**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 ended **July
        31, 2006**
  OR
  ̈
                  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 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.
 YESxNOo
  Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act).
 YESxNOo
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 YESoNOx
  Indicate
        the number of shares outstanding of each of the issuer's classes of common
        stock, as of the latest practicable date:
  Class
              
              Outstanding
                  at September 7, 2006Common
                  Stock, $0.01 par value per share
              
              5,521,824
                  shares.
  
  
  **LAKELAND
        INDUSTRIES, INC.**
 **AND
        SUBSIDIARIES**
  **FORM
        10-Q**
  The
        following information of the Registrant and its subsidiaries is submitted
        herewith:
  **PART
        I - FINANCIAL INFORMATION:**
  Item
                  1.
              Financial
                  Statements (unaudited):
              PageIntroduction
              1Condensed
                  Consolidated Balance Sheets July 31, 2006 and January 31,
                  2006
              2Condensed
                  Consolidated Statements of Income for the Three and Six Months
                  EndedJuly
                  31, 2006 and 2005
              3Condensed
                  Consolidated Statement of Stockholders' Equity -Six Months EndedJuly
                  31, 2006
              4Condensed
                  Consolidated Statements of Cash Flows -Six Months Ended July 31,
                  2006 and
                  2005
              5Notes
                  to Condensed Consolidated Financial Statements
              6Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              15Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              20Item
                  4.
              Controls
                  and Procedures
              20**PART
                  II - OTHER INFORMATION:**Item
                  6.
              Exhibits
                  and Reports on Form 8-K
              21Signature
                  Page
              22
  
  **LAKELAND
        INDUSTRIES, INC.**
 **AND
        SUBSIDIARIES**
  **PART
                  I -**
              **FINANCIAL
                  INFORMATION**
  Item
                  1.
              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 suppliers and 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 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.
  *Back
            to Index*
 1
  **LAKELAND
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 
 **ASSETS**
              
              July
                  31, 2006
                (Unaudited)
              
              January
                  31, 2006Current
                  assets:Cash
              
              $
              2,304,902
              
              $
              1,532,453Accounts
                  receivable, net of allowance for doubtful accounts of $85,000 at
                  July 31,
                  2006 and $323,000 at January 31, 2006
              
              
              12,527,091
              
              
              14,221,281Inventories,
                  net of reserves of $372,000 at July 31,2006
                  and $365,000 at January 31, 2006
              
              
              46,934,020
              
              
              45,243,490Deferred
                  income taxes
              
              
              917,684
              
              
              917,684Other
                  current assets
              
              
              2,320,946
              
              
              1,804,552Total
                  current assets
              
              
              65,004,643
              
              
              63,719,460Property
                  and equipment, net of accumulated depreciation of $6,702,000 at
                  July 31,
                  2006 and $6,201,000 January 31, 2006
              
              
              7,628,881
              
              
              7,754,765Goodwill
              
              
              871,297
              
              
              871,297Other
                  assets
              
              
              272,586
              
              
              118,330$
              73,777,407
              
              $
              72,463,852**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilities:Accounts
                  payable
              
              $
              1,845,254
              
              $
              2,536,756Accrued
                  expenses and other current liabilities
              
              
              693,265
              
              
              1,302,544Total
                  current liabilities
              
              
              2,538,519
              
              
              3,839,300Pension
                  liability
              
              
              473,700
              
              
              469,534Deferred
                  income taxes
              
              
              86,982
              
              
              86,982Borrowings
                  under revolving credit facility
              
              
              7,054,000
              
              
              7,272,000Commitments
                  and contingenciesStockholders'
                  equity:Preferred
                  stock, $.01 par; authorized 1,500,000 shares (none issued)Common
                  stock, $.01 par; authorized 10,000,000 shares; issued and outstanding
                  5,521,824 shares at July 31, 2006 and 5,017,046 shares at January
                  31,
                  2006
              
              
              55,219
              
              
              50,170Additional
                  paid-in capital
              
              
              48,824,964
              
              
              42,431,221Retained
                  earnings (1)
              
              
              14,744,023
              
              
              18,314,645Stockholders'
                  equity
              
              
              63,624,206
              
              
              60,796,036$
              73,777,407
              
              $
              72,463,852
  (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. As reflected in the Condensed
        Consolidated Statement of Stockholders’ Equity, $6,386,916 was included in
        the six months ended July 31, 2006.
  The
        accompanying notes are an integral part of these financial
        statements.
  *Back
            to Index*
 2
  **LAKELAND
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME**
 **(UNAUDITED)**
 
 THREE
                  MONTHS ENDED
                July
                  31,
              
              SIX
                  MONTHS ENDED
                July
                    31,2006
              
              2005
              
              2006
              
              2005Net
                  sales
              
              $
              24,086,862
              
              $
              25,089,146
              
              $
              51,308,887
              
              $
              50,798,074Cost
                  of goods sold
              
              
              17,621,040
              
              
              19,293,516
              
              
              38,310,335
              
              
              38,835,565Gross
                  profit
              
              
              6,465,822
              
              
              5,795,630
              
              
              12,998,552
              
              
              11,962,509Operating
                  expenses
              
              
              4,384,931
              
              
              3,589,281
              
              
              8,750,845
              
              
              7,210,126Operating
                  profit
              
              
              2,080,891
              
              
              2,206,349
              
              
              4,247,707
              
              
              4,752,383Interest
                  and other income, net
              
              
              18,184
              
              
              65,562
              
              
              32,985
              
              
              89,024Interest
                  expense
              
              
              (116,080
              )
              
              (3,582
              )
              
              (186,773
              )
              
              (4,102
              )Income
                  before income taxes
              
              
              1,982,995
              
              
              2,268,329
              
              
              4,093,919
              
              
              4,837,395Provision
                  for income taxes
              
              
              628,476
              
              
              620,119
              
              
              1,277,625
              
              
              1,476,208Net
                  income
              
              $
              1,354,519
              
              $
              1,648,210
              
              $
              2,816,294
              
              $
              3,361,187Net
                  income per common share*:Basic
              
              $
              .25
              
              $
              .30
              
              $
              .51
              
              $
              .61Diluted
              
              $
              .25
              
              $
              .30
              
              $
              .51
              
              $
              .61Weighted
                  average common shares outstanding*:Basic
              
              
              5,520,981
              
              
              5,518,751
              
              
              5,519,938
              
              
              5,518,751Diluted
              
              
              5,524,110
              
              
              5,523,164
              
              
              5,524,093
              
              
              5,523,394
  *Adjusted
        for the 10% stock dividend to shareholders of record on April 30, 2005 and
        August 1, 2006.
  The
        accompanying notes are an integral part of these financial
        statements.
  *Back
            to Index*
 3
  **LAKELAND
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**
 **(UNAUDITED)**
 Six
        months ended July 31, 2006
 
 Common
                  Stock
              
              Additional
                Paid-in
              
              RetainedShares
              
              Amount
              
              Capital
              
              Earnings
              
              TotalBalance,
                  January 31, 2006
              
              
              5,017,046
              
              $
              50,170
              
              $
              42,431,221
              
              $
              18,314,645
              
              $
              60,796,036Net
                  Income
              
              
              
              
              
              
              
              
              
              
              
              2,816,294
              
              
              2,816,294Exercise
                  of Stock Options
              
              
              2,662
              
              
              27
              
              
              11,849
              
              
              ----
              
              
              11,87610%
                  Stock Dividend
              
              
              502,116
              
              
              5,022
              
              
              6,381,894
              
              
              (6,386,916
              )
              
              ---Balance
                  July 31, 2006
              
              
              5,521,824
              
              $
              55,219
              
              $
              48,824,964
              
              $
              14,744,023
              
              $
              63,624,206
 
 (Reflects
        four separate 10% stock dividends issued on July 31, 2002, 2003, April 30,
        2005 and August 1, 2006, which resulted in a cumulative transfer of
        $17,999,739 from retained earnings to additional paid-in capital and par
        value
        of common stock).
 
 The
        accompanying notes are an integral part of these financial
        statements.
  *Back
            to Index*
 4
  **LAKELAND
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (UNAUDITED)
 
 SIX
                  MONTHS ENDED
                July
                  31,2006
              
              2005Cash
                  Flows from Operating Activities:Net
                  income
              
              $
              2,816,294
              
              $
              3,361,187Adjustments
                  to reconcile net income to net cash provided by (used in) operating
                  activities:Stock
                based compensation
              
              
              42,451
              
              
              ----Reserve
                  for doubtful accounts
              
              
              69,474
              
              
              ----Reserve
                  for inventory obsolescence
              
              
              25,347
              
              
              (4,601
              )Depreciation
                  and amortization
              
              
              501,466
              
              
              467,000Increase
                  in accounts receivable
              
              
              1,624,716
              
              
              109,600Increase
                  in inventories
              
              
              (1,715,877
              )
              
              (4,425,529)*Increase
                  in other assets
              
              
              (670,651
              )
              
              (87,522
              )(Decrease)
                  Increase in accounts payable, accrued expenses and other
                  liabilities
              
              
              (1,339,065
              )
              
              450,547Net
                  cash provided by (used in) operating activities
              
              
              1,354,155
              
              
              (129,318
              )Cash
                  Flows from Investing Activities:Purchases
                  of property and equipment
              
              
              (375,582
              )
              
              (3,821,157
              )Net
                  cash used in investing activities
              
              
              (375,582
              )
              
              (3,821,157
              )Cash
                  Flows from Financing Activities:Proceeds
                  from exercise of stock options
              
              
              11,876
              
              
              -----(Repayments)
                  Borrowing under loan agreements
              
              
              (218,000
              )
              
              1,881,933Net
                  cash (used in) provided by financing activities
              
              
              (206,124
              )
              
              1,881,933Net
                  increase (decrease) in cash
              
              
              772,449
              
              
              (2,068,542
              )Cash
                  and cash equivalents at beginning of period
              
              
              1,532,453
              
              
              9,185,382Cash
                  and cash equivalents at end of period
              
              $
              2,304,902
              
              $
              7,116,840
  *Inventory
        increased as production increased for the second half demand and accelerated
        purchases made on raw materials in anticipation of the July 1, 2005 price
        increase.
 
 The
        accompanying notes are an integral part of these financial
        statements.
  *Back
            to Index*
 5
  **LAKELAND
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Unaudited)
 
 ***1.***
              ***Business***
  Lakeland
        Industries, Inc. and Subsidiaries (the "Company"), 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 six month periods
        ended July 31, 2006 and 2005, 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 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, 2006.
  Certain
        reclassifications between cost of goods sold and operating expenses were
        made to
        the first quarter of fiscal year 2006, in order to be consistent with the
        second
        quarter and year to date of fiscal 2006 classifications for the Mexico and
        China
        subsidiaries.
  The
        results of operations for the three and six month periods ended July 31,
        2006 is
        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, Laidlaw Adams & Peck, Inc., a
        Delaware Corporation and its Subsidiary MeiYang Protective Products Co.,
        Ltd.,
        (a Chinese corporation), Lakeland Protective Wear, Inc. (a Canadian
        corporation), Weifang Lakeland Safety Products Co. Ltd. (a Chinese corporation),
        Qing Dao Maytung Healthcare Co., Ltd. (a Chinese corporation), Lakeland
        Industries Europe Ltd. (a British corporation), Lakeland de Mexico S.A. de
        C.V
        (a Mexican corporation), Mifflin Valley, Inc. (a Delaware corporation) Lakeland
        Industries, Inc. Agencia en Chile (A Chilean corporation), RFB Lakeland Private
        Ltd. (an Indian corporation) and Lakeland Protective Real Estate (a Canadian
        Corporation). All significant inter-company accounts and transactions have
        been
        eliminated.
  *Back
            to Index*
 6
  In
        January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable
        Interest Entities”. This interpretation provides guidance with respect to the
        consolidation of certain entities, referred to as variable interest entities,
        in
        which an investor is subject to a majority of the risk of loss from the variable
        interest entity’s activities, or is entitled to receive a majority of the
        variable interest entity’s residual returns. This interpretation also provides
        guidance with respect to the disclosure of variable interest entities in
        which
        an investor maintains an interest but is not required to consolidate. The
        provisions of the interpretation were effective immediately for all variable
        interest entities created after January 31, 2003, or in which we obtained
        an
        interest after that date. In December 2003, the FASB issued a revision to
        this
        pronouncement, FIN 46R, which clarified certain provisions and modified the
        effective date from October 1, 2003 to March 15, 2004 for variable interest
        entities created before February 1, 2003. The two entities which leased property
        and buildings to the Company and were owned by related parties, were
        consolidated in our financial statements for the year ended January 31, 2005
        are
        River Group Holding Co., L.L.P. and POMS Holding Co. Several of the owners
        of
        these entities were directors and officers of Lakeland. Under FIN 46, it
        is
        likely that leases between an entity and its related parties would be considered
        a variable interest, even if there is no residual value guarantee or purchase
        option. The FASB staff’s view is that these elements are implied in a
        related-party lease even though they may not be explicitly stated in the
        lease
        agreement.
  Effective
        February 1, 2004 we adopted this pronouncement. As a result, certain entities
        which leased property to the Company and were owned by related parties were
        determined to be Variable Interest Entities and have been consolidated since
        the
        Company’s April 30, 2004 quarterly financial statements. Creditors, or
        beneficial interest holders, of the consolidated variable interest entities
        have
        no recourse to the general credit of the Company.
  On
        April
        25, 2005, the Company purchased property and buildings from POMS Holding
        Co. for
        a net purchase price of $2,067,584. Reference is made to the Company’s filing on
        Form 8-K dated April 25, 2005.
 
 In
        April
        2005, the Company entered into a real estate purchase contract with River
        Group
        Holding Co. to purchase a warehouse and the real property underlying it for
        $928,686. The Company recorded the purchase on its April 30, 2005 financial
        statements. The purchase of this property was completed on May 25, 2005.
        Thus,
        the Company deemed the impact of FIN 46R to be de minimis for the October
        31,
        2005 financial statements.
  There
        are
        no variable interest entities in which the “Company” is not the primary
        beneficiary.
  ***4.***
              ***Business
                  Combinations***
 
 On
        August
        1, 2005, the Company acquired the assets and operations and assumed certain
        liabilities of Mifflin Valley, Inc., (“Mifflin”) of Shillington, PA for an
        initial purchase price of $1.58 million, subject to certain adjustments. 
Final payment was made in November 2005 following the audit of a closing
        date
        balance sheet. The final price amounted to $1.86 million and included
        adjustments for the payoff of a revolving loan of $.186 million and adjustments
        for inventory, fixed asset values and allowance for doubtful accounts. Mifflin
        did approximately $2.6 million of sales in 2004, and $1.5 million for the
        six
        months ended June 30, 2005.  Mifflin is a manufacturer of protective
        clothing specializing in safety and visibility, largely for the Emergency
        Services market, and also for the entire public safety and traffic control
        market.  Mifflin specializes in customized garments to suit customers’
needs, coupled with quality, service, price and delivery.  Mifflin’s
        products include flame retardant garments for the Fire Industry, Nomex clothing
        for utilities, and high visibility reflective outerwear for Departments of
        Transportation. The purchase was effective as of July 1, 2005 and the
        results of Mifflin’s operations have been included since July 1 in the Company’s
        reported results.
  *Back
            to Index*
 7
  ***5.***
              ***Inventories:***
  Inventories
        consist of the following:
  July
                  31,
                2006
              
              January
                  31,
                2006Raw
                  materials
              
              $
              22,576,710
              
              $
              18,656,894Work-in-process
              
              
              2,413,070
              
              
              1,996,027Finished
                  Goods
              
              
              21,944,240
              
              
              24,590,569$
              46,934,020
              
              $
              45,243,490
  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.
  ***6.***
              ***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.
  The
        following table sets forth the computation of basic and diluted earnings
        per
        share at July 31, 2006 and 2005, adjusted, retroactively, for the 10% Stock
        dividends to Shareholders on April 30, 2005 and August 1, 2006.
  **Three
                  Months Ended**
                **July
                  31,**
              
              **Six
                  Months Ended**
                **July
                  31****2006**
              
              **2005**
              
              **2006**
              
              **2005**NumeratorNet
                  Income
              
              $
              1,354,519
              
              $
              1,648,210
              
              $
              2,816,294
              
              $
              3,361,187DenominatorDenominator
                  for basic earnings per share (Weighted-average shares)
              
              
              5,520,981
              
              
              5,518,751
              
              
              5,519,938
              
              
              5,518,751Effect
                  of dilutive securities
              
              
              3,129
              
              
              4,413
              
              
              4,155
              
              
              4,643Denominator
                  for diluted earnings per share
              
              
              5,524,110
              
              
              5,523,164
              
              
              5,524,093
              
              
              5,523,394(adjusted
                  weighted average shares)Basic
                  earnings per share
              
              $
              .25
              
              $
              .30
              
              $
              .51
              
              $
              .61Diluted
                  earnings per share
              
              $
              .25
              
              $
              .30
              
              $
              .51
              
              $
              .61
  *Back
            to Index*
 8
  ***7.***
              ***Revolving
                  Credit Facility***
  At
        July
        31, 2006, the balance outstanding under our $25 million five year revolving
        credit facility amounted to $7.054 million. 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 July 31, 2006 and for the period then ended. The weighted average interest
        rate for the three month and six month periods ended July 31, 2006 was 5.93%
        and
        5.64%, respectively.
 
 ***8.***
              ***Major
                  Supplier***
  We
        purchased 65.7% of our raw materials from one supplier during the six-month
        period ended July 31, 2006. 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 could
        be
        adversely affected.
  ***9.***
              ***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.
        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.
  Effective
        February 1, 2006, the Company’s Plan is accounted for in accordance with the
        recognition and measurement provisions of Statement of Financial Accounting
        Standards (“FAS” No. 123 (R)”), which replaces FAS No. 123, Accounting for
        Stock-Based Compensation, and supersedes Accounting Principles Board Opinion
        (“APB”) No. 25, Accounting for Stock Issued to Employees, and related
        interpretations. FAS 123 (R) requires compensation costs related to share-based
        payment transactions including employee stock options, to be recognized in
        the
        financial statements. In addition, the Company adheres to the guidance set
        forth
        within Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin
        (“SAB”) No. 107, which provides the Staff’s views regarding the interaction
        between SFAS No. 123(R) and certain SEC rules and regulations and provides
        interpretations with respect to the valuation of share-based payments for
        public
        companies.
  Prior
        to
        February 1, 2006, the Company accounted for similar transactions in accordance
        with APB No. 25 which employed the intrinsic value method of measuring
        compensation cost. Accordingly, compensation expense was not recognized for
        fixed stock options if the exercise price of the option equaled or exceeded
        the
        fair value of the underlying stock at the grant date.
  While
        FAS
        No. 123 encouraged recognition of the fair value of all stock-based awards
        on
        the date of grant as expense over the vesting period, companies were permitted
        to continue to apply the intrinsic value-based method of accounting prescribed
        by APB No. 25 and disclose certain pro-forma amounts as if the fair value
        approach of SFAS No. 123 had been applied. In December 2002, FAS No. 148,
        Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment
        of SFAS No. 123, was issued, which, in addition to providing alternative
        methods
        of transition for a voluntary change to the fair value method of accounting
        for
        stock-based employee compensation, required more prominent pro-forma disclosures
        in both the annual and interim financial statements. The Company complied
        with
        these disclosure requirements for all applicable periods prior to February
        1,
        2006.
  *Back
            to Index*
 9
  In
        adopting FAS 123(R), the Company applied the modified prospective approach
        to
        transition. Under the modified prospective approach, the provisions of FAS
        123(R) are to be applied to new awards and to awards modified, repurchased,
        or
        cancelled after the required effective date. Additionally, compensation cost
        for
        the portion of awards for which the requisite service has not been rendered
        that
        are outstanding as of the required effective date shall be recognized as
        the
        requisite service is rendered on or after
        the
        required effective date. The compensation cost for that portion of awards
        shall
        be based on the grant-date fair value of those awards as calculated for either
        recognition or pro-forma disclosures under FAS 123.
  The
        following table represents our stock options granted, exercised, and forfeited
        during the second quarter of 2007.
  Stock
                  Options
              Number
                  of Shares
              Weighted
                  Average Exercise Price per Share
              Weighted
                  Average Remaining Contractual Term
              Aggregate
                  Intrinsic ValueOutstanding
                  at April 30, 2006
              17,963
              $12.61
              3.7
                  yearsExercised
              2,662
              4.46Forfeited/expiredGranted
              2,000
              14.4110%
                  Stock Dividend Adjustment
              1,730Outstanding
                  at July 31, 2006
              19,031
              $12.79
              3.1
                  years
              $30,085Exercisable
                  at July 31, 2006
              16,831
              $12.75
              3.1
                  years
              $30,085
 ***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
          are based upon an estimate made at the end of each reporting period as
          to the
          most probable outcome of this plan at the end of the three year performance
          period. (e.g., baseline, minimum, maximum or zero). In addition to the
          grants
          with vesting based solely on performance ,, certain awards pursuant to
          the plan
          have a time-based vesting requirement, under which awards vest from three
          to
          four years after issuance, subject to continuous employment and certain
          other
          conditions. Restricted stock have 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 131,893 restricted stock awards
          as of
          July 31, 2006 (88,223 shares at “baseline”
          and 45,543 shares
          at “minimum”).
          All of
          these restricted stock awards are non-vested at July 31, 2006 and have
          a
          weighted average grant date fair value of $13.09. 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
          July 31, 2006, unrecognized stock-based compensation expense related to
          restricted stock awards totaled $1,706,352, before income taxes, based
          on the
          maximum performance award level. Such unrecognized stock-based compensation
          expense related to restricted stock awards totaled $1,134,275 and $575,167
          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 its 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
 ***Share-Based
        Compensation***
  The
        Corporation adopted SFAS No. 123R on February 1, 2006, under the modified
        prospective method of adoption. The Corporation recognized total stock-based
        compensation costs of $42,451, of which $21,101 results from the 2006 Equity
        Incentive Plan, and $21,350 results from the Non-Employee Directors Option
        Plan
        for the three months ended July 31, 2006 and $0 for July 31, 2005, respectively.
        These amounts are reflected in selling, general and administrative expenses.
        The
        total income tax benefit recognized for stock-based compensation arrangements
        was $15,282 and $0 for the three months ended July 31, 2006 and July 31,
        2005,
        respectively.
    *Back
            to Index*
 10
   ***Adoption
        of New Accounting Standards for Share-Based Payment***
  As
        more
        fully disclosed in Note 1 of Notes to Consolidated Financial Statements included
        in Item 8 of the Corporation’s Annual Report on Form 10-K for the year ended
        January 31, 2006, in December 2004, the Financial Accounting Standards Board
        (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123
        (revised 2004) (SFAS No. 123R), *Share-Based
        Payment* .
        This
        Statement revises SFAS No. 123 by eliminating the option to account for employee
        stock options under Accounting Principles Board Opinion No. 25 (APB No. 25)
        and
        requires companies to recognize the cost of employee services received in
        exchange for awards of equity instruments based on the grant-date fair value
        of
        those awards (the “fair-value-based” method).
  SFAS
        No.
        123R permits public companies to adopt its requirement using one of two methods.
        The Company has adopted SFAS No. 123R under the modified prospective method.
        The
        Corporation adopted SFAS No. 123R effective February 1, 2006, using the modified
        prospective method of adoption. Stock-based compensation expense is recognized
        on a straight-line basis over the requisite service period of the award,
        which
        is generally the vesting period.
  The
        following table illustrates the effect on net income and earnings per share
        as
        if the fair value recognition provisions of FAS No. 123 had been applied
        to all
        outstanding and unvested awards in the prior year comparable
        period:
  **Three
                    Months Ended**
                
                **Six
                    Months Ended****July
                    31,**
                
                **July
                    31,****2005**
                
                **2005**Net
                    income as reported
                
                $
                1,648,210
                
                $
                3,361,187Less:Option
                    expense based on fair value method
                
                
                ----
                
                
                9,627Pro
                    forma
                
                $
                1,648,210
                
                $
                3,351,560Basic
                    earnings per common shareAs
                    reported
                
                $
                .33
                
                $
                .67Pro
                    forma
                
                $
                .33
                
                $
                .67Diluted
                    earnings per common shareAs
                    reported
                
                $
                .33
                
                $
                .67Pro
                    forma
                
                $
                .33
                
                $
                .67
 
 The
          fair
          value of these options was estimated at the date of grant using the
          Black-Scholes option-pricing model with the following assumptions for the
          quarters and six months ended July 31, 2005:
 
 Expected
          volatililty of 87% and 64%, respectively; risk-free interest rate of 3.6%
          and
          2.93%, respectively; expected dividend yield jof 0.0%; and expected life
          of six
          years. All stock-based awards were fully vested at July 31, 2005. Earnings
          per
          share and options granted have been adjusted to reflect the 10% stock dividends
          to stockholders of record as of April 30, 2005. During the three months
          ended
          July 31, 2005, no options were granted or exercised.
   *Back
            to Index*
 11
   ***10.***
              ***Manufacturing
                  Segment Data***
  Domestic
        and international sales are as follows in millions of dollars:
  Three
                  Months Ended
                July
                  31,
              
              Six
                  Months Ended
                July
                  31,**2006**
              
              **2005**
              
              **2006**
              
              **2005**Domestic
              
              $
              21.5
              
              
              89.2
              %
              $
              22.1
              
              
              88.0
              %
              $
              45.7
              
              
              89.1
              %
              $
              45.0
              
              
              88.6
              %International
              
              
              2.6
              
              
              10.8
              %
              
              3.0
              
              
              12.0
              %
              
              5.6
              
              
              10.9
              %
              
              5.8
              
              
              11.4
              %Total
              
              $
              24.1
              
              
              100
              %
              $
              25.1
              
              
              100
              %
              $
              51.3
              
              
              100
              %
              $
              50.8
              
              
              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), Celaya, Mexico (primarily disposable,
        glove and chemical suit production) St. Joseph, Missouri and Shillington,
        Pennsylvania (primarily woven products production). We also maintain three
        manufacturing facilities in China (primarily disposable and chemical suit
        production) and a glove manufacturing facilities in New Delhi, India. Our
        China
        facilities and our Decatur, Alabama facility 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, 2006. 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 small sales forces
        in
        Canada, Europe, Chile and China which sell and distribute products shipped
        from
        the United States, Mexico or China.
  The
        table
        below represents information about reported manufacturing segments for the
        three
        months noted therein:
  Three
                  Months Ended
                July
                  31,
                (in
                  millions of dollars)
              
              Six
                  Months Ended
                July
                  31, 2006
                (in
                  millions of dollars)2006
              
              2005
              
              2006
              
              2005Net
                  Sales:North
                  America
              
              $
              25.3
              
              $
              26.6
              
              $
              53.8
              
              $
              53.9China
              
              
              3.0
              
              
              2.8
              
              
              5.6
              
              
              4.8Less
                  inter-segment sales
              
              
              (4.2
              )
              
              (4.3
              )
              
              (8.1
              )
              
              (7.9
              )Consolidated
                  sales
              
              $
              24.1
              
              $
              25.1
              
              $
              51.3
              
              $
              50.8Operating
                  Profit:North
                  America
              
              $
              1.8
              
              $
              1.6
              
              $
              3.6
              
              $
              3.8China
              
              
              .5
              
              
              .7
              
              
              .9
              
              
              1.1Less
                  inter-segment profit (loss)
              
              
              (.2
              )
              
              (.1
              )
              
              (.3
              )
              
              (.1
              )Consolidated
                  profit
              
              $
              2.1
              
              $
              2.2
              
              $
              4.2
              
              $
              4.8Identifiable
                  Assets (at Balance Sheet date or change during quarter):North
                  America
              
              $
              .10
              
              $
              2.00
              
              $
              66.8
              
              $
              57.1China
              
              
              .30
              
              
              .9
              
              
              7.0
              
              
              9.8Consolidated
                  assets
              
              $
              .40
              
              $
              2.90
              
              $
              73.8
              
              $
              66.9Depreciation
                  and Amortization Expense:North
                  America
              
              $
              .14
              
              $
              .19
              
              $
              .30
              
              $
              .30China
              
              
              .09
              
              
              .10
              
              
              .20
              
              
              .20Consolidated
                  depreciation expense
              
              $
              .23
              
              $
              .29
              
              $
              .50
              
              $
              .50
  *Back
            to Index*
 12
  ***11.***
              ***Effects
                  of Recent Accounting
                  Pronouncements***
 
 In
        2005,
        the Financial Accounting Standards Board (FASB) issued Statements of Financial
        Accounting Standards (SFAS) No 155, *Accounting
        for Certain Hybrid Instruments* amending
        the guidance in SFAS 133, *Accounting
        for Derivative Instruments and Hedging Activities,* and
        No.
        140, *Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities. SFAS* 155
        allows financial instruments that have embedded derivatives to be accounted
        for
        the whole instrument on a fair value basis. SFAS 155 will be effective for
        financial instruments acquired or issued during our fiscal year that begins
        after September 15, 2006. We presently do not expect SFAS 155 to be applicable
        to any instruments likely to be acquired or issued by us.
  In
        2005,
        the FASB also issued SFAS 156, *Accounting
        for Servicing of Financial Assets - An Amendment of FASB Statement No. 140.* SFAS
        156
        which further amends the guidance in SFAS 140, *Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities* and,
        among other things, requires recognition of a servicing asset or servicing
        liability each time it undertakes an obligation to service a financial asset
        by
        entering into a servicing contract in certain situations. Statement 156 will
        be
        effective as of the beginning of an entity’s first fiscal year that begins after
        September 15, 2006. We presently do not expect SFAS 156 to be applicable
        to any
        of our activities.
 
 ***12.***
              ***Real
                  Estate Purchases***
 
 In
        April
        2005, the Company entered into two separate real estate purchase contracts,
        one
        with POMS Holding Co. and one with River Group Holding Co., L.L.P., both
        related
        parties. The Company purchased the land and buildings in Decatur, Alabama
        that
        it had leased from these related parties since their inception, POMS Holding
        Co.
        (1984) and River Group Holding Co. (1999). The purchase price was $2,056,000
        for
        the POMS property and $925,000 for the River Group property determined by
        averaging three separate and independent real estate appraisals. The
        partnerships were accounted for in accordance with FIN46R and were reflected
        in
        the financial statements for the fiscal year ended January 31,
        2005.
  In
        contemplation of the real estate purchases, the Company entered into an
        agreement, dated March 4, 2005, with an officer of Lakeland (who was a partner
        in POMS & River Group) to acquire his interest for $565,367 ($411,200 for
        POMS and $154,167 for River Group), at the same proportional valuation as
        the
        overall property.
 
 On
        April
        25, 2005 the Company closed on the real estate purchase contract with POMS
        paying a net amount of $1,656,384 ($2,056,000-$411,200 already paid +$11,584
        in
        closing costs). The Company paid rent from February 1, 2005 until April 25,
        2005
        of $86,157, which is charged to rent expense.
  *Back
            to Index*
 13
  On
        May
        25, 2005 the Company closed on the real estate purchase contract with River
        Group paying a net amount of $774,519 ($925,000-$154,167 already paid +$3,686
        in
        closing costs). The Company paid River Group rent from February 1, 2005 until
        May 25, 2005 amounting to $63,157, which is charged to rent
        expense.
 
 At
        April
        30, 2005, the Company recorded the asset land value of $230,000, the asset
        building value of $2,751,000, closing costs of $11,584 and a payable to River
        Group in the amount of $770,833. The Company recorded the purchase of the
        land
        and building from River Group as of April 30, 2005, since the contract of
        sale
        was finalized and the closing was deferred only until the release of an easement
        on the property. Total rent expense for the two properties for the nine months
        ended October 31, 2005 amounted to $146,577. The Company recorded depreciation
        on each of the two properties from the closing date forward.
 
 Upon
        conclusion of these two real estate purchase contracts, the Company no longer
        had related party transactions requiring the recording of variable interest
        entities under FIN46R. Other than the above entries, the Company has not
        recorded the effects of FIN46R in the current fiscal year. The Company deems
        any
        such impact to be immaterial.
  *Building
        purchase in New York:*
 
 On
        May
        10, 2005 the Company purchased a 6,250 square foot office condominium to
        serve
        as its Corporate Headquarters. The purchase price was $640,000 plus $9,161
        in
        closing costs. The lease on its previous location amounted to $51,202 annually
        and expired on June 30, 2005. The new address is 701 Koehler Avenue, Suite
        7,
        Ronkonkoma, NY 11779.
 
 ***13.***
              ***Related
                  Party Transactions***
 
 In
        connection with the asset purchase agreement, dated July 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 owned by the seller an annual rental of $55,560, or
        a per
        square foot rental of $3.00. 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 12,000 sq ft
        of
        warehouse space in PA from this employee, on a month by month basis, for
        the
        monthly amount of $3.35 per square foot.
  ***14.***
              ***Formation
                  of New Subsidiaries***
  During
        the quarter ended October 31, 2005, a new subsidiary RFB Lakeland Private
        LTD.
        (an Indian corporation) was formed to execute the supply agreement with RFB
        Latex Private LTD. dated October 25, 2005, and to exercise the option to
        buy its
        industrial glove business for $2.75 million after one year, if certain
        conditions are met and approved by the Company’s Board of Directors. The
        original purchase price of $2.75 million included a provision for Indian
        management to receive additional cash in employment compensation of $600,000
        and
        up to 33% of the Indian subsidiaries common stock. The Option to Buy is being
        nullified and a new agreement is being negotiated whereby the parties will
        increase the purchase price to approximately $3.15 million in return for
        removing the above described $600,000 in cash compensation, and the 33% equity
        participation. On March 13, 2006 Lakeland Industries, Inc. Agencia en Chile
        was
        formed to facilitate the opening of a new sales and warehousing operation
        in
        Santiago, Chile to service South American markets. On May 26, 2006, Lakeland
        Protective Real Estate was formed to obtain a $2 million mortgage for a new
        warehouse to be built in Canada.
  ***15.***
              ***Contingencies
                  - Tax Audit***
  The
        Company’s Federal Income Tax returns for the fiscal years ended January 31, 2003
        and 2004 are currently under audit by the Internal Revenue Service. The final
        results of these audits cannot be estimated by management. It is anticipated
        that the audits will be concluded by late Fiscal 2007.
  *Back
            to Index*
 14
  ***16.***
              ***Mexican
                  Tax Situation***
  In
        August
        2001, Guanajuato Mexico, Secretaria de Hacienda Credito Publico (“Hacienda”)
        began an audit of our wholly-owned subsidiary Lakeland de Mexico de SA de
        CV.
        The audit resulted in a claim by Hacienda for 9,195,254 Mexican Pesos
        (approximately $800,000 USD, based on exchange rate on June 7, 2006) in December
        2002 alleging that it was not proven that Lakeland’s imports into Mexico were
        re-exported, and therefore, no tariffs or taxes were due. In June 2002
        Hacienda’s own Legal Department in an administrative opinion dismissed this
        deficiency in total. In December 2003 the Hacienda Audit Department changed
        tactics and reinstated the deficiency based on new legal theories. In response
        to this second claim, in March 2004 Lakeland de Mexico filed a Nullity
        Proceeding against Hacienda at the Tribunal Federal de Justica Fiscal
        Administrativa, Celaya, Guanajuato to nullify Hacienda’s tax liens and
        deficiencies. On August 4, 2006 we were officially notified that the above
        described legal proceedings was decided in Lakeland’s favor by a three judge
        panel. It is standard procedure for the opposing side to ask for a review
        from a
        higher court judge. This review was requested, and we anticipate it will
        be
        concluded by December 31, 2006.
 
 ***17.***
              ***Subsequent
                  Event***
  The
        Company entered into an agreement to construct distribution facilities in
        Brantford, Ontario at a cost of approximately $2,200,000. In order to finance
        the acquisition, the Company has arranged a term loan in the amount of
        $2,000,000 bearing interest at the Business Development Bank of Canada’s
        floating base rate minus 1.25% and is repayable in monthly principal
        installments of $8,350 plus interest.
  ***18.***
              ***Foreign
                  Currency Exposure***
 
 The
        Company has foreign currency exposure, principally through 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 Mexican Peso. 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.
        There
        were no material open foreign currency hedge contracts at July 31,
        2006.
   **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,
        2006. 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 800 safety and mill supply distributors. These distributors
        in
        turn supply end user industrial customers such as 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 and state governments..
  We
        have
        operated manufacturing facilities in Mexico since 1995 and in China since
        1996.
        Beginning in 1995, we moved the labor intensive sewing operation for our
        limited
        use/disposable protective clothing lines to these facilities. Our facilities
        and
        capabilities in China and Mexico allow access to a less expensive labor pool
        than is available in the United States and permit us to purchase certain
        raw
        materials at a lower cost than they are available domestically. As we have
        increasingly moved production of our products to our facilities in Mexico
        and
        China, we have seen improvements in the profit margins for these products.
        We
        are at the half way point of moving production of our reusable woven garments
        and gloves to these facilities and expect to continue this process through
        fiscal 2008. As a result, we expect to see continuing profit margin improvements
        for these product lines over time.
  *Back
            to Index*
 15
  **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.* We
        derive
        our sales primarily from our limited use/disposable protective clothing and
        secondarily from our sales of high-end chemical protective suits, reusable
        woven
        garments, fire fighting and heat protective apparel, and gloves and arm guards..
        Sales are recognized when goods are shipped to our distributors at which
        time
        title and the risk of loss passes. Sales are reduced for sales returns and
        allowances. Payment terms are generally net 30 days for United States sales
        and
        net 90 days for international sales.
  *Inventories.* Inventories
        include freight-in, materials, labor and overhead costs and are stated at
        the
        lower of cost (on a first-in, first-out basis) or market. 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 collectibility 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. The Company’s Federal Income Tax returns for
        the fiscal years ended January 31, 2003 and 2004 are currently under audit
        by
        the Internal Revenue Service. The final results of these audits cannot be
        estimated by management at this time, but management does not believe the
        results of the audit will have a material effect on the financial condition
        of
        the Company.
  *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.
  *Back
            to Index*
 16
  In
        July
        2005 (in a transaction which closed August 1, 2005) the Company purchased
        Mifflin Valley, Inc. As a result of this purchase Goodwill was recorded in
        the
        amount of $840,777, after reflecting certain adjustments per the contract,
        resulting in a total purchase price of $1,907,680.
  *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.
  **Significant
        Balance Sheet Fluctuation July 31, 2006 as compared to January 31,
        2006**
 
 Accounts
        receivable decreased by $1.7 million as sales for the three months ended
        July
        31, 2006 decreased by 4.5% from the three months ended January 31, 2006.
        Inventory increased $1.7 million as sales decreased and the Company increased
        the rate of purchases made on raw materials during the three months ended
        July
        31, 2006 in order to take advantage of a rebate on such second quarter purchases
        from a major supplier.
 
 Management
        expects the benefit from such reduced costs to flow through cost of goods
        sold
        mainly in its fourth fiscal quarter.
 
 At
        July
        31, 2006 the Company had an outstanding loan balance of $7.054 million under
        its
        facility with Wachovia Bank, N.A. down from $7.272 million at January 31,
        2006.
        Total stockholder’s equity increased by the net income for the period of $2.8
        million
 
 **Six
        months ended July 31, 2006 as compared to the six months ended July 31,
        2005**
  
 *Net
        Sales* .
        Net
        sales increased $0.5 million, or 1.0% to $51.3 million for the six months
        ended
        July 31, 2006 from $50.8 million for the six months ended July 31, 2005.
        The
        increase was primarily due to growth in sales by our gloves division of $147,000
        and UK subsidiary of $318,000, new revenue from India and Chile of $350,000
        and
        the acquired Mifflin Valley, Inc., of $1,361,000 which had revenue in the
        6
        months ending July 2006 of $1,614,000 compared with $253,000 for the month
        of
        July 2005, offset significantly by decreased sales in disposable and chemical
        protection garments and lower selling prices in these two categories to meet
        competitive market conditions. Sales in these two product lines decreased
        by
        $2,143,000 over the prior six month period.
 
 *Gross
        Profit* .
        Gross
        profit increased $1.04 million or 8.7% to $13.0 million for the six months
        ended
        July 31, 2006 from $12.0 million for the six months ended July 31, 2005.
        Gross
        profit as a percentage of net sales increased to 25.3% for the six months
        ended
        July 31, 2006 from 23.5% for the six months ended July 31, 2005, primarily
        due
        to aggressive raw material purchasing in the latter part of FY 06 which
        benefited the Company as lower costs through approximately the end of June
        2006,
        on going cost reduction programs in component and service-purchasing, shifting
        production from the US to China and Mexico, the reassignment of certain
        personnel to SGA departments from COGS departments as described below and
        the
        inclusion of Mifflin Valley, Inc. results which has higher gross profit margins
        than most of Lakeland’s other product lines have overall, partially offset by
        rising raw material costs.
 
 *Operating
        Expenses* .
        Operating expenses increased $1.54 million, or 21.4% to $8.8 million for
        the six
        months ended July 31, 2006 from $7.2 million for the six months ended July
        31,
        2005. As a percent of sales, operating expenses increased to 17.1% for the
        six
        months ended July 31, 2006 from 14.2% for the six months ended July 31, 2005.
        The $1.54 million increase in operating expenses in the six months ended
        July
        31, 2006 as compared to the six months ended July 31, 2005 is comprised of:
  *Back
            to Index*
 17
  o
              $305,000
                  of Mifflin Valley operating expenses included for the full six
                  months
                  ended July 2006 in excess of the one month of July included in
                  the 6
                  months ended July 2005.
 o
              $236,000
                  of labor costs resulting from personnel reassigned to SGA departments
                  who
                  had been assigned to COGS departments in
                  2005.
 o
              $216,000
                  of SGA costs from new entities in India, Chile and
                  Japan.
 o
              $505,000
                  net increases in sales salaries and commissions, mainly in Canada,
                  Disposables and Wovens and related payroll taxes. Several senior
                  level
                  sales personnel were added to support lagging sales in Disposables,
                  support new woven product introductions and coordinate international
                  sales
                  efforts.
 o
              $104,000
                  of net increases in insurance and employee benefits mainly resulting
                  from
                  a more negative experience in our self insured medical
                  plan.
 o
              $
                  42,000 net increases in advertising promotions and trade
                  shows.
 o
              $
                  68,000 increase in administrative
                  payroll.
 o
              $
                  80,000 in foreign currency
                  fluctuation.
 o
              ($
                  58,000) miscellaneous net
                  decreases.
  *Interest
        Expenses* .
        Interest expenses increased by $0.18 million for the six months ended July
        31,
        2006 as compared to the six months ended July 31, 2005 because of higher
        amounts
        borrowed at increasing interest rates under our credit facility.
  *Income
        Tax Expense* .
        Income
        tax expenses consist of federal, state, and foreign income taxes. Income
        tax
        expenses decreased $0.199 million, or 15.4%, to $1.28 million for the six
        months
        July 31, 2006 from $1.48 million for the six months ended July 31, 2005.
        Our
        effective tax rates were 31.2% and 30.5% for the six months ended July 31,
        2006
        and 2005, respectively. Our effective tax rate varied from the federal statutory
        rate of 34% due primarily to lower foreign taxes, partially offset by state
        taxes and by losses in India, Chile and Japan which are not eligible for
        tax
        credits. Thus, our effective tax rate increased due to Start up losses in
        India,
        Chile and Japan.
 
 *Net
        Income* .
        Net
        income decreased $0.55 million, or 16.2% to $2.8 million for the six months
        ended July 31, 2006 from $3.4 million for the six months ended July 31, 2005.
        The decrease in net income primarily resulted from lower sales volumes in
        our
        disposable and chemical protective suit lines and meeting competitive market
        prices in our disposable garment division in the second quarter, the increased
        operating expenses described above, and the combined operating losses of
        $370,000 of the new foreign operations. Earnings per share were $0.51 for
        the
        six months ended July 31, 2006 compared to $0.61 for the six months ended
        July
        31, 2005 (after reflecting adjustments resulting from the 10% stock dividend
        payable to holders of record August 1, 2006.)
 
 **Three
        months ended July 31, 2006 as compared to the three months ended July 31,
        2005**
 
 *Net
        Sales* .
        Net
        sales decreased $1.0 million, or 4.0% to $24.1 million for the three months
        ended July 31, 2006 from $25.1 million for the three months ended July 31,
        2005.
        The decrease was primarily due to decreased sales in disposable garments
        due to
        a surplus of Tyvek in the distribution channels and lower government spending
        in
        our Chemical Protective garments offset partially by growth in sales in our
        glove division of $47,000, and UK subsidiary of $112,000, new revenue from
        India
        and Chile of $90,000, and Mifflin Valley, Inc. of $602,000 acquired in July
        2005
        which had revenue in the quarter ended July 2006 of $855,000 compared with
        $253,000 for the month of July 2005. Sales in our Disposable and Chemical
        suits
        declined by $1, 881,000 compared to the same period last year.
 
 *Gross
        Profit* .
        Gross
        profit increased $0.67 million or 11.6% to $6.5 million for the three months
        ended July 31, 2006 from $5.8 million for the three months ended July 31,
        2005.
        Gross profit as a percentage of net sales increased to 26.8% for the three
        months ended July 31, 2006 from 23.1% for the three months ended July 31,
        2005,
        primarily due to aggressive raw material purchasing in the latter part of
        FY 06
        which benefited the Company as lower costs through approximately the end
        of June
        2006, on going cost reduction programs in component and service-purchasing
        ,
        shifting production from the US to China and Mexico, the reassignment of
        certain
        personnel to SGA departments from COGS departments as described below and
        the
        inclusion of Mifflin Valley, Inc. results which has higher gross profit margins
        than most of Lakeland’s other product lines which were partially offset by
        rising raw material costs.
  *Back
            to Index*
 18
  *Operating
        Expenses* .
        Operating expenses increased $0.80 million, or 22.2% to $4.4 million for
        the
        three months ended July 31, 2006 from $3.6 million for the three months ended
        July 31, 2005. As a percent of sales, operating expenses increased to 18.2%
        for
        the three months ended July 31, 2006 from 14.3% for the three months ended
        July
        31, 2005. The $0.80 million increase in operating expenses in the three months
        ended July 31, 2006 as compared to the three months ended July 31, 2005 were
        comprised of:
 
 o
              $127,000
                  of Mifflin Valley operating expenses included for the full quarter
                  ended
                  July 2006 in excess of the one month of July included in the quarter
                  ended
                  July 2005.
 o
              $101,000
                  of labor costs resulting from personnel reassigned to SGA departments
                  who
                  had been assigned to COGS departments in
                  2005.
 o
              $122,000
                  of SGA costs from new entities in India, Chile and
                  Japan.
 o
              $189,000
                  net increases in sales salaries and commissions, mainly in Canada,
                  Disposables and Wovens and related payroll taxes. Several senior
                  level
                  sales personnel were added to support lagging sales in Disposables,
                  support new woven product introductions and coordinate international
                  sales
                  efforts.
 o
              $
                  65,000 of net increases in insurance and employee benefits mainly
                  resulting from a more negative experience in our self insured medical
                  plan.
 o
              $
                  54,000 net increases in advertising promotions and trade
                  shows.
 o
              $
                  50,000 increase in administrative
                  payroll.
 o
              $
                  31,000 higher freight out costs resulting from higher prevailing
                  carrier
                  rates.
 o
              $
                  42,000 in share-based compensation
 o
              $
                  15,000 miscellaneous increases.
  *Interest
        Expenses* .
        Interest expenses increased by $0.112 million for the three months ended
        July
        31, 2006 as compared to the three months ended July 31, 2005 because of higher
        amounts borrowed and increasing interest rates under our credit
        facility.
 
 *Income
        Tax Expense* .
        Income
        tax expenses consist of federal, state, and foreign income taxes. Income
        tax
        expenses increased $0.008 million, or 1.3%, to $0.628 million for the three
        months July 31, 2006 from $0.620 million for the three months ended July
        31,
        2005. Our effective tax rates were 31.7% and 27.4% for the three months ended
        July 31, 2006 and 2005, respectively. Our effective tax rate varied from
        the
        federal statutory rate of 34% due primarily to lower foreign taxes, partially
        offset by state taxes and by start up losses in India, Chile and Japan which
        are
        not eligible for tax credits.
 
 *Net
        Income* .
        Net
        income decreased $0.29 million, or 17.8% to $1.4 million for the three months
        ended July 31, 2006 from $1.6 million for the three months ended July 31,
        2005.
        The decrease in net income primarily resulted from lower sales volumes in
        our
        disposable and chemical protective suit lines and meeting competitive conditions
        in our disposable garment division, the increased operating expenses described
        above, and the combined operating losses of $250,000 of the new foreign
        operations. Earnings per share were $0.25 for the three months ended July
        31,
        2006 compared to $0.30 for the three months ended July 31, 2005 (after
        reflecting adjustments resulting from the 10% stock dividend payable to holders
        of record August 1, 2006.)
  **Liquidity
        and Capital Resources**
  **Cash******Flows**
  As
        of
        July 31, 2006 we had cash and cash equivalents of $2.3 million and working
        capital of $62.5 million, increases of $0.77 million and $2.6 million,
        respectively, from January 31, 2006. 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
        provided by operating activities of $1.4 million for the six months ended
        July
        31, 2006 was due primarily to net income from operations of $2.8 million,
        a
        decrease in accounts payable of $1.3 million, an increase in inventories
        of $1.7
        million and an increase in accounts receivable of $1.6 million. Net cash
        used in
        investing activities of $0.38 million in the six months ended July 31, 2006,
        was
        due to purchases of property and equipment.
  *Back
            to Index*
 19
  Net
        cash
        used in operating activities of $0.129 million for the six months ended July
        31,
        2005 was due primarily to net income from operations of $3.4 million, an
        increase in inventories of $4.4 million, a decrease in accounts receivable
        of
        $0.10 million, an increase in accounts payable of $3.82 million. Net cash
        used
        in investing activities of $0.45 million in the six months ended July 31,
        2005,
        was due to purchases of property and equipment.
  We
        currently have one credit facility - a $25 million revolving credit, of which
        $7.054 million of borrowings were outstanding as of July 31, 2006. On July
        10,
        2005 the Company entered into a $25 million five year secured revolving loan
        agreement to replace the former two facilities, one of which was to expire
        on
        July 31, 2005. 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 July 31, 2006,
        we
        were in compliance with all covenants contained in our credit
        facility.
  We
        believe that our current cash position of $2.3 million, our cash flow from
        operations along with borrowing availability under our $25 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 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
        and $1.2 million for capital equipment, primarily computer equipment and
        apparel
        manufacturing equipment in fiscal 2007, and approximately $2 million for
        a new
        Canadian facility (some of which will be incurred in FY 08).
  *Foreign
        Currency Exposure.* The
        Company has foreign currency exposure, principally through 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 Mexican Peso. 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.
        There
        were no material open foreign currency hedge contracts at July 31,
        2006.
  **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,
        2006.
  **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 effective.
  *Changes
        in Internal Control Over Financial Reporting* -
        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 second quarter of fiscal 2007. Based on that
        evaluation, management concluded that there has been no change in Lakeland
        Industries, Inc.’s internal control over financial reporting during the second
        quarter of fiscal 2007 that has materially affected, or is reasonably likely
        to
        materially affect, Lakeland Industries, Inc.’s internal control over financial
        reporting.
  *Back
            to Index*
 20
  Through
        the thirty months ended July 31, 2006 additional expense has been incurred
        relating to documenting and testing the systems of internal controls. The
        Company hired internal auditors in 2004 and 2005 and has contracted with
        an
        independent consultant for services related to overall Sarbanes-Oxley Act
        compliance and more specifically Section 404, in February 2004. The total
        cumulative amount expensed so far is approximately $824,000.
  **PART
        II. OTHER INFORMATION**
  Items
        1,
        2, 3 and 5 are not applicable
  **Item
                  4.**
              **Submission
                  of Matters to a vote of Security
                  Holders**
  The
        annual meeting of shareholders of the Company (the “Annual Meeting”) was held on
        June 21, 2006 in Ronkonkoma, New York. The Company had 5,017,046 shares of
        common stock outstanding as of April 28, 2006, the record date for the Annual
        Meeting.
  Proposal
                  1 -
              Election
                  of Directors
  The
        candidates listed below were duly elected to the Board of Directors at the
        Annual Meeting by the tally indicated.
  Candidate
                Votes
                    in Favor
                Votes
                    WithheldJohn
                    J. Collins
                3,655,868
                769,520Eric
                    O. Hallman
                3,655,938
                769,450Stephen
                    M. Bachelder
                4,198,845
                226,543
 
  Proposal
                  2 -
              Approve
                  the 2006 Equity Incentive Plan
 For:
        2,712,180 - Against: 114,498 - Abstain: 17,391 - Broker non-vote:
        1,581,319
  Proposal
                  3 -
              Ratification
                  of Auditors for fiscal 2007
 Holtz
        Rubenstein Reminick, LLP
 For:
        4,401,702 - Against: 19,790 - Abstain: 3,896 - Broker non-vote: 0
  **Item
                  6.**
              **Exhibits
                  and Reports on Form
                  8-K:**
  a
                  -
              On
                  June 2, 2006, the Company filed a Form 8-K under Item 2.02, relating
                  to a
                  Notice of Teleconference call for 4:30 PM June 8, 2006.
  On
        June
        8, 2006, the Company filed a Form 8-K for the purpose of furnishing under
        Items
        2.02 and 9.01 a press release announcing results of operations for the quarter
        ended April 30, 2006.
  One
                  June 29, 2006, the Company filed a form 8-K for the purpose of
                  furnishing
                  under items 8.01 and 7.01 information regarding Lakeland’s 10% stock
                  dividend.
  On
        July
        31, 2006, the Company filed a form 8-K for the purpose of furnishing under
        items
        8.01 and 7.01 information regarding Lakeland’s 10% stock dividend.
  *Back
            to Index*
 21
  **_________________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:
                  September 7, 2006
              /s/
                  Christopher J. RyanChristopher
                  J. Ryan,Chief
                  Executive Officer, President,Secretary
                  and General Counsel(Principal
                  Executive Officer and Authorized Signatory)Date:
                  September 7, 2006
              /s/
                  Gary PokrassaGary
                  Pokrassa,Chief
                  Financial Officer(Principal
                  Accounting Officer and Authorized
                  Signatory)






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