**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-K**


(Mark
      one)


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


For
      the
      fiscal year ended******January 31,
      2007**


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
                  or Other Jurisdiction of Incorporation or
                  Organization)**
              **(I.R.S.
                  Employer Identification No.)****701
                  Koehler Ave., Suite 7, Ronkonkoma, NY**
              **11779****(Address
                  of Principal Executive Offices)**
              **(Zip
                  Code)**





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





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


**Common
      Stock $0.01 Par Value**


**(Title
      of Class)**


**Name
      of Exchange on which listed - NASDAQ**


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


**Not
      Applicable**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.    Yeso    No
x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act.     Yes
o   No  x




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes
x  No
o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§ 229.405 of this Chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K.    Yesx    Noo




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated file, or a non- accelerated filer (as defined in Rule 12-b-2 of
      the
      Exchange Act).


Large
      accelerated filer
⁯         Accelerated
      Filer  ý        Non-Accelerated
      Filer ⁯




Indicate
      by check mark whether the
      registrant is a shell company (as defined in Rule 12-b-2 of the Exchange
      Act).    Yeso   No
x




As
      of
      July 31, 2006, the aggregate market value of the registrant’s common stock held
      by non-affiliates of the registrant was $57,041,653 based on the closing price
      of the common stock as reported on the National Association of Securities
      Dealers Automated Quotation System National Market System.




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




Class
                  
                  Outstanding
                      at April 12, 2007Common
                      Stock, $0.01 par value per share
                  
                  5,521,824


1
 *Index*








**DOCUMENTS
      INCORPORATED BY REFERENCE**


Document
            Parts
                Into Which IncorporatedAnnual
                Report to Stockholders for the Fiscal Year
            Parts  [I,
                II, and IV]Ended
                January 31, 2007 (Annual Report)





Portions
      of the proxy statement for the annual meeting of stockholders to be held on
      June
      20, 2007, are incorporated by reference into Part III.











2





**LAKELAND
      INDUSTRIES, INC.**


**INDEX
      TO ANNUAL REPORT ON FORM 10-K**


PART
                      1:Cautionary
                      Statement regarding Forward-Looking
                      Information
                  PageItem
                      1
                  BusinessOverview
                  4Industry
                      Overview and Consolidation
                  5Business
                      Strategy
                  7Our
                      Competitive Strengths
                  8Products
                  10Quality
                      Control
                  13Marketing
                      and Sales
                  13Research
                      and Development
                  13Suppliers
                      and Materials
                  14Internal
                      Audit
                  14Competition
                  14Seasonality
                  15Patents
                      and Trademarks
                  15Employees
                  15Environmental
                      Matters
                  15Available
                      Information
                  15Item
                      1A
                  Risk
                      Factors
                  16Item
                      1B
                  Unresolved
                      Staff Comments
                  22Item
                      2
                  Properties
                  22Item
                      3
                  Legal
                      Proceedings
                  24Item
                      4
                  Submission
                      of Matters to a Vote of Security
                      Holders
                  24PART
                      II:Item
                      5
                  Market
                      for the Registrant’s Common Stock and Related
                      Stockholder Matters
                  24Item
                      6
                  Selected
                      Financial Data
                  27Item
                      7
                  Management’s
                      Discussion and Analysis of Financial Condition
                      and Results of Operations
                  28Item
                      7A
                  Quantitative
                      and Qualitative Disclosure about Market
                      Risk
                  35Item
                      8
                  Financial
                      Statements and Supplementary
                      Data
                  37Item
                      9
                  Changes
                      in and Disagreements with Accountants on Accounting
                      and Financial Disclosure
                  63Item
                      9A
                  Controls
                      and Procedures
                  63Item
                      9B
                  Other
                      Information
                  64PART
                      III:Performance
                      Graph
                  65Item
                      10
                  Directors
                      and Executive Officers of the
                      Registrant
                  66Item
                      11
                  Executive
                      Compensation
                  68Item
                      12
                  Security
                      Ownership of Certain Beneficial Owners and
                      Management
                  68Item
                      13
                  Certain
                      Relationships and Related
                      Transactions
                  68Item
                      14
                  Principal
                      Accounting Fees and Services
                  69PART
                      IV:Item
                      15
                  Exhibits,
                      Financial Statement Schedules and Reports on Form
                      8-K
                  69Signatures
                  
                  73Certification
                      under Exchange Act Rules 13a – 14(b) and 15d- 14(b)
                  74





3
 *Index*








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





**PART
      I**





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





**ITEM
      1.  BUSINESS**


**Overview**





We
      manufacture and sell a comprehensive line of safety garments and accessories
      for
      the industrial protective clothing market. Our products are sold by our in-house
      customer service group our regional sales managers and independent sales
      representatives to a network of over 800 safety and mill supply distributors.
      These distributors in turn supply end user industrial customers such as
      chemical/petrochemical, automobile, steel, glass, construction, smelting,
      munition plants, 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
      Department of Homeland Security, and the Centers for Disease Control. In fiscal
      2007, we had net sales of $100.2 million which represent a growth rate of 1.4%
      over our previous fiscal year. Our net sales attributable to customers outside
      the United States were $9.0 million, $10.3 million and $12.4 million, in fiscal
      2005, fiscal 2006 and fiscal 2007, respectively.




Our
      major
      product categories and their applications are described below:




*Limited
      Use/Disposable Protective Clothing.*  We manufacture a complete
      line of limited use/disposable protective garments offered in coveralls, lab
      coats, shirts, pants, hoods, aprons, sleeves and smocks. These garments are
      made
      from several non-woven fabrics, primarily Tyvek® and
      Tychem® (both DuPont manufactured fabrics) and also our proprietary
      fabrics Micromax and Micromax NS manufactured pursuant to customer order. These
      garments provide protection from low-risk contaminants or irritants, such as
      chemicals, pesticides, fertilizers, paint, grease and dust, and from limited
      exposure to hazardous waste and toxic chemicals, including acids, asbestos,
      lead
      and hydro-carbons (or PCBs) that pose health risks after exposure for long
      periods of time. Additional applications include protection from viruses and
      bacteria, such as AIDS, streptococcus, SARS and hepatitis, at hospitals, clinics
      and emergency rescue sites and use in clean room environments to prevent human
      contamination in the manufacturing processes. This is our largest product
      line.




*High-End
      Chemical Protective Suits.*  We manufacture heavy duty chemical
      suits made from TyChem® SL, TK
      and BR, and
      F, which are DuPont patented fabrics and Pyrolon CRFR. These suits are worn
      by
      individuals on hazardous material teams to provide protection from powerful,
      highly concentrated and hazardous or potentially lethal chemical and biological
      toxins, such as toxic wastes at Super Fund sites, toxic chemical spills or
      biological discharges, chemical or biological warfare weapons (such as saran
      gas, anthrax or ricin), and chemicals and petro-chemicals present during the
      cleaning of refineries and nuclear facilities. These suits can be used in
      conjunction with a fire protective shell that we manufacture to protect the
      user
      from both chemical and flash fire hazards. Homeland Security measures and
      government funding of personal protective equipment for first responders to
      terrorist threats







4
 *Index*





or
      attack
      have since September 11, 2001 resulted in increased demand for our high-end
      chemical suits and we believe demand for these suits will continue in the future
      as state and local Bioterrorism grants are spent.




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




*Gloves
      and Arm Guards.*  We manufacture gloves and arm guards from
      Kevlar®,
      Spectra®, and
      Dyneema cut resistant fibers made by DuPont , Honeywell and DSM Corp.
      respectively as well as engineered composite yarns with Microgard antimicrobial
      for food service markets. Our gloves are used primarily in the automotive,
      glass, metal fabrication and food service industries to protect the wearer’s
      hand and arms from lacerations and heat without sacrificing manual dexterity
      or
      comfort.




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




*High
      Visibility Clothing.*In August 2005, we acquired the assets of Mifflin
      Valley, Inc. of Shillington, PA.  Mifflin is a manufacturer of
      protective clothing specializing in safety and visibility, largely for the
      Emergency Services market, but also for the entire public safety and traffic
      control market.  Mifflin’s high visibility products include flame
      retardant and reflective garments for the Fire Industry, Nomex clothing for
      utilities, and high visibility reflective outerwear for industrial uniforms
      and
      Departments of Transportation.  Mifflin products are our strategic fit
      for our Woven and Fire Lines of garments and we expect higher than normal sales
      growth out of this subsidiary as our existing sales force starts promoting
      this
      new line.




We
      believe we are one of the largest independent customers of DuPont’s Tyvek® and TyChem®
      apparel grade
      fabrics. We purchase Tyvek® and TyChem® under
      North American Trademark licensing agreements and other DuPont materials, such
      as Kevlar®,
      under international Trademark licensing agreements. While we have operated
      under
      these trademark agreements since 1995, we have been a significant customer
      of
      these DuPont materials since 1982. The trademark agreements require certain
      quality standards as a prerequisite for the use of DuPont trademarks and
      tradenames on the finished product manufactured by us. We believe this brand
      identification with DuPont and Tyvek® significantly
      benefits the marketing of our largest product line, as over the past 30 years
      Tyvek® has
      become known as the standard for limited use/disposable protective clothing.
      We
      believe our relationship with DuPont to be excellent.




We
      maintain manufacturing facilities in Decatur, Alabama; Celaya, Mexico; AnQui
      City, China; Jiaozhou, China; New Delhi, India, Shillington, PA, and St. Joseph,
      Missouri, where our products are designed, manufactured and sold. We also have
      a
      relationship with a sewing subcontractor in Mexico, which we can utilize for
      unexpected production surges. Our China, Mexico, and India facilities allow
      us
      to take advantage of favorable labor and component costs, thereby increasing
      our
      profit margins on products manufactured in these facilities. Our China and
      Mexico facilities are designed for the manufacture of limited use/disposable
      protective clothing as well as our high-end chemical protective suits. We have
      significantly improved our profit margins in these product lines by shifting
      production to our international facilities and we continue to expand our
      international manufacturing capabilities to include our gloves and reusable
      woven protective apparel product lines.




**Industry
      Overview**


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




The
      industrial protective safety clothing market in the United States has evolved
      over the past 35 years as a result of governmental regulations and requirements
      and commercial product development. In 1970, Congress enacted the Occupational
      Safety and Health Act, or OSHA, which requires employers to supply protective
      clothing in certain work environments.  Almost two million workers are
      subject to OSHA standards today. Certain states have also







5
 *Index*





enacted
      worker safety laws that supplement OSHA standards and requirements.




The
      advent of OSHA coincided with DuPont’s development of Tyvek® which,
      for the
      first time, allowed for the economical production of lightweight, disposable
      protective clothing. The attraction of disposable garments grew in the late
      1970s as a result of increases in labor and material costs of producing cloth
      garments and the promulgation of federal, state and local safety
      regulations.




In
      1990,
      additional standards proposed and developed by the National Fire Protection
      Association and the American Society for Testing and Materials were adopted
      by
      OSHA. These standards identify four levels of protection, A through D, and
      specify the equipment and clothing required to adequately protect the wearer
      at
      each level:




·
            **Level
                A** requires total encapsulation in a vapor proof chemical
                suit
                with “self contained breathing apparatus”, or SCBA, and appropriate
                accessories.




·
            **Level
                B** calls for SCBA or a positive pressure supplied respirator
                with
                escape SCBA, plus hooded chemical resistant clothing (coveralls),
                one or
                two piece chemical splash suit, or disposable chemical resistant
                coveralls.




·
            **Level
                C** requires hooded chemical resistant clothing, such as coveralls,
                two piece chemical splash suit, or disposable chemical resistant
                coveralls.




·
            **Level
                D** involves work and/or training situations that require minimal
                coverall protection.




In
      response to the terrorist attacks that took place on September 11, 2001, the
      federal government has provided for additional protective equipment funding
      through programs that are part of the Homeland Security initiative. The Fire
      Act
      of 2002 created the federal Assistance to Firefighters Grant Program, or AFGP,
      to provide funds directly to local fire districts to help improve their
      readiness and capability to respond to terrorist attacks.  Funds are
      allocated under AFGP to the following areas: fire operations/firefighter safety;
      fire prevention; emergency medical services; and firefighting vehicle
      acquisition. AFGP has provided more than $3.345 billion in funding through
      2006,
      with approximately $750 million appropriated for 2003, $750 million in 2004,
      $650 million more in 2005 and $648 million in 2006 and $547 million for 2007.
      The Bio Terrorism Preparedness and Response Act of 2002, which we refer to
      as
      the Bio Terrorism Act, appropriated $3.643 billion for Bioterrorism Preparedness
      and $1.641 billion for grants to improve state, local and hospital preparedness
      for and response to Bioterrorism and other public health emergencies between
      2002 and 2006.  Hospital Preparedness is where we expect to see future
      garment sales.  The 2006 appropriations bill provided $550 million for
      Hospital Preparedness.  The $514.6 million of bioterrorism hospital
      preparedness monies appropriated in 2005 are expected to be disbursed in 2006
      and 2007, and the funding for 2006 should be disbursed in 2007 and
      2008.




Since
      2001, federal and state purchasing of industrial protective clothing and federal
      grants to fire departments have increased demand for industrial protective
      clothing to protect first responders against actual or threatened terrorist
      incidents. Specific events such as the anthrax letters incidents in 2001, the
      2002 U.S. Winter Olympics, the SARS epidemic in 2003 and the ricin letter
      incidents in 2004 have also resulted in increased peak demand for our
      products.




**Industry
      Consolidation**




The
      industrial protective clothing industry is highly fragmented and consists of
      a
      large number of small, closely-held family businesses. DuPont, Lakeland and
      Kimberly Clark are the dominant disposable industrial protective apparel
      manufacturers. Since 1997, the markets for manufacturing and distribution have
      consolidated. A number of large distributors with access to capital have
      acquired smaller distributors. The acquisitions include Vallen Corporation’s
      acquisitions of Safety Centers, Inc., All Supplies, Inc., Shepco Manufacturing
      Co., and Century Safety (Canada) and Hagemeyer’s acquisition of Vallen
      Corporation; W.W. Grainger’s acquisitions of Allied Safety, Inc., Lab Safety
      Supply, Inc., Acklands Limited, Gempler’s safety supply division and Ben
      Meadows, Inc.; Air Gas’ acquisitions of Rutland Tool & Supply Co., Inc.,
      IPCO Safety Supply, Inc., Lyon Safety, Inc., Safety Supply, Inc., Safety West,
      Inc. and Delta Safety Supply, Inc.; and Fisher Scientifics’ acquisitions of
      Safety Services of America, Cole-Parner, Retsch and Emergo. Thermo Electron
      recently merged with Fisher Scientific.




As
      these
      safety distributors consolidate and grow, we believe they are looking to reduce
      the number of safety manufacturing vendors they deal with and support, while
      at
      the same time shifting the burden of end user selling to







6
 *Index*





the
      manufacturer. This creates a significant capital availability issue for small
      safety manufacturers as end user selling is more expensive, per sales dollar,
      than selling to safety distributors. As a result, the manufacturing sector
      in
      this industry is seeing follow-on consolidation. DuPont has acquired Marmac
      Manufacturing, Inc., Kappler, Inc., Cellucup, Melco, Mfg., and Regal
      Manufacturing since 1998, while in the related safety product industries
      Norcross Safety Products L.L.C. has acquired Morning Pride, Ranger-Servus,
      Salisbury, North  and Pro Warrington and Christian Dalloz has acquired
      Bacou, USA which itself acquired Uvex Safety, Inc., Survivair, Howard Leight,
      Perfect Fit, Biosystems, Fenzy, Titmus, Optrel, OxBridge and Delta
      Protection.




We
      believe a larger industrial protective clothing manufacturer has competitive
      advantages over a smaller competitor including:




·
            economies
                of scale when selling to end users, either through the use of a direct
                sales force or independent representation
                groups;




·
            broader
                product offerings that facilitate cross-selling
                opportunities;




·
            the
                ability to employ dedicated protective apparel training and selling
                teams;




·
            the
                ability to offer volume and growth incentives to safety distributors;
                and




·
            access
                to international sales.




We
      believe we have a substantial opportunity to pursue acquisitions in the
      industrial protective clothing industry, particularly because many smaller
      manufacturers share customers with us.




**Business
      Strategy**


Key
      elements of our strategy include:




·
            *Dealing
                with Price Increases in Raw Materials.*One major supplier,
                DuPont, increased the price of Tyvek® fabrics by 3.7% in
                January, 2005, by 4 to 6% in June 2005 and by 4.9% in November
                2005.  However, in June of 2005 DuPont also published new
                garment price increases of 4% to 6%, depending on style, and again
                increased garment prices in November 2005 by approximately
                6%.  These increases were mostly predicated upon increases in
                oil and natural gas which are prime components in the manufacturing
                of
                Tyvek®.  We reacted to such increases by increasing
                our inventories of Tyvek® roll goods prior to such announced
                increases.  Additionally, we have negotiated discounts or
                rebates with many suppliers of roll goods based upon volume
                purchases.  Nonetheless, Tyvek®garment pricing to
                prime volume accounts was very competitive in all of fiscal
                2007.  In order to offset any negative effect of these prices
                increases we are continuing the operating cost reduction program
                already
                in effect and have initiated new measures. We will continue to meet
                competitive pricing conditions to maintain or increase market shares
                and
                such actions may reduce our margins in the
                future




For
      example:




1.
            We
                continue to press our raw material and component suppliers for price
                reductions and better payment
                terms.




2.
            We
                are sourcing more raw materials and components from our China based
                operations as opposed to sourcing in Europe and North
                America.




3.
            We
                are re-engineering many products so as to reduce the amount of raw
                materials used and reduce the direct labor in such
                products.




Subsequent
      to January 31, 2007, we have seen a strong competitive push in the marketplace
      for disposable protective clothing, with a large competitor offering an
      aggressive rebate program.  We are meeting competitive offers by increasing
      our supply and logistic efficiencies.  We expect to lose a modest amount of
      our volume in this area with only a moderate net effect on our ultimate
      margins.





·
            *Increase
                International Sales Opportunities.*We also intend to
                increase our penetration of the International markets for our product
                lines.  We have recently opened new sales offices in Beijing,
                China; Tokyo, Japan; and







7
 *Index*





Santiago,
      Chile: Our sales in our older United Kingdom operations grew by 46.6% in fiscal
      2007 and 55.9% in 2006. We expect our newer operations in Chile, China, India
      and Japan to ramp up sales on a similar basis to our UK operations.




·
            *Introduction
                of New Products*. We continue our history of product development and
                innovation by introducing new proprietary products across all our
                product
                lines. Our innovations have included Micromax®
                disposable
                protective clothing line, our DesproTM
                patented
                glove design, Microgard antimicrobial products for food service and
                our
                engineered composite glove products for high cut and abrasion, our
                Thermbar glove and sleeve products for heat protection, GrapolatorTM
                sleeve lines
                for hand and arm cut protection and our ThermbarTM
                Mock Twist
                glove for hand and arm heat protection. We own 20 patents on fabrics
                and
                production machinery and have 11 additional patents in application.
                We
                will continue to dedicate resources to research and
                development.




·
            *Improve
                Marketing in Existing Markets*.  We believe significant
                growth opportunities are available to us through the better positioning,
                marketing and enhanced cross-selling of our reusable woven protective
                clothing, glove and arm guards and high-end chemical suit product
                lines,
                along with our limited use/disposable lines as a bundled
                offering.  This allows our customers one stop shopping using
                combined freight shipments.




·
            *Decrease
                Manufacturing Expenses by Moving Production to International
                Facilities*. We have additional opportunities to take advantage of our
                low cost production capabilities in Mexico and China. Beginning in
                1995,
                we successfully moved the labor intensive sewing operation for our
                limited
                use/disposable protective clothing lines to these facilities. Beginning
                January 1, 2005, pursuant to the United States World Trade Organization
                Treaty with China, the reduction in quota requirements and tariffs
                imposed
                by the U.S. and Canada on textiles goods, such as our reusable woven
                garments, have made it more cost effective to move production for
                some of
                these product lines to our assembly facilities in China. We are two
                thirds
                through this process and expect to complete this process by the third
                quarter of fiscal 2008. As a result, we expect to see profit margin
                improvements for these product lines, which will allow us to compete
                more
                effectively as quota restrictions are removed and tariffs
                lowered.




·
            *Acquisitions*.
                We believe that the protective clothing market is fragmented and
                presents
                the opportunity to acquire businesses that offer comparable products
                or
                specialty products that we do not offer. We intend to consider
                acquisitions that afford us economies of scale, enhanced opportunity
                for
                cross-selling, expanded product offerings and an increased market
                presence. We acquired a facility in New Delhi, India in November
                2006
                where we are producing Nitrile, Latex and Neoprene Gloves.  We
                also acquired Mifflin Valley, Inc., a manufacturer of high visibility
                protective clothing in August 2005.




·
            *Increase
                Sales to the First Responder Market.* Our high-end chemical protective
                suits meet all of the regulatory standards and requirements and are
                particularly well qualified to provide protection to first responders
                to
                chemical or biological attacks. For example, our products have been
                used
                for response to recent threats such as the 2001 anthrax letters,
                the 2003
                SARS epidemic and the 2004 ricin letters. A portion of appropriations
                for
                the Fire Act of 2002 and the Bio Terrorism Act of 2002 are available
                for
                purchase of products for first responders that we manufacture, and
                we are
                aggressively targeting this Homeland Security
                market.




·
            *Emphasize
                Customer Service*. We continue to offer a high level of customer
                service to distinguish our products and to create customer loyalty.
                We
                offer well-trained and experienced sales and support personnel, on-time
                delivery and accommodation of custom and rush orders. We also seek
                to
                advertise our brand names.




**Our
      Competitive Strengths**




Our
      competitive strengths include:




·
            *Industry
                Reputation*. We devote significant resources to creating customer
                loyalty by accommodating custom and rush orders and focusing on on-time
                delivery. Additionally, our ISO 9001 certified facilities manufacture
                high-quality products. As a result of these factors, we believe that
                we
                have an excellent reputation in the
                industry.







8
 *Index*





·
            *Long-standing
                Relationship with DuPont*. We believe we are the largest independent
                customer for DuPont’s Tyvek®
                and
                TyChem®
                material for use in the industrial protective clothing market. Our
                trademark agreements with DuPont for Tyvek®,
                TyChem®
                and
                Kevlar®
                require strict quality standards as a prerequisite for using the
                DuPont
                trademarks and tradenames on the finished product. We believe this
                brand
                identification with DuPont significantly benefits the marketing of
                our
                product lines, as over the past 30 years Tyvek®
                has become
                known as the standard for limited use/disposable protective clothing.
                We
                believe our relationship with DuPont to be
                excellent.




·
            *International
                Manufacturing Capabilities*. We have operated our own manufacturing
                facilities in Mexico since 1995 and in China since 1996. Our three
                facilities in China total over 160,000 sq. ft. of manufacturing,
                warehousing and administrative space while our facility in Mexico
                totals
                over 25,000 sq. ft. of manufacturing, warehousing and administrative
                space. Our facilities and capabilities in China and Mexico allow
                access to
                a less expensive labor pool than is available in the United States
                and
                permits us to purchase certain raw materials at a lower cost than
                they are
                available domestically.




·
            *India*.  In
                November 2006 we purchased three facilities comprising 58,945 square
                feet  in New Delhi, India where we are producing nitrile, latex
                and neoprene gloves which are being sold in Europe and South America
                presently.  We intend to enter the North American market in
                summer 2007 with a newly designed line of
                gloves.




·
            *International
                Sales Offices*.  We have sales offices around the world to
                service various major markets, Toronto, Canada for Canada, Newport,
                United
                Kingdom for the European Common Market, Beijing, China for China
                and
                Southeast Asia, Tokyo, Japan for Japan and Santiago, Chile and Jerez,
                Mexico for the South American
                market.




·
            *Comprehensive
                Inventory*. We have a large product offering with numerous
                specifications, such as size, styles and pockets, and maintain a
                large
                inventory of each in order to satisfy customer orders in a timely
                manner.
                Many of our customers traditionally make purchases of industrial
                protective gear with expectations of immediate delivery. We believe
                our
                ability to provide timely service for these customers enhances our
                reputation in the industry and positions us strongly for repeat business,
                particularly in our limited use/disposable protective clothing
                lines.




·
            *Manufacturing
                Flexibility*. By locating labor-intensive manufacturing processes such
                as sewing in Mexico and China, and by utilizing sewing sub-contractors,
                we
                have the ability to increase production without substantial additional
                capital expenditures. Our manufacturing systems allow us flexibility
                for
                unexpected production surges and alternative capacity in the event
                any of
                our independent contractors become
                unavailable.




·
            *Experienced
                Management Team*. We have an experienced management team. Our
                executive officers other than the CFO average greater than 21 years
                of
                experience in the industrial protective clothing market. The knowledge,
                relationships and reputation of our management team helps us maintain
                and
                build our customer base.







9
 *Index*





Products




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




**Product
                Line**
            **Raw
                Material**
            **Protection
                Against**
            **End
                Market**Limited
                use/disposable protective clothing
            ·Tyvek®
                and laminates
                of Polyethylene, Spunlaced Polyester, SMS, Polypropylene, and Company
                Micromax, Micromax NS, Pyrolon®,
                and other
                non-woven fabrics
            ·Contaminants, irritants, metals, chemicals, fertilizers,
                pesticides, acids, asbestos, PCBs, lead, dioxin and many other hazardous
                chemicals
              ·Viruses and bacteria (AIDS, streptococcus, SARS and
                hepatitis)
            ·Chemical/petrochemical industries
              ·Automotive and pharmaceutical industries
              ·Public utilities
              ·Government (terrorist response)
              ·Janitorial
              ·Medical FacilitiesHigh-end
                chemical protective suits
            ·TyChemâQC
              ·TyChem®
                SL
              ·TyChem®
                TK
              ·TyChem®
                F
              ·TyChem®
                BR
              ·Pyrolon CRFR
              ·Other Lakeland patented co-polymer laminates
            ·Chemical spills
              ·Toxic chemicals used in manufacturing processes
              ·Terrorist attacks, biological and chemical warfare (anthrax,
                ricin
                and sarin)
            ·Hazardous material teams
              ·Chemical and nuclear industries
              ·Fire departments
              ·Government (first responders)Fire
                fighting and heat protective apparel
            ·Nomex®
              ·Aluminized Nomex®
              ·Aluminized Kevlar®
              ·PBI Matrix
              ·Millenia®
              ·Basofil®
              ·Advance
              · Indura®
                Ultrasoft
            ·Fire, burns and excessive heat
            ·Municipal, corporate and volunteer fire departments
              ·Wildland fire fighting
              ·Hot equipment maintenance personnel and industrial fire
                departments
              ·Oil well fires
              ·Airport crash rescueGloves
                and arm guards (1)
            ·Kevlar®
                yarns
              ·Kevlar®
                wrapped steel
                core yarns
              ·Dyneema yarns
              ·Spectra®
                yarns
            ·Cuts, lacerations, heat and chemical irritants
            ·Automotive, glass and metal fabrication industries
              ·Chemical plants
              ·Food ProcessingReusable
                woven garments
            ·Staticsorb carbon thread with polyester
              ·Cotton polyester blends
              ·Cotton
              ·Polyester
              ·Nomex®/FR
                Cottons
            ·Protects manufactured products from human contamination or
                static
                electrical charge
              ·Bacteria, viruses and blood borne pathogens
              ·Protection from flash fires
            ·Hospital and industrial facilities
              ·Clean room environments
              ·Emergency medical ambulance services
              ·Chemical and refining





(2)
      Industrial grade Nitrile, Latex, Neoprene, Buytl and other combinations thereof
      will be added to our product line in the Summer of 2007 resulting from the
      acquisition of an Indian glove facility.  These industrial gloves are
      used to protect workers from hazardous chemicals and will complement our line
      of
      cut resistant Kevlar, Dyneema and Spectra string knit gloves.





_______________________





10
 *Index*








**Limited
      Use/Disposable Protective Clothing**




We
      manufacture a complete line of limited use/disposable protective garments,
      including coveralls, laboratory coats, shirts, pants, hoods, aprons, sleeves,
      arm guards, caps, and smocks. Limited use garments can also be coated or
      laminated to increase splash protection against harmful inorganic acids, bases
      and other liquid chemicals. Limited use garments are made from several non-woven
      fabrics, including Tyvek® and
      TyChem® QC (both DuPont fabrics) and our own trademarked fabrics such
      as Pyrolon®
      Plus 2, XT, CRFR, Micromax®, Micromax
      NS,
      Safegard “76”®,
      Zonegard®, RyTex® and TomTex®,
      which are made of
      spunlaced polyester, polypropylene and polyethylene materials, laminates, films
      and derivatives. We incorporate many seaming and taping techniques depending
      on
      the level of protection needed in the end use application.




Typical
      users of these garments include chemical plants, petrochemical refineries and
      related installations, automotive manufacturers, pharmaceutical companies,
      construction companies, coal and oil power generation utilities and telephone
      utility companies. Numerous smaller industries use these garments for specific
      safety applications unique to their businesses.  Additional
      applications include protection from viruses and bacteria, such as AIDS,
      streptococcus, SARS and hepatitis, at hospitals, clinics and emergency rescue
      sites and use in clean room environments to prevent human contamination in
      the
      manufacturing processes.




Our
      limited use/disposable protective clothing products range in unit price from
      $.04 for shoe covers to approximately $14.00 for a TyChem® QC laminated
      hood
      and booted coverall. Our largest selling item, a standard white Tyvek® coverall,
      sells for
      approximately $2.50 to $3.75 per garment. By comparison, similar reusable cloth
      coveralls range in price from $30.00 to $60.00, exclusive of laundering,
      maintenance and shrinkage expenses.




We
      cut,
      warehouse and sell our limited use/disposable garments primarily at our Decatur,
      Alabama and China facilities and warehouses in Las Vegas, NV and Shillington,
      PA. The fabric is cut into required patterns at our Decatur plant and shipped
      to
      our Mexico facility for assembly. Our assembly facilities in China or Mexico
      and
      independent contractors sew and package the finished garments and return them
      primarily to our Decatur, Alabama plant, normally within one to eight weeks,
      for
      immediate shipment to the customer.




We
      presently utilize one independent domestic sewing contractor and one
      international contractor under agreements that are terminable at will by either
      party. In fiscal 2007, no independent sewing contractor accounted for more
      than
      5% of our production of limited use/disposable garments. We believe that we
      can
      obtain adequate alternative production capacity should any of our independent
      contractors become unavailable.




The
      capacity of our facilities, complemented by the availability of existing and
      other available independent sewing contractors, allow us to reduce by 5%, or
      alternately increase by 10%, our production capacity without incurring large
      on
      going costs typical of many manufacturing operations. This allows us to react
      quickly to changing unit demand for our products.




**High-End
      Chemical Protective Suits**




We
      manufacture heavy-duty chemical suits made from DuPont TyChem® QC, SL,
      TK, TyChem
      F and TyChem®
      BR fabrics. These suits are worn by individuals on hazardous material teams
      to
      provide protection from powerful, highly concentrated and hazardous or
      potentially lethal chemical and biological toxins, such as toxic wastes at
      Super
      Fund sites, toxic chemical spills or biological discharges, chemical or
      biological warfare weapons (such as anthrax, ricin, or saran and mustard gas),
      and chemicals and petro-chemicals present during the cleaning of refineries
      and
      nuclear facilities. Our line of chemical suits range in cost from $14 per
      coverall to $1192. The chemical suits can be used in conjunction with a fire
      protective shell that we manufacture to protect the user from both chemical
      and
      flash fire hazards. We have also introduced two garments approved by the
      National Fire Protection Agency (NFPA) for varying levels of protection that
      are
      manufactured from DuPont materials:




·
              TyChem®
                  TK – a
                  co-polymer film laminated to a durable spun bonded substrate. This
                  garment
                  offers the broadest temperature range for limited use garments
                  of -94°F to
                  194°F. TyChem®
                  TK meets all
                  OSHA Level A requirements. It is available in National Fire Protection
                  Agency 1991-2000 certified versions when worn with an aluminized
                  over
                  cover.
 ·
              TyChem®
                  BR – meets
                  all OSHA Level B and all National Fire Protection Agency 1994 fabric
                  requirements and offers splash protection against a wide array
                  of
                  chemicals.





11
 *Index*










We
      manufacture chemical protective clothing at our facilities in Decatur, Alabama,
      Mexico and China. Using fabrics such as TyChem® SL, TyChem®
      TK, TyChem F, and
      TyChem® BR, we
      design, cut, glue and/or sew the materials to meet customer purchase
      orders.




The
      federal government, through the Fire Act of 2002, appropriated approximately
      $750 million in 2003 to fire departments in the United States and its
      territories to fund the purchase of, among other things, personal protective
      equipment, including our fire fighting and heat protective apparel and high-end
      chemical protective suits. An additional $750 million was appropriated for
      2004,
      $650 million for 2005, $648 million for 2006 and $547 million for 2007. The
      Bio
      Terrorism Preparedness and Response Act of 2002 included appropriations of
      $3.643 billion for Bioterrorism Preparedness and $1.641 billion for Bioterrorism
      Hospital Preparedness between 2002 and 2006.  Hospital Preparedness is
      where we expect to see future garment sales.




**Fire
      Fighting and Heat Protective Apparel**




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




·
            Kiln
                entry suit  –  to protect kiln maintenance workers
                from extreme heat.




·
            Proximity
                suits  –  to give protection in high heat areas where
                exposure to hot liquids, steam or hot vapors is
                possible.




·
            Approach
                suits  –  to protect personnel engaged in maintenance,
                repair and operational tasks where temperatures do not exceed 200°F
                ambient, with a radiant heat exposure up to
                2,000°F.




We
      manufacture fire fighter protective apparel for domestic and foreign fire
      departments. We developed the popular 32 inch coat high back bib style
      (Batallion) bunker gear. Crash rescue continues to be a major market for us,
      as
      we were one of the first manufacturers to supply military and civilian markets
      with airport fire fighting protection.




Our
      fire
      suits range in price from $750 for standard fire department turn out gear to
      $2,000 for a fire entry suit. Approximately 70% of our heat protective clothing
      is currently manufactured at our facility in St. Joseph, Missouri with the
      remainder being made in our China facilities. Our FyrepelTM brand of
      fire
      fighting apparel continues to benefit from ongoing research and development
      investment, as we seek to address the ergonomic needs of stressful
      occupations.  Additionally, we have introduced a new line of our OSX
      turnout gear manufactured in China in order to compliment our US
      line.




**Gloves
      and Arm Guards**




We
      manufacture and sell specially designed gloves and arm guards made from
      Kevlar®, a cut
      and heat resistant material produced by DuPont, Spectra®, a cut
      resistant
      fiber made by Honeywell, and Dyneema®, a fiber
      made by
      DSM Dyneema B.V. and our proprietary patented yarns. We are one of only seven
      companies licensed in North America to sell 100% Kevlar® gloves,
      which are
      high strength, lightweight, flexible and durable. Kevlar® gloves
      offer a
      better overall level of protection and lower worker injury rates, and are more
      cost effective, than traditional leather, canvas or coated work gloves.
      Kevlar® gloves,
      which can withstand temperatures of up to 400°F and are cut resistant enough to
      allow workers to safely handle sharp or jagged unfinished sheet metal, are
      used
      primarily in the automotive, glass and metal fabrication industries. Our higher
      end string knit gloves range in price from $37 to $240 for a dozen
      pair.




We
      manufacture these string knit gloves primarily at our Alabama and Mexican
      facilities, and we are shifting lower cost yarn production to our China
      facilities. We completed our shift of glove production to Mexico last year
      and
      will continue shifting more to our Chinese facilities and our Indian glove
      facility in this fiscal year and next fiscal year.  Foreign production
      will allow lower fabric and labor costs.




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







12
 *Index*










**Reusable
      Woven Garments**




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




·
            Electrostatic
                dissipative apparel – used primarily in the pharmaceutical and automotive
                industries.




·
            Clean
                room apparel – used in semiconductor manufacturing and pharmaceutical
                manufacturing to protect against human
                contamination.




·
            Flame
                resistant Nomex®/FR
                Cotton
                coveralls/pants/jackets – used in chemical and petroleum plants and for
                wild land firefighting.




·
            Cotton
                and Polycotton coveralls, lab coats, pants, and
                shirts.




·
            High
                Visibility vests, jackets, coats and pants used at highway construction
                sites, airports, and areas where moving vehicles are a danger to
                industrial workers.




Our
      reusable woven garments range in price from $20 to $150 per
      garment.  We manufacture and sell woven cloth garments at our
      facilities in China and St. Joseph, Missouri. We are continuing to relocate
      highly repetitive sewing processes for our high volume, standard product lines
      such as woven protective coveralls and high visibility vests and shirts to
      our
      facilities in China where lower fabric and labor costs allow increased profit
      margins. We expect the relocation process to be substantially complete by the
      fourth quarter of fiscal 2008.







**Quality
      Control**


Our
      Alabama, Missouri, Mexico and China manufacturing facilities are ISO 9001
      certified. ISO standards are internationally recognized quality manufacturing
      standards established by the International Organization for Standardization
      based in Geneva, Switzerland. To obtain our ISO registration, our factories
      were
      independently audited to test our compliance with the applicable standards.
      In
      order to maintain registration, our factories receive regular announced
      inspections by an independent certification organization. We believe that the
      ISO 9001 certification makes us more competitive in the marketplace, as
      customers increasingly recognize the standard as an indication of product
      quality.




**MarketingandSales**


We
      employ
      an in-house sales force of 17 people, 3 regional sales managers and utilize
      42
      independent sales representatives. These employees and representatives call
      on
      over 800 safety and mill supply distributors nationwide in order to promote
      and
      provide product information for and sell our products. Distributors buy our
      products for resale and typically maintain inventory at the local level in
      order
      to assure quick response times and the ability to service their customers
      properly. Our sales employees and independent representatives have consistent
      communication with end users and decision makers at the distribution level,
      thereby allowing us valuable feedback on market perception of our products,
      as
      well as information about new developments in our industry. During fiscal 2007,
      one single distributor accounted for 5% of our net sales. No other single
      distributor accounted for more than 5% of our net sales.




We
      seek
      to maximize the efficiency of our established distribution network through
      direct promotion of our products at the end user level. We advertise primarily
      through trade publications and our promotional activities include sales
      catalogs, mailings to end users, a nationwide publicity program and our Internet
      web site. We exhibit at both regional and national trade shows such as the
      National Safety Congress and the American Industrial Hygienists
      Convention.




**Research
      andDevelopment**


We
      continue to evaluate and engineer new or innovative products. In the past three
      years we have introduced the Micromax® line of
      disposable
      protective clothing; a newly configured line of fire retardant work coveralls
      and fire turn-out gear; a SARS protective medical gown for Chinese hospital
      personnel; the Despro®, GrapolatorTM
      and Microgard® anti microbial
      cut
      protective glove and sleeve lines for food service; our patented ThermbarTM Mock







13
 *Index*





Twist
      that provides heat protection for temperatures up to 600°F; and our new Chemax
      1, 2, and 3 lines for protection against intermediate chemical threats. We
      own
      20 patents on various fabrics, patterns and production machinery. We plan to
      continue investing in research and development to improve protective apparel
      fabrics and the manufacturing equipment used to make apparel. Specifically,
      we
      plan to continue to develop new specially knit and coated gloves, woven gowns
      for industrial and medical uses, fire retardant cotton fabrics and protective
      non-woven fabrics. During fiscal 2005, 2006 and 2007, we spent approximately
      $89,000, $90,000, and $100,000 respectively, on research and
      development.




**Suppliers
      and Materials**


Our
      largest supplier is DuPont, from whom we purchase Tyvek® and Tychem®
      under North
      American trademark licensing agreements and Kevlar® under international
      trademark licensing agreements. Commencing in 1995, anticipating the expiration
      of certain patents on its proprietary materials, DuPont offered certain
      customers of these materials the opportunity to enter into two year trademark
      licensing agreements. Starting in 1995, we entered into such agreements and
      have
      renewed them continually since. In fiscal 2007, we purchased approximately
      62.58% of the dollar value of our materials from DuPont, and Tyvek® constituted
      approximately 43.46% of our cost of goods sold and 61.93% of the dollar value
      of
      our raw material purchases.  We believe our relationship with DuPont
      to be excellent and our Tyvek/Tychem® trade mark licenses with DuPont
      have been extended since 1995 until January 31, 2008. Prior to 1995 we bought
      Tyvek® from DuPont under informal branding agreements for 13
      years.




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




We
      have
      not experienced difficulty in obtaining materials, including cotton, polyester
      and nylon, used in the production of reusable non-wovens and commodity
      gloves.  We obtain Spectra® yarn used
      in our
      super cut-resistant Dextra Guard gloves from Honeywell, and since we believe
      Honeywell will not be able to meet our supply needs for this material in the
      future we reacted to these shortages by developing a new relationship with
      DSM
      Dyneema B.V. for similar Dyneema yarns.. We obtain Kevlar®, used in
      the
      production of our specialty safety gloves, from independent mills that purchase
      the fiber from DuPont.




Materials
      used in our fire and heat protective suits include glass fabric, aluminized
      glass, Nomex®,
      aluminized Nomex®, Kevlar®,
      aluminized
      Kevlar®,
      polybenzimidazole, as well as combinations utilizing neoprene coatings.
      Traditional chemical protective suits are made of Viton, butyl rubber and
      polyvinyl chloride, all of which are available from multiple
      sources.  Advanced chemical protective suits are made from TyChem® SL, TK
      and BR
      fabrics, which we obtain from DuPont, and our own patented fabrics. We have
      not
      experienced difficulty obtaining any of these materials.




Material
      such as Nitrile Butadiene Rubber, Neoprene, and Latex used at our new India
      facilities are available from multiple sources.




**InternalAudit**


We
      have
      an internal audit group consisting of a team of 2 people who have direct access
      to the audit committee of our board of directors.  The team’s primary
      function is to insure our internal control system is functioning
      properly.  Additionally, the team is used from time to time to perform
      operational audits to determine areas of business
      improvements.  Working in close cooperation with the audit committee,
      senior management and the external auditors, the internal audit function
      supports management to ensure that we are in compliance with all aspects of
      the
      Sarbanes-Oxley Act.




**Competition**


Our
      business is highly competitive due to large competitors who have monopolistic
      positions in the fabrics that are standards in the industry in disposable and
      high end chemical suits. Thus, barriers to entry in disposable Tyvek®
      and Tychem® garments are high. We believe that the barriers to entry
      in the reusable garments and gloves outside of Kevlar are relatively low. We
      face competition in some of our other product markets from large established
      companies that have greater financial, research and development, sales and
      technical resources. Where larger competitors, such as DuPont and Kimberly
      Clark, offer products that are directly competitive with our products,
      particularly as part of an established line of products, there can be no
      assurance that we can successfully compete for







14
 *Index*





sales
      and
      customers. Larger competitors outside of our Disposable and Chemical Suit Lines
      also may be able to benefit from economies of scale and technological innovation
      and may introduce new products that compete with our products.




**Seasonality**


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




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




**Patents
      and Trademarks**


We
      own 20
      patents and have 11 patents in the application and approval process with the
      U.S. Patent and Trademark Office.   We own 14 Trademarks and have
      13 Trademarks in the application and approval process.  Additionally,
      a Patent Corporation Treaty application was filed for our Unilayer Glove Fabrics
      which involves technology using a robotic knitter that allows us to knit a
      glove
      using stronger or weaker yarns in different parts of the glove, as necessary,
      depending on the expected wear. Intellectual property rights that apply to
      our
      various products include patents, trade secrets, trademarks and to a lesser
      extent copyrights. We maintain an active program to protect our technology
      by
      ensuring respect for our intellectual property rights.




**Employees**


As
      of
      March 31, 2007, we had approximately 1,667 full time employees, 1,412, or 84.7%,
      of whom were employed in our international facilities and 255, or 15.3%, of
      whom
      were employed in our domestic facilities. An aggregate of 593 of our employees,
      are members of unions. We are not currently a party to any collective bargaining
      agreements. We believe our employee relations to be excellent.  We
      presently have no contracts with these unions.




**Environmental
      Matters**


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




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


**AvailableInformation**


We
      make available free of charge
      through our Internet website, *www.lakeland.com*, our annual
      report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
      8-K
      and amendments to those reports filed in accordance with Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934, as amended, as soon as reasonably
      practicable after such material is electronically filed with or furnished to
      the
      Securities and Exchange Commission. Our filings are also available to the public
      over the internet at the SEC’s website at
**http://www.sec.gov**.  In addition, we provide
      paper





15
 *Index*





copies
      of
      our SEC filings free of charge upon request.  Please contact the
      Corporate Secretary of the company at 631-981-9700 or by mail at our corporate
      address Lakeland Industries, Inc. 701-7 Koehler Avenue, Ronkonkoma, NY
      11779.





**Item
      1A. Risk Factors**


**RISK
      FACTORS**


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




**Risk
      Related to Our Business**




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




Our
      business is dependent to a
      significant degree upon close relationships with vendors and our ability to
      purchase raw materials at competitive prices.  The loss of key vendor
      support, particularly support by DuPont for its Tyvek® products, could have a
      material adverse effect on our business, financial condition, results of
      operations and cash flows.  We do not have long-term supply contracts
      with DuPont or any of our other fabric suppliers.  In addition, DuPont
      also uses Tyvek® and Tychem ® in some of its own products which compete directly
      with our products.  As a result, there can be no assurance that we
      will be able to acquire Tyvek®, Tychem® and other raw materials and components
      at competitive prices or on competitive terms in the future.  For
      example, certain materials that are high profile and in high demand may be
      allocated by vendors to their customers based upon the vendors’ internal
      criteria, which are beyond our control.




In
      fiscal 2007, we purchased
      approximately 62.6% of the dollar value of our raw materials from DuPont, and
      Tyvek® constituted approximately 43.5% of our cost of goods sold.  For
      periods in 1985 and 1987, DuPont placed all purchasers of Tyvek® on
“allocation.”  “Allocation” is a circumstance in which demand
      outstrips supply and fabrics are sold based upon the amount a buyer purchased
      the prior year.  This allocation limited our ability to meet demand
      for our products during those years.  There can be no assurance that
      an adequate supply of Tyvek® or Tychem® will be available in the
      future.  Any shortage could adversely affect our ability to
      manufacture our products, and thus reduce our net sales.




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




·
            Interruptions
                and delays in manufacturing and resulting cancellations of orders
                for our
                products;




·
            Increases
                in fabrics or component prices that we may not be able to pass on
                to our
                customers; and




·
            Our
                holding more inventory that normal because we cannot finish assembling
                our
                products until we have all of the
                components




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




Because
      most of our products are
      manufactured at our facilities located in China and Mexico, our operations
      are
      subject to risk inherent in doing business internationally.  Such
      risks include the adverse effects on operations from war, international
      terrorism, civil disturbances, political instability, governmental activities
      and deprivation of contract and property rights.  In particular, since
      1978, the Chinese government has been reforming its economic and political
      systems, and we expect this to continue.  Although we believe that
      these reforms have had a positive effect on the economic development of China
      and have improved our ability to successfully operate our facilities in
      China,







16
 *Index*





we
      cannot
      assure you that these reforms will continue or that the Chinese government
      will
      not take actions that impair our operations or assets in China.  In
      addition, periods of international unrest may impede our ability to manufacture
      goods in other countries and could have a material adverse effect on our
      business and results of operations.




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




Most
      of our assembly arrangements with
      our foreign-based subsidiaries or third party suppliers require payment to
      be
      made in U.S. dollars.  These payments aggregated $13.4 million in
      fiscal 2007.  Any decrease in the value of the U.S. dollar in relation
      to foreign currencies could increase the cost of the services provided to us
      upon contract expirations or supply renegotiations.  There can be no
      assurance that we will be able to increase product prices to offset any such
      cost increases and any failure to do so could have a material adverse effect
      on
      our business, financial condition and results of operations.




We
      are also exposed to foreign currency
      exchange rate risks as a result of our sales in foreign
      countries.  Our net sales to customers in Canada and EEC were $12.4
      million, in fiscal 2007.  Our sales in Canada are denominated in
      Canadian dollars.  If the value of the U.S. dollar increases relative
      to the Canadian dollar and we are unable to raise our prices proportionally,
      then our profit margins could decrease because of the exchange rate
      change.  Although our labor, some fabric and component costs in China
      are denominated in the Chinese Yuan, this currency has historically been largely
      pegged to the U.S. dollar, which has minimized our foreign currency exchange
      rate risk in China.  Recently, however the Chinese Yuan has been
      allowed to float against to the U.S. dollar, and therefore, we will be exposed
      to additional foreign currency exchange rate risk.  This risk will
      also increase as we continue to increase our sales in other foreign
      countries.  See “Management’s Discussion and Analysis of Financial
      condition and Results of Operations – Quantitative and Qualitative Disclosures
      About Market Risk – Foreign Currency Risk.”




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




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




***Acquisitions
      or future expansion could be unsuccessful.***




Mifflin
      Valley, Inc., a Pennsylvania
      company, acquired on August 1, 2005, and a portion of the assets of RFB Latex,
      an Indian company, which we acquired in November 2006 currently market high
      visibility clothing and chemically resistant gloves
      respectively.  These two new lines may accelerate our growth in the
      personal protective equipment market.  These acquisitions involve
      various risks, including: difficulties in integrating these companies’
operations, technologies, and products, the risk of diverting management’s
      attention from normal daily operations of the business; potential difficulties
      in completing projects associated with in-process research and development;
      risks of entering markets in which we have limited experience and where
      competitors in such markets have stronger market positions; initial dependence
      on unfamiliar supply chains; and insufficient revenues to offset increased
      expenses associated with these acquisitions.




In
      the future, we may seek to acquire
      additional selected safety products lines or safety-related businesses which
      will complement our existing products.  Our ability to acquire these
      businesses is dependent upon many factors, including our management’s
      relationship with the owners of these businesses, many of which are small and
      closely held by individual stockholders.  In addition, we will be
      competing for acquisition and expansion opportunities with other companies,
      many
      of which have greater name recognition, marketing support and financial
      resources than us, which may result in fewer acquisition opportunities for
      us as
      well as higher acquisition prices.  There can be no







17
 *Index*





assurance
      that we will be able to identify, pursue or acquire any targeted business and,
      if acquired, there can be no assurance that we will be able to profitably manage
      additional businesses or successfully integrate acquired business into our
      company without substantial costs, delays and other operational or financial
      problems.




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




Acquisitions
      involve a number of
      special risks in addition to those mentioned above, including the diversion
      of
      management’s attention to the assimilation of the operations and personnel of
      the acquired companies, the potential loss of key employees of acquired
      companies, potential exposure to unknown liabilities, adverse effects on our
      reported operating results, and the amortization or write down of acquired
      intangible assets.  We cannot assure you that any acquisition by us
      will or will not occur, that if an acquisition does occur that it will not
      materially and adversely affect our results of operations or that any such
      acquisition will be successful in enhancing our business.




***If
      we are unable to manage our growth, our business could be adversely
      affected.***




Our
      operations and business have
      expanded substantially in recent years, with a large increase in employees
      and
      business areas in a short period of time.  To manage our growth
      properly, we have been and will be required to expend significant management
      and
      financial resources.  There can be no assurance that our systems,
      procedures and controls will be adequate to support our operations as they
      expand.  There can also be no assurance that our management will be
      able to manage our growth and operate a larger organization efficiently or
      profitably.  To the extent that we are unable to mange growth
      efficiently and effectively or are unable to attract and retain additional
      qualified management personnel, our business, financial condition and results
      of
      operations could be materially and adversely affected.




***We
      must recruit and retain skilled employees, including our senior management,
      to
      succeed in our business.***




Our
      performance is substantially
      dependent on the continued services and performance of our senior management
      and
      certain other key personnel, including Christopher J. Ryan, our chief executive
      officer, president, general counsel and secretary, and Gary Pokrassa, our chief
      financial officer, who has 37 years of financial and accounting experience,
      and
      James McCormick our Controller and treasurer, Greg Willis, our Executive Vice
      President, and Harvey Pride, Jr., our Senior vice president in charge of
      manufacturing, due to their long experience in our industry.  Our
      executive officers, other than CFO, have an average tenure with us of 19 years
      and an average of 22 years of experience in our industry.  The loss of
      services of any of our executive officers or other key employees could have
      a
      material adverse effect on our business, financial condition and results of
      operations.  In addition, any future expansion of our business will
      depend on our ability to identify, attract, hire, train, retain and motivate
      other highly skilled managerial, marketing, customer service and manufacturing
      personnel and our inability to do so could have a material adverse effect on
      our
      business, financial condition and results of operations.




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




Our
      sales are generally made on the
      basis of individual purchase orders, which may later be modified or canceled
      by
      the customer, rather than long-term commitments.  We have historically
      been required to place firm orders for fabrics and components with our
      suppliers, prior to receiving an order for our products, based on our forecasts
      of customer demands.  Our sales process requires us to make multiple
      demand forecast assumptions, each of which may introduce error into our
      estimates, causing excess inventory to accrue or a lack of manufacturing
      capacity when needed.  If we overestimate customer demand, we may
      allocate resources to manufacturing products







18
 *Index*





that
      we
      may not be able to sell when we expect or at all.  As a result, we
      would have excess inventory, which would negatively impact our financial
      results.  Conversely, if we underestimate customer demand or if
      insufficient manufacturing capacity is available, we would lose sales
      opportunities, lose market share and damage our customer
      relationships.  On occasion, we have been unable to adequately respond
      to delivery dates required by our customers because of the lead time needed
      for
      us to obtain required materials or to send fabrics to our assembly facilities
      in
      China and Mexico.




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




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




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




We
      derived approximately 12.3% of our
      net sales from customers located in foreign countries in fiscal
      2007.  We intend to increase the amount of foreign sales we make in
      the future.  The additional risks of foreign sales
      include:




·
            Potential
                adverse fluctuations in foreign currency exchange
                rates;




·
            Higher
                credit risks;




·
            Restrictive
                trade policies of foreign
                governments;




·
            Currency
                nullification and weak banking
                institutions;




·
            Changing
                economic conditions in local
                markets;




·
            Political
                and economic instability in foreign markets;
                and




·
            Changes
                in leadership of foreign
                governments.


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


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


We
      currently have one credit facility;


·
            A
                five year, $25 million revolving credit facility which commenced
                July
                2005, of which we had $3.8 million of borrowings outstanding as of
                January
                31, 2007 and




Our
      current credit facility requires,
      and any future credit facilities may also require, that we comply with specified
      financial covenants relating to interest coverage, debt coverage, minimum
      consolidated net worth, and earnings before interest, taxes, depreciation and
      amortization.  Our ability to satisfy these financial covenants can be
      affected by events beyond our control, and we cannot assure you that we will
      meet the requirements of these covenants.  These restrictive covenants
      could affect our financial and operational flexibility or impede our ability
      to
      operate or expand our business.  Default under our credit facilities
      would allow the lenders to declare all amounts outstanding to be immediately
      due
      and payable.  Our lenders have a security interest in substantially
      all of our assets to secure the debt under our current credit facilities, and
      it
      is likely that our future lenders will have security interests in our
      assets.  If our lenders declare amounts outstanding under any credit
      facility to be due, the lenders could proceed against our assets.  Any
      event of default, therefore, could have a material adverse effect on our
      business.




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




Our
      operations require significant
      amounts of cash, and we may be required to seek additional capital, whether
      from
      sales of equity or by borrowing money, to fund acquisitions, for the future
      growth and development of our business or to fund our operations and inventory,
      particularly in the event of a market downturn.  Although we have the
      ability until July 31, 2010 to borrow additional sums under our $25 million
      revolving credit facility, this facility contains a borrowing base provision
      and
      financial covenants that may limit the amount we can borrow thereunder
      or







19
 *Index*





from
      other sources.  We may not be able to replace or renew this credit
      facility upon its expiration on terms that are as favorable to us or at
      all.  In addition, a number of factors could affect our ability to
      access debt or equity financing, including;




·
            Our
                financial condition, strength and credit
                rating;




·
            The
                financial markets’ confidence in our management team and financial
                reporting;




·
            General
                economic conditions and the conditions in the homeland security sector;
                and




·
            Capital
                markets conditions.




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




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




As
      a general matter, a significant
      portion of our sales growth to our distributors is dependent upon resale by
      those distributors to customers that are funded in large part by federal, state
      and local government funding.  Specifically, approximately 60% of our
      high-end chemical suit sales is dependent on government
      funding.  Congress passed the 2001 Assistance to Firefighters Grant
      Program and the Bioterrorism Preparedness and Response Act of
      2002.  Both of these Acts provide for funding to fire and police
      departments and medical and emergency personnel to respond to terrorist
      incidents.  Appropriations for these Acts by the federal government
      could be reduced or eliminated altogether.  Any such reduction or
      elimination of federal funding, or any reductions in state or local funding,
      could cause sales of our products purchased by fire and police departments
      and
      medical and emergency personnel to decline.




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




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




***Environmental
      laws and regulations may subject us to significant
      liabilities.***




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




***The
      market price of our common stock may fluctuate
      widely.***







20
 *Index*





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




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




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




·
            Our
                expansion of international
                operations;




·
            Competitive
                pricing pressures;




·
            Seasonal
                buying patterns resulting from the cyclical nature of the business
                of some
                of our customers;




·
            The
                size and timing of individual
                sales;




·
            Changes
                in the mix of products and services
                sold;




·
            The
                timing of introductions and enhancements of products by us or our
                competitors;




·
            Market
                acceptance of new products;




·
            Technological
                changes in fabrics or production equipment used to make our
                products;




·
            Changes
                in the mix of domestic and international
                sales;




·
            Personnel
                changes; and




·
            General
                industry and economic conditions.




These
      variations could negatively impact our stock price.




***Compliance
      with the Sarbanes-Oxley Act of 2002 and rules and regulations relating to
      corporate governance and public disclosure may result in additional expenses
      and
      negatively impact our results of operations.***




The
      Sarbanes-Oxley Act of 2002 and
      rules and regulations promulgated by the Securities and Exchange Commission
      and
      the Nasdaq Stock Market have greatly increased the scope, complexity and cost
      of
      corporate governance, reporting and disclosure practices for public companies,
      including our company.  Keeping abreast of, and in compliance with,
      these laws, rules and regulations have required an increased amount of resources
      and management attention.  In the future, this may result in increased
      general and administrative expenses and a diversion of management time and
      attention from sales-generating and other operating activities to compliance
      activities, which would negatively impact our results of
      operations.




In
      addition, the corporate governance,
      reporting and disclosure laws, rules and regulations could also make it more
      difficult for us to attract and retain qualified executive officers and members
      of our board of directors.  In particular, the Nasdaq Stock Market
      rules require a majority of our directors to be “independent” as determined by
      our board of directors in compliance with the Nasdaq rules.  It
      therefore has become more difficult and significantly more expensive to attract
      such independent directors to our Board.




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




As
      of April 12, 2007, our directors and
      executive officers beneficially owned approximately 19.40% of the outstanding
      shares of our common stock.  As a result of their ownership of common
      stock and their positions in our Company, our directors and executive officers
      are able to exert significant influence on our Company and on matters submitted
      to a vote by our stockholders.  In particular, as of April 12, 2007,
      Raymond J. Smith, our chairman of the board, and Christopher J. Ryan, our chief
      executive officer, president, general counsel and secretary and a
      director,







21
 *Index*





beneficially
      owned approximately 9.55% and 6.63% of our common stock,
      respectively.  The ownership interests of our directors and executive
      officers, including Messrs. Smith and Ryan, could have the effect of delaying
      or
      preventing a change of control of our Company that may be favored by our
      stockholders generally.







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




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









**ITEM1B: UNRESOLVED STAFF COMMENTS**




None.







**ITEM
      2. PROPERTIES**





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




**Address**
            
            **Estimated**
                **Square**
                **Feet**
            
            **Annual
                  Rent**
            
            **Lease
                  Expiration**
            
            **Principal
                  Activity**Weifang
                Lakeland Safety Products
              Co.,
                Ltd.
              Xiao
                Shi Village
              AnQui
                City, Shandong Province
              PRC
                262100
            
            65,000
            
            Owned(1)
            
            N/A
            
            Manufacturing
              Administration
              EngineeringQing
                Dao Lakeland Protective
              Products
                Co., Ltd
              Yinghai
                Industrial Park
              Jiaozhou,
                Shandong Province
              PRC
                266318
            
            90,415
            
            Owned(1)
            
            N/A
            
            Manufacturing
              Administration
              WarehousingMeiyang
                Protective Products Co.,
              Ltd.
              Xiao
                Shi Village
              AnQui
                City, Shandong Province
              PRC
                262100
            
            9,360
            
            $3,727
            
            12/31/11
            
            ManufacturingLakeland
                Industries, Inc.
              Woven
                Products Division
              2401
                SW Parkway
              St.
                Joseph, MO 64503
            
            44,000
            
            $96,000
            
            7/31/12
            
            Manufacturing
              Administration
              Warehousing








22
 *Index*








**Address**
            
            **Estimated**
                **Square**
                **Feet**
            
            **Annual
                  Rent**
            
            **Lease
                  Expiration**
            
            **Principal
                  Activity**Lakeland
                de Mexico S.A. de C.V.
              (Luis
                Gómez Guzmán –  former
              employee)
              Poniente,
                Mza 8, Lote 11
              Ciudad
                Industrial, S/No.
              Celaya,
                Guanajuato 38010
              Mexico
            
            23,885
            
            $112,800
            
            7/31/07
            
            Manufacturing
              Administration
              WarehousingLakeland
                Mexico
              Carretera
                a Santa Rita
              Calle
                Tomas Urbina #1
              Jerez
                de Garcia, Salinas, Zacatecas
              Mexico
            
            40,000
            
            $120,000
            
            3/31/10
            
            Manufacturing
              Administration
              WarehousingLakeland
                Protective Wear , Inc.
              5109-B7
                Harvestor Road
              Burlington,
                ON L7L5Y9
              Canada
            
            12,000
            
            Approximately
              $86,000
                (varies with
              exchange
                rates)
            
            11/30/07
            
            Sales
              Administration
              WarehousingLakeland
                Protective Real Estate
              Building
                under construction to
              replace
                rental facility of Lakeland
              Protective
                Wear, Inc.
            
            
            
            Owned
            
            N/ALakeland
                Industries, Inc.
              Headquarters
              701-7
                Koehler Avenue
              Ronkonkoma,
                NY 11779
            
            6,250
            
            Owned
            
            N/A
            
            Administration
              Studio
              SalesLakeland
                Industries, Inc.
              202
                Pride Lane
              Decatur,
                AL 35603
            
            91,788
            
            Owned
            
            N/A
            
            Manufacturing
              Administration
              Engineering
              WarehousingLakeland
                Industries, Inc.
              3428
                Valley Ave. (2011⁄2 Pride Lane)
              Decatur,
                AL 35603
            
            49,500
            
            Owned
            
            N/A
            
            Warehousing
              AdministrationLakeland
                Industries, Inc.
              (Harvey
                Pride, Jr. – officer- related
              party)
              201
                Pride Lane, SW
              Decatur,
                AL 35603
            
            2,400
            
            $18,000
            
            3/31/09
            
            Sales
              AdministrationLakeland
                Industries Europe Ltd.
              Wallingfen
                Park
              236
                Main Road
              Newport,
                East Yorkshire
              HU15
                2RH U United Kingdom
            
            4,940
            
            Approximately
              $48,600
                (varies with
              exchange
                rates)
            
            1/31/08
            
            Warehouse
              SalesLakeland
                Industries, Inc.
              Route
                227 & 73
              Blandon,
                PA 19510
            
            12,000
            
            $36,000  (Leased
              from
                D. Gallen an
              employee)
            
            Month
                to Month
            
            Warehouse








23
 *Index*








**Address**
            
            **Estimated**
                **Square**
                **Feet**
            
            **Annual
                  Rent**
            
            **Lease
                  Expiration**
            
            **Principal
                  Activity**Lakeland
                Industries, Inc.
              31
                South Sterley Street
              Shillington,
                PA 19607
            
            18,520
            
            $57,504
                (Leased from
              M.
                Gallen an
              employee)
            
            7/31/10
            
            Manufacturing
              Warehouse,
                Sales
              AdministrationLakeland
                India Private Ltd
              Plots
                81, 50 and 24
              Noida
                Special Economic Zone
              New
                Delhi, India
            
            58,945
            
            Owned
                (2)
            
            N/A
            
            Manufacturing
              WarehouseLakeland
                Industries Inc., Agencia En
              Chile
              Los
                Algarrobos no 2228
              Comuna
                de Santiago
              Código
                Postal 8361401
              Santiago,
                Chile
            
            904
            
            $12,000
            
            03/01/2008
            
            Warehouse
              Sales


___________________________________________________________________________________________




(1)
            We
                own the buildings in which we conduct our manufacturing operations
                and
                lease the land underlying the buildings from the Chinese
                government.  We have 41 years and 46 years remaining under the
                leases with respect to the AnQui City and Jiaozhou facilities,
                respectively.




(2)
            The annual total
                lease for plots 24, 81 and 50 amounts to approximately
                $10,000 on a lease expiring October 9,
                2011.





Our
      facilities in Decatur, Alabama; Celaya, Mexico; AnQui, China; Jiaozhou, China;
      St. Joseph, Missouri,  Shillington, Pennsylvania and New Delhi, India
      contain equipment used for the design, development and manufacture and sale
      of
      our products.  Our operations in Burlington, Canada; Newport, United
      Kingdom; and Santiago, Chile are primarily sales and warehousing operations
      receiving goods for resale from our manufacturing facilities around the world.
      We had $3.15 million, $3.68 million and $3.85 million of gross long-lived fixed
      assets, located in China and $0.80 million, $0.85 million and $0.86 million
      of
      long-lived assets located in Mexico as of January 31, 2005, 2006 and
      2007.




**ITEM
      3. LEGAL PROCEEDINGS**





From
      time to time, we are a party to litigation arising in the
      ordinary course of our business. We are not currently a party to any litigation
      that we believe could reasonably be expected to have a material adverse effect
      on our results of operations, financial condition or cash
      flows.




**ITEM
      4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS**





None.


**PART
      II**





**ITEM5****.********MARKET FOR
      THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDERS
      MATTERS**





Our
      common stock is currently traded on the NASDAQ Global Market under the symbol
      “LAKE”. The following table sets forth for the periods indicated the high and
      low sales prices for our common stock as reported by the Nasdaq National Market.
      The stock prices in the table below have been adjusted for periods prior to
      July
      31, 2003 to reflect our 10% stock dividends to stockholders of record on July
      31, 2002, July 31, 2003, April 30, 2005 and August 1, 2006.







24
 *Index*










**Price
                          Range of**
                        **Common
                          Stock****High**
                    
                    
                    **Low****Fiscal
                        2008**First
                        Quarter (through April 09, 2007)
                    
                    $
                    14.99
                    
                    
                    $
                    13.25**Fiscal
                        2007**First
                        Quarter
                    
                    $
                    18.64
                    
                    
                    $
                    16.79Second
                        Quarter
                    
                    
                    17.22
                    
                    
                    
                    12.54Third
                        Quarter
                    
                    
                    13.78
                    
                    
                    
                    11.93Fourth
                        Quarter
                    
                    
                    15.25
                    
                    
                    
                    13.11**Fiscal
                        2006**First
                        Quarter
                    
                    $
                    17.49
                    
                    
                    $
                    11.18Second
                        Quarter
                    
                    
                    14.82
                    
                    
                    
                    11.79Third
                        Quarter
                    
                    
                    16.99
                    
                    
                    
                    13.96Fourth
                        Quarter
                    
                    
                    18.70
                    
                    
                    
                    16.65




***Holders***




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




On
      April  10, 2007 the last reported sale price of our common stock on
      the Nasdaq National Market was $14.94 per share. As of April 10, 2007, there
      were approximately 73 record holders of shares of our common stock.




***Dividend
      Policy***




In
      the
      past, we have declared dividends in stock to our stockholders. We paid a 10%
      dividend in additional shares of our common stock to holders of record on July
      31, 2002, on July 31, 2003, on April 30, 2005 and on August 1,
      2006.  We may pay stock dividends in future years at the discretion of
      our board of directors.




We
      have never paid any cash dividends on our common stock and we currently intend
      to retain any future earnings for use in our business. The payment and rate
      of
      future cash or stock dividends, if any, or stock repurchase programs are subject
      to the discretion of our board of directors and will depend upon our earnings,
      financial condition, capital or contractual restrictions under our credit
      facilities and other factors.




***Equity
      Compensation Plans***




The
      following table sets forth certain information regarding Lakeland’s equity
      compensation plans as of January 31, 2007.







25
 *Index*










Plan
                      Category
                  Number
                      of securities to be
                    issued
                      upon exercise of
                    outstanding
                      options,
                    warrants
                      and rights (1)
                  Weighted-average
                      exercise
                    price
                      per share of
                    outstanding
                      options,
                    warrants
                      and rights (1)
                  Number
                      of securities
                    remaining
                      available for
                    future
                      issuance under
                    equity
                      compensation plans
                    (excluding
                      securities
                    reflected
                      in column (a)(1))Equity
                      Compensation plans approved by security holders
                  (a)
                    $
                  (b)
                  (c)
                    (2)Restricted
                      stock grants-employees
                  31,680
                  $0
                  100,320Restricted
                      stock grants-directors
                  12,320
                  $0
                  31,680Matching
                      award program
                  4,983
                  $0
                  28,017Bonus
                      in stock program-employees
                  0
                  $0
                  33,000Retainer
                      in stock program-directors
                  0
                  $0
                  11,000Total
                      Restricted Stock Plans
                  48,983
                  $0
                  204,017





(1)
      At
      minimum levels


(2)
      Includes 28,017 shares of common stock available for future issuance under
      our
      employee stock purchase plan.  Also includes up to 132,000 shares
      available for future issuance under the 2006 Restricted Stock Plan in the form
      of awards of restricted stock or restricted stock units.





26
 *Index*








**ITEM
      6.SELECTED
      CONSOLIDATED FINANCIAL DATA**





The
      following selected consolidated financial data as of and for our fiscal
      years  2003, 2004, 2005, 2006 and 2007 have been derived from our
      audited consolidated financial statements, which have been audited by
      PricewaterhouseCoopers LLP as of and for the fiscal years ended January 31,
      2003 and 2004 and by Holtz Rubenstein Reminick LLP for 2005, 2006 and 2007.
      You
      should read the information set forth below in conjunction with our
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” and our consolidated financial statements and related notes included
      in this Form 10-K.




**Year
                                        Ended January 31,****2003**
                                    
                                    
                                    **2004**
                                    
                                    
                                    **2005**
                                    
                                    
                                    **2006**
                                    
                                    
                                    **2007**(in
                                        thousands, except share and per share data)**Income
                                        Statement Data:**Net
                                        sales
                                    
                                    $
                                    77,826
                                    
                                    
                                    $
                                    89,717
                                    
                                    
                                    $
                                    95,320
                                    
                                    
                                    $
                                    98,740
                                    
                                    
                                    $
                                    100,171Costs
                                        of goods sold
                                    
                                    
                                    62,867
                                    
                                    
                                    
                                    71,741
                                    
                                    
                                    
                                    74,924
                                    
                                    
                                    
                                    74,818
                                    
                                    
                                    
                                    75,895Gross
                                        profit
                                    
                                    
                                    14,959
                                    
                                    
                                    
                                    17,976
                                    
                                    
                                    
                                    20,396
                                    
                                    
                                    
                                    23,922
                                    (1)
                                    
                                    
                                    24,276Operating
                                        expenses:Selling
                                        and shipping
                                    
                                    
                                    6,338
                                    
                                    
                                    
                                    7,342
                                    
                                    
                                    
                                    7,871
                                    
                                    
                                    
                                    8,301
                                    
                                    
                                    
                                    9,473General
                                        and administrative
                                    
                                    
                                    4,262
                                    
                                    
                                    
                                    4,596
                                    
                                    
                                    
                                    4,871
                                    
                                    
                                    
                                    6,119
                                    
                                    
                                    
                                    8,081Impairment
                                        of goodwill
                                    
                                    
                                    —
                                    
                                    
                                    
                                    249
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    ---
                                    
                                    
                                    
                                    ---Total
                                        operating expenses
                                    
                                    
                                    10,600
                                    
                                    
                                    
                                    12,187
                                    
                                    
                                    
                                    12,742
                                    
                                    
                                    
                                    14,420
                                    (2)
                                    
                                    
                                    17,554
                                    (2)Operating
                                        profit
                                    
                                    
                                    4,359
                                    
                                    
                                    
                                    5,789
                                    
                                    
                                    
                                    7,654
                                    
                                    
                                    
                                    9,502
                                    
                                    
                                    
                                    6,722Other
                                        income (expense):Interest
                                        expense
                                    
                                    
                                    (643
                                    )
                                    
                                    
                                    (535
                                    )
                                    
                                    
                                    (207
                                    )
                                    
                                    
                                    (167
                                    )
                                    
                                    
                                    (356
                                    )Interest
                                        income
                                    
                                    
                                    20
                                    
                                    
                                    
                                    19
                                    
                                    
                                    
                                    18
                                    
                                    
                                    
                                    49
                                    
                                    
                                    
                                    20Gain
                                        on Pension Plan Liquidation
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    353Other
                                        income
                                    
                                    
                                    40
                                    
                                    
                                    
                                    24
                                    
                                    
                                    
                                    98
                                    
                                    
                                    
                                    384
                                    
                                    
                                    
                                    191Total
                                        other expense
                                    
                                    
                                    (583
                                    )
                                    
                                    
                                    (492
                                    )
                                    
                                    
                                    (91
                                    )
                                    
                                    
                                    266
                                    
                                    
                                    
                                    208Income
                                        before minority interest
                                    
                                    
                                    3,776
                                    
                                    
                                    
                                    5,297
                                    
                                    
                                    
                                    7,563
                                    
                                    
                                    
                                    9,768
                                    
                                    
                                    
                                    6,930Minority
                                        interest in net income of variable interest
                                        entities
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    494
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    ---Income
                                        before income taxes
                                    
                                    
                                    3,776
                                    
                                    
                                    
                                    5,297
                                    
                                    
                                    
                                    7,069
                                    
                                    
                                    
                                    9,768
                                    
                                    
                                    
                                    6,930Income
                                        tax expenses
                                    
                                    
                                    1,172
                                    
                                    
                                    
                                    1,659
                                    
                                    
                                    
                                    2,053
                                    
                                    
                                    
                                    3,439
                                    
                                    
                                    
                                    1,826Net
                                        Income
                                    
                                    $
                                    2,604
                                    
                                    
                                    $
                                    3,638
                                    
                                    
                                    $
                                    5,016
                                    
                                    
                                    $
                                    6,329
                                    
                                    
                                    $
                                    5,104Net
                                        income per common share (Basic)(1)
                                    
                                    $
                                    0.66
                                    
                                    
                                    $
                                    .92
                                    
                                    
                                    $
                                    1.02
                                    
                                    
                                    $
                                    1.15
                                    
                                    
                                    $
                                    . 0.92Net
                                        income per common share (Diluted)(1)
                                    
                                    $
                                    0.65
                                    
                                    
                                    $
                                    .92
                                    
                                    
                                    $
                                    1.02
                                    
                                    
                                    $
                                    1.15
                                    
                                    
                                    $
                                    . 0.92Weighted
                                        average common shares outstanding(1)Basic
                                    
                                    
                                    3,945,951
                                    
                                    
                                    
                                    3,954,947
                                    
                                    
                                    
                                    4,918,856
                                    
                                    
                                    
                                    5,518,751
                                    
                                    
                                    
                                    5,520,881Diluted
                                    
                                    
                                    3,955,537
                                    
                                    
                                    
                                    3,963,356
                                    
                                    
                                    
                                    4,924,638
                                    
                                    
                                    
                                    5,524,076
                                    
                                    
                                    
                                    5,527,618**Balance
                                        Sheet Data (at period end):**Current
                                        assets
                                    
                                    $
                                    38,859
                                    
                                    
                                    $
                                    43,285
                                    
                                    
                                    $
                                    55,128
                                    
                                    
                                    $
                                    63,719
                                    
                                    
                                    $
                                    62,114Total
                                        assets
                                    
                                    
                                    42,823
                                    
                                    
                                    
                                    47,304
                                    
                                    
                                    
                                    60,313
                                    
                                    
                                    
                                    72,464
                                    
                                    
                                    
                                    74,198Current
                                        liabilities
                                    
                                    
                                    20,934
                                    
                                    
                                    
                                    21,509
                                    
                                    
                                    
                                    4,152
                                    
                                    
                                    
                                    3,839
                                    
                                    
                                    
                                    4,326Long-term
                                        liabilities
                                    
                                    
                                    529
                                    
                                    
                                    
                                    768
                                    
                                    
                                    
                                    1,695
                                    
                                    
                                    
                                    7,829
                                    
                                    
                                    
                                    3,813Stockholders’
                                        equity
                                    
                                    
                                    21,359
                                    
                                    
                                    
                                    25,027
                                    
                                    
                                    
                                    54,467
                                    
                                    
                                    
                                    60,796
                                    
                                    
                                    
                                    66,059










27
 *Index*







(1)
                Adjusted
                    for periods prior to August 1, 2006 to reflect our 10% stock
                    dividends to
                    stockholders of record as of July 31, 2002, July 31, 2003, April
                    30, 2005
                    and August 1, 2006. Earnings per share have been restated in
                    accordance
                    with Statement of Financial Accounting Standards No. 128, “Earnings Per
                    Share.”
 (2) 
           Operating expenses increased in FY07 mainly due
          to:


o
            $0.34
                million of Mifflin Valley operating expenses included for the full
                twelve
                months ended January 2007in excess of the seven months through January
                included in the year ended January
                2006.


o
            $0.36
                million of labor costs resulting from personnel reassigned to SGA
                departments and vacation accruals which had been assigned to COGS
                departments in the prior fiscal
                year.


o
            $0.83
                million of SGA costs from new entities in India, Chile and
                Japan.


o
            $0.70
                million net increases in sales salaries and commissions, mainly in
                Disposables, Wovens and Canada 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
            $0.26
                million of net increases in insurance and employee benefits mainly
                resulting from a more negative experience in our self insured medical
                plan.


o
            $0.36
                million increase in administrative payroll reflecting additional
                staff in
                the UK and Canada, an international accountant in NY, a new employment
                contract for the CEO, and related payroll
                taxes.





***Repurchase
      of Securities***


We
      did not repurchase any of our Common
      Stock or other securities during our fiscal year ending January 31,
      2007.





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





**Management’s
      Discussion and Analysis of**


**Financial
      Condition and Results of Operations**


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




**Overview**





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
      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 Department of Homeland Security and the Centers for Disease
      Control. Our net sales attributable to customers outside the United States
      were
      $9.0 million, $10.3 million and $12.4 million, in fiscal 2005, fiscal 2006
      and
      fiscal 2007, respectively.




Our
      sales
      of limited use/disposable protective clothing grew approximately 2.4% in the
      year ended January 31, 2007 compared to the year ended January 31, 2006.
      Subsequent to January 31, 2007, we have seen a strong competitive push in the
      marketplace for disposable protective clothing, with a large competitor offering
      an aggressive rebate program.  We are meeting competitive offers with the
      help of support from a large supplier.  We expect to lose a modest amount
      of our volume in this area with only a moderate net effect on our ultimate
      margins.  Our cost of goods sold will be further impacted by an
      approximately two month’s supply of material purchased earlier in FY 07 with no
      rebates.  We estimate this material will be charged to our cost of goods
      sold under strict FIFO accounting at the end of Q1 and the beginning of Q2,
      after which we expect to have a smooth flow of material costs. We expect that
      distributors will continue to stock inventory at historical levels as economic
      conditions in the United States continue to remain slightly positive. In
      addition, our net sales are driven in part by government funding and
      health-related events. Our net sales attributable to chemical suits decreased
      10.9% in the year ended January 31, 2007 compared to the year ended January
      31,
      2006. These sales decreases were due primarily to a lull in
      government





28
 *Index*





spending
      utilizing Fire Act monies and delays by state and local governmental purchasers
      in spending their Bio-Terrorism monies.  These governmental sales are
      driven primarily by grants from the federal government under the Fire Act of
      2002 and the Bio Terrorism Preparedness and Response Act of 2002 as part of
      the
      Homeland Security initiatives. During fiscal 2004, as a result of the SARS
      virus
      outbreak in various cities in 2003, we sold approximately $1.1 million of
      SARS-related garments in China, Toronto, Hong Kong and Taiwan. The Centers
      for
      Disease Control has recommended protective garments be used to protect
      healthcare workers in the fight against the spread of the SARS virus and the
      Avian Flu. In the event of future outbreaks of SARS or other similar contagious
      viruses, such as Avian Flu in 2005, we have positioned ourselves with increased
      production capacity.





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 close to completion of moving the production of our reusable woven garments
      and gloves to these facilities and expect to complete this process by the fourth
      quarter of fiscal 2008. As a result, we expect to see profit margin improvements
      for these product lines as well. The Company has decided to restructure its
      manufacturing operations in Mexico, by closing its current facilities in Celaya
      and opening new facilities in Jerez.  The Company estimates the costs to
      close, move and start up will aggregate approximately $500,000 pretax. 
This restructuring will allow for lower occupancy and labor costs and a more
      efficient production configuration.  The Company anticipates this cost will
      be charged to its first quarter FY2008 results







***Critical
      Accounting Policies and Estimates***


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




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




*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, fire fighting and heat protective apparel, gloves and arm
      guards, and reusable woven garments. 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.







29
 *Index*





*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.




In
      August
      2005 we purchased Mifflin Valley, a manufacturing facility in
      Pennsylvania.  This purchase resulted in the recording of $871,297 in
      goodwill as of January 31, 2006.




*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.




***Results
      of Operations***


The
      following table set forth our historical results of operations for the years
      ended January 31, 2005, 2006 and 2007 as a percentage of our net
      sales.




**Year
                      Ended January 31,****2005**
                
                
                **2006**
                
                
                **2007**Net
                    sales
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %Cost
                    of goods
                    sold
                
                
                78.6
                %
                
                
                75.8
                %
                
                
                75.8
                %Gross
                    profit
                
                
                21.4
                %
                
                
                24.2
                %
                
                
                24.2
                %Operating
                    expenses
                
                
                13.4
                %
                
                
                14.6
                %
                
                
                17.5
                %Operating
                    profit
                
                
                8.0
                %
                
                
                9.6
                %
                
                
                6.7
                %Interest
                    expense,
                    net
                
                
                0.2
                %
                
                
                0.2
                %
                
                
                .4
                %Minority
                    interest in net income of variable interest entities
                
                
                (0.5
                )%
                
                
                -0-
                
                
                
                -0-Income
                    tax
                    expense
                
                
                2.2
                %
                
                
                3.5
                %
                
                
                1.8
                %Net
                    income
                
                
                5.3
                %
                
                
                6.4
                %
                
                
                5.1
                %





***Significant
      Balance Sheet fluctuation January 31, 2007 as compared to January 31,
      2006***





*Balance
      Sheet Accounts.*  The increase in cash and cash equivalents of
      $0.37 million and the decrease in borrowings of $3.49 million under the
      revolving credit agreement is principally due to the decrease in inventories
      of
      $4.29 million as we restructured purchasing of raw materials from our major
      supplier. We had built raw material reserves due to an anticipated increase
      in
      the cost of these raw materials.  Accounts receivable increased $0.28
      million due to increased January sales.  Plant property and equipment
      increased as a result of purchasing $3.6 million of facilities in India in
      November 2006.





***Year
      ended January 31, 2007 compared to the year ended January 31,
      2006***





*Net
      Sales*.  Net sales increased $1.4 million, or 1.4%, to $100.2
      million for the year ended January 31, 2007 compared to $98.7 million for the
      year ended January 31, 2006.  The increase was due primarily to an
      increase in the sales by our new foreign subsidiaries and the acquisition of
      Mifflin Valley in July 2005.  Increased sales were offset by a slowing
      U.S. economy which decreased demand for our products, particularly in the
      industrial non-woven disposable markets we serve, and decreased demand for
      our
      chemical protective suits and fire turnout gear for Homeland Security
      purposes.





*Gross
      Profit*.  Gross Profit increased $.35 million, or 1.4%, to $24.3
      million for the year ended January 31, 2007 from $23.9 million for the year
      ended January 31, 2006.  Gross profit as a percent of net sales held
      steady at 24.2%





30
 *Index*





for
      the
      year ended January 31, 2007 and for the year ended January 31, 2006, primarily
      because of cost reductions achieved by shifting production of additional
      Tyvek®-based
      products and chemical suits to China and Mexico and changes in the mix resulting
      from sales of the higher margin chemical suits while incurring costs related
      to
      the new facilities in India, Chile and Japan. We have increasingly shifted
      and
      will continue to shift production to these lower-cost facilities.





*Operating
      Expenses*.  Operating expenses increased $3.2 million, or 21.7% to
      $17.6 million for the year ended January 31, 2007 from $14.4 million for the
      year ended January 31, 2006.  As a percent of net sales, operating
      expenses increased to 17.5% for the year ended January, 2007 from 14.6% for
      the
      year ended January 31, 2006.  The $3.2 million increase in operating
      expenses in the year ended January 31, 2007 compared to the year ended January
      31, 2006 was principally due to increases in:





o
            $0.34
                million of Mifflin Valley operating expenses included for the full
                twelve
                months ended January 2007 in excess of the seven months through January
                included in the year ended January
                2006.


o
            $0.36
                million of labor costs resulting from personnel reassigned to SGA
                departments and vacation accruals which had been assigned to COGS
                departments in the prior fiscal
                year.


o
            $0.83
                million of SGA costs from new entities in India, Chile and
                Japan.


o
            $0.70
                million net increases in sales salaries and commissions, mainly in
                disposables, wovens and Canada 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
            $0.26
                million of net increases in insurance and employee benefits mainly
                resulting from a more negative experience in our self insured medical
                plan.


o
            $0.36
                million increase in administrative payroll reflecting additional
                staff in
                the UK and Canada, an international accountant in NY, a new employment
                contract for the CEO, and related payroll
                taxes.


o
            ($0.08)
                million reduction in foreign currency fluctuation, mainly resulting
                form
                our hedging program commenced in June
                2006.


o
            $0.15
                million in share-based
                compensation.


o
            $0.05
                million in increased directors fees resulting from the new compensation
                schedule in fiscal 2007.


o
            $0.05
                million in higher professional and consulting fees, largely resulting
                from
                audit fees.


o
            $0.10
                million in additional depreciation mainly resulting from the purchases
                of
                facilities in fiscal 2006.


o
            $0.14
                million in increased bad debt expense resulting from two large accounts
                reserved against.


o
            ($0.13)
                million miscellaneous net expense
                decreases.





*Operating
      Profit.*Operating profit decreased by $2.8 million, or 29.3% to
      $6.7 million, from $9.5 million for the prior year. Operating income as a
      percent of net sales decreased to 6.7% for the year ended
      January**31, 2007 from 9.6% for the year ending January 31, 2006
      primarily due to increased operating expenses as discussed above.





*Interest
      Expense*.  Interest expense increased by $.2 million for the year
      ended January 31, 2007 compared to the year ended January 31, 2006 because
      of
      increased borrowings and interest rate increases.





*Other
      Income - Net.*Other income net increased $.13 million
      principally as a result of a gain on a pension plan liquidation of $.35 million
      in the current year and the non-recurrence of a litigation settlement in the
      prior year amounting to $.26 million.





*Income
      Tax Expense*.  Income tax expenses consist of federal, state and
      foreign income taxes. Income tax expense decreased $1.6 million, or 46.9%,
      to
      $1.8 million for the year ended January 31, 2007 from $3.4 million for the
      year
      ended January 31, 2006.  Our effective tax rate was 26.3% and 35.2%
      for the year ended January 31, 2007 and 2006, respectively.  Our
      effective tax rate varied from the federal statutory rate of 34% due primarily
      to lower foreign tax rates and that the prior year included $3.2 million
      repatriation in China subsidiary profits and a reserve of $65,000 covering
      a
      portion of IRS audit claims, the resolution of which cannot be determined at
      this time.





*Net
      Income*.  Net income decreased $1.2 million or 19.4%, to $5.1
      million for the year ended January 31, 2007 from $6.3 million for the year
      ended
      January 31, 2006. The decrease in net income was the result of an increase
      in
      expenses related to the new foreign facilities in India, Chile, Japan and a
      decrease in profit by the domestic operations.





***Year
      ended January 31, 2006 compared to the year ended January 31,
      2005***





31
 *Index*








*Net
      Sales*.  Net sales increased $3.4 million, or 3.6%, to $98.7
      million for the year ended January 31, 2006 compared to $95.3 million for the
      year ended January 31, 2005.  The increase was due primarily to an
      increase in the sales in our core non-woven disposable products line and
      secondarily by our fire and glove lines respectively. Increased sales were
      also
      driven by an improving U.S. and Canadian economy which increased demand for
      our
      products, particularly in the industrial non-woven disposable markets we serve,
      the acquisition of Mifflin Valley, Inc. in July 2005, offset by decreased demand
      for our chemical protective suits for Homeland Security purposes which decreased
      month over month from February 2005 to October 2006 but then started increasing
      from November 2005 to our fiscal year ended January 31, 2006.





*Gross
      Profit*.  Gross Profit increased $3.5 million, or 17.3%, to $23.9
      million for the year ended January 31, 2006 from $20.4 million for the year
      ended January 31, 2005.  Gross profit as a percent of net sales
      increased to 24.3% for the year ended January 31, 2006 from 21.4% for the year
      ended January 31, 2005, primarily because of cost reductions achieved by
      shifting production of additional Tyvek®-based products
      and
      chemical suits to China and Mexico and changes in product mix. We have
      increasingly shifted and will continue to shift production to these lower-cost
      facilities in order to increase our margins.





*Operating
      Expenses*.  Operating expenses increased $1.7 million, or 13.2% to
      $14.4 million for the year ended January 31, 2006 from $12.7 million for the
      year ended January 31, 2005.  As a percent of net sales, operating
      expenses increased to 14.6% for the year ended January 31, 2006 from 13.4%
      for
      the year ended January 31, 2005.  The $1.7 million increase in
      operating expenses in the year ended January 31, 2006 compared to the year
      ended
      January 31, 2005 was principally due to increases in:





·
            Salaries
                of $0.64 million.


·
            Freight
                of $0.06 million.


·
            Sales
                Commissions of $(.42) million.


·
            Pension
                Expense $(.12) million.


·
            Sales
                related expenses of $.28 million.


·
            Payroll
                Taxes of $0.09 million.


·
            Currency
                Fluctuations of $0.12 million.


·
            Professional
                Fees of $0.20 million.


·
            Consulting
                fees of $0.12 million (pertaining to Sarbanes-Oxley
                compliance).


·
            Other
                $0.23 million.


·
            The
                absence in the current year of a minority interest reclassification
                in the
                prior year of $0.5 million.


*Operating
      Profit.*Operating profit increased by $1.9 million, or 24.1%, to
      $9.5 million for the year ended 1/31/06, from $7.7 million for the prior
      year.  Operating income as a percent of net sales increased to 9.6%
      for the year ended January 31, 2006 from 8.0% for the year ending January 31,
      2005 primarily due to the higher margins as discussed above.





*Interest
      Expense*.  Interest expense decreased by $.04 million for the year
      ended January 31, 2006 compared to the year ended January 31, 2005 because
      of
      decreased borrowings and interest rates.





*Other
      Income – Net*.  Other income- net increased $0.29 million
      principally as a result of the settlement by the Company as plaintiff for $0.26
      million of an outstanding litigation involving two former employees of the
      company.





*Minority
      Interest*.  Minority interest in net income of variable interest
      entities decreased by $.5 million for the year ended January 31, 2006 as a
      result of our adoption on Financial Interpretation No. 46R (FIN 46R),
“Consolidation of Variable Interest Entities,” effective February 1, 2004 and
      then our purchasing such properties in fiscal year 2006. Subsequent to our
      adoption of FIN 46R, we determined that certain entities from which we lease
      real property and which are partially owned by related parties are variable
      interest entities governed by FIN 46R.  As a result,
      these





32
 *Index*





entities
      were consolidated in our statement of income for the year ended January 31,
      2005.  These facilities were purchased in April and May 2005 thereby
      negating the recording of variable interest entities in fiscal
      2006.





*Income
      Tax Expense*.  Income tax expenses consist of federal, state and
      foreign income taxes. Income tax expense increased $1.4 million, or 67.5%,
      to
      $3.4 million for the year ended January 31, 2006 from $2.1 million for the
      year
      ended January 31, 2005.  Our effective tax rate was 35.20% and 29.0%
      for the years ended January 31, 2006 and 2005, respectively.  Our
      effective tax rate increased from the federal statutory rate of 34% due
      primarily to the repatriation of $3.2 million in profits from our Chinese
      subsidiaries and a reserve of $65,000 covering the portion of the claims of
      the
      IRS which can be determined due to a recent audit.  The resolution of
      their claims cannot be determined at this time.





*Net
      Income*.  Net income increased $1.31 million or 26.2%, to $6.33
      million for the year ended January 31, 2006 from $5.02 million for the year
      ended January 31, 2005. The increase in net income was the result of an increase
      in net sales and productivity as a result of shifts in production to our China
      facilities, partially offset by an increase in costs and expenses due to higher
      sales and increases in our tax rates as mentioned above.





***Liquidity
      and Capital Resources***





Management
      measures our liquidity on
      the basis of our ability to meet short-term and long-term operational funding
      needs and fund additional investments, including
      acquisitions.  Significant factors affecting the management of
      liquidity are cash flows from operating activities, capital expenditures, access
      to bank lines of credit and our ability to attract long-term capital under
      satisfactory terms.




Internal
      cash generation, together with
      currently available cash and investment and an ability to access credit lines
      if
      needed are expected to be sufficient to fund operations, capital expenditures,
      and any increase in working capital that we would need to accommodate a higher
      level of business activity.  We are actively seeking to expand by
      acquisitions as well as through organic growth of our business.  While
      a significant acquisition may require additional borrowings, equity financing
      or
      both, we believe that we would be able to obtain financing on acceptable terms
      based, among other things, on our earnings performance and current financial
      position.





***Cash****Flows***




As
      of
      January 31, 2007 we had cash and cash equivalents of $1.9 million and working
      capital of $57.8 million, an increase and decrease of $.37 million and ($2.1)
      million, respectively, from January 31, 2006. Our primary sources of funds
      for
      conducting our business activities have been from 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 $8.2 million for the year ended January
      31,
      2007 was due primarily to net income from operations of $5.1 million, and a
      decrease in inventories of $4.3 million, offset by an increase in accounts
      receivable of $.3 million. Net cash used in operating activities of $8.4 million
      for the year ended January 31, 2006 was due primarily to net income from
      operations of $6.3 million offset in part by a decrease in accounts payable
      of
      $0.4 million, an increase in inventories of $13.7 million and an increase in
      accounts receivable of $0.7 million.




Net
      cash
      used in investing activities of $4.3 million and $6.5 million in the years
      ended
      January 31, 2007 and 2006, respectively, was due to purchases of real estate,
      property and equipment and the acquisitions of the India facility (current
      year)
      and Mifflin Valley (prior year). Net cash used in and provided by financing
      activities in the years ended January 31, 2007 and 2006 was primarily
      attributable to a decreased and increased borrowing under our credit facilities,
      respectively.





***Credit****Facilities***




We
      currently have one credit facility:




·
            A
                five year, $25 million revolving credit facility, of which we had
                borrowings outstanding as of January 31, 2007 amounting to $3.8
                million







33
 *Index*





Our
      $25 million revolving credit facility permits us to borrow up to the lower
      of
      $25 million and a borrowing base determined by reference to a percentage of
      our
      eligible accounts receivable and inventory. Our $25 million revolving credit
      facility expires on July 31, 2010.  Borrowings under this revolving
      credit facility bear interest at the London Interbank Offering Rate (LIBOR)
      plus
      60 basis points and were 5.92% at January 31, 2007. As of January 31, 2007,
      we
      had $21.2 million of borrowing availability under this revolving credit
      facility.




*Our
      credit facility* requires that we comply with specified financial covenants
      relating to interest coverage, debt coverage, minimum consolidated net worth,
      and earnings before interest, taxes, depreciation and amortization. These
      restrictive covenants could affect our financial and operational flexibility
      or
      impede our ability to operate or expand our business. Default under our credit
      facilities would allow the lenders to declare all amounts outstanding to be
      immediately due and payable. Our lenders have a security interest in
      substantially all of our assets to secure the debt under our credit facilities.
      As of January 31, 2007, we were in compliance with all covenants contained
      in
      our credit facilities.




We
      believe that our current cash position of $1.9 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, leasehold improvement and automobiles, 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. We expect our capital expenditures to be
      approximately $1.4 million to purchase our capital equipment primarily computer
      equipment and apparel manufacturing equipment and approximately $2.0 million
      for
      a new facility in Canada in fiscal 2008.




***Contractual
      Obligations***


We
      had no off-balance sheet arrangements at January 31, 2007. As shown below,
      at
      January 31, 2007, our contractual cash obligations totaled approximately $7.108
      million, including lease renewals entered into subsequent to January 31,
      2007.






**Payments
                      Due by Period****Total**
                
                
                **Less
                      than**
                    **1
                      Year**
                
                
                **1-3
                      Years**
                
                
                **4-5
                      Years**
                
                
                **After
                      5 Years**Canada
                    Facility Construction
                
                $
                1,566,000
                
                
                $
                1,566,000Operating
                    leases
                
                $
                1,766,000
                
                
                $
                522,000
                
                
                $
                1,096,000
                
                
                $
                148,000
                
                
                
                ----Revolving
                    credit
                    facility
                
                
                3,786,000
                
                
                
                ----
                
                
                
                3,786,000
                
                
                
                ----
                
                
                
                ----Total
                
                **$**
                **7,108,000**
                
                
                **$**
                **2,078,000**
                
                
                **$**
                **4,882,000**
                
                
                **$**
                **148,000**
                
                
                ****
                **----**





***Seasonality***


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




In
      recent
      years, due to increased demand by first responders for our chemical suits and
      fire gear, our historical seasonal pattern has shifted. Governmental
      disbursements are dependent upon budgetary processes and grant administration
      processes that do not follow our traditional seasonal sales patterns. Due to
      the
      size and timing of these







34
 *Index*





governmental
      orders, our net sales, results of operations, working capital requirements
      and
      cash flows can vary between different reporting periods. As a result, we expect
      to experience increased variability in net sales, net income, working capital
      requirements and cash flows on a quarterly basis.




***Effects
      of Recent Accounting Pronouncements***


In
      June 2006, the FASB issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
      Interpretation of FASB Statement No. 109” (“FIN No. 48”). FIN No. 48 clarifies
      the accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FAS No. 109, “Accounting for Income
      Taxes.” FIN No. 48 prescribes a two-step process to determine the amount of tax
      benefit to be recognized. First, the tax position must be evaluated to determine
      the likelihood that it will be sustained upon external examination. If the
      tax
      position is deemed “more-likely-than-not” to be sustained, the tax position is
      then assessed to determine the amount of benefit to recognize in the financial
      statements.  The amount of the benefit that may be recognized is the
      largest amount that has a greater than 50 percent likelihood of being realized
      upon ultimate settlement.  We are required to adopt FIN No. 48
      effective as of February 1, 2007. We are currently evaluating the effect FIN
      No.
      48 will have on our financial statement. We do not expect the impact will be
      material.




In
      September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (FAS No.
      157”), which addresses how companies should measure fair value when they are
      required to use a fair value measure for recognition or disclosure purposes
      under generally accepted accounting principles.  FAS No. 157 defines
      fair value, establishes a framework for measuring fair value in generally
      accepted accounting principles and expands disclosures about fair value
      measurements.  FAS No. 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007 and should be applied
      prospectively, except in the case of a limited number of financial instruments
      that require retrospective application.  We are currently evaluating
      the potential impact of FAS No. 157 on our financial position and results of
      operations.




In
      February 2007, the FASB issued FAS
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities-including an amendment of FAS 115” (FAS No. 159”). The new statement
      allows entities to choose, at specified election dates, to measure eligible
      financial assets and liabilities at fair value that are not otherwise required
      to be measured at fair value. If a company elects the fair value option for
      an
      eligible item,


changes
      in that item’s fair value in subsequent reporting periods must be recognized in
      current earnings.  FAS No. 159 is effective for fiscal years beginning
      after November 15, 2007. We are currently evaluating the potential impact of
      FAS
      No. 159 on our financial position and results of operations.




In
      September 2006, the Securities and
      Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 108,
      Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 provides
      interpretive guidance on how the effects of the carryover or reversal of prior
      year misstatements should be considered in quantifying a current year
      misstatement. The SEC staff believes that registrants should quantify errors
      using both a balance sheet and an income statement approach and evaluate whether
      either approach results in quantifying a misstatement that, when all relevant
      quantitative and qualitative factors are considered, is material. SAB 108 is
      effective for the Company's fiscal year ending January 31, 2007. The application
      of SAB 108 did not have a material effect on our financial position or results
      of operations as of January 31, 2007 or for the year then ended.





**ITEM
        7A.****QUANTITATIVE AND QUALITATIVE
        DISCLOSURES
        ABOUT MARKET RISK**




We
      are
      exposed to market risk, including changes in interest rates and currency
      exchange rates. To manage the volatility relating to these exposures, we seek
      to
      limit, to the extent possible, our non-U.S. dollar denominated
      purchases.





***Foreign
      Currency Risk***


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




In
      connection with our operations in China, we purchase a significant amount of
      products from outside of the United States. However, our purchases in China
      are
      primarily made in Chinese Yuan, the value of which has been







35
 *Index*





largely
      pegged to the U.S. dollar for the last decade.  However, the Chinese
      Yuan has recently been decoupled from the US Dollar and allowed to float by
      the
      Chinese government, and therefore, we will be exposed to additional foreign
      exchange rate risk on our Chinese purchases.




Our
      primary risk from foreign currency exchange rate changes is presently related
      to
      non-U.S. dollar denominated sales in Canada and, to a smaller extent, in Europe.
      Our sales to customers in Canada are denominated in Canadian
      dollars.  If the value of the U.S. dollar increases relative to the
      Canadian dollar, then our net sales could decrease as our products would be
      more
      expensive to our Canadian customers because of the exchange rate
      change.  Our sales in China are denominated in the Chinese Yuan,
      however, our sales there are presently not material. At this time, we do not
      manage the foreign currency risk through the use of derivative instruments.
      A
      10% decrease in the value of the U.S. dollar relative to foreign currencies
      would increase the landed costs into the U.S. but would make our selling price
      for international sales more attractive with respect to foreign
      currencies.  As non-U.S. dollar denominated international purchases
      and sales grow, exposure to volatility in exchange rates could have a material
      adverse impact on our financial results.




***Interest
      Rate Risk***


We
      are
      exposed to interest rate risk with respect to our credit facilities, which
      have
      variable interest rates based upon the London Interbank Offered Rate. At January
      31, 2007, we had $3.8 million in borrowings outstanding under this credit
      facility. If the interest rate applicable to this variable rate debt rose 1%
      in
      the year ended January 31, 2007, our interest expense would have increased
      and
      our income before income taxes would have decreased by less than
      $62,000.







36
 *Index*










**ITEM
      8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA**





**Index
      to Consolidated Financial Statements**





Consolidated
                Financial Statements:Page
                No.Report
                of Independent Registered Public Accounting Firm
            A-
                38Consolidated
                Balance Sheets - January 31, 2007 and 2006
            A-
                40Consolidated
                Statements of Income for the years ended
            A-
                41January
                31, 2007, 2006 and 2005Consolidated
                Statement of Stockholders' Equity for the years ended
            A-
                42January
                31, 2007, 2006 and 2005Consolidated
                Statements of Cash Flows for the years ended
            A-
                43January
                31, 2007, 2006 and 2005Notes
                to Consolidated Financial Statements
            A-
                44 to 62Schedule
                II – Valuation and Qualifying Accounts
            A-
                63


All
      other schedules are omitted because
      they are not applicable, not required, or because the required information
      is
      included in the consolidated financial statements or notes thereto.








37
 *Index*











**Report
      of Independent Registered Public Accounting Firm**








Board
      of
      Directors and Stockholders


Lakeland
      Industries, Inc. and Subsidiaries


Ronkonkoma,
      New York





We
      have
      audited the accompanying consolidated balance sheets of Lakeland Industries,
      Inc. and Subsidiaries ("Lakeland") as of January 31, 2007 and 2006 and
      the related consolidated statements of income, stockholders' equity and cash
      flows for each of the years in the three-year period ended January 31, 2007.
      We
      have also audited the schedule listed in Item 15(a)(2) of this Form 10-K for
      the
      years ended January 31, 2007, 2006 and 2005. We have also audited
      management’s assessment, included in the accompanying "Management's Report on
      Internal Control Over Financial Reporting", that Lakeland Industries, Inc.
      and
      Subsidiaries maintained effective internal control over financial reporting
      as
      of January 31, 2007, based on criteria established in Internal
      Control—Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission (COSO). Lakeland’s management is responsible for
      these consolidated financial statements and schedule, for maintaining effective
      internal control over financial reporting and for its assessment of the
      effectiveness of internal control over financial reporting. Our responsibility
      is to express an opinion on these consolidated financial statements and the
      schedule, an opinion on management's assessment, and an opinion on the
      effectiveness of the company's internal control over financial reporting based
      on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement and whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit of financial statements included examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial statements,
      assessing the accounting principles used and significant estimates made by
      management, and evaluating the overall financial statement presentation. Our
      audit of internal control over financial reporting included obtaining an
      understanding of internal control over financial reporting, evaluating
      management’s assessment, testing and evaluating the design and operating
      effectiveness of internal control, and performing such other procedures as
      we
      considered necessary in the circumstances. We believe that our audits provide
      a
      reasonable basis for our opinions.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3)





38
 *Index*





provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition, use, or disposition of the company’s assets that could have a
      material effect on the financial statements.





Because
      of its 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.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Lakeland
      Industries, Inc. and Subsidiaries as of January 31, 2007 and 2006 and
      the results of its operations and its cash flows for each of the years in the
      three-year period ended January 31, 2007 in conformity with accounting
      principles generally accepted in the United States of America. Also in our
      opinion, the related financial statement schedule, when considered in relation
      to the basic financial statements taken as a whole, presents fairly in all
      material respects the information set forth therein. Also in our opinion,
      management’s assessment that Lakeland maintained effective internal control over
      financial reporting as of January 31, 2007, is fairly stated, in all
      material respects, based on criteria established in Internal Control—Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO). Furthermore, in our opinion, Lakeland maintained, in all
      material respects, effective internal control over financial reporting as of
      January 31, 2007, based on criteria established in Internal
      Control—Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission (COSO).





As
      discussed in Note 1 to the financial statements, effective
      February 1, 2006, the Company adopted Statement of Financial
      Accounting Standards No. 123(R), *Share-Based Payment*.

















Melville,
      New York


April
      5,
      2007











39
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**CONSOLIDATED
      BALANCE SHEETS**


January
                        31,2007
                    
                    
                    2006**Assets**Current
                        assetsCash
                        and cash equivalents
                    
                    $
                    1,906,557
                    
                    
                    $
                    1,532,453Accounts
                        receivable, net of allowance for doubtful accounts of
                      $103,000
                        and $323,000 at January 31, 2007 and 2006,respectively
                    
                    
                    14,780,266
                    
                    
                    
                    14,221,281Inventories,
                        net of reserves of $306,000 and $365,000 at
                      January
                        31, 2007 and 2006, respectively
                    
                    
                    40,955,739
                    
                    
                    
                    45,243,490Deferred
                        income taxes
                    
                    
                    1,355,364
                    
                    
                    
                    917,684Prepaid
                        income tax
                    
                    
                    1,565,384
                    
                    
                    
                    -----Other
                        current assets
                    
                    
                    1,550,338
                    
                    
                    
                    1,804,552Total
                        current assets
                    
                    
                    62,113,648
                    
                    
                    
                    63,719,460Property
                        and equipment, net
                    
                    
                    11,084,030
                    
                    
                    
                    7,754,765Other
                        assets, net
                    
                    
                    129,385
                    
                    
                    
                    118,330Goodwill
                    
                    
                    871,297
                    
                    
                    
                    871,297Total
                        assets
                    
                    $
                    74,198,360
                    
                    
                    $
                    72,463,852**Liabilities
                        and Stockholders' Equity**Current
                        liabilitiesAccounts
                        payable
                    
                    $
                    3,055,339
                    
                    
                    $
                    2,536,756Accrued
                        compensation and benefits
                    
                    
                    766,451
                    
                    
                    
                    866,765Other
                        accrued expenses
                    
                    
                    504,172
                    
                    
                    
                    435,779Total
                        current liabilities
                    
                    
                    4,325,962
                    
                    
                    
                    3,839,300Borrowings
                        under revolving credit facility
                    
                    
                    3,786,000
                    
                    
                    
                    7,272,000Pension
                        liability
                    
                    
                    -----
                    
                    
                    
                    469,534Deferred
                        income taxes
                    
                    
                    27,227
                    
                    
                    
                    86,982Total
                        liabilities
                    
                    
                    8,139,189
                    
                    
                    
                    11,667,816Commitments
                        and contingenciesStockholders’
                        equityPreferred
                        stock, $01 par; 1,500,000 shares authorized; none
                        issued
                      Common
                        stock, $01 par; 10,000,000 shares authorized; 5,521,824 and
                      5,017,046
                        shares issued and outstanding at January 31, 2007 and 2006,
                        respectively
                    
                    
                    55,218
                    
                    
                    
                    50,170Additional
                        paid-in capital
                    
                    
                    48,972,025
                    
                    
                    
                    42,431,221Retained
                        earnings
                    
                    
                    17,031,928
                    
                    
                    
                    18,314,645Total
                        stockholders' equity
                    
                    
                    66,059,171
                    
                    
                    
                    60,796,036Total
                        liabilities and stockholders' equity
                    
                    $
                    74,198,360
                    
                    
                    $
                    72,463,852








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








40
 *Index*








**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**CONSOLIDATED
      STATEMENTS OF INCOME**





Fiscal
                      years ended January 31,2007
                  
                  
                  2006
                  
                  
                  2005Net
                      sales
                  
                  $
                  100,170,942
                  
                  
                  $
                  98,740,066
                  
                  
                  $
                  95,320,163Cost
                      of goods sold
                  
                  
                  75,895,066
                  
                  
                  
                  74,817,715
                  
                  
                  
                  74,924,375Gross
                      profit
                  
                  
                  24,275,876
                  
                  
                  
                  23,922,351
                  
                  
                  
                  20,395,788Operating
                      expensesSelling
                      and shipping
                  
                  
                  9,473,404
                  
                  
                  
                  8,301,216
                  
                  
                  
                  7,871,423General
                      and administrative
                  
                  
                  8,080,567
                  
                  
                  
                  6,118,722
                  
                  
                  
                  4,870,302Total
                      operating expenses
                  
                  
                  17,553,971
                  
                  
                  
                  14,419,938
                  
                  
                  
                  12,741,725Operating
                      profit
                  
                  
                  6,721,905
                  
                  
                  
                  9,502,413
                  
                  
                  
                  7,654,063Other
                      income (expense)Interest
                      expense
                  
                  
                  (356,331
                  )
                  
                  
                  (166,805
                  )
                  
                  
                  (207,912
                  )Interest
                      income
                  
                  
                  20,466
                  
                  
                  
                  48,545
                  
                  
                  
                  18,378Gain
                      on pension plan liquidation
                  
                  
                  352,843
                  
                  
                  
                  ---
                  
                  
                  
                  ---Other
                      income – net
                  
                  
                  191,163
                  
                  
                  
                  383,909
                  
                  
                  
                  98,370Total
                      other income (expense)
                  
                  
                  208,141
                  
                  
                  
                  265,649
                  
                  
                  
                  (91,164
                  )Income
                      before minority interest
                  
                  
                  6,930,046
                  
                  
                  
                  9,768,062
                  
                  
                  
                  7,562,899Minority
                      interest in net income of  variable interest
                      entities
                  
                  
                  ---
                  
                  
                  
                  ---
                  
                  
                  
                  493,558Income
                      before income taxes
                  
                  
                  6,930,046
                  
                  
                  
                  9,768,062
                  
                  
                  
                  7,069,341Income
                      tax expense
                  
                  
                  1,825,847
                  
                  
                  
                  3,438,698
                  
                  
                  
                  2,053,095Net
                      income
                  
                  $
                  5,104,199
                  
                  
                  $
                  6,329,364
                  
                  
                  $
                  5,016,246Net
                      income per common shareBasic
                  
                  $
                  0.92
                  
                  
                  $
                  1.15
                  
                  
                  $
                  1.02Diluted
                  
                  $
                  0.92
                  
                  
                  $
                  1.15
                  
                  
                  $
                  1.02Weighted
                      average common shares outstandingBasic
                  
                  
                  5,520,881
                  
                  
                  
                  5,518,751
                  
                  
                  
                  4,918,856Diluted
                  
                  
                  5,527,618
                  
                  
                  
                  5,524,076
                  
                  
                  
                  4,924,638











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








41
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY**





Fiscal
      years ended January 31, 2007, 2006 and 2005











Common
                        stock
                    
                    
                    AdditionalShares
                    
                    
                    Amount
                    
                    
                    paid-in
                      Capital
                    
                    
                    Retained
                        Earnings
                    
                    
                    TotalBalance,
                        February 1, 2004
                    
                    
                    3,273,925
                    
                    
                    $
                    32,739
                    
                    
                    $
                    11,862,461
                    
                    
                    $
                    13,131,770
                    
                    
                    $
                    25,026,970Exercise
                        of stock options
                    
                    
                    6,210
                    
                    
                    
                    62
                    
                    
                    
                    54,370
                    
                    
                    
                    -----
                    
                    
                    
                    54,432Net
                        income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    5,016,246
                    
                    
                    
                    5,016,246Proceeds
                        from secondary
                      stock
                        offering, net of expenses
                    
                    
                    1,280,750
                    
                    
                    
                    12,808
                    
                    
                    
                    24,356,215
                    
                    
                    
                    -----
                    
                    
                    
                    24,369,023Balance,
                        January 31, 2005
                    
                    
                    4,560,885
                    
                    
                    
                    45,609
                    
                    
                    
                    36,273,046
                    
                    
                    
                    18,148,016
                    
                    
                    
                    54,466,671Net
                        income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    6,329,364
                    
                    
                    
                    6,329,36410%
                        stock dividend
                    
                    
                    456,161
                    
                    
                    
                    4,561
                    
                    
                    
                    6,158,175
                    
                    
                    
                    (6,162,735
                    )
                    
                    
                    -----Balance,
                        January 31, 2006
                    
                    
                    5,017,046
                    
                    
                    
                    50,170
                    
                    
                    
                    42,431,221
                    
                    
                    
                    18,314,645
                    
                    
                    
                    60,796,036Exercise
                        of stock options
                    
                    
                    2,662
                    
                    
                    
                    27
                    
                    
                    
                    11,849
                    
                    
                    
                    -----
                    
                    
                    
                    11,876Net
                        income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    5,104,199
                    
                    
                    
                    5,104,19910%
                        stock dividend
                    
                    
                    502,116
                    
                    
                    
                    5,021
                    
                    
                    
                    6,381,894
                    
                    
                    
                    (6,386,916
                    )
                    
                    
                    --Stock
                        based compensation
                    
                    
                    -----
                    
                    
                    
                    -----
                    
                    
                    
                    147,061
                    
                    
                    
                    -----
                    
                    
                    
                    147,061Balance-
                        January 31, 2007
                    
                    
                    5,521,824
                    
                    
                    $
                    55,218
                    
                    
                    $
                    48,972,025
                    
                    
                    $
                    17,031,928
                    
                    
                    $
                    66,059,171








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





42
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





Fiscal
                      year ended January 31,2007
                  
                  
                  2006
                  
                  
                  2005Cash
                      flows from operating activitiesNet
                      income
                  
                  $
                  5,104,199
                  
                  
                  $
                  6,329,364
                  
                  
                  $
                  5,016,246Adjustments
                      to reconcile net income to net cash
                    provided
                      by  (used in) operating activitiesReserve
                      for inventory obsolescence
                  
                  
                  (58,626
                  )
                  
                  
                  (31,000
                  )
                  
                  
                  (20,831
                  )Provision
                      for bad debts
                  
                  
                  55,036
                  
                  
                  
                  -----
                  
                  
                  
                  -----Deferred
                      income taxes
                  
                  
                  (497,435
                  )
                  
                  
                  43,803
                  
                  
                  
                  (334,795
                  )Depreciation
                      and amortization
                  
                  
                  1,048,380
                  
                  
                  
                  993,686
                  
                  
                  
                  884,140Minority
                      interest in variable interest entity
                    Stock
                      based and restricted stock compensation
                  
                  
                  147,061
                  
                  
                  
                  -----
                  
                  
                  
                  493,558
                    -----Gain
                      on pension plan liquidation
                  
                  
                  (352,843
                  )(Increase)
                      decrease in operating assets:Accounts
                      receivable
                  
                  
                  (338,985
                  )
                  
                  
                  (726,169
                  )
                  
                  
                  (547,054
                  )Inventories
                  
                  
                  4,346,377
                  
                  
                  
                  (13,693,881
                  )
                  
                  
                  (4,619,385
                  )Prepaid
                      income taxes and other current assets
                  
                  
                  (1,586,206
                  )
                  
                  
                  (1,046,265
                  )
                  
                  
                  254,613Other
                      assets
                  
                  
                  (11,056
                  )
                  
                  
                  323,427
                  
                  
                  
                  (73,267
                  )Increase
                      (decrease) in operating liabilitiesAccounts
                      payable
                  
                  
                  518,583
                  
                  
                  
                  (391,737
                  )
                  
                  
                  (751,102
                  )Accrued
                      expenses and other liabilities
                  
                  
                  (31,921
                  )
                  
                  
                  (225,580
                  )
                  
                  
                  157,083Pension
                      liability
                  
                  
                  (116,691
                  )
                  
                  
                  -----
                  
                  
                  
                  -----Net
                      cash provided by (used in)operating
                      activities
                  
                  
                  8,225,873
                  
                  
                  
                  (8,424,352
                  )
                  
                  
                  459,206Cash
                      flows from investing activities
                    Purchase
                      of assets in India from RFB Latex
                  
                  
                  (3,464,994
                  )
                  
                  
                  ---
                  
                  
                  
                  ---Purchase
                      of Mifflin Valley
                  
                  
                  ---
                  
                  
                  
                  (1,907,680
                  )
                  
                  
                  -----Purchases
                      of property and equipment
                  
                  
                  (912,651
                  )
                  
                  
                  (4,592,897
                  )
                  
                  
                  (836,194
                  )Net
                      cash used in investing activities
                  
                  
                  (4,377,645
                  )
                  
                  
                  (6,500,577
                  )
                  
                  
                  (836,194
                  )Cash
                      flows from financing activitiesNet
                      borrowings (payments) under credit agreements
                  
                  
                  (3,486,000
                  )
                  
                  
                  7,272,000
                  
                  
                  
                  (16,784,781
                  )Distributions
                      to minority interest in variable interest entity
                  
                  
                  ----
                  
                  
                  
                  ----
                  
                  
                  
                  (521,575
                  )Proceeds
                      from exercise of stock options
                  
                  
                  11,876
                  
                  
                  
                  ----
                  
                  
                  
                  54,432Proceeds
                      from secondary stock offering
                  
                  
                  ----
                  
                  
                  
                  ----
                  
                  
                  
                  24,369,023Net
                      cash (used in) provided by financing activities
                  
                  
                  (3,474,124
                  )
                  
                  
                  7,272,000
                  
                  
                  
                  7,117,099Net
                      increase (decrease) in cash and cash equivalents
                  
                  
                  374,104
                  
                  
                  
                  (7,652,929
                  )
                  
                  
                  6,740,111Cash
                      and cash equivalents at beginning of year
                  
                  
                  1,532,453
                  
                  
                  
                  9,185,382
                  
                  
                  
                  2,445,271Cash
                      and cash equivalents at end of year
                  
                  $
                  1,906,557
                  
                  
                  $
                  1,532,453
                  
                  
                  $
                  9,185,382





See
      note
      for Supplemental Cash Flow information.





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





43
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**1.
      –  BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES**





***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
      market.  The principal market for the company’s products is in the
      United States. No customer accounted for more than 10% of net sales during
      the
      fiscal years ended January 31, 2007, 2006 and 2005.





***Principles
      of Consolidation***





The
      accompanying consolidated financial statements include the accounts of the
      Company and its wholly-owned subsidiaries, Laidlaw, Adams & Peck, Inc. and
      Subsidiary MeiYang Protective Products Co. Ltd., (a Chinese corporation),
      Lakeland Protective Wear, Inc. and Lakeland Protective Real Estate (Canadian
      corporations), Weifang Lakeland Safety Products Co., Ltd. (a Chinese
      corporation), Qingdao Lakeland Protective Products Co., Ltd. (a Chinese
      corporation), Lakeland Industries Europe Ltd. (a British corporation), Lakeland
      Industries Inc. Agencia en Chile, (a Chilean corporation), Lakeland Japan,
      Inc.
      (a Japanese corporation), Lakeland India Private, Ltd and Lakeland Gloves and
      Safety Apparel Private Limited (Indian corporations) and Lakeland de Mexico
      S.A.
      de C.V. (a Mexican corporation).  All significant intercompany
      accounts and transactions have been eliminated.





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 (“VIE”), in which an investor is subject to a majority of the
      risk of loss from the VIE’s activities, or is entitled to receive a majority of
      the VIE’s residual returns. This interpretation also provides guidance with
      respect to the disclosure of VIE’s in which
      an
      investor maintains an interest but is not required to
      consolidate.  The provisions of the interpretation were effective
      immediately for all VIE’s created after January 31, 2003, or in which we obtain
      an interest after that date. In October 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 Company adopted this
      pronouncement as of February 1, 2004. The two entities which leased property
      to
      the Company and are owned by related parties, which were consolidated in our
      financial statements, are River Group Holding Co., L.L.P. and POMS Holding
      Co.
      Ownership of these entities is held by 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.   In Fiscal 2006
      the Company purchased the property owned by River Group Holding Co., L.L.P.
      and
      POMS Holding Co.





There
      are
      no variable interest entities in which we hold a variable interest but where
      we
      are not primary beneficiary.  There are no collateralized assets
      related to the variable interest entity recorded at January 31, 2005 and the
      creditors of the VIE had no recourse to the general credit of the
      Company.





***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.  Domestic and international sales are as
      follows:














44
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005


**1.
      (continued)**





Fiscal
                                Years Ended January 31,2007
                            
                            
                            2006
                            
                            
                            2005Domestic
                            
                            $
                            87,813,000
                            
                            
                            
                            87.7
                            %
                            
                            $
                            89,107,000
                            
                            
                            
                            90.2
                            %
                            
                            $
                            86,320,000
                            
                            
                            
                            90.6
                            %International
                            
                            
                            12,358,000
                            
                            
                            
                            12.3
                            %
                            
                            
                            9,633,000
                            
                            
                            
                            9.8
                            %
                            
                            
                            9,000,000
                            
                            
                            
                            9.4
                            %Total
                            
                            $
                            100,171,000
                            
                            
                            
                            100.0
                            %
                            
                            $
                            98,740,000
                            
                            
                            
                            100.0
                            %
                            
                            $
                            95,320,000
                            
                            
                            
                            100.0
                            %





***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.





***Property
      and Equipment***





Property
      and equipment are stated at cost. Depreciation and amortization are provided
      for
      in amounts sufficient to relate the cost of depreciable assets to operations
      over their estimated service lives, on a straight-line
      basis.  Leasehold improvements and leasehold costs are amortized over
      the term of the lease or service lives of the improvements, whichever is
      shorter. The costs of additions and improvements which substantially extend
      the
      useful life of a particular asset are capitalized. Repair and maintenance costs
      are charged to expense.  When assets are sold or otherwise disposed
      of, the cost and related accumulated depreciation are removed from the account
      and the gain or loss on disposition is reflected in operating
      income.





***Goodwill***





On
      February 1, 2002, the Company adopted Statement of Financial Accounting
      Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” which provides
      that goodwill and other intangible assets will no longer be 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 the Company considers important that could identify a potential impairment
      include: significant under performance relative to expected historical or
      projected future operating results; significant changes in the overall business
      strategy; and significant negative industry or economic trends. When the Company
      determines that the carrying value of intangibles and goodwill may not be
      recoverable based upon one or more of these indicators of impairment, the
      Company measures any potential impairment based on a projected discounted cash
      flow method. Estimating future cash flows requires the Company’s management to
      make projections that can differ materially from actual results.





On
      August
      1, 2005 the Company purchased Mifflin Valley, Inc, a Pennsylvania
      manufacturer.  This acquisition resulted in the recording of $871,297
      in goodwill as of January 31, 2006.  There is no impairment of this
      goodwill at January 31, 2007.





***Self-Insured
      Liabilities******.***





The
      Company has 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. This estimate is based upon historical trends and amounted to $120,000
      for each of the years ended January 31, 2007 and 2006. The Company maintains
      separate insurance to cover the excess liability over set single claim amounts
      and aggregate annual claim amounts.














45
 *Index*








**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**1.
      (continued)**





***Stock-Based
      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 “Share-based Payment” (“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 No. 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 charge 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.




In
      adopting FAS No. 123(R), the Company applied the modified prospective approach
      to transition.  Under the modified prospective approach, the
      provisions of FAS No. 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
      No. 123.











46
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





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 years.





2006
                
                
                2005Net
                    income
                  As
                    reported
                
                $
                6,329,364
                
                
                $
                5,016,246Less:Stock
                    –based employee compensation expense determined
                  under
                    fair value based method, net of related tax benefit
                
                
                9,627
                
                
                
                91,331Net
                    income, Pro forma
                
                $
                6,319,737
                
                
                $
                4,924,915Basic
                    earnings per common shareAs
                    reported
                
                $
                1.15
                
                
                $
                1.02Pro
                    forma
                
                $
                1.15
                
                
                $
                1.00Diluted
                    earnings per common shareAs
                    reported
                
                $
                1.15
                
                
                $
                1.02Pro
                    forma
                
                $
                1.15
                
                
                $
                1.00





***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 136,213 restricted stock awards as of January 31, 2007.  All of
      these restricted stock awards are non-vested at January 31, 2007 (92,103shares
      at “baseline” and 48,983 shares at “minimum”) and have a weighted average grant
      date fair value of $12.98.  The Company recognizes expenses 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 January 31, 2007, unrecognized
      stock-based compensation expense related to restricted stock awards
      totaled  $960,512 and $1,421,319 and $510,043 at the baseline,
      maximum, 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.





The
      fair
      value of the options was estimated at the date of grant using the Black-Scholes
      option-pricing model with the following assumptions for the years ended January
      31, 2006 and 2005: expected volatility of 87% and 58%, respectively; risk-free
      interest rate of 3.6% and 3.6%, respectively; expected dividend yield of 0.0%;
      and expected life of six years. All stock-based awards were fully vested at
      January 31, 2006 and 2005.  During fiscal 2007, 2,200 option shares
      were granted to two Directors (1,100 each) upon re-election in June
      2006.  No options were granted in fiscal 2006.  During
      fiscal 2005, 1,000 option shares granted to a director upon re-election in
      June
      2004 were cancelled upon his resignation in November 2004.  In
      November 2004, two new directors were appointed and granted 5,000 option shares
      each. Earnings per share have been adjusted to reflect the 10% stock dividends
      to stockholders of record as of August 1, 2006 and April 30, 2005.








47
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**1.
      (continued)**








***Allowance
      for Doubtful Accounts***


The
      Company establishes an allowance for doubtful accounts to provide for accounts
      receivable that may not be collectible.  In establishing the allowance
      for doubtful accounts, the Company analyzes the collectibility of individual
      large or past due accounts customer-by-customer.  The Company
      establishes reserves for accounts that it determines to be doubtful of
      collection.





***Shipping
      and Handling Costs***


For
      larger orders, except in its Fyrepel product line, the Company absorbs the
      cost
      of shipping and handling.  For those customers who are billed the cost
      of shipping and handling fees, such amounts are included in net
      sales.  Shipping and handling costs associated with outbound freight
      are included in selling and shipping expenses and aggregated approximately
      $2,461,000, $2,411,000, and $2,355,000 in the fiscal years ended January 31,
      2007, 2006 and 2005, respectively.





***Research
      and Development Costs***


Research
      and development costs are expensed as incurred and included in general and
      administrative expenses.  Research and development expenses aggregated
      approximately $100,000, $90,000 and  $89,000 in the fiscal years ended
      January 31, 2007, 2006 and 2005, respectively, and were paid to contractors
      for
      development of new raw materials.





***Income
      Taxes***


The
      Company is required to estimate its income taxes in each of the jurisdictions
      in
      which it operates as part of preparing the 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 the Company’s balance sheet. A judgment must then be
      made of the likelihood that any deferred tax assets will be recovered 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 the Company determines that it 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 income in the period of such
      determination.





***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 average common stock equivalents for the years ended January
      31, 2007, 2006 and 2005 were 7,459, 5,325, and 5,782 respectively, representing
      the dilutive effect of stock options. The diluted earnings per share calculation
      takes into account the shares that may be issued upon exercise of stock options,
      reduced by shares that may be repurchased with the funds received from the
      exercise, based on the average price during the fiscal year (as adjusted for
      the
      10% stock dividend to holders of record on April 30, 2005 and August 1,
      2006).





***Advertising
      Costs***


Advertising
      costs are expensed as incurred.  Advertising costs (income) amounted
      to $30,433, $(43,104), and $(15,326) in the fiscal years ended January 31,
      2007,
      2006 and 2005, respectively, net of co-op advertising allowance received from
      a
      supplier.  These reimbursements include some costs which are
      classified in categories other than advertising, such as payroll.











48
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**1.
      (continued)**








***Statement
      of Cash Flows***


The
      Company considers highly liquid temporary cash investments with an original
      maturity of three months or less to be cash equivalents. Cash equivalents
      consist of money market funds. The market value of the cash equivalents
      approximates cost. Foreign denominated cash and cash equivalents were
      approximately $1,752,000 and $1,194,000 at January 31, 2007 and 2006,
      respectively.





Supplemental
      cash flow information for the years ended January 31 is as follows:





**2007**
                
                
                **2006**
                
                
                **2005**Interest
                    paid
                
                $
                356,331
                
                
                $
                166,805
                
                
                $
                207,912Income
                    taxes paid
                
                $
                3,744,519
                
                
                $
                3,402,723
                
                
                $
                2,103,682





***Concentration
      of Credit Risk***


Financial
      instruments, which potentially subject the Company to concentration of credit
      risk, consist principally of trade receivables. Concentration of credit risk
      with respect to these receivables is generally diversified due to the large
      number of entities comprising the Company’s customer base and their dispersion
      across geographic areas principally within the United States. The Company
      routinely addresses the financial strength of its customers and, as a
      consequence, believes that its receivable credit risk exposure is
      limited.  The Company does not require customers to post
      collateral.




The
      largest foreign cash balances are deposited in HSBC in China and the UK and
      in
      the TD Canada Trust Bank in Canada.  The utilization of these larger
      banking institutions minimizes risk of deposits held in foreign
      countries.





***Foreign
      Operations and Foreign Currency Translation***


The
      Company maintains manufacturing operations and uses independent contractors
      in
      Mexico, India and the People’s Republic of China. It also maintains sales and
      distribution entities located in Canada, the U.K., Chile and Japan. The Company
      is vulnerable to currency risks in these countries. The functional currency
      of
      foreign subsidiaries is the U.S. dollar.





The
      monetary assets and liabilities of the Company’s foreign operations are
      translated into U.S. dollars at current exchange rates, while non-monetary
      items
      are translated at historical rates. Revenues and expenses are generally
      translated at average exchange rates for the year. Transaction gains and losses
      that arise from exchange rate fluctuations on transactions denominated in a
      currency other than the functional currency are included in the results of
      operations as incurred and aggregated approximately $29,000, $66,000 and $58,000
      for the fiscal years ended January 31, 2007, 2006 and 2005,
      respectively.





***Use
      of Estimates***


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at year-end
      and
      the reported amounts of revenues and expenses during the reporting
      period.  Actual results could differ from those
      estimates.  The most significant estimates include the allowance for
      doubtful accounts and inventory reserves.  It is reasonably possible
      that events could occur during the upcoming year that could change such
      estimates.





***Fair
      value of Financial Instruments***


The
      Company's principal financial instrument consists of its outstanding revolving
      credit facility and term loan. The Company believes that the carrying amount
      of
      such debt approximates the fair value as the variable interest rates approximate
      the current prevailing interest rate.











49
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**1.
      (continued)**





***Effects
      of Recent Accounting Pronouncements***


In
      June 2006, the FASB issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
      Interpretation of FASB Statement No. 109” (“FIN No. 48”). FIN No. 48 clarifies
      the accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FAS No. 109, “Accounting for Income
      Taxes.” FIN No. 48 prescribes a two-step process to determine the amount of tax
      benefit to be recognized. First, the tax position must be evaluated to determine
      the likelihood that it will be sustained upon external examination. If the
      tax
      position is deemed “more-likely-than-not” to be sustained, the tax position is
      then assessed to determine the amount of benefit to recognize in the financial
      statements.  The amount of the benefit that may be recognized is the
      largest amount that has a greater than 50 percent likelihood of being realized
      upon ultimate settlement.  We are required to adopt FIN No. 48
      effective as of February 1, 2007. We are currently evaluating the effect FIN
      No.
      48 will have on our financial statement. We do not expect the impact will be
      material.




In
      September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (FAS No.
      157”), which addresses how companies should measure fair value when they are
      required to use a fair value measure for recognition or disclosure purposes
      under generally accepted accounting principles.  FAS No. 157 defines
      fair value, establishes a framework for measuring fair value in generally
      accepted accounting principles and expands disclosures about fair value
      measurements.  FAS No. 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007 and should be applied
      prospectively, except in the case of a limited number of financial instruments
      that require retrospective application.  We are currently evaluating
      the potential impact of FAS No. 157 on our financial position and results of
      operations.




In
      February 2007, the FASB issued FAS
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities-including an amendment of FAS 115” (“FAS No. 159”). The new
      statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item,


changes
      in that item’s fair value in subsequent reporting periods must be recognized in
      current earnings.  FAS No. 159 is effective for fiscal years beginning
      after November 15, 2007. We are currently evaluating the potential impact of
      FAS
      No. 159 on our financial position and results of operations.




In
      September 2006, the Securities and
      Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 108,
      Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 provides
      interpretive guidance on how the effects of the carryover or reversal of prior
      year misstatements should be considered in quantifying a current year
      misstatement. The SEC staff believes that registrants should quantify errors
      using both a balance sheet and an income statement approach and evaluate whether
      either approach results in quantifying a misstatement that, when all relevant
      quantitative and qualitative factors are considered, is material. SAB 108 is
      effective for the Company's fiscal year ending January 31, 2007. The application
      of SAB 108 did not have a material effect on our financial position or results
      of operations as of January 31, 2007 or for the year then ended.





***Comprehensive
      income (loss)***





******
      Comprehensive income (loss) refers to revenue, expenses, gains and losses that
      under generally accepted accounting principles are included in comprehensive
      income but are excluded from net income as these amounts are recorded directly
      as an adjustment to stockholders' equity. At January 31, 2007, 2006 and 2005,
      there were no such adjustments required or such amounts were de
      minimus.














50
 *Index*








**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**2
      –INVENTORIES**





Inventories
      consist of the following at January 31:


**2007**
                  
                  
                  2006Raw
                      materials
                  
                  $
                  19,051,284
                  
                  
                  $
                  18,656,894Work-in-process
                  
                  
                  2,760,196
                  
                  
                  
                  1,996,027Finished
                      goods
                  
                  
                  19,144,259
                  
                  
                  
                  24,590,569**$**
                  **40,955,739**
                  
                  
                  **$**
                  **45,243,490**





**3
      -PROPERTY, PLANT AND EQUIPMENT**





Property
      and equipment consist of the following at January 31:





Useful
                    life
                  in
                    years
                
                
                2007
                
                
                2006Machinery
                    and equipment
                
                3
–
                    10
                
                
                $
                6,965,360
                
                
                $
                6,919,530Furniture
                    and fixtures
                
                3
–
                    10
                
                
                
                255,949
                
                
                
                294,087Leasehold
                    improvements
                
                Lease
                    term
                
                
                
                941,002
                
                
                
                964,587Land
                    and Building  (China)
                
                20
                
                
                
                2,073,665
                
                
                
                2,153,592Land,
                    Building and equipment (India)
                
                7
                    -
                    39
                
                
                
                3,464,994
                
                
                
                ---Land
                    and Building (Canada)
                
                Under
                    construction
                
                
                
                122,395
                
                
                
                ---Land
                    and Buildings (USA)
                
                39
                
                
                
                3,967,973
                
                
                
                3,623,47117,791,338
                
                
                
                13,955,267Less
                    accumulated depreciation and amortization
                
                
                
                
                
                
                (6,707,308
                )
                
                
                (6,200,502
                )$
                11,084,030
                
                
                $
                7,754,765





Depreciation
      expense for fiscal 2007, 2006 and 2005 amounted to $1,048,380, $993,686,
      $884,140 respectively.  Net fixed assets in China were approximately
      $2.1 million, $2.2 million and $2.2 million as of January 31, 2007, 2006 and
      2005, respectively.  Net fixed assets in India were approximately $3.5
      million at January 31, 2007.




In
      November 2006, the Company purchased the Industrial Glove assets of RFB Latex,
      Ltd. (RFB) of New Delhi, India for a purchase price of approximately $3.4
      million, subject to reconciliation of operations over the prior year and an
      audit.  Such assets consist of long term land leases, buildings and
      equipment.  This purchase price is in addition to the cumulative
      outlay of approximately $1.5 million through November 15, 2006 which consists
      of
      the cost of the purchase option, inventory, receivables, operating losses to
      date and working capital. Such additional amount has been charged to expense
      in
      Fiscal 2007. The Company may, subject to Indian law, liquidate its existing
      subsidiary and set up a new subsidiary which will consummate the purchase
      transaction. The Company has purchased the assets in question directly and
      has
      hired a new Chief Operating Officer to manage and control the Indian operations.
      Management expects to begin shipping gloves to the USA in the summer of
      2007.





**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 $1.6
      million, subject to certain adjustments.  Final payment was made in
      November 2005 following the audit of the closing date balance
      sheet.  The final price amounted to $1.9 million and included
      adjustments for the payoff of a revolving loan of $0.2 million and adjustments
      for inventory, fixed asset values and allowances 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





51
 *Index*








**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





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, 2005 in the Company’s reported
      results , adding approximately $1.8 million in sales for the seven months ended
      January 31, 2006 and $0.02 to earnings per share to the actual reported
      results.  Had the transaction taken place on February 1, 2005, on a
      proforma basis, there would have been an increase in the reported amounts as
      follows:





Twelve
                months ended January 31, 2006Pro
                Forma Results Combined with Mifflin Valley
            Additional
                amount resulting from Mifflin ValleySales
            $100,043,000
            $1,303,000Net
                Income
            $6,411,000
            $82,000Earnings
                per share
            $1.16
            $0.01





Had
      the
      transactions taken place on February 1, 2004, on a Pro Forma basis, the effect
      on the reported amounts for the twelve months ended January 31, 2005 is
      considered by management to be insignificant.





Condensed
      balance sheet information at Acquisition


Accounts
                      receivable
                  
                  $
                  363,000Inventory
                  
                  
                  667,000Equipment
                  
                  
                  216,000Other
                      assets
                  
                  
                  35,000Total
                      assets
                  
                  
                  1,281,000Accounts
                      payable
                  
                  
                  261,000Other
                      liabilities
                  
                  
                  185,000Total
                      liabilities
                  
                  
                  446,000Net
                      assets acquired
                  
                  
                  835,000Purchase
                      price
                  
                  
                  1,767,000Excess
                      purchase price
                  
                  $
                  932,000





Allocated
                      to:Goodwill
                  
                  $
                  871,000Other
                      intangibles
                  
                  
                  61,000$
                  932,000





The
      above
      goodwill is deductible for tax purposes to be amortized over a 15 year
      life.





**5
      -LONG-TERM DEBT**





***Revolving
      Credit Facility***





In
      July 2005 the Company entered into a
      $25 million five year revolving credit facility with Wachovia Bank,
      N.A.  At January 31, 2007, the balance outstanding under this
      revolving credit facility amounted to $3.8 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 January 31, 2007 and for the year then
      ended.








52
 *Index*








**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005


**5.
      (continued)**




The
      Company’s previous agreement with its lending institution, as amended, provided
      the Company with a revolving credit facility of $18 million.  The
      balance was paid in full on June 18, 2004 using the proceeds from the Company’s
      June 18, 2004 Secondary Stock Offering. This credit facility, which was subject
      to a borrowing base calculated on a percentage of eligible accounts receivable
      and inventory as defined, bore  interest at LIBOR plus
      2%.





The
      maximum amounts borrowed under the credit facilities during the fiscal years
      ended January 31, 2007 and 2006 and 2005 were $10,000,000, $17,000,000, and
      $18,000,000 respectively, and the weighted average interest rates during the
      periods were 5.82%, 3.67% and 3.20%, respectively.





The
      fees
      incurred by the Company to obtain the credit facility amounted to $0, $25,000
      and $15,000 during fiscal 2007, 2006 and 2005, respectively.




**6.
      – STOCKHOLDERS’ EQUITY AND STOCK OPTIONS**




On
      June
      18, 2004, the company completed its secondary public offering by issuing an
      additional 1,100,000 shares of its common stock.  On July 1, 2004, an
      additional 180,750 shares of its common stock were issued pursuant to the
      over-allotment section of the prospectus dated June 14, 2004.  The
      Company received $24.4 million, net of related expenses of $0.4
      million.  The Company used $16.8 million to pay off the balance of its
      revolving credit facility.





The
      Non-employee Directors’ Option Plan (the “Directors’ Plan”) provides for an
      automatic one-time grant of options to purchase 5,000 shares of common stock
      to
      each non-employee director elected or appointed to the Board of Directors.
      Under
      the Directors’ Plan, 60,000 shares of common stock have been authorized for
      issuance. Options are granted at not less than fair market value, become
      exercisable commencing six months from the date of grant and expire six years
      from the date of grant. In addition, all non-employee directors re-elected
      to
      the Company’s Board of Directors at any annual meeting of the stockholders will
      automatically be granted additional options to purchase 1,000 shares of common
      stock on each of such dates.





The
      Corporation recognized total
      stock-based compensation costs of $147,061, of which $125,711 results from
      the
      2006 Equity Incentive Plan, and $21,350 results from the Non-Employee Directors
      Option Plan for the year ended January 31, 2007. Stock compensation expense
      and
      tax benefit recorded under APB 25 in the Consolidated Statements of Income
      for
      the years ended January 31, 2006 and 2005, were $0. These amounts are reflected
      in selling, general and administrative expenses.  The total income tax
      benefit recognized for stock-based compensation arrangements was $52,942 for
      the
      year ended January 31, 2007.





53
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**6.
      (continued)**


Additional
      information with respect to the Company’s plans for the fiscal year ended
      January 31, 2007 is summarized as follows:


2007
                        Directors’
                        PlanNumber
                        of
                        shares
                          *
                      
                      
                      Weighted
                        average
                        exercise
                        price
                      
                      
                      Weighted
                        average
                        remaining
                        term
                          (years)
                      
                      
                      Aggregate
                        Intrinsic
                        ValueShares
                          under optionOutstanding
                          at beginning of year
                      
                      
                      17,963
                      
                      
                      $
                      12.6110%
                          stock dividend
                      
                      
                      1,530Granted
                      
                      
                      2,200
                      
                      
                      
                      13.10Exercised
                      
                      
                      (2,662
                      )
                      
                      
                      4.46Outstanding
                          and exercisable at end of year
                      
                      
                      19,031
                      
                      
                      $
                      12.79
                      
                      
                      
                      3.5
                      
                      
                      $
                      35,778Weighted-average
                          fair value per share of  options granted during
                          2007
                      
                      
                      
                      
                      
                      $
                      11.8Weighted-average
                          fair value per share of options exercised during 2007
                      
                      
                      
                      
                      
                      $
                      4.46


***Adjusted
      for the 10% stock dividend to stockholders of record as of August 1,
      2006**





Reserved
                      Shares:Directors
                      Option Plan
                  
                  
                  32,936





**7.
      – INCOME TAXES**





The
      provision for income taxes is based on the following pre-tax
      income:





Year
                      Ended January 31,2007
                  
                  
                  2006
                  
                  
                  2005Domestic
                  
                  $
                  5,132,063
                  
                  
                  $
                  7,896,736
                  
                  
                  $
                  5,398,768Foreign
                  
                  
                  1,797,983
                  
                  
                  
                  1,871,326
                  
                  
                  
                  1,670,573Total
                  
                  $
                  6,930,046
                  
                  
                  $
                  9,768,062
                  
                  
                  $
                  7,069,341





The
      provision for income taxes is summarized as follows:





Year
                      ended January 31,2007
                  
                  
                  2006
                  
                  
                  2005CurrentFederal
                  
                  $
                  1,669,922
                  
                  
                  $
                  2,563,836
                  
                  
                  $
                  1,661,606State
                  
                  
                  180,999
                  
                  
                  
                  448,656
                  
                  
                  
                  330,337Foreign
                  
                  
                  429,343
                  
                  
                  
                  382,403
                  
                  
                  
                  395,9172,280,264
                  
                  
                  
                  3,394,895
                  
                  
                  
                  2,387,860Domestic
                      Deferred
                  
                  
                  (454,417
                  )
                  
                  
                  43,803
                  
                  
                  
                  (334,765
                  )$
                  1,825,847
                  
                  
                  $
                  3,438,698
                  
                  
                  $
                  2,053,095








54
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





The
      following is a reconciliation of the effective income tax rate to the Federal
      statutory rate:





Year
                    ended January 31,2007
                
                
                2006
                
                
                2005Statutory
                    rate
                
                
                34.0
                %
                
                
                34.0
                %
                
                
                34.0
                %State
                    income taxes, net of Federal tax benefit
                
                
                1.7
                %
                
                
                2.0
                %
                
                
                2.5
                %Permanent
                    differences
                
                
                (.7
                )%
                
                
                (.2
                )%
                
                
                (.2
                )%Repatriation
                    of foreign earnings
                
                
                -----
                
                
                
                1.7
                %
                
                
                -----Foreign
                    tax rate differential
                
                
                (7.6
                )%
                
                
                (2.7
                )%
                
                
                (2.0
                )%Contribution
                    carry forward realized
                
                
                -----
                
                
                
                -----
                
                
                
                (4.0
                )%Other
                
                
                (1.0
                )%
                
                
                .4
                %
                
                
                (1.3
                )%Effective
                    rate
                
                
                26.4
                %
                
                
                35.2
                %
                
                
                29.0
                %








The
      tax
      effects of temporary differences which give rise to deferred tax assets at
      January 31, 2007, 2006 and 2005 are summarized as follows:





January
                    31,2007
                
                
                2006
                
                
                2005Deferred
                    tax assetsInventories
                
                $
                766,662
                
                
                $
                688,800
                
                
                $
                606,652Accounts
                    receivable
                
                
                39,140
                
                
                
                120,703
                
                
                
                122,740Accrued
                    compensation and other
                
                
                150,895
                
                
                
                108,181
                
                
                
                231,342





Losses
                      in India prior to restructuring effective
                    February
                      1, 2007
                  
                  
                  398,667
                  
                  
                  
                  -----
                  
                  
                  
                  -----Gross
                      deferred tax assets
                  
                  
                  1,355,364
                  
                  
                  
                  917,684
                  
                  
                  
                  960,734Deferred
                      tax liabilitiesDepreciation
                      and other
                  
                  
                  27,227
                  
                  
                  
                  86,982
                  
                  
                  
                  86,229Gross
                      deferred tax liabilities
                  
                  
                  27,227
                  
                  
                  
                  86,982
                  
                  
                  
                  86,229Net
                      deferred tax asset
                  
                  $
                  1,328,137
                  
                  
                  $
                  830,702
                  
                  
                  $
                  874,505








In
      January 2006, the company
      repatriated through dividends to the parent, approximately $3.2 million of
      cumulative earnings from its Chinese subsidiaries, thereby incurring
      approximately $164,000 of additional US taxes.





**8.
      – BENEFIT PLANS**





***Defined
      Benefit Plan***





On
      January 30, 2007, Lakeland purchased a Single Premium Group Annuity Contract
      from the John Hancock Life Insurance Company (“John Hancock”) to cover all
      participants in the Fireland Pension Fund in connection with Lakeland’s
      termination of the plan.  The cost of such annuity contract was
      approximately $1,421,000 for which the John Hancock set up a Single Premium
      Non-participation Group Annuity plan to cover all participants in the
      plan.  The termination of the plan was approved by the Pension Benefit
      Guarantee Corporation (“PBGC”). Such cost of $1,421,000 was funded by plan
      assets of approximately $1,303,000 and net cash contributed by Lakeland
      Industries,





55
 *Index*














**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**8.
      (continued**)





Inc.
      of
      approximately $118,000.  After the completion of this transaction, the
      company had a remaining accrued benefit cost liability of approximately
      $353,000, recognized as a pre-tax gain of approximately $353,000.  This
      transaction meets the definition of “settlement” pursuant to FAS
      88.  The Fireland Pension Fund was a frozen defined benefit pension
      plan that covered former employees of an entity acquired in fiscal
      1987.





The
      Company’s funding policy was to contribute annually the recommended amount based
      on computations made by its consulting actuary as of January 31, 2006 and
      2005.





The
      following table sets forth the plan's funded status for the fiscal year ended
      January 31,





2006***Change
                        in benefit obligation***Projected
                        benefit obligation at beginning of year
                    
                    $
                    1,227,215Interest
                        cost
                    
                    
                    81,214Actuarial  loss
                    
                    
                    7,361Benefits
                        paid
                    
                    
                    (48,104
                    )Benefit
                        obligation at end of year
                    
                    $
                    1,267,686***Change
                        in plan assets***Fair
                        value at beginning of year
                    
                    $
                    1,190,964Actual
                        investment return
                    
                    
                    270,287Employer
                        contribution
                    
                    
                    ----Benefits
                        paid
                    
                    
                    (48,104
                    )Fair
                        value at end of year
                    
                    $
                    1,413,147





***Funded
                    status***Funded
                    status
                
                $
                (145,461
                )Unrecognized
                    gain
                
                
                614,998Unrecognized
                    benefit transition liability
                
                
                -----Accrued
                    benefit cost
                
                $
                469,534











The
      components of net periodic pension cost for the fiscal years ended January
      31,
      2006 and 2005 are summarized as follows (no information is presented for 2007
      as
      the Company purchased a singe premium group annuity contract on January 30,
      2007
      and terminated this plan):





An
      assumed discount rate of 6.75% was used in determining the actuarial present
      value of benefit obligations for all periods presented. The expected long-term
      rate of return on plan assets was 8% for all periods presented. At January
      31,
      2006 and 2005, approximately 25.1% of the plan’s assets were held in mutual
      funds invested primarily in equity securities, 92.4% and 66.7% were invested
      in
      equity securities and debt instruments and 7.6% and 8.2% were invested in money
      market and other instruments, respectively.














56
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**8.
      (continued**)





***Defined
      Contribution Plan***


Pursuant
      to the terms of the Company’s
      401(k) plan, substantially all U.S. employees over 21 years of age with a
      minimum period of service are eligible to participate.  The 401(k)
      plan is administered by the Company and provides for voluntary employee
      contributions ranging from 1% to 15% of the employee’s compensation. The Company
      made discretionary contributions of $197,075, $126,547 and $118,696 in the
      fiscal years ended January 31, 2007, 2006, and 2005, respectively.








**9.
      – MAJOR SUPPLIER**





The
      Company purchased approximately 62.6%, 74.0% and 74.7% of its raw materials
      from
      one supplier under licensing agreements for the fiscal years ended January
      31,
      2007, 2006 and 2005, respectively.  The Company expects this
      relationship to continue for the foreseeable future. Required similar raw
      materials could be purchased from other sources; although, the Company’s
      competitive position in the marketplace could be affected.








**10.
      – COMMITMENTS AND CONTINGENCIES**





***Employment
      Contracts***


The
      Company has employment contracts with six principal officers and the Chairman
      of
      the Board of Directors, expiring through April 30, 2008.  Such
      contracts are automatically renewable for two, one-year terms unless 30 to
      120
      days notice is given by either party. Pursuant to such contracts, the Company
      is
      committed to aggregate annual base remuneration of $1.4 million and $220,000
      for
      the fiscal years ended January 31, 2008 and 2009.





***Leases***


POMS
      Holding Co. (“POMS”), a partnership consisting of three directors and one
      officer of Lakeland, who own 55% of the entity, and six non-affiliates, was
      formed to lease both land and building to the Company because bank financing
      was
      unavailable.  POMS leased to the Company a 91,788 square foot
      disposable garment manufacturing facility in Decatur, Alabama.  20% of
      this space is highly improved office space.  Under a lease effective
      April 1, 2004 and expiring on March 31, 2009, the Company paid an annual rent
      of
      $364,900 and was the sole occupant of the facility.   The Company
      purchased this facility from POMS on April 25, 2005.





On
      April
      1, 2004, the Company entered into a five-year lease agreement (expiring March
      31, 2009) with River Group Holding Co., L.L.C. for a 49,500 sq. ft. warehouse
      facility located next to the existing facility in Decatur,
      Alabama.  River Group Holding Co., L.L.C. is a limited liability
      company consisting of five directors and one officer of the
      Company.  The annual rent for this facility is $199,100 and the
      Company was the sole occupant of the facility.  The Company purchased
      this facility from River Group on May 25, 2005.





On
      March
      1, 1999, the Company entered into a one-year (renewable for four additional
      one
      year terms) lease agreement with Harvey Pride, Jr., an officer of the Company,
      for a 2,400 sq. ft. customer service office for $18,000 annually located next
      to
      the existing Decatur, Alabama facility mentioned above.  This lease
      was renewed on March 1, 2004 through March 31, 2009 at the same rental rate
      and
      terms.





The
      Company believes that all rents paid to POMS, River Group Holding Co., L.L.C.
      and Harvey Pride, Jr. by the Company are comparable to what would be charged
      by
      an unrelated party, as three different rent fairness appraisals were performed
      in 1999, 2002 and 2004.  The net rent paid to POMS and River Group
      Holding Co., L.L.C. by the Company for the years ended January 31, 2006 and
      2005
      amounted to $116,000 and $564,000 respectively, and the








57
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005


**10.
      (continued)**





total
      rent paid to Harvey Pride, Jr. by the Company for use of the customer service
      office for each of the years ended January 31, 2007, 2006 and 2005 amounted
      to
      $18,000.  The Company paid $74,808 to Luis Gomez Guzman, (an employee
      in Mexico until December 2005), for rent on a building pursuant to a lease
      expiring July 7, 2007 and in fiscal 2006 an 12,853 square foot addition was
      built for additional annual rent of $46, 416.





Total
      rental costs under all operating leases is summarized as follows:


Gross
                    rental
                
                
                Rentals
                    paid to
                  related
                    partiesYear
                    ended January 31,2007
                
                $
                769,101
                
                
                $
                226,5602006
                
                
                540,162
                
                
                
                328,4202005
                
                
                893,862
                
                
                
                641,400





****Minimum
      annual rental commitments for the remaining term of the Company’s non-cancelable
      operating leases relating to manufacturing facilities, office space and
      equipment rentals at January 31, 2007 including lease renewals subsequent to
      year-end are summarized as follows:





Year
                    ending January 31,2008
                
                $
                522,1542009
                
                
                295,2872010
                
                
                278,2872011
                
                
                147,507$
                1,243,235





***Real
      Estate Purchases***





In
      April
      2005, the Company entered into two separate real estate purchase contracts,
      one
      with POMS and one with River Group, both related parties. The Company has
      purchased the land and buildings in Decatur, Alabama that it had leased from
      these related parties since their inception, POMS (1984) and River Group (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 is 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
      for
      a purchased price of $2,067,584. The Company paid rent from February 1, 2005
      until April 25, 2005 of $86,157, which was charged to rent expense.





On
      May 25, 2005, the Company closed on the real estate purchase contract with
      River
      Group for a purchase price of $928,686. The Company paid River Group rent from
      February 1, 2005 until May 25, 2005 amounting to $63,157, which was 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





58
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**10.
      (continued)**





the
      two
      properties from February 1, 2005 until the dates of sale 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
      has 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.





*Building
      purchase in India:*


On
      November 22, 2006 the Company announced the closing on its contract to buy
      the
      Industrial glove assets of RFB Latex, Ltd. of New Delhi, India. Included in
      this
      contract is a building of 58,945 square feet and three land plots which has
      an
      appraised value of $3.5 million.





*Canadian
      building under construction:*


The
      Company is currently building a warehouse/officer facility in Canada to replace
      the facility currently being rented for $86,000 per year. The expected cost
      is
      $2 million and at January 31, 2007 the Company has incurred the cost of land
      of
      $138,000 and construction costs at $122,000*.*





***Litigation***


The
      Company is involved in various litigation arising during the normal course
      of
      business which, in the opinion


of
      the
      management of the Company, will not have a material effect on the Company’s
      financial position, results of operations, or cash flows.





***Tax
      Audit***





The
      Company’s Federal Income Tax returns for the fiscal years ended January 31,
      2003, 2004 and 2005 have been audited by the Internal Revenue
      Service.  Such audits are complete with one issue in dispute relating to
      deductions taken by the Company for charitable contributions of its stock in
      trade, and one other issue in dispute which would


result
      in
      a timing difference.  Such issues are in the Appellate Division of the
      Internal Revenue Service with a meeting scheduled for April 2007.  
The final result of these issues cannot be estimated by management at this
      time,
      but management does not believe that the results of the audit will have a
      material effect on the financial condition of the Company.





**11.
      OTHER RELATED PARTY TRANSACTIONS**





In
      1997,
      An Qui Holding Co., L.L.C., or An Qui, a limited liability company whose members
      include the Company, five directors and one officer of the Company, provided
      financing for the construction of a 46,000 square foot building in An Qui City,
      China and the lease of the real property underlying the building for 50 years
      from the Chinese government to Weifang Lakeland Safety Product Co., Ltd., or
      Weifang, one of the Company’s subsidiaries.





In
      connection with the financing, Weifang agreed to make annual payments to An
      Qui
      and to allocate a portion of the proceeds from any sale of the property to
      An
      Qui.  In 2002, An Qui relinquished its rights to the annual payments
      and to its rights to proceeds from the sale of the property in exchange for
      the
      amount of $406,000 (net of expenses).





59
 *Index*














**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**11.
      (continued)**





Weifang
      paid $223,000, $89,000 and $94,000 of this amount to An Qui in December 2002,
      January 2003 and June 2003, respectively.  The Company now owns the
      building.





In
      2001,
      An Qui also helped to finance the construction of the Company’s facility in
      Jiaozhou, China through a loan to one of the Company’s Chinese
      subsidiaries.  The loan’s interest rate was 9% per annum until May 30,
      2003,
      when the rate increased to 10% per annum.  On June 19, 2003, the
      Company repaid this construction loan by paying $168,100 (plus accrued interest)
      to An Qui and a foreign investor who contributed to the loan.





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.  This amount was obtained prior to the acquisition from an
      independent appraisal of the fair market rental value per square
      foot.  In addition, in January 2006, the Company entered into a month
      to month lease with Donna Gallen (an employee and wife of Michael Gallen) for
      a
      12,000 sq. ft. warehouse space in Blandon, PA for $36,000
      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 of 27,066
      and $23,173 in fiscal 2007 and 2006, respectively.





***Related
      Party-outside contractor***




The
      Company leases its facility in Mexico from Louis Gomez Guzman, an employee
      in
      Mexico until December
      2005, pursuant to a lease expiring July 31, 2007 at an annual rental of
      $121,224.  Mr. Guzman is also acting as a contractor for our Mexican
      facility.  His company, Intermack, enables our Mexican facility to
      increase or decrease production as required without the Company needing to
      expand its facility.  During fiscal 2007 and 2006, Lakeland de Mexico
      paid Intermack $721,748, and $938,755, respectively for services relating to
      contract production.





**12.
      MANUFACTURING SEGMENT DATA**




The
      Company manages its operations by evaluating its geographic locations. The
      Company’s North American operations include its facilities in Decatur, Alabama
      (primarily disposables, chemical suit and glove production), Celaya, Mexico
      (primarily disposables, chemical suit and glove production) and St. Joseph,
      Missouri (primarily woven products).  The Company also maintains
      contract manufacturing facilities in China (primarily disposable and chemical
      suit production).  The Company’s China facilities and Celaya, Mexico
      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.  The Company evaluates the performance of these entities
      based on operating profit, which is defined as income before income taxes and
      other income and expenses.  The Company has a small sales force in
      Canada and Europe who distribute products shipped from the United States and
      China, the table below represents information about reported manufacturing
      segments for the years noted therein:





60
 *Index*





**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**12.
      (continued)**








**2007**
                
                
                **2006**
                
                
                **2005**Net
                    Sales:
                  North
                    America and other foreign
                
                $
                104,804,921
                
                
                $
                104,041,223
                
                
                $
                100,361,909China
                
                
                12,007,656
                
                
                
                9,205,660
                
                
                
                7,411,651India
                
                
                449,022
                
                
                
                60,446
                
                
                
                ---Less
                    inter-segment sales
                
                
                (17,090,657
                )
                
                
                (14,567,263
                )
                
                
                (12,453,397
                )Consolidated
                    sales
                
                $
                100,170,942
                
                
                $
                98,740,066
                
                
                $
                95,320,163Operating
                    Profit:
                  North
                    America & other foreign
                
                $
                5,879,388
                
                
                $
                8,355,869
                
                
                $
                7,067,855China
                
                
                1,858,226
                
                
                
                1,151,340
                
                
                
                921,208India
                
                
                (974,678
                )
                
                
                (16,428
                )
                
                
                ---


Less
                      intersegment profit
                  
                  
                  (41,031
                  )
                  
                  
                  11,632
                  
                  
                  
                  (335,000
                  )Consolidated
                      operating profit
                  
                  $
                  6,721,905
                  
                  
                  $
                  9,502,413
                  
                  
                  $
                  7,654,063Identifiable
                      Assets:
                    North
                      America and other foreign
                  
                  $
                  63,479,434
                  
                  
                  $
                  65,734,096
                  
                  
                  $
                  51,654,104China
                  
                  
                  4,353,599
                  
                  
                  
                  5,717,192
                  
                  
                  
                  8,659,150India
                  
                  
                  6,365,327
                  
                  
                  
                  1,012,564
                  
                  
                  
                  ---Consolidated
                      assets
                  
                  $
                  74,198,360
                  
                  
                  $
                  72,463,852
                  
                  
                  $
                  60,313,254Depreciation:
                    North
                      America and other foreign
                  
                  $
                  633,754
                  
                  
                  $
                  548,868
                  
                  
                  $
                  542,463China
                  
                  
                  402,233
                  
                  
                  
                  444,818
                  
                  
                  
                  341,677India
                  
                  
                  12,393
                  
                  
                  
                  ---
                  
                  
                  
                  ---Consolidated
                      depreciation
                  
                  $
                  1,048,380
                  
                  
                  $
                  993,686
                  
                  
                  $
                  884,140





**13.  UNAUDITED
      QUARTERLY RESULTS of OPERATIONS (In thousands, except for per share
      amounts):**









Fiscal
                    Year Ended January 31, 2007:
                
                **1/31/07**
                
                
                **10/31/06**
                
                
                **7/31/06**
                
                
                **4/30/06**Net
                    Sales
                
                $
                25,599
                
                
                $
                23,263
                
                
                $
                24,087
                
                
                $
                27,222Cost
                    of Sales
                
                
                19,958
                
                
                
                17,627
                
                
                
                17,621
                
                
                
                20,689Gross
                    Profit
                
                $
                5,641
                
                
                $
                5,636
                
                
                $
                6,466
                
                
                $
                6,533Net
                    Income
                
                $
                1,307
                
                
                $
                980
                
                
                $
                1,355
                
                
                $
                1,462Basic
                    and Diluted income per common share*:Basic
                    (a)
                
                $
                .23
                
                
                $
                .18
                
                
                $
                .25
                
                
                $
                .26Diluted
                    (a)
                
                $
                .23
                
                
                $
                .18
                
                
                $
                .25
                
                
                $
                .26








61
 *Index*








**Lakeland
      Industries, Inc.**


**and
      Subsidiaries**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


January
      31, 2007, 2006 and 2005





**13.
      (Continued)**




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.


Fiscal
                    Year Ended January 31, 2006:
                
                1/31/06
                
                
                10/31/05
                
                
                7/31/05
                
                
                4/30/05Net
                    Sales
                
                $
                25,226
                
                
                $
                22,717
                
                
                $
                25,089
                
                
                $
                25,709Cost
                    of Sales
                
                
                18,949
                
                
                
                17,034
                
                
                
                19,293
                
                
                
                19,542Gross
                    Profit
                
                $
                6,277
                
                
                $
                5,683
                
                
                $
                5,796
                
                
                $
                6,167Net
                    Income
                
                $
                1,655
                
                
                $
                1,313
                
                
                $
                1,648
                
                
                $
                1,713Basic
                    and Diluted income per common share*:Basic
                    (a)
                
                $
                0.30
                
                
                $
                0.24
                
                
                $
                0.30
                
                
                $
                0.31Diluted
                    (a)
                
                $
                0.30
                
                
                $
                0.24
                
                
                $
                0.30
                
                
                $
                0.31





(a)
                The sum of earnings per share for the four quarters may not equal
                earnings
                per share for the full year due to changes in the average number
                of common
                shares outstanding.
              *Adjusted,
                retroactively, for the 10% stock dividends to shareholders of records
                on
                August 1, 2006, and April 30, 2005.








**14.
      SUBSEQUENT EVENT**





The
      Company has decided to restructure its manufacturing operations in Mexico,
      by
      closing its current facilities in Celaya and opening new facilities in
      Jerez.  The Company estimates the costs to close, move and start up will
      aggregate approximately $500,000 pretax.  This restructuring will allow for
      lower occupancy and labor costs and a more efficient production
      configuration.  The Company anticipates this cost will be charged to its
      first quarter fiscal year 2008 results.





62
 *Index*








**SCHEDULE
      II – VALUATION AND QUALIFYING ACCOUNTS**





Column
                        A
                    
                    Column
                        B
                    
                    Column
                        C
                    
                    Column
                        D
                    
                    
                    Column
                        EAdditionsBalance
                        at
                      Beginning
                      of
                        period
                    
                    Charge
                        to
                      costs
                        and
                      expenses
                    
                    Charged
                      to
                        other
                      accounts
                    
                    Deductions
                    
                    
                    Balance
                        at
                      end
                        of
                      periodYear
                        ended January 31, 2007
                      Allowance
                        for doubtful accounts (a)
                    
                    $
                    323,000
                    
                    
                    
                    
                    
                    $
                    220,000
                    
                    
                    $
                    103,000Allowance
                        for slow moving inventory
                    
                    $
                    365,000
                    
                    
                    
                    
                    
                    $
                    59,000
                    
                    
                    $
                    306,000Year
                        ended January 31, 2006
                      Allowance
                        for doubtful accounts (a)
                    
                    $
                    323,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    323,000Allowance
                        for slow moving inventory
                    
                    $
                    396,000
                    
                    
                    
                    
                    
                    $
                    31,000
                    
                    
                    $
                    365,000Year
                        ended January 31, 2005
                      Allowance
                        for doubtful accounts (a)
                    
                    $
                    323,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    323,000Allowance
                        for slow moving inventory
                    
                    $
                    417,000
                    
                    
                    
                    
                    
                    $
                    21,000
                    
                    
                    $
                    396,000





(a)
      Deducted from accounts receivable.


(b)
      Uncollectible accounts receivable charged against allowance.




**ITEM
        9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING
        AND FINANCIAL DISCLOSURE**




None





**ITEM
      9A. CONTROLS AND PROCEDURES**





***Disclosure
      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 January 31, 2007. 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 the our evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures were effective as of January 31, 2007 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.
      In
      addition, our Chief Executive Officer and Chief Financial Officer concluded
      as
      of January 31, 2007 that our disclosure controls and procedures are also
      effective to ensure that information required to be disclosed in our reports
      filed or submitted under the Exchange Act are accumulated and communicated
      to
      our management, including the Chief Executive Officer and Chief Financial
      Officer, to allow timely decisions regarding required disclosure.





63
 *Index*








***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 January 31, 2007. 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).
      Management believes that, as of January 31, 2007, the Company maintained
      effective internal control over financial reporting based on the criteria
      established in *Internal Control—Integrated Framework*issued by the
      Committee of Sponsoring Organizations of the Treadway Commission.




Holtz
      Rubenstein Reminick LLP, the Company's 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 5, 2007 is included
      herein.




***Changes
      in Internal Control over Financial Reporting***





During
      our fourth fiscal quarter, there
      was no change in our internal control over financial reporting that materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.





Through
      the year ended January 31, 2007
      additional expense has been incurred relating to documenting and testing the
      systems of internal controls.  The company hired an internal auditor
      in July 2004 and 2005 and has contracted with an independent consultant for
      services related to Sarbanes-Oxley Act compliance with Section 404, in February
      2004.  The total cumulative amount expensed so far is approximately
      $1,187,000 including $162,000 in additional directors’ fees.








**ITEM9B. OTHER INFORMATION**





None








64
 *Index*








**PART
      III**





***Performance
      Graph***





The
      following Corporate Performance Graph, obtained from Core Data Group of
      Virginia, compares the five year cumulative total return of our common stock
      with that of the S&P composite market index, including dividend
      reinvestment, and with that of a peer group for the five fiscal years commencing
      January 31, 2001 and ending January 31, 2006 assuming an investment of $100
      and
      the re-investment of any dividends:










COMPARISON
                        OF CUMULATIVE TOTAL RETURN OF OE OR MORE
                      COMPANIES,
                        PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS-------------------------
                        FISCAL YEAR ENDING -------------------COMPANY/INDEX/MARKET
                    
                    1/31/2002
                    
                    
                    1/31/2003
                    
                    
                    1/31/2004
                    
                    
                    1/31/2005
                    
                    
                    1/31/2006
                    
                    
                    1/31/2007Lakeland
                        Industries, Inc.
                    
                    
                    193.90
                    
                    
                    
                    162.72
                    
                    
                    
                    376.48
                    
                    
                    
                    506.51
                    
                    
                    
                    522.51
                    
                    
                    
                    234.83Customer
                        Selected Stock List
                    
                    
                    129.01
                    
                    
                    
                    197.85
                    
                    
                    
                    238.49
                    
                    
                    
                    288.06
                    
                    
                    
                    193.22
                    
                    
                    
                    219.21S&P
                        Composite
                    
                    
                    83.85
                    
                    
                    
                    64.55
                    
                    
                    
                    86.87
                    
                    
                    
                    92.28
                    
                    
                    
                    101.86
                    
                    
                    
                    139.10





The
      Customer Selected Stock List is made up of the following
      securities:





ANGELICA
      CORP


SUPERIOR
      UNIFORM GROUP





The
      comparisons in the graph and tables above are based upon historical data and
      are
      not indicative of, nor intended to forecast, future performance of the Company’s
      Common Stock.





*The
      information contained in the Stock
      Performance Graph and the Reports of the Audit and Compensation Committee
      sections shall not be deemed to be “soliciting material” or “filed” or
      incorporated by reference in future filings with the SEC, or subject to the
      liabilities of Section 18 of the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”), except to the extent that the Company specifically
      incorporates it by reference into a document filed under the Securities Act
      of
      1933, as amended, or the Exchange Act.*











65
 *Index*











**ITEM
      10.** **DIRECTORS
      AND EXECUTIVEOFFICERS OF THE REGISTRANT**





The
      following is a list of the names and ages of all of our directors and executive
      officers, indicating all positions and offices they hold with us as of April
      12,
      2007. Our directors hold office for a three-year term and until their successors
      have been elected and qualified. Our executive officers hold offices for one
      year or until their successors are elected by our board of
      directors.




Name
              Age
              PositionRaymond
                  J.
                  Smith
              68
              Chairman
                  of the Board of DirectorsChristopher
                  J.
                  Ryan
              55
              Chief
                  Executive Officer, President,  Secretary, General Counsel and
                  DirectorGary
                  Pokrassa
              59
              Chief
                  Financial OfficerGregory
                  D. Willis
              50
              Executive
                  Vice PresidentHarvey
                Pride, Jr.
              60
              Senior
                  Vice President - ManufacturingJames
                  M.
                  McCormick
              59
              Controller
                  and TreasurerPaul
                  C.
                  Smith
              40
              Vice
                  PresidentGregory
                  Pontes
              46
              Vice
                  President - ManufacturingJohn
                  J.
                  Collins
              64
              DirectorEric
                  O.
                  Hallman
              63
              DirectorMichael
                  E.
                  Cirenza
              51
              DirectorJohn
                  Kreft
              56
              DirectorStephen
                  M.
                  Bachelder
              56
              Director





*Raymond
      J. Smith*, one of our co-founders, has been Chairman of our board of
      directors since our incorporation in 1982 and was President from 1982 to January
      31, 2004. Mr. Smith’s term as a director will expire at our annual meeting of
      stockholders in June 2007.




*Christopher
      J. Ryan* has served as our Chief Executive Officer since April 2004 and
      President since February 1, 2004, Secretary since April 1991, General Counsel
      since February 2000 and a director since May 1986. Mr. Ryan was our Executive
      Vice President - Finance from May 1986 until becoming our President on February
      1, 2004. From October 1989 until February 1991, Mr. Ryan was employed by Rodman
      & Renshaw, Inc., an investment banking firm. Prior to that, he was an
      independent consultant with Laidlaw Holding Co., Inc., an investment banking
      firm, from January 1989 until September 1989. From February 1987 to January
      1989, Mr. Ryan was employed as the Managing Director of Corporate Finance for
      Brean Murray, Foster Securities, Inc. He was employed from June 1985 to January
      1987 as a Senior Vice President with the investment banking firm of Laidlaw
      Adams Peck, Inc., a predecessor firm to Laidlaw Holdings, Inc. Mr. Ryan has
      served as one of our directors since 1986 and his term as a director will expire
      at our annual meeting of stockholders in June 2008.




*Gary
      Pokrassa*is a CPA with 37 years experience in both public and private
      accounting. Mr. Pokrassa was the CFO for Gristedes Foods, Inc. (AMEX-GRI) from
      2000-2003 and Syndata Technologies from 1997-2000. Mr. Pokrassa received a
      BS in
      Accounting from New York University and is a member of the American Institute
      of
      Certified Public Accountants and the New York State Society of Certified Public
      Accountants.




*Gregory
      D. Willis* has served as our Executive Vice President since May 1, 2005 and
      has held the position of National Sales Manager for us since
      November 1991. Prior to joining Lakeland he held the positions of National
      Sales
      Manager and Global Marketing Manager for Kappler Inc. from 1983 to 1991.
 Mr. Willis received his BBA degree in Business from Faulkner University
      and is currently a member of ISEA and NFPA.




*Harvey
      Pride, Jr.* has been our Vice President of manufacturing since May 1986 and
      was promoted to Senior Vice President of manufacturing in 2006. He was Vice
      President of Ryland (our former subsidiary) from May 1982 to June 1986 and
      President of Ryland until its merger into Lakeland on January 31,
      1990.




*Gregory
      D. Pontes* has served as Vice President of Manufacturing since September of
      2006.  He served as the Operations Manager from 2003-2006; and worked
      as Lakeland’s Senior Engineer from 1994-2003.  Prior to joining
      Lakeland Mr. Pontes worked at Kappler Inc. as their Project/Cost Engineer from
      1989-1994.




*James
      M. McCormick* was our Vice President and Treasurer from May 1986 to August
      2003 and is presently Controller and Treasurer. Mr. McCormick acted as Chief
      Financial Officer between April 2004 and November 2004.







66
 *Index*





Between
      January 1986 and May 1986 Mr. McCormick was our Controller.




*Paul
      C. Smith*, son of Raymond J. Smith, has served as Vice President since
      February 1, 2004. Prior to that, Mr. Smith was our Northeast Regional Sales
      Manager since September 1998. From April 1994 until September 1998, Mr. Smith
      was a sales representative for the Metropolitan Merchandising and Sales
      Co.




*John
      J. Collins, Jr.* was Executive Vice President of Chapdelaine GSI, a
      government securities firm, from 1977 to January 1987. He was Senior Vice
      President of Liberty Brokerage, a government securities firm, between January
      1987 and November 1998. Presently, Mr. Collins is self employed, managing a
      direct investment portfolio of small business enterprises for his own accounts.
      Mr. Collins has served as one of our directors since 1986 and his term as a
      director will expire at our annual meeting of stockholders in June
      2009.




*Eric
      O. Hallman* was President of Naess Hallman Inc., a ship brokering firm, from
      1974 to 1991. Mr. Hallman was also affiliated between 1991 and 1992 with
      Finanshuset (U.S.A.), Inc., a ship brokering and international financial
      services and consulting concern, and was an officer of Sylvan Lawrence, a real
      estate development company, between 1992 and 1998. Between 1998 and 2000, Mr.
      Hallman was President of PREMCO, a real estate management company, and currently
      is Comptroller of the law firm Murphy, Bartol & O’Brien, LLP. Mr. Hallman
      has served as one of our directors since our incorporation in 1982 and his
      term
      as a director will expire at our annual meeting of stockholders in June
      2009.




*Michael
      E. Cirenza* has been a Partner in Anchin, Block and Anchin since March 2007,
      and was the Executive Vice President and Chief Financial Officer of Country-Life
      LLC, a manufacturer and distributor of vitamins and nutritional supplements,
      from September 2002 until March 2007. Mr. Cirenza was the Chief Financial
      Officer and Chief Operating Officer of Resilien, Inc., an independent
      distributor of computers, components and peripherals from January 2000 to
      September 2002. He was an Audit Partner with the international accounting firm
      of Grant Thornton LLP from August 1993 to January 2000 and an Audit Manager
      with
      Grant Thornton LLP from May 1989 to August 1993. Mr. Cirenza was employed by
      the
      international accounting firm of Price Waterhouse from July 1980 to May 1989.
      Mr. Cirenza is a Certified Public Accountant in the State of New York and a
      member of the American Institute of Certified Public Accountants and the New
      York State Society of Certified Public Accountants. Mr. Cirenza has served
      as
      one of our directors since June 18, 2003 and his term as a director will expire
      at our annual meeting of stockholders in 2008.




*John
      Kreft* has been President of Kreft Interests, a Houston based private
      investment firm, since 2001. Between 1998 and 2001, he was CEO of Baker Kreft
      Securities, LLC, a NASD broker-dealer. From 1996 to 1998, he was a co-founder
      and manager of TriCap Partners, a Houston based venture capital firm. From
      1994
      to 1996 he was employed as a director at Alex Brown and Sons. He also held
      senior positions at CS First Boston including employment as a managing director
      from 1989 to 1994. Mr. Kreft graduated from the Wharton School of Business
      in
      1975.




*Stephen
      M. Bachelder* has been with Swiftview, Inc. a Portland based software
      company since 1999 and President since 2002. From 1991-1999 Mr. Bachelder ran
      a
      consulting firm advising software and hardware based companies in the Pacific
      Northwest. Mr. Bachelder was the president and owner of an Apparel Company,
      Bachelder Imports from 1982-1991 and worked in executive positions for Giant
      Foods, Inc. and Pepsico, Inc. between 1976-1982. Mr. Bachelder is a 1976
      Graduate of the Harvard Business School.




***Committees
      of the Board***


Our
      board
      of directors has a designated Audit Committee that reviews the scope and results
      of the audit and other services performed by our independent accountants. The
      Audit Committee is comprised solely of independent directors and consists of
      Messrs. Cirenza, Kreft, Bachelder, Hallman and Collins. The board of directors
      has also designated a Compensation Committee that establishes objectives for
      our
      senior executive officers, sets the compensation of directors, executive
      officers and our other employees and is charged with the administration of
      our
      employee benefit plans. The Compensation Committee is comprised solely of
      independent directors and consists of Messrs. Cirenza, Kreft, Bachelder, Collins
      and Hallman. There is also a Nominating Committee comprised of the independent
      directors.




***Compensation
      of Directors***


Each
      non-employee director receives a fee of $6,250 (committee chairman receive
      an
      additional $500) per quarter plus per-meeting fees of $1,500 for in-person
      attendance or $500 for telephone attendance. Non-employee directors are
      reimbursed for their reasonable expenses incurred in connection with attendance
      at or participation in such meetings. In addition, under our 1995 Director
      Plan,
      each non-employee director who becomes a director is granted an option to
      purchase 5,000 shares of our common stock. Messrs. Hallman and Collins were
      each
      granted an option to purchase 5,000 shares of our common stock under our
      previous 1986 Plan at the time of their respective







67
 *Index*





appointments
      or reelections to the board of directors. Such grants and the terms thereof
      were
      renewed on April 18, 1997, May 5, 1996 and May 5, 1996, respectively, in
      accordance with stockholder approval of the 1995 Director Plan at our 1995
      annual meeting of stockholders. Mr. Cirenza received an option to purchase
      5,000
      shares of our common stock upon his election to our board of directors in June
      2003.  Messrs. Kreft and Bachelder each received an option to purchase
      5,000 shares of our Common Stock upon appointment to our Board of Directors
      in
      November 2004.




Directors
      who are employees of Lakeland receive no additional compensation for their
      service as directors. However, such directors are reimbursed for their
      reasonable expenses incurred in connection with travel to or attendance at
      or
      participation in meetings of our board of directors or committees of the board
      of directors.








**ITEM
      11.  EXECUTIVE COMPENSATION**





See
      information under the caption "Compensation of Executive Officers" in the
      Company's Proxy Statement, which information is incorporated herein by
      reference.





**ITEM
      12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
      AND MANAGEMENT**





See
      the
      information under the caption "Voting Securities and Stock Ownership of
      Officers, Directors and Principal Stockholders" in the Company's Proxy
      Statement, which information is incorporated herein by reference.





**ITEM13.  CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS**





***Related
      Party Leases***


In
      the
      past, because our access to third party financing was insufficient, we entered
      into arrangements with our directors and executive officers in order to fund
      the
      construction or acquisition of our assembly facilities. In such cases, we
      commissioned independent appraisals in 1999, 2002 and 2004 to ensure that these
      arrangements approximated arrangements made on an arms length basis. We believe
      that we currently have sufficient access to financing to fund our current and
      anticipated facility needs, we do not anticipate entering into additional
      arrangements with our directors or executive officers in the
      future.  A description of our current arrangements with our directors
      and executive officers follows.




POMS
      Holding Co., or POMS, was formed in 1984 to lease both land and a building
      to us
      because bank financing was unavailable. POMS is a partnership whose partners
      include three of our directors, one of our officers and six other individuals
      who were stockholders of Lakeland at the time of the formation of POMS. Raymond
      J. Smith, the chairman of our board of directors, Harvey Pride, Jr., our Vice
      President – Manufacturing, and John J. Collins and Eric O. Hallman, both of whom
      are directors, have a 20%, 20%, 8.75% and 5% interest in POMS, respectively.
      POMS leased to us a 91,788 square foot disposable garment manufacturing facility
      in Decatur, Alabama. Under a lease effective September 1, 1999, we paid an
      annual rent of $364,900. This lease was renewed on April 1, 2004 through March
      31, 2009 at the same rental rate.   We purchased this facility
      from POMS on April 25, 2005.




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 and 2005. This lease was
      renewed on March 1, 2004 through March 31, 2009 at the same rental
      rate.




On
      June
      1, 1999, we entered into a five year lease agreement (expiring May 31, 2004)
      with River Group Holding Co., L.L.C. for a 49,500 sq. ft. warehouse facility
      located next to our existing facility in Decatur, Alabama. River Group Holding
      Co., L.L.C. is a limited liability company, the members of which are Raymond
      Smith, John Collins, Eric Hallman, Walter Raleigh (a former Director),
      Christopher Ryan and Harvey Pride, who all have an equal ownership interest.
      Mr.
      Ryan is our Chief Executive Officer, President, Secretary, General Counsel
      and a
      director of our company, Messrs. Smith, Collins and Hallman are all directors
      of
      our company, and Mr. Pride is our Vice President – Manufacturing. We paid an
      annual rent of $199,100 for this facility.  We were the sole occupant
      of the facility. This lease was renewed on April 1, 2004 through March 31,
      2009
      at the same rental rate.  We purchased this facility from River Group
      on May 25, 2005.












68
 *Index*





***Related
      Party-outside contractor***




The
      Company leases its facility in Mexico from Louis Gomez Guzman, an employee
      in
      Mexico until December 2005, pursuant to a lease expiring July 31, 2007 at an
      annual rental of $121,224.  Mr. Guzman is also acting as a contractor
      for our Mexican facility.  His company, Intermack, enables our Mexican
      facility to increase or decrease production as required without the Company
      needing to expand its facility.  During fiscal 2007 and 2006, Lakeland
      de Mexico paid Intermack $721,748 and $938,755 for services relating to contract
      production.




***Past
      Related Party Transactions***


In
      1997,
      An Qui Holding Co., L.L.C., or An Qui, a limited liability company whose members
      include Lakeland, and Messrs. Smith, Collins, Hallman, Raleigh, Ryan and Pride,
      provided financing for the construction of a 65,000 square foot building in
      An
      Qui City, China and the lease of the real property underlying the building
      for
      50 years from the Chinese government to Weifang Lakeland Safety Product Co.,
      Ltd., or Weifang, one of our subsidiaries. In connection with the financing,
      Weifang agreed to make annual payments to An Qui and to allocate a portion
      of
      the proceeds from any sale of the property to An Qui. In 2002, An Qui
      relinquished its rights to the annual payments and to its rights to proceeds
      from the sale of the property in exchange for the amount of $406,185 (net of
      expenses). Weifang paid $222,645, $89,000 and $94,400 of this amount to An
      Qui
      in December 2002, January 2003 and June 2003, respectively. Of the $406,185
      paid
      to An Qui, Messrs Smith, Collins, Hallman, Ryan and Pride each received $44,421
      and Mr. Raleigh received $39,792.




In
      2001,
      An Qui also helped to finance the construction of our facility in Jiaozhou,
      China through a loan to one of our Chinese subsidiaries. The loan bore interest
      at the rate of 9% per annum until May 30, 2003, when the rate increased to
      10%
      per annum. On June 19, 2003, we repaid this construction loan by paying $168,100
      (plus accrued interest) to An Qui and a foreign investor who contributed to
      the
      loan. Messrs. Smith, Collins, Hallman, Ryan and Pride, the members of An Qui
      who
      participated in this transaction, were each repaid their $26,000 investments
      plus interest of approximately $3,038.







**ITEM
      14.  PRINCIPAL ACCOUNTING FEES AND
      SERVICES**





See
      the information under the caption
“Report of the Audit Committee” in the Company’s Proxy Statement, which
      information is incorporated herein by reference.





**PARTIV**





**ITEM
      15.      EXHIBITS, FINANCIAL
      STATEMENT SCHEDULES AND REPORTS ON FORM 8 – K**





**(a)**         The
      following documents are filed as part of this report:





1  Consolidated
                Financial Statements (See Page 37 of this report which includes an
                index
                to the consolidated financial
                statements)





2  Financial
                Statement Schedules:


Schedule II- Valuation and Qualifying Accounts


All
      other
      schedules are omitted because they are not applicable, not required, or because
      the requiredinformation is included in the Consolidated Financial Statements
      or
      Notes thereto.


3.   Exhibits:





Exhibit
            Description3.1
            Restated
                Certificate of Incorporation of Lakeland Industries, Inc. (Incorporated
                by
                reference to Exhibit 3(a) of Lakeland Industries, Inc.’s Registration
                Statement on Form S-18 (File No. 33-7512 NY))








69
 *Index*








Exhibit
            Description3.2
            Bylaws
                of Lakeland Industries Inc., as amended (Incorporated by reference
                to
                Exhibit 3(b) of Lakeland Industries, Inc.’s Registration Statement on Form
                S-18 (File No. 33-7512 NY))10.2
            Lease
                Agreement, dated August 1, 2001, between Southwest Parkway, Inc.,
                as
                lessor, and Lakeland Industries, Inc., as lessee (Incorporated by
                reference to Exhibit 10(b) of Lakeland Industries, Inc.’s Annual Report on
                Form 10-K for the year ended January 31, 2002)10.3
            Lakeland
                Industries, Inc. Stock Option Plan (Incorporated by reference to
                Exhibit
                10(n) of Lakeland’s Registration Statement on Form S-18 (File No. 33-7512
                NY))10.4
            Employment
                Agreement, dated September 22, 2003, between Lakeland Industries,
                Inc. and
                Raymond J. Smith (Incorporated by reference to Exhibit 10(g) of Lakeland
                Industries, Inc.’s Quarterly Report on Form 10-Q filed December 12,
                2003)10.5
            Employment,
                dated February 1, 2006, agreement between Lakeland Industries, Inc.
                and
                Harvey Pride, Jr.10.7
            Employment
                Agreement, dated February 1, 2006, between Lakeland Industries, Inc.
                and
                Christopher J. Ryan10.10
            Lease
                Agreement, dated March 1, 2004, between Harvey Pride, Jr., as lessor,
                and
                Lakeland Industries, Inc., as lessee10.11
            Term
                Loan and Security Agreement, dated July 7, 2005, between Lakeland
                Industries, Inc. and Wachovia Bank, N.A. (Incorporated by reference
                to
                Exhibit 10.11 of Lakeland Industries, Inc.’s Quarterly Report on Form 10-Q
                filed September 7, 2005)10.12
            Employment
                Agreement, dated May 23, 2005, between Lakeland Industries, Inc.
                and James
                M. McCormick (Incorporated by reference to Exhibit 10(r) of Lakeland
                Industries, Inc.’s Quarterly Report on Form 10-Q filed June 9,
                2005)10.13
            Employment
                Agreement, dated September 22, 2003, between Lakeland Industries,
                Inc. and
                Paul C. Smith (Incorporated by reference to Exhibit 10(s) of Lakeland
                Industries, Inc.’s Quarterly Report on Form 10-Q filed December 12,
                2003)10.14
            Employment
                Agreement, dated November 29, 2005, between Lakeland Industries,
                Inc. and
                Gary Pokrassa, CPA.  (Incorporated by reference to exhibit 10.14
                of Lakeland Industries, Inc. Quarterly Report on Form 10-Q filed
                December
                12, 2005)10.15
            Employment
                Agreement, dated May 23, 2005, between Lakeland Industries Inc.,
                and
                Gregory D. Willis (Incorporated by reference to exhibit 10.15 of
                Lakeland
                Industries, Inc. Quarterly Report on Form 10-Q filed June 9,
                2005)








70
 *Index*








Exhibit
            Description10.16
            Asset
                Purchase Agreement, dated July, 2005 between Lakeland Industries,
                Inc. and
                Mifflin Valley, Inc. and Lease Agreement and Employment Contract
                between
                Lakeland Industries, Inc., and Michael Gallen (Incorporated by reference
                to exhibit 10.15, 10.16, and 10.17 of Lakeland Industries, Inc.’s
                Quarterly Report on form 10-Q filed September 7, 2005)10.17
            Supply
                Agreement and Option to Purchase, between Lakeland Industries, Inc.’s
                subsidiary RFB Lakeland Industries Private Ltd. and RFB Latex Private,
                Ltd. (Incorporated by reference to exhibits 10.18 and 10.19 of Lakeland
                Industries Inc.’s  Quarterly Report on form 10-Q filed December
                12, 2005)10.18
            Asset
                Purchase Agreement upon exercising of option, between Lakeland Industries,
                Inc. and RFB Lakeland Industries Private Ltd. (Incorporated by reference
                to exhibits 10.20 of Lakeland Industries Inc.’s Quarterly Report on form
                10-Q filed December 12, 2005)10.19
            Employment
                Agreements, between RFB Lakeland Industries Private Ltd. and P.S.
                Ratra
                and Kamal Ratra (Incorporated by reference to exhibits 10.21 and
                10.22 of
                Lakeland Industries, Inc.’s Quarterly Report on Form 10-Q filed December
                12, 2005)10.20
            Shareholder
                Agreement, between Lakeland Industries, Inc. and P.S. Ratra (Incorporated
                by reference to exhibit 10.23 of Lakeland Industries, Inc.’s Quarterly
                Report on form 10-Q filed December 12, 2005)10.21
            Lease
                Agreement, dated March 1, 2006, between Carlos Tornquist Bertrand,
                as
                lessor, and Lakeland Industries, Inc., as lessee10.22
            Lease
                Agreement, dated 2006, between Michael Robert Kendall, June Jarvis,
                and
                Barnett Waddingham Trustees Limited, as lessor, and Lakeland Industries,
                Inc., as lessee14.1
            Lakeland
                Industries, Inc. Code of Ethics21.1
            Subsidiaries
                of Lakeland Industries, Inc. (wholly-owned):
              Lakeland
                Protective Wear, Inc.
              Lakeland
                Protective Real Estate
              Lakeland
                de Mexico S.A. de C.V.
              Laidlaw,
                Adams & Peck, Inc. and Subsidiary (Meiyang Protective Products Co.,
                Ltd.)
              Weifang
                Lakeland Safety Products Co., Ltd.
              Qing
                Dao Lakeland Protective Products Co., Ltd.
              Lakeland
                Industries Europe Ltd.
              RFB
                Lakeland Industries Private, Ltd.
              Lakeland
                Industries, Inc. Agencia en Chile
              Lakeland
                Japan, Inc.








71
 *Index*








**(b)**
            **Reports
                on Form 8 - K.**




The
      documents which we incorporate by reference consist of the documents listed
      below that we have previously filed with the SEC:


A
–
On
      November 22, 2006 the Company filed a Form 8-K announcing the closing on its
      contract to buy the Industrial Glove assets of RFB Latex, Ltd. in
      India.


B
–
On
      November 30, 2006 the Company filed a Form 8-K reporting notice of a
      teleconference call on December 7, 2006 to discuss the results of the Company’s
      third quarter ended October 31, 2006.


C
–
On
      December 7, 2006 the Company filed a Form 8-K regarding the results for
      operations of the Company’s third quarter ended October 31, 2006.


D
–
On
      January 30, 2007 the Company filed a Form 8-K regarding the settlement and
      termination of the Fireland Pension Fund.








72
 *Index*








**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.**





Dated:    April
      12, 2007


LAKELAND
                INDUSTRIES, INC.By:
            /
                s / Christopher J. RyanChristopher
                J. Ryan,Chief
                Executive Officerand
                President








**Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated:**





**Name**
            **Title**
            **Date**/s/
                Raymond J. Smith
            Chairman
                of the Board
            April
                12, 2007Raymond
                J. Smith/s/
                Christopher J. Ryan
            Chief
                Executive Officer, President,
            April
                12, 2007Christopher
                J. Ryan
            General
                Counsel, Secretary and Director/s/
                Gary Pokrassa
            Chief
                Financial Officer
            April
                12, 2007Gary
                Pokrassa/s/  James
                M. McCormick
            Controller
                and Treasurer
            April
                12, 2007James
                M. McCormick/s/
                Eric O. Hallman
            Director
            April
                12, 2007Eric
                O. Hallman/s/
                John J. Collins, Jr.
            Director
            April
                12, 2007John
                J. Collins, Jr./s/
                Michael E. Cirenza
            Director
            April
                12, 2007Michael
                E. Cirenza/s/
                John Kreft
            Director
            April
                12, 2007John
                Kreft/s/
                Stephen M. Bachelder
            Director
            April
                12, 2007Stephen
                M. Bachelder




73