitions      and adjustments | 225,000              | -                  | 225,000  |
| Foreign      exchange gain/loss   | 1,088                | -                  | 1,088    |
| Impairments                       | -                    | -                  | -        |
| Balance,      March 31, 2007      | $588,821             | $383,406           | $972,227 |
|                              |                 |               |     |
|                              | Leather      Factory | Tandy      Leather | Total    |
| Balance,      December 31, 2007   | $607,130             | $383,406           | $990,536 |
| Acquisitions      and adjustments | -                    | -                  | -        |
| Foreign      exchange gain/loss   | (4,255)              | -                  | (4,255)  |
| Impairments                       | -                    | -                  | -        |
| Balance,      March 31, 2008      | $602,875             | $383,406           | $986,281 |

|                        | As      of March 31, 2008 |                    | As      of December 31, 2007 |
|-----------------------------|---------------------------|-------------------------|------------------------------|
|                        |  Gross               | AccumulatedAmortization |  Net                    |   |  Gross | AccumulatedAmortization |  Net |
| Trademarks,      Copyrights | $544,369                  | $295,086                | $249,283                     |   | $544,369 | $283,485 | $260,884 |
| Non-Compete      Agreements | 153,000                   | 33,500                  | 119,500                      |   | 153,000 | 29,750 | 123,250 |
|                        | $697,369                  | $328,586                | $368,783                     |   | $697,369 | $313,235 | $384,134 |

|   | Wholesale Leathercraft | Retail Leathercraft | Total   |
|--------|------------------------|---------------------|---------|
| 2008   | $20,954                | $30,337             | $51,291 |
| 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  |

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TABLE OF CONTENTS

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TABLE OF CONTENTS

|                              | Weighted      Average ExercisePrice | #ofshares | Weighted      Average Remaining      Contractual Term      (in years) | Aggregate      Intrinsic      Value |
|-----------------------------------|-------------------------------------|-----------|----------------------------------------------------------------------------|-------------------------------------|
| Outstanding,      January 1, 2007 | $2.05                               | 296,200   |                                                                       |                                |
| Granted                           | -                                   | -         |                                                                       |                                |
| Cancelled                         | -                                   | -         |                                                                       |                                |
| Exercised                         | 1.476                               | 34,500    |                                                                       |                                |
| Outstanding,      March 31, 2007  | $2.13                               | 261,700   | 4.80                                                                       | $303,069                            |
| Exercisable,      March 31, 2007  | $1.88                               | 231,700   | 4.56                                                                       | $239,529                            |
|                         |                                |      |                                                                       |                                |
| Outstanding,      January 1, 2008 | $2.11                               | 236,700   |                                                                       |                                |
| Granted                           | -                                   | -         |                                                                       |                                |
| Cancelled                         | -                                   | -         |                                                                       |                                |
| Exercised                         | -                                   | -         |                                                                       |                                |
| Outstanding,      March 31, 2008  | $2.11                               | 236,700   | 3.79                                                                       | $270,780                            |
| Exercisable,      March 31, 2008  | $1.97                               | 220,700   | 3.65                                                                       | $237,740                            |

|                                                                 | March 31,      2008 | March 31,      2007 |
|----------------------------------------------------------------------|---------------------|---------------------|
| Weighted      average grant-date fair value of stock options granted | N/A                 | N/A                 |
| Total      fair value of stock options vested                        | $7,625              | $7,626              |
| Total      intrinsic value of stock options exercised                | N/A                 | N/A                 |

|                                                                                            |                            | 2008   |       | 2007    |
|-------------------------------------------------------------------------------------------------|---------------------------------|--------|------------|---------|
| Net      income                                                                                 | $584,498                        |   | $1,346,355 |
| Numerator      for basic and diluted earnings per share                                         | $584,498                        |   | $1,346,355 |
|                                                                                            |                            |   |       |    |
| Denominator      for basic earnings per share –  weighted-average      shares   | 10,977,092                      |   | 10,893,359 |
|                                                                                            |                            |   |       |    |
| Effect      of dilutive securities:                                                             |                            |   |       |
|                                                                                            | Stock      options              | 90,771 |       | 205,304 |
|                                                                                            | Warrants                        | -      |       | 51,583  |
| Dilutive      potential common shares                                                           | 90,771                          |   | 256,887    |
|                                                                                            |                            |   |       |    |
| Denominator      for diluted earnings per share –  weighted-average      shares | 11,067,863                      |   | 11,150,246 |
|                                                                                            |                            |   |       |    |
|                                                                                            | Basic      earnings per share   | $0.05  |       | $0.12   |
|                                                                                            | Diluted      earnings per share | $0.05  |       | $0.12   |

| 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 North American      stores.  We started this operation in February 2008 and have one      store located in Northampton, UK;and |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Other,      which is a manufacturer of decorative hat trims sold directly to hat      manufacturers. |
|----------------|------------------------------------------------------------------------------------------------------|

----

TABLE OF CONTENTS

|                                                             | Wholesale      Leathercraft | Retail      Leathercraft | Int’lLeathercraft |  Other |  Total |
|------------------------------------------------------------------|-----------------------------|--------------------------|-------------------------|-------------|-------------|
| For      the quarter ended March 31, 2008                        |                        |                     |                    |        |        |
| Net      sales                                                   | $6,738,210                  | $6,270,774               | $41,738                 | $209,438    | $13,260,160 |
| Gross      profit                                                | 3,719,054                   | 3,908,469                | 29,724                  | 83,775      | 7,741,022   |
| Operating      earnings                                          | 123,955                     | 614,451                  | (41,461)                | 24,438      | 721,384     |
| Interest      expense                                            | 81,741                      | -                        | -                       | -           | 81,741      |
| Other,      net                                                  | (280,608)                   | 266                      | (49)                    | -           | (280,390)   |
| Income      before income taxes                                  | 322,822                     | 614,185                  | (41,412)                | 24,438      | 920,033     |
|                                                             |                        |                     |                    |        |        |
|      Depreciation      and amortization | 189,690                     | 32,025                   | 2,647                   | 1,062       | 225,424     |
|      Fixed      asset additions         | 2,856,751                   | 15,260                   | 67,947                  | -           | $2,939,958  |
|      Total      assets                  | $34,097,700                 | $5,368,486               | $272,964                | $124,031    | $39,863,181 |
|                                                             |                        |                     |                    |        |        |
| For      the quarter ended March 31, 2007                        |                        |                     |                    |        |        |
| Net      sales                                                   | $7,940,487                  | $6,254,219               | -                       | $313,099    | $14,507,805 |
| Gross      profit                                                | 4,681,886                   | 3,780,607                | -                       | 135,460     | 8,597,953   |
| Operating      earnings                                          | 1,346,203                   | 553,748                  | -                       | 54,830      | 1,954,781   |
| Interest      expense                                            | -                           | -                        | -                       | -           | -           |
| Other,      net                                                  | 50,434                      | (1,438)                  | -                       | -           | 48,996      |
| Income      before income taxes                                  | 1,396,637                   | 552,310                  | -                       | 54,830      | 2,003,777   |
|                                                             |                        |                     |                    |        |        |
|      Depreciation      and amortization | 68,148                      | 36,371                   | -                       | 1,220       | 105,739     |
|      Fixed      asset additions         | 178,797                     | 21,300                   | -                       | -           | 200,097     |
|      Total      assets                  | $27,794,341                 | $5,465,363               | -                       | $239,241    | $33,498,945 |

|                     | 2008        | 2007        |
|--------------------------|-------------|-------------|
| United      States       | $11,531,896 | $12,928,843 |
| Canada                   | 1,242,484   | 1,125,427   |
| All      other countries | 485,780     | 453,535     |
|                     | $13,260,160 | $14,507,805 |

Item2.            Management’sDiscussion and Analysis of Financial Condition andResults of Operations.

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

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

|                          | Quarter      Ended March 31, 2008 |   | Quarter      Ended March 31, 2007 |
|-------------------------------|-----------------------------------|--------|-----------------------------------|
|                          |  Sales                       |   | OperatingIncome                   |   |  Sales |   | OperatingIncome |
| Wholesale      Leathercraft   | $6,738,211                        |   | $123,955                          |   | $7,940,487 |   | $1,346,203 |
| Retail      Leathercraft      | 6,270,774                         |   | 614,452                           |   | 6,254,219 |   | 553,748 |
| Int’l      Leathercraft | 41,737                            |   | (41,460)                          |   | - |   | - |
| Other                         |   209,438               |   | 24,437                            |   |   313,099 |   | 54,830 |
| Total      Operations         | $13,260,160                       |   | $721,384                          |   | $14,507,805 |   | $1,954,781 |

|            | 2008     |   | 2007       | % change |
|-----------------|----------|--------|------------|----------|
| Net      income | $584,498 |   | $1,346,355 | 56.6%    |

|                                                                                                                   | Quarter      ended |
|------------------------------------------------------------------------------------------------------------------------|--------------------|
| Customer Group                                                                                                         | 03/31/08           |   | 03/31/07 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 28%                |   | 29% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 7%                 |   | 6% |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 43%                |   | 38% |
|   MANUFACTURERS                                                                                              | 10%                |   | 11% |
|   NATIONAL      ACCOUNTS                                                                                     | 12%                |   | 16% |
|                                                                                                                   | 100%               |   | 100% |

|                        | Quarter      Ended 03/31/08 |   | Quarter      Ended 03/31/07 |   | $change      | %change |
|-----------------------------|----------------------------------|--------|----------------------------------|--------|--------------|---------|
| Same      store sales (29)  | $5,829,014                       |   | $6,624,606                       |   | $(795,592)   | (12)%   |
| New      store (1)          | 162,938                          |   | 185,263                          |   | (22,325)     | (12)%   |
| National      account group | 746,259                          |   | 1,130,618                        |   | (384,359)    | (34)%   |
|                        | $6,738,211                       |   | $7,940,487                       |   | $(1,202,276) | (15)%   |

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|                             | #      Stores | Qtr      ended03/31/08 | Qtr      ended03/31/07 | $      Incr(decr) | %      Incr(decr) |
|----------------------------------|---------------|------------------------|------------------------|-------------------|-------------------|
| Same      (existing) store sales | 65            | $5,889,635             | $6,254,219             | $(364,584)        | (6)%              |
| New      store sales             | 7             | 381,139                | -                      | 381,139           | N/A               |
| Total      sales                 | 72            | $6,270,774             | $6,254,219             | $16,555           | 0%                |

|                                                                                                                   | Quarter      ended |
|------------------------------------------------------------------------------------------------------------------------|--------------------|
| Customer Group                                                                                                         | 03/31/08           |   | 03/31/07 |
|   RETAIL      (end users, consumers,      individuals)                                                       | 64%                |   | 65% |
|   INSTITUTION      (prisons, prisoners,      hospitals, schools, youth organizations, etc.)                  | 8                  |   | 7 |
|   WHOLESALE      (resellers &      distributors, saddle & tack shops, authorized dealers,      etc.) | 27                 |   | 26 |
|   NATIONAL      ACCOUNTS                                                                                     | -                  |   | - |
|   MANUFACTURERS                                                                                              | 1                  |   | 2 |
|                                                                                                                   | 100%               |   | 100% |

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Item 3.  Quantitative and Qualitative Disclosures AboutMarket Risk

Item 4.  Controls and Procedures

Item 6. Exhibits

| 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.                                                              |
| *31.1                 | 13a-14(a)      Certification by Ron Morgan, 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. |                                                                                                                                                                                                                                                                                                                                                            |

SIGNATURES

|                               | TANDY      LEATHER FACTORY, INC.                                       |
|------------------------------------|------------------------------------------------------------------------|
|                               | (Registrant)                                                           |
|                               |                                                                   |
| Date:  May      14, 2008 | By:  /s/ Ron Morgan                                          |
|                               | Ron      Morgan                                                        |
|                               | Chief      Executive Officer and President                             |
|                               |                                                                   |
| Date:  May      14, 2008 | By:  /s/ Shannon L. Greene                                   |
|                               | Shannon      L. Greene                                                 |
|                               | Chief      Financial Officer and Treasurer (Chief Accounting  Officer) |