**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**









**FORM
      10-Q**







**x**
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934****For
              the quarterly period ended March 31, 2008**




**or**




** ̈**
            **Transition
                Report Pursuant Section 13 or 15(d) of the Securities Exchange Act of
                1934****For
              the transition period from
              
              to
              .**




**Commission
      file number 0-51536**







**IRONCLAD
      PERFORMANCE WEAR** **CORPORATION**


**(Exact
      name of registrant 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, CA 90245**


**(Address
      of principal executive offices, zip code)**




**(310)
      643 -7800**


**(Registrant’s
      telephone number, including area code)**







Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 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  ̈




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      definition of “large accelerated filer,” “accelerated filer,” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
                accelerated filer ̈
            Accelerated
                filer
             ̈Non-accelerated
                filer ̈(Do not check if smaller reporting company)
            Smaller
                reporting company
            x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).    Yes  ̈ No x




As
      of May
      12, 2008, the registrant had 42,464,504 shares of common stock issued and
      outstanding.










**TABLE
      OF CONTENTS**





PagePART
                I
            Financial
                Information
            1Item
                1.
            Financial
                Statementsa.
            Consolidated
                Balance Sheet as of March 31, 2008
            1b.
            Consolidated
                Statements of Operations for the three months ended March 31, 2008
                and
                March 31, 2007
            2c.
            Consolidated
                Statements of Cash Flows for the three months ended March 31, 2008
                and
                March 31, 2007
            3d.
            Notes
                to Consolidated Financial Statements
            4
                -
                14Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            15Item
                3.
            Controls
                and Procedures
            29PART
                II
            Other
                Information
            30Item
                1.
            Legal
                Proceedings
            30Item
                6.
            Exhibits
            30










**PART
      I**





**ITEM
      1.**  **FINANCIAL
      STATEMENTS**





**IRONCLAD
      PERFORMANCE WEAR CORPORATION**


**CONSOLIDATED
      BALANCE SHEET**


**(unaudited)**





**March
                31,**
              **2008****ASSETS****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            266,848Accounts
                receivable net of allowance for doubtful accounts of $98,000
            
            
            2,102,856Inventory,
                net of reserve of $84,000
            
            
            3,743,333Prepaid
                and other
            
            
            163,136**Total
                current assets**
            
            
            6,276,173**PROPERTY,
                PLANT AND EQUIPMENT**Computer
                equipment and software
            
            
            205,531Vehicles
            
            
            43,680Office
                equipment and furniture
            
            
            142,972Leasehold
                improvements
            
            
            34,110Less:
                accumulated depreciation
            
            
            (
                181,933
            )**Total
                property, plant and equipment, net**
            
            
            244,360Trademarks,
                net of $10,379 of accumulated amortization
            
            
            86,485Deposits
                and other
            
            
            44,122**Total
                Assets**
            
            $
            6,651,140**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            1,980,848Accrued
                expenses
            
            
            1,118,578Line
                of credit
            
            
            1,720,881Current
                portion of capital lease
            
            
            674**Total
                current liabilities**
            
            
            4,820,981**LONG
                TERM LIABILITIES**
            
            
            -**Total
                Liabilities**
            
            
            4,823,080**STOCKHOLDERS’
                EQUITY**Common
                stock, $.001 par value; 172,744,750 million shares
                authorized; 35,389,504 shares issued and outstanding
            
            
            35,390Additional
                paid-in capital
            
            
            14,092,274Accumulated
                deficit
            
            
            (
                12,297,505
            )**Total
                Stockholders’ Equity**
            
            
            1,830,159**Total
                Liabilities and Stockholders’ Equity**
            
            $
            6,651,140




See
      Notes
      to Condensed Financial Statements.




1





**IRONCLAD
      PERFORMANCE WEAR CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(unaudited)**




**Three Months**
              **Ended**
              **March 31,**
            
            **Three Months**
              **Ended**
              **March
                 31,****2008**
            
            **2007****REVENUES**Net
                sales
            
            $
            1,851,103
            
            $
            1,849,932**COST
                OF SALES**Cost
                of sales
            
            
            1,057,106
            
            
            925,380**GROSS
                PROFIT**
            
            
            793,997
            
            
            924,552**OPERATING
                EXPENSES**General
                and administrative
            
            
            678,279
            
            
            944,859Sales
                and marketing
            
            
            899,031
            
            
            893,936Research
                and development
            
            
            104,914
            
            
            101,680Operations
            
            
            212,934
            
            
            149,875Depreciation
                and amortization
            
            
            24,031
            
            
            14,947**Total
                operating expenses**
            
            
            1,919,189
            
            
            2,105,297**LOSS
                FROM OPERATIONS**
            
            
            (1,125,192
            )
            
            (1,180,745
            )**OTHER
                INCOME (EXPENSE)**Interest
                expense
            
            
            (35,017
            )
            
            (38,563
            )Change
                in fair value of warrant liability
            
            
            -
            
            
            20,564Interest
                income
            
            
            3,235
            
            
            22,273Unrealized
                loss on financing activities
            
            
            (3,090
            )
            
            -Other
                income (expense), net
            
            
            9,014
            
            
            885**Total
                other income (expense)**
            
            
            (25,858
            )
            
            5,159**NET
                LOSS BEFORE PROVISION FOR INCOME TAXES**
            
            
            (1,151,050
            )
            
            (1,175,586
            )**PROVISION
                FOR INCOME TAXES**
            
            
            810
            
            
            -**NET
                LOSS**
            
            $
            (1,151,860
            )
            $
            (1,175,586
            )**BASIC
                AND DILUTED NET LOSS PER COMMON SHARE**
            
            $
            (0.03
            )
            $
            (0.04
            )**WEIGHTED
                AVERAGE****COMMON
                SHARES OUTSTANDING**
            
            
            35,389,504
            
            
            30,064,060





See
      Notes
      to Condensed Financial Statements.




2




**IRONCLAD
      PERFPRMANCE WEAR CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(unaudited)**




**Three Months**
              **Ended**
              **March 31,**
            
            **Three Months**
              **Ended**
              **March 31,****2008**
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (1,151,860
            )
            $
            (1,175,586
            )Adjustments
                to reconcile net loss to net cash used in operating
                activitiesAllowance
                for bad debts
            
            
            65,000
            
            
            -Depreciation
            
            
            22,958
            
            
            14,070Amortization
            
            
            1,073
            
            
            877Change
                in fair value of warrant liability
            
            
            -
            
            
            (20,564
            )Non-cash
                compensation:Stock
                option expense
            
            
            158,222
            
            
            193,906Changes
                in operating assets and liabilities:Receivables
            
            
            2,159,760
            
            
            326,986Inventory
            
            
            (613,994
            )
            
            58,568Deposits
                on inventory
            
            
            10,068
            
            
            61,555Deposits
            
            
            (31,756
            )
            
            450Prepaid
                and other
            
            
            21,320
            
            
            (7,624
            )Accounts
                payable and accrued liabilities
            
            
            (338,627
            )
            
            (830,139
            )Net
                cash flows provided by (used in) operating activities
            
            
            302,164
            
            
            (1,377,501
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Property,
                plant and equipment purchased
            
            
            (26,924
            )
            
            (27,816
            )Investment
                in trademarks
            
            
            (4,810
            )
            
            (2,760
            )Net
                cash flows used in investing activities
            
            
            (31,734
            )
            
            (30,576
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Drawdown
                (payback) on bank line of credit
            
            
            (588,440
            )
            
            232,453Payments
                on capital leases
            
            
            (968
            )
            
            (788
            )Net
                cash flows provided by (used in) financing activities
            
            
            (589,408
            )
            
            231,665**NET
                DECREASE IN CASH**
            
            
            (318,978
            )
            
            (1,176,412
            )**CASH
                AND CASH EQUIVALENTS BEGINNING OF PERIOD**
            
            
            585,826
            
            
            2,012,166**CASH
                AND CASH EQUIVALENTS END OF PERIOD**
            
            $
            266,848
            
            $
            835,754**SUPPLEMENTAL
                DISCLOSURES**Interest
                paid in cash
            
            $
            35,017
            
            $
            38,563Income
                taxes
            
            
            810
            
            
            -




See
      Notes
      to Condensed Financial Statements.




3




**IRONCLAD
      PERFORMANCE WEAR CORPORATION**


**Notes
      to Condensed 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.


4




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.




Private
      Placement Transaction




Immediately
      following the closing of the Merger, the Company 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, the Company 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
      the Company’s common stock, at an exercise price of $1.00 per share.




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.





**3.**  **Accounting
      Policies**




Basis
      of Presentation




The
      accompanying interim condensed consolidated financial statements are unaudited
      and have been prepared in accordance with accounting principles generally
      accepted in the United States of America (“GAAP”) including those for interim
      financial information and with the instructions for Form 10Q and Article 10
      of
      Regulation S-X issued by the Securities and Exchange Commission (“SEC”).
      Accordingly, they do not include all of the information and note disclosures
      required by GAAP for complete financial statements. In the opinion of
      management, all adjustments (consisting of normal recurring adjustments)
      considered necessary for a fair presentation have been reflected in these
      interim financial statements. These financial statements should be read in
      conjunction with the audited financial statements and notes for the year ended
      December 31, 2007 included in the Company’s Annual Report on Form 10-KSB filed
      with the SEC on March 31, 2008.




5




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.




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 generally 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.




6




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 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 12/31/07
            
            $
            200,000Payments
                Recorded During the Period
            
            
            (87,250
            )112,750Accrual
                for New Liabilities During the Reporting Period
            
            
            241,250Reserve
                Balance 3/31/08
            
            $
            354,000




Advertising
      and Marketing




Advertising
      and marketing costs are expensed as incurred. Advertising expenses for the
      three
      months ended March 31, 2008 and 2007 were $171,432 and $183,343,
      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 22% of net sales for the quarter ended March 31, 2008,
      and no customer accounted for more than 10% of net sales for the quarter ended
      March 31, 2007.




Supplier
      Concentrations




One
      supplier, which is located overseas, accounted for approximately 44% of total
      purchases during the quarter ended March 31, 2008 and 52% for the three months
      ended March 31, 2007.




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.


7




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:





QuarterEnded March 31,2008
            
            2007Options
                outstanding under the Company’s stock option plans
            
            
            5,459,726
            
            
            5,107,332Common
                Stock Warrants
            
            
            10,454,522
            
            
            10,454,522





Income
      Taxes





The
      Company adopted the provisions of FIN 48 effective January 1, 2007. The
      implementation of FIN 48 has not caused the Company to recognize any changes
      in
      its identified tax positions. Interest and penalties associated with
      unrecognized tax benefits would be classified as additional income taxes in
      the
      statement of operations.




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.




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 quarters ended
      March 31, 2008 and 2007 were $810 and $-0-, 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, 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Liabilities - Including an Amendment of FASB Statement No. 115”
(“SFAS 159”). SFAS 159 permits entities to choose to measure certain financial
      assets and liabilities at fair value. Unrealized gains and losses, arising
      subsequent to adoption, are reported in earnings. SFAS 159 is effective for
      fiscal years beginning after November 15, 2007. The Company has adopted SFAS
      159
      and determined that it has no effect on its consolidated financial
      statements.


8




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.





**4.**  **Inventory**




At
      March
      31, 2008 the Company had one class of inventory - finished goods.





March 31,
              2008Finished
                goods
            
            $
            **3,743,333**




**5.**  **Property
      and equipment**




Property
      and equipment consisted of the following:





March 31,2008Computer
                hardware and software
            
            $
            205,531Furniture
                and equipment
            
            
            142,972Vehicle
            
            
            43,680Leasehold
                improvements
            
            
            34,110426,293Less
                accumulated depreciation
            
            
            (181,933
            )**Property
                and equipment, net**
            
            **$**
            **244,360**




Depreciation
      expense for the three months ended March 31, 2008 and 2007 was $22,958 and
      $14,070, respectively.




**6.**  **Trademarks
      and Patents**




Trademarks
      consisted of the following:





March
                31,2008Trademarks
            
            $
            78,115Patents
            
            
            15,749Less:
                Accumulated amortization
            
            
            (10,379
            )**Trademarks,
                net**
            
            **$**
            **86,485**




9




Trademarks
      and patents consist of definite-lived trademarks and patents of $62,261 and
      indefinite-lived trademarks and patents of $31,603 at March 31, 2008. All
      trademark and patent costs have been generated by the Company, and consist
      of
      initial legal and filing fees.




Amortization
      expense was $1,073 and $877 for the three months ended March 31, 2008 and 2007,
      respectively.




**7.**  **Accounts
      payable and accrued expenses**




Accounts
      payable and accrued expenses consisted of the following at March 31,
      2008:





March
                31,
              2008Accounts
                payable
            
            $
            1,980,848Accrued
                inventory
            
            
            159,338Accrued
                rebates and co-op
            
            
            157,270Accrued
                returns reserve
            
            
            354,000Accrued
                expenses - other
            
            
            447,970**Total
                accounts payable and accrued expenses**
            
            **$**
            **3,099,426**




**8.**  **Bank
      Lines of Credit**





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 March 31, 2008, total
      amount due to Wells Fargo Century was $1,720,881.


10




**9.****Equity
      transactions**




Common
      Stock




The
      Company did not issue any shares during the quarter ended March 31, 2008. There
      were 35,389,504 shares of common stock of the Company
      outstanding at March 31, 2008.





Warrant
      Activity




A
      summary
      of warrant activity is as follows **:**




Number of Shares
            
            Weighted Average
              Exercise PriceWarrants
                outstanding at December 31, 2007
            
            
            10,454,522
            
            $
            0.91Warrants
                outstanding at March 31, 2008
            
            
            10,454,522
            
            $
            0.91




Stock
      Based Compensation




Ironclad
      California reserved 3,020,187 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.




There
      were no stock options issued during the quarter ended March 31, 2008.




A
      summary
      of stock option activity is as follows:





Number of Shares
            
            Weighted
              Average
              Exercise PriceOutstanding
                at January 1, 2008
            
            
            6,016,944
            
            $
            0.58Granted
            
            
            -
            
            $
            -Exercised
            
            
            -
            
            
            -Cancelled/Expired
            
            
            (557,218
            )
            $
            0.43Outstanding
                at March 31, 2008
            
            
            5,459,726
            
            $
            0.60Exercisable
                at March 31, 2008
            
            
            3,796,499
            
            $
            0.56




11




The
      following tables summarize information about stock options outstanding at March
      31, 2008:





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
            
            
            5.92
            
            $
            0.35
            
            $
            4,202$0.
                38 - $1.05
            
            
            3,046,373
            
            
            7.94
            
            $
            0.79
            
            $
            -0-




The
      following tables summarize information about stock options exercisable at March
      31, 2008:





Range
                of Exercise
              Price
            
            Number
              Exercisable
            
            Weighted
                Average
              Remaining Contractual
              Life (Years)
            
            Weighted
                Average
              Exercise
                Price
            
            Intrinsic
                Value
              Exercisable
                Shares$0.19
                - $0.35
            
            
            2,302,523
            
            
            5.87
            
            $
            0.35
            
            $
            4,202$0.
                38 - $1.05
            
            
            1,495,956
            
            
            6.93
            
            $
            0.88
            
            $
            -0-





The
      Company recorded $153,381 and $193,906 of compensation expense for employee
      stock options during the three months ended March 31, 2008 and 2007,
      respectively. These compensation expense charges were recorded in the following
      operating expense categories for 2008 and 2007 respectively, general and
      administrative - $91,736 and $137,277; sales and marketing - $44,149 and
      $34,864; research and development - $10,168 and $14,669; and operations - $7,328
      and $7,096. There was a total of $675,064 of unrecognized compensation costs
      related to non-vested share-based compensation arrangements under the Plan
      outstanding at March 31, 2008. This cost is expected to be recognized over
      a
      weighted average period of 2.6 years. The total fair value of shares vested
      during the three months ended March 31, 2008 was $161,738.





**10.**  **Income
      Taxes**





The
      Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
      Taxes - An Interpretation of FASB Statement No. 109 (FIN 48) as of January
      1,
      2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an entity’s financial statements in accordance with FASB Statement No. 109,
      Accounting for Income Taxes, and prescribes a recognition threshold and
      measurement attributes for financial statement disclosure of tax position taken
      or expected to be taken on a tax return. Additionally, FIN 48 provides guidance
      on de-recognition, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. No adjustments were required upon adoption
      of FIN 48. The Company has provided a full valuation allowance against its
      deferred tax assets.





The
      Company is currently open to audit under the statute of limitations by the
      Internal Revenue Service for the fiscal years 2005 through 2007. The Company’s
      state tax returns are open to audit under the statute of limitations for the
      fiscal years 2005 through 2007.




The
      provision for income taxes differs from the amount that would result from
      applying the federal statutory rate for the quarter ended March 31, 2008 as
      follows:





March 31,
              2008Statutory
                regular federal income benefit rate
            
            
            (34.0
            )%State
                income taxes, net of federal benefit
            
            
            (5.4
            )Change
                in valuation allowance
            
            
            39.4Total
            
            
            -
            %




12




In
      assessing the realizability 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 March 31, 2008 consisted of the following:





2008Deferred
                tax assetsNet
                operating loss carryforward
            
            $
            3,854,255Stock
                option expense
            
            
            607,724Allowance
                for doubtful accounts
            
            
            41,983Allowance
                for product returns
            
            
            152,082Accrued
                compensation
            
            
            102,184Inventory
            
            
            (34,272
            )Other
            
            
            3,134Valuation
                allowance
            
            
            (4,399,834
            )Total
                deferred tax assets
            
            
            327,256Total
                deferred tax liabilities
            
            
            (327,256
            )**Net
                deferred tax assets/liabilities**
            
            $
            -




As
      of
      March 31, 2008, the Company had unused federal and state contribution carryovers
      of $6,680 that expire in 2009 through 2011.





As
      of
      March 31, 2008, the Company had unused federal and states net operating loss
      carryforwards available to offset future taxable income of $9,035,000 and
      $9,528,000, respectively, that expire between 2009 and 2027.





**11.**  **Commitments
      and Contingencies**





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. Future minimum
      monthly lease payments on this facility are $14,377. Rent expense for the three
      months ended March 31, 2008 for this facility was $42,207.




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 $1,880 and $1,918 for the three months ended
      March 31, 2008 and 2007, respectively.




13




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.





**12.**  **Legal
      Proceedings**




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.
      Subsequent Event**





Between
      April 18 and April 22, 2008, the Company entered into Subscription Agreements
      with certain investors pursuant to which it agreed to sell an aggregate of
      7,075,000 shares of common stock, par value $0.001 per share of the Company
      at
      $0.20 per share for proceeds to the Company of $1,415,000. The last closing
      of
      the Financing occurred on April 22, 2008.




**14.**  **Related
      Party Transactions**




Mr.
      Alderton, an Ironclad Board member since August 2002, is a partner of the law
      firm, Stubbs, Alderton and Markiles, LLP (“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.




14




**ITEM
      2.****MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





*This
      discussion summarizes the significant factors affecting the operating results,
      financial condition and liquidity and cash flows of the Company for the three
      months ended March 31, 2008 and 2007. The following discussion of our results
      of
      operations and financial condition should be read together with the consolidated
      financial statements and the notes to those statements included elsewhere in
      this report. Except for historical information, the matters discussed in this
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations are forward looking statements that involve risks and uncertainties
      and are based upon judgments concerning various factors that are beyond our
      control. Our actual results could differ materially from the results anticipated
      in any forward-looking statements as a result of a variety of factors, including
      those discussed in “—Risk Factors.”*





**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, and 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.




**General**




Net
      sales
      are comprised of gross sales less returns and discounts. Our operating results
      are seasonal, with a greater percentage of net sales being earned in the third
      and fourth quarters of our fiscal year due to the fall and winter selling
      seasons.





Cost
      of
      goods sold consists primarily of product costs, inbound freight and duty costs,
      handling costs to make products floor-ready to customer specifications and
      a
      reserve for inventory obsolescence.





Our
      operating expenses consist primarily of marketing costs, non-marketing payroll
      and related costs, corporate infrastructure costs and our distribution costs.
      We
      expect that our operating expenses will decrease as a percentage of net sales
      if
      we are able to increase our net sales through expansion and growth. We expect
      this reduction in operating expenses to be offset by investment in sales and
      marketing to achieve brand growth, the development of new product lines, and
      the
      increased costs of operating as a public company.




15





Historically,
      we have funded our working capital needs through a combination of our existing
      asset-based credit facility along with subordinated debt and equity financing
      transactions. On September 15, 2006 the Company entered into a factoring
      agreement whereby it assigned certain of its accounts receivables with full
      recourse. This facility allows the Company to borrow 75% against eligible
      accounts receivable and 40% against eligible inventory, up to $750,000, with
      an
      aggregate limit of up to $2,500,000. This facility had an outstanding balance
      of
      $1,720,881 at March 31, 2008.





**Critical
      Accounting Policies and Estimates**




Our
      Management’s Discussion and Analysis of Financial Condition of Plan of
      Operations 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.




**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 three months ended March 31, 2008 our inventory reserve remained
      unchanged with a current balance of $84,000. For the three months ended March
      31, 2007, we decreased our inventory reserve by $20,000, to a balance of
      $100,000 and recorded a corresponding decrease 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 primarily of large national, regional and smaller independent customers
      with good payment histories with us. Since we have not experienced any
      significant payment defaults with any of our current customers, our allowance
      for doubtful accounts is generally 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.




16




**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, 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 is 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 1.25%
      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; (1) our products
      useful life is approximately 3-4 months and (2) 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 12/31/07
            
            $
            200,000Payments
                Recorded During the Period
            
            
            (87,250
            )112,750Accrual
                for New Liabilities During the Reporting Period
            
            
            241,250Reserve
                Balance 3/31/08
            
            $
            354,000




**Stock
      Based Compensation**




On
      January 1, 2006, we adopted the provisions of Financial Accounting Standards
      Board Statement 123R, *Share-Based
      Payment* (“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 the Company’s 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 Statement 123 for pro
      forma disclosures.




17




**Income
      Taxes**





Deferred
      income taxes are provided using the liability method whereby deferred tax assets
      are recognized for deductible temporary differences and operating loss and
      tax
      credit carryforwards and deferred tax liabilities are recognized for taxable
      temporary differences. Temporary differences are the differences between the
      reported amounts of assets and liabilities and their tax bases. Deferred tax
      assets are reduced by a valuation allowance when, in the opinion of management,
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. Deferred tax assets and liabilities are adjusted for
      the
      effects of the changes in tax laws and rates as of the date of
      enactment.




When
      tax
      returns are filed, it is highly certain that some positions taken would be
      sustained upon examination by the taxing authorities, while others are subject
      to uncertainty about the merits of the position taken or the amount of the
      position that would be effectively sustained. The benefit of a tax position
      is
      recognized in the financial statements in the period during which, based on
      all
      available evidence, management believes it is more-likely-than-not that the
      position will be sustained upon examination, including the resolution of appeals
      or litigation, if any. Tax positions taken are not offset or aggregated with
      other positions. Tax positions that meet the more-likely-than-not recognition
      threshold are measured as the largest amount of tax benefit that is more than
      50% likely of being realized upon settlement with the applicable taxing
      authority. The portion of the benefits associated with tax positions taken
      that
      exceeds the amount measured as described above would be reflected as a liability
      for unrecognized tax benefits in the accompanying balance sheet along with
      any
      associated interest and penalties that would be payable to the taxing
      authorities upon examination. Since the Company has reported losses for 2003,
      2004, 2005, 2006 and 2007, we have taken the conservative approach, and fully
      reserved the deferred tax assets.





Interest
      and penalties associated with unrecognized tax benefits would be classified
      as
      additional income taxes in the statement of operations.





**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.




**Results
      of Operations**




**Comparison
      of Three Months Ended March 31, 2008 and 2007**




*Net
      Sales* increased $1,171 or 0.06% *,* to
      $1,851,103 in the quarter ended March 31, 2008 from $1,849,932 for the
      corresponding period in 2007. One customer accounted for 22% of net sales during
      the quarter ended March 31, 2008 and no customer accounted for more than 10%
      of
      net sales for the quarter ended March 31, 2007. Included in net sales are co-op
      advertising and rebate expenses of approximately $80,000 and $54,000 for the
      three months ended March 31, 2008 and 2007, respectively.




*Gross
      Profit* decreased $130,555 to $793,997 for the quarter ended March 31, 2008 from
      $924,552 for the corresponding period in 2007. Gross profit, as a percentage
      of
      net sales, or gross margin, decreased to 42.9% in the first quarter of 2008
      from
      50.0% in the same quarter of 2007. The decrease in gross profit for the quarter
      was primarily due to an increase in accruals for product returns of 4.5%,
      product mix and customer sales mix that resulted in lower average selling prices
      of approximately 2.4%, offset by improved margins on apparel products generated
      by moving production overseas of approximately 0.9%. Also, the first quarter
      of
      2007 was favorably impacted by a one-time special purchase that increased
      margins by approximately 1%.




18




*Operating
      Expenses* decreased by $186,108, or 8.8%, to $1,919,189 in the first quarter of 2008
      from
      $2,105,297 in the first quarter of 2007. As a percentage of net sales, operating
      expenses decreased to 103.8% in the first quarter of 2008 from 113.8% in the
      same period of 2007. The decreased spending for the first quarter of 2008 was
      primarily due to decreased public company costs of $123,000; decreased travel
      & entertainment expenses of $20,000; decreased salaries and benefits
      expenses of approximately $198,000 and decreased Financial Accounting Standards
      No. 123R options expense of $36,000; offset by increased costs associated with
      implementing brand development initiatives, including trade shows, print and
      cooperative advertising - approximately $90,000; increased services, primarily
      warehousing of $94,000; increased office expenses of $7,000. Our number of
      employees decreased to 23 at March 31, 2008 from 34 at March 31, 2007.





*Loss
      from Operations*decreased $55,553 or 4.7%, to $1,125,192 in the first quarter of 2008 from
      $1,180,745 in first quarter of 2007. Loss from operations as a percentage of
      net
      sales decreased to 60.8% in the first quarter of 2008 from 63.8% in the first
      quarter of 2007. The decrease in loss from operations in the three month period
      was primarily the result of the decrease in operating expenses, as discussed
      above.




*Interest
      Expense* decreased $3,546 to $35,017 in the first quarter of 2008 from $38,563 in the
      same period of 2007 due to slightly reduced borrowings on our line of
      credit.




*Interest
      Income* decreased $19,038 in the first quarter of 2008 to $3,235 from $22,273 in the
      first quarter of 2007. Interest income is a result of investment of funds from
      the private equity funding completed in September 2007.




*Other
      Income (Expense)* net was
      $5,924 in the first quarter of 2008 as compared with $885 in the first quarter
      of 2007. Change in the fair value of warrant liability was $-0- in the first
      quarter as compared to $20,564 for the first quarter of 2007. This change
      represented the difference in the fair value of warrants recorded as liabilities
      at their issue date on May 9, 2006. These warrants were revalued at the end
      of
      each reporting period until the terms of the registration statement for the
      shares and warrants issued, that resulted in liability accounting, were
      satisfied in October 2007.




*Net
      Loss* decreased $23,725 to $1,151,860 in the first quarter of 2008 from $1,175,586
      in
      the first quarter of 2007. This decreased loss is the result of the combination
      of each of the factors discussed above, principally the reduction in operating
      expenses.




**Seasonality
      and Quarterly Results**




Our
      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 55% - 65% of our net sales during
      these months. Management has yet to determine whether our apparel line will
      affect the seasonality of our overall business.




Our
      working capital, at any particular time, reflects the seasonality of our
      business. We expect inventory, accounts payable and accrued expenses to be
      higher in the third and fourth quarters in preparation for our winter selling
      season.




19




**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 the
      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. On September 15, 2006 the Company
      entered into a new factoring agreement, whereby it assigned certain of its
      accounts receivable with full recourse. 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.




**Off
      Balance Sheet Arrangements**





At
      March
      31, 2008, 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.




**Recent
      Accounting Pronouncements**




SFAS
      No. 159




In
      February, 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
      Assets and Liabilities - Including an Amendment of FASB Statement No. 115”
(“SFAS 159”). SFAS 159 permits entities to choose to measure certain financial
      assets and liabilities at fair value. Unrealized gains and losses, arising
      subsequent to adoption, are reported in earnings. SFAS 159 is effective for
      fiscal years beginning after November 15, 2007. The Company has adopted SFAS
      159
      and determined that it has no effect 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.





**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.*




20




**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 our
                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;




·
            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 have
      funded our operations and capital expenditures from limited cash flow from
      operations, our cash on hand, the net proceeds of the private placement
      completed on May 9, 2006 and the factoring agreement entered into on September
      15, 2006. 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.




21




**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.




**We
      may be unable to compete successfully against existing and future competitors,
      which could decrease our revenue and margins and harm our
      business.**




The
      performance task-specific glove and 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 glove and
      workwear distribution channels from a number of competitors. 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.




22




**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.




**Our
      dependence on a single provider for all warehouse and fulfillment functions
      reduces our ability to control the warehousing and fulfillment processes, which
      could harm our sales, reputation, and overall business.**





We
      have
      entered into an agreement to outsource our warehouse and fulfillment functions
      to a single provider where we will consolidate our inventory at one site, which
      is managed by an independent contractor who will then perform all of our
      warehousing, assembly, packaging and fulfillment services. We depend on our
      independent contractor fulfiller to properly fulfill customer orders in a timely
      manner and to properly protect our inventories. The contractor’s failure to ship
      products to customers in a timely manner, to meet the required quality
      standards, to correctly fulfill orders, to maintain
      appropriate levels of inventory, or to provide adequate security
      measures and protections against excess shrinkage could cause us to miss
      delivery date requirements of our customers or incur increased expense to
      replace or replenish lost or damaged inventory or inventory shortfall. The
      failure to make timely and proper 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.




23




**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.




24




**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.





**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.




25




**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.




**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;




26




·
            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.




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.




In
      addition, 8,536,953 of the 27,117,720 shares referenced above were subject
      to
      restrictions on transfer set forth in lock-up agreements with holders of these
      shares, which were released from such restrictions on the first anniversary
      of
      the merger, May 9, 2007. The release of shares from lock-up agreements may
      have
      a negative impact on our stock price if such released shares are sold by their
      holders.  Further,
      in September of 2007 and April 2008, we completed private placement transactions
      in which we sold 2,750,000 and 7,075,000 shares of our common stock,
      respectively. Under the terms of the subscriptions agreements, the investors
      in
      each of the private placement transactions were granted certain registration
      rights with respect to such shares. The sale of such shares pursuant to such
      registration statements could have a negative impact on our stock
      price.





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.




27




**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 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
      Stock 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.




**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 43% 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.




28




**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.





**ITEM
      3.****CONTROLS
      AND PROCEDURES**





**Controls
      and Procedures**




Members
      of the company’s management, including our Chief Executive Officer and
      President, Eduard Jaeger, and Interim Chief Financial Officer, Thomas Kreig,
      have evaluated the effectiveness of our disclosure controls and procedures,
      as
      defined by paragraph (e) of Exchange Act Rules 13a-15 or 15d-15, as of June
      30,
      2007, the end of the period covered by this report. Based upon that evaluation,
      Messrs. Jaeger and Kreig concluded that our disclosure controls and procedures
      are effective.




**Internal
      Control Over Financial Reporting**




There
      were no changes in our internal control over financial reporting or in other
      factors identified in connection with the evaluation required by paragraph
      (d)
      of Exchange Act Rules 13a-15 or 15d-15 that occurred during the first quarter
      ended March 31, 2008 that have materially affected, or are reasonably likely
      to
      materially affect, our internal control over financial reporting.




29




**PART
      II**


**ITEM
      1.**  **Legal
      Proceedings**





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.




**ITEM
      6.**  **Exhibits**





**The
      following exhibits are filed as part of this report:**





Exhibit
              Number
            
            Description31.1
            
            Certification
                by Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
                under
                the Securities Exchange Act of 1934, as amended.31.2
            
            Certification
                by Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
                under
                the Securities Exchange Act of 1934, as amended.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
                2002.32.2
            
            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.




30





SIGNATURES




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**IRONCLAD
                PERFORMANCE WEAR CORPORATION**Date:
                May 15, 2008
            By:
            /s/
                Thomas KreigThomas
                Kreig,
              Interim
                Chief Financial Officer




31





**Exhibit
      Index**




Exhibit
              Number
            
            Description31.1
            
            Certification
                by Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
                under
                the Securities Exchange Act of 1934, as amended.31.2
            
            Certification
                by Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
                under
                the Securities Exchange Act of 1934, as amended.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
                2002.32.2
            
            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.