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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934. For the fiscal year ended May 31, 2006

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934      For the transition period from _______ to

                          Commission file number 1-7848
                        LAZARE KAPLAN INTERNATIONAL INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                      13-2728690
      (State or other jurisdiction of                      (IRS Employer
      incorporation or organization)                       Identification No.)

          19 West 44th Street                                    10036
      (Address of principal executive offices)                (Zip Code)
Registrant's telephone number, including area code (212) 972-9700

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

       Title of each class             Name of each exchange on which registered
       -------------------             -----------------------------------------
Common Stock ($1 par value)                     American Stock Exchange
Preferred Share Purchase Rights                 American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

      Indicate by check mark whether the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ]
No [X]

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [X]

      Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (check one):
      Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [X]

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

      As of November 30, 2005 the aggregate market value of voting and
non-voting common equity held by non-affiliates of the registrant, computed by
reference to the closing price for the registrant's common equity on the
American Stock Exchange at that date was $20,005,812.

      As of July 31, 2006, 8,197,134 of the registrant's common stock were
outstanding

                       DOCUMENTS INCORPORATED BY REFERENCE

      2006 definitive proxy statement to be filed with the Commission -
incorporated by reference into Part III.

      2006 Annual Report to Stockholders for the fiscal year ended May 31, 2006
to be filed with the Commission-incorporated by reference into Parts II and IV.




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Part1

Item 1. Business

The Company

      Lazare Kaplan International Inc. (the "Company") was incorporated in 1972
under the laws of the state of Delaware as the successor to a business which was
founded by Mr. Lazare Kaplan in 1903. The Company is engaged in the cutting,
polishing and selling of ideally proportioned diamonds which it markets
internationally under the brand name "Lazare Diamonds(R)". Ideally proportioned
diamonds are distinguished from non-ideal cut ("commercial") diamonds by the
symmetrical relationship of their facets, which optimize the balance of
brilliance, sparkle and fire in a polished diamond. Due to these
characteristics, Lazare Diamonds command a premium in the marketplace. The
Company believes there are only a few companies worldwide engaged primarily in
the production of ideally proportioned diamonds and that it is one of the
largest U.S. providers of ideal cut diamonds. In addition, the Company cuts and
polishes fine make commercial diamonds at diamond cutting facilities in Russia,
South Africa and Namibia which it markets to wholesalers, distributors and, to a
growing extent, retail jewelers. All rough stones purchased by the Company are
either selected for manufacturing or resold as rough diamonds in the
marketplace. The Company believes that the combination of its cutting and
polishing operations and its trading operations enables the Company to purchase
larger quantities of rough diamonds from which it may select those rough
diamonds best suited for the Company's current needs.

      The Company's marketing strategy in the selling of Lazare Diamonds is
directed primarily toward quality conscious consumers throughout the United
States, South America, the Far East, the Middle East and Europe. The Company
focuses its distribution efforts for Lazare Diamonds on selectivity with a view
towards helping retailers who carry the product maintain a competitive
advantage. Lazare Diamonds can be found at some of the most prestigious jewelry
stores around the world, including those with international reputations and
those known only in their communities as being the highest quality retail
jewelers. This strategy helps ensure that the Company's product is presented in
an environment consistent with its superior quality and image. The Company also
sells to certain jewelry manufacturers and diamond wholesalers. The Company has
developed a comprehensive grading system which, when coupled with the "ideal
cut" standard, allows jewelers to order inventory by category rather than
through the more cumbersome process of visual selection. In addition, the
Company designs, manufactures (through independent contractors) and sells a line
of high quality jewelry which features Lazare Diamonds.

      An important element of the Company's strategy is the promotion of the
Lazare Diamond brand name. Every Lazare Diamond bears a laser inscription on its
outer perimeter, invisible to the naked eye, containing the Lazare Kaplan logo
and an identification number unique to the stone. The laser signature also
allows consumers to register their Lazare Diamonds with the Company under its
program, The Lazare Diamond Registry(R), thereby providing proof of ownership in
case of loss or theft.

      One of the Company's important suppliers of rough diamonds is the Diamond
Trading Company ("DTC"), the rough diamond sales arm of the De Beers Group.
Based on published reports, the Company believes that more than half of the
world's current rough diamond output is sold by the DTC. The Company has been a
client of the DTC for approximately 60 years. In order to diversify its sources
of rough diamond supply, the Company has an office in Antwerp to supplement its
rough diamond needs by secondary market purchases and has entered into
relationships with other primary source suppliers. The Company believes that its
success in maintaining quantities and qualities of polished inventory that best
meet its customers' needs is achieved through its ability to fully integrate its
diverse rough and polished diamond sources.

      The Company operates various manufacturing facilities. The Company's
domestic manufacturing operation, located in Puerto Rico, is believed by the
Company to be the largest diamond cutting facility in the United States. The
Company believes its work force in Puerto Rico is the most highly skilled in the
diamond industry. This facility generally produces polished diamonds having
weights of 1/5 of a carat and greater. The Company also operates manufacturing
facilities in Moscow and Barnaul, Russia, Namibia and South Africa. The
facilities in Russia are operated pursuant to an agreement with AK ALROSA of
Russia. The facility in Namibia is operated under a strategic cooperation
agreement with NamGem Diamond Manufacturing Company (PYT) Ltd.

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The facility in South Africa is operated by Nozala Diamonds (Pty) Ltd, a joint
cutting and polishing operation with Nozala Investments (Pty) Ltd, a broadly
based women's empowerment investment group.

Diamond Supply

      The Company's overall revenues are, in part, dependent upon the
availability of rough diamonds, the world's known sources of which are highly
concentrated. Based upon published reports, the Company believes that Angola,
Australia, Botswana, Brazil, Canada, Ghana, Guinea, Ivory Coast, Namibia,
Republic of the Congo, Russia, Sierra Leone and South Africa account for more
than 90% of present world rough gem diamond production. The DTC is the primary
world-wide marketing mechanism of the rough diamond industry. Sales for the DTC
are made in London and South Africa to a select group of clients
("sightholders") which, according to published reports, number approximately 95,
including the Company. Based upon published reports, the Company believes that
more than half of the world's current rough diamond output is sold by the DTC
and its affiliated companies. In order to maintain their purchasing
relationship, the DTC's clients have traditionally been expected to purchase
substantially all of the diamonds offered to them by the DTC. Companies that are
not sightholders must either purchase their requirements from sightholders or
seek access to that portion of the world supply not marketed by the DTC.

      The DTC has been and continues to be an important supplier of rough
diamonds to the Company. The DTC periodically invites its clients to submit
their requirements as to the amount and type of stones they wish to purchase.
Employees of the Company attend offerings of rough diamonds ("sights") held by
the DTC periodically during the year in London. At sights, the Company
purchases, at the DTC's stated price, an assortment of rough diamonds known as a
"series", the composition of which attempts to take into account the qualitative
and quantitative requirements of the Company based on requests submitted to the
DTC by the Company. The Company has been a sightholder for approximately 60
years. The loss of its status as a sightholder could have a material adverse
effect on the Company.

      In 2000, the DTC announced significant changes in its approach to rough
diamond marketing. In brief, the DTC stated that it would stop open market
purchases, alter its market control and pricing policies and focus on selling
its own mining productions through its "Supplier of Choice" marketing programs.
These policy changes were intended to drive consumer demand for diamond jewelry
by fostering the development of efficient distribution networks that stimulate
demand, support the emergence of internationally recognized brands to meet
consumer needs, supply clients with a consistent supply of rough diamonds and
encourage and support additional investment in marketing and advertising
programs with the goal of developing an industry led by advertising and
marketing support.

      The Company is currently a Sightholder under the DTC's Supplier of Choice
Program. The Company believes it is well positioned to benefit from these
changes in the DTC's approach to diamond marketing. However, there can be no
assurance that this policy change will not have a material adverse effect on the
Company's operations.

      During the third quarter of fiscal 2004, the Company signed a cooperation
agreement with NamGem for the cutting and polishing of diamonds in Namibia.
NamGem is Namibia's flagship venture in the international diamond polishing
industry. Under the terms of the agreement the Company provides marketing and
technical manufacturing assistance to NamGem. The Company purchases rough
diamonds and supervises the manufacturing of those deemed suitable to cut and
polish. The Company pays NamGem for manufacturing on a fee for services basis.
All rough and polished diamonds are bought and sold by the Company for its
account.

      During the fourth quarter of fiscal 2004 the Company signed a four year
technical cooperation agreement regarding the marketing of rough diamonds with
SODIAM, the government entity responsible for the development and marketing of
diamonds produced in Angola. The Company began active buying operations in the
Angolan informal sector during the first quarter of fiscal 2005. During the
third fiscal quarter of 2006 the Company's rough buying operation expanded to
include buying in the Angolan formal sector.

      In November 2004, the Company signed an agreement with Nozala Investments
(PTY) LTD., a broadly based women's empowerment investment group, for
cooperation in South Africa's diamond sector. The

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agreement contemplates diamond mining, cutting, polishing, and distribution. The
joint venture is in line with the South African Government's recently announced
program to promote new entrants and investment in the domestic diamond sector,
increasing the sector's contribution to economic development. Cutting and
polishing activities which concentrate on local sources of rough diamond supply,
commenced during the third fiscal quarter of 2006.

      In order to diversify its sources of supply, the Company has entered into
arrangements with other primary source suppliers and manufacturers. The Company
also has established an office in Antwerp to supplement its rough and polished
diamond needs by making purchases in the secondary market.

      Through February 2009, the Company's wholly-owned subsidiary, Pegasus
Overseas Ltd. ("POL") has an exclusive agreement with Diamond Innovations Inc.
("DI") under which POL will market natural diamonds that have undergone a high
pressure, high temperature (HPHT) process to improve the color of certain gem
diamonds without reducing their all-natural content. The process is permanent
and irreversible and it does not involve treatments such as irradiation, laser
drilling, surface coating or fracture filling and is conducted before the final
cutting and polishing by the Company. The process is used only on a select,
limited range of natural diamonds with qualifying colors, sizes and clarities
for both round and fancy cuts. The estimated number of gemstones with
characteristics suitable for this process is a small fraction of the overall
diamond market. POL sells only diamonds that have undergone the HPHT process
under the brand name Bellataire(R). Each Bellataire diamond is laser inscribed
with a unique identification number.

      In November 2005, the Company (including certain of its subsidiaries)
amended certain terms of its agreement with DI relating to the sourcing,
manufacture and marketing of Bellataire diamonds. The amendment and related
agreements seek to increase the sales and profitability of Bellataire diamonds
by more closely aligning the economic interests of the parties through shared
management of product sourcing, manufacturing and marketing as well as the
sharing of related costs.

      The Company has rough diamond supply arrangements in Russia for the
cutting and polishing of diamonds in Russia. See "Cutting and Polishing".

      The Company believes that it has good relations with its suppliers, that
its trade reputation and established customer base will continue to assure
access to primary sources of diamonds and that its sources of supply are
sufficient to enable the Company to meet its present and foreseeable needs.
However, the Company's sources of supply could be affected by political and
economic developments in producing countries over which the Company has no
control. While the Company believes that alternative sources of supply may be
available, any significant disruption of the Company's access to its primary
source suppliers could have a material adverse effect on its ability to purchase
rough diamonds.

      As a concerned member of the international diamond industry and global
community at large, the Company fully supports and complies with policies which
prohibit the trade in conflict diamonds, prevent money laundering and combat the
financing of terrorism, a position which reflects the Company's leadership in
the industry. The Company fully complies with clean diamond trading and
anti-money laundering legislation adopted by the United States Government such
as the USA Patriot Act and the Clean Diamond Trade Act, and supports relevant
resolutions of concerned regional governments and international organizations
including the OECD and the United Nations. The Company is a founding member of
the United Nations Global Compact which was launched in 2000 to "initiate a
global compact of shared values and principles which will give a human face to
the global market". The Company will continue to join various industry and trade
associations in condemning and combating the trade in illicit diamonds and to
comply fully with World Diamond Congress resolutions for industry
self-regulation in respect of the Kimberley Process Certification Scheme,
including implementation of the prescribed System of Warranties and Code of
Conduct. Furthermore, the Company long ago adopted the highest professional and
ethical standards in every aspect of our business and is fully compliant with
the DTC's recently developed Diamond Best Practices Principles.

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Cutting and Polishing

      In March 1999 (in furtherance of a Memorandum of Understanding signed by
the Export-Import Bank of the United States ("Eximbank"), ALROSA and the
Company) the Company and ALROSA entered into an agreement (the "ALROSA
Agreement") to expand their relationship in the cutting, polishing and marketing
of rough gem diamonds for up to $100 million a year. Under the terms of the
ALROSA Agreement, the Company and ALROSA agreed to refurbish certain diamond
cutting facilities in Russia. At present, the Company's operations in Russia are
consolidated in two facilities, both of which are fully operational. These
facilities are staffed by Russian technicians and jointly managed and supervised
by the Company and ALROSA personnel. Under the ALROSA agreement, the Company
sells the resulting polished diamonds through its worldwide distribution
network. The proceeds from the sale of these polished diamonds, after deduction
of rough diamond cost, are generally shared equally with ALROSA. This agreement
does not require the Company to advance funds for the purchase of rough
diamonds. Any interruption in the supply of diamonds from Russia could have a
material adverse effect on the Company.

      The Company has signed a strategic cooperation agreement with NamGem
Diamond Manufacturing Company (PTY) Ltd. ("NamGem") for the cutting and
polishing of diamonds in Namibia. NamGem is Namibia's flagship venture in the
international diamond polishing industry. Under the terms of the agreement, the
Company provides technical manufacturing assistance and supervises the
manufacture of the Company's rough diamonds deemed suitable to cut and polish.

      The Company believes that its factory in Puerto Rico is the largest
cutting and polishing facility in the United States. Each diamond received in
Puerto Rico is evaluated against strict management standards designed to
maximize its potential economic contribution to the Company. Expert technicians,
assisted by proprietary computer software, determine whether to cut the diamond
to ideal or commercial proportions or resell the diamond. The shape of the
diamond, its color, clarity, size, potential profitability and salability are
among the criteria used in making such determinations.

      Rough diamonds selected for cutting are analyzed and where desirable are
sorted for sawing to achieve the desired shape and to eliminate imperfections.
They are then cut and polished into finished gems. Each finished ideal cut
diamond (weighing .18 carats and larger) which is marketed as a Lazare Diamond
is inscribed with the Lazare Kaplan logo and its own identification number by
the Company's patented laser inscription process. The Company believes its work
force in Puerto Rico is the most highly skilled in the diamond industry. The
Company has undertaken a worker training program at its facility in Puerto Rico
to ensure a constant flow of skilled labor to satisfy its needs for further
growth.

      The Company believes that it is recognized in the diamond industry for the
high quality and brilliance of the gems it cuts and that it also enjoys a
reputation as an imaginative and innovative cutter of large and difficult
diamonds.

Pricing

      Rough Diamond Prices

      Through its control of more than half of the value of the current world
rough diamond output, the DTC can exert significant control over the pricing of
rough and polished diamonds by adjusting the quantity and pricing of rough
diamonds it supplies to the marketplace. Rough diamond prices established by the
DTC have been characterized historically by steady increases over the long term;
however, prices in the secondary market have experienced a greater degree of
volatility, particularly during the late 1970's. Traditionally, the Company has
been able to pass along such price increases to its customers. From time to
time, however, the Company has absorbed these price increases in the short term
to maintain an orderly pricing relationship with its customers. This has, in the
past, caused temporary adverse effects on the Company's earnings. A large rapid
increase in rough diamond prices could materially adversely affect the Company's
revenues and operating margins if the increased cost of rough diamonds could not
be passed along to its customers in a timely manner.

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      According to published reports, during 1995 there was an emergence of a
two-tier market for rough diamonds. The first tier is comprised of better
quality rough diamonds, where supply and demand appear to be in balance. The
Company conducts its cutting and polishing operations almost exclusively in this
segment of the market. The second tier is comprised of small, less expensive,
imperfect rough diamonds. The prices for these diamonds have been considerably
more volatile since 1995. Because the Company focuses primarily on better
quality rough diamonds, this volatility has not had a significant effect on the
Company. However, a significant decrease in the price of better quality rough
diamonds could materially adversely affect the Company's revenues, operating
margins and inventory value.

      Polished Diamond Prices

      Over the past 60 years, increases in the price of rough diamonds have
generally resulted in a corresponding increase in the price of polished
diamonds. However, during periods of economic uncertainty, there may be a
significant time lag before the Company is able to increase polished diamond
prices. During the period of high inflation in the late 1970's, investors
speculated in hard assets, driving polished diamond prices to exceptionally high
levels which in turn caused significant increases in the cost of rough diamonds.
However, the moderation of inflation during the early 1980's resulted in a
sudden and massive shift of investments from hard assets to financial
instruments, resulting in dramatic price declines for polished diamonds which
caused a market liquidity crisis as prices of some categories of polished
diamonds fell below the inventory costs of such diamonds. Since this period in
the early 1980's, the Company believes the pricing of polished diamonds has
returned to its historical pattern of responding to increases in the pricing of
rough diamonds. The Company has broadened its sales base and implemented strict
inventory, pricing and purchasing controls which it believes could lessen the
impact of fluctuations in the price of rough and polished diamonds. These
include computerized rough diamond evaluation programs and inventory utilization
programs. However, there can be no assurance that volatility in the price of
polished diamonds could not occur again. Any rapid decrease in the price of
polished diamonds could have a material adverse effect on the Company in terms
of inventory reserves, lower sales and lower margins.

Marketing, Sales and Distribution

      Marketing Strategy

      The Company's sales strategy is directed primarily toward quality
conscious consumers throughout the United States, South America, the Far East,
the Middle East and Europe. The Company focuses its distribution efforts for
Lazare Diamonds on selectivity with a view to helping retailers who carry the
product maintain a competitive advantage. Lazare Diamonds can be found at some
of the most prestigious jewelry stores around the world, including both those
with international reputations and those recognized only in their local
communities as being the highest quality retail jewelers. This strategy helps
ensure that the Company's product is presented in an environment consistent with
its superior quality and image.

      The Company also sells to certain jewelry manufacturers and diamond
wholesalers. The Company has developed a comprehensive grading system for its
diamonds which, when coupled with the "ideal cut" standard, allows jewelers to
order inventory by category rather than through the more cumbersome process of
visual selection. In addition, the Company designs, manufactures (through
independent contractors) and sells a line of high quality jewelry that features
Lazare Diamonds.

      A key element of the Company's strategy is the promotion of the Lazare
Diamond brand name directly to consumers. The Company is able to market its
diamonds under a brand name to retailers because (a) the ideal cut
differentiates the Company's diamonds from commercial diamonds in the
marketplace and (b) each Lazare Diamond is inscribed with the Company's logo and
identification number using the Company's patented laser inscription process,
thus authenticating the diamonds. The Company holds domestic and various
international patents for this process. In addition, in March 2006 an additional
U.S. patent was issued to the Company relating to microinscribed gemstones. The
Company has additional domestic and international patents-pending.

      The Company's decision to pursue the brand name strategy is reinforced by
two factors - a rising trend among informed consumers to purchase quality, brand
name products, and the need among upscale jewelers to

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set themselves apart in an increasingly competitive market by carrying and
promoting a highly differentiated product.

      Building awareness and acceptance of the Lazare Diamond brand name is
accomplished through a comprehensive marketing program which includes sales
training, cooperative advertising, sales promotion and public relations. A wide
assortment of sales promotion materials has been designed to facilitate
jewelers' sales of the Company's diamonds and fine jewelry line to consumers.
Public relations events are offered which help build traffic in retail stores.
The Company has a program to build both free standing and in-counter boutiques
in the stores of a select group of its retail clients. The Company believes
these marketing programs have been and will continue to be instrumental in
increasing sales. The Company intends to continue concentrating its Lazare
Diamond(R) marketing efforts towards the quality retail jeweler.

      The Lazare Diamond Registry program has been established by the Company to
enable consumers to register their Lazare Diamonds with the Company using the
laser inscribed identification number, thereby providing proof of ownership in
case of loss or theft.

      The Company markets high quality commercial cut diamonds and diamond
jewelry through its worldwide distribution network to wholesalers, distributors
and retailer jewelers.

      In addition, Bellataire(R) diamonds and jewelry are marketed through
upscale retailers and select distributors throughout the world. Bellataire
diamonds are all natural diamonds that have been restored to their intrinsic
beauty through a patented high pressure, high temperature (HPHT) process that
improves the color of a limited group of gem diamonds.

      The Company has developed its own E-commerce site
(www.lazarediamonds.com). This site directly links the Company to its retailers,
which serves to further strengthen the ties with its retail client base.

Sales and Distribution

      While the purchase and sale of rough diamonds is concentrated among
relatively few parties, industry wide retailing of polished diamonds occurs
through over 40,000 jewelry stores in the United States, over 25,000 retailers
in Japan and over 60,000 retail stores in Europe. The Company's sales efforts
for its polished diamonds are directed primarily toward the fine quality segment
of these retailers (the majority of which are independently owned and operated),
wholesalers and distributors and, to a lesser extent, to jewelry manufacturers.
Full time regional sales representatives located throughout the United States,
Latin America, Japan, Hong Kong and Europe, are generally compensated, in whole
or in part, on a commission or incentive basis and handle sales throughout the
respective territories in which they operate.

      The Company's U.S. sales force is supported by a New York based in-house
sales and service department. Sales to certain of the Company's largest accounts
are handled by headquarters personnel. Most of the Company's major accounts are
customers of long standing.

      The Company has been actively working to expand its foreign business
activities, particularly in the Far East countries of Japan, Hong Kong,
Singapore, Taiwan, Korea, China and Malaysia and recently throughout Latin
America, Italy and the Middle East.

      The Company uses a comprehensive sorting and inventory classification
system for grading color and clarity of its ideal cut polished diamonds. This
system, combined with the fact that the Company's stones are uniformly cut to
ideal proportions, reduces and in some cases eliminates the need for customers
to view diamonds before placing orders. The system enables customers to
standardize their inventories, order by mail or telephone and minimize their
inventory investment.

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      The percentages of the Company's total domestic and foreign net sales to
its customers, which include a combination of both rough diamonds and polished
diamonds sales taken together, for the past three fiscal years are set forth
below:

                                          --------------------
                                          2006    2005    2004
                 ---------------------------------------------
                 United States             13%     20%     30%
                 Far East                   7%      9%      9%
                 Europe, Israel & Other    80%     71%     61%
                 ---------------------------------------------
                                          100%    100%    100%
                                          ====================

      The world's rough diamond trading markets are primarily located in
Belgium, India, and Israel; therefore, the majority of the Company's rough
diamond sales have been transacted with foreign customers.

      The Company believes that due to the possible international resale of
diamonds by its customers, the above percentages may not represent the final
location of retail sales of its product. All of the Company's foreign sales,
other than those made in Japan, are denominated in United States dollars. The
profitability of foreign sales of either polished or rough diamonds is
consistent with that of domestic sales of similar merchandise.

Competition

      The polished and rough diamond business is highly competitive. While the
Company believes that it has achieved a reputation as a leading cutter and
distributor of high quality diamonds, it faces competition in sales to its
customers in the United States and abroad from many other suppliers. In
addition, the Company sells rough diamonds in the competitive world market. A
substantial number of cutters and polishers and traders, some of which the
Company believes to be larger or to have greater financial resources than the
Company, sell diamonds of all qualities to the Company's customers.

      The Company believes there are significant barriers to entry by potential
competitors into the business of manufacturing and distributing high quality cut
diamonds. Among the most important of these barriers are the need for
significant working capital to purchase rough diamonds and hold polished
inventory, the long-term relationships required to have access to adequate
supplies of rough diamonds, the limited number of persons with the skills
necessary to consistently cut significant amounts of high quality cut diamonds,
the difficulty in obtaining access to upscale channels of distribution, the
importance of public recognition of an established brand name, a reputation for
diamond cutting excellence, and the procurement of computer systems to report on
and monitor the manufacturing and distribution network.

Employees

      At July 31, 2006, the Company had 223 full-time employees including 12
regional sales representatives. The Company maintains an apprenticeship program
at its facility in Puerto Rico, through which it trains its cutters, who are
highly skilled workers. The Company provides paid vacations, sick leave, group
life, disability, hospitalization and medical insurance for its employees. The
Company has a 401(k) retirement plan for its U.S. and Puerto Rico employees. The
Company believes that it has satisfactory relationships with its employees. None
of the Company's employees are represented by a union.

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Item 1A. Risk Factors

Supply

      The world's sources of rough diamonds are highly concentrated in a limited
number of countries. Varying degrees of political and economic risk exist in
these countries. As a consequence, the diamond business is subject to various
sovereign risks beyond the Company's control, such as changes in laws and
policies affecting foreign trade and investment. In addition, the Company is
subject to various political and economic risks, including the instability of
foreign economies and governments, labor disputes, war and civil disturbances
and other risks that could cause production difficulties or stoppages, restrict
the movement of inventory or result in the deprivation or loss of contract
rights or the taking of property by nationalization or expropriation without
fair compensation. Any significant disruption of the Company's sources of
supply, or restriction of inventory movement could have a material adverse
effect on the Company.

      Based upon published reports, the Company believes that more than half of
the world's current diamond output is sold by the Diamond Trading Company
("DTC"), the rough diamond sales arm of the De Beers Group. The DTC is the
primary world-wide marketing mechanism of the rough diamond industry. Sales for
the DTC are made in London and South Africa to a select group of clients
("sightholders") which, according to published reports, number approximately 95,
including the Company. The DTC has been and continues to be an important
supplier of rough diamonds to the Company. The Company has been a sightholder
for approximately 60 years. The loss of its status as a sightholder could have a
material adverse effect on the Company.

      The Company's cooperation arrangement with ALROSA is a significant part of
its operations. Any interruption in the supply of diamonds from Russia could
have a material adverse effect on the Company.

Rough Pricing

      Through its control of more than half of the value of the current world
rough diamond output, the DTC can exert significant control over the pricing of
rough and polished diamonds by adjusting the quantity and pricing of rough
diamonds it supplies to the marketplace. Historically, the Company has been able
to pass along such price increases to its customers. From time to time, however,
the Company has absorbed these price increases in the short term to maintain an
orderly pricing relationship with its customers. This has, in the past, caused
temporary adverse effects on the Company's earnings. A large rapid increase in
rough diamond prices could materially adversely affect the Company's revenues
and operating margins if the increased cost of rough diamonds could not be
passed along to its customers in a timely manner. Conversely, a significant
decrease in the price of better quality rough diamonds could materially
adversely affect the Company's revenues, operating margins and inventory value.

Polished Pricing

      Any rapid decrease in the price of polished diamonds could have a material
adverse effect on the Company in terms of inventory reserves, lower sales and
lower margins.

Competition

      The polished and rough diamond business is highly competitive. A
substantial number of cutters and polishers and traders, some of which the
Company believes to be larger or to have greater financial resources than the
Company, sell diamonds of all qualities to the Company's customers.

Item 1B. Unresolved Staff Comments

      Not applicable.

                                        9




<Page>


Item 2. Properties

      In June 2003, the Company entered into a lease for 17,351 square feet of
office space, a portion of which will be devoted to sales rooms, at 19 West 44th
Street, New York City, for a term expiring September 30, 2019 at an annual
rental rate of approximately $594,000 (subject to escalations). This location
serves as the Company's corporate headquarters.

      The Company also owns a manufacturing facility in Caguas, Puerto Rico. The
Caguas facility consists of approximately 12,650 square feet.

      The Company leases office space in Antwerp, Belgium for a term expiring
May 31, 2015 at an annual rental rate of approximately $50,000. The Company has
the right to terminate the lease on May 31, 2009, and 2012.

      The Company also leases office space in Antwerp, Belgium for a term
expiring August 11, 2013 at an annual rental rate of approximately 52,000 Euros
(approximately $64,000). The lease is cancelable by either the Company or the
landlord on August 11, 2008 and 2010.

      The Company owns a 330 square meter office in Antwerp, Belgium, a portion
of which is devoted to sales rooms.

      The Company leases office space in Hong Kong for a term expiring May 31,
2008 at an annual rental rate of 672,000 Hong Kong dollars (approximately
$87,000).

      The Company leases office space in Tokyo for a term expiring August 31,
2008 at an annual rental rate of 18,200,000 Japanese Yen (approximately
$150,000).

      The Company believes that its facilities are fully equipped and adequate
to fulfill its operating and manufacturing needs.

Item 3.  Legal Proceedings

      In May 2006, the Company initiated litigation against Photoscribe
Technologies, Inc. in the U.S. District Court for the Southern District of New
York asserting infringement of the Company's intellectual property rights with
respect to laser inscription of diamonds. The complaint seeks injunctive relief
as well as damages.

Item 4.  Submission of Matters to a Vote of Security Holders

      None

Executive Officers of the Company

      The following table sets forth information regarding executive officers of
the Company.

NAME                                   POSITION                     AGE
----                                   --------                     ---

Maurice Tempelsman    Chairman of the Board                         77

Leon Tempelsman       Vice Chairman of the Board and President      50

William H. Moryto     Vice President and Chief Financial Officer    48

                                       10




<Page>


      All officers were elected by the Board of Directors at its meeting
following the Annual Meeting of Stockholders held in November 2005. All officers
hold office until the Board of Directors meeting following the next Annual
Meeting of Stockholders and until their respective successors have been duly
elected and qualified.

      Maurice Tempelsman is the Chairman of the Board and a director of the
Company and a general partner of Leon Tempelsman & Son ("LTS"), a partnership
with interests in the international diamond and mining industries. He has held
these positions since 1984. Maurice Tempelsman is the father of Leon Tempelsman.

      Leon Tempelsman is the Vice Chairman of the Board, the President and a
director of the Company and a general partner of Leon Tempelsman & Son. He has
held these positions since 1984. Leon Tempelsman is the son of Maurice
Tempelsman.

      The Company believes that neither the Tempelsmans nor LTS currently
engages directly or indirectly in any activities competitive with those of the
Company.

      William H. Moryto has been Vice President and Chief Financial Officer
since May 2000.

                                     Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

      The Company's common stock (par value $1 per share) is traded on the
American Stock Exchange.

      Market prices and other information with respect to the Company's common
stock are hereby incorporated by reference to the Company's Annual Report.

      The following table presents a summary of share repurchases made by the
Company during the quarter ended May 31, 2006 under the Company's share
repurchase program authorized by our Board of Directors.

                                        Total Number of          Maximum
                 Total      Average    Shares Purchased        Dollar Value
               Number of     Price    as Part of Publicly      that May Yet
                 Shares    Paid per        Announced           Be Purchased
      Period   Purchased     Share         Programs         Under the Programs
   ---------------------------------------------------------------------------
      Mar-06     5,775     $   8.13          5,775               $ 31,767
      Apr-06         -     $      -              -               $ 31,767
      May-06         -     $      -              -               $ 31,767
   ------------------------------------------------
   Total         5,775     $   8.13          5,775
   ================================================

      On April 6, 2006, the Board of Directors of the Company adopted a
resolution to continue to purchase in the open market, at any time and from time
to time during the fiscal year ending May 31, 2007, shares of the Company's
common stock with an aggregate value not to exceed $2.0 million.

Item 6. Selected Financial Data

      Selected financial data are hereby incorporated by reference to the
Company's Annual Report.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      Management's discussion and analysis of financial condition and results of
operations is hereby incorporated by reference to the Company's Annual Report.

                                       11




<Page>


Item 7A. Quantitative and Qualitative Disclosure About Market Risk

      At May 31, 2006, the Company had borrowings totaling approximately $112.1
million outstanding under various credit agreements. The interest rates on these
borrowings are variable and therefore the general level of U.S. and foreign
interest rates affects interest expense. Increases in interest expense resulting
from an increase in interest rates could impact the Company's results of
operations. The Company's policy is to take actions that would mitigate such
risk when appropriate. These actions include staggering the term and rate of its
borrowings to match anticipated cash flow. International business represents a
major portion of the Company's revenues and profits. All purchases of rough
diamonds worldwide are denominated in U.S. dollars. All of the Company's foreign
sales are denominated in U.S. dollars, with the exception of those sales made by
the Company's subsidiary, Lazare Kaplan Japan Inc., which are denominated in
Japanese yen. The functional currency for Lazare Kaplan Japan is the Japanese
yen and, as of May 31, 2006 and 2005, the Company recognized cumulative foreign
currency translation adjustments with regard to the activities of Lazare Kaplan
Japan in the amount of $(425,000) and $(241,000) respectively, which are shown
as a component of stockholders' equity in the accompanying balance sheets.

Item 8. Financial Statements and Supplementary Data

      (a) The following financial statements and supplementary data are hereby
incorporated by reference to the Company's Annual Report.

            (i)   Report of BDO Seidman, LLP

            (ii)  Report of Ernst & Young, LLP

            (iii) Consolidated Income Statements for each of the three years in
                  the period ended May 31, 2006.

            (iv)  Consolidated Balance Sheets as at May 31, 2006 and May 31,
                  2005.

            (v)   Consolidated Statements of Stockholders' Equity for each of
                  the three years in the period ended May 31, 2006.

            (vi)  Consolidated Statements of Cash Flows for each of the three
                  years in the period ended May 31, 2006.

            (vii) Notes to Consolidated Financial Statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

      On September 22, 2004, the Company changed its independent accountants
from Ernst & Young, LLP to BDO Seidman, LLP. There are no disagreements, as
described in Item 304 of Regulation S-K, between the Company and Ernst & Young,
LLP.

Item 9A. Controls and Procedures

      The Company, under the supervision and with the participation of its
management, including its principal executive officer and principal financial
officer, evaluated the effectiveness of the design and operation of its
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
to the Securities and Exchange Act of 1934) as of the end of the period covered
by this report. Based on this evaluation, the principal executive officer and
principal financial officer concluded that the Company's disclosure controls and
procedures are effective in reaching a reasonable level of assurance that
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time period specified in the Securities and
Exchange Commission's rules and forms.

                                       12




<Page>


      The principal executive officer and principal financial officer also
conducted an evaluation of internal control over financial reporting ("Internal
Control") to determine whether any changes in Internal Control occurred during
the quarter ended May 31, 2006 that may have materially affected or which are
reasonably likely to materially affect Internal Control. Based on that
evaluation, there has been no change in the Company's internal controls over
financial reporting during the quarter ended May 31, 2006 that has materially
affected, or is reasonably likely to affect, the Company's internal controls
over financial reporting.

Item 9B. Other Information

      None.

                                    Part III

      Except for information regarding Executive Officers of the Company, which,
in accordance with Instruction G to Form 10-K, is included in Part I hereof, the
information called for by Part III (Items 10, 11, 12, 13, and 14) is
incorporated by reference herein to the Company's definitive proxy statement to
be filed with the Commission within 120 days after the close of its fiscal year
ended May 31, 2006.

                                     Part IV

Item 15. Exhibits and Financial Statement Schedules

      (a)   1.    The response to this portion of Item 15 is set forth in Item 8
                  of Part II hereof.

            2.    The schedule and reports of the independent registered public
                  accounting firms thereon.

            3.    The exhibits listed in the exhibit index attached hereto.

                                       13




<Page>


             Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
of Lazare Kaplan International Inc.

The audits referred to in our report dated August 17, 2006 relating to the
consolidated financial statements of Lazare Kaplan International Inc., which are
incorporated in Item 8 of the Form 10-K by reference to the annual report to
stockholders for the year ended May 31, 2006 included the audits of the
financial statement schedule listed in the accompanying index for the years
ended May 31, 2006 and 2005. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based upon our audits.

In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein for the years ended May 31,
2006 and 2005.

BDO Seidman, LLP

August 17, 2006

                                       14




<Page>


             Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
of Lazare Kaplan International Inc.

We have audited the consolidated financial statements of Lazare Kaplan
International Inc. and subsidiaries as of May 31, 2004, and have issued our
report thereon dated August 19, 2004. Our audit also included the financial
statement schedule listed in Item 15(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audit.

In our opinion, the May 31, 2004 financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

Ernst & Young, LLP

New York, New York
August 19, 2004

                                       15




<Page>


                        LAZARE KAPLAN INTERNATIONAL INC.

                                AND SUBSIDIARIES

                  SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A                            COLUMN B              COLUMN C             COLUMN D         COLUMN E
--------                            --------              --------             --------         --------

                                                         Additions
                                                ---------------------------

                                   Balance at   Charged to     Charged to                      Balance at
                                   beginning     costs and   other accounts   Deductions           end
      Description                  of period     expenses       describe       describe        of period
-------------------------------   -----------   ----------   --------------   ----------       ----------
<S>                               <C>           <C>          <C>              <C>              <C>
YEAR ENDED MAY 31, 2006:

Allowance for doubtful accounts   $   360,000   $  168,000   $            -   $  (13,000)(A)   $  515,000
                                  -----------   ----------   --------------   ----------       ----------

YEAR ENDED MAY 31, 2005:

Allowance for doubtful accounts   $   365,000   $   59,000   $            -   $  (64,000)(A)   $  360,000
                                  -----------   ----------   --------------   ----------       ----------

YEAR ENDED MAY 31, 2004:

Allowance for doubtful accounts   $   523,000   $   44,000   $            -   $ (114,000)(A)   $  365,000
                                  -----------   ----------   --------------   ----------       ----------
</TABLE>

(A)   Amounts written off.

                                       16




<Page>


Item 15.  Exhibits and Financial Statement Schedules (continued)

      (b)   Exhibits

(3)   Articles of Incorporation and Bylaws

      (a)   Certificate of Incorporation, as amended - incorporated herein by
            reference to Exhibit 3(a) to the Company's Annual Report on Form
            10-K for the fiscal year ended May 31, 1987 filed with the
            Commission on August 26, 1987, as amended on January 14, 1988.

      (b)   Certificate of Amendment of Certificate of Incorporation filed with
            the Secretary of State of the State of Delaware on November 1, 1990
            - incorporated herein by reference to Exhibit (3)(b) to the
            Company's Annual Report on Form 10-K for the fiscal year ended May
            31, 1992 filed with the Commission on August 28, 1992.

      (c)   Certificate of Amendment of the Certificate of Incorporation filed
            with the Secretary of State of the State of Delaware on November 6,
            1997 - incorporated by reference to Exhibit 4.1(a) (iii) to
            Company's Registration Statement for the Lazare Kaplan International
            Inc. 1997 Long Term Stock Incentive Plan on Form S-8 filed with the
            Commission on November 14, 1997.

      (d)   Certificate of Designations of Series A Junior Participating
            Preferred Stock filed with the Secretary of State of the State of
            Delaware on November 6, 1997 - incorporated by reference to Exhibit
            4.1(b) to the Company's Registration Statement on Form S-8 filed
            with the Commission on November 14, 1997.

      (e)   By-laws, as amended - incorporated herein by reference to Exhibit
            3(e) to the Company's Annual Report on Form 10-K for the fiscal year
            ended May 31, 2005 filed with the Commission on August 25, 2005, as
            amended and restated through November 4, 2003..

(10)  Material Contracts

      (a)   Lazare Kaplan International Inc. Amended and Restated 1988 Stock
            Option Incentive Plan - incorporated herein by reference to Exhibit
            4.1 to the Company's Registration Statement on Form S-8 filed with
            the Commission on November 5, 1990.

      (b)   Lazare Kaplan International Inc. 1997 Long Term Stock Incentive Plan
            - incorporated herein by reference to Exhibit A to the Company's
            proxy statement for its Annual Meeting of Stockholders held on
            November 5, 1997 filed with the Commission on September 17, 1997.

      (c)   Form of Incentive Stock Option Agreement for options granted
            pursuant to the Lazare Kaplan International Inc. 1997 Long Term
            Stock Incentive Plan - incorporated herein by reference to Exhibit
            4.5(a) to the Company's Registration Statement on Form S-8 filed
            with the Commission on November 14, 1997.

      (d)   Form of Non-Qualified Stock Option Agreement for options granted
            pursuant to the Lazare Kaplan International Inc. 1997 Long Term
            Stock Incentive Plan - incorporated herein by reference to Exhibit
            4.5(a) to the Company's Registration Statement on Form S-8 filed
            with the Commission on November 14, 1997.

      (e)   Revolving Credit Agreement, dated as of August 14, 2002, by and
            among the Company, as Borrower, ABN AMRO Bank N.V., as
            Administrative Agent and Arranger, and ABN AMRO Bank N.V. and Bank
            Leumi USA, as Bank Lenders - incorporated herein by reference to
            exhibit 10(e) to the Company's Annual Report on Form 10-K for the
            fiscal

                                       17




<Page>


            year ended May 31, 2002 filed with the Commission on August 28,
            2002.

      (f)   Agreement, dated as of October 12, 2001, between Antwerpse
            Diamantbank NV and Lazare Kaplan International Inc. relating to
            $25,000,000 (U.S.) facility Lenders - incorporated herein by
            reference to exhibit 10(f) to the Company's Annual Report on Form
            10-K for the fiscal year ended May 31, 2002 filed with the
            Commission on August 28, 2002.

      (g)   Agreement, dated as of October 12, 2001, between Antwerpse
            Diamantbank NV and Lazare Kaplan Belgium, N.V. relating to
            $15,000,000 (U.S.) facility Lenders - incorporated herein by
            reference to exhibit 10(g) to the Company's Annual Report on Form
            10-K for the fiscal year ended May 31, 2002 filed with the
            Commission on August 28, 2002.

      (h)   Credit Facility Agreement, dated as of November 29, 2002, between
            ABN Amro Bank N.V., Tokyo branch, Lazare Kaplan Japan Inc., and
            Lazare Kaplan International Inc. - incorporated herein by reference
            to exhibit 10(h) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2003 filed with the Commission on August
            26, 2003.

      (i)   Cooperation Agreement, dated July 15, 1996 between the Company and
            AK Almazi Rossii Sakha - incorporated herein by reference to Exhibit
            (2) to the Company's Current Report on Form 8-K/A filed with the
            Commission on November 18, 1996 (certain portions of this agreement
            have been omitted pursuant to a request for confidential treatment).

      (j)   Cooperation Agreement, dated March 23, 1999 between the Company and
            AK Almazi Rossii Sakha - incorporated herein by reference to Exhibit
            10(n) to the Company's Annual Report on Form 10-K for the fiscal
            year ended May 31, 1999 filed with the Commission on August 27, 1999
            (certain portions of this agreement have been omitted pursuant to a
            request for confidential treatment).

      (k)   Processing Agreement, dated as of February 20, 1999, between Pegasus
            Overseas Ltd. and a wholly-owned subsidiary of General Electric
            Company - incorporated herein by reference to Exhibit 10(o) to the
            Company's Annual Report on Form 10-K for the fiscal year ended May
            31, 1999 filed with the Commission on August 27, 1999 (certain
            portions of this agreement have been omitted pursuant to a request
            for confidential treatment).

      (l)   Rights Agreement, dated as of July 31, 1997, between the Company and
            ChaseMellon Shareholder Services, LLC - incorporated herein by
            reference to Exhibit 99.1 to the Company's Form 8-A filed with the
            Commission on August 26, 1997.

      (m)   Leon Tempelsman Retirement Benefit Plan of Lazare Kaplan
            International Inc. - incorporated herein by reference to Exhibit
            10(o) to the Company's Annual Report on Form 10-K for the fiscal
            year ended May 31, 1997 filed with the Commission on August 28,
            1997.

      (n)   Stock Purchase Agreement by and between Fifth Avenue Group, LLC and
            the Company dated as of January 18, 2002 - incorporated by reference
            to Exhibit (w) to the Company's Current Report on Form 8-K filed
            with the Commission on January 28, 2002.

      (o)   Shareholders Agreement by and among Maurice Tempelsman, Leon
            Tempelsman and Fifth Avenue Group, LLC dated as of January 18, 2002
            - incorporated herein by reference to Exhibit (x) to the Company's
            Current Report on Form 8-K filed with the Commission on January 28,
            2002.

                                       18




<Page>


      (p)   Form of Irrevocable Proxy from Fifth Avenue Group, LLC to Maurice
            Tempelsman and Leon Tempelsman - incorporated herein by reference to
            Exhibit (y) to the Company's Current Report on Form 8-K filed with
            the Commission on January 28, 2002.

      (q)   Amendment to Rights Agreement dated as of January 17, 2002 between
            the Company and Mellon Investor Services LLC - incorporated herein
            by reference to Exhibit (z) to the Company's Current Report on Form
            8-K filed with the Commission on January 28, 2002.

      (r)   Lease Agreement between EBS Forty-Fourth Property Associates LLC and
            Lazare Kaplan International Inc. dated June 6, 2003. - incorporated
            herein by reference to exhibit 10(r) to the Company's Annual Report
            on Form 10-K for the fiscal year ended May 31, 2003, filed with the
            Commission on August 26, 2003.

      (s)   Amendment to the Revolving Credit Agreement, dated May 28, 2003, by
            and among the Company, as Borrower, ABN AMRO Bank N.V., as
            Administrative Agent and Arranger, and ABN AMRO Bank N.V. and Bank
            Leumi USA, as Bank Lenders- incorporated herein by reference to
            exhibit 10(s) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2003, filed with the Commission on August
            26, 2003.

      (t)   Amendment to the Revolving Credit Agreement, dated November 24,
            2003, by and among the Company, as Borrower, ABN AMRO Bank N.V., as
            Administrative Agent and Arranger, and ABN AMRO Bank N.V. and Bank
            Leumi USA, as Bank Lenders - incorporated herein by reference to
            exhibit 10(t) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2004, filed with the Commission on August
            27, 2004.

      (u)   Cooperation Agreement, dated January 9, 2004, between Lazare Kaplan
            International Inc. and NamGem Diamond Manufacturing Company (PTY)
            Ltd. and Namdeb Diamond Corporation (PTY) Ltd. (certain portions of
            this agreement have been omitted pursuant to a request for
            confidential treatment) - incorporated herein by reference to
            exhibit 10(u) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2004, filed with the Commission on August
            27, 2004.

      (v)   Agreement dated April 29, 2004 between Lazare Kaplan International
            Inc. and Sociedade de Comercializacao de Diamantes de Angola, SARL
            (SODIAM) (certain portions of this agreement have been omitted
            pursuant to a request for confidential treatment) - incorporated
            herein by reference to exhibit 10(v) to the Company's Annual Report
            on Form 10-K for the fiscal year ended May 31, 2004, filed with the
            Commission on August 27, 2004.

      (w)   Amendment to the Credit Facility Agreement, dated December 1, 2003,
            between ABN AMRO Bank N.V., Tokyo Branch, Lazare Kaplan Japan Inc.,
            and Lazare Kaplan International Inc. - incorporated herein by
            reference to exhibit 10(w) to the Company's Annual Report on
            Form 10-K for the fiscal year ended May 31, 2004, filed with the
            Commission on August 27, 2004.

      (x)   Amendment to the Revolving Credit Agreement, dated September 13,
            2004, by and among the Company, as Borrower, ABN AMRO Bank N.V., as
            Administrative Agent and Arranger, and ABN AMRO Bank N.V. and Bank
            Leumi USA, as Bank Lenders, - incorporated herein by reference to
            exhibit 10(x) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2005, filed with the Commission on
            August 25, 2005.

      (y)   Amendment to the Revolving Credit Agreement, dated November 24,
            2004, by and among the Company, as Borrower, ABN AMRO Bank N.V., as
            Administrative Agent and Arranger, and ABN AMRO Bank N.V. and Bank
            Leumi USA, as Bank Lenders, - incorporated herein by reference to
            exhibit 10(y) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2005, filed with the Commission on
            August 25, 2005.

      (z)   Amendment to the Revolving Credit Agreement, dated May 6, 2005, by
            and among the Company, as Borrower, ABN AMRO Bank N.V., as
            Administrative Agent and Arranger, and ABN AMRO Bank N.V. and Bank
            Leumi USA, as Bank Lenders, - incorporated herein by reference to
            exhibit 10(z) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2005, filed with the Commission on
            August 25, 2005.

                                       19




<Page>


      (aa)  Amendment to the Revolving Credit Agreement, dated July 15, 2005, by
            and among the Company, as Borrower, ABN AMRO Bank N.V., as
            Administrative Agent and Arranger, and ABN AMRO Bank N.V. and Bank
            Leumi USA, as Bank Lenders - incorporated herein by reference to
            exhibit 10(aa) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2005. filed with the Commission on
            August 25, 2005.

      (ab)  Revolving Credit Agreement dated September 28, 2004 by and between
            Lazare Kaplan International, as Borrower and HSBC Bank USA, National
            Association, as Lender - incorporated herein by reference to
            exhibit 10(ab) to the Company's Annual Report on Form 10-K for the
            fiscal year ended May 31, 2005, filed with the Commission on
            August 25, 2005.

      (ac)  Amendment to the Credit Facility Agreement, dated December 1, 2004,
            between ABN AMRO Bank N.V., Tokyo Branch, Lazare Kaplan Japan Inc.,
            and Lazare Kaplan International Inc. - incorporated herein by
            reference to exhibit 10(ac) to the Company's Annual Report on
            Form 10-K for the fiscal year ended May 31, 2005, filed with the
            Commission on August 25, 2005.

      (ad)  Amendment to the credit facility dated July 18, 2005 between
            Antwerpse Diamantbank NV and Lazare Kaplan International Inc.
            - incorporated herein by reference to exhibit 10(ad) to the
            Company's Annual Report on Form 10-K for the fiscal year ended
            May 31, 2005, filed with the Commission on August 25, 2005.

      (ae)  Amendment to the Leon Tempelsman Retirement Benefit Plan of Lazare
            Kaplan International Inc., effective as of March 1, 2005
            - incorporated herein by reference to exhibit 10(ae) to the
            Company's Annual Report on Form 10-K for the fiscal year ended
            May 31, 2005, filed with the Commission on August 25, 2005.

      (af)  William H. Moryto Retirement Benefit Plan of Lazare Kaplan
            International Inc., effective as of February 1, 2005
            - incorporated herein by reference to exhibit 10(af) to the
            Company's Annual Report on Form 10-K for the fiscal year ended
            May 31, 2005, filed with the Commission on August 25, 2005.

      (ag)  Amendment, dated December 30, 2005, to the Credit Facility between
            Antwerpse Diamantbank NV and the Company - incorporated herein by
            reference to exhibit 10(ag) to the Company's Quarterly Report on
            Form 10-Q for the fiscal period ended November 30, 2005, filed with
            the Commission on January 13, 2006.

      (ah)  Amendment, dated December 30, 2005, to the Credit Facility between
            Antwerpse Diamantbank NV and Lazare Kaplan Belgium, N.V.
            - incorporated herein by reference to exhibit 10(ah) to the
            Company's Quarterly Report on Form 10-Q for the fiscal period ended
            November 30, 2005, filed with the Commission on January 13, 2006.

      (ai)  Amendment to the Revolving Credit Agreement by and among the
            Company, as Borrower, ABN AMRO Bank N.V., as Administrative Agent
            and Arranger, and ABN AMRO Bank N.V and Bank Leumi USA, as Lenders,
            dated December 1, 2005 - incorporated herein by reference to
            exhibit 10(ai) to the Company's Quarterly Report on Form 10-Q for
            the fiscal period ended November 30, 2005, filed with the Commission
            on January 13, 2006.

      (aj)  Amendment, dated December 1, 2005, to the Revolving Credit Agreement
            by and between the Company, as Borrower and HSBC Bank USA, National
            Association, as Lender - incorporated herein by reference to
            exhibit 10(aj) to the Company's Quarterly Report on Form 10-Q for
            the fiscal period ended November 30, 2005, filed with the Commission
            on January 13, 2006.

      (ak)  Amendment, dated December 1, 2005, to the Credit Facility Agreement
            among ABN AMRO Bank N.V., Tokyo Branch, Lazare Kaplan Japan Inc.,
            and the Company - incorporated herein by reference to exhibit
            10(ak) to the Company's Quarterly Report on Form 10-Q for the
            fiscal period ended November 30, 2005, filed with the Commission on
            January 13, 2006.

      (al)  Limited Liability Company Agreement of Bellataire International LLC,
            executed by DI Bahamas Inc. and LKI Bahamas Ltd. dated as of
            November 30, 2005 (certain portions of this agreement have been
            omitted pursuant to a request for confidential treatment)
            - incorporated herein by reference to exhibit 10(al) to the
            Company's Quarterly Report on Form 10-Q for the fiscal period ended
            November 30, 2005, filed with the Commission on January 13, 2006.

      (am)  Amended and Restated Limited Liability Company Agreement of
            Bellataire LLC executed by the Company and Diamond Innovations, Inc.
            dated as of November 30, 2005 (certain portions of this agreement
            have been omitted pursuant to a request for confidential treatment)
            - incorporated herein by reference to exhibit 10(am) to the
            Company's Quarterly Report on Form 10-Q for the fiscal period ended
            November 30, 2005, filed with the Commission on January 13, 2006.

      (an)  Letter Agreement, dated as of November 30, 2005, from Diamond
            Innovations, Inc. to, and agreed to by, Pegasus Overseas Ltd., the
            Company, Bellataire International LLC, Bellataire LLC and Bellataire
            BVBA (certain portions of this agreement have been omitted pursuant
            to a request for confidential treatment).

                                       20




<Page>


(13)   2006 Annual Report to Security Holders - incorporated herein by reference
       to the Company's 2006 Annual Report to Stockholders to be filed with the
       Commission.

(14)   Code of Conduct for the President and senior financial officers of the
       Company - incorporated herein by reference to exhibit 14 to the Company's
       Annual Report on Form 10-K for the fiscal year ended May 31, 2004, filed
       with the Commission on August 27, 2004.

(21)   Subsidiaries

(23.1) Consent of BDO Seidman, LLP

(23.2) Consent of Ernst & Young, LLP

(31.1) Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) as
       Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(31.2) Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) as
       Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32.1) Certifications Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
       Section 906 of the Sarbanes-Oxley Act of 2002.

(99.1) Amended and restated Audit Committee Charter - incorporated herein by
       reference to Exhibit A to the Company's Definitive Proxy Statement for
       the fiscal year ended May 31, 2004, filed with the Commission on October
       7, 2004.

(c)    Not applicable.

                                       21




<Page>


SIGNATURE

      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.

                                               LAZARE KAPLAN INTERNATIONAL INC.

                                               By /s/ William H. Moryto
                                                  ---------------------
                                               William H. Moryto, Vice President
                                               and Chief Financial Officer

Dated: August 24, 2006

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

Signature                               Title                       Date
---------                               -----                       ----

/s/ Maurice Tempelsman         Chairman of the                August 24, 2006
-----------------------        Board of Directors
(Maurice Tempelsman)

/s/ Leon Tempelsman            Vice Chairman of the           August 24, 2006
-----------------------        Board of Directors and
(Leon Tempelsman)              President (principal
                               executive officer)

/s/ Lucien Burstein            Director                       August 24, 2006
-----------------------
(Lucien Burstein)

/s/ Richard A. Berenson        Director                       August 24, 2006
-----------------------
(Richard A. Berenson)

/s/ Myer Feldman               Director                       August 24, 2006
-----------------------
(Myer Feldman)

/s/ Robert A. Del Genio        Director                       August 24, 2006
-----------------------
(Robert A. Del Genio)

/s/ William H. Moryto          Vice President and             August 24, 2006
-----------------------        Chief Financial Officer
(William H. Moryto)            (principal financial
                               and accounting officer)

                                       22