UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549


FORM
10-Q




(Mark
one)




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




For the
quarterly period endedOctober
31, 2008




OR




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
      Employer Identification Number)





701
      Koehler Avenue, Suite 7, Ronkonkoma, New York
            
            11779(Address
      of principal executive offices)
            
            (Zip
      Code)




(631)
981-9700


(Registrant's
telephone number, including area code)






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


Yeso    No
x


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


Yes o   No  x


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


Yes x   No o


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated file, a non- accelerated 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 o
            Accelerated
      filer               
          oNon-Accelerated
      filer  o (Do not check if
      a smaller reporting company)
            Smaller
      reporting company x





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


Yeso   No
x


As of
July 31, 2008, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $54,940,120 based on the closing price
of the common stock as reported on the National Association of Securities
Dealers Automated Quotation System National Market System.


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




Class
            
            Outstanding at December 8,
    2008Common
      Stock, $0.01 par value per share
            
            5,415,971





LAKELAND
INDUSTRIES, INC.


AND
SUBSIDIARIES







Table
ofContents









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









PART I - FINANCIAL INFORMATION:Item 1.
            Financial Statements (unaudited):
            PageIntroduction
            3Condensed Consolidated Balance Sheets October 31, 2008 and
      January 31, 2008
            4Condensed
      Consolidated Statements of Income for the Three and Nine Months EndedOctober
      31, 2008 and 2007
            5Condensed
      Consolidated Statement of Stockholders' Equity – Nine Months EndedOctober
      31, 2008
            6Condensed
      Consolidated Statements of Cash Flows –Nine Months EndedOctober
      31, 2008 and 2007
            7Notes to Condensed Consolidated Financial
      Statements
            8Item 2.
            Management's Discussion and Analysis of Financial Condition and
      Results of Operations
            16Item 3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            22Item 4.
            Controls and Procedures
            22PART II - OTHER INFORMATION:Item 4.
            Submission of Matters to a Vote of Security
      Holders
            24Item 6.
            Exhibits and Reports on Form 8-K
            24Signatures
            26







LAKELAND
INDUSTRIES, INC.


AND
SUBSIDIARIES




PART I -
            FINANCIAL
      INFORMATIONItem1.
            Financial
      Statements:


Introduction




SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS




This 10-Q
may contain certain forward-looking statements.  When used in this
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 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 historical 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 obtain fabrics and components from key suppliers such as DuPont
      and other manufacturers at competitive prices or prices that vary from
      quarter to quarter;


·
            Risks
      associated with our international manufacturing and start up sales
      operations;


·
            Potential
      fluctuations in foreign currency exchange
rates;


·
            Our
      ability to respond to rapid technological
  change;


·
            Our
      ability to identify and complete acquisitions or future
      expansion;


·
            Our
      ability to manage our growth;


·
            Our
      ability to recruit and retain skilled employees, including our senior
      management;


·
            Our
      ability to accurately estimate customer
demand;


·
            Competition
      from other companies, including some with much greater
      resources;


·
            Risks
      associated with sales to foreign
buyers;


·
            Restrictions
      on our financial and operating flexibility as a result of covenants in our
      credit facilitates;


·
            Our
      ability to obtain additional funding to expand or operate our business as
      planned;


·
            The
      impact of a decline in federal funding for preparations for terrorist
      incidents;


·
            The
      impact of potential product liability
claims;


·
            Liabilities
      under environmental laws and
regulations;


·
            Fluctuations
      in the price of our common stock;


·
            Variations
      in our quarterly results of
operations;


·
            The
      cost of compliance with the Sarbanes-Oxley Act of 2002 and rules and
      regulations relating to corporate governance and public
      disclosure;


·
            The
      significant influence of our directors and executive officer on our
      company and on matters subject to a vote of our
    stockholders;


·
            The
      limited liquidity of our common
stock;


·
            The
      other factors referenced in this 10-Q, including, without limitation, in
      the sections entitled “Management’s Discussion and Analysis of Financial
      Condition and Results of Operations,” and
  “Business.”


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
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.


3


LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





ASSETS
            
            October
      31, 2008
              (Unaudited)
            
            
            January
      31,
              2008Current
      assets:Cash
            
            $
            2,132,618
            
            
            $
            3,427,672Accounts
      receivable, net of allowance for doubtful accounts of  $36,000
      at  October 31, 2008 and $45,000 at January 31,
    2008
            
            
            16,505,775
            
            
            
            14,927,666Inventories,
      net of reserves of  $493,000 at  October 31, 2008 and
      $607,000 at January 31, 2008
            
            
            55,031,523
            
            
            
            48,116,173Deferred
      income taxes
            
            
            2,134,744
            
            
            
            1,969,713Other
      current assets
            
            
            4,293,714
            
            
            
            1,828,210Total
      current assets
            
            
            80,098,374
            
            
            
            70,269,434Property
      and equipment, net of accumulated depreciation of $8,626,928 atOctober
      31, 2008 and $7,054,914 at January 31, 2008
            
            
            13,702,952
            
            
            
            13,324,648Goodwill
            
            
            8,420,241
            
            
            
            871,297Other
      assets
            
            
            910,087
            
            
            
            157,474TOTAL
      ASSETS
            
            $
            103,131,654
            
            
            $
            84,622,853LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            5,126,979
            
            
            $
            3,312,696Accrued
      expenses and other current liabilities
            
            
            2,463,300
            
            
            
            1,684,161Total
      current liabilities
            
            
            7,590,279
            
            
            
            4,996,857Construction
      loan
            
            
            1,499,918
            
            
            
            1,882,085Borrowings
      under revolving credit facility
            
            
            25,517,466
            
            
            
            8,871,000Other
      non current liabilities
            
            
            108,100
            
            
            
            -----Commitments
      and contingencies
            
            
            -----
            
            
            
            -----Stockholders'
      equity:Preferred
      stock, $.01 par; authorized 1,500,000 shares(none
      issued)Common
      stock, $.01 par; authorized 10,000,000 shares;issued
      and outstanding 5,523,288 shares at  October 31, 2008 and
      January 31, 2008
            
            
            55,233
            
            
            
            55,233Less
      treasury stock, at  cost, 107,317 shares at October 31, 2008 and
      0 shares at January 31, 2008
            
            
            (1,255,459
            )
            
            
            -----Additional
      paid-in capital
            
            
            49,438,501
            
            
            
            49,211,961Other
      comprehensive loss
            
            
            (3,354,991
            )
            
            
            (36,073
            )Retained
      earnings (1)
            
            
            23,532,607
            
            
            
            19,641,790Stockholders'
      equity
            
            
            68,415,891
            
            
            
            68,872,911TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            103,131,654
            
            
            $
            84,622,853








(1)
A cumulative total of $17,999,739 has been transferred from retained earnings to
additional paid-in-capital and par value of common stock due to four separate
stock dividends paid in 2002, 2003, 2005 and 2006, with $6,386,916 included in
the year ended January 31, 2008.





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


4





LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(UNAUDITED)





THREE
      MONTHS ENDED
            
            
            NINE
      MONTHS ENDEDOctober
      31,
            
            
            October
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      sales
            
            $
            25,159,948
            
            
            $
            23,452,983
            
            
            $
            80,005,141
            
            
            $
            70,781,406Cost
      of goods sold
            
            
            17,989,076
            
            
            
            17,748,865
            
            
            
            57,994,805
            
            
            
            54,593,816Gross
      profit
            
            
            7,170,872
            
            
            
            5,704,118
            
            
            
            22,010,336
            
            
            
            16,187,590Operating
      expenses
            
            
            5,110,642
            
            
            
            4,355,330
            
            
            
            16,308,254
            
            
            
            12,928,909Operating
      profit
            
            
            2,060,230
            
            
            
            1,348,788
            
            
            
            5,702,082
            
            
            
            3,258,681Interest
      and other income, net
            
            
            44,270
            
            
            
            51,249
            
            
            
            130,159
            
            
            
            176,387Interest
      expense
            
            
            (284,463
            )
            
            
            (94,344
            )
            
            
            (637,958
            )
            
            
            (205,470
            )Income
      before income taxes
            
            
            1,820,037
            
            
            
            1,305,693
            
            
            
            5,194,283
            
            
            
            3,229,598Provision
      for income taxes
            
            
            446,876
            
            
            
            375,536
            
            
            
            1,303,466
            
            
            
            936,543Net
      income
            
            $
            1,373,161
            
            
            $
            930,157
            
            
            $
            3,890,817
            
            
            $
            2,293,055Net
      income per common share*:Basic
            
            $
            0.25
            
            
            $
            0.17
            
            
            $
            0.71
            
            
            $
            0.42Diluted
            
            $
            0.25
            
            
            $
            0.17
            
            
            $
            0.71
            
            
            $
            0.41Weighted
      average common shares outstanding*:Basic
            
            
            5,415,971
            
            
            
            5,523,288
            
            
            
            5,442,690
            
            
            
            5,522,572Diluted
            
            
            5,456,536
            
            
            
            5,544,619
            
            
            
            5,480,689
            
            
            
            5,542,144




*Adjusted
for the 10% stock dividend to shareholders of record on August 1,
2006.





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





5


LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY


(UNAUDITED)


Nine
months ended October 31, 2008


Common Stock
            
            
            Additional
              Paid-in
              Capital
            
            
            Treasury Stock
            
            
            Retained
              Earnings
            
            
            Other
              Comprehensive
              Income (Loss)
            
            
            TotalShares
            
            
            Amount
            
            
            
            
            
            Shares
            
            
            AmountBalance
      February 1, 2008
            
            
            5,523,288
            
            
            $
            55,233
            
            
            $
            49,211,961
            
            
            
            -----
            
            
            $
            -----
            
            
            $
            19,641,790
            
            
            $
            (36,073
            )
            
            $
            68,872,911Net
      Income
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            3,890,817
            
            
            
            -----
            
            
            
            3,890,817Stock
      Repurchase Program
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            107,317
            
            
            
            (1,255,459
            )
            
            
            -----
            
            
            
            -----
            
            
            
            (1,255,459
            )Other
      Comprehensive Loss
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            (3,318,918
            )
            
            
            (3,318,918
            )Stock
      Based Compensation Restricted Stock Plan
            
            
            -----
            
            
            
            -----
            
            
            
            194,996
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            194,996Issuance
      of Director Stock Options
            
            
            -----
            
            
            
            -----
            
            
            
            31,544
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            -----
            
            
            
            31,544Balance
      October 31, 2008
            
            
            5,523,288
            
            
            $
            55,233
            
            
            $
            49,438,501
            
            
            
            107,317
            
            
            $
            (1,255,459
            )
            
            $
            23,532,607
            
            
            $
            (3,354,991
            )
            
            $
            68,415,891














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





6


LAKELAND
INDUSTRIES, INC.  AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)





NINE
      MONTHS ENDEDOctober
      31,2008
            
            
            2007Cash
      Flows from Operating Activities:Net
      income
            
            $
            3,890,817
            
            
            $
            2,293,055Adjustments
      to reconcile net income to net cash used in operating
      activities:Stock
      based compensation
            
            
            226,540
            
            
            
            170,772Reserve
      for doubtful accounts
            
            
            (9,000
            )
            
            
            (13,000
            )Reserve
      for inventory obsolescence
            
            
            (114,000
            )
            
            
            289,601Depreciation
      and amortization
            
            
            1,231,285
            
            
            
            816,441Deferred
      income tax
            
            
            (165,032
            )
            
            
            (157,591
            )Changes
      in operating assets and liabilities:(Increase)
      decrease in accounts receivable
            
            
            (369,967
            )
            
            
            33,744(Increase)
      in inventories
            
            
            (3,492,428
            )
            
            
            (5,809,366
            )(Increase)
      decrease in other assets
            
            
            (2,183,085
            )
            
            
            1,369,535(Decrease)
      in accounts payable, accrued expenses
              and
      other liabilities
            
            
            (74,850
            )
            
            
            (628,465
            )Net
      cash used in operating activities
            
            
            (1,059,720
            )
            
            
            (1,635,274
            )Cash
      Flows from Investing Activities:Purchases
      of property and equipment
            
            
            (1,588,511
            )
            
            
            (2,049,565
            )Acquisition
      of Qualytextil, S.A.
            
            
            (13,669,763
            )
            
            
            --------------Net
      cash used in investing activities
            
            
            (15,258,274
            )
            
            
            (2,049,565
            )Cash
      Flows from Financing Activities:Purchases
      of stock under stock repurchase program
            
            
            (1,255,459
            )
            
            
            -----Proceeds
      from exercise of stock option
            
            
            -----
            
            
            
            6,690Construction
      loan proceeds
            
            
            -----
            
            
            
            992,888Net
      borrowings under loan agreements
            
            
            2,933,933
            
            
            
            3,450,000Borrowing
      to fund Qualytextil Acquisition
            
            
            13,344,466
            
            
            
            ------------Net
      cash provided by financing activities
            
            
            15,022,940
            
            
            
            4,449,578Net  (decrease)
      increase in cash
            
            
            (1,295,054
            )
            
            
            764,739Cash
      and cash equivalents at beginning of period
            
            
            3,427,672
            
            
            
            1,906,557Cash
      and cash equivalents at end of period
            
            $
            2,132,618
            
            
            $
            2,671,296





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





7


LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





1.    Business




Lakeland
Industries, Inc. and Subsidiaries, a Delaware corporation, organized in April
1982, manufactures and sells a comprehensive line of safety garments and
accessories for the industrial protective clothing and homeland security
markets. The principal market for our products is the United States. No customer
accounted for more than 10% of net sales during the three and nine month periods
ended October 31, 2008 and 2007, respectively.




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 consolidated
      financial information required therein.  Certain information and
      note disclosures normally included in financial statements prepared in
      accordance with accounting principles generally accepted in the United
      States of America (“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 filed with the Securities and Exchange
      Commission for the year ended January 31,
2008.




The
results of operations for the three and nine month periods ended October 31,
2008 are not necessarily indicative of the results to be expected for the full
year.




3.    Principles
of Consolidation




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





4.
            Inventories:




Inventories
      consist of the following:
            
            October
      31,
            
            
            January
      31,2008
            
            
            2008Raw
      materials
            
            $
            26,658,682
            
            
            $
            25,035,569Work-in-process
            
            
            3,306,596
            
            
            
            2,873,001Finished
      Goods
            
            
            25,066,245
            
            
            
            20,207,603TOTAL
            
            $
            55,031,523
            
            
            $
            48,116,173


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.




5.
            Earnings Per
      Share:




Basic
earnings per share are based on the weighted average number of common shares
outstanding without consideration of common stock equivalents. Diluted earnings
per share are based on the weighted average number of common and common stock
equivalents. The diluted earnings per share calculation takes into account the
shares that may be issued upon exercise of stock options, reduced by the shares
that may be repurchased with the funds received from the exercise, based on the
average price during the period.




8







The
following table sets forth the computation of basic and diluted earnings per
share at October 31, 2008 and 2007.




Three
      Months Ended
            
            
            Nine
      Months EndedOctober
      31,
            
            
            October
      31,2008
            
            
            2007
            
            
            2008
            
            
            2007NumeratorNet
      Income
            
            $
            1,373,161
            
            
            $
            930,157
            
            
            $
            3,890,817
            
            
            $
            2,293,055DenominatorDenominator for basic earnings per share
            
            
            5,415,971
            
            
            
            5,523,288
            
            
            
            5,442,690
            
            
            
            5,522,572(Weighted-average
      shares which reflect 107,317 and 80,598 weighted average common shares in
      the treasury as a result of the stock repurchase program for the three
      months and the nine months ended October 31, 2008,
      respectively)Effect
      of dilutive securities from restricted stock plan and from dilutive effect
      of stock options
            
            
            40,565
            
            
            
            21,331
            
            
            
            37,999
            
            
            
            19,572Denominator
      for diluted earnings per share (adjusted weighted average
      shares)
            
            
            5,456,536
            
            
            
            5,544,619
            
            
            
            5,480,689
            
            
            
            5,542,144Basic
      earnings per share
            
            $
            0.25
            
            
            $
            0.17
            
            
            $
            0.71
            
            
            $
            0.42Diluted
      earnings per share
            
            $
            0.25
            
            
            $
            0.17
            
            
            $
            0.71
            
            
            $
            0.41




6.
            Revolving
      Credit Facility




At
October 31, 2008, the balance outstanding under our five year revolving credit
facility amounted to $25.5 million. In May 2008, the facility was increased from
$25 million to $30 million (see Note 13). The credit facility is collateralized
by substantially all of the assets of the Company. The credit facility contains
financial covenants, including, but not limited to, fixed charge ratio, funded
debt to EBIDTA ratio, inventory and accounts receivable collateral coverage
ratio, with respect to which the Company was in compliance at October 31, 2008
and for the period then ended. The weighted average interest rate for the nine
month period ended October 31, 2008 was 3.36%.




7.
            Major
      Supplier




We
purchased 50% of our raw materials from one supplier during the nine month
period ended October 31, 2008. During the first quarter of this period, however,
we purchased an abnormally low amount from this supplier. We normally purchase
approximately 75% of our raw material from this suppler. We carried higher
inventory levels throughout FY08 and limited our material purchases in Q1 of
FY09. Such purchases resumed at normal levels in Q2 FY09. We expect this
relationship to continue for the foreseeable future. If required, similar raw
materials could be purchased from other sources; however, our competitive
position in the marketplace would be adversely affected.




8.
            Employee
      Stock Compensation




The
      Company’s Director’s Plan permits the grant of share options and shares to
      its Directors for up to 60,000 shares of common stock as stock
      compensation in the aggregate.  All stock options under this
      Plan are granted at the fair market value of the common stock at the grant
      date.  This date is fixed only once a year upon a Board Member’s
      re-election to the Board at the Annual Shareholders’ meeting which is the
      third Wednesday in June pursuant to the Director’s Plan and our Company
      By-Laws.  Directors’ stock options vest ratably over a 6 month
      period and generally expire 6 years from the grant
  date.


9








The
      following table represents our stock options granted, exercised, and
      forfeited during the nine months ended October 31,
  2008:





Stock
      Options
            
            Number
              of
      Shares
            
            
            Weighted
      Average
              Exercise
      Price per
              Share
            
            Weighted
      Average
              Remaining
              Contractual
      Term
            
            Aggregate
              Intrinsic
              ValueOutstanding
      at January 31, 2008
            
            
            17,567
            
            
            $
            13.48
            
            2.65
      years
            
            $
            8,618Granted
      in the nine months ended October 31, 2008
            
            
            3,000
            
            
            $
            13.10
            
            5.89
      years
            
            
            -----Outstanding
      at October 31, 2008
            
            
            20,567
            
            
            $
            13.42
            
            2.52
      years
            
            $
            12,800Exercisable
      at  October 31, 2008
            
            
            17,567
            
            
            $
            13.48
            
            2.15
      years
            
            $
            12,800





Restricted Stock Plan and Performance
Equity Plan




On June
21, 2006, the shareholders of the Company approved a restricted stock plan. A
total of 253,000 shares of restricted stock were authorized under this plan.
Under the restricted stock plan, eligible employees and directors are awarded
performance-based restricted shares of the Corporation’s common stock. The
amount recorded as expense for the performance-based grants of restricted stock
is 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, minimum, maximum or zero). In addition to the grants
vesting based solely on performance, certain awards pursuant to the plan have a
time-based vesting requirement, under which awards vest from three to four years
after issuance, subject to continuous employment and certain other conditions.
Restricted stock has the same voting rights as other common stock. Restricted
stock awards do not have voting rights, and the underlying shares are not
considered to be issued and outstanding until vested.





The
Company has granted up to a maximum of 147,280 restricted stock awards as of
October 31, 2008. All of these restricted stock awards are non-vested at October
31, 2008 (104,435 shares at “baseline” and 62,580 shares at “minimum”) and have
a weighted average grant date fair value of $12.95. 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, 2008, unrecognized stock-based compensation expense related to
restricted stock awards totaled $1,363,596, before income taxes, based on the
maximum performance award level.  Such unrecognized stock-based
compensation expense related to restricted stock awards totaled $803,984 and
$257,340 at the baseline and minimum performance levels, respectively. The cost
of these non-vested awards is expected to be recognized over a weighted-average
period of three years.  The board has estimated the Company’s current
performance level to be at the minimum level and expenses have been recorded
accordingly.  The performance based awards are not considered stock
equivalents for EPS purposes





Stock-Based Compensation




The
      Company recognized total stock-based compensation costs of $226,540, of
      which $194,996 results from the 2006 Equity Incentive Plan, and $31,544
      results from the Non-Employee Directors Option Plan for the nine months
      ended October 31, 2008 and $170,772 and $0 for the nine months ended
      October 31, 2007, respectively.  These amounts are reflected in
      selling, general and administrative expenses.  The total income
      tax benefit recognized for stock-based compensation arrangements was
      $81,554 and $61,478 for the nine months ended October 31, 2008 and 2007,
      respectively.





9.     Manufacturing
Segment Data




Domestic
and international sales are as follows in millions of dollars:




10





Three
      Months Ended
              
              
              Nine
      Months EndedOctober
      31,
              
              
              October
      31,2008
              
              
              2007
              
              
              2008
              
              
              2007Domestic
              
              $
              18.8
              
              
              
              75
              %
              
              $
              19.8
              
              
              
              84.3
              %
              
              $
              61.3
              
              
              
              77
              %
              
              $
              59.7
              
              
              
              84.3
              %International
              
              $
              6.4
              
              
              
              25
              %
              
              
              3.7
              
              
              
              15.7
              %
              
              $
              18.7
              
              
              
              23
              %
              
              
              11.1
              
              
              
              15.7
              %Total
              
              $
              25.2
              
              
              
              100
              %
              
              $
              23.5
              
              
              
              100
              %
              
              $
              80.0
              
              
              
              100
              %
              
              $
              70.8
              
              
              
              100
              %




We manage
our operations by evaluating each of our geographic locations. Our North
American operations include our facilities in Decatur, Alabama (primarily the
distribution to customers of the bulk of our products and the manufacture of our
chemical, glove and disposable products), Jerez, Mexico (primarily disposable,
glove and chemical suit production) St. Joseph, Missouri and Shillington,
Pennsylvania (primarily fire, hi-visibility and woven products production). We
also maintain three manufacturing facilities in China (primarily disposable and
chemical suit production) and a glove manufacturing facility in New Delhi,
India. On May 13, 2008 we acquired Qualytextil S.A. which manufactures primarily
fire protective apparel for the Brazilian market. Our China facilities produce
the majority of the Company’s products. The accounting policies of these
operating entities are the same as those described in Note 1 to
our  Annual Report on Form 10-K for the year ended January 31, 2008.
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 the U.S.A., Brazil, Canada, Europe, Chile,
China and India which sell and distribute products shipped from the United
States, Mexico, Brazil, China, and recently India.




The table
below represents information about reported manufacturing segments for the three
and nine month periods noted therein:





Three
      Months Ended
                October
      31,
                (in
      millions of dollars)
              
              
              Nine
      Months Ended
                October
      31,
                (in
      millions of dollars)2008
              
              
              2007
              
              
              2008
              
              
              2007Net
      Sales:North
      America and other foreign
              
              $
              22.53
              
              
              $
              23.62
              
              
              $
              73.87
              
              
              $
              72.67Brazil
              
              
              2.44
              
              
              
              -----
              
              
              
              5.52
              
              
              
              -----China
              
              
              5.31
              
              
              
              4.14
              
              
              
              16.75
              
              
              
              10.6India
              
              
              .12
              
              
              
              .04
              
              
              
              .29
              
              
              
              .13Less
      inter-segment sales
              
              
              (5.25
              )
              
              
              (4.30
              )
              
              
              (16.42
              )
              
              
              (12.60
              )Consolidated
      sales
              
              $
              25.16
              
              
              $
              23.50
              
              
              $
              80.00
              
              
              $
              70.80Operating
      Profit:North
      America and other foreign
              
              $
              1.37
              
              
              $
              .62
              
              
              $
              3.14
              
              
              $
              1.87Brazil
              
              
              .34
              
              
              
              -----
              
              
              
              1.14
              
              
              
              -----China
              
              
              .63
              
              
              
              1.02
              
              
              
              2.38
              
              
              
              2.0India
              
              
              (.22
              )
              
              
              (.22
              )
              
              
              (.63
              )
              
              
              (.46
              )Less
      inter-segment profit
              
              
              (.06
              )
              
              
              (.07
              )
              
              
              (.33
              )
              
              
              (.11
              )Consolidated
      profit
              
              $
              2.06
              
              
              $
              1.35
              
              
              $
              5.70
              
              
              $
              3.30Identifiable
      Assets (at Balance Sheet date):North
      America and other foreign
              
              
              -----
              
              
              
              -----
              
              
              $
              79.57
              
              
              $
              65.8Brazil
              
              
              -----
              
              
              
              -----
              
              
              
              6.63
              
              
              
              -----China
              
              
              -----
              
              
              
              -----
              
              
              
              12.54
              
              
              
              10.4India
              
              
              -----
              
              
              
              -----
              
              
              
              4.38
              
              
              
              4.3Consolidated
      assets
              
              
              -----
              
              
              
              -----
              
              
              $
              103.13
              
              
              $
              80.5Depreciation  and
      Amortization Expense:North
      America and other foreign
              
              $
              .14
              
              
              $
              .16
              
              
              $
              .64
              
              
              $
              .47Brazil
              
              
              .11
              
              
              
              -----
              
              
              
              .11
              
              
              
              -----China
              
              
              .07
              
              
              
              .07
              
              
              
              .21
              
              
              
              .27India
              
              
              .09
              
              
              
              .08
              
              
              
              .27
              
              
              
              .08Consolidated
      depreciation expense
              
              $
              .41
              
              
              $
              .31
              
              
              $
              1.23
              
              
              $
              .82


11





10.
            Adoption
      of FIN 48





UNCERTAIN TAX POSITIONS.Effective February 1, 2007, the first day of fiscal 2008, the Company
adopted the provisions of Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”).
FIN 48 prescribes recognition thresholds that must be met before a tax position
is recognized in the financial statements and provides guidance on
de-recognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. Under FIN 48, an entity may only recognize
or continue to recognize tax positions that meet a "more likely than not"
threshold. The Company recorded the cumulative effect of applying FIN 48 as a
$419,000 debit to the opening balance of accumulated deficit as of February 1,
2007, the date of adoption.





The
Company’s policy is to recognize interest and penalties related to income tax
issues as components of income tax expense. The Company had approximately
$90,000 of accrued interest as of July 31, 2008, prior to recording the effects
of the settlement with the IRS.





The
Company is subject to U.S. federal income tax, as well as income tax in multiple
U.S. state and local jurisdictions and a number of foreign
jurisdictions.   The Company’s Federal Income Tax returns for the
fiscal years ended January 31, 2003, 2004 and 2005 have been audited by the
Internal Revenue Service (“IRS”).





On July
23, 2008, the Company reached a settlement with the IRS regarding its
examination of the Company’s Federal Income Tax returns for taxable years ending
January 31, 2003, 2004 and 2005.




The
Company agreed with the IRS to settle the audit for the amount of
$91,000, which includes interest of $24,000. The impact of this
settlement results in an additional state tax liability of $12,000, which
includes interest of $3,000.  The settlement also resulted in the Company
recording a deferred tax asset of $28,000.  Accordingly, the Company
reported a reduction in income tax expense of $207,000 for this
transaction in its second quarter report for July 31, 2008.





An audit
of the Company’s US federal tax returns for the year ended January 31, 2007 has
just commenced.





11.
            Related
      Party Transactions




In
connection with the asset purchase agreement, dated August 1, 2005, between the
Company and Mifflin Valley, Inc., the Company entered into a five year lease
agreement with the seller (now an employee of the Company) to rent the
manufacturing facility in Shillington, Pennsylvania owned by the seller at an
annual rental of $57,504, or a per square foot rental of $3.25.  This
amount was obtained prior to the acquisition from an independent appraisal of
the fair market rental value per square feet.  In addition the Company
has, starting January 1, 2006 rented a second 12,000 sq ft of warehouse space in
Blandon, Pennsylvania from this employee, on a month to month basis, for the
monthly amount of $3.00 per square foot.





On March
1, 1999, we entered into a one year (renewable for four additional one year
terms) lease agreement with Harvey Pride, Jr., our Vice President of
Manufacturing, for a 2,400 sq. ft. customer service office located next to our
existing Decatur, Alabama facility at an annual rent of $18,000. This lease was
renewed on April 28, 2008 at $18,000 until March 30, 2009 with 5% increases in
both 2010 and 2011.





12.  Derivative
Instruments and Foreign Currency Exposure




12


The
Company has foreign currency exposure, principally through its investment in
Brazil, sales in Canada and the UK and production in Mexico and
China.  Management has commenced a hedging program to offset this risk
by purchasing forward contracts to sell the Canadian Dollar, Euro and Great
Britain Pound.  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.  Management has decided not to hedge its long position in the
Chinese Yuan or the Brazilian Real.




The
Company accounts for its foreign exchange derivative instruments under Statement
of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended.  This standard requires
recognition of all derivatives as either assets or liabilities at fair value and
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.





The
      Company had no derivative instruments outstanding at October 31, 2008 for
      foreign exchange.  The Company had one derivative instrument
      outstanding at October 31, 2007, which was treated as a cash flow hedge
      intended for forecasted purchases of merchandise by the Company’s Canadian
      subsidiary.  The change in the fair market value of the effective
      hedge portion of the foreign currency forward exchange contracts was
      zero. During the nine month period ended October 31, 2008, the
      Company recorded an immaterial loss in cost of goods sold for the
      remaining portion of the foreign currency forward exchange contract that
      did not qualify for hedge accounting treatment.  The derivative
      instrument was in the form of a foreign currency “participating forward”
      exchange contract. The “participating forward” feature affords the Company
      full protection on the downside and the ability to retain 50% of any
      gains, in exchange for a premium at inception.  Such premium is
      built into the contract in the form of a different contract rate in the
      amount of $0.016.





Interest
Rate Risk Management


We are
exposed to interest rate risk from debt. We have hedged against the risk of
changes in the interest rate associated with our variable rate Revolving Credit
(See Note 6) by entering into a variable-to-fixed interest rate swap agreement,
designated as fair value hedges, with a total notional amount of $18 million as
of October 31, 2008. We assume no hedge ineffectiveness as each interest rate
swap meets the short-cut method requirements under SFAS 133 for fair value
hedges of debt instruments. As a result, changes in the fair value of the
interest rate swaps are offset by changes in the fair value of the debt, both
are reported in interest and other income and no net gain or loss is recognized
in earnings.





The fair
values of all derivatives recorded on the consolidated balance sheet are as
follows:




October
      31, 2008
              
              
              January
      31, 2008Unrealized
      Gains:Foreign
      currency exchange contracts
              
              
              -----
              
              
              
              -----Unrealized
      (Losses):Foreign
      currency exchange contracts
              
              
              -----
              
              
              $
              77,000Interest
      rate swaps
              
              $
              33,825
              
              
              
              -----





The
Brazilian financial statements, when translated into USD pursuant to FAS 52,
“Foreign Currency Translation” resulted in a Currency Translation Adjustment
(CTA) of $(3,235,889), which is included in Other Comprehensive Loss on the
Balance Sheet.


13


13.
            Acquisition
      of Qualytextil, SA and Increase in Revolving Credit
  Line





On May
13, 2008 (the “Final Closing Date”), Lakeland Industries, Inc. completed the
acquisition of 100% of all outstanding stock (the “Acquisition”) of Qualytextil,
S.A., (“Qualytextil”) a corporation organized under the laws of Brazil, pursuant
to a Stock Purchase Agreement (the “Stock Purchase Agreement”). Qualytextil is a
supplier of protective apparel in Brazil.





The
Acquisition was financed through Lakeland’s existing revolving credit facility
as amended. Further, in related transactions to accommodate the Qualytextil
acquisition, Wachovia Bank, N.A. has increased the Revolving Line of Credit from
$25,000,000 to $30,000,000 and has reworked several covenants to allow for the
acquisition.





The
Purchase Price was determined to be a multiple of seven times the 2007 EBITDA of
Qualytextil, some of which was used to repay outstanding debts at closing. The
2007 EBITDA was $R3,118,000 ($1.9 million) and the total amount paid at closing,
including the repayment of such outstanding debts, is $R21,826,000
(approximately $13.3 million).




In
connection with the closing of such acquisition, a total of $R6.3 million ($3.9
million) was used to repay outstanding debts of Qualytextil, $R7.8 million ($4.7
million) was retained in the various escrow funds as described, and the balance
of $R7.7 million ($4.7 million) was paid to the Sellers at closing.




There are
provisions for an adjustment of the initial Purchase Price, based on results of
2008 EBITDA.  The Post-Closing audit as of April 30, 2008 resulted in
no adjustments to the Purchase Price.





There is
also a provision for a Supplementary Purchase Price - Subject to Qualytextil’s
EBITDA in 2010 being equal to or greater than $R4,449,200 ($2.7 million), the
Purchaser shall then pay to the Sellers the difference between six (6) times
Qualytextil’s EBITDA in 2010 and seven (7) times the 2007 EBITDA
($R21,826,000.00) ($13.3 million), less any unpaid disclosed or undisclosed
contingencies (other than Outstanding Debts) from pre-closing which exceeds
$R100,000.00 ($.06 million) ("Supplementary Purchase Price"). The Supplementary
Purchase Price in no event shall be greater than $R27,750,000.00 ($16.8 million)
additional over the initial Purchase Price, subject to certain restrictions.
(USD amounts are based on the exchange rate at the date of the transaction
1.645BRL = 1 USD)





All
sellers also have executed employment contracts with terms expiring December 31,
2011 which contain a non-compete provision extending seven years from
termination of employment.





The
Company is currently evaluating the fair market value of the assets purchased
including intangible assets.  Adjustments to the preliminary assets
valuation as and when acquired may result when this evaluation is
complete.  There is no significant purchased research and development
cost involved.





The
operations of Qualytextil have been included in the Lakeland consolidated
results commencing May 1, 2008.  A condensed balance sheet at the
acquisition date follows:





Current
      assets
              
              ($000
      USD)Cash
      and equivalents
              
              $
              34Accounts
      receivables
              
              
              1,199Inventory
              
              
              3,309Other
      current assets
              
              
              210Total
      current assets
              
              
              4,752Fixed
      assets
              
              
              1,249Intangible
      (Brands and Patents)
              
              
              186Other
      non-current assets
              
              
              606Total
      assets
              
              
              6,791Current
      LiabilitiesLoans
              
              
              3,093Trade
      payables and other current liabilities
              
              
              3,477Total
      current liabilities
              
              
              6,570Other
      non-current liabilities
              
              
              82Net
      assets acquired
              
              
              137





14





Total
      cost of acquisition of Qualytextil, SA
              
              $
              13,670Less
      net assets acquired
              
              
              (137
              )Less
      debt repayment at closing
              
              
              (3,890
              )Goodwill
      at closing
              
              
              9,643FAS
      52 foreign currency translation adjustment at October 31,
    2008
              
              
              (2,094
              )Goodwill
      at October 31, 2008 arising from Qualytextil, SA
              
              $
              7,549








Lakeland
results on a pro-forma basis with Qualytextil results included as if acquired at
beginning of each period shown are as follows:





Q1
      FY
                09
              
              
              Q2
      FY
                09
              
              
              Q3
      FY
                09
              
              
              Q3
      FY
                09
                YTD
              
              
              Q1
      FY
                08
              
              
              Q2
      FY
                08
              
              
              Q3
      FY
                08
              
              
              Q3
      FY
                08
                YTDSales
              
              $
              29,245
              
              
              $
              27,565
              
              
              $
              25,160
              
              
              $
              81,970
              
              
              $
              27,112
              
              
              $
              23,519
              
              
              $
              26,411
              
              
              $
              77,042Net
      Income
              
              
              1,158
              
              
              
              1,625
              
              
              
              1,373
              
              
              
              4,156
              
              
              
              580
              
              
              
              934
              
              
              
              1,559
              
              
              
              3,073EPS
              
              $
              0.21
              
              
              $
              0.30
              
              
              $
              0.25
              
              
              $
              0.76
              
              
              $
              0.11
              
              
              $
              0.17
              
              
              $
              0.28
              
              
              $
              0.56





For
Brazilian tax purposes, the Company expects to deduct goodwill over a five year
period commencing upon the merger of its holding company into the operating
company in Brazil which took place in November 2008.





There was
a strike of Brazilian customs workers from mid-March to mid-May, 2008. This
delayed many orders due to delays of imported raw materials. April sales were
significantly lower than normal. May sales included this additional backlog from
April. Since the acquisition was effective as of May 1, the revenue and profits
included in the quarter ending July 31, 2008 were higher than would otherwise
have occurred. Management estimates the benefit to May revenue and net income as
approximately $402,000 and $160,000, respectively, or $0.03 earnings per
share.





14.  Fraud
Involving China Plant Manager




In
October 2008, a senior manager in charge of one of the Company’s plants in China
was terminated. He has been charged by Chinese authorities with selling
non-woven fabric waste from garment production over the last eight years and
personally keeping the proceeds. Such proceeds amount to approximately
RMB4,000,000  (approximately USD$580,000). Such proceeds allegedly
originated periodically over the last eight years and were not significant in
any one year. VAT taxes, custom duties, income taxes, interest fines and
penalties are estimated to approximate the same amount of RMB4,000,000
(approximately USD $580,000). The Company has received these funds from the
former manager and estimates this will be sufficient to fund the estimated
liabilities to the Chinese Government.




Further,
the Company had been searching for an additional building to expand its China
operations. In May 2008, this senior manager steered the Company into purchasing
a building only 5 miles from our existing plants in AnQui City. The Company
agreed to purchase this building for RMB4.2 million (approximately USD
$614,000). This senior manager was an undisclosed owner of this building.
Further, a forged land lease was also issued. The Company has unwound this
transaction and has received the return in full of the RMB4,000,000 million it
paid in Q3 for this building. Such amount is included in Other Current Assets on
the October 31, 2008 Balance Sheet. The Company also negotiated a four year
lease for this property which will be reflected as prepaid rent for the
RMB1.5 million spent by the Company for improvements.




15












Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations





You
should read the following summary together with the more detailed business
information and consolidated financial statements and related notes that
appeared in our Form 10-K and Annual Report and in the documents that were
incorporated by reference into our Form 10-K for the year ended January 31,
2008.  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 industrial protective clothing and homeland security markets. Our products
are sold by our in-house sales force and independent sales representatives to a
network of over 1000 safety, fire and mill supply distributors. These
distributors in turn supply end user industrial customers such as integrated
oil, chemical/petrochemical, automobile, steel, glass, construction, smelting,
janitorial, pharmaceutical and high technology electronics manufacturers, as
well as hospitals and laboratories. In addition, we supply federal, state and
local governmental agencies and departments such as fire and police departments,
airport crash rescue units, the Department of Defense, the Centers for Disease
Control, and numerous other agencies of the federal, state and local
governments.





We have
operated manufacturing facilities in Mexico since 1995, in China since 1996, in
India since 2006 and in Brazil since May of 2008. Beginning in 1995, we moved
the labor intensive sewing operation for our limited use/disposable protective
clothing lines to China and Mexico. Our facilities and capabilities in China,
Mexico, India and Brazil allow access to a less expensive labor pool than is
available in the United States and permit us to purchase certain raw materials
at a lower cost than they are available domestically. As we have increasingly
moved production of our products to our facilities in Mexico and China, we have
seen improvements in the profit margins for these products. We continue to move
production of our reusable woven garments and gloves to these facilities and
expect to continue this process through fiscal 2009. As a result, we expect to
see continuing profit margin improvements for these product lines over
time.





Critical
Accounting Policies and Estimates




The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, net sales and
expenses, and disclosure of contingent assets and liabilities. We base estimates
on our past experience and on various other assumptions that we believe to be
reasonable under the circumstances and we periodically evaluate these
estimates.





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





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,
fire fighting and heat protective apparel, gloves and arm guards, and reusable
woven garments. Sales are recognized when goods are shipped at which time title
and the risk of loss passes to 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.





Substantially
all the Company’s sales are made through distributors. There are no significant
differences across product lines or customers in different geographical areas in
the manner in which the Company’s sales are made.


16








Rebates
are offered to a limited number of our distributors, who participate in a rebate
program. Rebates are predicated on total sales volume growth over the previous
year. The Company accrues for any such anticipated rebates on a pro-rata basis
throughout the year.





Our sales
are generally final; however requests for return of goods can be made and must
be received within 90 days from invoice date. No returns will be accepted
without a written authorization. Return products may be subject to a restocking
charge and must be shipped freight prepaid. Any special made-to-order items are
not returnable. Customer returns have historically been
insignificant.





Customer
pricing is subject to change on a 30-day notice; exceptions based on meeting
competitors pricing are considered on a case by case basis.





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





Allowance for Doubtful Accounts.We establish an allowance for doubtful accounts to provide for accounts
receivable that may not be collectible. In establishing the allowance for
doubtful accounts, we analyze the collectability of individual large or past due
accounts customer-by-customer. We establish reserves for accounts that we
determine to be doubtful of collection.





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





Valuation of Goodwill and Other
Intangible Assets.On February 1, 2002, we adopted Statement of Financial
Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,”
which provides that goodwill and other intangible assets are no longer
amortized, but are assessed for impairment annually and upon occurrence of an
event that indicates impairment may have occurred. Goodwill impairment is
evaluated utilizing a two-step process as required by SFAS No. 142. Factors that
we consider 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. When we
determine that the carrying value of intangibles and goodwill may not be
recoverable based upon one or more of these indicators of impairment, we measure
any potential impairment based on a projected discounted cash flow
method.  Estimating future cash flows requires our management to make
projections that can differ materially from actual results.





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 increases beyond what was anticipated, reserves recorded may not be
sufficient and additional accruals may be required in future periods. We
maintain separate insurance to cover the excess liability over set single claim
amounts and aggregate annual claim amounts.


17










Significant
Balance Sheet Fluctuation October 31, 2008 as compared to January 31,
2008




Cash
decreased by $1.3 million as a result of normal fluctuations in uncollected
funds deposited and a reduction of excess cash in China. Accounts receivable
increased by $1.6 million. Inventory increased by $6.9 million primarily
due to an increase in Tyvek inventory purchasing levels, and our
acquisition in Brazil. An increase in raw material of $1.4 million was mainly
due to our Brazil acquisition. Overall inventories increased by $6.8 million
from their January 2008 levels resulting from lower sales of Tyvek products in
Q3 FY08 compared with purchasing commitments to vendors and our acquisition in
Brazil. Raw material purchasing continued at higher levels than normal in order
to take advantage of discounts offered by suppliers.  Deferred income
taxes increased by a $.17 million tax benefit for the India and Mexican
operations.  Other current assets increased principally due to the
accrual of $.96 million in rebates related to the purchase of raw material.
Accounts payable increased by $1.8 million.





At
October 31, 2008 the Company had an outstanding loan balance of $25.5 million
under its facility with Wells Fargo-Wachovia Bank, N.A. compared with $8.9
million at January 31, 2008 largely to finance the purchase of the increase in
inventory referred to above and the acquisition of Qualytextil, SA in Brazil in
May 2008.  Total stockholders’ equity decreased principally by the
$3.3 million other comprehensive loss (mainly due to foreign exchange rate
fluctuations) and the $1.3 million stock buyback program, partially offset by
the net income of $3.9 million for the period and equity compensation of $.2
million.





Three
months ended October 31, 2008 as compared to the three months ended October 31,
2007




Net Sales.Net sales
increased $1.7 million or 7.3% to $25.2 million for the three months ended
October 31, 2008 from $23.5 million for the three months ended October 31,
2007.  The net increase was mainly due to foreign sales. Domestic
sales of disposables were down $1.2 million or 8.2%. Wovens sales were off $.9
million or 42.7%, mainly due to the downturn in the economy. Glove sales were
off slightly. Chemical sales were strong at $.4 million increase, or 16.1% and
Reflective sales nearly doubled, up $.7 million or 97.9% as a result of new
safety standards and penetration of reflective sales to existing customers.
Qualytextil sales included in the current quarter were $2.4 million. External
sales from China increased by $.2 million, or 21%, driven by sales to the new
Australian distributor. Canadian sales decreased by $.27 million, or 17%, UK
sales increased by $.13 million, or 15%, Chile sales decreased by $.07 million,
or 21%. US domestic sales decreased by $1.1 million or 5.6% due to the slowing
economy.





Gross Profit.Gross profit
increased $1.5 million or 26% to $7.2 million for the three months ended October
31, 2008 from $5.7 million for the three months ended October 31,
2007.  Gross profit as a percentage of net sales increased to 28.5%
for the three months ended October 31, 2008 from 24.3% for the three months
ended October 31, 2007, primarily due to the inclusion of Brazilian operations
at a 49.3% gross profit, the end of the prior year’s sales rebate program to
meet competitive conditions, certain higher-priced Tyvek being charged to the
prior year cost of goods sold, offset by gross losses in India of $.13 million
resulting from delayed start up conditions





Operating Expenses.Operating
expenses increased $.76 million, or 17% to $5.1 million for the three months
ended October 31, 2008 from $4.4 million for the three months ended October 31,
2007.  As a percentage of sales, operating expenses increased to 20.3%
for the three months ended October 31, 2008 from 18.6% for the three months
ended October 31, 2007. The $.76 million increases in operating expenses in the
three months ended October 31, 2008 as compared to the three months ended
October 31, 2007





·
            $0.86
      million operating expenses incurred by Qualytextil S.A., in Brazil now
      included in the three months ended October 31, 2008, not previously
      included.


·
            $0.10
      million increase in sales travel, trade shows and administrative travel
      costs to Brazil.


·
            $0.05
      million higher freight out costs resulting from prevailing carrier rates
      exclusive of Brazil.


·
            ($0.07)
      million reduced R&D costs reflecting the completion of R&D on the
      ChemMax product line in the prior
year.


18





·
            ($0.08)
      million reduced operating expenses in
India.


·
            ($0.10)
      million miscellaneous net
decreases.





Operating profit. Operating
profit increased 50% to $2.1 million for the three months ended October 31, 2008
from $1.4 million for the three months ended October 31, 2007. Operating margins
were 8.2% for the three months ended October 31, 2008 compared to 5.8% for the
three months ended October 31, 2007.





Interest
Expenses.  Interest expenses increased by $.2 million for the
three months ended October 31, 2008 as compared to the three months ended
October 31, 2007 due to higher borrowing levels outstanding mainly due to the
funding for the Qualytextil acquisition, partially offset by lower interest
rates in the current year.





Income Tax
Expense.  Income tax expenses consist of federal, state, and
foreign income taxes.


Income
tax expenses increased $.07 million, or 19%, to $.45 million for the three
months ended October 31, 2008 from $.38 million for the three months ended
October 31, 2007. Lakeland’s effective tax rates were 25% and 29% for the three
months ended October 31, 2008 and 2007, respectively. Included in the current
year tax expense is the inclusion of Brazilian operations with an effective tax
rate of 16%. Our effective tax rate for 2008 was impacted by higher statutory
rates in China and some losses in India not eligible for tax credits and
benefitted from some foreign exchange gains in Canada and UK. The effective tax
rate for 2007 reflected an unusually low mix of domestic profits combined with
higher profits in China. The 2007 China profits were taxed at a statutory rate
of 15%. The China statutory tax rate increased to 25% effective January 1,
2008.





Net Income.  Net
income increased $.44 million, or 48% to $1.4 million for the three months ended
October 31, 2008 from $.93 million for the three months ended October 31, 2007.
The increase in net income primarily resulted from the inclusion of the
Qualytextil acquisition and an increase in sales and profits across all
operations.





Nine
months ended October 31, 2008 as compared to the nine months ended October 31,
2007




Net Sales.Net sales
increased $9.2 million, or 13% to $80 million for the nine months ended October
31, 2008 from $70.8 million for the nine months ended October 31,
2007.  The increase in sales was mainly in international sales. Sales
decreased in disposable garments of $1.7 million in the U.S. and $.1 million in
Canada primarily due to competitive market conditions and competitors rebate
programs, counter balanced by growth in sales in Chile and United Kingdom
subsidiaries of $1.1 million and by increased external sales from China of $4.5
million.  The Company expects to reopen its Indian facility in
December 2008, so the resumption of glove sales should take full effect in the
first quarter of fiscal 2009.  Sales of wovens and gloves were flat
compared to the same period last year. Sales from Brazil of $5.5 million were
included in the current year-to-date sales reflecting sales in Q2 and Q3, not
included in prior year’s sales. Reflective sales are up $1.2 million for the
nine months this year compared with last year, or 52.2%.





Gross Profit.Gross profit
increased $5.8 million or 36% to $22 million for the nine months ended October
31, 2008 from $16.2 million for the nine months ended October 31,
2007.  Gross profit as a percentage of net sales increased to 27.5%
for the nine months ended October 31, 2008 from 22.9% for the nine months ended
October 31, 2007, primarily due to the inclusion of Brazilian operations at a
53% gross profit, a one-time plant restructuring charge in Mexico of $.5 million
in the previous year, the end of a sales rebate program in the prior year to
meet competitive conditions, offset by gross losses in India of $.5 million
resulting from delayed start-up conditions.





Operating Expenses.Operating
expenses increased $3.4 million, or 26% to $16.3 million for the nine months
ended October 31, 2008 from $12.9 million for the nine months ended October 31,
2007. As a percentage of sales, operating expenses increased to 20.4% for the
nine months ended


19


October
31, 2008 from 18.3% for the nine months ended October 31, 2007.  This
increase as a percent of sales is largely due to Brazil operations, which runs
at a higher margin with higher operating expenses. The increase in operating
expenses in the nine months ended October 31, 2008 as compared to the nine
months ended October 31, 2007 included:





·
            $1.78
      million operating expenses incurred by Qualytextil SA, in Brazil now
      included in the nine months ended October 31,
  2008.


·
            $0.59
      million additional freight out costs resulting from significantly higher
      prevailing carrier rates and higher
volume.


·
            $0.41
      million in additional selling expenses, travel and commission exclusive of
      Brazil.


·
            $0.30
      million in costs relating to the proxy
contest.


·
            $0.28
      million increased operating costs in China as the result of the large
      increase included in direct international sales made by China, are now
      allocated to SGA costs, previously allocated to cost of goods
      sold.


·
            $0.16
      million higher operating expenses in Chile due to higher
      volume.


·
            $0.14
      million miscellaneous increases.


·
            ($0.12)
      million lower start-up expenses in
India.


·
            ($0.15)
      million in reduced currency fluctuation
costs.





Operating Profit. Operating
profit increased 75% to $5.7 million for the nine months ended October 31, 2008
from $3.3 million for the nine months ended October 31,
2007.  Operating margins were 7.1% for the nine months ended October
31, 2008 compared to 4.6% for the nine months ended October 31,
2007.





Interest
Expenses.  Interest expenses increased by $.43 million for the
nine months ended October 31, 2008 as compared to the nine months ended October
31, 2007 because of higher amounts
borrowed and lower interest rates under the Company’s credit
facility.





Income Tax
Expense.  Income tax expenses consist of federal, state, and
foreign income taxes.  Income tax expenses increased $.37 million, or
39%, to $1.3 million for the nine months October 31, 2008 from $.94 million for
the nine months ended October 31, 2007.  Lakeland’s effective tax
rates were 25% and 29% for the nine months ended October 31, 2008 and 2007,
respectively.  Included in the current year tax expense is a reduction
of $207,000 of income tax expense resulting from the settlement with the IRS
(see Note 10) and the inclusion of Brazilian operations with an effective tax
rate of 16%. The 2007 period reflected a 12.5% statutory rate for China (raised
to 25% effective January 1, 2008) and was impacted by the $500,000 charge for
the Mexican plant restructuring in the previous year for which no tax credit was
available. Without this $500,000 charge, the effective rate for the 2007 period
would have been 25.1%.





Net
Income.  Net
income increased $1.6 million, or 70% to $3.9 million for the nine months ended
October 31, 2008 from $2.3 million for the nine months ended October 31, 2007.
The increase in net income primarily resulted from the acquisition in Brazil,
the result of meeting competitive conditions in the disposable garment division
both in the U.S. and Canada and the Mexican restructuring in the prior year,
offset by the combined operating losses of $.7 million of the new foreign
operations.





Liquidity
and Capital Resources




Cash Flows.As of October 31,
2008 we had cash and cash equivalents of $2.1 million and working capital of
$72.5 million; a decrease of $1.3 million and an increase of $7.2 million,
respectively, from January 31, 2008. Our primary sources of funds for conducting
our business activities have been cash flow provided by operations and
borrowings under our credit facilities described below.  We require
liquidity and working capital primarily to fund increases in inventories and
accounts receivable associated with our net sales and, to a lesser extent, for
capital expenditures.





Net cash
used in operating activities of $1.1 million for the nine months ended October
31, 2008 was due primarily to net income of $3.9 million, an increase in other
assets of $2.2 million, and an increase in inventories of $3.5 million, with an
decrease in accounts receivable of $.4 million. Net cash used in investing
activities of $15.3 million in the nine months ended October 31, 2008, was
mainly due to the Qualytextil acquisition, and also the purchases of property
and equipment.


20





We
currently have one credit facility - a $30 million revolving credit, of which
$25.5 million of borrowings were outstanding as of October 31,
2008.  Our credit facility requires that we comply with specified
financial covenants relating to fixed charge ratio, debt to EBIDTA coverage, and
inventory and accounts receivable collateral coverage ratios.  These
restrictive covenants could affect our financial and operational flexibility or
impede our ability to operate or expand our business.  Default under
our credit facility would allow the lender to declare all amounts outstanding to
be immediately due and payable.  Our lender has a security interest in
substantially all of our assets to secure the debt under our credit
facility.  As of October 31, 2008, we were in compliance with all
covenants contained in our credit facility.





We
believe that our current cash position of $2.1 million, our cash flow from
operations along with borrowing availability under our $30 million revolving
credit facility will be sufficient to meet our currently anticipated operating,
capital expenditures and debt service requirements for at least the next 12
months.





Capital Expenditures. Our
capital expenditures principally relate to purchases of manufacturing equipment,
computer equipment, and leasehold improvements, as well as payments related to
the construction of our new facilities in China. Our facilities in China are not
encumbered by commercial bank mortgages, and thus Chinese commercial mortgage
loans may be available with respect to these real estate assets if we need
additional liquidity. Our capital expenditures are expected to be approximately
$1.2 million for capital equipment, primarily computer equipment and apparel
manufacturing equipment in fiscal 2010.





Foreign Currency
Exposure.The Company has foreign currency exposure,
principally through its investment in Brazil, sales in Canada and the UK and
production in Mexico and China.  Management has commenced a hedging
program to offset this risk by purchasing forward contracts to sell the Canadian
Dollar, Euro and Great Britain Pound.  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.  Management has decided not to hedge its long
positions in the Chinese Yuan and Brazilian Real.





The
Company accounts for its foreign exchange derivative instruments under Statement
of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended.  This standard requires
recognition of all derivatives as either assets or liabilities at fair value and
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.





The
      Company had one derivative instrument outstanding at October 31, 2007
      which was treated as a cash flow hedge intended for forecasted purchases
      of merchandise by the Company’s Canadian subsidiary no longer outstanding
      at October 31, 2008. The change in the fair market value of the
      effective hedge portion of the foreign currency forward exchange contracts
      was a loss of  $77,000, for the nine month period ended October
      31, 2008 which was released into operations based on the timing of the
      sales of the underlying inventory.  The release to operations was
      reflected in cost of products sold.  During the period ended October
      31, 2007, the Company recorded an immaterial loss in cost of goods sold
      for the remaining portion of the foreign currency forward exchange
      contract that did not qualify for hedge accounting
      treatment.  The derivative instrument was in the form of a
      foreign currency “participating forward” exchange contract. The
      “participating forward” feature affords the Company full protection on the
      downside and the ability to retain 50% of any gains, in exchange for a
      premium at inception.  Such premium is built into the contract
      in the form of a different contract rate in the amount of
      $0.016.


21








The
company has a net investment in Brazil denominated in foreign currency of
approximately 22 million Brazilian Reals. Management has decided not to hedge
this investment at this time. Applying translation methodology per SFAS 52
results in a Currency Translation Adjustment of $3.3 million, included in Other
Comprehensive Loss in Stockholders’ Equity on the Balance Sheet at October 31,
2008. We are exposed to interest rate risk from debt. We have hedged against the
risk of changes in the interest rate associated with our variable rate Revolving
Credit (See Note 12) by entering into a variable-to-fixed interest rate swap
agreement, designated as fair value hedges, with a total notional amount of $18
million as of October 31, 2008. We assume no hedge ineffectiveness as each
interest rate swap meets the short-cut method requirements under SFAS 133 for
fair value hedges of debt instruments. As a result, changes in the fair value of
the interest rate swaps are offset by changes in the fair value of the debt,
both are reported in interest and other income and no net gain or loss is
recognized in earnings.





The fair
values of all derivatives recorded on the consolidated balance sheet are as
follows:




October
      31, 2008
              
              
              January
      31, 2008Unrealized
      Gains:Foreign
      currency exchange contracts
              
              
              -----
              
              
              
              -----Unrealized
      (Losses):Foreign
      currency exchange contracts
              
              
              -----
              
              
              $
              77,000Interest
      rate swaps
              
              $
              33,825
              
              
              $
              0




Item
      3.
            Quantitative and Qualitative Disclosures About Market
      Risk





There
have been no significant changes in market risk from that disclosed in our
Annual Report on Form 10-K for the fiscal year ended January 31,
2008.




Item
      4.
            Controls
      and Procedures





Evaluation of Disclosure Controls
and Procedures - Lakeland Industries, Inc.’s Chief Executive Officer and
Chief Financial Officer, after evaluating the effectiveness of Lakeland
Industries, Inc.’s disclosure controls and procedures (as defined in Rule
13a-15(e) or 15d-15(c) under the Securities Exchange Act) as of the end of the
period covered by this report, have concluded that, based on the evaluation of
these controls and procedures, the Company’s disclosure controls and procedures
were not effective as of October 31, 2008. Our Chief Executive Officer and Chief
Financial Officer have concluded that we have a material weakness in our
internal control over our China operations and financial reporting as of October
31, 2008.





A control
system, no matter how well conceived and operated, can provide only reasonable
assurance that the objectives of the control system are met. Our management,
including our chief executive officer and chief financial officer, does not
expect that our disclosure controls and procedures or internal control over
financial reporting will prevent all errors and fraud. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues within our company have been
detected. These inherent limitations include the reality that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
errors or mistakes. The design of any control system is also based, in part,
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a control
system, misstatements due to error or fraud may occur and not be
detected.





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.


22





Management
has identified a material weakness in its internal control over our China
operations and financial reporting. A senior manager in charge of one of the
Company’s plants in China was terminated after being charged by China
authorities with, over the last eight years, selling non-woven fabric waste from
garment production and personally keeping the proceeds. This control deficiency
is the result of fraud and inadequate controls governing non-woven fabric waste.
See further discussion in Footnote 14 to the financial statements
herein.





Previous Material Weaknesses-In its report at April 30, 2008, management had previously identified a
material weakness in its period-end financial reporting process relating to
employee withholding for medical insurance. The employee withholding for medical
insurance was not offset against the expenses as a result of human error and was
not identified on review due to the favorable claim experience resulting in
lowered expenses. This control deficiency resulted in an adjustment to our April
30, 2008 financial statements and could have resulted in an overstatement
of  cost of sales and operating expenses that would have resulted in
an understatement of net earnings in the amount of $127,000 to the interim
financial statements if not detected and prevented.





Management
had also previously identified two material weaknesses at January 31, 2008, in
its period-end financial reporting process relating to the elimination of
inter-company profit in inventory and the inadequate review of inventory cutoff
procedures and financial statement reconciliations from one of our China
subsidiaries.  The material weakness which related to the elimination
of inter-company profit in inventory resulted from properly designed controls
that did not operate as intended due to human error. The material weakness that
resulted in the inventory cut-off error was as a result of the improper
reconciliation of the conversion of one of our China subsidiaries’ financial
statements from Chinese GAAP to U.S. GAAP. We engaged a CPA firm in China to
assist management in this conversion, and the Chinese CPA firm’s review as well
as management’s final review did not properly identify the error in the
reconciliation. These control deficiencies resulted in audit adjustments to our
January 31, 2008 financial statements and could have resulted in a misstatement
to cost of sales that would have resulted in a material misstatement to the
annual and interim financial statements if not detected and
prevented.





As
described below under the heading “Changes in Internal Controls Over
Financial Reporting,” we have previously taken a number of steps designed
to improve our accounting for our Chinese subsidiaries,  the
elimination of intercompany profit in inventory, and employee withholding for
medical insurance.





Changes in Internal Control Over
Financial Reporting –Except as described
below, there have been no changes in our internal control over financial
reporting since January 31, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





Remediation - In response to
the material weaknesses identified at January 31, 2008, we continue the process
of initiating additional review procedures to reduce the likelihood of future
human error and are transitioning to internal accounting staff with greater
knowledge of U.S. GAAP to improve the accuracy of the financial reporting of our
Chinese subsidiary.  We have automated key elements of the calculation
of intercompany profits in inventory and formalized the review process of the
data needed to calculate this amount. With the implementation of this corrective
action we believe that the previously identified material weakness relating to
intercompany profit elimination has been remediated as of the first quarter of
the fiscal year 2009.





In
response to the material weakness identified at April 30, 2008, we have
initiated additional review procedures to reduce the likelihood of future human
error on the assets and liabilities trial balance amounts. Management believes
that the remediation relating to the weakness relating to the Chinese
subsidiaries is now completely in effect.





Effective
in full at October 31, 2008, management has taken primary responsibility to
prepare the US GAAP financial reporting based on China GAAP financial
statements. This function was previously performed by outside accountants in
China. Further, US corporate management is now also reviewing the China GAAP
financial statements. In addition, in July 2008, an internal auditor was hired
in China who will report directly to the US corporate internal audit department
and who will work closely with US management.


23








In
response to the material weakness identified at October 31, 2008, we will
initiate a China Internal Control Committee. Such Committee will review, examine
and evaluate China operating activities, and plan, design and implement internal
control procedures and policies. The Committee will report to the Chief
Financial Officer. In particular, the Committee will focus on: strengthening
controls over waste/scrap sales, upgrading local accounting manager authority
and responsibility, and creating new banking and inventory
controls.





We believe the above remediation steps
will provide us with the infrastructure and processes necessary to accurately
prepare our financial statements on a quarterly basis.





Lakeland
Industries, Inc.’s management, with the participation of Lakeland Industries,
Inc.’s Chief Executive Officer and Chief Financial Officer, has evaluated
whether any change in the Company’s internal control over financial reporting
occurred during the third quarter of fiscal 2009.  Based on that
evaluation, management concluded that there have not been changes in Lakeland
Industries, Inc.’s internal control over financial reporting during the third
quarter of fiscal 2009 that have materially affected, or is reasonably likely to
materially affect, Lakeland Industries, Inc.’s internal control over financial
reporting.








PART
II. OTHER INFORMATION




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




Item
      4.
            None


Item 6.
            Exhibits and
      Reports on Form 8-K:





Exhibits:a.
            31.1
      Certification Pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the
      Exchange Act, Signed by Chief Executive Officer (filed
      herewith)b.
            31.2
      Certification Pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the
      Exchange Act, Signed by Chief Financial Officer (filed
      herewith)c.
            32.1
      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002, Signed by Chief Executive
      Officer (filed herewith)d.
            32.1
      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002, Signed by Chief Financial
      Officer (filed herewith)












Reports
      on Form 8-K:




a
      -
            On
      August 1, 2008, the Company filed a Form 8-K under item 8.01 stating that
      on July 23, 2008, the Company reached a settlement with the Internal
      Revenue Service regarding its examination of the Company’s Federal Income
      Tax returns for taxable years ending January 31, 2003, 2004 and
      2005.




b
      -
            On
      August 7, 2008, the Company filed a Form 8-K/A under items 5.03 and 8.01.
      Item 5.03 states that on June 18, 2008 the Board of Directs of the Company
      amended and restated the Bylaws of the Company. Item 8.01 states that on
      June 18, 2008 the Board of Directors of the Company adopted various
      amendments to the Bylaws.




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c
      -
            On
      September 9, 2008, the Company filed a Form 8-K under items 2.02 for the
      purpose of furnishing a press release announcing the Company's Q2 FY09
      financial results for the reporting period ended July 31,
      2008.




d
      -
            On
      September 23, 2008, the Company filed a Form 8-K under items 1.01 and
      2.03. Item 1.01 states that on September 23, 2008 the Company entered into
      an interest rate swap agreement with Wachovia Bank, N.A. pursuant to a
      confirmation that incorporates the 1992 ISDA master Agreement, as amended
      in 2006. Item 2.03 states Creation of a direct financial obligation or an
      obligation under an off-balance sheet arrangement of a
      registrant.









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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, 2008
            /s/ Christopher J.
      RyanChristopher
      J. Ryan,Chief
      Executive Officer, President,Secretary
      and General Counsel(Principal
      Executive Officer and AuthorizedSignatory)Date:
      December 10, 2008
            /s/Gary
      PokrassaGary
      Pokrassa,Chief
      Financial Officer(Principal
      Accounting Officer and AuthorizedSignatory)









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