UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2006

                         COMMISSION FILE NUMBER: 0-16075


                      IRONCLAD PERFORMANCE WEAR CORPORATION
        (Exact name of small business issuer as specified in its charter)


             NEVADA                                      95-4762694
(State or other  jurisdiction of               (IRS Employer Identification No.)
 incorporation or organization)


                           2201 PARK PLACE, SUITE 101
                              EL SEGUNDO, CA 90245
                    (Address of principal executive offices)

                                 (310) 643-7800
                           (Issuer's telephone number)

                1111 EAST EL SEGUNDO BLVD., EL SEGUNDO, CA 90245
              (Former name, former address and former fiscal year,
                         if changed since last report)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                               Yes [X]   No [_]

         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]

         As of August 8,  2006,  29,619,992  shares of the  registrant's  common
stock were outstanding.

         Transitional Small Business Disclosure Format (Check One):

                               Yes [_]   No [X]


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I   Financial Information

Item 1.  Financial Statements

         a.       Consolidated Balance Sheet as of June 30, 2006 ..............1

         b.       Consolidated Statements of Operations for the
                  three months and the six months ended June
                  30, 2006 and June 30, 2005. .................................2

         c.       Consolidated Statements of Cash Flows for the
                  six months ended June 30, 2006 and June 30, 2005 ............3

         d.       Notes to Consolidated Financial Statements ..................4

Item 2.  Management's Discussion and Analysis or Plan of Operation ...........14

Item 3.  Controls and Procedures .............................................35

PART II  Other Information

Item 1.  Legal Proceedings ...................................................36

Item 4.  Submission of Matters to a Vote of Security Holders .................36

Item 6.  Exhibits ............................................................37


<PAGE>


                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

                      IRONCLAD PERFORMANCE WEAR CORPORATION
                           CONSOLIDATED BALANCE SHEET

                                                                      JUNE 30,
                                                                        2006
ASSETS                                                              ------------
CURRENT ASSETS
   Cash and cash equivalents ..................................     $ 3,203,497
   Accounts receivable net of allowance for
     doubtful accounts of $45,000 .............................         725,513
   Inventory ..................................................       2,355,592
   Prepaid and other ..........................................         140,239
     TOTAL CURRENT ASSETS .....................................       6,424,841

PROPERTY, PLANT AND EQUIPMENT
   Computer equipment and software ............................         168,618
   Vehicles ...................................................          42,230
   Office equipment and furniture .............................         110,475
   Less:  accumulated depreciation ............................        (232,785)
   TOTAL PROPERTY, PLANT AND EQUIPMENT, NET ...................          88,538

   Trademarks, net of $4,002 of accumulated amortization ......          52,381
   Deposits ...................................................          38,608
   TOTAL ASSETS ...............................................     $ 6,604,368

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
   Accounts payable ...........................................     $   606,351
   Accrued expenses ...........................................         759,220
   Current portion of capital lease ...........................           3,077
     TOTAL CURRENT LIABILITIES ................................       1,368,648

   Long term portion of capital lease obligations .............           3,435
     Fair value of warrant liability ..........................       8,297,686
     TOTAL LIABILITIES ........................................       9,669,769

STOCKHOLDERS' DEFICIT
   Common stock, $.001 par value; 172,744,750 million
     shares authorized; 29,619,992 shares
     issued and outstanding ...................................          29,620
   Additional paid-in capital .................................       3,860,967
     Accumulated deficit ......................................      (6,955,988)
     TOTAL STOCKHOLDERS' DEFICIT ..............................      (3,065,401)
     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ..............     $ 6,604,368


                                       1
<PAGE>


<TABLE>
                      IRONCLAD PERFORMANCE WEAR CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                                    THREE            THREE          SIX              SIX
                                                   MONTHS           MONTHS         MONTHS           MONTHS
                                                    ENDED            ENDED         ENDED            ENDED
                                                   JUNE 30,         JUNE 30,      JUNE 30,         JUNE 30,
                                                     2006            2005           2006             2005
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
REVENUES
  Net sales ..................................   $  1,538,949    $  1,400,583    $  3,329,134    $  3,042,335
                                                 ------------    ------------    ------------    ------------

COST OF SALES
  Cost of sales ..............................        957,790         714,373       2,040,733       1,541,021
                                                 ------------    ------------    ------------    ------------
OPERATING EXPENSES
  General and administrative .................        599,858         309,345       1,163,658         617,071
  Sales and marketing ........................        581,937         428,035       1,104,429         927,599
  Research and development ...................         46,218          47,287         104,782         102,499
  Operations .................................        133,774          61,861         226,011         137,616
  Depreciation and amortization ..............          8,101          14,249          15,370          28,357
                                                 ------------    ------------    ------------    ------------

    TOTAL OPERATING EXPENSES .................      1,369,888         860,777       2,614,250       1,813,142
                                                 ------------    ------------    ------------    ------------

LOSS FROM OPERATIONS .........................       (788,729)       (174,567)     (1,325,849)       (311,828)
                                                 ------------    ------------    ------------    ------------

OTHER INCOME (EXPENSE)
  Interest expense ...........................        (20,057)         (9,634)        (73,435)        (37,862)
  Interest expense from warrants issued
    as financing cost ........................       (256,188)           --          (256,188)           --
  Interest income ............................         16,013            --            16,013            --
  Change in fair value of warrant liability ..     (2,453,018)           --        (2,453,018)           --
  Other income (expense), net ................          2,884          (5,539            2,18           26,80
                                                 ------------    ------------    ------------    ------------
   TOTAL OTHER INCOME (EXPENSE) ..............     (2,710,366)        (15,173)     (2,764,447)        (11,056)
                                                 ------------    ------------    ------------    ------------

NET LOSS BEFORE PROVISION FOR INCOME TAXES ...     (3,499,095)       (189,740)     (4,090,296)       (322,884)

PROVISION FOR INCOME TAXES ...................           --              --               800             (24)
                                                 ------------    ------------    ------------    ------------

NET LOSS .....................................   $ (3,499,095)   $   (189,740)   $ (4,091,096)   $   (322,860)
                                                 ------------    ------------    ------------    ------------

BASIC AND DILUTED NET LOSS PER COMMON SHARE ..   $      (0.15)   $      (0.01)   $      (0.20)   $      (0.02)
                                                 ------------    ------------    ------------    ------------
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING ....................     24,080,602      15,483,163      19,973,102      15,450,605
                                                 ------------    ------------    ------------    ------------
</TABLE>

                  See Notes to Condensed Financial Statements.


                                       2
<PAGE>


<TABLE>
                      IRONCLAD PERFPRMANCE WEAR CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                      SIX MONTHS     SIX MONTHS
                                                                        ENDED          ENDED
                                                                       JUNE 30,       JUNE 30,
                                                                         2006           2005
                                                                     -----------    -----------
<S>                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss .......................................................   $(4,091,096)   $  (322,860)
  Adjustments to reconcile net loss to net cash
    provided by operating activities
      Allowance for bad debts ....................................        24,000           --
      Depreciation ...............................................        14,139         27,819
      Amortization ...............................................         1,231            538
      Warrants issued as financing cost ..........................       256,188           --
      Loss on disposition of equipment ...........................          --            3,288
      Change in fair value of warrant liability ..................     2,453,018           --
    Non-cash compensation:
      Common stock issued for services ...........................        51,779         13,750
      Stock option expense .......................................       245,812           --
    Changes in operating assets and liabilities:
      Receivables ................................................       660,610         21,041
      Inventory ..................................................    (1,371,554)       175,175
      Deposits on inventory ......................................       300,277        177,092
      Prepaid and other ..........................................        (8,304)        31,401
      Loan costs .................................................        15,798           --
      Accounts payable and accrued liabilities ...................      (515,947)       195,887
                                                                     -----------    -----------
         Net cash flows provided by (used in) operating activities    (1,964,049)       323,131

CASH FLOWS FROM INVESTING ACTIVITIES
  Property, plant and equipment purchased ........................       (43,337)       (13,405)
  Investment in trademarks .......................................          --           (3,088)
                                                                     -----------    -----------
         Net cash flows used in investing activities .............       (43,337)       (16,493)

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock .........................     7,828,691         50,000
  Offering costs .................................................    (1,284,453)          --
  Payments on  note payable ......................................      (500,000)      (404,010)
  Payments on bank loans .........................................      (861,612)      (349,051)
  Payments on capital leases .....................................        (1,316)          --
                                                                     -----------    -----------
         Net cash flows provided by (used in) financing activities     5,181,310       (703,061)

NET INCREASE (DECREASE) IN CASH ..................................     3,173,924       (396,423)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD ....................        29,573        362,702
CASH AND CASH EQUIVALENTS END OF PERIOD ..........................   $ 3,203,497        (33,721)

SUPPLEMENTAL DISCLOSURES
  Interest paid in cash ..........................................   $    73,435    $    37,862
  Income taxes ...................................................           800            (24)
</TABLE>


                                        3
<PAGE>


                      IRONCLAD PERFORMANCE WEAR CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION

         The accompanying  unaudited financial  statements have been prepared in
accordance with generally  accepted  accounting  principles in the United States
for  interim  financial  information  and with the  instructions  to Item 310 of
Regulation  S-B.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles in the United
States for complete financial statements.  The accompanying  unaudited financial
statements  reflect all  adjustments  that,  in the opinion of  management,  are
considered necessary for a fair presentation of the financial position,  results
of  operations,  and cash  flows  for the  periods  presented.  The  results  of
operations  for such  periods  are not  necessarily  indicative  of the  results
expected  for the full fiscal year or for any future  period.  The  accompanying
financial  statements  should be read in conjunction with the audited  financial
statements of Ironclad  Performance Wear Corporation,  a California  corporation
(the "Company"),  included with the Registrant's  Current Report on Form 8-K, as
amended, filed with the Securities and Exchange Commission on May 12, 2006.

         The  discussion and analysis of the Company's  financial  condition and
results of operations are based upon its financial  statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States.  The  preparation  of these  financial  statements  requires the
Company to make  estimates  and  judgments  that affect the reported  amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and  liabilities.  On an  on-going  basis,  the  Company  evaluates  its
estimates,  including  those related to reserves for bad debts and those related
to the possible impairment of long-lived assets. The Company bases its estimates
on historical  experience and on various other  assumptions 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  Company's use of
estimates,  however,  is quite  limited,  as it has adequate time to process and
record actual results from operations.

         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 apparel designed to significantly improve the
wearer's  ability to safely and  efficiently  perform general to highly specific
job functions.  Its customers are primarily specialty retailers,  "Big Box" home
centers and  hardware/industrial  distributors.  The  Company  has five  patents
pending for design and technological innovations incorporated in its performance
work  gloves.  The  Company  has 32  registered  US  trademarks,  10  registered
international trademarks and 20 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.


                                       4
<PAGE>


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  Calfiornia  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.

         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,


                                       5
<PAGE>


options to purchase  2,588,314  shares of common  stock and warrants to purchase
2,817,416 shares of common stock.

THE PRIVATE PLACEMENT

         Immediately  following the closing of the Merger,  the Company received
gross proceeds of approximately $7.3 million in a private placement  transaction
(the "Private Placement") with institutional  investors and other high net worth
individuals ("Investors"). Pursuant to Subscription Agreements entered into with
these  Investors,  the Company sold  9,761,558  Investment  Units,  at $0.75 per
Investment Unit. Each "Investment  Unit" consists of one share of Company common
stock, and a five year  non-callable  warrant to purchase  three-quarters of one
share of Company  common  stock,  at an exercise  price of $1.00 per share.  The
value of the warrants was  determined to be $5,278,388  using the  Black-Scholes
option  pricing  model with the  following  assumptions:  a  volatility  rate of
185.5%,  risk free  interest  rate of 5.13%,  an expected life of five years and
zero  dividends.  They have been  recorded as a warrant  liability in accordance
with SFAS No. 133 and EITF 00-19.

         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.

3.       ACCOUNTING POLICIES

REVENUE RECOGNITION

         A  customer  is  obligated  to pay for  products  sold to it  within  a
specified number of days from the date that title to the products is transferred
to the customer. The Company's standard terms are typically net 30 days from the
transfer  of  title to the  products  to the  customer.  The  Company  typically
collects payment from a customer within 30 to 45 days from the transfer of title
to the  products to a customer.  Transfer of title  occurs and risk of ownership
passes to a customer at the time of shipment or delivery, depending on the terms
of the  agreement  with a particular  customer.  The sale price of the Company's
products is  substantially  fixed or  determinable  at the date of sale based on
purchase  orders  generated  by a  customer  and  accepted  by  the  Company.  A
customer's  obligation  to  pay  the  Company  for  products  sold  to it is not
contingent upon the resale of those products.  The Company  recognizes  revenues
when products are delivered to customers.

RETURNS POLICY

         The Company has a warranty  policy that covers defects in  workmanship.
The Company also periodically  accepts stock adjustments from certain customers.
Stock  adjustment  returns are  typically  for new  customers  who are given the
opportunity  to `trade  out' of a style of  product  that does not sell in their
territory,  usually in exchange  for  another  product.  Historically,  warranty
returns  have  averaged 1% a year and stock  adjustment  returns  have  averaged
approximately  0.5% of gross  sales.  The Company  records an estimate for these
returns at the time of sale.


                                       6
<PAGE>


RESERVE FOR WARRANTY RETURNS

Balance 12/31/05 ................................................      $ 38,000
Payments Recorded During the Period .............................       (28,149)
                                                                       --------
                                                                          9,851
Adjustment to Reserve for Pre-existing Liabilities ..............         3,500
Accrual for New Liabilities During the Reporting Period .........        28,149
                                                                       --------
Balance 3/31/06 .................................................      $ 41,500
Payments Recorded During the Period .............................       (12,190)
                                                                       --------
                                                                         29,310
Adjustment to Reserve for Pre-existing Liabilities ..............         4,500
Accrual for New Liabilities During the Reporting Period .........        12,190
                                                                       --------
Balance 6/30/06 .................................................      $ 46,000
                                                                       ========

CUSTOMER CONCENTRATIONS

         One customer accounted for approximately 12% of net sales for the three
months  ended June 30, 2006 and no customer  accounted  for more than 10% of net
sales for the six  months  ended  June 30,  2006.  One  customer  accounted  for
approximately  22% of net sales for the three months ended June 30, 2005 and the
same customer  accounted for  approximately  11% of net sales for the six months
ended June 30, 2005.

SUPPLIER CONCENTRATIONS

         One supplier,  which is located  overseas,  accounted for approximately
80% of total  purchases  during the three  months ended ending June 30, 2006 and
76% of total  purchases  during the six months  ended  June 30,  2006.  The same
supplier accounted for 85% of total purchases during the three months ended June
30, 2005 and 83% during the six months ended June 30, 2005.

LOSS PER SHARE

         The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per
share is computed by  dividing  loss  available  to common  shareholders  by the
weighted-average number of common shares outstanding.  Diluted loss per share is
computed  similar  to basic  loss per  share  except  that  the  denominator  is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common  shares were  dilutive.  Common  equivalent  shares are excluded from the
computation if their effect is anti-dilutive.

         The  following  potential  common  shares have been  excluded  from the
computation of diluted net loss per share for the periods  presented because the
effect would have been anti-dilutive:

                                                             Six Months
                                                           Ended June 30,
                                                    ----------------------------
                                                       2006              2005
                                                    ----------        ----------
Options outstanding under the
  Company's stock option plan ..............         5,095,134         1,962,704
Common Stock Warrants ......................        10,812,281           759,999


                                       7
<PAGE>


INCOME TAXES

         Income  taxes are  provided  for the tax  effects  of the  transactions
reported in the  financial  statements  and consist of taxes  currently due plus
deferred  taxes  related  primarily to the  difference  between the basis of the
allowance for doubtful  accounts,  accumulated  depreciation  and  amortization,
accrued  payroll and net operating loss  carryforwards  for financial and income
tax reporting.  The deferred tax assets and liabilities represent the future tax
return  consequences  of those  differences,  which  will  either be  taxable or
deductible when the assets and liabilities are recovered or settled.

         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
six months ended June 30, 2006 and 2005 were $800 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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid  Financial  Instruments",  which  amends  SFAS No. 133,  "Accounting  for
Derivatives Instruments and Hedging Activities" and SFAS No. 140,"Accounting for
Transfers and Servicing of Financial Assets and  Extinguishment of Liabilities".
SFAS No. 155 amends SFAS No. 133 to narrow the scope exception for interest-only
and  principal-only  strips on debt  instruments  to  include  only such  strips
representing  rights to receive a specified portion of the contractual  interest
or  principle  cash  flows.  SFAS No.  155  also  amends  SFAS No.  140 to allow
qualifying  special-purpose  entities  to hold a  passive  derivative  financial
instrument  pertaining  to  beneficial  interests  that  itself is a  derivative
instrument.  Management  does not  expect  adoption  of SFAS  No.  155 to have a
material impact on our financial statements.

         In March 2006, the FASB issued SFAS No. 156,  "Accounting for Servicing
of Financial  Assets"  ("SFAS NO. 156"),  which provides an approach to simplify
efforts to obtain  hedge-like  (offset)  accounting.  This Statement amends FASB
Statement No. 140,  "Accounting for Transfers and Servicing of Financial  Assets
and  Extinguishments  of  Liabilities",  with  respect  to  the  accounting  for
separately recognized servicing assets and servicing liabilities.  The Statement
(1)  requires an entity to recognize a servicing  asset or  servicing  liability
each time it undertakes  an obligation to service a financial  asset by entering
into a servicing contract in certain situations;  (2) requires that a separately
recognized  servicing asset or servicing liability be initially measured at fair
value, if practicable;  (3) permits an entity to choose either the  amortization
method or the fair value  method for  subsequent  measurement  for each class of
separately recognized servicing assets or servicing liabilities;  (4) permits at
initial adoption a one-time reclassification of available-for-sale securities to
trading securities by an entity with recognized  servicing rights,  provided the
securities  reclassified  offset the  entity's  exposure  to changes in the fair
value  of the  servicing  assets  or  liabilities;  and  (5)  requires  separate
presentation of servicing assets and servicing liabilities subsequently measured
at fair value in the balance sheet and additional disclosures for all separately
recognized servicing assets and servicing liabilities. SFAS No. 156 is effective
for  all  separately  recognized  servicing  assets  and  liabilities  as of the
beginning of an entity's  fiscal year that begins after September 15, 2006, with
earlier  adoption  permitted  in  certain  circumstances.   The  Statement  also
describes the manner in which it should be initially  applied.  Management  does
not expect  adoption of SFAS No. 156 to have a material  impact on our financial
statements.

         In July 2006, the FASB released FASB  Interpretation No. 48, ACCOUNTING
FOR  UNCERTAINTY IN INCOME TAXES,  AN  INTERPRETATION  OF FASB STATEMENT NO. 109
(FIN 48). FIN 48 clarifies the  accounting  and reporting for  uncertainties  in
income tax law. This  Interpretation  prescribes a  comprehensive  model for the
financial  statement  recognition,  measurement,  presentation and disclosure of
uncertain  tax  positions  taken or expected to be taken in income tax  returns.
This statement is effective for fiscal years  beginning after December 15, 2006.
We are currently in the process of evaluating  the expected  effect of FIN 48 on
its results of operations and financial position.

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.


                                        8
<PAGE>


4.       INVENTORY

         At June  30,  2006 the  Company  had two  classes  of  inventory  - raw
materials and finished goods.

                                                              JUNE 30,
                                                                2006
                                                             ----------
      Raw Materials ...................................      $  308,762
      Finished Goods ..................................      $2,046,830
                                                             ----------
      Total ...........................................      $2,355,592
                                                             ==========

5.       NOTE PAYABLE AND BANK LINES OF CREDIT

NOTES PAYABLE

         In October 2005, the Company obtained short term financing from Westrec
Capital  Partners,  LLC. The amount of the note was $500,000.  It matured at the
earlier of 180 days or when the Company  received an aggregate of $550,000  from
the sale of equity  securities.  The Company  received a 30-day extension of the
maturity  date to May 20,  2006.  On May 9,  2006,  the  Registrant  closed on a
private  placement  financing of $7,321,191  of common stock.  Proceeds from the
Private Placement were used to retire the Note. The loan agreement also required
the  issuance of a warrant to purchase  400,000  shares of common stock at $0.56
per  share.  Westrec  Capital  Partners,  LLC also  agreed to extend  its bridge
financing  loan to the  Company  for up to thirty (30) days under the same terms
and  conditions  in exchange for a warrant for 100,000  shares of the  Company's
common stock, exercisable at $1.00 per share.

         The value of the 400,000  warrants was  determined to be $291,368 using
the Black-Scholes Option Pricing Model with the following assumptions: risk-free
interest rate of 5.13%,  volatility  factor of 185.5%,  five-year  life and zero
dividends. They have been recorded as equity in accordance with SFAS No. 133 and
EITF 00-19. The value of the 100,000 warrants was determined to be $72,097 using
the Black-Scholes Option Pricing Model with the following assumptions: risk-free
interest rate of 5.13%,  volatility  factor of 185.5%,  five-year  life and zero
dividends.  They have been recorded as a warrant  liability in  accordance  with
SFAS No. 133 and EITF 00-19.

BANK LINES OF CREDIT

         In March 2005 the Company renewed its senior secured loan facility with
a third party bank.  This  agreement was scheduled to mature on May 30, 2006. On
May  9,  2006,  the  Registrant  closed  on a  private  placement  financing  of
$7,321,191 of common stock.  Proceeds  from the Private  Placement  were used to
repay the balance outstanding on the loan facility.

6.       EQUITY TRANSACTIONS

COMMON STOCK

         During  the three  months  ended  March  31,  2006 the  Company  issued
investment  units  consisting  of 676,667  shares of common  stock and rights to
receive  warrants to purchase  1,568,334 shares of common stock upon the closing
of the Merger for an aggregate cash price of $507,500  (unaudited) pursuant to a
subscription  based sale at $0.75 per unit.  The  warrants  were issued upon the
closing of the Merger on May 9, 2006 at an aggregate exercise price of $0.75 per
share.  The value of the  1,568,334  warrants  so issued  was  determined  to be
$1,136,884  using the  Black-Scholes  Option  Pricing  Model with


                                        9
<PAGE>


the following assumptions:  risk-free interest rate of 5.13%,  volatility factor
of 185.5%, five-year life and zero dividends.  They have been recorded as equity
in accordance with SFAS No. 133 and EITF 00-19.

         On April 30, 2006 the Company issued 14,346 shares of common stock to a
consultant  in exchange for services.  The services were valued at $10,000,  and
were valued at a pre-merger expected valuation of $0.32 per common share. In May
2006 the Company employed this consultant as its Chief Financial Officer.

         Immediately  after the  consummation of the  cancellation  and purchase
transaction  in  connection  with the  Merger  of  Ironclad  California  and the
Company, a 3.455895-for-1  forward stock split of common stock was completed and
increased  the  number of  authorized  shares of  common  stock to  172,744,750.
Immediately after the closing of the Merger on May 9, 2006,  without taking into
account the private placement completed concurrently with the Merger, there were
19,858,404 outstanding shares of common stock.

         Following  the  closing  of the merger  with  Ironclad  California,  we
received gross  proceeds of  approximately  $7.3 million in a private  placement
transaction with  institutional  investors and other high net worth individuals.
Pursuant to our subscription  agreements with these investors, we sold 9,761,558
investment units, at $0.75 per investment unit. Each investment unit consists of
one share of our common stock, and a five year non-callable  warrant to purchase
three-quarters  of one share of our common stock,  at an exercise price of $1.00
per  share.  After  commissions  and  expenses,  we  received  net  proceeds  of
approximately $6.1 million in the private placement.

         On completion of the Merger on May 9, 2006, and at June 30, 2006, there
were outstanding 29,619,992 shares of Common Stock of the Registrant.

WARRANT ACTIVITY

         A summary of warrant activity is as follows:

                                                                      Weighted
                                                                      Average
                                                       Number of      Exercise
                                                        Shares         Price
                                                      -----------    -----------
Warrants outstanding at December 31, 2005 .........       749,079    $      0.23
Warrants expired ..................................        (4,448)   $      0.67
                                                      -----------    -----------
Warrants outstanding at March 31, 2006 ............       744,631    $      0.23
Warrants issued ...................................    10,072,840    $      0.93
Warrants expired ..................................        (5,190)   $      0.67
                                                      -----------    -----------
Warrants outstanding at June 30, 2006 .............    10,812,281    $      0.89


STOCK BASED COMPENSATION

         Effective with the Company's  current fiscal year that began on January
1, 2006, the Company has adopted the  accounting  and  disclosure  provisions of
Statement of Financial  Accounting  Standards ("SFAS") No. 123(R),  "SHARE-BASED
PAYMENTS" using the modified prospective application transition method.

         For fiscal years prior to January 1, 2006,  the Company  accounted  for
the  Plan  under  the  recognition  and  measurement  principles  of  Accounting
Principles Board Opinion No. 25,


                                       10
<PAGE>


"ACCOUNTING  FOR STOCK ISSUED TO EMPLOYEES,"  and related  interpretations.  The
Company  had  adopted  the  disclosure   provision  of  Statement  of  Financial
Accounting   Standards   ("SFAS")   No.   123,   "ACCOUNTING   FOR   STOCK-BASED
COMPANSATION,"  as  amended  by  SFAS  No.  148,   "ACCOUNTING  FOR  STOCK-BASED
COMPENSATION-TRANSITION AND DISCLOSURE," an amendment of FASB Statement No. 123.
The  following  table  illustrates  the effect on net  income  (loss) and income
(loss) per share if the Company had applied the fair value recognition provision
of SFAS No.  123 to  stock-based  employee  compensation  for the  three and six
months ended June 30, 2005:

                                                           Six          Three
                                                          Months       Months
                                                           Ended        Ended
                                                          June 30,     June 30,
                                                         ---------    ---------
                                                           2005          2005
                                                         ---------    ---------
Net loss as reported $ ................................   (322,860)    (189,740)
Less:  Total stock-based employee
     compensation expense determined
     under Black-Scholes option pricing
     model, net of tax effects ........................     39,637       18,849
                                                         ---------    ---------
PRO FORMA NET LOSS ....................................  $(362,497)   $(208,589)
                                                         =========    =========
Net loss per share - as reported
     Basic and dilted .................................  $   (0.02)   $   (0.01)
                                                         =========    =========
Net loss per share - pro forma
     Basic and dilted .................................  $   (0.02)   $   (0.01)
                                                         =========    =========

         Ironclad  California  reserved 7,000,000 shares of its common stock for
issuance to employees,  directors and consultants under the 2000 Stock Incentive
Plan, which the Company assumed in the Merger ("the 2000 Plan").  Under the 2000
Plan,  options may be granted at prices not less than the fair  market  value of
the Company's common stock at the grant date.  Options generally have a ten-year
term and shall be exercisable as determined by the Board of Directors.

         Effective May 18, 2006, the Company  reserved  4,250,000  shares of its
common stock for issuance to employees, directors and consultants under its 2006
Stock  Incentive  Plan (the "2006  Plan").  Under the 2006 Plan,  options may be
granted at prices not less than the fair market  value of the  Company's  common
stock at the grant date.  Options  generally  have a ten-year  term and shall be
exercisable as determined by the Board of Directors.

         The fair value of each stock  option  granted  under either the 2000 or
2006 Plan is estimated on the date of the grant using the  Black-Scholes  option
pricing  model and factors in an estimated  forfeiture  rate based on management
assessment of historical  employee  termination  experience.  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.


                                       11
<PAGE>


         For stock  options  issued  during the six month periods ended June 30,
2005 and 2006,  the fair value of these options was estimated at the date of the
grant using a  Black-Scholes  option  pricing model with the following  range of
assumptions:

                                               JUNE 30, 2005       JUNE 30, 2006
                                               -------------       -------------
Risk free interest rate ..............              4.2%           4.97% - 5.25%
Dividends ............................               --                  --
Volatility factor ....................          146% - 177%         170% - 185%
Expected life ........................            4 years             4 years


A summary of stock option activity is as follows:

                                                                       Weighted
                                                                       Average
                                                          Number of    Exercise
                                                           Shares       Price
                                                          ---------    ---------
Outstanding, December 31, 2005 .......................    2,584,000    $    0.35
Outstanding, March 31, 2006 ..........................    2,584,000    $    0.35
Granted ..............................................    2,511,134    $    0.88
Exercised ............................................         --           --
Cancelled/Expired ....................................         --           --
Outstanding June 30, 2006 ............................    5,095,134    $    0.64
Exercisable at June 30, 2006 .........................    2,059,629    $    0.39


The following tables summarize  information  about stock options  outstanding at
June 30, 2006:

                                  Weighted
                                   Average         Weighted        Intrinsic
                                  Remaining        Average           Value
  Range of          Number       Contractual       Exercise       Outstanding
Exercise Price    Outstanding    Life (Years)       Price           Shares
--------------   -------------   -------------   -------------   -------------
$0.19 - $0.35       2,584,000            7.56         $  0.35       1,878,279
$0.75 - $1.05       2,511,134            9.88         $  0.95         283,152


The following tables summarize  information  about stock options  exercisable at
June 30, 2006:

                                  Weighted
                                   Average         Weighted        Intrinsic
                                  Remaining        Average           Value
  Range of          Number       Contractual       Exercise       Outstanding
Exercise Price    Exercisable    Life (Years)       Price           Shares
--------------   -------------   -------------   -------------   -------------
$0.19 - $0.35       1,915,979            7.2          $  0.34       1,521,261
$0.75 - $1.05         143,651            9.88         $  1.05           1,436


         The Company recorded  $27,408 and $218,404 of compensation  expense for
employee  stock  options  during the three months ended March 31, 2006 and three
months ending June 30, 2006,  respectively.  These compensation  expense charges
were  recorded  in the  following  operating  expense  categories,  general  and
administrative  -  $216,747;  sales  and  marketing  -  $23,583;   research  and
development - $2627; and operations - $2,855.  There was a total of $198,982 and
$2,184,169 of unrecognized  compensation costs related to non-vested share-based
compensation  arrangements under the Plan outstanding at March 31, 2006 and June
30, 2006, respectively. This cost is expected to be


                                       12
<PAGE>


recognized over a weighted  average period of 3.8 years. The total fair value of
shares vested during the six month period ended June 30, 2006 was  approximately
$212,162.

7.       LEGAL PROCEEDINGS

POTENTIAL CLAIM

         On May 2, 2006, an existing  shareholder of the Company  identified the
purported existence of two warrants to purchase approximately 517,746 shares and
467,410  shares of the common  stock of the Company at exercise  prices equal to
approximately $0.116 and $0.139, respectively,  allegedly issued in June 2002 to
an entity owned by the shareholder.

         The  shareholder  has not raised a legal claim,  but has  contacted the
Company to dispute the existence of the warrants. While the Company continues to
investigate  the matter,  the Company's  records  indicate that the  transaction
pursuant to which the warrants were intended to be issued was never consummated,
and as such, the warrants were never issued.  In the event that the  shareholder
determines to present the warrants for exercise,  the Company  intends to reject
any such action and expects to defend any purported claim vigorously.

         If a legal  claim is raised by the  shareholder,  and to the extent the
shareholder is successful in the claim, the Company agreed to cause the issuance
of additional  shares of the Registrant's  common stock to each of the investors
in  the  Private  Placement  financing,  and  to  each  of  the  holders  of the
Registrant's shares issued and outstanding immediately prior to the Merger, on a
pro rata basis,  in such a manner and in such  amounts as would be  necessary to
adjust their  respective  ownership of the  Registrant's  common stock as of the
closing of the Private Placement financing and Merger for any dilution caused by
the issuance of the warrants or any shares thereunder.


                                       13
<PAGE>


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 AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005. 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
workwear.  Founded  in  1998,  we  have  grown  and  leveraged  our  proprietary
technologies  to produce  job-specific  gloves and apparel  that are designed to
significantly  improve the wearer's  ability to safely and  efficiently  perform
general to highly specific job functions.  We have built and continue to augment
our reputation among  professionals  in the construction and industrial  service
industries  with products  specifically  designed for  individual  tasks or task
types.  Utilizing our brand equity, we are currently  expanding our product line
into specialty  apparel (e.g. long and short sleeved shirts,  pants and jackets)
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 retail customers,  expanding into Big Box retailers
and increasing our product offerings in new and existing locations. Although the
addition of retail  locations by our largest  customers does not always directly
correlate to an increase in our net sales, as our products may not be carried in
every such additional  location,  we believe our growth has been  facilitated by
our largest retail customers opening additional locations since our inception.

         We believe that our products will have  international  appeal. In 2005,
we began selling products in Australia through an independent distributor, which
accounted  for less  than 5% of  total  sales.  We plan to  increase  net  sales
internationally by expanding our distribution into Canada and European countries
during the fiscal year ending December 31, 2006.

         Our  historical   operations  before  May  9,  2006  reflect  only  the
operations of Ironclad  Performance Wear Corporation,  a California  corporation
(or "Ironclad California").  Before May 9, 2006, we existed as a "shell company"
with  nominal  assets  whose  sole  business  was  to  identify,   evaluate  and
investigate various companies to acquire or with which to merge. On May 9, 2006,
we  consummated a merger  transaction  in which we acquired all of the shares of
Ironclad California (the "Merger").  Concurrently with the closing of the merger
we  completed  a private  placement  financing  and certain  other  transactions
related to the merger.  Upon completion of the merger and the private  placement
financing,  Ironclad  California  became our  wholly-owned  subsidiary,  and the
former  stockholders  of Ironclad  California  and the  investors in the private
placement  financing  received in the aggregate  26,130,548 shares of our common
stock,  or  approximately  88% of our  issued and  outstanding  shares of common
stock.  Ironclad  California  was formed and commenced its business in 1998. Our
merger with  Ironclad  California  was  accounted  for as a reverse  merger with
Ironclad  California  deemed  to be the  accounting  acquirer,  and us the legal
acquirer.


                                       14
<PAGE>


GENERAL

         Net sales are comprised of gross sales less returns and cash 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 facility 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.

         Historically,  we have  funded  our  working  capital  needs  primarily
through our existing  asset-based  credit facility along with subordinated debt.
In 2005,  we completed an equity  financing,  the proceeds of which were used to
extinguish  certain  subordinated  debt.  In 2006 we have  completed  two equity
financing transactions. A portion of the proceeds of the second equity financing
transaction was used to extinguish certain debt.

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.


                                       15
<PAGE>


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 quarters ended March 31, 2006 and June
30, 2006 we increased our inventory  reserve by $-0- and $10,000,  respectively,
to a current balance of $42,000 and recorded a corresponding increase 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.  During the three  months ended March 31, 2006 and June 30,
2006, we sold inventories  previously  reserved for and accordingly  reduced the
reserve by approximately $150 and $50 and recorded corresponding gains for these
sales.  During the same three month  periods we adjusted our  estimates for slow
moving inventory,  based on recent sales volumes, downward by $8,300 and $3,500,
respectively.  Although we have no specific  statistical data on this matter, we
believe that our  practices  are  reasonable  and  consistent  with those of our
industry.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

         We maintain  allowances  for  doubtful  accounts for  estimated  losses
resulting  from the inability of our customers to make  required  payments.  Our
current  customers consist of large national,  regional and smaller  independent
customers with good payment histories with us. Since we have not experienced any
previous payment defaults with any of our current  customers,  our allowance for
doubtful  accounts is minimal.  We perform  periodic  credit  evaluations of our
customers  and  maintain   allowances  for  potential  credit  losses  based  on
management's evaluation of historical experience and current industry trends. If
the financial  condition of our customers were to deteriorate,  resulting in the
impairment  of their  ability to make  payments,  additional  allowances  may be
required.  New customers are evaluated through Dun & Bradstreet before terms are
established.  Although we expect to collect all amounts due, actual  collections
may differ.

PRODUCT RETURNS

         We have a warranty policy that covers defects in workmanship.  We allow
our  customers  to return  damaged  or  defective  products  to us  following  a
customary return merchandise authorization process. We also allow for some stock
adjustments returns, typically for new customers,  whereby the customer is given
the  opportunity to `trade out' of a style of product that does not sell well in
their territory,  usually in exchange for another  product,  again following the
customary return merchandise authorization process. For both types of returns we
utilize actual historical return rates to determine our allowance for returns in
each  period.  Gross  sales  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 1.0% and our current estimated future stock adjustment return rate
is  approximately  0.5%. 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


                                       16
<PAGE>


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 12/31/05 ........................................      $ 38,000
Payments recorded during the period .............................       (28,149)
                                                                       --------
                                                                          9,851
Adjustment to reserve for pre-existing liabilities ..............         3,500
Accrual for new liabilities during the reporting period .........        28,149
                                                                       --------
Reserve balance 3/31/06 .........................................        41,500
Payments recorded during the period .............................       (12,190)
                                                                       --------
                                                                         29,310
Adjustment to reserve for pre-existing liabilities ..............         4,500
Accrual for new liabilities during the reporting period .........        12,190
                                                                       --------
Reserve balance 6/30/06 .........................................      $ 46,000
                                                                       ========

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.

INCOME TAXES

         Income  taxes are  provided  for the tax  effects  of the  transactions
reported in the  financial  statements  and consist of taxes  currently due plus
deferred  taxes  related  primarily to the  difference  between the basis of the
allowances  for returns and doubtful  accounts and for  inventory  obsolescence,
accrued  payroll and bonus and net operating  loss carry  forwards for financial
and income tax reporting.  The deferred tax assets and liabilities represent the
future tax  return  consequences  of those  differences,  which  will  either be
taxable or deductible when the assets and liabilities are recovered or settled.


                                       17
<PAGE>


         Deferred tax assets and  liabilities  are reflected at income tax rates
applicable  to the period in which the  deferred tax assets or  liabilities  are
expected to be realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and  liabilities  are  adjusted  through the  provision  for
income  taxes.  If it is more  likely  than not that  some  portion  or all of a
deferred tax asset will not be realized, a valuation allowance is recognized. As
the  Company  has  reported  losses for 2003,  2004 and 2005,  we have taken the
conservative approach, and fully reserved the deferred tax assets.

VALUATION OF DERIVATIVE INSTRUMENTS

SFAS No. 133  "Accounting  for Derivative  Instruments  and Hedging  Activities"
requires that embedded derivative instruments be bifurcated and assessed,  along
with free-standing  derivative  instruments such as warrants,  on their issuance
date  in  accordance  with  EITF  00-19  "Accounting  for  Derivative  Financial
Instruments  Indexed to, and  Potentially  Settled in, a Company's Own Stock" to
determine whether they should be considered a derivative  liability and measured
at their fair value for accounting purposes. In determining the appropriate fair
value,  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 AND SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005

         NET SALES  increased  $138,366,  or 9.9%,  to $1,538,949 in the quarter
ended June 30, 2006 from  $1,400,583 for the  corresponding  period in 2005. Net
sales increased  $286,799,  or 9.4%, to $3,329,134 for the six months ended June
30, 2006 from $3,042,335 in the  corresponding  period in 2005.  These increases
were primarily due to increased  sales through current  distribution,  and sales
from the launch of our  apparel  line of  approximately  $56,000  and  $231,000,
respectively.  One customer accounted for approximately 22% and 11% of net sales
during the  quarter  ended June 30,  2005 and six  months  ended June 30,  2005,
respectively.  One customer  accounted for approximately 12% of net sales during
the quarter ended June 30, 2006 and no customers  accounted for more than 10% of
net sales for the six months ended June 30, 2006.

         GROSS PROFIT decreased  $105,051 to $581,159 for the quarter ended June
30,  2006 from  $686,210  for the  quarter  ended June 30,  2005.  Gross  profit
decreased  $212,912 to  $1,288,401  for the six months  ended June 30, 2006 from
$1,501,313 for the six months ended June 30, 2005.  Gross profit as a percentage
of net sales,  or gross margin,  decreased  11.2% to 37.8% in second  quarter of
2006 from 49.0% in the same quarter of 2005. Gross profit as a percentage of net
sales,  or gross  margin,  decreased  10.6% to 38.7% in six  months of 2006 from
49.3% in the  corresponding six months of 2005. The decrease in gross margin was
mainly  attributable  to a shift in  product  mix,  aggressive  sales  promotion
programs with new and existing customers, the introduction of apparel sales, and
an increase in in-bound transportation costs, including air freight, between the
comparative  periods.  Our product mix changed  primarily  because sales to home
centers  have  increased  as a  proportion  of our sales.  Sales to home centers
generally  include an assortment  of lower priced  products than are sold to our
specialty  customers.  This  decrease in gross  margin was  partially  offset by
reduced product costs due to better pricing from our manufacturers.

         OPERATING  EXPENSES  increased by $509,111,  or 59.2%, to $1,369,888 in
the second  quarter of 2006 from  $860,777 in the second  quarter of 2005.  As a
percentage  of net sales,  operating  expenses  increased  27.5% to 89.0% in the
second quarter of 2006 from 61.5% in the same period of 2005. Operating expenses
increased  $801,108,  or 44.2%,  to $2,614,250  for the first six months of 2006
from  $1,813,142  in the  corresponding  period of 2005.  As a percentage of net
sales, operating expenses


                                       18
<PAGE>


increased 18.9% to 78.5% for the first six months of 2006 from 59.6% in the same
period of 2005.  The increased  spending was  primarily  due to increased  costs
associated with implementing brand development  initiatives,  including a NASCAR
sponsorship  and increased  print and  cooperative  advertising -  approximately
$32,000 and $114,000, respective; $14,000 in expenses associated with the launch
of our  apparel  line;  professional  fees of  approximately  $13,000;  expenses
associated with out status as public company costs of approximately $46,000; and
temporary labor and Financial  Accounting  Standards No. 123r options expense of
approximately  $290,000.  Sales and marketing  expenses were  increased to build
brand  recognition and increase sales.  Expenses  associated with being a public
company  included  public  accounting  and  legal  fees and  investor  relations
expenses.

         LOSS FROM OPERATIONS  increased  $614,162 or 351.9%, to $788,729 in the
second  quarter  of 2006 from  $174,567  in second  quarter  of 2005.  Loss from
operations as a percentage of net sales increased to 51.3% in the second quarter
of 2006 from 12.5% in the second quarter of 2005. Loss from operations increased
$1,014,120  or  325.2%,  to  $1,325,849  for the first  six  months of 2006 from
$311,828 for the first six months of 2005.  Loss from operations as a percentage
of net sales increased to 39.8 % for the first six months of 2006 from 10.2% for
the first six  months of 2005.  This  increase  was  primarily  the  result of a
decrease in gross  profit and an increase in  operating  expenses,  as discussed
above.

         INTEREST EXPENSE  increased  $266,611 to $276,245 in the second quarter
of 2006 from  $9,634 in the same  quarter of 2005.  Interest  expense  increased
$291,761  to  $329,623  for the first six  months  of 2006 from  $37,862  in the
corresponding  period of 2005. The increase was primarily due to the addition of
the short term financing with Westrec Capital Partners,  the amortization of the
loan  acquisition  costs  associated  with this  debt,  and the  recognition  of
$256,188 of imputed warrant interest charges.

         INTEREST INCOME increased  $16,013 in the second quarter and six months
ended  June 30,  2006.  Interest  income is a direct  result of  invested  funds
generated by the private equity funding completed  concurrent with the merger on
May 9, 2006.

         OTHER INCOME  (EXPENSE) net was $2,884 in the second quarter of 2006 as
compared  with $(5,539) in the second  quarter of 2005.  Other income was $2,181
for the first six  months of 2006 as  compared  with  $26,806  for the first six
months of 2005.  Change in the fair value of warrant liability was $2,453,018 in
the  second  quarter  and first six months of 2006 as  compared  to $-0- for the
second quarter and first six months of 2005. This loss represents the difference
in the fair value of warrants recorded as liabilities at June 30, 2006 and their
issue date on May 9, 2006.  These  warrants  will be revalued at the end of each
reporting  period until the terms of the  registration  statement for the shares
and warrants issued, that result in liability accounting, are satisfied.

         NET LOSS  increased  $3,309,355 to $3,499,095 in the second  quarter of
2006 from $189,740 in the second quarter of 2005. Net loss increased  $3,768,236
for the first six months of 2006 from $322,860 for the  corresponding  period in
2005.  These  increased  losses are a result of the  combination  of each of the
factors discussed above plus the recognition of change in fair value of warrants
recorded as liabilities during the quarter of $2,453,018.

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% - 60% 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
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         Our cash requirements are principally for working capital. Our need for
working capital is seasonal,  with the greatest  requirements  from July through
the end of October each year as a result of our inventory  build-up  during this
period for our fall and winter selling seasons.  Historically,  our main sources
of liquidity have been borrowings under our existing  revolving credit facility,
the issuance of subordinated debt and the sale of equity.

         OPERATING ACTIVITIES: For the six months ended June 30, 2006, cash used
in operating  activities was $1,964,049 and consisted primarily of a net loss of
$4,091,096, reduced by non-cash items of $3,046,167, an increase in inventory of
$1,371,554, a decrease in accounts receivable of $660,610, deposits on inventory
of $300,277, and decreases in accounts payable and accrued expenses of $515,947.
For the six months ended June 30, 2005,  cash  provided by operating  activities
was $323,131 and consisted of a net loss of $322,860,  reduced by non-cash items
of  $45,395,  a decrease  in  accounts  receivable  of  $21,041,  an increase in
inventory of $175,175,  deposits on inventory of $177,092,  prepaid  expenses of
$31,401, and an increase in accounts payable and accrued expenses of $195,887.

         INVESTING  ACTIVITIES  for the six months  ended June 30, 2006 and 2005
were primarily the result of capital expenditures, mainly for computer equipment
and trademark applications.  Cash used in investing activities increased $43,337
for 2006 from $16,493 in 2005.

         FINANCING  ACTIVITIES  for the six months ended June 30, 2006 consisted
primarily  of the payoff of our net  borrowing  under our  existing  asset-based
credit facility,  payoff of an existing note payable, proceeds from the issuance
of common stock,  financing  provided by a captial lease,  and the completion of
our merger and associated  financing on May 9, 2006.  Cash provided by financing
activities  increased  $5,181,310 for 2006 and $703,061 in 2005. The increase in
cash provided by financing  activities  was due to proceeds from the issuance of
common stock of $507,500,  the completion of the merger related equity financing
of $6,036,738 (net of $1,284,453 in offering costs),  and discounts  recorded on
the  issuance of warrants of  $256,188,  and was offset by payments  made on our
bank lines of credit of $861,612,  outstanding  note  payable of  $500,000,  and
payments  on a capital  lease of  $1,316.  We  believe  that our cash flows from
operations  together with the net proceeds from this offering,  will be adequate
to meet our liquidity needs and capital  expenditure  requirements  for at least
the next 18 months.


                                       20
<PAGE>


OFF BALANCE SHEET ARRANGEMENTS

         At June 30, 2006, we did not have any relationships with unconsolidated
entities  or  financial  partnerships,  such as  entities  often  referred to as
structured finance,  variable interest or special purpose entities,  which would
have  been  established  for  the  purpose  of  facilitating  off-balance  sheet
arrangements or other contractually narrow or limited purposes.  As such, we are
not exposed to any financing , liquidity, market or credit risk that could arise
if we had engaged in such relationships.

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS NO. 123R

         In December 2004,  the Financial  Accounting  Standards  Board ("FASB")
issued  SFAS 123  Revised  "Share-Based  Payment,"  "SFAS  123R." The  statement
eliminates the alternative to account for stock-based  compensation using APB 25
and requires such  transactions  be recognized  as  compensation  expense in the
statement  of  operations  based on their fair  values on the date of the grant,
with the compensation  expense  recognized over the period in which a grantee is
required to provide  service in exchange for the stock award. We will adopt this
statement  for the year ended  December  31,  2006.  We  recorded  $218,404  and
$245,812 of  compensation  expense for employee stock options during the quarter
and six months ended June 30, 2006.

SFAS NO. 151

         In November 2004, the FASB issued SFAS No. 151,  "Inventory Costs" SFAS
No. 151 amends the  accounting  for abnormal  amounts of idle facility  expense,
freight, handling costs and wasted material (spoilage) under the guidance in ARB
No. 43, Chapter 4,  "Inventory  Pricing."  Paragraph 5 of ARB No. 43, Chapter 4,
previously  stated that "under some  circumstances,  items such as idle facility
expense,  excessive  spoilage,  double  freight and  rehandling  costs may be so
abnormal as to require  treatment as current  period  charges."  This  Statement
requires that those items be recognized as current-period  charges regardless of
whether they meet the criterion of "so  abnormal." In addition,  this  Statement
requires  that  allocation  of  fixed  production  overheads  to  the  costs  of
conversion be based on the normal  capacity of the production  facilities.  This
statement  is  effective  for  inventory  costs  incurred  during  fiscal  years
beginning  after June 15, 2005.  Management does not expect adoption of SFAS No.
151 to have a material impact on our financial statements.

SFAS NO. 152

         In March  2004,  the FASB issued  SFAS No.  152,  "Accounting  for Real
Estate Time-Sharing Transactions." The FASB issued this Statement as a result of
the guidance provided in AICPA Statement of Position (SOP) 04-2, "Accounting for
Real  Estate  Time-Sharing  Transactions."  SOP 04-2  applies to all real estate
time-sharing  transactions.  Among other items, the SOP provides guidance on the
recording  of credit  losses and the  treatment of selling  costs,  but does not
change the revenue  recognition  guidance in SFAS No 66, Accounting for Sales of
Real Estate, " for real estate  time-sharing  transactions.  SFAS No. 152 amends
Statement No 66 to reference  the  guidance  provided in SOP 04-2.  SFAS No. 152
also amends SFAS No. 67,  "Accounting for Costs and Initial Rental Operations of
Real Estate  Projects," to state that SOP 04-2 provides the relevant guidance on
accounting  for  incidental  operations  and costs  related  to the sale of real
estate time-sharing transactions.  SFAS No. 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. This statement is not applicable to us.


                                       21
<PAGE>


SFAS NO. 153

         In March 2004, the FASB issued SFAS No. 153,  "Exchanges of Nonmonetary
Assets,"  an  amendment  to  Opinion  No.  29,   "Accounting   for   Nonmonetary
Transactions."  Statement No. 153 eliminates certain differences in the guidance
in Opinion No. 29 as compared to the guidance  contained in standards  issued by
the  International  Accounting  Standards Board. The amendment to Opinion No. 29
eliminates  the fair  value  exception  for  nonmonetary  exchanges  of  similar
productive  assets and  replaces it with a general  exception  for  exchanges of
nonmonetary assets that do not have commercial  substance.  Such an exchange has
commercial  substance  if the future  cash flows of the entity are  expected  to
change significantly as a result of the exchange.  SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in periods beginning after March 16, 2004.
Management does not expect adoption of SFAS No. 153 to have a material impact on
our financial statements.

SFAS NO. 154

         In May 2005,  the FASB  issued SFAS No.  154,  "Accounting  Changes and
Error Corrections" an amendment to Accounting  Principles Bulletin (APB) Opinion
No. 20, "Accounting  Changes," and SFAS No. 3, "Reporting  Accounting Changes in
Interim Financial  Statements"  though SFAS No. 154 carries forward the guidance
in APB No. 20 and SFAS No.3 with respect to accounting for changes in estimates,
changes  in  reporting  entity,  and the  correction  of  errors.  SFAS No.  154
establishes  new standards on accounting  for changes in accounting  principles,
whereby all such changes must be accounted for by  retrospective  application to
the financial  statements of prior periods unless it is  impracticable to do so.
SFAS No. 154 is effective for accounting  changes and error  corrections made in
fiscal years beginning  after December 15, 2005,  with early adoption  permitted
for changes and corrections made in years beginning after May 2005.

FIN NO. 47

         In March  2005,  the  FASB  issued  FASB  Interpretation  (FIN No.  47,
"Accounting for Conditional Asset Retirement Obligations".  FIN No. 47 clarifies
the meaning of the term conditional asset retirement  obligation as used in FASB
Statement No. 143,  "Accounting for Asset Retirement  Obligations" and clarifies
when an entity would have sufficient information to reasonable estimate the fair
value of an asset retirement  obligation.  This  interpretation  is effective no
later than the end of fiscal years ending after  December 15, 2005 (December 31,
2005  for  calendar-year   companies).   Retrospective  application  of  interim
financial  information  is permitted  but is not required.  Management  does not
expect  adoption  of FIN  No.  47 to have a  material  impact  on our  financial
statements.


                                       22
<PAGE>


SFAS NO. 155

         In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid  Financial  Instruments",  which  amends  SFAS No. 133,  "Accounting  for
Derivatives Instruments and Hedging Activities" and SFAS No. 140,"Accounting for
Transfers and Servicing of Financial Assets and  Extinguishment of Liabilities".
SFAS No. 155 amends SFAS No. 133 to narrow the scope exception for interest-only
and  principal-only  strips on debt  instruments  to  include  only such  strips
representing  rights to receive a specified portion of the contractual  interest
or  principle  cash  flows.  SFAS No.  155  also  amends  SFAS No.  140 to allow
qualifying  special-purpose  entities  to hold a  passive  derivative  financial
instrument  pertaining  to  beneficial  interests  that  itself is a  derivative
instrument.  Management  does not  expect  adoption  of SFAS  No.  155 to have a
material impact on our financial statements.

SFAS NO. 156

         In March 2006, the FASB issued SFAS No. 156,  "Accounting for Servicing
of Financial  Assets"  ("SFAS NO. 156"),  which provides an approach to simplify
efforts to obtain  hedge-like  (offset)  accounting.  This Statement amends FASB
Statement No. 140,  "Accounting for Transfers and Servicing of Financial  Assets
and  Extinguishments  of  Liabilities",  with  respect  to  the  accounting  for
separately recognized servicing assets and servicing liabilities.  The Statement
(1)  requires an entity to recognize a servicing  asset or  servicing  liability
each time it undertakes  an obligation to service a financial  asset by entering
into a servicing contract in certain situations;  (2) requires that a separately
recognized  servicing asset or servicing liability be initially measured at fair
value, if practicable;  (3) permits an entity to choose either the  amortization
method or the fair value  method for  subsequent  measurement  for each class of
separately recognized servicing assets or servicing liabilities;  (4) permits at
initial adoption a one-time reclassification of available-for-sale securities to
trading securities by an entity with recognized  servicing rights,  provided the
securities  reclassified  offset the  entity's  exposure  to changes in the fair
value  of the  servicing  assets  or  liabilities;  and  (5)  requires  separate
presentation of servicing assets and servicing liabilities subsequently measured
at fair value in the balance sheet and additional disclosures for all separately
recognized servicing assets and servicing liabilities. SFAS No. 156 is effective
for  all  separately  recognized  servicing  assets  and  liabilities  as of the
beginning of an entity's  fiscal year that begins after September 15, 2006, with
earlier  adoption  permitted  in  certain  circumstances.   The  Statement  also
describes the manner in which it should be initially  applied.  Management  does
not expect  adoption of SFAS No. 156 to have a material  impact on our financial
statements.

FIN NO. 48

         In July 2006, the FASB released FASB  Interpretation No. 48, ACCOUNTING
FOR  UNCERTAINTY IN INCOME TAXES,  AN  INTERPRETATION  OF FASB STATEMENT NO. 109
(FIN 48). FIN 48 clarifies the  accounting  and reporting for  uncertainties  in
income tax law. This  Interpretation  prescribes a  comprehensive  model for the
financial  statement  recognition,  measurement,  presentation and disclosure of
uncertain  tax  positions  taken or expected to be taken in income tax  returns.
This statement is effective for fiscal years  beginning after December 15, 2006.
We are currently in the process of evaluating  the expected  effect of FIN 48 on
its results of operations and financial position.


                                       23
<PAGE>


RISK FACTORS

         INVESTING  IN OUR  COMMON  STOCK  INVOLVES A HIGH  DEGREE OF RISK.  YOU
SHOULD CAREFULLY  CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER  INFORMATION
CONTAINED  IN THIS REPORT  BEFORE  PURCHASING  OUR COMMON  STOCK.  THE RISKS AND
UNCERTAINTIES  DESCRIBED BELOW ARE NOT THE ONLY ONES FACING US. ADDITIONAL RISKS
AND UNCERTAINTIES  THAT WE ARE UNAWARE OF, OR THAT WE CURRENTLY DEEM IMMATERIAL,
ALSO MAY BECOME IMPORTANT  FACTORS THAT AFFECT US. IF ANY OF THE FOLLOWING RISKS
OCCUR,  OUR  BUSINESS,  FINANCIAL  CONDITION OR RESULTS OF  OPERATIONS  COULD BE
MATERIALLY AND ADVERSELY AFFECTED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON
STOCK  COULD  DECLINE,  AND YOU MAY LOSE  SOME OR ALL OF THE  MONEY  YOU PAID TO
PURCHASE OUR COMMON STOCK.

RISKS RELATING TO OUR BUSINESS

OUR  OPERATING  RESULTS MAY  FLUCTUATE  SIGNIFICANTLY  AND OUR STOCK PRICE COULD
DECLINE OR FLUCTUATE IF OUR RESULTS DO NOT MEET THE  EXPECTATION  OF ANALYSTS OR
INVESTORS.

         Management  expects that we will experience  substantial  variations in
our net sales and operating results from quarter to quarter. We believe that the
factors which influence this variability of quarterly results include:

         o        the  timing  of  our   introduction   of  new  product  lines,
                  particularly our specialty apparel;

         o        the level of consumer acceptance of each new product line;

         o        general economic and industry  conditions that affect consumer
                  spending and retailer purchasing;

         o        the availability of manufacturing capacity;

         o        the seasonality of the markets in which we participate;

         o        the timing of trade shows;

         o        the product mix of customer orders;

         o        the  timing  of the  placement  or  cancellation  of  customer
                  orders;

         o        the weather;

         o        transportation delays;

         o        quotas and other regulatory matters; and

         o        the timing of  expenditures in anticipation of increased sales
                  and actions of competitors.

         As a result of fluctuations in our revenue and operating  expenses that
may occur, management believes that period-to-period  comparisons of our results
of  operations  are  not a good  indication  of our  future  performance.  It is
possible that in some future quarter or quarters,  our operating results will be
below the  expectations of securities  analysts or investors.  In that case, our
common stock price could fluctuate significantly or decline.

WE  MAY  NEED   ADDITIONAL   FUNDING  TO  SUPPORT  OUR  OPERATIONS  AND  CAPITAL
EXPENDITURES,  WHICH MAY NOT BE AVAILABLE  TO US AND WHICH LACK OF  AVAILABILITY
COULD ADVERSELY AFFECT OUR BUSINESS.

         We intend to fund our operations and capital  expenditures from limited
cash flow from operations,  our cash on hand and the net proceeds of the private
placement  completed on May 9, 2006. We believe we will have sufficient funds to
finance the cost of our operations and planned expansion for the next 18 months.
However,  we expect that we may need  additional  capital to continue and expand
our


                                       24
<PAGE>


operations,  in  particular  because we intend to expand  our line of  products,
enter and  compete in new  markets and  continue  the  rollout of our  specialty
apparel line. 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. We currently have no committed sources of additional  capital,
and there can be no assurance that any financing  arrangements will be available
in amounts or on terms  acceptable  to us, if at all.  Furthermore,  the sale of
additional  equity or  convertible  debt  securities  may  result in  additional
dilution  to  existing  stockholders.  If  adequate  additional  funds  are  not
available,  we may be  required  to  delay,  reduce  the  scope of or  eliminate
material parts of the implementation of our business  strategy.  This limitation
could  substantially  harm our  business,  results of  operations  and financial
condition.

WE HAVE A HISTORY OF OPERATING  LOSSES AND THERE CAN BE NO ASSURANCE THAT WE CAN
ACHIEVE OR MAINTAIN PROFITABILITY.

         We have a history of  operating  losses and may not  achieve or sustain
profitability.  We cannot guarantee that we will become  profitable.  Even if we
achieve profitability, given the competitive and evolving nature of the industry
in which we operate,  we may be unable to sustain or increase  profitability and
our failure to do so would adversely affect our business,  including our ability
to raise additional funds.

WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH.

         Our  strategy  envisions  growing our  business.  We plan to expand our
technology, sales, administrative and marketing organizations.  Any growth in or
expansion  of our  business  is  likely  to  continue  to place a strain  on our
management and administrative  resources,  infrastructure  and systems.  As with
other  growing  businesses,  we expect  that we will need to further  refine and
expand our business development capabilities,  our systems and processes and our
access to financing  sources.  We also will need to hire,  train,  supervise and
manage new employees.  These  processes are time  consuming and expensive,  will
increase management  responsibilities and will divert management  attention.  We
cannot assure you that we will be able to:

         o        expand our systems  effectively  or efficiently or in a timely
                  manner;

         o        allocate our human resources optimally;

         o        meet our capital needs;

         o        identify  and  hire  qualified   employees  or  retain  valued
                  employees; or

         o        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.


                                       25
<PAGE>


SUBSTANTIALLY  ALL OF OUR REVENUES  HAVE BEEN DERIVED FROM A RELATIVELY  LIMITED
PRODUCT LINE  CONSISTING OF WORK GLOVES,  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  high-performance
specialty gloves, targeted primarily to the construction, general and industrial
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  launched  specialty
work  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 specialty work 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
specialty work 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  glove and  specialty  work  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
workwear distribution channel from Gorgonz,  among others. Unknown or unforeseen
new entrants into our  distribution  channels,  particularly  low-cost  overseas
producers,  will further  increase the level of competition  in these  channels.
There can be no  assurance  that we will be able to maintain  our growth rate or
increase  our  market  share in our  distribution  channels  at the  expense  of
existing  competitors  and other  apparel  manufacturers  choosing  to enter the
market segments in which we compete. In addition, there can be no assurance that
we will be able to enter and achieve  significant  growth in other  distribution
channels.

FAILURE TO EXPAND INTO NEW DISTRIBUTION  CHANNELS AND NEW INTERNATIONAL  MARKETS
COULD MATERIALLY AND ADVERSELY IMPACT OUR GROWTH PLAN AND PROFITABILITY.

         Our sales  growth  depends in part on our  ability  to expand  from the
specialty  retail channels that we have focused on for the past seven years into
new  distribution  channels,  particularly  high-volume big box hardware chains.
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
and Australia,  and we are in the process of establishing  distribution networks
in Canada and the United Kingdom.  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.


                                       26
<PAGE>


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.

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.


                                       27
<PAGE>


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.

         All  of our  glove  products  are  manufactured  by  two  manufacturers
operating in China and Indonesia.  Our specialty  apparel products are currently
manufactured in the United States and Mexico.  We may in the future use offshore
manufacturers for all or some of these products.  In addition,  approximately 5%
of our fiscal 2005 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:

         o        political unrest, terrorism and economic instability resulting
                  in the disruption of trade from foreign countries in which our
                  products are manufactured;

         o        difficulties  in  managing   foreign   operations,   including
                  difficulties   associated   with   inventory   management  and
                  collection on foreign accounts receivable;

         o        dependence on foreign distributors and distribution networks;

         o        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;

         o        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;

         o        disruptions or delays in shipments;

         o        changes in local  economic  and  non-economic  conditions  and
                  standards in which our  manufacturers,  suppliers or customers
                  are located; and

         o        reduced   protection  for  intellectual   property  rights  in
                  jurisdictions outside the United States.

         These  and  other  factors  beyond  our  control  could  interrupt  our
manufacturers'  production in offshore facilities,  influence the ability of our
manufacturers to export our products cost-effectively or at all, inhibit our and
our  unaffiliated  manufacturer's  ability  to  produce  certain  materials  and
influence  our ability to sell our  products in  international  markets,  any of
which could have an adverse  effect on our business,  financial  conditions  and
operations.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.

         We rely in part on patent,  trade secret, trade dress and trademark law
to protect  our rights to certain  aspects of our  products,  including  product
designs, proprietary manufacturing processes and technologies,  product research
and concepts and recognized trademarks, all of which we believe are important to
the  success  of our  products  and our  competitive  position.  There can be no
assurance that any of our pending patent or trademark  applications  will result
in the  issuance  of a  registered  patent or  trademark,  or that any patent or
trademark granted will be effective in thwarting competition or be held valid if
subsequently challenged. In addition, there can be no assurance that the actions
taken by us to  protect  our  proprietary  rights  will be  adequate  to prevent
imitation of our  products,  that our  proprietary  information  will not become
known to competitors,  that we can meaningfully protect our rights to unpatented
proprietary   information  or  that  others  will  not   independently   develop
substantially  equivalent  or  better  products  that  do  not  infringe  on our
intellectual  property  rights.  We  could be  required  to  devote  substantial
resources  to enforce our patent and protect our  intellectual  property,  which
could divert our resources  and result in increased  expenses.  In addition,  an
adverse  determination  in litigation could subject us to the loss of our rights
to a particular patent or other intellectual property, could require us to grant
licenses to third parties, could prevent us from manufacturing, selling or using
certain  aspects of our products or could subject us to  substantial  liability,
any of which could harm our business.


                                       28
<PAGE>


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.


                                       29
<PAGE>


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 NEVER DEVELOP OR 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  no
established  public trading market for our common stock, and no assurance can be
given that a public trading  market will develop or, if developed,  that it 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.


                                       30
<PAGE>


IF AND WHEN A TRADING MARKET FOR OUR COMMON STOCK DEVELOPS,  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:

         o        quarterly variations in our revenues and operating expenses;

         o        developments in the financial  markets,  apparel  industry and
                  the worldwide or regional economies;

         o        announcements of innovations or new products or services by us
                  or our competitors;

         o        announcements  by the  government  that  affect  international
                  trade treaties;

         o        fluctuations  in  interest  rates  and / or the  asset  backed
                  securities market;

         o        significant  sales of our common stock or other  securities in
                  the open market;

         o        variations in interest rates; and

         o        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.

         Upon the  effectiveness  of a  registration  statement we filed in June
2006, up to 27,117,720 shares of common stock will become 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 are
subject to restrictions on transfer set forth in lock-up agreements with holders
of these shares. These include 6,497,509 shares of common stock and common stock
underlying warrants that were issued in connection with the merger with Ironclad
California  to former  holders of  preferred  stock of Ironclad  California  and
warrants  to purchase  preferred  stock of Ironclad  California,  and  2,039,444
shares  acquired in connection  with the purchase and  cancellation  transaction
completed  immediately  before our merger with  Ironclad  California.  Under our
lock-up  agreements  with  holders of  6,497,509  shares  issued in exchange for
preferred stock


                                       31
<PAGE>


and warrants to purchase preferred stock of Ironclad California, the shares will
only be released from restriction on the first anniversary of the effective date
of our merger with Ironclad  California.  Our lock-up agreements with holders of
2,039,444  shares of our common stock  acquired in connection  with the purchase
and cancellation transaction restrict the resale of these shares until the first
anniversary of the effective date of the merger, but provide for the termination
of  restrictions  with  respect to a limited  number of shares at various  times
before the  one-year  anniversary  date.  We, with the consent of the  placement
agents  in the  private  placement  financing  completed  concurrently  with the
merger, may also elect to waive the lock-up agreement restrictions as to certain
shares. 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.

         Some of our shares  may also be  offered  from time to time in the open
market pursuant to Rule 144, and these sales may have a depressive effect on the
market for our shares. In general, a person who has held restricted shares for a
period of one year may, upon filing with the Securities and Exchange  Commission
(or SEC) a notification on Form 144, sell into the market shares up to an amount
equal to 1% of the outstanding  shares.  The resale of the 3,489,444 shares held
by Gemini  and the  stockholders  who  acquired  shares in  connection  with the
purchase and cancellation  transaction  completed  immediately before the merger
with Ironclad  California may be registered as discussed above, but these shares
also may  currently  be  eligible  for sale under Rule 144.  The resale of these
shares under Rule 144 may cause our stock price to decline.
THE SALE OF  SECURITIES  BY US IN ANY EQUITY OR DEBT  FINANCING  COULD RESULT IN
DILUTION TO OUR EXISTING  STOCKHOLDERS AND HAVE A MATERIAL ADVERSE EFFECT ON OUR
EARNINGS.

         Any sale of common stock by us in a future private  placement  offering
could result in dilution to the existing  stockholders as a direct result of our
issuance of additional  shares of our capital stock.  In addition,  our business
strategy  may  include   expansion   through  internal   growth,   by  acquiring
complementary  businesses,  by acquiring or licensing  additional  brands, or by
establishing strategic  relationships with targeted customers and suppliers.  In
order to do so, or to  finance  the cost of our other  activities,  we may issue
additional  equity   securities  that  could  dilute  our  stockholders'   stock
ownership.  We may also  assume  additional  debt and  incur  impairment  losses
related to goodwill and other tangible  assets if we acquire another company and
this could negatively impact our earnings and results of operations.

THE TRADING OF OUR COMMON STOCK ON THE  OVER-THE-COUNTER  BULLETIN BOARD AND THE
POTENTIAL  DESIGNATION  OF OUR COMMON STOCK AS A "PENNY  STOCK" COULD IMPACT THE
TRADING MARKET FOR OUR COMMON STOCK.

         Our securities,  as traded on the 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


                                       32
<PAGE>


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 22% 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.


                                       33
<PAGE>


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.


                                       34
<PAGE>


ITEM 3.  CONTROLS AND PROCEDURES

         As of June 30, 2006, the end of the period covered by this report,  the
Company   conducted  an  evaluation,   under  the   supervision   and  with  the
participation of the Chief Executive Officer and Chief Financial Officer, of the
Company's  disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e))  under the 1934 Act. Based on this  evaluation,  the Chief  Executive
Officer and Chief  Financial  Officer  concluded  that the Company's  disclosure
controls and procedures are effective.

         There was no change in the Company's  internal  control over  financial
reporting  during the Company's most recently  completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


                                       35
<PAGE>


                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

POTENTIAL CLAIM

On May 2, 2006, an existing  shareholder of the Company identified the purported
existence of two warrants to purchase  approximately  517,746 shares and 467,410
shares  of  the  common  stock  of the  Company  at  exercise  prices  equal  to
approximately $0.116 and $0.139, respectively,  allegedly issued in June 2002 to
an entity owned by the shareholder.

The shareholder  has not raised a legal claim,  but has contacted the Company to
dispute  the  existence  of  the  warrants.   While  the  Company  continues  to
investigate  the matter,  the Company's  records  indicate that the  transaction
pursuant to which the warrants were intended to be issued was never consummated,
and as such, the warrants were never issued.  In the event that the  shareholder
determines to present the warrants for exercise,  the Company  intends to reject
any such action and expects to defend any purported claim vigorously.

If a legal claim is raised by the shareholder, and to the extent the shareholder
is  successful  in the  claim,  the  Company  agreed  to cause the  issuance  of
additional  shares of the Registrant's  common stock to each of the investors in
the Private Placement financing,  and to each of the holders of the Registrant's
shares issued and  outstanding  immediately  prior to the Merger,  on a pro rata
basis,  in such a manner  and in such  amounts as would be  necessary  to adjust
their respective ownership of the Registrant's common stock as of the closing of
the  Private  Placement  financing  and  Merger for any  dilution  caused by the
issuance of the warrants or any shares thereunder.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

In  connection  with the  Merger,  on May 2, 2006,  Ironclad  California  held a
shareholder  meeting to approve (a) the Merger with the Company (formerly Europa
Trade  Agency Ltd.)  pursuant to the terms of An  Agreement  and Plan of Merger,
including the private placement contemplated thereby, and (b) termination of the
Ironclad California  Securityholders  Agreement dated March 31, 2000, as amended
on August 30, 2002, and in March 2004 effective as of the closing of the Merger,
and the appointment of Thomas Kreig,  Corporate Secretary,  as Attorney in Fact,
to execute an  agreement or document on behalf of the  shareholders  pursuant to
which such Securityholders Agreement would be terminated.

Holders of 17,776,187 shares of Ironclad  California's common stock,  13,605,415
shares of its Series A Preferred Stock, 476,376 shares of its Series B Preferred
Stock approved the matters discussed above.


                                       36
<PAGE>


ITEM 6.  EXHIBITS

         THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REPORT:

EXHIBIT
NUMBER                               DESCRIPTION
-------  -----------------------------------------------------------------------
2.1      Agreement  and  Plan  of  Merger  between  Ironclad   Performance  Wear
         Corporation and Europa Trade Agency Ltd., dated April 20, 2006 (1)

4.1      Form of Warrant issued to Investors in Private Placement (2)

10.1     Separation  Agreement  between  Eduard Jaeger and Ironclad  Performance
         Wear Corporation, a California corporation*

10.5     Business  Loan  Agreement  (Asset  Based)  in the  principal  amount of
         $1,000,000,  by and between Ironclad  Berformance Wear  Corporation,  a
         California corporation, and Alliance Bank, dated March 31, 2005 (2)

10.6     Form of  Subscription  Agreement  between  the  Registrant  and certain
         investors,  dated  May 10,  2006 (2)

10.8     Form of  Registration  Rights  Agreement  between  the  Registrant  and
         certain shareholders, dated May 9, 2006 (2)

10.9     Form  of  Lock-Up   Agreement   between  the   Registrant  and  certain
         shareholders, dated May 9, 2006 (2)

10.10    Form of Lock-Up  Agreement  between the  Registrant  and certain former
         shareholders of Ironclad  Performance  Wear  Corporation,  a California
         corporation, dated May 9, 2006 (2)

31.1     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.

----------
(1)      Incorporated by reference to our Quarterly  Report on Form 10-QSB filed
         May 12, 2006.
(2)      Incorporated  by reference to our Current  Report on Form 8-K filed May
         12, 2006.
*        Indicates a management contract or compensatory plan.


                                       37
<PAGE>


                                   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: August 14, 2006                  By:  /S/ THOMAS E. WALSH
                                            --------------------------------
                                            Thomas E. Walsh
                                            Chief Financial Officer


                                       38
<PAGE>


                                  EXHIBIT INDEX


EXHIBIT
NUMBER                               DESCRIPTION
-------  -----------------------------------------------------------------------

2.1      Agreement  and  Plan  of  Merger  between  Ironclad   Performance  Wear
         Corporation and Europa Trade Agency Ltd., dated April 20, 2006 (1)

4.1      Form of Warrant issued to Investors in Private Placement (2)

10.1     Separation  Agreement  between  Eduard Jaeger and Ironclad  Performance
         Wear Corporation, a California corporation*

10.5     Business  Loan  Agreement  (Asset  Based)  in the  principal  amount of
         $1,000,000,  by and between Ironclad  Berformance Wear  Corporation,  a
         California corporation, and Alliance Bank, dated March 31, 2005 (2)

10.6     Form of  Subscription  Agreement  between  the  Registrant  and certain
         investors, dated May 10, 2006 (2)

10.8     Form of  Registration  Rights  Agreement  between  the  Registrant  and
         certain shareholders, dated May 9, 2006 (2)

10.9     Form  of  Lock-Up   Agreement   between  the   Registrant  and  certain
         shareholders, dated May 9, 2006 (2)

10.10    Form of Lock-Up  Agreement  between the  Registrant  and certain former
         shareholders of Ironclad  Performance  Wear  Corporation,  a California
         corporation, dated May 9, 2006 (2)

31.1     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.

----------
(1)      Incorporated by reference to our Quarterly  Report on Form 10-QSB filed
         May 12, 2006.
(2)      Incorporated  by reference to our Current  Report on Form 8-K filed May
         12, 2006.
*        Indicates a management contract or compensatory plan.


                                       39