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<SEC-DOCUMENT>0000914317-06-001087.txt : 20060417
<SEC-HEADER>0000914317-06-001087.hdr.sgml : 20060417
<ACCEPTANCE-DATETIME>20060417132422
ACCESSION NUMBER:		0000914317-06-001087
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		9
CONFORMED PERIOD OF REPORT:	20060131
FILED AS OF DATE:		20060417
DATE AS OF CHANGE:		20060417

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-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-15535
		FILM NUMBER:		06761810

	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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>form10k-74934_lake.txt
<TEXT>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the fiscal year ended January 31, 2006
                                ----------------
                                       OR
|_|   TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from _____________ to ______________

                        Commission File Number: 0 - 15535
- --------------------------------------------------------------------------------
                            LAKELAND INDUSTRIES, INC.
             (Exact Name of Registrant as Specified in its Charter)

             Delaware                                 13-3115216
 --------------------------------       ---------------------------------------
     (State of Incorporation)           (I.R.S. Employer Identification Number)

                 701 Koehler Ave., Suite 7, Ronkonkoma, NY 11779
                 -----------------------------------------------
                    (Address of Principal Executive Offices)

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

                 711 Koehler Ave., Suite 2, Ronkonkoma, NY 11779
                 -----------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12 (g) of the Act
                  Title of Class - Common Stock $0.01 Par Value
                    Name of Exchange on which listed - NASDAQ

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

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

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this Chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.                     Yes |X| No |_|

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

   Large accelerated filer |_| Accelerated Filer |X| Non-Accelerated Filer |_|

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

      As of July 29, 2005, the aggregate market value of the registrant's common
stock held by non-affiliates of the registrant was $65,777,000 based on the
closing price of the common stock as reported on the National Association of
Securities Dealers Automated Quotation System National Market System.

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

                Class                              Outstanding at April 17, 2006
- --------------------------------------             -----------------------------
Common Stock, $0.01 par value per share                      5,017,046

                                       1
<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

                    Document                       Parts Into Which Incorporated
                    --------                       -----------------------------
Annual Report to Stockholders for the Fiscal          Parts  [I, II, and IV]
Year Ended January 31, 2006 (Annual Report)

Portions of the Registrant's Proxy Statement relating to its 2006 Annual
Stockholders' Meeting to be filed subsequently - are incorporated by reference
and Part III of this Form 10-K. Except with respect to the Information
specifically incorporated by reference in this Form 10-K, the registrant's
definitive proxy statement is not deemed to be filed as part of this Form 10-K.

                                       2
<PAGE>
<TABLE>
<CAPTION>

LAKELAND INDUSTRIES, INC.
                                        INDEX TO ANNUAL REPORT ON FORM 10-K
PART 1:
- -------

Cautionary Statement regarding Forward-Looking Information                                           Page
- ----------------------------------------------------------                                           ----
<S>                                                                                                     <C>

Item 1     Business
- ------     --------
           Overview                                                                                     4
           ---------
           Industry Overview and Consolidation                                                          5
           -----------------------------------
           Business Strategy                                                                            7
           -----------------
           Our Competitive Strengths                                                                    9
           -------------------------
           Products                                                                                    10
           ----------
           Quality Control                                                                             13
           ---------------
           Marketing and Sales                                                                         13
           -------------------
           Research and Development                                                                    14
           ------------------------
           Suppliers and Materials                                                                     14
           -----------------------
           Competition                                                                                 14
           -----------
           Seasonality                                                                                 14
           -----------
           Patents and Trademarks                                                                      15
           ----------------------
           Employees                                                                                   15
           ---------
           Environmental Matters                                                                       15
           ---------------------
           Available Information                                                                       15
           ---------------------
Item 1A    Risk Factors                                                                                15
- -------    ------------
Item 1B    Unresolved Staff Comments                                                                   22
- -------    -------------------------

Item 2     Properties                                                                                  25
- ------     ----------
Item 3     Legal Proceedings                                                                           25
- ------     -----------------
Item 4     Submission of Matters to a Vote of Security Holders                                         25
- ------     ---------------------------------------------------

PART II:
- --------

Item 5     Market for the Registrant's Common Stock and Related Stockholder Matters                    25
- ------     ------------------------------------------------------------------------
Item 6     Selected Financial Data                                                                     26
- ------     -----------------------
Item 7     Management's Discussion and Analysis of Financial Condition and Results of Operations       28
- ------     -------------------------------------------------------------------------------------
Item 7A    Quantitative and Qualitative Disclosure about Market Risk                                   36
- -------    ---------------------------------------------------------
Item 8     Financial Statements and Supplementary Data                                                 36
- ------     -------------------------------------------
Item 9     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure        64
- ------     ------------------------------------------------------------------------------------
Item 9A    Controls and Procedures                                                                     64
- -------    -----------------------
Item 9B    Other Information                                                                           65
- -------    -----------------

PART III:
- ---------

Item 10    Directors and Executive Officers of the Registrant                                          65
- -------    --------------------------------------------------
Item 11    Executive Compensation                                                                      68
- -------    ----------------------
Item 12    Security Ownership of Certain Beneficial Owners and Management                              68
- -------    --------------------------------------------------------------
Item 13    Certain Relationships and Related Transactions                                              68
- -------    ----------------------------------------------
Item 14    Principal Accounting Fees and Services                                                      69
- -------    --------------------------------------

PART IV:
- --------

Item 15    Exhibits, Financial Statement Schedules and Reports on Form 8-K                             70
- -------    ---------------------------------------------------------------

Signatures
- ----------

Certification under Exchange Act Rules 13a - 14(b) and 15d- 14(b)                                      73

</TABLE>

                                                  3
<PAGE>

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

                                     PART I

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


ITEM 1.  BUSINESS
- -----------------

                                    Overview

      We manufacture and sell a comprehensive line of safety garments and
accessories for the industrial protective clothing market. Our products are sold
by our in-house customer service group our regional sales managers and
independent sales representatives to a network of over 800 safety and mill
supply distributors. These distributors in turn supply end user industrial
customers such as chemical/petrochemical, automobile, steel, glass,
construction, smelting, munition plants, janitorial, pharmaceutical and high
technology electronics manufacturers, as well as hospitals and laboratories. In
addition, we supply federal, state and local governmental agencies and
departments such as fire and police departments, airport crash rescue units, the
Department of Defense, Central Intelligence Agency, Federal Bureau of
Investigation, and the Centers for Disease Control. In fiscal 2006, we had net
sales of $98.7 million and earnings per share of $1.26, which represent a growth
rate of 3.6% and 11.6%, respectively, over our previous fiscal year. Our net
sales attributable to customers outside the United States were $8.0 million,
$9.0 million and $10.5 million, in fiscal 2004, fiscal 2005 and fiscal 2006,
respectively.

      Our major product categories and their applications are described below:

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

      High-End Chemical Protective Suits. We manufacture heavy duty chemical
suits made from TyChem(R) SL, TK and BR, and F, which are DuPont manufactured
fabrics and Pyrolon CRFR. These suits are worn by individuals on

                                       4
<PAGE>

hazardous material teams to provide protection from powerful, highly
concentrated and hazardous or potentially lethal chemical and biological toxins,
such as toxic wastes at Super Fund sites, toxic chemical spills or biological
discharges, chemical or biological warfare weapons (such as saran gas, anthrax
or ricin), and chemicals and petro-chemicals present during the cleaning of
refineries and nuclear facilities. These suits can be used in conjunction with a
fire protective shell that we manufacture to protect the user from both chemical
and flash fire hazards. Homeland Security measures and government funding of
personal protective equipment for first responders to terrorist threats or
attack have recently resulted in increased demand for our high-end chemical
suits and we believe demand for these suits will continue to increase in the
future as state and local Bioterrorism grants begin to be spent.

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

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

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

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

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

                                Industry Overview

      According to Global Industry Analysts, Inc., the global market for
industrial work clothing was projected to be approximately $6.3 billion in 2005,
and is projected to grow at a compound annual growth rate of approximately 6.5%.
Our primary market, North America, is the largest market, expected to make up
over one-third, or approximately $2.0 billion, of the global market. The
industrial work clothing market includes our limited use/disposable protective
or safety clothing, our high-end chemical protective suits, our fire fighting
and heat protective apparel and our reusable woven garments.

      The industrial protective safety clothing market has evolved over the past
35 years as a result of governmental regulations and requirements and commercial
product development. In 1970, Congress enacted the Occupational

                                       5
<PAGE>

Safety and Health Act, or OSHA, which requires employers to supply protective
clothing in certain work environments. Almost two million workers are subject to
OSHA standards today. Certain states have also enacted worker safety laws that
supplement OSHA standards and requirements.

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

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

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

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

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

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

      In response to the terrorist attacks that took place on September 11,
2001, the federal government has provided for additional protective equipment
funding through programs that are part of the Homeland Security initiative. The
Fire Act of 2002 created the federal Assistance to Firefighters Grant Program,
or AFGP, to provide funds directly to local fire districts to help improve their
readiness and capability to respond to terrorist attacks. Funds are allocated
under AFGP to the following areas: fire operations/firefighter safety; fire
prevention; emergency medical services; and firefighting vehicle acquisition.
AFGP will provide more than $2.15 billion in funding through 2005, with
approximately $750 million appropriated for 2003, $750 million in 2004, $650
million more in 2005 and $648 million in 2006. The Bio Terrorism Preparedness
and Response Act of 2002, which we refer to as the Bio Terrorism Act,
appropriated $3.643 billion for Bioterrorism Preparedness and $1.641 billion for
Bioterrorism Hospital Preparedness between 2002 and 2005. Hospital Preparedness
is where we expect to see most of our garment sales. The 2006 appropriations
bill provides $550 million for Hospital Preparedness. The $514.6 million of
bioterrorism hospital preparedness monies appropriated in 2005 are expected to
be disbursed in 2006 and 2007, and the funding for 2006 should be disbursed in
2007 and 2008.

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

                             Industry Consolidation

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

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

                                       6
<PAGE>

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

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

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

o     broader product offerings that facilitate cross-selling opportunities;

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

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

o     access to international sales.

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

                                Business Strategy

      Key elements of our strategy include:

o     Dealing with Price Increases in Raw Materials. One major supplier, DuPont,
      increased the price of Tyvek fabrics by 3.7% in January, 2005, by 4 to 6%
      in June 2005 and by 4.9% in November 2005. However, in June of 2005 DuPont
      also published new garment price increases of 4% to 6%, depending on
      style, and again increased garment prices in November 2005 by 6%. These
      increases were mostly predicated upon increases in oil and natural gas
      which are prime components in the manufacturing of Tyvek. We react to such
      increases by increasing our inventories of Tyvek roll goods prior to such
      announced increases. Additionally, we have negotiated discounts on such
      roll goods based upon volume purchases. Nonetheless, Tyvek garment pricing
      to prime volume accounts was competitive in the fourth quarter of fiscal
      2006. In order to offset any negative effect of these prices increases we
      are continuing the operating cost reduction program already in effect and
      have initiated new measures.

            For example:

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

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

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


o     Increase Sales to the First Responder Market. Our high-end chemical
      protective suits meet all of the regulatory standards and requirements and
      are particularly well qualified to provide protection to first responders
      to chemical or biological attacks. For example, our products have been
      used for response to recent threats such as the 2001 anthrax letters and
      the 2004 ricin letters. A portion of appropriations for the Fire Act of
      2002 and the

                                       7
<PAGE>

Bio Terrorism Act of 2002 are available for purchase of products for first
responders that we manufacture, and we are aggressively targeting this Homeland
Security market.

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

o     Decrease Manufacturing Expenses by Moving Production to International
      Facilities. We have additional opportunities to take advantage of our low
      cost production capabilities in Mexico and China. Beginning in 1995, we
      successfully moved the labor intensive sewing operation for our limited
      use/disposable protective clothing lines to these facilities. Beginning
      January 1, 2005, pursuant to the United States World Trade Organization
      Treaty with China, the reduction in quota requirements and tariffs imposed
      by the U.S. and Canada on textiles goods such as our reusable woven
      garments have made it more cost effective to move production for these
      product lines to our assembly facilities in China. We are half way through
      this process and expect to complete this process by the fourth quarter of
      fiscal 2007. As a result, we expect to see profit margin improvements for
      these product lines, which will allow us to compete more effectively as
      quota restrictions are removed and tariffs lowered. There are currently no
      items we produce in China subject to quotas. There are only a few minor
      items in our Mifflin Valley line which would presently fall into quota
      restraints. At this time, no such items are produced in China.

o     Increase International Sales Opportunities. We also intend to increase our
      penetration of the International markets for our product lines. We have
      recently opened new sales offices in Beijing, China; Tokyo, Japan; and
      Santiago, Chile: Our sales in our existing Canadian and United Kingdom
      operations grew by 21.5% and 35.9% respectively in fiscal 2006.

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

o     Acquisitions. We believe that the protective clothing market is fragmented
      and presents the opportunity to acquire businesses that offer comparable
      products or specialty products that we do not offer. We intend to consider
      acquisitions that afford us economies of scale, enhanced opportunity for
      cross-selling, expanded product offerings and an increased market
      presence. We currently have an option to purchase for $2.75 million the
      plant and machinery of the Indian glove operation, that we are presently
      leasing and at which we are producing gloves. We also acquired Mifflin
      Valley, Inc., a manufacturer of high visibility protective clothing in
      August 2005.

o     Introduction of New Products. We continue our history of product
      development and innovation by introducing new proprietary products across
      all our product lines. Our innovations have included Micromax(R)
      disposable protective clothing line, our Despro(TM) patented glove design,
      Microgard antimicrobial products for food service and our engineered
      composite glove products for high cut and abrasion, our Thermbar glove and
      sleeve products for heat protection, Grapolator(TM) sleeve lines for hand
      and arm cut protection and our Thermbar(TM) Mock Twist glove for hand and
      arm heat protection. We own 14 patents on fabrics and production machinery
      and have 9 additional patents in application. We will continue to dedicate
      resources to research and development.

o     Increase Penetration of the North American Tyvek(R) Market. We intend to
      increase our sales of Tyvek(R)-based garments by introducing Tyvek(R) in
      industries which have generally used woven reusable garments, such as food
      processing and food service industries including kitchens, grocery stores
      and chicken and fishery slaughter operations. We believe that limited
      use/disposable garments are more effective at preventing contamination
      than reusable garments that are exposed to possible contamination while in
      transit or while being laundered. We also plan to expand our sales of
      Tyvek(R)-based products and marketing efforts in Mexico and Canada.
      Industrial safety gear utilized in U.S. manufacturing often gains
      acceptance as standard equipment for new facilities and factories operated
      by U.S. companies in other countries.

                                       8
<PAGE>

                            Our Competitive Strengths

      Our competitive strengths include:

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

o     Long-standing Relationship with DuPont. We believe we are the largest
      independent customer for DuPont's Tyvek(R) and TyChem(R) material for use
      in the industrial protective clothing market. Our trademark agreements
      with DuPont for Tyvek(R), TyChem(R) and Kevlar(R) require certain quality
      standards and the identification of the DuPont brand on the finished
      product. We believe this brand identification with DuPont significantly
      benefits the marketing of our product lines, as over the past 30 years
      Tyvek(R) has become known as the standard for limited use/disposable
      protective clothing. We believe our relationship with DuPont to be
      excellent.

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

o     India. We are currently leasing a 30,155 square foot facility in New
      Delhi, India where we are producing nitrile, latex and neoprene gloves
      which are being sold in Europe and South America presently. We intend to
      enter the North American market in autumn 2006 with a newly designed line
      of gloves. We have an option to purchase this facility after November
      2006, if we are satisfied with its production and quality.

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

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

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

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

                                       9
<PAGE>

                                    Products

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

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

                                    --------

(1) Industrial grade Nitrile, Latex, Neoprene, Buytl and other combinations
thereof will be added to our product line if we exercise our option to acquire
the Indian glove facility we are working with now. These industrial gloves are
used to protect workers from hazardous chemicals and will complement our line of
cut resistant Kevlar and Spectra string knit gloves.

                                       10
<PAGE>

      Limited Use/Disposable Protective Clothing

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

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

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

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

      We presently utilize one independent domestic sewing contractor and one
international contractor under agreements that are terminable at will by either
party. In fiscal 2006, no independent sewing contractor accounted for more than
5% of our production of limited use/disposable garments. We believe that we can
obtain adequate alternative production capacity should any of our independent
contractors become unavailable.

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

      High-End Chemical Protective Suits

      We manufacture heavy-duty chemical suits made from DuPont TyChem(R) QC,
SL, TK, TyChem F and TyChem(R) BR fabrics. These suits are worn by individuals
on hazardous material teams to provide protection from powerful, highly
concentrated and hazardous or potentially lethal chemical and biological toxins,
such as toxic wastes at Super Fund sites, toxic chemical spills or biological
discharges, chemical or biological warfare weapons (such as anthrax, ricin, or
saran gas), and chemicals and petro-chemicals present during the cleaning of
refineries and nuclear facilities. Our line of chemical suits range in cost from
$24 per coverall to $1192. The chemical suits can be used in conjunction with a
fire protective shell that we manufacture to protect the user from both chemical
and flash fire hazards. We have also introduced two garments approved by the
National Fire Protection Agency (NFPA) for varying levels of protection that are
manufactured from DuPont materials:

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

      We manufacture chemical protective clothing at our facilities in Decatur,
Alabama, Mexico and China. Using fabrics such as TyChem(R) SL, TyChem(R) TK,
TyChem F, and TyChem(R) BR, we design, cut, glue and/or sew the

                                       11
<PAGE>

materials to meet customer purchase orders.

      The federal government, through the Fire Act of 2002, appropriated
approximately $750 million in 2003 to fire departments in the United States and
its territories to fund the purchase of, among other things, personal protective
equipment, including our fire fighting and heat protective apparel and high-end
chemical protective suits. An additional $750 million was appropriated for 2004,
$650 million for 2005 and $648 million for 2006. The Bio Terrorism Preparedness
and Response Act of 2002 included appropriations of $3.643 billion for
Bioterrorism Preparedness and $1.641 billion for Bioterrorism Hospital
Preparedness between 2002 and 2005. Hospital Preparedness is where we expect to
see most of our garment sales. The 2006 appropriations bill provides $550
million for Hospital Preparedness.

      Fire Fighting and Heat Protective Apparel

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

o     Kiln entry suit - to protect kiln maintenance workers from extreme heat.

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

o     Approach suits - to protect personnel engaged in maintenance, repair and
      operational tasks where temperatures do not exceed 200(degree)F ambient,
      with a radiant heat exposure up to 2,000(degree)F.

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

      Our fire suits range in price from $480 for standard fire department turn
out gear to $2,000 for a fire entry suit. Approximately 70% of our heat
protective clothing is currently manufactured at our facility in St. Joseph,
Missouri with the remainder being made in our China facilities. Our Fyrepel(TM)
brand of fire fighting apparel continues to benefit from ongoing research and
development investment, as we seek to address the ergonomic needs of stressful
occupations. Additionally, we have introduced a new line of turnout gear
manufactured in China in order to compliment our US line.

      Gloves and Arm Guards

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

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

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

      Reusable Woven Garments

      We manufacture and market a line of reusable and washable woven garments
that complement our fire fighting

                                       12
<PAGE>

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

o     Electrostatic dissipative apparel - used primarily in the automotive
      industry.

o     Clean room apparel - used in semiconductor manufacturing and
      pharmaceutical manufacturing to protect against human contamination.

o     Flame resistant Nomex(R)/FR Cotton coveralls/pants/jackets - used in
      chemical and petroleum plants and for wild land firefighting.

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

      Our reusable woven garments range in price from $10 to $100 per garment.
We manufacture and sell woven cloth garments at our facilities in China and St.
Joseph, Missouri. We are continuing to relocate highly repetitive sewing
processes for our high volume, standard product lines such as woven protective
coveralls and high visibility vests and shirts to our facilities in China where
lower fabric and labor costs allow increased profit margins. We expect the
relocation process to be substantially complete by the fourth quarter of fiscal
2007.

      High Visibility Clothing

      In August 2005, we acquired the assets of Mifflin Valley, Inc. of
Shillington, PA. Mifflin is a manufacturer of protective clothing specializing
in safety and visibility, largely for the Emergency Services market, but also
for the entire public safety and traffic control market. Mifflin's high
visibility products include Flame Retardant garments for the Fire Industry,
Nomex clothing for utilities, and high visibility Reflective Outerwear for
Departments of Transportation. Mifflin products are our strategic fit for our
Woven and Fire Line of garments and we expect higher than normal sales growth
out of this subsidiary as our existing sales force starts promoting this new
line.

                                 Quality Control

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

                               Marketing and Sales

      We employ an in-house sales force of 17 people, 3 regional sales managers
and utilize 42 independent sales representatives. These employees and
representatives call on over 800 safety and mill supply distributors nationwide
in order to promote and provide product information for and sell our products.
Distributors buy our products for resale and typically maintain inventory at the
local level in order to assure quick response times and the ability to service
their customers properly. Our sales employees and independent representatives
have consistent communication with end users and decision makers at the
distribution level, thereby allowing us valuable feedback on market perception
of our products, as well as information about new developments in our industry.
During fiscal 2006, one single distributor accounted for 5% of our net sales. No
other single distributor accounted for more than 5% of our net sales.

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

                                       13
<PAGE>

                            Research and Development

      We continue to evaluate and engineer new or innovative products. In the
past three years we have introduced the Micromax(R) line of disposable
protective clothing; a newly configured line of fire retardant work coveralls
and fire turn-out gear; a SARS protective medical gown for Chinese hospital
personnel; the Despro(TM), Grapolator(TM) and Microgard-anti microbial cut
protective glove and sleeve lines for food service; and our patented
Thermbar(TM) Mock Twist that provides heat protection for temperatures up to
600(degree)F. We own 14 patents on various fabrics, patterns and production
machinery. We plan to continue investing in research and development to improve
protective apparel fabrics and the manufacturing equipment used to make apparel.
Specifically, we plan to continue to develop new specially knit and coated
gloves, woven gowns for industrial and medical uses, fire retardant cotton
fabrics and protective non-woven fabrics. During fiscal 2004, 2005 and 2006, we
spent approximately $82,000, $89,000, and $90,000 respectively, on research and
development.

                             Suppliers and Materials

      Our largest supplier is DuPont, from whom we purchase Tyvek(R) under North
American trademark licensing agreements and Kevlar(R) under international
trademark licensing agreements. Commencing in 1995, anticipating the expiration
of certain patents on its proprietary materials, DuPont offered certain
customers of these materials the opportunity to enter into two year trademark
licensing agreements. We entered into such agreements and have renewed them
continually since. In fiscal 2006, we purchased approximately 74.1% of the
dollar value of our materials from DuPont, and Tyvek(R) constituted
approximately 64.4% of our cost of goods sold and 69.1% of the dollar value of
our raw material purchases. We believe our relationship with DuPont to be
excellent and our Tyvek/Tychem trade mark licenses with DuPont have been
extended until January 31, 2008.

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

      We have not experienced difficulty in obtaining materials, including
cotton, polyester and nylon, used in the production of reusable non-wovens and
commodity gloves. We obtain Spectra(R) yarn used in our super cut-resistant
Dextra Guard gloves from Honeywell, and we believe Honeywell will be able to
meet our needs for this material in the future. We obtain Kevlar(R), used in the
production of our specialty safety gloves, from independent mills that purchase
the fiber from DuPont. Our use of Kevlar(R) is subject to an international
trademark licensing agreement with DuPont.

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

                                   Competition

      Our business is highly competitive due to large competitors who have
monopolistic positions in the fabrics that are standards in the industry. We
believe that the barriers to entry in the reusable garments and glove markets
are relatively low. We face competition in some of our other product markets
from large established companies that have greater financial, research and
development, sales and technical resources. Where larger competitors, such as
DuPont and Kimberly Clark, offer products that are directly competitive with our
products, particularly as part of an established line of products, there can be
no assurance that we can successfully compete for sales and customers. Larger
competitors also may be able to benefit from economies of scale and
technological innovation and may introduce new products that compete with our
products.

                                   Seasonality

      Our operations have historically been seasonal, with higher sales
generally occurring in February, March, April and May when scheduled maintenance
on nuclear, coal, oil and gas fired utilities, chemical, petrochemical and
smelting facilities, and other heavy industrial manufacturing plants occurs,
primarily due to moderate spring temperatures. Sales decline during the warmer
summer and vacation months and generally increase from Labor Day

                                       14
<PAGE>

through February with slight declines during holidays. As a result of this
seasonality in our sales, we have historically experienced a corresponding
seasonality in our working capital, specifically inventories, with peak
inventories occurring between September and March coinciding with lead times
required to accommodate the spring maintenance schedules. We believe that by
sustaining higher levels of inventory, we gain a competitive advantage in the
marketplace. Certain of our large customers seek sole sourcing to avoid sourcing
their requirements from multiple vendors whose prices, delivery times and
quality standards differ.

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

                             Patents and Trademarks

      We own 14 patents and have 9 patents in the application and approval
process with the U.S. Patent and Trademark Office. We own 11 Trademarks and have
9 Trademarks in the application and approval process. Additionally, a Patent
Corporation Treaty application was filed for our Unilayer Glove Fabrics which
involves technology using a robotic knitter that allows us to knit a glove using
stronger or weaker yarns in different parts of the glove, as necessary,
depending on the expected wear. Intellectual property rights that apply to our
various products include patents, trade secrets, trademarks and to a lesser
extent copyrights. We maintain an active program to protect our technology by
ensuring respect for our intellectual property rights. We presently have no
contracts with these unions

                                    Employees

      As of March 31, 2006, we had approximately 1,634 full time employees,
1,348, or 82.50%, of whom were employed in our international facilities and 286,
or 17.50%, of whom were employed in our domestic facilities. An aggregate of 582
of our employees, representing a majority of our employees in our Mexico
facility and in each of our China facilities, are members of unions. We are not
currently a party to any collective bargaining agreements. We believe our
employee relations to be excellent. We presently have no contracts with these
unions.

                              Environmental Matters

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

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

                              Available Information

     We make available free of charge through our Internet website,
www.lakeland.com, our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange
Commission.

ITEM 1A.  RISK FACTORS
- ----------------------
                                  RISK FACTORS

      You should carefully consider the following risks before investing in our
common stock. These are not the only risks that we may face. If any of the
events referred to below actually occurs, our business, financial condition,
liquidity and results of operations could suffer. In that case, the trading
price of our common stock could decline

                                       15
<PAGE>

and you may lose all or part of your investment. You should also refer to the
other information in this Form 10-K and Annual Report and in the documents we
incorporate by reference into this Form 10-K and Annual Report, including our
consolidated financial statements and the related notes.


                          Risk Related to Our Business

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

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

      In fiscal 2006, we purchased approximately 74.01% of the dollar value of
our raw materials from DuPont, and Tyvek(R) constituted approximately 69.1% of
our cost of goods sold. For periods in 1985 and 1989, DuPont placed all
purchasers of Tyvek(R) on "allocation." "Allocation" is a circumstance in which
demand outstrips supply and fabrics are sold based upon the amount a buyer
purchased the prior year. This allocation limited our ability to meet demand for
our products. There can be no assurance that an adequate supply of Tyvek(R) or
Tychem(R) will be available in the future. Any shortage could adversely affect
our ability to manufacture our products, and thus reduce our net sales.

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

      o     Interruptions and delays in manufacturing and resulting
            cancellations of orders for our products;
      o     Increases in fabrics or component prices that we may not be able to
            pass on to our customers; and
      o     Our holding more inventory that normal because we cannot finish
            assembling our products until we have all of the components

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

      Because most of our products are manufactured at our facilities located in
China and Mexico, our operations are subject to risk inherent in doing business
internationally. Such risks include the adverse effects on operations from war,
international terrorism, civil disturbances, political instability, governmental
activities and deprivation of contract and property rights. In particular, since
1978, the Chinese government has been reforming its economic and political
systems, and we expect this to continue. Although we believe that these reforms
have had a positive effect on the economic development of China and have
improved our ability to successfully operate our facilities in China, we cannot
assure you that these reforms will continue or that the Chinese government will
not take actions that

                                       16
<PAGE>

impair our operations or assets in China. In addition, periods of international
unrest may impede our ability to manufacture goods in other countries and could
have a material adverse effect on our business and results of operations.

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

      Most of our assembly arrangements with our foreign-based subsidiaries or
third party suppliers require payment to be made in U.S. dollars. These payments
aggregated $9.9 million in fiscal 2006. Any decrease in the value of the U.S.
dollar in relation to foreign currencies could increase the cost of the services
provided to us upon contract expirations or supply renegotiations. There can be
no assurance that we will be able to increase product prices to offset any such
cost increases and any failure to do so could have a material adverse effect on
our business, financial condition and results of operations.

      We are also exposed to foreign currency exchange rate risks as a result of
our sales in foreign countries. Our net sales to customers in Canada and China
were $8.1 million, in fiscal 2006. Our sales in Canada are denominated in
Canadian dollars. If the value of the U.S. dollar increases relative to the
Canadian dollar and we are unable to raise our prices proportionally, then our
profit margins could decrease because of the exchange rate change. Although our
fabric and compenent costs in China are denominated in the Chinese Yuan, this
currency has historically been largely pegged to the U.S. dollar, which has
minimized our foreign currency exchange rate risk in China. Recently, however
the Chinese Yuan has been allowed to float against to the U.S. dollar, and
therefore, we will be exposed to additional foreign currency exchange rate risk.
This risk will also increase as we continue to increase our sales in other
foreign countries. See "Management's Discussion and Analysis of Financial
condition and Results of Operations - Quantitative and Qualitative Disclosures
About Market Risk - Foreign Currency Risk."

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

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

Acquisitions or future expansion could be unsuccessful.

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

      In the future, we may seek to acquire additional selected safety products
lines or safety-related businesses which

                                       17
<PAGE>

will complement our existing products. Our ability to acquire these businesses
is dependent upon many factors, including our management's relationship with the
owners of these businesses, many of which are small and closely held by
individual stockholders. In addition, we will be competing for acquisition and
expansion opportunities with other companies, many of which have greater name
recognition, marketing support and financial resources than us, which may result
in fewer acquisition opportunities for us as well as higher acquisition prices.
There can be no assurance that we will be able to identify, pursue or acquire
any targeted business and, if acquired, there can be no assurance that we will
be able to profitably manage additional businesses or successfully integrate
acquired business into our company without substantial costs, delays and other
operational or financial problems.

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

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

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

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

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

      Our performance is substantially dependent on the continued services and
performance of our senior management and certain other key personnel, including
Christopher J. Ryan, our chief executive officer, president, general counsel and
secretary, and Gary Pokrassa, our chief financial officer, who has 36 years of
financial and accounting experience, and James McCormick our Controller and
treasurer, Greg Willis, our Executive Vice President, and Harvey Pride, Jr., our
vice president in charge of manufacturing, due to their long experience in our
industry. Our executive officers, other than CFO, have an average tenure with us
of 18 years and an average of 21 years of experience in our industry. The loss
of services of any of our executive officers or other key employees could have a
material adverse effect on our business, financial condition and results of
operations. In addition, any future expansion of our business will depend on our
ability to identify, attract, hire, train, retain and motivate other highly
skilled managerial, marketing, customer service and manufacturing personnel and
our inability to do so could have a material adverse effect on our business,
financial condition and results of operations.

                                       18
<PAGE>

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

      Our sales are generally made on the basis of individual purchase orders,
which may later be modified or canceled by the customer, rather than long-term
commitments. We have historically been required to place firm orders for fabrics
and components with our suppliers, prior to receiving an order for our products,
based on our forecasts of customer demands. Our sales process requires us to
make multiple demand forecast assumptions, each of which may introduce error
into our estimates, causing excess inventory to accrue or a lack of
manufacturing capacity when needed. If we overestimate customer demand, we may
allocate resources to manufacturing products that we may not be able to sell
when we expect or at all. As a result, we would have excess inventory, which
would negatively impact our financial results. Conversely, if we underestimate
customer demand or if insufficient manufacturing capacity is available, we would
lose sales opportunities, lose market share and damage our customer
relationships. On occasion, we have been unable to adequately respond to
delivery dates required by our customers because of the lead time needed for us
to obtain required materials or to send fabrics to our assembly facilities in
China and Mexico.

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

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

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

      We derived approximately 9.8% of our net sales from customers located in
foreign countries in fiscal 2006. We intend to increase the amount of foreign
sales we make in the future. The additional risks of foreign sales include: o
Potential adverse fluctuations in foreign currency exchange rates; o Higher
credit risks; o Restrictive trade policies of foreign governments; o Currency
nullification and weak banking institutions; o Changing economic conditions in
local markets; o Political and economic instability in foreign markets; and o
Changes in leadership of foreign governments.

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

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

We currently have one credit facility;

      o     A five year $25 million revolving credit facility, of which we had
            $7.3 million of borrowings outstanding as

                                       19
<PAGE>

            of January 31, 2006; and

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

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

      Our operations require significant amounts of cash, and we may be required
to seek additional capital, whether from sales of equity or by borrowing money,
to fund acquisitions, for the future growth and development of our business or
to fund our operations and inventory, particularly in the event of a market
downturn. Although we have the ability until July 31, 2010 to borrow additional
sums under our $25 million revolving credit facility, this facility contains a
borrowing base provision and financial covenants that may limit the amount we
can borrow thereunder or from other sources. We may not be able to replace or
renew this credit facility upon its expiration on terms that are as favorable to
us or at all. In addition, a number of factors could affect our ability to
access debt or equity financing, including; o Our financial condition, strength
and credit rating; o The financial markets' confidence in our management team
and financial reporting; o General economic conditions and the conditions in the
homeland security sector; and o Capital markets conditions.

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

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

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

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

                                       20
<PAGE>

cover these claims.

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

Environmental laws and regulations may subject us to significant liabilities.

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

The market price of our common stock may fluctuate widely.

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

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

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

      o     Competitive pricing pressures;
      o     Seasonal buying patterns resulting from the cyclical nature of the
            business of some of our customers;
      o     The size and timing of individual sales;
      o     Changes in the mix of products and services sold;
      o     The timing of introductions and enhancements of products by us or
            our competitors;
      o     Market acceptance of new products;
      o     Technological changes in fabrics or production equipment used to
            make our products;
      o     Changes in the mix of domestic and international sales;

                                       21
<PAGE>

      o     Personnel changes;
      o     Our expansion of international operations; and
      o     General industry and economic conditions.

These variations could negatively impact our stock price.

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

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

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

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

      As of April 12, 2006, our directors and executive officers beneficially
owned approximately 19.2% of the outstanding shares of our common stock. As a
result of their ownership of common stock and their positions in our company,
our directors and executive officers are able to exert significant influence on
our company and on matters submitted to a vote by our stockholders. In
particular, as of April 12, 2006, Raymond J. Smith, our chairman of the board,
and Christopher J. Ryan, our chief executive officer, president, general counsel
and secretary and a director, beneficially owned approximately 9.56% and 6.52%
of our common stock, respectively. The ownership interests of our directors and
executive officers, including Messrs. Smith and Ryan, could have the effect of
delaying or preventing a change of control of our company that may be favored by
our stockholders generally.

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

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

ITEM 1B: UNRESOLVED STAFF COMMENTS
- ----------------------------------
None.

                                       22
<PAGE>



ITEM 2. PROPERTIES

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

<TABLE>
<CAPTION>
                                          Estimated
                                            Square
Address                                      Feet           Annual Rent           Lease Expiration       Principal Activity
- --------                                  ---------         -----------           ----------------       ------------------
<S>                                         <C>               <C>                       <C>                <C>
Weifang Lakeland Safety Products            65,000            Owned(1)                   N/A               Manufacturing
Co., Ltd.                                                                                                  Administration
Xiao Shi Village                                                                                           Engineering
AnQui City, Shandong Province
PRC 262100

Qing Dao MayTung                            90,415            Owned(1)                   N/A               Manufacturing
Healthcare Co., Ltd                                                                                        Administration
Yinghai Industrial Park                                                                                    Warehousing
Jiaozhou, Shandong Province
PRC 266318

Meiyang Protective Products Co., Ltd.       9,360              $3,727                  12/31/06            Manufacturing
Xiao Shi Village
AnQui City, Shandong Province
PRC 262100

Woven Products Division                     44,000             $96,000                 7/31/07             Manufacturing
2401 SW Parkway                                                                                            Administration
St. Joseph, MO 64503                                                                                       Warehousing

Lakeland de Mexico S.A. de C.V.             14,057             $59,400                 7/31/07             Manufacturing
(Luis Gomez Guzman -  former                                                                               Administration
employee)                                     and                and                                       Warehousing
Poniente, Mza 8, Lote 11                    12,853             $46,220
Ciudad Industrial, S/No.
Celaya, Guanajuato 38010
Mexico

Lakeland Protective Wear Canada             12,000          Approximately              11/30/07            Sales
5109-B7 Harvestor Road                                  $86,000 (varies with                               Administration
Burlington, ON L7L5Y9                                      exchange rates)                                 Warehousing
Canada

Lakeland Industries, Inc.                   6,250               Owned                    N/A               Administration
Headquarters                                                                                               Studio
701-7 Koehler Avenue                                                                                       Sales
Ronkonkoma, NY 11779

Lakeland Industries, Inc.                   91,788              Owned                    N/A               Manufacturing
202 Pride Lane                                                                                             Administration
Decatur, AL 35603                                                                                          Engineering
                                                                                                           Warehousing
</TABLE>

                                       23
<PAGE>
<TABLE>
<CAPTION>
                                          Estimated
                                            Square
Address                                      Feet           Annual Rent           Lease Expiration       Principal Activity
- --------                                  ---------         -----------           ----------------       ------------------
<S>                                         <C>               <C>                       <C>                <C>
Lakeland Industries, Inc.                   49,500              Owned                    N/A               Warehousing
3428 Valley Ave. (201 1/2 Pride Lane)                                                                      Administration
Decatur, AL 35603

Lakeland Industries, Inc.                   2,400              $18,000                 3/31/09             Sales
(Harvey Pride, Jr. - officer- related                                                                      Administration
party)
201 Pride Lane, SW
Decatur, AL 35603

Lakeland Industries Europe Ltd.             4,940       Approximately $48,600          1/31/08             Warehouse
Wallingfen Park                                              (varies with                                  Sales
236 Main Road                                              exchange rates)
Newport, East Yorkshire
HU15 2RH U United Kingdom

Lakeland Industries                         12,000      $40,200 (Leased from        Month to Month         Warehouse
Route 227 & 73                                         D. Gallen an employee)
Blandon, PA 19510

Mifflin Valley, Inc.                        18,520      $55,560 (Leased from           7/31/10             Manufacturing
31 South Sterley Street                                M. Gallen an employee)                              Warehouse, Sales
Shillington, PA 19607                                                                                      Administration

RFB Lakeland Industries Pvt. Ltd            30,155             $12,000                 11/30/06            Manufacturing
Plots 81, 50 and 24                                                                                        Warehouse
Noida Special Economic Zone
New Delhi, India

Lakeland Industries Inc., Agencia En         904               $12,000                03/01/2008           Warehouse
Chile
Los Algarrobos n(0) 2228                                                                                     Sales
Comuna de Santiago
Codigo Postal 8361401
Santiago, Chile

</TABLE>

- ----------------

(1)   We own the buildings in which we conduct our manufacturing operations and
      lease the land underlying the buildings from the Chinese government. We
      have 42 years and 47 years remaining under the leases with respect to the
      AnQui City and Jiaozhou facilities, respectively.

      Our facilities in Decatur, Alabama; Celaya, Mexico; AnQui, China;
Jiaozhou, China; St. Joseph, Missouri, and Shillington, Pennsylvania contain
equipment used for the design, development and manufacture and sale of our
products. Our operations in Burlington, Canada; Newport, United Kingdom; and
Santiago, Chile are primarily sales and warehousing operations receiving goods
for resale from our manufacturing facilities around the world. We had $1.9
million, $2.2 million and $0 million of long-lived assets, net located in China
and $0.17 million, $0.13 million and $0 million of long-lived assets located in
Mexico as of January 31, 2004, 2005 and 2006.


ITEM 3. LEGAL PROCEEDINGS
- -------------------------

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

                                       24
<PAGE>

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

None.

                                     PART II
                                     -------

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS
- -------------------------------------------------------------------------
MATTERS
- -------

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

                                                       Price Range of
                                                        Common Stock
                                                     -------------------
                                                       High        Low
                                                     --------   --------
Fiscal 2007
First Quarter (through April 12, 2006)               $  20.75   $  18.23

Fiscal 2006
   First Quarter .................................   $  19.50   $  12.27
   Second Quarter ................................      16.15      12.80
   Third Quarter .................................      18.89      15.13
   Fourth Quarter ................................      20.65      17.54

Fiscal 2005
   First Quarter .................................   $  25.05   $  13.13
   Second Quarter ................................      23.63      14.42
   Third Quarter .................................      21.40      14.10
   Fourth Quarter ................................      19.09      14.73

Holders
- -------

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

      On April 12, 2006 the last reported sale price of our common stock on the
Nasdaq National Market was $18.88 per share. As of April 12, 2006, there were
approximately 78 record holders of shares of our common stock.

Dividend Policy
- ---------------

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

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

                                       25
<PAGE>

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA
- ----------------------------------------------

      The following selected consolidated financial data as of and for our
fiscal years 2002, 2003, 2004, 2005 and 2006 have been derived from our audited
consolidated financial statements, which have been audited by Grant Thornton LLP
as of and for the fiscal years ended January 31, 2002 and by
PricewaterhouseCoopers LLP as of and for the fiscal years ended January 31, 2003
and 2004 and by Holtz Rubenstein Reminick LLP for 2005 and 2006. You should read
the information set forth below in conjunction with our "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and related notes included in this Form 10-K.

<TABLE>
<CAPTION>
                                                                           Year Ended January 31,
                                                 -----------------------------------------------------------------------
                                                     2002           2003           2004           2005           2006
<S>                                                   <C>            <C>            <C>            <C>            <C>
                                                               (in thousands, except share and per share data)
Income Statement Data:
Net sales ....................................   $    76,431    $    77,826    $    89,717    $    95,320    $    98,740
Costs of goods sold ..........................        63,294         62,867         71,741         74,924         74,818
                                                 -----------    -----------    -----------    -----------    -----------
         Gross profit ........................        13,137         14,959         17,976         20,396         23,922
                                                 -----------    -----------    -----------    -----------    -----------

Operating expenses:
         Selling and shipping ................         5,414          6,338          7,342          7,871          8,301
         General and administrative ..........         4,134          4,262          4,596          4,871          6,119
         Impairment of goodwill ..............            --             --            249             --             --
                                                 -----------    -----------    -----------    -----------    -----------
         Total operating expenses ............         9,548         10,600         12,187         12,742         14,420
                                                 -----------    -----------    -----------    -----------    -----------
         Operating profit ....................         3,589          4,359          5,789          7,654          9,502
                                                 -----------    -----------    -----------    -----------    -----------

Other income (expense):
         Interest expense ....................          (882)          (643)          (535)          (207)          (167)
         Interest income .....................            18             20             19             18             49
         Other income ........................            91             40             24             98            384
                                                 -----------    -----------    -----------    -----------    -----------

         Total other expense .................          (773)          (583)          (492)           (91)           266
                                                 -----------    -----------    -----------    -----------    -----------
Income before minority interest ..............         2,816          3,776          5,297          7,563          9,768

Minority interest in net income of variable
interest entities ............................            --             --             --            494             --
                                                 -----------    -----------    -----------    -----------    -----------

         Income before income taxes ..........         2,816          3,776          5,297          7,069          9,768

Income tax expenses ..........................           846          1,172          1,659          2,053          3,439
                                                 -----------    -----------    -----------    -----------    -----------

Net Income ...................................   $     1,970    $     2,604    $     3,638    $     5,016    $     6,329
                                                 ===========    ===========    ===========    ===========    ===========
Net income per common share (Basic)(1) .......   $      0.56    $      0.73    $      1.01    $      1.12    $      1.26
                                                 ===========    ===========    ===========    ===========    ===========
Net income per common share (Diluted)(1) .....   $      0.55    $      0.72    $      1.01    $      1.12    $      1.26
                                                 ===========    ===========    ===========    ===========    ===========
Weighted average common shares outstanding(1):

         Basic ...............................     3,545,252      3,587,228      3,595,406      4,471,687      5,017,046
                                                 ===========    ===========    ===========    ===========    ===========
         Diluted .............................     3,572,019      3,595,943      3,603,051      4,476,944      5,021,887
                                                 ===========    ===========    ===========    ===========    ===========

Balance Sheet Data (at period end):
Current assets ...............................   $    39,545    $    38,859    $    43,285    $    55,128    $    63,719
Total assets .................................        42,417         42,823         47,304         60,313         72,464
Current liabilities ..........................        22,778         20,934         21,509          4,152          3,839
Long-term liabilities ........................           912            529            768          1,695          7,829
Stockholders' equity .........................        18,727         21,359         25,027         54,467         60,796

</TABLE>

                                       26
<PAGE>

- -----------

(1)   Adjusted for periods prior to April 30, 2005 to reflect our 10% stock
      dividends to stockholders of record as of July 31, 2002, July 31, 2003,
      and April 30, 2005. Earnings per share have been restated in accordance
      with Statement of Financial Accounting Standards No. 128, "Earnings Per
      Share."

Repurchase of Securities

      We did not repurchase any of our Common Stock or other securities during
our fiscal year ending January 31, 2006.

                                       27
<PAGE>

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

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

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

                                    Overview

      We manufacture and sell a comprehensive line of safety garments and
accessories for the industrial protective clothing market. Our products are sold
by our in-house sales force and independent sales representatives to a network
of over 800 safety and mill supply distributors. These distributors in turn
supply end user industrial customers such as chemical/petrochemical, automobile,
steel, glass, construction, smelting, janitorial, pharmaceutical and high
technology electronics manufacturers, as well as hospitals and laboratories. In
addition, we supply federal, state and local governmental agencies and
departments such as fire and police departments, airport crash rescue units, the
Department of Defense, Central Intelligence Agency, Federal Bureau of
Investigation, and the Centers for Disease Control. Our net sales attributable
to customers outside the United States were $8.0 million, $9.0 million and $9.6
million, in fiscal 2004, fiscal 2005 and fiscal 2006, respectively.

      Our sales of limited use/disposable protective clothing grew approximately
2.4% in the year ended January 31, 2006 compared to the year ended January 31,
2005, and our expectation is to see continued growth. We expect that
distributors will continue to stock more inventory as economic conditions in the
United States continue to improve. We also expect our net sales to increase as
we introduce our Tyvek(R)-based products into new industries in which the use of
Tyvek(R) is not widespread. In addition, our net sales are driven in part by
government funding and health-related events. Our net sales attributable to
chemical suits decreased 27.0% in the year ended January 31, 2006 compared to
the year ended January 31, 2005. These sales decreases were due primarily to a
lull in government spending utilizing Fire Act monies and delays by state and
local governmental purchasers in spending their Bio-Terrorism monies. These
governmental sales are driven primarily by grants from the federal government
under the Fire Act of 2002 and the Bio Terrorism Preparedness and Response Act
of 2002 as part of the Homeland Security initiatives. During fiscal 2004, as a
result of the SARS virus outbreak in various cities in 2003, we sold
approximately $1.1 million of SARS-related garments in China, Toronto, Hong Kong
and Taiwan. The Centers for Disease Control has recommended protective garments
be used to protect healthcare workers in the fight against the spread of the
SARS virus and the Avian Flu. In the event of future outbreaks of SARS or other
similar contagious viruses, such as Avian Flu in 2005, we have positioned
ourselves with increased production capacity.

      We have operated manufacturing facilities in Mexico since 1995 and in
China since 1996. Beginning in 1995, we moved the labor intensive sewing
operation for our limited use/disposable protective clothing lines to these
facilities. Our facilities and capabilities in China and Mexico allow access to
a less expensive labor pool than is available in the United States and permit us
to purchase certain raw materials at a lower cost than they are available
domestically. As we have increasingly moved production of our products to our
facilities in Mexico and China, we have seen improvements in the profit margins
for these products. We are in the middle of the process of moving production of
our reusable woven garments and gloves to these facilities and expect to
complete this process by the fourth quarter of fiscal 2007. As a result, we
expect to see profit margin improvements for these product lines as well.

Critical Accounting Policies and Estimates

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

      We believe the following critical accounting policies affect our more
significant judgments and estimates used in

                                       28
<PAGE>

the preparation of our consolidated financial statements.


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

      Inventories. Inventories include freight-in, materials, labor and overhead
costs and are stated at the lower of cost (on a first-in, first-out basis) or
market. Provision is made for slow-moving, obsolete or unusable inventory.

      Allowance for Doubtful Accounts. We establish an allowance for doubtful
accounts to provide for accounts receivable that may not be collectible. In
establishing the allowance for doubtful accounts, we analyze the collectibility
of individual large or past due accounts customer-by-customer. We establish
reserves for accounts that we determine to be doubtful of collection.

      Income Taxes and Valuation Reserves. We are required to estimate our
income taxes in each of the jurisdictions in which we operate as part of
preparing our consolidated financial statements. This involves estimating the
actual current tax in addition to assessing temporary differences resulting from
differing treatments for tax and financial accounting purposes. These
differences, together with net operating loss carry forwards and tax credits,
are recorded as deferred tax assets or liabilities on our balance sheet. A
judgment must then be made of the likelihood that any deferred tax assets will
be realized from future taxable income. A valuation allowance may be required to
reduce deferred tax assets to the amount that is more likely than not to be
realized. In the event we determine that we may not be able to realize all or
part of our deferred tax asset in the future, or that new estimates indicate
that a previously recorded valuation allowance is no longer required, an
adjustment to the deferred tax asset is charged or credited to net income in the
period of such determination.

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

      In fiscal 2004, as a result of our decision to move a portion of our
reusable woven garment assembly from the United States to China, we reviewed
this portion of our business for impairment. An impairment was calculated based
on estimating the fair value, utilizing a discounted cash flow analysis,
resulting in an impairment charge of $0.2 million. We had no remaining goodwill
recorded as of January 31, 2004. In August 2005 we purchased Mifflin Valley, a
manufacturing facility in Pennsylvania. This purchase resulted in the recording
of $871,297 in Goodwill as of January 31, 2006.

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

                                       29
<PAGE>

Results of Operations

      The following table set forth our historical results of operations for the
years ended January 31, 2004, 2005 and 2006 as a percentage of our net sales.

<TABLE>
<CAPTION>
                                                                  Year Ended January 31,
                                                                --------------------------
                                                                 2004      2005      2006
                                                                ------    ------    ------
<S>                                                              <C>       <C>       <C>
Net sales ...................................................    100.0%    100.0%    100.0%
Cost of goods sold ..........................................     80.0%     78.6%     75.8%
                                                                ------    ------    ------
    Gross profit ............................................     20.0%     21.4%     24.2%

Operating expenses ..........................................     13.6%     13.4%     14.6%
    Operating profit ........................................      6.4%      8.0%      9.6%

Interest expense, net .......................................      0.5%      0.2%      0.2%
Minority interest in net income of variable interest entities      -0-    (0.5) %      -0-
Income tax expense ..........................................      1.8%      2.2%      3.5%
                                                                ------    ------    ------
    Net income ..............................................      4.1%      5.3%      6.4%
</TABLE>

            Significant Balance Sheet Fluctuation January 31, 2006 as
                          compared to January 31, 2005

Balance Sheet Accounts. The decrease in cash, cash equivalents and marketable
securities and the increase in borrowings under the revolving credit agreement
is principally due to the increase in inventories as we build our finished goods
inventory for our seasonally strong fourth and first quarters for fiscal 2006
and 2007. We also built raw material reserves due to an anticipated increase in
the cost of these raw materials. Accounts receivable increased due to increased
January sales. Plant property and equipment increased as a result of purchasing
$3.0 million of facilities in Alabama in April and May 2005 that had been
subject to FIN 46R, in which we recorded $1.1 million of buildings in our
consolidation of variable interest entities in the previous fiscal year. A
corporate headquarters was also purchased in New York for $649,000 in May 2005.

     Year Ended January 31, 2006 Compared to the Year Ended January 31, 2005

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

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

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

      o     Salaries of $0.64 million

                                       30
<PAGE>

      o     Freight of $0.06 million

      o     Sales Commissions of $(.42) million

      o     Pension Expense $(.12) million

      o     Sales related expenses of $.28 million

      o     Payroll Taxes of $0.09 million

      o     Currency Fluctuations of $0.12 million

      o     Professional Fees of $0.20 million

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

      o     Other $0.23 million

      o     the absence in the current year of a minority interest
            reclassification in the prior year of $0.5 million, leaving a net
            increase of $1.7 million.

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

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

      Minority Interest. Minority interest in net income of variable interest
entities decreased by $.5 million for the year ended January 31, 2006 as a
result of our adoption on Financial Interpretation No. 46R (FIN 46R),
"Consolidation of Variable Interest Entities," effective February 1, 2004 and
then our purchasing such properties in fiscal year 2006. Subsequent to our
adoption of FIN 46R, we determined that certain entities from which we lease
real property and which are partially owned by related parties are variable
interest entities governed by FIN 46R. As a result, these entities were
consolidated in our statement of income for the year ended January 31, 2005.
These facilities were purchased in April and May 2005 thereby negating the
recording of variable interest entities in fiscal 2006.

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

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

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

     Year ended January 31, 2005 Compared to the Year Ended January 31, 2004

      Net Sales. Net sales increased $5.6 million, or 6.2%, to $95.3 million for
the January 31, 2005 year ended from $89.7 million for the year ending January
31, 2004. The increase was due primarily to an increase in the sales of our
chemical suits and also an increase in our core non-woven disposable products
line. Increased sales were also driven

                                       31
<PAGE>

by an improving U.S. economy which increased demand for our products,
particularly in the industrial non-woven disposable markets we serve, and
increased demand for our chemical protective suits and fire turnout gear for
Homeland Security purposes.

      Gross Profit. Gross Profit increased $2.4 million, or 13.5%, to $20.4
million for the year ended January 31, 2005 from $18 million for the year ended
January 31, 2004. Gross profit as a percent of net sales increased to 21.4% for
the year ended January 31, 2005 from 20% for the year ended January 31, 2004,
primarily because of cost reductions achieved by shifting production of
additional Tyvek(R)-based products and chemical suits to China and Mexico and
changes in the mix resulting from more sales of the higher margin chemical
suits. We have increasingly shifted and will continue to shift production to
these lower-cost facilities.

      Operating Expenses. Operating expenses increased $0.55 million, or 4.5% to
$12.7 million for the year ended January 31, 2005 from $12.2 million for the
year ended January 31, 2004. As a percent of net sales, operating expenses
decreased to 13.4% for the year ended January, 2005 from 13.6% for the year
ended January 31, 2004. The $0.55 million increase in operating expenses in the
year ended January 31, 2005 compared to the year ended January 31, 2004 was
principally due to an increase in:

      o     Salaries of $0.35 million

      o     Freight of $0.3 million o Sales Commissions of $0.16 million

      o     Sales related expenses of $0.1 million

      o     Insurance expense of $(.14) million

      o     Currency Fluctuations of $0.06 million

      o     Licenses and Fees of $0.08 million o Advertising Expenses $(0.1)
            million

      o     Consulting fees of $0.19 million (pertaining to Sarbanes-Oxley
            compliance)

      o     Other $.05 million which above increases of $1.05 million were
            offset by:

      o     a minority interest reclassification of $0.5 million, leaving a net
            increase of $0.55 million.

      Operating Profit. Operating profit increased by $1.9 million, or 32.2% to
$7.7 million, from $5.8 million for the prior year. Operating income as a
percent of net sales increased to 8.0% for the year ended January 31, 2005 from
6.5% for the year ending January 31, 2004 primarily due to increased margins as
discussed above.

      Interest Expense. Interest expense decreased by $.3 million for the year
ended January 31, 2005 compared to the year ended January 31, 2004 because we
paid off our credit facility in full on June 18, 2004, from the proceeds of our
Secondary Stock Offering.

      Minority Interest. Minority interest in net income of variable interest
entities increased to $.5 million for the year ended January 31, 2005 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 partially 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 year ended January 31,
2005.

      Income Tax Expense. Income tax expenses consist of federal, state and
foreign income taxes. Income tax expense increased $.4 million, or 23.7%, to
$2.1 million for the year ended January 31, 2005 from $1.7 million for the year

                                       32
<PAGE>

ended January 31, 2004. Our effective tax rate was 29.0% and 31.3% for the year
ended January 31, 2005 and 2004, respectively. Our effective tax rate varied
from the federal statutory rate of 34% due primarily to lower foreign tax rates,
inclusion of minority interest in net income of variable interest entities and
utilization of a tax carry forward.

      Net Income. Net income increased $1.4 million or 37.9%, to $5.0 million
for the year ended January 31, 2005 from $3.6 million for the year ended January
31, 2004. The increase in net income was the result of an increase in net sales
primarily in the chemical suits 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 sales.

                         Liquidity and Capital Resources

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

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

      Cash Flows

      As of January 31, 2006 we had cash and cash equivalents of $1.5 million
and working capital of $59.9 million, a decrease and increase of $(7.7) million
and $8.9 million, respectively, from January 31, 2005. Our primary sources of
funds for conducting our business activities have been from cash flow provided
by operations and borrowings under our credit facilities described below. We
require liquidity and working capital primarily to fund increases in inventories
and accounts receivable associated with our net sales and, to a lesser extent,
for capital expenditures.

      Net cash used in operating activities of $8.4 million for the year ended
January 31, 2006 was due primarily to net income from operations of $6.3
million, offset by an increase in inventories of $13.7 million, and an increase
in accounts receivable of $.7 million. Net cash provided by operating activities
of $0.5 million for the year ended January 31, 2005 was due primarily to net
income from operations of $5.0 million offset in part by a decrease in accounts
payable of $0.4 million, an increase in inventories of $4.7 million and an
increase in accounts receivable of $0.5 million and an increase in minority
interest liability of $0.5 million.

      Net cash used in investing activities of $6.5 million and $0.8 million in
the years ended January 31, 2006 and 2005, respectively, was due to purchases of
property and equipment and the acquisition of Mifflin Valley. Net cash provided
by financing activities in the years ended January 31, 2006 and 2005 was
primarily attributable to borrowings under our credit facilities and to the
secondary offering in fiscal 2005.

      Credit Facilities

      We currently have one credit facility:

o     a Five year, $25 million revolving credit facility, of which we had
      borrowings outstanding as of January 31, 2006 amounting to $7.3 million

      Our $25 million revolving credit facility permits us to borrow up to the
lower of $25 million and a borrowing base determined by reference to a
percentage of our eligible accounts receivable and inventory. Our $25 million
revolving credit facility expires on July 31, 2010. Borrowings under this
revolving credit facility bear interest at the London Interbank Offering Rate
(LIBOR) plus 60 basis points and were 5.17% at January 31, 2006. As of January
31, 2006, we had $18 million of borrowing availability under this revolving
credit facility.

      Our credit facility requires that we comply with specified financial
covenants relating to interest coverage, debt coverage, minimum consolidated net
worth, and earnings before interest, taxes, depreciation and amortization. These
restrictive covenants could affect our financial and operational flexibility or
impede our ability to operate or expand our business. Default under our credit
facilities would allow the lenders to declare all amounts outstanding to be

                                       33
<PAGE>

immediately due and payable. Our lenders have a security interest in
substantially all of our assets to secure the debt under our credit facilities.
As of January 31, 2006, we were in compliance with all covenants contained in
our credit facilities.

      We believe that our current cash position of $1.5 million, our cash flow
from operations along with borrowing availability under our $25 million
revolving credit facility will be sufficient to meet our currently anticipated
operating, capital expenditures and debt service requirements for at least the
next 12 months.

      Capital Expenditures

      Our capital expenditures principally relate to purchases of manufacturing
equipment, computer equipment, leasehold improvement and automobiles, as well as
payments related to the construction of our facilities in China. Our facilities
in China are not encumbered by commercial bank mortgages and thus Chinese
commercial mortgage loans may be available with respect to these real estate
assets if we need additional liquidity. We expect our capital expenditures to be
approximately $1.4 million to purchase our capital equipment primarily computer
equipment and apparel manufacturing equipment in fiscal 2007.

                                       34
<PAGE>

                             Contractual Obligations

      We had no off-balance sheet arrangements at January 31, 2006. As shown
below, at January 31, 2006, our contractual cash obligations totaled
approximately $7.7 million, including lease renewals entered into subsequent to
January 31, 2006.

<TABLE>
<CAPTION>
                                                Payments Due by Period
                            ----------------------------------------------------------------
                                         Less than
                                         ---------
                              Total        1 Year     1-3 Years    4-5 Years   After 5 Years
                            ----------   ----------   ----------   ----------  -------------
<S>                         <C>          <C>          <C>          <C>          <C>
                                                   (in thousands)

Operating leases ........   $  476,000   $  373,000   $  592,000   $    3,000   $       --
Revolving credit facility    7,272,000           --           --    7,272,000           --
                            ==========   ==========   ==========   ==========   ==========
Total ...................   $7,748,000   $  373,000   $  592,000   $7,275,000   $       --
</TABLE>

                                   Seasonality

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

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

                   Effects of Recent Accounting Pronouncements

      In December 2004, the FASB issued SFAS No. 123(R), "Accounting for
Stock-Based Compensation" ("SFAS No. 123(R)"). SFAS No. 123(R) establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. This statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123(R) requires that the fair value
of such equity instruments be recognized as an expense in the historical
financial statements as services are performed. Prior to SFAS No. 123(R), only
certain pro forma disclosures of fair value were required. The provisions of
this statement are effective for our first annual reporting period that begins
after June 15, 2005. If the Company had included the cost of employee stock
option compensation in our financial statements it would not have had a material
effect on our net income for the years ended January 31, 2006, 2005, and 2004.


                                       35
<PAGE>

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

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

                              Foreign Currency Risk

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

      In connection with our operations in China, we purchase a significant
amount of products from outside of the United States. However, our purchases in
China are primarily made in Chinese Yuan, the value of which has been largely
pegged to the U.S. dollar for the last decade. However, the Chinese Yuan has
recently been decoupled from the US Dollar and allowed to float by the Chinese
government, and therefore, we will be exposed to additional foreign exchange
rate risk on our Chinese purchases.

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

                               Interest Rate Risk

      We are exposed to interest rate risk with respect to our credit
facilities, which have variable interest rates based upon the London Interbank
Offered Rate. At January 31, 2006, we had $7 million in borrowings outstanding
under this credit facility. If the interest rate applicable to this variable
rate debt rose 1% in the year ended January 31, 2006, our interest expense would
have increased and our income before income taxes would have decreased by less
than $70,000.

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

                   Index to Consolidated Financial Statements
                   ------------------------------------------

Consolidated Financial Statements:
                                                                  Page No.
                                                                  --------
Report of Independent Registered Public Accounting Firm             A-37
Report of Independent Registered Public Accounting Firm             A-38
Consolidated Balance Sheets - January 31, 2006 and 2005             A-39
Consolidated Statements of Income for the years ended               A-40
     January 31, 2006, 2005 and 2004
Consolidated Statement of Stockholders' Equity for the years ended  A-41
     January 31, 2006, 2005 and 2004
Consolidated Statements of Cash Flows for the years ended           A-42
     January 31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements                          A-43 to A-63
Schedule II - Valuation and Qualifying Accounts                     A-64

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

                                       36
<PAGE>


Report of Independent Registered Public Accounting Firm


Board of Directors and Stockholders
Lakeland Industries, Inc. and Subsidiaries
Ronkonkoma, New York

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

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

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

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Lakeland  Industries,  Inc. and Subsidiaries as of January 31, 2006 and 2005 and
the  results  of its  operations  and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.  Also in our opinion,  the related financial statement  schedule,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein. Also
in our opinion,  management's  assessment  that  Lakeland  maintained  effective
internal  control over  financial  reporting  as of January 31, 2006,  is fairly
stated,  in all material  respects,  based on criteria  established  in Internal
Control--Integrated   Framework   issued   by  the   Committee   of   Sponsoring
Organizations of the Treadway  Commission (COSO).  Furthermore,  in our opinion,
Lakeland maintained,  in all material respects,  effective internal control over
financial  reporting as of January 31, 2006,  based on criteria  established  in
Internal  Control--Integrated  Framework  issued by the  Committee of Sponsoring
Organizations of the Treadway Commission (COSO).


/s/ Holtz Rubenstein Reminick LLP


Melville, New York
April 14, 2006

                                       37
<PAGE>


             Report of Independent Registered Public Accounting Firm


To the Board of Directors and Shareholders
Of Lakeland Industries, Inc. and Subsidiaries:

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the results of operations and
the cash flows of Lakeland Industries, Inc. and its subsidiaries for the year
ended January 31, 2004 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule for the year ended January 31, 2004 listed in the
accompanying index presents fairly, in all material respects, the information
set forth therein when read in conjunction with related consolidated financial
information. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audit. We conducted our audit of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.



/s/ PRICEWATERHOUSECOOPERS LLP


Melville, New York
April 2, 2004





                                       38
<PAGE>
<TABLE>
<CAPTION>

                                     Lakeland Industries, Inc.
                                          and Subsidiaries

                                    CONSOLIDATED BALANCE SHEETS
                                    ---------------------------
                                                                                 January 31,
                                                                              2006          2005
                                                                              ----          ----
<S>                                                                           <C>           <C>
                                     Assets
Current assets
Cash and cash equivalents (which includes
 $3,711,320 of marketable securities at January 31, 2005)                 $ 1,532,453   $ 9,185,382
 Accounts receivable, net of allowance for doubtful accounts of
     $323,000 at January 31, 2006 and 2005, respectively                   14,221,281    13,117,374
Inventories, net of reserves of $365,000 and  $396,000 at January
31, 2006 and  2005, respectively                                           45,243,490    30,906,023
 Deferred income taxes                                                        917,684       960,734
 Other current assets                                                       1,804,552       958,491
                                                                          -----------   -----------
           Total current assets                                            63,719,460    55,128,004
Property and equipment, net                                                 7,754,765     5,014,240
Other assets, net                                                             118,330       171,010
Goodwill                                                                      871,297            --
                                                                          -----------   -----------
           Total assets                                                   $72,463,852   $60,313,254
                                                                          ===========   ===========
                  Liabilities and Stockholders' Equity
Current liabilities
     Accounts payable                                                     $ 2,536,756   $ 2,710,251
     Accrued compensation and benefits                                        866,765       842,319
     Other accrued expenses                                                   435,779       599,593
                                                                          -----------   -----------
     Total current liabilities                                              3,839,300     4,152,163
Borrowings under revolving credit facility                                  7,272,000            --
Pension liability                                                             469,534       495,330
Deferred income taxes                                                          86,982        86,229
Minority interest in variable interest entity                                             1,112,861
                                                                          -----------   -----------
                   Total liabilities                                       11,667,816     5,846,583
                                                                          -----------   -----------
Commitments and contingencies
Stockholders' equity
    Preferred stock, $.01 par; 1,500,000 shares
        authorized; none issued
    Common stock, $.01 par; 10,000,000 shares authorized; 5,017,046 and
        4,560,885 shares issued and outstanding
        at January 31, 2006 and 2005, respectively                             50,170        45,609
    Additional paid-in capital                                             42,431,221    36,273,046
    Retained earnings                                                      18,314,645    18,148,016
                                                                          -----------   -----------
    Total  stockholders' equity                                            60,796,036    54,466,671
                                                                          -----------   -----------
           Total liabilities and stockholders' equity                     $72,463,852   $60,313,254
                                                                          ===========   ===========

             The accompanying notes are an integral part of these financial statements.
</TABLE>
                                                39
<PAGE>
<TABLE>
<CAPTION>

                              Lakeland Industries, Inc.
                                  and Subsidiaries

                          CONSOLIDATED STATEMENTS OF INCOME
                          ---------------------------------

                                                Fiscal years ended January 31,
                                            2006            2005            2004
                                            ----            ----            ----
<S>                                    <C>             <C>             <C>
Net sales                              $ 98,740,066    $ 95,320,163    $ 89,717,162
Cost of goods sold                       74,817,715      74,924,375      71,740,876
                                       ------------    ------------    ------------
      Gross profit                       23,922,351      20,395,788      17,976,286
                                       ------------    ------------    ------------
Operating expenses
    Selling and shipping                  8,301,216       7,871,423       7,342,017
    General and administrative            6,118,722       4,870,302       4,596,437
    Impairment of goodwill                       --              --         248,834
                                       ------------    ------------    ------------
       Total operating expenses          14,419,938      12,741,725      12,187,288
                                       ------------    ------------    ------------
       Operating profit                   9,502,413       7,654,063       5,788,998
                                       ------------    ------------    ------------
Other income (expense)
   Interest expense                        (166,805)       (207,912)       (534,540)
   Interest income                           48,545          18,378          18,976
   Other income - net                       383,909          98,370          24,064
                                       ------------    ------------    ------------
      Total other income (expense)          265,649         (91,164)       (491,500)
                                       ------------    ------------    ------------
Income before minority interest           9,768,062       7,562,899       5,297,498
Minority interest in net income of
          variable interest entities             --         493,558              --
                                       ------------    ------------    ------------


      Income before income taxes          9,768,062       7,069,341       5,297,498

Income tax expense                        3,438,698       2,053,095       1,659,064
                                       ------------    ------------    ------------

      Net income                       $  6,329,364    $  5,016,246    $  3,638,434
                                       ============    ============    ============
Net income per common share
    Basic                              $       1.26    $       1.12    $       1.01
                                       ============    ============    ============

    Diluted                            $       1.26    $       1.12    $       1.01
                                       ============    ============    ============

Weighted average common shares
outstanding
    Basic                                 5,017,046       4,471,687       3,595,406
                                       ============    ============    ============

    Diluted                               5,021,887       4,476,944       3,603,051
                                       ============    ============    ============
</TABLE>

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

                                         40
<PAGE>
<TABLE>
<CAPTION>
                                         Lakeland Industries, Inc.
                                              and Subsidiaries

                               CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                               ----------------------------------------------

                             Fiscal years ended January 31, 2006, 2005 and 2004



                                         Common stock             Additional
                                  ---------------------------      paid-in       Retained
                                     Shares         Amount         Capital       Earnings          Total
                                     ------         ------         -------       --------          -----
<S>                                 <C>         <C>            <C>            <C>             <C>
Balance, January 31, 2003            2,969,107   $     29,691   $  8,762,673   $ 12,567,060    $ 21,359,424
Net income                                                                        3,638,434       3,638,434
Exercise of stock options               10,400            104         29,008                         29,112
10% stock dividend                     294,418          2,944      3,070,780     (3,073,724)             --
                                  ------------   ------------   ------------   ------------    ------------


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
Net income                                                                        5,016,246       5,016,246
Proceeds from secondary
stock offering, net of expenses      1,280,750         12,808     24,356,215             --      24,369,023
                                  ------------   ------------   ------------   ------------    ------------


Balance, January 31, 2005            4,560,885   $     45,609   $ 36,273,046   $ 18,148,016    $ 54,466,671

Net Income                                                                        6,329,364      6,329,364
10% stock dividend                     456,161          4,561      6,158,175     (6,162,735)
                                  ------------   ------------   ------------   ------------    ------------
Balance, January 31, 2006            5,017,046   $     50,170   $ 42,431,221   $ 18,314,645    $ 60,796,036
                                  ------------   ------------   ------------   ------------    ------------

                 The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                    41
<PAGE>
<TABLE>
<CAPTION>
                                          Lakeland Industries, Inc.
                                              and Subsidiaries

                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    -------------------------------------

                                                                       Fiscal year ended January 31,
                                                                    2006             2005           2004
                                                                    ----             ----           ----
<S>                                                                  <C>             <C>              <C>
Cash flows from operating activities
Net income                                                      $  6,329,364    $  5,016,246    $  3,638,434
Adjustments to reconcile net income to net cash
         (used in) provided by operating activities
       Reserve for inventory obsolescence                            (31,000)        (20,831)         63,000
       Deferred income taxes                                          43,803        (334,795)        446,750
       Depreciation and amortization                                 993,686         884,140         803,234
       Minority interest in variable interest entity                      --         493,558              --
       Impairment of goodwill                                             --              --         248,834
       (Increase) decrease in operating assets:
          Accounts receivable                                       (726,169)       (547,054)     (2,206,132)
          Inventories                                            (13,693,881)     (4,619,385)       (858,763)
          Prepaid income taxes and other
              current assets                                      (1,046,265)        254,613        (663,540)
          Other assets                                               323,427         (73,267)        260,256
       Increase (decrease) in operating liabilities
                                                                                                          --
          Accounts payable                                          (391,737)       (751,102)        447,315
          Accrued expenses and other liabilities                    (225,580)        157,083           3,444
                                                                ------------    ------------    ------------
       Net cash (used in) provided by
          operating activities                                    (8,424,352)        459,206       2,182,832
                                                                ------------    ------------    ------------
Cash flows from investing activities

    Purchase of Mifflin Valley                                    (1,907,680)             --              --
    Purchases of property and equipment                           (4,592,897)       (836,194)     (1,367,707)
                                                                ------------    ------------    ------------
       Net cash used in investing activities                      (6,500,577)       (836,194)     (1,367,707)
                                                                ------------    ------------    ------------
  Cash flows from financing activities
       Net borrowings (payments) under credit agreements           7,272,000     (16,784,781)        126,899
       Distributions to minority interest in variable
        interest entity                                                             (521,575)             --
       Proceeds from exercise of stock options                                        54,432          29,112
       Proceeds from secondary stock offering                                     24,369,023              --
                                                                ------------    ------------    ------------
       Net cash provided by financing
       activities                                                  7,272,000       7,117,099         156,011
                                                                ------------    ------------    ------------
       Net (Decrease) increase in cash and cash equivalents       (7,652,929)      6,740,111         971,136
Cash and cash equivalents at beginning of year                     9,185,382       2,445,271       1,474,135
                                                                ------------    ------------    ------------

Cash and cash equivalents at end of year                        $  1,532,453    $  9,185,382    $  2,445,271
                                                                ============    ============    ============
</TABLE>

See notes for Supplemental Cash Flow information.

The accompanying notes are an integral part of these financial statements

                                                     42
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

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

Business
- --------

      Lakeland  Industries,  Inc. and Subsidiaries  (the "Company"),  a Delaware
corporation,  organized in April 1982,  manufactures  and sells a  comprehensive
line of safety garments and accessories for the industrial  protective  clothing
market. The principal market for the company's products is in the United States.
No customer  accounted  for more than 10% of net sales  during the fiscal  years
ended January 31, 2006, 2005 and 2004.

Principles of Consolidation
- ---------------------------

      The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned  subsidiaries,  Laidlaw, Adams & Peck, Inc. and
Subsidiary  (MeiYang  Protective  Products  Co.  Ltd.,  a Chinese  corporation),
Lakeland Protective Wear, Inc. (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),  Mifflin  Valley,  Inc. (a  Delaware  Corporation),  RFB  Lakeland
Industries  Private,  Ltd (an Indian Corporation) and Lakeland de Mexico S.A. de
C.V.  (a  Mexican  corporation).   All  significant  intercompany  accounts  and
transactions have been eliminated.

      In January 2003, the FASB issued  Interpretation No. 46, "Consolidation of
Variable Interest Entities." This interpretation  provides guidance with respect
to the  consolidation  of certain  entities,  referred to as  variable  interest
entities  ("VIE"),  in which an investor is subject to a majority of the risk of
loss from the VIE's  activities,  or is  entitled  to receive a majority  of the
VIE's residual returns.  This interpretation also provides guidance with respect
to the disclosure of VIEs in which an investor  maintains an interest but is not
required to  consolidate.  The provisions of the  interpretation  were 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  October 1, 2003 to March 15,  2004 for  variable  interest
entities created before February 1, 2003. The Company adopted this pronouncement
as of February 1, 2004.  The two entities  which leased  property to the Company
and are owned by related  parties,  which  were  consolidated  in our  financial
statements,  are River Group Holding Co., L.L.P.  and POMS Holding Co. Ownership
of these  entities is held by directors and officers of Lakeland.  Under FIN 46,
it is likely that  leases  between an entity and its  related  parties  would be
considered a variable  interest even if there is no residual value  guarantee or
purchase  option.  The FASB staff's view is that these elements are implied in a
related-party  lease even though they may not be explicitly  stated in the lease
agreement.

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

      In Fiscal 2006 the Company  purchased  the  property  owned by River Group
Holding Co., L.L.P. and POMS Holding Co.

Revenue Recognition
- -------------------

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

                                       43
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004
1. (continued)
- --------------

                                   Fiscal Years Ended January 31,
                         2006                   2005                  2004
                         ----                   ----                  ----
Domestic       $89,107,000    90.2%  $86,320,000    90.6%   $81,763,000    91.1%
International    9,633,000     9.8%    9,000,000     9.4%     7,954,000     8.9%
               -----------   -----   -----------   -----    -----------   -----
Total          $98,740,000   100.0%  $95,320,000   100.0%   $89,717,000   100.0%
               ===========   =====   ===========   =====    ===========   =====
Inventories
- -----------

      Inventories  include freight-in,  materials,  labor and overhead costs and
are  stated  at the lower of cost (on a  first-in  first-out  basis) or  market.
Provision is made for slow-moving, obsolete or unusable inventory.

Property and Equipment
- ----------------------

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

Goodwill
- --------

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

      In fiscal 2004, as a result of the Company's decision to move a portion of
our reusable woven garment assembly from the United States to China, the Company
reviewed  this  portion of its  business  for  impairment.  The  impairment  was
calculated  based on estimating the fair value  utilizing a discounted cash flow
analysis, resulting in an impairment of $0.2 million in fiscal 2004. The Company
had no remaining goodwill recorded at January 31, 2004. In June 2005 the Company
purchased  Mifflin Valley,  Inc, a Pennsylvania  Manufacturer.  This acquisition
resulted in the recording of $871,297 in Goodwill as of January 31, 2006.

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

      The Company has a  self-insurance  program  for  certain  employee  health
benefits.  The cost of such  benefits is  recognized  as expense based on claims
filed in each  reporting  period  and an  estimate  of claims  incurred  but not
reported during such period.  This estimate is based upon historical  trends and
amounted to $120,000 and $90,000 at January 31, 2006 and 2005, respectively. The
Company  maintains  separate  insurance to cover the excess  liability  over set
single claim amounts and aggregate annual claim amounts.

                                       44
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

1. (continued)
- --------------

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-Based  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 years ended January 31,
2005, 2004 and 2003 to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                               2006          2005          2004
                                               ----          ----          ----
<S>                                        <C>           <C>           <C>
Net income
     As reported                           $ 6,329,364   $ 5,016,246   $ 3,638,434
Less:
Stock -based employee compensation
expense determined under fair value
based method, net of related tax benefit         9,627        91,331        28,344
                                           -----------   -----------   -----------
     Net income, Pro forma                 $ 6,319,737   $ 4,924,915   $ 3,610,090
                                           ===========   ===========   ===========
Basic earnings per common share
     As reported                           $      1.26   $      1.12   $      1.01
     Pro forma                             $      1.26   $      1.10   $      1.00
Diluted earnings per common share
     As reported                           $      1.26   $      1.12   $      1.01
     Pro forma                             $      1.26   $      1.10   $      1.00
</TABLE>

      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
years ended January 31, 2006, 2005 and 2004: expected volatility of 87%, 58% and
57%,   respectively;   risk-free   interest  rate  of  3.6%,   3.6%  and  3.25%,
respectively;  expected  dividend yield of 0.0%; and expected life of six years.
All stock-based  awards were fully vested at January 31, 2005, 2004 and 2003 and
7,000 new option  grants were made during the year ended  January 31,  2004.  No
options were granted in 2006.  During fiscal 2005 1,000 Option Shares granted to
a Director upon  re-election in June 2004 were cancelled upon his resignation in
November  2004. In November 2004 two new  directors  were  appointed and granted
5,000  option  shares  each,  which were not  exercisable  at January 31,  2005.
Earnings  per share have been  adjusted  to reflect the 10% stock  dividends  to
stockholders of record as of April 30, 2005 and July 31, 2003.

Allowance for Doubtful Accounts
- -------------------------------

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

                                       45
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004
1. (continued)
- --------------

Shipping and Handling Costs
- ---------------------------

      For larger orders except in its Fyrepel  product line, the Company absorbs
the cost of shipping and handling.  For those  customers who are billed the cost
of shipping and handling fees, such amounts are included in net sales.  Shipping
and handling costs  associated with outbound freight are included in selling and
shipping  expenses and  aggregated  approximately  $2,411,000,  $2,355,000,  and
$2,394,000  in  the  fiscal  years  ended  January  31,  2006,  2005  and  2004,
respectively.

Research and Development Costs
- ------------------------------

      Research  and  development  costs are expensed as incurred and included in
general  and  administrative   expenses.   Research  and  development   expenses
aggregated approximately $90,000, $89,000, and $82,000 in the fiscal years ended
January 31, 2006, 2005 and 2004, respectively,  and were paid to contractors for
development of new raw materials.

Income Taxes
- ------------

      The  Company is  required  to  estimate  its  income  taxes in each of the
jurisdictions  in  which  it  operates  as part of  preparing  the  consolidated
financial  statements.  This  involves  estimating  the  actual  current  tax in
addition to assessing temporary  differences resulting from differing treatments
for tax and financial accounting purposes. These differences,  together with net
operating  loss carry  forwards  and tax  credits,  are recorded as deferred tax
assets or  liabilities  on the Company's  balance sheet. A judgment must then be
made of the  likelihood  that any  deferred  tax assets will be  recovered  from
future taxable income. A valuation  allowance may be required to reduce deferred
tax assets to the amount  that is more likely  than not to be  realized.  In the
event the Company  determines  that it may not be able to realize all or part of
our  deferred tax asset in the future,  or that new  estimates  indicate  that a
previously recorded valuation allowance is no longer required,  an adjustment to
the  deferred  tax asset is charged or  credited to income in the period of such
determination.

Earnings Per Share
- ------------------

      Basic  earnings  per  share are based on the  weighted  average  number of
common shares  outstanding  without  consideration of common stock  equivalents.
Diluted  earnings per share are based on the weighted  average  number of common
and common stock  equivalents.  The common stock equivalents for the years ended
January 31,  2006,  2005 and 2004 were  4,841,  5,257,  and 7,645  respectively,
representing  the dilutive  effect of stock  options.  The diluted  earnings per
share calculation takes into account the shares that may be issued upon exercise
of stock  options,  reduced  by shares  that may be  repurchased  with the funds
received  from the  exercise,  based on the average price during the fiscal year
(as adjusted for the 10% stock  dividend to holders of record April 30, 2005 and
July 31, 2003).

Advertising Costs
- -----------------

      Advertising  costs are expensed as incurred.  Advertising  costs  (income)
amounted to $(43, 104), $(15,326), and $86,603 in the fiscal years ended January
31,  2006,  2005 and  2004,  respectively,  net of co-op  advertising  allowance
received  from  DuPont.  These  reimbursements  include  some  costs  which  are
classified in categories other than advertising such as payroll.

                                       46
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

1. (continued)
- --------------
Statement of Cash Flows
- -----------------------

      The Company  considers  highly liquid  temporary cash  investments with an
original  maturity  of  three  months  or  less  to be  cash  equivalents.  Cash
equivalents  consist  of  money  market  funds.  The  market  value  of the cash
equivalents  approximates  cost.  Foreign  denominated cash and cash equivalents
were approximately $1,194,000,  $2,707, 000, and $2,012,000 at January 31, 2006,
2005 and 2004, respectively.

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

                                   2006         2005          2004
                                   ----         ----          ----
            Interest paid       $  166,805   $  207,912   $  534,540
            Income taxes paid   $3,402,723   $2,103,682   $1,303,513

Concentration of Credit Risk
- ----------------------------

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

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

Foreign Operations and Foreign Currency Translation
- ---------------------------------------------------

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

      The monetary  assets and liabilities of the Company's  foreign  operations
are translated into U.S. dollars at current exchange rates,  while  non-monetary
items are  translated at historical  rates.  Revenues and expenses are generally
translated at average exchange rates for the year.  Transaction gains and losses
that arise from exchange rate  fluctuations  on  transactions  denominated  in a
currency  other than the  functional  currency  are  included  in the results of
operations  as incurred  and  aggregated  approximately  $66,000,  $58,000,  and
$29,000  for  the  fiscal  years  ended   January  31,  2006,   2005  and  2004,
respectively.

Use of Estimates
- ----------------

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

                                       47
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

1. (continued)
- --------------

Fair value of Financial Instruments
- -----------------------------------

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

Effects of Recent Accounting Pronouncements
- -------------------------------------------

In December 2004, the FASB issued SFAS No. 123(R), "Accounting for Stock-Based
Compensation" ("SFAS No. 123(R)"). SFAS No. 123(R) establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. This statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123(R) requires that the fair value of such equity
instruments be recognized as an expense in the historical financial statements
as services are performed. Prior to SFAS No. 123(R), only certain pro forma
disclosures of fair value were required. The provisions of this statement are
effective for the first annual reporting period that begins after June 15, 2005.
On March 29, 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB No.
107"), which provides the Staff's views regarding interactions between SFAS No.
123R and certain SEC rules and regulations and provides interpretations of the
valuation of share-based payments for public companies. If the Company had
included the cost of employee stock option compensation in its financial
statements it would not have had a material effect on our net income for the
years ended January 31, 2006, 2005, and 2004.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3"
("SFAS No. 154"). SFAS No. 154 requires the retrospective application to prior
periods' financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or cumulative
effect of the accounting change. SFAS No. 154 also requires that a change in
depreciation, amortization, or depletion method for long-lived non-financial
assets be accounted for as a change in accounting estimate affected by a change
in accounting principle. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.

Comprehensive income (loss)
- ---------------------------

      Comprehensive income (loss) refers to revenue,  expenses, gains and losses
that  under   generally   accepted   accounting   principles   are  included  in
comprehensive  income  but are  excluded  from net income as these  amounts  are
recorded directly as an adjustment to stockholders' equity. At January 31, 2006,
2005 and 2004, there were no such  adjustments  required or such amounts were de
minimus.

                                       48
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

2 -INVENTORIES
- --------------
      Inventories consist of the following at January 31:

                           2006          2005
                           ----          ----
Raw materials          $18,656,894   $12,231,264
Work-in-process          1,996,027     2,614,710
Finished goods          24,590,569    16,060,049
                       -----------   -----------
                       $45,243,490   $30,906,023
                       -----------   -----------

3 -PROPERTY, PLANT AND EQUIPMENT
- --------------------------------

     Property and equipment consist of the following at January 31:

<TABLE>
<CAPTION>
                                                             Useful life
                                                              in years            2006           2005
                                                              --------            ----           ----
<S>                                                            <C>           <C>            <C>
      Machinery and equipment                                  3 - 10         $ 6,919,530    $ 6,236,736
      Furniture and fixtures                                   3 - 10             294,087        249,971
      Leasehold improvements                                 Lease term           964,587        867,358
      Land and Building  (in China)                              20             2,153,592      1,823,027
      Land and Buildings (minority interest in 2005)             39             3,623,471      1,140,878
                                                                              -----------    -----------
                                                                               13,955,267     10,317,970
      Less accumulated depreciation and amortization                          (6,200,502)    (5,303,730)
                                                                              -----------    -----------
                                                                              $ 7,754,765    $ 5,014,240
                                                                              ===========    ===========
</TABLE>

      Depreciation  expense  incurred in fiscal 2006,  2005 and 2004 amounted to
$993,686,  $884,140, and $803,234  respectively.  Net fixed assets in China were
approximately $2.2 million,  $2.2 million,  $1.9 million as of January 31, 2006,
2005 and 2004,  respectively.  Net fixed  assets  in Mexico  were  approximately
$154,000,   $133,000,and   $168,000  at  January  31,   2006,   2005  and  2004,
respectively.

                                       49
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

4-BUSINESS COMBINATIONS
- -----------------------

      On August 1, 2005, the Company acquired the assets and operations and
assumed certain liabilities of Mifflin Valley, Inc., ("Mifflin") of Shillington,
PA for an initial purchase price of $1.6 million, subject to certain
adjustments. Final payment was made in November 2005 following the audit of a
closing date balance sheet. The final price amounted to $1.9 million and
included adjustments for the payoff of a revolving loan of $.2 million and
adjustments for inventory, fixed asset values and allowances for doubtful
accounts. Mifflin did approximately $2.6 million of sales in 2004, and $1.5
million for the six months ended June 30, 2005. Mifflin is a manufacturer of
protective clothing specializing in safety and visibility, largely for the
Emergency Services market, and also for the entire public safety and traffic
control market. Mifflin specializes in customized garments to suit customers'
needs, coupled with quality, service, price and delivery. Mifflin's products
include flame retardant garments for the Fire Industry, Nomex clothing for
utilities, and high visibility reflective outerwear for Departments of
Transportation. The purchase was effective as of July 1, 2005 and the results of
Mifflin's operations have been included since July 1, 2005 in the Company's
reported results , adding approximately $1.8 million in revenue for the seven
months ended January 31, 2006 and $.02 to earnings per share to the actual
reported results. Had the transaction taken place on February 1, 2005, on a
proforma basis, there would have been an increase in the reported amounts as
follows:

                      Twelve months ended January 31, 2006

<TABLE>
<CAPTION>
                   Pro Forma Results Combined with Mifflin Valley          Additional resulting from Mifflin Valley
                   ----------------------------------------------          ----------------------------------------
<S>                                 <C>                                                 <C>
Sales                               $100,043,000                                        $1,303,000
Net Income                          $  6,411,000                                        $   82,000
Earnings per share                  $       1.28                                        $     0.02
</TABLE>

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

Condensed Balance Sheet Information:

Accounts receivable                    $  363,000
Inventory                                 667,000
Equipment                                 216,000
Other assets                               35,000
                                       ----------
    Total assets                        1,281,000
                                       ----------

Accounts payable                          261,000
Other liabilities                         185,000
                                       ----------
    Total liabilities                     446,000
                                       ----------

Net assets acquired                       835,000
Purchase price                          1,767,000
                                       ----------
Excess purchase price                  $  932,000
                                       ==========

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

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

5 -LONG-TERM DEBT
- -----------------

Revolving Credit Facility

      In July 2005 the Company entered into a new $25 million five year
revolving credit facility with Wachovia Bank, N.A. At January 31, 2006, the
balance outstanding under this revolving credit facility amounted to $7.3
million. The credit facility is collateralized by substantially all of the
assets of the Company. The credit facility contains financial covenants,
including, but not limited to, fixed charge ratio, funded debt to EBIDTA ratio,
inventory and accounts receivable collateral coverage ratio, with respect to
which the Company was in compliance at January 31, 2006 and for the year then
ended. The weighted average interest rate for the year ended January 31, 2006
was 4.85%.

                                       50
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

5. (continued)
- --------------

      The Company's previous agreement with its lending institution, as amended,
provided the Company with a revolving credit facility of $18 million. The
balance was paid in full on June 18, 2004 using the proceeds from the Company's
June 18, 2004 Secondary Stock Offering. This credit facility, which was subject
to a borrowing base calculated on a percentage of eligible accounts receivable
and inventory as defined, bore interest at LIBOR plus 2% (4.69% at January 31,
2005) and pursuant to an amendment in May 2004 expired on July 31, 2005. The
agreement was amended on March 9, 2001 to (i) extend the maturity date to
October 31, 2001, (ii) modify the interest rate, and (iii) modify certain
financial covenants. The agreement was amended on July 12, 2001 to (i) extend
the maturity date to July 31, 2002, (ii) increase the amount available under the
revolving line of credit from $14 million to a percentage of eligible accounts
receivable and inventory as defined, up to a maximum of $18 million, (iii)
modify the interest rate, and (iv) modify a certain financial covenant. The
maximum amounts borrowed under the credit facility during the fiscal years ended
January 31, 2005 and 2004 were $17,000,000, and $18,000,000 respectively, and
the average interest rates during the periods were 3.67% and 3.20%,
respectively.

      The credit facility is collateralized by substantially all of the assets
of the Company. The credit facility and term loan contain financial covenants,
including, but not limited to, minimum levels of earnings and maintenance of
minimum tangible net worth and other certain ratios at all times. The fees
incurred by the Company related to the credit facility amounted to $25,000,
$15,000 and $63,000 during fiscal 2006, 2005 and 2004, respectively.

6. - STOCKHOLDERS' EQUITY AND STOCK OPTIONS
- -------------------------------------------

      On June 18, 2004 the company completed its secondary public offering by
issuing an additional 1,100,000 shares of its common stock. On July 1, 2004 an
additional 180,750 shares of its common stock was issued pursuant to the
over-allotment section of the prospectus dated June 14, 2004. The Company
received $24.4 million, net of related expenses of $.4 million. The Company used
$16.8 million to pay off the balance of its revolving credit facility.

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

      The Company's 1986 Incentive and Non-statutory Stock Option Plan (the
"Plan") provides for the granting of incentive stock options and non-statutory
options. The Plan provides for the grant of options to key employees to purchase
up to 400,000 shares of the Company's common stock, upon terms and conditions
determined by a committee of the Board of Directors, which administers the plan.
Options are granted at not less than fair market value (110 percent of fair
market value as to incentive stock options granted to ten percent stockholders)
and are exercisable over a period not to exceed ten years (five years as to
incentive stock options granted to ten percent stockholders). This plan expired
in May 2004.

                                       51
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

6. (continued)
- --------------

      Additional information with respect to the Company's plans for the fiscal
years ended January 31, 2006, 2005 and 2004 is summarized as follows:

<TABLE>
<CAPTION>
                                                                             2006
                                                     -----------------------------------------------------
                                                         Directors' Plan                  Plan
                                                                                 (Expired May 1, 2004)
                                                     -----------------------------------------------------
                                                                  Weighted-                   Weighted-
                                                       Number      average        Number       average
                                                         of        exercise         of         exercise
                                                      shares *      price         shares        price
                                                      --------      -----         ------        -----
<S>                                                     <C>         <C>           <C>         <C>
    Shares under option
        Outstanding at beginning of year                16,330      $13.87
           10% stock dividend                            1,633
                                                        ------

        Outstanding and exercisable at end of year      17,963      $12.61
                                                        ======

    Weighted-average remaining contractual           3.7 years
        life of options outstanding
</TABLE>

      * Adjusted for the 10% stock dividend to stockholders of record as of
      April 30, 2005
<TABLE>
<CAPTION>
                                                                           2005
                                                  --------------------------------------------------
                                                      Directors' Plan      Plan (expired May 1, 2004)

                                                  --------------------------------------------------
                                                               Weighted-                    Weighted-
                                                   Number      average        Number        average
                                                     of        exercise         of          exercise
                                                    shares      price         shares         price
                                                  --------    ----------    ---------     ----------
<S>                                                <C>          <C>         <C>          <C>
   Shares under option
       Outstanding at beginning of year            12,540       $  7.70
          Granted                                  11,000         18.43
          Cancelled                                (1,000)        21.99
          Exercised                                (6,210)         8.77
                                                   ------
       Outstanding and exercisable at end of year  16,330         13.87
                                                   ======

       Weighted-average remaining
         contractual life of options             4.7 years
   outstanding

       Weighted-average fair value per shares
       of options granted during 2005                            $13.87

</TABLE>

                                       52
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

6. (continued)

<TABLE>
<CAPTION>
                                                                       2004
                                                 -----------------------------------------------
                                                     Directors' Plan              Plan
                                                 -----------------------------------------------
                                                               Weighted-               Weighted-
                                                   Number       average     Number      average
                                                     of        exercise       of        exercise
                                                   shares       price       shares       price
                                                 ---------    ---------   ---------    ---------
<S>                                                  <C>      <C>             <C>      <C>
Shares under option
    Outstanding at beginning of year                 9,900    $    4.71       4,455    $    1.86
       10% stock dividend                            1,140                      445
       Granted                                       7,000         8.74
       Exercised                                    (5,500)        3.81      (4,900)        1.86
                                                 ---------                ---------
    Outstanding and exercisable at end of year      12,540         7.70           0
                                                 =========                =========

Weighted-average remaining contractual
    life of options outstanding                 4.25 years

Weighted-average fair value per shares of
    options granted during 2004                               $    7.70
</TABLE>

      Summarized information about stock options outstanding under the two plans
at January 31, 2006 is as follows (as adjusted for the 10% stock dividends):

                                        Options outstanding and exercisable
                           -----------------------------------------------------
                                                  Weighted-
                                Number             Average
                             Outstanding          Remaining          Weighted-
    Range of                      At             Contractual          Average
    Exercise prices        January 31, 2006     Life in years     Exercise price
    ---------------        ----------------     -------------     --------------

    $4.46-$5.03                       3,993              0.83              $4.65
    $7.94                             2,970              3.50               7.94
    $16.76                           11,000              4.80              16.76
    Reserved Shares:
    1986 Stock Option Plan          329,422
    Directors Option Plan            32,604
                                    -------
                                    362,026
                                    =======

                                       53
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

7. - INCOME TAXES
- -----------------
     The provision for income taxes is based on the following pre-tax income:

                                       Year Ended January 31,
                                   2006         2005           2004
                                   ----         ----           ----
               Domestic       $ 7,896,736   $ 5,398,768    $ 3,292,770
               Foreign          1,871,326     1,670,573      2,004,728
                              -----------   -----------    -----------
               Total          $ 9,768,062   $ 7,069,341    $ 5,297,498
                              -----------   -----------    -----------

     The provision for income taxes is summarized as follows:

                                       Year Ended January 31,
                                   2006         2005           2004
                                   ----         ----           ----
          Current
               Federal        $ 2,563,836   $ 1,661,606    $   699,069
               State              448,656       330,337         99,324
               Foreign            382,403       395,917        413,921
                              -----------   -----------    -----------
                                3,394,895     2,387,860      1,212,314
          Domestic Deferred        43,803      (334,765)       446,750
                              -----------   -----------    -----------
                              $ 3,438,698   $ 2,053,095    $ 1,659,064
                              ===========   ===========    ===========


                                       54
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

      7. (continued)


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

<TABLE>
<CAPTION>
                                                         Year ended January 31,
                                                    2006           2005           2004
                                                    ----           ----           ----
<S>                                                    <C>            <C>            <C>
Statutory rate                                         34.0%          34.0%          34.0%
State income taxes, net of Federal tax benefit          2.0%           2.5%           1.7%
Nondeductible expenses                                  (.2)%          (.2)%           .6%
Repatriation of foreign earnings                        1.7%            --             --
Foreign tax rate differential                          (2.7)%         (2.0)%         (3.2)%
Contribution carry forward realized                      --           (4.0)%           --

Other                                                    .4%          (1.3)%         (1.8)%
                                                 ----------     ----------     ----------
Effective rate                                         35.2%          29.0%          31.3%
                                                 ==========     ----------     ----------
<CAPTION>

      The tax effects of temporary differences which give rise to deferred tax
      assets at January 31, 2006, 2005 and 2004 are summarized as follows:

                                                                January 31,
                                                    2006           2005           2004
                                                    ----           ----           ----
<S>                                              <C>            <C>            <C>
Deferred tax assets
Inventories                                      $  688,800     $  606,652     $  639,156
Accounts receivable                                 120,703        122,740        122,740
Accrued compensation and other                      108,181        231,342         28,376
                                                 ----------     ----------     ----------
          Gross deferred tax assets                 917,684        960,734        790,272
                                                 ----------     ----------     ----------

Deferred tax liabilities
    Depreciation and other                           86,982         86,229        250,532
                                                 ----------     ----------     ----------
          Gross deferred tax liabilities             86,982         86,229        250,532
                                                 ----------     ----------     ----------
          Net deferred tax asset                 $  830,702     $  874,505     $  539,740
                                                 ==========     ==========     ==========
</TABLE>

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

                                       55
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

8. - BENEFIT PLANS
- ------------------
      Defined Benefit Plan

      The Company has a frozen defined benefit pension plan that covers former
employees of an acquired entity. The Company's funding policy is to contribute
annually the recommended amount based on computations made by its consulting
actuary as of January 31, 2006, 2005 and 2004.

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

                                                           2006         2005
                                                           ----         ----
Change in benefit obligation
- ----------------------------
    Projected benefit obligation at beginning of year  $ 1,227,215  $ 1,194,855
    Interest cost                                           81,214       79,046
    Actuarial  loss                                          7,361        1,141
    Benefits paid                                          (48,104)     (47,827)
                                                       -----------  -----------
    Benefit obligation at end of year                  $ 1,267,686  $ 1,227,215
                                                       ===========  ===========

Change in plan assets
- ---------------------
    Fair value at beginning of year                    $ 1,190,964  $   988,994
    Actual investment return                               270,287      225,797
    Employer contribution                                       --       24,000
    Benefits paid                                          (48,104)     (47,827)
                                                       -----------  -----------
    Fair value at end of year                          $ 1,413,147  $ 1,190,964
                                                       ===========  ===========

Funded status
    Funded Status                                      $  (145,461) $    36,251
    Unrecognized gain                                      614,998      459,452
    Unrecognized benefit transition liability                   --         (373)
                                                       -----------  -----------
    Accrued pension cost                               $   469,534  $   495,330
                                                       ===========  ===========

      The components of net periodic pension cost for the fiscal years ended
      January 31 are summarized as follows:

                                        2006         2005         2004
                                        ----         ----         ----

     Interest cost                   $  81,214    $  79,046    $  76,727
     Expected Return on Plan Assets     93,353       78,300    (366,369)
     Net amortization and deferral     (13,657)       1,437      326,217
                                     ---------    ---------    ---------

     Net periodic benefit cost       $ (25,796)   $   2,183    $  36,575
                                     =========    =========    =========

      An assumed discount rate of 6.75%, was used in determining the actuarial
present value of benefit obligations for all periods presented. The expected
long-term rate of return on plan assets was 8% for all periods presented. At
January 31, 2006, 2005 and 2004, approximately 19.1%, 25.1% and 33.9% of the
plan's assets were held in mutual funds invested primarily in equity securities,

                                       56
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004


8. (continued)

68.8%, 66.7% and 64.5% were invested in equity securities and debt instruments
and 5.1%, 8.2% and 1.6% were invested in money market and other instruments,
respectively.

                        Expected Annual Benefit Payments

             Year Ending 1/31                          Benefit Payments
             ----------------                          ----------------

             2007                                      $55,181
             2008                                      $54,566
             2009                                      $53,856
             2010                                      $52,864
             2011                                      $62,281
             2012-2016                                 $367,383

                                              2005          2006
                                              ----          ----
Benefit Obligations:
Accumulated benefit obligation             $1,227,215   $1,267,686
Vested accumulated benefit obligation      $1,227,215   $1,267,686

      The Company's policy is to hold no more than 50% of its pension assets in
broadly held mutual funds, which invest, in a wide range of securities as well
as money market funds, with the remainder of the plan assets invested in equity
securities and debt instruments. The Company has utilized an expected long-term
rate of return of 8% which it deems appropriate as a result of the fact that the
actual rate of return on investments has not been less that 8% in the past 4
years. The Company does not expect its contributions for 2007 to exceed $50,000.

Defined Contribution Plan

      Pursuant to the terms of the Company's 401(k) plan, substantially all U.S.
employees over 21 years of age with a minimum period of service are eligible to
participate. The 401(k) plan is administered by the Company and provides for
voluntary employee contributions ranging from 1% to 15% of the employee's
compensation. The Company made discretionary contributions of $126,547, $118,696
and $100,033 in the fiscal years ended January 31, 2006, 2005, and 2004,
respectively.

9. - MAJOR SUPPLIER
- -------------------

      The Company purchased approximately 74.0%, 74.7% and 77.4% of its raw
materials from one supplier under licensing agreements for the fiscal years
ended January 31, 2006, 2005 and 2004, respectively. 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 affected.

10. - COMMITMENTS AND CONTINGENCIES
- -----------------------------------

      Employment Contracts

      The Company has employment contracts with six principal officers and the
Chairman of the Board of Directors, expiring through April 30, 2008. Such
contracts are automatically renewable for two, one-year terms unless 30 to 120
days notice is given by either party. Pursuant to such contracts, the Company is
committed to aggregate annual base remuneration of $1.5 million and $1.2 million
for the fiscal years ended January 31, 2007 and 2008, respectively.

                                       57
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

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

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

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

      The Company believes that all rents paid to POMS, River Group Holding Co.,
L.L.C. and Harvey Pride, Jr. by the Company are comparable to what would be
charged by an unrelated party, as three different rent fairness appraisals were
performed in 1999, 2002 and 2004. The net rent paid to POMS and River Group
Holding Co., L.L.C. by the Company for the year entered January 31, 2006
amounted to $116,000 and the total rent paid to Harvey Pride, Jr. by the Company
for use of the customer service office for the year ended January 31, 2006
amounted to $18,000. The Company paid $74,808 to Luis Gomez Guzman, an employee
in Mexico (until December 2005), for rent on a building pursuant to a lease
expiring July 7, 2007 and in fiscal 2006 an 12,853 square foot addition was
built for additional annual rent of $46, 416.

      Total rental under all operating leases is summarized as follows:

                                                              Rentals
                                             Gross            paid to
                                            rental            related
                                            expense           parties
                                            -------           -------
Year ended January 31,
         2006                               $540,162         $328,420
         2005                                893,862          641,400
         2004                                944,375          641,400

      Minimum annual rental commitments for the remaining term of the Company's
non-cancelable operating leases relating to manufacturing facilities, office
space and equipment rentals at January 31, 2006 including lease renewals
subsequent to year-end are summarized as follows:

     Year ending January 31,
              2007                          $372,790
              2008                           198,867
              2009                            20,000
              2010                             3,000

                                            $594,657
                                            ========

                                       58
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

Real Estate Purchases

      In April 2005, the Company entered into two separate real estate purchase
contracts, one with POMS and one with River Group, both related parties. The
Company has purchased the land and buildings in Decatur, Alabama that it had
leased from these related parties since their inception, POMS (1984) and River
Group (1999). The purchase price was $2,056,000 for the POMS property and
$925,000 for the River Group property determined by averaging three separate and
independent real estate appraisals. The partnerships were accounted for in
accordance with FIN46R and were reflected in the financial statements for the
fiscal year ended January 31, 2005.

      In contemplation of the real estate purchases, the Company entered into an
agreement, dated March 4, 2005, with an officer of Lakeland (who is a partner in
POMS & River Group) to acquire his interest for $565,367 ($411,200 for POMS and
$154,167 for River Group), at the same proportional valuation as the overall
property.

      On April 25, 2005 the Company closed on the real estate purchase contract
with POMS for a purchase price of $2,067,587. The Company paid rent from
February 1, 2005 until April 25, 2005 of $86,157, which was charged to rent
expense.

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

      At April 30, 2005, the Company recorded the asset land value of $230,000,
the asset building value of $2,751,000, closing costs of $11,584 and a payable
to River Group in the amount of $770,833. The Company recorded the purchase of
the land and building from River Group as of April 30, 2005, since the contract
of sale was finalized and the closing was deferred only until the release of an
easement on the property. Total rent expense for the two properties from
February 1, 2005 until the dates of the sale amounted to $146,577. The Company
recorded depreciation on each of the two properties from the closing date
forward.

      Upon conclusion of these two real estate purchase contracts, the Company
no longer has related party transactions requiring the recording of variable
interest entities under FIN46R. Other than the above entries, the Company has
not recorded the effects of FIN46R in the current fiscal year. The Company deems
any such impact to be immaterial.

Building purchase in New York:

      On May 10, 2005 the Company purchased a 6,250 square foot office
condominium to serve as its Corporate Headquarters. The purchase price was
$640,000 plus $9,161 in closing costs. The lease on its previous location
amounted to $51,202 annually and expired on June 30, 2005. Certain leases
require additional payments based upon increases in property taxes and other
expenses.

      Litigation
      The Company is involved in various litigation arising during the normal
course of business which, in the opinion of the management of the Company, will
not have a material effect on the Company's financial position, results of
operations, or cash flows.

                                       59
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

11. OTHER RELATED PARTY TRANSACTIONS
- ------------------------------------

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

      In connection with the financing, Weifang agreed to make annual payments
to An Qui and to allocate a portion of the proceeds from any sale of the
property to An Qui. In 2002, An Qui relinquished its rights to the annual
payments and to its rights to proceeds from the sale of the property in exchange
for the amount of $406,185 (net of expenses). Weifang paid $222,645, $89,000 and
$94,400 of this amount to An Qui in December 2002, January 2003 and June 2003,
respectively. The Company now owns the building.

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

                             Gallen Rent & Insurance

Mifflin Valley, Inc.
- --------------------
      In July 2005 as part of the acquisition of Mifflin Valley Inc., the
Company entered into a five year lease with Michael Gallen (an employee) to
lease an 18,520 sq. ft. manufacturing facility in Shillington, PA for $55,560
annually or a per square foot rental of $3.00. This amount was obtained prior to
the acquisition from an independent appraisal of the fair market rental value
per square foot. In addition the Company, commencing January 1, 2006 is renting
12,000 sq ft of warehouse space in a second location is Pennsylvania from this
employee, on a month by month basis, for the monthly amount of $3.35 per square
foot. In addition, in January 2006 the Company entered into a month to month
lease with Donna Gallen (an employee and wife of Michael Gallen) for a 12,000
sq. ft. warehouse space in Blandon, PA for $40,200 annually. Mifflin Valley
utilizes the services of Gallen Insurance (an affiliate of Michael & Donna
Gallen) to provide certain insurance in Pennsylvania. Such payments for
insurance aggregated $4,728 in fiscal 2006.

                        Related Party-outside contractor

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

12. MANUFACTURING SEGMENT DATA
- ------------------------------

      The Company manages its operations by evaluating its geographic locations.
The Company's North American operations include its facilities in Decatur,
Alabama (primarily disposables, chemical suit and glove production), Celaya,
Mexico (primarily disposables, chemical suit and glove production) and St.
Joseph, Missouri (primarily woven products). The Company also maintains contract
manufacturing facilities in China (primarily disposable and chemical suit
production). The Company's China facilities and Celaya, Mexico facility produce
the majority of the Company's products. The accounting policies of these
operating entities are the same as those described in Note 1. The Company
evaluates the performance of these entities based on operating profit, which is
defined as income

                                       60
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004


before income taxes and other income and expenses. The Company has a small sales
force in Canada and Europe who distribute products shipped from the United
States and China, the table below represents information about reported
manufacturing segments for the years noted therein:

                                      2006            2005              2004
                                      ----            ----              ----
Net Sales:

     North America              $ 104,101,669    $ 100,361,909    $  88,346,362
     China                          9,205,660        7,411,651        4,753,853
     Less inter-segment sales     (14,567,263)     (12,453,397)      (3,383,053)
                                -------------    -------------    -------------
     Consolidated sales         $  98,740,066    $  95,320,163    $  89,717,162
                                =============    =============    =============

Operating Profit:

     North America              $   8,339,441    $   7,067,855    $   4,721,880
     China                          1,151,340          921,208        1,255,118
     Less intersegment profit          11,632         (335,000)        (188,000)
                                -------------    -------------    -------------
     Consolidated profit        $   9,502,413    $   7,654,063    $   5,788,998
                                =============    =============    =============

Identifiable Assets:

     North America              $  66,746,660    $  51,654,104    $  40,211,021
     China                          5,717,192        8,659,150        7,092,806
                                -------------    -------------    -------------
     Consolidated assets        $  72,463,852    $  60,313,254    $  47,303,827
                                =============    =============    =============

Depreciation:

     North America              $     548,868    $     542,463    $     535,572
     China                            444,818          341,677          267,662
                                -------------    -------------    -------------
     Consolidated depreciation  $     993,686    $     884,140    $     803,234
                                =============    =============    =============

                                       61
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

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

<TABLE>
<CAPTION>

Fiscal Year Ended January 31, 2006:     1/31/06     10/31/05    7/31/05     4/30/05
<S>                                   <C>         <C>         <C>         <C>
Net Sales                             $  25,226   $  22,717   $  25,089   $  25,709
Cost of Sales                            18,949      17,034      19,293      19,542
                                      ---------   ---------   ---------   ---------
Gross Profit                          $   6,277   $   5,683   $   5,796   $   6,167
                                      =========   =========   =========   =========
Net Income                            $   1,655   $   1,313   $   1,648   $   1,713
                                      =========   =========   =========   =========
Basic and Diluted income per
common share*:
 Basic (a)                            $    0.33   $    0.26   $    0.33   $    0.34
                                      =========   =========   =========   =========
 Diluted (a)                          $    0.33   $    0.26   $    0.33   $    0.34
                                      =========   =========   =========   =========

      Certain reclassifications between cost of goods sold and operating
expenses were made to the first quarter of fiscal year 2006, in order to be
consistent with the second quarter and year to date of fiscal 2006
classifications for the Mexico and China subsidiaries.

<CAPTION>

Fiscal Year Ended January 31, 2005:     1/31/05     10/31/04    7/31/04     4/30/04
<S>                                   <C>         <C>         <C>         <C>
Net Sales                             $  23,221   $  22,416   $  22,845   $  26,838
Cost of Sales                            18,592      17,491      17,983      20,858
                                      ---------   ---------   ---------   ---------
Gross Profit                          $   4,629   $   4,925   $   4,862   $   5,980
                                      =========   =========   =========   =========
Net Income                            $   1,258   $   1,190   $   1,143   $   1,425
                                      =========   =========   =========   =========
Basic and Diluted income per
common share*:
 Basic (a)                            $    0.25   $    0.24   $    0.27   $    0.36
                                      =========   =========   =========   =========
 Diluted (a)                          $    0.25   $    0.24   $    0.27   $    0.36
                                      =========   =========   =========   =========
</TABLE>

(a) The sum of earnings per share for the four quarters may not equal earnings
per share for the full year due to changes in the average number of common
shares outstanding.

*Adjusted, retroactively, for the 10% stock dividends to shareholders of records
on April 30, 2005, July 31, 2003 and 2002.

                                       62
<PAGE>

                            Lakeland Industries, Inc.
                                and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                         January 31, 2006, 2005 and 2004

14. FORMATION OF NEW SUBSIDIARIES
- ---------------------------------

      During the fiscal year ending January 31, 2006, a new subsidiary RFB
Lakeland Private LTD. (an Indian Corporation) was formed to execute the supply
agreement with RFB Latex LTD. dated October 25, 2005, and to exercise the option
to buy its industrial glove business for $2.7 million after one year, if certain
conditions are met and approved by the Company's Board of Directors. The
Company's minimum commitment is approximately $250,000. As of January 31, 2006,
the Company has a receivable from RFB Latex of approximately $439,000.

15. CONTINGENCIES - TAX AUDIT
- -----------------------------

      The Company's Federal Income Tax returns for the fiscal years ended
January 31, 2003 and 2004 are currently under audit by the Internal Revenue
Service. The final results of these audits cannot be estimated by management at
this time, but management does not believe that the results of the audit will to
have a material effect on the financial condition of the Company.


                                       63
<PAGE>

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -----------------------------------------------

<TABLE>
<CAPTION>

            Column A                           Column B         Column C         Column D   Column E
       --------------------                    --------   --------------------- ---------- ---------
                                                                Additions
                                              Balance at  Charge to  Charged to           Balance at
                                              Beginning   costs and    other                end of
                                              of period   expenses    accounts  Deductions  period
                                              ---------   --------    --------  ----------  ------
<S>                                            <C>         <C>          <C>      <C>        <C>
Year ended January 31, 2006
    Allowance for doubtful
       account (a)                             $323,000                                    $323,000
                                               ========                                    ========

    Allowance for slow moving inventory        $396,000                         $ 31,000   $365,000
                                               ========                         ========   ========

Year ended January 31, 2005
    Allowance for doubtful
       account (a)                             $323,000                                    $323,000
                                               ========                                    ========
         Allowance for slow moving inventory   $417,000                         $ 21,000   $396,000
                                               ========                         ========   ========
Year ended January 31, 2004
    Allowance for doubtful
  account (a)                                  $343,000                         $ 20,000   $323,000
                                               ========                         ========   ========
    Allowance for slow moving inventory        $354,000   $ 63,000                         $417,000
                                               ========   ========                         ========
</TABLE>

- --------------------------

(a) Deducted from accounts receivable.
(b) Uncollectible accounts receivable charged against allowance.

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

      None

ITEM 9A. CONTROLS AND PROCEDURES
- --------------------------------

      Evaluation of Disclosure Controls and Procedures

      We carried out an evaluation required by the 1934 Act, under the
supervision and with the participation of our principal executive officer and
principal financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934
Act, as of January 31, 2006. Based on this evaluation, our principal executive
officer and principal financial officer concluded that, as of January 31, 2006,
our disclosure controls and procedures were effective in timely alerting them to
material information required to be included in our periodic SEC reports.

      Management's Report on Internal Control over Financial Reporting

      Management is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Rule 13a-15(f) of the
1934 Act. Management has assessed the effectiveness of our internal control over
financial reporting as of January 31, 2006 based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. As a result of this assessment,
management concluded that, as of January 31, 2006, our internal control over
financial reporting was effective in providing reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles in the United States of America.

      Holtz Rubenstein Reminick LLP, the Company's independent registered public
accounting firm, has audited management's assessment of the effectiveness of the
Company's internal control over financial reporting as of April 14, 2006, as
stated in their report included herein.

                                       64
<PAGE>

      Limitations on Controls

      Management does not expect that our disclosure controls and procedures or
our internal control over financial reporting will prevent or detect all errors
and fraud. Any control system, no matter how well designed and operated, is
based upon certain assumptions and can provide only reasonable, not absolute,
assurance that its objectives will be met. Further, no evaluation of controls
can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, within the
Company have been detected.

      Through the year ended January 31, 2006 additional expense has been
incurred relating to documenting and testing the systems of internal controls.
The company hired an internal auditor in July 2004 and has contracted with an
independent consultant for services related to Sarbanes-Oxley Act compliance
with Section 404, in February 2004. The total cumulative amount expensed so far
is approximately $708,000 and is expected to increase in the first quarter of
2007 due to the hiring of additional accounting personnel and increased
professional fees.

ITEM 9B. OTHER INFORMATION
- --------------------------

      None

                                    PART III
                                    --------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------

      The following is a list of the names and ages of all of our directors and
executive officers, indicating all positions and offices they hold with us as of
April 15, 2006. Our directors hold office for a three-year term and until their
successors have been elected and qualified. Our executive officers hold offices
for one year or until their successors are elected by our board of directors.

<TABLE>
<CAPTION>

Name                                                     Age                      Position
- ----                                                     ---                      --------
<S>                                                      <C>     <C>
Raymond J. Smith..................................       67      Chairman of the Board of Directors
Christopher J. Ryan...............................       54      Chief Executive Officer, President,  Secretary,
                                                                 General Counsel and Director
Gary Pokrassa.....................................       58      Chief Financial Officer
Gregory D. Willis.................................       49      Executive Vice President
Harvey Pride, Jr. ................................       59      Vice President - Manufacturing
James M. McCormick................................       58      Controller and Treasurer
Paul C. Smith.....................................       39      Vice President
John J. Collins...................................       63      Director
Eric O. Hallman...................................       62      Director
Michael E. Cirenza................................       50      Director
John Kreft........................................       55      Director
Stephen M. Bachelder .............................       55      Director

</TABLE>

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

      Christopher J. Ryan has served as our Chief Executive Officer since April
2004 and President since February 1, 2004, Secretary since April 1991, General
Counsel since February 2000 and a director since May 1986. Mr. Ryan was our
Executive Vice President - Finance from May 1986 until becoming our President on
February 1, 2004. From October 1989 until February 1991, Mr. Ryan was employed
by Rodman & Renshaw, Inc., an investment banking firm. Prior to that, he was an
independent consultant with Laidlaw Holding Co., Inc., an investment banking
firm, from January 1989 until September 1989. From February 1987 to January
1989, Mr. Ryan was employed as the Managing Director of Corporate Finance for
Brean Murray, Foster Securities, Inc. He was employed from June 1985 to January
1987 as a Senior Vice President with the investment banking firm of Laidlaw
Adams Peck, Inc., a predecessor firm to Laidlaw Holdings, Inc. Mr. Ryan has
served as one of our directors since 1986 and his term as a director will expire
at our annual meeting of stockholders in June 2005.

                                       65
<PAGE>

      Gary Pokrassa is a CPA with 36 years experience in both public and private
accounting. Mr. Pokrassa was the CFO for Gristedes Foods, Inc. (AMEX-GRI) from
2000-2003 and Syndata Technologies from 1997-2000. Mr. Pokrassa received a BS in
Accounting from New York University and is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified Public
Accountants.

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

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

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

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

      John J. Collins, Jr. was Executive Vice President of Chapdelaine GSI, a
government securities firm, from 1977 to January 1987. He was Senior Vice
President of Liberty Brokerage, a government securities firm, between January
1987 and November 1998. Presently, Mr. Collins is self employed, managing a
direct investment portfolio of small business enterprises for his own accounts.
Mr. Collins has served as one of our directors since 1986 and his term as a
director will expire at our annual meeting of stockholders in June 2006.

      Eric O. Hallman was President of Naess Hallman Inc., a ship brokering
firm, from 1974 to 1991. Mr. Hallman was also affiliated between 1991 and 1992
with Finanshuset (U.S.A.), Inc., a ship brokering and international financial
services and consulting concern, and was an officer of Sylvan Lawrence, a real
estate development company, between 1992 and 1998. Between 1998 and 2000, Mr.
Hallman was President of PREMCO, a real estate management company, and currently
is Comptroller of the law firm Murphy, Bartol & O'Brien, LLP. Mr. Hallman has
served as one of our directors since our incorporation in 1982 and his term as a
director will expire at our annual meeting of stockholders in June 2006.

      Michael E. Cirenza has been the Executive Vice President and Chief
Financial Officer of Country-Life LLC, a manufacturer and distributor of
vitamins and nutritional supplements, since September 2002. Mr. Cirenza was the
Chief Financial Officer and Chief Operating Officer of Resilien, Inc., an
independent distributor of computers, components and peripherals from January
2000 to September 2002. He was an Audit Partner with the international
accounting firm of Grant Thornton LLP from August 1993 to January 2000 and an
Audit Manager with Grant Thornton LLP from May 1989 to August 1993. Mr. Cirenza
was employed by the international accounting firm of Price Waterhouse from July
1980 to May 1989. Mr. Cirenza is a Certified Public Accountant in the State of
New York and a member of the American Institute of Certified Public Accountants
and the New York State Society of Certified Public Accountants. Mr. Cirenza has
served as one of our directors since June 18, 2003 and his term as a director
will expire at our annual meeting of stockholders in 2005.

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

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

                                       66
<PAGE>

                             Committees of the Board

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

                            Compensation of Directors

      Each non-employee director receives a fee of $5,000 per quarter for
attending meetings of our board of directors or committees of our board of
directors. Non-employee directors are reimbursed for their reasonable expenses
incurred in connection with attendance at or participation in such meetings. In
addition, under our 1995 Director Plan, each non-employee director who becomes a
director is granted an option to purchase 5,000 shares of our common stock.
Messrs. Hallman and Collins were each granted an option to purchase 5,000 shares
of our common stock under our previous 1986 Plan at the time of their respective
appointments or reelections to the board of directors. Such grants and the terms
thereof were renewed on April 18, 1997, May 5, 1996 and May 5, 1996,
respectively, in accordance with stockholder approval of the 1995 Director Plan
at our 1995 annual meeting of stockholders. Mr. Cirenza received an option to
purchase 5,000 shares of our common stock upon his election to our board of
directors in June 2003. Messrs. Kreft and Bachelder each received an option to
purchase 5,000 shares of our Common Stock upon appointment to our Board of
Directors.

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


                                       67
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION
- --------------------------------

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

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

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

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------

                              Related Party Leases

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

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

      On March 1, 1999, we entered into a one year (renewable for four
additional one year terms) lease agreement with Harvey Pride, Jr., our Vice
President - Manufacturing, for a 2,400 sq. ft. customer service office located
next to our existing Decatur, Alabama facility. We paid an annual rent of
$18,000 for this facility under the lease agreement in fiscal 2004 and 2005.
This lease was renewed on March 1, 2004 through March 31, 2009 at the same
rental rate.

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

                        Related Party-outside contractor

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

                         Past Related Party Transactions

      In 1997, An Qui Holding Co., L.L.C., or An Qui, a limited liability
company whose members include Lakeland, and Messrs. Smith, Collins, Hallman,
Raleigh, Ryan and Pride, provided financing for the construction of a 65,000

                                       68
<PAGE>

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

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

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

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

                                       69
<PAGE>

                                     PART IV
                                     -------

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

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

            1     Consolidated Financial Statements (See Page 27 of this report
                  which includes an index to the consolidated financial
                  statements)

            2     Financial Statement Schedules:
                     Schedule II- Valuation and Qualifying Accounts
                         All other schedules are omitted because they are not
applicable, not required, or because the required information is included in the
Consolidated Financial Statements or Notes thereto.

            3.    Exhibits:

      Exhibit                              Description

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

        3.2     Bylaws of Lakeland Industries Inc., as amended (Incorporated by
                reference to Exhibit 3(b) of Lakeland Industries, Inc.'s
                Registration Statement on Form S-18 (File No. 33-7512 NY))

        10.2    Lease Agreement, dated August 1, 2001, between Southwest
                Parkway, Inc., as lessor, and Lakeland Industries, Inc., as
                lessee (Incorporated by reference to Exhibit 10(b) of Lakeland
                Industries, Inc.'s Annual Report on Form 10-K for the year ended
                January 31, 2002)

        10.3    Lakeland Industries, Inc. Stock Option Plan (Incorporated by
                reference to Exhibit 10(n) of Lakeland's Registration Statement
                on Form S-18 (File No. 33-7512 NY))

        10.4    Employment Agreement, dated September 22, 2003, between Lakeland
                Industries, Inc. and Raymond J. Smith (Incorporated by reference
                to Exhibit 10(g) of Lakeland Industries, Inc.'s Quarterly Report
                on Form 10-Q filed December 12, 2003)

        10.5*   Employment, dated February 1, 2006, agreement between Lakeland
                Industries, Inc. and Harvey Pride, Jr.

        10.7*   Employment Agreement, dated February 1, 2006, between Lakeland
                Industries, Inc. and Christopher J. Ryan

        10.10   Lease Agreement, dated March 1, 2004, between Harvey Pride, Jr.,
                as lessor, and Lakeland Industries, Inc., as lessee

                                       70
<PAGE>

        10.11   Term Loan and Security Agreement, dated July 7, 2005, between
                Lakeland Industries, Inc. and Wachovia Bank, N.A. (Incorporated
                by reference to Exhibit 10.11 of Lakeland Industries, Inc.'s
                Quarterly Report on Form 10-Q filed September 7, 2005)

        10.12   Employment Agreement, dated May 23, 2005, between Lakeland
                Industries, Inc. and James M. McCormick (Incorporated by
                reference to Exhibit 10(r) of Lakeland Industries, Inc.'s
                Quarterly Report on Form 10-Q filed June 9, 2005)

        10.13   Employment Agreement, dated September 22, 2003, between Lakeland
                Industries, Inc. and Paul C. Smith (Incorporated by reference to
                Exhibit 10(s) of Lakeland Industries, Inc.'s Quarterly Report on
                Form 10-Q filed December 12, 2003)

        10.14   Employment Agreement, dated November 29, 2005, between Lakeland
                Industries, Inc. and Gary Pokrassa, CPA. (Incorporated by
                reference to exhibit 10.14 of Lakeland Industries, Inc.
                Quarterly Report on Form 10-Q filed December 12, 2005)

        10.15   Employment Agreement, dated May 23, 2005, between Lakeland
                Industries Inc., and Gregory D. Willis (Incorporated by
                reference to exhibit 10.15 of Lakeland Industries, Inc.
                Quarterly Report on Form 10-Q filed June 9, 2005)

        10.16   Asset Purchase Agreement, dated July, 2005 between Lakeland
                Industries, Inc. and Mifflin Valley, Inc. and Lease Agreement
                and Employment Contract between Lakeland Industries, Inc., and
                Michael Gallen (Incorporated by reference to exhibit 10.15,
                10.16, and 10.17 of Lakeland Industries, Inc.'s Quarterly Report
                on form 10-Q filed September 7, 2005)

        10.17   Supply Agreement and Option to Purchase, between Lakeland
                Industries, Inc.'s subsidiary RFB Lakeland Industries Private
                Ltd. and RFB Latex Private, Ltd. (Incorporated by reference to
                exhibits 10.18 and 10.19 of Lakeland Industries Inc.'s Quarterly
                Report on form 10-Q filed December 12, 2005)

        10.18   Asset Purchase Agreement upon exercising of option, between
                Lakeland Industries, Inc. and RFB Lakeland Industries Private
                Ltd. (Incorporated by reference to exhibits 10.20 of Lakeland
                Industries Inc.'s Quarterly Report on form 10-Q filed December
                12, 2005)

        10.19   Employment Agreements, between RFB Lakeland Industries Private
                Ltd. and P.S. Ratra and Kamal Ratra (Incorporated by reference
                to exhibits 10.21 and 10.22 of Lakeland Industries, Inc.'s
                Quarterly Report on Form 10-Q filed December 12, 2005)

        10.20   Shareholder Agreement, between Lakeland Industries, Inc. and
                P.S. Ratra (Incorporated by reference to exhibit 10.23 of
                Lakeland Industries, Inc.'s Quarterly Report on form 10-Q filed
                December 12, 2005)

                                       71
<PAGE>

        10.21*  Lease Agreement, dated March 1, 2006, between Carlos Tornquist
                Bertrand, as lessor, and Lakeland Industries, Inc., as lessee

        10.22*  Lease Agreement, dated 2006, between Michael Robert Kendall,
                June Jarvis, and Barnett Waddingham Trustees Limited, as lessor,
                and Lakeland Industries, Inc., as lessee

        14.1    Lakeland Industries, Inc. Code of Ethics

        21.1    Subsidiaries of Lakeland Industries, Inc. (wholly-owned):

                        Lakeland Protective Wear, Inc.
                        Lakeland de Mexico S.A. de C.V.
                        Laidlaw, Adams & Peck, Inc. and Subsidiary (Meiyang
                        Protective Products Co., Ltd.)
                        Weifang Lakeland Safety Products Co. Ltd.
                        Qing Dao MayTung Healthcare Co., Ltd.
                        Lakeland Industries Europe Ltd.
                        Mifflin Valley, Inc.
                        RFB Lakeland Industries Private, Ltd.

     (b)Reports on Form 8 - K.

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

        A - On November 9, 2005 the Company filed a Form 8-K notifying of a new
Employment Contract.
        B - On December 6, 2005 the Company filed a Form 8-K reporting notice of
a teleconference call on December 12, 2005 to discuss the results of the
Company's third quarter ended October 31, 2005.
        C - On December 12, 2005 the Company filed a Form 8-K regarding the
results for operations of the Company's third quarter ended October 31, 2005.

- --------------------


 * Enclosed herein


                                       72
<PAGE>

                                   SIGNATURES
                                   ----------

        Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:   April 17, 2006
                                LAKELAND INDUSTRIES, INC.

                                By: /s/ Christopher J. Ryan
                                    --------------------------------------------
                                    Christopher J. Ryan, Chief Executive Officer
                                                and President

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

<TABLE>
<CAPTION>

Name                                              Title                               Date
- ----                                              -----                               ----
<S>                                <C>                                            <C>
/s/ Raymond J. Smith              Chairman of the Board                           April 17, 2006
- ----------------------------
Raymond J. Smith

/s/ Christopher J. Ryan           Chief Executive Officer, President,             April 17, 2006
- ----------------------------      General Counsel, Secretary and Director
Christopher J. Ryan

/s/ Gary Pokrassa                 Chief Financial Officer                         April 17, 2006
- ----------------------------
Gary Pokrassa

/s/ James M. McCormick            Controller and Treasurer                        April 17, 2006
- ----------------------------
James M. McCormick

/s/ Eric O. Hallman               Director                                        April 17, 2006
- ----------------------------
Eric O. Hallman

/s/ John J. Collins, Jr.          Director                                        April 17, 2006
- ----------------------------
John J. Collins, Jr.

/s/ Michael E. Cirenza            Director                                        April 17, 2006
- ----------------------------
Michael E. Cirenza

/s/ John Kreft                    Director                                        April 17, 2006
- ----------------------------
John Kreft

/s/ Stephen M. Bachelder          Director                                        April 17, 2006
- ----------------------------
Stephen M. Bachelder

</TABLE>

                                       73

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>2
<FILENAME>ex10-5.txt
<TEXT>
                                                                    EXHIBIT 10.5


February 1, 2006

Mr. Harvey Pride, Jr.
202 Pride Lane
Decatur, AL 35603

Dear Mr. Pride:

The purpose of this letter is to confirm your employment with Lakeland
Industries, Inc. on the following terms and conditions:

1.    THE PARTIES
      -----------

This is an agreement between Harvey Pride, Jr. (hereinafter referred to as
"you") and Lakeland Industries, Inc., a Delaware corporation with principal
place of business located at 701-7 Koehler Avenue, Ronkonkoma, NY 11779-7410
(hereinafter the "Company").

2.    TERM; RENEWAL
      -------------

The term of the agreement shall be for a 2 year period from February 1, 2006
through and including February 1, 2008.

3.    CAPACITY
      --------

You shall be employed in the capacity of Vice President of Manufacturing of
Lakeland Industries, Inc. and such other title or titles as may from time to
time be determined by the Board of Directors of the Company.

You agree to devote your full time and attention and best efforts to the
faithful and diligent performance of your duties to the Company and shall serve
and further the best interests and enhance the reputation of the Company to the
best of your ability.

4.    COMPENSATION
      ------------

As full compensation for your services you shall receive the following from the
Company:

      a.    A base annual salary of $220,000.00 per year payable bi-weekly; and
      b.    Participation when eligible in any of the Company's Pension, Profit
            Sharing, Disability and 401 (K) plans when any such plans have or
            become effective:

<PAGE>

      c.    Such other benefits as are consistent with the personnel benefits
            provided by the Company to its officers and employees; provided
            however that your vacation shall be for a period of no more than 20
            business days; and
      d.    An adjustment in the way car allowances or leases are paid which
            will require a gross up in W-2 wages of $9,000 covering all vehicle
            expenses except fuel.
      e.    An annual bonus payable May 25, 2007 as set forth in this agreement:

            1. Within year one of this contract you shall decrease identifiable
            expenses of Lakeland de Mexico by $150,000 as verified by us
            internal and outside accountants. For this you shall receive a bonus
            of $20,000. For anything under $150,000 you shall receive 10% of the
            savings and for anything over $150,000 you shall receive 15% of the
            savings up to a maximum of $50,000. This shall apply to reducing the
            cost of fabrics or components purchased, Mexican services purchased,
            reducing Mexican labor inefficiencies or redundancies, rents,
            supplies, transportation costs or other fixed and identifiable
            costs. The committee would expect that you would visit Mexico
            personally at least 4 times a year to insure that Mexico reduces its
            costs and achieves profitability. The Compensation Committee shall
            have full discretion and the final say on the determination of the
            bonus amount based upon the cost savings analysis submitted.
                  a. The same formula for Mexico shall apply to year 2 of the
                  contract.
                  b. Such actions as increasing Parent payments on Mexican
                  Products or moving labor from Mexico to China would not be
                  considered as cost reductions.

            2. Improving customer ship dates will be measured and weighed on a
            discretionary basis at year end and approximately $5,000 of the year
            end bonus will be allocated at the Board's discretion based upon the
            percent improvement of product shipped on time as compared to fiscal
            2006 from the Decatur facility.

            3. The remainder of up to $25,000 will be based upon your
            achievements as determined by the Board in reducing costs and other
            activities that directly increase profits on out bound and in bound
            freight, lowering labor costs at the Decatur facility and increasing
            Uniland productivity and profits.

            4. No later than May 25, 2007 #1-3 will be evaluated and bonus
            awarded and similar goals will be implemented for you for the fiscal
            year 2/1/07 - 1/31/08.

5.    NON-COMPETITION
      ---------------

During the term of this agreement and for two years thereafter, you shall not
either directly or indirectly as an agent, employee, partner, stockholder,
director, investor, or otherwise engage in any activities in competition with
the activities of the Company.

<PAGE>

You shall also abide by the Code of Ethics Agreement and other Corporate
Governance Rules as displayed on the Company's Web Page. You shall disclose
prior to the execution of this agreement (or later on as the case may be) all
outside business relationships, interests, investments, enterprises, that you
presently have or contemplate entering into or enter into in the future that
might affect your time spent on the business interests and your employment
responsibilities to Lakeland, and/or loyalties to Lakeland.

6.    CONFIDENTIALITY
      ---------------

Except as required in your duties to the Company you shall not at any time
during your employment and for a period of 5 years thereafter directly or
indirectly use or disclose any confidential information relating to the Company
or its business which is disclosed to you or known by you as a consequence of or
through your employment by the Company and which is not otherwise generally
obtainable by the public at large.

7.    TERMINATION
      -----------

You or the Company may terminate your employment prior to the end of the Term
for any reason upon written notice to the other party in accordance with the
following provisions:

      (a)   Death. Your employment shall terminate on the date of your death.
            Your Base Salary (as in effect on the date of death) shall continue
            through the last day of the month in which your death occurs.
            Payment of your Base Salary shall be made to your estate or your
            beneficiary as designated in writing to the Company. Your estate or
            designated beneficiaries as applicable shall also receive a pro-rata
            portion of the Annual Bonus, if any, determined for the fiscal year
            up to and including the date of death which shall be determined in
            good faith by the Compensation Committee of the Board of Directors.
            Your beneficiaries shall also be entitled to all other benefits
            generally paid by the Company on an employee's death.

      (b)   Disability. Your employment shall terminate if you become totally
            disabled. You shall be deemed to be totally disabled if you are
            unable, for any reason, to perform any of your duties to the Company
            for a period of ninety consecutive days, or for periods aggregating
            120 days in any period of 180 consecutive days.

      (c)   Other Termination. Should you decide to leave the Company, you will
            provide the Company with 45 days written notice. Should the Company
            decide to terminate you for any reason it shall have the right to
            buy out your contract rights herein for 6 months base pay and any
            commissions and bonus due you on the date of termination and shall
            determine same by what you would have been paid in salary for 6
            months after the date of termination

<PAGE>

            calculated from the prior six months of salary, all concomitant with
            your execution of the Company's standard severance agreement.

8.    NOTICES
      -------

Any notices required to be given under this Agreement shall, unless otherwise
agreed to by you and the Company, be in writing and by certified mail, return
receipt requested and mailed to the Company at its headquarters at 701-7 Koehler
Avenue, Ronkonkoma, NY 11779-07410 or to you at your business address at 202
Pride Lane, Decatur, AL 35603.

9.    WAIVER OR MODIFICATION
      ----------------------

No waiver or modification in whole or in part of this agreement or any term or
condition hereof shall be effective against any party unless in writing and duly
signed by the party sought to be bound. Any waiver of any breach of any
provision hereof or right or power by any party on one occasion shall not be
construed as a waiver of or a bar to the exercise of such right or power on any
other occasion or as a waiver of any subsequent breach.

10.   SEPARABILITY
      ------------

Any provision of this agreement or non-competition or confidentiality sections
(the "Agreement") which is unenforceable or invalid in any respect in any
jurisdiction shall be ineffective in such jurisdiction to the extent that it is
unenforceable or invalid without effecting the remaining provisions hereof which
shall continue in full force and effect. The unenforceability or invalidity of
any provision of the agreement in one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

11.   HEADINGS
      --------

The headings contained in this agreement are for convenience only and shall not
affect, restrict or modify the interpretation of this Agreement.

12.   CONTROLLING LAW
      ---------------

This agreement shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed therein
and you agree to the exclusive jurisdiction and venue of the federal or state
courts located in the State of New York on any legal issues arising out of this
contract and you agree that such judgments as rendered by New York courts shall
be transferable and binding in all other American courts of competent
jurisdiction.

<PAGE>








                                             LAKELAND INDUSTRIES, INC.
                                             COMPENSATION COMMITTEE


                                             By: /s/ Eric O. Hallman, Chairman
                                                 ------------------------------
                                                      Eric O. Hallman, Chairman


                                             By: /s/ John J. Collins
                                                 ------------------------------
                                                      John J. Collins

AGREED AND ACCEPTED:
                                             By: /s/ Michael Cirenza
                                                 ------------------------------
                                                      Michael Cirenza
/s/ Harvey Pride, Jr.
- ----------------------------
Harvey Pride, Jr.
Vice President                               By: /s/ A. John Kreft
                                                 ------------------------------
                                                      A. John Kreft


                                             By: /s/ Stephen M. Bachelder
                                                 ------------------------------
                                                      Stephen M. Bachelder

                                             Board of Directors
                                             Compensation Committee

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>3
<FILENAME>ex10-7.txt
<TEXT>

                            Lakeland Industries, Inc.               EXHIBIT 10.7

                              Employment Agreement

         This agreement ("Agreement") has been entered into this ___ day
_____________, 2006, by and between Lakeland Industries, Inc., a Delaware
corporation ("Company"), and Christopher J. Ryan, an individual ("Executive").

                             IT IS AGREED AS FOLLOWS

SECTION 1:          DEFINITIONS AND CONSTRUCTION.

1.1        DEFINITIONS. For purposes of this Agreement, the following words and
           phrases, whether or not capitalized, shall have the meanings
           specified below, unless the context plainly requires a different
           meaning.

1.1 (a)    "CHANGE IN CONTROL" means:

           (i) The acquisition by any individual, entity or group, or a Person
           (within the meaning of Section 13 (d) (3) or 14 (d) (2) of the
           Exchange Act) of ownership of more than 50% of either (a) the then
           outstanding shares of common stock of the Company (the "Outstanding
           Company Common Stock") or (b) the combined voting power of the then
           outstanding voting securities of the Company entitled to vote
           generally in the election of directors (the "Outstanding Company
           Voting Securities"); or

           (ii) Individuals who, as the date hereof, constitute the Board (the
           "Incumbent Board") cease for any reason to constitute at least a
           majority of the Board; provided, however, that any individual
           becoming a director subsequent to the date hereof whose election, or
           nomination for election by the Company's stockholders, was approved
           by a vote of at least a majority of the directors then comprising the
           Incumbent Board shall be considered as though such individual were a
           member of the Incumbent Board, but excluding, as a member of the
           Incumbent Board, any such individual whose initial assumption of
           office occurs as a result of either an actual or threatened election
           contest (as such terms are used in Rule 14a-11 of Regulation 14A
           promulgated under the Exchange Act) or other actual or threatened
           solicitation of proxies or consents by or on behalf of a Person other
           than the Board; or

           (iii) Approval by the stockholders of the Company of a
           reorganization, merger or consolidation, in each case, unless,
           following such reorganization, merger or consolidation, (a) more than
           50% of, respectively, the then outstanding shares of common stock of
           the corporation resulting from such reorganization, merger or
           consolidation and the combined voting power of the then outstanding
           voting securities of such corporation entitled to vote generally in
           the election of directors is then beneficially owned, directly or
           indirectly, by all or substantially all of the individuals and
           entities who were the beneficial owners, respectively, of the
           Outstanding Company Common Stock and Outstanding Company Voting
           Securities immediately prior to such reorganization, merger or
           consolidation in substantially the same proportions as their

                                       1
<PAGE>

           ownership, immediately prior to such reorganization, merger or
           consolidation, of the Outstanding Company Common Stock and
           Outstanding Company Voting Securities, as the case may be, (b) no
           Person beneficially owns, directly or indirectly, 30% or more of,
           respectively, the then outstanding shares of common stock of the
           corporation resulting from such reorganization, merger or
           consolidation or the combined voting power of the then outstanding
           voting securities of such corporation, entitled to vote generally in
           the election of directors and (c) at least a majority of the members
           of the board of directors of the corporation resulting from such
           reorganization, merger or consolidation were members of the Incumbent
           Board at the time of the execution of the initial agreement providing
           for such reorganization, merger or consolidation; or

           (iv) Approval by the stockholders of the Company of (a) a complete
           liquidation or dissolution of the Company or (b) the sale or other
           disposition of all or substantially all of the assets of the Company,
           other than to a corporation, with respect to which following such
           sale or other disposition, (1) more than 50% of, respectively, the
           then outstanding shares of common stock of such corporation and the
           combined voting power of the then outstanding voting securities of
           such corporation entitled to vote generally in the election of
           directors is then beneficially owned, directly or indirectly, by all
           or substantially all of the individuals and entities who were the
           beneficial owners, respectively, of the Outstanding Company Common
           Stock and Outstanding Company Voting Securities immediately prior to
           such sale or other disposition in substantially the same proportion
           as their ownership, immediately prior to such sales or other
           disposition, of the Outstanding Company Common Stock and Outstanding
           Company Voting Securities, as the case may be, (2) no Person
           beneficially owns, directly or indirectly, 30% or more of,
           respectively, the then outstanding shares of common stock of such
           corporation and the combined voting power of the then outstanding
           voting securities of such corporation entitled to vote generally in
           the election of directors and (3) at least a majority of the members
           of the board of directors of such corporation were members of the
           Incumbent Board at the time of the execution of the initial agreement
           or action of the Board providing for such sale or other disposition
           of assets of the Company.


                  1.1 (b) "EMPLOYMENT PERIOD" means the period beginning on
           February 1, 2006 and ending on April 30, 2008.

1.1 (c)    "PERSON" has the meaning set forth in Sections 13 (d) and 14 (d) of
           the Exchange Act.

1.1 (d)    "TERM" means the period that begins on February 1, 2006 and ends
           on the earlier of: (i) the Date of Termination as defined in Section
           3.6 of this Agreement, or (ii) the close of business on April 30,
           2008.

1.1 (e)    "TRIGGERING TRANSACTION" means a Change of Control of the Company.

1.1 (f)    "TRIGGERING TRANSACTION DATE" shall mean the date of the Triggering
           Transaction.

                                       2
<PAGE>

1.2        APPLICABLE LAW. This Agreement shall be governed by and construed in
           accordance with the laws of the State of New York without reference
           to its conflict of law principles.

SECTION 2:      TERMS AND CONDITIONS OF EMPLOYMENT.

2.1        PERIOD OF EMPLOYMENT. The Executive shall remain in the employ of the
           Company throughout the Term of this Agreement in accordance with the
           terms and provisions of this Agreement.

2.2        POSITIONS AND DUTIES.

2.2(a)     Throughout the Term of this Agreement, the Executive shall serve
           as a Director of the Board and President, General Counsel and
           Secretary of the Company, subject to reasonable directions and
           nominations of the Board. The Executive shall have such authority and
           shall perform such duties as are specified by the By-laws of the
           Company for the office to which he has been appointed hereunder and
           shall so serve, subject to the control exercised by the Board from
           time to time. Additionally, each year throughout the Term of the
           Executive's service as a Director, the Executive shall be nominated
           to serve as member of the Board.

2.2(b)     Throughout the Term of this Agreement (but excluding any periods
           of vacation and sick leave to which the Executive is entitled), the
           Executive shall devote his full business time and attention to the
           business and affairs of the Company and shall use his best efforts to
           perform faithfully and efficiently such responsibilities as are
           assigned to him under or in accordance with this Agreement; provided
           that, it shall not be a violation of this paragraph for the Executive
           to serve on corporate, civic or charitable boards or committees, so
           long as such activities do not interfere with the performance of the
           Executive's responsibilities as an employee of the Company in
           accordance with this Agreement or violate the Company's conflict of
           interest policy.

2.3        SITUS OF EMPLOYMENT. Throughout the Term of this Agreement, the
           Executive's services shall be performed at the location where the
           Executive was employed immediately prior to the Effective Date, or
           any office of the Company which is locatedon Long Island or the New
           York City metropolitan area. It is understood and agreed by the
           Executive that the Executive will be required at the discretion of
           the Board of Directors, to engage in substantial business travel.

2.4        COMPENSATION.

2.4(a)     ANNUAL BASE SALARY. The Executive shall receive an annual salary
           ("Annual Base Salary") of $400,000 between February 1, 2006 and April
           30, 2008, which shall be paid in equal or substantially equal
           semi-monthly installments (i.e. $16,666.67 semi-monthly). During the
           Term of this Agreement, the Annual Base Salary payable to the
           Executive shall be reviewed at least annually and may be increased at
           the sole discretion of the Compensation Committee of the Board but
           shall not be reduced.

                                       3
<PAGE>

2.4(b)     INCENTIVE BONUSES. In addition to Annual Base Salary, the Executive
           shall be awarded the opportunity to earn an incentive bonus on an
           annual basis ("Incentive Bonus") under an incentive compensation
           planto be determined by the Compensation Committee of the Board.
           During the Term of this Agreement, the annual Incentive Bonus which
           the Executive will have the opportunity to earn shall be reviewed at
           least annually and be increased at the discretion of the Compensation
           Committee of the Board.


2.4(c)     INCENTIVE, SAVINGS AND RETIREMENT PLANS. Throughout the Term of
           this Agreement, the Executive shall be entitled to participate in all
           incentive, savings and retirement plans generally available to other
           peer executives of the Company.

2.4(d)     WELFARE BENEFIT PLANS. Throughout the Term of this Agreement (and
           thereafter, subject to Section 4.1 (c) hereof), the Executive and /or
           the Executive's family, as the case may be, shall be eligible for
           participation in and shall receive all benefits under welfare benefit
           plans, practices, policies and programs provided by the Company
           (including, without limitation, medical, prescription, dental,
           disability, salary continuance, employee life, group life, accidental
           death and travel accident insurance plans and programs) to the extent
           generally available to other peer executives of the Company. As it
           affects Sections 2.4(c) and 2.4(d) above, the Company shall always
           have the right to alter its benefit plan providers.


2.4(e)     EXPENSES. Throughout the Term of this Agreement, the Executive
           shall be entitled to receive reimbursement for all reasonable and
           necessary business-related expenses incurred by the Executive in
           accordance with the policies, practices and procedures generally
           applicable to other peer executives of the Company. The Executive
           agrees to submit receipts and/or vouchers in support of all requests
           for reimbursement.

2.4(f)     FRINGE BENEFITS. Throughout the Term of this Agreement, the
           Executive shall be entitled to use a non-luxury automobile, with
           title to remain in the Company, and life insurance in the face amount
           of $500,000, paid by the Company. Executive agrees to be solely
           responsible for any and all federal, state and local taxes owing as a
           result of such automobile or life insurance being provided.

2.4(g)     VACATION. Throughout the Term of this Agreement, the Executive
           shall be entitled to paid vacation for 20 business days. It is
           understood that no more than two (2) consecutive weeks of vacation
           shall be taken by Executive at any one time.

SECTION 3:       TERMINATION OF EMPLOYMENT

3.1        DEATH. Your employment shall terminate on the date of your death.
           Your Base Salary (as in effect on the date of death) shall continue
           through the last day of the month in which your death occurs, the
           payment of which shall be made to your estate or your beneficiary as
           designated in writing to the Company. Your estate or designated
           beneficiaries as applicable shall also receive a pro-rata portion of
           the Incentive Bonus, if any, determined for the fiscal year up to and
           including the date of death which shall be determined in good faith
           by the Compensation Committee of the Board of Directors.

                                       4
<PAGE>

           Your beneficiaries shall also be entitled to all other benefits
           generally paid by the Company on an employee's death.

3.2.       DISABILITY. Your employment shall terminate if you become totally
           disabled. You shall be deemed to be totally disabled if you are
           unable, for any reason, to perform any of your duties to the Company
           for a period of ninety consecutive days, or for periods aggregating
           120 days in any period of 180 consecutive days.

3.3        TERMINATION FOR CAUSE. The Company may terminate the Executive's
           employment during the Employment Period for "Cause", which shall mean
           termination based upon: (i) the Executive's failure to substantially
           perform his duties with the Company (other than as a result ofa
           disability, which shall be governed by Section 3.2), after a written
           demand for substantial performance is delivered to the Executive by
           the Company, which specifically identifies the manner in which the
           Executive has not substantially performed his duties, (ii) the
           Executive's commission of an act of fraud, theft, misappropriation,
           dishonesty or embezzlement, (iii) the Executive's conviction for a
           felony or pleading nolo contendere to a felony, (iv) the Executive's
           failure to follow a lawful directive of the Board of Directors, or
           (v) the Executive's material breach of any provision of this
           Agreement. Notwithstanding the foregoing, the Executive shall not be
           deemed to have been terminated for Cause unless and until (i) he
           receives a Notice of Termination from the Company, (ii) he is given
           the opportunity, with counsel, to be heard before the Board, and
           (iii) the Board finds, in its good faith opinion, the Executive was
           guilty of the conduct set forth in the Notice of Termination.

3.4        GOOD REASON. The Executive may terminate his employment with the
           Company for "Good Reason", which shall mean:

3.4(a)     the assignment to the Executive of any duties inconsistent in any
           respect with the Executive's position (including status, offices,
           titles and reporting requirements), authority, duties or
           responsibilities as contemplated by Section 2.2 (a) or any other
           action by the Company which results in a material diminution in such
           position, authority, duties or responsibilities, excluding for this
           purpose any action not taken in bad faith and which is remedied by
           the Company promptly after receipt of notice thereof given by the
           Executive;


3.4(b)     (i) in the event of and after the occurrence of a Triggering
           Transaction, the failure by the Company to continue in effect any
           benefit or compensation plan, stock ownership plan, life insurance
           plan, health and accident plan or disability plan to which the
           Executive is entitled as specified in Section 2.4,
           (ii) the taking of any action by the Company which would adversely
           affect the Executive's participation in, or materially reduce the
           Executive's benefits under, any plans to which the Executive is
           entitled as specified in Section 2.4, or deprive the Executive of any
           material fringe benefit enjoyed by the Executive as described in
           Section 2.4 (f), or
           (iii) the failure by the Company to provide the Executive with paid
           vacation to which the Executive is entitled as described in Section
           2.4 (g).

                                       5
<PAGE>

3.4(c)     in the event of and after the occurrence of a Triggering
           Transaction, the Company's requiring the Executive to be based at any
           office or location other than that described in Section 2.3;

3.4(d)     a material breach by the Company of any provision of this
           Agreement; such breach by the Company shall require Executive to
           provide the Company a written notice describing with specificity the
           nature of the contractual breach and the Company shall have 30 days
           to cure such breach.

3.4(e)     within a period ending at the close of business on the date one
           (1) year after the Triggering Transaction Date of any Change in
           Control, if the Company has failed to comply with and satisfy Section
           6.2 on or after such Triggering Transaction Date.

3.5        NOTICE OF TERMINATION. Any termination by the Company for Cause or
           Disability, or by the Executive for Good Reason, shall be
           communicated by Notice of Termination to the other party, given in
           accordance with Section 7.2. For purposes of this Agreement, a
           "Notice of Termination" means a written notice which (i) indicates
           the specific termination provision in this Agreement relied upon,
           (ii) to the extent applicable, sets forth in reasonable detail the
           facts and circumstances claimed to provide a basis for termination of
           the Executive's employment under the provision so indicated, and
           (iii) if the Date of Termination (as defined in Section 3.6 hereof)
           is other than the date of receipt of such notice, specifies the
           termination date (which date shall be not more than thirty (30) days
           after the giving of such notice). The failure by the Executive or the
           Company to set forth in the Notice of Termination any fact or
           circumstance which contributes to a showing of Good Reason or Cause
           shall not waive any right of the Executive or the Company hereunder
           or preclude the Executive or the Company from asserting such fact or
           circumstance in enforcing the Executive's or the Company's rights
           hereunder.

3.6        DATE OF TERMINATION. "Date of Termination" means (i) if the
           Executive's employment is terminated by the Company for Cause, or by
           the Executive for Good Reason, the Date of Termination shall be the
           date of receipt of the Notice of Termination or any later date
           specified therein, as the case may be, (ii) if the Executive's
           employment is terminated by reason of death, the Date of Termination
           shall be the date of death of the Executive, or (iii) if the
           Executive's employment is terminated for any other reason, the Date
           of Termination shall be the date of receipt of the Notice of
           Termination.

SECTION 4:      CERTAIN BENEFITS UPON TERMINATION.

4.1        TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If, (i) the Company
           shall terminate the Executive's employment without Cause, or (ii) the
           Executive shall terminate employment with the Company for Good
           Reason, the Executive shall be entitled to the payment of the
           benefits provided below as of the Date of Termination:

4.1(a)     Accrued Obligations. Within thirty (30) days after the Date of
           Termination, the

                                       6
<PAGE>

           Company shall pay to the Executive the sum of (1) the Executive's
           Annual Base Salary through the Date of Termination to the extent not
           previously paid, (2) the accrued benefit payable to the Executive
           under any deferred compensation plan, program or arrangement in which
           the Executive is a participant subject to the computation of benefits
           provisions of such plan, program or arrangement, and (3) any accrued
           vacation pay; in each case to the extent not previously paid (the
           "Accrued Obligation").

           In addition, on the date that Incentive Bonuses are paid to other
           peer executives for the year in which the Executive's employment is
           terminated, the Executive will be paid an amount equal to the product
           of the Current Target Bonus multiplied by a fraction, the numerator
           of which is the number of days during the fiscal year for which the
           Incentive Bonus is paid prior to the Date of Termination and
           denominator of which is 365. For purposes of this Agreement, the term
           "Current Target Bonus" means the Incentive Bonus that would have been
           paid to the Executive for the fiscal year in which the termination of
           employment occurred, if the Executive's employment had not been so
           terminated and the Executive had earned 100% of the Incentive Bonus
           that he could have earned for that year.

4.1(b)     Annual Base Salary and Target Bonus Continuation. For the
           remainder of the Employment Period, the Company shall pay to the
           Executive, the Executive's then-current Annual Base Salary and
           Current Target Bonus as would have been paid to the Executive had the
           Executive remained in the Company's employ throughout the Employment
           Period; provided that in all cases the Executive shall receive, at
           minimum, the then-current Annual Base Salary and Current Target Bonus
           for the remainder of the Employment Period, or for a period beginning
           on the Date of Termination and ending one year thereafter, whichever
           is longer. The Company at any time may elect to pay the balance of
           such payments then remaining in a lump sum, in which case the total
           of such payments shall be discounted to present value on the basis of
           the applicable Federal short-term monthly rate as determined
           according to Code Section 1274 (s) for the month in which the
           Executive's Date of Termination occurred.

4.1(c)     Medical and Health Benefit Continuation. For a period of two
           years beginning on the Date of Termination, the Company shall
           continue medical and health benefits to the Executive and/or the
           Executive's family at least equal to those which would have been
           provided to them if the Executive's employment had not been
           terminated, in accordance with the plans, practices, programs or
           policies of the Company as those provided generally to other peer
           executives and their families; provided, however, that if the
           Executive becomes re-employed with another employer and is eligible
           to receive medical or health benefits under another employer-provided
           plan, the medical and health benefits described herein shall be
           secondary to those provided under such other plan during such
           applicable period of eligibility. In the event Executive is able to
           obtain medical and health care coverage from a third party for the
           duration of such coverage period that is at least as good in all
           material respects as that described in the immediately preceding
           sentence, Executive agrees to accept, in lieu of such Company
           provided medical and health benefits, a lump sum cash payment in an
           amount equal in value to the entire cost to Executive on an after-tax
           basis of such alternate medical and health care coverage.

                                       7
<PAGE>

4.1(d)     Other Benefits. To the extent not previously paid or provided,
           the Company shall timely pay or provide to the Executive and/or the
           Executive's family any other amounts or benefits required to be paid
           or provided for which the Executive and/or the Executive's family is
           eligible to receive pursuant to this Agreement and under any plan,
           program, policy or practice or contract or agreement of the Company
           as those provided generally to other peer executives and their
           families ("Other Benefits").

4.2        DEATH. If the Executive's employment is terminated by reason of the
           Executive's death during the Employment Period, this Agreement shall
           terminate without further obligations to the Executive's legal
           representatives under this Agreement, other than for (i) payment of
           Accrued Obligations (as defined in Section 4.1 (a)) (which shall be
           paid to the Executive's estate or beneficiary, as applicable, in a
           lump sum in cash within thirty (30) days of the Date of Termination)
           and (ii) the timely payment or provision ofany other benefit(s)
           generally provided by the Company upon the death of an employee of
           the Company, including death benefits pursuant to the terms of any
           plan, policy, or arrangement of the Company.

4.3        DISABILITY. If the Executive's employment is terminated by reason of
           the Executive's Disability during the Employment Period, , this
           Agreement shall terminate without further obligations to the
           Executive, other than for (i) payment of Accrued Obligations (as
           defined in Section 4.1 (a)) (which shall be paid to the Executive in
           a lump sum in cash within thirty (30) days of the Date of
           Termination) and (ii) the timely payment or provision of any other
           benefit(s) generally provided by the Company upon the Disability of
           an employee, including Disability benefits pursuant to the terms of
           any plan, policy or arrangement of the Company.

4.4        TERMINATION FOR CAUSE; OTHER THAN GOOD REASON. If the Executive's
           employment shall be terminated for Cause during the Employment
           Period, this Agreement shall terminate without further obligations to
           the Executive other than the obligations to pay to the Executive his
           Accrued Compensation (as defined in this Section). If the Executive
           terminates employment with the Company during the Employment Period,
           (excluding a termination for Good Reason), this Agreement shall
           terminate without further obligations to the Executive, other than
           for the payment of Accrued Compensation (as defined in this Section).
           In such case, all Accrued compensation shall be paid to the Executive
           in a lump sum in cash within thirty (30) days of the Date of
           Termination.

           For the purpose of this Section, the term "Accrued Compensation"
           means the sum of (i) the Executive's Annual Base Salary through the
           Date of Termination to the extent not previously paid, (ii) any
           compensation previously deferred by the Executive (together with any
           accrued interest or earnings thereon), and (iii) any accrued vacation
           pay; in each case, to the extent not previously paid.

4.5        NON-EXCLUSIVITY OF RIGHTS; SUPERSESSION OF CERTAIN BENEFITS. Except
           as provided in Section 4.1 (c) and in this Section 4.6, nothing in
           this Agreement shall prevent or limit the Executive's continuing or
           future participation in any plan,

                                       8
<PAGE>

           program, policy or practice provided by the Company and for which the
           Executive may qualify, nor shall anything herein limit or otherwise
           affect such rights as the Executive may have under any contract or
           agreement with the Company. Amounts which are vested benefits of
           which the Executive is otherwise entitled to receive under any plan,
           policy, practice or program of, or any contract or agreement with,
           the Company at or subsequent to the Date of Termination, shall be
           payable in accordance with such plan, policy, practice or program or
           contract or agreement except as explicitly modified by this
           Agreement.


SECTION 5:      NON-COMPETITION.

5.1        NON-COMPETE AGREEMENT

5.1(a)     It is agreed that during the Term of this Agreement and for a period
           of two (2) years thereafter, the Executive shall not, without prior
           written approval of the Board, become an officer, employee, agent,
           partner, consultant, beneficial/owner, agent, investor, or director
           of any business enterprise in substantial direct competition (as
           defined in Section 5.1(b)) with the Company; provided that, if the
           Executive is terminated by the Company without Cause or if the
           Executive terminates his employment for Good Reason, then he will not
           be subject to the restrictions of this Section.

5.1(b)     For purposes of Section 5.1, a business enterprise with which the
           Executive becomes associated as an officer, employee, agent, partner,
           consultant, beneficial/owner, agent, investor or director shall be
           considered in substantial direct competition, if such entity competes
           with the Company in any business in which the Company is engaged and
           is within the Company's market area as of the date that the Term of
           this Agreement expires.

5.1(c)     The above constraint shall not prevent the Executive from making
           passive investments, not to exceed five percent (5%), in any
           enterprise.

5.1(d)     It is agreed that during the Term of this Agreement and for a period
           of two (2) years thereafter, the Executive shall not, directly or
           indirectly, hire, offer to hire, or otherwise solicit the employment
           of any employee of the Company on behalf of himself or any business
           enterprise in substantial direct competition (as defined in Section
           5.1(b)) with the Company.

5.1(e)     CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
           capacity for the benefit of the Company all secret or confidential
           information, knowledge or data relating to the Company or any of its
           affiliated companies, and their respective businesses, which shall
           have been obtained by the Executive during or as a result of the
           Executive's employment by the Company and which shall not be or
           become public knowledge (other than by acts by the Executive or
           representatives of the Executive in violation of this Agreement).
           After termination of the Executive's employment with the Company, the
           Executive shall not, without the prior written consent of the
           Company, or as may otherwise be required by law or legal process,
           communicate or divulge any such information, knowledge or data to
           anyone other than the Company

                                       9
<PAGE>

           and those designated by it. In no event shall an asserted violation
           of the provisions of this Section constitute a basis for deferring or
           withholding any amounts otherwise payable to the Executive under this
           Agreement.

5.1(f)     The Executive agrees that the foregoing restrictions are
           reasonable and shall not prevent the Executive from earning a
           livelihood, and furthermore, if any court of competent jurisdiction
           deems any of the provisions of the foregoing invalid, this Agreement
           shall be enforced to the full extent that such provisions are valid
           and such court may modify such restrictions to afford the Company the
           maximum applicable protection permitted under the law.

5.1(g)     Should Executive be adjudicated by a court of competent jurisdiction
           to be in violation of this Section 5.1, all amounts owed Executive
           pursuant to this Agreement shall be forfeited, and the Company shall
           be entitled to injunctive or such other equitable relief as is
           necessary to restrain Executive's breaching conduct.

5.2        DEVELOPMENTS. It is agreed that all developments, including
           ------------
           inventions, whether patentable or otherwise, trade secrets,
           formulations, discoveries, concepts, processes, improvements, ideas
           or writings, or know-how related thereto, which directly or
           indirectly relate to or may be useful in the design, manufacture,
           packaging or marketing of the Company's products or otherwise in the
           business of the Company or which directly or indirectly result from
           or are related to any services the Executive has rendered, is or will
           be engaged in rendering for the Company which the Executive, either
           by himself or in conjunction with any other person or persons, shall
           conceive, make, develop, acquire or acquire knowledge of during the
           employment relationship or because of the employment relationship
           (the "developments"), shall become and remain the sole and exclusive
           property of the Company. The Executive hereby assigns, transfers and
           conveys all of his right, title and interest in and to any and all
           such developments and to promptly disclose all such developments to
           the Company. Upon the request of the Company, the Executive will
           execute and deliver any and all instruments, documents and papers,
           give evidence and do any and all other acts which are or may be
           necessary or desirable to document such transfer or to enable the
           Company to file and prosecute applications for and to acquire,
           maintain and enforce any and all patents, trademark registrations or
           copyrights under United States or foreign law with respect to any
           such developments or to obtain any extension, validation, reissue,
           continuance or renewal of any such patent, trademark or copyright.
           The Company will be responsible for the preparation of any such
           proceedings and will reimburse the Executive for reasonable expenses
           incurred complying with the provisions of this paragraph.


SECTIONS 6:     SUCCESSORS.

6.1        SUCCESSORS OF EXECUTIVE. This Agreement is personal to the Executive
           and, without the prior written consent of the Company, the rights
           (but not the obligations) shall not be assignable by the Executive
           otherwise than by will or the laws of descent and distribution. This
           Agreement shall inure to the benefit of and be enforceable by the
           Executive's legal representatives.

                                       10
<PAGE>

6.2        SUCCESSORS OF COMPANY. The Company will require any successor
           (whether direct or indirect, by purchase, merger, consolidation or
           otherwise) to all or substantially all of the business and/or assets
           of the Company to assume expressly and agree to perform this
           Agreement in the same manner and to the same extent that the Company
           would be required to perform it if no such succession had taken
           place. Failure of the Company to obtain such agreement prior to the
           effectiveness of any such succession shall be a breach of this
           Agreement and shall entitle the Executive to terminate the Agreement
           at his option on or after the Triggering Transaction Date for Good
           Reason. As used in this Agreement, "Company" shall mean the Company
           as hereinbefore defined and any successor to its business and/or
           assets which assumes and agrees to perform this Agreement by
           operation of law, or otherwise.

SECTION 7:      MISCELLANEOUS.

7.1        OTHER AGREEMENTS. The Board may, from time to time, in the future,
           provide other incentive programs and bonus arrangements to the
           Executive with respect to the occurrence of a Triggering Event that
           will be in addition to the benefits required to be paid in the
           designated circumstances in connection with the occurrence of a
           Triggering Transaction. Such additional incentive programs and/or
           bonus arrangements will affect or abrogate the benefits to be paid
           under this Agreement only in the manner and to the extent explicitly
           agreed to by the Executive in any such subsequent program or
           arrangement.

7.2         NOTICE. For purposes of this Agreement, notices and all other
            communications provided for in the Agreement shall be in writing and
            shall be deemed to have been duly given when delivered or mailed by
            certified or registered mail, return receipt requested, postage
            prepaid, addressed to the respective addresses as set forth below;
            provided that all notices to the Company shall be directed to the
            attention of the Chairman of the Board, or to such other address as
            one party may have furnished to the other in writing in accordance
            herewith, except that notice of change of address shall be effective
            only upon receipt.

                                    Notice to Executive:
                                    ------------------------
                                    Christopher J. Ryan
                                    136 West Bayberry Road
                                    Islip, NY 11751

                                    Notice to Company:
                                    -----------------------
                                    Lakeland Industries, Inc.
                                    701-7 Koehler Ave.
                                    Ronkonkoma, NY 11779

7.3        VALIDITY. The invalidity or unenforceability of any provisions of
           this Agreement shall not affect the validity or enforceability of any
           other provision of this Agreement.

7.4        WAIVER. The Executive's or the Company's failure to insist upon
           strict compliance

                                       11
<PAGE>

           with any provision hereof or any other provision of this Agreement or
           the failure to assert any right the Executive or the Company may have
           hereunder, including, without limitation, the right of the Executive
           to terminate employment for Good Reason pursuant to Section 3.4 shall
           not be deemed to be a waiver of such provision or right or any other
           provision or right of this Agreement.

           IN WITNESS WHEREOF, the Executive and, the Company, pursuant to the
            authorization from its Board, have caused this Agreement to be
            executed in its name on its behalf, all as of the day and year first
            above written.

                                        By:  /s/ Christopher J. Ryan
                                             ----------------------------
                                             Christopher J. Ryan

                                        Members BOD Compensation Committee

                                        By:  /s/ Eric O. Hallman
                                             ----------------------------
                                             Eric O. Hallman

                                        By:  /s/ John J. Collins
                                             ----------------------------
                                             John J. Collins

                                        By:  /s/ A. John Kreft
                                             ----------------------------
                                             A. John Kreft

                                        By:  /s/ Michael Cirenza
                                             ----------------------------
                                             Michael Cirenza

                                        By:  /s/ Stephan Bachelder
                                             ----------------------------
                                             Stephan Bachelder

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>4
<FILENAME>ex10-21.txt
<TEXT>
                                                                   Exhibit 10.21

                                 LEASE AGREEMENT

Santiago de Chile, March 1, 2006, Mr. Carlos Tornquist Bertrand, Chilean, an
individual, Los Algarrobos N2228, on behalf of Tor Chile S.A. (herinafter the
"Landloard")Herin after and Mrs. Agustina Byer, Argentinean, married, 115
Crooked Hill Rd. Huntington New York. U.S.A, Passport N(0)24.069.380, on behalf
of Lakeland Industries, 701 Koheler Avenue, Ronkonkoma New York, 11779, U.S.A.
(hereinafter the "Tenant") agree to this lease agreement upon the following
conditions and covenants stated here in.

1.- PROPERTY
The Landlord is the exclusive owner of the property located in Los Algarrobos
N(0)2228, Santiago de Chile, Chile.

The landlord agrees to lease to the Tenant 2 offices totaling 42 square meters,
including usage of a bathroom and kitchen and a warehouse in the property
mentioned above; and the Tenant agrees to use the property as agree herein,
otherwise it will be cause for termination of this lease agreement and Tenant
shall evacuate the property, even when the end of the term of this agreement is
still pending.

2.- PURPOSE
The Tenant agrees to use the property as office space and warehousing of
merchandise exclusively owned by the tenant. This obligation of the Tenant is
essential for the execution of this agreement.

3. OTHER SERVICES INCLUDED IN THIS AGREEMENT.
The Landlord agrees to provide services of electricity, water, alarm system, and
warehouseman, which are included in the monthly rent. This obligation of the
Landlord is essential for the execution of this agreement.

4.- TERM
The term of this lease agreement is from March 1, 2006 to March, 1 2008.

This agreement will expire in the stated term unless both parties shall agree in
writing to extend the term of this agreement or execute another agreement.

In the event there is no written letter extending the term of this agreement, or
a new agreement, and the Tenant shall not vacate the premises, the Tenant shall
pay the Landlord, the sum equal to a monthly rent plus a 20% for any additional
months the Tenant remains and the Landlord shall have all continuing rights
legal actions against the Tenant.

5.- RENT
The parties agree monthly rent shall be US$1,000 for the property and other
services Landlord shall provide. The rent shall be paid in advance, within the
first 5 days of each

<PAGE>

month at the Landlords domicile, through a deposit at the Bank Boston or any
other financial entity stated by the Landlord. The Tenant agrees and consents
that any late payment will result in a 1% interest penalty per day over the
monthly rent.

Landlord grants to Tenant an option to renew this lease agreement after
expiration of the term of this agreement, at which time the parties shall agrees
the amount of new rent and the new covenants of this agreement.

6.- OTHER PAYMENTS.
The tenant is obligated to pay for gas, telephone, freight, and communal
expenses.

7.- TERMINATION
In the event of default in payment on the rent over 10 days of the 5th day of
any month, the Landlord shall immediately terminate this agreement, according to
the law. The Landlord has the right to claim for damages and unpaid rents for
breach of this agreement.

8.- PROHIBITIONS FOR THE TENANT
It is expressly prohibited for the Tenant to assign, sublease or license in
whole or in part the premises; to alter the structure of the property; to
disturb the neighbors; to have animals; to have explosive, flammable or
intoxicating materials in the premises. It is expressly prohibited to use the
premises for any other purposes as stated in section 2 of this agreement. In the
event, the Tenant assigns or subleases the Leased Premises to a third party, the
tenant shall be liable for any damages on the premises and this lease shall be
terminable.

9.- MAINTENANCE
The Tenant shall agree to maintain in perfect conditions, the keys, artifacts,
valves, toilets, plugs, bells, electricity vents; and o repair them and change
them. The Tenant shall take care of the landscaping; clean and maintain the
heating system, and the Tenant shall repair and maintain the premises in good
condition.

The tenant agrees to repair at it's owns expense caused by its ordinary use the
ceiling, walls, glasses, paintings and features of the premise. Any damage that
is the tenants is not obliged to repair structural damages, liking pipes, etc,
which shall be repaired by the Landlord, immediately after notification by the
Tenant. If within 10 days the Landlord does not repair the damages, the Tenant
is entitled to repair the damage and to deduct the cost of the repair from the
monthly rent.

10.-IMPROVEMENTS.
The Tenant is authorized to improve and remodel the property necessary for its
usage. At the termination of this agreement all fixtures installed in, and
improvements made in the Leased Premises, can be removed if the removal does not
damage the structure of the property. All other improvements shall remain as
part of the premises. It is expressly

<PAGE>

agreed that if the agreement is terminated before the expiration of the Term of
this agreement because the Landlord is in breach, the Landlords shall pay the
Tenant for the cost, expenses or value of the fixtures that could not be removed
without damaging the property.

11.-RESTITUTION OF THE PREMISES.
At the end of this agreement the Tenant agrees to return the Leased Premises in
the same condition as when entered and to return the keys to the property.
Furthermore, the Tenant shall provide the Landlord with the rent receipts and
expenses incurred during this agreement.

12.-WARRANTY
To guaranty the maintenance of the premises in the same condition as when
entered; repairs of the damages on any fixtures, or the services and premises;
and in general, to perform all the obligations stated in this agreement; the
Tenant shall make a deposit one month's rent as a security. If at the end of the
Term there is a credit balance in favor of the Tenant, the Landlord agrees to
return such amount to the Tenant, unless the Landlord has a legal right to
exercise in his favor and to deduct damages caused by the Tenant; as well as the
amount of unpaid invoices for electricity, gas, telephone and other expenses
incurred by the Tenant.

13.- DAMAGES
The Landlord shall not be liable for robberies incurred to the property or
damages caused by fires, floods, leacks, broken pipes, damages caused by heat or
humidity and other natural damages.

15.- PROHIBITIONS
The Tenant shall not use the security to pay the monthly rent of any month nor
the last month of the term.

16.-DOMICILE
For all matters pertaining to this agreement the parties agree that the domicile
is Santiago the Chile, and whatever action may be brought, shall be governed by,
construed and enforced in accordance with the Jurisdiction of the Santiago de
Chile.

17. OTHER CONDITIONS.
The rent includes the fixtures that shall be stated in an attachment and signed
by the parties heretp


This agreement is executed March 1, 2006.


Carlos Tornquist                                     Agustina Byer
Tor Chile S.A.                                       Lakeland Industries, Inc.
Landlord                                             Tenant


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>5
<FILENAME>ex10-22.txt
<TEXT>
                                                                   Exhibit 10.22

                        DATED_______________________2006

            THE TRUSTEES OF THE WALLINGFEN PARK LIMITED PENSION TRUST

                                      -to-

                       LAKELAND INDUSTRIES EUROPE LIMITED

                                 ***************

                                      LEASE
                                  Relating to:
                       Units 9 and 10 and office block at
                     Wallingfen Park, 236 Main Road Newport
                            East Riding of Yorkshire



                                     Ivesons
                                   Solicitors
                                      HULL

<PAGE>

A LEASE DATED
- -------------

1.1     The Landlord                     MICHAEL  ROBERT KENDALL AND JUNE JARVIS
                                         of  Wallingfen  Lodge,  236 Main  Road,
                                         Newport,  East  Yorkshire  HU15 2RH and
                                         BARNETT  WADDINGHAM   TRUSTEES  LIMITED
                                         whose registered  office is at Chalfont
                                         Court,    Hill    Avenue,     Amersham,
                                         Buckinghamshire HP6 5BB

1.2.1   The Tenant                       LAKELAND   INDUSTRIES   EUROPE  LIMITED
                                         (Company    Number    04500660)   whose
                                         registered   office   is  at   Unit  11
                                         Wallingfen  Park 236 Main Road  Newport
                                         East Yorkshire HU15 2RH

1.3     The Guarantor                    None

1.4     The Premises                     All that  the  light  industrial  units
                                         known  as Unit 9 and 10  TOGETHER  WITH
                                         the  office  block to the south of Unit
                                         11 all of which form part of  Warehouse
                                         Unit 3 at  Wallingfen  Park,  236  Main
                                         Road,    Newport,    East   Riding   of
                                         Yorkshire   and  are   shown   for  the
                                         purposes of  identification  only edged
                                         red on the Plan

1.5     The Estate                       The   land  and   warehouse   buildings
                                         situate at  Wallingfen  Park,  236 Main
                                         Road,  Newport  (of which the  Premises
                                         forms   part)    together   with   such
                                         additional  land and buildings owned or
                                         acquired by the  Landlord  from time to
                                         time as  shall be  brought  into use in
                                         the Estate

                                       1
<PAGE>

1.6     Contractual Term                 Five (5) years from and  including  the
                                         First day of January 2006

1.7     Rent Commencement Date           the First day of January 2006

1.8     Initial Rent                     Twenty-two Thousand Nine Hundred Pounds
                                         ((pound)22,900.00) exclusive of VAT

1.9     Review Dates                     the First day of  January  2007 and the
                                         First  day  of  January  in  each  year
                                         thereafter  and  Review  Date means any
                                         one of the review dates

1.10    Interest Rate                    4% per  year  above  the  base  lending
                                         rate  of  Barclays  Bank  Plc  or  such
                                         other  Bank  (being  a  member  of  the
                                         Committee   of  London   and   Scottish
                                         Bankers) as the  Landlord may from time
                                         to time nominate in writing

1.11    Permitted User                   General  workshop  storage  and  office
                                         use/light  industrial use or such other
                                         use  that  falls   within   classes  B1
                                         and/or B8 of the  Schedule  to the Town
                                         and  Country   Planning  (Use  Classes)
                                         Order 1987 (as  amended by the Town and
                                         County     Planning    (Use    Classes)
                                         (Amendment)  (England)  Order  2005  as
                                         the  Landlord  shall  from time to time
                                         approve   (such   approval  not  to  be
                                         unreasonably withheld or delayed)

2.     DEFINITIONS
- ------------------

2.1      For all  purposes  of this  Lease the terms  defined in clauses 1 and 2
         have the meanings specified

                                       2
<PAGE>

2.2      "Access  Roads" means the roadways,  yards and pavements  shown hatched
         blue on the Plan

2.3      "Authorised  Guarantee Agreement" shall have the same meaning as in the
         Landlord and Tenant (Covenants) Act 1995

2.4      "Buildings"  means the  warehouse  building or buildings  now or at any
         time during the Term erected on the whole or part of the Estate

2.5      "the  Industrial  Covenants"  means the  covenants set out in the Third
         Schedule

2.6      "the Insurance  Rent" means the sums which the Landlord shall from time
         to time pay or be required to pay by way of premium

         2.6.1    for  insuring  the  Premises  (including  insuring for loss of
                  Rent) in  accordance  with its  obligations  contained in this
                  Lease and

         2.6.2    for insuring in such amount and on such terms (as the Landlord
                  shall consider appropriate or shall be reasonable) against all
                  liability of the Landlord to third  parties  arising out of or
                  in  connection  with any matter  including  or relating to the
                  Premises

         Provided  that  where any  policy  for such  insurance  includes  other
         property as well as the Premises the Insurance Rent shall be equal to a
         fair and  reasonable  proportion  attributable  to the  Premises (to be
         assessed by the Surveyor  whose  decision shall be final and binding on
         all the parties  hereto) of such sums referred to in  sub-clause  2.6.1
         and 2.6.2.

2.7      "Insured   Risks"   means,   subject  to  reasonable   and   continuing
         availability of insurance cover and without limitation,  fire lightning
         explosion   riot  civil   commotion   malicious   persons  and  vandals
         earthquakes  storm tempest flood  bursting and over flowing water pipes
         tanks  and other  apparatus  impact by road  vehicles  and  non-hostile
         aircraft  (including  articles  dropped from  aircraft)  and such other
         risks  or  contingencies  as the  Landlord  from  time  to  time in its
         reasonable  discretion may think fit to insure  against  subject to any
         exclusions  limitations  and  conditions  contained  in the  Policy  of
         Insurance

2.8      "Interest"  means interest during the period from the date on which the
         payment  is due to the  date of  payment  both  before  and  after  any
         judgement at the Interest Rate then  prevailing or should the base rate
         referred  to in clause 1.10 cease to exist or not be  published  at any
         time

                                       3
<PAGE>

         such other rate of  interest  as is most  closely  comparable  with the
         Interest  Rate to be  agreed  between  the  parties  or in  default  of
         agreement to be determined by the Surveyor  acting as an expert and not
         as an arbitrator

2.9      "the 1954 Act" means the Landlord and Tenant Act 1954 (and all statutes
         regulations and orders included by virtue of clause 3.14)

2.10     "Pipes"  means all pipes  sewers  drains mains ducts  conduits  gutters
         water  courses  wires cables  channels  flues and all other  conducting
         media and includes any fixings  louvres  cowls and any other  ancillary
         apparatus which are in on or under or which serve the Premises

2.11     "the Plan" means the plan annexed to this Lease

2.12     "the  Planning  Acts" means the Town and Country  Planning Act 1990 the
         Planning  (Listed  Buildings  and  Conservation  Areas)  Act 1990,  the
         Planning   (Hazardous   Substances)   Act   1990   and   the   Planning
         (Consequential  Provisions) Act 1990 (and all statutes  regulations and
         orders included by virtue of clause 3.14)

2.13     Rent" means the Initial Rent and rent  ascertained  in accordance  with
         the Second  Schedule and such term does not include the Insurance  Rent
         or Service  Charge but the terms Rents  includes  both the Rent and the
         Insurance Rent and the Service Charge

2.14     "Service  Charge" means such proportion as the gross metric area of the
         Premises  bears to the gross metric area of the Buildings on the Estate
         from  time to time of  which  it  forms  part  (to be  assessed  by the
         Surveyor whose decision reasonably based and reached shall be final and
         binding on all the parties hereto) of the annual  expenditure  referred
         to in Part A of the Fourth Schedule

2.15     "Surveyor" means any suitability  qualified person or firm appointed by
         the Landlord to perform any of the functions of the Surveyor under this
         Lease  (including  an employee of the  Landlord or a company  that is a
         member of the same group as the Landlord  within the meaning of Section
         42 of the 1954 Act and including  also the person or the firm appointed
         by the Landlord to collect the rents)

3.       INTERPRETATION
- -----------------------

3.1      The expressions "the Landlord" and "the Tenant" wherever the context so
         admits  include

                                       4
<PAGE>

         the person for the time being  entitled  to the  reversion  immediately
         expectant on the  determination of the Term and the Tenants  successors
         in title respectively and any reference to a superior landlord includes
         the Landlord's  immediate  reversioner (and any superior  landlords) at
         any time

3.2      Where the Landlord the Tenant or the  Guarantor  for the time being are
         two or more persons  obligations  expressed or implied to be made by or
         with such party are deemed to be made by or with such  persons  jointly
         and severally

3.3      Words  importing  one  gender  include  all  other  genders  and  words
         importing the singular include the plural and vice versa

3.4      The expression  "Guarantor"  includes not only the person registered to
         in clause 1.3 (if any) but also any person  who enters  into  covenants
         with the Landlord pursuant to clauses 5.9.5 or 5.25

3.5      The expression "the Premises" includes but without limitation

         3.5.1    the interior faces (including  plaster  surfaces) of all walls
                  and ceiling contiguous with the Premises

         3.5.2    the interior faces (including plaster surfaces) of all columns
                  within the Premises

         3.5.3    the floor  boards of the  Premises  including  beams or joists
                  supporting the same

         3.5.4    the suspended ceilings (if any) and lighting of the Premises

         3.5.5    Doors and all doors contiguous with the Premises including the
                  fasteners catches locks and glass herein

         3.5.6    all windows but excluding the lintels as are  contiguous  with
                  the Premises  including the fasteners catches locks frames and
                  glass therein

         3.5.7    all additions alterations and improvements to the Premises

         3.5.8    all the Landlord's fixtures and fittings and fixtures of every
                  kind which shall from time to time be in or upon the  Premises
                  (whether  originally  affixed  or  fastened  to  or  upon  the
                  Premises or otherwise)  except any such fixtures  installed by
                  the Tenant

         3.5.9    all  Pipes in on under or over  and  exclusively  serving  the
                  Premises

                                       5
<PAGE>

         and excludes:-

         3.5.10   the exterior of the Premises

         3.5.11   the  structure  of the  Premises  (save as may be  included by
                  virtue of clause 3.5.3)

         3.5.12   the foundation of the Premises

         but such  expression  includes no air space above the height of the top
         of the  Premises and  references  to the Premises in the absence of any
         provision to the contrary include any part of the Premises

3.6      The expression "the Term" includes the Contractual  Term and any period
         of holding over or extension or  continuance  of the  Contractual  Term
         whether by statute or common law

3.7      References  to "the last year of the Term" include the last year of the
         Term if the Term shall  determine  otherwise  than by effluxion of time
         and  references  to "the  expiration  of the Term"  include  such other
         determination of the Term

3.8      References  to any right of the Landlord to have access to the Premises
         shall be  construed  as  extending  to any  superior  landlord  and any
         mortgagee of the Premises and to all persons authorised by the Landlord
         and any superior landlord or mortgagee  (including agents  professional
         advisers  contractors or workmen and others) (where such superior Lease
         or  mortgage  grants such right of access to the  superior  Landlord or
         mortgagee)

3.9      Any covenant by the Tenant not to do an act or thing shall be deemed to
         include an  obligation  not to permit or suffer such act or thing to be
         done by another person where the Tenant is aware that such act or thing
         is being done

3.10     Any provision in this Lease referring to the consent or approval of the
         Landlord  shall be construed as also  requiring the consent or approval
         of any mortgagee of the Premises and any superior  landlord  where such
         consent  shall be required but nothing in this Lease shall be construed
         as implying  that any  obligation  is imposed upon any mortgagee or any
         superior  landlord  not  unreasonably  to refuse  any such  consent  or
         approval

3.11     References to "consent of the Landlord" or words to similar effect mean
         a consent  in  writing  signed by or on behalf of the  Landlord  and to
         "approved"  and  "authorised"  or words to similar  effect mean (as the
         case may be) approved or  authorised  in writing by or

                                       6
<PAGE>

         on behalf of the Landlord

3.12     The terms "the parties" or "party" mean the Landlord  and/or the Tenant
         but except where there is an express indication to the contrary exclude
         the Guarantor

3.13     "Development"  has the meaning  given by the Town and Country  Planning
         Act 1990 Section 55

3.14     Any references to a specific statute include any statutory extension or
         modification   amendment  or  re-enactment  of  such  statute  and  any
         regulations or orders made under such statute and any general reference
         to "statute" or  "statutes"  includes  any  regulations  or orders made
         under such statute or statutes

3.15     References  in this Lease to any clause sub clause or schedule  without
         further designation shall be construed as a reference to the clause sub
         clause or schedule to this Lease so numbered

3.16     The clause  paragraph  and  schedule  headings do not form part of this
         Lease  and shall  not be taken  into  account  in its  construction  or
         interpretation

4.       DEMISE
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The Landlord  demises to the Tenant the Premises  EXCEPTING AND RESERVING to the
Landlord the rights  specified in Part I of the First Schedule BUT TOGETHER WITH
the rights  specified  in Part II of the First  Schedule TO HOLD the Premises to
the Tenant for the Contractual Term SUBJECT to all rights  easements  privileges
restrictions  covenants  and  stipulations  of  whatever  nature  affecting  the
Premises  YIELDING  AND  PAYING to the  Landlord

4.1      The Rent  payable  without  deduction  by equal  quarterly  payments in
         advance on the usual quarter days in every year and proportionately for
         any  period  of  less  than a year  the  first  such  payment  being  a
         proportionate  sum in respect of the period from and including the Rent
         Commencement Date to and including the day before the quarter days next
         after the Rent  Commencement  Date to be paid on the date of this Lease
         and

4.2      By way of  further  rent  the  Insurance  Rent  payable  on  demand  in
         accordance  with clause 7 and the Service  Charge payable in accordance
         with the Third Schedule

                                       7
<PAGE>

5.       THE TENANT'S COVENANTS
- -------------------------------

The Tenant covenants with the Landlord

5.1      Rent

         5.1.1    to pay the rents on the days and in the manner set out in this
                  Lease and not to  exercise  or seek to  exercise  any right or
                  claim  to  withhold  rent or any  right  or  claim to legal or
                  equitable set-off

         5.1.2    if so  required  in  writing  by the  Landlord  to  make  such
                  payments  by  banker's  order or credit  transfer  to any bank
                  account in the United  Kingdom that the Landlord may from time
                  to time nominate

5.2      Outgoings and VAT
         To pay and to indemnify the Landlord against

         5.2.1    all rates taxes  assessments  duties charges  impositions  and
                  outgoings  which are now or during  the Term  shall be charged
                  assessed  or imposed  upon the  Premises  or upon the owner or
                  occupier  of  them  (excluding  any  payable  by the  Landlord
                  occasioned  by a  receipt  of rents or by any  disposition  or
                  dealing with or ownership of any interest  reversionary to the
                  interest  created  by this  Lease) and if the  Landlord  shall
                  suffer any loss of rating  relief which may be  applicable  to
                  empty  premises  after  the end of the Term by  reason of such
                  relief  being  allowed  to the Tenant in respect of any period
                  before  the  end of the  Term to make  good  such  loss to the
                  Landlord and

         5.2.2    VAT (or any tax of a similar  nature  that may be  substituted
                  for it or levied in addition to it)  chargeable  in respect of
                  any payment made by the Tenant under any of the terms of or in
                  connection  with this Lease or in respect of any payment  made
                  by the  Landlord  where the  Tenant  agrees  in this  Lease to
                  reimburse the Landlord for such payment

5.3      Electricity Gas and Other Services Consumed
         To pay to the  suppliers  and to  indemnify  the  Landlord  against all
         charges for water  electricity gas and other services  consumed or used
         at or in relation to the Premises (including meter rents)

5.4      Repair Cleaning Decoration etc

         5.4.1    to keep the Premises in as good repair as the same are now in,
                  as  evidenced by the

                                       8
<PAGE>

                  Schedule of Condition  attached hereto excepting damage caused
                  by an Insured Risk save to the extent that the insurance money
                  is  irrecoverable  in consequence of any act or default of the
                  Tenant or anyone at the Premises  expressly or by  implication
                  with the Tenant's authority and under the Tenant's control

         5.4.2    to  replace  from  time to time the  Landlord's  fixtures  and
                  fittings in the Premises  which may be or become beyond repair
                  at any time during or at the expiration of the Term

         5.4.3    to clean the Premises and keep them in a clean condition

         5.4.4    the  Tenant  must  redecorate  the  Premises  in  a  good  and
                  workmanlike  manner  and with  appropriate  materials  of good
                  quality  as  often  as is in  the  reasonable  opinion  of the
                  Landlord or his Surveyor necessary in order to maintain a high
                  standard of decorative finish and preserve the Premises and in
                  the last  year of the  Term  and when in the last  year of the
                  Term any  change to the tints,  colours  and  patterns  of the
                  decoration  are  to be  first  approved  by  the  Landlord  in
                  writing, provided that the covenants relating to the last year
                  of the Term are not to apply where the Tenant has  redecorated
                  the Premises less than 18 months before the end of the Term.

         5.4.5    not to deposit or permit to be deposited  any waste rubbish or
                  refuse on the Access Roads

         5.4.6    not to keep or store on the Access  Roads any vehicle  caravan
                  or movable dwelling

         5.4.7    not to  cause  the  Access  Roads to be  untidy  or in a dirty
                  condition  and in  particular  (but  without  prejudice to the
                  generality  of the above)  not to  deposit  on them  refuse or
                  other   materials  5.4.8  where  the  use  of  Pipes  boundary
                  structures or other things is common to the Premises and other
                  property to be  responsible  for and to indemnify the Landlord
                  against  all sums due from and to  undertake  all work that is
                  the  responsibility  of the owner  lessee or  occupier  of the
                  Premises in relation to those Pipes or other things

         5.5      Waste and Alterations

         5.5.1    Not to

                  5.5.1.1  commit any waste

                  5.5.1.2  make any addition to the Premises

                                       9
<PAGE>

                  5.5.1.3  unite the Premises with any adjoining premises

                  5.5.1.4  make any alteration to the Premises save as permitted
                           by the following provisions of this clause

         5.5.2    not to make any alterations to the Premises without

                  5.5.2.1  obtaining and complying  with all necessary  consents
                           of any competent  authority and paying all charges of
                           any such authority in respect of such consents

                  5.5.2.2  making an application supported by drawings and where
                           appropriate a specification in duplicate  prepared by
                           an  Architect  or  member of some  other  appropriate
                           profession

                  5.5.2.3  paying the fees of the Landlord any superior landlord
                           any  mortgagee  and  their  respective   professional
                           advisers and

                  5.5.2.4  entering  into such  covenants  as the  Landlord  may
                           require as to the execution and  reinstatement of the
                           alterations  and  in  the  case  of  any  works  of a
                           substantial  nature the Landlord may require prior to
                           the  commencement  of such works the provision by the
                           Tenant of adequate  security in the form of a deposit
                           of money or the  provision  of a bond as assurance to
                           the  Landlord  that any works  which may from time to
                           time be  permitted  by the  Landlord  shall  be fully
                           completed

         5.5.3    subject  to the  provisions  of  clause  5.5.2 not to make any
                  internal  non-structural  alterations to the Premises  without
                  the  consent  of  the  Landlord   (such   consent  not  to  be
                  unreasonably withheld or delayed)

         5.5.4    to remove any additional  buildings  additions  alterations or
                  improvements  made to the  Premises at the  expiration  of the
                  Term if so requested by the Landlord and to make good any part
                  or parts of the Premises which may be damaged by such removal

         5.5.5    not to make  connection with the Pipes that serve the Premises
                  otherwise  than in  accordance  with plans and  specifications
                  approved by the Landlord (such approval not to be unreasonably
                  withheld  or   delayed)   subject  to  consent  to  make  such
                  connections having previously been obtained from the competent
                  statutory authority or undertaker

                                       10
<PAGE>

5.6      Aerials Signs and Advertisements

         5.6.1    Not to erect any pole mast or wire (whether in connection with
                  telegraphic  telephonic  radio or television  communication or
                  otherwise) upon the Premises

         5.6.2    Not to affix to or exhibit on the  outside of the  Premises or
                  to or through any window of the Premises nor display  anywhere
                  on the  Premises  any  placard  sign  notice  fascia  board or
                  advertisement  except  any sign  permitted  by  virtue  of any
                  consent given by the Landlord pursuant to a covenant contained
                  in this Lease

5.7      Statutory Obligations

         5.7.1    At the  Tenant's  own expense to execute all works and provide
                  and  maintain  all  arrangements  upon  or in  respect  of the
                  Premises or the use to which the  Premises  are being put that
                  are required in order to comply with the  requirements  of any
                  statute  (already  or in  the  future  to be  passed)  or  any
                  government   department   local   authority  other  public  or
                  competent   authority  or  Court  of  competent   jurisdiction
                  regardless  of whether  such  requirements  are imposed on the
                  lessor the  lessee or the  occupier  PROVIDED  THAT the Tenant
                  shall  not  be   responsible   for  the   remediation  of  any
                  contamination in on or under the Premises or the Estate at the
                  date of this Lease

         5.7.2    Not to do in or near the  Premises  any act or thing by reason
                  of which the Landlord may under any statute incur have imposed
                  upon  it  or  become   liable  to  pay  any  penalty   damages
                  compensation costs charges or expenses

         5.7.3    Without  prejudice to the generality of the above to comply in
                  all respects with the provisions of any statutes and any other
                  obligations imposed by law or by any byelaws applicable to the
                  Premises or in regard to carrying on the trade or business for
                  the time being carried on the Premises

5.8      Access of Landlord and Notice to Repair

         5.8.1    To permit the Landlord:

                  5.8.1.1  to  enter  upon the  Premises  on  giving  reasonable
                           notice  to  the   Tenant   and   causing   as  little
                           inconvenience  and  disturbance to the Tenant and its
                           business as possible for the purpose of  ascertaining
                           that the covenants and  conditions of this Lease

                                       11
<PAGE>

                           have been observed and performed

                  5.8.1.2  to view (and to open up floors under the parts of the
                           Premises  where such  opening up is required in order
                           to view)  the state of repair  and  condition  of the
                           Premises and

                  5.8.1.3  to give to the Tenant (or leave upon the  Premises) a
                           notice specifying any repairs cleaning maintenance or
                           painting  that the  Tenant  has  failed to execute in
                           breach of the terms of this Lease and to request  the
                           Tenant to execute  the same  within  such  reasonable
                           time as the notice may specify  having  regard to the
                           nature and extent of the work  required to remedy the
                           breach  including  the making good of such opening up
                           (if any) providing that any such opening-up  shall be
                           made  good by and at the cost of the  Landlord  where
                           such  opening-up  reveals no breaches of the terms of
                           this Lease

         5.8.2    As soon as possible to repair  cleanse  maintain and paint the
                  Premises as required by such notice

         5.8.3    If within one month of the service of such a notice the Tenant
                  shall not have commenced and be proceeding diligently with the
                  execution of the work  referred to in the notice or shall fail
                  to complete the work within two months or if in the Landlord's
                  Surveyors  reasonable  opinion  the Tenant is unlikely to have
                  completed  the work within such period to permit the  Landlord
                  to enter the Premises to execute such work as may be necessary
                  to comply with the notice and to pay to the  Landlord the cost
                  of  so  doing  and  all  expenses  incurred  by  the  Landlord
                  (including legal costs and surveyors fees) within 14 days of a
                  written demand

5.9      Alienation

         5.9.1    Not to hold on  trust  for  another  or  (save  pursuant  to a
                  transaction  permitted by and effected in accordance  with the
                  provisions  of this  Lease)  part with the  possession  of the
                  whole or any part of the Premises or permit  another to occupy
                  the whole or any part of the Premises

         5.9.2    Not to assign or charge part only of the  Premises  and not to
                  underlet the whole or any part

                                       12
<PAGE>

                  of the Premises

         5.9.3    Not to  assign or charge  the  whole of the  Premises  without
                  prior   consent  to  the  Landlord  such  consent  not  to  be
                  unreasonably  withheld or delayed  provided  that the Landlord
                  shall be entitled  (for the purposes of Section  19(1A) of the
                  Landlord and Tenant Act 1925) in relation to an assignment

                  5.9.3.1  to withhold  its consent in any of the  circumstances
                           set out in clause 5.9.4

                  5.9.3.2  to impose all or any of the matters set out in clause
                           5.9.5 as a condition of its consent

                  The provisos to this subclause shall operate without prejudice
                  to the right of the  Landlord to withhold  such consent on any
                  other  ground or  grounds  where such  withholding  of consent
                  would be  reasonable  or to impose any  further  condition  or
                  conditions  upon the grant of consent where the  imposition of
                  such condition or conditions would be reasonable

         5.9.4    The  circumstances  referred to in clause 5.9.3.1 above are as
                  follows:-

                  5.9.4.1  where the  assignee is an  associated  company of the
                           Tenant

                  5.9.4.2. where in the  reasonable  opinion of the Landlord the
                           proposed  assignee is not  responsible or respectable
                           or of sufficient  financial  standing to enable it to
                           comply with the tenant's covenants in the Lease

                  5.9.4.3  where prior to completion of the intended  assignment
                           the  Tenant  has not paid  all of the  rents or other
                           monetary   payments   due   hereunder   or  had   not
                           substantially  observed or performed the covenants on
                           the part of the Tenant herein contains

         5.9.5    The matters referred to in clause 5.9.3.2 as conditions are as
                  follows:-

                  5.9.5.1  that the Tenant enters into an  Authorised  Guarantee
                           Agreement on or before  completion of the  assignment
                           whereby  the  Tenant   covenants  by  deed  with  the
                           Landlord to guarantee the performance by the proposed
                           Assignee of all  covenants  on the part of the Tenant
                           and  conditions  contained  in this  Lease  in a form
                           reasonably  required by the  Landlord to  incorporate
                           all or any of the terms set out in the Fifth Schedule
                           (as if  reference  therein  to "the  Guarantor"  were
                           reference  to the  Tenant)  with such  amendments  or
                           additions  as the  Landlord  may  require

                                       13
<PAGE>

                           within the  provisions  of S.16 of the  Landlord  and
                           Tenant  (Covenants) Act 1995 save that such guarantee
                           shall not  extend  to any  liability  restriction  or
                           other  requirement  arising  after  the  Assignee  is
                           released from its covenants by virtue of the Landlord
                           and Tenant (Covenants) 1995

                  5.9.5.2  that the Tenant  provides two  references  confirming
                           that the proposed  assignee  responsible  and will be
                           able to pay the rent and meet the other outgoings and
                           liabilities  arising  under the Lease from any of the
                           following   namely  a  former   landlord  bank  trade
                           creditor  solicitor or  accountant  (except where the
                           financial  status of the  proposes  assignee  is such
                           that it would be  unreasonable  for the  Landlord  to
                           require such references)

                  5.9.5.3  that  any  assignee  of the  whole  of  the  Premises
                           covenants  by deed with the Landlord to pay the rents
                           reserved by this Lease and to observe and perform all
                           covenants  on the part of the Tenant  and  conditions
                           contained   in  this  Lease  during  the  Term  until
                           released  by  virtue  of  the   Landlord  and  Tenant
                           (Covenants) Act 1995

                  5.9.5.4  that  (where  it  is  reasonable  so to  require)  in
                           addition  to the  guarantee  provided  by the  Tenant
                           pursuant to sub clause  5.9.5.1 at least two sureties
                           acceptable to the Landlord (acting reasonably) act as
                           sureties  for  the  assignee  in  order  to  covenant
                           jointly  and  severally  with the  Landlord  that the
                           assignee  will pay the rents  reserved  by this Lease
                           and perform and observe the  covenants on the part of
                           the Tenant and the conditions contained in this Lease
                           and  otherwise  in the  terms  set  out in the  Fifth
                           Schedule  hereto  (as if  reference  therein  to "the
                           Guarantor"  were  reference to the  sureties) or such
                           other terms as the Landlord may reasonably require

                  5.9.5.5  that the Tenant has with the  application for consent
                           to  assign   produced  to  the  Landlord   either  an
                           undertaking  from its solicitors to pay or such other
                           security   satisfactory   to  the  Landlord   (acting
                           reasonably)  to cover payment of, whether the licence
                           is  granted  or  not,  all  costs  and  disbursements
                           (including  irrecoverable

                                       14
<PAGE>

                           VAT) which may be properly  incurred by the  Landlord
                           in  connection   with  the  application  for  consent
                           (including without prejudice to the generality of the
                           foregoing) its solicitors' costs, it surveyors' costs
                           and the costs of any  accountants  employed to advise
                           in  whether  the  intended  assignee   satisfies  any
                           financial  criteria  specified  in this Lease or is a
                           person  of  such   financial   standing  that  it  is
                           reasonable  for the Landlord to grant licence for the
                           assignment of this Lease to it

         5.9.6    Within  28  days  of  any  assignment   charge  underlease  or
                  sub-underlease   or  any   transmission  or  other  devolution
                  relating to the Premises to produce for registration  with the
                  Landlord's  solicitors  such deed to  document  or a certified
                  copy of it an to pay to the Landlord's  solicitors  reasonable
                  charges for the registration of every such document

         5.9.7    Notwithstanding   clause   5.9.1  the  Tenant  may  share  the
                  occupation  of the  whole or any part of the  Premises  with a
                  company  which is a member  of the  same  group as the  Tenant
                  (within the meaning of Section 42 of the 1954 Act) for so long
                  as both  companies  shall  remain  members  of that  group and
                  otherwise  than in a manner that  transfers or creates a legal
                  estate

5.10     Nuisance etc and Residential Restrictions

         5.10.1   Not to do nor allow to remain upon the Premises anything which
                  may be or become  or cause a  nuisance  annoyance  disturbance
                  inconvenience  injury or damage to the Landlord or its tenants
                  or  the  owners  or  occupiers  of  adjacent  or  neighbouring
                  premises

         5.10.2   Not to use  the  Premises  for a sale  by  auction  or for any
                  dangerous   noxious   noisy  or   offensive   trade   business
                  manufacture  or occupation  nor for any illegal or immoral act
                  or purpose

         5.10.3   Not to use  the  Premises  as  sleeping  accommodation  or for
                  residential  purposes nor keep any animal fish reptile or bird
                  anywhere on the Premises

         5.11     Landlords Costs
         To pay to the  Landlord on an  indemnity  basis all costs fees  charges
         disbursements  and  expenses   (including   without  prejudice  to  the
         generality of the above those payable to counsel solicitors

                                       15
<PAGE>

         surveyors  and  bailiffs)  properly  and  reasonably  incurred  by  the
         Landlord in relation to or incidental to

         5.11.1   every  application made by the Tenant for a consent or licence
                  required by the  provisions of this Lease whether such consent
                  or licence is granted or refused or  proffered  subject to any
                  qualification  or  condition  or whether  the  application  is
                  withdrawn

         5.11.2   the preparation and service of a notice under the Landlord and
                  Tenant  [Covenants]  Act 1995  Section  17 or under the Law of
                  Property   Act  1925   Section   146  or  incurred  by  or  in
                  contemplation of proceedings  under section 146 or 147 of that
                  Act notwithstanding  that forfeiture is avoided otherwise than
                  by relief granted by the court

         5.11.3   the recovery or attempted recovery of arrears of rent or other
                  sums due from the Tenant and

         5.11.4   any steps taken in  contemplation of or in connection with the
                  preparation and service of a schedule of dilapidations  during
                  or  within 2 months  after  the  expiration  of the Term  (but
                  relating in all cases to dilapidations which occurred prior to
                  such expiration of the Term)

5.12     The Planning Acts

         5.12.1   Not to commit any breach of planning  control (such term to be
                  construed  as it is used in the  Planning  Acts) and to comply
                  with the provisions and requirements of the Planning Acts that
                  affect  the  Premises  whether  as to the  Permitted  User  or
                  otherwise  and to  indemnify  (both  during or  following  the
                  expiration  of the  Term)  and keep the  Landlord  indemnified
                  against all liability  whatsoever  including cost and expenses
                  in respect of any contravention

         5.12.2   At  the   expense  of  the  Tenant  to  obtain  all   planning
                  permissions  and to serve all such  notices as may be required
                  for the carrying out of any operations or user on the Premises
                  which may constitute  Development provided that no application
                  for  planning  permission  shall be made  without the previous
                  consent of the Landlord  (such consent not to be  unreasonably
                  withheld or delayed) in any case where the application for and
                  implementation of such planning  permission will not create or
                  give  rise  to any  tax or

                                       16
<PAGE>

                  other fiscal liability for the Landlord

         5.12.3   Subject only to any statutory direction to the contrary to pay
                  and  satisfy  any  charge  or levy  that may  subsequently  be
                  imposed under the Planning Acts in respect of the carrying out
                  or maintenance of any such  operations or the  commencement or
                  continuance of any such user

         5.12.4   Notwithstanding  any  consent  which  may  be  granted  by the
                  Landlord  under  this  Lease  not to  carry  out or  make  any
                  alteration  or addition  to the  Premises or any change of use
                  until

                  5.12.4.1 all  necessary  notices  under the Planning Acts have
                           been served and copies produced to the Landlord

                  5.12.4.2 all  necessary  permissions  under the Planning  Acts
                           have been obtained and produced to the Landlord and

                  5.12.4.3 the Landlord has  acknowledged  that every  necessary
                           planning   permission   is  acceptable  to  it  (such
                           acknowledgement not to be unreasonably  withheld) the
                           Landlord being entitled to refuse to acknowledge  its
                           acceptance  of a planning  permission  on the grounds
                           that  any  condition  contained  in  it  or  anything
                           omitted from it or the period referred to in it would
                           be (or be likely to be) prejudicial to the Landlord's
                           interest in the Premises  whether during or following
                           the expiration of the Term

         5.12.5   Unless the Landlord  shall  otherwise  direct to carry out and
                  complete before the expiration of the Term

                  5.12.5.1 any  works  stipulated  to  be  carried  out  to  the
                           Premises by a date subsequent to such expiration as a
                           condition of any planning  permission granted for any
                           Development  begun before the  expiration of the Term
                           and

                  5.12.5.2 any Development begun upon the Premises in respect of
                           which the Landlord  shall or may be or become  liable
                           for any change or levy under the Planning Acts

5.13     Plans Documents and Information

                                       17
<PAGE>

         5.13.1   If called  upon to do so to  produce  to the  Landlord  or the
                  Surveyor  all  plans  documents  and  other  evidence  as  the
                  Landlord  may  require  in order to  satisfy  itself  that the
                  provisions of this Lease have been complied with

         5.13.2   If  called  upon  to do so to  furnish  to  the  Landlord  the
                  Surveyor or any person  acting as the third party  determining
                  the Rent in default of agreement between the parties under any
                  provisions  for  rent  review  contained  in this  Lease  such
                  information  as may  reasonably  be  requested  in  writing in
                  relation to any pending or intended step under the 1954 Act or
                  the implementation of any provision for rent review

5.14     Indemnities
         To be  responsible  for  and to keep  the  Landlord  fully  indemnified
         against  all damage  damages  losses  costs  expenses  actions  demands
         proceedings claims and liabilities made against or suffered or incurred
         by the Landlord  arising  directly or indirectly  out of

         5.14.1   any act omission or negligence of the Tenant or any persons at
                  the  Premises   expressly  or  impliedly   with  the  Tenant's
                  authority and under the Tenant's control

         5.14.2   any breach or  non-observance  by the Tenant of the  covenants
                  conditions  or other  provisions  of this  Lease or any of the
                  matters to which this demise is subject

5.15     Encroachments

         5.15.1   Not to stop  up  darken  or  obstruct  any  windows  or  light
                  belonging to the Building

         5.15.2   To take all  reasonable  steps to  prevent  any  window  light
                  opening  doorway path passage  pipe or other  encroachment  or
                  easement  being made or acquired in against out of or upon the
                  Premises  and to notify the Landlord  immediately  if any such
                  encroachment  or  easement  shall  be  made  or  acquired  (or
                  attempted  to be made or  acquired)  and at the request of the
                  Landlord to adopt such means as shall  reasonably  be required
                  to prevent such  encroachment  or the  acquisition of any such
                  easement

         5.15.3   Not in any  event to place or store or leave any  articles  or
                  materials of any description on the retained parts (as defined
                  in clause 5 of Part A of the Fourth Schedule)

         5.15.4   Not to allow at any time any vehicular or other obstruction by
                  any  employee or invitees of the Tenant of the highways or the
                  access and service  roads or the service  areas or

                                       18
<PAGE>

                  forecourts  serving  the  Premises  or any other  parts of the
                  Estate

5.16     Yield Up

         At the expiration of the Term:

         5.16.1   To yield up the Premises in repair and in accordance  with the
                  terms of this Lease

         5.16.2   To give up all keys of the Premises to the Landlord and

         5.16.3   To remove all signs  erected by the Tenant in upon or near the
                  Premises  and  immediately  to make good any damage  caused by
                  such removal

5.17     Interest on Arrears

         5.17.1   If the Tenant shall fail to pay the rents or any other sum due
                  under  this  Lease  within  14 days of the  date  due  whether
                  formally  demanded or not the Tenant shall pay to the Landlord
                  Interest  on the  rents or other  sum from the date  when they
                  were due to the date on which they are paid (both  dates being
                  inclusive)  and such interest  shall be deemed to be rents due
                  to the Landlord

         5.17.2   Nothing in the  preceding  clause shall  entitle the Tenant to
                  withhold  or delay any  payment  of the rents or any other sum
                  due under this  Lease  after the date upon which they fall due
                  or in any way prejudice  affect or derogate from the rights of
                  the Landlord in relation to such  non-payment  including  (but
                  without  prejudice to the  generality  of the above) under the
                  proviso for re-entry contained in this Lease

5.18     Statutory Notices Etc

         To give full  particulars to the Landlord of any notice direction order
         or proposal for the Premises  made given or issued to the Tenant by any
         local or public  authority  within 7 days of receipt and if so required
         by the Landlord to produce it to the Landlord and without delay to take
         all necessary steps to comply with the notice direction or order and at
         the  request of the  Landlord  but at the cost of the Tenant to make or
         join with the  Landlord  in making  such  objection  or  representation
         against or in respect of any notice  direction order or proposal as the
         Landlord shall deem expedient

5.19     Sale of Reversion etc

                                       19
<PAGE>

         To permit

         5.19.1   the Landlord at any time upon reasonable  notice to enter upon
                  the Premises and affix and retain  anywhere  upon the Premises
                  (but  not so as to  obstruct  access  to or  egress  from  the
                  Premises) a notice for the sale of the Landlord's reversionary
                  interest

         5.19.2   upon reasonable notice at any time during the Term prospective
                  purchasers of or agents instructed in connection with the sale
                  of the Landlord's  reversion or of any other interest superior
                  to the Term to view the Premises without interruption provided
                  they are  authorised  in writing by the Landlord or its agents
                  and provided in exercising  such access as little  disturbance
                  or  interference  as  possible in caused to the Tenant and its
                  Permitted User:-

         5.20     Reletting Board

                  To permit the Landlord at any time during the last 6 months of
                  the  Contractual  Term and at any time  thereafter  unless the
                  Tenant shall have made a valid court application under Section
                  24 of the 1954 or  otherwise  be  entitled in law to remain in
                  occupation  or to a new tenancy of the  Premises (or sooner if
                  the Rent  reserved by clause 4.1 or any part of it shall be in
                  arrear and  unpaid for longer  than 28 days) to enter upon the
                  Premises and affix and retain  anywhere upon the Premises (but
                  not so as to obstruct access to or egress from the Premises) a
                  notice for  reletting  the  Premises and during such period to
                  permit  persons with the written  authority of the Landlord or
                  its agent at reasonable times of the day to view the Premises

         5.21     Defective Premises

                  To give notice to the  Landlord of any defect in the  Premises
                  coming to the notice of the Tenant which might give rise to an
                  obligation on the Landlord to do or refrain from doing any act
                  or thing in order to comply with the  provisions of this Lease
                  or the duty of care  imposed on the  Landlord  pursuant to the
                  Defective  Premises Act 1972 or otherwise  and at all times to
                  display and maintain  all notices  which the Landlord may from
                  time  to  time  reasonably  require  to be  displayed  at  the
                  Premises

         5.22     Landlords Rights

                                       20
<PAGE>

                  To  permit  the  Landlord  at all  times  during  the  Term to
                  exercise  without  interruption  or  interference  any  of the
                  rights granted to it by virtue of the provisions of this Lease

         5.23     The Industrial Covenants
                  To observe and perform the Industrial covenants

         5.24     Keyholders
                  To ensure that at all times the Landlord has written notice of
                  the name  address  and  home  telephone  number  of at least 2
                  keyholders of the Premises

         5.25     New Guarantor
                  Within 14 days of the death  during the Term of any  Guarantor
                  or of such  person  becoming  bankrupt  or having a  receiving
                  order made  against him or having a receiver  appointed  under
                  the  Mental  Health  Act 1983 or  being a  company  passing  a
                  resolution  to wind up or enter into  liquidation  or having a
                  receiver  to give  notice  of this to the  Landlord  and if so
                  required by the  Landlord at the expense of the Tenant  within
                  28  days  to  produce  some  other  person  acceptable  to the
                  Landlord  to execute a  guarantee  in respect of the  Tenant's
                  obligations  contained  in  this  Lease  in  the  form  of the
                  Guarantor's covenants contained in this Lease

         5.26     Landlords Costs on Grant etc
                  To pay all  proper  fees and  disbursements  of the  Landlords
                  Solicitors  agents  and  surveyors  and all  other  costs  and
                  expenses   incurred  by  the   Landlord  in  relation  to  the
                  negotiation preparation execution and grant of this Lease save
                  that the first  (pound)500.00  plus VAT of such fees costs and
                  expenses as aforesaid shall be paid by the Landlord

6.       THE LANDLORD'S COVENANTS
- ---------------------------------

The Landlord covenants with the Tenant:

6.1      Quiet Enjoyment
         To  permit  the  Tenant  peaceably  and  quietly  to hold and enjoy the
         Premises  without  any  interruption  or  disturbance  from  or by  the
         Landlord or any person claiming under or in trust for the Landlord

6.2      To observe and perform its obligations contained in the Third Schedule

                                       21
<PAGE>


7.       INSURANCE

7.1      Warranty re convictions
         The Tenant  warrants  that prior to the  execution of this Lease it has
         disclosed to the Landlord in writing any conviction judgment or finding
         of any court or tribunal  relating to the Tenant (or any director other
         officer or major  shareholder  of the Tenant) of such a nature as to be
         likely to affect the decision of any insurer or underwriter to grant or
         continue insurance of any of the Insured Risks

7.2      Landlord to insure
         The Landlord  covenants  with the Tenant to insure the Premises  unless
         such insurance  shall be vitiated by any act of the Tenant or by anyone
         at the Premises expressly or by implication with the Tenant's authority
         and under the Tenant's control

7.3      Details of the Insurance
         Insurance shall be effected:

         7.3.1    In such  substantial  and reputable  insurance  office or with
                  such  other  underwriters  and  through  such  agency  as  the
                  Landlord may from time to time decide

         7.3.2    For the following sums:

                  7.3.2.1  such sum as the  Landlord  shall from time to time be
                           advised  as being  the full  cost of  rebuilding  and
                           reinstatement  including  architects'  surveyors' and
                           other   professional  fees,  fees  payable  upon  any
                           applications for planning permission or other permits
                           or  consents  that may be required in relation to the
                           rebuilding or  reinstatement of the Premises the cost
                           of debris removal demolition site clearance any works
                           that  may  be  required  by  statute  and  incidental
                           expenses and

                  7.3.2.2  the loss of Rent  payable  under this Lease from time
                           to time  (having  regard to any  review of rent which
                           may become due under this Lease) for 2 years

         7.3.3    Against  damage or  destruction  by the  Insured  Risks to the
                  extent that such  insurance  may  ordinarily  be arranged  for
                  properties  such as the Premises with an insurer of repute and
                  subject to such  excesses  exclusions  or  limitations  as the
                  insurer may require

                                       22
<PAGE>

7.4      Payment of Insurance Rent
         The Tenant shall pay the  Insurance  Rent on the date of this Lease for
         the period from and  including  the Rent  Commencement  Date to the day
         before the next policy renewal date and  subsequently  the Tenant shall
         pay the Insurance Rent on demand

7.5      Suspension of Rent

         7.5.1    If and whenever during the Term:

                  7.5.1.1  the  Premises  or any  part of them  are  damaged  or
                           destroyed  by any of the  Insured  Risks  except  one
                           against  which   insurance  may  not   ordinarily  be
                           arranged  with an insurer  of repute  for  properties
                           such as the Premises  unless the Landlord has in fact
                           insured against that risk so that the Premises or any
                           part of them are unfit for occupation or use and

                  7.5.1.2  save where payment of the insurance  money is refused
                           in whole or in part by reason  of any act or  default
                           of the Tenant or anyone at the Premises  expressly or
                           by implication  with the Tenants  authority and under
                           the Tenant's  control the  provisions of clause 7.5.2
                           shall have effect

         7.5.2    When the circumstances  contemplated in clause 7.5.1 arise the
                  Rent or a fair  proportion of the Rent according to the nature
                  and the  extent  of the  damage  sustained  shall  cease to be
                  payable  until the  Premises or the  affected  part shall have
                  been  rebuilt  or  reinstated  so  that  the  Premises  or the
                  affected part are made fit for  occupation or use or until the
                  expiration of 2 years from the destruction or damage whichever
                  period is the shorter (the amount of such  proportion  and the
                  period  during  which the Rent shall cease to be payable to be
                  determined  by the  Surveyor  acting as an  expert  and not as
                  arbitrator)

7.6      Reinstatement and Termination if prevented:

         7.6.1    If and whenever during the Term:

                  7.6.1.1  the  Premises  or any  part of them  are  damaged  or
                           destroyed  by any of the  Insured  Risks  except  one
                           against  which   insurance  may  not   ordinarily  be
                           arranged  with an insurer  of repute  for  properties
                           such as the Premises unless

                                       23
<PAGE>

                           the Landlord  has in fact  insured  against that risk
                           and

                  7.6.1.2  save  where the  payment  of the  insurance  money is
                           refused  in whole or in part by  reason of any act or
                           default  of the  Tenant  or  anyone  at the  Premises
                           expressly   or  by   implication   with  the  Tenants
                           authority  (and  under  the  Tenant's   control)  the
                           Landlord shall use its best  endeavours to obtain all
                           planning  permissions  or other  permits and consents
                           that may be required under the Planning Acts or other
                           statutes  (if any) to enable the  Landlord to rebuild
                           and reinstate ("Permissions")

         7.6.2    Subject  to the  provisions  of  clause  7.6.3  and  7.6.4 the
                  Landlord shall as soon as the  Permissions  have been obtained
                  or  immediately  where no  Permissions  are required apply all
                  monies  received  in  respect of such  insurance  to which the
                  Landlord is entitled  (except  such sums in respect of loss of
                  Rent) in rebuilding or  reinstating  the Premises so destroyed
                  or damaged

         7.6.3    For the  purposes of this clause the  expression  "Supervening
                  Events" means

                  7.6.3.1  the  Landlord  has  failed  despite  using  its  best
                           endeavours to obtain the Permissions

                  7.6.3.2  any of the Permissions have been granted subject to a
                           lawful condition with which in all the  circumstances
                           it would be  unreasonable  to expect the  Landlord to
                           comply

                  7.6.3.3  some defect or  deficiency in the site upon which the
                           rebuilding  or  reinstatement  is to take place would
                           mean that the same could only be undertaken at a cost
                           that would be unreasonable in all the circumstances

                  7.6.3.4  the  Landlord is unable to obtain  access to the site
                           for the purposes of rebuilding or reinstating

                  7.6.3.5  the rebuilding or reinstating is prevented by war act
                           of God Government action strike lock out or

                  7.6.3.6  any other  circumstances  beyond  the  control of the
                           Landlord

                                       24
<PAGE>

         7.6.4    The Landlord  shall not be liable to rebuild or reinstate  the
                  Premises if and for so long as such  rebuilding or reinstating
                  is prevented by Supervening Events

         7.6.5    If upon the  expiry of 2 years  commencing  on the date of the
                  damage or  destruction  the Premises  have not been rebuilt or
                  reinstated so as to be fit for the Tenant's occupation and use
                  either  party by notice  served at any time within 6 months of
                  the  expiry of such  period  invoke the  provisions  of clause
                  7.6.6

         7.6.6    Upon service of a notice in accordance with clause 7.6.5

                  7.6.6.1  the Term will absolutely cease but without  prejudice
                           to any rights or  remedies  that may have  accrued to
                           either  party  against the other  including  (without
                           prejudice to the  generality  of the above) any right
                           that the Tenant may have  against the  Landlord for a
                           breach of the Landlords  covenants set out in clauses
                           7.6.1 and 7.6.2

                  7.6.6.2  all  money  received  in  respect  of  the  insurance
                           effected  by the  Landlord  pursuant  to this  clause
                           shall belong to the Landlord

7.7      Tenant's Insurance Covenants The Tenant covenants with the Landlord

         7.7.1    To comply with all the requirements and recommendations of the
                  insurers

         7.7.2    Not to do or omit  anything  that  could  cause any  policy of
                  insurance  on or in relation to the Premises to become void or
                  voidable  wholly or in part nor (unless the Tenant  shall have
                  previously  notified  the  Landlord and have agreed to pay the
                  increased  premium)  anything by which additional or increased
                  insurance premiums may become payable

         7.7.3    To  keep  the  Premises   supplied  with  such  fire  fighting
                  equipment as the insurers and the fire  authority  may require
                  and to maintain such  equipment to their  satisfaction  and in
                  efficient  working  order and that at least  once in every six
                  months to cause any  sprinkler  system and other fire fighting
                  equipment to be inspected by a competent person

         7.7.4    Not  to  store  or  bring  on to  the  Premises  any  articles
                  substance or liquid of a specially combustible  inflammable or
                  explosive  nature  and to  comply  with the  requirements  and

                                       25
<PAGE>

                  recommendations  of the fire authority as to fire  precautions
                  relating to the Premises

         7.7.5    Not to obstruct the access to any fire  fighting  equipment or
                  means of escape  from the  Premises  nor to lock any fire door
                  while the Premises are occupied

         7.7.6    To give notice to the Landlord  immediately upon the happening
                  of any event which  might  affect any  insurance  policy on or
                  relating to the  Premises or upon the  happening  of any event
                  against which the Landlord may have insured under this Lease

         7.7.7    Immediately   to  inform  the   Landlord  in  writing  of  any
                  conviction  judgement  or  finding  of any  court or  tribunal
                  relating to the Tenant (or any  director  or other  officer or
                  major  shareholder  of the  Tenant)  of such a nature as to be
                  likely to affect the decision of any insurer or underwriter to
                  grant or to continue any such insurance

         7.7.8    If at any time the Tenant  shall be entitled to the benefit of
                  any  insurance  on the  Premises  (which  is not  effected  or
                  maintained  in pursuance of any  obligation  contained in this
                  Lease) to apply all money received by virtue of such insurance
                  in making  good the loss or damage in  respect  of which  such
                  money shall have been received

         7.7.9    If however  during the Term the  Premises  or any part of them
                  are damaged or destroyed by an Insured Risk and the  insurance
                  money under the policy of  insurance  effected by the Landlord
                  pursuant  to its  obligation  contained  in this  Lease  is by
                  reason of any act or  default  of the  Tenant or anyone at the
                  Premises   expressly  or  by  implication  with  the  Tenant's
                  authority and under the Tenant's  control  wholly or partially
                  irrecoverable immediately in every such case (at the option of
                  the Landlord)  either

                  7.7.9.1  to  rebuild  and  reinstate  at its own  expense  the
                           Premises  or the part  destroyed  or  damaged  to the
                           reasonable  satisfaction and under the supervision of
                           the  Surveyor the Tenant  being  allowed  towards the
                           expenses  of  so  doing  upon  such   rebuilding  and
                           reinstatement  being  completed  the  amount (if any)
                           actually  received in respect of such  destruction or
                           damage under any such insurance policy or

                  7.7.9.2  to pay to the  Landlord on demand with  Interest  the
                           amount of such insurance

                                       26
<PAGE>

                           money so  irrecoverable in which event the provisions
                           of clause 7.5 and 7.6 shall apply

7.8      Landlords Insurance Covenants
         The  Landlord  covenants  with the Tenant in  relation to the policy of
         insurance   effected  by  the  Landlord  pursuant  to  its  obligations
         contained in this Lease

         7.8.1    To  produce  to the  Tenant on demand a copy of the policy and
                  the last premium renewal receipt or reasonable evidence of the
                  terms of the  policy  and the fact that the last  premium  has
                  been paid

         7.8.2    To  procure  that  the  interest  of the  Tenant  is  noted or
                  endorsed on the policy

         7.8.3    To notify  the  Tenant of any  material  change  and the risks
                  covered by the policy from time to time

8.       PROVISOS
- -----------------

         8.1      Re-entry

         If and whenever during the Term

         8.1.1    the  rents  (or any of them or any  part of them)  under  this
                  Lease are  outstanding  for 14 days after becoming due whether
                  formally demanded or not or

         8.1.2    there is a breach by the Tenant of any  covenant or other term
                  of this Lease or any document supplemental to this Lease or

         8.1.3    an individual Tenant becomes bankrupt or

         8.1.4    a company Tenant or the Guarantor

                  8.1.4.1  enters  into   liquidation   whether   compulsory  or
                           voluntary   (but  not  if  the   liquidation  is  for
                           amalgamation or  reconstruction of a solvent company)
                           or

                  8.1.4.2  has a receiver appointed or

         8.1.5    the Tenant enters into an  arrangement  for the benefit of its
                  creditors or

         8.1.6    the Tenant has any distress or execution levied on its goods
         the Landlord may re-enter the Premises (or any part of them in the name
         of the whole) at any time (and even if any  previous  right of re-entry
         has been  waived)  then the Term  will  absolutely  cease  but  without
         prejudice  to any  rights or  remedies  which may have  accrued  to the
         Landlord  against

                                       27
<PAGE>

         the Tenant or the  Guarantor  or to the Tenant  against the Landlord in
         respect  of any  breach  of  covenant  or  other  term  of  this  Lease
         (including the breach in respect of which the re-entry is made)

8.2      Exclusion of Use Warranty
         Nothing in this Lease or any consent granted by the Landlord under this
         Lease shall imply or warrant  that the  Premises  may  lawfully be used
         under the Planning  Acts for the purposes  authorised in this Lease (or
         any purpose subsequently authorised)

8.3      Entire Understanding
         This Lease embodies the entire understanding of the parties relating to
         the Premises and to all matters dealt with by any of the  provisions of
         this Lease

8.4      Representations
         The Tenant  acknowledges  that this Lease has not been  entered into in
         reliance wholly or partly on any statement or representation made by or
         on behalf of the Landlord  except any such statement or  representation
         that is  expressly  set out in this  Lease  or in  written  replies  to
         enquiries given by the Landlord's Solicitors

8.5      Licences etc under hand
         Whilst  the  Landlord  is a limited  company or other  corporation  all
         licences  consents  approvals  and notices  required to be given by the
         Landlord  shall be  sufficiently  given if  given  under  the hand of a
         director the secretary or other duly authorised officer of the Landlord
         or the Surveyor on behalf of the Landlord

8.6      Tenant's Property
         If after the Tenant has vacated the  Premises on the expiry of the Term
         any property of the Tenant remains in or on the Premises and the Tenant
         fails to remove it within 7 days after  being  requested  in writing by
         Landlord to do so or if after using its best endeavours the Landlord is
         unable  to make such a request  to the  Tenant  within 14 days from the
         first  attempt so made by the  Landlord

         8.6.1    the Landlord may as the agent of the Tenant sell such property
                  and  the  Tenant  will  indemnify  the  Landlord  against  any
                  liability  incurred by it to any third  party  whose  property
                  shall have been sold by the  Landlord in the  mistaken  belief
                  held in  good  faith

                                       28
<PAGE>

                  (which  shall be presumed  unless the contrary be proved) that
                  such property belonged to the Tenant

         8.6.2    if the Landlord  having made  reasonable  efforts is unable to
                  locate the Tenant the  Landlord  shall be  entitled  to retain
                  such proceeds of sale absolutely unless the Tenant shall claim
                  them within 6 months of the date upon which the Tenant vacated
                  the Premises and

         8.6.3    the Tenant shall  indemnify  the  Landlord  against any damage
                  occasioned to the Premises and any actions claims  proceedings
                  costs expenses and demands made against the Landlord caused by
                  or  related  to  the  presence  of the  property  in or on the
                  Premises

8.7      Compensation on Vacating
         Any  statutory  right  of the  Tenant  to claim  compensation  from the
         Landlord on vacating the Premises  shall be excluded to the extent that
         the law allows

8.8      Service of Notices
         The  provisions  of the Law of Property Act 1925 Section 196 as amended
         by the Recorded Delivery Service Act 1962 shall apply to the giving and
         service of all notices and documents  under or in connection  with this
         Lease  except  that  Section  196  shall be  deemed  to be  amended  as
         follows:-

         8.8.1    the final  words of  Section  196(4)  "and  that  service...be
                  delivered"  shall be deleted  and there  shall be  substituted
                  "and  that  service  shall be  deemed  to be made on the third
                  Working  Day  after  the  registered  letter  has been  posted
                  "Working Day" meaning any day from Monday to Friday  inclusive
                  other than Christmas Day Good Friday and any statutory bank or
                  public holiday"

         8.8.2    any notice or document shall also be sufficiently  served on a
                  party if served on solicitors who have acted for that party in
                  relation to this Lease or the  Premises at anytime  within the
                  year preceding the service of the notice or document

         8.8.3    any notice or document  shall also be  sufficiently  served if
                  sent by telex telephonic  facsimile  transmission or any other
                  means of electronic transmission to the party to be

                                       29
<PAGE>

                  served (or its solicitors where clause 8.8.2 applies) and that
                  service shall be deemed to be made on the day of  transmission
                  if transmitted before 4 p.m. on a Working Day but otherwise on
                  the next following Working Day (as defined above)

         And in the clause "Party" includes the Guarantor

8.9      Power to Determine

         8.9.1    The  Tenant  may  terminate  this  Lease on the  First  day of
                  January  2009 ("the Break Date") if the Tenant shall up to the
                  time of such  termination  have  paid Rent and  performed  and
                  observed  the  covenants  contained  in this  Lease by  giving
                  notice in writing  ("the Break  Notice") to the  Landlord  not
                  more than 18 months nor less than 12 months and one day before
                  the Break Date

         8.9.2    The Tenant may withdraw  the Break Notice by giving  notice in
                  writing  to that  effect  to the  Landlord  not less  than six
                  months  before the Break Date

         8.9.3    If a Break Notice is given in accordance with clause 8.9.1 and
                  not withdrawn in accordance  with clause 8.9.2 this Lease will
                  terminate  on the  Break  Date but  without  prejudice  to the
                  respective  right of either part in respect of any  antecedent
                  claim or breach of covenant

8.10     Jurisdiction
         This Lease shall be  construed  and governed by the Laws of England and
         Wales to the exclusive  jurisdiction of whose Courts the parties hereto
         unconditionally submit

8.11     Rights of Third Parties
         This Lease does not  create any right  enforceable  by any person not a
         party to it who is not the  Landlord  for the time  being or the Tenant
         for the time being or (where relevant) the Guarantor for the time being

9.       The Guarantor's Covenants
         The Guarantor covenants with the person named in clause 1.1 and without
         the need for any express assignment with all its successors in title in
         the terms set out in the Fifth Schedule

         IN WITNESS  WHEREOF the parties  hereto have  executed  this Lease as a
         deed the day and year first

                                       30
<PAGE>

before written

                                 FIRST SCHEDULE
                                 --------------

                                     Part I

                                (Rights Reserved)

1.    The free and  uninterrupted  passage of water and soil  through  the pipes
      drains and watercourse and of electricity,  gas and other services through
      the  Pipes  which are now or may at any time  during  the Term be in on or
      under or passing  through the Premises for the benefit of the remainder of
      the Estate  and any  adjoining  or  neighbouring  property  and every part
      thereof  with the right to  construct  and  maintain  new services for the
      benefit of the remainder of the Estate and any  adjoining or  neighbouring
      property and every part thereof the right to repair and maintain and renew
      such  existing  and new  services and the right at any time but (except in
      emergency)  after giving  reasonable  notice to enter upon the Premises in
      the exercise of such rights

2.    Full  right  and  liberty  at any time  hereafter  or from time to time to
      execute  works  services and  erections  and  buildings  upon or to alter,
      demolish or rebuild any of the erections  services or buildings erected on
      the remainder of the Estate and any adjoining or neighbouring  property or
      any part thereof  providing the Landlord is acting  reasonably  and to use
      the  remainder of the Estate and any  adjoining  neighbouring  property or
      buildings  erected or to be erected thereon in such manner as the Landlord
      acting reasonably shall think fit notwithstanding that the access of light
      or air to the  Premises  may be  interfered  with  or that  access  to the
      Premises may be unavoidably  obstructed  provided that the Landlord or the
      person  exercising  such  rights  shall  make good all  damage  occasioned
      thereby and shall abate an appropriate  amount of rent for any part of the
      Premises inaccessible by reason of such works

3.    The right (upon reasonable prior notice except in emergency) to enter upon
      the  Premises  so far as may be  necessary  for the  purpose of  executing
      repairs or  alteration  to and  maintaining  the Retained  Parts or to the
      remainder of the Estate and any adjoining or  neighbouring  property owned
      by the Landlord or any part thereof  making good any damage caused as soon
      as reasonably practicable

4.    The right of support and protection from the Premises for the remainder of
      the Estate  and any

                                       31
<PAGE>

      adjoining or neighbouring property and every part thereof

5.    The  right  at any  time  during  the Term at  reasonable  times  and upon
      reasonable  notice  except in cases of  emergency to enter (or in cases of
      emergency to break and enter) the Premises

5.1   to exercise any of the rights  granted to the  Landlord  elsewhere in this
      Lease

5.2   to inspect the condition and state of repair of the Premises

5.3   to take  schedules or inventories of fixtures and fittings and other items
      to be yielded up on the expiry of the Term

6.    The  right  with the  Surveyor  at any  time or  convenient  hours  and on
      reasonable  prior notice to enter and inspect and measure the Premises for
      all purposes  connected  with any pending or intended step or action under
      the 1954 Act or the implementation of the provisions for rent review

7.    The  right to vary  alter or  change  the  route  leading  to and from the
      Premises  or close or build  upon the  Access  Roads  forming  part of the
      Estate  provided  that the  Landlord  shall  provide or maintain  suitable
      alternate access to and from the Premises

8.    The  right in case of  emergency  for  itself or others  the  occupier  or
      Tenants of the remainder of the Estate and their  visitors or licensees to
      gain egress  through such parts of the Premises (if any) as are classified
      and maintained as fire exits or emergency escape routes

                                     Part II

                                (Rights Granted)

1.    The free and  uninterrupted  passage of water and soil  through  the pipes
      drains and watercourse and of electricity,  gas and other services through
      the Pipes  which are now or may at any time during the Term be in or under
      or passing  through or over the other parts of the Estate or any adjoining
      or neighbouring property of the Landlord

2.    All necessary  rights of subjacent and lateral  support and protection for
      the Premises

3.    A right (upon reasonable prior notice except in emergencies) to enter onto
      the  remainder of the Estate so far as may be necessary for the purpose of
      executing  repairs to and  maintaining  the  Premises and a right to enter
      into such part of the  Building in which  meters are housed in relation to
      mains service supplies  provided that the Tenant or the person  exercising
      such rights shall make

                                       32
<PAGE>

      good all damage occasioned thereby to the remainder of the Estate

4.    A right of way without or without  vehicles  over the Access Roads for the
      Tenant or any persons  expressly  or  impliedly  authorised  by him at all
      times and for all purposes  connected with such Tenant's use and enjoyment
      of the Premises and so far only as is necessary  and to load and unload in
      the  Access  Roads  without   causing   congestion  or  any  permanent  or
      unnecessary obstruction

5.    The right at all usual times of business to park up to 3 motor cars in the
      parking  spaces  coloured  red on the Plan or in other such  places as the
      Landlord acting  reasonably may from time to time designate  together with
      the  right to  casual  parking  in such  other  parking  spaces  which the
      Landlord  may  provide  and  designate  from time to time and which may be
      available

6.    All necessary  rights in the event of fire or other  similar  emergency to
      use the fire and emergency  exits with the necessary  egress to a place of
      safety

                               THE SECOND SCHEDULE
                               -------------------

                                   Rent Review

1.     DEFINITIONS
- ------------------

      For all  purposes of this  schedule  the terms  defined in this  paragraph
      shall have the meanings specified

1.1   "The Base Figure" means being the amount of the latest index figure of the
      index last published before the date of this Lease

1.2   "the Index" means the Index of Retail  Prices  published by H M Stationary
      Office or any official publication substituted for it

1.3   "The New Rent"  means that rent to apply  after the  relevant  Review Date
      until the next Review Date

1.4   "The  Revised  Rent" means the rent  determined  in  accordance  with this
      schedule

1.5   "The Review Date  Figure"  means the amount of the latest  index figure of
      the Index last published before the relevant Review Date

2.    THE NEW RENT
- ------------------

                                       33
<PAGE>

2.1   The New Rent shall be whichever is the higher of:

      2.1.1  An increase of 3% of the Rent then payable and

      2.1.2  The Revised Rent

2.2   If the relevant Review Date is not a quarter day the Tenants shall on that
      Review Date pay to the Landlord  the amount by which one quarters  rent at
      the rate payable on the immediately preceding quarter day in less then one
      Quarters Rent at the rate of the New Rent apportioned on a daily basis for
      then part of the Quarter during which the New Rent is payable

3.    REVISED RENT
- ------------------

      The Revised Rent shall be the amount to be  determined  at the Review Date
      by multiplying the Initial Rent by the Review Date Figure and dividing the
      result by the Base Figure

4.    PROVISOS
- --------------

4.1   In the event of any change  after the date of this Lease in the  reference
      base used to complete  the Index the figure taken to be shown in the Index
      after the change  shall be the figure  which  would have been shown in the
      Index if the  reference  base  current  at the date of this Lease had been
      retained

4.2   In the event of it becoming  impossible  by reason of any change after the
      date of this Lease in the  methods  used to  compile  the Index or for any
      other reason  whatsoever to calculate the Revised Rent by reference to the
      Index or if any dispute or question  whatsoever arises between the parties
      to this Lease  with  respect  to the  amount of the  Revised  Rent or with
      respect  to the  construction  or effect of this  clause  the  dispute  or
      question  shall be  determined  by a valuer  acting as an expert who shall
      have full power to determine on such dates as he shall deem  apposite what
      would have been the Review  Date  Figure  had the Index  continued  on the
      basis and giving the information assumed to be available for the operation
      of this Schedule

5.    NOTIFICATION OF THE REVISED RENT
- --------------------------------------

5.1   The Landlord  shall obtain copies of the Index and shall supply the Tenant
      with a copy of the latest  publication of the Index before the Review Date
      together with a calculation of the amount of the Revised Rent

5.2   Within one month of receipt  of the  Tenant  shall in writing  acknowledge
      receipt of the copy and

                                       34
<PAGE>

      statement and state whether or not he agrees with the calculation

6.    DEFAULT PROVISION
- -----------------------

6.1   If the Tenant fails to acknowledge the Landlords calculation of the amount
      of the Revised  Rent within one month or the  procedure  laid down in this
      Schedule is not complied  with the Revised Rent shall be the amount stated
      in the Landlords calculation

6.2   If it is  impossible  to  determine  the Revised Rent in  accordance  with
      paragraph 2 of this  Schedule then the Revised Rent shall be determined in
      accordance with paragraph 4.2 of this Schedule

7.    PAYMENT OF THE NEW RENT
- -----------------------------

7.1   The Tenant shall  continue to pay the previous  Rent payable in accordance
      with the terms of this Lease until ascertainment of the Revised Rent

7.2   Upon  ascertainment of the Revised Rent the New Rent shall be payable from
      the  Review  Date and the  Tenant  shall  pay the New Rent  until the next
      relevant Review Date

7.3   Upon  ascertainment  of the Revised Rent the Tenant shall forthwith pay to
      the Landlord  the amount of any  difference  between the rent  immediately
      payable  before that  Review Date and the New Rent for the period  between
      the Review Date and the ascertainment of the New Rent with interest at the
      Interest Rate  calculated on a daily basis from the date of  ascertainment
      of the New Rent to the date of payment

8.    MEMORANDUM OF NEW RENT
- ----------------------------

      When the New Rent have been  ascertained in accordance  with this Schedule
      memoranda  of the  amounts  shall  be  endorsed  on  this  Lease  and  the
      counterpart  of it and shall be signed by or on behalf of the Landlord and
      the Tenant

                               THE THIRD SCHEDULE
                               ------------------

                            The Industrial Covenants

1.    User.

1.1   To use the Premises for the Permitted User only

1.2   Not to leave the Premises  continuously  unoccupied  for more than 1 month
      without

                                       35
<PAGE>

      1.2.1  notifying the Landlord and

      1.2.2  providing such  caretaking or other  security  arrangements  as the
             Landlord shall reasonably require and the insurers shall require in
             order to  protect  the  Premises  from  vandalism  theft  damage or
             unlawful occupation

2.    Smoke Abatements

2.1   To ensure that every  furnace  boiler or heater at the  Premises  (whether
      using  solid  liquid  or  gaseous  fuel)  is  constructed  and  used so as
      substantially to consume or burn the smoke arising from it

2.2   Not to cause or permit  any grit or noxious or  offensive  effluvia  to be
      emitted from any engine furnace chimney or other apparatus on the Premises
      without using the best possible means for preventing or counteracting such
      emission

2.3   To  comply  with the  provisions  of the  Clean Air Acts 1956 and 1968 the
      Control of Pollution Act 1974 and the  Environmental  Protection  Act 1996
      and with the  requirements  of any  notice of the local  authority  served
      under them

3.    Pollution
      Not to permit to be  discharged  into any Pipes serving the Premises or to
      be spilled or deposited on the Premises or any  neighbouring  or adjoining
      land

3.1   Any oil or grease or any  deleterious  objectionable  dangerous  poisonous
      noxious  or  explosive  matter  or  substance  and to take all  reasonable
      measures to ensure that any effluent discharged into the Pipes will not be
      corrosive  or  otherwise  harmful  to the  Pipes or cause  obstruction  or
      deposit in them or

3.2   Any fluid of a poisonous or noxious nature or other kind likely to or that
      does in fact destroy  sicken or injure the fish or  contaminate or pollute
      the water of any stream or river

3.3   Any  controlled or special waste or any other  substance  that may produce
      concentrations  or  accumulations of noxious gases or noxious liquids that
      may cause pollution of the environment or harm to human health

4.    Roof and Floor Weighting

4.1   Not to bring or permit to remain  upon the  Premises  any safes  machinery
      goods or other  articles

                                       36
<PAGE>

      which shall or may strain or damage the Premises or any part of it

4.2   Not  without  the  consent of the  Landlord to suspend any weight from the
      portal  frames  stanchions or roof purlins of the Premises or use the same
      for the storage of goods or place any weight on them

4.3   On  the  application  by the  Tenant  for  the  Landlord's  consent  under
      paragraph  4.2 the  Landlord  shall be  entitled to consult and obtain the
      advice of an  engineer  or other  person in  relation to the roof or floor
      loading  proposed by the Tenant and the Tenant shall repay to the Landlord
      on demand the fee of such engineer or other person

5.    Machinery

5.1   To keep all plant  apparatus  and  machinery  (including  any  boilers and
      furnaces) upon the Premises properly  maintained and in good working order
      and for that  purpose  to employ  reputable  contractors  for the  regular
      periodic inspection and maintenance of them

5.2   To renew  all  working  and  other  parts as and  when  necessary  or when
      recommended by such contractors

5.3   To ensure by directions to the Tenants staff and otherwise that such plant
      apparatus and machinery are properly operated and

5.4   To avoid damage to the Premises by vibration or otherwise

6.    Signs
      At all times to display and maintain a suitable  sign showing the Tenant's
      trading name and  business of the size and kind  specified by the Landlord
      at points designated within the Estate by the Landlord

7.    To comply with all regulations  made by the Landlord from time to time for
      the management of the Estate

                              THE FOURTH SCHEDULE
                              -------------------

                                 Service Charge

                                     PART A

                                   Definitions

1.    "Services" means the services facilities and amenities specified in Part C
      of this Schedule

                                       37
<PAGE>

2. "Annual Expenditure" means

      2.1   all costs expenses and outgoings  whatever  properly incurred by the
            Landlord  during a Financial  Year in or incidental to providing all
            or any of the Services and

      2.2   all sums  reasonably and properly  incurred by the Landlord during a
            Financial  Year in relation to the  matters  specified  in Part D of
            this Schedule ("the  Additional  Items")
      and any VAT payable on such items (save where such VAT is  recoverable  by
      the Landlord) but

      2.3   excluding any  expenditure  in respect of any part of the Estate for
            which the Tenant or any other Tenant shall be wholly responsible and
            excluding any  expenditure  that the Landlord shall recover or which
            shall  be met  under  any  policy  of  insurance  maintained  by the
            Landlord pursuant to its obligations in this Lease

3.    "Computing Date" means 31st August in every year of the Term or such other
      date as the Landlord may from time to time nominate and "Computing  Dates"
      shall be construed accordingly

4.    "Financial Years" means the period

      4.1   from  the  commencement  of the  Term  to and  including  the  first
            Computing Date and subsequently

      4.2   between 2 consecutive Computing Dates (excluding the first Computing
            Date from but including the second Computing Date in the period)

5.    "Retained  Parts" mean all parts of the Estate not let or  constructed  or
      adapted for letting  including (but without prejudice to the generality of
      the above):

      5.1   any rooms and storage premises used in connection with the provision
            of services for the Estate

      5.2   all Pipes equipment and apparatus used in the Building  (except such
            as are within and solely  serve an  individual  unit which is let or
            constructed or adapted for letting)

      5.3   Such  parts of the  structure  walls  foundations  and  roofs of the
            Building that are not included in the Premises and that would not be
            included in the Premises demised by leases of all the other units in
            the Building if let on the same terms as this Lease

                                       38
<PAGE>


                                     PART B
                     Performance of the Services and Payment
                              of the Service Charge

6.    Performance of the Services

      Subject  to the  Tenant  paying to the  Landlord  the  Service  Charge the
      Landlord shall perform the Services  throughout the Term provided that the
      Landlord shall not be liable to the Tenant in respect of :

      6.1   any  failure or  interruption  in any of the  Services  by reason of
            repair replacement  maintenance of any installations or apparatus or
            their  damage or  destruction  or by reason of  mechanical  or other
            defect or breakdown or frost other inclement  conditions or shortage
            of fuel  materials  water or labour or any other  cause  beyond  the
            Landlord's  control  save as to the extent that any such  failure or
            interruption  could have been prevented or shortened by the exercise
            of proper care  attention and diligence and skill by the Landlord or
            those  undertaking  the  Services  on  behalf  of the  Landlord  and
            provided that the Landlord uses and continues to use its  reasonable
            endeavours  to  restore  the  Services  in  question  as  quickly as
            possible

      6.2   any  act  omission  or  negligence  of any  person  undertaking  the
            Services or any of them on behalf of the Landlord provided that this
            paragraph  shall not be  construed as  relieving  the Landlord  from
            liability for breach by the Landlord of any covenants on the part of
            the Landlord contained in this Lease

7.    Payment of the Service Charge

7.1   For each Financial Year, the Tenant must pay to the Landlord on account of
      the  Service  Charge  the sum of  (pound)750.00  or such  other sum as the
      Landlord's  Surveyor  certifies to be fair and reasonable having regard to
      the  likely  amount  of the  Service  Charge.  That  sum  shall be paid in
      advance,  without  deduction or set off by equal  instalments on the usual
      quarter days, the first instalment or  proportionate  part thereof for the
      period from the rent  commencement  date to the next quarter being paid on
      the execution  thereof.  During any Financial Year the Surveyor may

                                       39
<PAGE>

      revise  the  contribution  on  account  of the  service  charge  for  that
      Financial Year so as to take into account any actual or expected  increase
      in expenditure, and as soon as reasonably practicable after such revisions
      the Surveyor must certify the amount of the revised contribution

7.2   The Landlord shall as soon as convenient after each Computing Date prepare
      and serve on the Tenant an account showing the Annual  Expenditure for the
      Financial Year ending on that Computing Date and containing a fair summary
      of the expenditure referred to in it and upon such account being certified
      by the Surveyor it shall be  conclusive  evidence for the purposes of this
      lease of all matters of fact referred to in the account except in the case
      of manifest error

7.3   The Tenant  shall be  entitled  at any time to inspect  the  vouchers  and
      receipts relating to the Annual Expenditure

7.4   With the account prepared and served under the provisions of paragraph 7.2
      of this  Schedule the Landlord  will furnish the Tenant with an account of
      the service charge payable by him for that  Financial  Year,  credit being
      given for payments  made on account.  Within 14 days of the  furnishing of
      such an account,  the Tenant must pay the service charge or the balance of
      any balance of it payable, to the Landlord. The Landlord must allow to the
      Tenant any amount  overpaid by him against  future  payment of the Service
      Charge,  whether  on  account  or not.  At the end of the  Financial  Year
      current at the end of the Term the  Landlord  must repay to the Tenant any
      outstanding overpayment of the service charge

7.5   The Tenant shall pay the Service Charge each Financial Year within 14 days
      after service upon it of the account certified by the Surveyor as provided
      by paragraph 7.1 of this Schedule

8.    Variations
      The Landlord may withhold add to extend vary or make any alteration in the
      rendering of the Services or any of them from time to time  provided  that
      the same complies with the  principles  of good estate  management  and is
      reasonable in all the circumstances

                                     PART C

                                  The Services

9.    Maintaining etc Retained Parts
      Maintaining   repairing   renewing  where  beyond   economic   repair  and
      reinstating  and where

                                       40
<PAGE>

      appropriate  treating  washing down painting and  decorating  the Retained
      Parts

10.   Maintaining etc apparatus plant machinery etc
      Inspecting servicing  maintaining repairing amending overhauling replacing
      where beyond economic repair and insuring (save in so far as insured under
      other  provisions  of  this  lease)  all  apparatus  plant  machinery  and
      equipment  within the Retained Parts from time to time including  (without
      prejudice  to the  generality  of the  above)  all (if any) lifts and lift
      shafts stand-by generators and boilers and closed-circuit television

11.   Maintaining etc Pipes
      Maintaining  repairing  cleansing  emptying  draining and  renewing  where
      necessary  for the  purpose of repair only all Pipes  within the  Retained
      Parts

12.   Maintaining etc Fire Alarms etc
      Maintaining  and renewing where  necessary for the purposes of repair only
      any fire  alarms and  ancillary  apparatus  and fire  prevention  and fire
      fighting equipment and apparatus in the Retained Parts

13.   Cleaning etc Retained Parts
      Cleaning treating heating and lighting the Retained Parts to such standard
      as the Landlord may from time to time consider adequate

14.   Fixtures Fittings, etc
      Supplying  providing  purchasing hiring maintaining  renewing where beyond
      economic repair  replacing where necessary for the purposes of repair only
      repairing servicing  overhauling and keeping in good and serviceable order
      and condition all fixtures and fittings bins receptacles  tools appliances
      materials equipment and other things which the Landlord may deem desirable
      or necessary for the maintenance  appearance  upkeep or cleanliness of the
      Estate or any part of the Estate

15.   Other Services
      Any  other  services  relating  to the  Estate  or any part of the  Estate
      provided by the  Landlord  from time to time and not  expressly  mentioned
      which shall at any time during the Term be in keeping with the  principles
      of good estate management

                                       41
<PAGE>

                                     PART D

                              The Additional Items

16.      Fees

16.1     The reasonable and proper fees and  disbursements  (and any VAT payable
         on them save where recoverable by the Landlord) of :

16.1.1   the Surveyor and other  individual firm or company employed or retained
         by  the  Landlord  for  (or  in  connection  with)  such  surveying  or
         accounting functions or the management of the Estate

         16.1.2   the managing  agents  (whether or not the  Surveyor) for or in
                  connection with:

                  16.1.2.1 the management of the Estate

                  16.1.2.2 the collection of the rents and all other sums due to
                           the Landlord from the tenants of the Estate

                  16.1.2.3 the  performance of the Services and any other duties
                           in and about the Estate or any part of it relating to
                           (without  prejudice to the  generality  of the above)
                           the  general   management   administration   security
                           maintenance protection and cleanliness of the Estate

         16.1.3   any  individual  firm or  company  valuing  the Estate for the
                  purposes  of  assessing  the  full  cost  of  rebuilding   and
                  reinstatement

         16.1.4   any  individual  firm  or  company  providing   caretaking  or
                  security arrangements and services to the Estate as a whole

         16.1.5   any other  individual firm or company  employed or retained by
                  the  Landlord  to perform (or in  connection  with) any of the
                  Services or any of the functions or duties referred to in this
                  paragraph

         PROVIDED  that such fees and  expenses  shall not relate to  collecting
         arrears of rent  negotiating  new  lettings  or  negotiations  or other
         matters relating to rent reviews or dilapidations

16.2     The  reasonable and proper fees of the Landlord for any of the Services
         or the other  functions and duties  referred to in paragraph 16.1 above
         that shall be undertaken by the Landlord and not by a third party

                                       42
<PAGE>

17.      Contracts for Services
         The cost of entering  into any contracts for the carrying out of all or
         any of the  Services and other  functions  and duties that the Landlord
         may in its absolute discretion deem desirable or necessary

18.      Outgoings
         All taxes  assessments  duties charges  impositions and outgoings which
         are now or during  the Term shall be charged  assessed  or imposed  on:
         18.1  the  whole  of the  Estate  where  there  is no  separate  charge
         assessment or imposition on or in respect of an individual unit

18.2     the whole of the Retained Parts or any part of them

19.      Electricity Gas etc
         The  cost of  supply  of  electricity  gas oil or  other  fuel  for the
         provision of the Services and for all purposes in  connection  with the
         Retained Parts

20.      Road Charges etc
         The expense of repairing  maintaining  and  rebuilding and cleaning the
         access  roads  and any ways  roads  pavements  or  structures  Pipes or
         anything  which may  belong to or be used for the Estate or any part of
         it  exclusively  or in common  with  other  neighbouring  or  adjoining
         premises

21.      Regulations
         The costs  charges  and  expenses of  preparing  and  supplying  to the
         tenants copies of any regulation  made by the Landlord to the Estate or
         the use of it

22.      Statutory etc Requirements
         The cost of taking  all steps  deemed  desirable  or  expedient  by the
         Landlord for complying with making representations against or otherwise
         contesting  the incidence of the  provisions  of any statute  byelaw or
         notice concerning town planning public health highways streets drainage
         or other matters  relating to or alleged to relate to the Estate or any
         part of it for which any tenant is not directly and exclusively liable

23.      Nuisance
         The cost of the Landlord of abating a nuisance in respect of the Estate
         or any  part of it in so far as the  same is not the  liability  of any
         individual tenant

                                       43
<PAGE>

24.      Interest

         Any  reasonable  and  proper  interest  and  fees in  respect  of money
         borrowed to finance the  provisions  of the Services of the  Additional
         Items

25.      Anticipated Expenditure

         Such Provision (if any) for the  anticipated  expenditure in respect of
         any of the Services or the  Additional  Items as the Landlord  shall in
         its reasonable discretion consider appropriate.

                               THE FIFTH SCHEDULE
                               ------------------

                              Guarantors Covenants

1.       That as between the  Guarantor  and the Landlord  the  liability of the
         Guarantor will be as principal debtor and covenantor

2.       That the Tenant will at all times during the Term (and as well after as
         before any  disclaimer of this Lease) duly and punctually pay the rents
         as herein  provided  and will  observe  and  perform  all the  tenant's
         covenants and the conditions contained in this Lease

3.       That if at any time  during the Term the Tenant  defaults in paying any
         of the rents or in observing or  performing  any of the  covenants  and
         conditions  contained in this Lease the  Guarantor  will pay such rents
         and  observe and perform the  covenants  and  conditions  in respect of
         which the Tenant is in default and pay and make good to the Landlord on
         demand all  losses  damages  and costs and  expenses  sustained  by the
         Landlord through the default of the Tenant notwithstanding:-

         3.1      any time or  indulgence  granted by the Landlord to the Tenant
                  or any neglect or forbearance of the Landlord in enforcing the
                  payment  of  rents or the  observance  or  performance  of the
                  Tenant's covenants or other terms of this Lease or any refusal
                  by the  Landlord to accept  rents  tendered by or on behalf of
                  the Tenant at a time when the  Landlord was entitled (or would
                  after the service of a notice under  Section 146 of the Law of
                  Property Act 1925 have been entitled) to re-enter the Premises

         3.2      that the terms of this Lease may have been varied by agreement
                  between the parties

         3.3      that the Tenant may have  surrendered  part of the Premises in
                  which event the  liability of

                                       44
<PAGE>

                  the Guarantor hereunder shall continue in respect of the parts
                  of the Premises not so surrendered  after making any necessary
                  apportionments under the Law of Property Act 1925 s.140

         3.4      that the Tenant may have ceased to exist

         3.5      any  other act or thing  whereby  but for this  provision  the
                  Guarantor would have been released

4.       If at any time during the Term the Tenant (being an individual) becomes
         bankrupt or (being a company) goes into  liquidation and the trustee in
         bankruptcy  or  liquidator  disclaims  this  Lease or if this  Lease is
         forfeited  then this  Schedule  will  remain in full  force and  effect
         notwithstanding such event and the Guarantor will if the Landlord shall
         by notice in writing within 60 days after such disclaimer or forfeiture
         so require  take from the  Landlord a lease of the  Premises for a term
         commensurate  with the residue of the Contractual Term which would have
         remained had there been a  disclaimer  or  forfeiture  at the same Rent
         then being payable and subject to the same  covenants and conditions as
         are  reserved  by and  contained  in this Lease to take effect from the
         date  of the  said  disclaimer  or  forfeiture  and in  such  case  the
         Guarantor shall pay the costs of such new Lease and execute and deliver
         to the Landlord a counterpart thereof

5.       The  parties  agree that this  guarantee  shall only  subsist  for such
         period  and  extend  to  such   liabilities   restrictions   and  other
         requirements as may be permitted by the Landlord and Tenant (Covenants)
         Act 1995



SIGNED AS A DEED AND DELIVERED                )
by MICHAEL ROBERT KENDALL                     )
in the presence of:-                          )


                                       45
<PAGE>



SIGNED AS A DEED AND DELIVERED                )
by JUNE JARVIS in the presence of:-           )





SIGNED AS A DEED AND DELIVERED by             )
by BARNETT WADDINGHAM TRUSTEES                )
LIMITED acting by a Director and its Secretary)

      Director:

      Secretary:






SIGNED AS A DEED AND DELIVERED by             )
LAKELAND INDUSTRIES EUROPE LIMITED            )
acting by a Director and its Secretary        )

      Director:

      Secretary:



                                       46
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>6
<FILENAME>ex31-1.txt
<TEXT>

                                                                    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-K 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: April 17, 2006
                                             /s/ Christopher J. Ryan
                                             ------------------------------
                                             By: Christopher J. Ryan
                                             Chief Executive Officer, President,
                                             Secretary and General Counsel
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>7
<FILENAME>ex31-2.txt
<TEXT>

                                                                    Exhibit 31.2

                            CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Gary Pokrassa, certify that:

1.    I have reviewed this report on Form 10-K 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: April  17, 2006
                                                    /s/ Gary Pokrassa
                                                    ----------------------------
                                                    By: Gary Pokrassa
                                                    Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>8
<FILENAME>ex32-1.txt
<TEXT>

                                                                    Exhibit 32.1
                                                                    ------------

                            CERTIFICATION PRESIDENT,
                          SECRETARY AND GENERAL COUNSEL
             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
Annual Report of Lakeland Industries, Inc. (the "Company") on Form 10-K for the
period ending January 31, 2006 (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; 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

April 17, 2006

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>9
<FILENAME>ex32-2.txt
<TEXT>

                                                                    Exhibit 32.2
                                                                    ------------

                  CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
             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
Annual Report of Lakeland Industries, Inc. (the "Company") on Form 10-K for the
year ending January 31, 2006 (the "Report"), I Gary Pokrassa, Chief Financial
Officer 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/ Gary Pokrassa
- -----------------------
Gary Pokrassa
Chief Financial Officer

April  17 , 2006

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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