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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">UNITED
      STATES</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">SECURITIES
      AND EXCHANGE
      COMMISSION</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">WASHINGTON,
      D.C.
      20549</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">FORM
      8-K</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">CURRENT
      REPORT</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Pursuant
      to Section 13 or 15(d) of
      the</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Securities
      Exchange Act of
      1934</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Date
      of report (Date of earliest event
      reported): </font><font style="DISPLAY: inline; FONT-WEIGHT: bold; COLOR: #000000">January
      23,
      2008</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">HANCOCK
      FABRICS,
      INC.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">(Exact
      Name of Registrant as Specified
      in Charter)</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Delaware</font></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">1-9482</font></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">64-0740905</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">(State
                or other
                jurisdiction</font></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">(Commission</font></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">(I.
                R. S.
                Employer</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">of
                incorporation)</font></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">File
                Number)</font></font></div>
            </td>
            <td valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">Identification
                No.)</font></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">One
                Fashion Way, Baldwyn,
                MS</font></font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">38824</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">(Address
                of Principal Executive
                Offices)</font></font></div>
            </td>
            <td valign="top" width="23%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; COLOR: #000000">(Zip
                Code)</font></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Company's
      telephone number, including
      area code: </font><font style="DISPLAY: inline; FONT-WEIGHT: bold; COLOR: #000000">(662)
      365-6000</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Check
      the appropriate box below if the
      Form 8-K filing is intended to simultaneously satisfy the filing obligation
      of
      the registrant under any of the following provisions:</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Written
                communications pursuant to
                Rule 425 under the Securities Act (17 CFR
                230.425)</font></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Soliciting
                material pursuant to
                Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)</font></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Pre-commencement
                communications
                pursuant to Rule 14d-2(b) under the Exchange Act (17&#160;CFR
                240.14d-2(b))</font></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000;" face="Wingdings">o</font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Pre-commencement
                communications
                pursuant to Rule 13e-4(c) under the Exchange Act (17&#160;CFR
                240.13e-4(c))</font></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-WEIGHT: bold; COLOR: #000000">Item
      7.01&#160;&#160;&#160;&#160;&#160; Regulation FD Disclosure.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">As
      has been previously disclosed, on
      March 21, 2007, Hancock Fabrics, Inc. (the "Company") filed voluntary petitions
      for reorganization under Chapter 11 of the United States Bankruptcy Code (the
      "Bankruptcy Code"), in the United States Bankruptcy Court for the District
      of
      Delaware (the "Court") (Case No. 07-10353). The reorganization case is being
      administered under the caption "In re Hancock Fabrics, Inc., Case No.
      07-10353."</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">As
      has been previously disclosed, the
      Company and its subsidiaries have received numerous tax assessments from the
      Mississippi State Tax Commission (the "Tax Commission") resulting from an audit
      of the Company&#8217;s state income, franchise, sales and use tax
      returns.&#160;&#160;The predominant income tax issue underlying these
      assessments concerns the taxation of certain intercompany payments by and
      between the Company and certain of its subsidiaries.&#160;&#160;In essence, the
      Tax Commission believes that all intercompany payments made to the Company's
      subsidiaries domiciled in another state are attributable to the Mississippi
      operations of the Company and taxable in full in
      Mississippi.&#160;&#160;Additionally, the Tax Commission has asserted that those
      companies located in Mississippi that made the intercompany payments are not
      entitled to deduct those amounts.&#160;&#160;Thus, Mississippi is attempting
      simultaneously to tax the same intercompany payments to both parties to those
      transactions.&#160;&#160;The franchise tax assessments are primarily
      attributable to the Tax Commission's position that all of the intercompany
      indebtedness by and between the Company and its subsidiaries is properly
      classified as taxable capital rather than debt.&#160;&#160;With the exception of
      the relatively immaterial sales and use tax assessments, which are not being
      contested, the Company intends to continue to contest these income and franchise
      tax assessments aggressively through appropriate judicial
      procedures.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font size="2">On
      January 23, 2008, the Company filed with the Court a
      response (the "Response") to a Tax Commission filing with the court.&#160;
Although assessments for an aggregate amount for approximately $15.8 million
      have been issued (as the Company disclosed in the Response), based on
      information received from the Tax Commission, the Company believes this matter
      could currently be settled for approximately $2.8 million.&#160; The Company
      believes a more favorable settlement can be obtained either through negotiations
      or judicial procedures.&#160; Management believes the Company's position is
      strongly supported; however, an unfavorable resolution could have a material
      effect on the Company's results of operations, financial condition and
      liquidity.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">The
      information presented herein under
      Item 7.01 shall not be deemed "filed" under the Securities Exchange Act of
      1934,
      as amended, nor shall it be deemed incorporated by reference in any filing
      under
      the Securities Act of 1933, as amended, except as may be expressly set forth
      by
      specific reference in such a filing.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div><br>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">SIGNATURE</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 27pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">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 thereunto duly
      authorized.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">HANCOCK
      FABRICS,
      INC.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">(Registrant)</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font size="2">By:&#160;
<font style="TEXT-DECORATION: underline">/s/
      Larry D.&#160;Fair</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 234pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font size="2">Name:&#160;
Larry
      D. Fair</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 234pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font size="2">Title:&#160;&#160;&#160;
Vice
      President, Finance
      (Principal</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 234pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1; MARGIN-RIGHT: 0pt" align="left"><font id="TAB2" style="LETTER-SPACING: 9pt">&#160;&#160;&#160;</font>&#160;<font size="2">Financial
      and&#160;Accounting Officer)</font>&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div>&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; COLOR: #000000">Date:
</font><font style="DISPLAY: inline; COLOR: #000000">January
      29, </font><font style="DISPLAY: inline; COLOR: #000000">2008</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>&#160;</div>
    <div>&#160;</div>
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hancock8k012508.htm
UNITED
      STATES
SECURITIES
      AND EXCHANGE
      COMMISSION
WASHINGTON,
      D.C.
      20549
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):
January
      23,
      2008
HANCOCK
      FABRICS,
      INC.
(Exact
      Name of Registrant as Specified
      in Charter)
Delaware
1-9482
64-0740905
(State
                or other
                jurisdiction
(Commission
(I.
                R. S.
                Employer
of
                incorporation)
File
                Number)
Identification
                No.)
One
                Fashion Way, Baldwyn,
                MS
38824
(Address
                of Principal Executive
                Offices)
(Zip
                Code)
Company's
      telephone number, including
      area code:
(662)
      365-6000
Check
      the appropriate box below if the
      Form 8-K filing is intended to simultaneously satisfy the filing obligation
      of
      the registrant under any of the following provisions:
o
Written
                communications pursuant to
                Rule 425 under the Securities Act (17 CFR
                230.425)
o
Soliciting
                material pursuant to
                Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)
o
Pre-commencement
                communications
                pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
                240.14d-2(b))
o
Pre-commencement
                communications
                pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
                240.13e-4(c))
Item
      7.01      Regulation FD Disclosure.
As
      has been previously disclosed, on
      March 21, 2007, Hancock Fabrics, Inc. (the "Company") filed voluntary petitions
      for reorganization under Chapter 11 of the United States Bankruptcy Code (the
      "Bankruptcy Code"), in the United States Bankruptcy Court for the District
      of
      Delaware (the "Court") (Case No. 07-10353). The reorganization case is being
      administered under the caption "In re Hancock Fabrics, Inc., Case No.
      07-10353."
As
      has been previously disclosed, the
      Company and its subsidiaries have received numerous tax assessments from the
      Mississippi State Tax Commission (the "Tax Commission") resulting from an audit
      of the Company's state income, franchise, sales and use tax
      returns.  The predominant income tax issue underlying these
      assessments concerns the taxation of certain intercompany payments by and
      between the Company and certain of its subsidiaries.  In essence, the
      Tax Commission believes that all intercompany payments made to the Company's
      subsidiaries domiciled in another state are attributable to the Mississippi
      operations of the Company and taxable in full in
      Mississippi.  Additionally, the Tax Commission has asserted that those
      companies located in Mississippi that made the intercompany payments are not
      entitled to deduct those amounts.  Thus, Mississippi is attempting
      simultaneously to tax the same intercompany payments to both parties to those
      transactions.  The franchise tax assessments are primarily
      attributable to the Tax Commission's position that all of the intercompany
      indebtedness by and between the Company and its subsidiaries is properly
      classified as taxable capital rather than debt.  With the exception of
      the relatively immaterial sales and use tax assessments, which are not being
      contested, the Company intends to continue to contest these income and franchise
      tax assessments aggressively through appropriate judicial
      procedures.
On
      January 23, 2008, the Company filed with the Court a
      response (the "Response") to a Tax Commission filing with the court. 
Although assessments for an aggregate amount for approximately $15.8 million
      have been issued (as the Company disclosed in the Response), based on
      information received from the Tax Commission, the Company believes this matter
      could currently be settled for approximately $2.8 million.  The Company
      believes a more favorable settlement can be obtained either through negotiations
      or judicial procedures.  Management believes the Company's position is
      strongly supported; however, an unfavorable resolution could have a material
      effect on the Company's results of operations, financial condition and
      liquidity.
The
      information presented herein under
      Item 7.01 shall not be deemed "filed" under the Securities Exchange Act of
      1934,
      as amended, nor shall it be deemed incorporated by reference in any filing
      under
      the Securities Act of 1933, as amended, except as may be expressly set forth
      by
      specific reference in such a filing.
SIGNATURE
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 thereunto duly
      authorized.
HANCOCK
      FABRICS,
      INC.
(Registrant)
By:
/s/
      Larry D. Fair
Name: 
Larry
      D. Fair
Title:   
Vice
      President, Finance
      (Principal
Financial
      and Accounting Officer)
Date:
January
      29,
2008