8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

Form 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported:) May 11, 2010

Tandy Leather Factory, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation

1-12368	75-2543540
(Commission File Number)	(IRS Employer Identification Number)

1900 Southeast Loop 820, Fort Worth, Texas	76140
(Address of Principal Executive Offices)	(Zip Code)

(817) 872-3200

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Item 2.02.  Results of Operations and Financial Condition

     Tandy Leather Factory, Inc. on May 11, 2010 issued a press release regarding its financial results for the three months ended March 31, 2010.  A copy of the press release is attached as Exhibit 99.1.

     The information in this report and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.  Financial Statements and Exhibits

(a)   Financial statements of businesses acquired.

Not applicable.

(b)   Pro forma financial information.

Not applicable.

(c)   Exhibits.

No.                     Exhibit

99.1                     Press release dated May 11, 2010

SIGNATURES

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

	TANDY LEATHER FACTORY, INC.
Date:  May 13, 2010	By: /s/ Jon Thompson
	Jon Thompson, Chief Executive Officer and President

EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE                                   
60;                                                                           May 11, 2010

TANDY LEATHER FACTORY REPORTS 1ST QUARTER 2010 EARNINGS UP 36%

FORT WORTH, TEXAS – Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results for the first quarter of 2010.  Net income for the quarter ended March 31, 2010 was $948,000, up from net income of $698,000 in the first quarter of 2009, an increase of 36%.  Fully-diluted earnings per share for the quarter were $0.09 in the current quarter, compared to $0.06 in last year’s first quarter.  Total sales for the first quarter were $14.6 million, an increase of 10.7% compared to 2009’s first quarter sales of $13.2 million.

Sales from the Retail Leathercraft division, consisting of the Tandy Leather retail store chain, increased $1 million in the first quarter, up 15% from last year's first quarter sales.  The store chain consisted of seventy-six stores as of March 31, 2010, compared to seventy-four retail stores a year ago.  First quarter sales for the Wholesale Leathercraft division, consisting of the Leather Factory wholesale stores and the National Account group, increased $301,000, or 5% from the same quarter last year.  International Leathercraft, consisting of one store located in the United Kingdom, added sales of $384,000 for the quarter, a 31% increase over last year’s first quarter sales of $293,000.

Consolidated gross profit margin increased from 58.7% in the first quarter of 2009 to 61.5% in the first quarter of 2010, a significant improvement.  Operating expenses increased $697,000 in the first quarter of 2010 to $7.4 million compared to $6.8 million in the first quarter of 2009, decreasing slightly as a percentage of revenue from 51.2% in 2009 to 51.0% in 2010.

Jon Thompson, Chief Executive Officer and President, commented, “Overall, it was a good quarter.  I am especially pleased with the improvement in our gross profit margin.  All three divisions achieved sales gains and were solidly profitable.  Our goal as we move through the year is to continue our solid sales growth and keep our expenses under control.”

Shannon L. Greene, Chief Financial Officer, added, “This quarter makes our fifth consecutive quarter of higher earnings than in the prior year’s comparable quarter.  We have maintained a good trend there as we have worked our way through the economic turmoil of this past year.  While I don’t think profitability is in question for the year, we will continue to watch our operating expenses in order to maximize our earnings.”

Tandy Leather Factory, Inc., (http://www.tandyleatherfactory.com), headquartered in Fort Worth, Texas, is a specialty retailer and wholesale distributor of a broad product line including leather, leatherworking tools, buckles and adornments for belts, leather dyes and finishes, saddle and tack hardware, and do-it-yourself kits. The Company distributes its products through its 29 Leather Factory stores, located in 19 states and 3 Canadian provinces, 76 Tandy Leather retail stores, located in 36 states and 6 Canadian provinces, one combination wholesale/retail store located in the United Kingdom, and Mid-Continent Leather Sales, one store located in Oklahoma.  Its common stock trades on the NYSE Amex with the symbol "TLF".  To be included on Tandy Leather Factory’s email distribution list, go to http://www.b2i.us/irpass.asp?BzID=1625&to=ea&s=0.

Contact:	Shannon L. Greene, Tandy Leather Factory, Inc.	(817) 872-3200 or  sgreene@tandyleather.com
	Mark Gilbert, Magellan Fin, LLC	(317) 867-2839 or MGilbert@MagellanFin.com

This news release may contain statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results and events may differ from those projected as a result of certain risks and uncertainties. These risks and uncertainties include but are not limited to: changes in general economic conditions, negative trends in general consumer-spending levels, failure to realize the anticipated benefits of opening retail stores; availability of hides and leathers and resultant price fluctuations; change in customer preferences for our product, and other factors disclosed in our filings with the Securities and Exchange Commission.  These forward-looking statements are made only as of the date hereof, and except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

TANDY LEATHER FACTORY, INC.

CONSOLIDATED BALANCE SHEETS

					03/31/2010 (unaudited)	12/31/2009 (audited)
ASSETS
CURRENT ASSETS:
	Cash				$5,976,396	$7,891,962
	Short-term investments, including certificates of deposit				6,995,598	5,017,000
	Accounts receivable-trade, net of allowance for doubtful accounts
			of $174,000 and $136,000 in 2010 and 2009, respectively		1,459,075	1,202,811
	Inventory				17,538,853	16,865,826
	Deferred income taxes				289,556	271,481
	Other current assets				1,499,080	791,884
				Total current assets	33,758,558	32,040,964
PROPERTY AND EQUIPMENT, at cost					14,513,146	15,111,497
Less accumulated depreciation and amortization					(4,953,970)	(5,431,776)
					9,559,176	9,679,721
GOODWILL					987,812	983,823
OTHER INTANGIBLES, net of accumulated amortization of
	$433,000 and $418,000 in 2010 and 2009, respectively				293,401	307,802
OTHER assets					318,218	314,921
					$44,917,165	$43,327,231
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Accounts payable-trade				$1,613,639	$1,185,032
	Accrued expenses and other liabilities				4,116,620	3,988,144
	Income taxes payable				434,827	399,536
	Current maturities of long-term debt				202,500	202,500
				Total current liabilities	6,367,586	5,775,212
DEFERRED INCOME TAXES					706,222	682,364
LONG-TERM DEBT, net of current maturities					3,459,375	3,510,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
	Preferred stock, $0.10 par value; 20,000,000 shares authorized;
		none issued or outstanding; attributes to be determined on issuance			-	-
	Common stock, $0.0024 par value; 25,000,000 shares authorized;
		11,034,845 and 11,021,951 shares issued at 2010 and 2009;
		10,141,222 and 10,130,628 shares outstanding at 2010 and 2009			26,484	26,453
	Paid-in capital				5,491,705	5,491,736
	Retained earnings				30,908,023	29,959,910
	Treasury stock (893,623 shares at cost)				(2,461,068)	(2,452,649)
	Accumulated other comprehensive income				418,838	334,205
				Total stockholders' equity	34,383,982	33,359,655
					$44,917,165	$43,327,231

TANDY LEATHER FACTORY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009

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

TANDY LEATHER FACTORY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

Selected financial data:

	Quarter Ended 03/31/10		Quarter Ended 03/31/09
	Sales	Operating Income	Sales	Operating Income
Wholesale Leathercraft	$6,587,804	$534,196	$6,286,701	$366,247
Retail Leathercraft	7,616,296	922,738	6,603,522	550,168
International	384,438	79,434	292,872	81,116
Total Operations	$14,588,538	$1,536,368	$13,183,095	$997,531

Wholesale Leathercraft	Quarter Ended 03/31/10		Quarter Ended 03/31/09
	# of stores	Sales	# of stores	Sales
Distribution centers	30	$5,783,176	30	$5,414,997
National account group		804,628		871,704
Total Sales – Wholesale Leathercraft	30	$6,587,804	30	$6,286,701

Retail Leathercraft	Quarter Ended 03/31/10		Quarter Ended 03/31/09
	# of stores	Sales	# of stores	Sales
Same store sales	74	$7,527,635	74	$6,603,522
New store sales	2	88,661	-	-
Total Sales – Retail Leathercraft	76	$7,616,296	74	$6,603,522