UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2007

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

For the transition period from                                        &n bsp; to                                         

ROCKY BRANDS, INC.

(Exact name of registrant as specified in its charter)

Ohio		31-1364046
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

39 E. Canal Street, Nelsonville, Ohio 45764
(Address of Principal Executive Offices, Including Zip Code)

(740) 753-1951
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 the filing requirements for at least the past 90 days. YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o           Accelerated filer þ           Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

As of July 25, 2007, 5,484,413 shares of Rocky Brands, Inc. common stock, no par value, were outstanding.

FORM 10-Q

ROCKY BRANDS, INC.

TABLE OF CONTENTS

		PAGE
		NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets June 30, 2007 and 2006 (Unaudited), and December 31, 2006		3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and 2006 (Unaudited)		4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006 (Unaudited)		5
Notes to Interim Unaudited Condensed Consolidated Financial Statements		6 –15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16 – 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk		23
Item 4. Controls and Procedures		23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		24
Item 1A. Risk Factors		24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3. Defaults Upon Senior Securities		24
Item 4. Submission of Matters to a Vote of Security Holders		24
Item 5. Other Information		24
Item 6. Exhibits		25
SIGNATURE		26
EX-31(A)
EX-31(B)
EX-32(A)
EX-32(B)

PART 1 — FINANCIAL INFORMATION

ROCKY BRANDS, INC. AND SUBSIDIARIES

		June 30, 2007				December 31, 2006				June 30, 2006
		(Unaudited)								(Unaudited)
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents		$	1,446,022			$	3,731,253			$	474,910
Trade receivables – net			60,117,677				65,259,580				55,905,546
Other receivables			1,368,863				1,159,444				1,659,889
Inventories			83,973,162				77,948,976				94,337,405
Deferred income taxes			3,902,775				3,902,775				133,783
Income tax receivable			2,561,538				3,632,808				1,766,376
Prepaid expenses			2,118,034				1,581,303				2,585,430
Total current assets			155,488,071				157,216,139				156,863,339
FIXED ASSETS – net			24,443,562				24,349,674				23,730,670
DEFERRED PENSION ASSET			40,432				13,564				1,550,639
IDENTIFIED INTANGIBLES			36,823,525				37,105,291				38,093,117
GOODWILL			24,874,368				24,874,368				24,874,368
OTHER ASSETS			2,758,801				2,796,776				3,030,314
TOTAL ASSETS		$	244,428,759			$	246,355,812			$	248,142,447
LIABILITIES AND SHAREHOLDERS’ EQUITY:
CURRENT LIABILITIES:
Accounts payable		$	15,471,858			$	10,162,291			$	20,205,334
Current maturities – long term debt			311,534				7,288,474				7,276,398
Accrued expenses:
Salaries and wages			502,334				178,235				592,869
Co-op advertising			—				452,272				25,258
Interest			580,665				338,281				933,027
Taxes – other			673,098				552,782				378,713
Commissions			697,628				649,636				541,378
Other			2,310,034				2,025,079				1,506,607
Total current liabilities			20,547,151				21,647,050				31,459,584
LONG TERM DEBT – less current maturities			102,427,204				103,203,107				102,417,683
DEFERRED INCOME TAXES			17,009,025				17,009,025				13,477,939
DEFERRED LIABILITIES			324,038				368,580				442,067
TOTAL LIABILITIES			140,307,418				142,227,762				147,797,273
COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY:
Common stock, no par value;
25,000,000 shares authorized; issued and outstanding June 30, 2007 - 5,482,293; December 31, 2006 - 5,417,198; June 30, 2006 - 5,400,598			53,802,287				53,238,841				52,604,460
Accumulated other comprehensive loss			(942,036	)			(993,182	)			—
Retained earnings			51,261,090				51,882,391				47,740,714
Total shareholders’ equity			104,121,341				104,128,050				100,345,174
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	244,428,759			$	246,355,812			$	248,142,447

See notes to the interim unaudited condensed consolidated financial statements.

ROCKY BRANDS, INC. AND SUBSIDIARIES

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
NET SALES		$	58,797,664			$	57,297,505			$	120,454,688			$	114,822,669
COST OF GOODS SOLD			34,871,210				33,224,213				70,447,548				65,833,420
GROSS MARGIN			23,926,454				24,073,292				50,007,140				48,989,249
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			22,790,579				21,451,080				45,113,520				42,560,477
INCOME FROM OPERATIONS			1,135,875				2,622,212				4,893,620				6,428,772
OTHER INCOME AND (EXPENSES):
Interest expense, net			(3,344,076	)			(3,042,596	)			(5,842,921	)			(5,411,629	)
Other – net			6,994				76,759				(36,001	)			58,462
Total other – net			(3,337,082	)			(2,965,837	)			(5,878,922	)			(5,353,167	)
(LOSS) INCOME BEFORE INCOME TAXES			(2,201,207	)			(343,625	)			(985,302	)			1,075,605
INCOME TAX (BENEFIT) EXPENSE			(814,000	)			(128,000	)			(364,000	)			398,000
NET (LOSS) INCOME		$	(1,387,207	)		$	(215,625	)		$	(621,302	)		$	677,605
NET (LOSS) INCOME PER SHARE
Basic		$	(0.25	)		$	(0.04	)		$	(0.11	)		$	0.13
Diluted		$	(0.25	)		$	(0.04	)		$	(0.11	)		$	0.12
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			5,473,919				5,394,749				5,465,783				5,378,939
Diluted			5,473,919				5,394,749				5,465,783				5,607,902

See notes to the interim unaudited condensed consolidated financial statements.

ROCKY BRANDS, INC. AND SUBSIDIARIES

		Six Months Ended
		June 30,
		2007				2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(621,302	)		$	677,605
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization			2,753,424				2,589,785
Deferred compensation and other			(20,264	)			405,433
Deferred debt financing costs			811,582				382,144
Gain on disposal of fixed assets			(4,543	)			(591,690	)
Stock compensation expense			234,191				258,040
Change in assets and liabilities
Receivables			4,932,484				6,637,315
Inventories			(6,024,186	)			(18,950,673	)
Other current assets			534,540				(1,507,575	)
Other assets			606,832				411,673
Accounts payable			5,477,302				7,484,120
Accrued and other liabilities			567,474				(1,799,025	)
Net cash provided by (used in) operating activities			9,247,534				(4,002,848	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets			(2,687,705	)			(2,953,314	)
Investment in trademarks and patents			(49,951	)			(59,074	)
Proceeds from sale of fixed assets			8,918				1,853,584
Net cash used in investing activities			(2,728,738	)			(1,158,804	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility			125,665,531				133,942,094
Repayment of revolving credit facility			(140,774,353	)			(123,222,789	)
Proceeds from long-term debt			40,000,000				15,000,000
Repayments of long-term debt			(32,644,021	)			(21,397,830	)
Debt financing costs			(1,380,439	)			(610,000	)
Proceeds from exercise of stock options			329,255				316,407
Net cash (used in) provided by financing activities			(8,804,027	)			4,027,882
DECREASE IN CASH AND CASH EQUIVALENTS			(2,285,231	)			(1,133,770	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			3,731,253				1,608,680
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	1,446,022			$	474,910

See notes to the interim unaudited condensed consolidated financial statements.

ROCKY BRANDS, INC.
AND SUBSIDIARIES

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2007 AND 2006

1.

INTERIM FINANCIAL REPORTING

In the opinion of management, the accompanying interim unaudited condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of the financial results. All such adjustments reflected in the unaudited interim consolidated financial statements are considered to be of a normal and recurring nature. The results of the operations for the three month and six month periods ended June 30, 2007 and 2006 are not necessarily indicative of the results to be expected for the whole year. Accordingly, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2006.

The components of total comprehensive loss are shown below:

		(Unaudited)				(Unaudited)
		Three-Months Ended				Six-Months Ended
		June 30, 2007				June 30, 2007
Net loss		$	(1,387,207	)		$	(621,302	)
Other comprehensive income:
Amortization of unrecognized transition obligation and service cost			25,573				51,146
Total comprehensive loss		$	(1,361,634	)		$	(570,156	)

For the three month and six month periods ended June 30, 2006, net (loss) income was equal to comprehensive (loss) income.

2.

INVENTORIES

Inventories are comprised of the following:

		June 30, 2007				December 31, 2006				June 30, 2006
		(Unaudited)								(Unaudited)
Raw materials		$	8,434,319			$	6,564,731			$	10,178,194
Work-in-process			475,332				249,644				610,248
Finished goods			75,454,060				71,518,898				84,110,597
Reserve for obsolescence or lower of cost or market			(390,549	)			(384,297	)			(561,634	)
Total		$	83,973,162			$	77,948,976			$	94,337,405

Included in raw materials, at December 31, 2006 and June 30, 2006, is $1.6 million of purchases associated with the U.S. military. These raw material purchases were made exclusively for production under a subcontract for the U.S. military. Subsequent to the purchase of raw materials, the subcontract was cancelled for convenience by the U.S. military. In March 2007, we received a partial settlement and finalized the ultimate settlement of the contract in June 2007. As a result of this settlement and other third-party sales, the value of the raw material inventory was realized. In addition, the settlement provided for a reimbursement of expenses incurred in prior periods. This reimbursement is recognized as a reduction of cost of goods sold of approximately $0.7 million and $0.5 million in the first and second quarters of 2007, respectively.

3.

SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash information including, cash paid for interest and Federal, state and local income taxes, net of refunds, was as follows:

		Six Months Ended
		June 30,
		2007				2006
Interest		$	4,422,762			$	4,570,000
Federal, state and local income taxes		$	(1,490,000	)		$	996,000
Fixed asset purchases in accounts payable		$	204,448			$	—

4.

PER SHARE INFORMATION

Basic earnings per share (“EPS”) is computed by dividing net (loss) income applicable to common shareholders by the weighted average number of common shares outstanding during each period. The diluted earnings per share computation includes common share equivalents, when dilutive. There are no adjustments to net (loss) income necessary in the calculation of basic and diluted earnings per share.

A reconciliation of the shares used in the basic and diluted (loss) income per common share computation for the three months and six months ended June 30, 2007 and 2006 are as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2007				2006				2007				2006
Weighted average shares outstanding			5,473,919				5,394,749				5,465,783				5,378,939
Diluted stock options			—				—				—				228,963
Diluted weighted average shares outstanding			5,473,919				5,394,749				5,465,783				5,607,902
Anti-diluted weighted average shares outstanding			236,721				576,475				236,721				136,736

Because of the net loss for the three months ended June 30, 2007 and 2006, and the six months ended June 30, 2007, all stock options are anti-dilutive.

5.

RECENT FINANCIAL ACCOUNTING STANDARDS

In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) position EITF 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement (that is Gross versus Net Presentation)” (“EITF 06-3”), that addresses disclosure requirements for taxes assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value-added, and some excise taxes. EITF 06-3 requires disclosure of the method of accounting for the applicable assessed taxes, and the amount of assessed taxes that are included in revenues if they are accounted for under the gross method. The provisions of EITF 06-3 are effective for interim and annual reporting periods beginning after December 15, 2006, with earlier application permitted. We report sales, net of sales tax remittance. The adoption of EITF 06-3 on January 1, 2007 did not have a material effect on our financial statements.

In September 2006, the FASB issued a Statement of Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, rather it applies under existing accounting pronouncements that require or permit fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of adopting SFAS 157 on our financial statements.

Also in September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefits Pension and Other Postretirement Plans, an Amendment of FASB Statements 87, 88, 106, and 132(R)” (“SFAS 158”). SFAS 158, requires an employer to recognize in its statement of financial position the funded status of its defined benefit plans and to recognize as a component of other comprehensive income, net of tax, any unrecognized transition obligations and assets, the actuarial gains and losses and prior service costs and credits that arise during the period. The recognition provisions of Statement No. 158 were effective for fiscal years ending after December 15, 2006. In addition, Statement No. 158 requires a fiscal year end measurement of plan assets and benefit obligations, eliminating the use of earlier measurement dates currently permissible. However, the new measurement date requirement will not be effective until fiscal years ended after December 15, 2008. We utilize a measurement date of September 30th and will be required to change to December 31st. The adoption of Statement No. 158 as of December 31, 2006 resulted in a write-down of our pension asset by $1.6 million, increased accumulated other comprehensive loss by $1.0 million, and decreased deferred income tax liabilities by $0.6 million.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The standard also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for annual periods in fiscal years beginning after November 15, 2007. If the fair value option is elected, the effect of the first remeasurement to fair value is reported as a cumulative effect adjustment to the opening balance of retained earnings. In the event we elect the fair value option promulgated by this standard, the valuations of certain assets and liabilities may be impacted. The statement is applied prospectively upon adoption. We are currently evaluating the impact of adopting SFAS 159 on our financial statements.

6.

INCOME TAXES

We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. We did not have any unrecognized tax benefits and there was no effect on our financial condition or results of operations as a result of implementing FIN 48.

We file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. An examination of our 2004 Federal income tax return resulted in an immaterial adjustment. The examination of the 2003 Federal income tax return resulted in no changes. We are no longer subject to U.S. Federal tax examinations for years before 2003. State jurisdictions that remain subject to examination range from 2003 to 2006. Foreign jurisdiction (Canada and Puerto Rico) tax returns that remain subject to examination range from 2001 to 2006. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months.

Our policy is that we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of FIN 48, accrued interest or penalties were not material, and no such expenses were recognized during the quarter.

7.

INTANGIBLE ASSETS

A schedule of intangible assets is as follows:

		Gross				Accumulated				Carrying
June 30, 2007 (unaudited)		Amount				Amortization				Amount
Trademarks:
Wholesale		$	28,260,640			$	43,126			$	28,217,514
Retail			6,900,000				—				6,900,000
Patents			2,269,662				1,063,651				1,206,011
Customer relationships			1,000,000				500,000				500,000
Total Identified Intangibles		$	38,430,302			$	1,606,777			$	36,823,525

		Gross				Accumulated				Carrying
December 31, 2006		Amount				Amortization				Amount
Trademarks:
Wholesale		$	28,241,370							$	28,241,370
Retail			6,900,000								6,900,000
Patents			2,238,981			$	875,060				1,363,921
Customer relationships			1,000,000				400,000				600,000
Total Identified Intangibles		$	38,380,351			$	1,275,060			$	37,105,291

		Gross				Accumulated				Carrying
June 30, 2006 (unaudited)		Amount				Amortization				Amount
Trademarks:
Wholesale		$	28,933,009							$	28,933,009
Retail			6,900,000								6,900,000
Patents			2,247,810			$	687,702				1,560,108
Customer relationships			1,000,000				300,000				700,000
Total Identified Intangibles		$	39,080,819			$	987,702			$	38,093,117

Amortization expense for intangible assets was $166,012 and $135,000 for the three months ended June 30, 2007 and 2006, respectively and $331,717 and $270,000 for the six months ended June 30, 2007 and 2006, respectively. The weighted average amortization period for patents is six years and for customer relationships is five years.

Estimate of Aggregate Amortization Expense for the years ended December 31,:

2008		$	664,229
2009			664,224
2010			124,141
2011			122,761
2012			122,761

8. CAPITAL STOCK

On May 11, 2004, our shareholders approved the 2004 Stock Incentive Plan. This Stock Incentive Plan includes 750,000 of our common shares that may be granted for stock options and restricted stock awards. As of June 30, 2007, we were authorized to issue approximately 484,000 shares under our existing plans.

The plans generally provide for grants with the exercise price equal to fair value on the date of grant, graduated vesting periods of up to five years, and lives not exceeding ten years. The following summarizes stock option transactions from January 1, 2007 through June 30, 2007:

						Weighted
						Average
						Exercise
		Shares				Price
Options outstanding at January 1, 2007			536,176			$	14.33
Issued			15,000				14.40
Exercised			(57,500	)			5.73
Forfeited			(9,125	)			17.23
Options outstanding at June 30, 2007