UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended~~October 31, 2014~~April 30, 2015

¨o

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

For the transition period from _______________ to _______________

Commission File Number: 0-15535

LAKELAND INDUSTRIES, INC.

(Exact name of Registrant as specified in its charter)

Delaware		13-3115216.
(State of incorporation)		~~(IRS~~ (IRS Employer Identification Number)

~~701 Koehler Avenue,~~3555 Veterans Memorial Highway, Suite 7,C, Ronkonkoma, New York		11779.
(Address of principal executive offices)		(Zip Code)

(631) 981-9700

(Registrant's telephone number, including area code)

701 Koehler Avenue, Suite 7, Ronkonkoma, NY 11779

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yesx Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, 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 Noo

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 12-b-2 of the Exchange Act. Check one.

Large accelerated filer¨		Accelerated filer¨

Nonaccelerated filer¨(Do not check if a smaller reporting company)		Smaller reporting companyx

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

YesoNox

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

Class		Outstanding at ~~December 10, 2014~~June 12, 2015
Common Stock, $0.01 par value per share		~~7,047,059~~7,081,076 shares

LAKELAND INDUSTRIES, INC.

AND SUBSIDIARIES

FORM 10-Q

The following information of the Registrant and its subsidiaries is submitted herewith:

~~PART I - FINANCIAL INFORMATION:~~

PART I - FINANCIAL INFORMATION:

Item 1.		Financial Statements (Unaudited)		Page

		Introduction		3

		Condensed Consolidated Statements of Operations
	Three ~~and Nine~~ Months Ended ~~October 31,~~April 30, 2015 and 2014 ~~and 2013~~		5

		Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~
	Three ~~and Nine~~ Months Ended ~~October 31,~~April 30, 2015 and 2014 ~~and 2013~~		6

	~~Condensed Consolidated Balance Sheets~~
	~~October 31, 2014~~	Condensed Consolidated Balance Sheets April 30, 2015 and January 31, ~~2014~~2015		7

		Condensed Consolidated Statement of Stockholders' Equity
	~~Nine~~ Three Months Ended ~~October 31, 2014~~April 30, 2015		8

		Condensed Consolidated Statements of Cash Flows
	~~Nine~~ Three Months Ended ~~October 31,~~April 30, 2015 and 2014 ~~and 2013~~		9

		Notes to Condensed Consolidated Financial Statements		10

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations		28
	~~of Operations~~	26

Item 3.		Quantitative and Qualitative Disclosures about Market Risk		33

Item 4.		Controls and Procedures		33

PART II - OTHER INFORMATION:

Item 6.		Exhibits	35	34

Signature Pages				3635

LAKELAND INDUSTRIES, INC.

AND SUBSIDIARIES

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Introduction

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q may contain certain forward-looking statements. When used in this Form 10-Q or in any other presentation, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “project” and similar expressions, are intended to identify forward-looking statements. They also include statements containing a projection of sales, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.

The forward-looking statements in this Form 10-Q are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to us. These statements are not statements of fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Some of the important factors that could cause our actual results, performance or financial condition to differ materially from expectations are:

our ability to make payments on our significant indebtedness and comply with the restrictive covenants thereon;

covenants in our credit facilities may restrict our financial and operating flexibility;

our ability to remediate the material weaknesses in our internal controls identified by the evaluations performed by us as of October 31, 2014 and throughout fiscal 2014, 2015 and ~~2015;~~2016;

our ability to make timely payment on the arbitration award balance of ~~$4.25~~$3.75 million which is payable in the amount of $250,000 quarterly through December 31, 2018;

the risk that we will not make sufficient additional sales to justify our expansion of activities from the net proceeds of the October 2014 private placement;

our ability to obtain additional funds, if necessary;

we suffered losses from operations in fiscal 2013 and fiscal 2014 and there can be no assurance that such losses will not continue;

we are incurring adverse operating results from our Brazilian operations and we expect such losses in Brazil to continue ~~at least~~ through fiscal ~~2015;~~2016 and are included in discontinued operations;

we are subject to risk as a result of our international manufacturing operations;

we are subject to claims for a significant amount of VAT taxes in Brazil;

our results of operations could be negatively affected by potential fluctuations in foreign currency exchange rates;

we deal in countries where corruption is an obstacle, particularly in Brazil;

there is no assurance that our planned disposition of our Brazilian subsidiary will be successful. Even if consummated, we may continue to be exposed to contain liabilities in connection with the pre-closing operations of our Brazilian subsidiary. In addition, while the Company’s tax advisors believe that the worthless stock deduction intended to be taken by the Company in connection therewith is valid, there can be no assurance that the IRS will not challenge it and, if challenged, that the Company will prevail.

rapid technological change could negatively affect sales of our products, inventory levels and our performance;

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

our operations are substantially dependent upon key personnel;

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 inability to protect our intellectual property;

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

some of our sales are to foreign buyers, which exposes us to additional risks;

a significant reduction in government funding for preparations for terrorist incidents could adversely affect our net sales;

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

our directors and executive officers have the ability to exert significant influence on us and on matters subject to a vote of our stockholders;

our failure to realize anticipated benefits from acquisitions, divestitures or restructurings, or the possibility that such acquisitions, divestitures or restructurings could adversely affect us;

The other factors referenced in this Form 10-Q, including, without limitation, in the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the factors described under “Risk Factors” disclosed in our fiscal ~~2014~~2015 Form 10-K.

We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Furthermore, forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements after the date of this Form 10-Q, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-Q might not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors.

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three ~~and Nine~~ Months Ended ~~October 31,~~April 30, 2015 and 2014 ~~and 2013~~

Three Months Ended Nine Months Ended
October 31, October 31,
2014 2013 2014 2013
Net sales $ 25,092,772 $ 22,787,344 $ 73,210,278 $ 69,163,340
Cost of goods sold 16,484,612 17,744,932 49,440,097 50,579,123
Gross profit 8,608,160 5,042,412 23,770,181 18,584,217
Operating expenses 7,910,609 6,072,620 21,022,895 18,554,319
Operating profit (loss) 697,551 (1,030,208 ) 2,747,286 29,898
Foreign exchange gain (loss) Brazil (65,137 ) 115,764 (51,882 ) (271,647 )
Early extinguishment of subordinated debt (2,295,432 ) ----- (2,295,432 ) -----
Other income (loss), net 143,997 57,259 (282,249 ) 20,668
Interest expense (699,471 ) (649,436 ) (2,022,324 ) (1,390,623 )
Loss before taxes (2,218,492 ) (1,506,621 ) (1,904,601 ) (1,611,704 )
Income tax expense (benefit) 281,738 328,859 981,294 (3,103,143 )
Net income (loss) $ (2,500,230 ) $ (1,835,480 ) $ (2,885,895 ) $ 1,491,439
Net income (loss) per common share:
Basic $ (0.42 ) $ (0.31 ) $ (0.49 ) $ 0.27
Diluted $ (0.42 ) $ (0.31 ) $ (0.49 ) $ 0.26
Weighted average common and common equivalent shares outstanding:
Basic 5,951,613 5,919,253 5,933,229 5,607,654
Diluted 5,951,613 5,919,253 5,933,229 5,715,151

	Three Months Ended
	April 30,
	($000’s) except for share information
	2015			2014*
Net sales from continuing operations	$	24,819		$	21,758
Cost of goods sold from continuing operations		15,540			15,253
Gross profit from continuing operations		9,279			6,505
Operating expenses from continuing operations		6,059			5,647
Operating profit from continuing operations		3,220			858
Other income (loss), net from continuing operations		15			5
Interest expense from continuing operations		183			486
Income before taxes from continuing operations		3,052			377
Income tax expense from continuing operations		892			23
Net income from continuing operations	$	2,160		$	354
Net loss from discontinued operations	$	(931	)	$	(354	)
Net income (loss)	$	1,229		$	(0.00	)
Net income (loss) per common share – Basic:
Income from continuing operations	$	0.31		$	0.06
Loss from discontinued operations	$	(0.14	)	$	(0.06	)
Net income (loss)	$	0.17		$	0.00
Net income (loss) per common share – Diluted:
Income from continuing operations	$	0.30		$	0.06
Loss from discontinued operations	$	(0.13	)	$	(0.06	)
Net income (loss)	$	0.17		$	(0.00	)
Weighted average common shares outstanding:
Basic		7,062,144			5,923,224
Diluted		7,235,385			5,923,224

The accompanying notes are an integral part of these condensed consolidated financial statements.

*Restated for discontinued operations.

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(UNAUDITED)

Three months ended April 30, 2015 and ~~Nine Months Ended October 31,~~ 2014 ~~and 2013~~

Three Months Ended Nine Months Ended
October 31, October 31,
2014 2013 2014 2013
Net income (loss) $ (2,500,230 ) $ (1,835,480 ) $ (2,885,895 ) $ 1,491,439
Other comprehensive income (loss):
Cash flow hedge in China 107,549 (25,286 ) 119,557 (59,078 )
Foreign currency translation adjustments:
Lakeland Brazil, S.A. (420,584 ) 241,417 98,979 (560,243 )
Canada 13,286 (68,356 ) (5,353 ) (98,345 )
United Kingdom (280,685 ) 28,665 (330,201 ) (153,978 )
China 13,053 (178,526 ) (42,353 ) (133,066 )
Russia/Kazakhstan (140,398 ) (10,832 ) (224,971 ) (74,216 )
Other comprehensive loss (707,779 ) (12,918 ) (384,342 ) (1,078,926 )
Comprehensive income (loss) $ (3,208,009 ) $ (1,848,398 ) $ (3,270,237 ) $ 412,513

	Three Months Ended
	April 30,
	($000’s)
	2015			2014*

Net income	$	1,229		$	—
Other comprehensive income (loss):
Cash flow hedge in China		75			(81	)
Cash flow hedge in United Kingdom		40			—
Foreign currency translation adjustments:
Lakeland Brazil, S.A.		193			368
Canada		52			(18	)
United Kingdom		(106	)		(3	)
China		49			39
Russia/Kazakhstan		41			(125	)
Other comprehensive income		344			180
Comprehensive income	$	1,573		$	180

The accompanying notes are an integral part of these condensed consolidated financial statements.

*Restated for discontinued operations.

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

~~October 31, 2014~~April 30, 2015 and January 31, ~~2014~~2015


ASSETS	April 30,			January 31,
	2015			2015*
Current assets	($000’s)			($000’s)
Cash and cash equivalents	$	8,721		$	6,709
Accounts receivable, net of allowance for doubtful accounts of $538 and $484 at April 30, 2015 and January 31, 2015, respectively		14,769			13,277
Inventories, net of reserves of approximately $2,460 and $2,454 at April 30, 2015 and January 31, 2015, respectively		39,495			37,092
Deferred income taxes		1,015			1,144
Assets of discontinued operations in Brazil		6,447			6,335
Prepaid VAT tax		1,216			1,717
Other current assets		3,184			2,361
Total current assets		74,847			68,635
Property and equipment, net		10,311			10,144
Deferred income tax, noncurrent		13,101			13,101
Prepaid VAT and other taxes		173			173
Security deposits		86			113
Intangibles, prepaid bank fees and other assets, net		141			171
Goodwill		871			871
Total assets	$	99,530		$	93,208
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	8,512		$	7,763
Accrued compensation and benefits		854			1,120
Other accrued expenses		1,798			1,462
Liabilities of discontinued operations in Brazil		6,692			6,574
Current maturity of long-term debt		50			50
Current maturity of accrued arbitration award		1,000			1,000
Short-term borrowing		3,446			2,611
Borrowings under revolving credit facility		8,666			5,642
Total current liabilities		31,018			26,222
Accrued arbitration award, less current portion		2,637			2,870
Long-term portion of Canada loan		830			800
VAT taxes payable long term		130			60
Total liabilities		34,615			29,952
Stockholders’ equity
Preferred stock, $.01 par; authorized 1,500,000 shares (none issued)		—			—
Common stock, $.01 par; authorized 10,000,000 shares, issued 7,428,220 and 7,414,037; outstanding 7,071,779 and 7,057,596 at April 30, 2015 and January 31, 2015 respectively		74			74
Treasury stock, at cost; 356,441 shares at April 30, 2015 and January 31, 2015		(3,352	)		(3,352	)
Additional paid-in capital		64,680			64,594
Retained earnings		5,883			4,654
Accumulated other comprehensive loss		(2,370	)		(2,714	)
Total stockholders' equity		64,915			63,256
Total liabilities and stockholders' equity	$	99,530		$	93,208

October 31, January 31,
2014 2014
ASSETS
Current assets
Cash and cash equivalents $ 7,046,912 $ 4,555,097
Accounts receivable, net of allowance for doubtful accounts of approximately $482,400 and $588,800 at October 31, 2014 and January 31, 2014, respectively 15,098,336 13,795,301
Inventories, net of reserves of approximately $2,992,000 and $3,572,000 at October 31, 2014 and January 31, 2014, respectively 38,921,463 39,844,309
Deferred income taxes 4,807,895 4,707,278
Prepaid income tax 1,455,435 470,843
Other current assets 2,544,245 2,108,177
Total current assets 69,874,286 65,481,005
Property and equipment, net 11,768,421 12,069,107
Prepaid VAT and other taxes, noncurrent 2,458,921 2,379,395
Security deposits, mainly judicial deposits in Brazil 1,295,883 1,415,372
Intangibles, prepaid bank fees and other assets, net 493,566 1,533,349
Goodwill 871,297 871,297
Total assets $ 86,762,374 $ 83,749,525
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 9,484,343 $ 8,181,026
Accrued compensation and benefits, mainly accrued payroll 2,411,537 1,189,324
Other accrued expenses 2,574,135 1,554,231
Current maturity of long-term debt 50,000 50,000
Current maturity of arbitration settlement 1,000,000 1,000,000
Short-term borrowing 3,686,387 2,558,545
Borrowings under revolving credit facility 5,133,739 12,415,424
Total current liabilities 24,340,141 26,948,550
Accrued arbitration award in Brazil (net of current maturities) 3,103,784 3,758,691
Long-term portion of Canada and Brazil loans 924,001 1,110,634
Subordinated debt, net of original issue discount (“OID”), including PIK interest ----- 1,525,392
Other liabilities - accrued legal fees in Brazil 77,285 71,223
VAT taxes payable long term 3,361,774 3,329,275
Total liabilities 31,806,985 36,743,765
Stockholders’ equity
Preferred stock, $.01 par; authorized 1,500,000 shares
(none issued) ----- ------
Common stock, $.01 par; authorized 10,000,000 shares,
issued 7,399,234 and 5,713,180; outstanding 7,042,793 and 5,356,739 at October 31, 2014 and January 31, 2014, respectively 73,992 57,132
Treasury stock, at cost; 356,441 shares at October 31, 2014 and January 31, 2014 (3,352,291 ) (3,352,291 )
Additional paid-in capital 64,568,292 53,365,286
Accumulated deficit (3,477,840 ) (591,945 )
Accumulated other comprehensive loss (2,856,764 ) (2,472,422 )
Total stockholders' equity 54,955,389 47,005,760
Total liabilities and stockholders' equity $ 86,762,374 $ 83,749,525

The accompanying notes are an integral part of these condensed consolidated financial statements.

*Restated for discontinued operations.

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(UNAUDITED)

~~Nine Months Ended October 31, 2014~~Three months ended April 30, 2015

($000’s)

except for share information

Common Stock Treasury Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated
Other
Comprehen-sive Loss Total
Stockholders’
Equity
Shares Amount Shares Amount

Balance, January 31, 2014 5,713,180 $ 57,132 (356,441 ) $ (3,352,291 ) $ 53,365,286 $ (591,945 ) $ (2,472,422 ) $ 47,005,760

Net loss — — — — — (2,885,895 ) — (2,885,895 )

Other comprehensive loss — — — — — — (384,342 ) (384,342 )
Stock-based compensation:
Restricted stock issued at par 10,039 100 — — (100 ) — — —

Restricted stock plan —— —— —— —— 1,073,187 —— —— 1,073,187
Warrant shares exercised at
$0.01 per share 566,015 5,660 —— —— —— —— —— 5,660
Sale of common shares in a Private Institutional Placement of Equity (PIPE), net of fees 1,110,000 11,100 —— —— 10,179,729 —— —— 10,190,829
Return of shares in lieu of payroll tax withholding —— —— —— —— (37,260 ) —— —— (37,260 )
Legal fees associated with Warrant —— —— —— —— (12,550 ) —— —— (12,550 )

Balance October 31, 2014 7,399,234 $ 73,992 (356,441 ) $ (3,352,291 ) $ 64,568,292 $ (3,477,840 ) $ (2,856,764 ) $ 54,955,389

	Common Stock				Treasury Stock						Additional Paid-in			Retained		Accumulated Other Comprehensive
	Shares		Amount		Shares			Amount			Capital			Earnings		Loss			Total
Balance, January 31, 2015		7,414,037	$	74		(356,441	)	$	(3,352	)	$	64,594		$	4,654	$	(2,714	)	$	63,256

Net income		—		—		—			—			—			1,229		—			1,229
Other comprehensive income		—		—		—			—			—			—		344			344
Stock-based compensation:
Restricted stock issued		14,183		—		—			—			—			—		—			—
Restricted Stock Plan		—		—		—			—			127			—		—			127
Return of shares in lieu of payroll tax withholding		—		—		—			—			(41	)		—		—			(41	)
Balance, April 30, 2015		7,428,220	$	74		(356,441	)	$	(3,352	)	$	64,680		$	5,883	$	(2,370	)	$	64,915

The accompanying notes are an integral part of these condensed consolidated financial statements.

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

~~Nine~~Three Months Ended ~~October 31,~~April 30, 2015 and 2014 ~~and 2013~~

For the Nine Months Ended
October 31,
2014 2013
Cash flows from operating activities:
Net (loss) income $ (2,885,895 ) $ 1,491,439
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Provision for inventory obsolescence (579,653 ) 617,890
Provision for doubtful accounts (106,433 ) (97,327 )
Deferred income taxes asset (100,617 ) (4,635,499 )
Deferred taxes long-term 32,499 1,534
Interest expense resulting from amortization of warrant OID and PIK interest on subordinated debt 926,724 149,024
Early extinguishment of subordinated debt 2,295,432 -----
Depreciation and amortization 1,008,298 1,226,422
Loss on disposal of fixed assets 80,222 -----
Stock based and restricted stock compensation 1,073,187 179,002
(Increase) decrease in operating assets
Accounts receivable (1,470,122 ) (1,278,455 )
Inventories 1,113,398 (2,553,057 )
Prepaid VAT and other taxes, noncurrent (984,592 ) 936,421
Other assets-mainly prepaid fees from financing transaction (448,788 ) (2,507,068 )
Cash received from sale of discontinued operations ----- 428,827
Assets of discontinued operations ----- 364,435
Increase (decrease) in operating liabilities
Accounts payable 1,439,736 2,797,213
Arbitration award in Brazil (750,000 ) (702,000 )
Accrued compensation and benefits 1,222,213 568,456
Other accrued expenses 1,225,681 -----
Accrued interest resulting from Arbitration Award 95,093 -----
Liabilities of discontinued operations ----- (25,041 )
Net cash provided by (used in) operating activities 3,186,383 (3,037,784 )
Cash flows from investing activities:
Proceeds from sales of Qingdao net of cost of shutdown ----- 903,662
Purchases of property and equipment (404,719 ) (682,227 )
Net cash (used in) provided by investing activities (404,719 ) 221,435
Cash flows from financing activities:
Net borrowings (repayments) credit agreement (revolver) (7,281,685 ) 11,790,905
TD Bank and BDC repayments at closing of new financing ----- (15,108,882 )
Canada loan repayments (19,256 ) (1,398,566 )
Canada borrowings ----- 1,121,317
Subordinated debt financing including warrant valuation ----- 3,500,000
Subordinated debt principal payments (500,000 ) -----
Proceeds received through PIPE, net of fees 10,178,229 -----
Repayment of subordinated debt, PIK interest and fees (3,594,371 ) -----
Legal fees associated with the warrant OID (12,550 ) (9,000 )
Borrowings in Brazil ----- 159,462
Repayments in Brazil (5,664 ) (606,432 )
(Repayments) borrowing in UK, net (revolver) (272,245 ) 915,750
Borrowings in China, new loans 2,112,962 804,922
Repayments in China (811,669 ) -----
Other liabilities 6,060 (8,454 )
Shares returned in lieu of taxes under restricted stock program (37,260 ) (31,683 )
Net cash (used in) provided by financing activities (237,449 ) 1,129,339
Effect of exchange rate changes on cash (52,400 ) (30,735 )
Net increase (decrease) in cash and cash equivalents 2,491,815 (1,717,745 )
Cash and cash equivalents at beginning of year 4,555,097 6,736,962
Cash and cash equivalents at end of period $ 7,046,912 $ 5,019,217
Cash paid for interest $ 1,764,000 $ 1,065,000
Cash paid for taxes $ 1,098,000 $ 841,000

	For the Three Months Ended April 30,
	2015			2014*
Cash flows from operating activities:
Net income (loss)	$	1,229		$	0
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Provision for inventory obsolescence		7			(94	)
Provision for doubtful accounts		90			14
Deferred income taxes current		128			(128	)
Deferred taxes long-term		70			(1	)
Depreciation and amortization		246			293
Interest expense resulting from amortization of warrant OID and reclassification of PIK interest		——			481
Stock based and restricted stock compensation		127			24
Interest expense resulting from Arbitration Award		16			58
(Increase) decrease in operating assets
Accounts receivable		(1,630	)		(785	)
Inventories		(2,471	)		518
Prepaid VAT taxes and other current assets		501			(152	)
Other assets-mainly prepaid fees from financing transaction		(714	)		(42	)
Assets of discontinued operations		(672	)		(598	)
Increase (decrease) in operating liabilities
Accounts payable		828			1,302
Accrued expenses and other liabilities		77			573
Arbitration award in Brazil		(250	)		(250	)
Liabilities of discontinued operations		871			317
Net cash (used in) provided by operating activities		(1,547	)		1,530
Cash flows from investing activities:
Purchases of property and equipment		(307	)		(88	)
Net cash used in investing activities		(307	)		(88	)
Cash flows from financing activities:
Net borrowings under credit agreement (revolver)		3,024			1,083
Canada loan repayments		(6	)		(10	)
Borrowings in Argentina		269			——
UK borrowings, net		569			(30	)
China borrowings, net		7			(14	)
Shares returned to pay employee taxes under restricted stock program		(41	)		——
Net cash provided by financing activities		3,822			1,027
Effect of exchange rate changes on cash		44			(14	)
Net increase in cash and cash equivalents		2,012			2,455
Cash and cash equivalents at beginning of year		6,709			4,555
Cash and cash equivalents at end of year	$	8,721		$	7,010

(in $000)(From continuing operations)	Q1FY16			Q1FY15
Cash paid for interest	$	184		$	433
Cash paid for taxes	$	604		$	307

The accompanying notes are an integral part of these condensed consolidated financial statements.

*Restated for discontinued operations

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Business~~

1. Business

Lakeland Industries, Inc. and Subsidiaries ~~(the "Company"~~(“Lakeland” or the “Company”), a Delaware corporation organized in April ~~1982,~~1986, manufactures and sells a comprehensive line of safety garments and accessories for the industrial protective clothing ~~and homeland security markets.~~market. The principal market for ~~our~~the Company’s products is in the United States. No customer accounted for more than 10% of net sales during the ~~nine-month~~three month periods ~~ended October 31, 2014~~ending April 30, 2015 and ~~2013.~~2014. In April 2015, the Company decided to exit operations in Brazil. See Note 17 for further description.

~~Basis of Presentation~~

2. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments (consisting of only normal and recurring adjustments) which are, in the opinion of management, necessary to present fairly the condensed consolidated financial information required ~~therein.~~herein. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations. While we believe that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K ~~and Forms 10-K/A~~ filed with the Securities and Exchange Commission for the fiscal year ended January 31, ~~2014.~~2015.

Our consolidated financial statements have been prepared using the accrual method of accounting in accordance with US GAAP.

The results of operations for the three ~~and nine-month periods~~month period ended ~~October 31, 2014~~April 30, 2015 are not necessarily indicative of the results to be expected for the full year.

In this Form 10-Q, (a) “FY” means fiscal year; thus, for example, ~~FY15~~FY16 refers to the fiscal year ending January 31, ~~2015 and~~2016, (b) “Q” refers to quarter; thus, for example, ~~Q3 FY15~~Q1 FY16 refers to the ~~third~~first quarter of the fiscal year ending January 31, ~~2015~~2016, (c) “Balance Sheet” refers to the condensed consolidated balance ~~sheet.~~sheet and (d) “Statement of Operations" refers to the condensed consolidated statement of operations.

~~Principles of Consolidation~~

3. Principles of Consolidation

The accompanying ~~condensed~~ consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

~~Inventories~~

4. Inventories

Inventories of continuing operations consist of the ~~following:~~following (in $000s):

	October 31, 2014		January 31, 2014		April 30, 2015		January 31, 2015

Raw materials	$	15,661,684	$	16,348,861	$	16,468	$	14,379
Work-in-process		1,878,206		1,292,740		1,882		1,670
Finished goods		21,381,573		22,202,708		21,145		21,043
	$	38,921,463	$	39,844,309	$	39,495	$	37,092

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. Provision is made for slow-moving, obsolete or unusable inventory.

~~Earnings Per Share~~10

5. Earnings Per Share

Basic earnings per share ~~is calculated by dividing net loss income available to common stockholders by~~are based on the weighted average number of common shares outstanding without consideration of common stock ~~equivalents, but including contingently issuable shares.~~equivalents. Diluted earnings per share are based on the weighted average number of common shares and common stock ~~equivalents, that are not deemed anti-dilutive.~~equivalents. The diluted earnings per share calculation takes into account the shares that may be issued upon exercise of stock options, ~~or warrants~~ reduced by ~~the~~ shares that may be repurchased with the funds received from ~~their~~the exercise, based on the average price during the period.

The following table sets forth the computation of basic and diluted earnings ~~(loss)~~ per share for “income from continuing operations” at ~~October 31,~~April 30, 2015 and 2014, ~~and 2013.~~as follows:

Three Months Ended
April 30,
(in $000s)
2015 2014
Numerator
Net income from continuing operations $ 2,160 $ 354
Net loss from discontinued operations (931 ) (354 )
Net income (loss) $ 1,229 $ (0.00 )
Denominator
Denominator for basic earnings per share
(weighted-average shares which reflect 356,441 shares in the treasury as a result of the stock repurchase program that ended in 2011, and 0 and 566,015 weighted average common equivalents relating to the warrant issued with the FY14 subordinated debt financing) 7,062,144 5,923,224
Effect of dilutive securities from restricted stock plan and from dilutive effect of stock options 173,241 ——
Denominator for diluted earnings per share (adjusted weighted average shares) 7,235,385 5,923,224
Basic earnings per share from continuing operations $ 0.31 $ 0.06
Basic earnings per share from discontinued operations $ (0.14 ) $ (0.06 )
Basic earnings per share $ 0.17 $ (0.00 )
Diluted earnings per share from continuing operations $ 0.30 $ 0.06
Diluted earnings per share from discontinued operations $ (0.13 ) $ (0.06 )
Diluted earnings per share $ 0.17 $ (0.00 )

Three Months Ended Nine Months Ended
October 31, October 31,
2014 2013 2014 2013
Numerator:
Net income (loss) $ (2,500,230 ) $ (1,835,480 ) $ (2,885,895 ) $ 1,491,439
Denominator
  Denominator for basic income (loss) per share
Weighted-average shares outstanding before common share equivalents 5,592,559 5,353,238 5,436,959 5,345,610
Weighted average common equivalent shares resulting from the warrant issued June 28, 2013 to the subordinated debt lender LKL Investments LLC 359,054 566,015 496,270 262,044
Total weighted average, including common equivalent shares 5,951,613 5,919,253 5,933,229 5,607,654
Effect of dilutive securities from restricted stock plan and from dilutive effect of stock options —— —— —— 107,497
Denominator for diluted loss per share (adjusted weighted average shares) 5,951,613 5,919,253 5,933,229 5,715,151
Basic income (loss) per share $ (0.42 ) $ (0.31 ) $ (0.49 ) $ 0.27
Diluted income (loss) per share $ (0.42 ) $ (0.31 ) $ (0.49 ) $ 0.26
6.Long-Term Debt and Subsequent Event
Revolving Credit Facility

6. ~~Long-Term Debt and Subsequent Event~~
On June 28, 2013, ~~Lakeland Industries, Inc.~~the Company and its wholly-owned subsidiary, Lakeland Protective Wear Inc. (collectively with the Company, the “Borrowers”), entered into a Loan and Security Agreement (the “Senior Loan Agreement”) with AloStar Business Credit, a division of AloStar Bank of Commerce (the “Senior Lender”). The Senior Loan Agreement provides the Borrowers with a three-year $15 million revolving line of credit, at a variable interest rate based on LIBOR, with a first priority lien on substantially all of the United States and ~~Canadian~~Canada assets of the Company, except for the Canadian ~~warehouse~~warehouse.
On March 31, 2015, the Borrowers entered into a First Amendment to Loan and Security Agreement with the ~~Mexican~~Senior Lender (the “Amendment”) relating to their senior revolving credit facility. Pursuant to the Amendment, the parties agreed to (i) reduce the rate of interest on the revolving loans by 200 basis points and correspondingly lower the minimum interest rate floor from 6.25% to 4.25% per annum, and (ii) extend the maturity date of the credit facility (“to June 28, 2017.
On June 3, 2015, the Borrowers entered into a Second Amendment (the “Second Amendment”) to the Senior ~~Debt”~~Loan Agreement. The primary purposes of the Second Amendment are to (i) modify the definition of Permitted Asset Disposition to provide the Company with the ability to transfer the stock of the Company’s wholly-owned Brazilian subsidiary, Lake Brasil Indústria e Comércio de Roupas e Equipamentos de Proteção Individual Ltda. (“Lakeland Brazil”)., and (ii) allow the Borrowers to transfer funds to Lakeland Brazil for the specific purposes of settling arbitration claims, paying contractual expenses, and paying expenses incurred in connection with a transfer of the stock of Lakeland Brazil so long as, after giving effect to any such transfer, the amount Borrowers have as excess availability under the revolver loans, excluding the $15 million facility cap for this purpose only, calculated pursuant to and under the Senior Loan Agreement, is at least $3.0 million. Also, as part of the Second Amendment, Lender consented to the sale of the Company’s corporate offices in Ronkonkoma, New York on the condition that the net cash proceeds from the sale in the amount of at least $450,000 are used by the Company to pay down the Borrower’s obligations to Lender under the Senior Loan Agreement.
11

On June 28, 2013, the Borrowers also entered into a Loan and Security Agreement (the “Subordinated Loan Agreement”) with LKL Investments, LLC, an affiliate of Arenal Capital, a private equity fund (the “Junior Lender”). The Subordinated Loan Agreement provided for a $3.5 million term loan to be made to the Borrowers with a second priority lien on substantially all of the assets of the Company in the United States and Canada, except for the Canadian warehouse and except for a first lien on the Company’s Mexican facility. Pursuant to the Subordinated Loan Agreement, among other things, Borrowers issued to the Junior Lender a five-year term loan promissory note (the “Note”). At the election of the Junior Lender, interest under the Note may have been paid in cash, by PIK in additional notes or payable in shares of common stock (“Common Stock”), of the Company. The Junior Lender also, in connection with this transaction, received a common stock purchase warrant (the “Warrant”) to purchase up to 566,015 shares of Common Stock (subject to adjustment) ~~and fully exercised at October 31, 2014,~~, representing beneficial ownership of approximately 9.58% of the outstanding Common Stock of the Company, as of the closing of the transactions completed by the Subordinated Loan Agreement. The Company’s receipt of gross proceeds of $3.5 million (before original issue discount of $2.2 million related to the associated warrant) in subordinated debt financing was a condition precedent set by the Senior Lender, of which this transaction satisfied. The Warrant was fully exercised at October 31, 2014.
~~The~~
On October 29, 2014, with the proceeds from ~~such financings have been used to fully repay~~a private placement of 1,110,000 shares of its common stock, the Company’s former financing facility with TD Bank, N.A. in the amount of approximately US $13.7 million. Also repaid upon closing of the financings was the warehouse loan in Canada with a balance of CDN $1,362,000 Canadian dollars (approximately US $1,320,000), payable to Business Development Bank of Canada (“BDC”).
~~The~~ Company recorded the debt and warrants using the relative fair value method, in which there was a debt discount recorded at the date the transaction of approximately $2.2 million recorded as a component of additional paid-in capital. This was treated as Original Issue Discount (OID) and was being amortized as additional interest over the five-year term of the related subordinated debt. Including the 12% coupon and the amortization of the OID gave an effective per annum rate on just the debt of approximately 47%, assuming the warrant was broken out separately. However, management viewed this to be one blended loan or transaction along with the Senior Debt of up to $15 million at 6.25%, since the subordinated debt was a required condition of closing made by the Senior Lender.
~~In July 2014, the Company prepaid $500,000 on the subordinated loan. The subordinated lenders waived any prepayment penalty. The remainder of the subordinated loan was~~ repaid in full ~~on October 29, 2014 from~~ the ~~proceeds~~Subordinated Debt. The early extinguishment of the ~~equity financing that closed on that date, again without prepayment penalty. As~~Subordinated Debt resulted in a ~~result, the remaining OID~~one-time pretax non-cash charge of approximately $1.6 million for the remaining unamortized original issue discount on the Subordinated Debt and ~~unamortized fees~~a pretax non-cash charge of approximately $0.6 million for the remaining unamortized fees paid at the closing of the June 2013 Subordinated Debt financing. These charges were ~~completely written off~~included in the Company’s financial results for the third fiscal quarter ended October 31, 2014 and the fiscal year ended January 31, 2015. The $0.6 million of unamortized fees attributable to the Senior Debt will ~~no longer~~remain on the Company’s books and continue to be ~~charged to expense in future quarters. See Note 7.~~amortized over the remaining term of the Senior Debt through June 2017 as amended.

The following is a summary of the material terms of the ~~$15 million~~ Senior Credit Facility:

$15 million Senior Credit Facility
· Borrowers are ~~both~~ Lakeland Industries, Inc. and its Canadian operating subsidiary Lakeland Protective Wear Inc.
· Borrowing pursuant to a revolving credit facility subject to a borrowing base calculated as the sum of:
o○ 85% of eligible accounts receivable as defined
o○ The lesser of 60% of eligible inventory as defined or 85% of net orderly liquidation value of inventory
o○ In transit inventory in bound to the US up to a cap of $1,000,000
o○ Receivables and inventory held by the Canadian operating subsidiary to be included, up to a cap of $2 million of availability
· On ~~October 31, 2014,~~April 30, 2015, there was ~~$9.9~~$6.3 million available under the senior credit ~~facility~~facility.
· Collateral
o○ A perfected first security lien on all of the Borrowers United States and Canadian assets, other than its Mexican plant and the Canadian warehouse
o○ Pledge of 65% of Lakeland US stock in all foreign subsidiaries other than 100% pledge of stock of its Canadian subsidiaries
· Collection
o○ All customers of Borrowers must remit to a lockbox controlled by Senior Lender or into a blocked account with all collection proceeds applied against the outstanding loan ~~balance~~balance.
12
· Maturity
o○ An initial term of three years from June 28, 2013 (the “Closing Date”), which has been extended to June 28, 2017 pursuant to the Amendment
o○ Prepayment penalties of ~~3%, if prepaid prior to the first anniversary of Closing Date;~~ 2% if prior to the second anniversary ~~and 1% if prior to the third anniversary~~ of the Closing Date and 1% thereafter
· Interest Rate
o○ ~~Annual rate~~Rate equal to LIBOR rate plus 525 basis points, reduced to 325 basis points on March 31, 2015 per the Amendment
o○ Initial rate and rate at ~~October 31, 2014~~April 30, 2015 of 6.25% per annum
o○ Floor rate of 6.25%, reduced to 4.25% on March 31, 2015 per annum per the Amendment
· Fees: Borrowers shall pay to the Lender the following fees:
o○ Origination fee of $225,000, paid on the Closing Date and being amortized over the term of ~~loan~~loans and is included in “intangibles, prepaid bank fees and other assets, net” in the accompanying ~~condensed~~ consolidated balance sheet
o○ 0.50% per annum on unused portion of commitment
o○ A non-refundable collateral monitoring fee in the amount of $3,000 per month
o○ All legal and other out of pocket costs
· Financial Covenants
o○ Borrowers covenanted that, from the Closing Date until the commitment termination date and full payment of the obligations to Senior Lender, Lakeland Industries, Inc. (the parent company), together with its subsidiaries on a consolidated basis, excluding its Brazilian subsidiary, shall comply with the following additional covenants:

· Fixed Charge Coverage Ratio. At the end of each fiscal quarter of ~~the~~ Borrowers, ~~commencing with the fiscal quarter ending October 31, 2013, the~~ Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than 1.1 to ~~1.0~~1.00 for the four quarter period then ending.
· Minimum Quarterly Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). Borrowers shall achieve, on a rolling four quarter basis excluding the operations of the Borrower’s Brazilian subsidiary, EBITDA of not less than ~~the following as of the end of each quarter as follows:~~
o ~~July 31, 2013 for the two quarters then ended, $2.1 million;~~
o ~~October 31, 2013 for the three quarters then ended, $3.15 million,~~
o ~~January 31, 2014 for the four quarters then ended, and thereafter,~~ $4.1 ~~million~~million.
· Capital Expenditures. Borrowers shall not during any fiscal year make capital expenditures in an amount exceeding $1 million in the ~~aggregate~~aggregate.
· The Company is in compliance with all loan covenants of the Senior Debt at ~~October 31, 2014.~~April 30, 2015.
· Other Covenants
o○ Standard ~~Financial~~financial reporting requirements as defined
o○ Limitation on amounts that can be advanced to or on behalf of Brazilian operations, limited to one aggregate total of $200,000 for the term of the loan
o○ Limitation on total net ~~cash~~ investment in foreign subsidiaries of a maximum of $1.0 million per annum

~~The amount outstanding~~Brazil Loans
Brazil short-term borrowings as of ~~October 31, 2014 under~~April 30, 2015 consists of R$1,885,028 (US $629,686) and accrued interest of R$15,863 (US $5,299) which are included in liabilities of discontinued operations on the ~~Senior Lender Facility was $5.1 million.~~consolidated balance sheet. Brazil loans are collateralized by receivables, an officer guarantee, and customer contracts. Monthly interest rates range from 1.40% to 2.50% during the three month period ended April 30, 2015.

Borrowings in UK ~~and Subsequent Event~~
On December 19, 2013 the Company and its UK subsidiary entered into a one-year extension of its existing financing facility with HSBC Invoice Finance (UK) Ltd., (“HSBC”) pursuant to the same terms as disclosed in the Company's Form 8-K filed with the SEC on February 25, 2013, except for: the facility limit was increased from £1,000,000 (approximately US $1.6 million) to £1,250,000 (approximately USD $2.0 million at current exchange rates), and the prepayment percentage (advance rate) was increased from 80% to 85% of eligible receivables; more fully described in the Company’s Form 8-K which was filed on December 23, 2013. The balance outstanding under this facility at October 31, 2014 was the equivalent of USD $0.5 million and is included in short-term borrowings on the balance sheet. The per annum interest rate repayment rate was 3.44% and the term was for a minimum period of one year renewable on December 19, 2014.
On December 3, 2014, the Company and its UK subsidiary ~~further~~ amended the terms of its existing financing facility with HSBC to provide for (i) a one-year extension of the maturity date of the existing financing facility to December 3, 2015, (ii) an increase in the facility limit from £1,250,000 (approximately USD ~~$2.0~~$1.9 million) to £1,500,000 (approximately USD ~~$2,350,000)~~$2.3 million), and (iii) a decrease in the annual interest rate margin from 3.46% to 3.0%. In addition, pursuant to a letter agreement dated December 5, 2014, the Company agreed that £400,000 (approximately USD ~~$623,000)~~$0.6 million) of the note payable by the UK subsidiary to the Company shall be subordinated in priority of payment to the subsidiary’s obligations to HSBC under the financing facility. The balance outstanding under this facility at April 30, 2015 was the equivalent of USD $1.0 million and is included in short-term borrowings on the condensed consolidated balance sheet. The per annum interest rate repayment rate was 3.44% and the term was for a minimum period of one year renewable on December 3, 2015.
13
Canada ~~Loan~~Loans
In September 2013, the Company refinanced its loan with the Development Bank of Canada (BDC) for a principal amount of approximately Canadian and US $1.1 ~~million.~~million (based on exchange rates at time of closing). Such loan is for a term of 240 months at ~~a per annum~~an interest rate of 6.45% per annum with fixed monthly payments of approximately US ~~$7,620~~$6,447 (C$~~8,529)~~8,169) including principal and interest. It is collateralized by a mortgage on the Company's warehouse in Brantford, Ontario. The amount outstanding at ~~October 31, 2014~~April 30, 2015 is ~~US $0.96 million~~C$1,057,474 which is included ~~in long-term portion of Canada and Brazil loan~~as US $829,762 short term borrowings on the accompanying condensed consolidated balance sheet, net of current maturities of US $50,000.

China Loan
On March 27, 2014, the Company’s China subsidiary, Weifang Lakeland Safety Products Co., Ltd (“WF”), and Weifang Rural Credit Cooperative Bank (“WRCCB”) completed an agreement for WF to obtain a line of credit for financing in the amount RMB 8,000,000 (approximately US $1.3 million), with interest at 120% of the benchmark rate supplied by WRCCB (which is currently 5.6%). The effective per annum interest rate is currently 6.72%. The loan is collateralized by inventory owned by WF. WRCCB had hired a professional firm to supervise WF’s inventory flow, which WF paid RMB 40,000 (approximately US ~~$6,501)~~$6,500). ~~The balance under this~~This loan ~~outstanding at October 31, 2014~~ was ~~RMB 8,000,000 (approximately US $1.3 million)~~repaid on March 20, 2015 and ~~is included in short-term borrowings~~the line of credit matured on ~~the consolidated balance sheet.~~March 25, 2015. There ~~are~~were no covenant requirements inon this loan. ~~The loans are comprised of several loans with due dates ranging from June 18, 2014 to January 11, 2016.~~

On October 11, 2014, ~~the Company’s China subsidiary, Weifang Lakeland Safety Products Co., Ltd (“WF”),~~WF and Bank of China Anqiu Branch completed an agreement for WF to obtain a line of credit for financing in the amount RMB 5,000,000 (approximately US $0.8 million), with interest at 123% of the benchmark rate supplied by Bank of China Anqiu Branch (which is currently 6.0%). The effective per annum interest rate is currently 7.38%. The loan is collateralized by inventory owned by WF. The balance under this loan outstanding at ~~October 31, 2014~~April 30, 2015 was RMB 5,000,000 (approximately US $0.8 million) and is included in short-term borrowings on the condensed consolidated balance sheet. The line of credit is due within a one year period.

~~Brazil Loans~~
~~Brazil has long-term borrowing~~On March 25, 2015 WF and WRCCB completed an agreement for WF to obtain a line of ~~R$ 39,506 (US $16,163) that are included~~credit for financing in ~~long-term portion~~the amount of ~~Canada~~RMB 8,000,000 (approximately US $1.3 million), with interest at 120% of the benchmark rate supplied by WRCCB (which is currently 5.35% per annum). The effective per annum interest rate is currently 6.42%. The loan is collateralized by inventory owned by WF. WRCCB had hired a professional firm to supervise WF’s inventory flow, for which WF paid RMB 46,000 (approximately US $7,475). The balance under this loan outstanding at April 30, 2015 was RMB 8,000,000 (approximately US $1.3 million) and ~~Brazil loans on the balance sheet, short-term borrowing of R$ 2.7 million (US $1.1 million) that are~~is included in short-term borrowings on the condensed consolidated balance ~~sheet, and accrued interest~~sheet. The line of ~~R$ 195,000 (US $79,781). Brazil loans are collateralized by receivables, officer guarantee, and customer contracts. Monthly interest rates range from 1.40% to 2.50%.~~credit is due within a one year period.

7. ~~Equity Financing~~
~~On October 29, 2014,~~Argentina Loan
In April 2015, the ~~Company completed~~Company’s Argentina subsidiary was granted a ~~private placement,~~$300,000 line of credit denominated in Argentine pesos, pursuant to a ~~Securities Purchase Agreement dated as~~standby letter of October 24, 2014, for the issuance and sale of 1,110,000 shares of its common stock, at a purchase price of $10.00 per share, to a number of institutional and other accredited investors, for gross proceeds of $11,100,000. Proceeds from the private placement, following the payment of offering-related expenses, were usedcredit granted by the ~~Company to fully repay its 12% subordinated term loan (the “Subordinated Debt”)~~parent company. There are several drawdowns each with ~~the Junior Lender in the approximate amount~~six month terms at an annual rate of $3.6 million. The early extinguishment of the Subordinated Debt, however, has resulted in a one-time pretax NON-CASH charge of approximately $1.6 million for the remaining unamortized OID on the Subordinated Debt and a pretax NON-CASH charge of approximately $0.6 million for the remaining unamortized fees paid at the closing of the June 2013 Subordinated Debt financing. The balance of the proceeds will continue to be used for working capital and general corporate purposes, including supporting the increased demand for the Company’s safety products due to the EBOLA crisis. Pending such usage, the Company has and intends to continue to temporarily pay down a portion of its Senior Debt with AloStar Bank of Commerce.34%.

In connection with the private placement, the Company entered into a Registration Rights Agreement with the investors on October 24, 2014 pursuant to which it is required to file a registration statement with the Securities and Exchange Commission to register the resale of the shares of common stock sold to the investors within 30 calendar days of the date of such agreement. Such registration statement was filed on November 21, 2014.
At the closing of the private placement, the Company paid Craig-Hallum Capital Partners LLC, the exclusive placement agent for the private placement, a cash fee of $777,000 (equal to 7% of the gross proceeds of the offering), and issued a five-year warrant that is immediately exercisable to purchase up to 55,500 shares of the Company’s common stock at an exercise price of $11.00 per share. At the closing there was approximately $132,000 in professional fees incurred. Based on the October 31, 2014 market value of $14.10 the intrinsic value was $3.10 per share.7. Major Supplier

8. ~~Major Supplier~~
No supplier accounted for more than 10% of cost of sales during the ~~nine-month~~three-month period ended ~~October 31,~~April 30, 2015 and 2014.

9. ~~Employee Stock Compensation~~14
8. Employee Stock Compensation
The Company has ~~three~~two main share-based payment plans: The Nonemployee ~~Directors~~Directors’ Option Plan (the ~~“Directors~~“Directors’ Plan”) ~~(expired in 2012)~~ and ~~two~~a Restricted Stock ~~Plans~~Plan (the ~~“2009 Equity Plan” and the~~ “2012 Equity Plan”). ~~Both the 2009 Equity Plan and the 2012 Equity Plan have identical structures.~~
The below table summarizes the main provisions of each of these plans:

Nature and terms
Nonemployee ~~Directors~~Director Stock Option Plan The plan provides for an automatic one-time grant of options to purchase 5,000 shares of common stock to each nonemployee director newly elected or appointed. Options are granted at not less than fair market value, become exercisable commencing six months from the date of grant and expire six years from the date of grant. In addition, all nonemployee directors re-elected to the Company’s Board of Directors at any annual meeting of the stockholders will automatically be granted additional options to purchase 1,000 shares of common stock on that date. Such plan expired at December 31, 2012 as to any new awards. Existing options will expire based on individual award dates.
Restricted Stock Plan –- employees Long-term incentive compensation three-year plan. Employees are granted potential share awards at the beginning of the three-year cycle at baseline, ~~and~~ maximum or zero amounts.  The level of award and final vesting is based on the Board of ~~Director’s~~Directors’ opinion as to the performance of the Company and management in the entire three-year cycle.  All vesting is three-year “cliff” vesting - there is no partial vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period, which approximates the performance period.
Restricted Stock Plan –- directors Long-term incentive ~~compensation three-year~~compensation-three-year plan. Directors are granted potential share awards at the beginning of the three-year cycle at baseline, ~~and~~ maximum or zero amounts. The level of award and final vesting is based on the Board of ~~Director’s~~Directors’ opinion as to the performance of the Company and management in the entire three-year cycle. All vesting is three-year “cliff” vesting - there is no partial vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period, which approximates the performance period.
Matching award program All participating employees are eligible to receive one share of restricted stock awarded for each two shares of Lakeland stock purchased on the open market. Such restricted shares are subject to three-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period, which approximates the performance period.
Bonus in stock program - employees All participating employees are eligible to elect to receive any cash bonus in shares of restricted stock.  Such restricted shares are subject to two-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year period. Since the employee is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount based on the grant date stock price.
Director fee in stock program All directors are eligible to elect to receive any director fees in shares of restricted stock.  Such restricted shares are subject to two-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year period.  Since the director is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount based on the grant date stock price, which approximates the performance period.

15
The following table represents our stock options granted, exercised and forfeited during the ~~nine-months~~three-months ended ~~October 31, 2014.~~April 30, 2015.

Stock Options Number of
Shares Weighted
Average
Exercise
Price per
Share Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value
Outstanding at January 31, 2014 24,000 $ 7.47 2.95 years ——
Granted during the nine-months ended October 31, 2014 —— —— —— ——
Forfeited during the nine-months ended October 31, 2014 2,000 $ 13.10 —— ——
Outstanding at October 31, 2014 22,000 $ 6.96 2.43 years $ 53,960
Exercisable at October 31, 2014 22,000 $ 6.96 2.43 years $ 53,960
Reserved for future issuance: ——
Directors’ Plan (expired on December 31, 2012)
Stock Options Number of Shares Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at January 31, 2015 17,000 $ 7.11 1.83 years $ 54,580
Granted during the three-months ended April 30, 2015 — — — —
Forfeited during the three-months ended April 30, 2015 (5,000 ) $ 6.21 — —
Outstanding at April 30, 2015 12,000 $ 7.48 2.26 years $ 24,070
Exercisable at April 30, 2015 12,000 $ 7.48 2.26 years $ 24,070
Reserved for future issuance:
Directors’ Plan (expired on December 31, 2012) 0

All stock-based option awards were fully vested at April 30, 2015 and January 31, 2015. There were no ~~exercises~~new grants during the ~~nine-months~~three months ended ~~October~~April 30, 2015, and this plan expired by its terms on December 31, ~~2014.~~2012.

~~Restricted Stock~~The 2009 Equity Plan and ~~Performance~~the 2012 Equity Plan
On June 17, 2009, the stockholders of the Company approved the 2009 Equity Plan. A total of 253,000 shares of restricted stock were authorized under this plan. On June 20, 2012, the stockholders of the Company authorized 310,000 shares under ~~the 2012~~a new restricted stock plan (the “2012 Equity ~~Plan.~~Plan”). Under these restricted stock plans, eligible employees and directors are awarded performance-based restricted shares of the ~~Company~~Company’s common stock. The amount recorded as expense for the performance-based grants of restricted stock are based upon an estimate made at the end of each reporting period as to the most probable outcome of this plan at the end of the three-year performance period (e.g., baseline, maximum or zero). In addition to the grants with vesting based solely on performance, certain awards pursuant to the plan have a time-based vesting requirement, under which awards vest from two to three years after grant issuance, subject to continuous employment and certain other conditions. Restricted stock has voting rights, and the underlying shares are not considered to be issued and outstanding until vested.

Under the 2009 Equity Incentive Plan, ~~the Company has issued 182,859 fully vested shares and there~~all grants have been vested. There are ~~zero shares~~no remaining unvested or ungranted shares available under the 2009 Restricted Stock Plan as of ~~October 31, 2014. The Company recognizes expense related to performance-based awards over the requisite service period using the straight-line attribution method based on the outcome that is probable.~~April 30, 2015.

Under the 2012 Equity Incentive Plan, the Company has issued ~~8,622~~53,556 fully vested shares as of ~~October 31, 2014.~~April 30, 2015. The Company has also granted ~~265,394~~244,497 of shares of unvested restricted stock ~~awards~~ as of ~~October 31, 2014, at~~April 30, 2015, assuming all maximum ~~performance level. All of these restricted stock~~ awards are ~~nonvested at October 31, 2014 (209,394~~achieved, (188,497 shares at “baseline”), and have a weighted average grant date fair value of ~~$6.02.~~$6.49 per share. The Company recognizes expense related to performance-based awards over the requisite service period using the straight-line attribution method based on the outcome that is probable.

As of ~~October 31, 2014,~~April 30, 2015, unrecognized stock-based compensation expense related to restricted stock awards totaled ~~$0 pursuant to the 2009 Equity Incentive Plan and $295,682~~$207,122 pursuant to the 2012 Equity Incentive Plan, before income taxes, based on the maximum performance award level, ~~net of~~less what has been charged to expense ~~which was set to maximum~~ on a cumulative basis through October 31, ~~2014.~~2012, which was set to zero. The cost of these nonvested awards is expected to be recognized over a weighted-average period of three years. The ~~Board has estimated the ultimate~~ performance ~~level at the expiration of the plan to be at maximum, and accordingly, the Company has taken a non-cash charge of $1.0 million reflecting the cumulative amortization of the value of the awarded shares~~ based on grant date market value. This amount reflects the amortization of the total original value at grant date of the restricted shares in question for the period June 20, 2012 through October 31, 2014. Such amount will result in an after-tax charge on earnings per shares ($0.11) for both the three months and nine months ending October 31, 2014. The performance-based awards are not considered stock equivalents for earnings per share (“EPS”) calculation purposes.
16

Stock-Based Compensation

The Company recognized total stock-based compensation costs of ~~$1,073,187~~$127,652 and ~~$179,002~~$24,364 for the ~~nine-months~~three-months ended ~~October 31,~~April 30, 2015 and 2014, ~~and 2013,~~ respectively, of which ~~$20,707~~$0 and ~~$13,881~~$18,896 result from the 2009 Equity Plan and ~~$1,052,480~~$127,652 and ~~$165,121~~$5,468 result from the 2012 Equity Plan for the periods ended ~~October 31,~~April 30, 2015 and 2014, ~~and 2013,~~ respectively, and $0 and $0, respectively, from the Director Option Plan. These amounts are reflected in ~~selling, general and administrative~~operating expenses. The total income tax benefit recognized for stock-based compensation arrangements was ~~$386,347~~$45,955 and ~~$64,441~~$8,771 for the years ended ~~October 31,~~April 30, 2015 and 2014, ~~and 2013,~~ respectively.

Shares under
2009 Equity Plan Outstanding
unvested
grants at
maximum at
beginning of
FY15 Granted
during FY15
through
October 31,
2014 Vested during
FY15 through
October 31,
2014 Forfeited
during FY15
through
October 31,
2014 Outstanding
unvested
grants at
maximum
at October
31, 2014
Restricted stock grants -employees —— —— —— —— ——
Shares under 2012 Equity Plan Outstanding Unvested Grants at Maximum at Beginning of FY16 Granted during
FY16 through April 30, 2015 Becoming Vested during FY16 through April 30, 2015 Forfeited during
FY16 through April 30, 2015 Outstanding Unvested Grants at Maximum at End of
April 30, 2015
Restricted stock grants – employees 147,500 — — — 147,500
Restricted stock grants - directors —— —— —— —— —— 49,500 — — — 49,500
Matching award program 3,000 —— 3,000 —— —— 17,600 — — — 17,600
Bonus in stock - employees —— —— —— —— —— 36,172 — 18,316 — 17,856
Retainer in stock - directors 1,116 —— 1,116 —— —— 13,634 1,514 3,107 — 12,041
Total restricted stock plan 4,116 —— 4,116 —— —— 264,406 1,514 21,423 — 244,497

Weighted average grant date fair value $ 8.66 —— $ 8.66 —— —— $ 6.27 $ 9.22 $ 4.06 — $ 6.49

9. Segment Data
Shares under
2012 Equity Plan Outstanding unvested grants at maximum at beginning of FY15 Granted during FY15 through October 31, 2014 Vested during FY15 through October 31, 2014 Forfeited during FY15 through October 31, 2014 Outstanding unvested grants at maximum at October 31, 2014
Restricted stock grants – employees 150,500 ----- ----- 3,000 147,500
Restricted stock grants – directors 49,500 ----- ----- ----- 49,500
Matching award program 3,000 ----- ----- ----- 3,000
Bonus in stock - employees 55,189 ----- 4,331 ----- 50,858
Retainer in stock - directors 14,101 4,726 4,291 ----- 14,536
Total restricted stock plan 272,290 4,726 8,622 3,000 265,394

Weighted average grant date fair value $ 6.00 $ 8.16 $ 6.25 $ 6.44 $ 6.02
10. ~~Segment Data~~Domestic and international sales from continuing operations are as follows in millions of dollars:

~~Domestic and international sales are as follows in millions of dollars:~~
Three Months Ended April 30,
2015 2014

Domestic $ 12.84 51.73 % $ 12.20 56.07 %
International 11.98 48.27 % 9.56 43.93 %
Total $ 24.82 100.00 % $ 21.76 100.00 %

Three Months Ended October 31, Nine Months Ended October 31,
2014 2013 2014 2013
Unaudited Unaudited
Domestic $ 13.00 51.8 % $ 11.47 50.3 % $ 37.16 50.8 % $ 35.65 51.6 %
International 12.09 48.2 % 11.32 49.7 % 36.05 49.2 % 33.51 48.4 %
Total $ 25.09 100.0 % $ 22.79 100.0 % $ 73.21 100.0 % $ 69.16 100.0 %
17

We manage our operations by evaluating each of our geographic locations. Our ~~North American~~US operations include our facilities in Alabama (primarily the distribution to customers of the bulk of our products and ~~manufacturing~~the manufacture of our chemical, ~~suit~~glove and ~~fire protective~~disposable products)~~, and Mexico (primarily disposable, glove, chemical suit, woven, and high visibility production)~~. We also maintain ~~two~~three manufacturing companies in China (primarily disposable ~~chemical~~ and ~~woven~~chemical suit production), a wovens manufacturing facility in Brazil which has been discontinued and a ~~small~~ manufacturing facility in ~~Argentina.~~Mexico (primarily disposable, glove and chemical suit production). Our China and Mexico facilities produce the majority of the Company’s products and China generates a significant portion of the Company’s revenues. The accounting policies of these operating entities are the same as those described in Note 1. We evaluate the performance of these entities based on operating profit, which is defined as income before income taxes, interest expense and other income and expenses. We have sales forces in Canada, Europe, Latin America, India, Russia, Kazakhstan and China, which sell and distribute products shipped from the United States, Mexico, Brazil (which has been discontinued) or China. The table below represents information about reported manufacturing segments for the ~~periods~~years noted therein:

Three Months Ended
October 31,
(in millions of dollars)
Unaudited Nine Months Ended
October 31,
(in millions of dollars)
Unaudited
2014 2013 2014 2013
Net Sales:
USA $ 14.76 $ 12.40 $ 40.47 $ 37.60
Other foreign 4.55 2.44 11.43 8.67
Europe (UK) 3.27 2.92 9.79 8.85
Mexico 0.85 0.90 2.62 2.35
China 9.96 11.17 33.28 32.53
Brazil 1.55 1.91 5.10 5.40
Corporate 0.35 0.37 1.52 1.46
Less intersegment sales (10.20 ) (9.32 ) (31.00 ) (27.70 )
Consolidated sales $ 25.09 $ 22.79 $ 73.21 $ 69.16
External Sales:
USA $ 13.00 $ 11.47 $ 37.16 $ 35.65
Other foreign 3.79 2.22 10.17 7.17
Europe (UK) 3.27 2.92 9.79 8.85
Mexico 0.38 0.38 1.08 0.88
China 3.10 3.90 9.91 11.29
Brazil 1.55 1.90 5.10 5.32
Consolidated external sales $ 25.09 $ 22.79 $ 73.21 $ 69.16
Intersegment Sales:
USA $ 1.76 $ 0.93 $ 3.31 $ 1.95
Other foreign 0.76 0.22 1.26 1.50
Mexico 0.47 0.52 1.54 1.47
China 6.86 7.27 23.37 21.24
Brazil —— 0.01 —— 0.08
Corporate 0.35 0.37 1.52 1.46
Consolidated intersegment sales $ 10.20 $ 9.32 $ 31.00 $ 27.70
Three Months Ended
October 31,
(in millions of dollars)
Unaudited Nine Months Ended
October 31,
(in millions of dollars)
Unaudited
2014 2013 2014 2013
Operating Profit (Loss):
USA $ 2.65 $ 1.07 $ 5.11 $ 4.20
Other foreign 0.16 (0.03 ) 0.40 ——
Europe (UK) 0.27 0.09 0.80 0.56
Mexico (0.05 ) 0.05 (0.26 ) (0.03 )
China 0.54 1.05 2.80 2.65
Brazil (0.59 ) (1.93 ) (1.19 ) (3.74 )
Corporate (2.35 ) (1.25 ) (5.06 ) (3.61 )
Less intersegment profit 0.07 (0.08 ) 0.15 ——
Consolidated operating profit (loss) $ 0.70 $ (1.03 ) $ 2.75 $ 0.03
Depreciation and Amortization Expense:
USA $ 0.04 $ 0.05 $ 0.13 $ 0.16
Other foreign 0.02 0.04 0.06 0.12
Europe (UK) 0.01 —— 0.02 0.02
Mexico 0.01 0.01 0.04 0.04
China 0.05 0.08 0.16 0.20
Brazil 0.04 0.09 0.18 0.28
Corporate 0.15 0.19 0.44 0.42
Less intersegment (0.01 ) (0.01 ) (0.02 ) (0.01 )
Consolidated depreciation & amortization expense $ 0.31 $ 0.45 $ 1.01 $ 1.23
Interest Expense:
USA (shown in Corporate) $ —— $ —— $ —— $ ——
Other foreign 0.03 0.02 0.05 0.08
Europe (UK) 0.01 0.02 0.03 0.04
Mexico —— 0.03 —— 0.07
China 0.03 —— 0.03 ——
Brazil 0.19 0.34 0.50 0.87
Corporate 0.44 0.33 1.41 0.74
Less intersegment —— (0.09 ) —— (0.41 )
Consolidated interest expense $ 0.70 $ 0.65 $ 2.02 $ 1.39
Income Tax Expense (Benefits):
USA (shown in Corporate) $ —— $ —— $ —— $ ——
Other foreign 0.17 0.15 0.33 0.29
Europe (UK) 0.06 0.02 0.16 0.04
Mexico 0.01 —— (0.06 ) 0.01
China 0.19 0.25 0.68 0.73
Corporate (0.16 ) (0.04 ) (0.16 ) (3.91 )
Less intersegment 0.01 (0.05 ) 0.03 (0.26 )
Consolidated income tax expense (benefit) $ 0.28 $ 0.33 $ 0.98 $ (3.10 )
Three Months Ended
April 30,
(in millions of dollars)
2015 2014
(Restated for discontinued operations)
Net Sales from continuing operations:
USA $ 13.65 $ 13.11
Other foreign 3.08 3.67
Europe (UK) 5.61 2.79
Mexico 0.86 0.92
China 11.26 10.70
Corporate 0.62 0.98
Less intersegment sales (10.26 ) (10.41 )
Consolidated sales $ 24.82 $ 21.76
External Sales from continuing operations:
USA $ 12.84 $ 12.20
Other foreign 3.01 3.45
Europe (UK) 5.60 2.79
Mexico 0.31 0.42
China 3.06 2.90
Consolidated external sales $ 24.82 $ 21.76
Intersegment Sales from continuing operations:
USA $ 0.81 $ 0.91
Other foreign 0.07 0.22
Europe (UK) 0.01 —
Mexico 0.55 0.50
China 8.20 7.80
Corporate 0.62 0.98
Consolidated intersegment sales $ 10.26 $ 10.41

October 31,
2014
(in millions of
dollars)
Unaudited January 31, 2014
(in millions of
dollars)
Unaudited
Total Assets:*
USA $ 34.50 $ 28.88
Other foreign 19.02 15.09
Europe (UK) 6.10 4.83
Mexico 3.90 3.73
China 30.46 30.12
India (1.29 ) (1.19 )
Brazil 10.63 6.92
Corporate (16.56 ) (4.63 )
Consolidated assets $ 86.76 $ 83.75
Property and Equipment:
USA $ 2.34 $ 2.42
Other foreign 1.96 2.06
Europe (UK) 0.08 0.06
Mexico 2.06 2.09
China 2.53 2.64
India 0.06 0.03
Brazil 1.74 1.86
Corporate 1.00 0.91
Consolidated property and equipment $ 11.77 $ 12.07
Capital Expenditures:
USA $ 0.04 $ 0.08
Other foreign 0.01 0.07
Europe (UK) 0.03 0.01
Mexico 0.03 0.01
China 0.08 0.44
India 0.02 ——
Brazil 0.01 0.09
Corporate 0.18 0.13
Consolidated capital expenditures $ 0.40 $ 0.83
Goodwill:
USA $ 0.87 $ 0.87
Consolidated goodwill $ 0.87 $ 0.87
18
Three Months Ended
April 30,
(in millions of dollars)
2015 2014
(Restated for discontinued operations)
Operating Profit (Loss) from continuing operations:
USA $ 2.57 $ 0.91
Other foreign (0.10 ) 0.17
Europe (UK) 1.79 0.21
Mexico (0.05 ) (0.02 )
China 0.77 0.96
Corporate (1.62 ) (1.33 )
Less intersegment profit (0.14 ) (0.04 )
Consolidated operating profit $ 3.22 $ 0.86
Depreciation and Amortization Expense from continuing operations:
USA $ 0.04 $ 0.04
Other foreign 0.02 0.03
Europe (UK) — —
Mexico 0.03 0.01
China 0.08 0.06
Corporate 0.10 0.16
Less intersegment (0.03 ) (0.01 )
Consolidated depreciation & amortization expense $ 0.24 $ 0.29
Interest Expense from continuing operations:
USA (shown in Corporate) $ — $ —
Other foreign 0.02 0.04
Europe (UK) — 0.01
Mexico — 0.02
China 0.04 (0.02 )
Corporate 0.12 0.49
Less intersegment — (0.05 )
Consolidated interest expense $ 0.18 $ 0.49
Income Tax Expense (Benefits) from continuing operations:
USA (shown in Corporate) $ — $ —
Other foreign 0.05 0.06
Europe (UK) 0.40 0.02
Mexico — (0.04 )
China 0.17 0.25
Corporate 0.30 (0.25 )
Less intersegment (0.03 ) (0.02 )
Consolidated income tax expense $ 0.89 $ 0.02
19
April 30, 2015
(in millions of dollars) January 31, 2015
(in millions of dollars)
Total Assets:*
USA $ 39.00 $ 36.35
Other foreign 18.00 18.00
Europe (UK) 6.87 6.75
Mexico 4.17 4.20
China 34.47 33.04
India (1.42 ) (1.31 )
Brazil (discontinued operations) 6.45 6.34
Corporate 70.72 70.33
Less intersegment (78.73 ) (80.49 )
Consolidated assets $ 99.53 $ 93.21
Total Assets Less Intersegment:*
USA $ 32.82 $ 30.14
Other foreign 10.22 10.32
Europe (UK) 6.87 6.75
Mexico 4.15 4.13
China 21.55 17.03
India 0.30 0.44
Brazil (discontinued operations) 6.45 6.33
Corporate 17.17 18.07
Consolidated assets $ 99.53 $ 93.21
Property and Equipment:
USA $ 2.28 $ 2.30
Other foreign 1.83 1.77
Europe (UK) 0.07 0.07
Mexico 2.16 2.17
China 2.74 2.70
India 0.04 0.05
Corporate 1.30 1.20
Less intersegment (0.11 ) (0.12 )
Consolidated property and equipment $ 10.31 $ 10.14
Capital Expenditures:
USA $ 0.03 $ 0.05
Other foreign 0.02 0.05
Europe (UK) — 0.03
Mexico — 0.03
China 0.11 0.31
India — 0.02
Corporate 0.15 0.39
Consolidated capital expenditures $ 0.31 $ 0.88
Goodwill:
USA $ 0.87 $ 0.87
Consolidated goodwill $ 0.87 $ 0.87

* Negative assets ~~and negative amounts in interest expense~~ reflect intersegment accounts eliminated in consolidation
20
~~11.~~10. Income Taxes
Income Tax ~~Audits~~Audits/Change in Accounting Estimate

The Company is subject to US federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions. The Company has received a final “No Change Letter” from the IRS for FY07 dated August 20, 2009. The Company has received notice from the IRS on March 21, 2011, that it will shortly commence an audit for the FY09 tax return. There have been no further communications from the IRS since. The Company has not had any recent US corporate income tax returns examined by the IRS. Returns for the year since 2011 are still open based on statutes of limitation only.

~~Our four major foreign tax jurisdictions are China, Brazil, UK and Canada.~~ Chinese tax authorities have performed limited reviews on all Chinese subsidiaries as of tax years 2008, 2009, 2010, 2011, 2012, 2013 and ~~2013~~2014 with no significant issues noted. We believe our tax positions are reasonably stated as of ~~October 31, 2014.~~April 30, 2015. On ~~August~~May 20, ~~2013,~~2015, Weifang Lakeland Safety Products Co., Ltd., one of our Chinese operations, was ~~notified~~visited by the local tax authority ~~that it would conduct an audit on income tax and transfer pricing and the tax inspector took all accounting documents of 2011, 2012, and 2013, back to the tax bureau. Management~~as a routine check. Following this visit, management believes there ~~will not be a~~is no material ~~exposure from these audits.~~ risk in our China tax position.
Our operations in the UK ~~have just become~~are profitable ~~on a cumulative basis~~ and ~~as such are now~~continue to be subject to UK taxation. ~~This is the initial year of taxability.~~ Management is not aware of any exposure in the UK.
Lakeland Protective Wear, Inc., our Canadian subsidiary, follows Canada tax regulatory framework recording its tax expense and tax deferred assets or liabilities. As of this statement filing date, we believe the Lakeland Protective Wear, Inc.’s tax situation is reasonably stated in accordance with accounting principles generally accepted in the United States of America, and we do not anticipate future tax liability.

The Company’s Brazilian subsidiary is currently under a tax audit, which raised some issues regarding the tax impact related to the merger held in 2008 and the goodwill resulting from the structure which was set up atby the Company's Brazilian counsel's suggestion. ~~This~~The structure used is relatively common in acquisitions of Brazilian operations made by non-Brazilian companies. In general, acquisitions with this structure have survived challenge by the taxing authorities in Brazil. The cumulative amount of tax benefits recognized on the Company’s books through ~~October 31, 2014,~~April 30, 2015, resulting from the tax deduction of the goodwill amortization is now zero, net of the deferred tax valuation reserve. This results from the goodwill which had been on the Brazilian books which, for Brazilian tax purposes, is eligible for tax write-off over a five-year period dating from November 2008. The Company’s Brazilian subsidiary has received notice from the Brazilian tax authorities of a claim totaling approximately US ~~$1.0~~$0.9 million (R$ ~~2,265,728)~~2,774,843) consisting of tax of approximately US ~~$127,000~~$0.1 million (R$ 280,416) and the remainder in interest and ~~penalty. Management believes it is probable it will ultimately prevail~~penalties. In February 2015, a court decision was reached in ~~this claim~~favor of the Company and as such no provision has been recorded.

In connection with the exit plan from Brazil, the Company claimed a worthless stock deduction which generated a tax benefit of approximately US $9.5 million, net of a US $2.9 million valuation allowance. While the Company and its tax advisors believe that this deduction is valid, there can be no assurance that the IRS will not challenge it and, if challenged, there is no assurance that the Company will prevail.
Except in Canada, ~~and partially in China,~~ it is our practice and intention to reinvest the earnings of our non-US subsidiaries in their operations. As of ~~October 31, 2014,~~April 30, 2015, the Company had not made a provision for US or additional foreign withholding taxes on approximately ~~$16.6~~$23.6 million of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in ~~duration.~~duration ($21.6 million at January 31, 2015). Generally, such amounts become subject to US taxation upon remittance of dividends and under certain other circumstances. If theses earnings were repatriated to the US, the deferred tax liability associated with these temporary differences would be approximately ~~$2.9~~$3.4 million at ~~October 31, 2014.~~April 30, 2015.

In China, a dividend of $1.3 million was declared and paid to the Company in July 2014 from the Company’s China subsidiary, Weifang Lakeland Safety Products Co., Ltd. (“Weifang”) and in August 2014, a dividend of $450,000 was declared from the Company’s China subsidiary, Weifang Meiyang Protective Products Co., Ltd. (“Meiyang”) and paid to the Company in October 2014. The Company’s Board of Directors has instituted a plan to pay annual dividends of $1.0 million to the Company from Weifang’s future profits and 33% of Meiyang’s future profits starting in the next fiscal year. All other retained earnings are expected to be reinvested indefinitely.
21

Change in Accounting Estimate/Valuation Allowance
We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. The valuation allowance was ~~zero~~$2,945,884 at ~~October 31, 2014~~April 30, 2015 and January 31, ~~2014.~~2015.

Income Tax Expense
Income tax expenses consist of federal, state and foreign income taxes. Income tax expenses were ~~$1.0~~$0.8 million for the ~~nine~~three months ended ~~October 31, 2014,~~April 30, 2015, as compared to an income tax ~~benefit~~expense of ~~$3.1~~$0 million for the ~~nine~~three months ended October 31, 2013. Income taxes included a non-cash charge of $77,000 for the dividend paid by Meiyang to the US in October 2014, a non-cash charge of $350,000 for the tax effect of the change in the performance level of the 2012 Restricted Stock plan from zero to maximum and $170,000 of non-cash charges in fiscal 2015 for additional US taxes on UK and Canada income. Income taxes also reflect the write-off of $1.6 million relating to the remaining unamortized original issue discount on the subordinated debt repayment which is not deductible for tax purposes.
April 30, 2014.

~~12.~~11. Derivative Instruments and Foreign Currency Exposure
The Company is exposed to foreign currency risk. InManagement has commenced a derivative instrument program to partially offset this risk by purchasing forward contracts to sell the ~~third quarter of FY14,~~Canadian Dollar and the ~~Company established a foreign exchange facility with Wells Fargo Bank, N.A.~~Euro other than the cash flow hedge discussed below. Such contracts are largely timed to expire with the last day of the fiscal quarter, with a new contract purchased on the first day of the following quarter, to match the operating cycle of the Company. ~~The Company has continued its currency hedging in China.~~ We designated the forward contracts as derivatives, but not as hedging instruments, with loss and gain recognized in current earnings. ~~In the nine-months ended October 31, 2014, the Company had a gain on foreign exchange in China of $9,260 included in operating expenses on the accompanying statement of operations.~~
The Company accounts for its foreign exchange derivative instruments by recognizing all derivatives as either assets or liabilities at fair value, which may result in additional volatility in both current period earnings and other comprehensive income as a result of recording recognized and unrecognized gains and losses from changes in the fair value of derivative ~~instruments.~~instruments

We have two types of derivatives to manage the risk of foreign currency ~~fluctuations.~~ fluctuations as noted below:.
We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies. Those forward contract derivatives, not designated as hedging instruments, are generally settled quarterly. Gain and loss on those forward contracts are included in current earnings. There were no outstanding forward contracts at ~~October 31, 2014~~April 30, 2015 or ~~2013.~~2014.

We enter ~~into~~ cash flow hedge contracts with financial institutions to manage our currency exposure on future cash payments denominated in foreign currencies. The effective portion of gain or loss on cash flow ~~hedges~~hedge is reported as a component of accumulated other comprehensive income. The notional amount of these contracts was ~~$2.3~~$3.3 million and ~~$0.0~~$2.5 million at ~~October 31,~~April 30, 2015 and 2014, ~~and 2013,~~ respectively. The corresponding asset and income ~~which is~~ recorded in the consolidated statements of other comprehensive income is $115,482 at April 30, 2015 and in April 30, 2014 the amount is immaterial to the consolidated financial ~~statements at October 31, 2014 and 2013.~~statements.

~~13.~~12. VAT Tax Issue in Brazil and Prior Period Adjustments

~~Please see footnote 10~~Asserted Claims and Prior Period Adjustments
VAT (i.e. Value Added Tax) tax in Brazil is at the state level. We commenced operations in Brazil in May 2008 through an acquisition of Qualytextil, S.A. (“QT”). At the time of the ~~Company’s Annual Report on Form 10-K~~acquisition, and going back to 2004, the acquired company used a port facility in a neighboring state (Recife-Pernambuco), rather than its own, in order to take advantage of incentives, in the form of a discounted VAT tax, to use such neighboring port facility. We continued this practice until April 2009. The practice was stopped largely for ~~the year ended January 31, 2014 for a more detailed discussion.~~
economic reasons, resulting from additional trucking costs and longer lead time. The Bahia state ~~tax~~ auditors (state of domicile for the Lakeland operations in Brazil) initially reviewed the period from 2004-2006 and filed ~~several claims~~a claim for unpaid VAT ~~taxes.~~taxes in October 2009. The ~~claims assert~~claim asserted that the state VAT taxes are owed to the state of domicile of the ultimate importer/user and disregarded the fact that the VAT taxes had already been paid to the neighboring state.

~~Once~~The audit notice claimed that the ~~arrangement~~taxes paid to Recife-Pernambuco should have been paid to Bahia in the amount of R$4.8 million and assessed fines and interest of an additional R$5.6 million for a total of R$10.4 million (approximately US$3.0 million, $3.5 million and $6.5 million, respectively based on exchange rates at the time of the claim).
22
Bahia had announced an amnesty for this tax whereby R$3.5 million (US$1.9 million) of the taxes claimed were paid by QT by the end of the month of May 2010, and the interest and penalties related thereto were forgiven. According to fiscal regulation of Brazil, R$2.1 million (US$1.1 million) of this amnesty payment has since been recouped as credits against future taxes due.
An audit for the 2007-2009 period has been completed by the State of Bahia. In October 2010, the Company received five claims for 2007-2009 from the State of Bahia, the largest of which was for taxes of R$6.2 (US$2.1) million and fines and interest currently at R$8.3 million (US$2.8 million), for a total of R$14.6 (US$4.9) million. The Company intends to defend itself through a regulatory process and wait for the next amnesty period. Of other claims, our attorney informs us that three claims totaling R$1.3 (US$0.4) million in respect of fines and penalties will likely be successfully defended based on state auditor misunderstanding.
Lakeland intends to apply for amnesty and make any necessary payments upon a forthcoming, anticipated amnesty periods imposed by the local Brazilian authorities. Of this R$6.2 (US$2.1) million claim, R$3.4 (US$1.1) million is eligible for future credit. The future credit amount had been recorded at the USD value at the exchange rate prevailing in 2010 when recorded, but has not been recorded on the books and have been adjusted due to open contingencies (see prior period adjustment for see on VAT taxes in Brazil below).
The Company has changed its strategy regarding the large VAT tax claim as a result of the current cash flow needs in Brazil. In February 2014, as had been anticipated, the administrative proceedings have ended and a switch to a formal judicial proceeding became required. The Company is presently attempting to negotiate a guarantee with the ~~Bahia State~~administrative level in the Tax ~~Department~~department whereby the Company would either pledge its inventory as collateral for the judicial deposit or alternately would agree to deposit into an escrow account with the court system a monthly judicial deposit of a negotiated percentage of its future sales in Brazil. The Company would then be able to avail itself of a later amnesty. Any amounts paid into the escrow would be available at such time to be applied to the amnesty payment. The Company believes it is more likely than not that it will have the cash from operations or the borrowing capacity at such time to fund such amnesty payment but no assurances can be given.
Such arrangement would result in a judicial tax claim filed against the Company for 20% greater than the total claim, or approximately US$5.1 million (R$15.4 million). Of this amount, only a portion of any amount paid into future amnesty would be eligible for future credit as discussed elsewhere in this note.
Once this arrangement is completed, the formal judicial process could take from 5 to 10 years. The Company believes there is a strong likelihood that another amnesty would be offered by the state prior to such completion.

The Company has accepted amnesty for a smaller claim (the fifth referenced above) which will result in 8eight monthly payments of about US ~~$19,000~~$14,000 (R$42,000) which reflects abatement of 80% of penalty and interest. An
Of three remaining claims, our attorney informs us that R$1.0 (US $0.3) million will be successfully defended based on a lapse of statute of limitations and R$0.3 (US $0.1) million based on state auditor misunderstanding. No accrual ~~of US $153,000~~ has been ~~charged to expense in Q4FY14 and US $82,000 (R$ 189,000) is included in Other Accrued Expenses on the consolidated balance sheet as of October 31, 2014.~~made for these items.

In December 2013, the Company learned of a different VAT tax claimed by the State of Sao Paulo for a tax in the amount of approximately US $45,000 and the total claim including interest and ~~penalty~~penalties totaling approximately US $200,000. In July 2014, management settled this claim for an amount of US $75,000 (R$172,000) net present value which will be paid in 120 monthly installments of R$4,500 (US $1,500) fixed with no interest or monetary depreciation. An amount of US $75,000 (R$ 172,000) has been charged to expense in ~~Q2FY14.~~Q2FY15.
Set forth below are the total amounts of potential tax liability from both the original and larger of the five secondary claims, the amount of payments already made into amnesty or scheduled for future payment, which are not eligible for future credit (essentially the discount allowed as an incentive by the neighboring state), less the amount of VAT taxes actually paid which are available as a credit and the amounts of the escrow released by one of the three sellers of the Brazilian company acquired by the Company. The foregoing forms the basis for the US$1.6 million charge to expense recorded by Lakeland in the first quarter of fiscal 2011.
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A table summarizing all four different VAT claims remaining open and their status is listed below:

Principal Principal Interest &
Penalty Total Approximate
for Totals Interest & Penalty Total
Approximate
for Totals
Loss
Possibility Strategy Collateral
R$ R$ R$ R$ US $ Loss Possibility Strategy Collateral R$ R$ US $
305,897 491,271 797,168 $ 352,000 Remote To await Judicial Process and negotiate judicial deposit New Land
573,457 1,098,475 1,671,932 737,000 Remote To await Judicial Process and negotiate judicial deposit Plant
6,209,836 6,653,585 12,863,421 5,673,000 Probable To await Judicial Process and negotiate judicial deposit -
402,071 770,133 1,172,204 517,000 Remote To await Judicial Process and negotiate judicial deposit New Land
7,491,261 9,013,464 16,504,725 $ 7,279,000
305,897 534,038 839,935 $ 280,577 Remote To await Judicial Process and negotiate judicial deposit New Land
573,457 1,337,933 1,911,390 $ 636,492 Remote To await Judicial Process and negotiate judicial deposit Plant
6,209,836 8,356,422 14,566,258 4,865,800 Probable To await Judicial Process and negotiate judicial deposit -
402,071 826,346 1,228,417 $ 410,347 Remote To await Judicial Process and negotiate judicial deposit New Land
7,491,261 11,054,740 18,546,000 $ 6,193,216

The R$ 6,209,836 for the larger VAT claim is intended to be paid into the next amnesty and as such is included on the condensed consolidated balance sheet as ~~a long-term liability~~liabilities of discontinued operations of US ~~$3,361,774~~$2,074,371 as of ~~October~~April 30, 2015.
Numbers may not add due to rounding.
Future Accounting for Funds
Following earlier payment into the amnesty program in 2010 and December 2013, a portion of the taxes were since recouped via credits against future taxes due. The Company does not expect any further charges to expense. Any future payment into amnesty has already been reflected on our books as a liability at January 31, ~~2014.~~2015 and April 30, 2015, along with potential future credits.

Balance Sheet Treatment in Brazil after Discontinued Operations
The Company has reflected the above items on its April 30, 2015, balance sheet as follows:
R$ millions US$ millions
Liabilities of discontinued operations Taxes payable 6.2 2.1
Prior Period Adjustment for Credit on VAT taxes in Brazil
In April 2010, the Company had recorded a credit of approximately R$3.4 million ($1.9 million at time of recording in 2010 and $1.3 million at exchange rates at January 31, 2015) arising on the payment of VAT taxes into the anticipated future amnesty. This credit results from the fact that these VAT taxes were paid to the neighboring state of Pernambuco and the State of Bahia is demanding payment in full to them even though a discounted amount of taxes had already been paid to Pernambuco and the credit is allowed for these paid taxes but against future taxes due.
It has since been determined that while the Company is entitled to such credit upon payment of the taxes into a future amnesty program, there is a possibility this credit could be challenged by a supervisor in the Bahia tax department. Based on research which failed to reveal any instances in which such a challenge has been made and prevailed, the Company believes that in the case of such challenge it is also remote that such challenge would prevail. Further, the Company paid an earlier claim for VAT taxes into an amnesty program in 2010 and received this credit which was utilized in full with no such challenge. However, since there is a contingency open as to the granting of this credit, (i.e. it is contingent upon paying the tax into a future amnesty program and the credit not being challenged by the Bahia tax department), however small, US GAAP prohibits this from being recorded as a “contingent asset” and therefore the Company has adjusted the condensed consolidated balance sheets as at January 31, 2013 and January 31, 2014, to eliminate this “contingent asset.”
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Prior Period Adjustment for exchange rates on VAT taxes in Brazil
The VAT liability was not entered on the Brazil subsidiary’s books in earlier years but was treated as a consolidation entry and, accordingly, was not adjusted by the changing foreign exchange rates. This will be a favorable adjustment of $0.7 million and will reduce the liability in US dollars. Accordingly, the Company has adjusted the condensed consolidated balance sheets as at January 31, 2013 and January 31, 2014.
It should be noted that these assets would have been eliminated in any case in the event of the effectuation of the proposed transfer of the Company’s Brazilian subsidiary to an officer of the Company. Further, this, along with the other prior period adjustment referred to above, may reduce the Company’s basis in its Brazil subsidiary to below zero. The Company has announced that its Board has approved the aforementioned transfer. In such case, if and when the transfer is consummated, it may result in reporting a gain on such sale to the extent of negative basis.
Upon a transfer of Lakeland Brazil the buyer would assume these VAT tax liabilities. As described in Note 17, the Company could, under certain circumstances, continue to be exposed to these liabilities.
~~14.~~13. Brazil Management and Share Purchase Agreement-Arbitration Award and Settlement Agreement

Lakeland Industries, Inc. and its wholly-owned subsidiary, Lakeland Brasil S.A. (“Lakeland ~~Brasil”~~Brazil” and, for the purposes of this footnote, together with ~~Lakeland Industries, Inc., “Lakeland”)~~the Company were parties to an arbitration proceeding in Brazil involving ~~Lakeland~~the Company and two former officers (the “former officers”) of Lakeland ~~Brasil.~~Brazil. On May 8, 2012, ~~Lakeland~~the Company received notice of an arbitral award in favor of the former officers.

On September 11, 2012, ~~Lakeland~~the Company and the former officers entered into a settlement agreement ~~(“Settlement~~(the “Settlement Agreement”) which fully and finally resolved all alleged outstanding claims against ~~Lakeland which are settled through~~the Company arising from the arbitration proceeding. Pursuant to the Settlement Agreement, the Company agreed to a payment schedule to the former officers with a balance remaining as of ~~October 31, 2014~~April 30, 2015 of ~~$4.25 million~~$3,750,000 in US dollars consisting of 1715 consecutive quarterly installments ~~remaining~~ of US $250,000 ending on December 31, ~~2018. Lakeland~~2018, net of imputed interest of $127,832 as shown on the condensed consolidated balance sheet at $2,636,523, net of current maturity of $1,000,000. The Company is current with all obligations pursuant to ~~the~~this Settlement Agreement. There is no interest payable. This amount is shown on the accompanying consolidated balance sheet as $1,000,000 current maturity of arbitration settlement and $3,103,784 long-term portion ($174,351 of imputed interest).

In addition, pursuant to the Settlement Agreement, as additional security for payment of the ~~Settlement Amount,~~settlement amount, Lakeland ~~Brasil~~Brazil agreed to grant the former officers a second mortgage interest on certain of its property in Brazil, which mortgage is expressly behind the lien securing the payment of tax debts to a state within Brazil related to certain notices of tax assessment on such property. ~~Lakeland~~The Company also agreed to become a co-obligor, in lieu of a guarantor, for payment of the ~~Settlement Amount.~~settlement amount.
On March 9, 2015, Lakeland Brazil changed its legal form to a Limitada and changed its name to Lake Brasil Industria E Comercio de Roupas E Equipamentos de Protecao Individual LTDA.

~~15. Lakeland Brazil Consulting Agreement~~
Lakeland Brasil S.A. (“Lakeland Brazil”), a wholly-owned subsidiary of the Company, and Multiplica SoluçõesEmpresariais Ltda. (“Consultant”), a private equity turnaround specialist in Brazil, have entered into a Business Consultancy Agreement (the “Consultancy Agreement”), effective as of August 27, 2014 (the “Effective Date”). Under the Consultancy Agreement, among other things, Consultant shall provide Lakeland Brazil with assistance in securing financing, which financing may include loan guarantees by Consultant to various financial institutions on behalf of Lakeland Brazil, structuring and cash flow management services, assistance in negotiation of VAT tax issues, and placing a full-time financial analyst at the office of Lakeland Brazil. The Consulting Agreement also provides for the formation of a Managing Committee, consisting of one representative of Lakeland Brazil and one representative of Consultant. The Managing Committee discusses and makes determinations of strategies relating to payment of invoices, financing of accounts receivable, factoring, and negotiations with suppliers and banks. The term of the Consultancy Agreement is twelve (12) months commencing as of the Effective Date and may be extended for an additional twelve (12) months upon agreement of the parties, subject to earlier termination as provided therein. The Effective Date was triggered by Lakeland Brazil’s securing several financial lending facilities with Brazilian lenders that is collateralized by the assets of Consultant. The proceeds of the lending facility are being used by Lakeland Brazil to alleviate cash flow constraints.
Pursuant to the Consultancy Agreement, Consultant shall be paid the greater of (i) R$25,000 (Twenty Five Thousand reals) (approximately US $11,000) per month or (ii) 10% (ten percent) of earnings before interest, taxes, depreciation, and amortization of Lakeland Brazil, calculated as of the last day of each calendar quarter in accordance with the Consultancy Agreement. In addition, if during the term of the Consultancy Agreement there is a sale of all of the outstanding capital stock of Lakeland Brazil, Consultant shall be entitled to a commission of 10% of the Net Proceeds (as such term is defined in the Consultancy Agreement) of such sale transaction. The financial analyst shall be paid a fee of R$12,000 (Twelve Thousand reals) (approximately US $5,000) per month.
The financial obligations and other agreements and covenants of Lakeland Brazil or the Company relating to the Company’s current financing arrangement with Alostar Bank are not in any way be implicated or otherwise affected by the provisions of the Consultancy Agreement.
~~16.~~14. Goodwill

There was no ~~change in the carrying amount~~impairment of goodwill during Q3Q1 fiscal year ~~2015.~~2016.
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~~17.~~15. Recent Accounting Pronouncements

The Company considers the applicability and impact of all accounting standards updates (ASUs). No recent accounting pronouncement is expected to have a material impact on the consolidated financial statements.

~~18.~~16. Litigation

~~From time~~The Company is involved in various litigation proceedings, in addition to ~~time, we are a party to litigation arising in the ordinary course of our business. Other than the proceedings related to the VAT tax issue~~those described in Note ~~13, we are~~10 of the financial statements of the Company’s Form 10-K filed May 18, 2015 for the year ended January 31, 2015, arising during the normal course of business which, though in the opinion of the management of the Company, will 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~~the Company’s financial position and results of operations ~~financial condition~~ or cash ~~flows.~~flows; however, there can be no assurance as to the ultimate outcome of these matters.
17. Discontinued Operations
Potential Transfer of the Company’s Brazilian Operations
Discontinued operations

On ~~June 26, 2014,~~April 29, 2015, the Board of Directors of Lakeland ~~Brazil,~~Industries, Inc. determined to exit the Brazilian market. The Company’s Brazilian operations have been unprofitable over the last several years. After extensively considering a ~~wholly-owned subsidiary~~number of ~~the Company, received notice of a court judgment entered against it in a labor proceeding in Brazil in the amount of approximately US $1,086,000. Based on~~options and the advice of Brazilian legal counsel, ~~handling~~ the ~~action,~~Board of Directors approved a transfer of the Company’s wholly-owned Brazilian subsidiary, Lakeland Brazil to a current officer of Lakeland Brazil, subject to successful negotiation and entry into a definitive agreement. It is intended that the transfer involve the assumption of a substantial amount of liabilities by the transferee and additional funding from the Company. In order to effectuate a transfer and aid the transferee to meet its liabilities, it is anticipated the Company ~~had~~would contribute funding of approximately US $1,900,000 to the transferee, subject to possible partial recoupment through a land sale. The transfer has been approved by the Company’s senior lender, Alostar Bank of Commerce.
The Company expects that the transfer of Lakeland Brazil will occur during the second quarter of fiscal 2016. However, there can be no assurances that the transfer will be successfully consummated. The Company currently estimates that it will incur total pre-tax exit and disposal costs of approximately US $2.2 million, consisting of the aforementioned approximately US $1,900,000 of funding to the transferee in connection with the transfer of Lakeland Brazil and approximately US $300,000 for legal and accounting fees and expenses. The foregoing are estimates only. Actual amounts will not ~~anticipated a judgment~~be known until the Company has fully implemented the proposed transfer transaction. Even after the transfer, the Company may continue to be ~~entered against~~exposed to certain liabilities arising in connection with the prior operations of Lakeland Brazil, including, without limitation, from lawsuits pending in ~~this proceeding, if at all, in excess of US $45,000 (R$ 100,000), which amount was deemed not material and therefore not previously disclosed.~~
~~Lakeland Brazil is working with, and relying upon~~ the ~~advice of, legal counsel and accountants~~labor courts in Brazil and ~~intends~~VAT taxes, as more fully described in the Company’s annual report on Form 10-K for the fiscal year ended January 31, 2015. The Company understands that under the laws of Brazil, a concept of fraudulent bankruptcy exists, which may hold a parent company liable for the liabilities of its Brazilian subsidiary in the event some level of fraud or misconduct is shown during the period that the parent company owned the subsidiary. While the Company believes that there has been no such fraud or misconduct, there can be no assurance that the courts of Brazil will not make such a finding nonetheless. The risk of exposure to ~~appeal~~ the ~~judgment on~~Company substantially diminishes if the ~~basis that, among other things,~~transferee continues to operate the ~~judgment is mathematically incorrect.~~Brazilian subsidiary for a period of at least two years, as the risk of a finding of a fraudulent bankruptcy lessens and pre-sale liabilities are paid off.

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~~Based on review~~
The following tables summarize the results of the ~~case with our new legal counsel~~Brazil business included in the consolidated statement of income for the three months ended April 30, 2015 and ~~based upon their assessments~~2014, and balance sheets as of ~~our likelihood to prevail on appeal, the Company has taken a charge to earnings in fiscal~~April 30, 2015 ~~of US $380,000, which is our estimate of what the outcome will ultimately be on this case.~~and January 31, 2015 as discontinued operations.

Balance Sheet
(000's) (000's)
April 30, 2015 January 31, 2015
Assets of discontinued operations:
Cash $ 12 $ 53
Accounts receivable 622 888
Inventory 2,979 3,216
Other current assets 1,495 634
Property/Equipment held for sale
1,339 1,544
Total assets of discontinued operations 6,447 6,335
Liabilities of discontinued operations:
Accounts payable 467 651
Accrued compensation and benefits 1,361 1,739
Other accrued expenses 1,901 1,163
Short term borrowings 630 688
Other liabilities 2,333 2,333
Total liabilities of discontinued operations 6,692 6,574
Statement of Operations
(000's) (000's)
April 30, 2015 April 30, 2014
Net sales from discontinued operations $ 444 $ 1,749
Cost of goods sold from discontinued operations 412 1,154
Gross profit from discontinued operations 32 595
Operating expense from discontinued operations 484 871
Operating loss from discontinued operations (452 ) (276 )
Other, net from discontinued operations (479 ) (78 )
Loss from discontinued operations before income tax (931 ) (354 )
Net loss from discontinued operations $ (931 ) $ (354 )
~~19. Brazil Restructuring and~~
Summary Cash Flow Statement
(000's) (000's)
April 30, 2015 April 30, 2014
Net cash used in operating activities $ (587 ) $ (570 )
Net cash used in investing activities — (2 )
Net cash provided by financing activities 552 572
Net effect on cash of FX variations (6 ) —
Net increase in cash and cash equivalents (41 ) —
Cash and cash equivalents at beginning of year 53 —
Cash and cash equivalents at end of year $ 12 $ —
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18. Subsequent Event

~~Management currently intends to restructure its operations in Brazil because~~In June 2015, Alostar Bank of ~~its failure to progress as planned to profitability.~~
~~We intend to close~~Commerce, the ~~facility in Salvador, Brazil, sell~~Company's lender, amended the ~~real estate and then sell off the remaining old corporation and/or its assets together or separately.~~

~~When complete, these changes should result in a substantial pretax restructuring charge and is expected~~loan agreement to allow ~~a tax deduction in~~for the ~~USA. Such charges are not expected to generate a net loss after taxes and may result in a net gain after taxes in view of the anticipated tax benefit.~~
We expect this should be consummated anywhere from Q4 FY15 through Q2 FY16, however these negotiations will be complex and may require more time than anticipated in order to maximize shareholder value.
~~In connection with the restructuring plan, we plan to create two new corporations potentially relocating them to two different states in~~ Brazil that have more advantageous tax policy, more competitive freight rates, and are located closer to our customer base. In so doing we believe we will be able to further reduce operational overhead and improve customer service. We expect one company to import and sell disposable and chemical garments; the other to import and manufacture fire and FR garments.exit plan.
~~The proposed restructuring is subject to a number of factors, including without limitation, future operating results in Brazil and the degree of success of selling assets.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Form 10-Q 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
We manufacture and sell a comprehensive line of safety garments and accessories for the ~~global~~ industrial and public protective clothing ~~markets.~~market. Our products are sold by our in-house customer service group, our regional sales ~~force~~managers and independent sales representatives to a network of over 1,200 North American safety and mill supply ~~distributors, end-users, and distributors internationally.~~distributors. These distributors in turn supply end user industrial customers, such as integrated oil, ~~utilities,~~ chemical/petrochemical, utilities, automobile, steel, glass, construction, smelting, munition plants, janitorial, pharmaceutical, mortuaries and high technology electronics ~~manufacturers.~~manufacturers, as well as scientific and medical laboratories. In addition, we supply federal, state and local governmental agencies and departments, ~~domestically and internationally,~~ such as ~~municipal~~ fire and ~~police departments,~~law enforcement, airport crash rescue units, the ~~military,~~Department of Defense, the Department of Homeland Security and the Centers for Disease ~~Control~~Control. Internationally sales are to a mixture of end users directly and ~~state~~in industrial distributors depending on the particular country market. Sales are made to more than 40 foreign countries but are primarily in China, European Economic Community (“EEC”), Canada, Brazil, Chile, Argentina, Russia, Argentina, Colombia, Ecuador and ~~privately owned utilities and integrated oil companies.~~Southeast Asia.

We have operated facilities in Mexico since 1995, in China since 1996 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 of America 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. Our net sales from continuing operations attributable to customers outside the United States of America were ~~$12.1~~$11.98 million and ~~$11.3~~$9.56 million for the three months ended ~~October 31,~~April 30, 2015 and 2014, ~~and October 31, 2013,~~ respectively.

Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our audited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our ~~consolidated~~ 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 ~~condensed~~ consolidated financial statements.

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.
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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, 2014, the Company implemented a standardized policy for calculating slow-moving inventory outside the US. Previously, the Company wrote-down the inventory value on an individual product analysis basis.
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 ~~collectibility~~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~~carryforwards 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 tax positions that meet a “more likely than not” minimum recognition threshold.

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 (“US 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.
2729

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~~Canadian Real Estate, the Canadian dollar; the Argentina operation, the Argentine Peso, and the ~~Russia~~Russian 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.~~required in future periods. We maintain separate insurance to cover the excess liability over set single claim amounts and aggregate annual claim amounts.
Loss Contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been or is probable of being incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s ~~condensed~~ consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

Significant Balance Sheet Fluctuation ~~October 31, 2014,~~April 30, 2015, As Compared to January 31, ~~2014~~2015

Cash increased by ~~$2.5~~$2.0 million ~~borrowings~~as the Company built excess cash in its Chinese manufacturing subsidiary, rather than repaying debt, in anticipation of a planned dividend to the Company declared and paid in May 2015. Borrowings under the revolving credit facility ~~decreased~~increased by ~~$7.3~~$3.0 million ~~and subordinated debt, net~~as the Company prepared for the restructuring in Brazil. Inventory of OID decreased by $1.5 million due to the completion of the equity private placement in October 2014, a portion of the proceeds of which were used to fully repay the Company’s subordinated debt and to temporarily pay down a portion of the Company’s senior revolving credit facility. Inventorycontinuing operations net of reserves had ~~a decrease~~an increase of ~~$1.0 million.~~$2.4 million as the Company continued to stock for the Ebola crises response and the heavy volume normally associated with the second quarter. Accounts receivable increased ~~$1.3~~$1.5 million primarily due to sales volume in the UK and increased volume in chemical and disposable sales in the US. ~~Prepaid income tax~~Accounts payable increased ~~$1.0~~$0.7 million ~~for tax refunds receivable~~ in ~~Latin America~~the USA and the ~~UK. Intangibles, prepaid bank fees~~UK as a normal course of business. Accrued compensation and ~~other assets, net~~benefits decreased ~~$1.0~~$0.3 million primarily due to ~~the early extinguishment of the subordinated debt and the corresponding write off of prepaid bank fees. Accounts payable increased $1.3 million for rebates payable~~overtime reflected in payroll in the ~~USA~~China manufacturing facilities in the fourth quarter of FY15 and other accrued on a calendar year basis, Mexico accounts payable related to Mexico national sales and China purchases resulting from an increase in production capacity to meet worldwide sales requirements. Accrued compensation and benefitsexpenses increased ~~$1.2~~$0.3 million ~~primarily~~ as a result of ~~payroll~~professional fee accruals in ~~Brazil for a labor dispute~~corporate and ~~standardization of payroll accruals for international subsidiaries. Other accrued expenses increased $1.0 million due to taxes payable~~an increase in freight and customs accrual in the UK and Brazil. Short term borrowing increased $1.1 million mainly as China increased production capacity to meet worldwide sales requirements and where extended payment terms with suppliers are negotiable.UK.

2830

Three Months ended ~~October 31, 2014,~~April 30, 2015, As Compared to the Three Months Ended ~~October 31, 2013~~April 30, 2014

Net Sales.Net sales from continuing operations increased to ~~$25.1~~$24.8 million for the three months ended ~~October 31, 2014~~April 30, 2015 compared to ~~$22.8~~$21.8 million for the three months ended ~~October 31, 2013.~~April 30, 2014, an increase of 14%. Sales in the USA increased ~~$2.3~~$2.6 million or 22% due primarily to the strong sales levels in the disposables and chemical divisions related to the Company’s response to the Ebola crisis. ~~In view of the arising need for protective clothing for persons that may potentially be exposed to the Ebola virus,~~ USA sales of disposables increased by ~~$1.9~~$0.5 million and chemical sales increased ~~$0.8~~$0.6 million. Wovens ~~sales increased $0.1 million while~~and fire protection sales combined decreased $0.5 million, glove sales decreased $0.1 million and reflective sales ~~decreased by $0.3 million as a result of the initial conversion volume for one large utility last year which is not replacement orders.~~remained level. Sales in China and to the Asia Pacific Rim were ~~down $1.2~~up $0.2 million or 10.9% due to production capacity and timing issues as Company sales were prioritized over external sales during the Ebola crisis. Other contributing factors that reduced China sales revenue were strategic shifts in woven manufacturing from China to other facilities, a shift in China direct billing into the European market to European billing and a general economic weakness in Australia and corresponding sales into that market.5%. Canada sales increased by ~~$0.7~~$0.1 million or ~~66%~~8% and UK sales increased by ~~$0.4~~$2.8 million or ~~12.0%~~101% mostly due to the Company’s Ebola sales. Russia and Kazakhstan sales combined ~~increased~~decreased by $0.2 million or ~~45.5%~~47% as ~~these locations continue to grow.~~the economy experienced negative currency fluctuations and Latin America sales ~~increased $0.9~~decreased $0.6 million or ~~97.3%, primarily~~33% due to an ~~improvement in the Company’s ability~~inability to clear raw materials purchases through Argentine customs. ~~Sales in Brazil decreased $0.4 million due to manufacturing constraints associated with low cash flow.~~ Numbers may not add due to rounding. The increase in sales of Company protective products arising from the Ebola crisis began late in the quarter ended October 31, 2014. Based on orders and sales to date, the Company expects that a greater number of such additive sales will occur in the quarter ended January 31, 2015, and potentially thereafter depending on when the crisis ceases and the ability of the Company to secure additional orders. The Company has substantially increased its capacity to produce these protective garments.

Gross Profit.Gross profit from continuing operations increased ~~$3.6~~$2.8 million, or ~~70.7%~~43%, to ~~$8.6~~$9.3 million for the three months ended ~~October 31, 2014,~~April 30, 2015, from ~~$5.0~~$6.5 million for the three months ended ~~October 31, 2013.~~April 30, 2014. Gross profit as a percentage of net sales increased to ~~34.3%~~37.4% for the three months ended ~~October 31, 2014,~~April 30, 2015, from ~~22.1%~~29.9% for the three months ended ~~October 31, 2013.~~April 30, 2014. Major factors driving the changes in gross margins were:

· Disposables gross margin increased by ~~7.5~~10 percentage points as the Company implemented a price increase, costs were held steady and strong sales were generated in response to the Ebola crisis.
· Chemical gross margin increased by 6 percentage points as the Company implemented a price increase, costs were held steady and strong sales were generated in response to the Ebola crisis.
· Wovens gross margin ~~increased 20.1~~remained level as sales were flat.
· Fire protection gross margin decreased 18 percentage points ~~over a very weak third quarter in the previous year resulting from production inefficiencies that have been normalized year~~due to ~~date.~~low sales volume and product mix.
· Reflective gross margins increased ~~15.6~~35 percentage points assince the Company closed the USA facility ~~was closed~~in the first quarter of FY15 and production was moved to our lower cost Mexico ~~facility.~~
· ~~Canada gross margins increased by 7.5 percentage points resulting from a change in the sales mix and strong sales in response to the Ebola crisis.~~facility with normalized production.
· UK gross margins increased ~~2.0~~15 percentage points as a result of strong sales associated with the Ebola crisis response, product mix and modest price increases for major customers.
· Brazil’s gross margins improved 71.5 percentage points as we continue to address manufacturing inefficiencies continue to be addressed and sales and operations are stabilized along with reserves taken in the prior year.
· Chile’s gross margin ~~increased 1.6~~decreased 35 percentage points primarily as a result of very ~~strong~~weak sales volume and ~~steady costs.~~sale of reserve items at a discount.
· Argentina’s gross margin increased 13 percentage points due to product mix.
· Russia’s gross margin increased ~~16.4~~10 percentage points asdue to product mix and level costs though volume ~~increased and costs were held level.~~decreased.

Operating Expense.Operating expenses of continuing operations increased ~~$1.8 million, or 30.3%, to $7.9~~from $5.6 million for the three months ended ~~October 31,~~April 30, 2014 ~~from~~to $6.1 million for the three months ended ~~October 31, 2013.~~April 30, 2015. Operating expenses as a percentage of net sales was ~~31.6%~~24.4% for the three months ended ~~October 31, 2014 up~~April 30, 2015 down from ~~26.7%~~25.9% for the three months ended ~~October 31, 2013.~~April 30, 2014. The ~~primary~~main factors ~~comprising this increase were a $1.0 million noncash charge~~ for the ~~tax effect of the change~~increase in ~~the performance level of the 2012 Restricted Stock Plan from zero~~operating expenses is due to ~~maximum,~~ a ~~$0.3~~$0.2 million increase in ~~commissions as~~freight, a ~~result of strong sales volume and a $0.4~~$0.1 million increase in equity compensation and a $0.1 million increase in foreign currency ~~fluctuation expense in the UK, Latin America and Brazil.~~fluctuations.
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Operating Profit. Operating profit from continuing operations increased to a profit of ~~$0.7~~$3.2 million for the three months ended ~~October 31, 2014,~~April 30, 2015, from ~~$(1.0)~~$0.9 million for the three months ended ~~October 31, 2013,~~April 30, 2014, mainly as a result of strong sales volume and significantly improved gross profit margins. Operating margins were ~~2.8%~~13.0% for the three months ended ~~October 31, 2014,~~April 30, 2015, compared to ~~(4.5%)~~4.0% for the three months ended ~~October 31, 2013.~~April 30, 2014.

Interest Expense. Interest expenses ~~increased $0.1~~from continuing operations decreased $0.3 million to ~~$0.7~~$0.2 million for the three months ended ~~October 31, 2014,~~April 30, 2015, from ~~$0.6~~$0.5 million for the three months ended ~~October 31, 2013, due to higher balances outstanding in the USA and more borrowing in Brazil at higher local interest rates currently prevailing. As~~April 30, 2014, as a result of the payoff of the Company’s subordinated debt and temporary reduction of senior debt from the proceeds of the Company’s October 2014 equity ~~financing, current interest expense has been substantially reduced.~~financing.
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Income Tax Expense. Income tax expense consists of federal, state and foreign income taxes. Income tax expenses from continuing operations were ~~$0.3~~$0.9 million for the three months ended ~~October 31, 2014,~~April 30, 2015, as compared to an income tax expense of ~~$0.3~~$0.0 million for the three months ended October 31, 2013. Income taxes included a noncash charge of $77,000 for the dividend paid by Meiyang to the US in October 2014, a noncash charge of $350,000 for the tax effect of the change in the performance level of the 2012 Restricted Stock plan from zero to maximum and $170,000 of noncash charges in fiscal 2015 for additional US taxes on UK and Canada income. Income taxes also reflect the write-off of $1.6 million relating to the remaining unamortized original issue discount on the subordinated debt repayment which is not deductible for tax purposes.
April 30, 2014.

~~Net Loss~~Discontinued Operations. ~~Net loss~~Loss from discontinued operations increased ~~$(0.7)~~from $0.4 million to ~~$(2.5)~~$0.9 million this year mainly due to cash constraints impacting the sales volume of Lakeland Brazil.
Net Income. Net income from continuing operations increased $1.8 million to $2.2 million for the three months ended ~~October 31, 2014~~April 30, 2015 from ~~$(1.8)~~$0.3 million for the three month ended April 30, 2014. The net income for the three months ended ~~October 31, 2013. The net loss for the three months ended October 31, 2014~~April 30, 2015 resulted from ~~a $2.3 million charge to reflect~~strong sales volume in the ~~write-off of OID~~USA and ~~unamortized fees resulting~~the UK from the ~~repayment of the~~ Company’s subordinated debt in October 2014, a loss of $0.7 million from operations in Brazil and a noncash charge of $0.7 million net of tax for the change in the performance level of the 2012 Restricted Stock Plan from zero to maximum. In the quarter ended October 31, 2013, the loss from operations in Brazil was $2.1 million.
~~Nine Months ended October 31, 2014, As Compared~~response to the ~~Nine Months Ended October 31, 2013~~
~~Net Sales~~.Net sales increased $4.0 million, or 5.9%, to $73.2 million for the nine months ended October 31, 2014, from $69.2 million for the nine months ended October 31, 2013. Sales in China and to the Asia Pacific Rim increased by $2.4 million or 7.8% excluding those previous year sales from our Qingdao facility which was sold in June 2013. China sales increased primarily due to growth in the Asia Pacific and China markets. UK sales increased by $0.9 million, or 10.7%. Russia and Kazakhstan sales combined increased $0.2 million or 12.6% as these locations continue to grow. Latin America sales increased $2.0 million, or 77.6%, primarily due to a large sale of fire gear in Ecuador. US domestic sales of disposables increased by $2.9 million and chemical sales increased by $0.2 million mainly due to sales volume associated with the Company’s Ebola crisis response, fire protection sales increased $0.9 million as a result of the introduction of new products into the market place, wovens sales decreased $0.5 million and reflective sales decreased by $0.6 million primarily due to the initial conversion volume for one large utility last year which is now replacement sales, for an overall sales gain in the US of $2.9 million, or 7.6%. Sales in Brazil have stabilized under new management but were $0.3 million less than prior year sales. Numbers may not add due to rounding.
~~Gross Profit~~.Gross profit increased $5.2 million, or 27.9%, to $23.8 million for the nine months ended October 31, 2014, from $18.6 million for the nine months ended October 31, 2013. Gross profit as a percentage of net sales increased to 32.5% for the nine months ended October 31, 2014, from 26.9% for the nine months ended October 31, 2013. Major factors driving the changes in gross margins were:
· ~~Disposables gross margin remained relatively level at 26.8% as compared to last year of 27.6%.~~
· ~~Fyrepel gross margin increased by 5.1 percentage points due to higher sales volume.~~
· ~~Gloves gross margin reflects a large sale of the remaining reserved inventory of Nitrosol gloves.~~
· ~~Chemical gross margin decreased by 3.7 percentage points resulting from a different sales mix~~
· ~~Wovens gross margin increased 6.1 percentage points over a very weak third quarter in the previous year resulting from production inefficiencies that have been normalized year to date.~~
· ~~UK gross margin was up 1.8 percentage points reflecting higher volume and improved sales mix.~~
· ~~Reflective gross margins were impacted by a $0.2 million one-time charge for plant relocation.~~
· Brazil gross margins increased by 40.4 percentage points resulting from resuming normal sales compared with distress pricing and major inventory reserves taken in the previous year and continuing major cost cutting.
· ~~Chile gross margin improved by 19.2 percentage points reflecting a large sale to a fire department in Ecuador.~~
~~Operating Expenses.~~ Operating expenses increased $2.4 million, or 13.3%, to $21.0 million for the nine months ended October 31, 2014 from $18.6 million for the nine months ended October 31, 2013. Operating expenses as a percentage of net sales was 28.8% for the nine months ended October 31, 2014 up from 26.9% for the nine months ended October 31, 2013. The primary factors comprising this increase were a $1.0 million noncash charge for the change in the performance level of the 2012 Restricted Stock Plan from zero to maximum, a $0.4 million increase in commission expense resulting from higher volume, a $0.4 million increase in administrative salaries resulting from additional personnel in US, Mexico, UK and Canada for marketing and sales support and three new sales hires in Mexico, and a $0.7 million increase in foreign currency fluctuations in Argentina, Brazil and the UK.
~~Operating Profit~~. Operating profit increased to a profit of $2.7 million for the nine months ended October 31, 2014, from $0.0 million for the nine months ended October 31, 2013, mainly as a result of a significant improvement in gross profit margins, improvement of the Brazilian operations resulting from new management’s efforts in cost cutting and operating efficiencies, overall improvement in worldwide operations and strong sales volume. Operating margins were 3.8% for the nine months ended October 31, 2014, compared to 0.1% for the nine months ended October 31, 2013.
~~Interest Expenses~~. Interest expenses increased $0.6 million to $2.0 million for the nine months ended October 31, 2014, from $1.4 million for the nine months ended October 31, 2013, due to higher balances outstanding in the US and increased borrowing in Brazil at higher local interest rates currently prevailing. Also included in interest expense for fiscal 2015 is a non-cash charge of approximately $0.3 million of amortization of OID on the Subordinated Debt.
~~Income Tax Expense~~. Income tax expenses consist of federal, state and foreign income taxes. Income tax expenses were $1.0 million for the nine months ended October 31, 2014, as compared to an income tax benefit of $3.1 million for the nine months ended October 31, 2013. Income taxes included a non-cash charge of $325,000 for the dividend paid by Weifang its Chinese subsidiary in July 2014, and of $77,000 for the dividend paid by its Chinese subsidiary Meiyang to the US in October 2014, a noncash charge of $350,000 for the change in the performance level of the 2012 Restricted Stock Plan from zero to maximum, and $170,000 of non-cash charges in fiscal 2015 for additional US taxes on UK and Canada income. Income taxes also reflect the write-off of $1.6 million relating to the remaining unamortized original issue discount on the subordinated debt repayment which is not deductible for tax purposes. The prior year included a reversal of a deferred tax valuation reserve of $4.5 million.
~~Net Loss~~. Net loss increased $(4.4) million to $(2.9) million loss for the nine months ended October 31, 2014, from $1.5 million income for the nine months ended October 31, 2013, mainly due to the charge of $2.3 million for early extinguishment of the Subordinated Debt and the $(0.8) million net loss in Brazil and a noncash charge of $0.7 million net of tax for the change in the performance level of the 2012 Restricted Stock Plan from zero to maximum.
~~Brazil Restructuring~~~~. Management is in the process of planning to restructure its operations in Brazil because of its failure to progress as planned to profitability.~~
~~We plan to close the facility in Salvador, Brazil, sell the real estate and then sell off the remaining old corporation and/or its assets together or separately.~~
We expect these changes to result in a substantial pretax restructuring charge and allow a tax deduction in the USA. Such charges are not expected to generate a net loss after taxes and may result in a net gain after taxes in view of the anticipated tax benefit.
We expect this should be consummated anywhere from Q4 FY15 through Q2 FY16, however these negotiations will be complex and may require more time than anticipated in order to maximize shareholder value.
In connection with the restructuring plan, we plan to create two new corporations potentially relocating them to two different states in Brazil that have more advantageous tax policy, more competitive freight rates, and are located closer to our customer base. In so doing we believe we will be able to further reduce operational overhead and improve customer service. We expect one company to import and sell disposable and chemical garments; the other to import and manufacture fire and FR garments.
~~The proposed restructuring is subject to a number of factors, including without limitation, future operating results in Brazil and the degree of success of selling assets.~~crisis.

Liquidity and Capital Resources

Cash Flows. As of ~~October 31, 2014,~~April 30, 2015, we had cash and cash equivalents of approximately ~~$7.0~~$8.7 million and working capital of ~~$45.5~~$43.8 million. Cash and cash equivalents increased ~~$2.4~~$2.0 million by not repaying credit lines and working capital increased ~~$7.0~~$1.4 million from January 31, ~~2014~~2015 primarily as the Company built excess cash in its Chinese subsidiary in anticipation of a ~~result of~~planned dividend to the ~~net cash proceeds of $6.6 million from the October 2014 private equity financing~~Company to be declared and ~~cash management.~~paid in May 2015. International cash management is affected by local requirements and movements of cash across borders can be slowed down significantly.

Net cash ~~provided by~~used in operating activities of ~~$3.2~~$1.5 million for the ~~nine-months~~three-months ended ~~October 31, 2014~~April 30, 2015 was primarily due to ~~a decrease~~an increase to inventories of ~~$1.1~~$2.5 million resulting from the company’s production planning for our peak sales season, an increase of $1.6 million in accounts receivables payable resulting from strong sales volume related to the early extinguishment of subordinated debt and write-off of unamortized original issue discount and bank fees of $2.3 million, $0.9 million of non-cash interest expense resulting from amortization of warrant OID and PIK interest,Company’s response to the Ebola crisis, an increase to other assets of ~~$1.4~~$0.7 million primarily due to prepayments in ~~accounts payable resulting from capacity~~China for materials for Ebola production ~~levels, an increase~~and a reduction to accrued compensation and benefits of ~~$1.2~~$0.3 million resulting from ~~accruals in Brazil~~a lower accrual for ~~severance and increased accrued expenses of $1.2 million of primarily foreign income tax.~~payroll due to timing. These activities were offset by a decrease ~~in accounts receivables~~to prepaid VAT of ~~$1.5~~$0.5 million, an increase ~~in income and VAT prepaid taxes of $1.0 million, reductions of inventory reserves and bad debt provision in a combined total~~to accounts payable of $0.7 million, and ~~a net loss~~an increase in accrued expenses of ~~$2.2 million.~~$0.3 million due to accrued federal income tax. Net cash ~~used in~~provided by financing activities was ~~$(0.2)~~$3.8 million in the ~~nine-months~~three-months ended ~~October 31, 2014,~~April 30, 2015, due to net borrowings under the credit agreement, new financing in Argentina and borrowings in the ~~US, the early extinguishment of the subordinated debt and China and Brazil new borrowings.~~UK.

We currently have one ~~Senior~~senior credit facility: ~~A $15.0~~$15 million revolving credit facility which commenced June 28, 2013, of which we had ~~$5.1~~$8.7 million of borrowings outstanding as of ~~October 31, 2014,~~April 30, 2015, expiring on June 30, ~~2016~~2017, at a current per annum rate of ~~6.25%~~4.25%. Maximum availability in excess of amount outstanding at ~~October 31, 2014~~April 30, 2015 was ~~$9.9~~$6.3 million. Our current credit facility requires, and any future credit facilities may also require, that we comply with specified financial covenants relating to earnings before interest, taxes, depreciation and 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 would allow the lenders to declare all amounts outstanding to be immediately due and payable. Our lenders, including ~~BDC (our Canadian lender)~~Development Bank of Canada (“BDC”), have a security interest in substantially all of our US and Canadian assets and pledges of 65% of the equity of the Company’s foreign subsidiaries, outside ~~Canada.~~Canada which is 100%. 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. ~~Our~~We believe that our current availability under our Credit Facility, coupled with our anticipated operating cash and cash management strategy, is ~~expected to be~~ sufficient to cover our liquidity needs for the next 12 months.
~~As a use~~
Since the equity raise and repayment of ~~proceeds from the Equity raise of $11.1 million which closed~~subordinated debt in October 2014, the ~~remaining principal and accrued PIK~~prevailing interest ~~from this Subordinated Debt was repaid at closing. The early extinguishment of the Subordinated Debt, however,~~expense has resulted in a one-time pretax NON-CASH charge of approximately $1.6 million for the remaining unamortized original issue discount on the Subordinated Debt and a pretax NON-CASH charge of approximately $0.6 million for the remaining unamortized fees paid at the closing of the June 2013 Subordinated Debt financing.decreased substantially.

Capital Expenditures.Our capital expenditures in Q1 FY16 of$0.3 millionprincipally relate to ~~purchases of~~additions to equipment in China and manufacturing equipment, computer ~~equipment~~system and leasehold ~~improvements.~~ improvements in the USA.We anticipate ~~FY15 and~~ FY16 capital expenditures ~~not~~ to ~~exceed~~be approximately $1.0 ~~million~~million.There are no further specific plans for ~~each year.~~material capital expenditures in the fiscal year 2016.

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~~Item 3.~~ ~~Quantitative and Qualitative Disclosures About Market Risk~~
Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable
~~Item 4.~~ ~~Controls and Procedures~~
Item 4. Controls and Procedures

Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~October 31, 2014.~~April 30, 2015. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of ~~October 31, 2014~~April 30, 2015 based on the material weaknesses ~~described~~discussed below.

33
~~Management’s Report on Internal Control over Financial Reporting~~
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accepted accounting principles generally accepted in the United States of America.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.Brazil

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management has assessed the effectiveness of the Company’s internal control over financial reporting as of October 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) as issued in 1992. Based upon an evaluation performed, our management concluded that our internal control over financial reporting was not effective as of October 31, 2014. We have identified the material weaknesses below:
~~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 October 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.
In May and June 2014, the Company hired a new controller for China and also an additional internal auditor. These two new hires are getting acclimated to their position and are in the process of remediating this material weakness.
~~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 agreements in the USA precluded us from sending ~~any more~~additional cash to Brazil. As a result, we were not able to invest funds in Brazil ~~to improve~~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 of FY14 at which time the Company engaged an outside CPA firm in Brazil to review the internal controls and procedures.
Their report was 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 ~~fiscal year ended January 31, 2014 or~~year. Extensive internal control work was performed in FY15, including travel by the CFO and VP Finance to Brazil on a quarterly basis for financial review, and the ~~quarters ended~~hiring of a financial and operational consultant Multiplica who watches over the operations and cash flow and provides funding, and management is confident the financial reporting is correct at April 30, ~~2014, July 31, 2014 and October 31, 2014. However,~~2015 after the effect of recording the prior period adjustments. Due to challenges that still exist in Brazil, management concludes that the material weakness in internal controls was not fully remediated ~~before FY14 year-end or by October 31, 2014 and could result~~ in ~~misstatements impacting all accounts and disclosures that would result in a material misstatement~~Q1 FY16. However, the Board of Directors of the ~~financial statements that would not be prevented or detected. Accordingly, management~~Company has ~~determined that this control deficiency constitutes~~approved a ~~material weakness.~~plan to exit Brazil in FY16 and Brazil has become a discontinued operation.
Failure of Entity Level Controls
As a result of the ~~multiple~~ material ~~weaknesses identified above~~weakness regarding financial reporting in ~~international locations,~~Brazil in FY14 and FY15, the Company concluded that it ~~does~~did not have sufficient internal controls in ~~place to monitor the internal controls in remote locations.~~place. In addition, the Company ~~had~~did not ~~performed~~perform a sufficient level of review of the financial information from ~~the foreign subsidiaries~~Brazil to ensure that all general ledger accounts ~~are~~were reconciled and that estimates ~~are~~were properly ~~stated.~~stated in FY14 and FY15. Since the material weakness was identified prior to January 31, 2014 and all accounts were properly ~~reconciled~~reconciled and reviewed, it did not result in a misstatement for that year.
Due to the ~~fiscal year-end January 31, 2014. While~~prior period adjustments related to Brazil and the Company believes it has taken 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 October 31, 2014 the remediation of theresulting material weakness ~~from FY13~~in that country in FY15, management believes there remains an entity level control failure in Q1 FY16. Management believes all other related issues in this area have been remediated and ~~others identified in FY14.~~that with the sale of Brazil this material weakness will be fully resolved.

~~Since the Company qualifies as a smaller reporting company, an attestation report of management’s assessment of internal control by our independent auditors is not required.~~
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Changes in Internal Control over Financial Reporting
~~Though the Company has made progress in the remediation of the material weaknesses disclosed above, there~~
There have been no changes in ~~the Company’s~~Lakeland Industries, Inc.'s internal control over financial reporting that occurred during ~~the Company’s third~~Lakeland's first quarter of fiscal ~~2015~~2016 that ~~has~~have materially affected, or isare reasonably likely to materially affect, the Company's internal control over financial ~~reporting:~~reporting.

All internal control testing that cannot be conducted by the existing ~~personnel~~internal audit team in the US and China will continue to be outsourced. The internal control program will be monitored/tested in a manner consistent with full Sarbanes-Oxley compliance.

PART II. OTHER INFORMATION

Items 1, 1A, 2, 3, 4 and 5 are not applicable

Item 6. Exhibits:
Exhibits:

~~31.1~~10.1* Lease Agreement, dated April 4, 2011, between Wallingfen Park Limited, as lessor, and Lakeland Industries, Inc., as lessee.

10.2* Lease Agreement, dated May 15, 2015, between J & L Property Investors, LLC, as Landlord and Lakeland Industries, Inc., as tenant.
31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~31.2~~ 31.2* Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1~~ 32.1* Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~32.2~~ 32.2* Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~ 101.INS* XBRL ~~instance~~Instance Document
~~101.SCH~~
101.SCH* XBRL Taxonomy Extension Schema Document
~~101.CAL~~
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definitions Linkbase Document
~~101.DEF~~
101.LAB* XBRL Taxonomy Extension Labels Linkbase Document
~~101.LAB~~ ~~XBRL Taxonomy Extension Labels Document~~
101.PRE * XBRL Taxonomy Extension Presentations Linkbase Document
34
~~SIGNATURES~~_________________SIGNATURES_________________

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

LAKELAND INDUSTRIES, INC.
(Registrant)

Date: ~~December 10, 2014~~June 15, 2015 /s/ Christopher J. Ryan
Christopher J. Ryan,

Chief Executive Officer, President and Secretary
(Principal Executive Officer and Authorized Signatory)
Date: ~~December 10, 2014~~June 15, 2015 /s/Gary Pokrassa
Gary Pokrassa,
Chief Financial Officer
(Principal Accounting Officer and Authorized Signatory)

3635

	Three Months Ended						Nine Months Ended
	October 31,						October 31,
	2014			2013			2014			2013
Net sales	$	25,092,772		$	22,787,344		$	73,210,278		$	69,163,340
Cost of goods sold		16,484,612			17,744,932			49,440,097			50,579,123
Gross profit		8,608,160			5,042,412			23,770,181			18,584,217
Operating expenses		7,910,609			6,072,620			21,022,895			18,554,319
Operating profit (loss)		697,551			(1,030,208	)		2,747,286			29,898
Foreign exchange gain (loss) Brazil		(65,137	)		115,764			(51,882	)		(271,647	)
Early extinguishment of subordinated debt		(2,295,432	)		-----			(2,295,432	)		-----
Other income (loss), net		143,997			57,259			(282,249	)		20,668
Interest expense		(699,471	)		(649,436	)		(2,022,324	)		(1,390,623	)
Loss before taxes		(2,218,492	)		(1,506,621	)		(1,904,601	)		(1,611,704	)
Income tax expense (benefit)		281,738			328,859			981,294			(3,103,143	)
Net income (loss)	$	(2,500,230	)	$	(1,835,480	)	$	(2,885,895	)	$	1,491,439
Net income (loss) per common share:
Basic	$	(0.42	)	$	(0.31	)	$	(0.49	)	$	0.27
Diluted	$	(0.42	)	$	(0.31	)	$	(0.49	)	$	0.26
Weighted average common and common equivalent shares outstanding:
Basic		5,951,613			5,919,253			5,933,229			5,607,654
Diluted		5,951,613			5,919,253			5,933,229			5,715,151

	Common Stock				Treasury Stock						Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehen-sive Loss			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount

Balance, January 31, 2014		5,713,180	$	57,132		(356,441	)	$	(3,352,291	)	$	53,365,286		$	(591,945	)	$	(2,472,422	)	$	47,005,760

Net loss		—		—		—			—			—			(2,885,895	)		—			(2,885,895	)

Other comprehensive loss		—		—		—			—			—			—			(384,342	)		(384,342	)
Stock-based compensation:
Restricted stock issued at par		10,039		100		—			—			(100	)		—			—			—

Restricted stock plan		——		——		——			——			1,073,187			——			——			1,073,187
Warrant shares exercised at $0.01 per share		566,015		5,660		——			——			——			——			——			5,660
Sale of common shares in a Private Institutional Placement of Equity (PIPE), net of fees		1,110,000		11,100		——			——			10,179,729			——			——			10,190,829
Return of shares in lieu of payroll tax withholding		——		——		——			——			(37,260	)		——			——			(37,260	)
Legal fees associated with Warrant		——		——		——			——			(12,550	)		——			——			(12,550	)

Balance October 31, 2014		7,399,234	$	73,992		(356,441	)	$	(3,352,291	)	$	64,568,292		$	(3,477,840	)	$	(2,856,764	)	$	54,955,389

	For the Nine Months Ended October 31,
	2014			2013
Cash flows from operating activities:
Net (loss) income	$	(2,885,895	)	$	1,491,439
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Provision for inventory obsolescence		(579,653	)		617,890
Provision for doubtful accounts		(106,433	)		(97,327	)
Deferred income taxes asset		(100,617	)		(4,635,499	)
Deferred taxes long-term		32,499			1,534
Interest expense resulting from amortization of warrant OID and PIK interest on subordinated debt		926,724			149,024
Early extinguishment of subordinated debt		2,295,432			-----
Depreciation and amortization		1,008,298			1,226,422
Loss on disposal of fixed assets		80,222			-----
Stock based and restricted stock compensation		1,073,187			179,002
(Increase) decrease in operating assets
Accounts receivable		(1,470,122	)		(1,278,455	)
Inventories		1,113,398			(2,553,057	)
Prepaid VAT and other taxes, noncurrent		(984,592	)		936,421
Other assets-mainly prepaid fees from financing transaction		(448,788	)		(2,507,068	)
Cash received from sale of discontinued operations		-----			428,827
Assets of discontinued operations		-----			364,435
Increase (decrease) in operating liabilities
Accounts payable		1,439,736			2,797,213
Arbitration award in Brazil		(750,000	)		(702,000	)
Accrued compensation and benefits		1,222,213			568,456
Other accrued expenses		1,225,681			-----
Accrued interest resulting from Arbitration Award		95,093			-----
Liabilities of discontinued operations		-----			(25,041	)
Net cash provided by (used in) operating activities		3,186,383			(3,037,784	)
Cash flows from investing activities:
Proceeds from sales of Qingdao net of cost of shutdown		-----			903,662
Purchases of property and equipment		(404,719	)		(682,227	)
Net cash (used in) provided by investing activities		(404,719	)		221,435
Cash flows from financing activities:
Net borrowings (repayments) credit agreement (revolver)		(7,281,685	)		11,790,905
TD Bank and BDC repayments at closing of new financing		-----			(15,108,882	)
Canada loan repayments		(19,256	)		(1,398,566	)
Canada borrowings		-----			1,121,317
Subordinated debt financing including warrant valuation		-----			3,500,000
Subordinated debt principal payments		(500,000	)		-----
Proceeds received through PIPE, net of fees		10,178,229			-----
Repayment of subordinated debt, PIK interest and fees		(3,594,371	)		-----
Legal fees associated with the warrant OID		(12,550	)		(9,000	)
Borrowings in Brazil		-----			159,462
Repayments in Brazil		(5,664	)		(606,432	)
(Repayments) borrowing in UK, net (revolver)		(272,245	)		915,750
Borrowings in China, new loans		2,112,962			804,922
Repayments in China		(811,669	)		-----
Other liabilities		6,060			(8,454	)
Shares returned in lieu of taxes under restricted stock program		(37,260	)		(31,683	)
Net cash (used in) provided by financing activities		(237,449	)		1,129,339
Effect of exchange rate changes on cash		(52,400	)		(30,735	)
Net increase (decrease) in cash and cash equivalents		2,491,815			(1,717,745	)
Cash and cash equivalents at beginning of year		4,555,097			6,736,962
Cash and cash equivalents at end of period	$	7,046,912		$	5,019,217
Cash paid for interest	$	1,764,000		$	1,065,000
Cash paid for taxes	$	1,098,000		$	841,000

	Three Months Ended
	April 30, (in $000s)
	2015			2014
Numerator
Net income from continuing operations	$	2,160		$	354
Net loss from discontinued operations		(931	)		(354	)
Net income (loss)	$	1,229		$	(0.00	)
Denominator
Denominator for basic earnings per share (weighted-average shares which reflect 356,441 shares in the treasury as a result of the stock repurchase program that ended in 2011, and 0 and 566,015 weighted average common equivalents relating to the warrant issued with the FY14 subordinated debt financing)		7,062,144			5,923,224
Effect of dilutive securities from restricted stock plan and from dilutive effect of stock options		173,241			——
Denominator for diluted earnings per share (adjusted weighted average shares)		7,235,385			5,923,224
Basic earnings per share from continuing operations	$	0.31		$	0.06
Basic earnings per share from discontinued operations	$	(0.14	)	$	(0.06	)
Basic earnings per share	$	0.17		$	(0.00	)
Diluted earnings per share from continuing operations	$	0.30		$	0.06
Diluted earnings per share from discontinued operations	$	(0.13	)	$	(0.06	)
Diluted earnings per share	$	0.17		$	(0.00	)

	Nature and terms
Nonemployee ~~Directors~~Director Stock Option Plan	The plan provides for an automatic one-time grant of options to purchase 5,000 shares of common stock to each nonemployee director newly elected or appointed. Options are granted at not less than fair market value, become exercisable commencing six months from the date of grant and expire six years from the date of grant. In addition, all nonemployee directors re-elected to the Company’s Board of Directors at any annual meeting of the stockholders will automatically be granted additional options to purchase 1,000 shares of common stock on that date. Such plan expired at December 31, 2012 as to any new awards. Existing options will expire based on individual award dates.
Restricted Stock Plan –- employees	Long-term incentive compensation three-year plan. Employees are granted potential share awards at the beginning of the three-year cycle at baseline, ~~and~~ maximum or zero amounts. The level of award and final vesting is based on the Board of ~~Director’s~~Directors’ opinion as to the performance of the Company and management in the entire three-year cycle. All vesting is three-year “cliff” vesting - there is no partial vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period, which approximates the performance period.
Restricted Stock Plan –- directors	Long-term incentive ~~compensation three-year~~compensation-three-year plan. Directors are granted potential share awards at the beginning of the three-year cycle at baseline, ~~and~~ maximum or zero amounts. The level of award and final vesting is based on the Board of ~~Director’s~~Directors’ opinion as to the performance of the Company and management in the entire three-year cycle. All vesting is three-year “cliff” vesting - there is no partial vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period, which approximates the performance period.
Matching award program	All participating employees are eligible to receive one share of restricted stock awarded for each two shares of Lakeland stock purchased on the open market. Such restricted shares are subject to three-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the three-year period, which approximates the performance period.
Bonus in stock program - employees	All participating employees are eligible to elect to receive any cash bonus in shares of restricted stock. Such restricted shares are subject to two-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year period. Since the employee is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount based on the grant date stock price.
Director fee in stock program	All directors are eligible to elect to receive any director fees in shares of restricted stock. Such restricted shares are subject to two-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year period. Since the director is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount based on the grant date stock price, which approximates the performance period.

Stock Options	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 31, 2014		24,000	$	7.47		2.95 years		——
Granted during the nine-months ended October 31, 2014		——		——		——		——
Forfeited during the nine-months ended October 31, 2014		2,000	$	13.10		——		——
Outstanding at October 31, 2014		22,000	$	6.96		2.43 years	$	53,960
Exercisable at October 31, 2014		22,000	$	6.96		2.43 years	$	53,960
Reserved for future issuance:		——
Directors’ Plan (expired on December 31, 2012)

Stock Options	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 31, 2015		17,000		$	7.11	1.83 years	$	54,580
Granted during the three-months ended April 30, 2015		—			—	—		—
Forfeited during the three-months ended April 30, 2015		(5,000	)	$	6.21	—		—
Outstanding at April 30, 2015		12,000		$	7.48	2.26 years	$	24,070
Exercisable at April 30, 2015		12,000		$	7.48	2.26 years	$	24,070
Reserved for future issuance:
Directors’ Plan (expired on December 31, 2012)		0

Shares under 2009 Equity Plan	Outstanding unvested grants at maximum at beginning of FY15		Granted during FY15 through October 31, 2014		Vested during FY15 through October 31, 2014		Forfeited during FY15 through October 31, 2014		Outstanding unvested grants at maximum at October 31, 2014
Restricted stock grants -employees		——		——		——		——		——
Shares under 2012 Equity Plan											Outstanding Unvested Grants at Maximum at Beginning of FY16		Granted during FY16 through April 30, 2015		Becoming Vested during FY16 through April 30, 2015		Forfeited during FY16 through April 30, 2015		Outstanding Unvested Grants at Maximum at End of April 30, 2015
Restricted stock grants – employees												147,500		—		—		—		147,500
Restricted stock grants - directors		——		——		——		——		——		49,500		—		—		—		49,500
Matching award program		3,000		——		3,000		——		——		17,600		—		—		—		17,600
Bonus in stock - employees		——		——		——		——		——		36,172		—		18,316		—		17,856
Retainer in stock - directors		1,116		——		1,116		——		——		13,634		1,514		3,107		—		12,041
Total restricted stock plan		4,116		——		4,116		——		——		264,406		1,514		21,423		—		244,497

Weighted average grant date fair value	$	8.66		——	$	8.66		——		——	$	6.27	$	9.22	$	4.06		—	$	6.49

Shares under 2012 Equity Plan	Outstanding unvested grants at maximum at beginning of FY15		Granted during FY15 through October 31, 2014		Vested during FY15 through October 31, 2014		Forfeited during FY15 through October 31, 2014		Outstanding unvested grants at maximum at October 31, 2014
Restricted stock grants – employees		150,500		-----		-----		3,000		147,500
Restricted stock grants – directors		49,500		-----		-----		-----		49,500
Matching award program		3,000		-----		-----		-----		3,000
Bonus in stock - employees		55,189		-----		4,331		-----		50,858
Retainer in stock - directors		14,101		4,726		4,291		-----		14,536
Total restricted stock plan		272,290		4,726		8,622		3,000		265,394

Weighted average grant date fair value	$	6.00	$	8.16	$	6.25	$	6.44	$	6.02

	Three Months Ended April 30,
	2015				2014

Domestic	$	12.84	51.73	%	$	12.20	56.07	%
International		11.98	48.27	%		9.56	43.93	%
Total	$	24.82	100.00	%	$	21.76	100.00	%

	Three Months Ended October 31,								Nine Months Ended October 31,
	2014				2013				2014				2013
	Unaudited								Unaudited
Domestic	$	13.00	51.8	%	$	11.47	50.3	%	$	37.16	50.8	%	$	35.65	51.6	%
International		12.09	48.2	%		11.32	49.7	%		36.05	49.2	%		33.51	48.4	%
Total	$	25.09	100.0	%	$	22.79	100.0	%	$	73.21	100.0	%	$	69.16	100.0	%

	Three Months Ended October 31, (in millions of dollars) Unaudited						Nine Months Ended October 31, (in millions of dollars) Unaudited
	2014			2013			2014			2013
Net Sales:
USA	$	14.76		$	12.40		$	40.47		$	37.60
Other foreign		4.55			2.44			11.43			8.67
Europe (UK)		3.27			2.92			9.79			8.85
Mexico		0.85			0.90			2.62			2.35
China		9.96			11.17			33.28			32.53
Brazil		1.55			1.91			5.10			5.40
Corporate		0.35			0.37			1.52			1.46
Less intersegment sales		(10.20	)		(9.32	)		(31.00	)		(27.70	)
Consolidated sales	$	25.09		$	22.79		$	73.21		$	69.16
External Sales:
USA	$	13.00		$	11.47		$	37.16		$	35.65
Other foreign		3.79			2.22			10.17			7.17
Europe (UK)		3.27			2.92			9.79			8.85
Mexico		0.38			0.38			1.08			0.88
China		3.10			3.90			9.91			11.29
Brazil		1.55			1.90			5.10			5.32
Consolidated external sales	$	25.09		$	22.79		$	73.21		$	69.16
Intersegment Sales:
USA	$	1.76		$	0.93		$	3.31		$	1.95
Other foreign		0.76			0.22			1.26			1.50
Mexico		0.47			0.52			1.54			1.47
China		6.86			7.27			23.37			21.24
Brazil		——			0.01			——			0.08
Corporate		0.35			0.37			1.52			1.46
Consolidated intersegment sales	$	10.20		$	9.32		$	31.00		$	27.70

	Three Months Ended April 30, (in millions of dollars)
	2015			2014 (Restated for discontinued operations)
Net Sales from continuing operations:
USA	$	13.65		$	13.11
Other foreign		3.08			3.67
Europe (UK)		5.61			2.79
Mexico		0.86			0.92
China		11.26			10.70
Corporate		0.62			0.98
Less intersegment sales		(10.26	)		(10.41	)
Consolidated sales	$	24.82		$	21.76
External Sales from continuing operations:
USA	$	12.84		$	12.20
Other foreign		3.01			3.45
Europe (UK)		5.60			2.79
Mexico		0.31			0.42
China		3.06			2.90
Consolidated external sales	$	24.82		$	21.76
Intersegment Sales from continuing operations:
USA	$	0.81		$	0.91
Other foreign		0.07			0.22
Europe (UK)		0.01			—
Mexico		0.55			0.50
China		8.20			7.80
Corporate		0.62			0.98
Consolidated intersegment sales	$	10.26		$	10.41

	October 31, 2014 (in millions of dollars) Unaudited			January 31, 2014 (in millions of dollars) Unaudited
Total Assets:*
USA	$	34.50		$	28.88
Other foreign		19.02			15.09
Europe (UK)		6.10			4.83
Mexico		3.90			3.73
China		30.46			30.12
India		(1.29	)		(1.19	)
Brazil		10.63			6.92
Corporate		(16.56	)		(4.63	)
Consolidated assets	$	86.76		$	83.75
Property and Equipment:
USA	$	2.34		$	2.42
Other foreign		1.96			2.06
Europe (UK)		0.08			0.06
Mexico		2.06			2.09
China		2.53			2.64
India		0.06			0.03
Brazil		1.74			1.86
Corporate		1.00			0.91
Consolidated property and equipment	$	11.77		$	12.07
Capital Expenditures:
USA	$	0.04		$	0.08
Other foreign		0.01			0.07
Europe (UK)		0.03			0.01
Mexico		0.03			0.01
China		0.08			0.44
India		0.02			——
Brazil		0.01			0.09
Corporate		0.18			0.13
Consolidated capital expenditures	$	0.40		$	0.83
Goodwill:
USA	$	0.87		$	0.87
Consolidated goodwill	$	0.87		$	0.87

	April 30, 2015 (in millions of dollars)			January 31, 2015 (in millions of dollars)
Total Assets:*
USA	$	39.00		$	36.35
Other foreign		18.00			18.00
Europe (UK)		6.87			6.75
Mexico		4.17			4.20
China		34.47			33.04
India		(1.42	)		(1.31	)
Brazil (discontinued operations)		6.45			6.34
Corporate		70.72			70.33
Less intersegment		(78.73	)		(80.49	)
Consolidated assets	$	99.53		$	93.21
Total Assets Less Intersegment:*
USA	$	32.82		$	30.14
Other foreign		10.22			10.32
Europe (UK)		6.87			6.75
Mexico		4.15			4.13
China		21.55			17.03
India		0.30			0.44
Brazil (discontinued operations)		6.45			6.33
Corporate		17.17			18.07
Consolidated assets	$	99.53		$	93.21
Property and Equipment:
USA	$	2.28		$	2.30
Other foreign		1.83			1.77
Europe (UK)		0.07			0.07
Mexico		2.16			2.17
China		2.74			2.70
India		0.04			0.05
Corporate		1.30			1.20
Less intersegment		(0.11	)		(0.12	)
Consolidated property and equipment	$	10.31		$	10.14
Capital Expenditures:
USA	$	0.03		$	0.05
Other foreign		0.02			0.05
Europe (UK)		—			0.03
Mexico		—			0.03
China		0.11			0.31
India		—			0.02
Corporate		0.15			0.39
Consolidated capital expenditures	$	0.31		$	0.88
Goodwill:
USA	$	0.87		$	0.87
Consolidated goodwill	$	0.87		$	0.87

Principal	Principal	Interest & Penalty		Total		Approximate for Totals					Interest & Penalty		Total		Approximate for Totals		Loss Possibility	Strategy	Collateral
R$	R$	R$		R$		US $		Loss Possibility	Strategy	Collateral	R$		R$		US $
	305,897		491,271		797,168	$	352,000	Remote	To await Judicial Process and negotiate judicial deposit	New Land
	573,457		1,098,475		1,671,932		737,000	Remote	To await Judicial Process and negotiate judicial deposit	Plant
	6,209,836		6,653,585		12,863,421		5,673,000	Probable	To await Judicial Process and negotiate judicial deposit	-
	402,071		770,133		1,172,204		517,000	Remote	To await Judicial Process and negotiate judicial deposit	New Land
	7,491,261		9,013,464		16,504,725	$	7,279,000
305,897												534,038		839,935	$	280,577	Remote	To await Judicial Process and negotiate judicial deposit	New Land
573,457												1,337,933		1,911,390	$	636,492	Remote	To await Judicial Process and negotiate judicial deposit	Plant
6,209,836												8,356,422		14,566,258		4,865,800	Probable	To await Judicial Process and negotiate judicial deposit	-
402,071												826,346		1,228,417	$	410,347	Remote	To await Judicial Process and negotiate judicial deposit	New Land
7,491,261												11,054,740		18,546,000	$	6,193,216

		R$ millions	US$ millions
Liabilities of discontinued operations	Taxes payable	6.2	2.1

Balance Sheet
	(000's)		(000's)
	April 30, 2015		January 31, 2015
Assets of discontinued operations:
Cash	$	12	$	53
Accounts receivable		622		888
Inventory		2,979		3,216
Other current assets		1,495		634
Property/Equipment held for sale		1,339		1,544
Total assets of discontinued operations		6,447		6,335
Liabilities of discontinued operations:
Accounts payable		467		651
Accrued compensation and benefits		1,361		1,739
Other accrued expenses		1,901		1,163
Short term borrowings		630		688
Other liabilities		2,333		2,333
Total liabilities of discontinued operations		6,692		6,574

Statement of Operations
	(000's)			(000's)
	April 30, 2015			April 30, 2014
Net sales from discontinued operations	$	444		$	1,749
Cost of goods sold from discontinued operations		412			1,154
Gross profit from discontinued operations		32			595
Operating expense from discontinued operations		484			871
Operating loss from discontinued operations		(452	)		(276	)
Other, net from discontinued operations		(479	)		(78	)
Loss from discontinued operations before income tax		(931	)		(354	)
Net loss from discontinued operations	$	(931	)	$	(354	)

Summary Cash Flow Statement
	(000's)			(000's)
	April 30, 2015			April 30, 2014
Net cash used in operating activities	$	(587	)	$	(570	)
Net cash used in investing activities		—			(2	)
Net cash provided by financing activities		552			572
Net effect on cash of FX variations		(6	)		—
Net increase in cash and cash equivalents		(41	)		—
Cash and cash equivalents at beginning of year		53			—
Cash and cash equivalents at end of year	$	12		$	—

~~31.1~~10.1*	Lease Agreement, dated April 4, 2011, between Wallingfen Park Limited, as lessor, and Lakeland Industries, Inc., as lessee.

10.2*	Lease Agreement, dated May 15, 2015, between J & L Property Investors, LLC, as Landlord and Lakeland Industries, Inc., as tenant.

31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~31.2~~	31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1~~	32.1*	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~32.2~~	32.2*	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~	101.INS*	XBRL ~~instance~~Instance Document
~~101.SCH~~
101.SCH*	XBRL Taxonomy Extension Schema Document
~~101.CAL~~
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	XBRL Taxonomy Extension Definitions Linkbase Document
~~101.DEF~~
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
~~101.LAB~~		~~XBRL Taxonomy Extension Labels Document~~
101.PRE	*	XBRL Taxonomy Extension Presentations Linkbase Document

		LAKELAND INDUSTRIES, INC.
		(Registrant)


Date: ~~December 10, 2014~~June 15, 2015		/s/ Christopher J. Ryan
		Christopher J. Ryan,
		Chief Executive Officer, President and Secretary
		(Principal Executive Officer and Authorized Signatory)



Date: ~~December 10, 2014~~June 15, 2015		/s/Gary Pokrassa
		Gary Pokrassa,
		Chief Financial Officer
		(Principal Accounting Officer and Authorized Signatory)