UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K/A

(AMENDMENT NO. 2)



(Mark one)

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

For the fiscal year endedJanuary 31, 2014

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 registered
– NASDAQ Global Select Market

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.

YesoNo 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 oNo 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 xNo o



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



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



|Large accelerated filer | o                                                       | Accelerated filer o        
|----------------------- | ------------------------------------------------------- | ---------------------------
|Nonaccelerated filer    | o
    (Do not check if
    a smaller reporting company) | Smaller reporting company x



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

YesoNo x

As of July 31, 2013, the aggregate
market value of the registrant’s common stock held by nonaffiliates of the registrant was $21,189,363 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 registrant’s classes of common stock, as of the latest practicable date.



|Class                                   |  | Outstanding
    at April 25, 2014
|--------------------------------------- |  | ---------------------------------
|Common Stock, $0.01 par value per share |  | 5,357,390 Shares                 



DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s
definitive proxy statement to be filed pursuant to Regulation 14A of the Security Exchange Act of 1934 are incorporated by reference
into Part III (Items 10, 11, 12, 13 and 14) of this Form 10-K.













Explanatory Note



We are filing this Amendment No. 2
(this “Amendment No. 2”) to our Annual Report on Form 10-K for the year ended January 31, 2014 filed with the Securities
and Exchange Commission on April 28, 2014 (the “Original Form 10-K”) and amended by Amendment No. 1 on April 29, 2014,
to refile “Item 8. Financial Statements and Supplementary Data” in its entirety for the purpose of furnishing the
separate reports of the other independent registered public accounting firms relied upon by our principal independent registered
public accounting firm for the audit of our consolidated financial statements for the years ended January 31, 2014 and 2013. We
are also filing this Amendment No. 2 to amend Part IV, Item 15b to include the related consents of each such other independent
registered public accounting firm as exhibits to the Original Form 10-K and correctly disclose the restatement and the restatement
date of our Bylaws and correct the date of the filing of our Restated Certificate of Incorporation. The dates of these two exhibits
were inadvertently crossed from the electronic version on the Original Form 10-K. The report of ACAL CONSULTORIA E AUDITORIA S/S
on the 2014 and 2013 financial statements of Lakeland Brazil, S.A. contained a departure from accounting principles generally
accepted in the United States of America as Lakeland Brazil, S.A. had not recorded a liability pertaining to the VAT Tax Issue
in Brazil discussed in Note 10 to Lakeland Industries, Inc. and Subsidiaries (the “Company”) consolidated financial
statements. The related liability was, however, recorded as a corporate entry and thus included in the liabilities of the
Company in the consolidated financial statements. Warren Averett LLC’s opinion is not modified with respect to that
matter.



No other modifications or changes have
been made to the Original Form 10-K or the Company’s financial statements included therein. This Amendment No. 2 does not
reflect the effect of any events subsequent to the filing of the Original Form 10-K for the year ended January 31, 2014 and does
not modify or update in any way any other disclosures made in the Original Form 10-K.





2







ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA



Index to
Consolidated Financial Statements



|Consolidated Financial Statements:                                                                                                                                                     |         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                                                                                                       | Page No.
|Report of Independent Registered Public Accounting Firm (Warren Averett, LLC)                                                                                                          | 4       
|Report of Independent Registered Public Accounting Firm (ACAL Consultoria E Auditoria S/S)                                                                                             | 5       
|Report of Independent Registered Public Accounting Firm (RSM China)                                                                                                                    | 6       
|Consolidated Statements of Operations for the Years Ended January 31, 2014 and 2013                                                                                                    | 7       
|Consolidated Statements of Comprehensive Loss for the Years Ended January 31, 2014 and 2013                                                                                            | 8       
|Consolidated Balance Sheets for January 31, 2014 and 2013                                                                                                                              | 9       
|Consolidated Statements of Stockholders' Equity for the Years Ended January 31, 2014 and  2013                                                                                         | 10      
|Consolidated Statements of Cash Flows for the Years Ended January 31, 2014 and  2013                                                                                                   | 11      
|Notes to Consolidated Financial Statements                                                                                                                                             | 12-46   
|                                                                                                                                                                                       |         
|All 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. |         



3









REPORT OF WARREN AVERETT, LLC, INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM







To the Board of Directors and

Stockholders of Lakeland Industries,
Inc. and Subsidiaries

Ronkonkoma, New York



We have audited the accompanying consolidated
balance sheets of Lakeland Industries, Inc. and Subsidiaries (the Company) as of January 31, 2014 and 2013, and the related consolidated
statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year
period ended January 31, 2014. The Company’s management is responsible for these financial statements. Our responsibility
is to express an opinion on these financial statements based on our audits.  For the year ended January 31, 2014, we did not
audit the financial statements of Lakeland Brazil, S.A. and Weifang Lakeland Safety Products Co., Ltd., wholly-owned subsidiaries,
which statements reflect total assets and revenues constituting 22% and 14%, respectively, of the related consolidated totals in
2014. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates
to the amounts included for Lakeland Brazil, S.A., and Weifang Lakeland Safety Products Co., Ltd., China, is based solely on the
report of other auditors. For the year ended January 31, 2013, we did not audit the financial statements of Lakeland Brazil, S.A.,
a wholly-owned subsidiary, which statements reflect total assets and revenues constituting 19% and 18%, respectively, of the related
consolidated totals in 2013.  Those statements were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included in Lakeland Brazil, S.A., is based solely on the report of other auditors.



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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



In our opinion, based on our audit
and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of January 31, 2014 and 2013, and the consolidated results of
their operations and their cash flow for each of the years in the two-year period ended January 31, 2014, in conformity with
accounting principles generally accepted in the United States of America.





The other auditor’s report on the
2014 and 2013 financial statements of Lakeland Brazil, S.A. referred to the VAT Tax Issue in Brazil as discussed in Note 10 to
the consolidated financial statements.  Our opinion is not modified with respect to that matter.









|/s/
    Warren Averett, LLC | 
|--------------------------- | 
|Birmingham, Alabama         | 
|April 28, 2014              | 



4







REPORT OF ACAL CONSULTORIA E AUDITORIA
S/S, INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM



To the Board of Directors and

Stockholders of Lakeland Brasil S.A.



We have audited the accompanying balance
sheets of Lakeland Brasil S.A. as of January 31, 2014 and 2013, and the related statements of income, comprehensive income, stockholders’
equity, and cash flows for each of the years in the two-year period ended 2014 and 2013. Lakeland Brasil S.A.’s management
is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Lakeland Brasil S.A as of 2014 and 2013,
and the results of its operations and its cash flows for each of the years in the two-year period ended 2014 and 2013 in conformity
with accounting principles generally accepted in the United States of America.



As described on note No. 12, the State
Tax Authority of Bahia State issued several claims against the Company regarding tax payment insufficiency from 2004 to 2013 totaling
approximately USD 7,745,000. Considering that the above amounts are under discussions on an administrative phase, remaining other
administrative and even judicial instances, the Company decided not to account for a provision for contingencies.



|/s/
    ACAL CONSULTORIA E AUDITORIA S/S | 
|---------------------------------------- | 
|Rio de Janeiro, RJ                       | 
|April 22, 2014                           | 



5







REPORT OF RSM CHINA (Shanghai), INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM



RSM China SH 2014 – U001



To the Board of Directors and Stockholders of

Weifang Lakeland Safety Products Co., Ltd., China,



We have audited the accompanying balance sheet of Weifang
Lakeland Safety Products Co., Ltd. as of January 31, 2014, and the related statement of operations, stockholder’s equity
and cash flows for the year then ended. Weifang Lakeland Safety Products Co., Ltd.’s management is responsible for these
financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. The financial
statements of Weifang Lakeland Safety Products Co., Ltd. as of January 31, 2013 and for the year then ended were audited
by other auditors whose report dated March 8th, 2013.



We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes 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,
as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our
opinion.



In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Weifang Lakeland Safety Products Co., Ltd. as of January 31,
2014, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted
accounting principles.



|/s/ RSM
    CHINA | 
|----------------- | 
|(Shanghai)        | 



March 31, 2014





6







Lakeland Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended January 31, 2014
and 2013



|                                                                                                                                   |  | Years Ended |           
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----------
|                                                                                                                                   |  | January 31, |           
|                                                                                                                                   |  | 2014        |           
|                                                                                                                                   |  |             |           
|Net sales from continuing operations                                                                                               |  | $           | 91,384,695
|Cost of goods sold from continuing operations                                                                                      |  |             | 66,551,354
|Gross profit from continuing operations                                                                                            |  |             | 24,833,341
|Operating expenses from continuing operations                                                                                      |  |             |           
|Selling and shipping                                                                                                               |  |             | 11,797,803
|General and administrative                                                                                                         |  |             | 13,394,547
|Total operating expense from continuing operations                                                                                 |  |             | 25,192,350
|Operating loss from continuing operations                                                                                          |  |             | (359,009  
|Foreign exchange loss in Brazil                                                                                                    |  |             | (475,865  
|Arbitration judgment in Brazil                                                                                                     |  |             | —         
|Goodwill and other intangibles impairment in Brazil                                                                                |  |             | —         
|Other income (loss)                                                                                                                |  |             | 50,432    
|Additional VAT tax charge in Brazil                                                                                                |  |             | —         
|Interest expense                                                                                                                   |  |             | (2,186,450
|Loss from continuing operations  before income taxes                                                                               |  |             | (2,970,892
|Provision (benefit) for income taxes on continuing operations                                                                      |  |             | (2,851,391
|Loss from continuing operations                                                                                                    |  |             | (119,501  
|Discontinued operations:                                                                                                           |  |             |           
|Loss from operations of discontinued India glove manufacturing facility (including loss on disposal of $800,000 in assets in 2013) |  |             | —         
|Benefit from income taxes                                                                                                          |  |             | —         
|Loss on discontinued operations                                                                                                    |  |             | —         
|Net loss                                                                                                                           |  | $           | (119,501  
|Basic loss per share:                                                                                                              |  |             |           
|Loss from continuing operations                                                                                                    |  | $           | (0.02     
|Discontinued operations                                                                                                            |  |             | —         
|Basic loss per share                                                                                                               |  | $           | (0.02     
|Diluted loss per share:                                                                                                            |  |             |           
|Loss from continuing operations                                                                                                    |  | $           | (0.02     
|Discontinued operations                                                                                                            |  |             | —         
|Diluted loss per share                                                                                                             |  | $           | (0.02     
|Weighted average common shares outstanding:                                                                                        |  |             |           
|Basic                                                                                                                              |  |             | 5,689,230 
|Diluted                                                                                                                            |  |             | 5,689,230 



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



7







Lakeland Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS

For the Years Ended January 31, 2014
and 2013



|                                                                 |  | Years Ended |           
|---------------------------------------------------------------- |  | ----------- | ----------
|                                                                 |  | January 31  |           
|                                                                 |  | 2014        |           
|Net loss                                                         |  | $           | (119,501  
|Other comprehensive loss:                                        |  |             |           
|Cash flow hedge in China                                         |  |             | (19,664   
|Foreign currency translation adjustments:                        |  |             |           
|Lakeland Brazil, S.A.                                            |  |             | (1,094,776
|Canada                                                           |  |             | (91,461   
|United Kingdom                                                   |  |             | 21,732    
|China                                                            |  |             | 25,958    
|Russia/Kazakhstan                                                |  |             | (100,096  
|Brazil goodwill and other intangibles write-off reclassification |  |             | —         
|Other comprehensive loss                                         |  |             | (1,258,307
|Comprehensive loss                                               |  | $           | (1,377,808



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



8







Lakeland Industries, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

For the Years Ended January 31, 2014
and 2013



|                                                                                                                                                                     |  | January 31, |           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----------
|                                                                                                                                                                     |  | 2014        |           
|ASSETS                                                                                                                                                               |  |             |           
|Current assets                                                                                                                                                       |  |             |           
|Cash and cash equivalents                                                                                                                                            |  | $           | 4,555,097 
|Accounts receivable, net of allowance for doubtful accounts of  $588,800 and $342,000 at January 31, 2014 and 2013, respectively                                     |  |             | 13,795,301
|Inventories                                                                                                                                                          |  |             | 39,844,309
|Deferred income taxes                                                                                                                                                |  |             | 4,707,278 
|Assets of discontinued operations in India                                                                                                                           |  |             | —         
|Prepaid income tax                                                                                                                                                   |  |             | 470,843   
|Other current assets                                                                                                                                                 |  |             | 2,108,177 
|Total current assets                                                                                                                                                 |  |             | 65,481,005
|Property and equipment, net                                                                                                                                          |  |             | 12,069,107
|Prepaid VAT and other taxes, noncurrent                                                                                                                              |  |             | 2,379,395 
|Security deposits                                                                                                                                                    |  |             | 1,415,372 
|Intangibles, prepaid bank fees and other assets, net                                                                                                                 |  |             | 1,533,349 
|Goodwill                                                                                                                                                             |  |             | 871,297   
|Total assets                                                                                                                                                         |  | $           | 83,749,525
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                 |  |             |           
|Current liabilities                                                                                                                                                  |  |             |           
|Accounts payable                                                                                                                                                     |  | $           | 8,181,026 
|Accrued compensation and benefits                                                                                                                                    |  |             | 1,189,324 
|Other accrued expenses                                                                                                                                               |  |             | 1,554,231 
|Liabilities of discontinued operations in India                                                                                                                      |  |             | —         
|Current maturity of long-term debt                                                                                                                                   |  |             | 50,000    
|Current maturity of arbitration settlement                                                                                                                           |  |             | 1,000,000 
|Short-term borrowing                                                                                                                                                 |  |             | 2,558,545 
|Borrowings under revolving credit facility                                                                                                                           |  |             | 12,415,424
|Total current liabilities                                                                                                                                            |  |             | 26,948,550
|Accrued arbitration award in Brazil (net of current maturities)                                                                                                      |  |             | 3,758,691 
|Long-term portion of Canada and Brazil loans                                                                                                                         |  |             | 1,110,634 
|Subordinated debt, net of OID                                                                                                                                        |  |             | 1,525,392 
|Other liabilities - accrued legal fees in Brazil                                                                                                                     |  |             | 71,223    
|VAT taxes payable long term                                                                                                                                          |  |             | 3,329,275 
|Total liabilities                                                                                                                                                    |  |             | 36,743,765
|Stockholders’ equity                                                                                                                                                 |  |             |           
|Preferred stock, $.01 par; authorized 1,500,000 shares  (none issued)                                                                                                |  |             | —         
|Common stock, $.01 par; authorized 10,000,000 shares, issued 5,713,180 and 5,688,600; outstanding 5,356,739 and 5,332,159 at January 31, 2014 and 2013, respectively |  |             | 57,132    
|Treasury stock, at cost; 356,441 shares at January 31, 2014 and January 31, 2013                                                                                     |  |             | (3,352,291
|Additional paid-in capital                                                                                                                                           |  |             | 53,365,286
|Accumulated deficit                                                                                                                                                  |  |             | (591,945  
|Accumulated other comprehensive loss                                                                                                                                 |  |             | (2,472,422
|Total stockholders' equity                                                                                                                                           |  |             | 47,005,760
|Total liabilities and stockholders' equity                                                                                                                           |  | $           | 83,749,525



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



9







Lakeland Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY

For the Years Ended January 31, 2014
and 2013



|                                                                                                                       |  | Common Stock |           |  | Treasury Stock |   |        | Additional
    Paid-in |  |  | Retained
    Earnings |   |  | Accumulated
    Other
    Comprehensive |            |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- |  | -------------- | - | ------ | ---------------------- |  |  | --------------------- | - |  | --------------------------------------- | ---------- | - | --------- | -
|                                                                                                                       |  | Shares       |           |  | Amount         |   |        | Shares                 |  |  | Amount                |   |  | Capital                                 |            |   | (Deficit) |  
|                                                                                                                       |  |              |           |  |                |   |        |                        |  |  |                       |   |  |                                         |            |   |           |  
|Balance, January 31, 2012                                                                                              |  |              | 5,581,919 |  |                | $ | 55,819 |                        |  |  | (356,441              | ) |  | $                                       | (3,352,291 | ) |           | $
|                                                                                                                       |  |              |           |  |                |   |        |                        |  |  |                       |   |  |                                         |            |   |           |  
|Net loss                                                                                                               |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Other comprehensive loss                                                                                               |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Stock-based compensation:                                                                                              |  |              |           |  |                |   |        |                        |  |  |                       |   |  |                                         |            |   |           |  
|Grant of director stock options                                                                                        |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Restricted stock issued at par                                                                                         |  |              | 106,681   |  |                |   | 1,067  |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Restricted Stock Plan:                                                                                                 |  |              |           |  |                |   |        |                        |  |  |                       |   |  |                                         |            |   |           |  
|2009 Plan                                                                                                              |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|2012 Plan                                                                                                              |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Return of shares in lieu
    of payroll tax withholding                                                                |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Balance, January 31, 2013                                                                                              |  |              | 5,688,600 |  |                | $ | 56,886 |                        |  |  | (356,441              | ) |  | $                                       | (3,352,291 | ) |           | $
|                                                                                                                       |  |              |           |  |                |   |        |                        |  |  |                       |   |  |                                         |            |   |           |  
|Net loss                                                                                                               |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Other comprehensive loss                                                                                               |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Stock-based compensation:                                                                                              |  |              |           |  |                |   |        |                        |  |  |                       |   |  |                                         |            |   |           |  
|Restricted stock issued at par                                                                                         |  |              | 24,580    |  |                |   | 246    |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Restricted Stock Plan:                                                                                                 |  |              |           |  |                |   |        |                        |  |  |                       |   |  |                                         |            |   |           |  
|2009 Plan                                                                                                              |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|2012 Plan                                                                                                              |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Warrant issued to subordinated debt lender–valuation treated
    as Original Issue Discount (“OID”)   (566,015 shares) |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Legal fees associated with Warrant                                                                                     |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Return of shares in lieu of payroll tax withholding                                                                    |  |              | —         |  |                |   | —      |                        |  |  | —                     |   |  |                                         | —          |   |           |  
|Balance, January 31, 2014                                                                                              |  |              | 5,713,180 |  |                | $ | 57,132 |                        |  |  | (356,441              | ) |  | $                                       | (3,352,291 | ) |           | $

Numbers may not add due to rounding.



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



10







Lakeland Industries, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended January 31, 2014
and 2013



|                                                                                          |  | Years Ended January 31, |            
|----------------------------------------------------------------------------------------- |  | ----------------------- | -----------
|                                                                                          |  | 2014                    |            
|Cash flows from operating activities                                                      |  |                         |            
|Net loss                                                                                  |  | $                       | (119,501   
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                         |            
|Arbitration award in Brazil                                                               |  |                         | —          
|Payment of settlement agreement for arbitration award in Brazil, net of imputed interest  |  |                         | (952,000   
|Provision for inventory obsolescence                                                      |  |                         | 2,632,000  
|Goodwill and other intangibles impairment charge                                          |  |                         | —          
|Provision for doubtful accounts                                                           |  |                         | 246,813    
|Deferred income taxes                                                                     |  |                         | (4,707,278 
|Deferred taxes long term                                                                  |  |                         | 455        
|Depreciation and amortization                                                             |  |                         | 1,606,993  
|Interest expense resulting from amortization of warrant OID                               |  |                         | 260,792    
|Stock-based and restricted stock compensation                                             |  |                         | 197,744    
|(Increase) decrease in operating assets:                                                  |  |                         |            
|Accounts receivable                                                                       |  |                         | (528,873   
|Inventories                                                                               |  |                         | (4,595,924 
|Prepaid income taxes and other current assets                                             |  |                         | 1,093,993  
|Other assets - mainly prepaid fees from financing transaction                             |  |                         | (2,034,350 
|Cash received from sale of discontinued operations                                        |  |                         | 428,827    
|Assets of discontinued operations                                                         |  |                         | 364,434    
|Increase (decrease) in operating liabilities:                                             |  |                         |            
|Accounts payable                                                                          |  |                         | 2,601,139  
|Accrued compensation and benefits                                                         |  |                         | —          
|Accrued expenses and other liabilities                                                    |  |                         | (351,597   
|Liabilities of discontinued operations                                                    |  |                         | (25,041    
|Net cash provided by (used in) operating activities                                       |  |                         | (3,881,374 
|Cash flows from investing activities:                                                     |  |                         |            
|Proceeds from sales of Qingdao, net of cost of shutdown                                   |  |                         | 724,402    
|Additional write-off/India assets held for sale                                           |  |                         | —          
|Purchases of property and equipment                                                       |  |                         | (828,894   
|Net cash used in investing activities                                                     |  |                         | (104,492   
|Cash flows from financing activities                                                      |  |                         |            
|Net borrowings under credit agreement (revolver)                                          |  |                         | 12,415,424 
|Proceeds from term loans, net of repayments                                               |  |                         | —          
|Repayments of term loans                                                                  |  |                         | —          
|TD Bank and BDC repayments at closing of new financing                                    |  |                         | (15,108,882
|Borrowings in Canada                                                                      |  |                         | 1,061,776  
|Canada loan repayments                                                                    |  |                         | (1,398,566 
|Subordinated debt financing                                                               |  |                         | 3,500,000  
|Borrowings in Brazil                                                                      |  |                         | 1,698,653  
|Repayments in Brazil                                                                      |  |                         | (1,840,091 
|UK borrowings, net                                                                        |  |                         | 776,961    
|China borrowings, net                                                                     |  |                         | 811,669    
|Shares returned in lieu of taxes under restricted stock program                           |  |                         | (31,683    
|Other liabilities                                                                         |  |                         | (24,688    
|Net cash provided by (used in) financing activities                                       |  |                         | 1,860,573  
|Effect of exchange rate changes on cash                                                   |  |                         | (56,572    
|Cash reclassified from assets held-for-sale                                               |  |                         | —          
|Net increase (decrease) in cash and cash equivalents                                      |  |                         | (2,181,865 
|Cash and cash equivalents at beginning of year                                            |  |                         | 6,736,962  
|Cash and cash equivalents at end of year                                                  |  | $                       | 4,555,097  



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



11







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



| | 1. | BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
| | -- | --------------------------------------------



Business

Lakeland Industries, Inc. and
Subsidiaries (“Lakeland” or the “Company”), a Delaware corporation organized in April 1986, 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 FY14
or FY13. For purposes of these financial statements, FY refers to a fiscal year ended January 31; thus, FY14 refers to the fiscal
year ended January 31, 2014.



Basis
of Presentation

The Company prepares its financial
statements in accordance with accounting principles generally accepted in the United States of America. The following is a description
of the Company’s significant accounting policies.



Principles
of Consolidation

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



Revenue
Recognition

The Company derives its sales
primarily from its limited use/disposable protective clothing and secondarily from its sales of high-end chemical protective suits,
firefighting and heat protective apparel, gloves and arm guards and reusable woven garments. Sales are recognized when goods are
shipped, at which time title and the risk of loss pass to the customer. Some sales in Brazil may be sold on terms with F.O.B.
destination, which are recognized when received by the customer. Sales are reduced for sales returns and allowances. Payment terms
are generally net 30 days for United States sales and net 90 days for international sales.



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



Lakeland offers a growth rebate
to certain distributors each year on a calendar-year basis. Sales are tracked on a monthly basis, and accruals are based on sales
growth over the prior year. The growth rebate accrual is adjusted either up or down on a monthly basis as a reduction (increase)
to revenue and an increase (reduction) to the accrual based on monthly sales trends as compared with prior year. Based on volume
and products purchased, distributors can earn anywhere from 1% to 6% rebates in the form of either a quarterly or annual credit
to their account, depending on the specific agreement. In estimating the accrual needed, management tracks sales growth over the
prior year.



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



Customer pricing is subject
to change on a 30-day notice; exceptions based on meeting competitors’ pricing are considered on a case-by-case basis. Revenue
is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded
as current liabilities until remitted to the relevant government authority.



For larger orders, except in
its Lakeland Fire 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 $2.4 and $2.5 million in FY14 and FY13, respectively.



12







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013

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.



USA and China-Lower of Cost
or Market and Obsolete

There is one discontinued product
line in the US that management had been converting to a different style for one customer and reserving the cost of conversion.
While this customer continues to purchase these converted styles during FY14, management determined that this one customer would
not purchase these converted items in sufficient quantity and management will have to sell the remaining stock at a deep discount.
It was further determined an additional write-down was needed for remaining Tyvek inventory and obsolete raw materials used from
other discontinued product lines. Such write-downs totaled approximately $1.3 million.



Brazil-Lower of Cost or Market
and Obsolete

It was determined that due to
the introduction of a new fabric domestically sourced in Brazil which drove down market pricing, along with significant improvements
and elimination of inefficiencies in the production process, adjustments were made to inventory in FY14. In addition, the Company
identified certain inventory in Brazil as obsolete. The inventory became obsolete as a result of the introduction of competing
new products into the Brazilian marketplace which rendered the inventory items obsolete. As a result, the inventory was written
down to scrap value. Further, as a result of new Brazilian management completing its review of inventory to reflect new strategy
and current market conditions, we took a further write-down to reflect slow moving and obsolete inventory. Such write-downs in
Brazil totaled $1,463,000 in FY14.



While management does not expect
any further significant write-downs of current inventory, specifically in either Brazil or the US or anywhere else we operate,
no assurance can be given.



Property
and Equipment

Property and equipment is 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
and Intangible Assets

Goodwill represents the future
economic benefits arising from other assets acquired in a business combination that are not individually identified and separately
recognized. Goodwill and indefinite lived intangible assets are evaluated for impairment at least annually; however, this evaluation
may be performed more frequently when events or changes in circumstances indicate the carrying amount may not be recoverable.
Factors that the Company considers important that could identify a potential impairment include: significant changes in the overall
business strategy and significant negative industry or economic trends. Management assesses whether it is more likely than not
that goodwill is impaired and, if necessary, compares the current value of the entity acquired to the carrying value. Fair value
is generally determined by management either based on estimating future discounted cash flows for the reporting unit or by estimating
a sales price for the reporting unit based on a multiple of earnings. These estimates require the Company’s management to
make projections that can differ materially from actual results.



13







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



Impairment
of Long-Lived Assets

The Company evaluates the carrying
value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be
recoverable. The Company measures any potential impairment on a projected undiscounted cash flow method. Estimating future cash
flows requires the Company’s management to make projections that can differ materially from actual results.



The carrying value of a long-lived
asset is considered impaired when the total projected undiscounted cash flows from the asset is less than its carrying value.
In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset.



Self-Insured
Liabilities

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



Stock-Based
Compensation

The Company records the cost
of stock-based compensation plans based on the fair value of the award on the grant date. For awards that contain a vesting provision,
the cost is recognized over the requisite service period (generally the vesting period of the equity award). For awards based
on services already rendered, the cost is recognized immediately.



Allowance
for Doubtful Accounts

Trade accounts receivable are
stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The Company recognizes losses when information available
before the financial statements are issued or are available to be issued indicates that it is probable that an asset has been
impaired based on criteria noted above at the date of the financial statements, and the amount of the loss can be reasonably estimated.
Management considers the following factors when determining the collectability of specific customer accounts:



Customer creditworthiness, past
transaction history with the customer, current economic industry trends and changes in customer payment terms. Past due balances
over 90 days and other less creditworthy accounts are reviewed individually for collectability. If the financial condition of
the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would
be required. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge
to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection
efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.



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
$123,000 and $242,000 in the FY14 and FY13, respectively.



14







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



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.



The Company recognizes tax positions
that meet a “more likely than not” minimum recognition threshold.



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, 2014 and 2013 were 341,181 and 0, respectively, representing the warrant issued with the subordinated
debt financing. 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.



The following table sets forth
the computation of basic and diluted earnings per share for “income for continuing operations” at January 31, 2014
and 2013, as follows:



|                                                                                                                                                                                                                                                                                                                                                  |  | Years Ended |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ---------
|                                                                                                                                                                                                                                                                                                                                                  |  | January 31, |          
|                                                                                                                                                                                                                                                                                                                                                  |  | 2014        |          
|Numerator                                                                                                                                                                                                                                                                                                                                         |  |             |          
|Loss from continuing operations                                                                                                                                                                                                                                                                                                                   |  | $           | (119,501 
|Denominator                                                                                                                                                                                                                                                                                                                                       |  |             |          
|Denominator for basic earnings per share (weighted-average shares which reflect 356,441 shares in the treasury as a result of the stock repurchase program for the years ended January 31, 2014 and 2013, respectively) and 341,181 and 0 weighted average common equivalents relating to the warrant issued with the subordinated debt financing |  |             | 5,689,230
|Effect of dilutive securities from restricted stock plan and from dilutive effect of stock options                                                                                                                                                                                                                                                |  |             | —        
|Denominator for diluted earnings (loss) per share (adjusted weighted average shares)                                                                                                                                                                                                                                                              |  |             | 5,689,230
|Basic loss per share from continuing operations                                                                                                                                                                                                                                                                                                   |  | $           | (0.02    
|Diluted loss per share from continuing operations                                                                                                                                                                                                                                                                                                 |  | $           | (0.02    



15







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



Advertising Costs

Advertising costs are expensed
as incurred, including selling and shipping expenses on the income statement. Advertising and co-op costs amounted to $322,000
and $263,000 in FY14 and FY13, 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.



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 $4.6 million and $4.5 million at January 31, 2014 and 2013, respectively.



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



|                                                                     |  | 2014 |           |  | 2013 |  
|-------------------------------------------------------------------- |  | ---- | --------- |  | ---- | -
|                                                                     |  |      |           |  |      |  
|Interest paid                                                        |  | $    | 1,581,366 |  |      | $
|Income taxes paid                                                    |  | $    | 1,331,279 |  |      | $
|Accumulated amortization of warrant OID included in interest expense |  | $    | 260,792   |  |      | $





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.



Our foreign financial depositories
are Bank of America; China Construction Bank; Bank of China; China Industrial and Commercial Bank; HSBC; HSBC in India, Argentina
and UK; Raymond James in Argentina; TD Canada Trust; Banco do Brasil, S.A., Banco Itaú S.A., and Mercantil do Brasil, S.A.
in Brazil; Banco Credito Inversione in Chile; Banco Mercantil Del Norte SA in Mexico; ZAO KB Citibank Moscow in Russia and JSC
Bank Centercredit in Kazakhstan. We monitor our financial depositories by their credit rating.



Foreign
Operations and Foreign Currency Translation

The Company maintains manufacturing
operations in Mexico, Brazil, Argentina and the People’s Republic of China and can access independent contractors in Mexico,
Brazil, Argentina and China. It also maintains sales and distribution entities located in India, Canada, the U.K., Chile, China,
Argentina, Russia, Kazakhstan, Mexico and Brazil. The Company is vulnerable to currency risks in these countries. The functional
currency of foreign subsidiaries is the US dollar, except for the Brazilian operation (Brazil Real), UK operation (Euro), trading
companies in China (RenminBi), Russia (Russian Ruble), Kazakhstan (Tenge) and the Canadian Real Estate (Canadian dollar) subsidiary.



Pursuant to US GAAP, assets
and liabilities of the Company’s foreign operations with functional currencies, other than the US dollar, are translated
at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average rates prevailing
during the periods. Translation adjustments are reported in accumulated other comprehensive loss, a separate component of stockholders’
equity.



16







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



The monetary assets and liabilities
of the Company’s foreign operations with the US dollar as the functional currency are translated into US dollars at current
exchange rates, while nonmonetary 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 losses or
(gains) of approximately $124,000 and $390,000 for FY14 and FY13, respectively, outside Brazil.



Comprehensive
Loss

Comprehensive loss refers to
revenue, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income or
loss but are excluded from net income or loss as these amounts are recorded directly as an adjustment to stockholders' equity.
This includes translation adjustments for foreign subsidiaries where the functional currency is other than the US dollar. No tax
benefit or expense has been attributed to any of these items. Amounts have been reclassified into the statement of operations
as appropriate based on impairment charges.



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. 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 instruments are its outstanding revolving credit facility and term loans and its cash flow hedges in China. 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, or the prevailing foreign exchange rates in the case of the cash flow hedges.



2. INVENTORIES,
NET

Inventories consist of the following
at January 31:



|                |  | 2014 |            |  | 2013 |  
|--------------- |  | ---- | ---------- |  | ---- | -
|                |  |      |            |  |      |  
|Raw materials   |  | $    | 16,348,861 |  |      | $
|Work-in-process |  |      | 1,292,741  |  |      |  
|Finished goods  |  |      | 22,202,707 |  |      |  
|                |  | $    | 39,844,309 |  |      | $





17







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



3. PROPERTY
AND EQUIPMENT, NET



Property and equipment consists
of the following at January 31:



|                              |  | Useful Life in Years |  | 2014 |             |   | 2013 |  
|----------------------------- |  | -------------------- |  | ---- | ----------- | - | ---- | -
|Machinery and equipment       |  | 3-10                 |  | $    | 10,260,162  |   |      | $
|Furniture and fixtures        |  | 3-10                 |  |      | 636,759     |   |      |  
|Leasehold improvements        |  | Lease term           |  |      | 1,294,928   |   |      |  
|Land and building (China)     |  | 20-30                |  |      | 1,917,154   |   |      |  
|Land and building (Canada)    |  | 30                   |  |      | 2,201,934   |   |      |  
|Land and buildings (USA)      |  | 30                   |  |      | 6,018,838   |   |      |  
|Land and building (Brazil)    |  | 5                    |  |      | 1,362,696   |   |      |  
|                              |  |                      |  |      | 23,692,471  |   |      |  
|Less accumulated depreciation |  |                      |  |      | (11,735,960 | ) |      |  
|Construction-in-progress      |  |                      |  |      | 112,596     |   |      |  
|                              |  |                      |  | $    | 12,069,107  |   |      | $



Depreciation expense for FY14
and FY13 amounted to $1,197,696 and $1,315,037, respectively.



The estimated cost to complete
construction-in-progress at January 31, 2014, is $415,000.



4. BRAZIL
MANAGEMENT AND SHARE PURCHASE AGREEMENT-ARBITRATION



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



On September 11, 2012, the Company
and the former officers entered into a settlement agreement (the “Settlement Agreement”) which fully and finally resolved
all alleged outstanding claims against the Company arising from the arbitration proceeding. Pursuant to the Settlement Agreement,
the Company agreed to a payment schedule to the former officers with a balance remaining as of January 31, 2014, of $5.0 million
in US dollars consisting of 20 consecutive quarterly installments of US $250,000 ending on December 31, 2018, net of imputed interest
of $241,309 as shown on the balance sheet at $3,758,691, net of current maturity of $1,000,000. The Company is current with all
obligations pursuant to this Settlement Agreement.



In addition, pursuant to the
Settlement Agreement, as additional security for payment of the Settlement Amount, Lakeland Brasil agreed to grant the former
officers a second mortgage interest on certain of its property in Brazil, which mortgage is expressly behind the lien securing
the payment of tax debts to a state within Brazil related to certain notices of tax assessment on such property. The Company also
agreed to become a co-obligor, in lieu of a guarantor, for payment of the settlement amount.



18







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



5. INTANGIBLES, PREPAID BANK FEES AND OTHER ASSETS, NET



Intangible assets consist of
the following at January 31, 2014:



|                                                                                                                                                                                                                                |  | 2014 |           |  | 2013 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | -
|Trademarks and tradenames in Brazil and prepaid costs for Certificate of Approval
    (“CA”) by the ministry of Labor in Brazil, net of accumulated amortization of $98,000 at January 31, 2014, and
    $0 at January 31, 2013 |  | $    | 335,635   |  |      | $
|Appraised value of customer contracts acquired in Qualytextil acquisition, amortized over estimated
    remaining life ending April 2013, net of accumulated amortization of $349,095 at January 31, 2013                       |  |      | —         |  |      |  
|Bank fees net of accumulated amortization of $267,718 at 2014
    and $96,228 at 2013                                                                                                                                           |  |      | 1,197,714 |  |      |  
|                                                                                                                                                                                                                                |  | $    | 1,533,349 |  |      | $



Amortization expense included
in general and administrative expense was $409,297 and $235,828 for FY14 and FY13, respectively.



Amortization expense for the
next five years is as follows: Bank fees: $451,374 for 2015, $451,374 for 2016, $243,051 for 2017, $33,661 for 2018 and $18,254
for 2019. CA certification in Brazil: $130,840 for 2015, $130,840 for 2016 and $31,378 for 2017.



The changes in the carrying
amount of trademarks and trade names during the fiscal years 2014 and 2013 are summarized in the following table:



|                            |  | Balance Beginning of Year |           |  | Changes Resulting from Foreign Exchange Differences |   |          | Additions During Year |  |   | Changes from Impairment Charges |  |  | Balance End of Year |           
|--------------------------- |  | ------------------------- | --------- |  | --------------------------------------------------- | - | -------- | --------------------- |  | - | ------------------------------- |  |  | ------------------- | ----------
|                            |  |                           |           |  |                                                     |   |          |                       |  |   |                                 |  |  |                     |           
|Year ended January 31, 2014 |  | $                         | 312,238   |  |                                                     | $ | (66,817  | )                     |  | $ | 90,214                          |  |  | $                   | —         
|Year ended January 31, 2013 |  | $                         | 4,282,100 |  |                                                     | $ | (615,614 | )                     |  | $ | —                               |  |  | $                   | (3,354,248



Goodwill

On August 1, 2005, the Company
purchased Mifflin Valley, Inc., a Pennsylvania manufacturer, the operations of which now comprise the Company’s Reflective
division. This acquisition resulted in the recording of $0.9 million in goodwill in FY06. Management has determined this did not
meet “more likely than not” threshold for impairment at January 31, 2014. This goodwill is included in the US segment
for reporting purposes.



19







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



The changes in the carrying
value of goodwill during the fiscal years 2014 and 2013 are summarized in the following table:



|                                                     |  | USA |         |  | Brazil |   |            | Total | 
|---------------------------------------------------- |  | --- | ------- |  | ------ | - | ---------- | ----- | 
|Balance as of January 31, 2012                       |  | $   | 871,296 |  |        | $ | 5,261,658  |       | 
|During fiscal year 2013:                             |  |     |         |  |        |   |            |       | 
|Effect of foreign currency translation               |  |     | —       |  |        |   | (526,073   | )     | 
|Rounding                                             |  |     | 1       |  |        |   | —          |       | 
|Goodwill and other intangibles impairment charge     |  |     | —       |  |        |   | (4,735,585 | )     | 
|Balance as of January 31, 2013                       |  | $   | 871,297 |  |        | $ | —          |       | 
|During fiscal year 2014:                             |  |     |         |  |        |   |            |       | 
|Effect of foreign currency translation               |  |     | —       |  |        |   | —          |       | 
|Goodwill and other intangibles
    impairment charge |  |     | —       |  |        |   | —          |       | 
|Balance as of January 31, 2014                       |  | $   | 871,297 |  |        | $ | —          |       | 



For Brazilian tax purposes,
the Company is deducting goodwill over a five-year period which commenced with the merger of its holding company into the operating
company in Brazil, which took place in November 2008.



6. LONG-TERM
DEBT AND SUBSEQUENT EVENT



Revolving
Credit Facility

The maximum amounts borrowed
under the existing and previous revolving credit facilities during FY14 and FY13 were $13.7 million and $12.9 million, respectively,
and the weighted average interest rates during the periods were 5.53% and 2.87%, respectively.



On June 28, 2013, the Company
and its wholly-owned subsidiary, Lakeland Protective Wear Inc. (collectively with the Company, the “Borrowers”), entered
into a Loan and Security Agreement (the “Senior Loan Agreement”) with AloStar Business Credit, a division of AloStar
Bank of Commerce (the “Senior Lender”). The Senior Loan Agreement provides the Borrowers with a three-year $15 million
revolving line of credit, at a variable interest rate based on LIBOR, with a first priority lien on substantially all of the United
States and Canada assets of the Company, except for the Canadian warehouse.



On June 28, 2013, the Borrowers
also entered into a Loan and Security Agreement (the “Subordinated Loan Agreement”) with LKL Investments, LLC, an
affiliate of Arenal Capital, a private equity fund (the “Junior Lender”). The Subordinated Loan Agreement provides
for a $3.5 million term loan to be made to the Borrowers and a second priority lien on substantially all of the assets of the
Company in the United States and Canada, except for the Canadian warehouse and except for a first lien on the Company’s
Mexican facility. Pursuant to the Subordinated Loan Agreement, among other things, Borrowers issued to the Junior Lender a five-year
term loan promissory note (the “Note”). At the election of the Junior Lender, interest under the Note may be paid
in cash, by payment in kind (“PIK”) in additional notes or payable in shares of common stock (“Common Stock”),
of the Company (the “Interest Shares”). If shares of Common Stock are used to make interest payments on the Note,
the number of Interest Shares will be based upon 100% of an average of the then current market value of the Common Stock, subject
to the limitations set forth in the Subordinated Loan Agreement. The Junior Lender also, in connection with this transaction,
received a common stock purchase warrant (the “Warrant”) to purchase up to 566,015 shares of Common Stock (subject
to adjustment), representing beneficial ownership of approximately 9.58% of the outstanding Common Stock of the Company, as of
the closing of the transactions contemplated by the Subordinated Loan Agreement. The Company’s receipt of gross proceeds
of $3.5 million (before original issue discount of $2.2 million related to the associated warrant) in subordinated debt financing
was a condition precedent set by Senior Lender, of which this transaction satisfied.



20







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



The proceeds from such financings
have been used to fully repay the Company’s former financing facility with TD Bank, N.A. in the amount of approximately
US $13.7 million. Also repaid upon closing of the financings was the warehouse loan in Canada with a balance of CDN $1,362,000
Canadian dollars (approximately US $1,320,000), payable to Business Development Bank of Canada (“BDC”).



The following is a summary of
the material terms of the financings:



$15 million Senior Credit
Facility

| | · | Borrowers
                                         are both Lakeland Industries, Inc. and its Canadian operating subsidiary Lakeland Protective
                                         Wear Inc.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Borrowing
                                         pursuant to a revolving credit facility subject to a borrowing base calculated as the
                                         sum of:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | 85%
                                         of eligible accounts receivable as defined
| | - | ---------------------------------------------------------------------------------------

| | o | The
                                         lesser of 60% of eligible inventory as defined or 85% of net orderly liquidation value
                                         of inventory
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | In
                                         transit inventory in bound to the US up to a cap of $1,000,000
| | - | ----------------------------------------------------------------------------------------------------------

| | o | Receivables
                                         and inventory held by the Canadian operating subsidiary to be included, up to a cap of
                                         $2 million of availability
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | On
                                         January 31, 2014, there was $2.6 million available under the senior credit facility
| | - | -------------------------------------------------------------------------------------------------------------------------------

| | · | Collateral
| | - | ----------

| | o | A
                                         perfected first security lien on all of the Borrowers United States and Canadian assets,
                                         other than its Mexican plant and the Canadian warehouse
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Pledge
                                         of 65% of Lakeland US stock in all foreign subsidiaries other than 100% pledge of stock
                                         of its Canadian subsidiaries
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Collection
| | - | ----------

| | o | All
                                         customers of Borrowers must remit to a lockbox controlled by Senior Lender or into a
                                         blocked account with all collection proceeds applied against the outstanding loan balance
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Maturity
| | - | --------

| | o | An
                                         initial term of three years from June 28, 2013 (the “Closing Date”)
| | - | ---------------------------------------------------------------------------------------------------------------

| | o | Prepayment
                                         penalties of 3%, if prepaid prior to the first anniversary of Closing Date; 2% if prior
                                         to the second anniversary and 1% if prior to the third anniversary of the Closing Date
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Interest
                                         Rate
| | - | ------------------------------------------------------

| | o | Rate
                                         equal to LIBOR rate plus 525 basis points
| | - | ---------------------------------------------------------------------------------------

| | o | Initial
                                         rate and rate at January 31, 2014 of 6.25%
| | - | -------------------------------------------------------------------------------------------

| | o | Floor
                                         rate of 6.25%
| | - | ------------------------------------------------------------

| | · | Fees:
                                         Borrowers shall pay to the Lender the following fees:
| | - | ----------------------------------------------------------------------------------------------------

| | o | Origination
                                         fee of $225,000, paid on the Closing Date and being amortized over the term of loan and
                                         is included in “intangibles, prepaid bank fees and other assets, net” in
                                         the accompanying balance sheet
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | 0.50%
                                         per annum on unused portion of commitment
| | - | ----------------------------------------------------------------------------------------

| | o | A
                                         non-refundable collateral monitoring fee in the amount of $3,000 per month
| | - | ---------------------------------------------------------------------------------------------------------------------

| | o | All
                                         legal and other out of pocket costs
| | - | --------------------------------------------------------------------------------

| | · | Financial
                                         Covenants
| | - | ------------------------------------------------------------

| | o | Borrowers
                                         covenanted that, from the Closing Date until the commitment termination date and full
                                         payment of the obligations to Senior Lender, Lakeland Industries, Inc. (the parent company),
                                         together with its subsidiaries on a consolidated basis, excluding its Brazilian subsidiary,
                                         shall comply with the following additional covenants:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



| | · | Fixed
                                         Charge Coverage Ratio. At the end of each fiscal quarter of Borrowers, commencing with
                                         the fiscal quarter ending July 31, 2013, Borrowers shall maintain a Fixed Charge Coverage
                                         Ratio of not less than 1.1 to 1.00 for the four quarter period then ending.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Minimum
                                         Quarterly Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”).
                                         Borrowers shall achieve, on a rolling basis excluding the operations of the Borrower’s
                                         Brazilian subsidiary, EBITDA of not less than the following as of the end of each quarter
                                         as follows:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | July
                                         31, 2013 for the two quarters then ended, $2.1 million;
| | - | -----------------------------------------------------------------------------------------------------

| | o | October
                                         31, 2013 for the three quarters then ended, $3.15 million,
| | - | -----------------------------------------------------------------------------------------------------------

| | o | January
                                         31, 2014 for the four quarters then ended, and thereafter, $4.1 million
| | - | ------------------------------------------------------------------------------------------------------------------------

| | · | Capital
                                         Expenditures. Borrowers shall not during any fiscal year make capital expenditures in
                                         an amount exceeding $1 million in the aggregate
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The
                                         Company is in compliance with all loan covenants of the Senior Debt at January 31, 2014.
| | - | -------------------------------------------------------------------------------------------------------------------------------------

| | · | Other
                                         Covenants
| | - | --------------------------------------------------------

| | o | Standard
                                         financial reporting requirements as defined
| | - | ---------------------------------------------------------------------------------------------

| | o | Limitation
                                         on amounts that can be advanced to or on behalf of Brazilian operations, limited to one
                                         aggregate total of $200,000 for the term of the loan
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Limitation
                                         on total net investment in foreign subsidiaries of a maximum of $1.0 million per annum
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



$3.5 million Subordinated
Debt Financing

| | · | Subordinated
                                         Loan Agreement
| | - | --------------------------------------------------------------------

| | o | Maturity
                                         date: June 28, 2018
| | - | ---------------------------------------------------------------------

| | o | Interest
                                         at 12.0% per annum through and including December 27, 2016, increased to 16% per annum
                                         on December 28, 2016 and 20% per annum on December 28, 2017. Until the first anniversary
                                         of the Closing Date, all interest shall either be paid in kind (PIK) or paid in shares
                                         of common stock of Lakeland, valued at 100% of the then market value, at the election
                                         of the Junior Lender. Such accrued PIK interest is included in “other accrued expenses”
                                         in the accompanying balance sheet.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | All
                                         loan costs associated with the Subordinated Debt are included with the deferred debt
                                         costs from the Senior Loan and are being amortized over the life of the Senior Loan and
                                         are included with “intangibles, bank fees and other assets, net” on the balance
                                         sheet
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Warrant
                                         to purchase 566,015 shares of Common Stock (subject to adjustment), exercisable at $0.01
                                         per share
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Warrant
                                         is subject to customary anti-dilution adjustment provisions, including for issuances
                                         of Common Stock or Common Stock equivalents at a price less than $5.00 per share, computed
                                         on a weighted average basis, subject to a hard cap limitation of 1,068,506 shares on
                                         total number of shares to be issued from a combination of warrants, interest shares and
                                         price-protection anti-dilution adjustments. The Company is allowed to issue up to 500,000
                                         shares without triggering this provision, to allow for restricted shares and other new
                                         compensatory issuances.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Warrant
                                         exercise period is five years from the Closing Date
| | - | ----------------------------------------------------------------------------------------------------

| | o | Registration
                                         Rights: the Company commits to filing with the Securities and Exchange Commission a registration
                                         statement covering the shares issuable in connection with the subordinated loan transaction
                                         within 90 days of the Closing Date and to have it effective no later than 180 days from
                                         the Closing Date, which requirement has been complied with.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Investor
                                         Rights: Junior Lender will have the right to designate one board member or a board observer,
                                         subject to certain conditions. As of April 28, 2014, the Junior Lender has not exercised
                                         this right
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Subject
                                         to Senior Lender Subordination Agreement, the subordinated loan may be repaid in increments
                                         of $500,000 with Senior Lender approval on or after June 28, 2014
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



22







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



| | o | Early
                                         Termination Fees; Applicable Termination Percentage:
| | - | ---------------------------------------------------------------------------------------------------

| | · | (a)
                                         Upon early repayment of the Term Loan, Borrowers shall be obligated to pay, in addition
                                         to all of the other Obligations then outstanding, an amount equal to the product obtained
                                         by multiplying $3,500,000 or the amount of principal repaid by the applicable percentage
                                         set forth below:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | 5.00%
                                         if the effective date of termination occurs on or before June 28, 2014;
| | - | ----------------------------------------------------------------------------------------------------------------------

| | · | 3.00%
                                         if the effective date of termination occurs after June 28, 2014, but on or before
| | - | --------------------------------------------------------------------------------------------------------------------------------

June 28, 2015; or

| | · | 1.00%
                                         if the effective date of termination occurs after June 28, 2015, but on or before
| | - | --------------------------------------------------------------------------------------------------------------------------------

June 28, 2016

| | · | Upon
                                         acceleration of the loan following a Change of Control, Borrowers shall be obligated
                                         to pay an additional fee equal to $35,000
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Financial
                                         covenant amounts are 10% less restrictive than those in the Senior Loan Agreement
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| | o | Second
                                         priority lien on substantially all of the assets of the Company in the United States
                                         and Canada, except a first lien on Mexican facility
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | The
                                         Company is in compliance with all covenants of the Subordinated Debt at January 31, 2014.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



Management has valued the Warrant
at $2.2 million. This has been treated as Original Issue Discount (OID) and is being amortized as additional interest over the
five-year term of the related subordinated debt. The effective rate of return to the Junior Lender is computed by deducting the
warrant valuation OID from the $3.5 million principal leaving a valuation for the debt at closing of $1.3 million. Including
the 12% coupon and the amortization of the OID gives an effective per annum rate on just the debt of approximately 47%, assuming
the warrant is broken out separately. However, management views this to be one blended loan or transaction along with the
Senior Debt of up to $15 million at 6.25%, since the subordinated debt was an absolutely required condition of closing made by
the Senior Lender.



Amounts outstanding as of January
31, 2014, under the Senior Lender Facility were $12.4 million and under the Junior Lender Facility, $3.5 million net of un-amortized
original issue discount of $2.0 million for a net value of $1.5 million included in the subordinated debt on the balance sheet.



23







Borrowings
in Brazil



Brazil
Loan Schedule Year Ended January 31, 2014 in USD



|Lender             |  | Maturity
 Date |  | Balance Beginning |           |  | New Loan |  |           | Begin Date |  | Principal Payment |  |  | Interest Payment |   |  | Balance
 Ending |         |  | Collateral |  | Foreign Exchange Difference |  |  | Monthly Interest
 Rate |  |  | Monthly Payments Including Interest | 
|------------------ |  | -------------- |  | ----------------- | --------- |  | -------- |  | --------- | ---------- |  | ----------------- |  |  | ---------------- | - |  | --------------- | ------- |  | ---------- |  | --------------------------- |  |  | ---------------------- |  |  | ----------------------------------- | 
|                   |  |                |  | US $              |           |  | US $     |  |           |            |  | US $              |  |  | US $             |   |  | US $            |         |  |            |  | US $                        |  |  |                        |  |  | US $                                | 
|Bank Itau          |  | 1/6/2014       |  |                   | 557,054   |  |          |  | -         |            |  | 7/6/2012          |  |  | (491,209         | ) |  |                 | 38,935  |  |            |  | -                           |  |  | Receivables            |  |  | 65,845                              | 
|Bank Itau          |  | 2/12/2014      |  |                   | 1,004,571 |  |          |  | -         |            |  | 1/11/2013         |  |  | (820,066         | ) |  |                 | 71,995  |  |            |  | 75,633                      |  |  | Receivables            |  |  | 108,872                             | 
|Bank Itau          |  | 6/18/2014      |  |                   | -         |  |          |  | 258,665   |            |  | 4/19/2013         |  |  | (136,617         | ) |  |                 | 27,781  |  |            |  | 106,970                     |  |  | Guarantee Officer      |  |  | 15,078                              | 
|Bank Itau          |  | 6/12/2014      |  |                   | -         |  |          |  | 162,484   |            |  | 6/12/2013         |  |  | (88,410          | ) |  |                 | 18,348  |  |            |  | 67,109                      |  |  | Receivables            |  |  | 6,965                               | 
|Bank Itau          |  | 9/18/2015      |  |                   | -         |  |          |  | 165,437   |            |  | 9/5/2013          |  |  | (21,405          | ) |  |                 | 12,866  |  |            |  | 131,403                     |  |  | Receivables            |  |  | 12,629                              | 
|Bank Itau          |  | 9/30/2015      |  |                   | -         |  |          |  | 109,061   |            |  | 9/19/2013         |  |  | (13,896          | ) |  |                 | 10,346  |  |            |  | 87,753                      |  |  | Receivables            |  |  | 7,412                               | 
|Bank Itau          |  | 7/31/2014      |  |                   | -         |  |          |  | 226,183   |            |  | 12/19/2013        |  |  | -                |   |  |                 | 8,086   |  |            |  | 213,442                     |  |  | Customer Contract      |  |  | 12,741                              | 
|Citibank           |  | 8/5/2014       |  |                   | -         |  |          |  | 161,095   |            |  | 8/6/2013          |  |  | (61,127          | ) |  |                 | 13,631  |  |            |  | 90,483                      |  |  | Guarantee Officer      |  |  | 9,485                               | 
|Mercantil  Bank    |  | 1/11/2016      |  |                   | -         |  |          |  | 229,924   |            |  | 12/30/2013        |  |  | -                |   |  |                 | 3,565   |  |            |  | 212,731                     |  |  | Guarantee Officer      |  |  | 17,193                              | 
|Athena  Factoring  |  | N/A            |  |                   | -         |  |          |  | 126,872   |            |  | 12/23/2013        |  |  | (70,771          | ) |  |                 | 3,957   |  |            |  | 51,113                      |  |  | Guarantee Officer      |  |  | 4,987                               | 
|Athena  Factoring  |  | N/A            |  |                   | -         |  |          |  | 122,341   |            |  | 1/17/2014         |  |  | -                |   |  |                 | 3,659   |  |            |  | 111,467                     |  |  | Guarantee Officer      |  |  | 10,876                              | 
|Valecred Factoring |  | N/A            |  |                   | -         |  |          |  | 136,591   |            |  | 12/13/2013        |  |  | (136,590         | ) |  |                 | 3,298   |  |            |  | -                           |  |  | Guarantee Officer      |  |  | -                                   | 
|TOTAL              |  |                |  |                   | 1,561,625 |  |          |  | 1,698,653 |            |  |                   |  |  | (1,840,091       | ) |  |                 | 216,467 |  |            |  | 1,148,104                   |  |  |                        |  |  | 272,083                             | 



Certain numbers may not add due to rounding



Brazil
Loan Schedule Year Ended January 31, 2014 in BRL



|Lender             |  | Maturity
 Date |  | Balance Beginning |           |  | New Loan |  |           | Begin Date |  | Principal Payment |  |  | Interest   |   |  | Balance
 Ending |          |   | Collateral |  | Monthly Interest
 Rate |  |  | Monthly payments including
 interest | 
|------------------ |  | -------------- |  | ----------------- | --------- |  | -------- |  | --------- | ---------- |  | ----------------- |  |  | ---------- | - |  | --------------- | -------- | - | ---------- |  | ---------------------- |  |  | ------------------------------------ | 
|                   |  |                |  | BRL               |           |  | BRL      |  |           |            |  | BRL               |  |  | BRL        |   |  | BRL             |          |   |            |  |                        |  |  | BRL                                  | 
|Bank Itau          |  | 1/6/2014       |  |                   | 1,124,515 |  |          |  | -         |            |  | 7/6/2012          |  |  | (1,109,250 | ) |  |                 | (101,333 | ) |            |  | -                      |  |  | Receivables                          | 
|Bank Itau          |  | 2/12/2014      |  |                   | 2,042,225 |  |          |  | -         |            |  | 1/11/2013         |  |  | (1,845,996 | ) |  |                 | (171,872 | ) |            |  | 183,509                |  |  | Receivables                          | 
|Bank Itau          |  | 6/18/2014      |  |                   | -         |  |          |  | 571,805   |            |  | 4/19/2013         |  |  | (313,058   | ) |  |                 | (60,618  | ) |            |  | 259,541                |  |  | Guarantee Officer                    | 
|Bank Itau          |  | 6/12/2014      |  |                   | -         |  |          |  | 359,188   |            |  | 6/12/2013         |  |  | (195,440   | ) |  |                 | (41,480  | ) |            |  | 162,827                |  |  | Receivables                          | 
|Bank Itau          |  | 9/18/2015      |  |                   | -         |  |          |  | 365,716   |            |  | 9/5/2013          |  |  | (47,319    | ) |  |                 | (28,014  | ) |            |  | 318,824                |  |  | Receivables                          | 
|Bank Itau          |  | 9/30/2015      |  |                   | -         |  |          |  | 241,090   |            |  | 9/19/2013         |  |  | (30,718    | ) |  |                 | (20,328  | ) |            |  | 212,915                |  |  | Receivables                          | 
|Bank Itau          |  | 7/31/2014      |  |                   | -         |  |          |  | 500,000   |            |  | 12/19/2013        |  |  | -          |   |  |                 | -        |   |            |  | 517,875                |  |  | Customer Contract                    | 
|Citibank           |  | 8/5/2014       |  |                   | -         |  |          |  | 356,118   |            |  | 8/6/2013          |  |  | (135,127   | ) |  |                 | (31,584  | ) |            |  | 219,540                |  |  | Guarantee Officer                    | 
|Mercantil  Bank    |  | 1/11/2016      |  |                   | -         |  |          |  | 508,270   |            |  | 12/30/2013        |  |  | -          |   |  |                 | -        |   |            |  | 516,150                |  |  | Guarantee Officer                    | 
|Athena  Factoring  |  | N/A            |  |                   | -         |  |          |  | 280,463   |            |  | 12/23/2013        |  |  | (156,446   | ) |  |                 | (8,748   | ) |            |  | 124,017                |  |  | Guarantee Officer                    | 
|Athena  Factoring  |  | N/A            |  |                   |           |  |          |  | 270,447   |            |  | 1/17/2014         |  |  | -          |   |  |                 | (8,090   | ) |            |  | 270,447                |  |  | Guarantee Officer                    | 
|Valecred Factoring |  | N/A            |  |                   | -         |  |          |  | 301,946   |            |  | 12/13/2013        |  |  | (301,948   | ) |  |                 | (7,292   | ) |            |  | -                      |  |  | Guarantee Officer                    | 
|TOTAL              |  |                |  |                   | 3,166,740 |  |          |  | 3,755,043 |            |  |                   |  |  | (4,135,302 | ) |  |                 | (479,359 | ) |            |  | 2,785,644              |  |  |                                      | 



|Certain numbers
    may not add due to rounding |  | 
|----------------------------------------------- |  | 



24







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



Borrowings in UK

On February 20, 2013, the Company
and its UK subsidiary completed an agreement to obtain accounts receivable financing with HSBC Bank in the UK in the amount £1,000,000
(approximately US $1.3 million at current exchange rates), more fully described in the Company’s Form 8-K, which was filed
on February 20, 2013. On December 19, 2013, the Company’s UK subsidiary entered into a one-year extension pursuant to the
same terms except that the facility limit was raised from £1.0 million (approximately US $1.6 million) to £1,250,000
(approximately US $2.0 million) and the advance rate was raised from 80% to 85%. The balance outstanding under this facility at
January 31, 2014, was the equivalent of US $0.8 million and is included in short-term borrowings on the balance sheet. The interest
rate repayment rate is 3.46% per annum and the term is for a minimum period of one-year renewable on December 19, 2014.



China Loan

On August 12, 2013, the Company’s
China subsidiary borrowed approximately US $0.8 million at an interest rate of 5.395% per annum for a term of one year as more
fully described in the Company’s Form 8-K which was filed on August 16, 2013. The balance under this loan outstanding at
January 31, 2014, was $0.8 million. Such amounts mature August 2014 and are included in short-term borrowings on the balance sheet.



Canada
Loan

In September 2013 the Company
refinanced its loan with the Development Bank of Canada (BDC) for a principal amount of approximately Canadian and US $1.1 million
(based on exchange rates at time of closing). Such loan is for a term of 240 months at an interest rate of 6.45% per annum with
fixed monthly payments of approximately US $7,386 (C$8,169) including principal and interest. It is collateralized by a mortgage
on the Company's warehouse in Brantford, Ontario. The amount outstanding at January 31, 2014, is C$1,093,194 which is included
as US $932,235 loan on the accompanying balance sheet, net of current maturities of US $50,000.



Subsequent
Event – New Loan Facility in China

On March 27, 2014, Lakeland
Industries, Inc.’s (the “Company”) China subsidiary, Weifang Lakeland Safety Products Co., Ltd (“WF”),
and Weifang Rural Credit Cooperative Bank (“WRCCB”) completed an agreement to obtain a line of credit for financing
in the amount RMB 8,000,000 (approximately USD $1,287,000). The term is due September 27, 2014, with interest at 120% of
the benchmark rate supplied by WRCCB (which is currently 5.6%). The effective per annum interest rate is currently 6.72%. The
loan will be collateralized by inventory owned by WF. WRCCB has hired a professional firm to supervise WF’s inventory
flow, which WF will pay yearly at a rate of RMB 40,000 (approximately US $6,450). As of April 28, 2014 the Company has not
yet drawn down on this line of credit, but intends to do so shortly. There are no covenant requirements in this loan.



25







Lakeland Industries, Inc.
and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



Five-year Debt Payout Schedule

This schedule reflects the liabilities
as of January 31, 2014, and does not reflect any subsequent event:



|                             |  | Total |            |  | 1 Year or less |   |            | 2 Years |  |   | 3 Years |  |  | 4 Years |        |  | 5 Years |   |        | After 5 Years | 
|---------------------------- |  | ----- | ---------- |  | -------------- | - | ---------- | ------- |  | - | ------- |  |  | ------- | ------ |  | ------- | - | ------ | ------------- | 
|                             |  |       |            |  |                |   |            |         |  |   |         |  |  |         |       
|Borrowings in Weifang, China |  | $     | 811,669    |  |                | $ | 811,669    |         |  | $ | —       |  |  | $       | —      |  |         | $ | —      |               | 
|Borrowings in UK             |  |       | 777,171    |  |                |   | 777,171    |         |  |   | —       |  |  |         | —      |  |         |   | —      |               | 
|Revolving credit facility    |  |       | 12,415,424 |  |                |   | 12,415,424 |         |  |   | —       |  |  |         | —      |  |         |   | —      |               | 
|Subordinated debt financing* |  |       | 3,500,000  |  |                |   | —          |         |  |   | —       |  |  |         | —      |  |         |   | —      |               | 
|Borrowings in Canada         |  |       | 982,235    |  |                |   | 50,000     |         |  |   | 26,833  |  |  |         | 28,616 |  |         |   | 30,517 |               | 
|Borrowings in Brazil         |  |       | 1,148,104  |  |                |   | 969,705    |         |  |   | 178,399 |  |  |         | —      |  |         |   | —      |               | 
|Total                        |  | $     | 19,634,603 |  |                | $ | 15,024,969 |         |  | $ | 205,232 |  |  | $       | 28,616 |  |         | $ | 30,517 |               | 

*Before original issue discount
(OID) at inception of $2.2 million



Sale of Real Estate in China

In April 2013, the Company
executed a contract for the sale of real estate located in Qingdao, China, which was completed on June 30, 2013. The sale was
structured as a sale of a subsidiary’s stock after transferring out substantially all non-real estate assets to other Lakeland
entities. The net proceeds of the sale to the Company were approximately $0.7 million, received in June 2013. All production from
this facility has been transferred to other Lakeland manufacturing facilities. There are no product lines which will be dropped
as a result of this plant relocation. Accordingly, the operations of this plant are not being treated as a discontinued operation.
This sale resulted in a loss of approximately $0.5 million for financial statement purposes. However, as a result of this sale
there were dividends paid to the US parent company of approximately US $1.7 million, which results in taxable income in the US,
generating a tax charge of $422,321 in Q2 2014 financial statements. However, as a result of its loss carry forwards for US tax
purposes, no cash tax liability has been incurred.



Sale of India Property

The Company sold Plot 24, the
largest of three plots held for sale by the Company, which closed on July 29, 2013. The sale price was $428,827 (INR 25,000,000),
which is less than previously anticipated due to foreign exchange deterioration in the Indian Rupee.



26







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|                                             |  | Remaining Assets Held for Sale as of |  
|-------------------------------------------- |  | ------------------------------------ | -
|                                             |  | January 31, 2014                     |  
|Inventory                                    |  | $                                    | —
|Other current asset                          |  |                                      | —
|Property and equipment                       |  |                                      | —
|Total assets of discontinued operations      |  |                                      | —
|Liabilities of discontinued operations:      |  |                                      |  
|Accounts payable                             |  |                                      | —
|Other liabilities                            |  |                                      | —
|Total liabilities of discontinued operations |  |                                      | —
|                                             |  |                                      |  
|Net assets of discontinued operations        |  | $                                    | —



7. STOCKHOLDERS’ EQUITY AND STOCK
OPTIONS



The Company has three main share-based
payment plans: The Nonemployee Directors’ Option Plan (the “Directors’ Plan”) and two Restricted Stock
Plans (the “2009 Equity Plan” and the “2012 Equity Plan”). Both the 2009 and 2012 Equity Plans have an
identical structure. The below table summarizes the main provisions of each of these plans:



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

27







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|Bonus in stock program - employees | All participating employees
    are eligible to elect to receive any cash bonus in shares of restricted stock.  Such restricted shares are subject
    to two-year time vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year
    period. Since the employee is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount
    based on the grant date stock price. The Chief Executive Officer, Chief Financial Officer and Chief Operating Officer of the
    Company all elected to take 30% of their cash compensation in restricted stock pursuant to this program, commencing in October
    2012 and ended in June 2013.
|---------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Director fee in stock program      | All directors are eligible to elect
    to receive any director fees in shares of restricted stock.  Such restricted shares are subject to two-year time
    vesting. The valuation is based on the stock price at the grant date and amortized to expense over the two-year period.  Since
    the director is giving up cash for unvested shares, the amount of shares awarded is 133% of the cash amount based on the grant
    date stock price.                                                                                                                                                                                                                                                                      



The Directors’ Plan provides
for an automatic one-time grant of options to purchase 5,000 shares of common stock to each nonemployee 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 nonemployee directors re-elected to the Company’s Board of Directors at any
annual meeting of the stockholders will automatically be granted additional options to purchase 1,000 shares of common stock on
each of such dates.



The following table represents
our stock options granted, exercised and forfeited during the fiscal year ended January 31, 2014.



|Stock Options                                    |  | Number
of Shares |        |  | Weighted Average Exercise Price per Share |   |      | Weighted Average Remaining
 Contractual Term |  |  | Aggregate Intrinsic Value | 
|------------------------------------------------ |  | ---------------- | ------ |  | ----------------------------------------- | - | ---- | -------------------------------------------- |  |  | ------------------------- | 
|Outstanding at January 31, 2013                  |  |                  | 24,000 |  |                                           | $ | 7.47 |                                              |  |  | 3.95 years                | 
|Granted during the year ended January 31, 2014   |  |                  | —      |  |                                           |   | —    |                                              |  |  | —                         | 
|Forfeited during the year ended January 31, 2014 |  |                  | —      |  |                                           |   | —    |                                              |  |  | —                         | 
|Outstanding at January 31, 2014                  |  |                  | 24,000 |  |                                           | $ | 7.47 |                                              |  |  | 2.95 years                | 
|Exercisable at January 31, 2014                  |  |                  | 24,000 |  |                                           | $ | 7.47 |                                              |  |  | 2.95 years                | 
|Reserved for future issuance                     |  |                  | 0      |  |                                           |   |      |                                              |  |  |                           | 
|Directors’ Plan (expired on December 31, 2012)   |  |                  |        |  |                                           |   |      |                                              |  |  |                           | 



There were no exercises during
the year ended January 31, 2014.



All stock-based option awards
were fully vested at January 31, 2014 and 2013. There were no new grants during the year ended January 31, 2014, and this plan
expired by its terms on December 31, 2012.



28







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



The 2009 Equity Plan and the 2012 Equity
Plan

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



Under the 2009 Equity Incentive
Plan, the Company has issued 178,743 fully vested shares as of January 31, 2014. The Company has granted up to a maximum of 4,116
restricted stock awards remaining unvested as of January 31, 2014. All of these restricted stock awards are nonvested at January
31, 2014, and have a weighted average grant date fair value of $8.66 per share. The Company recognizes expense related to performance-based
awards over the requisite service period using the straight-line attribution method based on the outcome that is probable.



Under the 2012 Equity Incentive
Plan, the Company has granted 272,290 restricted stock awards as of January 31, 2014, assuming all maximum awards are achieved.
All of these restricted stock awards are nonvested at January 31, 2014 (214,790 shares at “baseline”), and have a
weighted average grant date fair value of $6.00 per share. The Company recognizes expense related to performance-based awards
over the requisite service period using the straight-line attribution method based on the outcome that is probable.



As of January 31, 2014, unrecognized
stock-based compensation expense related to restricted stock awards totaled $20,707 pursuant to the 2009 Equity Incentive Plan
and $1,328,912 pursuant to the 2012 Equity Incentive Plan, before income taxes, based on the maximum performance award level,
less what has been charged to expense on a cumulative basis through October 31, 2012, which was set to zero. Such unrecognized
stock-based compensation expense related to restricted stock awards totaled $20,707 for the 2009 Equity Incentive Plan and $958,612
for the 2012 Equity Incentive Plan at the baseline performance level. The cost of these nonvested 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 zero, and expenses
have been recorded accordingly. The performance based awards are not considered stock equivalents for earnings per share (“EPS”)
calculation purposes.



Stock-Based
Compensation

The Company recognized total
stock-based compensation costs of $197,744 and $332,761 for the years ended January 31, 2014 and 2013, respectively, of which
$17,192 and $144,617 result from the 2009 Equity Plan and $180,552 and $163,514 result from the 2012 Equity Plan for the years
ended January 31, 2014 and 2013, respectively, and $0 and $24,630, respectively, from the Directors’ Plan. These amounts
are reflected in selling, general and administrative expenses. The total income tax benefit recognized for stock-based compensation
arrangements was $71,188 and $119,795 for the years ended January 31, 2014 and 2013, respectively.



29







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|Restricted Stock Plan 2012 Equity Plan |  | Shares Authorized Under 2012 Plan as Revised |         |  | Outstanding Unvested Grants at Maximum at End of
 FY14 |  |         | Shares Remaining Available for Future
    Issuance |  |  | Reallocation
    by Board of Directors |   |  | Shares Remaining Available for Future
 Issuance |        
|-------------------------------------- |  | -------------------------------------------- | ------- |  | ------------------------------------------------------ |  | ------- | -------------------------------------------------- |  |  | -------------------------------------- | - |  | ----------------------------------------------- | -------
|Restricted stock grants - employees    |  |                                              | 173,000 |  |                                                        |  | 150,500 |                                                    |  |  | 22,500                                 |   |  |                                                 | (20,000
|Restricted stock grants - directors    |  |                                              | 50,000  |  |                                                        |  | 49,500  |                                                    |  |  | 500                                    |   |  |                                                 | —      
|Matching award program                 |  |                                              | 9,000   |  |                                                        |  | 3,000   |                                                    |  |  | 6,000                                  |   |  |                                                 | —      
|Bonus in stock - employees             |  |                                              | 40,000  |  |                                                        |  | 55,189  |                                                    |  |  | (15,189                                | ) |  |                                                 | 20,000 
|Retainer in stock - directors          |  |                                              | 38,000  |  |                                                        |  | 14,101  |                                                    |  |  | 23,899                                 |   |  |                                                 | —      
|Total restricted stock plan            |  |                                              | 310,000 |  |                                                        |  | 272,290 |                                                    |  |  | 37,710                                 |   |  |                                                 | —      



|Total Restricted Shares             |  | Outstanding Unvested Grants at Maximum at Beginning of
    FY14 |         |  | Granted during  FY14 |  |        | Becoming Vested during  FY14 |  |  | Forfeited during  FY14 |  |  | Outstanding Unvested Grants at Maximum at End of 
    FY14 |       
|----------------------------------- |  | --------------------------------------------------------------- | ------- |  | -------------------- |  | ------ | ---------------------------- |  |  | ---------------------- |  |  | ---------------------------------------------------------- | ------
|Restricted stock grants - employees |  |                                                                 | 164,500 |  |                      |  | —      |                              |  |  | —                      |  |  |                                                            | 14,000
|Restricted stock grants - directors |  |                                                                 | 49,500  |  |                      |  | —      |                              |  |  | —                      |  |  |                                                            | —     
|Matching award program              |  |                                                                 | 3,500   |  |                      |  | 3,000  |                              |  |  | 500                    |  |  |                                                            | —     
|Bonus in stock - employees          |  |                                                                 | 47,607  |  |                      |  | 33,672 |                              |  |  | 26,090                 |  |  |                                                            | —     
|Retainer in stock - directors       |  |                                                                 | 13,289  |  |                      |  | 7,500  |                              |  |  | 5,572                  |  |  |                                                            | —     
|Total restricted stock plan         |  |                                                                 | 278,396 |  |                      |  | 44,172 |                              |  |  | 32,162                 |  |  |                                                            | 14,000



|Shares under 2012 Equity Plan       |  | Outstanding Unvested Grants at Maximum at Beginning of
    FY14 |         |  | Granted during  FY14 |  |        | Becoming Vested during FY14 |  |  | Forfeited during  FY14 |  |  | Outstanding Unvested Grants at Maximum at End of 
    FY14 |       
|----------------------------------- |  | --------------------------------------------------------------- | ------- |  | -------------------- |  | ------ | --------------------------- |  |  | ---------------------- |  |  | ---------------------------------------------------------- | ------
|Restricted stock grants – employees |  |                                                                 | 164,500 |  |                      |  | —      |                             |  |  | —                      |  |  |                                                            | 14,000
|Restricted stock grants - directors |  |                                                                 | 49,500  |  |                      |  | —      |                             |  |  | —                      |  |  |                                                            | —     
|Matching award program              |  |                                                                 | —       |  |                      |  | 3,000  |                             |  |  | —                      |  |  |                                                            | —     
|Bonus in stock - employees          |  |                                                                 | 21,517  |  |                      |  | 33,672 |                             |  |  | —                      |  |  |                                                            | —     
|Retainer in stock - directors       |  |                                                                 | 6,601   |  |                      |  | 7,500  |                             |  |  | —                      |  |  |                                                            | —     
|Total restricted stock plan         |  |                                                                 | 242,118 |  |                      |  | 44,172 |                             |  |  | —                      |  |  |                                                            | 14,000



30







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|Shares under 2009 Equity Plan       |  | Outstanding Unvested Grants at Maximum at Beginning of
    FY14 |        |  | Granted during  FY14 |  |   | Becoming Vested during FY14 |  |  | Forfeited during  FY14 |  |  | Outstanding Unvested Grants at Maximum at End of 
    FY14 |  
|----------------------------------- |  | --------------------------------------------------------------- | ------ |  | -------------------- |  | - | --------------------------- |  |  | ---------------------- |  |  | ---------------------------------------------------------- | -
|Restricted stock grants - employees |  |                                                                 | —      |  |                      |  | — |                             |  |  | —                      |  |  |                                                            | —
|Restricted stock grants - directors |  |                                                                 | —      |  |                      |  | — |                             |  |  | —                      |  |  |                                                            | —
|Matching award program              |  |                                                                 | 3,500  |  |                      |  | — |                             |  |  | 500                    |  |  |                                                            | —
|Bonus in stock - employees          |  |                                                                 | 26,090 |  |                      |  | — |                             |  |  | 26,090                 |  |  |                                                            | —
|Retainer in stock - directors       |  |                                                                 | 6,688  |  |                      |  | — |                             |  |  | 5,572                  |  |  |                                                            | —
|Total restricted stock plan         |  |                                                                 | 36,278 |  |                      |  | — |                             |  |  | 32,162                 |  |  |                                                            | —



|Overall weighted average per share - all plans |  | Outstanding Unvested Grants at Maximum at Beginning of
    FY14 |      |  | Granted during  FY14 |   |      | Becoming Vested during FY14 |  |   | Forfeited during  FY14 |  |  | Outstanding Unvested Grants at Maximum at End of 
    FY14 |     
|---------------------------------------------- |  | --------------------------------------------------------------- | ---- |  | -------------------- | - | ---- | --------------------------- |  | - | ---------------------- |  |  | ---------------------------------------------------------- | ----
|Restricted stock grants – employees            |  | $                                                               | 6.44 |  |                      | $ | —    |                             |  | $ | —                      |  |  | $                                                          | 6.44
|Restricted stock grants - directors            |  |                                                                 | 6.44 |  |                      |   | —    |                             |  |   | —                      |  |  |                                                            | —   
|Matching award program                         |  |                                                                 | 8.14 |  |                      |   | 4.97 |                             |  |   | 9.03                   |  |  |                                                            | —   
|Bonus in stock - employees                     |  |                                                                 | 6.91 |  |                      |   | 4.14 |                             |  |   | 8.15                   |  |  |                                                            | —   
|Retainer in stock - directors                  |  |                                                                 | 7.42 |  |                      |   | 4.67 |                             |  |   | 8.49                   |  |  |                                                            | —   
|Total restricted stock plan                    |  | $                                                               | 6.59 |  |                      | $ | 4.28 |                             |  | $ | 8.22                   |  |  | $                                                          | 6.44



|Shares under 2012 Equity Plan       |  | Outstanding Unvested Grants at Maximum at Beginning of
    FY14 |      |  | Granted during  FY14 |   |      | Becoming Vested during FY14 |  |   | Forfeited during  FY14 |  |  | Outstanding Unvested Grants at Maximum at End of 
    FY14 |     
|----------------------------------- |  | --------------------------------------------------------------- | ---- |  | -------------------- | - | ---- | --------------------------- |  | - | ---------------------- |  |  | ---------------------------------------------------------- | ----
|Restricted stock grants – employees |  | $                                                               | 6.44 |  |                      | $ | —    |                             |  | $ | —                      |  |  | $                                                          | 6.44
|Restricted stock grants - directors |  |                                                                 | 6.44 |  |                      |   | —    |                             |  |   | —                      |  |  |                                                            | —   
|Matching award program              |  |                                                                 | —    |  |                      |   | 4.97 |                             |  |   | —                      |  |  |                                                            | —   
|Bonus in stock - employees          |  |                                                                 | 5.41 |  |                      |   | 4.14 |                             |  |   | —                      |  |  |                                                            | —   
|Retainer in stock - directors       |  |                                                                 | 6.01 |  |                      |   | 4.67 |                             |  |   | —                      |  |  |                                                            | —   
|Total restricted stock plan         |  | $                                                               | 6.34 |  |                      | $ | 4.28 |                             |  | $ | —                      |  |  | $                                                          | 6.44



31







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|Shares under 2009 Equity Plan       |  | Outstanding Unvested Grants at Maximum at Beginning of
    FY14 |      |  | Granted during  FY14 |   |   | Becoming Vested during FY14 |  |   | Forfeited during  FY14 |  |  | Outstanding Unvested Grants at Maximum at End of 
    FY14 |  
|----------------------------------- |  | --------------------------------------------------------------- | ---- |  | -------------------- | - | - | --------------------------- |  | - | ---------------------- |  |  | ---------------------------------------------------------- | -
|Restricted stock grants - employees |  | $                                                               | —    |  |                      | $ | — |                             |  | $ | —                      |  |  | $                                                          | —
|Restricted stock grants - directors |  |                                                                 | —    |  |                      |   | — |                             |  |   | —                      |  |  |                                                            | —
|Matching award program              |  |                                                                 | 8.14 |  |                      |   | — |                             |  |   | 9.03                   |  |  |                                                            | —
|Bonus in stock - employees          |  |                                                                 | 8.15 |  |                      |   | — |                             |  |   | 8.15                   |  |  |                                                            | —
|Retainer in stock - directors       |  |                                                                 | 8.82 |  |                      |   | — |                             |  |   | 8.49                   |  |  |                                                            | —
|Total restricted stock plan         |  | $                                                               | 8.27 |  |                      | $ | — |                             |  | $ | 8.22                   |  |  | $                                                          | —



8. INCOME
TAXES

The provision for income taxes
is based on the following pretax income (loss):





|                                          |  | <————————FY 14————————> |            |   | <————————FY 13————————> |  
|----------------------------------------- |  | ----------------------- | ---------- | - | ----------------------- | -
|Domestic and Foreign Pretax Income (Loss) |  | Total                   |            |   | Continuing  Operations  |  
|Domestic                                  |  | $                       | 1,962,763  |   |                         | $
|Foreign                                   |  |                         | (4,933,655 | ) |                         |  
|                                          |  |                         |            |   |                         |  
|Total                                     |  | $                       | (2,970,892 | ) |                         | $
|                                          |  |                         |            |   |                         |  
|Income Tax Expense (Benefit)              |  |                         | Total      |   |                         |  
|                                          |  |                         |            |   |                         |  
|Current:                                  |  |                         |            |   |                         |  
|Federal                                   |  | $                       | 575,202    |   |                         | $
|State and other taxes                     |  |                         | 39,810     |   |                         |  
|Foreign                                   |  |                         | 1,303,875  |   |                         |  
|                                          |  |                         |            |   |                         |  
|Deferred:                                 |  |                         |            |   |                         |  
|Domestic                                  |  | $                       | (162,847   | ) |                         | $
|Valuation allowance-deferred tax asset    |  |                         | (4,544,431 | ) |                         |  
|Foreign                                   |  |                         | —          |   |                         |  
|Total                                     |  | $                       | (2,851,391 | ) |                         | $









32







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



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





|                                                                          |  | 2014 |        |    | 2013 | 
|------------------------------------------------------------------------- |  | ---- | ------ | -- | ---- | 
|Statutory rate                                                            |  |      | 34.0   | %  |      | 
|State income taxes, net of Federal tax benefit                            |  |      | (0.88  | )% |      | 
|Goodwill and other intangibles impairment charge                          |  |      | —      |    |      | 
|Arbitration settlement charge                                             |  |      | —      |    |      | 
|Dividend from sale of Qingdao and from Canada   relating
    to financing |  |      | (17.33 | )% |      | 
|Brazil losses with no tax benefit                                         |  |      | (69.42 | )% |      | 
|Permanent differences                                                     |  |      | (12.44 | )% |      | 
|Foreign tax rate differential*                                            |  |      | 2.67   | %  |      | 
|Various tax credits                                                       |  |      | —      |    |      | 
|Valuation allowance-deferred tax asset                                    |  |      | 159.38 | %  |      | 
|Other                                                                     |  |      | —      |    |      | 
|Effective rate                                                            |  |      | 95.98  | %  |      | 



*
The foreign rate differential is due to losses in India, Chile and Argentina treated as pass through entities for US tax purposes,
the VAT tax charge in Brazil and the elimination of intercompany profit in inventory, all of which serve to reduce the consolidated
pretax income.



The tax effects of temporary
differences which give rise to deferred tax assets at January 31, 2014 and 2013 are summarized as follows:



|                                                                   |  | 2014 |           |  | 2013 |  
|------------------------------------------------------------------ |  | ---- | --------- |  | ---- | -
|Deferred tax assets:                                               |  |      |           |  |      |  
|Inventories                                                        |  | $    | 1,545,663 |  |      | $
|US tax loss carry-forwards, including work opportunity
    credit* |  |      | 233,798   |  |      |  
|Accounts receivable and accrued rebates                            |  |      | 125,159   |  |      |  
|Accrued compensation and other                                     |  |      | 183,434   |  |      |  
|India reserves - US deduction                                      |  |      | 613,200   |  |      |  
|Equity based compensation                                          |  |      | 215,872   |  |      |  
|Foreign tax credit carry-forward                                   |  |      | 1,243,519 |  |      |  
|State and local carry-forwards                                     |  |      | 145,528   |  |      |  
|Depreciation and other                                             |  |      | 299,756   |  |      |  
|Accrued interest on subordinated debt                              |  |      | 101,349   |  |      |  
|Deferred tax asset                                                 |  |      | 4,707,278 |  |      |  
|Less valuation allowance                                           |  |      | —         |  |      |  
|Net deferred tax asset                                             |  | $    | 4,707,278 |  |      | $



*The federal net operating
loss (“NOL”) that is left after FY14 will expire after 1/31/2033 (20 years from the generated date of 1/31/2013). 
The credits will begin to expire after 1/31/2030 (20 years from the 1st carryover year generated date of 1/31/2010) and will fully
expire after 1/31/2033.



The state NOLs will begin to
expire after 1/31/2025 and will continue to expire at various periods up until 1/31/2033 when they will be fully expired. 
The states have a larger spread because some only carryforward for 15 years and some allow 20 years.



33







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



Valuation Allowance

We record net deferred tax assets
to the extent we believe these assets will more likely than not be realized. In making such determination, we considered all available
positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax
planning strategies and recent financial operations. In the event we were to determine that it would not be able to realize deferred
income tax assets in the future in excess of net recorded amount, we would make an adjustment to the valuation allowance which
would reduce the provision for income taxes. The valuation allowance was $0 at January 31, 2014 ($4,544,431 in 2013). As a result
of the going concern uncertainty in FY13, the Company recorded a valuation allowance for the full amount of the deferred tax assets.
During FY14, the Company successfully refinanced its long term debt and alleviated substantial doubt of a going concern. As such,
the Company believes no allowance is necessary in FY14.



Tax
Audit



Income Tax Audit/Change
in Accounting Estimate

The Company is subject to US
federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions.
The Company’s federal income tax returns for the fiscal years ended January 31, 2003, 2004, 2005 and 2007, have been audited
by the Internal Revenue Service (“IRS”). The Company has received a final “No Change Letter” from the
IRS for FY07 dated August 20, 2009. The Company has received notice from the IRS on March 21, 2011, that it will shortly commence
an audit for the FY09 tax return. There have been no further communications from the IRS since.



Our three major foreign tax
jurisdictions are China, Canada and Brazil. China tax authorities have performed limited reviews on all China subsidiaries as
of tax years 2008, 2009, 2010, 2011 and 2012 with no significant issues noted. We believe our tax positions are reasonably stated
as of January 31, 2014. On May 9, 2013, one of our China operations was notified by local tax authority that they could conduct
an audit on transfer pricing. After preliminary communication with the tax authority, we believe the additional tax liability
will be no more than RMB100,000 or US $16,000. At the same time, China tax authority also questioned the retained earnings balance
for not being repatriated to corporate which would result in a 10% withholding tax paid to China, and the delayed payment in trade
payable from corporate affiliated companies, especially from US parent to China. Additionally, China tax authority also questioned
if there is any tax avoidance motive in the investment of US $500,000 to our Argentina subsidiary. We do not believe there will
be any material tax consequences from the latter two inquiries.



Lakeland Protective Wear, Inc.,
our Canadian subsidiary, follows Canada tax regulatory framework recording its tax expense and tax deferred assets or liabilities.
As of this statement filing date, we believe the Company’s tax situation is reasonably stated, and we do not anticipate
future tax liability for fiscal year ended January 31, 2014, or prior years.



The Company’s
Brazilian subsidiary is currently under a tax audit, which raised some issues regarding the tax impact related to the merger
held in 2008 and the resulting goodwill resulting from the structure which was set up by the Company's Brazilian counsel's suggestion.
The structure used is relatively common in acquisitions of Brazilian operations made by non-Brazilian companies. In general,
acquisitions with this structure have survived challenge by the taxing authorities in Brazil. The cumulative amount of tax benefits
recognized on the Company’s books through January 31, 2014, resulting from the tax deduction of the goodwill amortization
is approximately US $0, net of the deferred tax valuation reserve. This results from the goodwill on the Brazilian books which,
for Brazilian tax purposes, is eligible for tax write-off over a five-year period dating from November 2008.



34







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



Except in
Canada, it is our practice and intention to reinvest the earnings of our non-US subsidiaries in their operations. As of January
31, 2014, the Company had not made a provision for US or additional foreign withholding taxes on approximately $18.0 million of
the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially
permanent in duration ($16.6 million at January 31, 2013). Generally, such amounts become subject to US taxation upon remittance
of dividends and under certain other circumstances. If theses earnings were repatriated to the US, the deferred tax liability
associated with these temporary differences would be approximately $3.2 million and $2.9 million at January 31, 2014 and 2013,
respectively.



9. BENEFIT
PLANS



Defined Contribution
Plan

Pursuant to the terms of the
Company’s 401(k) plan, substantially all US 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. There was no Company match in FY13 or FY14.



10. VAT
TAX ISSUE IN BRAZIL



Asserted Claims

VAT tax in Brazil is at the
state level. We commenced operations in Brazil in May 2008 through an acquisition of Qualytextil, S.A. (“QT”). At
the time of the acquisition, and going back to 2004, the acquired company used a port facility in a neighboring state (Recife-Pernambuco),
rather than its own, in order to take advantage of incentives, in the form of a discounted VAT tax, to use such neighboring port
facility. We continued this practice until April 2009. The practice was stopped largely for economic reasons, resulting from additional
trucking costs and longer lead time. The Bahia state auditors (state of domicile for the Lakeland operations in Brazil) initially
reviewed the period from 2004-2006 and filed a claim for unpaid VAT taxes in October 2009. The claim asserted that the state VAT
taxes are owed to the state of domicile of the ultimate importer/user and disregarded the fact that the VAT taxes had already
been paid to the neighboring state.



The audit notice claimed that
the taxes paid to Recife-Pernambuco should have been paid to Bahia in the amount of R$4.8 million and assessed fines and interest
of an additional R$5.6 million for a total of R$10.4 million (approximately US$3.0 million, $3.5 million and $6.5 million, respectively).



Bahia had announced an amnesty
for this tax whereby R$3.5 million (US$1.9 million) of the taxes claimed were paid by QT by the end of the month of May 2010,
and the interest and penalties related thereto were forgiven. According to fiscal regulation of Brazil, R$2.1 million (US$1.1
million) of this amnesty payment has since been recouped as credits against future taxes due.



An audit for the 2007-2009 period
has been completed by the State of Bahia. In October 2010, the Company received five claims for 2007-2009 from the State
of Bahia, the largest of which was for taxes of R$6.2 (US$2.6) million and fines and interest currently at R$6.7 million (US$2.9
million), for a total of R$12.9 (US$5.5) million. The Company intends to defend and wait for the next amnesty period. 
Of other claims, our attorney informs us that three claims totaling R$1.3 (US$0.6) million in respect of fines and penalties
will likely be successfully defended based on state auditor misunderstanding.



Lakeland intends to apply for
amnesty and make any necessary payments upon the forthcoming, anticipated amnesty periods imposed by the local Brazilian authorities.
Of this R$6.2 (US$2.6) million claim, R$3.4 (US$1.4) million is eligible for future credit. The future credit amount was recorded
at the USD value at the exchange rate prevailing in 2010 when recorded.



35







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



The Company has changed its strategy
regarding the large VAT tax claim as a result of the current cash flow needs in Brazil. In February 2014, as had been anticipated,
the administrative proceedings have ended and a switch to a formal judicial proceeding became required. The Company is presently
attempting to negotiate a guarantee with the administrative level in the Tax department whereby the Company would either pledge
its inventory as collateral for the judicial deposit or alternately would agree to deposit into an escrow account with the court
system a monthly judicial deposit of a negotiated percentage of its future sales in Brazil. The Company would then be able to avail
itself of a later amnesty. Any amounts paid into the escrow would be available at such time to be applied to the amnesty payment.
The Company believes it is more likely than not that it will have the cash from operations or the borrowing capacity at such time
to fund such amnesty payment but no assurances can be given.



Such arrangement would result
in a judicial tax claim filed against the Company for 20% greater than the total claim, or approximately US$6.6 million (R15.4
million). Of this amount, only a portion of any amount paid into future amnesty would be eligible for future credit as discussed
elsewhere in this note.



Once this arrangement is completed,
the formal judicial process could take from 5 to 10 years. The Company believes there is a strong likelihood that another amnesty
would be offered by the state prior to such completion.



The Company has accepted amnesty
for a smaller claim (the fifth referenced above) which will result in eight monthly payments of about US $18,000 (R$42,000) which
reflects abatement of 80% of penalty and interest. An accrual of US $153,000 has been charged to expense and included in other
accrued expenses on the Balance Sheet as of January 31, 2014.



Of three remaining claims, our
attorney informs us that R$1.0 (US $0.6) million will be successfully defended based on a lapse of statute of limitations and R$0.3
(US $0.2) million based on state auditor misunderstanding. No accrual has been made for these items.



In December 2013, the company
has just learned of a different VAT tax claimed by the State of Sao Paulo for a tax in the amount of approximately US $45,000 and
total claim including interest and penalty totaling approximately US $200,000.



Management will continue to monitor
the situation and revise its estimates as more information becomes available.



36







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



A table summarizing all five
different VAT claims and their status is listed below:



|      |  | Principle |           |  | Interest & 
Penalty |  |           | Total |  |  | Approximate for Totals |  |  | Loss Possibility |           | Strategy |  | Collateral                                            
|----- |  | --------- | --------- |  | ------------------- |  | --------- | ----- |  |  | ---------------------- |  |  | ---------------- | --------- | -------- |  | ------------------------------------------------------
|      |  | R$        |           |  | R$                  |  |           | R$    |  |  | US $                   |  |  |                  |           |          |  |                                                       
|      |  |           | 305,897   |  |                     |  | 491,272   |       |  |  | 797,168                |  |  |                  | 362,000   |          |  | Remote                                                
|      |  |           | 573,457   |  |                     |  | 1,098,475 |       |  |  | 1,671,932              |  |  |                  | 760,000   |          |  | Remote                                                
|      |  |           | 6,209,836 |  |                     |  | 6,653,586 |       |  |  | 12,863,422             |  |  |                  | 5,847,000 |          |  | Probable                                              
|      |  |           | 402,071   |  |                     |  | 770,133   |       |  |  | 1,172,204              |  |  |                  | 533,000   |          |  | Remote                                                
|      |  |           | 285,009   |  |                     |  | 249,140   |       |  |  | 534,149                |  |  |                  | 243,000   |          |  | Loss Agreed                                           
|      |  |           | 7,776,270 |  |                     |  | 9,262,605 |       |  |  | 17,038,875             |  |  |                  | 7,745,000 |          |  |                                                       
|      |  |           | PRINCIPAL |  |                     |  | INTEREST  |       |  |  | TOTAL                  |  |  |                  |           |          |  | State Requirements                                    
|      |  |           | 285,009   |  |                     |  | 15,626    |       |  |  | 334,835                |  |  |                  |           |          |  | 8 Installments representing accepted amnesty per above
|Total |  |           | 285,009   |  |                     |  | 15,626    |       |  |  | 334,835                |  |  |                  | 152,000   |          |  |                                                       



Numbers may not add due to rounding



Set forth below are the total
amounts of potential tax liability from both the original and larger of the five secondary claims, the amount of payments already
made into amnesty or scheduled for future payment, which are not eligible for future credit (essentially the discount allowed
as an incentive by the neighboring state), less the amount of VAT taxes actually paid which are available as a credit and the
amounts of the escrow released by one of the three sellers of the Brazilian company acquired by the Company. The foregoing forms
the basis for the US$1.6 million charge to expense recorded by Lakeland in the first quarter of fiscal 2011.



37







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|                                            |  | BRL (millions)                                                 |     |  |                                 |  | US (millions) |                      
|------------------------------------------- |  | -------------------------------------------------------------- | --- |  | ------------------------------- |  | ------------- | ---------------------
|Foreign exchange rate (at the time recorded |  |                                                                |     |  |                                 |  |               |                      
|                                            |  | Total Paid Or To Be Paid Into Government Under Amnesty Program |     |  | Total Not Available For Credit1 |  |               | Available For Credit2
|Original claim 2004-2006                    |  |                                                                | 3.5 |  |                                 |  | 1.4           |                      
|Second claim                                |  |                                                                |     |  |                                 |  |               |                      
|Preacquisition 2007-April 2008              |  |                                                                | 2.4 |  |                                 |  | 1.0           |                      
|Postacquisition May 2008 -     April 2009   |  |                                                                | 3.3 |  |                                 |  | 1.4           |                      
|Totals                                      |  |                                                                | 9.2 |  |                                 |  | 3.8           |                      
|Escrow released from one seller             |  |                                                                | 1.0 |  |                                 |  | 1.0           |                      
|Charged to expense at April 30, 2010        |  |                                                                | -   |  |                                 |  | 2.8           |                      







2The amount allowed as credit against future
payments represents the VAT taxes actually previously paid to the neighboring state.



Future Accounting for Funds

Following earlier payment into
the amnesty program in 2010 and December 2013, a portion of the taxes were since recouped via credits against future taxes
due. The Company does not expect any further charges to expense. Any future payment into amnesty has already been reflected on
our books as a liability at January 31, 2014, along with potential future credits.



Balance Sheet Treatment

The Company has reflected the
above items on its January 31, 2014, balance sheet as follows:



|                      |  |                                      |  | R$ millions |     |  | US$
    millions(1) | 
|--------------------- |  | ------------------------------------ |  | ----------- | --- |  | ------------------- | 
|Noncurrent assets     |  | VAT taxes eligible for future credit |  |             | 3.4 |  |                     | 
|Long-term liabilities |  | Taxes payable                        |  |             | 6.2 |  |                     | 



(1)At exchange rate prevailing in 2010
when recorded.



38







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



11. DISCONTINUED
OPERATIONS IN INDIA



The Company decided to discontinue
operations in its India glove manufacturing facility and put the assets and business up for sale in FY12. The Company decided
to sell this division primarily because it has incurred significant operating losses since inception, and the Company has been
unsuccessful in developing sufficient sales to reach at least break even. The Company was attempting to sell the operations as
an ongoing operation but shut down its operations in December 2011.



The assets and liabilities of
the discontinued operations are presented separately under the captions “Assets of discontinued operations in India”
and “Liabilities of discontinued operations in India,” respectively, in the accompanying Balance Sheets at January
31, 2014 and 2013, and consist of the following:



|                                             |  | January 31,    |  
|-------------------------------------------- |  | -------------- | -
|                                             |  | 2014           |  
|                                             |  | (In thousands) |  
|Cash                                         |  | $              | —
|Accounts receivable                          |  |                | —
|Inventory                                    |  |                | —
|Other current asset                          |  |                | —
|Property/equipment                           |  |                | —
|Total assets of discontinued operations      |  |                | —
|Liabilities of discontinued operations:      |  |                |  
|Accounts payable                             |  |                | —
|Other liabilities                            |  |                | —
|Total liabilities of discontinued operations |  |                | —
|                                             |  |                |  
|Net assets of discontinued operations        |  | $              | —



39







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



The following table illustrates
the reporting of the discontinued operations included in the Statements of Operations for the years ended January 31, 2014 and
2013:



|                                                       |  | Years Ended January 31, |  
|------------------------------------------------------ |  | ----------------------- | -
|                                                       |  | 2014                    |  
|                                                       |  | (in 000’s)              |  
|Net sales                                              |  | $                       | —
|Cost of goods sold                                     |  |                         | —
|Gross loss                                             |  |                         | —
|Operating expense                                      |  |                         | —
|Operating loss                                         |  |                         | —
|Loss on shutdown and sale assets                       |  |                         | —
|Loss from discontinued operations before income taxes  |  |                         | —
|Benefit from income taxes from discontinued operations |  |                         | —
|Net loss from discontinued operations                  |  | $                       | —



12. MAJOR
SUPPLIER



Our largest supplier in FY14
was Southern Mills from whom we purchased 12.7% of our total purchases. In FY13, our largest supplier was Southern Mills, from
whom we purchased 11.7% of our total purchases. There were no other vendors over 10% for either FY14 or FY13.



12. RELATED
PARTIES AND TRANSACTIONS



During the year, the Company
paid approximately $587,000 and $435,000 in FY14 and FY13, respectively, to a company owned in part by managers of the Company
for certain printing services, which management believes were at fair market value



14. COMMITMENTS
AND CONTINGENCIES



Certain conditions may exist
as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved
when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s
legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of
the amount of relief sought or expected to be sought therein.



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



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



We must comply with American
laws such as the Foreign Corrupt Practices Act (FCPA) and Sarbanes-Oxley, and also with anti-corruption legislation in the UK.



40







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



Employment Contracts

The Company has employment contracts
with four principal officers expiring through January 31, 2017. Pursuant to such contracts, the Company is committed to aggregate
annual base remuneration of $1,032,000, $915,000, $370,000 and $290,000 for FY14, FY15, FY16 and FY17, respectively. Three of
such employees voluntarily took an 8% reduction in pay along with a 30% reduction to be paid in restricted shares rather than
cash, which was terminated in January 2014 and August 2013, respectively. Three of such contracts provide for bonuses based on
reported earnings per share for FY15 compared with targets set by the Board. Such bonuses were not earned in FY14.



In March 2013, the Company reached
a termination agreement with Mr. Miguel Bastos, President of Lakeland’s Brazilian subsidiary. Such Agreement became effective
on August 30, 2013. This is a part of the Company’s efforts to reduce costs. The termination agreement calls for an aggregate
maximum payout of R$1.1 million (approximately US$470,000), to be paid out over a period of approximately two years. Mr. Bastos
will continue to receive his normal salary for six months and then will receive 3% of Lakeland Brazil’s sales, until he
reaches a total payout equal to the aggregate R$1.1 million. This termination agreement pays Mr. Bastos approximately half of
the amount which would have been paid out for the remaining years of Mr. Bastos’s employment contract, which had run through
December 31, 2015. Such termination amount has been accrued as of January 31, 2014. The balance included in other accrued expenses
on the Balance Sheet at January 31, 2014, was $361,367.



Leases

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

|                       |  | Gross rental |         |  | Rentals paid to related parties |  
|---------------------- |  | ------------ | ------- |  | ------------------------------- | -
|Year ended January 31, |  |              |         |  |                                 |  
|2014                   |  | $            | 651,918 |  |                                 | $
|2013                   |  | $            | 559,485 |  |                                 | $



Minimum annual rental commitments
for the remaining term of the Company’s noncancelable operating leases relating to manufacturing facilities, office space
and equipment rentals at January 31, 2014, including lease renewals subsequent to year end, are summarized as follows:



|Year ending January 31,
|-----------------------
|                       
|2015                   
|2016                   
|2017                   
|2018                   
|2019                   
|and thereafter         



Litigation

The Company is involved in various
litigation proceedings, in addition to those described in Notes 4 and 10 of the financial statements, arising during the normal
course of business which, though in the opinion of the management of the Company, will not have a material effect on the Company’s
financial position and results of operations or cash flows, however, there can be no assurance as to the ultimate outcome of these
matters.



41







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



15. Derivative
Instruments and Foreign Currency Exposure



The Company is exposed to foreign
currency risk. Management has commenced a derivative instrument program to partially offset this risk by purchasing forward contracts
to sell the Canadian Dollar and the Euro other than the cash flow hedge discussed below. Such contracts are largely timed to expire
with the last day of the fiscal quarter, with a new contract purchased on the first day of the following quarter, to match the
operating cycle of the Company. We designated the forward contracts as derivatives but not as hedging instruments, with loss and
gain recognized in current earnings. In the year ended January 31, 2014, the Company recorded a loss on foreign exchange in Brazil
of $475,865 or $0.08 per share included in income from continuing operations. In the year ended January 31, 2013, the Company
recorded a loss on foreign exchange in Brazil of $741,052 or $0.14 per share included in income from continuing operations.



The Company accounts for its
foreign exchange derivative instruments by recognizing all derivatives as either assets or liabilities at fair value, which may
result in additional volatility in both current period earnings and other comprehensive income as a result of recording recognized
and unrecognized gains and losses from changes in the fair value of derivative instruments.



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



We enter cash flow hedge contracts
with financial institutions to manage our currency exposure on future cash payments denominated in foreign currencies. The effective
portion of gain or loss on cash flow hedge is reported as a component of accumulated other comprehensive income. The notional
amount of these contracts was $1,633,542 and $3,634,077 at January 31, 2014 and 2013, respectively. The corresponding asset and
income recorded in other comprehensive income is immaterial to the consolidated financial statements at January 31, 2014 and 2013.



16. MANUFACTURING
SEGMENT DATA



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



|              |  | Fiscal Years Ended January 31, ($ millions) |      
|------------- |  | ------------------------------------------- | -----
|              |  | 2014                                        |      
|Domestic      |  | $                                           | 46.73
|International |  |                                             | 44.65
|Total         |  | $                                           | 91.38



42







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



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



|                                               |  | Year Ended January 31                                       |       
|---------------------------------------------- |  | ----------------------------------------------------------- | ------
|                                               |  | 2014 (in
                                         millions) |       
|Net Sales from Continuing Operations:          |  |                                                             |       
|USA                                            |  | $                                                           | 50.53 
|Other foreign                                  |  |                                                             | 23.44 
|Mexico                                         |  |                                                             | 3.17  
|China                                          |  |                                                             | 44.3  
|Brazil                                         |  |                                                             | 7.21  
|Corporate                                      |  |                                                             | 2.02  
|Less intersegment sales                        |  |                                                             | (39.29
|Consolidated sales                             |  | $                                                           | 91.38 
|External Sales from Continuing Operations:     |  |                                                             |       
|USA                                            |  | $                                                           | 46.73 
|Other foreign                                  |  |                                                             | 21.59 
|Mexico                                         |  |                                                             | 1.26  
|China                                          |  |                                                             | 14.76 
|Brazil                                         |  |                                                             | 7.04  
|Corporate                                      |  |                                                             | —     
|Consolidated external sales                    |  | $                                                           | 91.38 
|Intersegment Sales from Continuing Operations: |  |                                                             |       
|USA                                            |  | $                                                           | 3.80  
|Other foreign                                  |  |                                                             | 1.85  
|Mexico                                         |  |                                                             | 1.91  
|China                                          |  |                                                             | 29.54 
|Brazil                                         |  |                                                             | 0.17  
|Corporate                                      |  |                                                             | 2.02  
|Consolidated intersegment sales                |  | $                                                           | 39.29 



43







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|                                                                     |  | Year Ended January 31 |      
|-------------------------------------------------------------------- |  | --------------------- | -----
|                                                                     |  | 2014 (in millions)    |      
|Operating Loss from Continuing Operations:                           |  |                       |      
|USA                                                                  |  | $                     | 5.22 
|Other foreign                                                        |  |                       | 0.08 
|Mexico                                                               |  |                       | (0.01
|China                                                                |  |                       | 3.54 
|Brazil                                                               |  |                       | (4.41
|Corporate                                                            |  |                       | (4.80
|Less intersegment profit                                             |  |                       | 0.03 
|Consolidated operating loss                                          |  | $                     | (0.36
|Interest Expense from Continuing Operations:                         |  |                       |      
|USA                                                                  |  | $                     | —    
|Other foreign                                                        |  |                       | 0.18 
|Mexico                                                               |  |                       | 0.09 
|China                                                                |  |                       | 0.03 
|Brazil                                                               |  |                       | 1.08 
|Corporate                                                            |  |                       | 1.27 
|Less intersegment                                                    |  |                       | (0.46
|Consolidated interest expense                                        |  | $                     | 2.19 
|Income Tax Expense (Benefit) from Continuing Operations:             |  |                       |      
|USA                                                                  |  | $                     | —    
|Other foreign                                                        |  |                       | 0.37 
|Mexico                                                               |  |                       | 0.02 
|China                                                                |  |                       | 0.92 
|Brazil                                                               |  |                       | —    
|Corporate                                                            |  |                       | (3.87
|Less intersegment                                                    |  |                       | (0.29
|Consolidated income tax expense (benefit) from continuing operations |  | $                     | (2.85
|Depreciation and Amortization Expense:                               |  |                       |      
|USA                                                                  |  | $                     | 0.21 
|Other foreign                                                        |  |                       | 0.17 
|Mexico                                                               |  |                       | 0.05 
|China                                                                |  |                       | 0.25 
|India - D&A of discontinued operations                               |  |                       | —    
|Brazil                                                               |  |                       | 0.35 
|Corporate                                                            |  |                       | 0.60 
|Less intersegment                                                    |  |                       | (0.02
|Consolidated depreciation and amortization expense                   |  | $                     | 1.61 
|Total Assets (at Balance Sheet Date): *                              |  |                       |      
|USA                                                                  |  | $                     | 28.88
|Other foreign                                                        |  |                       | 19.93
|Mexico                                                               |  |                       | 3.73 
|China                                                                |  |                       | 30.11
|India                                                                |  |                       | (1.19
|Brazil                                                               |  |                       | 6.92 
|Corporate                                                            |  |                       | (4.63
|Consolidated assets                                                  |  | $                     | 83.75





*Negative assets reflect intersegment
accounts eliminated in consolidation



44







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



|                                                |  | Year Ended January 31 |      
|----------------------------------------------- |  | --------------------- | -----
|                                                |  | 2014 (in millions)    |      
|Property and Equipment (at Balance Sheet Date): |  |                       |      
|USA                                             |  | $                     | 2.42 
|Other foreign                                   |  |                       | 2.14 
|Mexico                                          |  |                       | 2.09 
|China                                           |  |                       | 2.64 
|India                                           |  |                       | 0.01 
|Brazil                                          |  |                       | 1.86 
|Corporate                                       |  |                       | 0.91 
|Consolidated long-lived assets                  |  | $                     | 12.07
|Capital Expenditures:                           |  |                       |      
|USA                                             |  | $                     | 0.08 
|Other foreign                                   |  |                       | 0.08 
|Mexico                                          |  |                       | 0.01 
|China                                           |  |                       | 0.44 
|India                                           |  |                       | —    
|Brazil                                          |  |                       | 0.09 
|Corporate                                       |  |                       | 0.13 
|Consolidated capital expenditure                |  | $                     | 0.83 
|Goodwill:                                       |  |                       |      
|USA                                             |  | $                     | 0.87 
|Other foreign                                   |  |                       | —    
|Mexico                                          |  |                       | —    
|China                                           |  |                       | —    
|India                                           |  |                       | —    
|Brazil                                          |  |                       | —    
|Corporate                                       |  |                       | —    
|Consolidated goodwill                           |  | $                     | 0.87 



45







Lakeland Industries, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

January 31, 2014 and 2013



17. UNAUDITED
QUARTERLY RESULTS OF OPERATIONS (In thousands, except for per share amounts):



|                                             |  | 1/31/2014 |        |   | 10/31/2013 |   |        | 7/31/2013 |  |   | 4/30/2013 | 
|-------------------------------------------- |  | --------- | ------ | - | ---------- | - | ------ | --------- |  | - | --------- | 
|Net sales from continuing operations         |  | $         | 22,222 |   |            | $ | 22,787 |           |  | $ | 24,639    | 
|Gross profit from continuing operations      |  |           | 6,249  |   |            |   | 5,042  |           |  |   | 7,462     | 
|(Loss) earnings from continuing operations   |  |           | (1,611 | ) |            |   | (1,835 | )         |  |   | 4,171     | 
|(Loss) earnings from discontinued operations |  |           | —      |   |            |   | —      |           |  |   | —         | 
|Net income (loss)                            |  |           | (1,611 | ) |            |   | (1,835 | )         |  |   | 4,171     | 
|Basic net earnings (loss) per share:         |  |           |        |   |            |   |        |           |  |   |           | 
|Continuing operations                        |  |           | (0.27  | ) |            |   | (0.31  | )         |  |   | 0.75      | 
|Discontinued operations                      |  |           | —      |   |            |   | —      |           |  |   | —         | 
|Total                                        |  |           | (0.27  | ) |            |   | (0.31  | )         |  |   | 0.75      | 
|Diluted net earnings (loss) per share:       |  |           |        |   |            |   |        |           |  |   |           | 
|Continuing operations                        |  |           | (0.27  | ) |            |   | (0.31  | )         |  |   | 0.74      | 



|                                             |  | 1/31/2013 |         |   | 10/31/2012 |   |        | 7/31/2012 |  |   | 4/30/2012 | 
|-------------------------------------------- |  | --------- | ------- | - | ---------- | - | ------ | --------- |  | - | --------- | 
|Net sales from continuing operations         |  | $         | 23,399  |   |            | $ | 24,239 |           |  | $ | 23,499    | 
|Gross profit from continuing operations      |  |           | 5,598   |   |            |   | 7,287  |           |  |   | 7,131     | 
|(Loss) earnings from continuing operations   |  |           | (17,572 | ) |            |   | 283    |           |  |   | 1,644     | 
|(Loss) earnings from discontinued operations |  |           | (522    | ) |            |   | —      |           |  |   | —         | 
|Net income (loss)                            |  |           | (18,094 | ) |            |   | 283    |           |  |   | 1,644     | 
|Basic net earnings (loss) per share:         |  |           |         |   |            |   |        |           |  |   |           | 
|Continuing operations                        |  |           | (3.30   | ) |            |   | 0.05   |           |  |   | 0.31      | 
|Discontinued operations                      |  |           | (0.10   | ) |            |   | —      |           |  |   | —         | 
|Total                                        |  |           | (3.40   | ) |            |   | 0.05   |           |  |   | 0.31      | 
|Diluted net earnings (loss) per share:       |  |           |         |   |            |   |        |           |  |   |           | 
|Continuing operations                        |  |           | (3.30   | ) |            |   | 0.05   |           |  |   | 0.30      | 
|Discontinued operations                      |  |           | (0.10   | ) |            |   | —      |           |  |   | —         | 
|Total                                        |  |           | (3.40   | ) |            |   | 0.05   |           |  |   | 0.30      | 



Numbers may not add due to rounding



46







PART
IV



ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



| | a. | (1)
                                         Financial Statements - Covered by Reports of Independent Registered Public Accounting
                                         Firms
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (A) | Consolidated Statements of Operations
                                         for the years ended January 31, 2014 and 2013
| | --- | ----------------------------------------------------------------------------------------------------------------------------



| | (B) | Consolidated Statements of Comprehensive
                                         Income for the years ended January 31, 2014 and 2013
| | --- | --------------------------------------------------------------------------------------------------------------------------------------



| | (C) | Consolidated Balance Sheets at
                                         January 31, 2014 and 2013
| | --- | -------------------------------------------------------------------------------------------------



| | (D) | Consolidated Statements of Stockholder’s
                                         Equity for the years ended January 31, 2014 and 2013
| | --- | --------------------------------------------------------------------------------------------------------------------------------------



| | (E) | Consolidated Statements of Cash
                                         Flows for the years ended January 31, 2014 and 2013
| | --- | ----------------------------------------------------------------------------------------------------------------------------



| | (F) | Notes to Consolidated Financial
                                         Statements
| | --- | -----------------------------------------------------------------------------------



| | (2) | Financial Statement Schedule –
                                         Covered by Report of Independent Registered Public Accounting Firm. All schedules are
                                         omitted because they are not applicable, not required or the required information is
                                         included in a consolidated financial statement or notes hereto.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Exhibits – See (b) below
| | --- | ------------------------



| | b. | Exhibits
| | -- | --------



|Exhibit
    No. |  | Description                                                                                                                                                                                                                                                                                                    
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1             |  | Restated Certificate of Incorporation of Lakeland Industries, Inc. (incorporated by reference to Exhibit
3.2 of Lakeland Industries, Inc.’s Form 10-Q filed December 7, 2011).                                                                                                                                 
|                |  |                                                                                                                                                                                                                                                                                                                
|3.2             |  | Amended and Restated Bylaws of Lakeland Industries Inc. (incorporated by reference to Exhibit 3.1 of Lakeland
Industries, Inc.’s Form 8-K filed April 14, 2014).                                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                
|4.1             |  | 2006 Incentive Plan (incorporated by reference to Exhibit
    4.1 of Lakeland Industries, Inc. Registration Statement on Form S-8 filed July 26, 2007).                                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                
|4.2             |  | 2009 Stock Plan (incorporated by reference to Exhibit 4.1
    of Lakeland Industries, Inc. Registration Statement on Form S-8 filed September 8, 2011).                                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                
|4.3             |  | 2012 Stock Incentive Plan (incorporated by reference to Exhibit
    4.1 of Lakeland Industries, Inc. Registration Statement on Form S-8 filed September 13, 2012).                                                                                                                                             
|                |  |                                                                                                                                                                                                                                                                                                                
|4.4             |  | Investor Rights Agreement, dated June 28, 2013, by and between Lakeland Industries, Inc. and
    LKL Investments, LLC (incorporated by reference to Exhibit 4.1 of Lakeland Industries, Inc.’s Form 8-K filed July 1,
    2013).                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                
|4.5             |  | Registration Rights Agreement, dated June 28, 2013, by and between Lakeland Industries, Inc.
    and LKL Investments, LLC (incorporated by reference to Exhibit 4.2 of Lakeland Industries, Inc.’s Form 8-K filed July
    1, 2013).                                                                           
|                |  |                                                                                                                                                                                                                                                                                                                
|10.1            |  | Employment Agreement, dated April 16, 2010, between Lakeland
    Industries, Inc. and Christopher J. Ryan (incorporated by reference to Exhibit 10.5 of Lakeland Industries, Inc. Form 10-K
    for the fiscal year ended January 31, 2010, filed April 16, 2010).                                             
|                |  |                                                                                                                                                                                                                                                                                                                
|10.2            |  | Employment Agreement, dated January 24, 2012, between Lakeland
    Industries, Inc. and Gary Pokrassa (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed
    January 24, 2012).                                                                                            
|                |  |                                                                                                                                                                                                                                                                                                                
|10.3            |  | Lease Agreement, dated 2006, between Michael Robert Kendall,
    June Jarvis and Barnett Waddingham Trustees Limited, as lessor, and Lakeland Industries, Inc., as lessee (incorporated by
    reference to Exhibit 10.22 of Lakeland Industries, Inc.’s Form 10-K for the fiscal year ended January 31, 2007).



47







|Exhibit
    No. |  | Description                                                                                                                                                                                                                                                                                                                          
|--------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.4            |  | Lease Agreement, dated October 14,
    2010, between South Heidelberg Partners, LP, as lessor, and Lakeland Industries, Inc., as lessee for Lakeland High Visibility
    Clothing in Pennsylvania (incorporated by reference to Exhibit 10.14 of Lakeland Industries, Inc. Form 10-K for the fiscal
    year ended January 31, 2011).
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.5            |  | Lease Agreement, dated December 28,
    2010, between Land Services, LLC, as lessor, and Lakeland Industries, Inc., as lessee (incorporated by reference to Exhibit
    10.15 of Lakeland Industries, Inc. Form 10-K for the fiscal year ended January 31, 2011).                                                                    
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.6            |  | Lakeland Industries, Inc. Form of
    Indemnification Agreement (incorporated by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form 8-K filed June 29,
    2012).                                                                                                                                                           
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.7            |  | Settlement Agreement between Lakeland and Elder Marcos Vieira da
    Conceição and Márcia Cristina Vieira daConceição Antunes(incorporated
    by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form 10-Q filed July 31, 2012).                                                                                             
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.8            |  | Agreement, dated January 11, 2013,
    between Lakeland Industries, Inc. and Bank Itau (incorporated by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form
    8-K filed January 15, 2013).                                                                                                                                 
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.9            |  | Summary of Exhibit 10.8 in English
    (incorporated by reference to Exhibit 10.2 to Lakeland Industries, Inc. Form 8-K filed January 15, 2013).                                                                                                                                                                                     
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.10           |  | Amendment for the Purchase of Debts,
    dated January 29, 2013 (incorporated by reference to Exhibit 10.1 to Lakeland Industries, Inc. Form 8-K filed February 20,
    2013).                                                                                                                                                       
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.11           |  | Fixed Charge on Non-vesting Debts
    and Floating Charge, dated January 29, 2013 (incorporated by reference to Exhibit 10.2 to Lakeland Industries, Inc. Form 8-K
    filed February 20, 2013).                                                                                                                                     
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.12           |  | Standard Terms & Conditions (incorporated
    by reference to Exhibit 10.3 to Lakeland Industries, Inc. Form 8-K filed February 20, 2013).                                                                                                                                                                                           
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.13           |  | Termination Agreement, dated March
    14, 2013, among Lakeland Brasil S.A., Lakeland Industries, Inc. and Miguel Bastos (incorporated by reference to Exhibit 10.1
    to Lakeland Industries, Inc. Form 8-K filed March 15, 2013).                                                                                                 
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.14           |  | Loan and Security Agreement, dated June 28, 2013, by and
    among Lakeland Industries, Inc. and Lakeland Protective Wear Inc., as borrowers, and Alostar Bank of Commerce (incorporated
    by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed July 1, 2013).                                               
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.15           |  | Amended and Restated Revolver Note, dated June 28, 2013,
    issued by Lakeland Industries, Inc. and Lakeland Protective Wear Inc., as borrowers, to Alostar Bank of Commerce (incorporated
    by reference to Exhibit 10.2 of Lakeland Industries, Inc.’s Form 8-K filed July 1, 2013).                                            
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.16           |  | Loan and Security Agreement, dated June 28, 2013, by and
    among Lakeland Industries, Inc. and Lakeland Protective Wear Inc., as borrowers, and LKL Investments, LLC (incorporated by
    reference to Exhibit 10.3 of Lakeland Industries, Inc.’s Form 8-K filed July 1, 2013).                                                   
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.17           |  | Term Note, dated June 28, 2013, issued by Lakeland Industries,
    Inc. and Lakeland Protective Wear Inc., as borrowers, to LKL Investments, LLC (incorporated by reference to Exhibit 10.4 of
    Lakeland Industries, Inc.’s Form 8-K filed July 1, 2013).                                                                         
|                |  |                                                                                                                                                                                                                                                                                                                                      
|10.18           |  | Warrant to Purchase Common Stock, dated as of June 28, 2013,
    issued by Lakeland Industries, Inc. to LKL Investments, LLC (incorporated by reference to Exhibit 10.5 of Lakeland Industries,
    Inc.’s Form 8-K filed July 1, 2013).                                                                                             





48







|Exhibit
    No. |  | Description                                                                                                                                                                                                                                                                                       
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19           |  | Letter of Offer, effective as of September
    27, 2013, between Lakeland Protective Real Estate Inc. and Business Development Bank of Canada (incorporated by reference
    to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed October 1, 2013).                                      
|                |  |                                                                                                                                                                                                                                                                                                   
|10.20           |  | General Security Agreement, effective as of September 27,
    2013, between Lakeland Protective Real Estate Inc. and Business Development Bank of Canada (incorporated by reference to Exhibit
    10.2 of Lakeland Industries, Inc.’s Form 8-K filed October 1, 2013).                           
|                |  |                                                                                                                                                                                                                                                                                                   
|10.21           |  | Agreement for Purchase of Debts, dated
    December 19, 2013 (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc.’s Form 8-K filed December
    23, 2013).                                                                                                                     
|                |  |                                                                                                                                                                                                                                                                                                   
|10.22           |  | Replacement Schedule, dated December
    19, 2013 (incorporated by reference to Exhibit 10.2 of Lakeland Industries, Inc.’s Form 8-K filed December 23, 2013).                                                                                                                                    
|                |  |                                                                                                                                                                                                                                                                                                   
|10.23           |  | Loan Agreement dated on December 13, 2013 between Lakeland
    Industries, Inc. and Bank Itau in Brazil to borrow R$ 500.000 (approximately USD $211,000) for working capital (incorporated
    by reference to Exhibit 10.3 of Lakeland Industries, Inc.’s Form 8-K filed December 23, 2013).    
|                |  |                                                                                                                                                                                                                                                                                                   
|10.24           |  | Summary of Exhibit 10.23 in English
    (incorporated by reference to Exhibit 10.4 of Lakeland Industries, Inc.’s Form 8-K filed December 23, 2013).                                                                                                                                              
|                |  |                                                                                                                                                                                                                                                                                                   
|10.25           |  | Loan Agreement,
    dated March 27, 2014, between the China subsidiary of Lakeland Industries, Weifang Lakeland Safety Products Inc., Ltd and
    Weifang Rural Credit Cooperative Bank (incorporated by reference to Exhibit 10.1 of Lakeland Industries, Inc. Form 8-K filed
    April 2, 2014).
|                |  |                                                                                                                                                                                                                                                                                                   
|10.26           |  | Summary of Exhibit
    10.25 in English (incorporated by reference to Exhibit 10.2 of Lakeland Industries, Inc. Form 8-K filed April 2, 2014).                                                                                                                                                    
|                |  |                                                                                                                                                                                                                                                                                                   
|10.27           |  | Employment Agreement,
    dated March 1, 2014, between Lakeland Industries, Inc. and Stephen M. Bachelder.                                                                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                   
|14.1            |  | Amendment to
    the Lakeland Industries, Inc. Code of Ethics, dated February 6, 2012 (incorporated by reference to Exhibit 14.1 of Lakeland
    Industries, Inc. Form 10-K for the fiscal year ended January 31, 2012).                                                                          
|                |  |                                                                                                                                                                                                                                                                                                   
|21              |  | Subsidiaries
    of Lakeland Industries, Inc. (wholly owned) and jurisdictions of incorporation:                                                                                                                                                                                                  



| | Lakeland Protective Wear,
    Inc.                  | Ontario                    
| | --------------------------------------------------- | ---------------------------
| | Lakeland Protective Real Estate                     | Ontario                    
| | Laidlaw, Adams & Peck, Inc. and
    Subsidiary      | Delaware                   
| | (Weifang Meiyang Protective
    Products Co., Ltd.) |                            
| | Weifang Lakeland Safety Products
    Co., Ltd.      | An Qiu City, Shandong      
| | Lakeland Brazil, S.A.                               | Salvador, Brazil           
| | Lakeland Glove and Safety Apparel
    Private Ltd.  | New Delhi                  
| | Lakeland Industries Europe Ltd.                     | Cardiff, UK                
| | Weifang Meiyang Protective Products
    Co., Ltd    | An Qiu City, Shandong      
| | Lakeland (Beijing) Safety Products,
    Co., Ltd.   | Beijing, China             
| | Lakeland Shanghai                                   | Shanghai, China            
| | Lakeland Industries, Inc. Agencia
    en Chile      | Santiago, Chile            
| | Lakeland Argentina, SRL                             | Buenos Aires, Argentina    
| | Art Prom, LLC                                       | Ust-Kamenogorsk, Kazakhstan
| | RussIndProtection, Ltd.                             | Moscow, Russia             
| | Lakeland (Hong Kong) Trading Co.,
    Ltd.          | Hong Kong                  



49







|Exhibit
    No. |  | Description                                                                                                                                                                                                   
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|23.1            |  | Consent of Warren
    Averett, LLC, Independent Registered Public Accounting Firm                                                                                                                             
|                |  |                                                                                                                                                                                                               
|23.2*           |  | Consent
    of ACAL Consultoria E Auditoria S/S, Independent Registered Public Accounting Firm                                                                                                                
|                |  |                                                                                                                                                                                                               
|23.3*           |  | Consent
    of RSM China, Independent Registered Public Accounting Firm                                                                                                                                       
|                |  |                                                                                                                                                                                                               
|31.1*           |  | Certification
    of Christopher J. Ryan, Chief Executive Officer, President and Secretary, pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002                                                     
|                |  |                                                                                                                                                                                                               
|31.2*           |  | Certification
    of Gary Pokrassa, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                        
|                |  |                                                                                                                                                                                                               
|32.1*           |  | Certification
    of Christopher J. Ryan, Chief Executive Officer, President and Secretary, pursuant to Section 18 USC. Section 1350, as Adopted
    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|                |  |                                                                                                                                                                                                               
|32.2*           |  | Certification
    of Gary Pokrassa, Chief Financial Officer, pursuant to Section 18 USC. Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002                               
|                |  |                                                                                                                                                                                                               
|101.INS         |  | XBRL Instance
    Document                                                                                                                                                                                    
|                |  |                                                                                                                                                                                                               
|101.SCH         |  | XBRL Taxonomy
    Extension Schema Document                                                                                                                                                                   
|                |  |                                                                                                                                                                                                               
|101.CAL         |  | XBRL Taxonomy
    Extension Calculations Document                                                                                                                                                             
|                |  |                                                                                                                                                                                                               
|101.DEF         |  | XBRL Taxonomy
    Extension Definitions Document                                                                                                                                                              
|                |  |                                                                                                                                                                                                               
|101.LAB         |  | XBRL Taxonomy
    Extension Labels Document                                                                                                                                                                   
|                |  |                                                                                                                                                                                                               
|101.PRE         |  | XBRL Taxonomy
    Extension Presentations Document                                                                                                                                                            
|                |  |                                                                                                                                                                                                               
|*               |  | Filed herewith                                                                                                                                                                                                



50







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:  August 13, 2014 |                           |                                      
|----------------------- | ------------------------- | -------------------------------------
|                        |                           |                                      
|                        | LAKELAND INDUSTRIES, INC.
|                        |                           |                                      
|                        | By:                       | / s / Christopher J. Ryan            
|                        |                           | Christopher J. Ryan,                 
|                        |                           | Chief Executive Officer and President



51