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 endedApril 30,
2009


OR


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


For the
transition period from _______________ to _______________





Commission
File Number:  0-15535





LAKELAND
INDUSTRIES, INC.





(Exact
name of Registrant as specified in its charter)





Delaware
                
                13-3115216(State
      of incorporation)
                
                (IRS
      Employer Identification Number)701
      Koehler Avenue, Suite 7, Ronkonkoma, New York
                
                11779(Address
      of principal executive offices)
                
                (Zip
      Code)





(631)
981-9700


(Registrant's
telephone number, including area code)





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


Yes o    No
x


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


Yes o   No  x


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


Yes x  No o


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





Large
      accelerated filer o
            Accelerated
      filer                  oNon-Accelerated
      filer   o (Do not check if
      a smaller reporting company)
            Smaller
      reporting company ý


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


Yes o   No
x


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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).


Yes o   No
x


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 June 5, 2009Common
      Stock, $0.01 par value per share
              
              5,397,966

















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:
                                        PageIntroduction
                                        3Condensed Consolidated Balance Sheets - April 30, 2009 and
      January 31, 2009
                                        4Condensed
      Consolidated Statements of Income - Three Months EndedApril
      30, 2009 and 2008
                                        5Condensed
      Consolidated Statement of Stockholders' Equity –Three Months EndedApril
      30, 2009
                                        6Condensed Consolidated Statements of Cash Flows –Three Months
      Ended April 30, 2009 and 2008
                                        7Notes to Condensed Consolidated Financial
      Statements
                                        8Item 2.
                                        Management's Discussion and Analysis of Financial Condition and
      Results of Operations
                                        13Item 3.
                                        Quantitative and Qualitative Disclosures About Market
      Risk
                                        18Item 4.
                                        Controls and Procedures
                                        18PART 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.





3





LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS




ASSETS
                    
                    April
      30, 2009
                    
                    
                    January
      31, 2009(Unaudited)Current
      assets:Cash
                    
                    $
                    3,939,812
                    
                    
                    $
                    2,755,441Accounts
      receivable, net of allowance for doubtful accounts of
    $38,900
                    
                    
                    15,089,322
                    
                    
                    
                    13,353,430at
      April 30, 2009 and $104,500 at January 31, 2009Inventories,
      net of reserves of $783,000 at April 30, 2009 and $657,000
                    
                    
                    52,238,592
                    
                    
                    
                    57,074,028at
      January 31, 2009Deferred
      income taxes
                    
                    
                    2,228,232
                    
                    
                    
                    2,578,232Prepaid
      income tax
                    
                    
                    517,852
                    
                    
                    
                    531,467Other
      current assets
                    
                    
                    1,861,018
                    
                    
                    
                    2,070,825Total
      current assets
                    
                    
                    75,874,828
                    
                    
                    
                    78,363,423Property
      and equipment, net of accumulated depreciation of
                    
                    
                    13,888,229
                    
                    
                    
                    13,736,326$9,391,600
      at April 30, 2009 and $8,975,900 at January 31, 2009Intangibles
      and other assets, net
                    
                    
                    4,487,711
                    
                    
                    
                    4,405,833Goodwill
                    
                    
                    5,109,136
                    
                    
                    
                    5,109,136$
                    99,359,904
                    
                    
                    $
                    101,614,718LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                    
                    $
                    5,053,376
                    
                    
                    $
                    3,853,890Other
      accrued expenses
                    
                    
                    62,996
                    
                    
                    
                    434,809Loans
      payable
                    
                    
                    575,177
                    
                    
                    
                    -----Current
      maturity of long-term debt
                    
                    
                    94,000
                    
                    
                    
                    94,000Accrued
      expenses and other current liabilities
                    
                    
                    2,836,224
                    
                    
                    
                    3,069,409Total
      current liabilities
                    
                    
                    8,621,773
                    
                    
                    
                    7,452,108Canadian
      warehouse loan payable (net of current maturity of
$94,000)
                    
                    
                    1,389,449
                    
                    
                    
                    1,368,406Borrowings
      under revolving credit facility
                    
                    
                    20,490,466
                    
                    
                    
                    24,408,466Other
      liabilities
                    
                    
                    79,333
                    
                    
                    
                    74,61130,581,021
                    
                    
                    
                    33,303,591COMMITMENTS
      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 5,523,288 shares at April 30, 2009 and atJanuary
      31, 2009, respectively
                    
                    
                    55,233
                    
                    
                    
                    55,233Less
      treasury stock, at cost, 125,322 shares at April 30, 2009 and 107,317
      shares at January 31, 2009
                    
                    
                    (1,353,247
                    )
                    
                    
                    (1,255,459
                    )Additional
      paid-in capital
                    
                    
                    49,615,061
                    
                    
                    
                    49,511,896Other
      comprehensive (loss)
                    
                    
                    (3,826,741
                    )
                    
                    
                    (4,191,801
                    )Retained
      earnings
                    
                    
                    24,288,577
                    
                    
                    
                    24,191,258Stockholders'
      equity
                    
                    
                    68,778,883
                    
                    
                    
                    68,311,127$
                    99,359,904
                    
                    
                    $
                    101,614,718





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





4








LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(UNAUDITED)








THREE
      MONTHS ENDEDApril
      30,2009
                  
                  
                  2008Net
      sales
                  
                  $
                  23,975,894
                  
                  
                  $
                  27,280,157Cost
      of goods sold
                  
                  
                  17,965,456
                  
                  
                  
                  20,601,559Gross
      profit
                  
                  
                  6,010,438
                  
                  
                  
                  6,678,598Operating
      expenses
                  
                  
                  5,331,933
                  
                  
                  
                  5,230,484Operating
      profit
                  
                  
                  678,505
                  
                  
                  
                  1,448,114Interest
      and other income, net
                  
                  
                  40,116
                  
                  
                  
                  30,074Interest
      expense
                  
                  
                  (193,480
                  )
                  
                  
                  (99,520
                  )Income
      before income taxes
                  
                  
                  525,141
                  
                  
                  
                  1,378,668Provision
      for income taxes
                  
                  
                  427,822
                  
                  
                  
                  485,529Net
      income
                  
                  $
                  97,319
                  
                  
                  $
                  893,139Net
      income per common share:Basic
                  
                  $
                  0.02
                  
                  
                  $
                  0.16Diluted
                  
                  $
                  0.02
                  
                  
                  $
                  0.16Weighted
      average common shares outstanding:Basic
                  
                  
                  5,406,291
                  
                  
                  
                  5,487,260Diluted
                  
                  
                  5,468,616
                  
                  
                  
                  5,520,868








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














5





LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY


(UNAUDITED)


Three
months ended April 30, 2009


Common
      Stock
              
              
              Additional
                Paid-in
              
              
              Treasury Stock
              
              
              Retained
              
              
              Other
                ComprehensiveShares
              
              
              Amount
              
              
              Capital
              
              
              Shares
              
              
              Amount
              
              
              Earnings
              
              
              (loss)
              
              
              TotalBalance
      February 1, 2009
              
              
              5,523,288
              
              
              $
              55,233
              
              
              $
              49,511,896
              
              
              
              (107,317
              )
              
              $
              (1,255,459
              )
              
              $
              24,191,258
              
              
              $
              (4,191,801
              )
              
              $
              68,311,127Net
      Income
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              97,319
              
              
              
              -----
              
              
              
              97,319Stock
      Repurchase Program
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              (18,005
              )
              
              $
              (97,788
              )
              
              
              -----
              
              
              
              -----
              
              
              
              (97,788
              )Other
      Comprehensive Income
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              365,060
              
              
              
              365,060Stock
      Based Compensation:Restricted
      Stock
              
              
              -----
              
              
              
              -----
              
              
              
              76,183
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              76,183Director
      options granted at fair market value
              
              
              -----
              
              
              
              -----
              
              
              
              26,982
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              -----
              
              
              
              26,982Balance
      April 30, 2009
              
              
              5,523,288
              
              
              $
              55,233
              
              
              $
              49,615,061
              
              
              
              (125,322
              )
              
              $
              (1,353,247
              )
              
              $
              24,288,577
              
              
              $
              (3,826,741
              )
              
              $
              68,778,883














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








6





LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)





THREE
      MONTHS ENDEDApril
      30,2009
                
                
                2008Cash
      Flows from Operating Activities:Net
      income
                
                $
                97,319
                
                
                $
                893,139Adjustments
      to reconcile net income to net cash providedby
      operating activities:Stock
      based compensation
                
                
                80,680
                
                
                
                62,041Allowance
      for doubtful accounts
                
                
                (65,600
                )
                
                
                (10,000
                )Reserve
      for inventory obsolescence
                
                
                126,215
                
                
                
                (52,200
                )Depreciation
      and amortization
                
                
                405,408
                
                
                
                383,826Deferred
      income tax
                
                
                350,000
                
                
                
                -----Changes
      in operating assets and liabilities:Increase
      in accounts receivable
                
                
                (1,670,292
                )
                
                
                (2,436,763
                )Decrease
      in inventories
                
                
                4,709,221
                
                
                
                7,510,545Decrease
      (Increase) in other assets
                
                
                164,029
                
                
                
                (486,320
                )Increase
      in accounts payable, accrued expenses and other
liabilities
                
                
                959,547
                
                
                
                582,906Net
      cash provided by operating activities
                
                
                5,156,527
                
                
                
                6,447,174Cash
      Flows from Investing Activities:Purchases
      of property and equipment
                
                
                (557,311
                )
                
                
                (313,544
                )Net
      cash used in investing activities
                
                
                (557,311
                )
                
                
                (313,544
                )Cash
      Flows from Financing Activities:Purchases
      of stock under stock repurchase program
                
                
                (97,788
                )
                
                
                (1,083,963
                )Payments
      under loan agreements
                
                
                (3,317,057
                )
                
                
                (5,476,206
                )Net
      cash used in by financing activities
                
                
                (3,414,845
                )
                
                
                (6,560,169
                )Net
      increase (decrease) in cash
                
                
                1,184,371
                
                
                
                (426,539
                )Cash
      and cash equivalents at beginning of period
                
                
                2,755,441
                
                
                
                3,427,672Cash
      and cash equivalents at end of period
                
                $
                3,939,812
                
                
                $
                3,001,133





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








7





LAKELAND
INDUSTRIES, INC. AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





1.     Business




Lakeland
Industries, Inc. and Subsidiaries (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 three month  periods ended April 30, 2009 and 2008,
respectively.




2.     Basis
of Presentation


The
      condensed consolidated financial statements included herein have been
      prepared by us, without audit, pursuant to the rules and regulations of
      the Securities and Exchange Commission and reflect all adjustments
      (consisting of only normal and recurring adjustments) which are, in the
      opinion of management, necessary to present fairly the consolidated
      financial information required therein.  Certain information and
      note disclosures normally included in financial statements prepared in
      accordance with accounting principles generally accepted in the United
      States of America (“GAAP”) have been condensed or omitted pursuant to such
      rules and regulations. While we believe that the disclosures are adequate
      to make the information presented not misleading, it is suggested that
      these condensed consolidated financial statements be read in conjunction
      with the consolidated financial statements and the notes thereto included
      in our Annual Report on Form 10-K filed with the Securities and Exchange
      Commission for the year ended January 31,
2009.





The
results of operations for the three-month period ended April 30, 2009 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.  All
significant inter-company accounts and transactions  have been
eliminated.




4.     Inventories:




Inventories consist of the
following:




April
      30,
                  
                  
                  January
      31,2009
                  
                  
                  2009Raw
      materials
                  
                  $
                  24,877,933
                  
                  
                  $
                  26,343,875Work-in-process
                  
                  
                  2,115,528
                  
                  
                  
                  2,444,160Finished
      Goods
                  
                  
                  25,245,131
                  
                  
                  
                  28,285,993$
                  52,238,592
                  
                  
                  $
                  57,074,028


Inventories
include freight-in, materials, labor and overhead costs and are stated at the
lower of cost (on a first-in-first-out basis) or market.





5.     Earnings Per
Share:




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





8








The
following table sets forth the computation of basic and diluted earnings per
share at April 30, 2009 and 2008.




Three
      Months EndedApril
      30,2009
                  
                  
                  2008NumeratorNet
      Income
                  
                  $
                  97,319
                  
                  
                  $
                  893,139DenominatorDenominator
      for basic earnings per share
                  
                  
                  5,406,291
                  
                  
                  
                  5,487,260(Weighted-average
      shares which reflect 116,997 and 36,028 weighted average common shares in
      the treasury as a result of the stock repurchase program for 2009 and
      2008, respectively)Effect
      of dilutive securities from restricted stock plan and from dilutive effect
      of stock options
                  
                  
                  62,325
                  
                  
                  
                  33,608Denominator
      for diluted earnings per share
                  
                  
                  5,468,616
                  
                  
                  
                  5,520,868(adjusted
      weighted average shares)Basic
      earnings per share
                  
                  $
                  0.02
                  
                  
                  $
                  0.16Diluted
      earnings per share
                  
                  $
                  0.02
                  
                  
                  $
                  0.16





6.     Revolving
Credit Facility




At
      April 30, 2009, the balance outstanding under our five year revolving
      credit facility amounted to $20.5 million. In May 2008 the facility was
      increased from $25 million to $30 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 April 30, 2009 and for the period then ended.
      The weighted average interest rate for the three month period ended April
      30, 2009 was 3.04%.





7.     Major
Supplier


We
      purchased 13% of our raw materials from one supplier during the
      three-month period ended April 30, 2009. We normally purchase
      approximately 75% of our raw material from this suppler. We carried higher
      inventory levels throughout FY09 and limited our material purchases in Q1
      of FY10. 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.





8.     Employee
Stock Compensation




The
Company’s Director’s Plan permits the grant of share options and shares to its
Directors for up to  60,000 shares of common stock as stock
compensation.  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 six-month period and generally expire 6 years from the grant
date.








9








The
following table represents our stock options granted, exercised, and forfeited
during the first quarter of fiscal 2010.





Stock
      Options
                    Number
                      of
      Shares
                    Weighted
      Average
                      Exercise
      Price per
                      Share
                    Weighted
      Average
                      Remaining
                      Contractual
      Term
                    Aggregate
                      Intrinsic
                      ValueOutstanding
      at January 31, 2009
                    20,567
                    $13.42
                    2.27
      years
                    $8,618Outstanding
      at April 30, 2009
                    25,567
                    $12.01
                    2.79
      years
                    $7,772Exercisable
      at  April 30, 2009
                    20,567
                    $13.42
                    2.02
      years
                    $1,072





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 has the same voting rights as other
common stock. Restricted stock awards do not have voting rights, and the
underlying shares are not considered to be issued and outstanding until
vested.





The
Company has granted up to a maximum of 164,928 restricted stock awards as of
April 30, 2009. All of these restricted stock awards are non-vested at April 30,
2009 (122,083 shares at “baseline” and 80,228 shares at “minimum”) and have a
weighted average grant date fair value of $12.06 at maximum. 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
April 30, 2009, unrecognized stock-based compensation expense related to
restricted stock awards totaled $1,294,957, before income taxes, based on the
maximum performance award level.  Such unrecognized stock-based
compensation expense related to restricted stock awards totaled $735,344 and
$128,439 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.





Stock-Based
Compensation




The
Company recognized total stock-based compensation costs of $80,680 and $62,041
for the three months ended April 30, 2009 and 2008, respectively, of which
$76,183 and $62,041 results from the 2006 Equity Incentive Plan for the three
months ended April 30, 2009 and 2008, respectively, and $4,497 and $0,
respectively, from the Director Option Plan.  These amounts are
reflected in selling, general and administrative expenses.  The total
income tax benefit recognized for stock-based compensation arrangements was
$29,045 and $22,335 for the three months ended April 30, 2009 and 2008,
respectively.








10








9.
              Manufacturing
      Segment Data


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


Three
      Months EndedApril
      30,2009
                      
                      
                      2008Domestic
                      
                      $
                      17.2
                      
                      
                      
                      71.8
                      %
                      
                      $
                      23.2
                      
                      
                      
                      84.9
                      %International
                      
                      
                      6.8
                      
                      
                      
                      28.2
                      %
                      
                      
                      4.1
                      
                      
                      
                      15.1
                      %Total
                      
                      $
                      24.0
                      
                      
                      
                      100
                      %
                      
                      $
                      27.3
                      
                      
                      
                      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 facility 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, 2009. We evaluate the performance of these
      entities based on operating profit which is defined as income before
      income taxes, interest expense and other income and expenses. We
      have  sales forces in Canada, Europe, 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-month periods noted
      therein:


Three
      Months Ended April 30,
                      (in
      millions of dollars)2009
                    
                    
                    2008Net
      Sales:North
      America and other foreign
                    
                    $
                    20.6
                    
                    
                    $
                    27.2Brazil
                    
                    
                    2.6
                    
                    
                    
                    -----China
                    
                    
                    4.6
                    
                    
                    
                    5.4India
                    
                    
                    0.2
                    
                    
                    
                    0.1Less
      inter-segment sales
                    
                    
                    (4.0
                    )
                    
                    
                    (5.4
                    )Consolidated
      sales
                    
                    $
                    24.0
                    
                    
                    $
                    27.3Operating
      Profit:North
      America and other foreign
                    
                    $
                    0.2
                    
                    
                    $
                    1.0Brazil
                    
                    
                    0.1
                    
                    
                    
                    -----China
                    
                    
                    0.8
                    
                    
                    
                    0.8India
                    
                    
                    (0.4
                    )
                    
                    
                    (0.2
                    )Less
      inter-segment profit
                    
                    
                    -----
                    
                    
                    
                    (0.2
                    )Consolidated
      profit
                    
                    $
                    0.7
                    
                    
                    $
                    1.4Identifiable
      Assets (at Balance Sheet date):North
      America and other foreign
                    
                    $
                    69.7
                    
                    
                    $
                    63.8Brazil
                    
                    $
                    15.0
                    
                    
                    
                    -----China
                    
                    
                    14.1
                    
                    
                    
                    11.4India
                    
                    
                    0.6
                    
                    
                    
                    4.4Consolidated
      assets
                    
                    $
                    99.4
                    
                    
                    $
                    79.6Depreciation  and
      Amortization Expense:North
      America and other foreign
                    
                    $
                    0.2
                    
                    
                    $
                    0.2Brazil
                    
                    
                    0.05
                    
                    
                    
                    -----China
                    
                    
                    0.1
                    
                    
                    
                    0.1India
                    
                    
                    0.05
                    
                    
                    
                    0.1Consolidated
      depreciation expense
                    
                    $
                    0.4
                    
                    
                    $
                    0.4








11





10.
            Tax
      Audit /  Adoption of FIN 48 / Change in Accounting
      Estimate





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





The
Company’s policy is to recognize interest and penalties related to income tax
issues as components of income tax expense. The Company had $0 of accrued
interest as of April 30, 2009.





The
Company is subject to U.S. federal income tax, as well as income tax in multiple
U.S. state and local jurisdictions and a number of foreign
jurisdictions.   The Company’s federal income tax returns for the
fiscal year ended January 31, 2007 have been audited by the Internal Revenue
Service. Such audit is complete with a “No Change Letter” received by the
Company.





Our two
major foreign tax jurisdictions are China and Brazil. According to China tax
regulatory framework, there is no statute of limitation on fraud or any criminal
activities to deceive tax authorities. However, the general practice is
going back five years, and general practice for records maintenance is fifteen
years.  Our China subsidiaries were audited during the tax year 2007 for
the tax years through 2006, 2005 and 2004, respectively. Those audits are
associated with ordinary course of business. China tax authorities did not
perform tax audits associated with ordinary course of business during tax year
2008.  China tax authority performed a fraud audit but the scope was
limited to the fraud activities found in late tax year 2008.  This audit
covered tax years from 2003 through 2008, please see Note 17 of our Annual
Report on Form 10-K for further details. Qualytextil, S.A. has never been
audited under Brazilian Federal tax authorities, but by law in Brazil they are
allowed to audit the five most recent years. We do not anticipate significant
tax liability upon any future tax audits in Brazil.





Effective
with the three months ended April 30, 2009, management changed its estimates for
the deferred tax asset to be realized upon the final restructuring of its Indian
operations. Accordingly, management has recorded an allowance of $350,000
against the ultimate realization of the $750,000 included in Deferred Income
Taxes on the accompanying balance sheet.





11.
              Related
      Party Transactions


On March
1, 1999, we entered into a one year (renewable for four additional one year
terms) lease agreement with Harvey Pride, Jr., our Vice President –
Manufacturing, for a 2,400 sq. ft. customer service office located next to our
existing Decatur, Alabama facility. We paid an annual rent of $18,000 for this
facility under the lease agreement in fiscal 2004 through 2008. This lease was
renewed on April 1, 2008 at the same rental rate of $18,000 for FY09 with 5%
increments for FY10 and FY11.




In July
2005 as part of the acquisition of Mifflin Valley Inc., (merged into Lakeland
Industries, Inc. on September 1, 2006) the Company entered into a five year
lease with Michael Gallen (an employee) to lease an 18,520 sq. ft. manufacturing
facility in Shillington, PA for $55,560 annually or a per square foot rental of
$3.00 with an annual increase of 3.5%.  This amount was obtained prior
to the acquisition from an independent appraisal of the fair market rental value
per square foot.  In addition the Company, commencing January 1, 2006
is renting 12,000 sq ft of warehouse space in a second location is Pennsylvania
from this employee, on a month by month basis, for the monthly amount of $3,350
or $3.35 per square foot annually.  Mifflin Valley utilizes the
services of Gallen Insurance (an affiliate of Michael & Donna Gallen) to
provide certain insurance in Pennsylvania.  Such payments for
insurance aggregated approximately $40,000, $34,000 and $27,000 in fiscal 2009,
2008 and 2007, respectively.








12





12.
            Derivative
      Instruments and Foreign Currency
Exposure





The
Company has foreign currency exposure, principally through its investment in
Brazil, sales in Canada and the UK and production in Mexico and
China.  Management has commenced a hedging program to offset this risk
by purchasing forward contracts to sell the Canadian Dollar, Chilean Peso, Euro
and Great Britain Pound.  Such contracts for the Chilean Peso, Euro
and Pound are largely timed to expire with the last day of the fiscal quarter,
with a new contract purchased on the first day of the following quarter, to
match the operating cycle of the company.  Management has decided not
to hedge its long position in the Chinese Yuan or the Brazilian
Real.





Effective
January 1, 2009, the Company adopted the provisions of SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, which amends SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Company accounts for its foreign
exchange derivative instruments under Statement of Financial Accounting
Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” as amended by SFAS No. 161.  This standard requires
recognition of all derivatives as either assets or liabilities at fair value and
may result in additional volatility in both current period earnings and other
comprehensive income as a result of recording recognized and unrecognized gains
and losses from changes in the fair value of derivative instruments. The Company
had no derivative instruments outstanding at April 30, 2009 for foreign
exchange.





Interest
Rate Risk Management




We are
exposed to interest rate risk from debt. We have hedged against the risk of
changes in the interest rate associated with our variable rate Revolving Credit
by entering into a variable-to-fixed interest rate swap agreement, designated as
fair value hedge, with a total notional amount of $18 million as of April 30,
2009. We assume no hedge ineffectiveness as each interest rate swap meets the
short-cut method requirements under SFAS 133 for fair value hedges of debt
instruments. As a result, changes in the fair value of the interest rate swaps
are offset by changes in the fair value of the debt, both are reported in
interest and other income and no net gain or loss is recognized in
earnings.





The fair
value of the interest rate swap in a net liability position is included in Other
Liabilities on the balance sheet.





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





April
      30, 2009
                    
                    
                    January
      31, 2009Unrealized
      Gains:Foreign
      currency exchange contracts
                    
                    
                    -----
                    
                    
                    
                    -----Unrealized
      (Losses):Foreign
      currency exchange contracts
                    
                    
                    -----
                    
                    
                    
                    -----Interest
      rate swaps
                    
                    $
                    (527,380
                    )
                    
                    $
                    (627,380
                    )





The
Brazilian financial statements, when translated into USD pursuant to FAS 52,
“Foreign Currency Translation” resulted in a Currency Translation Adjustment
(CTA) of $(3,223,897), which is included in Other Comprehensive Loss on the
Balance Sheet.





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 andconsolidated financial statements and related notes that appeared
in our Form 10-K and AnnualReport and in the documents that were incorporated by
reference into our Form 10-K for the year ended January 31,
2009.  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.





13








Overview




We
manufacture and sell a comprehensive line of safety garments and accessories for
the industrial protective clothing market. Our products are sold by our in-house
customer service group, our regional sales managers and independent sales
representatives to a network of over 1000 safety and mill supply distributors.
These distributors in turn supply end user industrial customers such as
integrated oil, chemical/petrochemical, utilities, automobile, steel, glass,
construction, smelting, munition plants, janitorial, pharmaceutical, mortuaries
and high technology electronics manufacturers, as well as scientific and medical
laboratories. In addition, we supply federal, state and local governmental
agencies and departments such as fire and law enforcement, airport crash rescue
units, the Department of Defense, the Department of Homeland Security, and the
Centers for Disease Control.





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
continue to move production of our reusable woven garments and gloves to these
facilities and expect to continue this process through fiscal 2010. As a result,
we expect to see continuing profit margin improvements for these product lines
over time.





Critical
Accounting Policies and Estimates




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





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





Revenue Recognition.The
Company derives its sales primarily from its limited use/disposable protective
clothing and secondarily from its sales of high-end chemical protective suits,
fire fighting and heat protective apparel, gloves and arm guards, and reusable
woven garments. Sales are recognized when goods are shipped at which time title
and the risk of loss passes to the customer. Sales are reduced for sales returns
and allowances. Payment terms are generally net 30 days for United States sales
and net 90 days for international sales.





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





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





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





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





14











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.





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





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





Significant
Balance Sheet Fluctuation April 30, 2009 as compared to January 31,
2009




Cash
increased by $1.2 million as borrowings under the revolving credit facility
decreased by $3.9 million at April 30, 2009. Accounts receivable increased by
$1.7 million as sales for the three months ended April 30, 2009 increased by
7.7% from the three months ended January 31, 2009.  Inventory
decreased by $4.8 million with a increase in inventory reserves of $0.1 million,
an increase in intercompany profit elimination of $0.2 million resulting from
increased intercompany profit on sales shipped from China, and a decrease of
$3.0 million in finished goods inventory and a decrease in raw materials and
work-in-process of $1.8 million. Accounts payable increased by $1.2 million
mainly due to larger payables in Brazil. Other current assets decreased by $0.2
million, mainly due to prepaid insurance policies with policy years the same as
the Company’s fiscal year, VAT and other taxes refundable in Chile and
China.





At April
30, 2009 the Company had an outstanding loan balance of $20.5 million under its
facility with Wachovia Bank, N.A. compared with $24.4 million at January 31,
2009.  Total stockholder’s equity increased $0.5 million principally
due to the net income for the period of $0.1 million, the changes in foreign
exchange translations in other comprehensive income and Stock Based
Compensation, partially offset by the Stock Repurchase Program.





15








Three
months ended April 30, 2009 as compared to the three months ended April 30,
2008




Net Sales.Net sales
decreased $3.3 million, or 12.1% to $24 million for the three months ended April
30, 2009 from $27.3 million for the three months ended April 30,
2008.  The net decrease was mainly due to domestic sales. External
sales from China increased by $0.1 million, or 7.0% driven by sales to the new
Australian distributor. Canadian sales decreased by $0.1 million, or 7.4%, UK
sales decreased by $0.5 million or 38%, Chile sales decreased by $0.1 million,
or 22%. US domestic sales of disposables decreased by $5.2 million, chemical
suit sales decreased by $0.1 million, wovens decreased by $0.4 million,
reflective sales increased by $0.3 million and glove sales decreased by $0.5
million. Sales in Brazil were $2.6 million for Q1 FY2010, but were not included
in operations for Q1 FY2009.





Gross Profit.Gross profit
decreased $0.7 million or 10% to $6.0 million for the three months ended April
30, 2009 from $6.7 million for the three months ended April 30,
2008.  Gross profit as a percentage of net sales increased to 25.1%
for the three months ended April 30, 2009 from 24.5% for the three months ended
April 30, 2008. Major factors driving the changes in gross margins
were:





o
            Disposables
      gross margin declined by 4.5 percentage points in Q1 this year compared
      with Q1 last year. This decline was mainly due to higher priced raw
      materials and a very competitive pricing environment coupled with lower
      volume.


o
            Brazil
      operations were included in operations for Q1 this year while they were
      not included in  Q1 last year operations. Brazil’s gross margin
      was 46.7% for Q1 this year. This was less than previous periods due to a
      large order shipped in April 2009 but bid in the summer of 2008, which had
      significant purchased items impacted by the major change in foreign
      exchange rates in August to October 2008. Further, the month of March had
      low sales resulting in no incentives from the Brazilian government.
      Management expects both these factors will be
    non-recurring.


o
            Continued
      gross losses of $0.1 million from India in Q1
  FY2010.


o
            Glove
      division reduction in volume coupled with inventory
      write-offs.


o
            Chemical
      division gross margin increased by 8.6 percentage points resulting from
      sales mix.


o
            Canada
      gross margin increased by 14.8 percentage points mainly resulting from
      more favorable exchange rates and local competitive pricing
      climate.


o
            UK
      and Europe margins declined 14.5 percentage points mainly resulting from
      exchange rate differentials.





Operating Expenses.Operating
expenses increased $0.1 million, or 1.9% to $5.3 million for the three months
ended April 30, 2009 from $5.2 million for the three months ended April 30,
2008.  As a percentage of sales, operating expenses increased to 22.2%
for the three months ended April 30, 2009 from 19.2% for the three months ended
April 30, 2008.  The $0.1 million increase in operating expenses in
the three months ended April 30, 2009 as compared to the three months ended
April 30, 2008 were comprised of:




o
              ($0.3)
      million lower freight out costs resulting from significantly lower
      prevailing carrier rates and lower
volume.
 o
              ($0.2)
      million in reduced administrative and officer salaries resulting from cost
      cut-backs, along with related reduction in payroll taxes and employee
      benefits.
 o
              ($0.2)
      million in reduced sales commissions resulting from lower
      volume.
 o
              ($0.2)
      million in reduced shareholder costs relating to the proxy contest in Q1
      last year.
 o
              ($0.1)
      million reduction in foreign exchange costs resulting from the Company’s
      hedging program and more favorable
rates.
 o
              ($0.1)
      million miscellaneous decreases.
 o
              $0.1
      million in increased operating costs in China were the result of the large
      increase in direct international sales made by China, are now allocated to
      SG&A costs, previously allocated to cost of goods
  sold.
 o
              $1.1
      million of operating expenses in Brazil for the three months ended April
      30,2009, not included in operations for the three months April 30,
      2008.







16








Operating profit. Operating
profit decreased 53.1% to $0.7 million for the three months ended April 30, 2009
from $1.4 million for the three months ended April 30,
2008.  Operating margins were 2.8% for the three months ended April
30, 2009 compared to 5.3% for the three months ended April 30,
2008.





Interest
Expenses.  Interest expenses increased by $0.1 million for the
three months ended April 30, 2009 as compared to the three months ended April
30, 2008 due to higher borrowing levels outstanding mainly due to the purchase
price paid for the Brazil acquisition, partially offset by lower interest
rates.





Income Tax
Expense.  Income tax expenses consist of federal, state, and
foreign income taxes.  Income tax expenses decreased $0.1 million, or
11.9%, to $0.4 million for the three months April 30, 2009 from $0.5 million for
the three months ended April 30, 2008.  Our effective tax rates were
81.5% and 35.2% for the three months ended April 30, 2009 and 2008,
respectively. Our effective tax rate for 2009 was affected by a $350,000
allowance against deferred taxes resulting from the India restructuring, losses
in India and UK with no tax benefit, tax benefits in Brazil resulting from
government incentives and goodwill write-offs, and credits to prior years taxes
in the US not previously recorded.





Net
Income.  Net income decreased $0.8 million, or 89% to $0.1
million for the three months ended April 30, 2009 from $0.8 million for the
three months ended April 30, 2008. The decrease in net income primarily resulted
from a decrease in sales, larger losses in India and reduction in gross margins
in disposables and Brazil, a $350,000 allowance against deferred taxes resulting
from the India restructuring, offset by management’s cost reduction
program.





Liquidity
and Capital Resources




Cash Flows.As of April 30,
2009 we had cash and cash equivalents of $3.9 million and working capital of
$67.3 million increases of $1.2 million and a decrease of $3.6 million,
respectively, from January 31, 2009. 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 $5.2 million for the three months ended
April 30, 2009 was due primarily to net income from operations of $0.1 million,
an increase in accounts payable accrued expenses and other liabilities of $1.0
million, and a decrease in inventories of $4.8 million, offset by an increase in
accounts receivable of $1.7 million. Net cash used in investing activities of
$0.6 million in the three months ended April 30, 2009, was due to purchases of
property and equipment.





We
currently have one credit facility - a $30 million revolving credit, of which
$20.5 million of borrowings were outstanding as of April 30,
2009.  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 April 30, 2009, we were in compliance with all
covenants contained in our credit facility.





We
believe that our current cash position of $3.9 million, our cash flow from
operations along with borrowing availability under our $30 million revolving
credit facility will be sufficient to meet our currently anticipated operating,
capital expenditures and debt service requirements for at least the next 12
months.





17








Capital Expenditures. Our
capital expenditures principally relate to purchases of manufacturing equipment,
computer equipment, and leasehold improvements, as well as payments related to
the construction of our new facilities in China. Our facilities in China are not
encumbered by commercial bank mortgages and thus Chinese commercial mortgage
loans may be available with respect to these real estate assets if we need
additional liquidity. Our capital expenditures are expected to be approximately
$1.5 million for plant expansion in Brazil and capital equipment, primarily
computer equipment and apparel manufacturing equipment in fiscal
2010.





Foreign Currency
Exposure.The Company has foreign currency exposure,
principally through its investment in Brazil, sales in Canada and the UK and
production in Mexico and China.  Management has commenced a hedging
program to offset this risk by purchasing forward contracts to sell the Canadian
Dollar, Chilean Peso, Euro and Great Britain Pound.  Such contracts
are largely timed to expire with the last day of the fiscal quarter, with a new
contract purchased on the first day of the following quarter, to match the
operating cycle of the company.  Management has decided not to hedge
its long position in the Chinese Yuan or Brazilian Real.





Interest
Rate Risk Management




We are
exposed to interest rate risk from debt. We have hedged against the risk of
changes in the interest rate associated with our variable rate Revolving Credit
by entering into a variable-to-fixed interest rate swap agreement, designated as
fair value hedges, with a total notional amount of $18 million as of April 30,
2009. We assume no hedge ineffectiveness as each interest rate swap meets the
short-cut method requirements under SFAS 133 for fair value hedges of debt
instruments. As a result, changes in the fair value of the interest rate swaps
are offset by changes in the fair value of the debt, both are reported in
interest and other income and no net gain or loss is recognized in
earnings.





Effective
January 1, 2009, the Company adopted the provisions of SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, which amends SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Company accounts for its foreign
exchange derivative instruments under Statement of Financial Accounting
Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” as amended by SFAS No. 161.  This standard requires
recognition of all derivatives as either assets or liabilities at fair value and
may result in additional volatility in both current period earnings and other
comprehensive income as a result of recording recognized and unrecognized gains
and losses from changes in the fair value of derivative instruments. The fair
value of the interest rate swap in a net liability position is included in Other
Liabilities on the balance sheet.








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,
2009.






Item
      4.
            Controls and Procedures




We
conducted an evaluation, under the supervision and with the participation of the
our management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) as of April 30, 2009. There are inherent limitations to the effectiveness
of any system of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can
only provide reasonable assurance of achieving their control objectives. Based
on their evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of April
30, 2009 for the reasons discussed below, to ensure them that information
relating to the Company (including our consolidated subsidiaries) required to be
included in our reports filed or submitted under the Exchange Act are recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Our Chief Executive Officer
and Chief Financial Officer have concluded that we no longer have a material
weakness over our China operations and financial reporting as of April 30,
2009.





18













Management’s
      Report on Internal Control over Financial
  Reporting




Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Our internal control system is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles.




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




Management
has assessed the effectiveness of the Company’s internal control over financial
reporting as of April 30, 2009. In making this assessment, management used the
criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on this evaluation, management has concluded that the Company’s internal control
over financial reporting was effective as of April 30, 2009. Our Chief Executive
Officer and Chief Financial Officer have concluded that we no longer have a
material weakness over our inventory relating to sales of raw material waste in
China at April 30, 2009.




In
response to the fraud in China (as fully explained in Note 17 to the Annual
Report filed under Form 10-K) and the material weakness identified at October
31, 2008, we have initiated a China Internal Control Committee. Such Committee
reviews, examines and evaluates China operating activities, and plans, designs
and implements internal control procedures and policies. The Committee reports
to the Chief Financial Officer. In particular, the Committee focuses on:
strengthening controls over waste/scrap sales, upgrading local accounting
manager authority and responsibility, and creating new banking and inventory
controls.




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




A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.




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





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





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





19










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





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





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





Changes in Internal Control Over
Financial Reporting –Except as described
above, there have been no changes in our internal control over financial
reporting since January 31, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





Management
is in the process of reviewing, evaluating and upgrading the systems of internal
control existing at our new subsidiary in Brazil, Qualytextil, S.A.





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 first quarter of fiscal 2010.  Based on that
evaluation, management concluded that other than the China Internal Control
Committee discussed above, there have not been changes in Lakeland Industries,
Inc.’s internal control over financial reporting during the first quarter of
fiscal 2010 that have materially affected, or is reasonably likely to materially
affect, Lakeland Industries, Inc.’s internal control over financial
reporting.




Holtz
Rubenstein Reminick LLP, the Company's previous independent registered public
accounting firm has issued a report on management’s assessment of the Company’s
internal control over financial reporting. That report dated April 14, 2009 is
included in the Company’s Annual Report on Form 10-K for the year ended January
31, 2009.




Changes
in Internal Control over Financial Reporting





Other
than the China Internal Control Committee discussed above, there have been no
other changes in Lakeland Industries, Inc.’s internal control over financial
reporting during the first quarter of fiscal 2010 that have materially affected,
or is reasonably likely to materially affect, Lakeland Industries,Inc.’s
internal control over financial reporting.








20








PART
II. OTHER INFORMATION




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




Exhibits:




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





a.
                10.2  Garment Manufacturer
      & Seller Liscence Agreement between E. I. DuPont De Nemours and
      Company and Lakeland Industries, Inc. dated June 6, 2009 (filed
      herein)b.
                10.7
      Fourth Modification to Note and Loan Agreement and Affirmation of Guaranty
      dated February 28, 2009 between Lakeland Industries, Inc. and Wachovia
      Bank, N.A. (filed herein)c.
                10.16
      Agreement of non-residential rent between Engenharia, Comercio e Industria
      Ltda and Qualytextil, S.A. dated December 22, 2008. (filed
      herein)d.
                10.17
      Particular Instrument of Rent Agreement between Ceprin Empreendimentos e
      Participacoes S/A and Qualytextil, S.A. dated October 28, 2008. (filed
      herein)e.
                31.1
      Certification Pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the
      Exchange Act, Signed by Chief Executive Officer (filed
      herewith)f.
                31.2
      Certification Pursuant to Rule 13a-14(b) and Rule 15d-14(b) of the
      Exchange Act, Signed by Chief Financial Officer (filed
      herewith)g.
                32.1
      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002, Signed by Chief Executive
      Officer (filed herewith)h.
                32.2
      Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002, Signed by Chief Financial
      Officer (filed herewith)








Reports
      on Form 8-K:




a
      -
              On
      February 12, 2009, the Company filed a Form 8-K under Item 5.02 relating
      to the departure of Michael Cirenza from Lakeland’s Board of
      Directors.




b
      -
              On
      March 4, 2009, the Company filed a Form 8-K under Item 7.01, for the
      purpose of furnishing a press release announcing that Lakeland will be
      presenting at the Edgewater Conference in Las
  Vegas.




c
      -
              On
      April 15, 2009, the Company filed a Form 8-K under Item 2.02 for the
      purpose of furnishing a press announcing the Company's FY 2009 financial
      results for the reporting period ended January 31,
  2009.




d
      -
              On
      April 23, 2009, the Company filed a Form 8-K under Item 5.02 relating to
      the election of Duane Albro to Lakeland’s Board of
    Directors.




e
      -
              On
      April 28, 2009, the Company filed a Form 8-K under Item 4.01 for the
      purpose of furnishing a press release announcing that on April 27, 2009,
      the Company Changed certifying accountants.











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:  June
      9, 2009
                  /s/ Christopher J. RyanChristopher
      J. Ryan,Chief
      Executive Officer, President,Secretary
      and General Counsel(Principal
      Executive Officer and AuthorizedSignatory)Date:
      June 9, 2009
                  /s/Gary PokrassaGary
      Pokrassa,Chief
      Financial Officer(Principal
      Accounting Officer and AuthorizedSignatory)







22