UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

For the fiscal year endedJanuary 31, 20132014

OR

For the transition period from _____________ to ______________

Commission File Number: 0-15535

LAKELAND INDUSTRIES, INC.

(Exact Name of Registrant as Specified in its Charter)

(Registrant's telephone number, including area code) (631) 981-9700

Securities registered pursuant to Section 12(b) of the Act:

Common Stock $0.01 Par Value

(Title of Class)

Name of Exchange on which registered -– NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

Not Applicable

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes¨oNox

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes¨oNox

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¨   No  xNoo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,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).

Yesx No¨o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this Chapter) 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.

YesxNo¨o

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

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

Yes¨oNox

As of July 31, 2012,2013, the aggregate market value of the registrant’s common stock held by nonaffiliates of the registrant was $31,302,417$21,189,363 based on the closing price of the common stock as reported on the National Association of Securities Dealers Automated Quotation System National Market System.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed pursuant to Regulation 14A of the Security Exchange Act of 1934 are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14). of this Form 10-K.

LAKELAND INDUSTRIES, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

This Annual Report on Form 10-K contains forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties and assumptions as described from time to time in registration statements, annual reports and other periodic reports and filings of the Company filed with the Securities and Exchange Commission. All statements, other than statements of historical facts, which address the Company’s expectations of sources of capital or which express the Company’s expectation for the future with respect to financial performance or operating strategies, can be identified as forward-looking statements. As a result, there can be no assurance that the Company’s future results will not be materially different from those described herein as “believed,” “anticipated,” “estimated” or “expected,” “may,” “will” or “should” or other similar words which reflect the current views of the Company with respect to future events. We caution readers that these forward-looking statements speak only as of the date hereof. The Company hereby expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which such statement is based.

PART I

Lakeland Industries, Inc. (the “Company” or “Lakeland,” “we,” “our,” or “us”) was incorporated in the State of Delaware in 1986. Our executive office is located at 701 Koehler Avenue, Suite 7, Ronkonkoma, New York 11779, and our telephone number is (631) 981-9700. Our website is located at www.lakeland.com. Information contained on our website is not part of this report.

ITEM 1. BUSINESS

Overview

We manufacture and sell a comprehensive line of safety garments and accessories for the industrial protective clothing market. Our products are sold by our in-house customer service group, our regional sales managers and independent sales representatives to a network of over 1,200 North American safety and mill supply distributors. These distributors in turn supply end user industrial customers, such as integrated oil, chemical/petrochemical, utilities, automobile, steel, glass, construction, smelting, munition plants, janitorial, pharmaceutical, mortuaries and high technology electronics manufacturers, as well as scientific and medical laboratories. In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. However, internationallyInternationally sales are to a mixture of end users directly and industrial distributors depending on the particular country market. Sales are made to more than 40 foreign countries but are primarily in Brazil, China, European Economic Community (“EEC”), Brazil, Canada, Chile, Argentina, Australia and Southeast Asia, Australia, Chile and Argentina.Asia. In FY13,FY14, we had net sales from continuing operations of $91.4 million and $95.1 million and $96.3 million in FY12.FY13. For purposes of this Form 10-K, FY refers to a fiscal year ended January 31; for example, FY13FY14 refers to the fiscal year ended January 31, 2013.2014.

In FY14 we resolved many issues. FY14 started out as a difficult year with the Company in default on its banking agreements and experiencing operating losses, but during FY14 we resolved the default with new financing, which closed on June 28, 2013. Also in FY14, operating profit increased in the US before corporate expenses from $1.11 million in FY13 to $5.22 million in FY14 and increased in China from $2.88 million in FY13 to $3.54 million in FY14. This is largely due to the improvements in sales of Lakeland branded products, recovering from the loss of the DuPont license in July 2011. Our major remaining challenge is to attempt to address and resolve remaining issues in Brazil and return Brazilian operations to profitability sometime during FY15. We have changed local management and strategy, and we believe we should be able to turn around Brazil operations in FY15, but there can be no assurance in this regard.

FY13 was a challenging year for management. The Company lost an officer contract dispute where we had substantial documentary evidence that the officer in question had breached his employment contract with Lakeland. Nonetheless, a Brazilian Arbitration Panel awarded this officer a $12.5 million judgment against Lakeland. According to our local counsel, arbitration decisions in Brazil are very difficult to successfully appeal. Subsequently, Lakeland successfully negotiated the judgment down to $8.5 million of which $6.0 million was payable over six years with no interest. As of April 1, 2013,January 31, 2014, the remaining liability associated with this arbitration judgment is $5.75$5.0 million and is payable at $250,000 a quarter over the next 5 ¾five years, with no interest. In addition, the Brazilian government devalued its currency by 10% in 2012 which greatly reduced our margins in Brazil on imported fabrics.

Declining salesA key factor in FY13 led to quarterly losses in Brazil, which led to the necessity of writing off all goodwill, certain intangibles, and deferred tax assets of Brazil. These factors led to a default on the TD Bank loan, which in turn created substantial doubt about our ability to continue as a going concern. Thus, we engaged with new lenders and considered other options, such as the sale of the company, the sale of assets which has occurred, and a refinance of the TD Bank loan. In May 2013, the Company accepted a commitment letter from a bank for a Senior Credit Facility subject to certain terms and conditions andbusiness model is currently working towards closing this financing. However, no assurance can be given that this transaction or any other transaction will be consummated. We will continue pursuing all options to maximize stockholder value.

As a result of the default under the TD Bank loan, and the risk that such loan could be called as immediately due and payable, we were unable to conclude that we would have the capital to continue our operations through January 31, 2014. Successful completion of the proposed new financing, in management’s opinion, would relieve this condition.

We have operated manufacturing facilities in Mexico since 1995, in China since 1996, in India since 2007 (being sold) and in Brazil since 2008 (being restructured). Beginning in 1995, we movedhaving the labor intensive sewing operation for our limited use/disposable protective clothing lines to these facilities.our facilities in Mexico and China. Our facilities and capabilities in China and Mexico allow access to a less expensive labor pool than is available in the United States and permit us to purchase certain raw materials at a lower cost than areis available domestically. As we have increasingly movedshifted production of our products to our facilities in Mexico and China, we have experienced improvements in the profit margins for these products. We completed the moving of production of our reusable woven garments and gloves to these facilities in fiscal 2010. As a result, we have experienced cost improvements for these particular product lines.

We are exposed to changes in foreign currency exchange rates as a result of our purchases and sales in other countries. To manage the volatility relating to foreign currency exchange rates, we seek to limit, to the extent possible, our non-US dollar denominated purchases and sales.

In connection with our operations in China, we purchase a significant amount of products from outside of the United States. However, our purchases in China are primarily made in Chinese Yuan, the value of which had been largely pegged to the US dollar for the last decade. However, the Chinese Yuan has been decoupled from the US Dollar and allowed to float by the Chinese government and, therefore, we have been exposed to additional foreign exchange rate risk on our Chinese raw material and component purchases.

Our primary risk from foreign currency exchange rate changes is presently related to non-US dollar denominated sales in Brazil, Canada and Europe and, to a smaller extent, in other South American countries and dollar-denominated payables in Brazil. Our sales to customers in Brazil are denominated in Brazilian Reals, in Canada in Canadian dollars and in Europe in Euros and British pounds. If the value of the US dollar increases relative to the Canadian dollar, the Real, the Pound or the Euro, then our net sales could decrease as our products would be more expensive to these international customers because of changes in rate of exchange. The largest supplier of raw materials to Brazil is an American company, and these payables are denominated in US dollars. If the Brazilian Real weakened against the US dollar, it would make our costs higher and trigger a loss on foreign exchange on the payables. Our sales from China are denominated in the Chinese Yuan, US dollar and Euros;. We did experience some losses between the Chinese Yuan, the Euro and US dollars in FY12, but we have since stepped up our hedging program to include this risk. We manage the foreign currency risk through the use of rolling 90-day forward contracts against the Canadian dollar and Euros and through longer term cash flow hedges in China against the USD and Euro. We also do limited short-term hedging of the Brazilian Real. We do not hedge other currencies at this time. As non-US dollar denominated international purchases and sales grow, exposure to volatility in exchange rates could have a material adverse impact on our financial results. The only significant unhedged foreign exchange exposure we have is the Brazilian Real. Other unhedged currency exposure is not significant.  If the Brazilian exchange rates varied either way by +/- 10% it could cause a gain/loss to P&L of $212,000.

Our major product categories and their applications are described below:

Limited Use/Disposable Protective Clothing.We manufacture a complete line of limited use/disposable protective garments offered in coveralls, lab coats, shirts, pants, hoods, aprons, sleeves and smocks. These garments are made from several nonwoven fabrics, such as Micromax^®, Micromax NS, HBF^®, SafeGard^® SMS^®, Pyrolon XT^®, Plus 2^®, RyTex^®, Zonegard^® and ChemMax^® 1 and 2. These garments provide protection from low-risk contaminants or irritants, such as chemicals, pesticides, fertilizers, paint, grease and dust, and from limited exposure to hazardous waste and toxic chemicals, including acids, asbestos, lead and hydro-carbons (or PCBs) that pose health risks after exposure for long periods of time. Additional applications include protection from viruses and bacteria, such as AIDS, streptococcus, SARS and hepatitis, at international hospitals, clinics and emergency rescue sites and use in clean room environments to prevent human contamination in the manufacturing processes.

High-End Chemical Protective Suits. We manufacture heavy duty chemical suits made from our Pyrolon^® CRFR and ChemMax^®3, 4 and Interceptor product lines. These suits are worn by individuals on hazardous material teams to provide protection from powerful, highly concentrated and hazardous or potentially lethal chemical and biological toxins, such as toxic wastes at Super Fund sites, toxic chemical spills or biological discharges, chemical or biological warfare weapons (such as sarin gas, anthrax or ricin), and hazardous chemicals and petro-chemicals present during the cleaning of refineries and nuclear facilities. These suits can be used in conjunction with a fire protective shell that we manufacture to protect the user from both chemical and flash fire hazards. Homeland Security measures and government funding of personal protective equipment for first responders to terrorist threats or attack we believe will result in increased demand for our high-end chemical suits, and we believe a reasonable demand for these suits will continue in the future as annual state and local Bioterrorism grants are spent.

Fire Fighting and Heat Protective Apparel. We manufacture both domestically and internationally an extensive line of firefighting and heat protective apparel for use by fire fighters and other individuals that work in extreme heat environments. Our firefighting apparel is sold to local municipalities and industrial firefighting teams. Our heat protective aluminized fire suits are manufactured from Nomex^®, a fire and heat resistant material, and Kevlar^®, a cut and heat resistant, high-strength, lightweight, flexible and durable fiber produced by DuPont and woven by Tencate, Springs and other fabric manufacturers. This apparel is also used for maintenance of extreme high temperature equipment, such as coke ovens, kilns, glass furnaces, refinery installations and smelting plants, as well as for military and airport crash and rescue teams.

Reusable Woven Garments.We manufacture a line of reusable and washable woven garments that complement our firefighting and heat protective apparel offerings and provide alternatives to our limited use/disposable protective clothing lines. Product lines include electrostatic dissipative apparel used in the pharmaceutical and automotive industries for control of static electricity in the manufacturing process, clean room apparel to prevent human contamination in the manufacturing processes, flame resistant Nomex^® and fire resistant (FR) cotton coveralls used in chemical and petroleum plants and for wildland firefighting, and extrication suits for police and ambulance workers.

High Visibility Clothing.We manufacture a line of high visibility clothing. This line includes flame retardant and reflective garments for the Fire Industry, Nomex clothing for utilities and high visibility reflective outer wear for industrial uniforms and State Departments of Transportation.

Glove and Sleeves.We manufacture gloves and arm guards from Kevlar^®and Spectra^®cut resistant fibers made by DuPont, Honeywell and similar yarns made by other manufacturers, respectively, as well as engineered composite yarns and our Microgard antimicrobial yarns for food service markets. These gloves are used primarily in the automotive, glass, metal fabrication and food service industries to protect the wearer’s hands and arms from lacerations and heat without sacrificing manual dexterity or comfort.

We maintain manufacturing facilities in Alabama, Mexico, Brazil, Argentina, China and Pennsylvania (Pennsylvania facility will be closed in FY15 and all production is being moved to Mexico, and the sales and administrative functions will be moved to Alabama), where our products are designed, manufactured and sold. We also have relationships with sewing subcontractors in Mexico, Argentina, Brazil and China, which we can utilize for unexpected production requirement. Our international facilities allow us to take advantage of favorable labor and component costs, thereby increasing our profit margins on products manufactured in these facilities. These facilities also allow us to sell in those domestic markets, thereby avoiding high import tariffs in countries like Argentina, Brazil and China. The Company decided to discontinue operations in its India glove manufacturing facility and put the assets and business up for sale during FY12.FY12, which assets were written down to estimated net realizable value in FY 12 with a further write-down in FY13 when the assets proved to be difficult to market. The Company decided to sellliquidate this division primarily because it has incurred significant operating losses since inception, and the Company has beendivision was unsuccessful in developing sufficient sales to reach at least break even.

Industry Overview

The industrial work clothing market includes our limited use/disposable protective or safety clothing, our high-end chemical protective suits, our firefighting and heat protective apparel, gloves and our reusable woven garments.

The industrial protective safety clothing market in the United States has evolved over the past 4044 years as a result of governmental regulations and requirements and commercial product development. In 1970, Congress enacted the Occupational Safety and Health Act, or OSHA, which requires employers to supply protective clothing in certain work environments. Almost two million workers in the US are subject to OSHA standards today. Certain states have also enacted worker safety laws that further supplement OSHA standards and requirements.

The advent of OSHA coincided with the development of light disposable fabrics, such as SMS (a three layered non-woven)nonwoven) and Polypropylene which, for the first time, allowed for the economical production of lightweight, disposable protective clothing. The attraction of disposable garments grew in the late 1970s as a result of increases in labor and material costs of producing cloth garments and the promulgation of federal, state and local safety regulations. Also, in order to comply with World Trade Organization (WTO)(“WTO”) entry requirements, foreign countries are beginning to adopt and imitate OSHA regulations, American National Standards Institute (ANSI)(“ANSI”) and Committee European de Normalization (CE)(“CE”) standards. Thus, these developing international markets are growing much more rapidly than the US markets where these regulations and standards have been in effect for over 4044 years.

Additionally, in response to the terrorist attacks that took place on September 11, 2001, in the US, the federal government has provided for additional protective equipment funding through programs that are part of the Homeland Security initiative.

Since 2001, federal and state purchasing of industrial protective clothing and federal grants to fire departments have increased demand for industrial protective clothing to protect first responders against actual or threatened terrorist incidents. Specific events, such as British Petroleum oil spill in 2010, the tornado storms of 2011 and Super Storm Sandy in 2012, have also resulted in increased peak demand for our products.

International and Domestic Standards

Standards development, within both the US and global markets, continues to challenge manufacturers as the pace of change and adoption of new standards increase. Recently this dynamic has been further complicated by the collapse of WTO talks to revise General Agreement on Tariffs and Trade (“GATT”). This is leading to the establishment of new barriers to trade within WTO requirements and an increase in bilateral trade agreements. Complex and changing international standards play to Lakeland’s strengths when compared to most multinationals or smaller manufacturers.

Globally, standards for lower levels of protection are also changing rapidly. In 1996, the European Committee for Standardization (CEN)(“CEN”) adopted a group of standards that collectively comprised the only standards available for chemical protective clothing for general industry. Because these standards established performance requirements for a wide range of chemical protective clothing, these standards have been adopted by many countries and multinational corporations outside of the European Union (EU)(“EU”) as minimum requirements. This is especially true in the Asian and Pacific markets where compliance with occupational health and safety standards is being driven by WTO membership. In addition to CEN, ASTM International and the National Fire Protection Association (NFPA)(“NFPA”) are increasing the numbers of “Memorandums of Understanding” (MOUs)(“MOUs”) they have in place with foreign countries as they vie for relevance on the international stage. Developing nations that want WTO membership must establish worker safety laws as the USA did in 1970 with its OSHA laws. This trend is driving demand for our products internationally, particularly in fast GDPGross Domestic Product (“GDP”) growth countries, such as China, Brazil, IndiaChile, Australia and Russia.

A number of developing nations are now becoming active in their own standards development based on existing international standards.  However, the primary goal of their standards writing activity is not focused on worker protection (that is provided for by the use of international standards), rather they are attempting to establish their own certification criteria that will protect their domestic markets or favor specific regional suppliers. This presents a new challenge in that now not only are we faced with multiple test methods and standards, but we have the potential for multiple certification processes. While this adds to product development and sales expenses, the additional cost is only incremental. The real challenge is in navigating the certification process itself. Lakeland, by virtue of its international manufacturing and sales operations, is in a unique position to capitalize on this newcomplex dynamic.

With the 2010 publication of ANSI/ISEA (International Safety Equipment Association) 103, there are now three standards that apply to chemical protective clothing for industrial applications globally.globally and in the coming year, Canada is likely to adopt its own version of ISO 16602 adapted  specifically for their market requirements. There are a number of reasons why we believe that none of the threethese will ever achieve global dominance even among countries that aggressively seek to comply with WTO agreements on Technical Barriers to Trade (TBT). This situation, having to comply with multiple international standards, favors protective clothing suppliers that manufacture their own garments as they are in the best position to optimizeminimize the long certification times and expenses for manufacturing. With manufacturing in multiple countries around the world and a uniquely consolidated international sales force, Lakeland is well positioned to take advantage of this development in international standards.standards

Business Strategy

Key elements of our strategy include:

Our Competitive Strengths

Our competitive strengths include:

Products

The following table summarizes our principal product lines, the raw materials used to manufacture them, their applications and end markets:

Limited Use/Disposable Protective Clothing

Limited Use/Disposable Protective Clothing

We manufacture a complete line of limited use/disposable protective garments, including coveralls, laboratory coats, shirts, pants, hoods, aprons, sleeves, arm guards, caps and smocks. Limited use garments can also be coated or laminated to increase splash protection against harmful inorganic acids, bases and other hazardous liquid and dry chemicals. Limited use garments are made from several nonwoven fabrics, including our premium lines, our own trademarked fabrics, such as Pyrolon^® Plus 2, XT, Micromax^®, Micromax NS, Safegard^® “76”, Zonegard^®, RyTex^® ChemMax^®1 and 2 and TomTex^®, which are made of spunlaced polyester, polypropylene, laminates, micropourousmicroporous films and derivatives. We incorporate many seaming, heat sealing and taping techniques depending on the level of protection needed in the end use application.

Typical users of these garments include integrated oil/petrochemical refineries, chemical plants and related installations, automotive manufacturers, pharmaceutical companies, construction companies, coal, gas and oil power generation utilities and telephone utility companies, laboratories, mortuaries and governmental entities. Numerous smaller industries use these garments for specific safety applications unique to their businesses. Additional applications include protection from viruses and bacteria, such as AIDS, streptococcus, SARS and hepatitis, at international hospitals, clinics and emergency rescue sites and use in clean room environments to prevent human contamination in the manufacturing processes. There is no one customer who constituted more than 5% of sales in FY14 and in FY13 one customer accounted for 7% of sales.

Our limited use/disposable protective clothing products range in unit price from $0.19 for shoe covers to approximately $15.00$5.00 for a ChemMax^® 1 laminated hood and booted coverall. Our largest selling item, a standard white Micromax NS ANSI standard or CE standard coverall, sells for approximately $2.00 to $3.75 per garment. By comparison, similar reusable cloth coveralls range in price from $35.00 to $90.00, exclusive of laundering, maintenance and shrinkage expenses.

We warehouse and sell our limited use/disposable garments primarily at our Alabama and China manufacturing facilities and secondarily from warehouses in Hull, United Kingdom; Sao Paulo, Brazil; Toronto, Canada; Buenos Aires, Argentina; Santiago, Chile; Moscow, Russia; Ust-Kamenogorsk, Kazakhstan; Las Vegas, NevadaNevada; and Sinking Spring, Pennsylvania.Pennsylvania, (Pennsylvania plant being closed in FY15 and all production is being moved to Mexico, and the sales and administrative functions will be moved to Alabama). The fabric is cut and sewn into required patterns at our fourtwo Chinese and one Mexican plant and shipped to all our sales points around the world. Our assembly facilities in China and Mexico cut, sew and package the finished garments and return them primarily to our Alabama plant, normally within 1 to 10 weeks, for immediate shipment to our North American customers.

In FY13,FY14, there was no independent sewing contractor that accounts for more than 5% of our production of the limited use disposable garments.garments or any of our other divisions. We believe that we can obtain adequate alternative production capacity should any of our independent contractors become unavailable.

High-End Chemical Protective Suits

We manufacture and sell heavy duty protective chemical suits and protective apparel from our proprietary CRFR, ChemMax^® 3, 4, Interceptor and other fabrics. These suits are worn by individuals on hazardous material teams and within general industry to provide protection from powerful, highly concentrated and hazardous or potentially lethal chemical and biological toxins, such as toxic wastes at Superfund sites, toxic chemical spills or biological discharges, chemical or biological warfare weapons (such as sarin, anthrax or ricin and mustard gas) and chemicals and petro-chemicals present during the cleaning of refineries and nuclear facilities. Our line of chemical suits rangeprotective clothing ranges in cost from about $113-$30-$1,300 per coverall.garment. The chemical suits can be used in conjunction with a fire protective shell that we manufacture to protect the user from both chemical and flash fire hazards. We have also introduced two garments approved by the National Fire Protection Agency (NFPA) for varying levels of protection:

The addition of Interceptor and ChemMax^®4 to our product line provides Lakeland with, we believe, the most complete and cost-effective line of chemical protective garments available on the market today. Garments are certified to NFPA standards where applicable, and versions of all of these garments are CE certified.

We manufacture chemical protective clothing at our facilities in Alabama, Mexico and China. Using fabrics, such as ChemMax^® 1, ChemMax^® 2, ChemMax^®3, ChemMax^® 4 and Interceptor, we design, cut, glue and/or sew theand seal these materials to meet customer purchase orders.

Fire FightingFirefighting and Heat Protective Apparel

We manufacture an extensive line of products to protect individuals who work in high heat environments. Our heat protective aluminized fire suit product lines include the following:

We manufacture fire fighterUL/NFPA-certified structured firefighter protective apparel for domestic and foreign fire departments. departments, available both in standard stock form and custom configurations.

We developedoffer basic firefighter turnout/bunker gear in the popular 32-inch coat high back bibAttack (A10) and Battalion (B1) styles. Newly introduced in 2013 are the Battalion (“B2”) style (Battalion) bunker gear. Crash rescue continueswith advanced ergonomic features and the Stealth style, with innovative features new to be a major market for us, as we were onethe fire industry.

We also manufacture each of the first manufacturersabove styles in our UL/NFPA-certified Proximity line for Aircraft Rescue Fire Fighting (“ARFF”) with aluminized shells.

We manufacture full lines of Fire service extrication suits in FR cotton, UL/NFPA-certified Wildland firefighting apparel in multiple fabrics and Aluminized Kiln entry/Approach suits to supply military and civilian markets with airport firefighting protection.

protect industrial workers from extreme heat.

We manufacture fire suits at our facilities in China, Mexico, Alabama and Brazil. Our fire suits range in price from about $800 for standard fire department turnout gear to $2,000 for certain fire proximity suits and heat protective apparel.custom gear. Our FyrepelLakeland Fire^® brand of firefighting apparel continues to benefit from ongoing research and development investment, as we seek to address the ergonomic needs of stressful occupations. Additionally, we have introduced a new NFPA certified line of our OSX turnout gear manufactured in China. Orders continue to increase as it complements our US product offering.

In order to enhance our sales, complement our existing woven products line and broaden our product offering, we have initiated a completely new product line that will be branded Fyrban. The Fyrban product offering will enable us to sell more to the fire service, as well as open the doors regarding woven clothing in the electrical and industrial markets. The products that we are introducing for the fire service are as follows:

The products that we are introducing for the electrical and industrial markets are as follows:

These products range in price from approximately $35.00 for a standard certified pant to $400.00 for a certified arc protective suit. The Alabama facility will also be utilized as a finishing location for garments that need to be altered.

Reusable Woven Garments

We manufacture and market a line of reusable and washable woven garments that complement our firefighting and heat protective apparel offerings and provide alternatives to our limited use/disposable protective clothing lines and give us access to the much larger woven industrial and health care-related markets. Cloth reusable garments are favored by customers for certain uses or applications because of familiarity with and acceptance of these fabrics and woven cloth’s heavier weight, durability, longevity and comfort. These products allow us to supply and satisfy a wider range of safety and customer needs.

Additionally, we are currently working on a new line of FR and non-FRwoven garments that will be utilized in the Police/SWATexpanding Oil and Emergency Medical Technician areas.Gas exploration market.

Our product lines include the following:

Our reusable woven garments range in price from $30 to $200 per garment. We manufacture woven cloth garments at our facilities in China Mexico and Alabama.Mexico. We are continuing to relocate highly repetitive sewing processes for our high volume, standard product lines, such as woven protective coveralls and fire retardant coveralls to our facilities in China and Mexico where lower fabric and labor costs allow increased profit margins.

High Visibility Clothing

Lakeland Reflective manufactures and markets a comprehensive line of reflective apparel meeting the American National Standards Institute (ANSI) requirements as designated under standards 107-2004107-2010 and 207-2006. The line includes vests, T-shirts, sweatshirts, jackets, coats, raingear, jumpsuits, hats and gloves.

Fabrics available, including solid and mesh fluorescent, polyester, both standard and FR treated, Modacrylic materials, which meet ASTM 1560 Test method for standard 70 Electric Arc Protection, are part of our offering. We recently introduced a breathable Modacrylic fabric. We believe this fabric should have strong appeal in states where very hot weather affects utility workers working outside during spring and summer (heat prostration).

In FY10,FY14, we released a new series of High Contrast Bomber Jackets, withViz Polyurethane FR/ARC rated rainwear. This ARC rated rainwear is light in weight, soft, flexible and provides a polyester shell that is waterproof, breathable, and has a FR treated fabric.cooler garment. This product is intended to provide visibility tofor the Public Safety sector. Public Safety as a market consists of Firemen, PoliceGas and Emergency Medical Services. Such personnel also contend with hazards, such as hot objects and sparks. Hence, the additionElectrical Utility markets. The Lakeland ARC TECH FR/PU garment exceeds all of the FR treatment makes this garment desirable in such working environments.required ASTM ARC and Flash fire ratings for the large Electric and Gas Utility market.

With the onset of Federal Legislation, 23CFR634, effective NovemberSince 2008, all contractors and other groups,others working on any highway which benefits from Federal Funds have been required to wear classClass 2 or classClass 3 vests. This legislation has greatly expanded the market for economically priced vests, which we manufacture in China.

Our domestic vest production occurs at Pennsylvania. Much of the manufacturing at this facility is focused on custom vest requirements. Many corporations and agencies, such as State Departments of Transportation, develop custom specifications which they feel are more efficient in meeting their specific needs versus an off-the-shelf product. We also can import a significant amount of product from China to meet the demand for items in high volume commodity markets.

In addition to ANSI Reflective items, Lakeland Hi-Visibility manufactures Nomex and FR cotton garments which have reflective trim as a part of their design criteria. These garments typically are used in rescue operations, such as those encountered with a vehicular crash. Garments in this group are not as price sensitive as those in the reflective categories. Consequently, they are made in our Pennsylvania facility where we can react to customized needs and offer quicker customer response. Garments in this group can range in price from $200-$350.

Gloves and Sleeves

We manufacture and sell specially designed glove and sleeve protective products made from Kevlar^®, a cut and heat resistant fiber produced by DuPont, Spectra^®, a cut resistant fiber made by Honeywell and our proprietary patented engineered yarns. We are one of only nine companies licensed in North America to sell 100% Kevlar^® gloves, which are high strength, lightweight, flexible and durable. Kevlar^®gloves offer a better overall level of protection and lower worker injury rates,rate, and are more cost effective than traditional leather, canvas or coated work gloves. Kevlar^® gloves, which can withstand temperatures of up to 400°F and are cut resistant enough to allow workers to safely handle sharp or jagged unfinished sheet metal, are used primarily in the automotive, glass and metal fabrication industries. Our higher end string knit gloves range in price from about $40 to $170 for a dozen pair.

Since 2008, we We manufacture these string knit gloves primarily at our Mexican facility, allowing forenabling lower production and labor costs. Foreign production will allow lower fabric and labor costs.

We have received patents for our Despro^®and Despro^® Plus products on manufacturing processes that provide greater cut and abrasion hand protection to the areas of a glove where it wears out prematurely in various applications. For example, the areas of the thumb crotch and index fingers are made heavier than the balance of the glove, providing increased wear protection and longer glove life, reducing overall glove costs. This proprietary manufacturing process allows us, we believe, to produce our gloves more economically and provide a greater value to our end user.

Quality

All of our manufacturing facilities are ISO 9001 or 9002 certified. ISO standards are internationally recognized quality manufacturing standards established by the International Organization for Standardization based in Geneva, Switzerland. To obtain our ISO registration, our factories were independently audited to test our compliance with the applicable standards. In order to maintain registration, our factories receive regular announced inspections by an independent certification organization. While ISO certification is advantageous in retaining CE certification of products, we believe that the ISO 9001 and ISO 9002 certifications make us more competitive in the marketplace, as customers increasingly recognize the standard as an indication of product quality.

As we are increasingly sourcing fabrics internationally, we have installed a quality control laboratory at our China facility.facility in 2012. This laboratory is critical for insuring that our incoming raw materials meet our quality requirements, and we continue to add new capabilities to this facility to further guarantee product quality and to aid in new product development.

Marketing and Sales

Domestically, we employ an employee field sales force in order to better support customers and our enhanced marketing. We further leverage our in-house sales team with 4258 independent sales representatives. These employees and representatives call on over 1,200 industrial safety and fire service distributors nationwide to promote and sell our products. Distributors buy our products for resale and typically maintain inventory at the local level in order to assure quick response times and the ability to serve their customers properly. Our sales employees and independent representatives have consistent communication with end users and decision makers at the distribution level, thereby allowing us valuable feedback on market perception of our products, as well as information about new developments in our industry.

As a key competitive and marketing advantage, we manufacture nearly all the garments we sell in our own factories for better control of costs, quality and delivery. Our competitors rely largely on contractors, which is a major selling point in our favor-favor, as customers are more comfortable dealing with the actual manufacturer.  

We seek to maximize the efficiency of our established distribution network through direct promotion of our products at the end user level. We advertise primarily through trade publications, and our promotional activities include sales brochures, emails and our website. We exhibit at both regional and national trade shows, such as the National Safety Congress, the American Society of Safety Engineers, China Import and Export Fair, COS+H and the A + A show in Dusseldorf, Germany.

Internationally, aggregatesalesoutside of Brazil, aggregatesales growth continues to meet expectations even when factoring in currency exchange rates are factored in.rates. Product line expansion to higher value products is progressing in all global markets and is contributing to increased brand recognition, sales growth and profitability. We believe that future international growth is still sustainable in the coming year, based on our current estimates of market penetration, the introduction of higher value products and the opportunity to open new markets in which we do not yet have a presence.

We derive a percentage of our sales from the Department for Homeland Security. The federal government, through the Fire Act of 2002, began appropriating money as grants in 2003 to fire departments in the United States and its territories to fund the purchase of, among other things, personal protective equipment, including our firefighting and heat protective apparel and high-end chemical protective suits. In 2011, funds in the amount of $190 million were appropriated, $610 million were appropriated in 2012 and $365 million is expected in appropriations for 2013. The Bio Terrorism Preparedness and Response Act of 2002 originally included appropriations of approximately $3.6 billion for Bioterrorism Preparedness. In this program approximately $254 million of that amount is budgeted for Bioterrorism Hospital Preparedness and approximately $641 million in state, local preparedness and response in 2013.

Lakeland has salespeople in 1718 countries outside of the US and product sales in more than 40 countries. Internationally, our sustainable market advantages continue to be our knowledge of global standards, the diversity of our product offering and the fact that we manufacture our own products. This provides our customers with product selection, quality, delivery and customer service that we believe is unmatched in the market place.In There are no customers who accounted for 5% of sales or more in FY14 and in FY13 one customer accounted for 7% of sales.

Research and Development

We continue to evaluate and engineer new or innovative products. InOver the past year, we focused our research and development activities only on key development activities considered critical to the continuing growth and profitability of the Company. Lakeland currently has five years, we have acquiredsuch projects underway. We anticipate rollout for some of these developments in Q4 FY14 or introduced 121 new products, the more prominent of which are the Micromax^® line of disposable protective clothing; multiple new configured lines of fire retardant work coveralls and fire turnout gear in Brazil, China and the USA; approximately 40 new lines of Hi-Visibility products; a SARS protective medical gown for Chinese hospital personnel; the Despro^®, Grapolator^™ and Microgard^®antimicrobial cut protective glove and sleeve lines for food service; our patented Thermbar^™ Mock Twist that provides heat protection for temperatures up to 600°F; 20 new lines of gloves and our new ChemMax^® 1, 2, 3, 4, Interceptor and other fabrics for protection against intermediate chemical threats.FY15. We own 1813 patents on various fabrics, patterns and production machinery.

We plan to continue investing in research and development (“R & D”) to improve protective apparel fabrics and the manufacturing equipment used to make apparel. The ability to engage in R&D for final products, fabrics and manufacturing processes/equipment is a situation unique to Lakeland and, as such, we consider this capability a sustainable competitive advantage in the market. Specifically, we plan to continue to develop new specially knit and coated gloves, woven gowns for industrial and laboratory uses, fire retardant cotton fabrics and protective nonwoven fabrics.fabrics and the processes to manufacture them. During FY13FY14 and FY12,FY13, we spent approximately $240,000$123,000 and $430,000,$242,000, respectively, on research and development.

To insure that our development activities are properly directed, we are active participants in standards writing. We are represented on a number of relevant ASTM International and the International Safety Equipment Association (ISEA) committees and participate in NFPA standards writing meetings. Internationally, we participate in the US Technical Advisory Group (TAG)(“TAG”) to ISO through the ASTM, and monitor CEN activities through our European offices.offices and are members of the Russian Safety Association which is integral in setting norms and standards for the Russian markets.

Suppliers and Materials

Our largest supplier in FY14 and FY13 was Southern Mills, from whom we purchased 12.7% and 11.7% of our total purchases. In FY12, our largest supplier was DuPont, from whom we purchased 13.9%, respectively, of our total purchases.

We do not have long-term, formal trademark use agreements with any other suppliers of nonwoven fabric raw materials used by us in the production of our limited use/disposable protective clothing product lines. Materials, such as polypropylene, polyethylene, polyvinyl chloride, spun lacedspunlaced polyester, melt blown polypropylene and their derivatives and laminates, are available from 30 or more major mills. FR fabrics are also available from a number of both domestic and international mills. The accessories used in the production of our disposable garments, such as thread, boxes, snaps and elastics, are obtained from unaffiliated suppliers. We have not experienced difficulty in obtaining our requirements for these commodity component items.

We have not experienced difficulty in obtaining materials, including cotton, polyester and nylon, used in the production of reusable nonwovens and commodity gloves. We obtain Honeywell Spectra^® yarn, used in our super cut-resistant Dextra Guard gloves, and Kevlar^®, used in the production of our specialty safety gloves, from independent mills that purchase the fibers from DuPont.

Materials used in our fire and heat protective suits include glass fabric, aluminized glass, Nomex^®, aluminized Nomex^®, Kevlar^®, aluminized Kevlar^®, and polybenzimidazole, as well as combinations utilizing neoprene coatings. Traditional chemical protective suits are made of Viton^®, butyl rubber and polyvinyl chloride, all of which are available from multiple sources. Advanced chemical protective suits are made from our proprietary ChemMax^® 1, 2, 3, 4 and Interceptor^®. We have not experienced difficulty obtaining any of these materials.

Internal Audit

We have an internal audit group located in Alabama and China consisting of a manager and an auditor who have direct access to the audit committee of our board of directors. The team’s primary function is to insure our internal control system is functioning properly. Additionally, the team is used from time to time to perform operational audits to determine areas of business improvements. Working in close cooperation with the audit committee, senior management and the external auditors, the internal audit function supports management to ensure that we are in compliance with all aspects of the Sarbanes-Oxley Act.

Competition

Our business is highly competitive due to large competitors who have monopolistic positions in the fabrics that are standards in the industry in disposable and high endhighend chemical suits. We believe that the barriers to entry in the reusable garments and gloves are relatively low. We face competition in some of our other product markets from large established companies that have greater financial, research and development, sales and technical resources. Where larger competitors, such as DuPont, Kimberly Clark, Ansell Edmont and Honeywell, offer products that are directly competitive with our products, particularly as part of an established line of products, there can be no assurance that we can successfully compete for sales and customers. Larger competitors outside of our Disposable and Chemical Suit Lines also may be able to benefit from economies of scale and technological innovation and may introduce new products that compete with our products.

Seasonality

Seasonality

Our operations have historically been moderately seasonal, with higher sales generally occurring in March, April and May when scheduled maintenance on nuclear, coal, oil and gas fired utilities, chemical, petrochemical and smelting facilities, and other heavy industrial manufacturing plants occurs, primarily due to moderate spring temperatures and low energy demands. Sales decline during the warmer summer vacation months and gradually increase from Labor Day through February with slight declines during holidays, such as Christmas. As a result of this seasonality in our sales, we have historically experienced a corresponding seasonality in our working capital, specifically inventories, with peak inventories occurring between December and May, coinciding with lead times required to accommodate the spring maintenance schedules. We believe that by sustaining higher levels of inventory, we gain a competitive advantage in the marketplace. Certain of our large customers seek sole sourcing to avoid sourcing their requirements from multiple vendors whose prices, delivery times and quality standards differ.

In recent years, due to increased demand by first responders for our chemical suits and fire gear, our historical seasonal pattern has shifted. Governmental disbursements are dependent upon budgetary processes and grant administration processes that do not follow our traditional seasonal sales patterns. Due to the size and timing of these governmental orders, our net sales, results of operations, working capital requirements and cash flows can vary between different reporting periods. As a result, we expect to experience increased variability in net sales, net income, working capital requirements and cash flows on a quarterly basis.

Patents and Trademarks

We own 1813 patents and have one patenteight patents in the application and approval process with the US Patent and Trademark Office. We own 2918 Trademarks and have sixtwo Trademarks in the application and approval process. Intellectual property rights that apply to our various products include patents, trade secrets, trademarks and, to a lesser extent, copyrights. We maintain an active program to protect our technology by ensuring respect for our intellectual property rights.

Employees

As of January 31, 2013,2014, we had 1,6521,427 full-time employees, 1,513,1,292, or 92%91%, of whom were employed in our international facilities, and 139,135, or 8%9%, of whom were employed in our domestic facilities. An aggregate of 1,3001,100 of our employees are members of unions. We are not currently a party to any collective bargaining agreements or any other contracts with these unions. We believe our employee relations to be excellent.

Environmental Matters

We are subject to various foreign, federal, state and local environmental protection, chemical control, and health and safety laws and regulations, and we incur costs to comply with those laws. We own and lease real property, and certain environmental laws hold current or previous owners or operators of businesses and real property responsible for contamination on or originating from property, even if they did not know of or were not responsible for the contamination. The presence of hazardous substances on any of our properties or the failure to meet environmental regulatory requirements could affect our ability to use or to sell the property or to use the property as collateral for borrowing, and could result in substantial remediation or compliance costs. If hazardous substances are released from or located on any of our properties, we could incur substantial costs and damages.

Although we have not in the past had any material costs or damages associated with environmental claims or compliance, and we do not currently anticipate any such costs or damages, we cannot guarantee that we will not incur material costs or damages in the future as a result of the discovery of new facts or conditions, acquisition of new properties, the release of hazardous substances, a change in interpretation of existing environmental laws or the adoption of new environmental laws.

Executive Officers of the Registrant

The following is a list of the names and ages of all of our executive officers indicating all positions and offices they hold with us as of May 17, 2013.April 28, 2014.

Christopher J. Ryan has served as our Chief Executive Officer and President since February 1, 2004,November 2003, Secretary since April 1991, General Counsel from February 2000 to December 2011 and a director since May 1986. Mr. Ryan was our Executive Vice President - Finance from May 1986 until becoming our President on February 1, 2004.in November 2003. Mr. Ryan also worked as a Corporate Finance Partner at Furman Selz Mager Dietz & Birney, Senior Vice President, CorporatePresident-Corporate Finance at Laidlaw Adams & Peck, Inc., Managing CorporateManaging-Corporate Finance Director of Brean Murray Foster Securities, Inc. and Senior Vice President CorporatePresident-Corporate Finance of Rodman & Renshaw, respectively, between 1983-1991. Mr. Ryan has served as a Director of Lessing, Inc. from 1995-2008,, a privately held restaurant chain based in New York.York, from 1995-2008. Mr. Ryan received his BA from Stanford University, his MBA from Columbia Business School and his J.D. from Vanderbilt Law School. Mr. Ryan isRyan’s qualifications to serve on our board include his business and legal education as well as his lengthy experience as a member of the National Association of Corporate Directors (NACD).director at our Company and at other companies.

Gary Pokrassahas served as our Chief Financial Officer since November 2004. He is a CPA with over 40 years’ experience in both public and private accounting. Mr. Pokrassa was the CFO for Gristedes Foods, Inc. (AMEX-GRI) from 2000-2003 and Syndata Technologies from 1997-2000. Mr. Pokrassa received a BS in Accounting from New York University and is a member of the American Institute of Certified Public Accountants and the New York State Society of Certified Public Accountants.

Stephen M. Bachelder beenhas served as our Chief Operating Officer since November 2012 and a director since 2004. From February 2011 to November 2004, and2012, he served as Chairman of theour Board of Directors from February 2011 until November 2012, when he was named Chief Operating Officer, his current position.Directors. From March 2011 until November 2012 he served as our National Sales Manager of the Company.  His current term as a director will expire at our Annual Meeting of Stockholders in June 2015.Manager. Mr. Bachelder was an executive and President of Swiftview, Inc., a Portland, Oregon based software company, from 1999-2007.1999 to 2007. Swiftview, Inc. was sold to a private equity firm in October 2006. From 1991 to 1999 Mr. Bachelder ran a consulting firm advising technology companies in the Pacific Northwest.  Mr. Bachelder was the president and owner of an apparel company, Bachelder Imports, from 1982 to 1991 and worked in executive positions for Giant Foods, Inc. and Pepsico, Inc. between 1976 and 1982.  Mr. Bachelder is a 1976 Graduate of the Harvard Business School. Mr. Bachelder’s qualifications to serve on our Board include his business education and multiple prior executive positions.

Charles D. Robersonhas served as our Vice President-InternationalPresident International Sales since March 2009. Mr. Roberson joined Lakelandour Company in 2004 as Technical Marketing Manager and later served as International Sales Manager. Prior to joining Lakeland,our Company, Mr. Roberson was employed by Precision Fabrics Group, Inc. as a Market Manager from 1995-2001 and as a Nonwovens Manufacturing Manager from 1991-1995. He began his career as a manufacturing manager for Burlington Industries, Inc. in its Menswear Division from 1985-1991.

Item 1A. Risk Factors

RISK FACTORS

You should carefully consider the following risks before investing in our common stock. These are not the only risks that we may face. If any of the events referred to below actually occurs, our business, financial condition, liquidity and results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should also refer to the other information in this Form 10-K and in the documents we incorporate by reference into this Form 10-K, including our consolidated financial statements and the related notes.

If we are unable to continueWhile as a going concern, our securities will have little or no value.

The reportsmaller reporting Company disclosure of our independent registered public accounting firm that accompanies our audited consolidated financial statements for the years ended January 31, 2013 and 2012 contains a going concern explanatory paragraph in which such firm expressed substantial doubt about our ability to continue as a going concern.

We have sustained substantial operating losses since in FY13 and we are in default with our lender, TD Bank. During the year ended January 31, 2013, we had a net loss of $(26.3) million. Theserisk factors raise substantial doubt about our ability to continue as a going concern. Brazil incurred operating losses of $1.4 million for the fourth quarter and $1.6 million for the full FY13.

We expect to continue to incur substantial additional operating losses from our Brazilian operations for at least the first half of FY14.Unless we are able to establish a new credit facility, we believe that our current cash position of $6.7 million, our cash flow from operations and, borrowing in Brazil and the United Kingdom, mayis not be sufficient to meet our currently anticipated operating, capital expenditures and debt service requirements for at least the next 12 months. Management engaged Raymond James to explore strategic options. In May 2013,required, the Company accepted a commitment letter from a bank for a Senior Credit Facility subjectis voluntarily including such disclosures.

Risks Related to certain termsOur Business and conditionsIndustry and is currently working towards closing this financing. However, no assurance can be given that this transaction or any other transaction will be consummated.

Other Matters

There is a risk if we are not successful in the current refinancing transaction.

If the Company cannot consummate the financing deal with the bank presently underway, there are several options available to the Company. There are several other lending proposals with acceptable terms received by the Company. Alternatively the Company could be sold. A further risk is that TD Bank would not accept either alternative. TD Bank has the right to call the entire outstanding balance on the TD credit facility.

Covenants in our credit facilities may restrict our financial and operating flexibility andflexibility.

As a result of the refinancing on June 28, 2013, we are currently in default on this facility.

We currently have one credit facility: $23.5a $15 million revolving credit facility, which commenced January 2010, of which we had $15.1 million of borrowings outstanding as of January 31, 2013, expiring June 2013.2016. Our currentnew credit facility requires, among others, and any future credit facilities may also require, that we comply with specified financial covenants relating to interest coverage, debtfixed charge coverage, minimum consolidated net worth and earnings before interest, taxes, depreciation and amortization.amortization, and maximum capital expenditures, as more fully described in Note 6 to the financial statements herein. As part of our refinancing on June 28, 2013, we also consummated a $3.5 million subordinated debt loan, the agreement for which establishes similar financial covenants, one of which limits the amount the parent Company can spend on Brazilian operations to $200,000 over the three-year term of the loan. Our ability to satisfy these financial covenants can be affected by events beyond our control, and we cannot guarantee that we will meet the requirements of these covenants. These restrictive covenants could affect our financial and operational flexibility or impede our ability to operate or expand our business.business, including a limitation on annual investments and advances we can make to foreign subsidiaries. Default under our credit facilities would allow the lenders to declare all amounts outstanding to be immediately due and payable. Our lenders have a security interest in substantially all of our assets to secure the debt under our current credit facilities, and it is likely that our future lenders will have security interests in our assets. If our lenders declare amounts outstanding under any credit facility to be due, the lenders could proceed against our assets. Any event of default, therefore, could have a material adverse effect on our business.

If we fail to maintain proper and effective internal controls or are unable to remediate a material weakness in our internal controls, our ability to produce accurate and timely financial statements could be impaired, and investors’ views of us could be harmed.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis involves substantial effort that needs to be reevaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We are currently in defaulthave documented and tested our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which requires annual management assessment of the effectiveness of our currentinternal control over financial reporting.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2014. In making this assessment, management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon an evaluation performed as of January 31, 2014 and throughout FY14, we have identified several material weaknesses surrounding our internal control over international financial reporting and review as follows:

China

In FY13 the Company determined that there were inadequate controls and procedures in place in China. The Company further determined in Q3 of FY14, partially as a result of the change in management with the International Controller departure in Q2, that the Company’s intended remediation was not adequate. Management devoted considerable time in Q3 and Q4 of FY14 to resolving the accounting issues, and management is confident the financial reporting is correct at January 31, 2014. Management intends to further remediate the internal controls in place in China and to make changes as appropriate during FY15, including changes in financial accounting management personnel. Since the material weakness was identified prior to January 31, 2014, action was taken by management such that it did not result in a misstatement for the year.

Brazil

Management determined in FY14 that we did not have adequate internal controls in place in Brazil which constituted a material weakness. The Company has operated without adequate cash resources in Brazil and our loan facility.agreements in the USA precluded us from sending any more cash to Brazil. As a result, we were not able to invest funds in Brazil on internal controls until the operation could be returned to profitability. In FY14 we completely changed the senior management in Brazil and recruited and hired a new CEO specializing in turnaround situations who started in September 2013 and recruited a new CFO who started in February 2014. It was not possible to address the internal controls in Brazil until late in Q4 FY14 at which time the Company engaged an outside CPA firm in Brazil to review the internal controls and procedures. Their report was just rendered March 29, 2014. The conclusion of the report was that the design of the activity/process controls does not meet the minimum requirements needed for information security controls. In addition, the report indicated that the controls resulted in high exposure in the areas of purchase, accounting closing, sales, financial, production, payroll, and logistics. Since the material weakness was identified prior to January 31, 2014, action was taken by management such that it did not result in a misstatement for the year. The Company is reviewing this report and will remediate any areas needed as soon as practicable.

Failure to Identify Related Party Transaction

The Company failed to identify all payments made to related parties during the year. During the year, it was discovered that the Weifang facility paid approximately $587,000 in fiscal 2014 and $435,000 in fiscal 2013 in payments to a company owned in part by managers of the Company’s main China subsidiary, for certain printing services, which management believes were at arms-length pricing. The appropriate disclosures were not made in the FY14 quarterly filings or in the FY13 financial filings. Since the material weakness was identified by management prior to preparation of the financial statements for the year ended January 31, 2014, it did not result in a misstatement in the 2014 Form 10-K.

Failure of Entity Level Controls

As a result of the multiple material weaknesses identified above regarding financial reporting in international locations, the Company concluded that it does not have sufficient internal controls in place to monitor the internal controls in remote locations. In addition, the Company had not performed a sufficient level of review of the financial information from the foreign subsidiaries to ensure that all general ledger accounts are reconciled and that estimates are properly stated.  Since the material weakness was identified prior to January 31, 2014 and all accounts were properly reconciled and reviewed, it did not result in a misstatement for the year. While Lakelandthe Company believes it has signedtaken the appropriate steps to initiate the remediation of the weaknesses, several of these steps will take time to complete and thus it was unable to complete by January 31, 2014 the remediation of the material weakness from FY13 and others identified in FY14.

Since the Company qualifies as a commitment letter with another bank as discussed in Note 6 to the Financial Statements, theresmaller reporting company, an attestation report of management’s assessment of internal control by our independent auditors is no assurance that Lakeland can successfully refinance.not required.

We may need additional funds, and if we are unable to obtain these funds, we may not be able to expand or operate our business as planned.

Our operations require significant amounts of cash, and we may be required to seek additional capital, whether from sales of equity or by borrowing money, to fund acquisitions for the future growth and development of our business or to fund our operations and inventory, particularly in the event of a market downturn. In May 2013,

A number of factors could affect our ability to access future debt or equity financing, including:

Even if available, additional financing may be more costly than our current facility and may have adverse consequences. If additional funds are raised through the Company accepted a commitment letter from a bank for a Senior Credit Facilityincurrence of debt, we will incur increased debt servicing costs and may become subject to certain termsadditional restrictive financial and conditions and is currently working towards closing this financing. However,other covenants. We can give no assurance can be given that this transactionas to the terms or any other transaction will be consummated.availability of additional capital. Although management believes it currently has sufficient capital following the recent financing, if we do need additional capital in the future and are unsuccessful, it could reduce our net sales and materially adversely impact our earning capability and financial position.

We incurred a significant loss in the fourth quarter of FY13 and for the full fiscal year in FY13 and for FY14, and there can be no assurance that such losses will not continue.

For the fourth quarter of FY13 and for the full fiscal year, we incurred net losses of approximately $18.0 million and $26.3million,$26.3 million, respectively. Such losses primarily arose from (a) the write-down in Brazil of goodwill and intangible assets,other intangibles (b) the arbitration settlement in Brazil and (c) the termination of our supply agreement with DuPont de Nemours. More specifically, in the fourth quarter of FY14,FY13, we recorded an impairment charge of $10.0 million. FY13 also reflected a charge of $7.9 million in respect of the adverse arbitration judgment in Brazil suffered during the year and a valuation allowance for deferred tax assets of $4.5 million. In addition, for FY13, we had an operating loss from continuing operations of $1.0 million, as compared to an operating profit from continuing operations of $1.7 million in FY12. We expect to continue to incur substantial additional operating losses from our Brazilian operations for at least the first quarter of FY15. In FY14 there was a loss from continuing operations for three quarters and the entire year, mainly resulting from the losses sustained in Brazil. Excluding Brazil and before Corporate, as disclosed in the Note 16 - Manufacturing Segment Data, the Company generated an operating profit in FY14. There can be no assurance that we will revert back to profitability.

We are required to make, inover the near future,next five years, substantial cash payments in respect of the settlement agreement.

CashSubstantial cash payments are required relating to the settlement agreement resulting from the arbitration award in Brazil, significant and furtheras described in Note 4 to the Financial Statements. As of April 1, 2013,January 31, 2014, the remaining liability associated with the settlement agreement is $5.75$5.0 million and is payable $250,000 a quarter over the next 5 ¾five years, with no interest. Default on this obligation will have serious negative consequences.

We are subject to risk as a result of our international manufacturing operations.

Because most of our products are manufactured at our facilities located in China, Brazil and Mexico, our operations are subject to risk inherent in doing business internationally. Such risks include the adverse effects on operations from corruption, war, international terrorism, civil disturbances, political instability, governmental activities, deprivation of contract and property rights and currency valuation changes.

Brazil, in particular, operates in an extremely difficult climate and has had several significant issues resulting in the arbitration loss and impairment chargesdiscussed in Note 4 and Note 5 to the Financial Statement, respectively.

Since 1978, the Chinese government has been reforming its economic and political systems, and we expect this to continue. Although we believe that these reforms have had a positive effect on the economic development of China and have improved our ability to successfully operate our facilities in China, we cannot assure you that these reforms will continue or that the Chinese government will not take actions that impair our operations or assets in China. In addition, periods of international unrest may impede our ability to manufacture goods in other countries, such as Mexico presently, and could have a material adverse effect on our business and results of operations.

The termination of our supply agreement with DuPont adversely affected our recentFY13 results of operations and will continue to do so for at least the immediate future.operations.

By notice given to us in July 2011, E.I. DuPont de Nemours and Company (“DuPont”) terminated, effective September 10, 2011, the agreement by virtue of which DuPont supplied to us garments made from their proprietary Tyvek and Tychem fabrics. Products containing these fabrics constituted 50% and 59% of our North American revenues in FY12 and FY11, respectively. As a consequence, our results of operations in FY13 were adversely affected. Since 2005, we have been introducing alternative fabrics to Tyvek and Tychem. These fabrics are available to us from other textile mills, and we believe that they do everything and, in some instances, more than Tyvek and Tychem materials do in the way of protection and comfort. Our strategy ishas been to switch customers out of Tyvek and Tychem fabrics into our existing alternative products, which offer better margins than the DuPont-related product lines. The impactManagement believes as of our strategy will be determined by how many customers switch over to our proprietary product linesFY14 the Company has fully recovered its gross margins in the US resulting from the DuPont-related product lines and when the switching will occur. There can be no assurance that the adverse effect will not extend to a significantly longer periodloss of time or that it will not be permanent.

If such financing does not close, there is no assurance that we will be able to replace or renew the current credit facility, which is currently in default, on terms that are favorable to us or at all. In addition, a number of factors could affect our ability to access debt or equity financing, including:

Even if available, additional financing will be more costly than our current facility and may have adverse consequences. If additional funds are raised through the incurrence of debt, we will incur increased debt servicing costs and may become subject to additional restrictive financial and other covenants. We can give no assurance as to the terms or availability of additional capital. If we are not successful in obtaining sufficient capital, it could reduce our net sales and materially adversely impact our earning capability and financial position.these products.

Our results of operations could be negatively affected by potential fluctuations in foreign currency exchange rates.

Most of our assembly arrangements with our foreign-based subsidiaries or third-party suppliers require payment to be made in US dollars.dollars or Euros. Any decrease in the value of the US dollar or the Euro in relation to foreign currencies could increase the cost of the services provided to us upon contract expirations or supply renegotiations. There can be no assurance that we will be able to increase product prices to offset any such cost increases, and any failure to do so could have a material adverse effect on our business, financial condition and results of operations.

We are also exposed to foreign currency exchange rate risks as a result of our sales in foreign countries. Our net sales to customers in South America, Canada, Asia and EEC were $44US $42.0 million USD, in FY13.FY14. Our sales in these countries are usually denominated in the local currency. If the value of the US dollar increases relative to these local currencies, and we are unable to raise our prices proportionally, then our profit margins could decrease because of the exchange rate change. Although our labor and some fabric and component costs in China are denominated in the Chinese Yuan, this currency has historically been largely pegged to the US dollar, which has minimized our foreign currency exchange rate risk in China. Recently, however, the Chinese Yuan has been allowed to float against the US dollar and, therefore, we may be exposed to additional foreign currency exchange rate risk. We do not fully hedge the Brazilian Real as it costs approximately 9% a year to do soof the amount hedged , and management has deemed this not to be cost effective. This risk will also increase in the event that as we continue to increase our sales in other foreign countries.countries, other than Brazil and there we have a plan to grow our sales. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures about Market Risk-ForeignRisk Foreign Currency Risk.”

We are exposed to changes in foreign currency exchange rates as a result of our purchases and sales in other countries. To manage the volatility relating to foreign currency exchange rates, we seek to limit, to the extent possible, our non-US dollar denominated purchases and sales.

In connection with our operations in China, we purchase a significant amount of products from outside of the United States. However, our purchases in China are primarily made in Chinese Yuan, the value of which had been largely pegged to the US dollar for the last decade. However, the Chinese Yuan has been decoupled from the US dollar and allowed to float by the Chinese government and, therefore, we have been exposed to additional foreign exchange rate risk on our Chinese raw material and component purchases.

Our primary risk from foreign currency exchange rate changes is presently related to non-US dollar denominated sales in Brazil, Canada and Europe and, to a smaller extent, in other South American countries and dollar-denominated payables in Brazil. Our sales to customers in Brazil are denominated in Brazilian Reals, in Canada in Canadian dollars and in Europe in Euros and British pounds. If the value of the US dollar increases relative to the Canadian dollar, the Real, the Pound or the Euro, then our net sales could decrease as our products would be more expensive to these international customers because of changes in rate of exchange. The largest supplier of raw materials to Brazil is an American company, and these payables are denominated in US dollars. If the Brazilian Real weakened against the US dollar, it would make our costs higher and trigger a loss on foreign exchange on the payables. Our sales from China are denominated in the Chinese Yuan, US dollar and Euros. We did experience some losses between the Chinese Yuan, the Euro and US dollars in FY12, but we have since stepped up our hedging program to include this risk. We manage the foreign currency risk through the use of rolling 90-day forward contracts against the Canadian dollar and Euros and through longer term cash flow hedges in China against the Euro. We do not hedge other currencies at this time. As non-US dollar denominated international purchases and sales grow, exposure to volatility in exchange rates could have a material adverse impact on our financial results. The only significant unhedged foreign exchange exposure we have is the Brazilian Real. Other unhedged currency exposure is not significant.

Our results of operations may vary widely from quarter to quarter.

Our quarterly results of operations have varied and are expected to continue to vary in the future. These fluctuations may be caused by many factors, including:

These variations could negatively impact our stock price.

Rapid technological change could negatively affect sales of our products and our performance.

The rapid development of fabric technology continually affects our apparel applications and may directly impact the performance of our products. We cannot assure you that we will successfully maintain or improve the effectiveness of our existing products, nor can we assure you that we will successfully identify new opportunities or continue to have the needed financial resources to develop new fabric or apparel manufacturing techniques in a timely or cost-effective manner. In addition, products manufactured by others may render our products obsolete or noncompetitive. If any of these events occur, our business, prospects, financial condition and operating results will be materially and adversely affected.

Because we do not have long-term commitments from many of our customers, we must estimate customer demand, and errors in our estimates could negatively impact our inventory levels and net sales.

Our sales are generally made on the basis of individual purchase orders, which may later be modified or canceled by the customer, rather than long-term commitments. We have historically been required to place firm orders for fabrics and components with our suppliers prior to receiving an order for our products, based on our forecasts of customer demands. Our sales process requires us to make multiple demand forecast assumptions, each of which may introduce error into our estimates, causing excess inventory to accrue or a lack of manufacturing capacity when needed. If we overestimate customer demand, we may allocate resources to manufacturing products that we may not be able to sell when we expect or at all. As a result, we would have excess inventory, which would negatively impact our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would lose sales opportunities, lose market share and damage our customer relationships. On occasion, we have been unable to adequately respond to delivery dates required by our customers because of the lead time needed for us to obtain required materials or to send fabrics to our assembly facilities in China, Brazil and Mexico. We must recruit and retain skilled employees, including our senior management, to succeed in our business.

Our operations are substantially dependent upon key personnel.

Our performance is substantially dependent on the continued services and performance of our senior management and certain other key personnel, including Christopher J. Ryan, our Chief Executive Officer, presidentPresident and secretary,Secretary, Gary Pokrassa, our Chief Financial Officer, and Stephen Bachelder, our Chief Operating Officer. The loss of services of any of our executive officers or other key employees could have a material adverse effect on our business, financial condition and results of operations. In addition, any future expansion of our business will depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled managerial, marketing, customer service and manufacturing personnel, and our inability to do so could have a material adverse effect on our business, financial condition and results of operations.

We rely on a limited number of suppliers and manufacturers for specific fabrics, and we may not be able to obtain substitute suppliers and manufacturers on terms that are as favorable, or at all, if our supplies are interrupted.

Our business is dependent to a significant degree upon close relationships with vendors and our ability to purchase raw materials at competitive prices. The loss of key vendor support could have a material adverse effect on our business, financial condition, results of operations and cash flows. We do not have multiyear supply contracts with any of our other finished goods or fabric suppliers. There can be no assurance that we will be able to acquire raw materials and components at competitive prices or on competitive terms in the future.

Other than our previous purchases of Tyvek® and TyChem® from DuPont, and current purchases of Kevlar® and Nomex® fabrics, all of which we have bought either directly or indirectly from DuPont since 1986, we generally use standard fabrics and components in our products. We rely on nonaffiliated suppliers and manufacturers for the supply of these fabrics and components that are incorporated in our products. If such suppliers or manufacturers experience financial, operational, manufacturing capacity or quality assurance difficulties, or if there is a disruption in our relationships, we will be required to locate alternative sources of supply. We cannot assure you that we will be able to locate such alternative sources. In addition, we do not have any long-term contracts with any of our suppliers for any of these components. Our inability to obtain sufficient quantities of these components, if and as required in the future, may result in:

We deal in countries where corruption is an obstacle.

We must comply with American laws such as the Foreign Corrupt Practices Act (FCPA) and Sarbanes-Oxley and also with recently passed anti-corruptionanticorruption legislation in the U K.U.K. Some of our competitors and customers in foreign jurisdictions may not adhere to such legislation. As a result, we believe that we lose sales orders due to our strict adherence to such regulations.

We face competition from other companies, a number of which have substantially greater resources than we do.

Three of our competitors, DuPont, Honeywell and Kimberly Clark, have substantially greater financial, marketing and sales resources than we do. In addition, we believe that the barriers to entry in the disposable and reusable garments and gloves markets are relatively low. We cannot assure you that our present competitors or competitors that choose to enter the marketplace in the future will not exert significant competitive pressures. Such competition could have a material adverse effect on our net sales and results of operations. For further discussion of the competition we face in our business, see “Business-Competition.”

Some of our sales are to foreign buyers, which exposes us to additional risks.

We derived approximately 57.2%49% of our net sales from customers located in foreign countries in FY13.FY14. We intend to seek to increase the amount of foreign sales we make in the future. The additional risks of foreign sales include:

·     Potential adverse fluctuations in foreign currency exchange rates;

·     Higher credit risks;

·     Restrictive trade policies of foreign governments;

·     Currency hyperinflation and weak banking institutions;

·     Changing economic conditions in local markets;

·     Political and economic instability in foreign markets; and

·     Changes in leadership of foreign governments.

Some or all of these risks may negatively impact our results of operations and financial condition.

A significant reduction in government funding for preparations for terrorist incidents could adversely affect our net sales.

As a general matter, a significant portion of our sales growth to our distributors is dependent upon resale by those distributors to customers that are funded in large part by federal, state and local government funding. Specifically, depending on the year, approximately 20% of our high-end chemical suit sales are dependent on government funding. Congress passed the 2001 Assistance to Firefighters Grant Program and the Bioterrorism Preparedness and Response Act of 2002. Both of these Acts provide for funding to fire and police departments and medical and emergency personnel to respond to terrorist incidents. Appropriations for these Acts by the federal government could be reduced or eliminated altogether. Any such reduction or elimination of federal funding, or any reductions in state or local funding, could cause sales of our products purchased by fire and police departments and medical and emergency personnel to decline.

We may be subject to product liability claims, and insurance coverage could be inadequate or unavailable to cover these claims.

We manufacture products used for protection from hazardous or potentially lethal substances, such as chemical and biological toxins, fire, viruses and bacteria. The products that we manufacture are typically used in applications and situations that involve high levels of risk of personal injury. Failure to use our products for their intended purposes, failure to use our products properly or the malfunction of our products could result in serious bodily injury to or death of the user. In such cases, we may be subject to product liability claims arising from the design, manufacture or sale of our products. If these claims are decided against us, and we are found to be liable, we may be required to pay substantial damages, and our insurance costs may increase significantly as a result. We cannot assure you that our insurance coverage would be sufficient to cover the payment of any potential claim. In addition, we cannot assure you that this or any other insurance coverage will continue to be available or, if available, that we will be able to obtain it at a reasonable cost. Any material uninsured loss could have a material adverse effect on our financial condition, results of operations and cash flows.

Environmental laws and regulations may subject us to significant liabilities.

Our US operations, including our manufacturing facilities, are subject to federal, state and local environmental laws and regulations relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes. Any violation of any of those laws and regulations could cause us to incur substantial liability to the Environmental Protection Agency, the state environmental agencies in any affected state or to any individuals affected by any such violation. Any such liability could have a material adverse effect on our financial condition and results of operations.

The market price of our common stock may fluctuate widely.

The market price of our common stock could be subject to significant fluctuations in response to quarter-to-quarter variations in our operating results, announcements of new products or services by us or our competitors and other events or factors. For example, a shortfall in net sales or net income, or an increase in losses, from levels expected by securities analysts, could have an immediate and significant adverse effect on the market price and volume fluctuations that have particularly affected the market prices of many micro and small capitalization companies and that have often been unrelated or disproportionate to the operating performance of these companies. These fluctuations, as well as general economic and market conditions, may adversely affect the market price for our common stock.

Our directors and executive officers have the ability to exert significant influence on our Company and on matters subject to a vote of our stockholders.

As of January 31, 2013,2014, our directors and executive officers beneficially owned or could vote approximately 10.25%10.49% of the outstanding shares of our common stock. As a result of their ownership of common stock and their positions in our Company, our directors and executive officers are able to exert significant influence on our Company and on matters submitted to a vote by our stockholders. In particular, as of January 31, 2013,2014, Christopher J. Ryan, our chief executive officer, president and secretary and a director, beneficially owned or votes approximately 8.76%8.95% of our common stock. The ownership interests of our directors and executive officers, including Mr. Ryan, could have the effect of delaying or preventing a change of control of our Company that may be favored by our stockholders generally.

Provisions in our restated certificate of incorporation and by-laws and Delaware law could make a merger, tender offer or proxy contest difficult.

Our restated certificate of incorporation contains classified board provisions, authorized preferred stock that could be utilized to implement various “poison pill” defenses and a stockholder authorized, but as yet unused, Employee Stock Ownership Plan (ESOP)(“ESOP”), all of which may have the effect of discouraging a takeover of Lakeland, which is not approved by our board of directors. Further, we are subject to the antitakeover provisions of Section 203 of the Delaware General Corporation Law, which prohibit us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the prescribed manner.

If we fail to maintain proper and effective internal controls or are unable to remediate a material weakness in our internal controls, our ability to produce accurate and timely financial statements could be impaired, and investors’ views of us could be harmed.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis involves substantial effort that needs to be reevaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We have documented and tested our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which requires annual management assessment of the effectiveness of our internal control over financial reporting.

Based upon an evaluation performed as of January 31, 2013 and throughout FY13, we have identified a material weakness surrounding our internal control over international financial reporting and review. In response to the material weakness management is restructuring its international financial review process and believes these changes will remediate the issue. Further, this weakness did not result in any significant adjustment to the financial statements.

Acquisitions could be unsuccessful.

In the future, subject to capital constraints, we may seek to acquire selected safety products lines or safety-related businesses which will complement our existing products. Our ability to acquire these businesses is dependent upon many factors, including our management’s relationship with the owners of these businesses, many of which are small and closely held by individual stockholders. In addition, we will be competing for acquisition and expansion opportunities with other companies, many of which have greater name recognition, marketing support and financial resources than us, which may result in fewer acquisition opportunities for us, as well as higher acquisition prices. There can be no assurance that we will be able to identify, pursue or acquire any targeted business and, if acquired, there can be no assurance that we will be able to profitably manage additional businesses or successfully integrate acquired business into our companyCompany without substantial costs, delays and other operational or financial problems.

If we proceed with additional acquisitions for cash, we may use a substantial portion of our available line of credit (if available) in order to consummate any such acquisition. We may also seek to finance any such acquisition through debt or equity financings, and there can be no assurance that such financings will be available on acceptable terms or at all. If consideration for an acquisition consists of equity securities, our stockholders could be diluted. If we borrow funds in order to finance an acquisition, we may not be able to obtain such funds on terms that are favorable to us. In addition, such indebtedness may limit our ability to operate our business as we currently intend because of restrictions placed on us under the terms of the indebtedness and because we may be required to dedicate a substantial portion of our cash flow to payments on the debt instead of to our operations, which may place us at a competitive disadvantage.

Acquisitions involve a number of special risks in addition to those mentioned above, including the diversion of management’s attention to the assimilation of the operations and personnel of the acquired companies, the potential loss of key employees of acquired companies, potential exposure to unknown liabilities, adverse effects on our reported operating results and the amortization or write downwrite-down of acquired intangible assets. We cannot assure you that any acquisition by us will or will not occur, that if an acquisition does occur that it will not materially and adversely affect our results of operations or that any such acquisition will be successful in enhancing our business. To the extent that we are unable to manage growth efficiently and effectively or are unable to attract and retain additional qualified management personnel, our business, financial condition and results of operations could be materially and adversely affected.

Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information and adversely impact our reputation and results of operations.

Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information technology (IT)(“IT”) systems to sophisticated and targeted measures known as advanced persistent threats. While we employ comprehensive measures to prevent, detect, address and mitigate these threats (including access controls, data encryption, vulnerability assessments, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of our investment in research, development and engineering, and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results of operations.

Risks Relating to Our Common Stock

The market price of our common stock may fluctuate widely.

The market price of our common stock could be subject to significant fluctuations in response to quarter-to-quarter variations in our operating results, announcements of new products or services by us or our competitors and other events or factors. For example, a shortfall in net sales or net income, or an increase in losses, from levels expected by securities analysts, could have an immediate and significant adverse effect on the market price and volume fluctuations that have particularly affected the market prices of many micro and small capitalization companies and that have often been unrelated or disproportionate to the operating performance of these companies. These fluctuations, as well as general economic and market conditions, may adversely affect the market price for our common stock.

Future sales or issuance of our common stock may cause the prevailing market price of our shares to decrease.

In connection with our junior financing transaction, we issued a warrant and a note in a private placement transaction conducted pursuant to Rule 506 of Regulation D promulgated under the Securities Act. If the holder of the warrant and note chooses to exercise its purchase rights under the warrant and/or elects to be paid interest on the note in shares of common stock and, in either such case, decides to sell its shares in the public market under Rule 144 or pursuant to an effective registration statement, the prevailing market price for our common stock may decline.

Our common stock is an equity interest and therefore subordinated to our indebtedness.

Payments of the principal and interest under the notes issued under the loan agreements entered into in connection with our senior and junior financings are secured by first and second priority liens on, and security interests in, substantially all of our and our subsidiaries’ present and after-acquired assets. In the event of our liquidation, dissolution or winding up, our common stock would rank below all debt claims against us. As a result, holders of our common stock will not be entitled to receive any payment or other distribution of assets upon our liquidation, dissolution or winding up until after all of our obligations to our debt holders have been satisfied.

The securities we issued or may be required to issue in the future in connection with our subordinated debt financing may affect the value of our common stock and dilute the holdings of our then existing stockholders.

We may be required to issue up to an aggregate of 1,068,506 shares of our common stock upon the exercise of the warrant, including as a price-protection anti-dilution adjustment, and as interest shares on the note, which could depress our stock price and further dilute the holdings of our then existing stockholders.

We are precluded from paying and do not anticipate paying any dividends to our common stockholders in the near future.

We are prohibited from declaring or paying any dividends to our common stockholders without the prior consent of our senior and junior lenders. Further, we have not paid dividends on our common stock since August 2006 and we do not anticipate, if permitted, paying any dividends in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations.

ITEM 1B: UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We believe that our owned and leased facilities are suitable for the operations we conduct in each of them. Each manufacturing facility is well maintained and capable of supporting higher levels of production. The table below sets forth certain information about our principal facilities.

⁽¹⁾ We own the buildings in which we conduct the majority of our manufacturing operations in China and lease the land underlying the buildings from the Chinese government. We have 33 years and 3832 years remaining under the leases with respect to the AnQui City and Jiaozhou facilities, respectively.facilities.

⁽²⁾ The annual total leases for the underlying land on plots 24,50 and 81 and 50 in India amount to approximately $10,000 on the land leases$5,000, expiring in 2024.

⁽³⁾Facility in Mexico purchased from landlord in FY122029 and expanded.2024, respectively.

* A small amount of manufacturing is done locally, but most sales are made in other Lakeland facilities.

Our facilities in Alabama, Mexico, China, Pennsylvania, Argentina and Brazil contain equipment used for the design, development, and manufacture and sale of our products. Our operations in Canada, United Kingdom, Brazil, Chile, Hong Kong, Russia, India and Kazakhstan are primarily sales and warehousing operations receiving goods for resale from our manufacturing facilities around the world. We had $3.5$2.42 million and $3.3 million of netproperty and equipment located in in the US and China, $2.0 million and $.1 million of property and equipment located in India and Mexico and $2.2 million and $2.8$2.55 million of net property and equipment located in the US; $2.64 million and $3.28 million in China; $2.09 million and $2.21 million in Mexico and $1.86 million and $2.75 million in Brazil as of January 31, 20122014 and 2013, respectively. In the third quarter of FY12, management decided to shut down manufacturing operations in India and sell the assets. This has been reflected as discontinued operations.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are a party to litigation arising in the ordinary course of our business. Other than the proceedings related to the VAT issue and the Brazilian income tax issueaudit described in Note 10 and Note 8 to the financial statements, we are not currently a party to any litigation or other legal proceedings that we believe could reasonably be expected to have a material adverse effect on our results of operations, financial condition or cash flows.

ITEM 4. MININGMINE SAFETY DISCLOSURES

Not Applicable

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is currently traded on the Nasdaq Global Market under the symbol “LAKE.” The following table sets forth for the periods indicated the high and low closing sales prices for our common stock as reported by the Nasdaq National Market.

Holders

Holders of our Common Stock, approximately 58,55 of record, are entitled to one (1) vote for each share held on all matters submitted to a vote of the stockholders. No cumulative voting with respect to the election of directors is permitted by our Articles of Incorporation. The Common Stock is not entitled to preemptive rights and is not subject to conversion or redemption. Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to stockholders are distributable ratably among the holders of the Common Stock after payment of liquidation preferences, if any, on any outstanding stock that may be issued in the future having prior rights on such distributions and payment of other claims of creditors. Each share of Common Stock outstanding as of the date of this Annual Report is validly issued, fully paid and nonassessable.

Dividend Policy

In the past, we have declared dividends in stock to our stockholders. We paid a 10% dividend in additional shares of our common stock to holders of record on July 31, 2002, on July 31, 2003, on April 30, 2005 and on August 1, 2006. We may pay stock dividends in future years at the discretion of our board of directors. In addition, the payment of cash dividends is restricted by the terms of our loan agreement with TD Bank.

We have never paid any cash dividends on our common stock, and we currently intend to retain any future earnings for use in our business. The payment and rate of future cash or stock dividends, if any, or stock repurchase programs are subject to the discretion of our board of directors and will depend upon our earnings, financial condition, capital or contractual restrictions under our credit facilities and other factors. In addition, the payment of cash dividends is restricted by the terms of our current senior and subordinated loan agreement with TD Bankagreements.

ITEM 6.Selected Financial Data

The following selected consolidated financial data as of and for our FYE 2013, 2012, 2011, 2010FY14, FY13, FY12, FY11 and 2009FY10 has been derived from our audited consolidated financial statements. You should read the information set forth below in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in this Form 10-K.

While as a smaller reporting Company disclosure of Selected Financial Data is not required, the Company is voluntarily including such disclosures.

* FY09 only reflected three quarters of Brazilian operations. Brazil ran a much higher gross margin with higher operating costs. Further, weWe do not hedge against foreign exchange (FX) movements in the Brazilian currency. In FY11 we had an FX gain which is included in operating profit for FY11 and in FY12, FY13 and FY13FY14 we had a FX loss in Brazil.

Repurchase of Securities

We repurchased our Common Stock during FY09, FY10, FY11 and FY12. The Company initiated a stock repurchase program on February 21, 2008, and has repurchased 125,322 shares as of April 14, 2010. The Company initiated a second stock repurchase program on December 7, 2010, and has repurchased 231,119 shares through February 9, 2011. There were no further stock repurchases.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

You should read the following summary together with the more detailed business information and consolidated financial statements and related notes that appear elsewhere in this Form 10-K and in the documents that we incorporate by reference into this Form 10-K. This document may contain certain “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. This information involves risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements.

Overview

In FY14, we resolved many issues. FY14 started out as a difficult year with the Company being in default on its banking agreements and experiencing operating losses but, during FY14, we resolved the default with new financing, which closed on June 28, 2013. Also in FY14, operating profit increased in the US before corporate expenses from $1.11 million in FY13 to $5.22 million in FY14 and increased in China from $2.88 million in FY13 to $3.54 million in FY14. This is largely due to the improvements in sales of Lakeland branded products, recovering from the loss of the DuPont license in July 2011. Our major remaining challenge is to attempt to address and resolve remaining issues in Brazil and return Brazilian operations to profitability sometime during FY15. We have changed local management and strategy in Brazil and we believe we should be able to turn around Brazil operations in FY15, but there can be no assurance in this regard.

FY13 was a challenging year for management. The Company lost an officer contract dispute where we had substantial documentary evidence that the officer in question had breached his employment contract with Lakeland. Nonetheless, a Brazilian Arbitration Panel awarded this officer a $12.5 million judgment against Lakeland. According to our local counsel, arbitration decisions in Brazil are very difficult to successfully appeal. Subsequently, Lakeland successfully negotiated the judgment down to $8.5 million of which $6.0 million was payable over six years with no interest. As of April 1, 2013,January 31, 2014, the remaining liability associated with this arbitration judgment is $5.75$5.0 million and is payable at $250,000 a quarter over the next 5 ¾five years, with no interest. In addition, the Brazilian government devalued its currency by 10% in 2012, which greatly reduced our margins in Brazil on imported fabrics.

Declining sales in FY13 led to quarterly losses in Brazil, which led to the necessity of writing off all goodwill, certain intangibles and deferred tax assets of Brazil. These factors led to a default on the TD Bank loan, which in turn created substantial doubt about our ability to continue as a going concern. Thus, we engaged with new lenders and considered other options, such as the sale of the Company, the sale of assets which has occurred, and a refinance of the TD Bank loan. In May 2013, the Company accepted a commitment letter from a bank for a Senior Credit Facility subject to certain terms and conditions and, is currently working towards closingon June 28, 2013, closed this financing. However, no assurance can be given that this transaction or any other transaction will be consummated.financing as more fully described in Note 6 to the financial statements herein. We will continue pursuing all options to maximize stockholder value.

As a result of the default under the TD Bank loan, and the risk that such loan could be called as immediately due and payable, we were unable to conclude that we would have the capital to continue our operations through January 31, 2014. Successful completion of the proposed new financing, in management’s opinion, would relieve this condition.

We manufacture and sell a comprehensive line of safety garments and accessories for the global industrial protective clothing markets. Our products are sold by our in-house sales force and independent sales representatives to a network of over 1,200 North American safety and mill supply distributors and end users and distributors internationally. These distributors in turn supply end user industrial customers, such as integrated oil, utilities, chemical/petrochemical, automobile, steel, glass, construction, smelting, janitorial, pharmaceutical and high technology electronics manufacturers. In addition, we supply federal, state and local governmental agencies and departments domestically and internationally, such as municipal fire and police departments, airport crash rescue units, the military, the Department of Homeland Security and the Centers for Disease Control and state and privately owned utilities and integrated oil companies.

Management believes that we have turned around the operations worldwide, outside of Brazil. Consolidated operating loss was $(359,000) in FY14 compared with $(1,030,000) in FY13. Excluding Brazil, worldwide operating profits increased to $4.1 million in FY14 compared to $0.7 million in FY13.

We have operated -facilitiesfacilities in Mexico since 1995, in China since 1996, in India since 2007 (now discontinued) and in Brazil since May 2008. Beginning in 1995, we moved the labor intensive sewing operation for our limited use/disposable protective clothing lines to these facilities. Our facilities and capabilities in China and Mexico allow access to a less expensive labor pool than is available in the United States and permit us to purchase certain raw materials at a lower cost than they are available domestically. As we have increasingly moved production of our products to our facilities in Mexico and China, we have seen improvements in the profit margins for these products. We have completed the process of moving of production of our reusable woven garments and gloves to these facilities by the second quarter of FY10. Our net sales from continuing operations attributable to customers outside the United States were $44.7 million and $54.4 million in FY14 and $45.8 million in FY13, and FY12, respectively.

We anticipate R&D expenses remaining flat at $240,000to be $200,000 in FY15 compared to $123,000 in FY14, compared to FY13. This is due largely to expenses for a development project that we incurred in FY13 coupled with the anticipated elimination of several projects as a partsome of our product rationalization process, which is ongoing.R&D will involve equipment purchases, as well as material costs. We are gradually returning our R&D efforts to normal levels as business performance permits.   

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and disclosure of contingent assets and liabilities. We base estimates on our past experience and on various other assumptions that we believe to be reasonable under the circumstances, and we periodically evaluate these estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Going Concern.Our consolidated financial statements have been prepared using the accrual method of accounting in accordance with GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. We have sustained substantial operating losses since in FY13 and we are in default with our lender, TD Bank. During the year ended January 31, 2013, we had a net loss of $(26.3) million. These factors raise substantial doubt about our ability to continue as a going concern.

We expect to continue to incur substantial additional operating losses from our Brazilian operations for at least the first half of FY14.Unless we are able to have in place a new credit facility, we believe that our current cash position of $6.7 million, our cash flow from operations and, borrowing in Brazil and the United Kingdom, may not be sufficient to meet our currently anticipated operating, capital expenditures and debt service requirements for at least the next 12 months. To this end, in May 2013, the Company accepted a commitment letter from a bank for a Senior Credit Facility subject to certain terms and conditions and is currently working towards closing this financing. However, no assurance can be given that this transaction or any other transaction will be consummated.

If management is unable to successfully implement its cost reduction strategies or to complete any other financing, that would impact our ability to continue as a going concern.

Revenue Recognition. The Company derives its sales primarily from its limited use/disposable protective clothing and secondarily from its sales of high-end chemical protective suits, firefighting and heat protective apparel, high-end chemical protective suits, gloves and arm guards and reusable woven garments. Sales are recognized when goods are shipped, at which time title and the risk of loss pass to the customer. Some sales in Brazil may be sold on terms with F.O.B. destination, which are recognized when received by the customer. Sales are reduced for sales returns and allowances. Payment terms are generally net 30 days for United States sales and net 90 days for international sales.

Inventories. Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out basis) or market. Inventory is written down for slow-moving, obsolete or unusable inventory.

In the year ended January 31, 2013,2014, the Company changed its estimate used inimplemented a standardized policy for calculating slow movingslow-moving inventory inoutside the US. Previously, the Company reservedwrote-down the inventory value on an individual product analysis basis.

USA and China Lower of Cost or Market and Obsolete.There is one discontinued product line in the US that management had been converting to a different style for any itemone customer and reserving the cost of conversion. While this customer continues to purchase these converted styles, management determined that this one customer would not purchase these converted items in excesssufficient quantity, and management will have to sell the remaining stock at a deep discount. It was further determined an additional write-down was needed for remaining Tyvek inventory and obsolete raw materials used from other discontinued product lines. Such write-downs totaled approximately $1.3 million. In FY14, management believes it has adequately written down all slow-moving and obsolete inventory to lower of 5 years stock on handcost or market.

Brazil Lower of Cost or Market and Obsolete.It was determined that due to the introduction of a new fabric domestically sourced in Brazil, which drove down market pricing, along with significant improvements and elimination of inefficiencies in the production process, adjustments were made to inventory in FY14.

In addition, the Company identified certain inventory in Brazil as obsolete. The inventory became obsolete as a result of the introduction of competing new products into the Brazilian marketplace. As a result, the inventory was written down to scrap value. Further, as a result of new Brazilian management completing its review of inventory based on annualized sales levels. The Company has determined that based on its needsrevised strategy and current market conditions, we took a further write-down to service customers, up to a two year supply mayreflect slow-moving and obsolete inventory. Such write-downs in Brazil totaled $1,463,000 in FY14. While management does not expect any further significant write-downs of current inventory, specifically in either Brazil or the US or anywhere else we operate, no assurance can be needed. Therefore, the Company now writes down anything in excess of a two year supply. The change in estimate resulted in an additional write down of $288,000 at January 31, 2013. Most foreign operations consider inventory obsolete or slow-moving when more than one year supply exists.given.

Allowance for Doubtful Accounts. Trade accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts:

Customer creditworthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. Past due balances over 90 days and other less creditworthy accounts are reviewed individually for collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

Income Taxes and Valuation Allowances. We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of preparing our consolidated financial statements. This involves estimating the actual current tax in addition to assessing temporary differences resulting from differing treatments for tax and financial accounting purposes. These differences, together with net operating loss carry forwards and tax credits, are recorded as deferred tax assets or liabilities on our balance sheet. A judgment must then be made of the likelihood that any deferred tax assets will be realized from future taxable income. A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized. In the event we determine that we may not be able to realize all or part of our deferred tax asset in the future, or that new estimates indicate that a previously recorded valuation allowance is no longer required, an adjustment to the deferred tax asset is charged or credited to net income in the period of such determination.

Uncertain Tax Positions.In the event the Company determines that it may not be able to realize all or part of our deferred tax assets in the future, or that new estimates indicate that a previously recorded valuation allowance is no longer required, an adjustment to the deferred tax asset is charged or credited to income in the period of such determination. The Company recognizes the tax positions that meet a “morebenefit from an uncertain tax position only if it is more likely than not” minimum recognition threshold.not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

Valuation of Goodwill and Other Intangible Assets. Goodwill and indefinite lived, intangible assets are tested for impairment at least annually; however, these tests may be performed more frequently when events or changes in circumstances indicate the carrying amount may not be recoverable. Goodwill and other intangibles impairment is evaluated utilizing a two-step process as required by US GAAP.generally accepted accounting principles (“GAAP”). Factors that the Company considers important that could identify a potential impairment include: significant underperformance relative to expected historical or projected future operating results; significant changes in the overall business strategy; and significant negative industry or economic trends. The Company measures any potential impairment on a projected discounted cash flow method. Estimating future cash flows requires the Company’s management to make projections that can differ materially from actual results.

Impairment of Long-Lived Assets. The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the asset are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset.

Foreign Currency Risks. The functional currency for the Brazil operation is the Brazil Real; the United Kingdom, the Euro; the trading company in China, the RenminBi; the Canada Real Estate, the Canadian dollar; and the Russia operation, the Russian Ruble and Kazakhstan Tenge. All other operations have the US dollar as its functional currency.

Self-Insured Liabilities. We have a self-insurance program for certain employee health benefits. The cost of such benefits is recognized as expense based on claims filed in each reporting period and an estimate of claims incurred but not reported during such period. Our estimate of claims incurred but not reported is based upon historical trends. If more claims are made than were estimated or if the costs of actual claims increase beyond what was anticipated, reserves recorded may not be sufficient, and additional accruals may be required in future periods. We maintain separate insurance to cover the excess liability over set single claim amounts and aggregate annual claim amounts.

Significant Balance Sheet Fluctuation January 31, 2014, as Compared to January 31, 2013

Balance Sheet Accounts. The decrease in cash and cash equivalents of $2.2 million is primarily the result of normal fluctuations in cash management. Inventories increased $0.6 million primarily due to a planned buildup of inventory in the US to avoid stock outs in peak times of late December through May in North America, offset by write-downs of obsolete and slow-moving items and a $4.4 million reduction in Brazil inventory resulting from heavy discounting and sales of raw material to raise cash and write-downs as described herein. The decrease in net property and equipment of $2.0 million is mainly due to the sale of the Company’s plant in Qingdao China and currency fluctuations in Brazil. The increase of $1.0 million in intangibles, prepaid bank fees and other assets, net is largely due to the fees incurred in the Company’s financing which closed in June 2013, which is being amortized over the terms of the loans. Assets of discontinued operations decreased $0.8 million with the sale of Plot 24 in India (discussed in more detail in Note 6) and further inventory sales. Accounts payable increased $1.5 million mainly in China due to extended payment terms negotiated with raw material suppliers. The increase of $4.7 million in the current deferred tax asset is due to the reversal of a valuation allowance for such accounts. The borrowing in Brazil was used for working capital.

Year Ended January 31, 2014, Compared to the Year Ended January 31, 2013

Results of Operations

The following table sets forth our historical results of continuing operations for the years and three-months ended January 31, 2011, 20122014 and 2013, as a percentage of our net sales from continuing operations.

Significant Balance Sheet Fluctuation January 31, 2013, as Compared to January 31, 2012

Balance Sheet Accounts. The increase in cash and cash equivalents of $1.0 million is primarily the result of normal fluctuations in cash management. Inventories decreased $6.4 million primarily due to sell off of remaining Tyvek inventory by January 31, 2013, overall inventory reduction program and the sale of inventory in Brazil built up for the Navy contract. The decrease in intangibles and goodwill of $9.3 million is due to the write down of these assets in Brazil. The decrease of $4.5 million in the current deferred tax assets is due to the creation of a valuation allowance for such accounts. The borrowing in Brazil was used for working capital. The increase in cash and cash equivalents of $1.0 million is primarily the result of careful cash management to enable Brazilian arbitration settlement payments through cash generated by current assets and liabilities, inventory and payables management. Trade payables increased in FY13 due to increased purchases of materials in China, Argentina and Chile with longer payment terms and cash management in the US.

Year Ended January 31, 2013, Compared to the Year Ended January 31, 2012

Net Sales*. Net sales from continuing operations decreased $1.2$3.7 million, or 1.3%3.9%, to $91.4 million for the year ended January 31, 2014, compared to $95.1 million for the year ended January 31, 2013, compared to $96.3 million for the year ended January 31, 2012.2013. The net decrease was mainly due to a $9.8$9.7 million decrease in domesticforeign sales, partially offset by a $8.6$6.0 million increase in foreigndomestic sales. The net decrease in the US was comprised mainly of a decrease in US disposables sales, resulting from the loss of the Tyvek license from DuPont. This decrease in US sales was offset by significant increases$9.7 million in foreign sales including a $1.2 million increase in sales by Qualytextil, SA in Brazil, a $3.2 million increase in European sales and a $1.8 million growth in combined Chile and Argentina sales. External sales from China were flat for the fourth quarter FY13 but were up for the full year 15.7%. Sales in Brazil have decreased in Q4FY13and we expect next fiscal year’s sales to be lower in Brazil.

Net sales from continuing operations in Q4 FY13 increased by $3.2 million, or 16.0%, to $23.4 million from Q4 of FY12. This increase was mainly due to an increasea $9.6 million decrease in foreign sales, from $10.6 million in Q4 FY12 to $11.3 million in Q4 FY13 Of these amounts, sales in Brazil as a result of several large bid sales in the prior year and a generally poor sales level in Brazil. UK sales increased by $1.8 million, or 18%. US disposable sales increased by $4.2 million but, excluding direct ships, decreased by $1.0 million. Fyrepel sales increased by $1.7 million, or 56%, as a result of new product introductions. Canada sales decreased by $0.3 million, mainly as a result of the weakening Canadian economy and the further loss from DuPont product sales, although Canada sales strengthened in Q4 in spite of the weak currency. Reflective sales were $2.7increased by $1.4 million as a result of new product introduction. Kazakhstan and $2.7Russia sales increased by $0.9 million for Q4 of FY12 and FY13, respectively.as we gain market acceptance in these new markets.

*For *For purposes of the Management’s Discussion, the reference to “Q” shall mean “Quarter.” Thus “Q2” means the second quarter of the applicable fiscal year.

Gross Profit.Gross profit from continuing operations decreased $1.5$2.5 million, or 5.1%9.1%, to $24.8 million for the year ended January 31, 2014, from $27.3 million for the year ended January 31, 2013, from $28.8 million for the year ended January 31, 2012.2013. Gross profit as a percentage of net sales decreased to 27.2% for the year ended January 31, 2014, from 28.7% for the year ended January 31, 2013, from 29.9% for the year ended January 31, 2012.2013. The major factors driving the changes in gross margins were:

Operating Expenses. Operating expenses from continuing operations increased $1.3decreased $3.2 million, or 4.9%,11.2 %, to $28.3$25.2 million for the year ended January 31, 2013,2014, from $27.0$28.4 million for the year ended January 31, 2012.2013. As a percentage of net sales, operating expenses increaseddecreased to 27.6% for the year ended January 31, 2014, from 29.8% for the year ended January 31, 2013, from 28.1% for the year ended January 31, 2012.2013. The increasedecrease in operating expenses in the year ended January 31, 2013,2014, as compared to the year ended January 31, 2012,2013, included:

Operating Profit/(Loss).Operating profit/(loss) from continuing operations decreasedincreased by $2.7$0.7 million to $(1.0)a loss of $0.4 million from $1.7a loss of $1.0 million for the prior year. Operating profit as a percentage of net sales decreasedincreased for the year ended January31, 2014, from a loss of (1.1)% for the year ended January31, 2013, from 1.8% for the year ended January 31, 2012,2013, to a loss of 0.4% in FY14, primarily due to sharply lower volume in disposables in the US due to the termination of the Company’s Tyvek and Tychem supply agreement by DuPont, a $0.6 million$550,000 charge for contract termination of the President of the Brazilian subsidiary issues in Brazil with the Navy and other contracts causedFY13, offset by a currency devaluation earlier in the year and weak volumeissues in Brazil mainly due to lack of large bid contracts in Q4 of FY13.FY14. Without Brazil’s FY13 operating loss of $1.6$4.4 million in FY14, the Company would have had operating income of $0.6$4.1 million in FY14. In FY13, Brazil had an operating loss of $(1.6) million. Without Brazil, the Company would have had an operating profit of $0.7 million in FY13. Operating profit, excluding Brazil, therefore, increased from $0.7 million in FY13 to $4.1 million in FY14.

Interest Expense. Interest expense increased by $0.2$1.3 million for the year ended January 31, 2013,2014, compared to the year ended January 31, 2012, because of term loan borrowing in 2012 to fund capital expansion in Brazil and Mexico outstanding throughout FY13 and also borrowing in Brazil at higher rates prevailing in Brazil and the US. Further, the Company paid higher interest rates on its TD facility in FY132013, as a result of several amendments during FY13.the financing closed in June 2013 and additional borrowings in Brazil at the higher rate prevailing in Brazil.

Other Expenses - Net.The increasedecrease in other expenses resulted mainly from the inclusion in FY13 of a $10.0 million write downwrite-down of goodwill and other intangibles in Brazil and the $7.9 million arbitration settlement with two of the former owners of the Company’s subsidiary in Brazil.

Income Tax Expense.Expense. Income tax expenses from continuing operations consist of federal, state and foreign income taxes. Income tax expense increased $5.3decreased $7.9 million to a net benefit of $(2.9) million for the year ended January 31, 2014, from $5.0 million for the year ended January 31, 2013, from $(0.3) million for the year ended January 31, 2012. Our effective tax rate was meaningless for the fiscal years ended January 31, 2013 and 2012. Our2013. In FY13, our effective tax rate varied from the federal statutory rate of 34% due primarily to the $7.9 million arbitration settlement in Brazil and $10.0 million goodwill and other intangibles write-off in Brazil, which did not get a tax benefit $10.0in such prior year and, in FY14 by dividends taxable in the US of $1.7 million goodwill write-offfrom the sale of the Qingdao plant and by $0.6 million from the Company’s Canadian subsidiary as a result of the financing closed in Brazil and theJune 2013, establishment of a $4.5 million valuation allowance for deferred tax assets.assets in FY13 and the reversal thereof in FY14. Our incomeUS taxes were also impacted in FY14 due to nondeductible amortization of the current year were benefited by losses in the US and a “check-the-box” US tax benefit$2.2 million original issue discount resulting from the losses in India at a higher rate than most of the foreign income. Further, there was a $4.5 million valuation allowance charged to tax expense this year relatingwarrant issued to the deferred tax asset.subordinated lender.

Net Income/(Loss). Net income/(loss) from continuing operations decreased $26.9increased $26.2 million to a loss of $(25.8)$(0.1) million for the year ended January 31, 2013,2014, from $1.1a loss of $(26.3) million for the year ended January 31, 2012.2013. The decreaseincrease in net income was primarily a result of the arbitration settlement and goodwill and other intangibles impairment charge in Brazil in the prior year (see Notes 4 and 5 for full discussion). and improvements in the Company’s operations in the US, UK and China, offset by deterioration in the Brazilian operations.

Fourth Quarter Results

Continuing Operations

The sales in Brazil in Q4 of FY13 and FY12 had no large bid sales and were approximately the same as prior year. The increase in sales in other foreign jurisdictions is primarily due to the introduction of new products and new marketing material targeting specific markets.

Factors effecting 4QFY13affecting Q4FY14 results included:

Discontinued Operations

In Q4FY12, the Company commenced its efforts to market its property in India. Based on the difficulty in marketing this property in Q4FY13, the Company determined carrying value exceeded projected undiscounted cash flows and recorded a loss of $800,000 to reduce carrying value to future value.

Liquidity and Capital Resources

CashFlows

As of January 31, 2013,2014, we had cash and cash equivalents of $6.7$4.6 million and working capital of $36.0$38.5 million, a decrease of $2.2 million and an increase of $1.0 million and a decrease of $28.3$2.5 million, respectively, from January 31, 2012.2013. We have operations in many foreign jurisdictions which may place restrictions on repatriation of cash to the US. We are planning various strategies to mitigate this issue. Our primary sources of funds for conducting our business activities have been from cash flow provided by (used in) operations and borrowings under our credit facilities described below. Much of our cash is overseas, and not readily available.international cash management is affected by local requirements. We require liquidity and working capital primarily to fund increases in inventories and accounts receivable associated with our net sales and, to a lesser extent, for capital expenditures. The decrease in cash and cash equivalents is primarily the result of normal fluctuations in cash management. The $2.5 million increase in working capital was primarily due to thereversal of a $4.5 million valuation allowance for current deferred tax assets offset by net additions to reserves of $1.4 million and an increase in borrowings of $1.7 million primarily due to a seasonal buildup of inventory in the reclassificationUSA to avoid stock outs during the peak sales period.

Net cash used by continuing operating activities of $(3.9) million for the year ended January 31, 2014, was due primarily to a $3.4 million increase in inventory, currency fluctuation in Brazil, the reversal of the TD Bank loan outstanding balancesvaluation allowance for deferred tax assets and a $2.0 million increase in other assets, mainly prepaid fees from long-termfinancing transaction. These activities were offset by a $2.5 million increase in FY12accounts payable mostly in China due to current liabilities in FY13.

extended payment terms negotiated with raw material suppliers and a write-down for inventory obsolescence. Net cash provided by continuing operating activities of $2.2$1.4 million for the year ended January 31, 2013, was primarily due primarily to a net loss of $26.3 million, offset by noncash charges of $7.9 million for the arbitration award, less $1.8 million payments and fees, noncash $10.0 million goodwill and other intangibles impairment charge in Brazil and $3.8 million valuation allowance for deferred tax noncash charge, an increase in receivables of $1.5 million, a decrease in inventory of $4.6 million and increased payables of $1.8 million. Net cash used in continuing operating activities of $0.0 million for the year ended January 31, 2012, was due primarily to a net loss of $0.4 million, an increase in receivables of $1.3 million and decreased payables of $1.9 million.

Net cash used in investing activities of $1.4$0.1 million and $4.9$0.6 million in the years ended January 31, 20132014 and 2012,2013, respectively, was due to sales of one of our China factories and the cost of relocation in fiscal 2014 and the purchases and improvements to property and equipment in both years, in fiscal 2013 mainly in China and Mexico, and in fiscal 2012 mainly due to capital expansions in Brazil and Mexico. For both periods the use was purchases of property and equipment, offset in FY14 with proceeds of Qingdao and offset in FY13 with India write-off. Net cash used inprovided by financing activities in the yearsyear ended January 31, 2013 and 20122014, was primarily new borrowings underin Brazil, the term loan facilityUK and China to fund the Brazilian and Mexican expansions, payments of $1.9 million, pursuant to the Brazil Settlement Agreement and borrowings in Brazil.those operations.

Credit Facility

As of January 31, 2013 we hadWe currently have one Senior credit facility: a $17.5$15 million revolving credit facility with TD Bank, expiring inwhich commenced June 28, 2013, including a Revolver and Term Loans, of which we had borrowing outstanding under the revolver as$12.4 million of January 31, 2013 amounting to $9.6 million, expiring in June 2013 and a term loan facility of which we had $5.5 millionborrowings outstanding as of January 31, 2013.

As2014, expiring on June 30, 2016, at a resultcurrent per annum rate of the arbitration award issued against the Company6.25%. Maximum availability in May 2012 and the subsequent entry into a Settlement Agreement (the “Brazilian Settlement Agreement”) in respect thereof, as well as due to the recent operating resultsexcess of the Company mentioned below, one or more events of default have occurred during the year under the TD Bank revolving credit facility and term loan facility, including an event of default for failure to comply with the minimum EBITDA covenant, which allow TD Bank, at its option, to accelerate the loan.

Borrowings under the revolving credit facility bear interest at the London Interbank Offering Rate (LIBOR) plus 200 basis points and were 3.7%amount outstanding at January 31, 2013.2014, was $2.6 million. Our TD Bankcurrent credit facility requires, and any future credit facilities may also require, that we comply with specified financial covenants relating to interest coverage, debt coverage, minimum consolidated net worth and earnings before interest, taxes, depreciation and amortization.amortization and others relating to fixed charge coverage ratio and limits on capital expenditures and investments in foreign subsidiaries. Our ability to satisfy these financial covenants can be affected by events beyond our control, and we cannot guarantee that we will meet the requirements of these covenants. These restrictive covenants could affect our financial and operational flexibility or impede our ability to operate or expand our business. Default under our credit facilities allowswould allow the lenders to declare all amounts outstanding to be immediately due and payable. Our lenders, including Development Bank of Canada (“BDC”), have a security interest in substantially all of our US and Canadian assets to secureand pledges of 65% of the debtequity of the Company’s foreign subsidiaries, outside Canada which is 100%. If our lenders declare amounts outstanding under our credit facilities. On May 15, 2013, the Company accepted a commitment letter from a bank for a Senior Credit Facility subject to certain terms and conditions and is currently working towards closing this financing. However, no assurance can be given that this transaction or any other transaction will be consummated.

Unless we are able to have in place a new credit facility weto be due, the lenders could proceed against our assets. Any event of default, therefore, could have a material adverse effect on our business. This financing is described more fully in Note 6 to the Financial Statements. We believe that our current availability under our Credit Facility, coupled with our anticipated operating cash position of $6.7 million, ourand cash flow from operations and, borrowing in Brazil and the United Kingdom, may not bemanagement strategy, is sufficient to meetcover our currently anticipated operating, capital expenditures and debt service requirementsliquidity needs for at least the next 12 months.

CapitalExpendituresSubordinated Debt Financing (Junior Lender). As described more fully in Note 6, the June 28, 2013, financing included Subordinated Debt, which contained warrants. The value of the warrants was treated as Original Issue Discount (“OID”) and is being amortized over the term of the loan. Management views this to be one blended loan or transaction along with the Senior Debt at 6.25%, since the subordinated debt was a required condition of closing made by the Senior Lender. In management’s view, this financing is at favorable terms considering Lakeland’s then deteriorating financial conditions at the time of the closing and the year prior, as well as the alternatives available to the Company. Lakeland considered several “Unitranche” transactions with overall cost less favorable than the overall cost of the combined Senior and Junior financing closed June 28, 2013.

Capital Expenditures

Our capital expenditures in FY14 of $828,894 principally relate to purchases ofadditions to building and equipment in Brazil and Mexico,China, manufacturing equipment, computer equipment and leasehold improvements.We anticipate FY14FY15 capital expenditures to be approximately $1.0 million.Our facilities in China are not encumbered by commercial bank mortgages and, thus, Chinese commercial mortgage loans or the sale of a facility may be available with respect to these real estate assets if we need additional liquidity. There are no further specific plans for material capital expenditures in the fiscal year 2014.2015.

During FY13theFY14, the AnQui City, China Weifang Lakeland factory expanded its operations substantially to accommodate the movement of the work infrom a leased facility, whose lease had expires.expired. By bringing the two factories together, economies of scale were achieved.

Contractual Obligations

We had no off-balance sheet arrangements at January 31, 2013. As shown below, at January 31, 2013, our contractual cash obligations totaled approximately $19.8 million, including lease renewals entered into subsequent to January 31, 2013.

The TD facility is reflected as amended in October 2012 (See Note 6 to the financial statements included in this Form 10-K )

Recent Accounting Developments

The Company considers the applicability and impact of all accounting standards updates (ASUs)(“ASUs”). ASUs not listed below were determined to either not be applicable or to have a minimal impact on the consolidated financial statements.

The FASBFinancial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (ASU) No. 2013-02,Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S.US GAAP. The new amendments will require an organization to:

•Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S.US GAAP to be reclassified to net income in its entirety in the same reporting period.

•Cross-reference to other disclosures currently required under U.S.US GAAP for other reclassification items (that are not required under U.S.US GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies and are effective for reporting periods beginning after December 15, 2013, for private companies. Early adoption is permitted.Company adopted this principle on February 1, 2013.

The FASB has issued Accounting Standards Update (ASU)ASU No. 2012-02,Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.This ASU states that an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Codification Subtopic 350-30,Intangibles—Goodwill and Other, General Intangibles Other than Goodwill.

Under the guidance in this ASU, an entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period.

The amendments in this ASU are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as ofThe Company has adopted the effective with FY 14. There was not a date before July 27, 2012, if a public entity’smaterial impact on its financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance.

The FASB has issued Accounting Standards Update (ASU)ASU No. 2011-08,Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment.ASU 2011-08 is intended to simplify how entities, both public and nonpublic, test goodwill for impairment. ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350,Intangibles- GoodwillIntangibles-Goodwill and Other.The more-likely-than-not threshold is defined as having a likelihood of more than 50%.

ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The Company has adopted the effective with FY 13. There was not a material impact on its financial statements

The FASB has issued itsU.S.US GAAP Financial Reporting Taxonomy Implementation Guide - Subsequent Events.The guide is the first in a series of XBRL Implementation Guides, which are designed to help Taxonomy users understand how certain disclosures are structured within the Taxonomy. The purpose of the Implementation Guide is to demonstrate the modeling for disclosures required about events occurring subsequent to the end of a public company’s reporting period. The modeling has been completed using the elements in the Taxonomy. The examples are not intended to encompass all of the potential modeling configurations or to dictate the appearance and structure of a company’s XBRL documents. In addition to the Implementation Guide, the FASB also issuedDefinition Components & Structure, the first style guide of the FASB U.S.US GAAP Financial Reporting Taxonomy Style Guide Series.Also available on the FASB website, the style guides provide additional insight into design criteria and are offered as a reference for users of the Taxonomy.

The U.S.US GAAP Financial Reporting Taxonomy is a list of computer-readable tags in XBRL that allows companies to tag precisely the thousands of pieces of financial data that are included in typical long-form financial statements and related footnote disclosures. The tags allow computers to automatically search for, assemble and process data so it can be readily accessed and analyzed by investors, analysts, journalists and regulators. In early 2010, the Financial Accounting Foundation assumed maintenance responsibilities for the Taxonomy and, along with the FASB, assembled a team of technical staff dedicated to updating the Taxonomy for changes in U.S.US GAAP, identifying best practices in Taxonomy extensions and technical enhancements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

While as a smaller reporting company, disclosure of risk factors is not required, and the Company is voluntarily including such disclosures.

We are exposed to changes in foreign currency exchange rates as a result of our purchases and sales in other countries. To manage the volatility relating to foreign currency exchange rates, we seek to limit, to the extent possible, our non-US dollar denominated purchases and sales.

In connection with our operations in China, we purchase a significant amount of products from outside of the United States. However, our purchases in China are primarily made in Chinese Yuan, the value of which had been largely pegged to the US dollar for the last decade. However, the Chinese Yuan has been decoupled from the US Dollar and allowed to float by the Chinese government and, therefore, we have been exposed to additional foreign exchange rate risk on our Chinese raw material and component purchases.

Our primary risk from foreign currency exchange rate changes is presently related to non-US dollar denominated sales in Brazil, Canada and Europe and to a smaller extent, in other South American countries and dollar-denominated payables in Brazil. Our sales to customers in Brazil are denominated in Brazilian Reals, in Canada in Canadian dollars and in Europe in Euros and British pounds. If the value of the US dollar increases relative to the Canadian dollar, the Real, the Pound or the Euro, then our net sales could decrease as our products would be more expensive to these international customers because of changes in rate of exchange. The largest supplier of raw materials to Brazil is an American company, and these payables are denominated in US dollars. If the Brazilian Real weakened against the US dollar, it would make our costs higher and trigger a loss on foreign exchange on the payables. Our sales from China are denominated in the Chinese Yuan, US dollar and Euros;.Euros. We did experience some losses between the Chinese Yuan, the Euro and US dollarsdollar in FY12, but we have since stepped up our hedging program to include this risk. We manage the foreign currency risk through the use of rolling 90-day forward contracts against the Canadian dollar and Euros and through longer term cash flow hedges in China against the USD and Euro. We also do limited short-term hedging of the Brazilian Real. We do not hedge other currencies at this time. As non-US dollar denominated international purchases and sales grow, exposure to volatility in exchange rates could have a material adverse impact on our financial results. The only significant unhedged foreign exchange exposure we have is the Brazilian Real. Other unhedged currency exposure is not significant.  If the Brazilian exchange rates varied either way by +/- 10%, it would not be significant so long as prices could cause a gain/lossbe raised to P&L of $212,000.account for more expensive garments.

Interest Rate Risk

We are exposed to interest rate risk with respect to our credit facilities, which have variable interest rates based upon the London Interbank Offered Rate. At January 31, 2013,2014, we had $15.1$12.4 million in borrowings outstanding under this credit facility. If the interest rate applicable to this variable rate debt rose 1.0% in the year ended January 31, 2013,2014, our interest expense would not have increased due to the floor of 6.25%. If the effective interest rate rose 1 percentage point over 6.25%, it would increase interest expense by approximately $0.2 million.$130,000.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Lakeland Industries, Inc. and Subsidiaries

Ronkonkoma, New York

We have audited the accompanying consolidated balance sheets of Lakeland Industries, Inc. and Subsidiaries (the Company) as of January 31, 20132014 and 2012,2013, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended January 31, 2013. Lakeland’s2014. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.  For the year ended January 31, 2014, we did not audit the financial statements of Lakeland Brazil, S.A. and Weifang Lakeland Safety Products Co., Ltd., wholly-owned subsidiaries, which statements reflect total assets and revenues constituting 22% and 14%, respectively, of the related consolidated totals in 2014. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Lakeland Brazil, S.A., and Weifang Lakeland Safety Products Co., Ltd., China, is based solely on the report of other auditors. For the year ended January 31, 2013, we did not audit the financial statements of Lakeland Brazil, S.A., a wholly-owned subsidiary, which statements reflect total assets and revenues constituting 19% and 18%, respectively, of the related consolidated totals in 2013.  Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included in Lakeland Brazil, S.A., is based solely on the report of other auditors.

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 Companycompany 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’scompany’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, based on our audit and the reportreports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of January 31, 20132014 and 2012,2013, and the consolidated results of itstheir operations and itstheir cash flow for each of the years in the two-year period ended January 31, 2013,2014, in conformity with accounting principles generally accepted in the United States of America.

The accompanyingother auditor’s report on the 2014 and 2013 financial statements have been prepared assumingof Lakeland Brazil, S.A. referred to the Company will continueVAT Tax Issue in Brazil as a going concern. As discussed in Note 110 to the consolidated financial statements, the Companystatements.  Our opinion is in default on certain covenants of its loan agreements at January 31, 2013. The lenders have not waived these events of default and may demand repayment at any time. Management is currently tryingmodified with respect to secure replacement financing but does not have new financing available at the date of this report. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.matter.

/s/ Warren Averett, LLC

Birmingham, Alabama

May 21, 2013April 28, 2014

Lakeland Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended January 31, 20132014 and 20122013