**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
  **FORM
        10-KSB**
  x
              Annual
                  Report Under Section 13 or 15(d) of the Securities Exchange Act
                  of
                  1934
  For
        the
        fiscal year ended December 31, 2007
 or
  ̈
              Transition
                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934
  For
        the
        transition period from__________ to__________
  Commission
        file number: 0-51365
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
 (Exact
        Name of Small Business Issuer as Specified in its Charter)
  **Nevada**
              
              **98-0434104**(State
                  or Other Jurisdiction of Incorporation or
                Organization)
              
              (I.R.S.
                  Employer Identification No.)
 
 **2201
        Park Place, Suite 101**
 **El
        Segundo, California 90245**
  (Address
        of Principal Executive Offices)
 **(310)
        643-7800**
  (Issuer’s
        Telephone Number, Including Area Code)
  Securities
        registered under Section 12(b) of the Exchange Act:
 **None**
  Securities
        registered under Section 12(g) of the Exchange Act:
  **Common
        Stock, par value $.001 per share**
  Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90
        days. Yes x No  ̈
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of registrant’s knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB of any
        amendment to this Form 10-KSB. o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act.)
  Yes  ̈ No x
  Issuer’s
        Revenues for the fiscal year ended December 31, 2007 were
        $13,049,197.
  The
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates as of March 27, 2008 was $7,355,481
  As
        of
        March 27, 2008, the issuer had 35,389,504 shares of common stock, par value
        $.001 per share, issued and outstanding.
  DOCUMENTS
        INCORPORATED BY REFERENCE
  **None**
  Transitional
        Small Business Disclosure Format (check one):  Yes  ̈ No x
  
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
 **INDEX
        TO FORM 10-KSB**
  **PART
                    I**
                
                
                **Page**Item
                    1.
                Description
                    of Business
                
                1Item
                    2.
                Description
                    of Property
                
                11Item
                    3.
                Legal
                    Proceedings
                
                11Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                
                12**PART
                    II**Item
                    5.
                Market
                    for Common Equity, Related Stockholder Matters and Small Business
                    Issuer Purchases of Equity Securities
                
                13Item
                    6.
                Management’s
                    Discussion and Analysis or Plan of Operation
                
                15Item
                    7.
                Financial
                    Statements
                
                22Report
                    of Independent Registered Public Accounting Firm
                
                23-24Consolidated
                    Balance Sheet
                
                25Consolidated
                    Statements of Operations
                
                26Consolidated
                    Statements of Cash Flows
                
                27Consolidated
                    Statements of Changes in Stockholders’ Equity
                
                28Notes
                    to Consolidated Financial Statements
                
                29-44Item
                    8.
                Changes
                    in and Disagreements with Accountants on Accounting and Financial
                    Disclosure
                
                45Item
                    8A.
                Controls
                    and Procedures
                
                45Item
                    8B
                Other
                    Information
                
                46**PART
                    III**Item
                    9.
                Director,
                    Executive Officers, Promoters, Control Persons and Corporate
                    Governance;
                    Compliance With Section 16(a) of the Exchange Act
                
                46Item
                    10.
                Executive
                    Compensation
                
                48Item
                    11.
                Security
                    Ownership of Certain Beneficial Owners and Management and Related
                    Stockholder Matters
                
                54Item
                    12.
                Certain
                    Relationships and Related Transactions, and Director
                    Independence
                
                57Item
                    13.
                Exhibits
                
                58Item
                    14.
                Principal
                    Accountant Fees and Services
                
                59
  i




**PART
        I**
  This
        report, including the sections entitled “Risk Factors,” “Management’s Discussion
        and Analysis or Plan of Operation” and “Description of Business,” contains
“forward-looking statements” that include information relating to future events,
        future financial performance, strategies, expectations, competitive environment,
        regulation and availability of resources. These forward-looking statements
        include, without limitation, statements regarding: proposed new services;
        our
        expectations concerning litigation, regulatory developments or other matters;
        statements concerning projections, predictions, expectations, estimates or
        forecasts for our business, financial and operating results and future economic
        performance; statements of management’s goals and objectives; and other similar
        expressions concerning matters that are not historical facts. Words such
        as
“may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,”
“expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and
“estimates,” and similar expressions, as well as statements in future tense,
        identify forward-looking statements.
  Forward-looking
        statements should not be read as a guarantee of future performance or results,
        and will not necessarily be accurate indications of the times at, or by which,
        that performance or those results will be achieved. Forward-looking statements
        are based on information available at the time they are made and/or management’s
        good faith belief as of that time with respect to future events, and are
        subject
        to risks and uncertainties that could cause actual performance or results
        to
        differ materially from those expressed in or suggested by the forward-looking
        statements. Important factors that could cause these differences include,
        but
        are not limited to other
        factors discussed under the headings “Risk Factors,” “Management’s Discussion
        and Analysis of Financial Condition or Plan of Operation” and “Description of
        Business.”
  Forward-looking
        statements speak only as of the date they are made. You should not put undue
        reliance on any forward-looking statements. We assume no obligation to update
        forward- looking statements to reflect actual results, changes in assumptions or changes in
        other
        factors affecting forward-looking information, except to the extent required
        by
        applicable securities laws. If we do update one or more forward-looking
        statements, no inference should be drawn that we will make additional updates
        with respect to those or other forward-looking statement. ****
  **Item
        1.**  **Description
        of Business.**
  With
        respect to this discussion, the terms “we” “us” “our” “Ironclad” and the
“Company” refer to Ironclad Performance Wear Corporation, a Nevada corporation
        and its wholly-owned subsidiary Ironclad Performance Wear Corporation, a
        California corporation ,
        or
        Ironclad California
  **2006
        Merger Transaction**
  Founded
        in 1998, and based in El Segundo, CA, we are a designer and manufacturer
        of
        branded performance work wear for a variety of construction, do-it-yourself,
        industrial, sporting goods and general services markets.
  On
        April
        20, 2006, we entered into an Agreement and Plan of Merger, or Merger Agreement,
        with Ironclad California, and Ironclad Merger Corporation, a California
        corporation and our wholly-owned subsidiary, or MergerCo, pursuant to which
        we
        would acquire Ironclad California in a merger transaction wherein MergerCo
        would
        merge with and into Ironclad California, with Ironclad California being the
        surviving corporation, or the Merger. On May 9, 2006, the Merger closed,
        Ironclad California became our wholly-owned subsidiary, and we changed our
        name
        to Ironclad Performance Wear Corporation.
  **Private
        Placement Transaction**
  Immediately
        following the closing of the Merger, we received gross proceeds of approximately
        $7.3 million in a private placement transaction, or the Private Placement,
        with
        institutional investors and other high net worth individuals, or the Investors.
        Pursuant to Subscription Agreements entered into with these Investors, we
        sold
        9,761,558 investment units, at $0.75 per investment unit. Each investment
        unit
        consists of one share of our common stock, and a five year non-callable warrant
        to purchase three-quarters of one share of our common stock, at an exercise
        price of $1.00 per share.
  **General**
  We
        design
        and manufacture branded performance work wear for a variety of construction,
        do-it-yourself, industrial, sporting goods and general services markets.
        Since
        inception, we have leveraged our proprietary technologies to design job-specific
        gloves and performance apparel designed to improve the wearer’s ability to
        safely, efficiently and comfortably perform specific job functions. Our goal
        is
        to establish a reputation in the construction, do-it-yourself, industrial,
        sporting goods and general services markets as a leader in performance gloves
        and apparel. We recently expanded our performance apparel product line to
        include jackets, pants, shorts, reflective and polo shirts, underwear and
        tights.
  We
        manufacture our performance gloves and apparel using 20 functional materials,
        including DuPontTM Kevlar® and Teflon®, Gore-tex® Synthetic Leather, 3M
        Reflective ScotchliteTM, DriRelease® and Duraclad®. We incorporate these
        materials in the manufacturing process to create products that meet the
        functional and protective requirements of our consumers. Since inception,
        we
        have employed an in-house research and development team responsible for
        identifying and creating new products and applications, and improving and
        enhancing existing products.
  1
  We
        currently sell our products in all 50 states and internationally through
        approximately 9,000 retail outlets. Our gloves are priced at retail between
        $15
        and $60 per unit with apparel unit prices ranging from $20 to $80.
  **Glove
        Products**
  Currently,
        our primary products are our task-specific technical gloves. Glove products
        are
        specially designed for individual user groups. Currently, we produce and
        sell 45
        distinct glove types in a variety of sizes and colors which cater to the
        specific demands and requirements of construction, do-it-yourself, industrial
        and sporting goods consumers, including carpenters, machinists, package
        handlers, plumbers, welders, roofers, hunters, gardeners and do-it-yourself
        users. Gloves are available in multiple levels of protection and abrasion
        that
        allow the wearer to choose a product based on the task demands, weather and
        ease
        of motion. Glove products are currently manufactured by three suppliers
        operating in China, Hong Kong and Indonesia. The manufacturing capabilities
        necessary for the manufacturing of our gloves is not particularly specialized
        and we believe that we would be able to replace our current manufacturers
        without significant disruption in supply if necessary. Raw material suppliers
        and substitute materials are readily available and we believe that our
        manufacturers would be able to replace their current raw material suppliers
        without significant disruption in supply.
  **Apparel**
  We
        launched a line of performance apparel products during the fourth quarter
        of
        2005. This apparel line consists of eight long and short sleeved shirts designed
        to increase the comfort and functionality of the wearer by taking into account
        environmental temperatures and workers’ corresponding perspiration levels. The
        apparel is engineered to keep the wearer dry and cool under extreme work
        conditions. Ironclad’s apparel products are comparable to Under ArmourTM
Products, but we have incorporated worker-centric features such as
        anti-microbials, SPF 30 sunscreen protection and self wicking, and have made
        our
        apparel products slightly heavier for durability. In 2006, we hired a Director
        of Apparel who was a designer/developer of performance apparel for Under
        Armour
        and other apparel companies. We also hired a Vice President of Sales - Apparel,
        who previously worked for Dickies and other apparel companies, to develop
        a
        sales force to sell the performance apparel line to the work wear and sporting
        goods channels. Our existing sales force will sell the performance apparel
        line
        to our existing customer base. In 2007, we expanded the apparel line to include
        performance jackets, pants, shorts, reflective and polo shirts, underwear
        and
        tights. The apparel line will be manufactured by three suppliers located
        in
        Taiwan, Mexico and the Dominican Republic. Manufacturing capacity for apparel
        is
        readily available and we believe that we would be able to replace our current
        manufacturers and add new manufacturers without significant disruption in
        supply.
  **Competition**
  Ironclad
        competes in the following two principal markets: construction and
        industrial.
  **Technical
        Gloves**
  Ironclad
        faces competition from other specialty gloves and apparel companies such
        as
        Custom Leathercraft Manufacturing Company, Big Time, Gorgonz and Mechanix
        Wear.
        Compared generally, we believe our material selection and construction provides
        for superior protection, durability, quality and repeat customers affording
        a
        substantial, sustainable advantage in the category.
  **Performance
        Work Apparel**
  We
        are
        one of a limited number of manufacturers of performance work apparel and,
        in the
        opinion of management, currently face relatively little competition from
        other
        manufacturers in this sector.
  **Mainstream
        Product Channels**
  To
        date,
        we have established our reputation, customer loyalty and brand by selling
        our
        products through hardware stores, lumber yards, big box home centers, industrial
        distributors and sporting goods retailers. We intend to expand into work
        wear
        chains and additional large retailers in 2008.
  **International
        Expansion**
  We
        began
        distributing products internationally in 2005 in Australia and Japan. In
        2006,
        we entered the Canadian market through a distributor. We expanded into the
        United Kingdom in 2007 and plan to expand into Europe and other international
        markets in 2008.
  2
  **Ironclad
        Branding**
  We
        place
        an emphasis on the establishment and maintenance of our brand equity. Since
        the
        inception of our business, our products have carried the “Ironclad” brand. We
        believe that our success in building a dedicated following of users with
        substantial product penetration across a large number of retailers and
        storefronts was instrumental in recently allowing us to gain entry into larger
        retailers and providing the foundation to expand internationally.
  **Television
        Relationships**
  Ironclad
        is working to develop advertising and marketing opportunities with television
        programs that could provide strong exposure to our target demographic and
        demonstrate to viewers the advantage of utilizing Ironclad products. Our
        products are currently featured on twelve television programs.
  **Print
        Media**
  We
        expanded our marketing programs in print media throughout 2007, in construction
        industry and occupational health and safety publications, and lifestyle and
        recreational magazines.
  **Sponsorship
        Relationships**
  We
        maintain a number of sponsorship relationships with sporting and television
        events that appeal to our target demographic. We view these relationships
        as a
        means to further establish and solidify brand recognition with our target
        customers.
  **Sales
        and Customer Analysis**
  We
        are
        currently distributing our products through approximately 9,000 outlets that
        cater to the professional tradesman, do-it-yourself consumer, industrial
        user
        and sporting goods consumer including “Big Box” home centers, hardware co-ops,
        lumber yards, industrial distributors and sporting goods retailers. In 2008
        we
        intend to sell our expanded performance apparel line to work wear retailers.
        Currently, we estimate that our products are sold in only 30% of the retail
        and
        distribution outlets identified by our management as viable Ironclad outlets.
        We
        intend to continue to emphasize and expand our relationships with these
        retailers and distributors
  Sales
        through “Big Box” home centers accounted for approximately 25% of our sales
        revenue in 2007. One retailer, Menard, Inc., accounted for approximately
        19% of
        our sales in 2007.
  **Selected
        Analysis of “Big Box” and International Retailers**
  We
        plan
        to continue our expansion by increasing selling efforts through “Big Box” home
        centers and international channels, which we believe creates significant
        opportunities for strengthening our brand.
  **Geographic
        Information**
  Domestic
        sales accounted for 89% of our revenue in 2007 and 93% in 2006. International
        sales in Australia, United Kingdom, Canada and other countries accounted
        for our
        remaining revenue in 2007. All of our fixed assets are located in the United
        States, principally in California at our headquarters. Our products are
        currently manufactured in China, Indonesia, Taiwan, Mexico, Hong Kong and
        the
        Dominican Republic.
  **Co-Branded
        Products and Relationships**
  Although
        we do not sell privately-labeled products, we have opportunistically sought
        to
        co-brand with major partners that represent a value added relationship in
        terms
        of sales and brand awareness.
  **Intellectual
        Property and Proprietary Rights**
  We
        currently have eight patents or patents pending, which are intended to protect
        the design and technical innovations found in our performance work gloves.
        Following are descriptions of the patents or patents pending.
  ·
              Advanced
                  Touch® Technology is a seamless fingertip design that places a smooth
                  layer of material on the touch receptors of the fingers. The result
                  is an
                  increase in comfort and a high degree of touch sensitivity. It
                  is used in
                  Ironclad’s Evolution, Tuff Chix and Ranchworx gloves. This patent issued
                  on October 30, 2007.
  ·
              Ironclad’s
                  Engineered Grip System consists of a uniquely patterned, molded
                  thermoplastic elastomer, or TPE, that is welded to a synthetic
                  leather
                  palm. It provides extreme grip and abrasion protection without
                  sacrificing
                  hand dexterity. It is found in Ironclad’s Extreme Duty glove, which is
                  designed to handle brick, cement block, rebar, and demolition rubble.
                  The
                  Extreme Duty glove is primarily used by search and rescue professionals,
                  including units of the New York and Los Angeles Fire Departments.
                  This
                  patent issued on September 5, 2006.
  ·
              Silicone
                  rubber is fused to the synthetic leather palm of the Box Handler
                  and
                  Gripworx gloves in a specific pattern. This pattern, designed for
                  optimum
                  grip on smooth surfaces, is patent
                  pending.
  3
  ·
              Ironclad’s
                  signature palm pattern is found on nine popular glove styles, including
                  the General Utility, Wrenchworx, and Ranchworx gloves. Management
                  believes
                  this pattern differentiates Ironclad from other non-branded gloves.
                  This
                  patent was issued on February 14,
                  2006.
  ·
              Ironclad
                  has developed two glove styles that absorb tool impacts with a
                  unique
                  design of multiple gel-filled palm pads. This design is found on
                  the
                  Wrenchworx Impact and Mach 5 Impact gloves. This patent issued
                  on February
                  13, 2007.
  ·
              Ironclad
                  has developed a heat resistant, shrink resistant, oil repellant,
                  high
                  durability synthetic fabric used for the palm of high temperature,
                  high
                  dexterity gloves. Exclusive Ironclad Hotshield TM palm technology, found in
                  the Heatworx line. This patent is
                  pending.
  ·
              A
                  specific geometry, construction and chemical composition for the
                  palm of a
                  glove that is heat resistant up to 650°F yet maintains hand dexterity,
                  found on Heatworx Heavy Duty glove. This patent is
                  pending.
  Ironclad
        owns the following intellectual trademark property: 39 registered US trademarks,
        10 registered international trademarks and 9 in-use US trademarks. These
        trademarks significantly strengthen consumer awareness of the Ironclad brand,
        and enable Ironclad to maintain distinction between it and other companies
        trying to copy the Ironclad brand image. We also have 7 copyright
        marks.
  We
        seek
        to protect our intellectual property through existing laws and regulations
        and
        by contractual restrictions. We rely upon trademark, patent and copyright
        law,
        trade secret protection and confidentiality or license agreements with our
        employees, customers, partners and others to help us protect our intellectual
        property.
  The
        status of any patent involves complex legal and factual questions. The scope
        of
        allowable claims is often uncertain. As a result, we cannot be sure that
        any
        patent application filed by us will result in a patent being issued, nor
        that
        any patents issued in the future will afford adequate protection against
        competitors with similar technology; nor can we provide assurance that patents
        issued to us will not be infringed upon or designed around by others.
  **Item
        1A. Risk Factors.**
  *Investing
        in our common stock involves a high degree of risk. You should carefully
        consider the following risk factors and all other information contained in
        this
        report before purchasing our common stock. The risks and uncertainties described
        below are not the only ones facing us. Additional risks and uncertainties
        that
        we are unaware of, or that we currently deem immaterial, also may become
        important factors that affect us. If any of the following risks occur, our
        business, financial condition or results of operations could be materially
        and
        adversely affected. In that case, the trading price of our common stock could
        decline, and you may lose some or all of the money you paid to purchase our
        common stock.*
  **RISKS
        RELATING TO OUR BUSINESS**
  **Our
        operating results may fluctuate significantly and our stock price could decline
        or fluctuate if our results do not meet the expectation of analysts or
        investors.**
  Management
        expects that we will experience substantial variations in our net sales and
        operating results from quarter to quarter. We believe that the factors which
        influence this variability of quarterly results include:
  ·
              the
                  timing of our introduction of new product lines, particularly specialty
                  apparel;
  ·
              the
                  level of consumer acceptance of each new product
                  line;
  ·
              general
                  economic and industry conditions that affect consumer spending
                  and
                  retailer purchasing;
  ·
              the
                  availability of manufacturing capacity;
  ·
              the
                  seasonality of the markets in which we participate;
  ·
              the
                  timing of trade shows;
  ·
              the
                  product mix of customer orders;
  ·
              the
                  timing of the placement or cancellation of customer orders;
  ·
              the
                  weather;
  ·
              transportation
                  delays;
  4
  ·
              quotas
                  and other regulatory matters; and
  ·
              the
                  timing of expenditures in anticipation of increased sales and actions
                  of
                  competitors.
  As
        a
        result of fluctuations in our revenue and operating expenses that may occur,
        management believes that period-to-period comparisons of our results of
        operations are not a good indication of our future performance. It is possible
        that in some future quarter or quarters, our operating results will be below
        the
        expectations of securities analysts or investors. In that case, our common
        stock
        price could fluctuate significantly or decline.
  **We
        may need additional funding to support our operations and capital expenditures,
        which may not be available to us and which lack of availability could adversely
        affect our business.**
  We
        intend
        to fund our operations and capital expenditures from limited cash flow from
        operations, our cash on hand, the net proceeds of the private placements
        completed on May 9, 2006 and September 28, 2007 and the factoring agreement
        entered into on September 15, 2006. We believe we will have sufficient funds
        to
        finance the cost of our operations and planned expansion for the foreseeable
        future. As part of our planned growth and expansion, we will be required
        to make
        expenditures necessary to expand and improve our operating and management
        infrastructure. We also plan to invest more heavily in research and development
        of new products, designs or services. In addition, we may need additional
        funds
        to pursue business opportunities (such as acquisitions of complementary
        businesses), to react to unforeseen difficulties or to respond to competitive
        pressures.
  If
        our
        capital resources are insufficient, we will need to raise additional funds.
        There can be no assurance that any financing arrangements will be available
        in
        amounts or on terms acceptable to us, if at all. Furthermore, the sale of
        additional equity or convertible debt securities may result in additional
        dilution to existing stockholders. If adequate additional funds are not
        available, we may be required to delay, reduce the scope of or eliminate
        material parts of the implementation of our business strategy. This limitation
        could substantially harm our business, results of operations and financial
        condition.
  **We
        have a history of operating losses and there can be no assurance that we
        can
        achieve or maintain profitability.**
  We
        have a
        history of operating losses and may not achieve or sustain profitability.
        We
        cannot guarantee that we will become profitable. Even if we achieve
        profitability, given the competitive and evolving nature of the industry
        in
        which we operate, we may be unable to sustain or increase profitability and
        our
        failure to do so would adversely affect our business, including our ability
        to
        raise additional funds.
  **We
        may be unable to effectively manage our growth.**
  Our
        strategy envisions growing our business. We plan to expand our technology,
        sales, administrative and marketing organizations. Any growth in or expansion
        of
        our business is likely to continue to place a strain on our management and
        administrative resources, infrastructure and systems. As with other growing
        businesses, we expect that we will need to further refine and expand our
        business development capabilities, our systems and processes and our access
        to
        financing sources. We also will need to hire, train, supervise and manage
        new
        employees. These processes are time consuming and expensive, will increase
        management responsibilities and will divert management attention. We cannot
        assure you that we will be able to:
  ·
              expand
                  our systems effectively or efficiently or in a timely manner;
  ·
              allocate
                  our human resources optimally;
  ·
              meet
                  our capital needs;
  ·
              identify
                  and hire qualified employees or retain valued employees; or
  ·
              incorporate
                  effectively the components of any business or product line that
                  we may
                  acquire in our effort to achieve growth.
  Our
        inability or failure to manage our growth and expansion effectively could
        harm
        our business and materially and adversely affect our operating results and
        financial condition.
  **Substantially
        all of our revenues have been derived from a relatively limited product line
        consisting of task-specific gloves and performance apparel, and our future
        success depends on our ability to expand our product line and achieve broader
        market acceptance of our company and our products.**
  To
        date,
        our products have consisted mainly of task-specific gloves and performance
        apparel, targeted primarily to the construction, do-it-yourself, industrial
        and
        sporting goods markets. Our success and the planned growth and expansion
        of our
        business depend on us achieving greater and broader acceptance in our existing
        market segments as well as in new segments. In particular, our success, growth
        and expansion depend largely on new and increasing sales of our recently
        expanded performance apparel. We have little or virtually no experience in
        this
        line of business, which creates substantial uncertainty regarding our ability
        to
        succeed in this sector. We will be required to develop and execute a strategy
        for effectively marketing and distributing our performance apparel. We may
        be
        required to enter into new arrangements and relationships with vendors,
        suppliers and others. We also may be required to undertake new types of risks
        or
        obligations that we may be unable to manage. There can be no assurance that
        consumers will purchase our products or that retail outlets will stock our
        products. Though we plan to spend significant amounts on promotion, marketing
        and advertising to increase product awareness, we cannot guarantee that these
        expenses will generate the desired product awareness or commensurate increase
        in
        sales of our products. If we are unable to effectively market and distribute
        our
        performance apparel or expand into new market segments, we will be unable
        to
        grow and expand our business or implement our business strategy as described
        in
        this report. This could materially impair our ability to increase sales and
        revenue and materially and adversely affect our margins, which could harm
        our
        business and cause our stock price to decline.
  5
  **We
        may be unable to compete successfully against existing and future competitors,
        which could decrease our revenue and margins and harm our
        business.**
  The
        task-specific glove and performance apparel segments of the apparel industry
        are
        highly competitive. Our future growth and financial success depend on our
        ability to further penetrate and expand our existing distribution channels
        and
        to increase the size of our average annual net sales per account in these
        channels, as well as our ability to penetrate and expand other distribution
        channels. For example, we encounter competition in our existing work wear
        distribution channel from Gorgonz, among others. Unknown or unforeseen new
        entrants into our distribution channels, particularly low-cost overseas
        producers, will further increase the level of competition in these channels.
        There can be no assurance that we will be able to maintain our growth rate
        or
        increase our market share in our distribution channels at the expense of
        existing competitors and other apparel manufacturers choosing to enter the
        market segments in which we compete. In addition, there can be no assurance
        that
        we will be able to enter and achieve significant growth in other distribution
        channels.
  **Failure
        to expand into new distribution channels and new international markets could
        materially and adversely impact our growth plan and
        profitability.**
  Our
        sales
        growth depends in part on our ability to expand from the hardware and lumber
        retail channels and industrial distributors that we have focused on for the
        past
        eight years into new distribution channels, particularly “Big Box” home centers
        and work wear and sporting goods retailers. Failure to expand into these
        mass-market channels could severely limit our growth.
  Our
        business plan also depends in part on our ability to expand into international
        markets. We have begun the distribution of our products in Japan, Australia
        and
        Canada and we are in the process of establishing distribution in Europe and
        other international markets. Failure to expand international sales through
        these
        and other markets could limit our growth capability and leave us vulnerable
        solely to United States market conditions.
  **Our
        dependence on independent manufacturers reduces our ability to control the
        manufacturing process, which could harm our sales, reputation and overall
        profitability.**
  We
        depend
        on independent contract manufacturers to maintain sufficient manufacturing
        and
        shipping capacity in an environment characterized by declining prices, labor
        shortages, continuing cost pressure and increased demands for product innovation
        and speed-to-market. This dependence could subject us to difficulty in obtaining
        timely delivery of products of acceptable quality. In addition, a contractor’s
        failure to ship products to us in a timely manner or to meet the required
        quality standards could cause us to miss the delivery date requirements of
        our
        customers. The failure to make timely deliveries may cause our customers
        to
        cancel orders, refuse to accept deliveries, impose non-compliance charges
        through invoice deductions or other charge-backs, demand reduced prices or
        reduce future orders, any of which could harm our sales, reputation and overall
        profitability.
  We
        do not
        have long-term contracts with any of our independent contractors and any
        of
        these contractors may unilaterally terminate their relationship with us at
        any
        time. While management believes that there exists an adequate supply of
        contractors to provide products and services to us, to the extent we are
        not
        able to secure or maintain relationships with independent contractors that
        are
        able to fulfill its requirements, our business would be harmed.
  We
        have
        initiated standards for our suppliers, and monitor our independent contractors’
compliance with applicable labor laws, but we do not control our contractors
        or
        their labor practices. The violation of federal, state or foreign labor laws
        by
        one of our contractors could result in us being subject to fines and our
        goods
        that are manufactured in violation of such laws being seized or their sale
        in
        interstate commerce being prohibited. To date, we have not been subject to
        any
        sanctions that, individually or in the aggregate, have had a material adverse
        effect on our business, and we are not aware of any facts on which any such
        sanctions could be based. There can be no assurance, however, that in the
        future
        we will not be subject to sanctions as a result of violations of applicable
        labor laws by our contractors, or that such sanctions will not have a material
        adverse effect on our business and results of operations.
  6
  **Trade
        matters may disrupt our supply chain, which could result in increased expenses
        and decreased sales.**
  We
        cannot
        predict whether any of the countries in which our merchandise currently is
        manufactured or may be manufactured in the future will be subject to additional
        trade restrictions imposed by the U.S. and other foreign governments, including
        the likelihood, type or effect of any such restrictions. Trade restrictions,
        including increased tariffs or quotas, embargoes, safeguards and customs
        restrictions, against apparel items, as well as U.S. or foreign labor strikes,
        work stoppages or boycotts, could increase the cost or reduce the supply
        of
        apparel available to us and adversely affect our business, financial condition
        and results of operations. Although the quota system established by the
        Agreement on Textiles and Clothing was completely phased out for World Trade
        Organization countries effective January 1, 2005, there can be no assurances
        that restrictions will not be reestablished for certain categories in specific
        countries. We are unable to determine the impact of the changes to the quota
        system on our sourcing operations, particularly in China. Our sourcing
        operations may be adversely affected by trade limits or political and financial
        instability resulting in the disruption of trade from exporting countries,
        significant fluctuation in the value of the U.S. dollar against foreign
        currencies, restrictions on the transfer of funds and/or other trade
        disruptions.
  **Our
        international operations and the operations of our manufacturers and suppliers
        in China are subject to additional risks that are beyond our control and
        that
        could harm our business.**
  Our
        glove
        products are manufactured by 3 manufacturers operating in China, Hong Kong
        and
        Indonesia. Our performance apparel products are currently manufactured in
        Taiwan, Mexico and the Dominican Republic. We may in the future use offshore
        manufacturers for all or some of these products. In addition, approximately
        7%
        of our fiscal 2006 net revenues were generated through international sales
        and
        we plan to increase our sales to international markets in the future. As
        a
        result of our international manufacturing and sales, we are subject to
        additional risks associated with doing business abroad, including:
  ·
              political
                  unrest, terrorism and economic instability resulting in the disruption
                  of
                  trade from foreign countries in which our products are
                  manufactured;
  ·
              difficulties
                  in managing foreign operations, including difficulties associated
                  with
                  inventory management and collection on foreign accounts
                  receivable;
  ·
              dependence
                  on foreign distributors and distribution networks;
  ·
              currency
                  exchange fluctuations and the ability of our Chinese manufacturers
                  to
                  change the prices they charge us based on fluctuations in the value
                  of the
                  US dollar relative to that of the Chinese
                  Yuan;
  ·
              the
                  imposition of new laws and regulations, including those relating
                  to labor
                  conditions, quality and safety standards as well as restrictions
                  on the
                  transfer of funds;
  ·
              disruptions
                  or delays in shipments;
  ·
              changes
                  in local economic and non-economic conditions and standards in
                  which our
                  manufacturers, suppliers or customers are located;
                  and
  ·
              reduced
                  protection for intellectual property rights in jurisdictions outside
                  the
                  United States.
  These
        and
        other factors beyond our control could interrupt our manufacturers’ production
        in offshore facilities, influence the ability of our manufacturers to export
        our
        products cost-effectively or at all, inhibit our and our unaffiliated
        manufacturer’s ability to produce certain materials and influence our ability to
        sell our products in international markets, any of which could have an adverse
        effect on our business, financial conditions and operations.
  **We
        may be unable to adequately protect our intellectual property
        rights.**
  We
        rely
        in part on patent, trade secret, trade dress and trademark law to protect
        our
        rights to certain aspects of our products, including product designs,
        proprietary manufacturing processes and technologies, product research and
        concepts and recognized trademarks, all of which we believe are important
        to the
        success of our products and our competitive position. There can be no assurance
        that any of our pending patent or trademark applications will result in the
        issuance of a registered patent or trademark, or that any patent or trademark
        granted will be effective in thwarting competition or be held valid if
        subsequently challenged. In addition, there can be no assurance that the
        actions
        taken by us to protect our proprietary rights will be adequate to prevent
        imitation of our products, that our proprietary information will not become
        known to competitors, that we can meaningfully protect our rights to unpatented
        proprietary information or that others will not independently develop
        substantially equivalent or better products that do not infringe on our
        intellectual property rights. We could be required to devote substantial
        resources to enforce our patent and protect our intellectual property, which
        could divert our resources and result in increased expenses. In addition,
        an
        adverse determination in litigation could subject us to the loss of our rights
        to a particular patent or other intellectual property, could require us to
        grant
        licenses to third parties, could prevent us from manufacturing, selling or
        using
        certain aspects of our products or could subject us to substantial liability,
        any of which could harm our business.
  7
  **We
        may become subject to litigation for infringing the intellectual property
        rights
        of others** .
  Others
        may initiate claims against us for infringing on their intellectual property
        rights. We may be subject to costly litigation relating to such infringement
        claims and we may be required to pay compensatory and punitive damages or
        license fees if we settle or are found culpable in such litigation, we may
        be
        required to pay damages, including punitive damages. In addition, we may
        be
        precluded from offering products that rely on intellectual property that
        is
        found to have been infringed by us. We also may be required to cease offering
        the affected products while a determination as to infringement is considered.
        These developments could cause a decrease in our operating income and reduce
        our
        available cash flow, which could harm our business and cause our stock price
        to
        decline.
  **We
        may be unable to attract and retain qualified, experienced, highly skilled
        personnel, which could adversely affect the implementation of our business
        plan.**
  Our
        success depends to a significant degree upon our ability to attract, retain
        and
        motivate skilled and qualified personnel. If we fail to attract, train and
        retain sufficient numbers of these qualified people, our prospects, business,
        financial condition and results of operations will be materially and adversely
        affected. In particular, we are heavily dependent on the continued services
        of
        Eduard Jaeger and the other members of our senior management team. We do
        not
        have long-term employment agreements with any of the members of our senior
        management team, each of whom may voluntarily terminate his employment with
        us
        at any time. Following any termination of employment, these employees would
        not
        be subject to any non-competition covenants. The loss of any key employee,
        including members of our senior management team, and our inability to attract
        highly skilled personnel with sufficient experience in our industries could
        harm
        our business.
  **Our
        senior management’s limited recent experience managing a publicly traded company
        may divert management’s attention from operations and harm our
        business.**
  Our
        management team has relatively limited recent experience managing a publicly
        traded company and complying with federal securities laws, including compliance
        with recently adopted disclosure requirements on a timely basis. Our management
        will be required to design and implement appropriate programs and policies
        in
        responding to increased legal, regulatory compliance and reporting requirements,
        and any failure to do so could lead to the imposition of fines and penalties
        and
        harm our business.
  **RISKS
        RELATING TO OUR INDUSTRY**
  **If
        we are unable to respond to the adoption of technological innovation in our
        industry and changes in consumer demand, our products will cease to be
        competitive, which could result in a decrease in revenue and harm our
        business.**
  Our
        future success will depend, in part, on our ability to keep up with changes
        in
        consumer tastes and our continued ability to differentiate our products through
        implementation of new technologies, such as new materials and fabrics. We
        may
        not, however, be able to successfully do so, and our competitors may be able
        to
        produce designs that are more appealing, implement new technologies or
        innovations in their design, or manufacture their products at a much lower
        cost.
        These types of developments could render our products less competitive and
        possibly eliminate any differentiating advantage in design and materials
        that we
        might hold at the present time.
  **We
        are susceptible to general economic conditions, and a downturn in our industries
        or a reduction in spending by consumers could adversely affect our operating
        results.**
  The
        apparel industry in general has historically been characterized by a high
        degree
        of volatility and subject to substantial cyclical variations. Our operating
        results will be subject to fluctuations based on general economic conditions,
        in
        particular conditions that impact consumer spending and construction and
        industrial activity. A downturn in the construction, industrial or housing
        sectors could be expected to directly and negatively impact sales of protective
        gear to workers in these sectors, which could cause a decrease in revenue
        and
        harm our sales.
  Difficult
        economic conditions could also increase the risk of extending credit to our
        retailers. In the event we enter into a factoring relationship, a customer’s
        financial problems would limit the amount of customer receivables that we
        could
        assign to such factor on the receivables, and could cause us to assume more
        credit risk relating to those assigned receivables or to curtail business
        with
        that customer.
  8
  **Government
        regulation and supervision**
  Any
        negative changes to international treaties and regulations such as the North
        American Free Trade Agreement, or NAFTA, and to the effects of international
        trade agreements and embargoes imposed by such entities such as the World
        Trade
        Organization which could result in a rise in trade quotas, duties, taxes
        and
        similar impositions or which could limit the countries from whom we can purchase
        our fabric or other component materials, or which could limit the countries
        where we might market and sell our products, could have an adverse effect
        on our
        business.
  Any
        changes in regulation by the Federal Trade Commission, or FTC, with respect
        to
        labeling and advertising of our products could have an adverse affect on
        our
        business. The FTC requires apparel companies to provide a label clearly stating
        the country of origin of manufacture and the company’s apparel registration
        number and a second label stating washing instructions for the product. A
        change
        in these requirements could add additional cost to the production of our
        products, though we do not believe that this additional cost would be material,
        especially in relation to the cost of producing our products.
  **RISKS
        RELATING TO OUR COMMON STOCK**
  **There
        is a limited trading market for our common stock and a market for our stock
        may
        not be sustained, which will adversely affect the liquidity of our common
        stock
        and could cause our market price to decline.**
  Although
        prices for our shares of common stock are quoted on NASDAQ’s Over-the-Counter
        Bulletin Board (under the symbol ICPW.OB), there is a limited public trading
        market for our common stock, and no assurance can be given that a public
        trading
        market will be sustained.
  Active
        trading markets generally result in lower price volatility and more efficient
        execution of buy and sell orders. The absence of an active trading market
        reduces the liquidity of our common stock. As a result of the lack of trading
        activity, the quoted price for our common stock on the Over-the-Counter Bulletin
        Board is not necessarily a reliable indicator of its fair market value. Further,
        if we cease to be quoted, holders of our common stock would find it more
        difficult to dispose of, or to obtain accurate quotations as to the market
        value
        of, our common stock, and the market value of our common stock would likely
        decline.
  **The
        market price of our common stock is likely to be highly volatile and subject
        to
        wide fluctuations, and you may be unable to resell your shares at or above
        the
        offering price.**
  The
        market price of our common stock is likely to be highly volatile and could
        be
        subject to wide fluctuations in response to a number of factors that are
        beyond
        our control, including announcements of new products or services by our
        competitors. In addition, the market price of our common stock could be subject
        to wide fluctuations in response to a variety of factors, including:
  ·
              quarterly
                  variations in our revenues and operating expenses;
  ·
              developments
                  in the financial markets, apparel industry and the worldwide or
                  regional
                  economies;
  ·
              announcements
                  of innovations or new products or services by us or our competitors;
  ·
              announcements
                  by the government that affect international trade
                  treaties;
  ·
              fluctuations
                  in interest rates and / or the asset backed securities
                  market;
  ·
              significant
                  sales of our common stock or other securities in the open
                  market;
  ·
              variations
                  in interest rates; and
  ·
              changes
                  in accounting principles.
  In
        the
        past, stockholders have often instituted securities class action litigation
        after periods of volatility in the market price of a company’s securities. If a
        stockholder were to file any such class action suit against us, we would
        incur
        substantial legal fees and our management’s attention and resources would be
        diverted from operating our business to respond to the litigation, which
        could
        harm our business.
  **Substantial
        future sales of our common stock in the public market could cause our stock
        price to fall.**
  On
        October 2, 2006 the registration statement we filed in June 2006 became
        effective, and up to 27,117,720 shares of common stock became eligible for
        sale.
        The sale of these shares could depress the market price of our common stock.
        Sales of a significant number of shares of our common stock in the open market
        could harm the market price of our common stock. A reduced market price for
        our
        shares could make it more difficult to raise funds through future offering
        of
        common stock.
  9
  Moreover,
        as additional shares of our common stock become available for resale in the
        open
        market (including shares issued upon the exercise of our outstanding warrants),
        the supply of our publicly traded shares will increase, which could decrease
        its
        price. Gemini Partners, Inc., or Gemini, and other stockholders that funded
        the
        purchase and cancellation of shares from our former stockholders have demand
        registration rights with respect to the resale of 3,489,444 shares they received
        in connection with the purchase and cancellation transaction completed
        immediately before the closing of the merger with Ironclad California. Brean
        Murray, Carret & Co., or Brean Murray, the placement agent in the private
        placement completed on May 9, 2006, also has demand rights with respect to
        the
        resale of its shares of common stock and common stock underlying warrants.
        The
        resale of these shares may be registered subsequently pursuant to these demand
        registration rights.
  Some
        of
        our shares may also be offered from time to time in the open market pursuant
        to
        Rule 144, and these sales may have a depressive effect on the market for
        our
        shares. In general, a person who has held restricted shares for a period
        of one
        year may, upon filing with the Securities and Exchange Commission, or SEC,
        a
        notification on Form 144, sell into the market shares up to an amount equal
        to
        1% of the outstanding shares. The resale of the 3,489,444 shares held by
        Gemini
        and the stockholders who acquired shares in connection with the purchase
        and
        cancellation transaction completed immediately before the merger with Ironclad
        California may be registered as discussed above, but these shares also may
        currently be eligible for sale under Rule 144. The resale of these shares
        under
        Rule 144 may cause our stock price to decline.
  **The
        sale of securities by us in any equity or debt financing could result in
        dilution to our existing stockholders and have a material adverse effect
        on our
        earnings.**
  Any
        sale
        of common stock by us in a future private placement offering could result
        in
        dilution to the existing stockholders as a direct result of our issuance
        of
        additional shares of our capital stock. In addition, our business strategy
        may
        include expansion through internal growth, by acquiring complementary
        businesses, by acquiring or licensing additional brands, or by establishing
        strategic relationships with targeted customers and suppliers. In order to
        do
        so, or to finance the cost of our other activities, we may issue additional
        equity securities that could dilute our stockholders’ stock ownership. We may
        also assume additional debt and incur impairment losses related to goodwill
        and
        other tangible assets if we acquire another company and this could negatively
        impact our earnings and results of operations.
  **The
        trading of our common stock on the Over-the-Counter Bulletin Board and the
        potential designation of our common stock as a “penny stock” could impact the
        trading market for our common stock.**
  Our
        securities, as traded on the NASDAQ Over-the-Counter Bulletin Board, may
        be
        subject to SEC rules that impose special sales practice requirements on
        broker-dealers who sell these securities to persons other than established
        customers or accredited investors. For the purposes of the rule, the phrase
        “accredited investors” means, in general terms, institutions with assets in
        excess of $5,000,000, or individuals having a net worth in excess of $1,000,000
        or having an annual income that exceeds $200,000 (or that, when combined
        with a
        spouse’s income, exceeds $300,000). For transactions covered by the rule, the
        broker-dealer must make a special suitability determination for the purchaser
        and receive the purchaser’s written agreement to the transaction before the
        sale. Consequently, the rule may affect the ability of broker-dealers to
        sell
        our securities and also may affect the ability of purchasers to sell their
        securities in any market that might develop therefore.
  In
        addition, the SEC has adopted a number of rules to regulate “penny stock” that
        restrict transactions involving these securities. Such rules include Rules
        3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under
        the
        Securities Exchange Act of 1934, as amended. These rules may have the effect
        of
        reducing the liquidity of penny stocks. “Penny stocks” generally are equity
        securities with a price of less than $5.00 per share (other than securities
        registered on certain national securities exchanges or quoted on the NASDAQ
        Global Market if current price and volume information with respect to
        transactions in such securities is provided by the exchange or system). Because
        our securities may constitute “penny stock” within the meaning of the rules, the
        rules would apply to us and to our securities.
  Stockholders
        should be aware that, according to SEC, the market for penny stocks has suffered
        in recent years from patterns of fraud and abuse. Such patterns include (i)
        control of the market for the security by one or a few broker-dealers that
        are
        often related to the promoter or issuer; (ii) manipulation of prices through
        prearranged matching of purchases and sales and false and misleading press
        releases; (iii) “boiler room” practices involving high-pressure sales tactics
        and unrealistic price projections by inexperienced sales persons; (iv) excessive
        and undisclosed bid-ask differentials and markups by selling broker-dealers;
        and
        (v) the wholesale dumping of the same securities by promoters and broker-dealers
        after prices have been manipulated to a desired level, resulting in investor
        losses. Our management is aware of the abuses that have occurred historically
        in
        the penny stock market. Although we do not expect to be in a position to
        dictate
        the behavior of the market or of broker-dealers who participate in the market,
        management will strive within the confines of practical limitations to prevent
        the described patterns from being established with respect to our
        securities.
  10
  **We
        have not paid dividends in the past and do not expect to pay dividends for
        the
        foreseeable future, and any return on investment may be limited to potential
        future appreciation on the value of our common stock.**
  We
        currently intend to retain any future earnings to support the development
        and
        expansion of our business and do not anticipate paying cash dividends in
        the
        foreseeable future. Our payment of any future dividends will be at the
        discretion of our Board of Directors after taking into account various factors,
        including without limitation, our financial condition, operating results,
        cash
        needs, growth plans and the terms of any credit agreements that we may be
        a
        party to at the time. To the extent we do not pay dividends, our stock may
        be
        less valuable because a return on investment will only occur if and to the
        extent our stock price appreciates, which may never occur. In addition,
        investors must rely on sales of their common stock after price appreciation
        as
        the only way to realize their investment, and if the price of our stock does
        not
        appreciate, then there will be no return on investment. Investors seeking
        cash
        dividends should not purchase our common stock.
  **Our
        officers, directors and principal stockholders can exert significant influence
        over us and may make decisions that are not in the best interests of all
        stockholders.**
  Our
        officers, directors and principal stockholders (greater than 5% stockholders)
        collectively control approximately 52% of our outstanding common stock. As
        a
        result, these stockholders will be able to affect the outcome of, or exert
        significant influence over, all matters requiring stockholder approval,
        including the election and removal of directors and any change in control.
        In
        particular, this concentration of ownership of our common stock could have
        the
        effect of delaying or preventing a change of control of us or otherwise
        discouraging or preventing a potential acquirer from attempting to obtain
        control of us. This, in turn, could have a negative effect on the market
        price
        of our common stock. It could also prevent our stockholders from realizing
        a
        premium over the market prices for their shares of common stock. Moreover,
        the
        interests of this concentration of ownership may not always coincide with
        our
        interests or the interests of other stockholders, and accordingly, they could
        cause us to enter into transactions or agreements that we would not otherwise
        consider.
  **Anti-takeover
        provisions may limit the ability of another party to acquire us, which could
        cause our stock price to decline.**
  Our
        Articles of Incorporation, as amended, our by-laws and Nevada law contain
        provisions that could discourage, delay or prevent a third party from acquiring
        us, even if doing so may be beneficial to our stockholders. In addition,
        these
        provisions could limit the price investors would be willing to pay in the
        future
        for shares of our common stock.
  **Employees**
  As
        of
        December 31, 2007, Ironclad had 28 full-time employees. Since inception,
        we have
        never had a work stoppage, and our employees are not represented by a labor
        union. Ironclad considers its relationships with its employees to be positive.
  **Item
        2.**  **Description
        of Property.**
  We
        lease
        all of our facilities. Our headquarters are located at 2201 Park Place, Suite
        101, El Segundo, California 90245. The table below sets forth certain
        information regarding our leaseholds as of March 27, 2008.
  **Address**
              
              **Approximate**
                **Floor
                  Space**
                **(Sq.
                  Ft.)**
              
              **Monthly**
                **Rent**
              
              **Use**2201
                  Park Place, Suite 101 El Segundo, CA
              
              
              10,600
              
              $
              14,069
              
              Corporate offices
  We
        believe our facilities are adequate to meet our current and near-term needs.
  **Item
        3.**  **Legal
        Proceedings.**
  In
        September 12, 2006, American Sports Group, Inc., or ASG, filed a lawsuit
        against
        both Ironclad California and Ironclad Nevada in the Superior Court of the
        State
        of California for the County of Los Angeles, alleging causes of action for
        Declaratory Relief and Breach of Contract.
  We
        took
        the position that ASG's claims were without merit and vigorously defended
        against these claims, denying all of the allegations and filing a
        Cross-Complaint for unfair business practices against ASG, Youngstown Equipment
        Corp., Blackstone Investment Group, Pacifica Ltd, LLC, Lakeview Canyon, LLC,
        or
        Lakeview, and Greg Thomsen, or Thomsen, among others. In December of 2007,
        we
        also filed a Federal Court complaint against Youngstown, Blackstone, Pacifica,
        Lakeview and Thomsen, alleging certain trademark violations.
  11
  In
        January of 2008, the parties settled their claims with respect to both lawsuits
        with prejudice. The settlement included a general mutual release covering
        all
        existing and potential claims between the parties arising out of the
        litigation.
  **Item
        4.**  **Submission
        of Matters to a Vote of Securities Holders.**
  On
        January 12, 2007, we held a Special Meeting of the Shareholders, or the Special
        Meeting. At the Special Meeting, there were 30,064,060 shares of common stock
        entitled to vote. There were 20,147,006 shares (67.014% of the shares entitled
        to vote) represented at the meeting in person or by proxy. The matter submitted
        to the shareholders at the Special Meeting was the approval or our 2006 Stock
        Incentive Plan, which authorizes the issuance of up to 4,250,000 shares of
        our
        common stock pursuant to grants awarded under such Plan.
  The
        following summarizes vote results for the matter submitted to our shareholders
        for action at the Special Meeting:
  For
              Against
              Withheld18,792,774
              1,353,732
              500
  12
 
  **PART
          II**
  **Item
        5.**  **Market
        for Common Equity, Related Stockholder Matters and Small Business Issuer
        Purchases of equity Securities.**
  **Common
        Stock**
  Our
        common stock is quoted on the Over-The-Counter Bulletin Board under the symbol
        “ICPW.” Prior to the second quarter of 2006, there was no established trading
        market for our common stock. The following table sets forth, for the periods
        indicated, the high and low bid information for the common stock, as determined
        from sporadic quotations on the Over-the-Counter Bulletin Board, as well
        as the
        total number of shares of common stock traded during the periods indicated.
        The
        information has been adjusted to reflect a 3.454895-for-1 forward stock split
        of
        our common stock which took effect at the close of business on May 9, 2006.
        The
        following quotations reflect inter-dealer prices, without retail mark-up,
        mark-down or commission, and may not represent actual transactions.
  **High**
              
              **Low**
              
              **Volume****Year
                  Ended December 31, 2006**Second
                  Quarter
              
              $
              2.56
              
              $
              1.01
              
              
              328,862Third
                  Quarter
              
              $
              1.30
              
              $
              0.86
              
              
              382,974Fourth
                  Quarter
              
              $
              0.90
              
              $
              0.55
              
              
              3,123,332**Year
                  Ended December 31, 2007**First
                  Quarter
              
              $
              0.71
              
              $
              0.45
              
              
              3,612,791Second
                  Quarter
              
              $
              0.70
              
              $
              0.39
              
              
              1,447,863Third
                  Quarter
              
              $
              0.60
              
              $
              0.41
              
              
              3,618,063Fourth
                  Quarter
              
              $
              0.50
              
              $
              0.36
              
              
              549,719
 
 On
        March
        27, 2008, the closing sales price of our common stock as reported on the
        Over-The-Counter Bulletin Board was $0.30 per share. As of March 27, 2008,
        there
        were approximately 277 shareholders of record of our common stock.
  13
  **19-MONTH
        PRICE PERFORMANCE GRAPH COMPARISON (1)**
 
 The
        graph
        below matches our cumulative 19-month total shareholder return on common
        stock
        with the cumulative total returns of the Dow Jones Wilshire MicroCap index
        and
        the DJ Wilshire Clothing & Accessories index. The graph tracks the
        performance of a $100 investment in our common stock and in each of the indexes
        (with the reinvestment of all dividends) from 5/11/2006 to 12/31/2007.
 
 Ironclad
  **5/06**
              
              **5/06**
              
              **6/06**
              
              **7/06**
              
              **8/06**
              
              **9/06**
              
              **10/06**
              
              **11/06****Ironclad
                  Performance Wear Corporation**
              
              
              **100.00**
              
              
              **111.11**
              
              
              **73.61**
              
              
              **79.86**
              
              
              **71.53**
              
              
              **69.44**
              
              
              **51.39**
              
              
              **50.00****Dow
                  Jones Wilshire MicroCap**
              
              
              **100.00**
              
              
              **94.40**
              
              
              **93.60**
              
              
              **89.94**
              
              
              **91.87**
              
              
              **92.03**
              
              
              **96.91**
              
              
              **99.33****DJ
                  Wilshire Clothing & Accessories**
              
              
              **100.00**
              
              
              **94.69**
              
              
              **95.03**
              
              
              **90.87**
              
              
              **94.92**
              
              
              **102.65**
              
              
              **111.35**
              
              
              **116.36**
 
 **12/06**
              
              **1/07**
              
              **2/07**
              
              **3/07**
              
              **4/07**
              
              **5/07**
              
              **6/07**
              
              **7/07**
              
              **8/07**
              
              **9/07**
              
              **10/07**
              
              **11/07**
              
              **12/07****46.53**
              
              
              **47.22**
              
              
              **47.92**
              
              
              **31.94**
              
              
              **27.78**
              
              
              **33.33**
              
              
              **38.19**
              
              
              **32.64**
              
              
              **32.64**
              
              
              **34.72**
              
              
              **31.25**
              
              
              **27.78**
              
              
              **31.25****100.88**
              
              
              **102.70**
              
              
              **102.29**
              
              
              **102.49**
              
              
              **104.46**
              
              
              **106.59**
              
              
              **105.85**
              
              
              **99.58**
              
              
              **98.60**
              
              
              **100.78**
              
              
              **102.07**
              
              
              **92.93**
              
              
              **92.28****116.89**
              
              
              **120.47**
              
              
              **122.77**
              
              
              **124.18**
              
              
              **126.08**
              
              
              **128.91**
              
              
              **126.37**
              
              
              **119.72**
              
              
              **116.89**
              
              
              **119.62**
              
              
              **108.83**
              
              
              **101.54**
              
              
              **89.48**
 
 The
        stock
        price performance included in this graph is not necessarily indicative of
        future
        stock price performance.
  **Dividends**
  We
        have
        never paid dividends on our common stock. We intend to retain any future
        earnings for use in our business.
  **Recent
        Sales of Unregistered Securities**
  None.
  (1)
        This
        section is not “soliciting material,” is not deemed “filed” with the SEC and is
        not to be incorporated by reference into any filing of Ironclad Performance
        Wear
        Corporation under the Securities Act of 1933, as amended or the Exchange
        Act of
        1934, as amended, whether made before or after the date hereof and irrespective
        of any general incorporation language in such filing.
 14
  I **tem
        6.**  **Management’s
        Discussion and Analysis or Plan of Operation.**
  *The
        following discussion and analysis should be read together with the Consolidated
        Financial Statements of Ironclad Performance Wear Corporation and the “Notes to
        Consolidated Financial Statements” included elsewhere in this report. This
        discussion summarizes the significant factors affecting the consolidated
        operating results, financial condition and liquidity and cash flows of Ironclad
        Performance Wear Corporation for the fiscal years ended December 31, 2007
        and
        2006. Except for historical information, the matters discussed in this
        Management’s Discussion and Analysis or Plan of Operation are forward-looking
        statements that involve risks and uncertainties and are based upon judgments
        concerning various factors that are beyond our control.*
  **Overview**
  We
        are a
        leading designer and manufacturer of branded performance work wear. Founded
        in
        1998, we have grown and leveraged our proprietary technologies to produce
        task-specific gloves and performance apparel that are designed to significantly
        improve the wearer’s ability to safely, efficiently and comfortably perform
        general to highly specific job functions. We have built and continue to augment
        our reputation among professionals in the construction and industrial service
        markets, and do-it-yourself and sporting goods consumers with products
        specifically designed for individual tasks or task types. Utilizing our brand
        equity, we are currently expanding our performance apparel product line (e.g.
        pants, jackets, shorts, reflective and polo shirts, underwear and tights)
        also
        designed to enhance the wearer’s comfort and performance. We believe that our
        dedication to quality and durability and focus on our client needs has created
        a
        high level of brand loyalty and has solidified substantial brand equity.
  We
        plan
        to increase our domestic revenues by leveraging our relationships with existing
        retailers and industrial distributors, including “Big Box” and sporting goods
        retailers, increasing our product offerings in new and existing locations.
        We
        also plan to sell our expanded apparel line to work wear retailers.
  We
        believe that our products have international appeal. In 2005, we began selling
        products in Australia and Japan through independent distributors, which
        accounted for approximately 4% of total sales. In 2006, we entered the Canadian
        market through a distributor, and international sales represented approximately
        7% of total sales. In 2007 we entered the European market through a distributor
        and international sales represented approximately 11% of total sales. We
        plan to
        continue to increase sales internationally by expanding our distribution
        into
        Europe and other international markets during the fiscal year ending December
        31, 2008
  Our
        historical operations before May 9, 2006 reflect only the operations of Ironclad
        Performance Wear Corporation, a California corporation, or Ironclad California.
        Before May 9, 2006, we existed as a “shell company” with nominal assets whose
        sole business was to identify, evaluate and investigate various companies
        to
        acquire or with which to merge. On May 9, 2006, we consummated a merger
        transaction in which we acquired all of the shares of Ironclad California,
        or
        the Merger. Concurrently with the closing of the merger we completed a private
        placement financing and certain other transactions related to the Merger.
        Upon
        completion of the Merger and the private placement financing, Ironclad
        California became our wholly-owned subsidiary, and the former stockholders
        of
        Ironclad California and the investors in the private placement financing
        received in the aggregate 26,130,548 shares of our common stock, or
        approximately 88% of our issued and outstanding shares of common stock. Ironclad
        California was formed and commenced its business in 1998. Our merger with
        Ironclad California was accounted for as a reverse merger with Ironclad
        California deemed to be the accounting acquirer, and us the legal acquirer.
  **Critical
        Accounting Policies, Judgments and Estimates**
  Our
        Management’s Discussion and Analysis of Financial Condition or Plan of Operation
        section discusses our financial statements, which have been prepared in
        accordance with accounting principles generally accepted in the United States.
        To prepare these financial statements, we must make estimates and assumptions
        that affect the reported amounts of assets and liabilities. These estimates
        also
        affect our reported revenues and expenses. On an ongoing basis, management
        evaluates its estimates and judgment, including those related to revenue
        recognition, accrued expenses, financing operations and contingencies and
        litigation. Management bases its estimates and judgment on historical experience
        and on various other factors that are believed to be reasonable under the
        circumstances, the results of which form the basis for making judgments about
        the carrying value of assets and liabilities that are not readily apparent
        from
        other sources. Actual results may differ from these estimates under different
        assumptions or conditions. The following represents a summary of our critical
        accounting policies, defined as those policies that we believe are the most
        important to the portrayal of our financial condition and results of operations
        and that require management’s most difficult, subjective or complex judgments,
        often as a result of the need to make estimates about the effects of matters
        that are inherently uncertain.
  **Revenue
        Recognition**
  Under
        our
        sales model, a customer is obligated to pay us for products sold to it within
        a
        specified number of days from the date that title to the products is transferred
        to the customer. Our standard terms are typically net 30 days from the transfer
        of title to the products to a customer. We typically collect payment from
        a
        customer within 30 to 45 days from the transfer of title to the products
        to a
        customer. Transfer of title occurs and risk of ownership passes to a customer
        at
        the time of shipment or delivery, depending on the terms of our agreement
        with a
        particular customer. The sale price of our products is substantially fixed
        or
        determinable at the date of sale based on purchase orders generated by a
        customer and accepted by us. A customer’s obligation to pay us for products sold
        to it is not contingent upon the resale of those products. We recognize revenue
        at the time product is delivered to a customer.
  15
  **Inventory
        Obsolescence Allowance**
  We
        review
        the inventory level of all products quarterly. For all items that have been
        in
        the market for one year or greater, we consider inventory levels of greater
        than
        one year’s sales to be excess. Products that are no longer part of the current
        product offering are considered obsolete. The potential for re-sale of
        slow-moving and obsolete inventories is based upon our assumptions about
        future
        demand and market conditions. The recorded cost of obsolete inventories is
        then
        reduced to zero and a reserve is established for slow moving products. Both
        the
        write down and reserve adjustments are recorded as charges to cost of goods
        sold. For the years ended December 31, 2007 and December 31, 2006 we adjusted
        our inventory reserve by ($36,000) and $88,000, respectively, to a current
        balance of $84,000 and recorded a corresponding adjustment in cost of goods
        sold. All adjustments for obsolete inventory establish a new cost basis for
        that
        inventory as we believe such reductions are permanent declines in the market
        price of our products. Generally, obsolete inventory is sold to companies
        that
        specialize in the liquidation of these items or contributed to charities,
        while
        we continue to market slow-moving inventories until they are sold or become
        obsolete. As obsolete or slow-moving inventory is sold or disposed of, we
        reduce
        the reserve.
  **Allowance
        for Doubtful Accounts**
  We
        maintain allowances for doubtful accounts for estimated losses resulting
        from
        the inability of our customers to make required payments. Our current customers
        consist of large national, regional and smaller independent customers with
        good
        payment histories with us. Since we have not experienced any previous payment
        defaults with any of our current customers, our allowance for doubtful accounts
        is minimal. We perform periodic credit evaluations of our customers and maintain
        allowances for potential credit losses based on management’s evaluation of
        historical experience and current industry trends. If the financial condition
        of
        our customers were to deteriorate, resulting in the impairment of their ability
        to make payments, additional allowances may be required. New customers are
        evaluated for credit worthiness before terms are established. Although we
        expect
        to collect all amounts due, actual collections may differ.
  **Product
        Returns**
  We
        have a
        warranty policy that covers defects in workmanship. We allow our customers
        to
        return damaged or defective products to us following a customary return
        merchandise authorization process. We also allow for some stock adjustments
        returns, typically for new customers, whereby the customer is given the
        opportunity to ‘trade out’ of a style of product that does not sell well in
        their territory, usually in exchange for another product, again following
        the
        customary return merchandise authorization process. For both types of returns
        we
        utilize actual historical return rates to determine our allowance for returns
        in
        each period. Gross sales are reduced by estimated returns. We record a
        corresponding accrual for the estimated liability associated with the estimated
        returns which is based on the historical gross sales of the products
        corresponding to the estimated returns. This accrual is offset each period
        by
        actual product returns.
  Our
        current estimated future warranty product return rate is approximately 1.0%
        and
        our current estimated future stock adjustment return rate is approximately
        0.75%. As noted above, our return rate is based upon our past history of
        actual
        returns and we estimate amounts for product returns for a given period by
        applying this historical return rate and reducing actual gross sales for
        that
        period by a corresponding amount. We believe that using a trailing 12-month
        return rate provides us with a sufficient period of time to establish recent
        historical trends in product returns for two primary reasons: (i) our products
        useful life is approximately 3-4 months and (ii) we are able to quickly correct
        any significant quality issues as we learn about them. If an unusual
        circumstance exists, such as a product that has begun to show materially
        different actual return rates as compared to our average 12-month return
        rates,
        we will make appropriate adjustments to our estimated return rates. Factors
        that
        could cause materially different actual return rates as compared to the 12-month
        return rates include a new product line, a change in materials or product
        being
        supplied by a new factory. Although we have no specific statistical data
        on this
        matter, we believe that our practices are reasonable and consistent with
        those
        of our industry. Our warranty terms under our arrangements with our suppliers
        do
        not provide for individual products returned by retailers or retail customers
        to
        be returned to the vendor.
  **Reserve
        for Warranty Returns**
  Reserve
                  balance 12/31/05
              
              $
              38,000Payments
                  recorded during the period
              
              
              (186,097
              )(148,097
              )Adjustment
                  to reserve for pre-existing liabilities
              
              
              34,000Accrual
                  for new liabilities during the reporting period
              
              
              186,097Reserve
                  balance 12/31/06
              
              
              72,000Payments
                  recorded during the period
              
              
              (486,030
              )(414,030
              )Adjustment
                  to reserve for pre-existing liabilities
              
              
              128,000Accrual
                  for new liabilities during the reporting period
              
              
              486,030Reserve
                  balance 12/31/07
              
              $
              200,000
  16
  **Stock
        Based Compensation**
  On
        January 1, 2006, we adopted the provisions of Financial Accounting Standards
        Board, or FASB, Statement of Financial Accounting Standards, or SFAS, 123R,
        “ *Share-Based
        Payments,”* or ** SFAS
        123R. This statement establishes standards surrounding the accounting for
        transactions in which an entity exchanges its equity instruments for goods
        and
        services. The statement focuses primarily on accounting for transactions
        in
        which an entity obtains employee services in share-based payment transactions,
        such as the options issued under our stock option plans. The statement provides
        for, and we have elected to adopt the standard using the modified prospective
        application under which compensation cost is recognized on or after the required
        effective date for the fair value of all future share based award grants
        and the
        portion of outstanding awards at the date of adoption of this statement for
        which the requisite service has not been rendered, based on the grant-date
        fair
        value of those awards calculated under SFAS 123R for pro forma
        disclosures.
  **Income
        Taxes**
  Income
        taxes are provided for the tax effects of the transactions reported in the
        financial statements and consist of taxes currently due plus deferred taxes
        related primarily to the difference between the basis of the allowances for
        returns and doubtful accounts and for inventory obsolescence, accrued payroll
        and bonus and net operating loss carry forwards for financial and income
        tax
        reporting. The deferred tax assets and liabilities represent the future tax
        return consequences of those differences, which will either be taxable or
        deductible when the assets and liabilities are recovered or
        settled.
  Deferred
        tax assets and liabilities are reflected at income tax rates applicable to
        the
        period in which the deferred tax assets or liabilities are expected to be
        realized or settled. As changes in tax laws or rates are enacted, deferred
        tax
        assets and liabilities are adjusted through the provision for income taxes.
        If
        it is more likely than not that some portion or all of a deferred tax asset
        will
        not be realized, a valuation allowance is recognized. As we have reported
        losses
        for 2003, 2004, 2005, 2006 and 2007, we have taken the conservative approach,
        and fully reserved the deferred tax assets.
  **Valuation
        of Derivative Instruments**
  SFAS
        No.
        133 *“Accounting
        for Derivative Instruments and Hedging Activities”* requires
        that embedded derivative instruments be bifurcated and assessed, along with
        free-standing derivative instruments such as warrants, on their issuance
        date in
        accordance with EITF 00-19 *“Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company’s Own Stock”* to
        determine whether they should be considered a derivative liability and measured
        at their fair value for accounting purposes. In determining the appropriate
        fair
        value, we use the Black-Scholes-Merton Option Pricing Formula, or the Black
        Scholes Model. At each period end, or when circumstances indicate that we
        reevaluate the accounting for the derivative liability, derivative liabilities
        are adjusted to reflect changes in fair value, with any increase or decrease
        in
        the fair value being recorded in results of operations as “Adjustments to Fair
        Value of Derivatives.”
  **Recent
        Accounting Pronouncements**
  SFAS
        No. 155
  In
        February 2006, the FASB issued SFAS No. 155, *“Accounting
        for Certain Hybrid Financial Instruments,”* which
        amends SFAS No. 133, *“Accounting
        for Derivatives Instruments and Hedging Activities”* and SFAS
        No. 140, *“Accounting
        for Transfers and Servicing of Financial Assets and Extinguishment of
        Liabilities.”* SFAS No.
        155 amends SFAS No. 133 to narrow the scope exception for interest-only and
        principal-only strips on debt instruments to include only such strips
        representing rights to receive a specified portion of the contractual interest
        or principle cash flows. SFAS No. 155 also amends SFAS No. 140 to allow
        qualifying special-purpose entities to hold a passive derivative financial
        instrument pertaining to beneficial interests that itself is a derivative
        instrument. Management does not expect adoption of SFAS No. 155 to have a
        material impact on our financial statements.
 17
  FIN
        No. 48
  In
        June 2006, the FASB issued FASB Interpretation No. 48, or FIN 48, *“Accounting
        for Uncertainty in Income Taxes,”* an
        interpretation of FASB Statement No. 109. This interpretation clarifies the
        accounting and financial statement reporting for uncertainties in income
        tax
        recognized by prescribing a recognition threshold and measurement attribute
        for
        a tax position taken or expected to be taken in a tax return. The Interpretation
        is effective for fiscal years beginning after December 15, 2006. We have
        completed our analysis of the effects of this interpretation and have determined
        that the adoption of FIN 48 will not have a material effect on its financial
        statements.
  SFAS
        No. 157
  In
        September 2006, the FASB issued SFAS No. 157, *“Fair
        Value Measurements,”* SFAS No.
        157, which defines fair value, establishes a framework for measuring fair
        value
        in generally accepted accounting principles, and expands disclosures about
        fair
        value measurements. SFAS No. 157 applies under other accounting pronouncements
        that require or permit fair value measurements. SFAS No. 157 is effective
        for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. Management will evaluate the
        effect of this statement, if any, on its financial statements.
  SFAS
        No. 159
  In
        February 2007, the FASB issued SFAS No. 159, *"The
        Fair Value Option for Financial Assets and Financial Liabilities, including
        an
        amendment of FASB Statement No. 115.”* SFAS 159
        permits entities to choose to measure many financial instruments and certain
        other items at fair value at specified election dates. SFAS No. 159 is effective
        as of the beginning of an entity’s first fiscal year that begins after November
        15, 2007. As such, we are required to adopt these provisions at the beginning
        of
        the fiscal year ended December 31, 2008. We are currently evaluating the
        impact
        of SFAS No. 159 on its consolidated financial statements.
  SFAS
        No. 160
  In
        December 2007, the FASB issued SFAS No. 160, *"Noncontrolling
        Interests in Consolidated Financial Statements, an Amendment of ARB No.
        51.”* SFAS No.
        160 establishes accounting and reporting standards for the noncontrolling
        interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS
        No.
        160 is effective for fiscal years, and interim periods within those fiscal
        years, beginning on or after December 15, 2008. As such, we are required
        to
        adopt these provisions at the beginning of the fiscal year ended December
        31,
        2009. We are currently evaluating the impact of SFAS No. 160 on our consolidated
        financial statements but do not expect it to have a material effect.
  **Results
        of Operations**
  **Comparison
        of Years Ended December 31, 2007 and December 31, 2006**
  *Net
        Sales* increased
        $3,467,987, or 36.2% *,* to ** $13,049,197
        in the year ended December 31, 2007 from $9,581,210 for the corresponding
        period
        in 2006. This increase was primarily due to increased sales of approximately
        $818,000 with new and existing “Big Box” home center customers, approximately
        $677,000 due to a full year of sales of our performance apparel products,
        approximately $855,000 of increase in international sales, and approximately
        $1,118,000 in growth from our existing customers. One customer accounted
        for
        approximately 21% of net sales during the year ended December 31, 2007 and
        approximately 17% of net sales for the year ended December 31, 2006. We expect
        the overall trend of increased sales to continue through existing and new
        retail
        and distribution outlets in the United States, planned international expansion,
        and sales of our expanded apparel line in new distribution channels, with
        continued increased spending on sales and marketing of our
        products.
  *Gross
        Profit* increased
        $1,388,099 to $5,001,743 for the year ended December 31, 2007 from $3,613,644
        for the year ended December 31, 2006. Gross profit as a percentage of net
        sales,
        or gross margin, increased to 38.3% in 2007 from 37.7% in 2006. The increase
        in
        gross margin was mainly attributable to a shift in product mix, increased
        direct
        sales to international distributors, aggressive sales promotion programs
        with
        new and existing customers, and improved margins on apparel sales, between
        the
        comparative periods. Product mix and customer sales mix shifts can affect
        gross
        profit in any period. Sales to “Big Box” home centers generally include an
        assortment of lower priced products than are sold to other retailers and
        distributors. Sales to international distributors are generally at lower
        gross
        margin, as the international distributor pays the cost of selling and
        distributing the product and servicing their customers. These increased costs
        have been offset by improved margins on apparel products generated by
        outsourcing and increased direct factory-to-customer shipments to international
        customers.
 18
  *Operating
        Expenses* increased
        by $2,196,137, or 33.1%, to $8,832,283 in 2007 from $6,636,146 in 2006. As
        a
        percentage of net sales, operating expenses decreased to 67.7% in 2007 from
        69.3% in the same period of 2006. The increased spending in 2007 was primarily
        due to increased costs associated with implementing brand development
        initiatives, including a NASCAR sponsorship and increased print and cooperative
        advertising - approximately $402,000; expenses associated with our status
        as
        public company costs of approximately $27,000; increased legal expenses of
        $241,000; increased cost for contracted services, primarily third party
        fulfillment warehouse of $318,000; increased commissions of $31,000; increased
        rents of $41,000; increased travel & entertainment expenses of $86,000;
        increased trade show and sample expenses of $37,000; Financial Accounting
        Standards No. 123R options expense of $32,000; salaries, temporary labor
        and
        bonus accrual expenses of approximately $832,000 (includes full year salaries
        & benefits for six hires from late 2006), and increased general operating
        expenses of $149,000. Our number of employees increased to 28 at December
        31,
        2007 from 26 at December 31, 2006. Sales and marketing expenses were increased
        to build brand recognition and increase sales. Expenses associated with being
        a
        public company included public accounting and legal fees and investor relations
        expenses.
  *Loss
        from Operations* increased
        $808,038 or 26.7%, to $3,830,540 in 2007 from $3,022,502 in 2006. Loss from
        operations as a percentage of net sales decreased to 29.4% in 2007 from 31.5%
        in
        2006. The increased loss for 2007 was primarily the result of an increase
        in
        operating expenses, as discussed above.
  *Interest
        Expense* decreased
        $212,382 to $148,381 in 2007 from $360,763 in 2006. The decrease was primarily
        due to the reduction in the recognition of imputed warrant interest charges
        of
        $256,188, offset by additional bank borrowing.
  *Interest
        Income* decreased $28,425 to $42,235 in 2007 from $70,660 in 2006. Interest income
        is a
        result of investment of funds from the private equity funding completed
        concurrent with the merger on May 9, 2006.
  *Other
        Income (Expense)* net was
        $1,526 in 2007 as compared with $2,397 in 2006. Change in the fair value
        of
        warrant liability was $18,230 in 2007 as compared to ($1,082,944) for 2006.
        This
        income (expense) represents the difference in the fair value of warrants
        recorded as liabilities at December 31, 2007 and their issue date on May
        9,
        2006. The terms of the registration statement underlying 98% of the warrants
        were satisfied in October, 2006. The remaining warrant liability was revalued
        at
        the end of each reporting period until the terms of the registration statement
        for the shares underlying the warrants were satisfied in October, 2007.
  *Net
        Loss* decreased
        $445,196 to $3,917,777 in 2007 from $4,362,973 in 2006. This decreased loss
        is a
        result of the combination of each of the factors discussed above.
  **Seasonality
        and Annual Results**
  Our
        glove
        business generally shows an increase in sales during the third and fourth
        quarters due primarily to a consistent increase in the sale of our winter
        glove
        line during this period. We typically generate 60% - 65% of our glove net
        sales
        during these months. In addition, with the introduction of our expanded
        performance apparel line and penetration of new international markets in
        the
        second half of 2007 we expect that our sales in the third and fourth quarter
        will represent 65% to 70% of our total net sales for 2008.
  Our
        working capital, at any particular time, reflects the seasonality of our
        glove
        business and plans to expand product lines and enter new markets. We expect
        inventory, accounts payable and accrued expenses to be higher in the third
        and
        fourth quarters for these reasons.
  **Liquidity
        and Capital Resources**
  Our
        cash
        requirements are principally for working capital. Our need for working capital
        is seasonal, with the greatest requirements from July through the end of
        October
        each year as a result of our inventory build-up during this period for our
        fall
        and winter selling seasons. Historically, our main sources of liquidity have
        been borrowings under our existing revolving credit facility, the issuance
        of
        subordinated debt and the sale of equity.
  *Operating
        Activities.* In 2006,
        cash used in operating activities was $4,698,717 and consisted primarily
        of a
        net loss of $4,362,973, reduced by non-cash items of $2,052,979 and increases
        in
        inventory of $1,979,830, and accounts receivable of $618,668 and decreases
        in
        deposits on inventory of $238,722, prepaid and other expenses of $11,292
        and
        loan costs of $15,798, offset by a decrease in accounts payable and accrued
        expenses of $56,006.
  In
        2007,
        cash used in operating activities was $4,012,719 and consisted primarily
        of a
        net loss of $3,917,777, reduced by non-cash items of $754,870 and increases
        in
        inventory of $165,470, accounts receivable of $2,310,824, and prepaid and
        other
        expenses of $37,541, and decreases in deposits on inventory of $51,487, offset
        by an increase in accounts payable and accrued expenses of $1,612,536.
  *Investing
        Activities* .
        In 2006
        and 2007, investing activities were primarily the result of capital
        expenditures, mainly for computer equipment and trademark applications. Cash
        used in investing activities increased $9,159 to $167,716 for 2007 from $158,557
        in 2006. Expenditures for property and equipment increased $25,522 and
        investment in trademarks decreased $16,363.
 19
  *Financing
        Activities.* Financing
        activities during 2006 consisted primarily of our net borrowing under our
        existing asset-based credit facility, payoff of an existing note payable,
        proceeds from the issuance of common stock, financing provided by a capital
        lease, proceeds from the exercise of warrants and options, and the completion
        of
        our merger and associated financing on May 9, 2006. Cash provided by financing
        activities was $6,839,867 for 2006. The increase in cash provided by financing
        activities was due to proceeds from the issuance of common stock of $507,500,
        the completion of the merger related equity financing of $6,036,738 (net
        of
        $1,284,453 in offering costs), proceeds from the exercise of warrants of
        $66,338, proceeds from the exercise of options of $30,000, and by net borrowings
        on our bank lines of credit of $702,066, offset by payments on an outstanding
        note payable of $500,000 and payments on a capital lease of $2,775.
  Financing
        activities during 2007 consisted primarily of our net borrowing under our
        existing asset-based credit facility, proceeds from the issuance of common
        stock, financing provided by a capital lease, and proceeds from the exercise
        of
        options. Cash provided by financing activities was $2,754,095 for 2007. The
        increase in cash provided by financing activities was due to proceeds from
        the
        issuance of common stock of $2,007,363 (net of $92,637 in offering costs),
        proceeds from the exercise of options of $4,500, and by net borrowings on
        our
        bank lines of credit of $745,643, offset by payments on a capital lease of
        $3,411.
  We
        believe that our cash flows from operations and borrowings available to us
        under
        our senior secured credit facility, together with additional net proceeds
        from
        future private placements will be adequate to meet our liquidity needs and
        capital expenditure requirements for at least the next 12 months.
  Our
        ability to access these sources of liquidity may be negatively impacted by
        a
        decrease in demand for our products and the requirement that we meet certain
        borrowing conditions under our senior secured credit facility, as well as
        the
        other factors described in Risk Factors.
  **Credit
        Facilities**
  In
        March
        2005, we renewed our existing credit facility with the bank at an interest
        rate
        of prime plus 3%. This facility allowed us to borrow 75% against eligible
        accounts receivable, up to $1,000,000, while maintaining a funded reserve
        equal
        to 25% of the outstanding accounts receivable. All of our assets secured
        amounts
        borrowed under the terms of this agreement and were personally guaranteed
        by an
        officer of the company. The renewed credit facility did not contain any
        financial covenants and matured on May 30, 2006. Proceeds from the private
        placement completed on May 9, 2006, were used to repay the balance on the
        loan
        facility.
  Through
        May 2006 we also maintained a $250,000 revolving line of credit with our
        senior
        secured lender. We were eligible to borrow 30% against our eligible inventory,
        up to $250,000. Amounts borrowed under the terms of this agreement were secured
        by all of our assets, and were personally guaranteed by one of our executive
        officers. Interest on outstanding loan balances under our revolving line
        of
        credit accrued at the same interest rates as our senior secured loan facility
        and also matured in May 2006. Proceeds from the private placement completed
        on
        May 9, 2006, were used to repay the balance on the loan facility.
  On
        September 15, 2006 we entered into a new factoring agreement with Wells Fargo
        Century, Inc. whereby we assigned certain of our accounts receivables with
        full
        recourse. On November 21, 2006, we entered into an amendment to this factoring
        agreement. This facility currently allows us to borrow the lesser of (a)
        $2,500,000 or (b) the sum of: (i) seventy-five percent (75%) of the net
        amount of our Eligible Receivables and (ii) 40% of the value of our Eligible
        Inventory (which amount shall not exceed the lesser of $750,000 and the net
        amount of our Eligible Receivables) (as such terms are defined in the factoring
        agreement. This credit facility does not contain any financial covenants.
        All of
        our assets secure amounts borrowed under the terms of this agreement. Interest
        on outstanding balances accrues at the prime rate announced from time to
        time by
        Wells Fargo Bank N.A. (or such other bank as Wells Fargo Century, Inc. shall
        select in its discretion) as its “prime” or base rate for commercial loans and
        the agreement has an initial term of 24 months.
  **Subordinated
        Debt**
  In
        October 2005, we issued a promissory note in the principal amount of $500,000
        to
        Westrec Capital Partners, LLC in exchange for $500,000 in order to fund
        inventory purchases for the apparel launch along with the costs associated
        with
        the Merger. The note accrues interest at a rate equal to (a) the highest
        prime
        rate of interest per annum published in the Money Rate Table of the Western
        Edition of The Wall Street Journal, as adjusted on a daily basis, plus 8.25%
        per
        annum, or (b) 15.00% per annum, in either case compounded annually. The note
        was
        set to mature on the earlier to occur of (i) April 21, 2006 or (ii) the date
        on
        which Ironclad has received an aggregate of $500,000 from the sale(s) of
        its
        equity securities in one or a series of transactions. We received a 30-day
        extension of the April 21, 2006 maturity date. Proceeds from the private
        placement completed on May 9, 2006, were used to retire the note.
 20
  **Off-Balance
        Sheet Arrangements**
  At
        December 31, 2007 and December 31, 2006, we did not have any relationships
        with
        unconsolidated entities or financial partnerships, such as entities often
        referred to as structured finance, variable interest or special purpose
        entities, which would have been established for the purpose of facilitating
        off-balance sheet arrangements or other contractually narrow or limited
        purposes. As such, we are not exposed to any financing, liquidity, market
        or
        credit risk that could arise if we had engaged in such
        relationships.
  **Contractual
        Obligations**
  The
        following summarizes our contractual obligations at December 31, 2007 and
        the
        effects such obligations are expected to have on liquidity and cash flow
        in
        future periods:
  Payments
                  Due by PeriodContractual
                  Obligations
              
              Total
              
              Less
                  than 1 Year
              
              1-3
                  Years
              
              4-5
                  YearsOperating
                  Leases
              
              $
              638,111
              
              
              180,805
              
              
              451,347
              
              
              5,959Advances
                  from Factor
              
              
              2,309,321
              
              
              2,309,321
              
              
              -
              
              
              -Total
              
              $
              2,947,432
              
              
              2,490,126
              
              
              451,347
              
              
              5,959
 21
 **Item
        7.**  **Financial
        Statements.**
  **INDEX
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **Page****Audited
                  Financial Statements:**Report
                  of Independent Registered Public Accounting Firm
              23-24Consolidated
                  Balance Sheet at December 31, 2007
              25Consolidated
                  Statements of Operations for each of the Twelve Months Ended December
                  31,
                  2007, and December 31, 2006
              26Consolidated
                  Statements of Cash Flows for the Twelve Months Ended December 31,
                  2007,
                  and December 31, 2006
              27Consolidated
                  Statements of Changes in Stockholders’ Equity from December 31, 2005 to
                  December 31, 2007
              28Notes
                  to the Consolidated Financial Statements
              29 - 44
 22
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Stockholders
 Ironclad
        Performance Wear Corporation
 Los
        Angeles, California
 
 We
        have
        audited the accompanying consolidated statements of operations, changes in
        stockholders’ equity, and cash flows for the year ended December 31, 2006 of
        Ironclad Performance Wear Corporation and its subsidiary (collectively, the
        “Company”). These financial statements are the responsibility of the Company's
        management. Our responsibility is to express an opinion on these financial
        statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the results of operations of Ironclad Performance
        Wear
        Corporation and its subsidiary and their cash flows for the year ended December
        31, 2006, in conformity with U.S. generally accepted accounting
        principles.
 
 /s/
        SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
 
 SINGER
        LEWAK GREENBAUM & GOLDSTEIN LLP
 
 
 Los
        Angeles, California
 March
        31,
        2008
 23
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  To
        the
        Board of Directors and Stockholders of
 Ironclad
        Performance Wear Corporation
  We
        have
        audited the accompanying consolidated balance sheet of Ironclad Performance
        Wear
        Corporation as of December 31, 2007, and the related consolidated statements
        of
        operations, cash flows and changes in stockholders’ equity for the year then
        ended. Ironclad Performance Wear Corporation’s management is responsible for
        these consolidated financial statements. Our responsibility is to express
        an
        opinion on these consolidated financial statements based on our audit.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. The
        company
        is not required to have, nor were we engaged to perform, an audit of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements, assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall consolidated financial statement presentation. We
        believe
        that our audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Ironclad Performance
        Wear as
        of December 31, 2007, and the results of its operations and its cash flows
        for
        the year ended December 31, 2007 in conformity with accounting principles
        generally accepted in the United States of America.
  /s/
        ROTENBERG AND COMPANY, LLP
  Rochester,
        New York
 March
        17,
        2008
 24
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
 **CONSOLIDATED
        BALANCE SHEET**
 **AT
        DECEMBER 31, 2007**
  December
                      31,
                  2007**ASSETS****CURRENT
                    ASSETS**Cash
                    and equivalents
                
                $
                585,826Accounts
                    receivable net of allowance for doubtful accounts of
                    $33,000
                
                
                4,327,616Inventory,
                    net of reserve for obsolete inventory of $84,000
                
                
                3,129,339Deposits
                    on inventory
                
                
                10,068Prepaid
                    and other
                
                
                184,456**Total
                    Current Assets**
                
                
                8,237,305**PROPERTY
                    AND EQUIPMENT**Computer
                    equipment and software
                
                
                253,657Vehicle
                
                
                43,680Furniture
                    and equipment
                
                
                128,465Leasehold
                    improvements
                
                
                34,110Less:
                    accumulated depreciation
                
                
                (219,517
                )**Total
                    Property and equipment, net**
                
                
                240,395**OTHER
                    ASSETS**Trademarks,
                    net of accumulated amortization of $9,306
                
                
                82,748Deposits
                    and other
                
                
                12,366**Total
                    Other Assets**
                
                
                95,114**TOTAL
                    ASSETS******
                
                **$**
                **8,572,814****LIABILITIES
                    AND STOCKHOLDERS’ EQUITY****CURRENT
                    LIABILITIES**Accounts
                    payable and accrued expenses
                
                $
                3,438,054Bank
                    lines of credit
                
                
                2,309,321Current
                    portion of capital lease
                
                
                1,642**Total
                    current liabilities**
                
                
                5,749,017**Total
                    Liabilities**
                
                
                **5,749,017****STOCKHOLDERS’
                    EQUITY**Common
                    stock, $0.001 par value per share,172,744,750 shares authorized,
                    35,389,504 shares issued and outstanding
                
                
                35,390Capital
                    in Excess of Par Value
                
                
                13,934,051Accumulated
                    deficit
                
                
                (11,145,644
                )**Total
                    Stockholders’ Equity**
                
                
                2,823,797**TOTAL
                    LIABILITIES AND STOCKHOLDERS’ EQUITY**
                
                **$**
                **8,572,814**
  See
        Notes
        to Consolidated Financial Statements.
  25
 
 **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **For
        the Years Ended December 31, 2007 and 2006**
 2007
                
                2006**REVENUES**Net
                    sales
                
                $
                13,049,197
                
                $
                9,581,210**COST
                    OF SALES**Cost
                    of sales
                
                
                8,047,454
                
                
                5,967,566**GROSS
                    PROFIT**
                
                
                5,001,743
                
                
                3,613,644**EXPENSES**General
                    and administrative
                
                
                3,459,952
                
                
                2,967,883Sales
                    and marketing
                
                
                4,005,866
                
                
                2,756,222Research
                    and development
                
                
                502,729
                
                
                340,589Operations
                
                
                788,997
                
                
                531,083Depreciation
                    and amortization
                
                
                74,739
                
                
                40,369**Total
                    operating expenses**
                
                
                8,832,283
                
                
                6,636,146**LOSS
                    FROM OPERATIONS**
                
                
                (3,830,540
                )
                
                (3,022,502
                )**OTHER
                    INCOME/(EXPENSE)**Interest
                    expense
                
                
                (148,381
                )
                
                (104,575
                )Interest
                    expense from warrants issued as financing cost
                
                
                -
                
                
                (256,188
                )Interest
                    income
                
                
                42,235
                
                
                70,660Unrealized
                    gain (loss) on financing activities
                
                
                18,230
                
                
                (1,082,944
                )Loss
                    on disposition of equipment
                
                
                (974
                )
                
                -Other
                    income (expense), net
                
                
                2,500
                
                
                2,397**Total
                    other income (expense)**
                
                
                (86,390
                )
                
                (1,370,650
                )**NET
                    LOSS BEFORE BENEFIT FROM (PROVISION FOR) INCOME
                    TAXES**
                
                
                (3,916,930
                )
                
                (4,393,152
                )Benefit
                    from (provision for) income taxes
                
                
                (847
                )
                
                30,179**NET
                    LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS**
                
                **$**
                (3,917,777
                )
                **$**
                (4,362,973
                )**BASIC
                    AND DILUTED NET LOSS PER COMMON SHARE**
                
                $
                (0.12
                )
                $
                (0.17
                )**WEIGHTED
                    AVERAGE COMMON SHARE**
                
                
                31,615,394
                
                
                24,961,749
  See
        Notes
        to Consolidated Financial Statements.
  26
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **For
        the Years Ended December 31, 2007 and 2006**
 **2007**
                
                **2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    loss attributable to common shareholders
                
                $
                (3,917,777
                )
                $
                (4,362,973
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activitiesAllowance
                    for bad debts
                
                
                7,000
                
                
                5,000Depreciation
                
                
                71,023
                
                
                37,551Amortization
                
                
                3,716
                
                
                2,819Warrants
                    issued as financing cost
                
                
                -
                
                
                256,188Loss
                    on disposition of equipment
                
                
                974
                
                
                -Change
                    in fair value of warrant liability
                
                
                (18,230
                )
                
                1,082,944Non-cash
                    compensation:Common
                    stock issued for services
                
                
                -
                
                
                51,779Options
                    issued for services
                
                
                41,875
                
                
                -Stock
                    option expense
                
                
                648,512
                
                
                616,698Changes
                    in operating assets and liabilities:Receivables
                
                
                (2,310,824
                )
                
                (618,668
                )Inventory
                
                
                (165,470
                )
                
                (1,979,831
                )Deposits
                    on inventory
                
                
                51,487
                
                
                238,722Prepaid
                    and other
                
                
                (37,541
                )
                
                11,262Loan
                    costs
                
                
                -
                
                
                15,798Accounts
                    payable and accrued expenses
                
                
                1,612,536
                
                
                (56,006
                )Net
                    cash flows used in operating activities
                
                
                (4,012,719
                )
                
                (4,698,717
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Property
                    and equipment purchased
                
                
                (158,061
                )
                
                (132,539
                )Investment
                    in trademarks
                
                
                (9,655
                )
                
                (26,018
                )Net
                    cash flows used in investing activities
                
                
                (167,716
                )
                
                (158,557
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES**Net
                    proceeds from bank lines of credit
                
                
                745,643
                
                
                702,066Proceeds
                    from (payments on) convertible note payable
                
                
                -
                
                
                (500,000
                )Proceeds
                    from issuance of common stock
                
                
                2,100,000
                
                
                7,828,691Offering
                    costs
                
                
                (92,637
                )
                
                (1,284,453
                )Proceeds
                    from exercise of warrants
                
                
                -
                
                
                66,338Proceeds
                    from exercise of options
                
                
                4,500
                
                
                30,000Payments
                    on capital leases
                
                
                (3,411
                )
                
                (2,775
                )Net
                    cash flows provided by financing activities
                
                
                2,754,095
                
                
                6,839,867**NET
                    INCREASE (DECREASE) IN CASH**
                
                
                (1,426,340
                )
                
                1,982,593**CASH
                    AND CASH EQUIVALENTS BEGINNING OF PERIOD**
                
                
                2,012,166
                
                
                29,573**CASH
                    AND CASH EQUIVALENTS END OF PERIOD**
                
                $
                585,826
                
                $
                2,012,166**SUPPLEMENTAL
                    SCHEDULE OF CASH FLOW INFORMATION:**Cash
                    (paid) received during the year for:Interest
                    paid in cash
                
                $
                (148,381
                )
                $
                (88,788
                )Income
                    taxes paid
                
                
                (800
                )
                
                (800
                )Income
                    tax refund
                
                
                -
                
                
                30,979
  See
        Notes
        to Consolidated Financial Statements.
  27
 
 **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN**
 **STOCKHOLDERS’
        EQUITY**
 **For
        the Years Ended December 31, 2007 and 2006**
  Common
                      StockShares
                      Issued
                    and
                    Outstanding
                  
                  Par
                      Value
                  
                  Capital
                      in
                    Excess
                      of
                    Par
                      Value
                  
                  Accumulated
                    Deficit
                  
                  Total
                    Stockholders’
                      EquityBalance
                      at December 31, 2005
                  
                  
                  15,622,197
                  
                  $
                  15,624
                  
                  $
                  2,621,614
                  
                  $
                  (2,864,894
                  )
                  $
                  (227,656
                  )Common
                      stock issued for cash
                  
                  
                  13,927,705
                  
                  
                  13,927
                  
                  
                  7,814,764
                  
                  
                  -
                  
                  
                  7,828,691Offering
                      costs
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,284,453
                  )
                  
                  -
                  
                  
                  (1,284,453
                  )Common
                      stock issued -for services
                  
                  
                  70,095
                  
                  
                  70
                  
                  
                  51,709
                  
                  
                  -
                  
                  
                  51,779Common
                      stock issued -exercise of warrants
                  
                  
                  357,772
                  
                  
                  413
                  
                  
                  65,925
                  
                  
                  -
                  
                  
                  66,338Common
                      stock issued-exercise of options
                  
                  
                  86,291
                  
                  
                  30
                  
                  
                  29,970
                  
                  
                  -
                  
                  
                  30,000Stock
                      option expense
                  
                  
                  -
                  
                  
                  -
                  
                  
                  616,698
                  
                  
                  -
                  
                  
                  616,698Warrants
                      issued as a financing cost
                  
                  
                  -
                  
                  
                  -
                  
                  
                  256,188
                  
                  
                  -
                  
                  
                  256,188Reclassify
                      fair value of warrant liability
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,017,676
                  
                  
                  -
                  
                  
                  1,017,676Net
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (4,362,973
                  )
                  
                  (4,362,973
                  )Balance
                      at December 31, 2006
                  
                  
                  30,064,060
                  
                  $
                  30,064
                  
                  $
                  11,190,091
                  
                  $
                  $(7,227,867
                  )
                  $
                  3,992,288Common
                      stock issued for cash
                  
                  
                  5,250,000
                  
                  
                  5,250
                  
                  
                  2,094,750
                  
                  
                  -
                  
                  
                  2,100,000Offering
                      costs
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (92,639
                  )
                  
                  -
                  
                  
                  (92,639
                  )Common
                      stock issued-exercise of options
                  
                  
                  12,944
                  
                  
                  13
                  
                  
                  4,487
                  
                  
                  -
                  
                  
                  4,500Common
                      stock issued for services
                  
                  
                  62,500
                  
                  
                  63
                  
                  
                  41,812
                  
                  
                  -
                  
                  
                  41,875Stock
                      option expense
                  
                  
                  -
                  
                  
                  -
                  
                  
                  648,512
                  
                  
                  -
                  
                  
                  648,512Reclassify
                      fair value of warrant liability
                  
                  
                  -
                  
                  
                  -
                  
                  
                  47,038
                  
                  
                  
                  
                  
                  47,038Net
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (3,917,777
                  )
                  
                  (3,917,777
                  )Balance
                      at December 31, 2007
                  
                  
                  35,389,504
                  
                  $
                  35,390
                  
                  $
                  13,934,051
                  
                  $
                  (11,145,644
                  )
                  $
                  (2,823,797
                  )
  See
        Notes
        to Consolidated Financial Statements
  28
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **1.** **Description
        of Business** .
  The
        Company was incorporated in Nevada on May 26, 2004 and engages in the business
        of design and manufacture of branded performance work wear including
        task-specific gloves and performance apparel designed to significantly improve
        the wearer’s ability to safely, efficiently and comfortably perform general to
        highly specific job functions. Its customers are primarily hardware, lumber
        retailers, “Big Box” home centers, industrial distributors and sporting goods
        retailers. The Company has received four patents and has three patents pending
        for design and technological innovations incorporated in its performance
        work
        gloves. The Company has 39 registered US trademarks, 10 registered international
        trademarks and 9 in-use US trademarks. The Company introduced its line of
        specialty work apparel in the fourth quarter of 2005. The apparel is engineered
        to keep the wearer dry and cool under extreme work conditions.
  **2.** **Reverse
        Merger and Financing**
  Completion
        of Merger
  On
        April
        20, 2006, Ironclad Performance Wear Corporation (formerly Europa Trade Agency
        Ltd.), a Nevada corporation (the “Company”), along with Ironclad Merger
        Corporation., a Nevada corporation and the Company’s wholly owned subsidiary
        (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger
        Agreement”) with Ironclad Performance Wear Corporation, a privately held
        California corporation (“Ironclad California”), pursuant to which Ironclad
        California would be acquired by the Company in a merger transaction wherein
        Merger Sub would merge with and into Ironclad California, with Ironclad
        California being the surviving corporation (the “Merger”). On May 9, 2006, the
        Merger closed and Ironclad California became a wholly-owned subsidiary of
        the
        Company. At the closing, the Company changed its name to Ironclad Performance
        Wear Corporation.
  Accordingly,
        from an historical perspective, Ironclad California was deemed to have been
        the
        acquirer in the reverse merger and Ironclad California is deemed the survivor
        of
        the reorganization. As a result, the financial statements of the Company
        presented reflect the historical results of Ironclad California prior to
        the
        Merger, and of the combined entities following the merger, and do not include
        the historical financial results of the entity formerly known as Europa Trade
        Agency Ltd. Common stock has been retroactively restated to reflect the
        number of shares received by Ironclad California equity holders in the Merger
        after giving effect to the difference in par value, with the offset to
        additional paid-in capital. The equity of the Company survives the
        reorganization. Upon the closing of the reorganization, the Company changed
        its
        fiscal year to December 31, beginning with the quarter ended June 30, 2006.
        All
        costs associated with the Merger were expensed as incurred.
  Principal
        Terms of the Merger
  On
        May 9,
        2006, Merger Sub was merged with and into Ironclad California, the separate
        existence of Merger Sub ceased, and Ironclad California continued as the
        surviving corporation at the subsidiary level. The Company issued shares
        of its
        common stock pursuant to certain exchange ratios set forth in the Merger
        Agreement to the stockholders of Ironclad California in exchange for 100%
        of the
        issued and outstanding shares of common stock of Ironclad California.
        Additionally, the Company assumed options to purchase shares of common stock
        and
        warrants to purchase shares of common stock on the same terms and conditions
        as
        previously issued by Ironclad California.
  Immediately
        prior to the Merger the Company canceled 2,000,000 shares of its common stock
        held by our former sole officer and director, Thomas Lamb, and one of its
        former
        principal stockholders Craig Lamb, pursuant to an Amended and Restated Share
        Cancellation Agreement dated May 8, 2006. Thomas Lamb and Craig Lamb received
        cash remuneration of $349,413 from third party purchasers for their agreement
        to
        cancel such shares. At the time of the payment and share cancellation the
        third
        party purchasers were also party to an Amended and Restated Share Purchase
        and
        Escrow Agreement, dated May 9, 2006 with holders of approximately 90% of
        our
        common stock. The holders of such shares of Company common stock received
        $765,938 in consideration for the transfer of their shares to the third party
        purchasers.
  29
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  Immediately
        after the consummation of the cancellation and purchase transaction, but
        prior
        to the Merger, the Company effected a 3.454895-for-1 forward stock split
        of its
        common stock and increased the number of shares of authorized common stock
        to
        172,744,750.
  Immediately
        after the closing of the Merger, and without taking into consideration the
        Private Placement offering described below, the Company had outstanding
        19,858,404 shares of common stock, options to purchase 2,588,314 shares of
        common stock and warrants to purchase 2,817,416 shares of common
        stock.
  The
        Private Placement
  Immediately
        following the closing of the Merger, the Company received gross proceeds
        of
        approximately $7.3 million in a private placement transaction (the “Private
        Placement”) with institutional investors and other high net worth individuals
        (“Investors”). Pursuant to Subscription Agreements entered into with these
        Investors, the Company sold 9,761,558 Investment Units, at $0.75 per Investment
        Unit. Each “Investment Unit” consists of one share of Company common stock, and
        a five year non-callable warrant to purchase three-quarters of one share
        of
        Company common stock, at an exercise price of $1.00 per share. The value
        of the
        warrants was determined to be $5,278,388 using the Black-Scholes option pricing
        model with the following assumptions: a volatility rate of 185.5%, risk free
        interest rate of 5.13%, an expected life of five years and zero dividends.
        They
        have been recorded as a warrant liability in accordance with SFAS No. 133
        and
        EITF 00-19. On October 2, 2006, the common shares underlying the warrants
        were
        registered satisfying the warrant liability. The value of the warrant liability
        on October 2, 2006 was determined to be $6,275,422. This amount was reclassified
        to Stockholders’ Equity and a credit to income of $997,034 was recorded on
        October 2, 2006.
  As
        partial consideration for services rendered further to the Private Placement,
        one of the Company’s placement agents was issued warrants to purchase 390,464
        shares of Company common stock at an exercise price of $0.75 per share and
        warrants to purchase 292,848 shares of Company common stock at an exercise
        price
        of $1.00 per share. The value of the warrants was determined to be $494,182
        using the Black-Scholes option pricing model with the following assumptions:
        a
        volatility rate of 185.5%, risk free interest rate of 5.13%, an expected
        life of
        five years and zero dividends. They have been recorded as a warrant liability
        in
        accordance with SFAS No. 133 and EITF 00-19. On October 2, 2006 the common
        shares underlying the warrants were registered satisfying the warrant liability.
        The value of the warrant liability on October 2, 2006 was determined to be
        $586,923. This amount was reclassified to Stockholders’ Equity and a credit to
        income of $92,741 was recorded on October 2, 2006.
 30
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  **3.** **Accounting
        Policies**
  Basis
        of Consolidation
  The
        consolidated financial statements include the accounts of Ironclad Performance
        Corporation, an inactive parent company, and its wholly owned subsidiary
        Ironclad California. All significant inter-company transactions have been
        eliminated in consolidation.
  Cash
        and Cash Equivalents
  The
        Company considers all highly liquid investments with original maturities
        of
        three months or less when purchased to be cash equivalents. The Company places
        its cash with high credit quality institutions. The Federal Deposit Insurance
        Company (FDIC) insures cash amount at each institution for up to $100,000.
        From
        time to time, the Company maintains cash in excess of the FDIC
        limit.
  Accounts
        Receivable
  Trade
        receivables are carried at the original invoice amount less an estimate made
        for
        doubtful accounts. The allowance for doubtful accounts is based on management’s
        regular evaluation of individual customer receivables and consideration of
        a
        customer’s financial condition and credit history. Trade receivables are written
        off when deemed uncollectible. Recoveries of trade receivables previously
        written off are recorded when received. Interest is not charged on past due
        accounts.
  Inventory
  Inventory
        is stated at the lower of average cost (which approximates first in, first
        out)
        or market and consists primarily of finished goods. The Company regularly
        reviews its inventory quantities on hand and records a provision for excess
        and
        obsolete inventory based primarily on management’s estimated forecast of product
        demand and production requirements.
  Property
        and Equipment
  Property
        and equipment are recorded at cost less accumulated depreciation. Depreciation
        is recorded using the straight-line method over the estimated useful lives
        of
        the related assets, which range from three to seven years. Leasehold
        improvements are depreciated over fifteen years or the lease term, whichever
        is
        shorter. Maintenance and repairs are charged to expense as
        incurred.
  Trademarks
  The
        costs
        incurred to acquire trademarks, which are active and relate to products with
        a
        definite life cycle, are amortized over the estimated useful life of fifteen
        years. Trademarks, which are active and relate to corporate identification,
        such
        as logos, are not amortized. Pending trademarks are capitalized and reviewed
        monthly for active status.
 31
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  Long-Lived
        Asset Impairment
  The
        Company periodically evaluates whether events and circumstances have occurred
        that indicate the remaining estimated useful life of long-lived assets may
        warrant revision or that the remaining balance may not be recoverable. When
        factors indicate that the asset should be evaluated for possible impairment,
        the
        Company uses an estimate of the undiscounted net cash flows over the remaining
        life of the asset in measuring whether the asset is recoverable. Based upon
        the
        anticipated future income and cash flow from operations and other factors,
        relevant in the opinion of the Company’s management, there has been no
        impairment.
  Revenue
        Recognition
  A
        customer is obligated to pay for products sold to it within a specified number
        of days from the date that title to the products is transferred to the customer.
        The Company’s standard terms are typically net 30 days from the transfer of
        title to the products to the customer. The Company typically collects payment
        from a customer within 30 to 45 days from the transfer of title to the products
        to a customer. Transfer of title occurs and risk of ownership passes to a
        customer at the time of shipment or delivery, depending on the terms of the
        agreement with a particular customer. The sale price of the Company’s products
        is substantially fixed or determinable at the date of sale based on purchase
        orders generated by a customer and accepted by the Company. A customer’s
        obligation to pay the Company for products sold to it is not contingent upon
        the
        resale of those products. The Company recognizes revenues when products are
        delivered to customers.
  Returns
        Policy
  The
        Company has a warranty policy that covers defects in workmanship. The Company
        also periodically accepts stock adjustments from certain customers. Stock
        adjustment returns are typically for new customers who are given the opportunity
        to ‘trade out’ of a style of product that does not sell in their territory,
        usually in exchange for another product. Historically, warranty returns have
        averaged 1.25% a year and stock adjustment returns have averaged approximately
        0.75% of gross sales. The Company records an estimate for these returns at
        the
        time of sale.
  **Reserve
                  for Warranty Returns**Reserve
                  Balance 12/31/05
              
              $
              38,000Payments
                  Recorded During the Period
              
              
              (186,097
              )(148,097
              )Adjustment
                  to Reserve for Pre-existing Liabilities
              
              
              34,000Accrual
                  for New Liabilities During the Reporting Period
              
              
              186,097Reserve
                  Balance 12/31/06
              
              
              72,000Payments
                  Recorded During the Period
              
              
              (486,030
              )(414,030
              )Adjustment
                  to Reserve for Pre-existing Liabilities
              
              
              128,000Accrual
                  for New Liabilities During the Reporting Period
              
              
              486,030Reserve
                  Balance 12/31/07
              
              $
              200,000
  32
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  Advertising
        and Marketing
  Advertising
        and marketing costs are expensed as incurred. Advertising expenses for the
        years
        ended December 31, 2007 and 2006 were $1,221,590 and $844,023,
        respectively.
  Shipping
        and Handling Costs
  Freight
        billed to customers is recorded as sales revenue and the related freight
        costs
        as cost of sales.
  Customer
        Concentrations
  One
        customer accounted for approximately 21% of net sales for year ended December
        31, 2007 and the same customer accounted for approximately 17% of net sales
        for
        year ended December 31, 2006.
  Supplier
        Concentrations
  One
        supplier, which is located overseas, accounted for approximately 56% of total
        purchases during the year ended December 31, 2007 and 68% of total purchases
        during the year ended December 31, 2006.
  Loss
        Per Share
  The
        Company utilizes SFAS No. 128, “Earnings per Share.” Basic loss per share is
        computed by dividing loss available to common shareholders by the
        weighted-average number of common shares outstanding. Diluted loss per share
        is
        computed similar to basic loss per share except that the denominator is
        increased to include the number of additional common shares that would have
        been
        outstanding if the potential common shares had been issued and if the additional
        common shares were dilutive. Common equivalent shares are excluded from the
        computation if their effect is anti-dilutive.
  The
        following potential common shares have been excluded from the computation
        of
        diluted net loss per share for the periods presented because the effect would
        have been anti-dilutive:
  Year
                Ended
                  December 31,2007
              
              2006Options
                  outstanding under the Company’s stock option plans
              
              
              6,016,944
              
              
              5,003,343Common
                  Stock Warrants
              
              
              10,454,522
              
              
              10,454,522
 
 Income
        Taxes
 
 Income
        taxes are provided for the tax effects of the transactions reported in the
        financial statements and consist of taxes currently due plus deferred taxes
        related primarily to the difference between the basis of the allowance for
        doubtful accounts, accumulated depreciation and amortization, accrued payroll
        and net operating loss carryforwards for financial and income tax reporting.
        The
        deferred tax assets and liabilities represent the future tax return consequences
        of those differences, which will either be taxable or deductible when the
        assets
        and liabilities are recovered or settled.
  33
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  Deferred
        tax assets and liabilities are reflected at income tax rates applicable to
        the
        period in which the deferred tax assets or liabilities are expected to be
        realized or settled. As changes in tax laws or rates are enacted, deferred
        tax
        assets and liabilities are adjusted through the provision for income taxes.
        If
        it is more likely than not that some portion or all of a deferred tax asset
        will
        not be realized, a valuation allowance is recognized.
  The
        significant components of the provision for income taxes for the years ended
        December 31, 2007 and 2006 were $800 and $800, respectively, for the
        current state provision. There was no state deferred and federal tax provision.
        Due to its current net loss position, the Company has provided a valuation
        allowance in full on its net deferred tax assets in accordance with SFAS
        109 and
        in light of the uncertainty regarding ultimate realization of the net deferred
        tax assets.
  Use
        of
        Estimates
  The
        preparation of financial statements requires management to make a number
        of
        estimates and assumptions relating to the reporting of assets and liabilities
        and the disclosure of contingent assets and liabilities. Actual results could
        differ from those estimates. Significant estimates and assumptions made by
        management are used for, but not limited to, the allowance for doubtful
        accounts, inventory obsolescence, allowance for returns and the estimated
        useful
        lives of long-lived assets.
  Valuation
        of Derivative Instruments
  SFAS
        No.
        133 *“Accounting
        for Derivative Instruments and Hedging Activities”* requires
        that embedded derivative instruments be bifurcated and assessed, along with
        free-standing derivative instruments such as warrants, on their issuance
        date in
        accordance with EITF 00-19 “Accounting for Derivative Financial Instruments
        Indexed to, and Potentially Settled in, a Company’s Own Stock” to determine
        whether they should be considered a derivative liability and measured at
        their
        fair value for accounting purposes. In determining the appropriate fair value,
        the Company uses the Black-Scholes-Merton Option Pricing Formula (the “Black
        Scholes Model”). At each period end, or when circumstances indicate that the
        Company reevaluate the accounting for the derivative liability, derivative
        liabilities are adjusted to reflect changes in fair value, with any increase
        or
        decrease in the fair value being recorded in results of operations as
        Adjustments to Fair Value of Derivatives.
  RECENTLY
        ISSUED ACCOUNTING PRONOUNCEMENTS
  In
        February 2006, the FASB issued SFAS No. 155, *“Accounting
        for Certain Hybrid Financial Instruments,”* which
        amends SFAS No. 133, *“Accounting
        for Derivatives Instruments and Hedging Activities”* and SFAS
        No. 140, *“Accounting
        for Transfers and Servicing of Financial Assets and Extinguishment of
        Liabilities.”* SFAS No.
        155 amends SFAS No. 133 to narrow the scope exception for interest-only and
        principal-only strips on debt instruments to include only such strips
        representing rights to receive a specified portion of the contractual interest
        or principle cash flows. SFAS No. 155 also amends SFAS No. 140 to allow
        qualifying special-purpose entities to hold a passive derivative financial
        instrument pertaining to beneficial interests that itself is a derivative
        instrument. Management does not expect adoption of SFAS No. 155 to have a
        material impact on our financial statements.
  34
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  In
        July 2006, the FASB released FASB Interpretation No. 48, *Accounting
        for Uncertainty in Income Taxes, an interpretation of FASB Statement
        No. 109* (FIN
        48). FIN 48 clarifies the accounting and reporting for uncertainties in income
        tax law. This Interpretation prescribes a comprehensive model for the financial
        statement recognition, measurement, presentation and disclosure of uncertain
        tax
        positions taken or expected to be taken in income tax returns. This statement
        is
        effective for fiscal years beginning after December 15, 2006. Management
        has determined that the adoption of FIN 48 does not have a material effect
        on
        our results of operations and financial position.
  In
        September 2006, the FASB issued SFAS No. 157, *“Fair
        Value Measurements”* (“SFAS
        No. 157”), which defines fair value, establishes a framework for measuring fair
        value in generally accepted accounting principles, and expands disclosures
        about
        fair value measurements. This Statement applies under other accounting
        pronouncements that require or permit fair value measurements. SFAS No. 157
        is
        effective for financial statements issued for fiscal years beginning after
        November 15, 2007, and interim periods within those fiscal years. Management
        will evaluate the effect of this statement, if any, on its financial
        statements.
  In
        February 2007, the Financial Accounting Standards Board (“FASB”) issued
        Statement of Financial Accounting Standard (“SFAS”) No. 159, *"The
        Fair Value Option for Financial Assets and Financial Liabilities, including
        an
        amendment of FASB Statement No. 115.* ”
SFAS
        159 permits entities to choose to measure many financial instruments and
        certain
        other items at fair value at specified election dates. SFAS 159 is effective
        as
        of the beginning of an entity’s first fiscal year that begins after November 15,
        2007. As such, the Company is required to adopt these provisions at the
        beginning of the fiscal year ended December 31, 2008. The Company is currently
        evaluating the impact of SFAS 159 on its consolidated financial
        statements.
  In
        December 2007, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standard (“SFAS”) No. 160, *"Noncontrolling
        Interests in Consolidated Financial Statements, an amendment of ARB No.
        51.”* SFAS 160
        establishes accounting and reporting standards for the noncontrolling interest
        in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is
        effective for fiscal years, and interim periods within those fiscal years,
        beginning on or after December 15, 2008. As such, the Company is required
        to
        adopt these provisions at the beginning of the fiscal year ended December
        31,
        2009. The Company is currently evaluating the impact of SFAS 160 on its
        consolidated financial statements but does not expect it to have a material
        effect.
  35
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  **4.** **Inventory**
  At
        December 31, 2007 the Company had one class of inventory - finished
        goods.
  December 31,
                2007Finished
                  Goods
              
              $
              3,129,339
  **5.** **Property
        and equipment**
  Property
        and equipment consisted of the following:
 
 December 31,
                2007Computer
                  hardware and software
              
              $
              253,657Furniture
                  and equipment
              
              
              128,465Vehicle
              
              
              43,680Leasehold
                  improvements
              
              
              34,110459,312Less
                  accumulated depreciation
              
              
              (219,517
              )**Property
                  and equipment, net**
              
              **$**
              **240,395**
  Depreciation
        expense for the years ended December 31, 2007 and 2006 was $71,023 and $37,550,
        respectively.
  36
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  **6.** **Trademarks**
  Trademarks
        consisted of the following:
  December 31,
                2007Trademarks
              
              $
              92,054Less:
                  Accumulated amortization
              
              
              (9,306
              )**Trademarks,
                  net**
              
              **$**
              **82,748**
 
 Trademarks
        consist of definite-lived trademarks of $60,452 and indefinite-lived trademarks
        of $31,602 at December 31, 2007. All trademark costs have been generated
        by the
        Company, and consist of initial legal and filing fees.
  Amortization
        expense was $3,716 and $2,819 for the years ended December 31, 2007 and 2006,
        respectively. The Company expects to amortize $3,950 in each of the next
        five
        years.
  **7.** **Accounts
        payable and accrued expenses**
  Accounts
        payable and accrued expenses consisted of the following at December 31,
        2007:
  December 31,
                2007Accounts
                  payable
              
              $
              2,217,758Accrued
                  inventory
              
              
              110,094Accrued
                  rebates and co-op
              
              
              339,932Accrued
                  bonus
              
              
              86,000Accrued
                  warranty reserve
              
              
              200,000Accrued
                  expenses – other
              
              
              484,270**Total
                  accounts payable and accrued expenses**
              
              **$**
              **3,438,054**
 
 **8.** **Note
        Payable and Bank Lines of Credit**
  Notes
        Payable
  In
        April
        2006, Westrec Capital Partners, LLC agreed to extend its existing $550,000
        bridge financing loan to the Company for up to thirty (30) days under the
        same
        terms and conditions in exchange for a warrant for 100,000 shares of the
        Company’s common stock, exercisable at $1.00 per share.
 
 The
        value
        of the 100,000 warrants was determined to be $72,097 using the Black-Scholes
        Option Pricing Model with the following assumptions: risk-free interest rate
        of
        5.13%, volatility factor of 185.5%, five-year life and zero dividends. They
        have
        been recorded as a warrant liability in accordance with SFAS No. 133 and
        EITF
        00-19. On October 2, 2007 the Company revalued this liability with the following
        assumptions: risk free interest rate of 4.2%, volatility factor of 222.2%,
        five
        year life and zero dividends, adjusted the current value of this warrant
        liability to $47,038. On this date the terms and conditions of the warrant
        were
        fully satisfied and the Company converted this warrant liability to equity
        in
        accordance with SFAS No. 133 and EITF 00-19.
  37
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  Factoring
        Agreement
  On
        September 15, 2006 the Company entered into a factoring agreement with Wells
        Fargo Century, Inc. whereby it assigned certain of its accounts receivables
        with
        full recourse. On November 21, 2006, the Company entered into an amendment
        to
        this factoring agreement. This facility allows the Company to borrow the
        lesser
        of (a) $2,500,000 or (b) the sum of (i) seventy-five percent (75%) of the
        net
        amount of eligible accounts receivable and (ii) 40% of the value of eligible
        inventory, which amount shall not exceed the lesser of $750,000 and the net
        amount of eligible accounts receivable. All of the Company’s assets secure
        amounts borrowed under the terms of this agreement. Interest on outstanding
        balances accrues at the prime rate announced from time to time by Wells Fargo
        Bank N.A. (or such other bank as Wells Fargo Century, Inc. shall select in
        its
        discretion) as its “prime” or base rate for commercial loans and the agreement
        has an initial term of twenty-four (24) months. As of December 31, 2007,
        total
        amount due to Wells Fargo Century was $2,309,321.
  **9.** **Equity** **transactions**
  Common
        Stock
  On
        August
        7, 2007 the Company issued 12,944 shares of common stock upon the exercise
        of a
        stock option at an exercise price of $0.348.
  In
        September 2007, the Company completed a private placement transaction with
        institutional investors and other high net worth individuals. Pursuant to
        its
        subscription agreements with these investors, the Company sold 5,250,000
        shares
        of common stock, at $0.40 per share. In accordance with the terms of the
        subscription agreements the Company was required to file a registration
        statement for resale of the common stock sold within forty-five (45) days
        of the
        closing date of the offering, use commercially reasonable efforts to cause
        such
        registration statement to become effective within one hundred fifty (150)
        days
        after the closing date and maintain such registration for twenty-four (24)
        months after the closing date. The Company has timely filed an SB-2 Registration
        Statement which became effective on November 9, 2007. After commissions and
        expenses, the Company received net proceeds of approximately $2.0 million
        in the
        private placement
 
 Warrant
        Activity
 
 A
        summary
        of warrant activity is as follows **:**
  Number
                    of
                  Shares
                
                Weighted
                  Average
                  Exercise
                    PriceWarrants
                    outstanding at December 31, 2005
                
                
                749,079
                
                $
                0.23Warrants
                    issued
                
                
                10,072,852
                
                $
                0.93Warrants
                    expired
                
                
                (9,637
                )
                $
                0.67Warrants
                    exercised
                
                
                (357,772
                )
                $
                0.19Warrants
                    outstanding at December 31, 2006
                
                
                10,454,522
                
                $
                0.91Warrants
                    issued
                
                
                -
                
                $
                -Warrants
                    expired
                
                
                -
                
                $
                -Warrants
                    exercised
                
                
                -
                
                $
                -Warrants
                    outstanding at December 31, 2007
                
                
                10,454,522
                
                $
                0.91
  38
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  Stock
        Based Compensation
  Effective
        with the Company’s fiscal year that began on January 1, 2006, the Company
        adopted the accounting and disclosure provisions of Statement of Financial
        Accounting Standards (“SFAS”) No. 123(R), *“Share-Based
        Payments* ”
using
        the modified prospective application transition method.
  Ironclad
        California reserved 7,000,000 shares of its common stock for issuance to
        employees, directors and consultants under the 2000 Stock Incentive Plan,
        which
        the Company assumed in the Merger (“the 2000 Plan”). Under the 2000 Plan,
        options may be granted at prices not less than the fair market value of the
        Company’s common stock at the grant date. Options generally have a ten-year term
        and shall be exercisable as determined by the Board of Directors.
  Effective
        May 18, 2006, the Company reserved 4,250,000 shares of its common stock for
        issuance to employees, directors and consultants under its 2006 Stock Incentive
        Plan (the “2006 Plan”). Under the 2006 Plan, options may be granted at prices
        not less than the fair market value of the Company’s common stock at the grant
        date. Options generally have a ten-year term and shall be exercisable as
        determined by the Board of Directors.
  The
        fair
        value of each stock option granted under either the 2000 or 2006 Plan is
        estimated on the date of the grant using the Black-Scholes option pricing
        model.
        The Black-Scholes option pricing model has assumptions for risk free interest
        rates, dividends, stock volatility and expected life of an option grant.
        The
        risk free interest rate is based the U.S. Treasury Bill rate with a maturity
        based on the expected life of the options and on the closest day to an
        individual stock option grant. Dividend rates are based on the Company’s
        dividend history. The stock volatility factor is based on historical market
        prices of the Company’s common stock. The expected life of an option grant is
        based on management’s estimate. The fair value of each option grant is
        recognized as compensation expense over the vesting period of the option
        on a
        straight line basis.
  For
        stock
        options issued during the years ended December 31, 2007 and 2006, the fair
        value
        of these options was estimated at the date of the grant using a Black-Scholes
        option pricing model with the following range of assumptions:
  December 31, 2007
              
              December 31, 2006Risk
                  free interest rate
              
              
              4.06%
                  - 4.83%
              
              
              5.12%
                  - 5.16%Dividends
              
              
              -
              
              
              -Volatility
                  factor
              
              
              203%
                  - 224%
              
              
              170%
                  - 185%Expected
                  life
              
              
              4 –
                  6.25 years
              
              
              4
                  years
  39
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
 
 A
        summary
        of stock option activity is as follows:
  Number
                    of
                  Shares
                
                Weighted
                  Average
                  Exercise
                    PriceOutstanding
                    December 31, 2005
                
                
                2,584,000
                
                $
                0.35Granted
                
                
                2,511,134
                
                $
                0.88Exercised
                
                
                (86,291
                )
                $
                0.35Cancelled/Expired
                
                
                (5,500
                )
                $
                1.05Outstanding
                    at December 31, 2006
                
                
                5,003,343
                
                $
                0.65Granted
                
                
                1,808,300
                
                $
                0.43Exercised
                
                
                (12,944
                )
                $
                0.35Cancelled/Expired
                
                
                (781,755
                )
                $
                0.71Outstanding
                    at December 31, 2007
                
                
                6,016,944
                
                $
                0.58Exercisable
                    at December 31, 2007
                
                
                3,534,557
                
                $
                0.55
  40
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  The
        following tables summarize information about stock options outstanding at
        December 31, 2007:
  Range
                  of Exercise Price
              
              Number
                  Outstanding
              
              Weighted
                  Average
                Remaining
                  Contractual
                Life
                  (Years)
              
              Weighted
                  Average
                Exercise
                  Price
              
              Intrinsic
                  Value
                Outstanding
                  Shares$0.19
                  - $0.35
              
              2,413,353
              
              6.17
              
              $0.35
              
              $252,931$0.38
                  - $1.05
              
              3,603,591
              
              8.45
              
              $0.74
              
              $73,800
  The
        following tables summarize information about stock options exercisable at
        December 31, 2007:
  Range
                  of Exercise Price
              
              Number
                  Exercisable
              
              Weighted
                  Average
                Remaining
                  Contractual
                Life
                  (Years)
              
              Weighted
                  Average
                Exercise
                  Price
              
              Intrinsic
                  Value
                Exercisable
                  Shares$0.19
                  - $0.35
              
              2,253,714
              
              6.09
              
              $0.35
              
              $236,594$0.38
                  - $1.05
              
              1,280,343
              
              6.88
              
              $0.91
              
              $-0-
  The
        Company recorded $648,512 of compensation expense for employee stock options
        during the year ended December 31, 2007. These compensation expense charges
        were
        recorded in the following operating expense categories, general and
        administrative - $428,890; sales and marketing - $149,956; research and
        development - $41,587; and operations - $28,079. There was a total of $1,461,663
        of unrecognized compensation costs related to non-vested share-based
        compensation arrangements under the Plan outstanding at December 31, 2007.
        This
        cost is expected to be recognized over a weighted average period of 3.0 years.
        The total fair value of shares vested during the year ended December 31,
        2007
        was $931,119.
  **10.** **Income
        Taxes**
  The
        provision (benefit) for income taxes for the years ended December 31, 2007
        and
        2006 consisted of the following:
  2007
                
                2006Current
                
                $
                800
                
                $
                800Deferred
                
                
                -
                
                
                -Refund
                
                
                -
                
                
                (30,979
                )**$**
                800
                
                **$**
                (30,179
                )
 
 The
        provision for income taxes differs from the amount that would result from
        applying the federal statutory rate for the years ended December 31, 2007
        and
        2006 as follows:
  41
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  2007
                
                2006Statutory
                    regular federal income benefit rate
                
                
                (34.0
                )%
                
                (34.0
                )%State
                    income taxes, net of federal benefit
                
                
                (5.7
                )
                
                (4.4
                )Unrealized
                    loss on financing activities
                
                
                0.2
                
                
                8.4Return
                    to provision adjustment
                
                
                -
                
                
                (7.1
                )Change
                    in valuation allowance
                
                
                39.2
                
                
                36.9Other
                
                
                0.3
                
                
                0.2Total
                
                
                0
                %
                
                0
                %
  In
        assessing the reliability of deferred tax assets, management considers whether
        it is more likely than not that some portion or all of the deferred tax assets
        will not be realized. The ultimate realization of deferred tax assets is
        dependent upon the generation of future taxable income during the periods
        in
        which those temporary differences become deductible. Management considers
        the
        scheduled reversals of deferred tax liabilities, projected future taxable
        income, and tax planning strategies in making this assessment. Based upon
        the
        level of historical taxable income and projections for future taxable income
        over the periods which the deferred tax assets are deductible, management
        believes it is more likely than not the Company will realize all of the benefits
        of these deductible, differences, however the Company chooses to provide
        a 100%
        valuation allowance against its deferred tax asset.
  Significant
        components of the Company’s deferred tax assets and liabilities for federal
        incomes taxes at December 31, 2007 consisted of the following:
  2007Deferred
                  tax assetsNet
                  operating loss carryforward
              
              $
              3,484,495Stock
                  option expense
              
              
              542,015Allowance
                  for doubtful accounts
              
              
              14,137Allowance
                  for product returns
              
              
              85,680Accrued
                  compensation
              
              
              90,316Inventory
              
              
              18,850Other
              
              
              3,134Valuation
                  allowance
              
              
              (3,945,622
              )Total
                  deferred tax assets
              
              
              293,005Total
                  deferred tax liabilities
              
              
              (293,005
              )**Net
                  deferred tax assets/liabilities**
              
              $
              -
  As
        of
        December 31, 2007, the Company had unused federal and state contribution
        carryovers of $6,680 that expire in 2009 through 2011.
  As
        of
        December 31, 2007, the Company had unused federal and state net operating
        loss
        carryforwards available to offset future taxable income of $8,179,000 and
        $8,555,000, respectively, that expire between 2009 and 2027.
  42
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  **11. Commitments
        and Contingencies**
  The
        Company relocated to a temporary facility in November 2005. Rent expense
        for the
        period January 1, 2006 through June 30, 2006 for this temporary facility
        was
        $40,500.
  The
        Company entered into a new five-year lease with one option to renew for an
        additional five years for a corporate office and warehouse lease commencing
        in
        July 2006. The facility is located in El Segundo, California. Rent expense
        for
        this facility for the years ended December 31, 2007 and 2006 for this facility
        were $166,926 and $82,512, respectively.
  The
        Company has various non-cancelable operating leases for office equipment
        expiring through December 31, 2012. Equipment lease expense charged to
        operations under these leases was $7,619 and $6,290 for the years ended December
        31, 2007 and 2006, respectively.
  Future
        minimum rental commitments under these non-cancelable operating leases for
        years
        ending December 31 are as follows:
  Year
              
              Facility
              
              Equipment
              
              Total2008
              
              
              173,526
              
              
              7,279
              
              
              180,8052009
              
              
              174,720
              
              
              6,949
              
              
              181,6692010
              
              
              175,146
              
              
              5,959
              
              
              181,1052011
              
              
              82,614
              
              
              5.959
              
              
              88,5732012
              
              
              -
              
              
              5,959
              
              
              5,959Thereafter
              
              
              -
              
              
              -
              
              
              -$
              606,006
              
              $
              32,105
              
              $
              638,111
  Ironclad
        California executed a Separation Agreement with Eduard Jaeger effective in
        April
        2004. Pursuant to the terms of the Separation Agreement, if Ironclad terminates
        Mr. Jaeger’s employment with Ironclad California at any time other than for
        Cause, then Ironclad California must pay Mr. Jaeger (a) all accrued and unpaid
        salary and other compensation payable by the Company for services rendered
        through the termination date, payable in a lump sum payment on the termination
        date; and (b) a cash amount equal to Two Hundred Thousand Dollars ($200,000),
        payable in installments throughout the one (1) year period following the
        termination date in the same manner as Ironclad California pays salaries
        to its
        other executive officers. The Separation Agreement requires Mr. Jaeger to
        sign a
        general release and non-competition agreement in order to receive the lump
        sum
        payment. For the purposes of the Separation Agreement, termination for “Cause”
means termination by reason of: (i) any act or omission knowingly undertaken
        or
        omitted by Executive with the intent of causing damage to Ironclad California,
        its properties, assets or business or its stockholders, officers, directors
        or
        employees; (ii) any improper act of Mr. Jaeger involving a material personal
        profit to him, including, without limitation, any fraud, misappropriation
        or
        embezzlement, involving properties, assets or funds of Ironclad or any of
        its
        subsidiaries; (iii) any consistent failure by Mr. Jaeger to perform his normal
        duties as directed by the Chairman of the Board, in the sole discretion of
        the
        Board; (iv) any conviction of, or pleading nolo contendere to, (A) any crime
        or
        offense involving monies or other property of Ironclad; (B) any felony offense;
        or (C) any crime of moral turpitude; or (v) the chronic or habitual use or
        consumption of drugs or alcoholic beverages.
  43
  **IRONCLAD
        PERFORMANCE WEAR CORPORATION**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  **12.** **Legal
        Proceedings**
  Claim
  In
        September 12, 2006, American Sports Group, Inc.("ASG"), filed a lawsuit against
        both Ironclad California and Ironclad Nevada in the Superior Court of the
        State
        of California for the County of Los Angeles, alleging causes of action for
        Declaratory Relief and Breach of Contract.
  The
        Company took the position that ASG's claims were without merit and vigorously
        defended against these claims, denying all of the allegations and filing
        a
        Cross-Complaint for unfair business practices against ASG, Youngstown Equipment
        Corp. ("Youngstown"), Blackstone Investment Group ("Blackstone"), Pacifica
        Ltd,
        LLC ("Pacifica"), Lakeview Canyon, LLC ("Lakeview") and Greg Thomsen ("Thomsen")
        among others. In December of 2007, Ironclad also filed a Federal Court complaint
        ("Federal Lawsuit") against Youngstown, Blackstone, Pacifica, Lakeview and
        Thomsen, alleging certain trademark violations.
  In
        January of 2008, the parties settled their claims with respect to both lawsuits
        with prejudice. The settlement included a general mutual release covering
        all
        existing and potential claims between the parties arising out of the
        litigation.
  **13.** **Related
        Party Transactions**
  Mr.
        Bloomer, who is Chairman of the Company’s board of directors, is also the
        Chairman and Chief Executive Officer of CVM Management, Inc. which is the
        Managing Partner of CVM. Before our merger with Ironclad California, CVM
        held
        29.83% of the issued and outstanding shares of Ironclad California. At August
        22, 2006, CVM held approximately 16.8% of Ironclad California’s issued and
        outstanding shares, including warrants to purchase 415,782 shares of its
        common
        stock, a portion of which were issued in connection with the stockholder
        bridge
        financing transaction completed by Ironclad California in February 2006.
        These
        warrants are exercisable an exercise price per share of $0.75.
  Mr.
        Alderton, an Ironclad Board member since August 2002, is a partner of the
        law
        firm, Stubbs, Alderton and Markiles, LLP, or SAM, which is Ironclad’s attorney
        of record. SAM rendered services to Ironclad California as its primary legal
        firm since 2002, and became our primary legal counsel upon closing of the
        merger
        with Ironclad California on May 9, 2006.
  44




**Item
      8.**  **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.**




Not
      applicable.




**Item
      8A.**  **Controls
      and Procedures.**




**Controls
      and Procedures**




*Evaluation
      of Controls and Procedures*




We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports under the Securities
      Exchange Act of 1934, as amended, or the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the Securities
      Exchange Commission's rules and forms, including to ensure that information
      required to be disclosed by us in the reports filed or submitted by us under
      the
      Exchange Act is accumulated and communicated to our management, including our
      principal executive and principal financial officers, or persons performing
      similar functions, as appropriate to allow timely decisions regarding required
      disclosure as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act.




As
      of
      December 31, 2007, we conducted an evaluation, with the participation of our
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      the
      design and operation of our disclosure controls and procedures. Based on that
      evaluation, our Chief Executive Officer and Chief Financial Officer have
      concluded that as of December 31, 2007, our disclosure controls and procedures
      were effective.




*Changes
      in Internal Controls*




During
      the last fiscal quarter, there have been no changes in our internal control
      over
      financial reporting that have materially affected, or are reasonably likely
      to
      materially affect, our internal control over financial reporting.




*Management’s
      Report on Internal Control over Financial Reporting*




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
      under the Securities Exchange Act of 1934. Our internal control over financial
      reporting is designed, under the supervision of our chief executive and chief
      financial officers, and effected by our board of directors, management and
      other
      personnel to provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external purposes
      in
      accordance with accounting principles generally accepted in the United States
      of
      America (GAAP). Our internal control over financial reporting includes those
      policies and procedures that:




· pertain
          to the maintenance of records that, in reasonable detail, accurately and
          fairly
          reflect the transactions and dispositions of the our
          assets;




· provide
        reasonable assurance that transactions are recorded as necessary to permit
        preparation of financial statements in accordance with GAAP, and that our
        receipts and expenditures are being made only in accordance with authorizations
        of our management and directors; and




· 
        provide reasonable assurance
        regarding prevention or timely detection of unauthorized acquisition, use
        or
        disposition of our assets that could have a material effect on the financial
        statements.





We
      conducted an evaluation of the effectiveness of our internal control over
      financial reporting as of December 31, 2007. This evaluation was based on the
      framework in “Internal Control—Integrated Framework” issued by the Committee of
      Sponsoring Organizations of the Treadway Commission , or COSO. All internal
      control systems, no matter how well designed, have inherent limitations.
      Therefore, even those systems determined to be effective can provide only
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      GAAP.




Based
      on
      our evaluation under the framework in Internal Control—Integrated Framework, our
      Chief Executive Officer and Chief Financial Officer concluded that internal
      control over financial reporting was effective as of December 31, 2007.




This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only management’s report in this annual
      report.




45




**Item
      8B.**  **Other
      Information.**




None.




**Item
      9.**  **Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance With Section 16(a) of the Exchange Act.**




The
      following table sets forth the name, age and position of each of our executive
      officers and directors as of March 9, 2008.




**Name**
            
            **Age**
            
            **Position**R.D.
                Peter Bloomer
            
            72
            
            Chairman
                of the BoardEduard
                Jaeger
            
            47
            
            Director,
                President and Chief Executive OfficerRhonda
                Hoffarth
            
            47
            
            Executive
                Vice President and Chief Operating OfficerKent
                Pachl
            
            41
            
            Executive
                Vice President of Sales & MarketingThomas
                Kreig
            
            60
            
            Interim
                Chief Financial Officer, Vice President of Finance and
                SecretaryVane
                P. Clayton
            
            49
            
            DirectorScott
                Alderton
            
            49
            
            DirectorScott
                Jarus
            
            52
            
            Director





*R.
      D.
      Peter Bloomer, Chairman of the Board*




Mr.
      Bloomer has served as Chairman of our board of directors in April 2003. He
      is
      the Chairman and Chief Executive Officer of CVM Management, Inc. and Managing
      Partner of CVM Equity Fund V, Ltd., LLP, or CVM, which is our largest
      stockholder. Prior to the formation of CVM, Mr. Bloomer was Vice President
      of
      Marketing for Head Ski & Tennis, Vice President of Operations for Hanson
      Industries and spent 11 years with IBM Sales and Marketing. Mr. Bloomer has
      served on the board of directors of multiple private companies.




*Eduard
      Jaeger, Director, President, Chief Executive Officer &
Founder*




Mr.
      Jaeger founded Ironclad in 1998 and has served as a Director and as President
      and Chief Executive Officer since that time. Mr. Jaeger has been Founder,
      co-Founder and President of a number of successful companies in the consumer
      products sector over a 20 year period. Prior to founding Ironclad, he developed
      extensive experience and expertise in innovative product design and development,
      overseas manufacturing, importing and exporting, sales and marketing, and
      forming worldwide distribution channels. Mr. Jaeger is also the inventor of
      six
      U.S. patents and two patents pending, and has held executive positions in
      marketing and promotion.




*Rhonda
      Hoffarth, Executive Vice President & Chief Operating Officer*




Ms.
      Hoffarth has served as our Executive Vice President & Chief Operating
      Officer since January 2003. Prior to January 2003, Ms. Hoffarth has also
      previously served as Ironclad’s interim Chief Financial Officer. Ms. Hoffarth
      has over 20 years of experience in operations and finance with growing consumer
      product companies. Prior to joining us, Ms. Hoffarth spent 9 years with Bell
      Sports, Inc. in various roles, including Vice President of Operations, North
      American, helping the company grow from $45,000,000 in revenue to over
      $200,000,000. Subsequently, Ms. Hoffarth spent 2 years as the Senior Vice
      President of Operations for Targus, Inc., a $500,000,000 developer of mobile
      accessories. Both Bell Sports and Targus source their finished products from
      Asia and have multiple sales channels (independent shops, regional and national
      accounts, big box accounts). Ms. Hoffarth received her Masters of Business
      Administration from the University of Southern California in 1992.




*Kent
      Pachl, Executive Vice President of Sales & Marketing*




Mr.
      Pachl
      has served as our Executive Vice President of Sales and Marketing in January
      2005. Prior to joining us, Mr. Pachl has spent a total of 15 years in the
      consumer products and sporting goods industries with Dunlop/Maxfli Sports
      Corporation and more recently with Taylor Made-Adidas Golf Company. At
      Dunlop/Maxfli, Mr. Pachl was Vice President of Sales and helped facilitate
      the
      sale of the company by consolidating multiple divisions into one group. During
      his tenure at Taylor Made-Adidas golf, Mr. Pachl held various senior management
      roles in International Sales, Taylor Made equipment and the Adidas footwear
      and
      apparel division. Mr. Pachl possesses a Bachelors of Science degree in Business
      Finance from San Diego State University in 1990.




46




*Thomas
      Kreig, Interim Chief Financial Officer, Vice President of Finance and Secretary*




Mr.
      Kreig
      has served as our Interim Chief Financial Officer since December 2007. From
      September 2002 to December 2007, Mr. Kreig served as our Vice President of
      Finance and Secretary. Before joining Ironclad, Mr. Kreig spent 18 years serving
      as Controller and Vice President of Finance at companies in several different
      industries. Most recently he served as Controller for In-Flight Network, LLC,
      a
      developer of satellite-based broadband communications for airline passengers.
      Prior to In-Flight Network, Mr. Kreig served as Vice President of Finance for
      Network Courier Services, Inc. From 1983 to 1996, Mr. Kreig served as Controller
      and Chief Financial Officer for Triple L Distributing Co., Inc. and Controller
      and Treasurer for a medical diagnostic equipment company where he was
      instrumental in helping to successfully execute an initial public offering.
      He
      is a certified public accountant and received his Masters of Business
      Administration from the University of Detroit in 1975.




*Vane
      P. Clayton, Director*




Mr.
      Clayton has served on our board of directors since March 2004 and currently
      serves as the Chair of the Audit Committee. He currently serves as the chief
      executive officer and member of the board of directors of KPA LLC, an
      Environmental & Safety Services Company. Prior to KPA, Mr. Clayton was
      President of ZOLL Data Systems, an Enterprise Software subsidiary of ZOLL
      Medical Corporation ($250M in Sales - NASDAQ: ZOLL) and board member of TROY.
      Earlier in his career, Mr. Clayton managed a sales team for Raychem ($1.7B
      in
      Sales), a division of Tyco Electronics. Mr. Clayton brings experience in
      directing public companies in high growth sales and marketing strategies; new
      product and channel development; fund raising; Sarbanes-Oxley Act of 2004,
      Section 404 compliance; strategic positioning; and building successful teams.
      Mr. Clayton holds a B.S. in Agricultural/Mechanical Engineering from Purdue
      University and an MBA from Harvard Business School




*Scott
      Alderton, Director*




Mr.
      Alderton has served on our board of directors since August 2002. In 2002, Mr.
      Alderton co-founded the law firm of Stubbs Alderton & Markiles, LLP and has
      over 21 years experience working with technology and emerging growth companies
      at all stages along their evolutionary path. He brings to our board his
      expertise in securities law matters, capital formation, venture capital and
      financing transactions; mergers, acquisitions and divestitures; and the
      protection of copyrights, trademarks and trade secrets. Mr. Alderton received
      his Bachelor of Arts from the University of California at Los Angeles in 1982
      and juris doctor from Loyola Law School in 1985.




*Scott
      Jarus, Director*




Mr.
      Jarus
      has served as a member of our board of directors since May 18, 2006. Mr. Jarus
      is Chief Executive Officer of Cognition Technologies, Inc., an early-stage
      company located in Culver City, California, which is a developer of
      revolutionary linguistic meaning-based content Search technology. From 2001
      to
      2005, Mr. Jarus was President and principal executive of j2 Global
      Communications, Inc. (NASDAQ: JCOM), a provider of outsourced, value-added
      messaging and communications services to individuals and companies throughout
      the world. Before joining j2 Global Communications, Inc., from 1998 to 2001,
      Mr.
      Jarus was President and Chief Operating Officer for OnSite Access, a provider
      of
      building-centric integrated communications services. Mr. Jarus has 27 years
      of
      management experience in the telecommunications industry and has served in
      various senior management positions. He currently serves on the board of
      directors of various other companies, none of which compete with or are in
      the
      same industry as Ironclad. In 2005, Mr. Jarus was named National Entrepreneur
      of
      the Year for Media/Entertainment/Communications by Ernst & Young (and Los
      Angeles Entrepreneur of the Year for Technology in 2004). Mr. Jarus received
      his
      Bachelor of Arts degree in Psychology and a Master of Business Administration
      degree from the University of Kansas in 1982.




**Audit
      Committee of the Board of Directors**




The
      Board
      of Directors currently has the following standing committees: Audit Committee
      and Compensation Committee.




The
      Audit
      Committee currently consists of Messrs. Clayton, Alderton and Jaeger. None
      of
      our current Audit Committee members is an audit committee financial expert,
      as
      defined in Item 401(e)(2) of Regulation S-B. Our Board of Directors currently
      has no independent director who qualifies as an audit committee expert. We
      intend to recruit new independent directors such that the independent directors
      on our Board may fulfill committee and independence requirements. The primary
      purposes of the Audit Committee are (i) to review the scope of the audit and
      all
      non-audit services to be performed by our independent auditors and the fees
      incurred by us in connection therewith, (ii) to review the results of such
      audit, including the independent accountants’ opinion and letter of comment to
      management and management’s response thereto, (iii) to review with our
      independent accountants our internal accounting principles, policies and
      practices and financial reporting, (iv) to engage our independent auditors
      and
      (v) to review our quarterly and annual financial statements prior to public
      issuance. The role and responsibilities of the Audit Committee are more fully
      set forth in a written Charter adopted by our board of directors. The Audit
      Committee was created by our Board effective May 18, 2006.




47




**Compliance
      with Section 16(a) of the Exchange Act**




Section
      16(a) of the Securities Exchange Act of 1934 requires that our executive
      officers and directors, and persons who own more than ten percent of a
      registered class of our equity securities, file reports of ownership and changes
      in ownership with the SEC.  Executive officers, directors and
      greater-than-ten percent stockholders are required by SEC regulations to furnish
      us with all Section 16(a) forms they file.  Based solely on our review of
      the copies of the forms received by us and written representations from certain
      reporting persons that they have complied with the relevant filing requirements,
      we believe that, during the year ended December 31, 2007, all of our executive
      officers, directors and greater-than-ten percent stockholders complied with
      all
      Section 16(a) filing requirements, except for the following: Scott Alderton
      reported two late transactions on a Form 5, and Scott Jarus reported one late
      transaction on a Form 5.




**Code
      of Ethics**




We
      have
      adopted a Code of Ethics applicable to all of our Board members and to all
      of
      our employees, including our Chief Executive Officer and Chief Financial
      Officer. The Code of Ethics constitutes a “code of ethics” as defined by
      applicable SEC rules and a “code of conduct” as defined by applicable NASDAQ
      rules. The Code of Ethics will be publicly filed with the SEC as an exhibit
      to
      this report. You may also request a copy of the Code of Ethics by writing or
      calling us at:




Ironclad
      Performance Wear Corporation


Attn:
      Investor Relations


2201
      Park
      Place, Suite 101


El
      Segundo, CA 90245


(310)
      643-7800




Any
      waiver of the Code of Ethics pertaining to a member of our Board or one of
      our
      executive officers will be disclosed in a report on Form 8-K filed with the
      SEC.




**Item
      10.**  **Executive
      Compensation.**




**Summary
      Compensation Table**




The
      following table sets forth, as to the Chief Executive Officer and as to each
      of
      the other two most highly compensated executive officers whose compensation
      exceeded $100,000 during the last fiscal year, information concerning all
      compensation paid for services to us in all capacities for our last two fiscal
      years.







**Name and PrincipalPosition**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Stock**
              **Awards**
              **($)**
            
            **Option**
              **Awards**
              **($)**
            
            **All Other**
              **Compensation**
              **($)**
            
            **Total**
              **($)**Eduard
                Jaeger
            
            
            2007
            
            
            234,257
            
            
            39,947
            (2)
            
            -
            
            
            39,328
            
            
            7,200
            (3)
            
            320,732Chief
                Executive Officer and Director
            
            
            2006
            
            
            193,424
            
            
            150,000
            (1)
            
            -
            
            
            480,000
            
            
            7,200
            (3)
            
            833,624Rhonda
                Hoffarth
            
            
            2007
            
            
            163,416
            
            
            20,000
            (2)
            
            -
            
            
            27,064
            
            
            -
            
            
            210,480Executive
                Vice President and Chief Operating Officer
            
            
            2006
            
            
            146,655
            
            
            30,000
            (1)
            
            -
            
            
            120,750
            
            
            -
            
            
            297,405Kent
                Pachl
            
            
            2007
            
            
            190,477
            
            
            30,000
            (2)
            
            -
            
            
            31,493
            
            
            7,200
            (3)
            
            259,170Executive
                Vice President of Sales and Marketing
            
            
            2006
            
            
            177,298
            
            
            40,000
            
            
            -
            
            
            193,200
            
            
            7,200
            (3)
            
            418,328




(1)  Represents
      payment of bonus for performance in 2005.


(2)  Represents
      payment of bonus for performance in 2006.


(3)  Represents
      an automobile allowance.





**Outstanding
      Equity Awards at Fiscal Year End**




The
      following table presents information regarding outstanding options held by
      our
      named executive officers as of the end of our fiscal year ended December 31,
      2007.




48




**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
            
            **Equity**
              **Incentive**
              **Plan Awards:**
              **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options**
              **(#)**
            
            **Option**
              **Exercise**
              **Price**
              **($)**
            
            **Option**
              **Expiration**
              **Date**
            
            **Number**
              **of**
              **Shares**
              **or Units**
              **of Stock**
              **That**
              **Have**
              **Not**
              **Vested**
              **(#)**
            
            **Market**
              **Value of**
              **Shares or**
              **Units of**
              **Stock**
              **That**
              **Have Not**
              **Vested**
              **($)**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights That**
              **Have Not**
              **Vested**
              **(#)**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Market or**
              **Payout**
              **Value of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That Have**
              **Not Vested**
              **($)****Exercisable** ****
            
            **Unexercisable**Eduard
                Jaeger (1)
            
            
            43,146
            (2)
            
            -
            
            
            -
            
            
            0.35
            
            
            5/9/11
            
            
            -
            
            
            -
            
            
            -
            
            
            -215,728
            (3)
            
            -
            
            
            -
            
            
            0.35
            
            
            6/16/12
            
            
            -
            
            
            -
            
            
            -
            
            
            -32,053
            (4)
            
            -
            
            
            -
            
            
            0.35
            
            
            3/4/13
            
            
            -
            
            
            -
            
            
            -
            
            
            -431,455
            (5)
            
            -
            
            
            -
            
            
            0.35
            
            
            3/31/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -276,131
            (6)
            
            -
            
            
            -
            
            
            0.35
            
            
            9/3/15
            
            
            -
            
            
            -
            
            
            -
            
            
            -197,917
            (7)
            
            302,083
            (7)
            
            -
            
            
            1.05
            
            
            5/18/16
            
            
            -
            
            
            -
            
            
            -
            
            
            --
            
            
            103,900
            (14)
            
            -
            
            
            0.38
            
            
            11/20/17
            
            
            -
            
            
            -
            
            
            -
            
            
            -Rhonda
                Hoffarth
            
            
            172,582
            (8)
            
            -
            
            
            -
            
            
            0.35
            
            
            1/13/13
            
            
            -
            
            
            -
            
            
            -
            
            
            -18,876
            (9)
            
            2,697
            (9)
            
            -
            
            
            0.35
            
            
            6/22/14
            
            
            -
            
            
            -
            
            
            -
            
            
            -49,479
            (10)
            
            75,521
            (10)
            
            -
            
            
            1.05
            
            
            5/18/16
            
            
            -
            
            
            -
            
            
            -
            
            
            --
            
            
            71,500
            (15)
            
            -
            
            
            0.38
            
            
            11/20/07
            
            
            -
            
            
            -
            
            
            -
            
            
            -Kent
                Pachl
            
            
            275,053
            (11)
            
            91,684
            (11)
            
            -
            
            
            0.35
            
            
            1/3/15
            
            
            -
            
            
            -
            
            
            -
            
            
            -86,291
            (12)
            
            -
            
            
            -
            
            
            0.35
            
            
            9/2/15
            
            
            -
            
            
            -
            
            
            -
            
            
            -79,167
            (13)
            
            120,833
            (13)
            
            -
            
            
            1.05
            
            
            5/18/16
            
            
            -
            
            
            -
            
            
            -
            
            
            --
            
            
            83,200
            (16)
            
            -
            
            
            0.38
            
            
            11/20/07
            
            
            -
            
            
            -
            
            
            -
            
            
            -




(1)
              Ironclad
                  California executed a Separation Agreement with Eduard Jaeger effective
                  in
                  April 2004, the terms of which are described in Employment Contracts
                  herein.(2)
              Mr.
                  Jaeger was granted options to purchase 43,146 shares on 5/10/01,
                  25%
                  vested on the first anniversary of the date of grant, and 1/24thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(3)
              Mr.
                  Jaeger was granted options to purchase 215,728 shares on 1/14/03,
                  33.3%
                  vested on June 15, 2003 and 1/24thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(4)
              Mr.
                  Jaeger was granted options to purchase 32,053 shares on 3/3/03,
                  25% vested
                  on the first anniversary of the effective date of grant and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(5)
              Mr.
                  Jaeger was granted options to purchase 431,455 shares on 3/30/04,
                  100%
                  vested on the date of grant.(6)
              Mr.
                  Jaeger was granted options to purchase 276,131 shares on 9/2/05,
                  146,695
                  shares vested immediately and 50% of the remainder vests on each
                  of the
                  first and second anniversary of the effective date of
                  grant.(7)
              Mr.
                  Jaeger was granted options to purchase 500,000 shares on 5/18/06,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(8)
              Ms.
                  Hoffarth was granted options to purchase 172,582 shares on 1/14/03,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(9)
              Ms.
                  Hoffarth was granted options to purchase 21,573 shares on 6/22/04,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(10)
              Ms.
                  Hoffarth was granted options to purchase 125,000 shares on 5/18/06,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.
  49
  (11)
              Mr.
                  Pachl was granted options to purchase 366,737 shares on 1/4/05,
                  25% vested
                  on the first anniversary of the effective date of grant and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(12)
              Mr.
                  Pachl was granted options to purchase 86,291 shares on 9/2/05,
                  100% vested
                  as of the date of grant.(13)
              Mr.
                  Pachl was granted options to purchase 200,000 shares on 5/18/06,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(14)
              Mr.
                  Jaeger was granted options to purchase 103,900 shares on 11/17/07,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter.(15)
              Ms.
                  Hoffarth was granted options to purchase 71.500 shares on 11/17/07,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter(14)
              Mr.
                  Pachl was granted options to purchase 83,200 shares on 11/17/07,
                  25%
                  vested on the first anniversary of the effective date of grant
                  and
                  1/36thof
                  the remaining amount of shares vest at the end of each month
                  thereafter





None
      of
      the executive officers listed in the above table exercised options during the
      fiscal year ended December 31, 2007.




50


**Director
      Compensation**




The
      following table presents information regarding compensation paid to our
      non-employee directors for our fiscal year ended December 31, 2007.





**Name**
            
            **Fees Earned or**
              **Paid in Cash**
              **($)**
              **(2)**
            
            **Stock**
              **Awards**
              **($)**
            
            **Option**
              **Awards**
              **($)**
            
            **All Other**
              **Compensation**
              **($)**
            
            **Total**
              **($)**R.D.
                Peter Bloomer
            
            
            25,000
            
            
            -
            
            
            35,695
            (3)
            
            -
            
            
            60,695Eduard
                Jaeger
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Scott
                Alderton (1)
            
            
            25,000
            
            
            -
            
            
            35,695
            (4)
            
            -
            
            
            60,695Vane
                Clayton
            
            
            25,000
            
            
            -
            
            
            35,695
            (5)
            
            -
            
            
            60,695Scott
                Jarus
            
            
            25,000
            
            
            -
            
            
            35,695
            (6)
            
            -
            
            
            60,695




(1)
      Fees
      and option awards granted to Mr. Alderton are made to the law firm, Stubbs
      Alderton and Markiles, LLP, of which he is a partner.




(2)
      Effective January 1, 2007 fees paid to non-employee directors were increased
      to
      $25,000 annually.




(3)
      The
      aggregate number of common shares reserved under option awards outstanding
      at
      fiscal year end totaled 365,728.




(4)
      The
      aggregate number of common shares reserved under option awards outstanding
      at
      fiscal year end totaled 236,291.




(5)
      The
      aggregate number of common shares reserved under option awards outstanding
      at
      fiscal year end totaled 236,291.




(6)
      The
      aggregate number of common shares reserved under option awards outstanding
      at
      fiscal year end totaled 150,000.




In
      2006,
      non-employee directors of Ironclad California received $2,500 per quarter for
      attending meetings and serving on Ironclad California’s board of directors.
      Since April 2000, non-employee directors of Ironclad California have each
      received options to purchase 300,000 shares of Ironclad California common stock
      upon their appointment to our board of directors. We expect to continue the
      practice of compensating our directors with options to purchase our common
      stock
      going forward. Compensation payable to non-employee directors may be adjusted
      from time to time, as approved by our board of directors, and was increased
      to
      $25,000 beginning January 1, 2007, and decreased to $10,000 beginning on
      February 5, 2008.




**Employment
      Contracts**




Except
      as
      described in this section, Ironclad California is not party to any employment
      agreements with any of its executive officers.




Ironclad
      California executed a Separation Agreement with Eduard Jaeger effective in
      April
      2004. Pursuant to the terms of the Separation Agreement, if Ironclad terminates
      Mr. Jaeger’s employment with Ironclad California at any time other than for
      Cause, then Ironclad California must pay Mr. Jaeger (a) all accrued and unpaid
      salary and other compensation payable by the Company for services rendered
      through the termination date, payable in a lump sum payment on the termination
      date; and (b) a cash amount equal to Two Hundred Thousand Dollars ($200,000),
      payable in installments throughout the one (1) year period following the
      termination date in the same manner as Ironclad California pays salaries to
      its
      other executive officers. The Separation Agreement requires Mr. Jaeger to sign
      a
      general release and non-competition agreement in order to receive the lump
      sum
      payment. For the purposes of the Separation Agreement, termination for “Cause”
means termination by reason of: (i) any act or omission knowingly undertaken
      or
      omitted by Executive with the intent of causing damage to Ironclad California,
      its properties, assets or business or its stockholders, officers, directors
      or
      employees; (ii) any improper act of Mr. Jaeger involving a material personal
      profit to him, including, without limitation, any fraud, misappropriation or
      embezzlement, involving properties, assets or funds of Ironclad or any of its
      subsidiaries; (iii) any consistent failure by Mr. Jaeger to perform his normal
      duties as directed by the Chairman of the Board, in the sole discretion of
      the
      Board; (iv) any conviction of, or pleading nolo contendere to, (A) any crime
      or
      offense involving monies or other property of Ironclad; (B) any felony offense;
      or (C) any crime of moral turpitude; or (v) the chronic or habitual use or
      consumption of drugs or alcoholic beverages.




51




**Indemnification
      of Directors and Executive Officers and Limitation of
      Liability**




We
      are a
      Nevada Corporation. The Nevada Revised Statutes and certain provisions of our
      Bylaws under certain circumstances provide for indemnification of our officers,
      directors and controlling persons against liabilities which they may incur
      in
      such capacities. A summary of the circumstances in which such indemnification
      is
      provided for is contained herein, but this description is qualified in its
      entirety by reference to our bylaws and to the statutory provisions.




In
      general, any officer, director, employee or agent may be indemnified against
      expenses, fines, settlements or judgments arising in connection with a legal
      proceeding to which such person is a party, if that person’s actions were in
      good faith, were believed to be in our best interest, and were not unlawful.
      Unless such person is successful upon the merits in such an action,
      indemnification may be awarded only after a determination by independent
      decision of the Board of Directors, by legal counsel, or by a vote of the
      stockholders, that the applicable standard of conduct was met by the person
      to
      be indemnified.




The
      circumstances under which indemnification is granted in connection with an
      action brought on our behalf is generally the same as those set forth above;
      however, with respect to such actions, indemnification is granted only with
      respect to expenses actually incurred in connection with the defense or
      settlement of the action. In such actions, the person to be indemnified must
      have acted in good faith and in a manner believed to have been in our best
      interest, and have not been adjudged liable for negligence or
      misconduct.




Indemnification
      may also be granted pursuant to the terms of agreements which may be entered
      in
      the future or pursuant to a vote of stockholders or directors. The statutory
      provision cited above also grants us the power to purchase and maintain
      insurance which protects our officers and directors against any liabilities
      incurred in connection with their service in such a position, and such a policy
      may be obtained by us.




We
      have
      entered into indemnification agreements with our directors and executive
      officers.




A
      stockholder’s investment may be adversely affected to the extent we pay the
      costs of settlement and damage awards against directors and officers as required
      by these indemnification provisions. At present, there is no pending litigation
      or proceeding involving any of our directors, officers or employees regarding
      which indemnification by us is sought, nor are we aware of any threatened
      litigation that may result in claims for indemnification.




Insofar
      as indemnification for liabilities arising under the Securities Act may be
      permitted to directors, officers or persons controlling us pursuant to the
      foregoing provisions, we have been informed that, in the opinion of the SEC,
      this indemnification is against public policy as expressed in the Securities
      Act
      and is therefore unenforceable.




**2006
      Stock Incentive Plan**




Our
      2006
      Stock Incentive Plan, or the Plan, was adopted on September 18, 2006 and became
      effective on January 12, 2007. A total of 4,250,000 shares of common stock
      have
      been reserved for issuance upon exercise of awards granted under the Plan.
      Any
      shares of common stock subject to an award, which for any reason expires or
      terminates unexercised, are again available for issuance under the
      Plan.




The
      Plan
      will terminate after 10 years from the date on which our board approved the
      plan, unless it is terminated earlier by our board. The plan authorizes the
      award of stock options and stock purchase grants.




The
      Plan
      will be administered by our board of directors or the Compensation Committee
      of
      our board of directors as determined by our board of directors otherwise
      permitted under the Plan. Our board of directors has the authority to select
      the
      eligible participants to whom awards will be granted, to determine the types
      of
      awards and the number of shares covered and to set the terms, conditions and
      provisions of such awards, to cancel or suspend awards under certain conditions,
      and to accelerate the exercisability of awards. Our board of directors will
      be
      authorized to interpret the Plan, to establish, amend, and rescind any rules
      and
      regulations relating to the plan, to determine the terms of agreements entered
      into with recipients under the plan, to make all other determinations that
      may
      be necessary or advisable for the administration of the Plan. Our board of
      directors may at its discretion delegate the responsibility for administering
      the plan to any committee or subcommittee of our board of directors.




52




The
      exercise price per share of common stock purchasable under any stock option
      will
      be determined by our board of directors, but cannot in any event be less than
      100% of the fair market value of the common stock on the date the option is
      granted. Our board of directors will determine the term of each stock option
      (subject to a maximum of 10 years) and each option will be exercisable pursuant
      to a vesting schedule determined by our board of directors. The grants and
      the
      terms of ISOs will be restricted to the extent required for qualification as
      ISOs by the U.S. Internal Revenue Code of 1986, as amended, or the Code. Subject
      to approval of our board of directors, options may be exercised by payment
      of
      the exercise price in cash, shares of common stock, which have been held for
      at
      least six months, or pursuant to a “cashless exercise” through a broker-dealer
      under an arrangement approved by us. Our board of directors may require the
      grantee to pay to us any applicable withholding taxes that the company is
      required to withhold with respect to the grant or exercise of any award. The
      withholding tax may be paid in cash or, subject to applicable law, our board
      of
      directors may permit the grantee to satisfy these obligations by the withholding
      or delivery of shares of common stock. We may withhold from any shares of common
      stock that may be issued pursuant to an option or from any cash amounts
      otherwise due from the company to the recipient of the award an amount equal
      to
      such taxes.




Stock
      purchase rights are generally treated similar to stock options with respect
      to
      exercise/purchase price, exercisability and vesting.




In
      the
      event of any change affecting the shares of common stock by reason of any stock
      dividend or split, recapitalization, merger, consolidation, spin-off,
      combination or exchange of shares or other similar corporate change, or any
      distribution to shareholders other than cash dividends, our board of directors
      will make such substitution or adjustment in the aggregate number of shares
      that
      may be distributed under the Plan and in the number and option price (or
      exercise or purchase price, if applicable) as it deems to be appropriate in
      order to maintain the purpose of the original grant.




No
      option
      will be assignable or otherwise transferable by the grantee other than by will
      or the laws of descent and distribution and, during the grantee’s lifetime, an
      option may be exercised only by the grantee.




If
      a
      grantee’s service to the company terminates on account of death, disability or
      retirement, then the grantee’s unexercised options, if exercisable immediately
      before the grantee’s death, disability or retirement, may be exercised in whole
      or in part, not later than one year after this event. If a grantee’s service to
      the company terminates for cause, then the grantee’s unexercised option
      terminates effective immediately upon such termination. If a grantee’s service
      to us terminates for any other reason, then the grantee’s unexercised options,
      to the extent exercisable immediately before such termination, will remain
      exercisable, and may be exercised in whole or in part, for a period of three
      months after such termination of employment




Under
      the
      Plan, the occurrence of a “Change in Control” can affect options and other
      awards granted under the plan. Generally, the Plan defines a “Change in Control”
to include the consummation of a merger or consolidation with or into another
      entity or any other corporate reorganization, if more than 80% of the combined
      voting power of the continuing or surviving entity’s securities outstanding
      immediately after the merger, consolidation or other reorganization is owned,
      directly or indirectly, by persons who were not our shareholders immediately
      before the merger, consolidation or other reorganization, except that in making
      the determination of ownership by our shareholders, immediately after the
      reorganization, equity securities that persons own immediately before the
      reorganization as shareholders of another party to the transaction will be
      disregarded. For these purposes voting power will be calculated by assuming
      the
      conversion of all equity securities convertible (immediately or at some future
      time) into shares entitled to vote, but not assuming the exercise of any
      warrants or rights to subscribe to or purchase those shares. “Change in Control”
also includes the sale, transfer or other disposition of all or substantially
      all of our assets. A transaction will not constitute a Change in Control if
      its
      sole purpose is to change the state of our incorporation or to create a holding
      company that will be owned in substantially the same proportions by the persons
      who held the our securities immediately before such transaction.




If
      a
“Change in Control” were to occur, our board of directors would determine, in
      its sole discretion, whether to accelerate any unvested portion of any option
      grant. Additionally, if a Change in Control were to occur, any agreement between
      us and any other party to the Change in Control could provide for (i) the
      continuation of any outstanding awards, (ii) the assumption of the Plan or
      any
      awards by the surviving corporation or any of its affiliates, (iii) cancellation
      of awards and substitution of other awards with substantially the same terms
      or
      economic value as the cancelled awards, or (iv) cancellation of any vested
      or
      unvested portion of awards, subject to providing notice to the option
      holder.




53




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**




The
      following table presents information regarding the beneficial ownership of
      our
      common stock as of March 27, 2008 by:




·  each
      of
      the executive officers listed in the summary compensation table;




·  each
      of
      our directors;




·  all
      of
      our directors and executive officers as a group; and




·  each
      shareholder known by us to be the beneficial owner of more than 5% of our common
      stock.




Beneficial
      ownership is determined in accordance with the rules of the SEC and generally
      includes voting or investment power with respect to securities. Unless otherwise
      indicated below, to our knowledge, the persons and entities named in the table
      have sole voting and sole investment power with respect to all shares
      beneficially owned, subject to community property laws where applicable. Shares
      of our common stock subject to options that are currently exercisable or
      exercisable within 60 days of March 27, 2007 are deemed to be outstanding and
      to
      be beneficially owned by the person holding the options for the purpose of
      computing the percentage ownership of that person but are not treated as
      outstanding for the purpose of computing the percentage ownership of any other
      person.




The
      information presented in this table is based on 35,389,504 shares of our common
      stock outstanding on March 27, 2008. Unless otherwise indicated, the address
      of
      each of the executive officers and directors and 5% or more shareholders named
      below is c/o Ironclad Performance Wear Corporation, 2201 Park Place, Suite
      101,
      El Segundo, California 90245.







**Name
                of Beneficial Owner**
            
            **Number of Shares**
              **Beneficially Owned**
            
            **Percentage of Shares**
              **Outstanding****Executive
                Officers and Directors:**Eduard
                Jaeger (1)
            
            
            5,002,769
            
            
            12.3
            %Director,
                Chief Executive OfficerRhonda
                Hoffarth (2)
            
            
            287,792
            
            
            
            *Executive
                Vice President, Chief Operating OfficerKent
                Pachl (3)
            
            
            499,546
            
            
            
            *Executive
                Vice President Sales & MarketingThomas
                Kreig (4)
            
            
            174,226
            
            
            
            *Interim
                Chief Financial Officer, Vice President of Finance,
                SecretaryR.D.
                Peter Bloomer (5)
            
            
            354,941
            
            
            
            *DirectorVane
                B. Clayton (6)
            
            
            286,931
            
            
            
            *DirectorScott
                Alderton (7)
            
            
            360,916
            
            
            
            *DirectorScott
                Jarus (8)
            
            
            238,473
            
            
            
            *Directors
                and officers as a group (8 persons) (9)
            
            
            7,205,594
            
            
            17.8
            %**5%
                Stockholders:**CVM
                Equity Fund V Ltd., LLP (10)
            
            
            5,052,176
            
            
            12.5
            %Context
                Capital Management LLC (11)
            
            
            2,526,669
            
            
            6.1
            %Liberty
                View Capital Management Inc. (12)
            
            
            3,495,001
            
            
            8.6
            %







*  Less
      than
      1%




54




(1)
              Includes
                  (i) 990,272 shares of common stock held by Jaeger Family, LLC,
                  of which
                  Eduard Jaeger is a member and over which Eduard Jaeger has voting
                  and
                  investment power, and (ii) 1,248,513 shares of common stock reserved
                  for
                  issuance upon exercise of stock options which currently are exercisable
                  or
                  will become exercisable within 60 days of March 27, 2008.(2)
              Includes
                  256,205 shares of common stock reserved for issuance upon exercise
                  of
                  stock options which currently are exercisable or will become exercisable
                  within 60 days of March 27, 2008.(3)
              Consists
                  of 499,546 shares of common stock reserved for issuance upon exercise
                  of
                  stock options which currently are exercisable or will become exercisable
                  within 60 days of March 27, 2008.(4)
              Includes
                  134,741 shares of common stock reserved for issuance upon exercise
                  of
                  stock options which currently are exercisable or will become exercisable
                  within 60 days of March 27, 2008.(5)
              Consists
                  of 354,941 shares of common stock reserved for issuance upon exercise
                  of
                  stock options which currently are exercisable or will become exercisable
                  within 60 days of March 27, 2008.(6)
              Includes
                  236,291 shares of common stock reserved for issuance upon exercise
                  of
                  stock options which currently are exercisable or will become exercisable
                  within 60 days of March 27, 2008.(7)
              Includes
                  77,258 shares of common stock reserved for issuance upon exercise
                  of
                  certain warrants to purchase common stock which are currently
                  exercisable.(8)
              Includes
                  (i) 150,000 shares of common stock reserved for issuance upon exercise
                  of
                  stock options which currently are exercisable or will become exercisable
                  within 60 days of March 27, 2008, and (ii) 61,806 shares of common
                  stock
                  reserved for issuance upon exercise of certain warrants to purchase
                  common
                  stock which are currently exercisable.(9)
              Consists
                  of (i) 4,181,293 shares of common stock, (ii) 139,064 shares of
                  common
                  stock reserved for issuance upon exercise of certain warrants to
                  purchase
                  common stock which are currently exercisable, and (ii) 2,880,237
                  shares of
                  common stock reserved for issuance upon exercise of stock options
                  which
                  currently are exercisable or will become exercisable within 60
                  days of
                  March 27, 2008.(10)
              Includes
                  415,782 shares of common stock reserved for issuance upon exercise
                  of
                  certain warrants to purchase common stock which currently are exercisable.
                  Mr. Bloomer, our Chairman of the Board, is also the Chairman and
                  Chief
                  Executive Officer of Colorado Venture Management, Inc., which is
                  the
                  Managing Partner of CVM. Mr. Bloomer disclaims beneficial ownership
                  of the
                  securities held by this stockholder, except with respect to his
                  pecuniary
                  interest therein.(11)
              Consists
                  of (i) 47,774 and 442,810 shares of common stock held by Context
                  Advantage
                  Fund LP and Context Offshore Advantage Fund, Ltd., respectively,
                  and (ii)
                  warrants to purchase 208,551 and 1,791,450 shares of common stock
                  held by
                  Context Advantage Fund LP and Context Offshore Advantage Fund,
                  Ltd.,
                  respectively. Context Capital Management LLC maintains voting and
                  investment power over these shares, except with respect to its
                  pecuniary
                  interest therein.(12)
              Consists
                  of (i) 265,987, 1,063,997, and 665,017 shares of common stock held
                  by
                  LibertyView Special Opportunities Fund, LP, LibertyView Funds,
                  LP, and
                  Trust D (for a portion of the assets of Kodak Retirement Income
                  Plan)
                  respectively, and (ii) warrants to purchase 200,000 and 800,000
                  and
                  500,000 shares of common stock held by LibertyView Special Opportunities
                  Fund, LP, LibertyView Funds, LP, and Trust D (for a portion of
                  the assets
                  of Kodak Retirement Income Plan) respectively. LibertyView Capital
                  Management Inc. maintains voting and investment power over these
                  shares.




55




**Equity
      Compensation Plan Information**




The
      following table sets forth information concerning our equity compensation plans
      as of December 31, 2007.




**Plan Category**
            
            **Number of securities**
              **to be issued upon**
              **exercise of**
              **outstanding options,**
              **warrants and rights**
              **(a)**
            
            **Weighted-average**
              **exercise price of**
              **outstanding options,**
              **warrants and rights**
              **(b)**
            
            **Number of securities**
              **remaining available**
              **for future issuance**
              **under equity**
              **compensation plans**
              **(excluding securities**
              **reflected in column(a))**
              **(c)**Equity
                compensation plans approved by security holders (2000 Stock Incentive
                Plan)
            
            
            2,413,353
            (1)
            $
            0.35
            
            
            0Equity
                compensation plans approved by security holders (2006 Stock Incentive
                Plan)
            
            
            4,555,695
            (2)
            $
            0.63
            
            
            646,409**Total**
            
            
            6,969,048
            
            $
            0.53
            
            
            646,409





(1) This
      number represents options assumed in connection with the merger with Ironclad
      California.




(2) This
      number represents: (i) stock options to purchase 268,792 shares of our common
      stock which were granted outside the 2006 Stock Incentive Plan to one of our
      executive officers on May 9, 2006, after the closing of the merger with Ironclad
      California, (ii) warrants to purchase 683,312 shares of our common stock which
      were issued to one of the placement agents in our private placement in exchange
      for services and (iii) stock options to purchase 3,603,591 shares of our common
      stock under the 2006 Stock Incentive Plan, or the Plan.




The
      options issued outside of the Plan are exercisable at an exercise price of
      $0.75
      per share, will expire on April 16, 2008 and are fully vested.




Brean
      Murray Carret & Co., or Brean Murray, acted as one of the co-placement
      agents in connection with our private placement financing. We issued to Brean
      Murray warrants to purchase 390,464 shares of our common stock at an exercise
      price of $0.75 per share and warrants to purchase 292,848 shares of our common
      stock at an exercise price of $1.00 per share. The warrants are immediately
      exercisable and have a term of 5 years.




On
      May
      18, 2006, we granted to certain officers, directors and employees options to
      purchase 1,650,999 shares of our common stock under the Plan at an exercise
      price of $1.05 per share, including options to purchase 299,999 shares of our
      common stock that were granted to our non-employee directors. Of these 19,000
      have reverted to the Plan upon the termination of four grantees. The options
      granted to our non-employee directors expire on May 17, 2016, and vest in equal
      increments on a monthly basis over the 12 month period following May 18, 2006,
      other than options to purchase 129,437 shares, which were fully vested on the
      date grant. The remaining options granted to officers, directors and employees
      expire on May 17, 2016 and vest on the following schedule: 25% of the underlying
      shares will vest on the first anniversary of the effective date of the grant,
      and 1/36 th of the
      remaining amount of the shares will vest at the end of each month thereafter.
      The Plan was approved by the our stockholders on January 12, 2007.




On
      January 17, 2007, we granted to certain of our employees options to purchase
      168,000 shares of our common stock under the Plan at an exercise price of $0.67
      per share. Of these, 5,000 have reverted to the Plan upon the termination of
      one
      grantee. The remaining options granted to employees expire on January 17, 2017
      and vest on the following schedule: 25% of the underlying shares will vest
      on
      the first anniversary of the effective date of the grant, and 1/36 th of the
      remaining amount of the shares will vest at the end of each month
      thereafter.




On
      January 31, 2007, we granted to one of our executive officers options to
      purchase 100,000 shares of our common stock under the Plan at an exercise price
      of $0.68 per share. All 100,000 of these options have reverted to the Plan
      upon
      the termination of the grantee.




On
      September 18, 2007, we granted to certain of our directors, employees and
      contractors options to purchase 399,000 shares of our common stock under the
      Plan at an exercise price of $0.48 per share, including options to purchase
      300,000 shares of our common stock that were granted to our non-employee
      directors. The options granted to our non-employee directors expire on September
      18, 2017, and vest in equal increments on a monthly basis over the 12 month
      period following May 18, 2007. The remaining options granted to employees and
      contractors expire on September 18, 2017 and vest on the following schedule:
      25%
      of the underlying shares will vest on the first anniversary of the effective
      date of the grant, and 1/36 th of the
      remaining amount of the shares will vest at the end of each month
      thereafter.




56




On
      November 20, 2007, we granted to certain or executive officers and employees
      options to purchase 741,300 shares of our common stock under the Plan at an
      exercise price of $0.38 per share. These options expire on November 20, 2017
      and
      vest on the following schedule: 25% of the underlying shares will vest on the
      first anniversary of the effective date of the grant, and 1/36 th of the
      remaining amount of the shares will vest at the end of each month
      thereafter.




**Item
      12.**   **Certain
      Relationships and Related Transactions, and Director
      Independence.**




Other
      than the employment arrangements described above in “Executive Compensation” and
      the transactions described below, since January 1, 2007, there has not been,
      nor
      is there currently proposed, any transaction or series of similar transactions
      to which we were or will be a party:




·  in
      which
      the amount involved exceeds the lesser of $120,000 or one percent of the average
      of our total assets at year-end for the last three completed fiscal years;
      and




·  in
      which
      any director, executive officer, shareholder who beneficially owns 5% or more
      of
      our common stock or any member of their immediate family had or will have a
      direct or indirect material interest.




**Transactions
      with Officers and Directors**




Mr.
      Bloomer, who is Chairman of our board of directors, is also the Chairman and
      Chief Executive Officer of Colorado Venture Management, Inc., which is the
      Managing Partner of CVM. Before our merger with Ironclad California, CVM held
      29.83% of the issued and outstanding shares of Ironclad California. At August
      22, 2006, CVM held approximately 16.8% of Ironclad California’s issued and
      outstanding shares, including warrants to purchase 415,782 shares of its common
      stock, a portion of which were issued in connection with the stockholder bridge
      financing transaction completed by Ironclad California in February 2006. These
      warrants are exercisable an exercise price per share of $0.75.




Mr.
      Alderton, an Ironclad Board member since August 2002, is a partner of the law
      firm, Stubbs, Alderton and Markiles, LLP, or SAM, which is our attorney of
      record. SAM rendered services to Ironclad California as its primary legal firm
      since 2002, and became our primary legal counsel upon the closing of the merger
      with Ironclad California on May 9, 2006.




**Director
      Independence**




Our
      board
      of directors currently consists of five members: Messrs. Bloomer (Chairman),
      Jaeger (CEO), Clayton, Alderton and Jarus. Each director serves until our next
      annual meeting or until his or her successor is duly elected and
      qualified.




Our
      board
      of directors currently has the following standing committees: Audit Committee
      and Compensation Committee. We do not have a separately designated nominating
      committee of our board of directors and the functions customarily designated
      to
      such committee are performed by our full board of directors.




The
      Audit
      Committee currently consists of Messrs. Clayton, Alderton and Jaeger. None
      of
      our current Audit Committee members is an audit committee financial expert,
      as
      defined in Item 401(e)(2) of Regulation S-B. Our board of directors currently
      has no independent director who qualifies as an audit committee expert. We
      intend to recruit new independent directors such that the independent directors
      on our board of directors may fulfill committee and independence requirements.




The
      Compensation Committee currently consists of Messrs. Bloomer, Jarus and Jaeger.




We
      are
      not a “listed issuer” under SEC rules and are therefore not required to have
      separate committees comprised of independent directors. We have, however,
      determined that neither Messrs. Bloomer, Clayton and Jarus are
“independent” as that term is defined in Section 4200 of the Marketplace Rules
      as required by the NASDAQ Stock Market.




57




**Item
      13. Exhibits and Financial Statement Schedules.**




(a)  The
      following exhibits are filed herewith:




**Exhibit**
              **Number**
            
            **Exhibit
                Title**2.1
            
            Agreement
                and Plan of Merger between the Registrant and Europa Trade Agency
                Ltd.,
                dated April 20, 2006 (1)3.1
            
            Articles
                of Incorporation of the Registrant (2)3.2
            
            Certificate
                of Change effecting a forward stock split and increasing the number
                of
                authorized shares, filed May 9, 2006 (3)3.3
            
            Articles
                of Merger effecting a name change to the Registrant (3)3.4
            
            Bylaws
                (2)4.1
            
            Form
                of Warrant issued to Investors in Private Placement (3)10.1
            
            Form
                of Subscription Agreement between the Registrant and certain investors,
                dated May 10, 2006 (3)10.2
            
            Form
                of Lock-Up Agreement between the Registrant and certain shareholders,
                dated May 9, 2006 (3)10.3†
            
            Form
                of Indemnification Agreement (4)10.4
            
            Factoring
                Agreement by and between the Registrant and Wells Fargo Century,
                Inc.,
                effective September 15, 2006. (5)10.5
            
            Letter
                of Credit and Security Agreement by and between the Registrant and
                Wells
                Fargo Century, Inc., effective September 15, 2006. (5)10.6
            
            Amendment
                Number One to Factoring Agreement by and between the Registrant and
                Wells
                Fargo Century, Inc., effective November 21, 2006. (6)10.7†
            
            Separation
                Agreement between Eduard Jaeger and the Registrant (3)10.8
            
            Standard
                Industrial/Commercial Single-Tenant Lease by and between Faith Pearlman,
                Trustee of the Jerome M. Pearlman and Faith Pearlman Trust II and
                the
                Registrant, dated October 12, 2005, as amended (3)


10.9
            
            Standard
                Industrial/Commercial Multi-Tenant Lease by and between Park/El Segundo
                Partners, LLC, and the Registrant, dated September 12, 2005, as amended
                (3)10.10
            
            Business
                Loan Agreement (Asset Based) in the principal amount of $250,000,
                by and
                between the Registrant and Alliance Bank, dated March 31, 2005
                (3)10.11
            
            Business
                Loan Agreement (Asset Based) in the principal amount of $1,000,000,
                by and
                between the Registrant and Alliance Bank, dated March 31, 2005
                (3)10.12
            
            Letter
                Agreement with Advantage Media Systems, Inc., dated June 29,
                2007(7)10.13†*
            
            2007
                Senior Management Bonus Plan21.1
            
            Subsidiaries
                of the Registrant (3)23.2
            
            Consent
                of Singer Lewak Greenbaum & Goldstein LLP23.2(a)
            
            Consent
                of Rotenberg & Co.24.1
            
            Power
                of Attorney (included on signature page)31.1
            
            Certification
                of Principal Executive Officer pursuant to Securities Exchange Act
                Rules
                13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Principal Financial Officer pursuant to Securities Exchange Act
                Rules
                13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to section 906 of the Sarbanes-Oxley Act of
                200232.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to section 906 of the Sarbanes-Oxley Act of 2002





†
Each
      a
      management contract or compensatory plan or arrangement required to be filed
      as
      an exhibit to this report on Form 10-K.


*
      Confidential treatment has been requested with respect to certain portions
      of
      this exhibit. Omitted portions have been filed separately with the Securities
      and Exchange Commission.




(1)
      Incorporated by reference to our Quarterly Report on Form 10-QSB filed May
      12,
      2006.


(2)
      Incorporated by reference to our Registration Statement on Form SB-2, filed
      September 3, 2006.


(3)
      Incorporated by reference to our Current Report on Form 8-K filed May 12, 2006.


(4)
      Incorporated by reference to the initial Registration Statement on Form SB-2
      dated June 23, 2006 (File No. 333-135288).


(5)
      Incorporated by reference to our Current Report on Form 8-K filed September
      21,
      2006.


(6)
      Incorporated by reference to our Current Report on Form 8-K filed November
      28,
      2006.


(7)
      Incorporated by reference to our Current Report on Form 8-K filed July 7,
      2007.




58




(b)  Financial
      Statement Schedules




Schedules
      not listed above have been omitted because the information required to be set
      forth therein is not applicable or is shown in the consolidated financial
      statements or notes thereto.




**Item
      14.**  **Principal
      Accountant Fees and Services.**




Rotenberg
      & Co. is our principal independent public accounting firm. All audit work
      was performed by the full time employees of Rotenberg & Co. Our Audit
      Committee approves in advance, all services performed by Rotenberg & Co. Our
      board of directors has considered whether the provision of non-audit services
      is
      compatible with maintaining the principal accountant’s independence, and has
      approved such services. Prior to the fourth quarter 2007 we engaged Singer
      Lewak
      Greenbaum & Goldstein LLP as our principal independent accounting
      firm.




*Audit
      Fees*




Fees
      for
      audit services totaled approximately $239,590 and $169,807 for the years ended
      December 31, 2007 and 2006, respectively, including fees associated with the
      annual audit, and reviews of our quarterly reports on Form 10-QSB.




*Audit-Related
      Fees*




Fees
      for
      audit-related services totaled approximately $21,571 and $64,688 for the years
      ended December 31, 2007 and 2006, respectively. Audit-related services
      principally include due diligence in connection with acquisitions, financing
      transactions, and accounting consultations.




*Tax
      Fees*




Fees
      were
      incurred totaling approximately $22,769 and $10,726 during the years ended
      December 31, 2007 and 2006, respectively for tax services, including for tax
      compliance, tax advice and tax planning.




*All
      Other Fees*




No
      other
      fees were incurred during the years ended December 31, 2007 and 2006 for
      services provided by Singer Lewak Greenbaum & Goldstein LLP or Rotenberg
& Co., except as described above.




59


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) 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.




**IRONCLAD
                PERFORMANCE WEAR CORPORATION**Date:
                March 31, 2008
            /s/
                  Thomas KreigBy:
            Thomas
                KreigIts:
            Interim
                Chief Financial Officer(Principal
                Financial and Accounting Officer)





**POWER
      OF ATTORNEY**




The
      undersigned directors and officers of Ironclad Performance Wear Corporation
      do
      hereby constitute and appoint Eduard Jaeger and Thomas Kreig, and each of them,
      with full power of substitution and resubstitution, as their true and lawful
      attorneys and agents, to do any and all acts and things in our name and behalf
      in our capacities as directors and officers and to execute any and all
      instruments for us and in our names in the capacities indicated below, which
      said attorney and agent, may deem necessary or advisable to enable said
      corporation to comply with the Securities Exchange Act of 1934, as amended
      and
      any rules, regulations and requirements of the Securities and Exchange
      Commission, in connection with this Annual Report on Form 10-KSB, including
      specifically but without limitation, power and authority to sign for us or
      any
      of us in our names in the capacities indicated below, any and all amendments
      (including post-effective amendments) hereto, and we do hereby ratify and
      confirm all that said attorneys and agents, or either of them, shall do or
      cause
      to be done by virtue hereof.




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.





**Name**
            
            **Title**
            
            **Date**/s/
                Eduard Jaeger
            
            President
                and Chief Executive
            
            March
                31, 2008Eduard
                Jaeger
            
            Officer
                and Director (Principal Executive Officer)/s/
                Thomas Kreig
            
            Interim
                Chief Financial Officer
            
            March
                31, 2008Thomas
                Kreig
            
            (Principal
                Financial Officer)/s/
                Scott Alderton
            
            Director
            
            March
                31, 2008Scott
                Alderton/s/
                R.D. Peter Bloomer
            
            Director
            
            March
                31, 2008R.D.
                Peter Bloomer/s/
                Vane Clayton
            
            Director
            
            March
                31, 2008Vane
                Clayton/s/
                Scott Jarus
            
            Director
            
            March
                31, 2008Scott
                Jarus




60