10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2012

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 0-51365

IRONCLAD PERFORMANCE WEAR CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Nevada	98-0434104
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2201 Park Place, Suite 101

El Segundo, California 90245

(Address of Principal Executive Offices and Zip Code)

(310) 643-7800

(Registrant’s Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $0.001 per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large Accelerated Filer	o	Accelerated Filer	o
Non-accelerated Filer	o  (Do not check if smaller reporting company)	Smaller Reporting Company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes oNo x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $13,803,525.

At February 28, 2013, the issuer had 76,704,275 shares of common stock, par value $0.001 per share, issued and outstanding.

IRONCLAD PERFORMANCE WEAR CORPORATION

INDEX TO FORM 10-K

PART I		1
Item 1.	Business.	1
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments.	14
Item 2.	Properties.	14
Item 3.	Legal Proceedings.	14
Item 4.	Mine Safety Disclosures.	15
PART II		16
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	16
Item 6.	Selected Financial Data.	16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	23
Item 8.	Financial Statements and Supplementary Data.	24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	47
Item 9A.	Controls and Procedures.	47
Item 9B.	Other Information.	48
PART III		49
Item 10.	Directors, Executive Officers and Corporate Governance.	49
Item 11.	Executive Compensation.	53
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	58
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	62
Item 14.	Principal Accounting Fees and Services.	62
PART IV		63
Item 15.	Exhibits, Financial Statement Schedules.	63

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PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains “forward-looking statements” that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources.  These forward-looking statements include, without limitation, statements regarding: proposed new services; our expectations concerning litigation, regulatory developments or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; and other similar expressions concerning matters that are not historical facts.  Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved.  Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.  Important factors that could cause these differences include, but are not limited to other factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

Forward-looking statements speak only as of the date they are made.  You should not put undue reliance on any forward-looking statements.  We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.  If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Item 1.   Business.

With respect to this discussion, the terms “we,” “us,” “our,” “Ironclad” and the “Company” refer to Ironclad Performance Wear Corporation, a Nevada corporation and its wholly-owned subsidiary Ironclad Performance Wear Corporation, a California corporation, or “Ironclad California.”

General

Founded in 1998, we design and manufacture branded performance work wear for a variety of construction, do-it-yourself, industrial, sporting goods and general services markets.  Since inception, we have leveraged our proprietary technologies to design task-specific technical gloves and performance apparel designed to improve the wearer’s ability to safely, efficiently and comfortably perform specific job functions.  Our goal is to establish and maintain a reputation in the construction, do-it-yourself, industrial, sporting goods and general services markets as a leader in performance gloves and apparel.

We manufacture our performance gloves and apparel using functional materials, including DuPont™ Kevlar® and Teflon®, Clarino® Synthetic Leather, DriRelease® and Duraclad®.  We incorporate these materials in the manufacturing process to create products that meet the functional and protective requirements of our consumers.  Since inception, we have employed an in-house research and development department responsible for identifying and creating new products and applications, and improving and enhancing existing products.

We currently sell our products in all 50 states and internationally through an estimated 16,000 retail outlets.  Our gloves are priced at retail between $8 and $65 per unit, with apparel unit prices ranging from $4 to $80.

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Glove Products

Currently, our primary products are our task-specific technical gloves.  Glove products are specially designed for individual user groups.  Currently, we produce and sell over 75 distinct glove types in a variety of sizes and colors which cater to the specific demands and requirements of industrial, construction, do-it-yourself, and sporting goods consumers, including carpenters, machinists, package handlers, plumbers, welders, roofers, oil and gas workers, mechanics, hunters, gardeners and do-it-yourself users.  Gloves are available in multiple levels of protection and abrasion that allow the wearer to choose a product based on the task demands, weather and ease of motion.  Glove products are currently manufactured by multiple suppliers operating in China, Hong Kong, Cambodia, Dominican Republic and Indonesia.  The manufacturing capabilities necessary for the manufacturing of our gloves is not particularly specialized and we believe that we would be able to replace our current manufacturers without significant disruption in supply, if necessary.  Raw material suppliers and substitute materials are readily available and we believe that our manufacturers would be able to replace their current raw material suppliers without significant disruption in supply.

Apparel

We launched a line of performance apparel products during the fourth quarter of 2005.  This apparel line initially consisted of long and short sleeved shirts designed to increase the comfort and functionality of the wearer by taking into account environmental temperatures and workers’ corresponding perspiration levels.  The apparel is engineered to keep the wearer dry and cool under extreme work conditions.  Ironclad’s apparel products are comparable to Under Armour™ Products, but we have incorporated worker-centric features such as anti-microbials, SPF 30 sunscreen protection and self wicking, and have made our apparel products slightly heavier for durability.  Our existing sales force sells the performance apparel line to our existing customer base.  In 2007, we expanded the apparel line to include performance jackets, pants, shorts, reflective and polo shirts, underwear and tights.  The apparel line is manufactured by four suppliers located in Taiwan, Mexico, Vietnam and the Dominican Republic.  Manufacturing capacity for apparel is readily available and we believe that we would be able to replace our current manufacturers and add new manufacturers without significant disruption in supply.

In mid-2008, after completing an internal and competitive analysis, we determined that Ironclad should reduce its focus and attention on performance apparel because of the cost involved in launching a new line of business and promoting this new line into the marketplace.  As a result, we have decreased the number of performance apparel items produced and sold by the Company.  The reduction in performance apparel was guided by our sell-through analysis and a survey of our retail customers’ preferences.  Those apparel items remaining in Ironclad’s offerings will continue to be sold through our existing sales channels.

Competition

Ironclad competes in the following principal markets: industrial, construction and sport.

Technical Gloves

Ironclad faces competition from other specialty gloves and apparel companies, such as Custom Leathercraft Manufacturing Company, Ergodyne and Mechanix Wear.  Compared generally, we believe our material selection and construction provides for superior protection, durability, quality and repeat customers affording a substantial, sustainable advantage in the category.

Performance Work Apparel

We are one of a limited number of manufacturers of performance work apparel and, in the opinion of management, currently face relatively little competition from other manufacturers in this sector.  However, as mentioned above, we intend on de-emphasizing our work apparel line in favor of focusing on the task-specific technical glove business.  As such, our position in the performance work apparel market will decline significantly.

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Mainstream Product Channels

To date, we have established our reputation, customer loyalty and brand by selling our products through hardware stores, lumber yards, big box home centers, industrial distributors, automotive and sporting goods retailers.  We intend to continue to expand into additional large retailers and distributors in 2013.

International Expansion

We began distributing products internationally in 2005 in Australia and Japan.  In 2006, we entered the Canadian market through a distributor.  We expanded into the United Kingdom in 2007 and into Spain and the Netherlands in 2008.  In 2010 we expanded into Sweden through a direct customer.  We plan to expand further into Europe and other international markets in the future.

Ironclad Branding

We place an emphasis on the establishment and maintenance of our brand equity.  Since the inception of our business, our products have carried the “Ironclad” brand.  We believe that our success in building a dedicated following of users with substantial product penetration across a large number of retailers and storefronts was instrumental in recently allowing us to gain entry into larger retailers, and providing the foundation to expand internationally and into broader industrial distributors.

We have been expanding our efforts on Web sales and marketing through a redesigned Ironclad Website and will continue to focus on e-commerce (i.e. offering our complete line of gloves and apparel, in all sizes, directly to the end consumer).

Sales and Customer Analysis

We are currently distributing our products through an estimated 16,000 outlets that cater to the professional tradesman, do-it-yourself consumer, industrial user and sporting goods consumer, including “Big Box” home centers, hardware co-ops, lumber yards, industrial distributors, national auto retailers and sporting goods retailers.  Currently, we estimate that our products are sold in only 25% of the retail and distribution outlets identified by our management as viable Ironclad outlets.  We intend to continue to emphasize and expand our relationships with these retailers and distributors.

Sales through industrial distributors accounted for approximately 53% and 44% of our sales revenue in 2012 and 2011, respectively.  One distributor, Orr Safety Corporation, accounted for approximately 41% of our sales in 2012 and approximately 29% of our sales in 2011.

Selected Analysis of “Big Box” and International Retailers

We plan to continue our expansion by increasing selling efforts through “Big Box” home centers, large industrial distributors and international channels, which we believe creates significant opportunities for strengthening our brand and expanding our product penetration in the various markets.

Geographic Information

Domestic sales accounted for 82% of our revenue in 2012 and 87% in 2011.  International sales in Australia, the United Kingdom, Canada, the Netherlands, Sweden and other countries accounted for our remaining revenue in each year.  All of our fixed assets are located in the United States, principally in California at our headquarters.  Our products are currently manufactured in China, Hong Kong, Indonesia, Cambodia, Taiwan, Mexico, Vietnam and the Dominican Republic.

Private-Label and Co-Branded Products and Relationships

We have selectively teamed up with several existing brands in our marketplace to produce private-label gloves (co-branded with a “Built Tough by Ironclad” tag).  In addition, we have also developed co-branded gloves with qualified partners to penetrate alternate marketplaces, such as the oil & gas industry (i.e. the KONG glove).  We have also licensed several brand names (Snap-on, RealTree, Tuff Chix, Coleman) whereby we have the right to use their logo or patterns on gloves we produce for sale to our customers.

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Intellectual Property and Proprietary Rights

We currently have six U.S. patents, one international patent and three U.S. patents pending, which are intended to protect the design and technical innovations found in our performance work gloves.  Following are descriptions of the patents or patents pending.

· Advanced Touch® Technology is a seamless fingertip design that places a smooth layer of material on the touch receptors of the fingers.  The result is an increase in comfort and a high degree of touch sensitivity.  It is used in Ironclad’s Tuff Chix® and Ranchworx® gloves as well as most gloves built for 5.11 Tactical.  This patent was issued on October 30, 2007.

· Ironclad’s Engineered Grip System consists of a uniquely patterned, molded thermoplastic elastomer, or TPE, that is welded to a synthetic leather palm.  It provides extreme grip and abrasion protection without sacrificing hand dexterity.  It is found in Ironclad’s Extreme Duty® glove, which is designed to handle brick, cement block, rebar, and demolition rubble.  The Extreme Duty glove is primarily used by search and rescue professionals, including units of the New York and Los Angeles Fire Departments.  This patent was issued on September 5, 2006.

· Silicone rubber is fused to the synthetic leather palm of the Box Handler® and Gripworx® gloves in a specific pattern.  The patent for this pattern, designed for optimum grip on smooth surfaces, was issued April 28, 2008.

· Ironclad’s signature palm pattern is found on nine popular glove styles, including the General Utility™, Wrenchworx® and Ranchworx® gloves.  Management believes this pattern differentiates Ironclad from other non-branded gloves.  This patent was issued on February 14, 2006.

· Ironclad has developed two glove styles that absorb tool impacts with a unique design of multiple gel-filled palm pads.  This design is found on the Vibration Impact and Mach 5® Impact and Snap-on Impact gloves.  This patent was issued on February 13, 2007.

· Ironclad has designed a new silicone impregnated palm pattern specifically for use in automotive market glove products.  This patent was issued on July 6, 2010.

· Ironclad has developed a heat resistant, shrink resistant, oil repellant, high durability synthetic fabric used for the palm of high temperature, high dexterity gloves.  Exclusive Ironclad Hotshield ® palm technology is found in the Heatworx® line.  This patent is pending.

· Utilized in the complete line of KONG™ gloves, specific geometry and construction for a glove used in the oil and gas extraction industries provides protection to the entire hand for impacts, glancing blows and pinched fingers.  This patent is pending.

· Ironclad has created a new glove palm material and design that provides oil resistance, heat resistance and improved grip in the presence of heavy oil saturation.  This patent is pending.

Ironclad owns the following trademark intellectual property: 58 registered U.S. trademarks, 12 in-use U.S. trademarks, 1 trademark pending registration and 22 registered international trademarks.  These trademarks significantly strengthen consumer awareness of the Ironclad brand, and enable Ironclad to maintain distinction between it and other companies trying to copy the Ironclad brand image.  We also have 7 copyright marks.

We seek to protect our intellectual property through existing laws and regulations, and by contractual restrictions.  We rely upon trademark, patent and copyright law, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to help us protect our intellectual property.

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The status of any patent involves complex legal and factual questions.  The scope of allowable claims is often uncertain.  As a result, we cannot be sure that any patent application filed by us will result in a patent being issued, nor that any patents issued in the future will afford adequate protection against competitors with similar technology; nor can we provide assurance that patents issued to us will not be infringed upon or be designed around by others.

Employees

As of February 28, 2013, Ironclad had 29 full-time employees.  Since inception, we have never had a work stoppage, and our employees are not represented by a labor union.  Ironclad considers its relationships with its employees to be positive.

Item 1A.  Risk Factors

Investing in our common stock involves a high degree of risk.  You should carefully consider the following risk factors and all other information contained in this report before purchasing our common stock.  The risks and uncertainties described below are not the only ones facing us.  Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us.  If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected.  In that case, the trading price of our common stock could decline, and you may lose some or all of the money you paid to purchase our common stock.

RISKS RELATING TO OUR BUSINESS

We may need additional funding to support our operations and capital expenditures.  Our inability to obtain such funding could adversely affect our business.

We have funded our operations and capital expenditures with cash flow from operations, our cash on hand, the net proceeds of the private placements and credit agreements.  As part of our planned growth, we will be required to make expenditures necessary to expand and improve our operating and management infrastructure.

While capital resources have historically been insufficient to support the continued growth of our operations, we believe that the proceeds from our financing transactions, our cash flows from operations and borrowings available to us under our senior secured credit facility, the availability of purchase order financing and our continuing cost containment measures will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months.  In the event that our working capital needs exceed our cash sources we will need to raise additional funds.  There can be no assurance that any financing arrangements will be available in amounts or on terms acceptable to us, if at all.  Furthermore, if we are able to raise additional capital through the sale of equity or convertible debt securities it may result in additional dilution to our existing shareholders.  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.

Our operating results may fluctuate significantly and our stock price could decline or fluctuate if our results do not meet the expectation of analysts or investors.

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

· the timing of our introduction of new product lines;

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

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

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· the availability of manufacturing capacity;

· the seasonality of the markets in which we participate;

· the timing of trade shows;

· the product mix of customer orders;

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

· the weather;

· transportation delays;

· quotas and other regulatory matters; and

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

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

We have a history of operating losses and there can be no assurance that we can maintain profitability.

We have a history of operating losses and may not sustain profitability.  We cannot guarantee that we will remain profitable.  Even if we remain profitable, 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, potentially requiring us to raise additional funds to continue operations.

We may be unable to effectively manage our growth.

Our strategy envisions growing our business.  Any growth in or expansion of our business is likely to continue to place a strain on our financial, managerial and other administrative resources, infrastructure and systems.  We have historically been undercapitalized to effectively manage and sustain our growth.  As with other growing businesses, we expect that we will need to continually restructure and expand our business development capabilities, our systems and processes and our access to financing sources.  We also will need to hire, train, supervise and manage new employees.  These processes are time consuming and expensive, will increase management responsibilities and will divert management attention.  We cannot assure you that we will be able to:

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

· allocate our human resources optimally;

· meet our capital needs;

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

· incorporate effectively the components of any business or product line that we may acquire in our effort to achieve growth.

Our inability or failure to manage our growth and expansion effectively could harm our business and materially and adversely affect our operating results and financial condition.

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Substantially all of our revenues have been derived from a relatively limited product line consisting of task-specific gloves and performance apparel, and our future success depends on our ability to expand our product line and achieve broader market acceptance of our company and our products.

To date, our products have consisted mainly of task-specific gloves and performance apparel, targeted primarily to the construction, do-it-yourself, industrial and sporting goods markets.  Our success and the planned growth and expansion of our business depend on us achieving greater and broader acceptance in our existing market segments as well as in new segments.  We may be required to enter into new arrangements and relationships with vendors, suppliers and others to achieve broader acceptance of our products, but cannot guarantee that we will be able to enter into such relationships.  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 continue to expend resources on promoting, marketing and advertising to increase product awareness, we cannot guarantee that any expenses we incur in such efforts will generate the desired product awareness or commensurate increase in sales of our products.  If we are unable to expand into new market segments, we may be unable to grow and expand our business or implement our business strategy as described in this report.  This could materially impair our ability to increase sales and revenue and materially and adversely affect our margins, which could harm our business and cause our stock price to decline.

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

The performance task specific glove and apparel industries are highly competitive.  There are several other companies that provide similar products, many of which are larger and have greater financial resources than us.  Our future growth and financial success depend on our ability to further penetrate and expand our existing distribution channels and to increase the size of our average annual net sales per account in these channels, as well as our ability to penetrate and expand other distribution channels.  For example, we encounter competition in our existing glove and workwear distribution channels from a number of competitors.  Unknown or unforeseen new entrants into our distribution channels, particularly low-cost overseas producers, will further increase the level of competition in these channels.  There can be no assurance that we will be able to maintain our growth rate or increase our market share in our distribution channels at the expense of existing competitors and other apparel manufacturers choosing to enter the market segments in which we compete.  In addition, there can be no assurance that we will be able to enter and achieve significant growth in other distribution channels.

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 our existing hardware and lumber retail channels and industrial distributors into new distribution channels, particularly “Big Box” home centers and work wear and sporting goods retailers.  Failure to expand into these mass-market channels could severely limit our growth.

Our business plan also depends in part on our ability to expand into international markets.  We have begun the distribution of our products in Japan, Australia, Canada and Europe and we are in the process of establishing additional distribution in Europe and other international markets.  Failure to expand international sales through these and other markets could limit our growth capability and leave us vulnerable solely to United States market conditions.

Our dependence on independent manufacturers reduces our ability to control the manufacturing process, which could harm our sales, reputation and overall profitability.

We depend on independent contract manufacturers to maintain sufficient manufacturing and shipping capacity in an environment characterized by declining prices, labor shortages, continuing cost pressure and increased demands for product innovation and speed-to-market.  This dependence could subject us to difficulty in obtaining timely delivery of products of acceptable quality.  In addition, a contractor’s failure to ship products to us in a timely manner or to meet the required quality standards could cause us to miss the delivery date requirements of our customers.  The failure to make timely deliveries may cause our customers to cancel orders, refuse to accept deliveries, impose non-compliance charges through invoice deductions or other charge-backs, demand reduced prices or reduce future orders, any of which could harm our sales, reputation and overall profitability.

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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 our requirements, our business would be harmed.

We have initiated standards for our suppliers, and monitor our independent contractors’ compliance with applicable labor laws, but we do not control our contractors or their labor practices.  The violation of federal, state or foreign labor laws by one of our contractors could result in us being subject to fines and our goods that are manufactured in violation of such laws being seized or their sale in interstate commerce being prohibited.  To date, we have not been subject to any sanctions that, individually or in the aggregate, have had a material adverse effect on our business, and we are not aware of any facts on which any such sanctions could be based.  There can be no assurance, however, that in the future we will not be subject to sanctions as a result of violations of applicable labor laws by our contractors, or that such sanctions will not have a material adverse effect on our business and results of operations.

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

We have entered into an agreement to outsource most of our warehouse and fulfillment functions to a single provider where we will consolidate most of our inventory at one site, which is managed by an independent contractor who will then perform most of our warehousing, assembly, packaging and fulfillment services.  We depend on our independent contractor fulfiller to properly fulfill customer orders in a timely manner and to properly protect our inventories.  The contractor’s failure to ship products to customers in a timely manner, to meet the required quality standards, to correctly fulfill orders, to maintain appropriate levels of inventory, or to provide adequate security measures and protections against excess shrinkage could cause us to miss delivery date requirements of our customers or incur increased expense to replace or replenish lost or damaged inventory or inventory shortfall.  The failure to make timely and proper deliveries may cause our customers to cancel orders, refuse to accept deliveries, impose non-compliance charges through invoice deductions or other charge-backs, demand reduced prices or reduce future orders, any of which could harm our sales, reputation and overall profitability.

Trade matters may disrupt our supply chain, which could result in increased expenses and decreased sales.

We cannot predict whether any of the countries in which our merchandise currently is manufactured or may be manufactured in the future will be subject to additional trade restrictions imposed by the U.S. and other foreign governments, including the likelihood, type or effect of any such restrictions.  Trade restrictions, including increased tariffs or quotas, embargoes, safeguards and customs restrictions, against apparel items, as well as U.S. or foreign labor strikes, work stoppages or boycotts, could increase the cost or reduce the supply of apparel available to us and adversely affect our business, financial condition and results of operations.  Although the quota system established by the Agreement on Textiles and Clothing was completely phased out for World Trade Organization countries effective January 1, 2005, there can be no assurances that restrictions will not be reestablished for certain categories in specific countries.  We are unable to determine the impact of the changes to the quota system on our sourcing operations, particularly in China.  Our sourcing operations may be adversely affected by trade limits or political and financial instability resulting in the disruption of trade from exporting countries, significant fluctuation in the value of the U.S. dollar against foreign currencies, restrictions on the transfer of funds and/or other trade disruptions.

Our international operations, and the operations of our foreign manufacturers and suppliers, are subject to additional risks that are beyond our control and that could harm our business.

Our glove products are manufactured by 7 manufacturers operating in China, Hong Kong, Indonesia and Cambodia. Our performance apparel products are manufactured in Taiwan, Vietnam, Mexico and the Dominican Republic.  We may in the future use offshore manufacturers for all or some of these products.  In addition, approximately 18% of our fiscal 2012 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:

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

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

· dependence on foreign distributors and distribution networks;

· currency exchange fluctuations and the ability of our Chinese manufacturers to change the prices they charge us based on fluctuations in the value of the U.S. dollar relative to that of the Chinese Yuan;

· the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards as well as restrictions on the transfer of funds;

· disruptions or delays in shipments;

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

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

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

We may be unable to adequately protect our intellectual property rights.

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

We may become subject to litigation for infringing the intellectual property rights of others.

Others may initiate claims against us for infringing on their intellectual property rights.  We may be subject to costly litigation relating to such infringement claims and we may be required to pay compensatory and punitive damages or license fees if we settle or are found culpable in such litigation, we may be required to pay damages, including punitive damages.  In addition, we may be precluded from offering products that rely on intellectual property that is found to have been infringed by us.  We also may be required to cease offering the affected products while a determination as to infringement is considered.  These developments could cause a decrease in our operating income and reduce our available cash flow, which could harm our business and cause our stock price to decline.

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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 Albert Jaeger, Scott Jarus 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 their 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.

Adverse conditions in the economy and disruption of financial markets could negatively impact us and our customers and therefore our results of operations.

A further economic downturn in the businesses or geographic areas in which we sell our products could reduce demand for these products and result in a decrease in sales volume that could have a negative impact on our results of operations.  Volatility and disruption of financial markets could limit our ability, as well as our customers’ ability, to obtain adequate financing or credit to purchase and pay for our products in a timely manner, or to maintain operations, and result in a decrease in sales volume that could have a negative impact on our results of operations.

If we are unable to adequately fund our operations, we may be forced to voluntarily file for deregistration of our common stock with the U.S. Securities and Exchange Commission.

Compliance with the periodic reporting requirements required by the U.S. Securities and Exchange Commission (or SEC) consumes a considerable amount of both internal, as well external, resources and represents a significant cost for us.  If we are unable to continue to devote adequate funding and the resources needed to maintain such compliance, while continuing our operations, we may be forced to deregister with the SEC.  If we file for deregistration, our common stock will no longer be listed on NASDAQ’s OTC Bulletin Board (or OTCBB), and it may suffer a decrease in or absence of liquidity as after the deregistration process is complete, our common stock will only be tradable on the “Pink Sheets.”  As a result of such deregistration, non-affiliates will no longer have access to information regarding our results of operations.  Without the availability of such information, our lenders may be forced to increase their monitoring of our operations which may result in higher costs to us when borrowing money which could have a negative impact 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 designs, 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 designs and materials that we might hold at the present time.

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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.  Since we have entered 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.

Changes in international treaties or governmental regulatory schemes could adversely impact our business.

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 entities such as the World Trade Organization, could result in a rise in trade quotas, duties, taxes and similar impositions, limit the countries from whom we can purchase our fabric or other component materials, or limit the countries where we might market and sell our products, any of which could correspondingly 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 effect on our business.  The FTC requires apparel companies to provide a label clearly stating the country of origin of manufacture and the company’s apparel registration number and a second label stating washing instructions for the product.  A change in these requirements could add additional cost to the production of our products, though we do not believe that this additional cost would be material, especially in relation to the cost of producing our products.

RISKS RELATING TO OUR COMMON STOCK

There is a limited trading market for our common stock and a market for our stock may not be sustained, which will adversely affect the liquidity of our common stock and could cause our market price to decline.

Although prices for our shares of common stock are quoted on the OTCBB (under the symbol ICPW), there is a limited public trading market for our common stock, and no assurance can be given that a public trading market will be sustained.

Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders.  The absence of an active trading market reduces the liquidity of our common stock.  As a result of the lack of trading activity, the quoted price for our common stock on the OTC Bulletin Board is not necessarily a reliable indicator of its fair market value.  Further, if we cease to be quoted, holders of our common stock would find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock, and the market value of our common stock would likely decline.

The market price of our common stock is likely to be highly volatile and subject to wide fluctuations, and you may be unable to resell your shares at or above the offering price.

The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including announcements of new products or services by our competitors.  In addition, the market price of our common stock could be subject to wide fluctuations in response to a variety of factors, including:

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· quarterly variations in our revenues and operating expenses;

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

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

· announcements by the government that affect international trade treaties;

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

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

· changes in accounting principles.

In the past, stockholders have often instituted securities class action litigation after periods of volatility in the market price of a company’s securities.  If a stockholder were to file any such class action suit against us, we would incur substantial legal fees and our management’s attention and resources would be diverted from operating our business to respond to the litigation, which could harm our business.

Substantial future sales of our common stock in the public market could cause our stock price to fall.

Sales of a significant number of shares of our common stock in the open market could depress the market price of our common stock.  Further reduction in the market price for our shares could make it more difficult to raise funds through future equity offerings.

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 options and warrants), the supply of our publicly traded shares will increase, which could decrease its price.

Some of our shares may also be offered from time-to-time in the open market pursuant to Rule 144, and these sales may have a depressive effect on the market for our shares.  In general, a non-affiliate who has held restricted shares for a period of six months may sell an unrestricted number of shares of our common stock into the market.  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 OTCBB 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 OTCBB, 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 therefor.

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In addition, the SEC has adopted a number of rules to regulate “penny stock” that restrict transactions involving these securities.  Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934, as amended.  These rules may have the effect of reducing the liquidity of penny stocks.  “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market if current price and volume information with respect to transactions in such securities is provided by the exchange or system).  Because our securities may constitute “penny stock” within the meaning of the rules, the rules would apply to us and to our securities.

Shareholders should be aware that, according to the 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 36% of our outstanding common stock.  As a result, these stockholders will be able to affect the outcome of, or exert significant influence over, all matters requiring stockholder approval, including the election and removal of directors and any change in control.  In particular, this concentration of ownership of our common stock could have the effect of delaying or preventing a change of control of us or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of us.  This, in turn, could have a negative effect on the market price of our common stock.  It could also prevent our stockholders from realizing a premium over the market prices for their shares of common stock.  Moreover, the interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders, and accordingly, they could cause us to enter into transactions or agreements that we would not otherwise consider.

Anti-takeoverprovisions 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 bylaws, as amended, 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.

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Item 1B.  Unresolved Staff Comments.

Not applicable.

Item 2.   Properties.

We lease all of our facilities.  Our headquarters are located at 2201 Park Place, Suite 101, El Segundo, California 90245.  The table below sets forth certain information regarding our leaseholds as of February 28, 2013.

Address	Approximate Floor Space (Sq. Ft.)	Monthly Rent	Use
2201 Park Place, Suite 101 El Segundo, CA	8,900	$13,216*	Corporate offices and warehouse

* In 2012 we received a rent abatement of 50% for six months.

In July 2011 we exercised our option to extend our current lease for an additional five years.   As part of this renewal process we reduced our square footage by approximately 1,700 square feet of unneeded warehouse space in exchange for six months of rent concessions and approximately $40,000 of tenant improvements.  We believe our facilities are adequate to meet our current and near-term needs.

Item 3.   Legal Proceedings.

On or around April 26, 2012, one of our stockholders (the “Plaintiff”) filed a lawsuit in the California Superior Court, together with an ex parte application for a temporary restraining order, attempting to immediately restrain us from conducting the election of directors on May 23, 2012 unless we included certain nominees proposed by the Plaintiff on the ballot for election.  In connection with the application the Plaintiff requested that the Court set a hearing for a preliminary injunction on the same issue prior to the election that was held on May 23, 2012.  We were successful in opposing the ex parte application and the Court denied the relief requested to set a hearing for the preliminary injunction.  On or around May 10, 2012, the Plaintiff filed another ex parte application in connection with the same action, seeking substantially similar relief.  We were again successful in opposing the application.

We held our annual meeting as planned on May 23, 2012.  The slate nominated by our board of directors was successfully nominated and elected.  We did not nominate or present as a matter of business the director slate proposed by the Plaintiff.

On May 29, 2012, we filed an action in the US District Court for the Central District of California against the Plaintiff and certain other shareholders alleging, among other matters, violations of the U.S. securities laws and seeking declaratory relief relating to the interpretation of our bylaws.  We sought monetary damages and injunctive relief asking the court to order the defendant to cease violating the securities laws.

In August 2012, two of the defendant shareholders purported to substitute themselves as plaintiffs in the original state action (in place of the Plaintiff) (the “New Plaintiffs”) and concurrently filed another ex parte application with the California Superior Court seeking a hearing under California Corporations Code Section 709 to determine whether the Plaintiff and the New Plaintiffs were denied the right to vote at our 2012 annual meeting, and to set aside the results of our 2012 annual meeting.  Without deciding on the merits of the parties’ arguments, the Court scheduled the hearing for January 2013.

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In late September 2012, we conducted a mediation proceeding with the New Plaintiffs and ultimately agreed to a non-binding resolution of all disputes under the state and federal actions.  All parties thereafter dismissed the pending state and federal proceedings without prejudice.

On December 17, 2012, we entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”), dated December 14, 2012, by and among our company, Scott Jarus, Scott Alderton, Eduard A. Jaeger, R.D. Pete Bloomer, Vane Clayton and David Jacobs, on the one hand, and Kenneth J. Frank, Richard B. Kronman, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter and Marcel Sassola, on the other hand, pursuant to which we and the then-current members of our board of directors (the “Board”) agreed to a final settlement and release of claims with respect to the actions described above filed by Richard Kronman, Marcel Sassola and Kenneth Frank on behalf of certain of our stockholders (collectively, the “Claimants”), against our company in the California Superior Court, and the actions described above filed by our company against the Claimants in the United States District Court for the Central District of California.

Under the Settlement Agreement, Scott Alderton agreed to resign from the Board and we agreed to appoint Charles H. Giffen and Michael A. DiGregorio to fill the vacant seats on the Board (accounting for an increase in the size of the Board to seven).  The Settlement Agreement also provides for the replacement of certain members of the Board prior to our 2013 annual meeting of stockholders should such members resign.  In addition, the parties to the Settlement Agreement agreed that the persons to be nominated to be members of the Board at our 2013 annual meeting of stockholders shall be the persons who are members of the Board pursuant to the Settlement Agreement.  The parties also agreed that each of the Claimants and each of Eduard A. Jaeger and Scott Jarus (who individually are parties to the Voting Agreement referenced below), will vote all of their shares of our voting stock in favor of those nominees at or in connection with our 2013 annual meeting of stockholders.  The provisions of the Settlement Agreement related to the composition of our board of directors expire automatically upon the conclusion of our 2013 annual meeting of stockholders unless terminated earlier in accordance with the terms of the Settlement Agreement.

To effectuate the parties agreement with respect to voting shares of our voting stock, on December 17, 2012, we also entered into a Voting Agreement, dated December 14, 2012, with Kenneth J. Frank, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter, Marcel Sassola, Eduard A. Jaeger, Richard B. Kronman and Scott Jarus.

Item 4.   Mine Safety Disclosures.

Not applicable.

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PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Common Stock

Our common stock is quoted on the OTC Bulletin Board under the symbol “ICPW.”  The following table sets forth, for the periods indicated, the high and low bid information for the common stock, as determined from sporadic quotations on the OTC Bulletin Board.  The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

	High		Low
Year Ended December 31, 2011
First Quarter	$	0.13	$	0.09
Second Quarter	$	0.12	$	0.08
Third Quarter	$	0.12	$	0.08
Fourth Quarter	$	0.20	$	0.10
Year Ended December 31, 2012
First Quarter	$	0.33	$	0.16
Second Quarter	$	0.30	$	0.18
Third Quarter	$	0.26	$	0.16
Fourth Quarter	$	0.30	$	0.20

On February 28, 2013, the closing sales price of our common stock as reported on the OTC Bulletin Board was $0.285 per share.  As of February 28, 2013, there were approximately 145 shareholders of record of our common stock.

Dividends

We have never paid dividends on our common stock.  We intend to retain any future earnings for use in our business.

Recent Sales of Unregistered Securities

On February 7, 2012, we issued 60,000 shares of our common stock upon the exercise of a warrant at an exercise price of $0.05 per share.  In making the aforementioned issuance without registration under the Securities Act of 1933, as amended (the “Securities Act”), we relied upon one or more of the exemptions from registration contained in and/or promulgated under Section 4(2) of the Securities Act as the stock recipient was an accredited investor and no general solicitation or advertising was used in connection with the stock issuance.

Item 6.    Selected Financial Data.

Not applicable.

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Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read together with the Consolidated Financial Statements of Ironclad Performance Wear Corporation and the “Notes to Consolidated Financial Statements” included elsewhere in this report.  This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and liquidity and cash flows of Ironclad Performance Wear Corporation for the fiscal years ended December 31, 2012 and 2011.  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.

Overview

We are a leading designer and manufacturer of branded performance work wear.  Founded in 1998, we have grown and leveraged our proprietary technologies to produce task-specific gloves and performance apparel that are designed to significantly improve the wearer’s ability to safely, efficiently and comfortably perform general to highly specific job functions.  We have built and continue to augment our reputation among professionals in the construction and industrial service markets, and do-it-yourself and sporting goods consumers with products specifically designed for individual tasks or task types.  We believe that our dedication to quality and durability and focus on our clients’ needs has created a high level of brand loyalty and has solidified substantial brand equity.

We plan to increase our domestic revenues by leveraging our relationships with existing retailers and industrial distributors, including “Big Box” and sporting goods retailers, increasing our product offerings in new and existing locations, and introducing new products, developed and targeted for specific customers and/or industries.

We believe that our products have international appeal.  In 2005, we began selling products in Australia and Japan through independent distributors, which accounted for approximately 4% of total sales.  From 2006 through 2012 we entered the Canadian and European markets through distributors.  International sales have grown from approximately 7% - 18% of total sales in 2012.  We plan to continue to increase sales internationally by expanding our distribution into Europe and other international markets during the fiscal year ending December 31, 2013.

Critical Accounting Policies, Judgments and Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results 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, however, we have negotiated special terms with certain customers and industries.  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 shipped or delivered to a customer, based on terms of agreement with a customer.

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Cost of Goods Sold

Our cost of goods sold includes the FOB cost of the product plus landed costs.  Landed costs include freight-in, insurance, duties and administrative costs to deliver the finished goods to our distribution warehouse.  Cost of goods sold does not include purchasing costs, warehousing or distribution costs.  These costs are captured as incurred on a separate line in operating expenses.  Our gross margins may not be comparable to other entities that may include some or all of these costs in the calculation of gross margin.

Inventory Obsolescence Allowance

We review the inventory level of all products quarterly.  For most glove products 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.  Due to limited market penetration for our apparel products we have decided to provide a 35%-40% allowance against this line of products.  Products that are no longer part of the current product offering are considered obsolete.  The potential for re-sale of slow-moving and obsolete inventories is based upon our assumptions about future demand and market conditions.  The recorded cost of obsolete inventories is then reduced to zero and a reserve is established for slow moving products.  Both the write down and reserve adjustments are recorded as charges to cost of goods sold.  For the years ended December 31, 2012 and December 31, 2011 we adjusted our inventory reserve by $159,000 and $240,000, respectively, to a current balance of $619,000 and recorded a corresponding adjustment in cost of goods sold.  All adjustments for obsolete inventory establish a new cost basis for that inventory as we believe such reductions are permanent declines in the market price of our products.  Generally, obsolete inventory is sold to companies that specialize in the liquidation of these items or contributed to charities, while we continue to market slow-moving inventories until they are sold or become obsolete.  As obsolete or slow-moving inventory is sold or disposed of, we reduce the reserve.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.  Our current customers consist of large national, regional and smaller independent customers with good payment histories with us.  In 2010 we began factoring certain accounts receivable without recourse with our factor.   In December 2012 we terminated this factoring arrangement.  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 by us for credit worthiness before terms are established.  Although we expect to collect all amounts due, actual collections may differ.

Product Returns, Allowances and Adjustments

Product returns, allowances and adjustments is a broad term that encompasses a number of offsets to gross sales.  Included herein are warranty returns of defective products, returns of saleable products and accounting adjustments.

Warranty Returns - We have a warranty policy that covers defects in workmanship.  It allows customers to return damaged or defective products to us following a customary return merchandise authorization process.

Saleable Product Returns - We may allow from time-to-time, depending on the customer and existing circumstances, stock adjustment returns, whereby the customer is given the opportunity to ‘trade out’ of a style of product that does not sell well in their territory, usually in exchange for another product, again following the customary return merchandise authorization process.  In addition we may allow from time to time other saleable product returns from customers for other business reasons, for example, in settlement of an outstanding accounts receivable, from a discontinued distributor customer or other customer service purpose.

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Accounting Adjustments - These adjustments include pricing and shipping corrections and periodic adjustments to the product returns reserve.

For both warranty and saleable product returns we utilize actual historical return rates to determine our allowance for returns in each period, adjusted for unique, one-time events.  Gross sales are reduced by estimated returns.  We record a corresponding accrual for the estimated liability associated with the estimated returns which is based on the historical gross sales of the products corresponding to the estimated returns.  This accrual is offset each period by actual product returns.

Our current estimated future sales return rate is approximately 1.5% and our current estimated future warranty product 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 period by applying this historical return rate and reducing actual gross sales for that period by a corresponding amount.  We believe that using a trailing 12-month return rate provides us with a sufficient period of time to establish recent historical trends in product returns for two primary reasons: (i) our products’ useful life is approximately 3-4 months and (ii) we are able to quickly correct any significant quality issues as we learn about them.  If an unusual circumstance exists, such as a product that has begun to show materially different actual return rates as compared to our average 12-month return rates, we will make appropriate adjustments to our estimated return rates.  Factors that could cause materially different actual return rates as compared to the 12-month return rates include a new product line, a change in materials or product being supplied by a new factory.  Although we have no specific statistical data on this matter, we believe that our practices are reasonable and consistent with those of our industry.  Our warranty terms under our arrangements with our suppliers do not provide for individual products returned by retailers or retail customers to be returned to the vendor.

Reserve for Warranty Returns
Reserve Balance 12/31/10	$	57,000
Payments Recorded During the Period		(333,665	)
		(276,665	)
Accrual for New Liabilities During the Reporting Period		338,665
Reserve Balance 12/31/11		62,000
Payments Recorded During the Period		(348,371	)
		(286,371	)
Accrual for New Liabilities During the Reporting Period		351,371
Reserve Balance 12/31/12	$	65,000

Stock Based Compensation

The Company accounts for stock based compensation under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Share-Based Payment.  This statement establishes standards surrounding the accounting for transactions in which an entity exchanges its equity instruments for goods and services.  The statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as the options issued under our stock option plans.  We follow a fair value approach using an option-pricing model, Black-Scholes option valuation model, at the date of a stock option grant.  The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option.

Income Taxes

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

19

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be effectively sustained.  The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than-not that the position will be sustained upon examination, including the resolution of appeals or litigation, if any.  Tax positions taken are not offset or aggregated with other positions.  Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority.  The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  We have reported losses for 2003, 2004, 2005, 2006, 2007, 2008 and 2009, and uncertainty exists as to whether benefits from deferred tax assets will be utilized.  In the past we have fully reserved our deferred tax assets, however, we have now had several years in a row of sustained profits and believe it would now be appropriate to reduce this valuation allowance.  Accordingly we have reduced our valuation allowance to approximately 70%.  There remains sufficient future uncertainty that we have determined not to record any long-term deferred tax assets at this time.

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

Recent Accounting Pronouncements

In July 2012, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles – Goodwill and Others: Testing Indefinite-Lived Intangible Assets for Impairment”, to allow entities to use a qualitative approach to test indefinite-lived assets for impairment.  ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-live intangible asset is less than its carrying value.  If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying value.  Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for impairment tests for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted.  We adopted the provisions of this standard and noted no material impact on our financial condition or results of operations.

Results of Operations

Comparison of Years Ended December 31, 2012 and December 31, 2011

Net Sales increased $4,779,112, or 22.3%,to$26,180,114 in the year ended December 31, 2012 from $21,401,002 for the corresponding period in 2011.  This increase was primarily due to increased sales with our industrial customers, notably the oil and gas industry, of approximately $4,639,000, increased sales of approximately $1,454,000 with international customers, and $252,000 with private label customers, offset by the loss of a sales promotion with a “Big Box” retailer of $1,583,000.  Two customers accounted for approximately 55% of net sales during the year ended December 31, 2012 and two customers accounted for approximately 39% of net sales for the year ended December 31, 2011.  Customer demand for our products in certain retail sectors seems to have stabilized this year, however those sectors tied to housing and construction are still lagging.  We continue to focus our sales efforts on those areas where we see continued growth, the industrial and safety channels, international markets and job specific glove styles.

Gross Profit increased $2,089,200 to $10,050,640 for the year ended December 31, 2012 from $7,961,440 for the year ended December 31, 2011.  Gross profit, as a percentage of net sales, or gross margin, increased to 38.4% in 2012 from 37.2% in 2011.  The increase in gross profit is primarily the result of the loss of a large, low margin, one-time “Big Box” home center promotion in the current year.  Product mix and customer sales mix shifts can affect gross profit in any period as well.  Sales to international distributors are generally at lower gross margin, as the international distributor pays the cost of selling and distributing the product and servicing their customers.  These increased costs have been offset by increased direct factory-to-customer shipments to international and certain domestic customers.

20

Operating Expenses increased by $1,083,134, or 16.6%, to $7,589,119 in 2012 from $6,505,985 in 2011.  As a percentage of net sales, operating expenses decreased to 29.0% in 2012 from 30.4% in the same period of 2011.  The increased spending in 2012 was primarily due to increased salaries and benefits of approximately $524,000; increased contracted service fees, primarily third-party fulfillment services, of approximately $102,000; increased investor relations services of $61,000; increased depreciation and amortization expenses of approximately $26,000; increased legal costs of approximately $275,000; increased stock option expense of $84,000; and increased travel and entertainment expenses of approximately $25,000; offset by decreased general office expenses of approximately $14,000.  Our number of employees increased to 28 at December 31, 2012 from 26 at December 31, 2011.

Income from Operations increased $1,006,066 or 69.1%, to $2,461,521 in 2012 from $1,455,455 in 2011.  Income from operations as a percentage of net sales increased to 9.4% in 2012 from 6.8% in 2011.  The increase in income for 2012 was primarily the result of increased sales and gross profit from both new and existing products and customers in addition to our ongoing cost containment measures.

Interest Expense decreased $44,262 to $50,145 in 2012 from $94,407 in 2011.  The decrease was primarily due to lower bank borrowing in the current year, and reduced interest rates starting in December 2012.

Interest Income increased $21,374 to $21,463 in 2012 from $89 in 2011.  Interest income in 2012 was almost entirely from refunds received from our protests of duty rates with the U.S. Customs Office.

Other Income, net was $55,419 in 2012 as compared with $700 in 2011.  This was the result of refunds of prior period duties of $107,417, offset by prior period duty chargebacks of $64,600, plus a trademark settlement payment of $12,500.

Gain(Loss) on Disposition of Equipment in 2012 was $50 on the disposition of equipment and in 2011 was ($25,720) on the disposition of equipment.

Deferred Income Tax Benefit, in prior years, based on our history of losses, we provided a 100% valuation allowance against our deferred tax assets, as it was not more likely than not that any future benefit from deductible temporary differences and net operating loss carryforwards would be realized.  For the year ended December 31, 2012 we have reassessed the need for a valuation allowance against our deferred tax assets and, based on the positive evidence of the last three year’s pre-tax income and forecasted future results, concluded that it is more likely than not that we would be able to realize some of our deferred tax assets.  Accordingly, we have reversed approximately 30% of our valuation allowance for our current deferred tax assets and recorded a deferred tax benefit of $857,500.  We will continue to evaluate if it is more likely than not that we will realize the benefits from future deferred tax assets and have accordingly provided a 70% valuation allowance against our remaining deferred tax assets.

Net Income increased $1,956,641 to $3,078,808 in 2012 from $1,122,167 in 2011.  This increase in income is a result of two factors, the recognition of approximately 30% of previously reserved valuation allowances against deferred tax assets of $857,500 and the combination of each of the sales, profit and expense factors discussed above.

Seasonality and Annual Results

Our glove business generally shows an increase in sales during the third and fourth quarters due primarily to an increase in the sale of our winter glove line during this period.  We typically generate 55% - 65% of our glove net sales during these months.  Though the overall economy appears to be experiencing pockets of recovery, our results have been improved by the successful introduction of new products designed specifically for the oil and gas, safety, automotive and sporting goods industries.

21

Our working capital, at any particular time, reflects the seasonality of our glove business and plans to expand product lines and enter new markets.  We expect inventory, accounts payable and accrued expenses to be higher in the third and fourth quarters for these reasons.

Liquidity and Capital Resources

Our cash requirements are principally for working capital.  Our need for working capital is seasonal, with the greatest requirements from July through the end of October each year as a result of our inventory build-up during this period for the fall and winter selling seasons.  Additionally, in 2012 we deliberately increased our safety stock of key items in order to mitigate the longer lead times from overseas vendors and better service our customers.  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.  In the short term we are monitoring our credit issuances and cash collections to maximize cash flows and investigating opportunities to quickly reduce our current inventories to convert these assets into cash.  Over the past year, and continuing in the near and longer term we are focused on controlling our operating costs, increasing margins and improving operating procedures to generate sustained profitability.

Operating Activities.  In 2012, cash used in operating activities was $232,387 and consisted primarily of net income of $3,078,808, increased by non-cash items of $545,699 and decreases and accounts payable and accrued expenses of $2,372,144; offset by the reversal of our deferred tax valuation allowance of $857,500; increases in total accounts receivable of $4,089,185; increases in inventory of $991,130;  increases in deposits on inventory of $249,211; and increases in prepaid expenses and other expenses of $42,012.

In 2011, cash provided by operating activities was $235,459 and consisted primarily of net income of $1,122,167, increased by non-cash items of $501,088 and decreases in deposits on inventory of $566,920 andaccounts payable and accrued expenses of $34,401; offset by increases in accounts receivable of $422,270, inventory of $1,421,125 and prepaid expenses and other of $145,722.

Investing Activities.  In 2012 and 2011, investing activities were primarily the result of capital expenditures, mainly for computer equipment and trademark applications.  Cash used in investing activities decreased $144,534 to $95,328 for 2012 from $239,862 in 2011.  Expenditures for property and equipment in 2012 were $86,170, and investment in trademarks and patents were $9,158.

Financing Activities.  Financing activities during 2012 consisted of net payments under our factoring facility of $177,336 and cash proceeds from the issuance of common stock due to stock option exercises of $166,515.  Cash provided by financing activities in 2011 consisted of net payments under our factoring facility of $115,167 and cash proceeds from the issuance of common stock due to stock option exercises of $112,258.

We believe that our cash flows from operations and borrowings available to us under our senior secured credit facility, the availability of purchase order financing and our continuing cost containment measures will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months.

Our ability to access these sources of liquidity may be negatively impacted by a decrease in demand for our products and the requirement that we meet certain borrowing conditions under our senior secured credit facility, as well as the other factors described in Risk Factors.

Credit Facilities

On December 7, 2009 we entered into a factoring agreement with FCC, LLC, dba First Capital Western Region, LLC (“FCC”), whereby we assigned certain of our accounts receivable without recourse and other accounts receivable with recourse.  FCC, based on its internal credit policies, determined which accounts receivable it would accept on a non-recourse basis.  This facility allowed us to borrow the lesser of (a) $3,000,000 or (b) the sum of (i) the threshold for the net amount of eligible accounts receivable set forth in the agreement and (ii) the threshold for the value of eligible inventory set forth in the agreement, which amount shall not exceed the lesser of $1,500,000 or the net amount of eligible accounts receivable.  All of our assets secured amounts borrowed under the terms of this agreement.  The interest rate was based on the level of our rolling twelve month EBITDA/ASC718 balance.  In 2011 we achieved a 1.5% rate savings in Q1 and Q2, and a 2% rate savings in Q3, Q4 and through 2012.  The 2% rate savings was the best rate available under our agreement.   Interest on outstanding balances based on accounts receivable accrued at LIBOR plus 5.5% and interest on outstanding balances based on inventory accrued at LIBOR plus 6.5%.  This agreement had an initial term of thirty-six (36) months.  On December 1, 2011, this agreement was amended to increase our limit on permissible capital equipment expenditures from $100,000 to $250,000 per year, effective for 2011 and 2012.  This agreement was terminated on December 7, 2012.

22

On November 30, 2012 we entered into a Business Loan Agreement with Union Bank, N.A. which provides a revolving loan of up to $6,000,000.  The first $3,500,000 of advances under this facility are under an open line-of-credit.  Advances in excess of $3,500,000, up to the line limit of $6,000,000, are subject to a Borrowing Base report.  The term Borrowing Base means an amount equal to (a) 80% of the net amount of all eligible accounts receivable plus, (b) the lesser of (i) 50% of the value of eligible landed inventory and (ii) $2,750,000, plus (c) 35% of eligible in-transit inventory.  In addition, during the months of April to October each calendar year, the outstanding principal amount of all advances against eligible inventory shall not exceed 150% of the aggregate outstanding principal amount of advances against eligible accounts receivable.  All of our assets secure amounts borrowed under the terms of this agreement.  Interest on borrowed funds will accrue at Prime minus 0.25% unless we choose to “fix” a portion of the indebtedness (minimum $150,000) at LIBOR plus 2% for fixed periods of time ranging from 30 days to 360 days.

At December 31, 2012, we had unused credit available under our current facility of approximately $4,516,000.  At December 31, 2011, we had unused credit available under our prior facility of approximately $1,149,000.

Off Balance Sheet Arrangements

At December 31, 2012, 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.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

23

Item 8.   Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Audited Financial Statements:
Report of Independent Registered Public Accounting Firm	25
Consolidated Balance Sheets at December 31, 2012 and December 31, 2011	26
Consolidated Statements of Operations for each of the Years Ended December 31, 2012, and December 31, 2011	27
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, and December 31, 2011	28
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2011 and December 31, 2012	29
Notes to the Consolidated Financial Statements	30

24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Ironclad Performance Wear Corporation

We have audited the accompanying consolidated balance sheets of Ironclad Performance Wear Corporation as of December 31, 2012 and 2011, and the related consolidated statements of operations, cash flows, and changes in stockholders’ equity for each of the years in the two-year period ended December 31, 2012. Ironclad Performance Wear Corporation’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ironclad Performance Wear Corporation as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

/s/ EFP Rotenberg, LLP                                                     

EFP Rotenberg, LLP

Rochester, New York

March 13, 2013

25

IRONCLAD PERFORMANCE WEAR CORPORATION

CONSOLIDATED BALANCE SHEETS

AT DECEMBER 31, 2012 AND 2011

	December 31, 2012			December 31, 2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	721,589		$	1,060,125
Accounts receivable net of allowance for doubtful accounts of $48,000 and $37,000		6,423,670			798,004
Due from factor without recourse		915,492			2,462,973
Inventory net of reserve of $619,000 and $460,000		5,281,445			4,449,315
Deposits on inventory		716,273			467,063
Prepaid and other		308,814			265,652
Deferred tax assets - current		857,500			-
Total Current Assets		15,224,783			9,503,132
PROPERTY AND EQUIPMENT
Computer equipment and software		515,058			486,066
Vehicle		43,680			43,680
Furniture and equipment		179,835			162,871
Leasehold improvements		47,381			43,589
Less: accumulated depreciation		(529,917	)		(416,672	)
Total Property and Equipment, Net		256,037			319,534
OTHER ASSETS
Trademarks and patents, net of accumulated amortization of $40,318 and $31,915		132,168			131,412
Deposits		10,204			11,354
Total Other Assets		142,372			142,766
TOTAL ASSETS	$	15,623,192		$	9,965,432
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	4,932,648		$	2,560,504
Line of credit		1,483,883			1,661,220
Total Current Liabilities		6,416,531			4,221,724
Total Liabilities		6,416,531			4,221,724
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value,172,744,750 shares authorized, 76,447,587 and 74,550,754 shares issued and outstanding at December 31, 2012 and 2011, respectively		76,448			74,551
Capital in excess of par value		18,920,811			18,538,563
Accumulated deficit		(9,790,598	)		(12,869,406	)
Total Stockholders’ Equity		9,206,661			5,743,708
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	15,623,192		$	9,965,432

See Notes to Consolidated Financial Statements.

26

IRONCLAD PERFORMANCE WEAR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2012 and 2011

	2012			2011
REVENUES
Net sales	$	26,180,114		$	21,401,002
COST OF SALES
Cost of sales		16,129,474			13,439,562
GROSS PROFIT		10,050,640			7,961,440
EXPENSES
General and administrative		3,185,662			2,566,152
Sales and marketing		2,591,725			2,583,111
Research and development		541,171			365,481
Purchasing, warehousing and distribution		1,112,492			858,758
Depreciation and amortization		158,069			132,483
Total Operating Expenses		7,589,119			6,505,985
INCOME FROM OPERATIONS		2,461,521			1,455,455
OTHER INCOME (EXPENSE)
Interest expense		(50,145	)		(94,407	)
Interest income		21,463			89
Other income, net		55,419			700
Gain (loss) on disposition of equipment		50			(25,720	)
Total Other Income (Expense), Net		26,787			(119,338	)
NET INCOME BEFORE PROVISION FOR INCOME TAXES		2,488,308			1,336,117
Provision for income taxes - current		(267,000	)		(213,950	)
Deferred income tax benefit – reversal of valuation allowance		857,500			-
NET INCOME	$	3,078,808		$	1,122,167
NET INCOME PER COMMON SHARE
Basic	$	0.04		$	0.02
Diluted	$	0.04		$	0.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		76,028,200			73,446,414
Diluted		85,641,801			83,922,950

See Notes to Consolidated Financial Statements.

27

IRONCLAD PERFORMANCE WEAR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2012 and 2011

	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income attributable to common shareholders	$	3,078,808		$	1,122,167
Adjustments to reconcile net loss to net cash used in operating activities
Allowance for bad debts		11,000			(93,000	)
Inventory reserve		159,000			240,000
Depreciation		149,666			125,330
Amortization		8,403			7,153
(Gain) loss on disposition of equipment		(50	)		26,414
Reversal of deferred income tax valuation allowance		(857,500	)		-
Non-cash compensation:
Common stock issued for services		-			62,164
Stock option expense		217,630			133,027
Changes in operating assets and liabilities:
Accounts receivable		(5,636,666	)		71,940
Due from factor without recourse		1,547,481			(494,210	)
Inventory		(991,130	)		(1,421,125	)
Deposits on inventory		(249,211	)		566,920
Prepaid and other		(42,012	)		(145,722	)
Accounts payable and accrued expenses		2,372,144			34,401
Net cash flows provided by (used in) operating activities		(232,437	)		235,459
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment purchased		(86,170	)		(211,254	)
Proceeds from sale of assets		50			-
Investment in trademarks and patents		(9,158	)		(28,608	)
Net cash flows used in investing activities		(95,278	)		(239,862	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank lines of credit		32,534,536			19,818,724
Payments to bank lines of credit		(32,711,872	)		(19,933,891	)
Proceeds from issuance of common stock and warrants		166,515			112,258
Net cash flows used by financing activities		(10,821	)		(2,909	)
NET DECREASE IN CASH		(338,536	)		(7,312	)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD		1,060,125			1,067,437
CASH AND CASH EQUIVALENTS END OF PERIOD	$	721,589		$	1,060,125
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash (paid) during the year for:
Interest paid in cash		(50,145	)		(94,407	)
Income taxes paid		(77,000	)		(213,950	)

See Notes to Consolidated Financial Statements.

28

IRONCLAD PERFORMANCE WEAR CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

For the Years Ended December 31, 2012 and 2011

	Common Stock
	Shares Issued and Outstanding		Par Value		Capital in Excess of Par Value		Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2010		72,951,185	$	72,951	$	18,232,713	$	(13,991,573	)	$	4,314,091
Common stock issued for services		518,033		518		61,646		-			62,164
Common stock issued upon exercise of stock options		1,081,536		1,082		111,177		-			112,259
Stock option expense		-		-		133,027		-			133,027
Net income		-		-		-		1,122,167			1,122,167
Balance at December 31, 2011		74,550,754		74,551		18,538,563		(12,869,406	)		5,743,708
Common stock issued upon exercise of stock options		1,836,833		1,837		161,678		-			163,515
Common stock issued upon exercise of warrant		60,000		60		2,940		-			3,000
Stock option expense		-		-		217,630		-			217,630
Net income		-		-		-		3,078,808			3,078,808
Balance at December 31, 2012		76,447,587	$	76,448	$	18,920,811	$	(9,790,598	)	$	9,206,661

See Notes to Consolidated Financial Statements

29

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.           Description of Business.

The Company was incorporated in Nevada on May 26, 2004 and engages in the business of design and manufacture of branded performance work wear including task-specific gloves and performance apparel designed to significantly improve the wearer’s ability to safely, efficiently and comfortably perform general to highly specific job functions.  Its customers are primarily hardware, lumber retailers, “Big Box” home centers, industrial distributors and automotive and sporting goods retailers.  The Company has received six U.S. patents and one international patent and has three patents pending for design and technological innovations incorporated in its performance work gloves.  The Company has 58 registered U.S. trademarks, 12 in-use U.S. trademarks and 22 registered international trademarks.

2.           Accounting Policies.

Basis of Consolidation

The consolidated financial statements include the accounts of Ironclad Performance Corporation, an inactive parent company, and its wholly owned subsidiary Ironclad California.  All significant inter-company transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.  The Company places its cash with high credit quality institutions.  The Federal Deposit Insurance Company (FDIC) insures cash amounts at each institution for up to $250,000.  From time to time, the Company maintains cash in excess of the FDIC limit.

Accounts Receivable

The Company factored designated trade receivables pursuant to a factoring agreement with an unrelated Factor.  On December 7, 2009 the Company entered into a new factoring agreement whereby it assigns certain of its trade receivables with recourse and other trade receivables without recourse.  The Company incurs a one-time servicing fee (discount) of 0.75% as a percentage of the face value of each invoice assigned to the Factor.  This servicing fee is recorded on the condensed consolidated statement of operations in the period of sale.  Servicing fees incurred for the years ended December 31, 2012 and 2011 were $102,397 and $102,323, respectively.  The financing of accounts receivable without recourse is accounted for as a sale of receivables in accordance with the guidance under ASC 860-20, “Sales of Financial Assets.”  The Factor, based on its internal credit policies, determines which customer trade receivables it will accept without recourse and assigns a credit limit for that customer.  The Company then assigns (sells) the face value of certain trade receivable invoices to the Factor, excludes them from accounts receivable, and records a current asset entitled “Due from factor without recourse” on the condensed consolidated balance sheet and they are reflected as cash provided by operating activities on the condensed consolidated statement of cash flows. Thereafter, the Company is entitled to borrow up to 70% of the value of such invoices through its line of credit with the Factor.  The Factor retains the remaining 30% of the outstanding factored accounts receivable as a reserve.  The Factor handles all collection activities and receives payment from the customer into its own bank lockbox account.  The Factor has no recourse to the Company for failure of debtors of these designated accounts receivable.  The Factor reimburses the Company for its purchased invoices by applying the funds collected from the customer as payments against the Company’s line of credit.

Trade receivables with recourse were also assigned to the Factor as an additional source of financing, and are carried at the original invoice amount less an estimate made for doubtful accounts.  Under the terms of the recourse provision, the Company is required to reimburse the Factor, upon demand, for factored receivables that are not paid on time.  Accordingly, these receivables are accounted for as a secured borrowing arrangement and not as a sale of financial assets.  The allowance for doubtful accounts is based on management’s regular evaluation of individual customer’s receivables and consideration of a customer’s financial condition and credit history.  Trade receivables are written off when deemed uncollectible.  Recoveries of trade receivables previously written off are recorded when received.  Interest is not charged on past due accounts.

30

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On December 7, 2012 the Company terminated this factoring agreement.  The amounts showing as “Due from factor without recourse” on the balance sheet reflect open balances that are being collected through the Factor.

On November 30, 2012 the Company entered into a Business Loan Agreement with a bank providing a revolving loan of up to $6,000,000.  The first $3,500,000 of advances under this facility are under an open line-of-credit.  Advances in excess of $3,500,000, up to the line limit of $6,000,000, are subject to a Borrowing Base report.  The term Borrowing Base means an amount equal to (a) 80% of the net amount of all eligible accounts receivable plus, (b) the lesser of (i) 50% of the value of eligible landed inventory and (ii) $2,750,000, plus (c) 35% of eligible in-transit inventory.  In addition, during the months of April to October each calendar year, the outstanding principal amount of all advances against eligible inventory shall not exceed 150% of the aggregate outstanding principal amount of advances against eligible accounts receivable.  Interest on borrowed funds will accrue at Prime minus 0.25% unless the Company chooses to “fix” a portion of the indebtedness (minimum $150,000) at LIBOR plus 2% for fixed periods of time ranging from 30 days to 360 days.

Accounts Receivable and Due From Factor	December 31, 2012			December 31, 2011
Accounts receivable – non factored	$	6,471,670		$	519,010
Accounts receivable - factored with recourse		-			315,994
Less-Allowance for doubtful accounts		(48,000	)		(37,000	)
Net accounts receivable	$	6,423,670		$	798,004
Due from factor without recourse	$	915,492		$	2,462,973

Inventory

Inventory is stated at the lower of average cost (which approximates first in, first out) or market and consists primarily of finished goods.  The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on management’s estimated forecast of product demand and production requirements.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation.  Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years.  Leasehold improvements are depreciated over fifteen years or the lease term, whichever is shorter.  Maintenance and repairs are charged to expense as incurred.

Trademarks

The costs incurred to acquire trademarks, which are active and relate to products with a definite life cycle, are amortized over the estimated useful life of fifteen years.  Trademarks, which are active and relate to corporate identification, such as logos, are not amortized.  Pending trademarks are capitalized and reviewed monthly for active status.

Long-Lived Asset Impairment

The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable.  When factors indicate that the asset should be evaluated for possible impairment, the Company uses an estimate of the undiscounted net cash flows over the remaining life of the asset in measuring whether the asset is recoverable.  Based upon the anticipated future income and cash flow from operations and other factors, relevant in the opinion of the Company’s management, there has been no impairment.

31

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Operating Segment Reporting

As previously discussed, the Company has two product lines, “gloves” and “apparel,” both of which have similar characteristics.  They each provide functional protection and comfort to workers in the form of workwear for various parts of the body; their production processes are similar; they are both sold to the same type of class of customers, typically on the same purchase order; and they are warehoused and distributed from the same warehouse facility.  In addition, the “apparel” segment currently comprises less than 1% of the Company’s revenues.  The Company believes that the aggregation criteria of FASB ASC 280-10 applies and will accordingly aggregate these two segments.

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, however, we have negotiated special terms with certain customers and industries.  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 shipped or delivered to customers, based on terms of agreement with the customer.

Revenue Disclosures

The Company’s revenues are derived from the sale of our core line of task specific work gloves plus our line of workwear apparel products, available to all of our customers, both domestically and internationally.  Below is a table outlining this breakdown for the comparative periods:

	Year Ended December 31, 2012						Year Ended December 31, 2011
Net Sales	Gloves		Apparel		Total		Gloves		Apparel		Total
Domestic	$	21,437,978	$	140,681	$	21,578,659	$	18,445,725	$	149,739	$	18,595,464
International		4,601,021		434		4,601,455		2,784,033		21,505		2,805,538
Total	$	26,038,999	$	141,115	$	26,180,114	$	21,229,758	$	171,244	$	21,401,002

Cost of Goods Sold

Cost of goods sold includes all of the costs associated with producing the product by independent, third party factories (FOB costs), plus the costs of transporting, inspecting and delivering the product to our distribution warehouse in California (landed costs).  Landed costs consist primarily of ocean/air freight, transport insurance, import duties, administrative charges and local trucking charges from the port to our warehouse.  Cost of goods sold for the years ended December 31, 2012 and 2011 were $16,129,474 and $13,439,562 respectively.

Purchasing, warehousing and distribution costs are reported in operating expenses on the line item entitled “Purchasing, warehousing and distribution” and, for the years ending December 31, 2012 and 2011 were $1,112,492 and $858,758, respectively.  These costs were comprised of salaries and benefits of approximately $502,000 and $410,000; office expenses of approximately $65,000 and $51,000; travel and lodging of approximately $43,000 and $30,000; and warehouse operations of approximately $502,000 and $368,000, respectively.

32

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Product Returns, Allowances and Adjustments

Product returns, allowances and adjustments is a broad term that encompasses a number of offsets to gross sales.  Included herein are warranty returns of defective products, returns of saleable products and accounting adjustments.

Warranty Returns - the Company has a warranty policy that covers defects in workmanship.  It allows customers to return damaged or defective products to us following a customary return merchandise authorization process.  Warranty returns for the years ending December 31, 2012 and 2011 were approximately $78,000 or 0.3% and $94,000 or 0.4%, respectively.

Saleable Product Returns - the Company may allow from time to time, depending on the customer and existing circumstances, stock adjustment returns, whereby the customer is given the opportunity to ‘trade out’ of a style of product that does not sell well in their territory, usually in exchange for another product, again following the customary return merchandise authorization process.  In addition we may allow from time to time other saleable product returns from customers for other business reasons, for example, in settlement of an outstanding accounts receivable, from a discontinued distributor customer or other customer service purpose.  Saleable product returns for the years ending December 31, 2012 and 2011 were approximately $271,000 or 1.0% and $239,000 or 1.1%, respectively.

Accounting Adjustments - these adjustments include pricing and shipping corrections and periodic adjustments to the product returns reserve.  Pricing and shipping corrections for the years ending December 31, 2012 and 2011 were approximately $49,000 or 0.2% and $19,000 or 0.1%, respectively.  Adjustments to the product returns reserve for the years ending December 31, 2012 and 2011 were approximately $3,000 or 0.0% and ($16,000) or (0.1%), respectively.

For warranty returns the Company utilizes actual historical return rates to determine the allowance for returns in each period.  For saleable product returns the Company also utilizes actual historical return rates, adjusted for large, non-recurring occurrences.  The Company does not accrue for pricing and shipping corrections as they are unpredictable and generally de minimis.  Gross sales are reduced by estimated returns.  We record a corresponding accrual for the estimated liability associated with the estimated returns which is based on the historical gross sales of the products corresponding to the estimated returns.  This accrual is offset each period by actual product returns.

Reserve for Warranty Returns
Reserve Balance 12/31/10	$	57,000
Payments Recorded During the Period		(333,665	)
		(276,665	)
Accrual for New Liabilities During the Reporting Period		338,665
Reserve Balance 12/31/11		62,000
Payments Recorded During the Period		(348,371	)
		(286,371	)
Accrual for New Liabilities During the Reporting Period		351,371
Reserve Balance 12/31/12	$	65,000

Advertising and Marketing

Advertising and marketing costs are expensed as incurred.  Advertising expenses for the years ended December 31, 2012 and 2011 were $384,080 and $406,146, respectively.

33

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Shipping and Handling Costs

Freight billed to customers is recorded as sales revenue and the related freight costs as cost of sales.

Customer Concentrations

Two customers accounted for approximately $14,524,000 or 55% of net sales for year ended December 31, 2012 and two customers accounted for approximately $8,412,000 or 39% of net sales for year ended December 31, 2011.  No other customer accounted for more than 10% of net sales.  All transactions were in United States dollars.  There were no transaction gains or losses associated with sales transactions.

Supplier Concentrations

Two suppliers, which are located overseas, accounted for approximately 76% of total purchases during the year ended December 31, 2012 and 79% of total purchases during the year ended December 31, 2011.  All transactions were in United States dollars.  There were no transaction gains or losses associated with vendor purchase transactions.

Earnings (Loss) Per Share

The Company utilizes FASB ASC 260, “Earnings per Share.”  Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding.  Diluted earnings (loss) per share is computed similar to basic earnings (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 table sets forth the calculation of the numerators and denominators of the basic and diluted per share computations for the years ended December 31:

	2012		2011
Numerator: Net Income	$	3,078,808	$	1,122,167
Denominator: Basic EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Denominator for basic earnings per common share		76,028,200		73,446,414
Denominator: Diluted EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Dilutive warrants outstanding at end of the period		43,146		60,000
Dilutive stock options outstanding at the end of the period		9,570,455		10,416,536
Denominator for diluted earnings per common share		85,641,801		83,922,950

34

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	Year Ended December 31,
	2012		2011
Common Stock Warrants		-		43,146

Income Taxes

The Company adopted the provisions of FASB ASC 740-10 effective January 1, 2007.  The implementation of FASB ASC 740-10 has not caused the Company to recognize any changes in its identified tax positions. Interest and penalties associated with unrecognized tax benefits would be classified as additional income taxes in the statement of operations.

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

Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

The significant components of the provision for income taxes for the years ended December 31, 2012 and 2011 were $219,000 and $201,750, respectively, for the current state provisions and $48,000 and $12,200 for the federal tax provision, respectively.  There was no state or federal deferred tax provision.  Based on its history of losses, the Company provided a 100% valuation allowance against its deferred tax assets, as it was not more likely than not that any future benefit from deductible temporary differences and net operating loss carryforwards would be realized.  For the year ended December 31, 2012 the Company has reassessed the need for a valuation allowance against its deferred tax assets and, based on the positive evidence of the last three year’s pre-tax income and forecasted future results, concluded that it is more likely than not that it would be able to realize some of its deferred tax assets.  Accordingly, the Company has reversed approximately 30% of its valuation allowance for its current deferred tax assets and recorded a deferred tax benefit of $857,500.  We will continue to evaluate if it is more likely than not that we will realize the benefits from future deferred tax assets and have accordingly provided a 70% valuation allowance against our remaining deferred tax assets.

By statute, tax years ending in December 31, 2011 through 2008 remain open to examination by the major taxing jurisdictions to which the Company is subject. 

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.

35

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recently Issued Accounting Pronouncements

In July 2012, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles – Goodwill and Others: Testing Indefinite-Lived Intangible Assets for Impairment”, to allow entities to use a qualitative approach to test indefinite-lived assets for impairment.  ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-live intangible asset is less than its carrying value.  If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying value.  Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for impairment tests for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted.  The Company has adopted the provisions of this standard and noted no material impact on the financial condition or results of operations of the Company.

3.           Inventory

At December 31, 2012 and 2011 the Company had one class of inventory - finished goods.

	December 31, 2012		December 31, 2011
Finished Goods	$	5,281,445	$	4,449,315

4.           Property and equipment

Property and equipment consisted of the following:

	December 31, 2012			December 31, 2011
Computer hardware and software	$	515,058		$	486,066
Vehicle		43,680			43,680
Furniture and equipment		179,835			162,871
Leasehold improvements		47,381			43,589
		785,954			736,206
Less accumulated depreciation		(529,917	)		(416,672	)
Property and equipment, net	$	256,037		$	319,534

Depreciation expense for the years ended December 31, 2012 and 2011 was $149,666 and $125,330, respectively.

36

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.           Trademarks and patents

Trademarks and patents consisted of the following:

	December 31, 2012			December 31, 2011
Trademarks and patents	$	172,486		$	163,327
Less: Accumulated amortization		(40,318	)		(31,915	)
Trademarks, net	$	132,168		$	131,412

Trademarks consist of definite-lived trademarks of $111,043 and $103,703 and indefinite-lived trademarks of $61,443 and $59,624 at December 31, 2012 and 2011, respectively.  All trademark costs have been generated by the Company, and consist of initial legal and filing fees.

Amortization expense was $8,403 and $7,153 for the years ended December 31, 2012 and 2011, respectively.  The Company expects to amortize approximately $8,600 in each of the next five years.

6.           Accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following at December 31, 2012 and 2011:

	December 31, 2012		December 31,  2011
Accounts payable	$	185,244	$	487,398
Accrued inventory		1,326,621		183,436
Accrued rebates and co-op		322,159		307,707
Accrued bonus		735,250		569,680
Accrued warranty reserve		65,000		62,000
Customer deposits		1,730,899		515,794
Accrued expenses – other		567,475		434,489
Total accounts payable and accrued expenses	$	4,932,648	$	2,560,504

37

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.           Bank Lines of Credit

Factoring Agreement

On December 7, 2009 the Company entered into a factoring agreement with FCC, LLC, dba First Capital Western Region, LLC (“FCC”), whereby it assigns certain of its accounts receivable without recourse and other accounts receivable with recourse.  FCC, based on its internal credit policies, determines which accounts receivable it will accept without recourse.  This facility allows the Company to borrow the lesser of (a) $3,000,000 or (b) the sum of (i) the threshold for the net amount of total eligible accounts receivable set forth in the agreement, with and without recourse, and (ii) the threshold for the value of eligible inventory set forth in the agreement, which amount shall not exceed the lesser of $1,500,000 or the net amount of eligible accounts receivable.  All of the Company’s assets secure amounts borrowed under the terms of this agreement.  Interest on outstanding balances based on accounts receivable accrues at LIBOR plus 5.5% and interest on outstanding balances based on inventory accrues at LIBOR plus 6.5%.  This agreement had an initial term of thirty-six (36) months.  On December 1, 2011, this agreement was amended to increase the Company’s limit on permissible capital equipment expenditures from $100,000 to $250,000 per year, effective for 2011 and 2012.  On December 7, 2012 the Company terminated this factoring agreement.  As of December 31, 2012, the total amount due from factor was $915,492 which represents open factored balances that are being collected through the Factor.  As of December 31, 2011, the total amount due to FCC was $1,661,220 offset by $2,462,973 due from factor, thereby creating a net due from factor of $801,753.

Bank Revolving Loan

On November 30, 2012 the Company entered into a Business Loan Agreement with Union Bank, N.A. which provides a revolving loan of up to $6,000,000.  The first $3,500,000 of advances under this facility are under an open line-of-credit.  Advances in excess of $3,500,000, up to the line limit of $6,000,000, are subject to a Borrowing Base report.  The term Borrowing Base means an amount equal to (a) 80% of the net amount of all eligible accounts receivable plus, (b) the lesser of (i) 50% of the value of eligible landed inventory and (ii) $2,750,000, plus (c) 35% of eligible in-transit inventory.  In addition, during the months of April to October each calendar year, the outstanding principal amount of all advances against eligible inventory shall not exceed 150% of the aggregate outstanding principal amount of advances against eligible accounts receivable.  All of the Company’s assets secure amounts borrowed under the terms of this agreement.  Interest on borrowed funds will accrue at Prime minus 0.25% unless the Company chooses to “fix” a portion of the indebtedness (minimum $150,000) at LIBOR plus 2% for fixed periods of time ranging from 30 days to 360 days.

As of December 31, 2012, the total amount due to Union Bank was $1,483,883.

8.           Equity transactions

Common Stock

On March 17, 2011, the Company issued a stock bonus of 518,033 shares to an officer of the company as a bonus.   The bonus was valued at $62,164 and was based on a current market valuation of $0.12 per common share.

On April 11, 2011 the Company issued 36,674 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

On November 30, 2011 the Company issued 362,862 shares of common stock upon the exercise of stock options at an exercise prices between $0.09 and $0.095.

On December 7, 2011 the Company issued 682,000 shares of common stock upon the exercise of stock options at an exercise prices between $0.09 and $0.15.

On February 7, 2012 the Company issued 60,000 shares of common stock upon the exercise of a warrant at an exercise price of $0.05.

On February 27, 2012 the Company issued 268,792 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

On February 29, 2012 the Company issued 561,291 shares of common stock upon the exercise of various stock options at exercise prices between $0.09 and $0.095.

On March 15, 2012 the Company issued 43,146 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

38

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On March 20, 2012 the Company issued 833,333 shares of common stock upon the exercise of various stock options at an exercise price of $0.09.

On March 22, 2012 the Company issued 36,687 shares of common stock upon the cashless exercise of a stock option at an exercise price of $0.11.

On September 15, 2012 the Company issued 43,146 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

On December 20, 2012 the Company issued 50,438 shares of common stock upon the exercise of a stock option at an exercise price of $0.095.

There were 76,447,587 shares of common stock of the Company outstanding at December 31, 2012.

Warrant Activity

A summary of warrant activity is as follows:

	Number of Shares			Weighted Average Exercise Price
Warrants outstanding at December 31, 2010		10,175,994		$	0.93
Warrants expired		(10,072,848	)	$	0.93
Warrants outstanding at December 31, 2011		103,146		$	0.11
Warrants exercised		(60,000	)	$	0.05
Warrants outstanding at December 31, 2012		43,146		$	0.185

Stock Based Compensation

The Company accounts for stock based compensation under the provisions of FASB ASC 718 “Share-Based Payments” using the modified prospective application transition method.

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

Effective May 9, 2009, the Company reserved an additional 6,750,000 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 Company’s board of directors.

Effective April 11, 2011, the Company reserved an additional 2,000,000 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 Company’s board of directors.

39

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 Model.  The Black-Scholes 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 on the U.S. Treasury Bill rate with a maturity based on the expected life of the options and on the closest day to an individual stock option grant.  Dividend rates are based on the Company’s dividend history.  The stock volatility factor is based on historical market prices of the Company’s common stock.  The expected life of an option grant is based on management’s estimate.  The fair value of each option grant is recognized as compensation expense over the vesting period of the option on a straight line basis.

For stock options issued during the years ended December 31, 2012 and 2011, the fair value of these options was estimated at the date of the grant using a Black-Scholes Model with the following range of assumptions:

	December 31, 2012					December 31, 2011
Risk free interest rate		0.58%	-	0.94	%		1.62	%
Dividends		-					-
Volatility factor		89.1			%		90.7	%
Expected life (years)	5.5		-	6.25		6.25

A summary of stock option activity is as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2010		9,610,488		$	0.095
Granted		3,203,033		$	0.099
Exercised		(1,599,568	)	$	0.109
Cancelled/Expired		(797,417	)	$	0.093
Outstanding at December 31, 2011		10,416,536		$	0.094
Granted		1,301,625		$	0.24
Exercised		(1,836,831	)	$	0.091
Cancelled/Expired		(310,875	)		0.13
Outstanding at December 31, 2012		9,570,455			0.113
Exercisable at December 31, 2012		6,697,838		$	0.106

The following tables summarize information about stock options outstanding at December 31, 2012:

Range of Exercise Price				Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Intrinsic Value Outstanding Shares
$	0.09	-	$0.24		9,570,455		6.74	$	0.113	$	1,432,830

The following tables summarize information about stock options exercisable at December 31, 2012:

Range of Exercise Price				Number Exercisable		Weighted Average Remaining Contractual  Life (Years)		Weighted Average  Exercise Price		Intrinsic Value  Exercisable Shares
$	0.09	-	$0.24		6,697,838		5.95	$	0.106	$	1,049,563

40

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize information about non-vested stock options:

	Number of Shares			Weighted Average Grant Date  Fair Value
Non-Vested at December 31, 2010		2,418,323		$	0.10
Granted		3,203,033		$	0.08
Vested		(1,378,589	)	$	0.12
Forfeited		(170,907	)	$	0.10
Non-Vested at December 31, 2011		4,071,860		$	0.08
Granted		1,301,625		$	0.17
Vested		(2,216,731	)	$	0.10
Forfeited		(284,137	)	$	0.10
Non-Vested at December 31, 2012		2,872,617		$	0.10

The Company recorded $217,630 of compensation expense for employee stock options during the year ended December 31, 2012.  These compensation expense charges were recorded in the following operating expense categories, general and administrative - $120,685; sales and marketing - $58,292; research and development - $19,142; and purchasing, warehousing and distribution - $19,511.  There was a total of $270,825 of unrecognized compensation costs related to non-vested share-based compensation arrangements under the Plan outstanding at December 31, 2012.  This cost is expected to be recognized over a weighted average period of 2.8 years.  The total fair value of shares vested during the year ended December 31, 2012 was $224,088.

9.           Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2012 and 2011 consisted of the following:

	2012			2011
Current	$	267,000		$	213,950
Deferred		(857,500	)		-
	$	(590,500	)	$	213,950

41

 IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The provision for income taxes differs from the amount that would result from applying the federal statutory rate for the years ended December 31, 2012 and 2011 as follows:

	2012			2011
Statutory regular federal income benefit rate		(34.0	)%		(34.0	)%
State income taxes, net of federal benefit		(5.2	)		(8.1	)
Change in valuation allowance		64.8			28.3
Other		(1.9	)		(0.5	)
Total		23.7	%		14.3	%

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize some portion or all of the benefits of these deductible, differences, and has chosen to reduce its valuation allowance against its deferred tax assets to 70%.

Significant components of the Company’s deferred tax assets and liabilities for federal incomes taxes at December 31, 2012 and 2011 consisted of the following:

	2012			2011
Deferred tax assets
Net operating loss carryforward	$	2,761,949		$	3,619,404
Stock option expense		1,269,244			1,184,822
Allowance for doubtful accounts		20,563			15,851
Allowance for product returns		27,846			26,561
Accrued compensation		44,566			38,035
Inventory reserve		265,180			197,064
Other		67,597			18,276
Valuation allowance		(3,207,803	)		(4,720,054	)
Total deferred tax assets		1,249,142			379,959
Deferred tax liabilities – state taxes		(391,642	)		(379,959	)
Net deferred tax assets/liabilities	$	857,500		$	-

As of December 31, 2012, the Company had unused federal and state net operating loss carryforwards available to offset future taxable income of $5,778,000 and $9,344,000, respectively, that expire between 2015 and 2025.  As of December 31, 2011, the Company had unused federal and state net operating loss carryforwards available to offset future taxable income of $8,300,000 and $9,553,000, respectively, that expire between 2015 and 2024.

42

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.           Commitments and Contingencies

The Company entered into a five-year lease with one option to renew for an additional five years for a corporate office and warehouse lease commencing in July 2006.  The Company exercised its five year option to renew this lease commencing in July 2011.  The facility is located in El Segundo, California.   As part of this renewal process we reduced our square footage by approximately 1,700 square feet of unneeded warehouse space in exchange for six months of rent concessions and approximately $40,000 for tenant improvements.  Rent expense for this facility for the years ended December 31, 2012 and 2011 for this facility were $125,038 and $185,568, respectively.

The Company has various non-cancelable operating leases for office equipment expiring through July 15, 2016.  Equipment lease expense charged to operations under these leases was $12,205 and $9,245 for the years ended December 31, 2012 and 2011, respectively.

Future minimum rental commitments under these non-cancelable operating leases for years ending December 31 are as follows:

Year	Facility		Equipment		Total
2013	$	158,592	$	5,274	$	163,866
2014		162,864		3,924		166,788
2015		167,148		1,541		168,689
2016		85,176		899		86,075
Thereafter		-		-		-
	$	573,780	$	11,638	$	585,418

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

43

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.           Legal Proceedings

On or around April 26, 2012, one of the Company’s stockholders (the “Plaintiff”) filed a lawsuit in the California Superior Court, together with an ex parte application for a temporary restraining order, attempting to immediately restrain the Company from conducting the election of directors on May 23, 2012 unless it included certain nominees proposed by the Plaintiff on the ballot for election.  In connection with the application the Plaintiff requested that the Court set a hearing for a preliminary injunction on the same issue prior to the election that was held on May 23, 2012.  The Company was successful in opposing the ex parte application and the Court denied the relief requested to set a hearing for the preliminary injunction.  On or around May 10, 2012, the Plaintiff filed another ex parte application in connection with the same action, seeking substantially similar relief.  The Company was again successful in opposing the application.

The Company held its annual meeting as planned on May 23, 2012.  The slate nominated by the Company’s board of directors was successfully nominated and elected.  The Company did not nominate or present as a matter of business the director slate proposed by the Plaintiff.

On May 29, 2012, the Company filed an action in the US District Court for the Central District of California against the Plaintiff and certain other shareholders alleging, among other matters, violations of the U.S. securities laws and seeking declaratory relief relating to the interpretation of its bylaws.  The Company sought monetary damages and injunctive relief asking the court to order the defendant to cease violating the securities laws.

In August 2012, two of the defendant shareholders purported to substitute themselves as plaintiffs in the original state action (in place of the Plaintiff) (the “New Plaintiffs”) and concurrently filed another ex parte application with the California Superior Court seeking a hearing under California Corporations Code Section 709 to determine whether the Plaintiff and the New Plaintiffs were denied the right to vote at the Company’s 2012 annual meeting, and to set aside the results of our 2012 annual meeting.  Without deciding on the merits of the parties’ arguments, the Court scheduled the hearing for January 2013.

In late September 2012, the Company conducted a mediation proceeding with the New Plaintiffs and ultimately agreed to a non-binding resolution of all disputes under the state and federal actions.  All parties thereafter dismissed the pending state and federal proceedings without prejudice.

On December 17, 2012, the Company entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”), dated December 14, 2012, by and among the Company, Scott Jarus, Scott Alderton, Eduard A. Jaeger, R.D. Pete Bloomer, Vane Clayton and David Jacobs, on the one hand, and Kenneth J. Frank, Richard B. Kronman, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter and Marcel Sassola, on the other hand, pursuant to which the Company and the then-current members of its board of directors (the “Board”) agreed to a final settlement and release of claims with respect to the actions described above filed by Richard Kronman, Marcel Sassola and Kenneth Frank on behalf of certain of the Company’s stockholders (collectively, the “Claimants”), against the Company in the California Superior Court, and the actions described above filed by the Company against the Claimants in the United States District Court for the Central District of California.

Under the Settlement Agreement, Scott Alderton agreed to resign from the Board and the Company agreed to appoint Charles H. Giffen and Michael A. DiGregorio to fill the vacant seats on the Board (accounting for an increase in the size of the Board to seven).  The Settlement Agreement also provides for the replacement of certain members of the Board prior to the Company’s 2013 annual meeting of stockholders should such members resign.  In addition, the parties to the Settlement Agreement agreed that the persons to be nominated to be members of the Board at the Company’s 2013 annual meeting of stockholders shall be the persons who are members of the Board pursuant to the Settlement Agreement.  The parties also agreed that each of the Claimants and each of Eduard A. Jaeger and Scott Jarus (who individually are parties to the Voting Agreement referenced below), will vote all of their shares of the Company’s voting stock in favor of those nominees at or in connection with the Company’s 2013 annual meeting of stockholders.  The provisions of the Settlement Agreement related to the composition of the Company’s board of directors expire automatically upon the conclusion of the Company’s 2013 annual meeting of stockholders unless terminated earlier in accordance with the terms of the Settlement Agreement.

To effectuate the parties agreement with respect to voting shares of the Company’s voting stock, on December 17, 2012, the Company also entered into a Voting Agreement, dated December 14, 2012, with Kenneth J. Frank, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter, Marcel Sassola, Eduard A. Jaeger, Richard B. Kronman and Scott Jarus.

44

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.           Related Party Transactions

Mr. Jarus, an Ironclad board member since May 2006 and currently Chairman of the Board, was appointed in September 2008, in a consulting capacity, as Executive Chairman of the Corporation with a compensation of $10,000 per month.  In May 2009, Mr. Jarus also took on the role of Interim Chief Executive Officer. He performed in this capacity through December 31, 2009.  On January 1, 2010, Mr. Jarus was employed by the Company in the role of Chief Executive Officer at an annual salary of $130,000.  Mr. Jarus also received an additional annual amount equal to $5,220 to cover any employee portion of health benefits offered by the Company.  On January 1, 2011 Mr. Jarus received an increase in his annual salary to $145,000.  On January 1, 2012 Mr. Jarus received an increase in his annual salary to $250,000.

Mr. Alderton, an Ironclad board member since August 2002, is a partner of the law firm, Stubbs, Alderton and Markiles, LLP, or SAM, which is Ironclad’s attorney of record.  SAM rendered services to Ironclad California as its primary legal firm since 2002, and became our primary legal counsel upon closing of the merger with Ironclad California on May 9, 2006.  On December 31, 2012 Mr. Alderton resigned from our Board of Directors.  The Company has incurred legal fees from SAM of $160,283 and $137,566 in 2012 and 2011, respectively.

Prior to Dr. Frank’s appointment to the Company’s board of directors, Dr. and Mrs. Frank purchased 1,000,000 shares of the Company’s common stock on April 22, 2008, at $0.20 per share for an aggregate purchase price of $200,000. Further, Dr. Frank and Mrs. Frank purchased an additional 4,000,000 shares of the Company common stock on February 5, 2009, at $0.05 per share for an aggregate purchase price of $200,000. Dr. Frank is the father-in-law of Mr. Eduard Albert Jaeger, the Company’s Founder and head of new business development.  On April 5, 2012 Dr. Frank resigned from our Board of Directors.

On December 17, 2012, the Company entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”), dated December 14, 2012, by and among the Company, Scott Jarus, Scott Alderton, Eduard A. Jaeger, R.D. Pete Bloomer, Vane Clayton and David Jacobs, on the one hand, and Kenneth J. Frank, Richard B. Kronman, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter and Marcel Sassola, on the other hand, pursuant to which the Company and the then-current members of its board of directors (the “Board”) agreed to a final settlement and release of claims with respect to the actions described above filed by Richard Kronman, Marcel Sassola and Kenneth Frank on behalf of certain of the Company’s stockholders (collectively, the “Claimants”), against the Company in the California Superior Court, and the actions described above filed by the Company against the Claimants in the United States District Court for the Central District of California.

Under the Settlement Agreement, Scott Alderton agreed to resign from the Board and the Company agreed to appoint Charles H. Giffen and Michael A. DiGregorio to fill the vacant seats on the Board (accounting for an increase in the size of the Board to seven).  The Settlement Agreement also provides for the replacement of certain members of the Board prior to the Company’s 2013 annual meeting of stockholders should such members resign.  In addition, the parties to the Settlement Agreement agreed that the persons to be nominated to be members of the Board at the Company’s 2013 annual meeting of stockholders shall be the persons who are members of the Board pursuant to the Settlement Agreement.  The parties also agreed that each of the Claimants and each of Eduard A. Jaeger and Scott Jarus (who individually are parties to the Voting Agreement referenced below), will vote all of their shares of the Company’s voting stock in favor of those nominees at or in connection with the Company’s 2013 annual meeting of stockholders.  The provisions of the Settlement Agreement related to the election of directors at the Company’s 2013 annual meeting of stockholders expire automatically upon the conclusion of the Company’s 2013 annual meeting of stockholders unless terminated earlier in accordance with the terms of the Settlement Agreement.

To effectuate the parties agreement with respect to voting shares of the Company’s voting stock, on December 17, 2012, the Company also entered into a Voting Agreement, dated December 14, 2012, with Kenneth J. Frank, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter, Marcel Sassola, Eduard A. Jaeger, Richard B. Kronman and Scott Jarus.

45

IRONCLAD PERFORMANCE WEAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.           Customs and Duties Protests

Early in 2008 the Company became aware that competitors had been importing gloves similar to many of its products under a temporary tariff provision at a lower duty rate under Chapter 99.  This lower duty rate of 2.8% was significantly less than the 10.4% rate the Company had been paying.  The Company filed retroactive, formal protests with U.S. Customs and Border Protection (CBP) for refund of duties for previous entries totaling approximately $165,000.

In July, 2008, the Company received a written denial on its formal protest from CBP. The Company continued to contest this denial through the courts.

In summary, the outcome of the Company’s challenge to the classification of some of its products for the purpose of determining the appropriate duty rate has been resolved.  We have received successful rulings lowering duties on specific styles of gloves, and we have modified the wrist closure on some of our gloves to conform with the current classification, where feasible.  The Company continued to challenge the higher classification for certain styles of gloves under protest and the protest denials have been summonsed to the Court of International Trade (“CIT”). These entries at the CIT have been approved for stipulation to the Justice Department and the Company has received reimbursement from the U.S. Customs Office in 2012 of previously paid duties of $107,417 plus accrued interest of $19,001.

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Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.  Controls and Procedures.

Evaluation of Controls and Procedures

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

As of December 31, 2012, management conducted an evaluation, with the participation of our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, management has concluded that as of December 31, 2012, our disclosure controls and procedures were effective.

Changes in Internal Controls

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

Management’s Report on Internal Control over Financial Reporting

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

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

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

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

We carried out an evaluation under the supervision, and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our internal control over financial reporting as of December 31, 2012.  This evaluation was based on the framework in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

47

Based on their evaluation, our management concluded that internal control over financial reporting was effective as of December 31, 2012.

Item 9B.  Other Information.

None.

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PART III

Item 10.  Directors, Executive Officers and Corporate Governance.

The following table sets forth the name, age and position of each of our executive officers and directors as of February 28, 2013.  All directors serve until the next annual meeting of stockholders or until their successors are elected and qualified.  Officers are appointed by our board of directors and their terms of office are, except to the extent governed by an employment contract, at the discretion of our board of directors.

Name	Age	Position
Scott Jarus	57	Chief Executive Officer, Chairman of the Corporation and Director
Eduard Albert Jaeger	52	Director, Head of New Business Development
Rhonda Hoffarth	52	Executive Vice President and Chief Operating Officer
Thomas Kreig	65	Senior Vice President of Finance, Principal Financial Officer and Secretary
Federico Castro	42	Vice President of Sales & Marketing
R.D. Pete Bloomer	77	Director
Vane Clayton	54	Director
David Jacobs	79	Director
Michael A. DiGregorio	58	Director
Charles H. Giffen	54	Director

Scott Jarus, Chief Executive Officer, Chairman of the Corporation, Director

Mr. Jarus was appointed and elected as a director of our Company on May 18, 2006, and became its Chairman in September 2008.  Mr. Jarus’ experience in turning-around and running a $1B market-cap public company (j2 Global Communications, Inc.), and his experience serving on various growth company Boards of Directors in his past, led to the Company’s decision to first appoint Mr. Jarus to the Company’s Board of Directors, then to name him Chairman.

On May 4, 2009, to facilitate the turn-around plan for our company designed and orchestrated by Mr. Jarus, he was named Chief Executive Officer for our company (in addition to his role as Chairman).  Mr. Jarus also serves on the boards of directors for Oversee.net and Food Forward (a 501(c)(3) non-profit), none of which compete with or are in the same industry as our company.

From 2001 to 2005, Mr. Jarus was President and principal executive of j2 Global Communications, Inc. (NASDAQ: JCOM), a provider of outsourced, value-added messaging and communications services to individuals and companies throughout the world. Before joining j2 Global Communications, Inc., from 1998 to 2001, Mr. Jarus was President and Chief Operating Officer for OnSite Access, a provider of building-centric integrated communications services.  Mr. Jarus has 29 years of management experience in the telecommunications industry and has served in various senior management positions.    Mr. Jarus is a member of the Tech Coast Angels, the largest angel investor organization in the Country.  In 2005, Mr. Jarus was named National Entrepreneur of the Year for Media/Entertainment/Communications by Ernst & Young (and Los Angeles Entrepreneur of the Year for Technology in 2004). He holds a Bachelor of Arts degree in Psychology and a Master of Business Administration degree from the University of Kansas.

Eduard Albert Jaeger, Director, Head of New Business Development

Mr. Jaeger founded Ironclad in 1998 and has served as a director since that time.  Mr. Jaeger was the CEO of Ironclad from inception to mid-2009, and led the company through the reverse tender offer.  He currently serves as our Head of New Business Development and has created and manages all of the brand partners now associated with our company, including Snap on, KONG, 5.11 Tactical, Duluth Trading Company, Realtree Outfitters, Red Wing, Tuff Chix and most recently Coleman Outdoors.  Mr. Jaeger has been Founder, co-Founder and President of a number of successful companies in the consumer products sector over a 34-year period.  As the creator of the new market in technical work gloves and the current culture of our company, his extensive experience and expertise in innovative product design and development, overseas manufacturing, importing and exporting, sales and marketing, and forming worldwide distribution channels led to the conclusion that Mr. Jaeger should serve on our Board of Directors.  Mr. Jaeger is also the inventor and co-inventor of many U.S. patents and several more in process, and has held executive positions in marketing and promotion.

49

Rhonda Hoffarth, Executive Vice President & Chief Operating Officer

Ms. Hoffarth has served as our Executive Vice President & Chief Operating Officer since January 2003.  From August 2005 through May 2006, Ms. Hoffarth also served as Ironclad’s interim Chief Financial Officer.  Ms. Hoffarth has over 20 years of experience in operations and finance with growing consumer product companies.  Prior to joining us, Ms. Hoffarth spent 9 years with Bell Sports, Inc. in various roles, including Vice President of Operations, North American, helping the company grow from $45,000,000 in revenue to over $200,000,000.  Subsequently, Ms. Hoffarth spent 2 years as the Senior Vice President of Operations for Targus, Inc., a $500,000,000 developer of mobile accessories.  Both Bell Sports and Targus source their finished products from Asia and have multiple sales channels (independent shops, regional and national accounts, big box accounts).  Ms. Hoffarth received her Masters of Business Administration from the University of Southern California in 1992.

Thomas Kreig, Senior Vice President of Finance, Principal Financial Officer and Secretary

Mr. Kreig currently serves as Senior Vice President of Finance, Principal Financial Officer and Secretary.  From September 2002 through May 2009, Mr. Kreig served as our Vice President of Finance and Secretary.  From April 2007 through December 2007 and from February 2008 through May 2009 Mr. Kreig served as our Interim Chief Financial Officer.  Before joining Ironclad, Mr. Kreig spent 18 years serving as Controller, Vice President of Finance and Chief Financial Officer at companies in several different industries.  Most recently he served as Controller for In-Flight Network, LLC, a developer of satellite-based broadband communications for airline passengers.  Prior to In-Flight Network, Mr. Kreig served as Vice President of Finance for Network Courier Services, Inc.  From 1983 to 1996, Mr. Kreig served as Controller and Chief Financial Officer for Triple L Distributing Co., Inc. and Controller and Treasurer for a medical diagnostic equipment company where he was instrumental in helping to successfully execute an initial public offering.  He is a certified public accountant and received his Masters of Business Administration from the University of Detroit in 1975.

Federico Castro, Vice President of Sales

Mr. Castro joined the Ironclad Team in February, 2009 and currently serves as Vice President of Sales and Marketing. Mr. Castro comes to us with extensive leadership experience in sales, sales team management, and strategic channel expansion in addition to a proven track record for pioneering and developing market leading consumer brands. Mr. Castro spent six years with Marzocchi Suspension based out of Bologna Italy developing the first US based IBD (independent bicycle dealer) aftermarket parts and distribution program. Subsequently, Mr. Castro spent the next eleven years of his career with Mechanix Wear Performance Gloves. During his tenure with Mechanix Wear he served as the National Accounts Manager and was quickly promoted to National Sales Manager, managing the entire sales organization. Mr. Castro’s leadership skills were instrumental in the evolution of Mechanix Wear’s business and success, taking the company from an independent dealer based sales organization producing $7 million on an annual basis to a company that currently exceeds $60 million in annual revenues nationwide servicing a broad range of customers from Independents, National Retailers, Big-Box and International customers alike in addition to increasing the brands value.

R. D. Pete Bloomer, Director

Mr. Bloomer served as Chairman of our board of directors from April 2003 through September 2008.  He is the Chairman and Chief Executive Officer of CVM Management, Inc. and Managing Partner of CVM Equity Fund V, Ltd., LLP, or CVM, which was one of our larger stockholders.  He is also the Managing Partner of the Northern Rockies Venture Fund which is one of the original investors of Ironclad.  The specific experience, qualifications, attributes and skills that led to the conclusion that Mr. Bloomer should serve on our board of directors, in light of our business and structure, include his service as the managing partner of 7 venture funds dating back to 1983.  Those funds have invested in over 90 early stage venture investments.  Mr. Bloomer has served as a member of the board of directors of many of the entities in which he has invested.  Mr. Bloomer has significant experience in marketing and sales having been Vice President of Sales/Marketing for Head Ski & Tennis, and having spent 11 years with IBM in sales and marketing.  Mr. Bloomer is also an experienced operations executive having served as Vice President of Operations for Hanson Industries.  Mr. Bloomer has served on the board of directors of several private companies not associated with his venture capital activity.

50

Vane Clayton, Director

Mr. Clayton has served on our board of directors since March 2004.  He currently serves as the CEO and board member of KPA, LLC, a software and services company providing environment and safety, human resource management and internet marketing services to 4,600 auto, truck and equipment dealers in the U.S. and Canada.  Prior to KPA, Mr. Clayton was President of ZOLL Data Systems, an Enterprise Software subsidiary of ZOLL Medical Corporation ($520M in Sales - NASDAQ: ZOLL).  Earlier in his career, Mr. Clayton managed a sales team for Raychem ($1.7B in Sales), a division of Tyco Electronics.  Mr. Clayton has experience in directing public and private companies in high growth sales and marketing strategies; new product and channel development; fund raising; Sarbanes-Oxley Section 404 compliance; strategic positioning; and building successful teams.  Mr. Clayton holds a B.S. in Agricultural/Mechanical Engineering from Purdue University and an MBA from Harvard Business School.

David Jacobs, Director

Mr. Jacobs has served on our board of directors since May 2012.  He is the Founder (in 1978), of Spyder Active Sports, Inc., the largest specialty ski wear brand in the world with sales in 54 countries.  It was purchased by Apax Partners, in 2004.  Mr. Jacobs currently serves on the Spyder board of directors.  Prior to Spyder, Mr. Jacobs introduced the Pearl Izumi brand of bicycling wear to the U.S. through a joint venture with the Japanese owners from 1982 to 1989.  In 1972, Mr. Jacobs founded the Hot Gear children’s ski wear brand.  From 1966 to 1969, he was a joint venture partner with Bob Lange, the founder of the first plastic ski boot, and then served as Vice President in charge of International operations for Lange USA from 1969 to 1972.  Mr. Jacobs is the winner of the Ernst & Young Entrepreneur of the Year award for the Rocky Mountain Region in 2004, and was inducted into the Boulder Business Hall of Fame in 2004.  As an athlete, Mr. Jacobs was the Canadian National Downhill Champion, Head Coach of Canada’s National Ski Team, and has been named to the Canadian Ski Hall of Fame, the Colorado Ski Hall of fame, and the Laurentian Ski Hall of fame.  From 2001 to 2002, before the Company went public, Mr. Jacobs served on the board of directors of Ironclad Performance Wear Corporation, a California corporation and our wholly-owned subsidiary.  Mr. Jacobs’ extensive experience managing and growing apparel businesses make him a valuable addition to our Board of Directors in light of our business and structure.

Michael A. DiGregorio, Director

Mr. DiGregorio was appointed to our board of directors in January 2013 pursuant to the terms of the Settlement Agreement disclosed above.  He has spent many years in senior financial and operating capacities in domestic and international markets.  A CPA by background, he has been CFO of public and private companies, and also as president of two large organizations.  Thirteen of those years were spent working with private equity groups, in which he helped transform underperforming companies and helped add significant market value to those enterprises.  Since early 2012, he has been developing his Board and advisory practice.  From mid-2009 to February 2012, he was EVP & CFO for Korn Ferry International, Inc.  Previously he had been the CFO at St. John Knits and also at Jafra Cosmetics International, Inc.  Mr. DiGregorio also serves as a member of the board of directors of Calavo Growers, Inc. (NASDAQ: CVGW).  Mr. DiGregorio’s experience in senior financial and operating capacities led to the conclusion that Mr. DiGregorio should serve on our board of directors in light of our business and structure.

Charles H. Giffen, Director

Mr. Giffen was appointed to our board of directors in January 2013 pursuant to the terms of the Settlement Agreement disclosed above.  He is a veteran management consultant and executive coach, specializing in optimizing all aspects of operational and financial performance for small to mid-size businesses. Mr. Giffen holds over 30 years of broad business experience, both managing and advising a wide variety of companies in different industries and sectors (manufacturing, wholesale, service, professional), and he has worked as a management consultant for the last 15 years.  His company, Small Biz Wrangler, maximizes execution, efficiency, communication, leadership and profitability for its client companies.  Previously, Mr. Giffen served as President and Chief Operating Officer of GTCO Calcomp, Inc., a leading manufacturer of computer input peripherals and pioneer in electromagnetic digitizing technology.  He has also developed entertainment ventures in cable television (New Culture Network, Inc.) and motion simulation (RideTime USA, Inc.), and managed operations for publishing and technical education companies.  Mr. Giffen holds a Bachelor of Arts in Economics from the University of Maryland at College Park.  Mr. Giffen’s experience in optimizing operational and financial performance led to the conclusion that Mr. Giffen should serve on our board of directors in light of our business and structure.

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Audit Committee of the Board of Directors

The Audit Committee of our board of directors currently consists of Messrs. Clayton (Chair), Bloomer and DiGregorio.  Our board of directors has determined that Mr. DiGregorio is an audit committee financial expert, as defined in Item 407(d)(5) of Regulation S-K, and that Mr. DiGregorio is “independent” as that term is defined in the applicable rules for companies traded on the NASDAQ Stock Market.  Our board of directors has also determined that each other member of our Audit Committee is able to read and understand fundamental financial statements and has substantial business experience that results in such member’s financial sophistication.  Accordingly, our board of directors believes that each member of our Audit Committee has sufficient knowledge and experience necessary to fulfill such member’s duties and obligations on our Audit Committee.  The primary purposes of the Audit Committee are (i) to review the scope of the audit and all non-audit services to be performed by our independent auditors and the fees incurred by us in connection therewith, (ii) to review the results of such audit, including the independent accountants’ opinion and letter of comment to management and management’s response thereto, (iii) to review with our independent accountants our internal accounting principles, policies and practices and financial reporting, (iv) to engage our independent auditors and (v) to review our quarterly and annual financial statements prior to public issuance.  The role and responsibilities of the Audit Committee are more fully set forth in a written Charter adopted by our board of directors.  The Audit Committee was created by our board of directors effective May 18, 2006.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC.  Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file.  Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2012, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements other than Mr. Alderton who did not timely file two Form 4’s reporting four transactions, and Messrs. Jarus, Bloomer, Clayton, Jaeger and Jacobs who each did not timely file a Form 4 reporting one transaction.

Code of Ethics

We have adopted a Code of Ethics applicable to all of our board members and to all of our employees, including our Chief Executive Officer and Principal Financial Officer.  The Code of Ethics constitutes a “code of ethics” as defined by applicable SEC rules and a “code of conduct” as defined by applicable NASDAQ rules.  We will provide a copy of the Code of Ethics to any person without charge, upon request by writing or calling us at:

Ironclad Performance Wear Corporation

Attn: Investor Relations

2201 Park Place, Suite 101

El Segundo, CA 90245

(310) 643-7800

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

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Item 11.  Executive Compensation.

Summary Compensation Table

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

Name and Principal Position	Year	Salary ($)	Bonus ($)	Option Awards ($)	All Other Compen-sation ($)	Total ($)
Eduard Albert Jaeger (1) Head of New Business Development and Director	2012 2011	209,000 204,173	63,000 10,615	12,412 23,334	21,468 7,200	305,880 245,322
Scott Jarus (2) Chief Executive Officer, Executive Chairman of the Corporation, Director	2012 2011	231,660 144,650	65,000 62,264	23,265 --	20,029 5,882	339,954 212,796
Federico Castro (3) Vice President of Sales and Marketing	2012 2011	193,689 164,599	71,000 30,920	-- 7,180	12,456 7,200	277,145 209,899

(1) Mr. Jaeger served as our President and Chief Executive Officer from our formation through May 4, 2009.  Mr. Jaeger’s current annual base salary is $209,000 and he may also receive a discretionary bonus as determined by the Compensation Committee of our board of directors.  The terms of Mr. Jaeger’s Separation Agreement with us are discussed below.  The other compensation disclosed for Mr. Jaeger represents an automobile allowance, 401(k) employer matching funds and amounts paid to cover any employee portion of health benefits offered by the Company.  The fair value of options granted to Mr. Jaeger was estimated on the date of grant using the Black-Scholes Model with the following weighted-average assumptions:

Year	Risk Free Interest Rate	Volatility	Term	Dividends
2012	0.58%	89.1%	5.5 years	None
2011	1.62%	90.7%	6.25 years	None

(2) Mr. Jarus served as our Interim Chief Executive Officer from May 4 to December 31, 2009, and was appointed our Chief Executive Officer effective as of January 1, 2010.  The other compensation disclosed for Mr. Jarus represents an automobile allowance, 401(k) employer matching funds and amounts paid to cover any employee portion of health benefits offered by the Company.  Mr. Jarus’ current annual base salary is $250,000 and he may also receive a discretionary bonus as determined by the Compensation Committee of our board of directors.  Mr. Jarus does not have an employment agreement with us.  The fair value of options granted to Mr. Jarus was estimated on the date of grant using the Black-Scholes Model with the following weighted-average assumptions:

Year	Risk Free Interest Rate	Volatility	Term	Dividends
2012	0.58%	89.1%	5.5 years	None

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Mr. Jarus was awarded a stock bonus in 2011 of 518,033 shares of our common stock by the Compensation Committee of our board of directors.  These shares were issued under the Ironclad Performance Wear 2006 Stock Option Plan and the fair value of this stock grant was estimated on the date of grant using the Black-Scholes Model with the following weighted-average assumptions:

Year	Risk Free Interest Rate	Volatility	Term	Dividends
2011	0.06%	95.9%	5 years	None

(3) Mr. Castro’s current annual base salary is $193,545 and he may also receive a discretionary bonus as determined by the Compensation Committee of our board of directors.  The other compensation disclosed for Mr. Castro represents an automobile allowance and 401(k) employer matching funds.  Mr. Castro does not have an employment agreement with us.  The fair value of options granted to Mr. Castro was estimated on the date of grant using the Black-Scholes Model with the following weighted-average assumptions:

Year	Risk Free Interest Rate	Volatility	Term	Dividends
2011	1.62%	90.7%	6.25 years	None

Outstanding Equity Awards at Fiscal Year End

The following table presents information regarding outstanding options held by our named executive officers as of the end of our fiscal year ended December 31, 2012.

Name	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Option Exercise Price ($) (1)		Option Expiration Date
Eduard Albert Jaeger (2)		122,034	(3)		-			0.09	9/3/15
		500,000	(4)		-			0.09	5/18/16
		103,900	(5)		-			0.09	11/20/17
		144,581	(6)		22,419	(6)		0.095	7/16/19
		109,966	(7)		215,034	(7)		0.095	8/24/21
		49,646	(8)		31,979	(8)		0.24	7/26/22
Scott Jarus		93,058	(9)		59,942	(9)		0.24	7/26/22
Federico Castro		76,932	(10)		3,068	(10)		0.09	2/26/19
		231,205	(11)		58,795	(11)		0.095	7/16/19
		86,199	(12)		63,801	(12)		0.10	9/14/20
		33,836	(13)		66,164	(13)		0.095	8/24/21

(1) On May 4, 2009, the board of directors approved changing the exercise price for all outstanding stock options which were fixed and re-priced at $0.09 per share, which price represents an amount equal to $0.02 above the average closing stock price of the Company over the prior 30 days.

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(2) Ironclad California executed a Separation Agreement with Eduard Albert Jaeger effective in April 2004, the terms of which are described in Employment Contracts herein.

(3) Mr. Jaeger was granted options to purchase 276,131 shares on 9/2/05, 146,695 shares vested immediately and 50% of the remainder vests on each of the first and second anniversary of the effective date of grant. On March 20, 2012 Mr. Jaeger exercised 154,097 shares of this option.

(4) Mr. Jaeger was granted options to purchase 500,000 shares on 5/18/06, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

(5) Mr. Jaeger was granted options to purchase 103,900 shares on 11/17/07, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

(6) Mr. Jaeger was granted options to purchase 167,000 shares on 7/16/09, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

(7) Mr. Jaeger was granted options to purchase 325,000 shares on 8/24/11, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

(8) Mr. Jaeger was granted options to purchase 81,625 shares on 7/26/12, 1/12th vests on the twenty-third day of each month commencing June 23, 2012.

(9) Mr. Jarus was granted options to purchase 153,000 shares on 7/26/12, 1/12th vests on the twenty-third day of each month commencing June 23, 2012.

(10) Mr. Castro was granted options to purchase 80,000 shares on 2/26/09, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

(11) Mr. Castro was granted options to purchase 290,000 shares on 7/16/09, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

(12) Mr. Castro was granted options to purchase 150,000 shares on 9/14/10, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

(13) Mr. Castro was granted options to purchase 100,000 shares on 8/24/11, 25% vested on the first anniversary of the effective date of grant and 1/36th of the remaining amount of shares vest at the end of each month thereafter.

The following executive officers listed in the above table exercised options during the fiscal year ended December 31, 2012:

Name	# Options Exercised	Exercise Price	Total
Eduard Jaeger	215,728 shares	$0.09	$19,416
Eduard Jaeger	32,053 shares	$0.09	$2,885
Eduard Jaeger	431,455 shares	$0.09	$38,831
Eduard Jaeger	154,097 shares	$0.09	$13,869

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Director Compensation

The following table presents information regarding compensation paid to our non-employee directors for our fiscal year ended December 31, 2012.

Name	Fees Earned or Paid in Cash ($)		Option Awards ($)		Total ($)
R. D. Pete Bloomer		28,750		23,265		52,015
Scott Alderton (1)		28,750		23,265		52,015
Vane Clayton		28,750		23,265		52,015
Kenneth J. Frank, M.D.		6,250		-		6,250
David Jacobs		18,214		23,265		41,479

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

The following directors listed in the above table exercised options during the fiscal year ended December 31, 2012:

Name	# Options Exercised	Exercise Price	Total
Scott Alderton	129,437 shares	$0.09	$11,649
Scott Alderton	31,854 shares	$0.09	$2,867
Scott Alderton	75,000 shares	$0.09	$6,750
Scott Alderton	75,000 shares	$0.09	$6,750
Scott Alderton	250,000 shares	$0.095	$23,750

In 2011, non-employee directors of Ironclad received $25,000 for attending meetings and serving on Ironclad California’s board of directors.  In 2012, non-employee directors of Ironclad received $28,750 for attending meetings and serving on Ironclad California’s board of directors. Since April 2000, non-employee directors of Ironclad California have each received options to purchase shares of Ironclad common stock upon their appointment to our board of directors and periodically thereafter.  We expect to continue the practice of compensating our directors with options to purchase our common stock going forward.  Compensation payable to non-employee directors may be adjusted from time to time, as approved by our board of directors.

Employment Contracts

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

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

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2006 Stock Incentive Plan

Our 2006 Stock Incentive Plan, or the Plan, was adopted on September 18, 2006 and became effective on January 12, 2007.  A total of 13,000,000 shares of common stock have been reserved for issuance upon exercise of awards granted under the Plan.  Any shares of common stock subject to an award, which for any reason expires or terminates unexercised, are again available for issuance under the Plan.

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

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

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

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

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

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

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

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

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

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table presents information regarding the beneficial ownership of our common stock as of February 28, 2013 by:

· each of our executive officers;

· each of our directors;

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

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

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Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.  Shares of our common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of February 28, 2013 are deemed to be outstanding and to be beneficially owned by the person holding the options or warrants for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

The information presented in this table is based on 76,704,275 shares of our common stock outstanding on February 28, 2013.  Unless otherwise indicated, the address of each of the executive officers and directors and 5% or more shareholders named below is c/o Ironclad Performance Wear Corporation, 2201 Park Place, Suite 101, El Segundo, California 90245.

Name of Beneficial Owner	Number of Shares Beneficially Owned		Percentage of Shares Outstanding
Executive Officers and Directors:
Eduard Albert Jaeger (1)		4,694,156	6.0%
Director, Head of New Business Development
Rhonda Hoffarth (2)		727,156	*
Executive Vice President Sales & Marketing
Thomas Kreig (3)		549,027	*
Senior Vice President of Finance, Secretary
Federico Castro (4)		475,253	*
Vice President of Sales and Marketing
R.D. Pete Bloomer (5)		891,981	1.2%
Director
Vane Clayton (6)		754,871	1.0%
Director
Scott Jarus (7)		7,169,640	9.3%
Executive Chairman, Director, Chief Executive Officer
David Jacobs (8)		142,940	*
Director
Michael DiGregorio (9)		159,750	*
Director
Charles Giffen (10)		39,750	*
Director
Directors and officers as a group (10 persons) (11)		15,604,524	19.2%
5% Shareholders:
Ronald Chez		5,972,380	7.8%
Kenneth J. Frank		5,842,951	7.6%

*           Less than 1%

(1) Consists of (i) 2,763,984 shares of common stock held by Eduard and Kari Family Trust dtd 7/19/2006, of which Eduard Albert Jaeger is a trustee and as such has voting and investment power, (ii) 833,333 shares of common stock held directly by Mr. Jaeger, and (iii) 1,096,839 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.  Mr. Jaeger disclaims beneficial ownership of the shares of common stock held by Eduard and Kari Family Trust dtd 7/19/2006 except to the extent of his pecuniary interest therein.

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(2) Includes 522,987 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(3) Includes 417,802 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(4) Consists of 475,253 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(5) Consists of (i) 11,591 shares of common stock held directly, (ii) 46,722 shares of common stock held by CVM Management, Inc., of which Mr. Bloomer is the President and as such has voting and investment power, and (iii) 833,668 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(6) Includes 704,231 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(7) Consists of (i) 7,026,700 shares of common stock held by the Jarus Family Trust, for which Mr. Jarus exercises voting and investment power, and (ii) 142,940 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(8) Consists of 142,940 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(9) Includes 39,750 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(10) Consists of 39,750 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

(11) Consists of (i) 11,188,364 shares of common stock, and (ii) 4,416,160 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable or will become exercisable within 60 days of February 28, 2013.

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Equity Compensation Plan Information

The following table sets forth information concerning our equity compensation plans as of December 31, 2012.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)			Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders (2000 Stock Incentive Plan)		638,485	(1)	$	0.09	-
Equity compensation plans approved by security holders (2006 Stock Incentive Plan)		8,931,970	(2)	$	0.115	2,022,768
Equity compensation plans approved by security holders (Warrants)		43,146	(3)	$	0.185	-
Total		9,613,601		$	0.114	2,022,768

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

(2)This number represents stock options to purchase 8,931,970 shares of our common stock under the 2006 Stock Incentive Plan, or the Plan.

(3)           This number represents warrants issued to purchase 43,146 shares of our common stock in exchange for services.  This warrant has no expiration.

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Item 13.  Certain Relationships and Related Transactions, and Director Independence.

Transactions with Officers and Directors

Other than the transactions described below, since January 1, 2011, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party:

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

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

Mr. Alderton, one of our board members since August 2002, is a partner of the law firm Stubbs, Alderton and Markiles, LLP, or SAM, which serves as our attorney of record.  SAM rendered services to Ironclad California as its primary legal firm since 2002, and became our primary legal counsel upon closing of the merger with Ironclad California on May 9, 2006.  The Company incurred legal fees for services rendered by SAM of $160,283 and $137,566 in 2012 and 2011, respectively.   Mr. Alderton ceased to serve as a member of our board on December 31, 2012.

Director Independence

Our board of directors currently consists of seven members: Messrs. Jarus (Chairman), Jaeger, Bloomer, Clayton, DiGregorio, Giffen and Jacobs.  We are not a “listed issuer” under SEC rules.  We believe that Messrs. Bloomer, Clayton, DiGregorio, Giffen and Jacobs are “independent” as that term is defined in the applicable rules for companies traded on the NASDAQ Stock Market.

Item 14.  Principal Accounting Fees and Services.

EFP Rotenberg, LLP is our principal independent public accounting firm.  All audit work was performed by the full time employees of EFP Rotenberg, LLP.  Our Audit Committee approves in advance, all services performed by EFP Rotenberg, LLP.  Our board of directors has considered whether the provision of non-audit services is compatible with maintaining the principal accountant’s independence, and has approved such services.

Audit Fees

Fees for audit services totaled approximately $98,750 and $93,800 for the years ended December 31, 2012 and 2011, respectively, including fees associated with the annual audit, and reviews of our quarterly reports on Form 10-Q.

Audit-Related Fees

Fees for audit-related services totaled approximately $-0- and $2,300 for the years ended December 31, 2012 and 2011, respectively.  Audit-related services principally include accounting consultations.

Tax Fees

Fees were incurred totaling approximately $10,850 and $10,500 during the years ended December 31, 2012 and 2011, respectively for tax services, including for tax compliance, tax advice and tax planning.

All Other Fees

No other fees were incurred during the years ended December 31, 2012 and 2011 for services provided by EFP Rotenberg, LLP, except as described above.

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PART IV

Item 15.  Exhibits, Financial Statement Schedules.

The financial statements filed as part of this Annual Report on Form 10-K are listed on page 24.

The following exhibits are filed with this Annual Report on Form 10-K:

Exhibit Number	Exhibit Title
3.1.1	Articles of Domestication of the Registrant.  Incorporated by reference to Exhibit 3.1 to our Registration Statement on Form SB-2 (File No. 333-118808), filed September 3, 2004.
3.1.2	Certificate of Change effecting a forward stock split and increasing the number of authorized shares, filed May 9, 2006.  Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K (File No. 000-51365), filed May 12, 2006.
3.1.3	Articles of Merger effecting a name change to the Registrant.  Incorporated by reference to Exhibit 3.3 to our Current Report on Form 8-K (File No. 000-51365), filed May 12, 2006.
3.2	Amended and Restated Bylaws.  Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K (File No. 000-51365), filed March 15, 2012.
4.1.1	Articles of Domestication of the Registrant.  Incorporated by reference to Exhibit 3.1 to our Registration Statement on Form SB-2 (File No. 333-118808), filed September 3, 2004.
4.1.2	Certificate of Change effecting a forward stock split and increasing the number of authorized shares, filed May 9, 2006.  Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K (File No. 000-51365), filed May 12, 2006.
4.1.3	Articles of Merger effecting a name change to the Registrant.  Incorporated by reference to Exhibit 3.3 to our Current Report on Form 8-K (File No. 000-51365), filed May 12, 2006.
4.2	Amended and Restated Bylaws.  Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K (File No. 000-51365), filed March 15, 2012.
4.3	Ironclad Performance Wear Corporation 2000 Stock Incentive Plan.  Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-8 (File No. 333-139210), filed December 8, 2006.
4.4	First Amendment to Ironclad Performance Wear Corporation 2000 Stock Incentive Plan.  Incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-8 (File No. 333-139210), filed December 8, 2006.
4.5	2006 Stock Incentive Plan.  Incorporated by reference to Exhibit 99.1 to our Registration Statement on Form S-8 (File No. 333-145855), filed September 4, 2007.
4.6	Amendment No. 1 to Ironclad Performance Wear Corporation’s 2006 Stock Incentive Plan.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-51365), filed May 11, 2009.
4.7	Amendment No. 2 to Ironclad Performance Wear Corporation’s 2006 Stock Incentive Plan.  Incorporated by reference to Appendix A to our Definitive Proxy Statement on Schedule 14A (File No. 000-51365), filed April 18, 2011.
10.1†	Form of Indemnification Agreement.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-51365), filed December 21, 2012.
10.2†	Separation Agreement between Eduard Albert Jaeger and the Registrant.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-51365), filed May 12, 2006.
10.3	Standard Industrial/Commercial Multi-Tenant Lease by and between Park/El Segundo Partners, LLC, and the Registrant, dated September 12, 2005, as amended.  Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (File No. 000-51365), filed May 12, 2006.
10.4	Letter Agreement with Advantage Media Systems, Inc., dated June 29, 2007.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-51365), filed July 6, 2007.

63

Exhibit Number	Exhibit Title
10.5*	Exclusive License and Distributorship Agreement dated January 6, 2009, between the Registrant and Orr Safety Corporation.  Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q (File No. 000-51365), filed May 15, 2009.
10.6	Ironclad Performance Wear 2006 Profit Sharing Plan.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-51365), filed May 8, 2009.
10.7*	Factoring and Inventory Advances and Security Agreement dated December 7, 2009, between the Registrant and FCC, LLC d/b/a First Capital Western Region, LLC.Incorporated by reference to Exhibit 10.13 to our Annual Report on Form 10-K (File No. 000-51365), filed March 11, 2010.
10.8	Patent and Trademark Security Agreement dated December 7, 2009, between the Registrant and FCC, LLC d/b/a First Capital Western Region, LLC.  Incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-K (File No. 000-51365), filed March 11, 2010.
10.9†*	Ironclad Performance Wear Annual Incentive Plan – 2012.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-51365), filed March 2, 2012
10.10	Business Loan Agreement dated November 30, 2012, between Ironclad Performance Wear Corporation and Union Bank, N.A.  Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-51365), filed December 11, 2012.
10.11	Security Agreement dated November 30, 2012, between Ironclad Performance Wear Corporation and Union Bank, N.A.  Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (File No. 000-51365), filed December 11, 2012.
10.12	Commercial Promissory Note issued on November 30, 2012 by Ironclad Performance Wear Corporation in favor of Union Bank, N.A.  Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K (File No. 000-51365), filed December 11, 2012.
10.13*	Settlement Agreement and Mutual General Release dated December 14, 2012, by and among Ironclad Performance Wear Corporation, Scott Jarus, Scott Alderton, Eduard A. Jaeger, R.D. Pete Bloomer, Vane Clayton, David Jacobs, Kenneth J. Frank, Richard B. Kronman, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter and Marcel Sassola.
10.14	Voting Agreement dated December 14, 2012, by and among Ironclad Performance Wear Corporation, Kenneth J. Frank, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter, Marcel Sassola, Eduard A. Jaeger, Richard B. Kronman and Scott Jarus.
21.1	Subsidiaries of the Registrant.  Incorporated by reference to Exhibit 21.1 to our Current Report on Form 8-K (File No. 000-51365), filed May 12, 2006.
23.1	Consent of Rotenberg & Co.
24.1	Power of Attorney (included on signature page).
31.1	Certification of Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal 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 Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance.
101.SCH**	XBRL Taxonomy Extension Schema.
101.CAL**	XBRL Taxonomy Extension Calculation.
101.DEF**	XBRL Taxonomy Extension Definition.

64

Exhibit Number	Exhibit Title
101.LAB**	XBRL Taxonomy Extension Labels.
101.PRE**	XBRL Taxonomy Extension Presentation.

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

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

**  XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

65

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	IRONCLAD PERFORMANCE WEAR CORPORATION
Date: March 13, 2013		/s/ Thomas Kreig
	By:	Thomas Kreig
	Its:	Senior Vice President of Finance and
		Principal Financial Officer

POWER OF ATTORNEY

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

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

Name	Title	Date
/s/ Scott Jarus	Chief Executive Officer,	March 13, 2013
Scott Jarus	Chairman of the Board and Director (Principal Executive Officer)
/s/ Thomas Kreig	Senior Vice President of Finance and	March 13, 2013
Thomas Kreig	Principal Financial Officer (Principal Financial and Accounting Officer)
/s/ David Jacobs	Director	March 13, 2013
David Jacobs
/s/ R. D. Pete Bloomer	Director	March 13, 2013
R. D. Pete Bloomer
/s/ Vane Clayton	Director	March 13, 2013
Vane Clayton
/s/ Eduard Albert Jaeger	Director and Head of New Business	March 13, 2013
Eduard Albert Jaeger	Development
	Director	March __, 2013
Michael DiGregorio
/s/ Charles Giffen	Director	March 13, 2013
Charles Giffen

66

EX-10.13

Exhibit 10.13

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE

THIS SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE ("Agreement") is made and entered into as of  December 14, 2012, by and between IRONCLAD PERFORMANCE WEAR CORPORATION (“Ironclad” or “Company”), SCOTT JARUS, SCOTT ALDERTON, EDUARD A. JEAGER, R.D. PETE BLOOMER, VAYNE CLAYTON and DAVID JACOBS  on the one hand, and KENNETH J. FRANK, RICHARD B. KRONMAN, MICHAEL A. DIGREGORIO, CHARLES H. GIFFEN, CHARLES W. HUNTER and MARCEL SASSOLA (collectively, the “Shareholders”) on the other hand, (each individually a “Party”, and collectively “Parties”), with reference to the following facts:

RECITALS

A.           On April 26, 2012, Richard Kronman filed an action against Ironclad in the Los Angeles Superior Court entitled Richard B. Kronman v. Ironclad Performance Wear Corporation etc., Case No. BC 483223,  (“State Court Action”) on behalf of the Shareholders seeking declaratory and injunctive relief arising out of and related to Kronman’s claim that the Shareholders other than Kronman and Orcutt were entitled to stand for election as directors at the annual meeting of the shareholders of Ironclad that had been noticed for May 23, 2012;

B.           In connection with the State Court Action, Kronman filed two ex parte applications seeking certain immediate relief in connection with the annual meeting of the shareholders of Ironclad, both of which were denied;

           C.           On May 23, 2012, the Company conducted its annual shareholders’ meeting (the “2012 Annual Shareholders’ Meeting”), at which the six persons nominated by the Company to serve as members of the Company’s board of directors (the “Board”), namely, Scott Jarus, Eduard Albert Jaeger, R.D. Pete Bloomer, Vane Clayton, Scott Alderton and David Jacobs (collectively, the “Incumbents”), were elected to serve as the members of the Company’s Board;

D.           On May 29, 2012, Ironclad filed an action in the United States District Court for the Central District of California, Case No. CV12-04669, entitled Ironclad Performance Wear Corporation v. Frank, et al. (“Federal Action”), against the Shareholders (other than John Orcutt) for violation of Federal Securities Laws, Injunctive Relief and Declaratory Relief;

E.           On August 16, 2012, Marcel Sassola (“Sassola”) and Kenneth Frank (“Frank”) filed an amended complaint in the State Court Action as Plaintiffs, notwithstanding the fact that they did not seek relief from the court to substitute in as Plaintiffs in said action;

F.           On August 23, 2012 Sassola and Frank filed an ex parte application to set a hearing pursuant to California Corporations Code Section 709, which was granted by the Court.  The hearing was set for January 24, 2013;

G.           On September 25, 2012, certain of the Parties mediated both the State Court Action and the Federal Action, and in connection therewith entered into a non-binding Memorandum of Understanding (“MOU”) resolving both actions in their entirety.  Attached hereto as Exhibit “1” is a true and correct copy of the MOU.

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

H.           This Agreement is the formal agreement contemplated by the Parties to resolve the State Court Action and the Federal Action, and supersedes the MOU.

NOW THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, it is agreed as follows:

1.           Recitals.  The Recitals set forth above are incorporated herein by this reference.

2.           Composition of the Board.

a.           At a duly convened Board of Directors meeting held on July 26, 2012, Ironclad increased the number of members on its Board from six (6) members to a current seven (7) member Board, with the additional seat created thereby to remain vacant pending further action of the Board.  Such vacancy will be filled in accordance with Section 2b, below.  The Board presently is comprised of six members and one vacancy.  The members are Scott Jarus, Eduard Jaeger, R.D. Pete Bloomer, Vane Clayton, Scott Alderton and David Jacobs (i.e., the “Incumbents”);

b.           Effective upon execution of this Agreement: (i) Scott Alderton (“Alderton”) will resign from the Company’s Board; (ii) the Board will  appoint Charles H. Giffen (“Giffen”) (who has been interviewed by members of the Board), to serve as a member of the Board to fill the vacancy created by the Company’s action to increase the size of the Board from six (6) to seven (7) members; and, (iii) the Board will  appoint Michael A. DiGregorio (“DiGregorio”) (who has also been interviewed by members of the Board), to serve as a member of the Board to fill the vacancy created by Alderton’s resignation;

c.           In the event either of the two new members, or any successor thereto, later resigns or otherwise ceases to be a member of the Board prior to the next annual shareholders meeting which will occur in 2013 (the “2013 Annual Shareholders’ Meeting”), then that vacancy or those vacancies will be filled as soon as reasonably possible by the Board as then comprised in the exercise of their business judgment from persons proposed by the Shareholders;

d.           In the event that any of Scott Jarus, Vane Clayton or R.D. Pete Bloomer, or any successor thereto resigns or otherwise ceases to be a member of the Board prior to the 2013 Annual Shareholders’ Meeting then that vacancy or those vacancies will be filled as soon as reasonably possible by the Board as then comprised in the exercise of their business judgment, from persons proposed by the Incumbents; and

e.           In the event that David Jacobs, Eduard Jaeger or any successor thereto resigns or otherwise ceases to be a member of the Board prior to the 2013 Annual Shareholders’ Meeting, then that vacancy will be filled as soon as reasonably possible by the Board as then comprised in the exercise of their business judgment, by a person mutually acceptable to the Incumbents and the Shareholders.

2

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

f.           Section 2, and each subsection thereof, will expire automatically upon the conclusion of the 2013 Annual Shareholders Meeting unless terminated earlier pursuant to Section 4 hereof.

3.           Election of Directors at the 2013 Annual Shareholders’ Meeting.TheParties agree that the persons to be nominated to be members of the Board at the 2013 Annual Shareholders’ Meeting shall be the persons who are members of the Board pursuant to Section 2 hereof.  The Parties also agree that each of the Shareholders and each of Eduard Jaeger and Scott Jarus (who individually are parties to the voting agreement referenced below), each will vote all of their Company stock in favor of those nominees at or in connection with the 2013 Annual Shareholders’ Meeting.  To effectuate this agreement, the Parties agree as follows:

a.           The Board as comprised pursuant to Section 2 hereof will nominate each and every member of the Board as then comprised to stand for election at the 2013 Annual Shareholders’ Meeting;

b.           The Shareholders together with Eduard Jaeger and Scott Jarus individually, will enter into a shareholder voting agreement in the form attached hereto as Exhibit “2”, to which Ironclad will be a party with the same rights to enforce that agreement as the other parties thereto;

c.           The Shareholders, together with Eduard Jaeger and Scott Jarus, each will deliver to the Company, within ten business days of the Company filing with the United States Securities and Exchange Commission a definitive proxy statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 (the “Company’s 2013 Proxy Statement”), proxies in the form provided by the Company, which proxies shall be completed to vote all Company stock legally and/or beneficially owned by each of the Shareholders and by Each of Eduard Jaeger and Scott Jarus for each of the persons nominated by the Company to serve as members of the Board;

d.           It is further agreed that, in the event that any of the Shareholders, Eduard Jaeger and Scott Jarus fail to deliver a proxy or proxies as provided for in the immediately preceding subparagraph, the other Parties hereto, including Ironclad, shall be and are entitled to mandatory injunctive relief requiring the nonperforming Party to perform pursuant to the immediately preceding subparagraph, which mandatory injunctive relief can be obtained from any court of competent jurisdiction;

e.           It is further agreed that Ironclad shall be and hereby is entitled to disregard, and to not count any vote by any one required to provide a proxy as provided above, whether at or in connection with the 2013 Annual Shareholders’ Meeting, if such vote is not for the persons nominated by the Company to serve as members of the Board;

f.           The Parties agree that neither they nor any agent of theirs, nor any person acting at their behest, at their direction or under their control or in concert with them, may or shall take any action whatsoever, including but not limited to soliciting proxies or disseminating so-called fight letters, which action directly or indirectly challenges or contests the nominees listed in the Company’s Proxy Statement, or which supports candidates other than those nominated by the Company to be elected as members of the Company’s Board at the 2013 Annual Shareholders’ Meeting; and

3

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

g.           The Parties further agree that, in the event that any of them act or cause actions of the type or nature described in the immediately preceding subparagraph, the other Parties hereto, including Ironclad, shall be and are entitled to injunctive relief limiting and prohibiting such actions, which injunctive relief can be obtained from any court of competent jurisdiction.

4.  [***].

5.           State Court Action and Federal Action.

a.             A Notice of Settlement has been filed in the State Court Action and the Federal Action;

b.           Upon execution of this Agreement by all parties, the State Court Action and the Federal Action will be dismissed by all parties, with prejudice pursuant to Stipulations of Dismissal in the form of Exhibits “3” and “4” hereto; and

c.           The Shareholders will not re-file the State Court Action in any Court, nor will Ironclad re-file the Federal Action in any Court, except as otherwise provided herein. Further, no Party will directly or indirectly initiate any litigation, provide any documents or information to any third party (except as required by law), or cooperate in any way with anyone, in respect of the filing of any action substantially similar to or raising any allegation made or matter raised in or in connection with either the State Court Action or Federal Action.

6.           [***].

7.           Attorney Fees.  No later than one (1) week from execution of this Agreement (or such later date as the Shareholders make the designation required in this Section 7), Ironclad will pay to an attorney’s client trust account designated in writing by each of the Shareholders or their authorized representative, the sum of Forty Thousand Dollars ($40,000.00), as payment in full of any claim for attorney fees and/or costs in connection with the State Court Action, the Federal Action and anything else whatsoever related to the matters resolved herein.  Ironclad shall be permitted to rely upon written notice directing payment of the foregoing, provided that the notice indicates that a copy thereof was sent to Edward Gartenberg, without any liability whatsoever.

8.           Reserved

9.           Default, Retention of Jurisdiction under CCP §664.6.  The Parties hereby stipulate and agree that the Los Angeles Superior Court will retain jurisdiction pursuant to CCP §664.6 to enforce the terms of this Agreement.

4

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

10.         Mutual General Releases.

a.           Effective as of the date of this Agreement, Ironclad and the Incumbents, for themselves and for their respective agents, employees, trustees, trustors, beneficiaries, receivers, corporations, parents, affiliates, subsidiaries, predecessors, successors, assigns, shareholders, officers, directors, partners, partnerships, members, attorneys, representatives, heirs, spouses, executors, administrators, affiliated or related entities and their respective owners, officers, and directors and any other persons or entities who may claim through it, does hereby release the Shareholders, and each of them, absolutely and forever, and discharge all of their respective employees, trustees, trustors, beneficiaries, receivers, corporations, parents, affiliates, subsidiaries, predecessors, successors, assigns, shareholders, officers, directors, partners, partnerships, members, attorneys, representatives, heirs, spouses, executors, administrators, affiliated or related entities and their respective owners, officers, and directors, and each of them, ("Shareholder Releasees”) of and from any and all claims, demands, damages, debts, liabilities, accounts, reckonings, obligations, costs, expenses, liens, actions and causes of action of every kind or nature, including but not limited to the State Court Action and the Federal Action, from the beginning of time to the date of this Agreement (except for any and all demands, damages, debts, liabilities, accounts, reckoning, obligations, costs, expenses, liens, actions and causes of action with respect to obligations created by or arising out of this Agreement).

This general release applies to all of the above claims, causes of action, or otherwise, whether or not any such matters, causes, or things whatsoever were, or could in any way have been, claimed by Ironclad or the Incumbents, against the Shareholder Releasees, or any of them, or otherwise have been or could have been brought or alleged by Ironclad or the Incumbents, or any of them, against the Shareholder Releasees, or any of them, in law or in equity, suits, debts, liens, security interests, claims, demands, damages, losses, costs, attorneys fees or expenses of any nature whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, which Ironclad or the Incumbents, at any time heretofore ever had, owned or held, or which it now has, owns or holds.

b.           Effective as of the date of this Agreement, the Shareholders, for themselves and for their respective assigns, agents, employees, shareholders, attorneys, representatives, trustees, heirs, executors, administrators and any other persons or entities who may claim through any or all of them, do hereby release Ironclad and the Incumbents absolutely and forever, and discharge all of its respective employees, trustees, trustors, beneficiaries, receivers, corporations, parents, affiliates, subsidiaries, predecessors, successors, assigns, shareholders, officers, directors, partners, partnerships, members, attorneys, representatives, heirs, spouses, executors, administrators, affiliated or related entities and its respective owners, officers, and directors, and each of them, ("Ironclad Releasees") of and from any and all claims, demands, damages, debts, liabilities, accounts, reckonings, obligations, costs, expenses, liens, actions and causes of action of every kind or nature, including but not limited to the State Court Action and the Federal Action, from the beginning of time to the date of this Agreement (except for any and all demands, damages, debts, liabilities, accounts, reckonings, obligations, costs, expenses, liens, actions and causes of action with respect to the obligations created by or arising out of this Agreement).

5

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

This general release applies to all of the above claims, causes of action, or otherwise, whether or not any such matters, causes, or things whatsoever were, or could in any way have been, claimed by the Shareholders, or any of them, against the Ironclad Releasees, or any of them, or otherwise have been or could have been brought or alleged by the Shareholders, or any of them, against the Ironclad Releasees, or any of them, in law or in equity, suits, debts, liens, security interests, claims, demands, damages, losses, costs, attorneys fees or expenses of any nature whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, which the Shareholders or any of them, at any time heretofore ever had, owned or held, or which they now have, own or hold

           11.           Waiver Under Section 1542 of the California Civil Code.  It is the intention of the Parties, in entering into the mutual general releases described hereinabove that the foregoing mutual general releases shall be effective as a bar to the actions, causes of action, suits, claims or demands of every kind, nature or character whatsoever, known or' unknown, suspected or unsuspected, fixed or contingent, referred to above. THE SHAREHOLDERS, INCUMBENTS AND IRONCLAD ACKNOWLEDGE THAT THEY HAVE BEEN ADVISED BY THEIR OWN RESPECTIVE INDEPENDENT LEGAL COUNSEL AND ARE FAMILIAR WITH THE PROVISIONS OF SECTION 1542 OF THE CALIFORNIA CIVIL CODE, WHICH PROVIDES AS FOLLOWS:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”

THE PARTIES EXPRESSLY WAIVE AND RELINQUISH ANY AND ALL RIGHTS OR BENEFITS THEY MAY HAVE UNDER, OR WHICH MAY BE CONFERRED UPON THEM BY, THE PROVISIONS OF SECTION 1542 OF THE CALIFORNIA CIVIL CODE TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY WAIVE SUCH RIGHTS OR BENEFITS PERTAINING TO THE SUBJECT MATTER OF THEIR MUTUAL GENERAL RELEASE. In connection with such waiver and relinquishment, the Parties acknowledge that they are aware that they or their attorneys may hereafter discover claims or facts in addition to, or different from, those which they now know or believe to exist with respect to the subject matter of, or any part of, the mutual general release, but that it is nonetheless the intention of the Parties to hereby fully, finally and forever settle and release all disputes and differences, known or unknown, suspected or unsuspected, which do now or may exist, as to the matters released by the mutual general release hereinabove.

12.           Warranty and Indemnification Regarding Non-Assignment of Claims.  The Parties each hereby represent and warrant that he, she, or it is the sole and rightful owner of all rights, title and interests in and to the claims set forth above, and to every other claim or matter which is the subject of the mutual general release hereinabove and that he, she, or it has not heretofore assigned or otherwise transferred, and shall not assign or otherwise transfer, any interest in the claims or any other claims which are the subject of the mutual general release and which he, she, or it may have against the other, or any of them, and has not heretofore created or given rise, and shall not create or give rise, to any lien, charge, encumbrance or other right by which any other person or entity may claim all or any part of the consideration given under this Agreement. The Parties, and each of them, agree to indemnify and hold the other harmless from any liabilities, claims, demands, damages, costs, expenses and attorneys fees incurred as a result of any person or entity asserting any claim or cause of action based upon any such assignment or transfer or purported assignment or transfer, or any such lien, charge or encumbrance.

6

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

           13.           Covenant Not To Sue. Each of the Parties covenants and agrees not to bring any claim, action, suit, arbitration or other proceeding against any of the other Parties regarding the matters settled and released by this Agreement, including, but not limited to, any claim, action, suit, arbitration or other proceeding brought or that could have been brought up to the date of this Agreement or after this Agreement except as may be required to enforce the terms of this Agreement, or except as otherwise provided herein.

           14.           Dismissals.  Upon the execution of this Agreement by all Parties, counsel for the Parties will execute such documents as may be necessary to cause the State Court Action and the Federal Action to be dismissed, in their entirety, with prejudice.

           15.           Attorney's Fees And Costs.  Except as otherwise provided above, the Parties shall bear their own respective attorneys' fees and costs paid or incurred by each of them in connection with the matters contained herein and the State Court Action and the Federal Action.

           16.           Representation by Counsel.  Each Party acknowledges that it has had the opportunity to be represented by and rely on counsel of his/her/its own choosing, and/or has been represented by and has relied upon counsel of his/her/its own choosing, in the negotiations for the preparation of this Agreement, that he/she/it has read this Agreement, has had its contents fully explained to it by such counsel and/or has had the opportunity to obtain such an explanation, and is fully aware of and understands all of its terms and the legal consequences thereof. It is acknowledged that each of the Parties hereto, either directly or through its respective counsel, has mutually participated in the preparation of this Agreement, and it is agreed that no provision hereof shall be construed against any Party hereto by virtue of the participation by that Party or his/her/its attorneys in the drafting of this Agreement;

           17.           No Admission of Liability.  This Agreement effects the settlement of all claims, demands, actions, and causes of action which are expressly denied and contested by the Parties. Nothing contained herein shall be construed as an admission by any Party of any liability of any kind to the other Party or to any other person or entity.

           18.           Governing Law, Jurisdiction And Venue.  This Agreement is executed and delivered within the County of Los Angeles, State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California. The parties hereby agree and consent to the exclusive jurisdiction and venue of the Los Angeles County Superior Court and/or the United States District Court, Central District of California, over all matters relating to this Agreement.

7

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

           19.           Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be considered an original and all of which shall together constitute one and the same instrument.

           20.           Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the heirs, permitted assigns, and successors in interest of the parties hereto. Each individual signing this Agreement and each of the parties hereto represent and warrant to the other Party that the individual signing this Agreement has the authority to execute this Agreement and to bind the Party on whose behalf the individual is executing this Agreement.

           21.           Confidentiality.  The parties agree that they, their attorneys and agents will not, at any time, directly or indirectly, except as expressly authorized in writing by the other Party, publicize, divulge, or disclose to any person, entity or media representative the terms of this settlement, except (i) as may be required by law, including the federal securities laws, (ii) a Party may disclose the fact of this settlement, and may further disclose the payment under this agreement to governmental authorities, to whom disclose is required by law, (iii) to legal and financial advisors and accountants, to the extent necessary to receive professional advice with respect to his/her/its legal and financial situation, only if such persons are made aware of and agree to be bound by this confidentiality agreement, and any with respect to the provisions hereof that are absolutely required to be disclosed in connection with the advice sought, (iv) [***] or (v) a court action seeking to enforce one or more provisions of this Agreement which shall be filed under seal to the extent permitted by the Court.

22.           Notice.  All notices and other communications required to be given by this Agreement shall be deemed given upon: (i) the sender's confirmation of receipt of a facsimile transmission to the recipient's facsimile number set forth below, (ii) e-mail, or (iii) delivery by hand to the recipient's address set forth below, (or at such other facsimile number or e-mail address for a Party as such Party may specify by notice given in accordance with this Section).

To Ironclad or the Incumbents:	Scott Jarus, Chairman &CEO 2201 Park Place, Suite 101 El Segundo, CA 90245 Facsimile: (310) 356-3198 Email:  scottj@ironclad.com
With a copy to:	Jeffrey F. Gersh, Esq. Gersh | Derby, Attorneys at Law 15821 Ventura Blvd., Suite 515 Encino, CA 91436 Facsimile: (818) 981-4618 Email:jgersh@gershderbylaw.com

8

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

To the Shareholders:	Chas Giffen 908 N. Genesee Avenue, # 3 West Hollywood, CA 90046 Facsimile: 323-650-0467 Email: chasgiffen@gmail.com
With a copy to:	Edward Gartenberg, Esq. Gartenberg Gelfand Hayton & Selden, LLP 801 S. Figueroa Street, Suite 2170 Los Angeles, CA 90017 Facsimile: (213) 542-101 Email:  egartenberg@gghslaw.com

All notices, requests, demands, claims, and other communications hereunder shall be in writing, addressed to the intended recipient as set forth on the signature page to this Agreement, and shall be deemed to have been duly given when delivered by the Party providing notice.

23.           Entire Agreement. This Agreement constitutes the entire agreement and understanding of the Parties in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the parties, written or oral, to the extent they relate in any way to the subject matter hereof including, without limitation that certain Memorandum of Understanding among the Parties dated September 25, 2012. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Party against whom enforcement of any such amendment, waiver, discharge or termination is sought.

24.             Paragraph Headings.The various captions of this Agreement are for reference only and shall not be considered or referred to in resolving questions of interpretation of this Agreement. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

25.             Severability.  The Parties each covenant and agree that in the event that any provision of this Agreement should be held by a court of competent jurisdiction to be void, voidable, illegal or unenforceable in any respect, the remaining portions thereof and provisions hereof shall nevertheless remain in full force and effect as if such void, voidable or unenforceable provision had never been contained herein.

26.           No Waiver.  No breach of this Agreement or of any provision herein can be waived except by an express written waiver executed by the Party waiving such breach, which waiver shall be effective only as to that Party who executed the waiver. Waiver of any one breach shall not be deemed a waiver of any other breach of the same or other provisions of this Agreement.

9

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

27.           Authority.  Each of the Parties further represents and warrants that he, she or it has full mental and legal capacity to enter into and execute this Agreement.  Each person executing this Agreement represents and warrants that he or she  has the right and power to enter into this Agreement on behalf of the Party for whom he or she is representing that he or she is executing it.

DATED: December 14, 2012	IRONCLAD PERFORMANCE WEAR CORPORATION
	/s/ Scott Jarus
	By: Scott Jarus
	Its: Chairman & Chief Executive Officer

DATED: December __, 2012	SHAREHOLDERS
	/s/ Kenneth J. Frank
	KENNETH J. FRANK BY JUDY FRANK, ATTORNEY-IN-FACT
	/s/ Michael A. DiGregorio
	MICHAEL A. DIGREGORIO
	/s/ Richard B. Kronman
	RICHARD B. KRONMAN
	/s/ Charles H. Giffen
	CHARLES H. GIFFEN
	/s/ Charles W. Hunter
	CHARLES W. HUNTER
	/s/ Marcel Sassola
	MARCEL SASSOLA

10

CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. §§ 200.80(b)(4) AND 240.24B-2 FOR PORTIONS OF THIS DOCUMENT MARKED AS FOLLOWS: [***].  CONFIDENTIAL INFORMATION FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

DATED: December 14, 2012	INCUMBENTS
	/s/ Scott Jarus
	SCOTT JARUS
	/s/ Eduard A. Jaeger
	EDUARD A. JAEGER
	/s/ R. D. Pete Bloomer
	R.D. PETE BLOOMER
	/s/ Vane Clayton
	VANE CLAYTON
	/s/ Scott Alderton
	SCOTT ALDERTON
	/s/ David Jacobs
	DAVID JACOBS

11

EX-10.14

Exhibit 10.14

VOTING AGREEMENT

THIS VOTING AGREEMENT (the "Agreement") is made and entered into as of December 14, 2012, among IRONCLAD PERFORMANCE WEAR CORPORATION ("Ironclad" or the "Company"), KENNETH J. FRANK, RICHARD KRONMAN, MICHAEL A. DIGREGORIO, CHARLES H. GIFFEN, CHARLES W. HUNTER, MARCEL SASSOLA, EDUARD A. JAEGER, RICHARD B. KRONMAN, and SCOTT JARUS (individually and collectively, "Shareholders"), (each individually a "Party", and collectively "Parties"), with reference to the following facts:

RECITALS:

A.           The Shareholders each are legal and/or beneficial owners of voting stock of the Company in the approximate amounts as set forth on Exhibit A.

B.           In order to provide for the stability and continuity of the Board of Directors of the Company (the "Board"), and to provide for representation on the Board as provided for in that certain Settlement Agreement and Mutual General Release also made and entered into December 14, 2012 (the "Settlement Agreement"), the Shareholders each have agreed to vote all of their shares in the Company as provided by this Agreement.

C.           The Shareholders have consented to act under this Agreement for the purposes herein provided for the benefit of the Company.

AGREEMENT:

Now, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1.           Recitals.  The Recitals set forth above are incorporated herein by their reference.

2.           Election of Directors at the Company's Annual Shareholders' Meeting in 2013.  The Shareholders each shall vote to elect as members of the Company's Board at the Company's Annual Shareholder's Meeting in 2013 (the "2013 Annual Shareholders' Meeting") the persons nominated by the Company's Board and identified in the Company's Proxy Statement filed with the United States Securities and Exchange Commission (the "SEC") pursuant to Section 14(a) of the Securities Exchange Act of 1934 (the "Company's 2013 Proxy Statement").  To effectuate this Agreement, the Parties agree as follows:

a.           Each Shareholder shall deliver to the Company, within ten (10) business days of the later of: (i) the Company filing the Company's 2013 Proxy Statement with the SEC, or (ii) the Company delivering the Company's 2013 Proxy Statement to such Shareholder in the form provided by the Company, which proxy shall be completed to vote all Company stock legally and/or beneficially owned by such members of the Board;

b.           It is further agreed that, in the event that any of the Shareholders fail to deliver a proxy or proxies as provided for in the immediately preceding sub-paragraph, the other Parties hereto, including Ironclad, shall be and are entitled to mandatory injunctive relief requiring the non-performing party to perform pursuant to the immediately preceding sub-paragraph, which mandatory injunctive relief can be obtained from any court of competent jurisdiction;

c.           It is further agreed that Ironclad shall be and hereby is entitled to disregard, and to not count any vote by any of the Shareholders required to provide a proxy as provided above, whether at or in connection with the 2013 Annual Shareholders' Meeting, if such vote is not for the persons nominated by the Company to serve as members of the Board;

d.           Each of the Parties agrees that neither they nor any agent of theirs, nor any person acting at their behest, at their direction or under their control or in concert with them, may or shall take any action whatsoever, including but not limited to soliciting proxies or disseminating so-called fight letters, which  action directly or indirectly challenges or contests the nominees listed in the Company's 2013 Proxy Statement, or which supports candidates other than those nominated by the Company to be elected as members of the Company's Board at the 2013 Annual Shareholders' Meeting; and

e.           The Parties further agree that, in the event that any of them act or cause actions of the type or nature described in the immediately preceding sub-paragraph, the other Parties hereto, including Ironclad, shall be and are entitled to injunctive relief limiting and prohibiting such actions, which injunctive relief can be obtained from any court of competent jurisdiction.

3.           Transaction That Entails Change to the Composition of the Board.  Notwithstanding anything contained herein, including in particular Section 2, entitled "Election of Directors at the Company's Annual Shareholders' Meeting in 2013", if a transaction approved by the Board and, if necessary, by the Company's Shareholders, such as a merger or acquisition, is consummated and includes as a term or condition of that transaction that the composition of the Board is to change, or the composition of the Board is changed in connection with or pursuant to that transaction, then Section 2 in its entirety thereupon automatically shall be and is terminated and of no force and effect.

4.           Rights of the Shareholders.  The Shareholders shall have all of the rights, privileges and benefits as shareholders of the Company, including the right to vote the shares as the Shareholders individually determine, except as specified in this Agreement.  Any and all additional shares acquired by the Shareholders are subject to the terms of this Agreement.

5.           Rights of the Shareholders.  This Agreement will become effective on the date hereof and continue in effect through and including the 2013 Annual Shareholders' Meeting.  If the Company fails to hold an Annual Shareholders' Meeting in 2013, this Agreement will terminate on December 31, 2013.  The Parties hereto, by agreement in writing, may extend the duration of this Agreement for any additional period as agreed upon.

6.           No Withdrawal/Permitted Transfers.  No shares may be withdrawn from this Agreement except shares sold by the Shareholders in open market transactions with unrelated and unknown third parties.  Otherwise, all shares must and will remain subject to this Agreement, meaning that the Shareholders may transfer shares from time-to-time in private transactions, provided that the transferee is informed of and consents in writing to be bound by this Agreement.

7.           Assignability.  This Agreement shall be irrevocable throughout the term, and shall be binding upon and inure to the benefit of the Parties, their legal representatives, successors, agents and assigns.  The above notwithstanding, this Agreement shall not be binding on any person who is unrelated and unknown to a Shareholder who buys shares from the Shareholder in an open market transaction.

8.           Representation by Counsel.  Each Party acknowledges that he or it has had the opportunity to be represented by and rely on counsel of his or its own choosing, and/or has been represented by and has relied upon counsel of his or its own choosing, in the negotiations for the preparation of this Agreement, that he or it has read this Agreement, has had its contents fully explained to him or it by such counsel and/or has had the opportunity to obtain such an explanation, and is fully aware of and understands all of its terms and the legal consequences thereof.  It is acknowledged that each of the Parties hereto, either directly or through his or its respective counsel, has mutually participated in the preparation of this Agreement, and it is agreed that no provision hereof shall be construed against any Party hereto by virtue of the participation of that Party or his or its attorneys in the drafting of this Agreement;

9.           Governing Law, Jurisdiction and Venue.  This Agreement is executed and delivered within the County of Los Angeles, State of California, and the rights and obligations of the Parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California. The Parties hereby agree and consent to the exclusive jurisdiction and venue of the Los Angeles County Superior Court and/or the United States District Court, Central District of California, over all matters relating to this Agreement.

10.         Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be considered an original and all of which shall together constitute one and the same instrument.

11.         Binding Agreement.  This Agreement shall be binding upon and inure to the benefit of the heirs, permitted assigns, and successors in interest of the Parties hereto.  The above notwithstanding, this Agreement shall not be binding on any person who is unrelated and unknown to a Shareholder who buys shares from the Shareholder in an open market transaction.  Each individual signing this Agreement and each of the Parties hereto represent and warrant to each other Party that the individual signing this Agreement has the authority to execute this Agreement and to bind the Party on whose behalf the individual is executing this Agreement.

12.         Confidentiality.  The Parties agree that they, their attorneys and agents will not, at any time, directly or indirectly, except as expressly authorized in writing by the other Parties, publicize, divulge, or disclose to any person, entity, or media representative the terms of this Agreement, except (i) as may be required by law, including the federal securities laws, (ii) a Party may disclose the fact of this Agreement to governmental authorities to whom disclosure is required by law, (iii) to legal and financial advisors and accountants, to the extent necessary to receive professional advice with respect to his/her/its legal and financial situation, only if such persons are made aware of and agree to be bound by this confidentiality agreement, and only with respect to the provisions hereof that are absolutely required to be disclosed in connection with the advice sought, (iv) to any other person or entity in connection with a possible transaction, including in particular but not limited to a transaction of the type or nature referenced in Section 3 hereof, or (v) a court action seeking to enforce one or more provisions of this Agreement in which event the Agreement shall be filed under seal to the extent permitted by the Court.

13.         Entire Agreement.  This Agreement constitutes the entire agreement and understanding of the Parties in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Party against whom enforcement of any such amendment, waiver, discharge or termination is sought, or (v) a court action seeking to enforce one or more provisions of this Agreement and/or the Settlement Agreement.

14.         Paragraph Headings.  The various captions of this Agreement are for reference only and shall not be considered or referred to in resolving questions of interpretation of this Agreement. Whenever possible each provision of this Agreement shall be interpreted in such mam1er as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

15.         Severability.  The Parties each covenant and agree that in the event that any provision of this Agreement should be held by a court of competent jurisdiction to be void, voidable, illegal or unenforceable in any respect, the remaining portions thereof and provisions hereof shall nevertheless remain in full force and effect as if such void, voidable or unenforceable provision had never been contained herein.

16.         No Waiver.  No breach of this Agreement or of any provision herein can be waived except by an express written waiver executed by the Party waiving such breach, which waiver shall be effective only as to that Party who executed the waiver. Waiver of any one breach shall not be deemed a waiver of any other breach of the same or other provisions of this Agreement.

DATED:     December 14, 2012	IRONCLAD PERFORMANCE WEAR CORPORATION
	/s/ Scott Jarus
	Its: Chairman & Chief Executive Officer

	SHAREHOLDERS
December __, 2012	/s/ Kenneth J. Frank
	BY JUDY FRANK, ATTORNEY-IN FACT
December __, 2012	/s/ Michael A. DiGregorio
December __, 2012	/s/ Richard B. Kronman
December __, 2012	/s/ Charles H. Giffen
December __, 2012	/s/ Charles W. Hunter
December __, 2012	/s/ Marcel Sassola
December __, 2012	/s/ Eduard A. Jaeger
December 14, 2012	/s/ Scott Jarus

EXHIBIT A

Shareholder	Approximate Number of Shares
KENNETH J. FRANK	5,434,451
RICHARD KRONMAN	2,333,110
MICHAEL A. DIGREGORIO	120,000
CHARLES H. GIFFEN	0
CHARLES W. HUNTER	31,800
MARCEL SASSOLA	2,088,500
EDUARD JAEGER	4,769,842
SCOTTJARUS	7,179,700

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ironclad Performance Wear Corporation

2201 Park Place, Suite 101

El Segundo, CA 90245

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. -139210, -145855 and -176326) of Ironclad Performance Wear Corporation of our report dated March 13, 2013 relating to the consolidated financial statements for the years ended December 31, 2012 and 2011, which appear in this Form 10-K.

/s/  EFP Rotenberg, LLP

EFP Rotenberg, LLP

Rochester, New York

March 13, 2013

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott Jarus, certify that:

1. I have reviewed this annual report on Form 10-K of Ironclad Performance Wear Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such valuation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially effect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2013

/s/ Scott Jarus

Scott Jarus,

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas Kreig, certify that:

1. I have reviewed this annual report on Form 10-K of Ironclad Performance Wear Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such valuation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially effect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2013

/s/ Thomas Kreig

Thomas Kreig,

Senior Vice President of Finance and Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott Jarus, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Ironclad Performance Wear Corporation on Form 10-K for the year ended December 31, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Ironclad Performance Wear Corporation.

Dated: March 13, 2013

/s/ Scott Jarus

Scott Jarus,

Chief Executive Officer

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Ace.  Such certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas Kreig, certify, pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Ironclad Performance Wear Corporation on Form 10-K for the year ended December 31, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Ironclad Performance Wear Corporation.

Dated: March 13, 2013

/s/ Thomas Kreig

Thomas Kreig,

Senior Vice President of Finance and

Principal Financial Officer

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or the Exchange Act, or otherwise subject to the liability of Section 18 of the Exchange Ace.  Such certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

XML

Note 5 - Trademarks and Patents (Detail) - Trademarks And Patents (USD $)	Dec. 31, 2012	Dec. 31, 2011
Trademarks and patents	$ 172,486	$ 163,327
Less: Accumulated amortization	(40,318)	(31,915)
Trademarks, net	$ 132,168	$ 131,412

XML

Note 10 - Commitments and Contingencies (Detail) - Future Minimum Rental Commitments (USD $)	Dec. 31, 2012
2013	$ 163,866
2014	166,788
2015	168,689
2016	86,075
	585,418
Corporate Office and Warehouse Facility [Member]
2013	158,592
2014	162,864
2015	167,148
2016	85,176
	573,780
Office Equipment [Member]
2013	5,274
2014	3,924
2015	1,541
2016	899
	$ 11,638

XML

Note 8 - Equity Transactions (Detail) - Non-vested stock options: (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Non-Vested	4,071,860	2,418,323
Non-Vested (in Dollars per share)	$ 0.08	$ 0.10
Granted	1,301,625	3,203,033
Granted (in Dollars per share)	$ 0.17	$ 0.08
Vested	(2,216,731)	(1,378,589)
Vested (in Dollars per share)	$ 0.10	$ 0.12
Forfeited	(284,137)	(170,907)
Forfeited (in Dollars per share)	$ 0.10	$ 0.10
Non-Vested	2,872,617	4,071,860
Non-Vested (in Dollars per share)	$ 0.10	$ 0.08

XML

Note 12 - Related Party Transactions (Detail) (USD $)	12 Months Ended		16 Months Ended	12 Months Ended						0 Months Ended	1 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2009 Mr. Jarus, Executive Chairman and Interim Chief Executive Officer [Member] Monthly Compensation [Member]	Dec. 31, 2010 Mr. Jarus, Chief Executive Officer [Member] Annual Salary [Member]	Dec. 31, 2010 Mr. Jarus, Chief Executive Officer [Member] Additional Annual Amount To Cover Any Employee Portion of Health Benefits Offered By the Company [Member]	Dec. 31, 2012 Mr. Jarus, Chief Executive Officer [Member] Annual Salary Increase [Member]	Dec. 31, 2011 Mr. Jarus, Chief Executive Officer [Member] Annual Salary Increase [Member]	Dec. 31, 2012 Incurred From Stubbs, Alderton, and Markiles, LLP (SAM) [Member]	Dec. 31, 2011 Incurred From Stubbs, Alderton, and Markiles, LLP (SAM) [Member]	Feb. 05, 2009 Dr. Frank [Member]	Apr. 22, 2008 Dr. Frank [Member]
Officers' Compensation			$ 10,000	$ 130,000	$ 5,220	$ 250,000	$ 145,000
Legal Fees								160,283	137,566
Stock Issued During Period, Shares, New Issues (in Shares)										4,000,000	1,000,000
Sale of Stock, Price Per Share (in Dollars per share)										$ 0.05	$ 0.20
Proceeds from Issuance of Common Stock	$ 166,515	$ 112,258								$ 200,000	$ 200,000

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Note 8 - Equity Transactions (Detail) - Stock Options Outstanding (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
	$ 0.09
	6 years 270 days
(in Shares)	9,570,455	10,416,536	9,610,488
	$ 0.24
	$ 0.113	$ 0.094	$ 0.095
(in Dollars)	$ 1,432,830

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Note 2 - Accounting Policies (Detail) - The following table sets forth the calculation of the numerators and denominators of the basic and d (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012
Numerator: Net Income (in Dollars)	$ 3,078,808	$ 1,122,167
Denominator: Basic EPS
Common shares outstanding, beginning of period	74,550,754	72,951,185	76,447,587
Weighted average common shares issued during the period	1,477,446	495,229
Denominator for basic earnings per common share	76,028,200	73,446,414
Denominator: Diluted EPS
Denominator for diluted earnings per common share	85,641,801	83,922,950
Stock Options [Member]
Denominator: Diluted EPS
Dilutive outstanding stock options and warrants	43,146	60,000
Warrant [Member]
Denominator: Diluted EPS
Dilutive outstanding stock options and warrants	9,570,455	10,416,536

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Note 6 - Accounts Payable and Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value, by Balance Sheet Grouping [Table Text Block]

	December 31, 2012		December 31,  2011
Accounts payable	$	185,244	$	487,398
Accrued inventory		1,326,621		183,436
Accrued rebates and co-op		322,159		307,707
Accrued bonus		735,250		569,680
Accrued warranty reserve		65,000		62,000
Customer deposits		1,730,899		515,794
Accrued expenses – other		567,475		434,489
Total accounts payable and accrued expenses	$	4,932,648	$	2,560,504

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Note 9 - Income Taxes (Detail) - The provision (benefit) for income taxes for the years ended December 31, 2011 and 2010 consisted of (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Current	$ 267,000	$ 213,950
Deferred	(857,500)
	$ (590,500)	$ 213,950

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Note 8 - Equity Transactions (Detail) (USD $)	1 Months Ended	0 Months Ended		1 Months Ended		0 Months Ended	1 Months Ended					12 Months Ended			0 Months Ended	12 Months Ended			0 Months Ended		12 Months Ended		12 Months Ended				0 Months Ended	1 Months Ended		0 Months Ended	1 Months Ended
	Dec. 20, 2012	Sep. 15, 2012	Mar. 15, 2012	Mar. 20, 2012	Mar. 22, 2012	Dec. 07, 2011	Feb. 27, 2012	Feb. 29, 2012	Nov. 30, 2011	Apr. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Feb. 07, 2012 Warrant [Member]	Dec. 31, 2012 Warrant [Member]	Dec. 31, 2012 "The 2000 Plan" [Member]	Dec. 31, 2000 "The 2000 Plan" [Member]	Apr. 11, 2011 "The 2006 Plan" [Member]	May 09, 2009 "The 2006 Plan" [Member]	Dec. 31, 2012 "The 2006 Plan" [Member]	May 18, 2006 "The 2006 Plan" [Member]	Dec. 31, 2012 General and Administrative Expense [Member]	Dec. 31, 2012 Other Selling and Marketing Expense [Member]	Dec. 31, 2012 Research and Development Expense [Member]	Dec. 31, 2012 Purchasing, Warehousing, and Distribution [Member]	Dec. 07, 2011 Minimum [Member]	Feb. 29, 2012 Minimum [Member]	Nov. 30, 2011 Minimum [Member]	Dec. 07, 2011 Maximum [Member]	Feb. 29, 2012 Maximum [Member]	Nov. 30, 2011 Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period											518,033
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures (in Dollars)											$ 62,164
Share Price (in Dollars per share)											$ 0.12
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	50,438	43,146	43,146	833,333	36,687	682,000	268,792	561,291	362,862	36,674		1,836,831	1,599,568
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in Dollars per share)	$ 0.095	$ 0.09	$ 0.09	$ 0.09	$ 0.11		$ 0.09			$ 0.09		$ 0.091	$ 0.109														$ 0.09	$ 0.09	$ 0.09	$ 0.15	$ 0.095	$ 0.095
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised															60,000	(60,000)
undefined (in Dollars per share)															$ 0.05	$ 0.05
Common Stock, Shares, Outstanding												76,447,587	74,550,754	72,951,185
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized																		7,000,000				4,250,000
Options, Term																	10 years				10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized																			2,000,000	6,750,000
Allocated Share-based Compensation Expense (in Dollars)												217,630											120,685	58,292	19,142	19,511
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized (in Dollars)												270,825
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition												2 years 292 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value (in Dollars)												$ 224,088

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Note 4 - Property and Equipment (Detail) - Property And Equipment (USD $)	Dec. 31, 2012	Dec. 31, 2011
Property, plant and equitment	$ 515,058	$ 486,066
Less accumulated depreciation	(529,917)	(416,672)
Property and equipment, net	256,037	319,534
Vehicle	43,680	43,680
Furniture and equipment	179,835	162,871
Leasehold improvements	47,381	43,589
Computer Equipment [Member]
Property, plant and equitment	515,058	486,066
Transportation Equipment [Member]
Vehicle	43,680	43,680
Furniture and Fixtures [Member]
Furniture and equipment	179,835	162,871
Leasehold Improvements [Member]
Leasehold improvements	47,381	43,589
Total [Member]
Property, plant and equitment	$ 785,954	$ 736,206

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Note 9 - Income Taxes (Detail) - Deferred Tax Assets And Liabilities (USD $)	Dec. 31, 2012	Dec. 31, 2011
Net operating loss carryforward	$ 2,761,949	$ 3,619,404
Stock option expense	1,269,244	1,184,822
Allowance for doubtful accounts	20,563	15,851
Allowance for product returns	27,846	26,561
Accrued compensation	44,566	38,035
Inventory reserve	265,180	197,064
Other	67,597	18,276
Valuation allowance	(3,207,803)	(4,720,054)
Total deferred tax assets	1,249,142	379,959
Deferred tax liabilities – state taxes	(391,642)	(379,959)
Net deferred tax assets/liabilities	$ 857,500	$ 0

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Note 8 - Equity Transactions (Detail) - Stock Options Exercisable (USD $)	12 Months Ended
	Dec. 31, 2012
	$ 0.09
(in Shares)	6,697,838
	5 years 346 days
	$ 0.24
	$ 0.106
(in Dollars)	$ 1,049,563

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Note 3 - Inventory

12 Months Ended

Dec. 31, 2012

Inventory Disclosure [Text Block]

3.           Inventory

At December 31, 2012 and 2011 the Company had one class of inventory - finished goods.

	December 31, 2012		December 31, 2011
Finished Goods	$	5,281,445	$	4,449,315

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Note 8 - Equity Transactions (Detail) - Warrant Activity (Warrant [Member], USD $)	0 Months Ended	12 Months Ended
	Feb. 07, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Warrant [Member]
Warrants Outstanding		43,146	103,146	10,175,994
Warrants Outstanding (in Dollars per share)		$ 0.185	$ 0.11	$ 0.93
Warrants exercised	60,000	(60,000)
Warrants exercised (in Dollars per share)	$ 0.05	$ 0.05
Warrants expired			(10,072,848)
Warrants expired (in Dollars per share)			$ 0.93

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Note 2 - Accounting Policies (Detail) (USD $)	12 Months Ended								1 Months Ended		1 Months Ended		12 Months Ended					12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012 Two customers [Member] Net Sales [Member]	Dec. 31, 2011 Two customers [Member] Net Sales [Member]	Dec. 31, 2012 Two customers [Member] Percentage of Net Sales [Member]	Dec. 31, 2011 Two customers [Member] Percentage of Net Sales [Member]	Nov. 30, 2012 Subject To A Borrowing Base Report [Member] Union Bank, N.A. [Member] Minimum [Member]	Nov. 30, 2012 Subject To A Borrowing Base Report [Member] Union Bank, N.A. [Member] Maximum [Member]	Nov. 30, 2012 Borrowing Base Calculation, Input [Member] Union Bank, N.A. [Member]	Nov. 30, 2012 During The Months Of April To October Each Calendar Year [Member] Union Bank, N.A. [Member] Maximum [Member]	Nov. 30, 2012 Amount Required In Order To "Fix" At LIBOR Plus 2% [Member] Union Bank, N.A. [Member] Minimum [Member]	Nov. 30, 2012 Spread If Company Chooses To "Fix" A Portion Of The Indebtedness [Member] Union Bank, N.A. [Member]	Dec. 31, 2012 Leasehold Improvements [Member]	Dec. 31, 2012 Two Suppliers [Member] Percentage of Total Purchases [Member]	Dec. 31, 2011 Two Suppliers [Member] Percentage of Total Purchases [Member]	Nov. 30, 2012 Union Bank, N.A. [Member] Line of Credit [Member]	Nov. 30, 2012 Union Bank, N.A. [Member]	Dec. 31, 2012 Minimum [Member]	Dec. 31, 2012 Maximum [Member]	Dec. 31, 2012 Reversal of Valuation Allowance For Current Deferred Tax Assets [Member]	Dec. 31, 2012 Warehouse Expense [Member]	Dec. 31, 2011 Warehouse Expense [Member]	Dec. 31, 2012 Trademarks [Member]	Dec. 31, 2012 Pricing and shipping adjustments [Member]	Dec. 31, 2011 Pricing and shipping adjustments [Member]	Dec. 31, 2012 Sales Returns and Allowances [Member]	Dec. 31, 2011 Sales Returns and Allowances [Member]
Cash, FDIC Insured Amount	$ 250,000
Servicing Fee Discount	0.75%
Sales Discounts, Goods	102,323	102,397
Line of Credit Facility, Maximum Borrowing Capacity							3,500,000	6,000,000								3,500,000	6,000,000
Percentage Of Net Amount Of All Eligible Accounts Receivable									80.00%
Percentage Of The Value Of Eligible Landed Inventory									50.00%
Borrowing Base, Comparison Amount Used In Determining A Factor									2,750,000
Percentage Of Eligible In-Transit Inventory									35.00%
Outstanding Principal Amount Of All Advances Against Eligible Inventory As A Percent Of Aggregate Outstanding Principal Amount Of Advances Against Eligible Accounts Receivable										150.00%
Debt Instrument, Basis Spread on Variable Rate1																	minus 0.25%
Fixed Portion Of Indebtedness											150,000
Debt Instrument, Basis Spread on Variable Rate												2.00%
Property, Plant and Equipment, Useful Life													15 years					3 years	7 years
Finite-Lived Intangible Asset, Useful Life																							15 years
Cost of Goods Sold	16,129,474	13,439,562
Shipping, Handling and Transportation Costs	1,112,492	858,758
Labor and Related Expense	502,000	410,000
Other General and Administrative Expense	65,000	51,000
Travel and Entertainment Expense	43,000	30,000
Operating Expenses	7,589,119	6,505,985																			502,000	368,000
Product Warranty Expense	78,000	94,000
Sales Returns, Goods	271,000	239,000																						49,000	19,000
Change in Accounting Estimate, Financial Effect																										$3,000	($16,000)
Marketing and Advertising Expense	384,080	406,146
Concentration Risk, Customer			$14,524,000	$8,412,000
Concentration Risk, Percentage					55.00%	39.00%
Concentration Risk, Supplier														76%	79%
Current State and Local Tax Expense (Benefit)	219,000	201,750
Current Federal Tax Expense (Benefit)	48,000	12,200
Deferred Income Tax Expense (Benefit)	$ (857,500)																			$ 857,500

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Note 10 - Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Rent Expense [Table Text Block]

Year	Facility		Equipment		Total
2013	$	158,592	$	5,274	$	163,866
2014		162,864		3,924		166,788
2015		167,148		1,541		168,689
2016		85,176		899		86,075
Thereafter		-		-		-
	$	573,780	$	11,638	$	585,418

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Note 13 - Customs and Duties Protests (Detail) (USD $)	Dec. 31, 2012	Dec. 31, 2008
Accrued Interest [Member] | Amount of Previously Paid Duties Sought Through Formal Protests With U.S. Customs and Border Protection (CBP) [Member]
Former Gain Contingency, Recognized in Current Period	$ 19,001
Competitor Rate [Member]
Duty Rate		2.80%
Company Rate [Member]
Duty Rate		10.40%
Amount of Previously Paid Duties Sought Through Formal Protests With U.S. Customs and Border Protection (CBP) [Member]
Gain Contingency, Unrecorded Amount		165,000
Former Gain Contingency, Recognized in Current Period	$ 107,417

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Note 8 - Equity Transactions (Detail) - Black-Scholes Option-Pricing Model Assumptions:	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2012 Minimum [Member]	Dec. 31, 2012 Maximum [Member]
Risk free interest rate	1.62%	0.58%	0.94%
Volatility factor	90.70%	89.10%
Expected life (years)	6 years 3 months	5 years 6 months	6 years 3 months

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Note 2 - Accounting Policies (Detail) - Accounts Receivable and Due From Factor Without Recourse (USD $)	Dec. 31, 2012	Dec. 31, 2011
Less-Allowance for doubtful accounts	$ (48,000)	$ (37,000)
Net accounts receivable	6,423,670	798,004
Due from factor without recourse	915,492	2,462,973
Non Factored [Member]
Accounts receivable	6,471,670	519,010
Factored with Recourse [Member]
Accounts receivable		315,994
Without Recourse [Member]
Due from factor without recourse	$ 915,492	$ 2,462,973

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Note 2 - Accounting Policies (Detail) - Revenue By Segment (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Net Sales	$ 26,180,114	$ 21,401,002
Domestic sales [Member] | Gloves [Member]
Net Sales	21,437,978	18,445,725
Domestic sales [Member] | Apparel [Member]
Net Sales	140,681	149,739
Domestic sales [Member] | Total [Member]
Net Sales	21,578,659	18,595,464
International sales [Member] | Gloves [Member]
Net Sales	4,601,021	2,784,033
International sales [Member] | Apparel [Member]
Net Sales	434	21,505
International sales [Member] | Total [Member]
Net Sales	4,601,455	2,805,538
Total [Member] | Gloves [Member]
Net Sales	26,038,999	21,229,758
Total [Member] | Apparel [Member]
Net Sales	141,115	171,244
Total [Member] | Total [Member]
Net Sales	$ 26,180,114	$ 21,401,002

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Note 2 - Accounting Policies

12 Months Ended

Dec. 31, 2012

Significant Accounting Policies [Text Block]

2.           Accounting Policies.

Basis of Consolidation

The consolidated financial statements include the accounts of Ironclad Performance Corporation, an inactive parent company, and its wholly owned subsidiary Ironclad California.  All significant inter-company transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.  The Company places its cash with high credit quality institutions.  The Federal Deposit Insurance Company (FDIC) insures cash amounts at each institution for up to $250,000.  From time to time, the Company maintains cash in excess of the FDIC limit.

Accounts Receivable

The Company factored designated trade receivables pursuant to a factoring agreement with an unrelated Factor.  On December 7, 2009 the Company entered into a new factoring agreement whereby it assigns certain of its trade receivables with recourse and other trade receivables without recourse.  The Company incurs a one-time servicing fee (discount) of 0.75% as a percentage of the face value of each invoice assigned to the Factor.  This servicing fee is recorded on the condensed consolidated statement of operations in the period of sale.  Servicing fees incurred for the years ended December 31, 2012 and 2011 were $102,397 and $102,323, respectively.  The financing of accounts receivable without recourse is accounted for as a sale of receivables in accordance with the guidance under ASC 860-20, “Sales of Financial Assets.”  The Factor, based on its internal credit policies, determines which customer trade receivables it will accept without recourse and assigns a credit limit for that customer.  The Company then assigns (sells) the face value of certain trade receivable invoices to the Factor, excludes them from accounts receivable, and records a current asset entitled “Due from factor without recourse” on the condensed consolidated balance sheet and they are reflected as cash provided by operating activities on the condensed consolidated statement of cash flows. Thereafter, the Company is entitled to borrow up to 70% of the value of such invoices through its line of credit with the Factor.  The Factor retains the remaining 30% of the outstanding factored accounts receivable as a reserve.  The Factor handles all collection activities and receives payment from the customer into its own bank lockbox account.  The Factor has no recourse to the Company for failure of debtors of these designated accounts receivable.  The Factor reimburses the Company for its purchased invoices by applying the funds collected from the customer as payments against the Company’s line of credit.

Trade receivables with recourse were also assigned to the Factor as an additional source of financing, and are carried at the original invoice amount less an estimate made for doubtful accounts.  Under the terms of the recourse provision, the Company is required to reimburse the Factor, upon demand, for factored receivables that are not paid on time.  Accordingly, these receivables are accounted for as a secured borrowing arrangement and not as a sale of financial assets.  The allowance for doubtful accounts is based on management’s regular evaluation of individual customer’s receivables and consideration of a customer’s financial condition and credit history.  Trade receivables are written off when deemed uncollectible.  Recoveries of trade receivables previously written off are recorded when received.  Interest is not charged on past due accounts.

On December 7, 2012 the Company terminated this factoring agreement.  The amounts showing as “Due from factor without recourse” on the balance sheet reflect open balances that are being collected through the Factor.

On November 30, 2012 the Company entered into a Business Loan Agreement with a bank providing a revolving loan of up to $6,000,000.  The first $3,500,000 of advances under this facility are under an open line-of-credit.  Advances in excess of $3,500,000, up to the line limit of $6,000,000, are subject to a Borrowing Base report.  The term Borrowing Base means an amount equal to (a) 80% of the net amount of all eligible accounts receivable plus, (b) the lesser of (i) 50% of the value of eligible landed inventory and (ii) $2,750,000, plus (c) 35% of eligible in-transit inventory.  In addition, during the months of April to October each calendar year, the outstanding principal amount of all advances against eligible inventory shall not exceed 150% of the aggregate outstanding principal amount of advances against eligible accounts receivable.  Interest on borrowed funds will accrue at Prime minus 0.25% unless the Company chooses to “fix” a portion of the indebtedness (minimum $150,000) at LIBOR plus 2% for fixed periods of time ranging from 30 days to 360 days.

Accounts Receivable and Due From Factor	December 31, 2012			December 31, 2011
Accounts receivable – non factored	$	6,471,670		$	519,010
Accounts receivable - factored with recourse		-			315,994
Less-Allowance for doubtful accounts		(48,000	)		(37,000	)
Net accounts receivable	$	6,423,670		$	798,004
Due from factor without recourse	$	915,492		$	2,462,973

Inventory

Inventory is stated at the lower of average cost (which approximates first in, first out) or market and consists primarily of finished goods.  The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on management’s estimated forecast of product demand and production requirements.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation.  Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years.  Leasehold improvements are depreciated over fifteen years or the lease term, whichever is shorter.  Maintenance and repairs are charged to expense as incurred.

Trademarks

The costs incurred to acquire trademarks, which are active and relate to products with a definite life cycle, are amortized over the estimated useful life of fifteen years.  Trademarks, which are active and relate to corporate identification, such as logos, are not amortized.  Pending trademarks are capitalized and reviewed monthly for active status.

Long-Lived Asset Impairment

The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable.  When factors indicate that the asset should be evaluated for possible impairment, the Company uses an estimate of the undiscounted net cash flows over the remaining life of the asset in measuring whether the asset is recoverable.  Based upon the anticipated future income and cash flow from operations and other factors, relevant in the opinion of the Company’s management, there has been no impairment.

Operating Segment Reporting

As previously discussed, the Company has two product lines, “gloves” and “apparel,” both of which have similar characteristics.  They each provide functional protection and comfort to workers in the form of workwear for various parts of the body; their production processes are similar; they are both sold to the same type of class of customers, typically on the same purchase order; and they are warehoused and distributed from the same warehouse facility.  In addition, the “apparel” segment currently comprises less than 1% of the Company’s revenues.  The Company believes that the aggregation criteria of FASB ASC 280-10 applies and will accordingly aggregate these two segments.

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, however, we have negotiated special terms with certain customers and industries.  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 shipped or delivered to customers, based on terms of agreement with the customer.

Revenue Disclosures

The Company’s revenues are derived from the sale of our core line of task specific work gloves plus our line of workwear apparel products, available to all of our customers, both domestically and internationally.  Below is a table outlining this breakdown for the comparative periods:

	Year Ended December 31, 2012						Year Ended December 31, 2011
Net Sales	Gloves		Apparel		Total		Gloves		Apparel		Total
Domestic	$	21,437,978	$	140,681	$	21,578,659	$	18,445,725	$	149,739	$	18,595,464
International		4,601,021		434		4,601,455		2,784,033		21,505		2,805,538
Total	$	26,038,999	$	141,115	$	26,180,114	$	21,229,758	$	171,244	$	21,401,002

Cost of Goods Sold

Cost of goods sold includes all of the costs associated with producing the product by independent, third party factories (FOB costs), plus the costs of transporting, inspecting and delivering the product to our distribution warehouse in California (landed costs).  Landed costs consist primarily of ocean/air freight, transport insurance, import duties, administrative charges and local trucking charges from the port to our warehouse.  Cost of goods sold for the years ended December 31, 2012 and 2011 were $16,129,474 and $13,439,562 respectively.

Purchasing, warehousing and distribution costs are reported in operating expenses on the line item entitled “Purchasing, warehousing and distribution” and, for the years ending December 31, 2012 and 2011 were $1,112,492 and $858,758, respectively.  These costs were comprised of salaries and benefits of approximately $502,000 and $410,000; office expenses of approximately $65,000 and $51,000; travel and lodging of approximately $43,000 and $30,000; and warehouse operations of approximately $502,000 and $368,000, respectively.

Product Returns, Allowances and Adjustments

Product returns, allowances and adjustments is a broad term that encompasses a number of offsets to gross sales.  Included herein are warranty returns of defective products, returns of saleable products and accounting adjustments.

Warranty Returns - the Company has a warranty policy that covers defects in workmanship.  It allows customers to return damaged or defective products to us following a customary return merchandise authorization process.  Warranty returns for the years ending December 31, 2012 and 2011 were approximately $78,000 or 0.3% and $94,000 or 0.4%, respectively.

Saleable Product Returns - the Company may allow from time to time, depending on the customer and existing circumstances, stock adjustment returns, whereby the customer is given the opportunity to ‘trade out’ of a style of product that does not sell well in their territory, usually in exchange for another product, again following the customary return merchandise authorization process.  In addition we may allow from time to time other saleable product returns from customers for other business reasons, for example, in settlement of an outstanding accounts receivable, from a discontinued distributor customer or other customer service purpose.  Saleable product returns for the years ending December 31, 2012 and 2011 were approximately $271,000 or 1.0% and $239,000 or 1.1%, respectively.

Accounting Adjustments - these adjustments include pricing and shipping corrections and periodic adjustments to the product returns reserve.  Pricing and shipping corrections for the years ending December 31, 2012 and 2011 were approximately $49,000 or 0.2% and $19,000 or 0.1%, respectively.  Adjustments to the product returns reserve for the years ending December 31, 2012 and 2011 were approximately $3,000 or 0.0% and ($16,000) or (0.1%), respectively.

For warranty returns the Company utilizes actual historical return rates to determine the allowance for returns in each period.  For saleable product returns the Company also utilizes actual historical return rates, adjusted for large, non-recurring occurrences.  The Company does not accrue for pricing and shipping corrections as they are unpredictable and generally de minimis.  Gross sales are reduced by estimated returns.  We record a corresponding accrual for the estimated liability associated with the estimated returns which is based on the historical gross sales of the products corresponding to the estimated returns.  This accrual is offset each period by actual product returns.

Reserve for Warranty Returns
Reserve Balance 12/31/10	$	57,000
Payments Recorded During the Period		(333,665	)
		(276,665	)
Accrual for New Liabilities During the Reporting Period		338,665
Reserve Balance 12/31/11		62,000
Payments Recorded During the Period		(348,371	)
		(286,371	)
Accrual for New Liabilities During the Reporting Period		351,371
Reserve Balance 12/31/12	$	65,000

Advertising and Marketing

Advertising and marketing costs are expensed as incurred.  Advertising expenses for the years ended December 31, 2012 and 2011 were $384,080 and $406,146, respectively.

Shipping and Handling Costs

Freight billed to customers is recorded as sales revenue and the related freight costs as cost of sales.

Customer Concentrations

Two customers accounted for approximately $14,524,000 or 55% of net sales for year ended December 31, 2012 and two customers accounted for approximately $8,412,000 or 39% of net sales for year ended December 31, 2011.  No other customer accounted for more than 10% of net sales.  All transactions were in United States dollars.  There were no transaction gains or losses associated with sales transactions.

Supplier Concentrations

Two suppliers, which are located overseas, accounted for approximately 76% of total purchases during the year ended December 31, 2012 and 79% of total purchases during the year ended December 31, 2011.  All transactions were in United States dollars.  There were no transaction gains or losses associated with vendor purchase transactions.

Earnings (Loss) Per Share

The Company utilizes FASB ASC 260, “Earnings per Share.”  Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding.  Diluted earnings (loss) per share is computed similar to basic earnings (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 table sets forth the calculation of the numerators and denominators of the basic and diluted per share computations for the years ended December 31:

	2012		2011
Numerator: Net Income	$	3,078,808	$	1,122,167
Denominator: Basic EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Denominator for basic earnings per common share		76,028,200		73,446,414
Denominator: Diluted EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Dilutive warrants outstanding at end of the period		43,146		60,000
Dilutive stock options outstanding at the end of the period		9,570,455		10,416,536
Denominator for diluted earnings per common share		85,641,801		83,922,950

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

	Year Ended December 31,
	2012		2011
Common Stock Warrants		-		43,146

Income Taxes

The Company adopted the provisions of FASB ASC 740-10 effective January 1, 2007.  The implementation of FASB ASC 740-10 has not caused the Company to recognize any changes in its identified tax positions. Interest and penalties associated with unrecognized tax benefits would be classified as additional income taxes in the statement of operations.

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

Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

The significant components of the provision for income taxes for the years ended December 31, 2012 and 2011 were $219,000 and $201,750, respectively, for the current state provisions and $48,000 and $12,200 for the federal tax provision, respectively.  There was no state or federal deferred tax provision.  Based on its history of losses, the Company provided a 100% valuation allowance against its deferred tax assets, as it was not more likely than not that any future benefit from deductible temporary differences and net operating loss carryforwards would be realized.  For the year ended December 31, 2012 the Company has reassessed the need for a valuation allowance against its deferred tax assets and, based on the positive evidence of the last three year’s pre-tax income and forecasted future results, concluded that it is more likely than not that it would be able to realize some of its deferred tax assets.  Accordingly, the Company has reversed approximately 30% of its valuation allowance for its current deferred tax assets and recorded a deferred tax benefit of $857,500.  We will continue to evaluate if it is more likely than not that we will realize the benefits from future deferred tax assets and have accordingly provided a 70% valuation allowance against our remaining deferred tax assets.

By statute, tax years ending in December 31, 2011 through 2008 remain open to examination by the major taxing jurisdictions to which the Company is subject. 

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.

Recently Issued Accounting Pronouncements

In July 2012, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles – Goodwill and Others: Testing Indefinite-Lived Intangible Assets for Impairment”, to allow entities to use a qualitative approach to test indefinite-lived assets for impairment.  ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-live intangible asset is less than its carrying value.  If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying value.  Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for impairment tests for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted.  The Company has adopted the provisions of this standard and noted no material impact on the financial condition or results of operations of the Company.

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Note 2 - Accounting Policies (Detail) - Reserve For Product Returns, Allowances And Adjustments (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Reserve for Warranty Returns
Reserve Balance	$ 65,000	$ 62,000	$ 57,000
Payments Recorded During the Period	(348,371)	(333,665)
Total	(286,371)	(276,665)
Accrual for New Liabilities During the Reporting Period	$ 351,371	$ 338,665

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Note 6 - Accounts Payable and Accrued Expenses (Detail) - Accounts Payable And Accrued Expenses (USD $)	Dec. 31, 2012	Dec. 31, 2011
Accounts payable	$ 185,244	$ 487,398
Accrued inventory	1,326,621	183,436
Accrued rebates and co-op	322,159	307,707
Accrued bonus	735,250	569,680
Accrued warranty reserve	65,000	62,000
Customer deposits	1,730,899	515,794
Accrued expenses – other	567,475	434,489
Total accounts payable and accrued expenses	$ 4,932,648	$ 2,560,504

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Note 10 - Commitments and Contingencies (Detail) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Area of Real Estate Property (in Square feet)	1,700
Tenant Improvements	$ 40,000
Termination Loans	200,000
Office Equipment [Member]
Operating Leases, Rent Expense	12,205	9,245
Corporate Office and Warehouse Facility [Member]
Operating Leases, Rent Expense	$ 125,038	$ 185,568

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Consolidated Balance Sheets (USD $)	Dec. 31, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash and cash equivalents	$ 721,589	$ 1,060,125
Accounts receivable net of allowance for doubtful accounts of $48,000 and $37,000	6,423,670	798,004
Due from factor without recourse	915,492	2,462,973
Inventory net of reserve of $619,000 and $460,000	5,281,445	4,449,315
Deposits on inventory	716,273	467,063
Prepaid and other	308,814	265,652
Deferred tax assets - current	857,500
Total Current Assets	15,224,783	9,503,132
PROPERTY AND EQUIPMENT
Computer equipment and software	515,058	486,066
Vehicle	43,680	43,680
Furniture and equipment	179,835	162,871
Leasehold improvements	47,381	43,589
Less: accumulated depreciation	(529,917)	(416,672)
Total Property and Equipment, Net	256,037	319,534
OTHER ASSETS
Trademarks and patents, net of accumulated amortization of $40,318 and $31,915	132,168	131,412
Deposits	10,204	11,354
Total Other Assets	142,372	142,766
TOTAL ASSETS	15,623,192	9,965,432
CURRENT LIABILITIES
Accounts payable and accrued expenses	4,932,648	2,560,504
Line of credit	1,483,883	1,661,220
Total Current Liabilities	6,416,531	4,221,724
Total Liabilities	6,416,531	4,221,724
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value,172,744,750 shares authorized, 76,447,587 and 74,550,754 shares issued and outstanding at December 31, 2012 and 2011, respectively	76,448	74,551
Capital in excess of par value	18,920,811	18,538,563
Accumulated deficit	(9,790,598)	(12,869,406)
Total Stockholders’ Equity	9,206,661	5,743,708
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 15,623,192	$ 9,965,432

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Note 8 - Equity Transactions (Detail) - Stock Option Activity (USD $)	1 Months Ended	0 Months Ended		1 Months Ended		0 Months Ended	1 Months Ended				12 Months Ended
	Dec. 20, 2012	Sep. 15, 2012	Mar. 15, 2012	Mar. 20, 2012	Mar. 22, 2012	Dec. 07, 2011	Feb. 27, 2012	Feb. 29, 2012	Nov. 30, 2011	Apr. 30, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Outstanding											9,570,455	10,416,536	9,610,488
Outstanding (in Dollars per share)											$ 0.113	$ 0.094	$ 0.095
Granted											1,301,625	3,203,033
Granted (in Dollars per share)											$ 0.24	$ 0.099
Exercised	(50,438)	(43,146)	(43,146)	(833,333)	(36,687)	(682,000)	(268,792)	(561,291)	(362,862)	(36,674)	(1,836,831)	(1,599,568)
Exercised (in Dollars per share)	$ 0.095	$ 0.09	$ 0.09	$ 0.09	$ 0.11		$ 0.09			$ 0.09	$ 0.091	$ 0.109
Cancelled/Expired											(310,875)	(797,417)
Cancelled/Expired (in Dollars per share)											$ 0.13	$ 0.093
Exercisable at December 31, 2012											6,697,838
Exercisable at December 31, 2012 (in Dollars per share)											$ 0.106

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Consolidated Statements Of Changes In Stockholders' Equity (USD $)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at December 31, 2010 at Dec. 31, 2010	$ 72,951	$ 18,232,713	$ (13,991,573)	$ 4,314,091
Balance at December 31, 2010 (in Shares) at Dec. 31, 2010	72,951,185
Common stock issued for services	518	61,646		62,164
Common stock issued for services (in Shares)	518,033
Common stock issued upon exercise of stock options	1,082	111,177		112,259
Common stock issued upon exercise of stock options (in Shares)	1,081,536			1,599,568
Stock option expense		133,027		133,027
Net income			1,122,167	1,122,167
Balance at Dec. 31, 2011	74,551	18,538,563	(12,869,406)	5,743,708
Balance (in Shares) at Dec. 31, 2011	74,550,754
Common stock issued upon exercise of stock options	1,837	161,678		163,515
Common stock issued upon exercise of stock options (in Shares)	1,836,833			1,836,831
Common stock issued upon exercise of warrant	60	2,940		3,000
Common stock issued upon exercise of warrant (in Shares)	60,000
Stock option expense		217,630		217,630
Net income			3,078,808	3,078,808
Balance at Dec. 31, 2012	$ 76,448	$ 18,920,811	$ (9,790,598)	$ 9,206,661
Balance (in Shares) at Dec. 31, 2012	76,447,587

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Note 3 - Inventory (Detail) - Inventories (USD $)	Dec. 31, 2012	Dec. 31, 2011
Finished Goods	$ 5,281,445	$ 4,449,315

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Note 3 - Inventory (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Inventory, Current [Table Text Block]

	December 31, 2012		December 31, 2011
Finished Goods	$	5,281,445	$	4,449,315

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Note 4 - Property and Equipment (Detail) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Depreciation	$ 149,666	$ 125,330

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Note 5 - Trademarks and Patents (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	December 31, 2012			December 31, 2011
Trademarks and patents	$	172,486		$	163,327
Less: Accumulated amortization		(40,318	)		(31,915	)
Trademarks, net	$	132,168		$	131,412

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Note 1 - Description of Business

12 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.           Description of Business.

The Company was incorporated in Nevada on May 26, 2004 and engages in the business of design and manufacture of branded performance work wear including task-specific gloves and performance apparel designed to significantly improve the wearer’s ability to safely, efficiently and comfortably perform general to highly specific job functions.  Its customers are primarily hardware, lumber retailers, “Big Box” home centers, industrial distributors and automotive and sporting goods retailers.  The Company has received six U.S. patents and one international patent and has three patents pending for design and technological innovations incorporated in its performance work gloves.  The Company has 58 registered U.S. trademarks, 12 in-use U.S. trademarks and 22 registered international trademarks.

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Consolidated Balance Sheets (Parentheticals) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Allowance for doubtful accounts (in Dollars)	$ 48,000	$ 37,000
Inventory reserve (in Dollars)	619,000	460,000
Accumulated amortization, trademarks (in Dollars)	$ 40,318	$ 31,915
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	172,744,750	172,744,750
Common stock, shares issued	76,447,587	74,550,754
Common stock, shares outstanding	76,447,587	74,550,754

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Note 11 - Legal Proceedings

12 Months Ended

Dec. 31, 2012

Legal Matters and Contingencies [Text Block]

11.           Legal Proceedings

On or around April 26, 2012, one of the Company’s stockholders (the “Plaintiff”) filed a lawsuit in the California Superior Court, together with an ex parte application for a temporary restraining order, attempting to immediately restrain the Company from conducting the election of directors on May 23, 2012 unless it included certain nominees proposed by the Plaintiff on the ballot for election.  In connection with the application the Plaintiff requested that the Court set a hearing for a preliminary injunction on the same issue prior to the election that was held on May 23, 2012.  The Company was successful in opposing the ex parte application and the Court denied the relief requested to set a hearing for the preliminary injunction.  On or around May 10, 2012, the Plaintiff filed another ex parte application in connection with the same action, seeking substantially similar relief.  The Company was again successful in opposing the application.

The Company held its annual meeting as planned on May 23, 2012.  The slate nominated by the Company’s board of directors was successfully nominated and elected.  The Company did not nominate or present as a matter of business the director slate proposed by the Plaintiff.

On May 29, 2012, the Company filed an action in the US District Court for the Central District of California against the Plaintiff and certain other shareholders alleging, among other matters, violations of the U.S. securities laws and seeking declaratory relief relating to the interpretation of its bylaws.  The Company sought monetary damages and injunctive relief asking the court to order the defendant to cease violating the securities laws.

In August 2012, two of the defendant shareholders purported to substitute themselves as plaintiffs in the original state action (in place of the Plaintiff) (the “New Plaintiffs”) and concurrently filed another ex parte application with the California Superior Court seeking a hearing under California Corporations Code Section 709 to determine whether the Plaintiff and the New Plaintiffs were denied the right to vote at the Company’s 2012 annual meeting, and to set aside the results of our 2012 annual meeting.  Without deciding on the merits of the parties’ arguments, the Court scheduled the hearing for January 2013.

In late September 2012, the Company conducted a mediation proceeding with the New Plaintiffs and ultimately agreed to a non-binding resolution of all disputes under the state and federal actions.  All parties thereafter dismissed the pending state and federal proceedings without prejudice.

On December 17, 2012, the Company entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”), dated December 14, 2012, by and among the Company, Scott Jarus, Scott Alderton, Eduard A. Jaeger, R.D. Pete Bloomer, Vane Clayton and David Jacobs, on the one hand, and Kenneth J. Frank, Richard B. Kronman, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter and Marcel Sassola, on the other hand, pursuant to which the Company and the then-current members of its board of directors (the “Board”) agreed to a final settlement and release of claims with respect to the actions described above filed by Richard Kronman, Marcel Sassola and Kenneth Frank on behalf of certain of the Company’s stockholders (collectively, the “Claimants”), against the Company in the California Superior Court, and the actions described above filed by the Company against the Claimants in the United States District Court for the Central District of California.

Under the Settlement Agreement, Scott Alderton agreed to resign from the Board and the Company agreed to appoint Charles H. Giffen and Michael A. DiGregorio to fill the vacant seats on the Board (accounting for an increase in the size of the Board to seven).  The Settlement Agreement also provides for the replacement of certain members of the Board prior to the Company’s 2013 annual meeting of stockholders should such members resign.  In addition, the parties to the Settlement Agreement agreed that the persons to be nominated to be members of the Board at the Company’s 2013 annual meeting of stockholders shall be the persons who are members of the Board pursuant to the Settlement Agreement.  The parties also agreed that each of the Claimants and each of Eduard A. Jaeger and Scott Jarus (who individually are parties to the Voting Agreement referenced below), will vote all of their shares of the Company’s voting stock in favor of those nominees at or in connection with the Company’s 2013 annual meeting of stockholders.  The provisions of the Settlement Agreement related to the composition of the Company’s board of directors expire automatically upon the conclusion of the Company’s 2013 annual meeting of stockholders unless terminated earlier in accordance with the terms of the Settlement Agreement.

To effectuate the parties agreement with respect to voting shares of the Company’s voting stock, on December 17, 2012, the Company also entered into a Voting Agreement, dated December 14, 2012, with Kenneth J. Frank, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter, Marcel Sassola, Eduard A. Jaeger, Richard B. Kronman and Scott Jarus.

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Feb. 28, 2013	Jun. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	IRONCLAD PERFORMANCE WEAR CORP
Document Type	10-K
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		76,704,275
Entity Public Float			$ 13,803,525
Amendment Flag	false
Entity Central Index Key	0001301712
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY

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Note 12 - Related Party Transactions

12 Months Ended

Dec. 31, 2012

Related Party Transactions Disclosure [Text Block]

12.           Related Party Transactions

Mr. Jarus, an Ironclad board member since May 2006 and currently Chairman of the Board, was appointed in September 2008, in a consulting capacity, as Executive Chairman of the Corporation with a compensation of $10,000 per month.  In May 2009, Mr. Jarus also took on the role of Interim Chief Executive Officer. He performed in this capacity through December 31, 2009.  On January 1, 2010, Mr. Jarus was employed by the Company in the role of Chief Executive Officer at an annual salary of $130,000.  Mr. Jarus also received an additional annual amount equal to $5,220 to cover any employee portion of health benefits offered by the Company.  On January 1, 2011 Mr. Jarus received an increase in his annual salary to $145,000.  On January 1, 2012 Mr. Jarus received an increase in his annual salary to $250,000.

Mr. Alderton, an Ironclad board member since August 2002, is a partner of the law firm, Stubbs, Alderton and Markiles, LLP, or SAM, which is Ironclad’s attorney of record.  SAM rendered services to Ironclad California as its primary legal firm since 2002, and became our primary legal counsel upon closing of the merger with Ironclad California on May 9, 2006.  On December 31, 2012 Mr. Alderton resigned from our Board of Directors.  The Company has incurred legal fees from SAM of $160,283 and $137,566 in 2012 and 2011, respectively.

Prior to Dr. Frank’s appointment to the Company’s board of directors, Dr. and Mrs. Frank purchased 1,000,000 shares of the Company’s common stock on April 22, 2008, at $0.20 per share for an aggregate purchase price of $200,000. Further, Dr. Frank and Mrs. Frank purchased an additional 4,000,000 shares of the Company common stock on February 5, 2009, at $0.05 per share for an aggregate purchase price of $200,000. Dr. Frank is the father-in-law of Mr. Eduard Albert Jaeger, the Company’s Founder and head of new business development.  On April 5, 2012 Dr. Frank resigned from our Board of Directors.

On December 17, 2012, the Company entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”), dated December 14, 2012, by and among the Company, Scott Jarus, Scott Alderton, Eduard A. Jaeger, R.D. Pete Bloomer, Vane Clayton and David Jacobs, on the one hand, and Kenneth J. Frank, Richard B. Kronman, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter and Marcel Sassola, on the other hand, pursuant to which the Company and the then-current members of its board of directors (the “Board”) agreed to a final settlement and release of claims with respect to the actions described above filed by Richard Kronman, Marcel Sassola and Kenneth Frank on behalf of certain of the Company’s stockholders (collectively, the “Claimants”), against the Company in the California Superior Court, and the actions described above filed by the Company against the Claimants in the United States District Court for the Central District of California.

Under the Settlement Agreement, Scott Alderton agreed to resign from the Board and the Company agreed to appoint Charles H. Giffen and Michael A. DiGregorio to fill the vacant seats on the Board (accounting for an increase in the size of the Board to seven).  The Settlement Agreement also provides for the replacement of certain members of the Board prior to the Company’s 2013 annual meeting of stockholders should such members resign.  In addition, the parties to the Settlement Agreement agreed that the persons to be nominated to be members of the Board at the Company’s 2013 annual meeting of stockholders shall be the persons who are members of the Board pursuant to the Settlement Agreement.  The parties also agreed that each of the Claimants and each of Eduard A. Jaeger and Scott Jarus (who individually are parties to the Voting Agreement referenced below), will vote all of their shares of the Company’s voting stock in favor of those nominees at or in connection with the Company’s 2013 annual meeting of stockholders.  The provisions of the Settlement Agreement related to the election of directors at the Company’s 2013 annual meeting of stockholders expire automatically upon the conclusion of the Company’s 2013 annual meeting of stockholders unless terminated earlier in accordance with the terms of the Settlement Agreement.

To effectuate the parties agreement with respect to voting shares of the Company’s voting stock, on December 17, 2012, the Company also entered into a Voting Agreement, dated December 14, 2012, with Kenneth J. Frank, Michael A. DiGregorio, Charles H. Giffen, Charles W. Hunter, Marcel Sassola, Eduard A. Jaeger, Richard B. Kronman and Scott Jarus.

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Consolidated Statements of Operations (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
REVENUES
Net sales	$ 26,180,114	$ 21,401,002
COST OF SALES
Cost of sales	16,129,474	13,439,562
GROSS PROFIT	10,050,640	7,961,440
EXPENSES
General and administrative	3,185,662	2,566,152
Sales and marketing	2,591,725	2,583,111
Research and development	541,171	365,481
Purchasing, warehousing and distribution	1,112,492	858,758
Depreciation and amortization	158,069	132,483
Total Operating Expenses	7,589,119	6,505,985
INCOME FROM OPERATIONS	2,461,521	1,455,455
OTHER INCOME (EXPENSE)
Interest expense	(50,145)	(94,407)
Interest income	21,463	89
Other income, net	55,419	700
Gain (loss) on disposition of equipment	50	(25,720)
Total Other Income (Expense), Net	26,787	(119,338)
NET INCOME BEFORE PROVISION FOR INCOME TAXES	2,488,308	1,336,117
Provision for income taxes - current	(267,000)	(213,950)
Deferred income tax benefit – reversal of valuation allowance	857,500
NET INCOME	$ 3,078,808	$ 1,122,167
NET INCOME PER COMMON SHARE
Basic (in Dollars per share)	$ 0.04	$ 0.02
Diluted (in Dollars per share)	$ 0.04	$ 0.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic (in Shares)	76,028,200	73,446,414
Diluted (in Shares)	85,641,801	83,922,950

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Note 6 - Accounts Payable and Accrued Expenses

12 Months Ended

Dec. 31, 2012

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

6.           Accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following at December 31, 2012 and 2011:

	December 31, 2012		December 31,  2011
Accounts payable	$	185,244	$	487,398
Accrued inventory		1,326,621		183,436
Accrued rebates and co-op		322,159		307,707
Accrued bonus		735,250		569,680
Accrued warranty reserve		65,000		62,000
Customer deposits		1,730,899		515,794
Accrued expenses – other		567,475		434,489
Total accounts payable and accrued expenses	$	4,932,648	$	2,560,504

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Note 5 - Trademarks and Patents

12 Months Ended

Dec. 31, 2012

Intangible Assets Disclosure [Text Block]

5.           Trademarks and patents

Trademarks and patents consisted of the following:

	December 31, 2012			December 31, 2011
Trademarks and patents	$	172,486		$	163,327
Less: Accumulated amortization		(40,318	)		(31,915	)
Trademarks, net	$	132,168		$	131,412

Trademarks consist of definite-lived trademarks of $111,043 and $103,703 and indefinite-lived trademarks of $61,443 and $59,624 at December 31, 2012 and 2011, respectively.  All trademark costs have been generated by the Company, and consist of initial legal and filing fees.

Amortization expense was $8,403 and $7,153 for the years ended December 31, 2012 and 2011, respectively.  The Company expects to amortize approximately $8,600 in each of the next five years.

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Note 4 - Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2012

Property, Plant and Equipment [Table Text Block]

	December 31, 2012			December 31, 2011
Computer hardware and software	$	515,058		$	486,066
Vehicle		43,680			43,680
Furniture and equipment		179,835			162,871
Leasehold improvements		47,381			43,589
		785,954			736,206
Less accumulated depreciation		(529,917	)		(416,672	)
Property and equipment, net	$	256,037		$	319,534

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Note 13 - Customs and Duties Protests

12 Months Ended

Dec. 31, 2012

Customs And Duties Protests [Text Block]

13.           Customs and Duties Protests

Early in 2008 the Company became aware that competitors had been importing gloves similar to many of its products under a temporary tariff provision at a lower duty rate under Chapter 99.  This lower duty rate of 2.8% was significantly less than the 10.4% rate the Company had been paying.  The Company filed retroactive, formal protests with U.S. Customs and Border Protection (CBP) for refund of duties for previous entries totaling approximately $165,000.

In July, 2008, the Company received a written denial on its formal protest from CBP. The Company continued to contest this denial through the courts.

In summary, the outcome of the Company’s challenge to the classification of some of its products for the purpose of determining the appropriate duty rate has been resolved.  We have received successful rulings lowering duties on specific styles of gloves, and we have modified the wrist closure on some of our gloves to conform with the current classification, where feasible.  The Company continued to challenge the higher classification for certain styles of gloves under protest and the protest denials have been summonsed to the Court of International Trade (“CIT”). These entries at the CIT have been approved for stipulation to the Justice Department and the Company has received reimbursement from the U.S. Customs Office in 2012 of previously paid duties of $107,417 plus accrued interest of $19,001.

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Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

9.           Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2012 and 2011 consisted of the following:

	2012			2011
Current	$	267,000		$	213,950
Deferred		(857,500	)		-
	$	(590,500	)	$	213,950

The provision for income taxes differs from the amount that would result from applying the federal statutory rate for the years ended December 31, 2012 and 2011 as follows:

	2012			2011
Statutory regular federal income benefit rate		(34.0	)%		(34.0	)%
State income taxes, net of federal benefit		(5.2	)		(8.1	)
Change in valuation allowance		64.8			28.3
Other		(1.9	)		(0.5	)
Total		23.7	%		14.3	%

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize some portion or all of the benefits of these deductible, differences, and has chosen to reduce its valuation allowance against its deferred tax assets to 70%.

Significant components of the Company’s deferred tax assets and liabilities for federal incomes taxes at December 31, 2012 and 2011 consisted of the following:

	2012			2011
Deferred tax assets
Net operating loss carryforward	$	2,761,949		$	3,619,404
Stock option expense		1,269,244			1,184,822
Allowance for doubtful accounts		20,563			15,851
Allowance for product returns		27,846			26,561
Accrued compensation		44,566			38,035
Inventory reserve		265,180			197,064
Other		67,597			18,276
Valuation allowance		(3,207,803	)		(4,720,054	)
Total deferred tax assets		1,249,142			379,959
Deferred tax liabilities – state taxes		(391,642	)		(379,959	)
Net deferred tax assets/liabilities	$	857,500		$	-

As of December 31, 2012, the Company had unused federal and state net operating loss carryforwards available to offset future taxable income of $5,778,000 and $9,344,000, respectively, that expire between 2015 and 2025.  As of December 31, 2011, the Company had unused federal and state net operating loss carryforwards available to offset future taxable income of $8,300,000 and $9,553,000, respectively, that expire between 2015 and 2024.

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Note 7 - Bank Lines of Credit

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Text Block]

7.           Bank Lines of Credit

Factoring Agreement

On December 7, 2009 the Company entered into a factoring agreement with FCC, LLC, dba First Capital Western Region, LLC (“FCC”), whereby it assigns certain of its accounts receivable without recourse and other accounts receivable with recourse.  FCC, based on its internal credit policies, determines which accounts receivable it will accept without recourse.  This facility allows the Company to borrow the lesser of (a) $3,000,000 or (b) the sum of (i) the threshold for the net amount of total eligible accounts receivable set forth in the agreement, with and without recourse, and (ii) the threshold for the value of eligible inventory set forth in the agreement, which amount shall not exceed the lesser of $1,500,000 or the net amount of eligible accounts receivable.  All of the Company’s assets secure amounts borrowed under the terms of this agreement.  Interest on outstanding balances based on accounts receivable accrues at LIBOR plus 5.5% and interest on outstanding balances based on inventory accrues at LIBOR plus 6.5%.  This agreement had an initial term of thirty-six (36) months.  On December 1, 2011, this agreement was amended to increase the Company’s limit on permissible capital equipment expenditures from $100,000 to $250,000 per year, effective for 2011 and 2012.  On December 7, 2012 the Company terminated this factoring agreement.  As of December 31, 2012, the total amount due from factor was $915,492 which represents open factored balances that are being collected through the Factor.  As of December 31, 2011, the total amount due to FCC was $1,661,220 offset by $2,462,973 due from factor, thereby creating a net due from factor of $801,753.

Bank Revolving Loan

On November 30, 2012 the Company entered into a Business Loan Agreement with Union Bank, N.A. which provides a revolving loan of up to $6,000,000.  The first $3,500,000 of advances under this facility are under an open line-of-credit.  Advances in excess of $3,500,000, up to the line limit of $6,000,000, are subject to a Borrowing Base report.  The term Borrowing Base means an amount equal to (a) 80% of the net amount of all eligible accounts receivable plus, (b) the lesser of (i) 50% of the value of eligible landed inventory and (ii) $2,750,000, plus (c) 35% of eligible in-transit inventory.  In addition, during the months of April to October each calendar year, the outstanding principal amount of all advances against eligible inventory shall not exceed 150% of the aggregate outstanding principal amount of advances against eligible accounts receivable.  All of the Company’s assets secure amounts borrowed under the terms of this agreement.  Interest on borrowed funds will accrue at Prime minus 0.25% unless the Company chooses to “fix” a portion of the indebtedness (minimum $150,000) at LIBOR plus 2% for fixed periods of time ranging from 30 days to 360 days.

As of December 31, 2012, the total amount due to Union Bank was $1,483,883.

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Note 8 - Equity Transactions

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

8.           Equity transactions

Common Stock

On March 17, 2011, the Company issued a stock bonus of 518,033 shares to an officer of the company as a bonus.   The bonus was valued at $62,164 and was based on a current market valuation of $0.12 per common share.

On April 11, 2011 the Company issued 36,674 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

On November 30, 2011 the Company issued 362,862 shares of common stock upon the exercise of stock options at an exercise prices between $0.09 and $0.095.

On December 7, 2011 the Company issued 682,000 shares of common stock upon the exercise of stock options at an exercise prices between $0.09 and $0.15.

On February 7, 2012 the Company issued 60,000 shares of common stock upon the exercise of a warrant at an exercise price of $0.05.

On February 27, 2012 the Company issued 268,792 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

On February 29, 2012 the Company issued 561,291 shares of common stock upon the exercise of various stock options at exercise prices between $0.09 and $0.095.

On March 15, 2012 the Company issued 43,146 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

On March 20, 2012 the Company issued 833,333 shares of common stock upon the exercise of various stock options at an exercise price of $0.09.

On March 22, 2012 the Company issued 36,687 shares of common stock upon the cashless exercise of a stock option at an exercise price of $0.11.

On September 15, 2012 the Company issued 43,146 shares of common stock upon the exercise of a stock option at an exercise price of $0.09.

On December 20, 2012 the Company issued 50,438 shares of common stock upon the exercise of a stock option at an exercise price of $0.095.

There were 76,447,587 shares of common stock of the Company outstanding at December 31, 2012.

Warrant Activity

A summary of warrant activity is as follows:

	Number of Shares			Weighted Average Exercise Price
Warrants outstanding at December 31, 2010		10,175,994		$	0.93
Warrants expired		(10,072,848	)	$	0.93
Warrants outstanding at December 31, 2011		103,146		$	0.11
Warrants exercised		(60,000	)	$	0.05
Warrants outstanding at December 31, 2012		43,146		$	0.185

Stock Based Compensation

The Company accounts for stock based compensation under the provisions of FASB ASC 718 “Share-Based Payments” using the modified prospective application transition method.

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

Effective May 9, 2009, the Company reserved an additional 6,750,000 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 Company’s board of directors.

Effective April 11, 2011, the Company reserved an additional 2,000,000 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 Company’s 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 Model.  The Black-Scholes 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 on the U.S. Treasury Bill rate with a maturity based on the expected life of the options and on the closest day to an individual stock option grant.  Dividend rates are based on the Company’s dividend history.  The stock volatility factor is based on historical market prices of the Company’s common stock.  The expected life of an option grant is based on management’s estimate.  The fair value of each option grant is recognized as compensation expense over the vesting period of the option on a straight line basis.

For stock options issued during the years ended December 31, 2012 and 2011, the fair value of these options was estimated at the date of the grant using a Black-Scholes Model with the following range of assumptions:

	December 31, 2012					December 31, 2011
Risk free interest rate		0.58%	-	0.94	%		1.62	%
Dividends		-					-
Volatility factor		89.1			%		90.7	%
Expected life (years)	5.5		-	6.25		6.25

A summary of stock option activity is as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2010		9,610,488		$	0.095
Granted		3,203,033		$	0.099
Exercised		(1,599,568	)	$	0.109
Cancelled/Expired		(797,417	)	$	0.093
Outstanding at December 31, 2011		10,416,536		$	0.094
Granted		1,301,625		$	0.24
Exercised		(1,836,831	)	$	0.091
Cancelled/Expired		(310,875	)		0.13
Outstanding at December 31, 2012		9,570,455			0.113
Exercisable at December 31, 2012		6,697,838		$	0.106

The following tables summarize information about stock options outstanding at December 31, 2012:

Range of Exercise Price				Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Intrinsic Value Outstanding Shares
$	0.09	-	$0.24		9,570,455		6.74	$	0.113	$	1,432,830

The following tables summarize information about stock options exercisable at December 31, 2012:

Range of Exercise Price				Number Exercisable		Weighted Average Remaining Contractual  Life (Years)		Weighted Average  Exercise Price		Intrinsic Value  Exercisable Shares
$	0.09	-	$0.24		6,697,838		5.95	$	0.106	$	1,049,563

The following tables summarize information about non-vested stock options:

	Number of Shares			Weighted Average Grant Date  Fair Value
Non-Vested at December 31, 2010		2,418,323		$	0.10
Granted		3,203,033		$	0.08
Vested		(1,378,589	)	$	0.12
Forfeited		(170,907	)	$	0.10
Non-Vested at December 31, 2011		4,071,860		$	0.08
Granted		1,301,625		$	0.17
Vested		(2,216,731	)	$	0.10
Forfeited		(284,137	)	$	0.10
Non-Vested at December 31, 2012		2,872,617		$	0.10

The Company recorded $217,630 of compensation expense for employee stock options during the year ended December 31, 2012.  These compensation expense charges were recorded in the following operating expense categories, general and administrative - $120,685; sales and marketing - $58,292; research and development - $19,142; and purchasing, warehousing and distribution - $19,511.  There was a total of $270,825 of unrecognized compensation costs related to non-vested share-based compensation arrangements under the Plan outstanding at December 31, 2012.  This cost is expected to be recognized over a weighted average period of 2.8 years.  The total fair value of shares vested during the year ended December 31, 2012 was $224,088.

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Note 10 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Text Block]

10.           Commitments and Contingencies

The Company entered into a five-year lease with one option to renew for an additional five years for a corporate office and warehouse lease commencing in July 2006.  The Company exercised its five year option to renew this lease commencing in July 2011.  The facility is located in El Segundo, California.   As part of this renewal process we reduced our square footage by approximately 1,700 square feet of unneeded warehouse space in exchange for six months of rent concessions and approximately $40,000 for tenant improvements.  Rent expense for this facility for the years ended December 31, 2012 and 2011 for this facility were $125,038 and $185,568, respectively.

The Company has various non-cancelable operating leases for office equipment expiring through July 15, 2016.  Equipment lease expense charged to operations under these leases was $12,205 and $9,245 for the years ended December 31, 2012 and 2011, respectively.

Future minimum rental commitments under these non-cancelable operating leases for years ending December 31 are as follows:

Year	Facility		Equipment		Total
2013	$	158,592	$	5,274	$	163,866
2014		162,864		3,924		166,788
2015		167,148		1,541		168,689
2016		85,176		899		86,075
Thereafter		-		-		-
	$	573,780	$	11,638	$	585,418

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

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Note 2 - Accounting Policies (Detail) - Potential Common Shares Excluded From The Computation Of Diluted Net Loss Per Share (Warrant [Member])	12 Months Ended
	Dec. 31, 2011
Warrant [Member]
Common Stock Warrants	43,146

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Note 9 - Income Taxes (Detail) - Provision For Income Taxes	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Statutory regular federal income benefit rate	(34.00%)	(34.00%)
State income taxes, net of federal benefit	(5.20%)	(8.10%)
Change in valuation allowance	64.80%	28.30%
Other	(1.90%)	(0.50%)
Total	23.70%	14.30%

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Note 2 - Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Accounts Receivable and Due From Factor	December 31, 2012			December 31, 2011
Accounts receivable – non factored	$	6,471,670		$	519,010
Accounts receivable - factored with recourse		-			315,994
Less-Allowance for doubtful accounts		(48,000	)		(37,000	)
Net accounts receivable	$	6,423,670		$	798,004
Due from factor without recourse	$	915,492		$	2,462,973

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Year Ended December 31, 2012						Year Ended December 31, 2011
Net Sales	Gloves		Apparel		Total		Gloves		Apparel		Total
Domestic	$	21,437,978	$	140,681	$	21,578,659	$	18,445,725	$	149,739	$	18,595,464
International		4,601,021		434		4,601,455		2,784,033		21,505		2,805,538
Total	$	26,038,999	$	141,115	$	26,180,114	$	21,229,758	$	171,244	$	21,401,002

Product Warranty Disclosure [Text Block]

Reserve for Warranty Returns
Reserve Balance 12/31/10	$	57,000
Payments Recorded During the Period		(333,665	)
		(276,665	)
Accrual for New Liabilities During the Reporting Period		338,665
Reserve Balance 12/31/11		62,000
Payments Recorded During the Period		(348,371	)
		(286,371	)
Accrual for New Liabilities During the Reporting Period		351,371
Reserve Balance 12/31/12	$	65,000

Schedule of Earnings Per Share Reconciliation [Table Text Block]

	2012		2011
Numerator: Net Income	$	3,078,808	$	1,122,167
Denominator: Basic EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Denominator for basic earnings per common share		76,028,200		73,446,414
Denominator: Diluted EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Dilutive warrants outstanding at end of the period		43,146		60,000
Dilutive stock options outstanding at the end of the period		9,570,455		10,416,536
Denominator for diluted earnings per common share		85,641,801		83,922,950

Schedule of Weighted Average Number of Shares [Table Text Block]

	Year Ended December 31,
	2012		2011
Common Stock Warrants		-		43,146

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Note 8 - Equity Transactions (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Number of Shares			Weighted Average Exercise Price
Warrants outstanding at December 31, 2010		10,175,994		$	0.93
Warrants expired		(10,072,848	)	$	0.93
Warrants outstanding at December 31, 2011		103,146		$	0.11
Warrants exercised		(60,000	)	$	0.05
Warrants outstanding at December 31, 2012		43,146		$	0.185

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	December 31, 2012					December 31, 2011
Risk free interest rate		0.58%	-	0.94	%		1.62	%
Dividends		-					-
Volatility factor		89.1			%		90.7	%
Expected life (years)	5.5		-	6.25		6.25

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2010		9,610,488		$	0.095
Granted		3,203,033		$	0.099
Exercised		(1,599,568	)	$	0.109
Cancelled/Expired		(797,417	)	$	0.093
Outstanding at December 31, 2011		10,416,536		$	0.094
Granted		1,301,625		$	0.24
Exercised		(1,836,831	)	$	0.091
Cancelled/Expired		(310,875	)		0.13
Outstanding at December 31, 2012		9,570,455			0.113
Exercisable at December 31, 2012		6,697,838		$	0.106

Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding [Table Text Block]

Range of Exercise Price				Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Intrinsic Value Outstanding Shares
$	0.09	-	$0.24		9,570,455		6.74	$	0.113	$	1,432,830

Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable [Table Text Block]

Range of Exercise Price				Number Exercisable		Weighted Average Remaining Contractual  Life (Years)		Weighted Average  Exercise Price		Intrinsic Value  Exercisable Shares
$	0.09	-	$0.24		6,697,838		5.95	$	0.106	$	1,049,563

Schedule of Nonvested Share Activity [Table Text Block]

	Number of Shares			Weighted Average Grant Date  Fair Value
Non-Vested at December 31, 2010		2,418,323		$	0.10
Granted		3,203,033		$	0.08
Vested		(1,378,589	)	$	0.12
Forfeited		(170,907	)	$	0.10
Non-Vested at December 31, 2011		4,071,860		$	0.08
Granted		1,301,625		$	0.17
Vested		(2,216,731	)	$	0.10
Forfeited		(284,137	)	$	0.10
Non-Vested at December 31, 2012		2,872,617		$	0.10

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Note 9 - Income Taxes (Detail) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Deferred Tax Assets, Operating Loss Carryforwards, Domestic	$ 5,778,000	$ 8,300,000
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	$ 9,344,000	$ 9,553,000

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Note 7 - Bank Lines of Credit (Detail) (USD $)			1 Months Ended				1 Months Ended		1 Months Ended		1 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2011 Prior to amendment [Member] Capital Equipment Expenditures [Member]	Dec. 31, 2011 Subsequent to amendment [Member] Capital Equipment Expenditures [Member]	Nov. 30, 2012 Subject To A Borrowing Base Report [Member] Union Bank, N.A. [Member] Minimum [Member]	Nov. 30, 2012 Subject To A Borrowing Base Report [Member] Union Bank, N.A. [Member] Maximum [Member]	Nov. 30, 2012 Borrowing Base Calculation, Input [Member] Union Bank, N.A. [Member]	Nov. 30, 2012 During The Months Of April To October Each Calendar Year [Member] Union Bank, N.A. [Member] Maximum [Member]	Nov. 30, 2012 Amount Required In Order To "Fix" At LIBOR Plus 2% [Member] Union Bank, N.A. [Member] Minimum [Member]	Nov. 30, 2012 Spread If Company Chooses To "Fix" A Portion Of The Indebtedness [Member] Union Bank, N.A. [Member]	Dec. 31, 2012 FCC [Member]	Nov. 30, 2012 Union Bank, N.A. [Member] Line of Credit [Member]	Dec. 31, 2012 Union Bank, N.A. [Member]	Nov. 30, 2012 Union Bank, N.A. [Member]	Dec. 31, 2012 FCC [Member]	Dec. 31, 2011 FCC [Member]	Dec. 31, 2012 Debt secured by accounts receivable [Member]	Dec. 31, 2012 Debt secured by inventory [Member]
Line of Credit Facility, Maximum Borrowing Capacity					$ 3,500,000	$ 6,000,000					$ 3,000,000	$ 3,500,000		$ 6,000,000
Amount Used To Compare To Another Factor When Determining Borrowing Limit											1,500,000
Debt Instrument, Basis Spread on Variable Rate										2.00%							5.50%	6.50%
Debt Instrument, Restrictive Covenants			$100,000	$250,000
DueFromFactor	915,492	2,462,973													915,492	2,462,973
Line of Credit Facility, Amount Outstanding													1,483,883			1,661,220
Due From Factor, Net																801,753
Percentage Of Net Amount Of All Eligible Accounts Receivable							80.00%
Percentage Of The Value Of Eligible Landed Inventory							50.00%
Borrowing Base, Comparison Amount Used In Determining A Factor							2,750,000
Percentage Of Eligible In-Transit Inventory							35.00%
Outstanding Principal Amount Of All Advances Against Eligible Inventory As A Percent Of Aggregate Outstanding Principal Amount Of Advances Against Eligible Accounts Receivable								150.00%
Debt Instrument, Basis Spread on Variable Rate1														minus 0.25%
Fixed Portion Of Indebtedness									$ 150,000

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Condensed Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income attributable to common shareholders	$ 3,078,808	$ 1,122,167
Adjustments to reconcile net loss to net cash used in operating activities
Allowance for bad debts	11,000	(93,000)
Inventory reserve	159,000	240,000
Depreciation	149,666	125,330
Amortization	8,403	7,153
(Gain) loss on disposition of equipment	(50)	26,414
Reversal of deferred income tax valuation allowance	(857,500)
Non-cash compensation:
Common stock issued for services		62,164
Stock option expense	217,630	133,027
Changes in operating assets and liabilities:
Accounts receivable	(5,636,666)	71,940
Due from factor without recourse	1,547,481	(494,210)
Inventory	(991,130)	(1,421,125)
Deposits on inventory	(249,211)	566,920
Prepaid and other	(42,012)	(145,722)
Accounts payable and accrued expenses	2,372,144	34,401
Net cash flows provided by (used in) operating activities	(232,437)	235,459
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment purchased	(86,170)	(211,254)
Proceeds from sale of assets	50
Investment in trademarks and patents	(9,158)	(28,608)
Net cash flows used in investing activities	(95,278)	(239,862)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank lines of credit	32,534,536	19,818,724
Payments to bank lines of credit	(32,711,872)	(19,933,891)
Proceeds from issuance of common stock and warrants	166,515	112,258
Net cash flows used by financing activities	(10,821)	(2,909)
NET DECREASE IN CASH	(338,536)	(7,312)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD	1,060,125	1,067,437
CASH AND CASH EQUIVALENTS END OF PERIOD	721,589	1,060,125
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Interest paid in cash	(50,145)	(94,407)
Income taxes paid	$ (77,000)	$ (213,950)

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Note 4 - Property and Equipment

12 Months Ended

Dec. 31, 2012

Property, Plant and Equipment Disclosure [Text Block]

4.           Property and equipment

Property and equipment consisted of the following:

	December 31, 2012			December 31, 2011
Computer hardware and software	$	515,058		$	486,066
Vehicle		43,680			43,680
Furniture and equipment		179,835			162,871
Leasehold improvements		47,381			43,589
		785,954			736,206
Less accumulated depreciation		(529,917	)		(416,672	)
Property and equipment, net	$	256,037		$	319,534

Depreciation expense for the years ended December 31, 2012 and 2011 was $149,666 and $125,330, respectively.

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Note 9 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	2012			2011
Current	$	267,000		$	213,950
Deferred		(857,500	)		-
	$	(590,500	)	$	213,950

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	2012			2011
Statutory regular federal income benefit rate		(34.0	)%		(34.0	)%
State income taxes, net of federal benefit		(5.2	)		(8.1	)
Change in valuation allowance		64.8			28.3
Other		(1.9	)		(0.5	)
Total		23.7	%		14.3	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	2012			2011
Deferred tax assets
Net operating loss carryforward	$	2,761,949		$	3,619,404
Stock option expense		1,269,244			1,184,822
Allowance for doubtful accounts		20,563			15,851
Allowance for product returns		27,846			26,561
Accrued compensation		44,566			38,035
Inventory reserve		265,180			197,064
Other		67,597			18,276
Valuation allowance		(3,207,803	)		(4,720,054	)
Total deferred tax assets		1,249,142			379,959
Deferred tax liabilities – state taxes		(391,642	)		(379,959	)
Net deferred tax assets/liabilities	$	857,500		$	-

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Note 5 - Trademarks and Patents (Detail) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Finite-Lived Trademarks, Gross	$ 111,043	$ 103,703
Indefinite-Lived Trademarks	61,443	59,624
Amortization of Intangible Assets	8,403	7,153
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	$ 8,600

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Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2012

Consolidation, Policy [Policy Text Block]

Basis of Consolidation

The consolidated financial statements include the accounts of Ironclad Performance Corporation, an inactive parent company, and its wholly owned subsidiary Ironclad California.  All significant inter-company transactions have been eliminated in consolidation.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.  The Company places its cash with high credit quality institutions.  The Federal Deposit Insurance Company (FDIC) insures cash amounts at each institution for up to $250,000.  From time to time, the Company maintains cash in excess of the FDIC limit.

Receivables, Policy [Policy Text Block]

Accounts Receivable

The Company factored designated trade receivables pursuant to a factoring agreement with an unrelated Factor.  On December 7, 2009 the Company entered into a new factoring agreement whereby it assigns certain of its trade receivables with recourse and other trade receivables without recourse.  The Company incurs a one-time servicing fee (discount) of 0.75% as a percentage of the face value of each invoice assigned to the Factor.  This servicing fee is recorded on the condensed consolidated statement of operations in the period of sale.  Servicing fees incurred for the years ended December 31, 2012 and 2011 were $102,397 and $102,323, respectively.  The financing of accounts receivable without recourse is accounted for as a sale of receivables in accordance with the guidance under ASC 860-20, “Sales of Financial Assets.”  The Factor, based on its internal credit policies, determines which customer trade receivables it will accept without recourse and assigns a credit limit for that customer.  The Company then assigns (sells) the face value of certain trade receivable invoices to the Factor, excludes them from accounts receivable, and records a current asset entitled “Due from factor without recourse” on the condensed consolidated balance sheet and they are reflected as cash provided by operating activities on the condensed consolidated statement of cash flows. Thereafter, the Company is entitled to borrow up to 70% of the value of such invoices through its line of credit with the Factor.  The Factor retains the remaining 30% of the outstanding factored accounts receivable as a reserve.  The Factor handles all collection activities and receives payment from the customer into its own bank lockbox account.  The Factor has no recourse to the Company for failure of debtors of these designated accounts receivable.  The Factor reimburses the Company for its purchased invoices by applying the funds collected from the customer as payments against the Company’s line of credit.

Trade receivables with recourse were also assigned to the Factor as an additional source of financing, and are carried at the original invoice amount less an estimate made for doubtful accounts.  Under the terms of the recourse provision, the Company is required to reimburse the Factor, upon demand, for factored receivables that are not paid on time.  Accordingly, these receivables are accounted for as a secured borrowing arrangement and not as a sale of financial assets.  The allowance for doubtful accounts is based on management’s regular evaluation of individual customer’s receivables and consideration of a customer’s financial condition and credit history.  Trade receivables are written off when deemed uncollectible.  Recoveries of trade receivables previously written off are recorded when received.  Interest is not charged on past due accounts.

On December 7, 2012 the Company terminated this factoring agreement.  The amounts showing as “Due from factor without recourse” on the balance sheet reflect open balances that are being collected through the Factor.

On November 30, 2012 the Company entered into a Business Loan Agreement with a bank providing a revolving loan of up to $6,000,000.  The first $3,500,000 of advances under this facility are under an open line-of-credit.  Advances in excess of $3,500,000, up to the line limit of $6,000,000, are subject to a Borrowing Base report.  The term Borrowing Base means an amount equal to (a) 80% of the net amount of all eligible accounts receivable plus, (b) the lesser of (i) 50% of the value of eligible landed inventory and (ii) $2,750,000, plus (c) 35% of eligible in-transit inventory.  In addition, during the months of April to October each calendar year, the outstanding principal amount of all advances against eligible inventory shall not exceed 150% of the aggregate outstanding principal amount of advances against eligible accounts receivable.  Interest on borrowed funds will accrue at Prime minus 0.25% unless the Company chooses to “fix” a portion of the indebtedness (minimum $150,000) at LIBOR plus 2% for fixed periods of time ranging from 30 days to 360 days.

Accounts Receivable and Due From Factor	December 31, 2012			December 31, 2011
Accounts receivable – non factored	$	6,471,670		$	519,010
Accounts receivable - factored with recourse		-			315,994
Less-Allowance for doubtful accounts		(48,000	)		(37,000	)
Net accounts receivable	$	6,423,670		$	798,004
Due from factor without recourse	$	915,492		$	2,462,973

Inventory, Policy [Policy Text Block]

Inventory

Inventory is stated at the lower of average cost (which approximates first in, first out) or market and consists primarily of finished goods.  The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on management’s estimated forecast of product demand and production requirements.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation.  Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years.  Leasehold improvements are depreciated over fifteen years or the lease term, whichever is shorter.  Maintenance and repairs are charged to expense as incurred.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Trademarks

The costs incurred to acquire trademarks, which are active and relate to products with a definite life cycle, are amortized over the estimated useful life of fifteen years.  Trademarks, which are active and relate to corporate identification, such as logos, are not amortized.  Pending trademarks are capitalized and reviewed monthly for active status.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-Lived Asset Impairment

The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance may not be recoverable.  When factors indicate that the asset should be evaluated for possible impairment, the Company uses an estimate of the undiscounted net cash flows over the remaining life of the asset in measuring whether the asset is recoverable.  Based upon the anticipated future income and cash flow from operations and other factors, relevant in the opinion of the Company’s management, there has been no impairment.

Segment Reporting, Policy [Policy Text Block]

Operating Segment Reporting

As previously discussed, the Company has two product lines, “gloves” and “apparel,” both of which have similar characteristics.  They each provide functional protection and comfort to workers in the form of workwear for various parts of the body; their production processes are similar; they are both sold to the same type of class of customers, typically on the same purchase order; and they are warehoused and distributed from the same warehouse facility.  In addition, the “apparel” segment currently comprises less than 1% of the Company’s revenues.  The Company believes that the aggregation criteria of FASB ASC 280-10 applies and will accordingly aggregate these two segments.

Revenue Recognition, Policy [Policy Text Block]

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, however, we have negotiated special terms with certain customers and industries.  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 shipped or delivered to customers, based on terms of agreement with the customer.

Revenue Disclosures [Policy Text Block]

Revenue Disclosures

The Company’s revenues are derived from the sale of our core line of task specific work gloves plus our line of workwear apparel products, available to all of our customers, both domestically and internationally.  Below is a table outlining this breakdown for the comparative periods:

	Year Ended December 31, 2012						Year Ended December 31, 2011
Net Sales	Gloves		Apparel		Total		Gloves		Apparel		Total
Domestic	$	21,437,978	$	140,681	$	21,578,659	$	18,445,725	$	149,739	$	18,595,464
International		4,601,021		434		4,601,455		2,784,033		21,505		2,805,538
Total	$	26,038,999	$	141,115	$	26,180,114	$	21,229,758	$	171,244	$	21,401,002

Cost of Sales, Policy [Policy Text Block]

Cost of Goods Sold

Cost of goods sold includes all of the costs associated with producing the product by independent, third party factories (FOB costs), plus the costs of transporting, inspecting and delivering the product to our distribution warehouse in California (landed costs).  Landed costs consist primarily of ocean/air freight, transport insurance, import duties, administrative charges and local trucking charges from the port to our warehouse.  Cost of goods sold for the years ended December 31, 2012 and 2011 were $16,129,474 and $13,439,562 respectively.

Purchasing, warehousing and distribution costs are reported in operating expenses on the line item entitled “Purchasing, warehousing and distribution” and, for the years ending December 31, 2012 and 2011 were $1,112,492 and $858,758, respectively.  These costs were comprised of salaries and benefits of approximately $502,000 and $410,000; office expenses of approximately $65,000 and $51,000; travel and lodging of approximately $43,000 and $30,000; and warehouse operations of approximately $502,000 and $368,000, respectively.

Revenue Recognition, Sales Returns [Policy Text Block]

Product Returns, Allowances and Adjustments

Product returns, allowances and adjustments is a broad term that encompasses a number of offsets to gross sales.  Included herein are warranty returns of defective products, returns of saleable products and accounting adjustments.

Warranty Returns - the Company has a warranty policy that covers defects in workmanship.  It allows customers to return damaged or defective products to us following a customary return merchandise authorization process.  Warranty returns for the years ending December 31, 2012 and 2011 were approximately $78,000 or 0.3% and $94,000 or 0.4%, respectively.

Saleable Product Returns - the Company may allow from time to time, depending on the customer and existing circumstances, stock adjustment returns, whereby the customer is given the opportunity to ‘trade out’ of a style of product that does not sell well in their territory, usually in exchange for another product, again following the customary return merchandise authorization process.  In addition we may allow from time to time other saleable product returns from customers for other business reasons, for example, in settlement of an outstanding accounts receivable, from a discontinued distributor customer or other customer service purpose.  Saleable product returns for the years ending December 31, 2012 and 2011 were approximately $271,000 or 1.0% and $239,000 or 1.1%, respectively.

Accounting Adjustments - these adjustments include pricing and shipping corrections and periodic adjustments to the product returns reserve.  Pricing and shipping corrections for the years ending December 31, 2012 and 2011 were approximately $49,000 or 0.2% and $19,000 or 0.1%, respectively.  Adjustments to the product returns reserve for the years ending December 31, 2012 and 2011 were approximately $3,000 or 0.0% and ($16,000) or (0.1%), respectively.

For warranty returns the Company utilizes actual historical return rates to determine the allowance for returns in each period.  For saleable product returns the Company also utilizes actual historical return rates, adjusted for large, non-recurring occurrences.  The Company does not accrue for pricing and shipping corrections as they are unpredictable and generally de minimis.  Gross sales are reduced by estimated returns.  We record a corresponding accrual for the estimated liability associated with the estimated returns which is based on the historical gross sales of the products corresponding to the estimated returns.  This accrual is offset each period by actual product returns.

Reserve for Warranty Returns
Reserve Balance 12/31/10	$	57,000
Payments Recorded During the Period		(333,665	)
		(276,665	)
Accrual for New Liabilities During the Reporting Period		338,665
Reserve Balance 12/31/11		62,000
Payments Recorded During the Period		(348,371	)
		(286,371	)
Accrual for New Liabilities During the Reporting Period		351,371
Reserve Balance 12/31/12	$	65,000

Advertising Costs, Policy [Policy Text Block]

Advertising and Marketing

Advertising and marketing costs are expensed as incurred.  Advertising expenses for the years ended December 31, 2012 and 2011 were $384,080 and $406,146, respectively.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

Freight billed to customers is recorded as sales revenue and the related freight costs as cost of sales.

Customer Concentrations [Policy Text Block]

Customer Concentrations

Two customers accounted for approximately $14,524,000 or 55% of net sales for year ended December 31, 2012 and two customers accounted for approximately $8,412,000 or 39% of net sales for year ended December 31, 2011.  No other customer accounted for more than 10% of net sales.  All transactions were in United States dollars.  There were no transaction gains or losses associated with sales transactions.

Supplier Concentrations [Policy Text Block]

Supplier Concentrations

Two suppliers, which are located overseas, accounted for approximately 76% of total purchases during the year ended December 31, 2012 and 79% of total purchases during the year ended December 31, 2011.  All transactions were in United States dollars.  There were no transaction gains or losses associated with vendor purchase transactions.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) Per Share

The Company utilizes FASB ASC 260, “Earnings per Share.”  Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding.  Diluted earnings (loss) per share is computed similar to basic earnings (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 table sets forth the calculation of the numerators and denominators of the basic and diluted per share computations for the years ended December 31:

	2012		2011
Numerator: Net Income	$	3,078,808	$	1,122,167
Denominator: Basic EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Denominator for basic earnings per common share		76,028,200		73,446,414
Denominator: Diluted EPS
Common shares outstanding, beginning of period		74,550,754		72,951,185
Weighted average common shares issued during the period		1,477,446		495,229
Dilutive warrants outstanding at end of the period		43,146		60,000
Dilutive stock options outstanding at the end of the period		9,570,455		10,416,536
Denominator for diluted earnings per common share		85,641,801		83,922,950

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

	Year Ended December 31,
	2012		2011
Common Stock Warrants		-		43,146

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company adopted the provisions of FASB ASC 740-10 effective January 1, 2007.  The implementation of FASB ASC 740-10 has not caused the Company to recognize any changes in its identified tax positions. Interest and penalties associated with unrecognized tax benefits would be classified as additional income taxes in the statement of operations.

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

Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

The significant components of the provision for income taxes for the years ended December 31, 2012 and 2011 were $219,000 and $201,750, respectively, for the current state provisions and $48,000 and $12,200 for the federal tax provision, respectively.  There was no state or federal deferred tax provision.  Based on its history of losses, the Company provided a 100% valuation allowance against its deferred tax assets, as it was not more likely than not that any future benefit from deductible temporary differences and net operating loss carryforwards would be realized.  For the year ended December 31, 2012 the Company has reassessed the need for a valuation allowance against its deferred tax assets and, based on the positive evidence of the last three year’s pre-tax income and forecasted future results, concluded that it is more likely than not that it would be able to realize some of its deferred tax assets.  Accordingly, the Company has reversed approximately 30% of its valuation allowance for its current deferred tax assets and recorded a deferred tax benefit of $857,500.  We will continue to evaluate if it is more likely than not that we will realize the benefits from future deferred tax assets and have accordingly provided a 70% valuation allowance against our remaining deferred tax assets.

By statute, tax years ending in December 31, 2011 through 2008 remain open to examination by the major taxing jurisdictions to which the Company is subject.

Use of Estimates, Policy [Policy Text Block]

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.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

In July 2012, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles – Goodwill and Others: Testing Indefinite-Lived Intangible Assets for Impairment”, to allow entities to use a qualitative approach to test indefinite-lived assets for impairment.  ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of an indefinite-live intangible asset is less than its carrying value.  If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test by comparing the fair value of the indefinite-lived intangible asset with its carrying value.  Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for impairment tests for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted.  The Company has adopted the provisions of this standard and noted no material impact on the financial condition or results of operations of the Company.