-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JTGYSN6I+8jkzSFb0Y0dsJJN4Cmza42tSUXH5sMXDj3iKqQq1RAHvXMX1zA30+yO x4RXF51AvDvdbgDqaqZ71Q== 0000914317-04-003424.txt : 20040913 0000914317-04-003424.hdr.sgml : 20040913 20040913155749 ACCESSION NUMBER: 0000914317-04-003424 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040731 FILED AS OF DATE: 20040913 DATE AS OF CHANGE: 20040913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAKELAND INDUSTRIES INC CENTRAL INDEX KEY: 0000798081 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 133115216 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15535 FILM NUMBER: 041027620 BUSINESS ADDRESS: STREET 1: 711-2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 BUSINESS PHONE: 5169819700 MAIL ADDRESS: STREET 1: 711- 2 KOEHLER AVENUE CITY: RONKONKOMA STATE: NY ZIP: 11779 10-Q 1 form10q-62598_lakeland.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2004 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number: 0-15535 LAKELAND INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) Delaware 13-3115216 (State of incorporation) (IRS Employer Identification Number) 711-2 Koehler Avenue, Ronkonkoma, New York 11779 (Address of principal executive offices) (631) 981-9700 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES |X| NO |_| Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES |_| NO |X| Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.01 par value, outstanding at September 13, 2004 - 4,560,885 shares. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q The following information of the Registrant and its subsidiaries is submitted herewith: PART I - FINANCIAL INFORMATION: Item 1. Financial Statements (unaudited):
Page ---- Introduction .............................................................................. 1 Condensed Consolidated Balance Sheets July 31, 2004 and January 31, 2004 .................. 2 Condensed Consolidated Statements of Income for the Six Months Ended July 31, 2004 and 2003 ................................................... 3 Condensed Consolidated Statement of Stockholders' Equity - Six Months Ended July 31, 2004 . 4 Condensed Consolidated Statements of Cash Flows - Six Months Ended July 31, 2004 and 2003 .................................................................................. 5 Notes to Condensed Consolidated Financial Statements ...................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ..... 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................ 13 Item 4. Controls and Procedures ................................................................... 13 PART II - OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K .......................................................... 14 Signature Page .................................................................................... 15
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Introduction CAUTIONARY STATEMENTS This report may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical fact included in this report, including, without limitation, the statements under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding the Company's financial position and liquidity, the Company's strategic alternatives, future capital needs, development and capital expenditures (including the amount and nature thereof), future net revenues, business strategies, and other plans and objectives of management of the Company for future operations and activities. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, and factors in the Company's other filings with the Securities and Exchange Commission (the "commission"), general economic and business conditions, the business opportunities that may be presented to and pursued by the Company, changes in law or regulations and other factors, many of which are beyond the control of the Company. Readers are cautioned that these statements are not guarantees of future performance, and the actual results or developments may differ materially from those projected in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS July 31, January 31, 2004 2004 (Unaudited) Current assets: Cash and cash equivalents ............................. $ 6,106,573 $ 2,445,271 Marketable Securities ................................. 4,477,578 0 Accounts receivable, net of allowance for doubtful accounts of $323,000 at July 31, 2004 and at January 31, 2004 ................................. 12,032,648 12,570,320 Inventories ........................................... 29,214,216 26,265,807 Deferred income taxes ................................. 790,272 790,272 Other current assets .................................. 773,663 1,213,104 ----------- ----------- Total current assets ............................ 53,394,950 43,284,774 Property and equipment, net of accumulated depreciation of $4,864,000 at July 31, 2004 and $4,511,000 January 31, 2004 ..................... 5,127,214 3,921,308 Other assets .......................................... 146,555 97,745 ----------- ----------- $58,668,719 $47,303,827 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ...................................... $ 2,945,838 $ 3,461,353 Current portion of long-term liabilities .............. -- 16,784,781 Accrued expenses and other current liabilities ........ 1,703,769 1,263,044 ----------- ----------- Total current liabilities ......................... 4,649,607 21,509,178 Other long-term liabilities ........................... 522,147 517,147 Deferred income taxes ................................. 250,532 250,532 Minority interest in Variable Interest Entities ....... 1,228,043 -- Commitments and contingencies Stockholders' equity Preferred stock, $.01 par; authorized 1,500,000 shares (none issued) Common stock, $.01 par; authorized 10,000,000 shares; issued and outstanding 4,560,885 and 3,273,925shares at July 31, 2004 and at January 31, 2004, respectively ............. 45,609 32,739 Additional paid-in capital ............................ 36,273,046 11,862,461 Retained earnings ..................................... 15,699,735 13,131,770 ----------- ----------- Total stockholders' equity ........................ 52,018,390 25,026,970 ----------- ----------- $58,668,719 $47,303,827 =========== ===========
The accompanying notes are an integral part of these financial statements. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED July 31, July 31, 2004 2003 2004 2003 ------------ ------------ ------------ ------------ Net sales ...................................... $ 22,845,169 $ 23,289,944 $ 49,683,192 $ 47,114,830 Cost of goods sold ............................. 17,983,098 18,596,614 38,841,689 38,325,684 ------------ ------------ ------------ ------------ Gross profit ................................... 4,862,071 4,693,330 10,841,503 8,789,146 Operating expenses ............................. 2,990,264 3,209,938 6,576,984 5,833,100 ------------ ------------ ------------ ------------ Operating profit ............................... 1,871,807 1,483,392 4,264,519 2,956,046 Other income, net .............................. 849 29,784 10,309 45,226 Interest expense ............................... (69,316) (143,201) (206,457) (280,997) ------------ ------------ ------------ ------------ Income before income taxes ..................... 1,803,340 1,369,975 4,068,371 2,720,275 Provision for income taxes ..................... 485,000 379,829 1,206,000 865,829 ------------ ------------ ------------ ------------ Income before minority interest ................ 1,318,340 990,146 2,862,371 1,854,446 Minority interest in net income of variable interest entities ............................ 175,710 -- 294,406 -- ------------ ------------ ------------ ------------ Net income ..................................... $ 1,142,630 $ 990,146 $ 2,567,965 $ 1,854,446 ============ ============ ============ ============ Net income per common share*: Basic ..................................... $ .30 $ .30 $ .72 $ .57 ============ ============ ============ ============ Diluted ................................... $ .30 $ .30 $ .72 $ .57 ============ ============ ============ ============ Weighted average common shares outstanding*: Basic ..................................... 3,864,987 3,268,867 3,569,456 3,266,431 ============ ============ ============ ============ Diluted ................................... 3,870,790 3,276,480 3,574,796 3,270,976 ============ ============ ============ ============
*Adjusted for the 10% stock dividend to shareholders of record on July 31, 2003. The accompanying notes are an integral part of these financial statements. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) Six months ended July 31, 2004
Common Stock Additional paid-in Retained Shares Amount capital earnings Total --------- ------- ----------- ----------- ----------- Balance, January 31, 2004 3,273,925 $32,739 $11,862,461 $13,131,770 $25,026,970 Exercise of Stock Options 6,210 62 54,370 -- 54,432 Proceeds from Secondary Stock offering, Net of Expenses 1,280,750 12,808 24,356,215 -- 24,369,023 Net income 2,567,965 2,567,965 --------- ------- ----------- ----------- ----------- Balance, July 31, 2004 4,560,885 45,609 $36,273,046 $15,699,735 $52,018,390 ========= ======= =========== =========== ===========
The accompanying notes are an integral part of these financial statements. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED July 31, 2004 2003 ------------ ----------- Cash Flows from Operating Activities: Net income ................................................ $ 2,567,965 $ 1,854,446 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for bad debts ................................. -- (53,000) Depreciation and amortization ........................... 436,664 403,100 Decrease in accounts receivable ........................... 537,672 (1,359,935) (Increase) decrease in inventories ........................ (2,948,409) 2,717,108 Decrease (Increase) in other assets ....................... 390,631 (374,516) Decrease (increase) in accounts payable, accrued expenses and other liabilities .......................... (29,439) 726,110 ------------ ----------- Net cash provided by operating activities .............................................. 955,084 3,913,313 ------------ ----------- Cash Flows from Investing Activities: Purchases of property and equipment ....................... (454,878) (598,947) Purchase of marketable securities ......................... (4,477,578) -- ------------ ----------- Net cash used in investing activities ..................... (4,932,456) (598,947) ------------ ----------- Cash Flows from Financing Activities: Proceeds from exercise of stock options ................... 54,432 19,945 Proceeds from secondary stock offering .................... 24,369,023 -- Repayments under loan agreements .......................... (16,784,781) (2,722,239) ------------ ----------- Net cash provided by (used in) financing activities ....... 7,638,674 (2,702,294) ------------ ----------- Net increase (decrease) in cash ........................... 3,661,302 612,072 Cash and cash equivalents at beginning of period .......... 2,445,271 1,474,135 ------------ ----------- Cash and cash equivalents at end of period ................ $ 6,106,573 $ 2,086,207 ============ ===========
The accompanying notes are an integral part of these financial statements. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Business Lakeland Industries, Inc. and Subsidiaries (the "Company"), a Delaware corporation, organized in April 1982, manufactures and sells a comprehensive line of safety garments accessories for the industrial protective clothing market. The principal market for the Company's products is the United States. No customer accounted for more than 10% of net sales during the six month periods ended July 31, 2004 and 2003, respectively. 2. Basis of Presentation The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to present fairly the consolidated financial information required therein. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. While the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended January 31, 2004. The results of operations for the six month periods ended July 31, 2004 and 2003, respectively, are not necessarily indicative of the results to be expected for the full year. 3. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Laidlaw Adams & Peck, Inc., and Subsidiary (MeiYang Protective Products Co., Ltd., a Chinese Corporation), Lakeland Protective Wear, Inc. (a Canadian corporation), Weifang Lakeland Safety Products Co. Ltd. (a Chinese corporation), Qing Dao Maytung Healthcare Co., Ltd. (a Chinese corporation), Lakeland Industries Europe Ltd. (a British Corporation) and Lakeland de Mexico S.A. de C.V (a Mexican corporation). All significant inter-company accounts and transactions have been eliminated. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities". This interpretation provides guidance with respect to the consolidation of certain entities, referred to as variable interest entities, in which an investor is subject to a majority of the risk of loss from the variable interest entity's activities, or is entitled to receive a majority of the variable interest entity's residual returns. This interpretation also provides guidance with respect to the disclosure of variable interest entities in which an investor maintains an interest but is not required to consolidate. The provisions of the interpretation are effective immediately for all variable interest entities created after January 31, 2003, or in which we obtain an interest after that date. In October 2003, the FASB issued a revision to this pronouncement, FIN 46R, which clarified certain provisions and modified the effective date from July 1, 2003 to March 15, 2004 for variable interest entities created before February 1, 2003. Effective February 1, 2004 the Company adopted this pronouncement. As a result, certain entities which leased property to the Company and are owned by related parties were determined to be Variable Interest Entities and have been consolidated since the Company's April 30, 2004 quarterly financial statements. This consolidation had no impact on the Company's net income and resulted in increases at July 31, 2004 in cash of $0.06 million, property and equipment, net of $1.2 million, and minority interest of $1.2 million. Creditors, or beneficial interest holders, of the consolidated variable interest entities have no recourse to the general credit of the Company. The Company accounts for marketable securities in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The Company determines the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time of purchase and re- evaluates such classification as of each balance sheet date. At July 31, 2004 all the Company's investments in marketable securities were classified as available-for-sale, and as a result, were reported at fair value which does not significantly differ from cost. 4. Inventories: Inventories consist of the following: July 31, January 31, 2004 2004 ----------- ----------- Raw materials .......... $12,379,196 $10,868,816 Work-in-process ........ 2,598,478 2,279,444 Finished Goods ......... 14,236,542 13,117,547 ----------- ----------- $29,214,216 $26,265,807 =========== =========== Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in-first-out basis) or market. 5. Earnings Per Share: On June 18, 2004 the Company concluded its secondary public stock offering issuing an additional 1,100,000 shares of common stock. On July 1, 2004 the underwriter exercised its over allotment option whereby the Company issued an additional 180,750 shares of common stock. Basic earnings per share are based on the weighted average number of common shares outstanding without consideration of common stock equivalents. Diluted earnings per share are based on the weighted average number of common and common stock equivalents. The diluted earnings per share calculation takes into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the period. The following table sets forth the computation of basic and diluted earnings per share at July 31, adjusted, retroactively, for the 10% Stock dividends to Shareholders on July 31, 2003 and 2002, respectively:
Three Months Ended Six Months Ended July 31, July 31, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Numerator Net income ................................. $1,142,630 $ 990,146 $2,567,965 $1,854,446 ========== ========== ========== ========== Denominator Denominator for basic earnings per share (Weighted-average shares) ......... 3,864,987 3,268,867 3,569,456 3,266,431 Effect of dilutive securities: Stock options ........................ 5,803 7,613 5,340 4,545 ---------- ---------- ---------- ---------- Denominator for diluted earnings per share (adjusted weighted-average shares) ......... 3,870,790 3,276,480 3,574,796 3,270,976 ========== ========== ========== ========== Basic earnings per share ................... $ 0.30 $ 0.30 $ 0.72 $ 0.57 ========== ========== ========== ========== Diluted earnings per share ................. $ 0.30 $ 0.30 $ 0.72 $ 0.57 ========== ========== ========== ==========
Options to purchase 1,210 shares of the Company's common stock have been excluded for the six months ended July 31, 2003, as their inclusion would be antidilutive. 6. Revolving Credit Facility: At July 31, 2004, the balance outstanding under the Company's $18 million revolving credit facility amounted to $0. The balance was paid in full on June 18, 2004 upon the Company receiving the proceeds from its Secondary Stock Offering. This credit facility, which is subject to borrowings based on a percentage of eligible accounts receivable and inventory, as defined, was set to expire on July 31, 2004; however, in May 2004 it was extended through July 31, 2005. Borrowings under the facility bear interest at a rate per annum equal to LIBOR plus 2%. In January 2004, the Company entered into a new 3-year $3 million revolving credit facility which expires on January 31, 2007. Availability under this facility decreases from $3 million by $83,333 each month over the 3-year term and is also subject to the borrowing base limitation discussed above in connection with the $18 million revolving credit facility. Borrowings under this revolving credit facility bear interest at LIBOR plus 2.5%. There were no borrowings outstanding under either facility at July 31, 2004.The credit facilities are collateralized by substantially all of the assets of the Company. The credit facilities contain financial covenants, including, but not limited to, minimum levels of earnings and maintenance of minimum tangible net worth and certain other ratios at all times, with respect to which the Company was in compliance at July 31, 2004. 7. Major Supplier The Company purchased approximately 76.7% of its raw materials from one supplier during the six-month period ended July 31, 2004. The Company expects this relationship to continue for the foreseeable future. If required, similar raw materials could be purchased from other sources; although, the Company's competitive position in the marketplace could be adversely affected. 8. Stock Based Compensation The Company has adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). In compliance with SFAS 123, the Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans and does not recognize compensation expense for its employee stock-based compensation plans. The Company has also adopted the disclosure provisions of SFAS No. 148, "Accounting for Stock-Base Compensation - Transition and Disclosure." This pronouncement requires prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reporting results. If the Company had elected to recognize compensation expense based upon the fair value at the date of grant for awards under these plans, consistent with the methodology prescribed by SFAS 123, the effect on the Company's net income and earnings per share as reported would be reduced for the quarters ended July 31, 2004 and 2003 to the pro forma amounts indicated below:
Three Months Ended Six Months Ended July 31, July 31, 2004 2003 2004 2003 ----------- ----------- ----------- ------------- Net income $ 1,142,630 $ 990,146 $ 2,567,965 $ 1,854,446 As reported Less: Option expense based on fair value method 11,186 9,022 11,186 27,946 ----------- ----------- ----------- ------------- Pro forma $ 1,131,444 $ 981,124 $ 2,556,779 $ 1,826,500 =========== =========== =========== ============= Basic earnings per common share As reported $ 0.30 $ 0.30 $ 0.72 $ 0.57 =========== =========== =========== ============= Pro forma $ 0.29 $ 0.30 $ 0.72 $ 0.57 =========== =========== =========== ============= Diluted earnings per common share As reported $ 0.30 $ 0.30 $ 0.72 $ 0.57 =========== =========== =========== ============= Pro forma $ 0.29 $ 0.30 $ 0.72 $ 0.56 =========== =========== =========== =============
The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for the quarters and six months ended July 31, 2004 and 2003: expected volatility of 87% and 60%, respectively; risk-free interest rate of 3.6% and 2.93%, respectively; expected dividend yield of 0.0%; and expected life of six years. All stock-based awards were fully vested at July 31, 2004 and 2003. Earnings per share have been adjusted to reflect the 10% stock dividends to stockholders of record as of July 31, 2003 and 2002. 9. Revenue Recognition and Manufacturing Segment Data The Company derives its sales primarily from its limited use/disposable protective clothing and secondarily from its sales of high-end chemical protective suits, fire fighting and heat protective apparel, gloves and arm guards, and reusable woven garments. Sales are recognized when goods are shipped at which time title and the risk of loss passes to the customer. Sales are reduced for sales returns and allowances. Payment terms are generally net 30 days for United States sales and net 90 days for international sales. Domestic and international sales are as follows in millions of dollars:
Three Months Ended Six Months Ended July 31, July 31, 2004 2003 2004 2003 ---- ---- ---- ---- Domestic $21.5 94.3% $21.3 91.4% $45.6 91.7% $44.5 94.5% International 1.3 5.7% 2.0 8.6% 4.1 8.3% 2.6 5.5% ----- ----- ----- ----- ----- ----- ----- ----- Total $22.8 100% $23.3 100% $49.7 100% $47.1 100% ===== ===== ===== ===== ===== ===== ===== =====
The Company manages its operations by evaluating its geographic locations. The Company's North American operations include its facilities in Decatur, Alabama (primarily disposables, chemical suit and glove production), Celaya, Mexico (primarily disposable chemical suit and glove production) and St. Joseph, Missouri (primarily woven products). The Company also maintains contract manufacturing facilities in China (primarily disposable and chemical suit production). The Company's China facilities and the Decatur, Alabama facility produce the majority of the Company's products. The accounting policies of these operating entities are the same as those described in Note 1 to the Company's Annual Report on Form 10-K for the year ended January 31, 2004. The Company evaluates the performance of these entities based on operating profit which is defined as income before income taxes, interest expense and other income and expenses. The Company has a small sales force in Canada and Europe who sell and distribute products shipped from the United States. The table below represents information about reported manufacturing segments for the six months noted therein: Six Months Ended July 31, (in millions of dollars) 2004 2003 ------- ------- Net Sales: North America $ 50.9 $ 48.3 China 4.2 2.5 Less inter-segment profit (loss) (5.4) (3.7) ------- ------- Consolidated sales $ 49.7 $ 47.1 ======= ======= Operating Profit: North America $ 3.7 $ 2.6 China .6 .4 Less inter-segment profit (loss) -- -- ------- ------- Consolidated profit $ 4.3 $ 3.0 ======= ======= Identifiable Assets: North America $ 50.5 $ 36.7 China 8.2 6.0 ------- ------- Consolidated assets $ 58.7 $ 42.7 ======= ======= Depreciation and Amortization Expense: North America $ .3 $ .3 China .1 .1 ------- ------- Consolidated depreciation expense $ .4 $ .4 ======= ======= 10. Effects of Recent Accounting Pronouncements In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 requires that certain financial instruments that were accounted for as equity under previous guidance must now be accounted for as liabilities. The financial instruments affected include mandatory redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. SFAS No. 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June15, 2003. The adoption of SFAS No. 150 did not have any impact on our consolidated financial statements for the six months ended July 31, 2004. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others-an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34." This interpretation expands on the existing accounting guidance and disclosure requirements for most guarantees, including indemnifications. It requires that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value of the obligations it assumes under that guarantee if that amount is reasonably estimable, and must disclose that information in its interim and annual financial statements. The provisions for initial recognition and measurement of the liability are to be applied on a prospective basis to guarantees issued or modified on or after January 1, 2003. Our initial adoption of this statement on January 1, 2003 did not have an impact on its results of operations, financial position, or cash flows. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This interpretation provides guidance with respect to the consolidation of certain entities, referred to as variable interest entities ("VIE"), in which an investor is subject to a majority of the risk of loss from the VIE's activities, or is entitled to receive a majority of the VIE's residual returns. This interpretation also provides guidance with respect to the disclosure of VIEs in which an investor maintains an interest but is not required to consolidate. The provisions of the interpretation are effective immediately for all VIEs created after January 31, 2003, or in which we obtain an interest after that date. In October 2003, the FASB issued a revision to this pronouncement, FIN 46R, which clarified certain provisions and modified the effective date from July 1, 2003 to March 15, 2004 for variable interest entities created before February 1, 2003. The Company has adopted this pronouncement as of February 1, 2004. In December 2003, the FASB issued a revised SFAS No. 132, "Employers Disclosures about Pensions and Other Postretirement Benefits", to improve financial statement disclosures for defined benefit plans. The company has adopted SFAS No. 132 and disclosure requirements as described in Note 7 to the Company's Annual Report on Form 10-K for the year ended January 31, 2004. Interim disclosure of net pension costs are not material. Item 2. LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Six Months Ended July 31, 2004 Compared to the Six Months Ended July 31, 2003 Net Sales. Net sales increased $2.6 million, or 5.0%, to $49.7 million for the six months ended July 31, 2004 from $47.1 million for the six months ended July 31, 2003. The increase was due primarily to an increase in our market share in our Tyvek(R)-based product lines. Increased sales were also driven by an improving U.S. economy which increased demand for our products, particularly in the industrial Tyvek(R) markets we serve, and increased demand for our chemical protective suits and fire turnout gear for Homeland Security purposes. Gross Profit. Gross profit increased $2 million, or 23.4%, to $10.8 million for the six months ended July 31, 2004 from $8.8 million for the six months ended July 31, 2003. Gross profit as a percent of net sales increased to 21.8% for the six months ended July 31, 2004 from 18.7% for the six months ended July 31, 2003, primarily because of cost reductions achieved by shifting production of additional Tyvek(R) -based products and chemical suits to China and Mexico. We have increasingly shifted and will continue to shift production to these lower-cost facilities. Operating Expenses. Operating expenses increased $.8 million, or 12.7%, to $6.6 million for the six months ended July 31, 2004 from $5.8 million for the six months ended July 31, 2003. As a percent of net sales, operating expenses increased to 13.7% for the six months ended July 31, 2004 from 12.4% for the six months ended July 31, 2003. The $0.8 million increase in operating expenses in the six months ended July 31, 2004 compared to the six months ended July 31, 2003 was principally due to an increase in freight of $.1 million, commissions of $.12 million, salaries of $.3 million, trade shows and travel and entertainment of $.13 million, currency fluctuation of $.05 million, license and fees of $.07 million and printing of $.08 million. Interest Expense. Interest decreased by $0.075 million for the six months ended July 31, 2004 compared to the six months ended July 31, 2003 due to the credit facility being paid in full on June 18, 2004, as a result of the completion of the Company's Secondary Stock Offering. Income Tax Expense. Income tax expense consists of federal, state and foreign income taxes. Income tax expense increased $0.3 million, or 39.4%, to $1.2 million for the six months ended July 31, 2004 from $0.9 million for the six months ended July 31, 2003. Our effective tax rate was 29.6% and 31.8% in the six months ended July 31, 2004 and 2003, respectively. Our effective tax rate varied from the federal statutory rate of 34% due primarily to lower foreign tax rates. Minority interest. Minority interest in net income of variable interest entities increased to $0.3 million for the six months ended July 31, 2004 as a result of our adoption on Financial Interpretation No. 46R (FIN 46R), "Consolidation of Variable Interest Entities," effective February 1, 2004. Subsequent to our adoption of FIN 46R, we determined that certain entities from which we lease real property and which are owned by related parties are variable interest entities governed by FIN 46R. As a result, these entities have been consolidated in our statement of income for the six months ended July 31, 2004. Net Income. Net income increased $0.7 million, or 38.5%, to $2.6 million for the six months ended July 31, 2004 from $1.9 million for the six months ended July 31, 2003. The increase in net income was the result of an increase in net sales and increased productivity as a result of shifts in production to our China facilities, partially offset by an increase in costs and expenses due to higher volumes of our products being sold. Three Months Ended July 31, 2004 Compared to the Three Months Ended July 31, 2003 Net Sales. Net sales decreased $.5 million, or 1.9%, to $22.8 million for the three months ended July 31, 2004 from $23.3 million for the three months ended July 31, 2003. The decrease was due primarily to the prior year period receiving the benefit of an estimated $1.5 million in SARS related sales that were not repeated in the current year period. The current year period sales also decreased due to an estimated $400,000 downturn in sales caused by the moving of our woven production facilities from the USA to China. Gross Profit. Gross profit increased $.2 million, or 3.6%, to $4.9 million for the three months ended July 31, 2004 from $4.7 million for the three months ended July 31, 2003. Gross profit as a percent of net sales increased to 21.3% for the three months ended July 31, 2004 from 20.2% for the three months ended July 31, 2003, primarily because of cost reductions achieved by shifting production of additional Tyvek(R) -based products and chemical suits to China and Mexico. We have increasingly shifted and will continue to shift production to these lower-cost facilities. Operating Expenses. Operating expenses remained relatively constant at $3.0 million for the three months ended July 31, 2004 and for the three months ended July 31, 2003 as cost savings continue. As a percent of net sales, operating expenses decreased to 13.1% for the three months ended July 31, 2004 from 13.8% for the three months ended July 31, 2003. Interest Expense. Interest expense decreased by .07 million to $.07 million for the three months ended July 31, 2004 from $.14 million the three months ended July 31, 2003 due to the payoff of the loan balance using funds received from the Company's Secondary Public Offering concluded on June 18, 2004. Income Tax Expense. Income tax expense consists of federal, state and foreign income taxes. Income tax expense increased $0.1 million, or 26.9%, to $0.5 million for the three months ended July 31, 2004 from $0.4 million for the three months ended July 31, 2003. Our effective tax rate was 26.9% and 27.7% in the three months ended July 31, 2004 and 2003, respectively. Our effective tax rate varied from the federal statutory rate of 34% due primarily to lower foreign tax rates. Minority interest. Minority interest in net income of variable interest entities increased to $.02 million for the three months ended July 31, 2004 as a result of our adoption on Interpretation No. 46R (FIN 46R), "Consolidation of Variable Interest Entities," effective February 1, 2004. Subsequent to our adoption of FIN 46R, we determined that certain entities from which we lease real property and which are owned by related parties are variable interest entities governed by FIN 46R. As a result, these entities have been consolidated in our statement of income for the three months ended July 31, 2004. Net Income. Net income increased $0.1 million, or 15.4%, to $1.1 million for the three months ended July 31, 2004 from $1.0 million for the three months ended July 31, 2003. The increase in net income was the result of increased productivity and decreased expenses as a result of shifts in production to our China facilities and reduced interest expense. Liquidity and Capital Resources Cash Flows As of July 31, 2004 we had cash and cash equivalents and marketable securities of $10.6 million and working capital of $48.7 million, an increase of $8.1 million and $26.9 million, respectively, from January 31, 2004. In May 2004, we extended the expiration date of our $18 million revolving credit facility to July 31, 2005. The increase in working capital at July 31, 2004 from January 31, 2004 was due primarily to the pay down of the loan balances on June 18, 2004 upon the completion of the Company's Secondary Stock Offering. Our primary sources of funds for conducting our business activities have been from cash flow provided by operations and borrowings under our credit facilities described below and the cash received from the above mentioned offering. We require liquidity and working capital primarily to fund increases in inventories and accounts receivable associated with our net sales and, to a lesser extent, for capital expenditures. Net cash provided by operating activities of $1.0 million for the six months ended July 31, 2004 was due primarily to net income from operations of $2.6 million, a decrease in accounts receivable of $.5 million and a decrease in other assets of $.4 million, offset in part by an increase in inventories of $2.9 million. Net cash provided by operating activities of $3.9 million for the six months ended July 31, 2003 was primarily attributable to net income from operations of $1.9 million and a decrease in inventories of $2.7 million, offset in part by an increase in accounts payable of $.7 million and a decrease in accounts receivable of $1.3 million. Net cash used in investing activities of $4.9 million and $0.6 million in the six months ended July 31, 2004 and 2003, respectively, was due to purchases of property and equipment and the purchase of marketable securities. Net cash provided by financing activities of $7.6 million in the six months ended July 31, 2004 and net cash used by financing activities of $2.7 million in the six months ended July 31, 2003 was primarily attributable to the proceeds from the secondary public offering and the payoff on June 18, 2004 of the revolving credit facility balance and repayments under our credit facilities. Credit Facilities We currently have two credit facilities: o an $18 million revolving credit facility, under which we had no borrowings outstanding as of July 31, 2004; and o a $3 million revolving credit facility (the availability of which reduces incrementally over its 3-year term), under which we had no borrowings outstanding as of July 31, 2004. Our $18 million revolving credit facility permits us to borrow up to the lower of $18 million or a borrowing base determined by reference to a percentage of our eligible accounts receivable and inventory. Our $18 million revolving credit facility now expires on July 31, 2005, and was classified as a long-term liability on our balance sheet at April 30, 2004. Borrowings under this revolving credit facility bear interest at the London Interbank Offering Rate (LIBOR) plus 2% and were approximately $16.8 million at January 31, 2004. As of July 31, 2004, we had $18 million of borrowing availability under this revolving credit facility, since the outstanding balance was paid in full on June 18, 2004. In January 2004, we entered into a new 3-year $3 million revolving credit facility which expires on January 21, 2007. Availability under this facility decreases from $3 million by $83,333 each month over the 3-year term and is also subject to the borrowing base limitation discussed above in connection with our $18 million revolving credit facility. Borrowings under this revolving credit facility bear interest at LIBOR plus 2.5%. We did not have any borrowings outstanding under this facility at July 31, 2004. As of July 31, 2004, we had $2.58 million of borrowing availability under this revolving credit facility. Our credit facilities require that we comply with specified financial covenants relating to interest coverage, debt coverage, minimum consolidated net worth, and earnings before interest, taxes, depreciation and amortization. These restrictive covenants could affect our financial and operational flexibility or impede our ability to operate or expand our business. Default under our credit facilities would allow the lenders to declare all amounts outstanding to be immediately due and payable. Our lenders have a security interest in substantially all of our assets to secure the debt under our credit facilities. As of July 31, 2004, we were in compliance with all covenants contained in our credit facilities. We believe that cash flow from operations and the cash received from the Company's secondary stock offering, along with borrowing availability under our $18 million revolving credit facility and our $3 million revolving credit facility will be sufficient to meet our currently anticipated operating, capital expenditures and debt service requirements for at least the next 12 months. Historically, we have been able to renew our primary credit facility on acceptable terms, but there can be no assurance that such financing will continue to be available after its current expiration or that any renewal will be on terms as favorable as our current facility. Capital Expenditures Our capital expenditures principally relate to purchases of manufacturing equipment, computer equipment, leasehold improvement and automobiles, as well as payments related to the construction of our facilities in China. Our capital spending plans for fiscal 2005 include the last payment on our 90,415 square foot facility in Jiaozhou, China due to a construction company as payment for the construction of this facility in 2004. Our facilities in China are not encumbered by commercial bank mortgages and thus Chinese commercial mortgage loans may be available with respect to these real estate assets if we need additional liquidity. We expect our capital expenditures to be approximately $1.1 million in fiscal 2005. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes in our market risk from that disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2004. Item 4. Controls and Procedures The Company's chief executive officer and principal accounting officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, they have concluded that as of such date, our disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms. During the quarter ended July 31, 2004, there were no significant changes in our internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting during fiscal 2005. PART II. OTHER INFORMATION Items 1 - 3 and 5 are not applicable. Item 2. On June 18, 2004 the Company concluded its secondary public stock offering issuing an additional 1,100,00 shares of common stock. Only July 1, 2004 the underwriter exercised its over allotment option whereby the Company issued an additional 180,750 shares of common stock. After deducting underwriting discounts and commissions and the offering expenses, the net proceeds from the offering to the Company were approximately $24.4 million. The Company has used proceeds from the offering to repay debt of $16.6 million under the Company's $18 million revolving credit facility. The remaining $7.8 million of the proceeds to the Company from offering are invested in cash investments and short-term investment grade debt securities. The Company anticipates using the balance of the proceeds from the offering for general corporate purposes. Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareholders of the Company (the "Annual Meeting") was held on June 16, 2004 in Ronkonkoma, New York. The Company had 3,273,925 shares of common stock outstanding as of April 23, 2004, the record date for the Annual Meeting. Proposal 1 - Election of Directors The candidates listed below were duly elected to the Board of Directors at the Annual Meeting by the tally indicated. Candidate Votes in Favor Votes Withheld --------- -------------- -------------- Raymond J. Smith 3,177,142 49,973 Walter J. Raleigh 3,203,326 23,789 Proposal 2 - Ratification of Auditors for fiscal 2005: Votes in Favor Votes Withheld Abstain -------------- -------------- ------- Pricewaterhouse Coopers LLP 3,218,263 7,614 1,238 Item 6. Exhibits and Reports on Form 8-K: a - 10.6 Lease dated July 1, 2004 between Lakeland Industries, Inc. and JBJ Realty. b - On May 20, 2004, the Company filed a Form 8-K, under Item 5, relating to renewal of its commercial line of credit and record sales for the first quarter ended April 30, 2004. On May 27, the Company filed a Form 8-K for the purpose of furnishing under Items 5 and 7 a press release reporting guidance for fiscal year 2005. On June 14, 2004, the Company filed a Form 8-K for the purpose of furnishing under Items 7 and 12 a press release announcing results of operations for the 1st Quarter ended April 30, 2004. On June 17, 2004, the Company filed a Form 8-K for the purpose of furnishing under Items 5 and 7 a press release announcing the Company's public offering of 1,100,000 shares of common stock, plus up to an additional 180,750 shares upon exercise of an over allotment option. __________SIGNATURES__________ Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LAKELAND INDUSTRIES, INC. ------------------------- (Registrant) Date: September 13, 2004 /s/ Christopher J. Ryan ------------------------------ Christopher J. Ryan, Chief Executive Officer, President Secretary and General Counsel (Principle Executive Officer and Authorized Signatory) Date: September 13, 2004 /s/ James M. McCormick ------------------------------ James M. McCormick, Chief Financial Officer and Treasurer (Principal Accounting Officer and Authorized Signatory) EX-10.6 2 ex10-6.txt THIS AGREEMENT BETWEEN EXHIBIT 10.6 JBJ REALTY, 376 Fulton Street, Farmingdale, NY 11735 As Landlord and LAKELAND INDUSTRIES, INC., As Tenant WITNESSETH: The Landlord hereby leases to the Tenant the following premises: APPROXIMATELY 4362 S.F. OF SPACE KNOWN AS 711-2 Koehler Avenue Ronkonkoma, New York 11779 For the term of ONE (1) YEAR WITH ONE (1) YEAR OPTION TO RENEW. to commence from the FIRST day of July 2004 and to the end on the LAST day of June, 2005 to be used and occupied only for LIGHT INDUSTRIAL upon the conditions and covenants following: 1st That the Tenant shall pay the annual rent of 1ST YR.-FORTY FOUR THOUSAND SEVEN HUNDRED OLLARS AND 00/100($44,700.00) OPT.YR.-FORTY FIVE THOUSAND SIX HUNDRED OLLARS AND 00/100($45,600.00) said rent to be paid in equal monthly payments in advance on the first day of each and every month during the term aforesaid, as follows: 1ST.YR.-THREE THOUSAND SEVEN HUNDRED TWENTY FIVE DOLLARS AND 00/100($3,725.00) OPT.YR.-THREE THOUSAND EIGHT HUNDRED DOLLARS AND OO/00($45,600.00) 2nd That the Tenant shall take Good care of the premises and shall, at the Tenant's own cost and expense make all repairs EXCEPT STRUCTURAL NOT TO EXCEED TEN (10%) OF ANNUAL LEASE PAYMENTS, BALANCE OF COST TO BE PAID BY LANDLORD. 3rd That the Tenant shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and Local Governments and of any and all their Departments and Bureaus applicable to said premises during said term; and shall also promptly comply with and execute all rules, order and regulations of the New York Board of Fire Underwriters, or any other similar body, at the Tenant's own cast and expense. 4th That the Tenant, successors, heirs, executors or administrators shall not assign this agreement, or underlet or under lease the premises, or any part thereof, or make any alterations on the premises, without the Landlords consent in writing; or occupy, or permit or suffer the same to be occupied for any business or purpose deemed disreputable or extra-hazardous on account of fire, under the penalty of damages and forfeiture, and in the event of a breach thereof, the term herein shall immediately cease and determine at the option of the Landlord as if it were the expiration of the original term. 5th Tenant must give Landlord prompt notice of fire, accident, damage or dangerous or defective condition. If the Premises can not be used because of fire or other casualty, Tenant is not required to pay rent for the time the Premises are unusable. If part of the Premises can not be used, Tenant must pay rent for the usable part. Landlord shall have the right to decide which part of the Premises is usable. Landlord need only repair the damaged structural parts of the Premises. Landlord is not required to repair or replace any equipment, fixtures, furnishings, or decorations unless originally installed by Landlord. Landlord is not responsible for delays due to settling insurance claims, obtaining estimates, labor and supply problems or any other cause not fully under Landlord's control. If the fire or other casualty is caused by an act or neglect of Tenant, Tenant's employees or invitees, or at the time of the fire or casualty Tenant is in default in any term of this Lease, then all repairs will be made at Tenant's expense and Tenant must pay the full rent with no adjustments. The cost of the repairs will be added rent. Landlord has the right to demolish or rebuild the Building if there is substantial damage by fire or other casualty. Landlord may cancel this Lease within 30 days after the substantial fire or casualty by giving Tenant notice of Landlord's intention to demolish or rebuild. The Lease will end 30 days after Landlord's cancellation notice to Tenant. Tenant must deliver the Premises to Landlord on or before the cancellation date in the notice and pay all rent due to date of the fire or casualty. If the Lease is cancelled Landlord is not required to repair the Premises or Building. The cancellation does not release Tenant of liability in connection with the fire or casualty. This Section is intended to replace the terms of New York Real Property Law Section 227. 6th The said Tenant agrees that the said Landlord and the Landlord's agents and other representatives shall have the right to enter into and upon said premises, or any part thereof, at all reasonable hours for the purpose of examining the same, or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. 7th The Tenant also agrees to permit the Landlord or the Landlord's agents to show the premises to persons wishing to hire or purchase the same; and the Tenant further agrees that on and after the sixth month, next preceding the expiration of the term hereby granted, the Landlord or the Landlord's agents shall have the right to place notices on the front of said premises, or any part thereof offering the premises "To Let" or "For Sale", and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation. 8th That if the said premises, or any part thereof shall be deserted or become vacant during said term, or if any default be made in the payment of the said rent or any part thereof, or if any default be made in the performance of any of the covenants herein contained, the Landlord or representatives may re-enter the said premises by force, summary proceedings or otherwise, and remove all persons there from, without being liable to prosecution therefor, and the Tenant hereby expressly waives the service of any notice in writing of intention to re-enter, and the Tenant shall pay at the same time as the rent becomes payable under the terms hereof a sum equivalent to the rent reserved herein, and the Landlord may rent the premises on behalf of the Tenant, reserving the right to rent the premises for a longer period of time than fixed in the original lease without releasing the original Tenant from any liability, applying any moneys collected, first to the expense of resuming or obtaining possession, second to restoring the premises to a rentable condition, and then to the payment of the rent and all other charges due and to grow due to the Landlord, any surplus to be paid to the Tenant, who shall remain liable for any deficiency. 9th Landlord may replace at the expense of Tenant, any and all broken glass in and about the demised premises. Landlord may insure, and keep insured, all plate glass in the demised premises for and in the name of Landlord. Bills, for the premiums therefor shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due from, and payable by Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, additional rental. Damage and injury to the said premises, caused by the carelessness, negligence or improper conduct on the part of the said Tenant or the Tenant's agents or employees shall be repaired as speedily as possible by the Tenant at the Tenant's own cost and expense. 10th That the Tenant shall neither encumber nor obstruct the sidewalk in front of , entrance to, or halls and stairs of said premises, nor allow the same to be obstructed or encumbered in any manner. 11th The Tenant shall neither place, or cause or allow to be placed, any sign or signs of any kind whatsoever at, in or about the entrance to said premises or any other part of same, except in or at such place or places as may be indicated by the Landlord and consented to by the Landlord in writing. And in case the Landlord or the Landlord's representatives shall deem it necessary to remove any such sign or signs in order to paint the said premises or the building wherein same is situated or make any other repairs, alterations or improvements in or upon said premises or building or any part thereof, the Landlord shall have the right to do so, providing the same be removed and replaced at the Landlord's expense, whenever the said repairs alterations or improvements shall be completed. 12th That the Landlord is exempt from any and all liability for any damage or injury to person or property caused by or resulting from steam, electricity, gas, water, rain, ice or snow, or any leak or flow from or into any part of said building or from any damage or injury resulting or arising from any other cause or happening whatsoever unless said damage or injury be caused by or be due to the negligence of the Landlord. 13th That if default be made in any of the covenants herein contained, then it shall be lawful for the said Landlord to re-enter the said premises, and the same to have again, re-possess and enjoy. The said Tenant hereby expressly waives the service of any notice in writing of intention to re-enter. 14th That this instrument shall not be a lien against said premises in respect to any mortgages that are now on or that hereafter may be placed against said premises, and that the recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien of this lease, irrespective of the date of recording and the Tenant agrees to execute without cost, any such instrument which may be deemed necessary or desirable to further effect the subordination of this lease to any such mortgage or mortgages, and a refusal to execute such instrument shall entitle the Landlord, or the Landlord's assigns and legal representatives to the option of cancelling this lease without incurring any expense or damage and the term hereby granted is expressly limited accordingly. 15th The Tenant has ALREADY deposited with the Landlord the sum of $5089.88 as security for the full and faithful performance by the Tenant of all the terms, covenants and conditions of this lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provided the Tenant has fully and faithfully carried out all of said terms, covenants and conditions on Tenant's part to be performed. In the event of a bona fide sale, subject to this lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord. 16th That the security deposited under this lease shall not be mortgaged, assigned or encumbered by EITHER PARTY without the written consent of the OTHER PARTY. 17th It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part thereof as herein specified, or if, without the consent of the Landlord, the Tenant shall sell, assign or mortgage this lease or if default be made in the performance of any of the covenants and agreements in this lease contained on the part of the Tenant to be kept and performed, or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and Local Governments or of any and all their Departments and Bureaus, applicable to said premises, or if the Tenant shall file or there be filed against Tenant a petition in bankruptcy or arrangement or Tenant be adjudicated a bankrupt or make an assignment for the benefit of creditors or take advantage of any insolvency act, the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days notice in writing of the Landlord's intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises. 18th Tenant shall pay to Landlord the rent or charge, which may, during the demised term, be assessed or imposed for the water used or consumed in or on the said premises, whether determined by meter or otherwise, as soon as and when the same may be assessed or imposed, and will also pay the expenses for the setting of a water meter in the said premises should the latter be required. Tenant shall pay Tenant's proportionate part of the sewer rent or charge imposed upon the building. All such rents or charges or expenses shall be paid as additional rent and shall be added to the next month's rent thereafter to become due. 19th That the Tenant will not nor will the Tenant permit under tenants or other persons to do anything in said premises, or bring anything into said premises, or permit anything to be brought into said premises or to be kept therein, which will in any way increase the rate of fire insurance on said demised premises, nor use the demised premises or any part thereof, nor suffer or permit their use for any business or purpose which would cause an increase in the rate of fire insurance on said building, and the Tenant agrees to pay on demand any such increase. 20th The failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein, shall not be deemed a waiver of any rights or remedies that the Landlord may have, and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained. This instrument may not be changed, modified, discharged or terminated orally. 21st If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim against Landlord for the value of any unexpired term of said lease. No part of any award shall belong to the Tenant. 22nd If after default in payment of rent or violation of any other provision of this lease, or upon the expiration of this lease, the Tenant moves out or is dispossessed and fails to remove any trade fixtures or other property prior to such said default, removal, expiration of lease, or prior to the issuance of the final order or execution of the warrant, then and in that event, the said fixtures and property shall be deemed abandoned by the said Tenant and shall become the property of the Landlord. 23rd In the event that the relation of the Landlord and Tenant may cease or terminate by reason of the re-entry of the Landlord under the terms and covenants contained in this lease or by the ejectment of the Tenant by summary proceedings or otherwise, or after the abandonment of the premises by the Tenant, it is hereby agreed that the Tenant shall remain liable and shall pay in monthly payments the rent which accrues subsequent to the re-entry by the Landlord, and the Tenant expressly agrees to pay as damages for the breach of the covenants herein contained, the difference between the rent reserved and the rent collected and received, if any, by the Landlord during the remainder of the unexpired term, such difference or deficiency between the rent herein reserved ant the rent collected if any, shall become due and payable in monthly payments during the remainder of the unexpired term, as the amounts of such difference or deficiency shall from time to time be ascertained; and it is mutually agreed between Landlord and Tenant that the respective parties hereto shall and hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other on any matters whatsoever arising out of or in any way connected with this lease, the Tenant's use or occupancy of said premises, and/or any claim of injury or damage. 24th The Tenant waives all rights to redeem under any law. 25th This lease and the obligation of Tenant to pay rent hereunder and perform all of the covenants and agreements hereunder on part of Tenant to be performed shall in nowise be affected, impaired or excused because Landlord is unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make or is delayed in making any repairs, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with a National Emergency or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the condition of supply and demand which have been or are affected by war or other emergency. 26th No diminution or abatement of rent, or other compensation, shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the building or to its appliances, nor for any space taken to comply with any law, ordinance or order of a governmental authority. In respect to the various "services," if any, herein expressly or impliedly agreed to be furnished by the Landlord to the Tenant, it is agreed that there shall be no diminution or abatement of the rent, or any other compensation, for interruption or curtailment of such "service" when such interruption or curtailment shall be due to accident, alterations or repairs desirable or necessary to be made or to inability or difficulty in securing supplies or labor for the maintenance of such "service" or to some other cause, not gross negligence on the part of the Landlord. No such interruption or curtailment or any such "service" shall be deemed a constructive eviction. The Landlord shall not be required to furnish, and the Tenant shall not be entitled to receive, any of such "services" during any period wherein the Tenant shall be in default in respect to the payment of rent. Neither shall there be any abatement of diminution of rent because of making of repairs, improvements or decorations to the demised premises after the date above fixed for the commencement of the term, it being understood that rent shall, in any event, commence to run at such date so above fixed. 27th Landlord shall not be liable for failure to give possession of the premises upon commencement date by reason of the fact that premises are not ready for occupancy or because a prior Tenant or any other person is wrongfully holding over or is in wrongful possession, or for any other reason. The rent shall not commence until possession is given or is available, but the term herein shall not be extended. SEE RIDERS ANNEXED HERETY AND MADE A PART HEREOF And the said Landlord doth covenant that the said Tenant on paying the said yearly rent, and performing the covenants aforesaid, shall and may peacefully and quietly have, hold and enjoy the said demised premises for the term aforesaid, provided however, that this covenant shall be conditioned upon the retention of title to the premises by the Landlord. And it is mutually understood and agreed that the covenants and agreements contained in the within lease shall be binding upon the parties hereto and upon their respective successors, heirs, executors and administrators. In Witness Whereof, the parties have interchangeably set their hands and seals (or caused these presents to be signed by their proper corporate officers and caused their proper corporate seal to be hereto affixed) this 1st day of April, 2004 Signed, sealed and delivered In the presence of JBJ REALTY As Landlord By: /s/ Peter Hofrichter, Agent ---------------------------- Peter Hofrichter, Agent Lakeland Industries, Inc. By: /s/ Christopher J. Ryan ---------------------------- Christopher J. Ryan, President ACKNOWLEDGMENT IN NEW YORK STATE State of New York, Count of On before me, the undersigned, Personally appeared Personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their signature(s) on the instruments, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. ________________________________________________________________ Signature and office of individual taking acknowledgment ACKNOWLEDGMENT OUTSIDE NEW YORK STATE State of County of On before me, the undersigned Personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instruments, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned ________________________________________________________________ Signature and office of individual taking acknowledgment ACKNOWLEDGMENT BY SUBSCRIBING WITNESS(ES) State of County of On Before me, the undersigned Personally appeared the subscribing witness(es) to the foregoing instrument, with whom I am personally acquainted, who, being by me duly sworn, did depose and say that he/she/they reside(s) in (if the place of residence is in a city, include the street and street number, if any thereof) that he/she/they know(s) to be the individual(s) described in and who executed the foregoing instruments; that said subscribing witness(es) was (were) present and saw said execute the same; and that said witness(es) at the same time subscribed his/her/their name(s) as a witness(es) thereto. (_[]if taken outside New York State insert city or political subdivision and state or country or other place acknowledgment taken and that said subscribing witness(es) made such appearance before the undersigned in - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ____________________________________________________________ (signature and office of individual taking acknowledgement LEASE Dated _________________ In consideration of the letting of the premises within mentioned to the within named Tenant and the sum of $1.00 paid to the undersigned by the within named Landlord, the undersigned do hereby covenant and agree, to and with the Landlord and the Landlords legal representatives, that it default shall at any time be made by the said Tenant in the payment of the rent and the performance of the covenants contained in the within lease, on the Tenant's part to be paid an performed, that the undersigned will well and truly pay the said rent, or any arrears thereof, that may remain due unto the said Landlord, and also pay all damages that may arise in consequence of the non-performance of said covenants, or either of them, without requiring notice of any such default from the said Landlord. The undersigned hereby waives all right to trial by jury in any action or proceeding hereinafter by the Landlord, to which the undersigned may be a party. In Witness Whereof, the undersigned has set hand and seal this day of WITNESS L.S ---------------------------- RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 7/1/2004. 28th The Tenant agrees to keep in force and provide during the term of this lease for the benefit of the Landlord general liability policy of insurance in standard from protecting the Landlord against any liability whatsoever occasioned by accident in or about the demised premises, in which the Landlord shall be named as additional insured, and shall be protected against all liability occasioned by any occurrence insured against. Such policies shall cover and leased premises and shall provide for at least five days' notice to the Landlord before cancellation. A certification thereof shall be delivered to their Landlord. Said policies shall provide for the following minimum coverage's; $300,000.00 for injury or death of one person; $500,000.00 for injury or death arising out of one accident; and $25,000.00 for property damage. In the event the Tenant fails to effect such insurance, the Landlord may do so, and add the cost thereof to the rent for the month next ensuing, and the amount thereof shall be deemed to be, and shall be, paid as additional rent. 29th. If any mechanic's lien or liens shall be filed against the premises for work done or materials furnished to the Tenant, the Tenant shall within thirty days thereafter, and at its own cost and expense cause such lien or liens to be discharged by filing the bond or bonds required for that purpose by law. In the event the Tenant fails to have such liens discharged, the Landlord may do so at the Tenant's expense. 30th. All annexations to the freehold made or installed in such a manner that their removal would cause injury to the freehold shall be the property of the Landlord and may not be removed by the Tenant except that all trade fixtures shall be deemed the property of the Tenant, and may be removed by the Tenant provided that all injury to the freehold resulting therefrom shall be repaired at the expense of the Tenant. 31st. There are no representations, warranties, terms, or obligations other than those expressed in this agreement. No variation of this lease shall be valid unless in writing and signed by the party to be charged. Any holding over by the Tenant after the term of this lease shall be unlawful and in no manner constitute a renewal or extension of this lease agreement. In the event, however, Tenant does become a holdover, the use and occupancy charges shall be 125% of the last rental amount. In addition to the provisions of Paragraph 4. Tenant shall, before making any alterations, additions, installations, or improvements, obtain at its sole cost and expense all permits, approvals, and certificates required by any governmental or quasi-governmental authorities and upon completion of same, certificates of final approval thereof shall promptly deliver to the Landlord copies of all such permits, approvals, and certificates. 32nd. The Landlord shall not be liable for damage or injury to person or property unless written notice of any defect alleged to have caused such damage or injury shall have been given to the Landlord a sufficient time before such occurrence to have reasonable time to enable the Landlord to correct such defect. Nothing herein contained shall impose any additional obligation on the Landlord to make repairs. Should any additional construction be undertaken on the interior of the premises, Tenant must: a) Obtain a Permit; b) Obtain the permission and signature of the Landlord on application; and c) Supply Landlord with copy of plans, specifications, and Certificate of Compliance. 33rd. It is mutually covenanted that if the Landlord shall reasonably payor be compelled to pay any sum of money, or shall reasonably perform any act or be compelled to perform any act, which act shall require the payment of any sum of money be reason of the failure of the Tenant after thirty days' notice, to perform anyone or more of the covenants herein contained, the sum or sums shall, after the ten days' notice, in writing and demand, be added to the rent installment next due and shall be collectible in the same manner and with the same remedies as if originally reserved as rent hereunder. The failure to pay rent and to make payment pursuant to this paragraph shall be deemed a material default. /s/ Peter Hofrichter, Agent /s/ Christopher J. Ryan, President JBJ REALTY LAKELAND INDUSTRIES,INC. - ---------- ------------------------ LANDLORD TENANT RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 7/1/2004. 34th. Notwithstanding any provisions of this Lease to the contrary, in the event of a breach or default by Landlord, its successors or assigns, of any of its obligations hereunder of any kind or nature whatsoever, or of any provisions of this Lease. Tenant shall look solely to the equity of the Landlord, its successors, or assigns in the demised premises or the building of which they are a part for the satisfaction of Tenant's remedies and no personal judgment shall be sought against the Landlord, its successors or assigns under the terms, covenants, conditions, warranties and obligations of this Lease shall in no event exceed the loss of its equity in the demised premises or the building of which they are a part. 35th. The Tenant agrees at its own cost and expense to pay for all electricity, telephone, gas, fuel, etc., consumed and used by it, it being the understanding and intention of the parties hereto that the Landlord rents, and the Tenant hires, the demised premises without any service of any kind whatsoever. 36th. Anything to the contrary herein notwithstanding, Tenant may assign this Lease as long as Tenant is not in default, and the Landlord shall not unreasonably withhold its consent to the assignment and/or sub-lease agreement upon the following conditions: a) Each assignment and/or sublease of this lease shall be accompanied by an agreement, in writing, executed by the assignee for the benefit of the Landlord, wherein the assignee shall assume all the duties and obligations of the Tenant herein. b) Said agreement executed by the assignee shall be deposited with the Landlord within five days of the making of the assignment. c) The assignment and/or sub-lease of this lease agreement shall in no way operate to release the assignor security shall be required. d) An additional security of 0 shall be deposited with the Landlord by the assignee to be held by the Landlord in accordance with the provisions of Paragraph "15" herein. e) No further or additional assignments of this lease shall be made except upon compliance with, and subject to, the provisions of this paragraph, except that no further security shall be required. 37th. In the event the premium for the Landlord's policy of insurance covering fire and extended coverage with all of the usage and customary endorsements its increased over the basic rate for same as determined by the appropriate insurance underwriting organization as a result of Tenants use or occupancy of the premises, then Tenant shall pay such insurance as additional rent. Landlord shall provide Tenant with a copy of pertinent invoices for insurance, and Tenant shall reimburse Landlord. Failure to make such reimbursement shall be deemed a material default hereunder. 38th. The Tenant shall pay to the Landlord during each year of the term herein demised as and for additional rent hereunder the amount of any increase of the aggregate of all real estate taxes of every nature and description, including assessments, if any, levied against the demised premises and herein referred to as the basic taxes. The basic tax, as aforementioned, shall be the aggregate of all real estate taxes of each and every nature, including assessments levied against the demised premises after the completion of the building and constituting the first assessment predicated upon a completed building. The amount of any such increase shall be deemed additional rent and shall be paid by the Tenant to the Landlord not later than the first day of the calendar month occurring subsequent to the giving of notice to the Tenant of the amount of such increase, and the simultaneous exhibiting to the Tenant of a copy of a tax bill evidencing such increase. Such notice to be given by the Landlord to the Tenant may be given personally, or by certified mail, return receipt requested. The Tenant shall be responsible only for the payment of that portion of such increase, if any; as shall be applicable to that portion of the overall premises lease by Tenant. The base tax year will be July 1. 2004 through June 31. 2005. Any additional taxes over and above the base tax year shall be passed on to the Tenant according to their proportionate share. 39th. Notwithstanding the provisions of Paragraph 15, the Landlord shall have the right to deduct from the security deposit, if kept in an interest-bearing account, the sum equivalent to one percent (1 %) per annum of the security monies so deposited as administrative expenses. With regard to Tenant's security, this money shall be in lieu of all other administrative and custodial expenses. 40th. The parties herein acknowledge that No One is the broker which brought about this leasing agreement, and Commissions therefore shall be paid by the Landlord pursuant to separate agreement. /s/ Peter Hofrichter, Agent /s/ Christopher J. Ryan, President JBJ REALTY LAKELAND INDUSTRIES,INC. - ---------- ------------------------ LANDLORD TENANT RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 7/1/2004. 41 st. In the event the summary proceeding is commenced by the Landlord or its successors and assigns, for non payment of rent during any part of the term hereunder; then the Landlord shall be entitled to costs and attorney's fees incurred during the summary proceeding as added rent in default and such costs and attorney's fees may be added to the amount demanded in any such summary proceeding. A summary proceeding shall be deemed to have been commenced hereunder upon service of a three-day Notice. 42nd. Landlord will put all cooling, heating, and plumbing systems in good working order for new Tenant. It is the responsibility of all tenants to maintain the systems in like condition and to provide service and maintenance for heating system. Minimal heat must be provided by Tenant at all times during the winter months. To prevent frozen pipes and heating damage. Should this not be done, any repairs necessary will be at the sole cost of the Tenant. Tenant shall pay for all electricity, gas, fuel, telephone, garbage disposal. Should the septic systems and/or pools become contaminated and in need of service, the Tenant responsible for such repair will be billed for the necessary repair. Should the source of the problems be of such indeterminate nature, other than faulty installation, all Tenants will be billed for the service in proportion with their occupancy of the building. Tenant shall be responsible for repair and maintenance of plate glass, overhead doors, plumbing, heating, and cooling systems. 43rd. If, during the term of the lease or Tenant's occupancy of the demised premise, Landlord or any predecessor in title to the premises of which the demised premises are a part is required to undertake the removal, clean-up, neutralization or any other affirmative act with respect to the presence of hazardous, toxic or dangerous materials or substances, whether of the Landlord's own choice or as the result of a directive or order from any governmental authority or court having jurisdiction, the Tenant specifically acknowledges and agrees that any such action shall not be a breach of the covenant of quiet enjoyment of the premises and further, the Tenant shall not be entitled to any diminution or abatement of rent in such event notwithstanding any other provisions of this lease to the contrary. Tenant further agrees to cooperate fully with the Landlord in connection with any such action. It is specifically understood and agreed that the Tenant will not contaminate the premises with any hazardous, toxic, or dangerous material or substance and nothing herein contained shall relieve the Tenant from any liability to the Landlord or any governmental authority as a result of any actions of the Tenant, its employees, agents, or invitee with respect to the causation of any such hazardous, dangerous, or toxic condition at the premises. 43-2. In the event the Landlord has reason to believe that the Tenant, or Tenant's employees or agents are in violation of any provision of this lease pertaining to the use or maintenance of Hazardous Substances or Hazardous Materials, the Landlord shall give written notice to the Tenant concerning the suspected issues of non-compliance. The Tenant shall respond in writing the Landlord's concerns within ten (10) days, and shall provide such other documents or information which the Landlord deems necessary to determine that the Tenant is in compliance with all the provisions in the leas involving Hazardous Substances or Hazardous Materials. 43-3. In the event the Tenant fails to provide the assurances required by this paragraph within the time specified, the Landlord and the Landlord's designated agent shall have the right to enter and inspect the premises to determine the Tenant's compliance with the provisions of the lease pertaining to Hazardous Substances and Hazardous Materials. The Landlord, in its sole discretion, shall also have the right to conduct an environmental audit of the leased premises for the purposes of establishing the Tenant's compliance with the provisions of this lease which involve Hazardous Substances or Materials. The cost of any such environments audit shall be borne by the Tenant. /s/ Peter Hofrichter, Agent /s/ Christopher J. Ryan, President JBJ REALTY LAKELAND INDUSTRIES,INC. - ---------- ------------------------ LANDLORD TENANT RIDERS TO BE ANNEXED TO AND MADE PART OF LEASE BETWEEN JBJ REALTY AS LANDLORD, AND LAKELAND INDUSTRIES, INC. AS TENANT. DATED 7/1/2004. 44 TH. Tenant agrees not to allow garbage or refuse to accumulate outside the building or grounds of the demised premises. Any violations regarding debris from the local municipality shall be made known to the Tenant and should the violation not be corrected in the given period of time, the Tenant will payment as rent, all fines and legal fees incurred. 45th. All rents are due and payable on the first day of the month. In the event of a default by the Tenant for non-payment of rent, and such default continues for a period of ten (10) days subsequent to the due date, there shall be added to the monthly rental then due and payable a sum designated as a late charge, which shall be equal to five (5) cents for each dollar of the monthly payment past due rent, shall become immediately due and payable with the succeeding month's rent. Should Tenant issue a check with insufficient funds, an additional twenty-five dollars and 001100 ($25.00) fee per check will be applied to the next month's invoice. If this occurs, Tenant will be expected to substitute cash or a certified check in person within a three- (3) day period. 45-2. Notwithstanding any provisions in the Lease permitting Tenant to cure any default within a specified period of time, if Tenant shall default(I) in the timely payments of rent or additional rent, and such default shall continue or be repeated for two consecutive months or for a total of four months in any period of twelve months or (ii) in the performance of any particular term, condition or covenant of this Lease more than two times in any period of six months, then, notwithstanding that such defaults shall have each been cured within the period after notice if any, as provided in this Lease. Any further similar default shall be deemed to be deliberate and Landlord thereafter may cancel or terminate this Lease as provided herein without according to Tenant an opportunity to cure such further default. 46th. The Tenant agrees to comply with the following rules and regulations and with such reasonable and additions thereto as the Landlord may hereafter from time to time make for the premises. The Landlord shall not be responsible for non-compliance by any other Tenant of any said rules and regulations, however, will request the non-complying Tenant to comply with all haste. a) Tenant will not store materials, supplies, or equipment outside the premises. b) Tenant will keep loading area/overhead door clean and unobstructed in order to allow for parking lot, lawn, and other maintenance. c) Tenant will be responsible for any damage done to the building or parking lot area by trucks making deliveries for the Tenant's business. d) Parking or storage of unregistered vehicles is expressly prohibited. 47th. Certificate of Insurance with owner named as co-insured must accompany this Lease in order for it to become valid. (See Paragraph 28) 48th. In conjunction with Lease signing, Tenant agrees to pay Landlord Two (2) month's security and one (1) month's rent in advance. 49th. In the event Tenant vacates the premises prior to the termination date of this Lease, the corporate officers or shareholders or the general partners executing this Lease on behalf of Tenant or such other guarantors who execute the guarantee at the end of this Rider personally guarantee the payment of all rent and additional rent that has accrued to the date the premises are vacated together with the costs of restoring the premises in accordance with the provisions of this Lease and Tenant's obligations under Paragraph 43 hereof. /s/ Peter Hofrichter, Agent /s/ Christopher J. Ryan, President JBJ REALTY LAKELAND INDUSTRIES,INC. - ---------- ------------------------ LANDLORD TENANT The provisions of Paragraphs 43 and 48 are hereby personally accepted and the Tenant's performance and payments thereof personally guaranteed. N/A --------- GUARANTOR EX-31.1 3 ex31-1.txt Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Christopher J. Ryan, certify that: 1. I have reviewed this report on Form 10-Q of Lakeland Industries, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: September 13, 2004 /s/ Christopher J. Ryan ----------------------- By: Christopher J. Ryan Chief Executive Officer, President, Secretary and General Counsel EX-31.2 4 ex31-2.txt Exhibit 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James M. McCormick, certify that: 1. I have reviewed this report on Form 10-Q of Lakeland Industries, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: September 13, 2004 /s/ James M. McCormick ---------------------- By: James M. McCormick Chief Financial Officer and Treasurer EX-32.1 5 ex32-1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO ss. 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of Lakeland Industries, Inc. (the "Company") on Form 10-Q for the period ending July 31, 2004 (the "Report"), I Christopher J. Ryan, Chief Executive Officer, President, Secretary and General Counsel of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents in all material respects, the financial condition and results of operations of the Company. /s/ Christopher J. Ryan - ----------------------------- Christopher J. Ryan Chief Executive Officer, President, Secretary and General Counsel September 13, 2004 EX-32.2 6 ex32-2.txt Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO ss. 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of Lakeland Industries, Inc. (the "Company") on Form 10-Q for the period ending July 31, 2004 (the "Report"), I James M. McCormick, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents in all material respects, the financial condition and results of operations of the Company. /s/ James M. McCormick - ------------------------- James M. McCormick Chief Financial Officer and Treasurer September 13, 2004 -----END PRIVACY-ENHANCED MESSAGE-----