What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-04-21 compared with 2021-04-16 · 179 added, 196 removed, 571 unchanged (40% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Statements of Income for the Years Ended January 31, 2022 and 2021

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Lakeland Industries, Inc.

and subsidiaries (the "Company") as of January 31, 2021, the related statements of income, comprehensive income, stockholders' equity, and cash flows, for the year ended January 31, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2021, and the results of its operations and its cash flows for the year ended January 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Lakeland Industries, Inc.

and subsidiaries (the “Company”) as of January 31, 2022 and 2021, the related statements of income, comprehensive income, stockholders’ equity, and cash flows, for each of the two years in the period ended January 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 21, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

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Our audit procedures related to valuation of slow moving, excess and obsolete inventory included, among others:

We tested the effectiveness of controls over management’s process to evaluate the need for adjustments for its slow-moving, obsolete or unusable inventory, such as controls related to the development of management’s forecast around the commercial marketability and customer purchases of this inventory.

We tested the effectiveness of controls over management’s process to evaluate the need for adjustments for its slow-moving, obsolete or unusable inventory.

We tested the mathematical accuracy of management’s estimates of the net realizable value for slow-moving, obsolete or unusable inventory.

We evaluated management’s historical ability to forecast sales for inventory.

We evaluated management’s ability and intent to execute promotional actions and the financial impact of those actions and their relationship to the costs incurred to produce historically slower moving inventory.

We compared forecasts and planned actions to:

We evaluated management’s judgments as to the historical lookback period utilized in determining slow-moving, obsolete or unusable inventory.

We evaluated the valuation of slow moving, excess and obsolete inventory in relation to:

Historical results and actions

Communications between management and the board of directors

Industry information related to the market for these products, including sales prices and buying cycles.

Industry information related to the market for these products

Subsequent events

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April 21, 2022

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Lakeland Industries, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Lakeland Industries, Inc.

and Subsidiaries (collectively, the “Company”) as of January 31, 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year ended January 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2020, and the results of its operations and its cash flows for the year ended January 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of January 31, 2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated April 15, 2020, expressed an adverse opinion.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company’s auditor since 2016.

/s/ Friedman LLP

New York, New York

April 15, 2020

Lakeland Industries, Inc.

and Subsidiaries

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Operating profit

Other income (expense), net

Other income, net

Interest expense

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For the Years Ended January 31, 2022 and 2021

Other comprehensive income (loss):

Other comprehensive income:

Foreign currency translation adjustments

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Deferred tax assets

Prepaid VAT and other taxes

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Common stock, $ 0.01 par;

authorized 20,000,000 shares, Issued 8,498,457 and 8,481,665 ;

authorized 20,000,000 shares,

Issued 8,555,672 and 8,498,457 ;

outstanding 7,615,967 and 7,984,518 at January 31, 2022 and 2021, respectively

Treasury stock, at cost;

509,242 shares at January 31, 2021 and 2020

939,705 and 509,242 shares at January 31, 2022 and 2021, respectively

Additional paid-in capital

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Comprehensive

Balance, As At January 31, 2019

Balance, January 31, 2020 as previously reported

Impact of immaterial restatement (see Note 1)

Balance, January 31, 2020 as restated

Other comprehensive loss

3 unchanged sentences

Return of shares in lieu of payroll tax withholding

Treasury stock purchased, inclusive of commissions

Balance, As At January 31, 2020

Treasury stock purchased

Balance, January 31, 2021

Other comprehensive income

3 unchanged sentences

Return of shares in lieu of payroll tax withholding

Treasury stock purchased, inclusive of commissions

Balance, As At January 31, 2021

Treasury stock purchased

Balance, January 31, 2022

Lakeland Industries, Inc.

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Loss on disposal of property and equipment

Non-cash operating lease expense

Equity in (earnings) loss of equity investment

(Increase) decrease in operating assets:

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Internationally, we sell to a mixture of end users directly, and to industrial distributors depending on the particular country and market.

Sales are made to more than 50 countries, the majority of which were into China, the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India and Southeast Asia.

Sales are made to more than 50 countries, the majority of which were into China, countries within the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India and countries within Southeast Asia.

For purposes of this Form 10-K, FY refers to a fiscal year ended January 31;

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The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.

The Company recognizes losses when information available indicates that it is probable that a receivable has been impaired based on criteria noted above at the date of the consolidated financial statements, and the amount of the loss can be reasonably estimated.

Management considers the following factors when determining the collectability of specific customer accounts:

Customer creditworthiness, past transaction history with the customers, current economic industry trends and changes in customer payment terms.

Past due balances over 90 days and other less creditworthy accounts are reviewed individually for collectability.

If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required.

Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance.

Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

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 net realizable value.

Allowances are recorded for slow-moving, obsolete or unusable inventory.

The Company estimates credit losses by considering historical credit losses, the current economic environment, customer credit ratings or bankruptcies.

Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost (on a first-in, first-out or moving average basis) or net realizable value.

Adjustments are recorded for slow-moving, obsolete or unusable inventory.

We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future sales and supply on-hand, if necessary.

If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

If actual market conditions are less favorable than those projected by management, additional inventory adjustments may be required.

Property and Equipment

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Assets classified as held for sale are not depreciated.

Capitalized Software Costs

In accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, the Company capitalizes eligible costs to acquire or develop internal-use software.

Capitalized costs related to internal-use software are amortized using the straight-line method over the estimated useful life of the assets, which is generally three years.

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

Goodwill is evaluated for impairment at least annually;

however, this evaluation may be performed more frequently when events or changes in circumstances indicate the carrying amount may not be recoverable.

Factors that the Company considers important that could identify a potential impairment include:

significant changes in the overall business strategy and significant negative industry or economic trends.

Management assesses whether it is more likely than not that goodwill is impaired and, if necessary, compares the fair value of the reporting unit to the carrying value.

Fair value is generally determined by management either based on estimating future discounted cash flows for the reporting unit or by estimating a sales price for the reporting unit based on multiple of earnings.

These estimates require the Company's management to make projections that can differ from actual results.

Impairment of Long-Lived Assets

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(in millions of dollars)

External Sales by region:

Other foreign

Latin America

Consolidated external sales

(in millions of dollars)

External Sales by product lines:

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Consolidated external sales

(in millions of dollars)

External Sales by region:

Other foreign

Latin America

Consolidated external sales

Advertising Costs

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For awards based on services already rendered, the cost is recognized immediately.

Research and Development Costs

Research and development costs include labor, equipment and materials costs and are expensed as incurred and included in operating expenses.

Research and development expenses aggregated were approximately $ 0.2 million in FY21 and FY20.

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.

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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.

Foreign currency transaction loss included in net income for the years ended January 31, 2021 and 2020, were approximately $ 0.1 million and $ 0.4 million, respectively.

Foreign currency transaction income (loss) included in net income for the years ended January 31, 2022 and 2021, were approximately $ 0.3 million and ($ 0.5 ) million, respectively.

Fair Value of Financial Instruments

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Management periodically reviews new accounting standards that are issued.

New Accounting Pronouncements Recently Adopted

In January 2017, the FASB issued ASU No.

2017-04, Intangibles-Goodwill and Other (Topic 350), which includes provisions, intended to simplify the test for goodwill impairment.

The standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company has adopted this guidance using prospective transition method, which had no material impact on its unaudited condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, "Leases:

Amendments to the FASB Accounting Standards Codification (Topic 842)".

This ASU requires the Company to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with terms of more than twelve months.

This ASU also requires disclosures enabling the users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases.

In addition, the FASB provided a practical expedient transition method that allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, as opposed to applying the requirements retrospectively and providing comparative prior period financial statements.

The Company adopted the new standard on February 1, 2019, the first day of fiscal 2020, and applied the above practical expedient transition method.

The Company elected certain other transition options which, among other things, allowed the Company to carry forward its prior conclusions about lease identification and classification.

Upon adoption of the new standard, the Company recognized approximately $ 2.3 million of right-of-use ("ROU") assets and lease liabilities.

Adoption of the new standard did not have a material impact on the Company's consolidated statements of income or consolidated statements of cash flows.

Refer to Note 10 for additional information and disclosures related to the adoption of ASC 842.

Recently Adopted Accounting Standards

In 2019, the FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes (Topic 740) .

The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the tax basis of goodwill after a business combination, and the recognition of deferred tax liabilities for outside basis differences.

The new guidance also changes the calculation of the income tax impact of hybrid taxes and the methodology for calculating income taxes in an interim period.

We adopted this standard as of January 31, 2021 on either a prospective basis, or through a modified retrospective approach, as required by the standard.

There was no cumulative effect adjustment recorded to retained earnings as the amount was not material.

The effects of this standard on our financial position, results of operations and cash flows were not material.

New Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes.

The ASU removes certain exceptions for performing intra-period allocation and calculating income taxes in interim periods.

It also simplifies the accounting for income taxes by requiring recognition of franchise tax partially based on income as an income-based tax, requiring reflection of enacted changes in tax laws in the interim period and making improvements for income taxes related to employee stock ownership plans.

ASU 2019-12 is effective for fiscal years and interim periods within those years, beginning after December 15, 2020.

Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued.

The Company is currently evaluating the impact the standard will have on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

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No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s consolidated financial statements.

Restatement For Correction of Immaterial Errors in Previously Issued Consolidated Financial Statements

In connection with the preparation of the consolidated financial statements for the fiscal year ended January 31, 2022, the Company identified errors in its previously filed annual consolidated financial statements and unaudited quarterly consolidated financial statements.

The errors were not material to any individual prior quarterly or annual period.

The prior period errors were related to assumptions and estimates made related to intercompany profit in ending inventory, use of a blended rate to calculate state net operating losses within the income tax provision and assumptions made concerning compensation information used to calculate employee benefits in one of our foreign entities.

These errors accumulated over time and prior to the beginning of FY 2022.

In accordance with SEC Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (codified as Topic 1-N), the Company concluded that the correction of the errors was not material to any of its previously issued annual or interim financial statements.

The Company has revised its previously issued consolidated financial statements contained in this Annual Report on Form 10-K to correct the effect of these immaterial errors for the corresponding periods.

Accordingly, for these prior periods we revised the affected line items of our consolidated balance sheets, consolidated statements of income and comprehensive income, consolidated statements of stockholders’ equity, and consolidated statements of cash flows.

The correction of the errors resulted in a $ 1.4 million decrease in retained earnings as of January 31, 2020.

The effects of the correction of immaterial errors on the impacted accounts within the Consolidated Balance Sheets were as follows (in thousands):

January 31, 2021

As Previously Reported

Deferred tax assets

Accrued compensation and benefits

Total Liabilities

Retained earnings

Total Stockholders’ Equity

The effects of the correction of immaterial errors on the impacted accounts within the Consolidated Statements of Income were as follows (in thousands):

Year ended January 31, 2021

As Previously Reported

Cost of goods sold

Income before taxes

Income tax expense

Basic net income per common share

Diluted income per common share

The effects of the correction of immaterial errors on the impacted accounts within the Consolidated Statements of Cash Flows were as follows (in thousands):

Year ended January 31, 2021

As Previously Reported

Deferred taxes

Accrued expenses and other liabilities

Net cash provided by operating activities

Inventories consist of the following (in $000s):

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Property and equipment consists of the following:

Useful Life in Years

Machinery and equipment

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Depreciation and amortization expense for FY22 and FY21 amounted to $ 1.9 million and $ 2.0 million, respectively.

On October 18, 2021, the Company entered into an Investment Agreement (the “Investment Agreement”) with Inova Design Solutions Ltd, a private limited company incorporated under the laws of England and Wales and headquartered in the United Kingdom, doing business as Bodytrak ® (“Bodytrak”), and the other parties thereto, pursuant to which Bodytrak agreed to issue and sell to the Company 508,905 cumulative convertible series A shares of Bodytrak (“Series A Shares”) in exchange for a payment by the Company of £2,000,000 ($ 2.8 million).

The closing of this minority investment transaction occurred on October 18, 2021.

Bodytrak provides wearable monitoring solutions for customers in industrial health, safety, defense and first responder markets wanting to achieve better employee health and performance.

Bodytrak’s solution is provided as a platform as a service (PaaS), delivering real-time data and cloud-based analytics, and hardware that includes a patented earpiece for, physiological monitoring and audio communications.

The Series A Shares issued to the Company at the closing represent approximately 11.43 % of Bodytrak’s total share capital.

Under the terms of the Investment Agreement, the Company may also elect, within 30 months of the date of the initial investment, to acquire up to an additional 381,679 Series A Shares of Bodytrak for £1,500,000 (approximately $ 2.0 million at current exchange rates) assuming all 381,679 Series A Shares are acquired by the Company), which would result in the Company owning an aggregate of 18.42 % of Bodytrak’s share capital, assuming no other shares are issued by Bodytrak.

The investment in Bodytrak will be accounted for under the equity method given our board representation and the resulting ability to exercise significant influene.

A substantial portion of our investment represents differences in our investment and our share of the underlying recognized net assets of Bodytrak.

These differences are predominately attributable to non-amortizing intangible assets, including internally developed intellectual property, of Bodytrak.

For the period October 18, 2021 (date of investment) through January 31, 2022, the Company recognized a loss of $ 0.1 million as the Company’s share of Bodytrak’s net loss.

The loss is reflected in other income (expense), net in the consolidated statements of income.

LONG-TERM DEBT

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The Loan Agreement provides for an annual unused line of credit commitment fee, payable quarterly, of 0.25%, based on the difference between the total credit line commitment and the average daily amount of credit outstanding under the facility during the preceding quarter.

On June 18, 2021, the Company entered into an Amendment No.

1 to Loan Agreement (the “Amendment”) with the Lender, which modifies certain terms of the Company’s existing Loan Agreement with the Lender.

The Amendment increases the credit limit under the Loan Agreement’s senior secured revolving credit facility from $ 12.5 million to $ 25.0 million.

The Amendment also amends the covenant in the Loan Agreement that restricts acquisitions by the Company or its subsidiaries in order to allow, without the prior consent of the Lender, acquisitions of a business or its assets if there is no default under the Loan Agreement and the aggregate consideration does not exceed $ 7.5 million for any individual acquisition or $ 15.0 million on a cumulative basis for all such acquisitions.

The Loan Agreement requires the Company to maintain a Funded Debt to EBITDA (as each such term is defined in the Loan Agreement) ratio of 3.0 to 1.0 or less and a Basic Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of at least 1.15 to 1.0.

The Loan Agreement also contains customary covenants, including covenants that, among other things, limit or restrict the Company’s and/or the Company’s subsidiaries’ ability, subject to certain exceptions and qualifications, to incur liens or indebtedness, pay dividends, or merge, consolidate or sell or otherwise transfer assets.

The Company was in compliance with all of its debt covenants as of January 31, 2022.

The Company made certain representations and warranties to the Lender in the Loan Agreement that are customary for credit arrangements of this type.

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On March 9, 2019 the facility was extended to March 31, 2020 and on March 6, 2020 further extended to March 31, 2021 with no additional changes to the terms.

On April 6, 2021 the facility was extended to March 31, 2022 and to reflect a reduction of the service charge from 0.85% to 0.765%.

The agreement can be terminated with three months notice.

There were no borrowings outstanding under this facility at January 31, 2022 and January 31, 2021.

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STOCKHOLDERS’ EQUITY

The 2017 Plan

On June 21, 2017, the stockholders of the Company approved the Lakeland Industries, Inc.

2017 Equity Incentive Plan (the “2017 Plan”) at the Annual Meeting of Stockholders.

2017 Equity Incentive Plan (the “2017 Plan”).

The executive officers and all other employees and directors of the Company, including its subsidiaries, are eligible to participate in the 2017 Plan.

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The 2017 Plan provides for the grant of equity-based compensation in the form of stock options, restricted stock, restricted stock units, performance shares, performance units, or stock appreciation rights (“SARs”).

The Committee has the authority to determine the type of award, as well as the amount, terms and conditions of each award, under the 2017 Plan, subject to the limitations and other provisions of the 2017 Plan.

On June 16, 2021, the stockholders of the Company approved Amendment No.

1 (the “Amendment”) to the 2017 Plan.

The Amendment increases the number of shares of common stock, par value $ 0.01 per share (the “Common Stock”), of the Company reserved for issuance under the Plan by 480,000 shares.

An aggregate of 840,000 shares of the Company’s common stock are authorized for issuance under the 2017 Plan, subject to adjustment as provided in the 2017 Plan for stock splits, dividends, distributions, recapitalizations and other similar transactions or events.

If any shares subject to an award are forfeited, expire, lapse or otherwise terminate without issuance of such shares, such shares shall, to the extent of such forfeiture, expiration, lapse or termination, again be available for issuance under the 2017 Plan.

The Company recognizes expense related to performance-based restricted share awards over the requisite performance period using the straight-line attribution method based on the most probable outcome (Minimum, Target, Maximum, Cap or Zero) at the end of the performance period and the price of the Company’s common stock price at the date of grant.

The 2017 grants actually expired unvested on January 31, 2020 (described above) that will be earned for the designated performance period.

Based on actual EBITDA achieved by the Company in FY20, it was deemed improbable that such performance would meet even the Minimum level required for the 2017 and 2018 grants to vest.

As a result, stock-based compensation expense for the 2017 and 2018 grants was adjusted to account for the change in estimate.The total amount of previously recognized stock-based compensation attributable to the 2017 and 2018 grants that was reversed was approximately $ 0.8 million.

Due to significantly increased profitability during FY21, the Company has determined that it is probable that the 2018 grants will now vest and has recorded approximately $0.8 million in stock based compensation expense in FY21.

The 2017 grants expired unvested on January 31, 2020.

The Company recognized total stock-based compensation costs, which are reflected in operating expenses:

The Company recognized total stock-based compensation costs, which are reflected in operating expenses (in 000’s):

Year Ended January 31,

Restricted Stock Program

$ ( 404,764 )

Stock Options

$ ( 377,187 )

Stock appreciation rights

Total stock-based compensation

$ ( 402,746 )

Total income tax benefit (expense) recognized for stock-based compensation arrangements

Total restricted stock and stock option programs

Total income tax expense recognized for stock-based compensation arrangements

Restricted Stock

Under the 2017 Plan, as described above, the Company awarded performance-based shares and service-based restricted stock units to eligible employees and directors.

Under the 2017 Plan, as described above, the Company awarded performance-based and service-based shares of restricted stock and restricted stock units to eligible employees and directors.

The following table summarizes the activity under the 2017 Plan for the year ended January 31, 2022.

This table reflects the amount of awards granted at the number of shares that would be vested if the Company were to achieve the cap performance level under the June 2018 grants and maximum performance level under the December 2019 and April 2020 grants.

This table reflects the amount of awards granted at the number of shares that would be vested if the Company were to achieve the maximum performance level under the December 2019, April 2020 and June 2021 grants.

Service-Based

Weighted Average Grant Date Fair Value

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Outstanding at January 31, 2022

The actual number of shares of common stock of the Company, if any, to be earned by the award recipients is determined over a three year performance measurement period based on measures that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) with respect to the June 7, 2018 grant and revenue growth, EBITDA margin, and cash flow for the December 4, 2019 and April 8,2020 grants.

The actual number of shares of common stock of the Company, if any, to be earned by the award recipients is determined over a three year performance measurement period based on measures that include Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin, revenue growth, and free cash flow for the December 2019, April 2020 and June 2021 grants.

The performance targets have been set for each of the Minimum, Target, and Maximum levels.

The actual performance amount achieved is determined by the Board and may be adjusted for items determined to be unusual in nature or infrequent in occurrence, at the discretion of the Board.

The actual performance amount achieved is determined by the Committee and may be adjusted for items determined to be unusual in nature or infrequent in occurrence, at the discretion of the Committee.

The compensation cost is based on the fair value at the grant date, is recognized over the requisite performance/service period using the straight-line method, and is periodically adjusted for the probable number of shares to be awarded.

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Stock Repurchase Program

On July 19, 2016, the Company’s board of directors approved a stock repurchase program under which the Company may repurchase up to $ 2,500,000 of its outstanding common stock.

During the year ended January 31, 2021, the Company did not repurchase any shares.

The Company has repurchased 152,801 shares of stock under this program as of January 31, 2021 for $ 1,671,188 , inclusive, of commissions.

On February 17, 2021, the Company’s Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $ 5,000,000 of its outstanding common stock.

This new program replaced the prior program which had approximately $ 800,000 remaining for repurchases.

In October 2014, the Company issued a five-year warrant that is immediately exercisable to purchase up to 55,500 shares of the Company’s common stock at an exercise price of $ 11.00 per share.

During FY20, such warrant expired.

On February 17, 2021, the Company’s Board of Directors approved a stock repurchase program under which the Company may repurchase up to $ 5 million of its outstanding common stock.

On July 6, 2021, the Board of Directors authorized an increase in the Company’s current stock repurchase program under which the Company may repurchase up to an additional $ 5 million of its outstanding common stock (the "Existing Shares Repurchase Program") Shares repurchased in FY22 totaled 430,463 shares at a cost of $ 9.2 million leaving $ 0.8 million remaining under the stock repurchase program at January 31, 2022.

On April 7, 2022, the Board of Directors authorized a new stock repurchase program under which the Company may repurchase up to $ 5 million of its outstanding common stock (the “New Share Repurchase Program”).

The New Share Repurchase Program will become effective upon the completion of the Existing Share Repurchase Program, which has approximately $ 800,000 remaining for repurchases as of April 21, 2022.

The New Share Repurchase Program has no expiration date but may be terminated by the Board of Directors at any time.

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

Years Ended January 31,

Domestic and Foreign Pretax Income

Income Tax Expense

Years Ended January 31,

Income Tax Expense (Benefit)

State and other taxes

Total Current Tax Expense

$ 4,122 $ 5,578

$ 526 $ 3,005

Total Deferred Tax Expense

Total Income Taxes

$ 4,781 $ 8,583

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

Years Ended January 31,

Statutory rate

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Foreign Tax Credit

Argentina Flow Through Loss

Foreign Dividend & Subpart F

Foreign Rate Differential

Change in State Apportionment Rate

Effective Rate

The tax effects of temporary cumulative differences which give rise to deferred tax assets are summarized as follows:

Years Ended January 31,

Deferred tax assets:

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State and local carry-forwards

Argentina timing difference

Depreciation and other

Depreciation and amortization

Prepaid expenses

Brazil write-down

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those earnings needed for working capital or additional foreign investment.

As stated above, GILTI is recognized in the period it is incurred and is not considered with regard to deferred income tax on unremitted E&P.

All international subsidiaries are impacted by GILTI calculation.

The Company strategically employs a dividend plan with respect to our non-U.S.

subsidiaries subject to subsidiary profitability, cash requirements and withholding taxes.

During FY22 the Company’s subsidiaries in Canada, Uruguay and Hong Kong declared and paid dividends of $ 2.6 million, $ 1.0 million and $ 4.4 million respectively.

Withholding taxes totaling $ 0.2 million are included in income tax expense.

No dividends were proposed by management or declared by our Board of Directors for our China subsidiary in FY22 or FY21.

Income Tax Audits

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The 2021 tax review will be performed before May 30, 2022 in China.

As mentioned above, it’s the Company’s intention is to reinvest outside the US those earnings needed for working capital or foreign investment.

As a result of the transition tax, $ 5.0 million of foreign income was repatriated at the end of FY18.

However, the Company has no intention to repatriate earnings with regards with GILTI.

It is not practicable to determine the amount of unrecognized deferred tax liabilities related to the Company's investments in foreign subsidiaries that are permanent In duration.

the fiscal year ended January 31, 2021, no dividends were declared.

It is the Company’s practice and intention to reinvest the earnings of our non-US subsidiaries in their operations with the exception of the dividend plan.

Change in Valuation Allowance

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Numerator – Net Income

Denominator for basic net income per share (weighted-average shares which reflect 509,242 shares in the treasury at January 31, 2021 and 2020)

Denominator for basic net income per share (weighted-average shares which reflect 939,705 and 509,242 treasury shares at January 31, 2022 and 2021, respectively)

Effect of dilutive securities from restricted stock plan and from dilutive effect of stock options

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We have one type of derivatives to manage the risk of foreign currency fluctuations.

We entered into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies.

We enter into forward contracts with financial institutions to manage our currency exposure related to net assets and liabilities denominated in foreign currencies.

Those forward contract derivatives, not designated as hedging instruments, were generally settled quarterly.

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

The Company’s Exit from Brazil

On March 9, 2015, Lakeland Brazil, S.A.

changed its legal form to a Limitada and changed its name to Lake Brasil Industria E Comercio de Roupas E Equipamentos de Protecao Individual LTDA (“Lakeland Brazil”).

Transfer of Shares Agreement

On July 31, 2015 (the “Closing Date”), Lakeland and Lakeland Brazil, completed a conditional closing of a Shares Transfer Agreement (the “Shares Transfer Agreement”) with Zap Comércio de Brindes Corporativos Ltda (“Transferee”), a company owned by an existing Lakeland Brazil manager, entered into on June 19, 2015.

Pursuant to the Shares Transfer Agreement, the Transferee has acquired all of the shares of Lakeland Brazil owned by the Company.

Pursuant to the Shares Transfer Agreement, Transferee paid R$1.00 to the Company and assumed all liabilities and obligations of Lakeland Brazil, whether arising prior to, on or after the Closing Date.

In order to help enable Lakeland Brazil to have sufficient funds to continue to operate for a period of at least two years following the Closing Date, the Company provided funding to Lakeland Brazil in the aggregate amount of USD $ 1,130,000 in cash, in the form of a capital raise, on or prior to the Closing Date, and agreed to provide an additional R$582,000 (approximately USD $ 188,000 ) (the “Additional Amount”), in the form of a capital raise, to be utilized by Lakeland Brazil to pay off certain specified liabilities and other potential contingent liabilities.

Pursuant to the Shares Transfer Agreement, the Company paid R$992,000 (approximately USD $ 320,000 ) in cash, on July 1, 2015 and issued a non-interest bearing promissory note for the payment to be due for the Additional Amount (R$582,000) (approximately USD $ 188,000 ) on the Closing Date which was paid to Lakeland Brazil in two (2) installments of ( i) R$288,300 (approximately USD $82,000) which was paid on August 1, 2015, and (ii) R$294,500 (approximately USD $84,000) on September 1, 2015 .

The closing of this agreement was subject to Brazilian government approval of the shares transfer, which was received in October 2015 (The “Final Closing Date”).

Although the Company formally completed the terms of the “Shares Transfer Agreement”, pursuant to which our entire equity interest in our former Brazilian subsidiary (“Lakeland Brazil”) was transferred, during the fiscal year ended January 31, 2016, we may continue to be exposed to certain liabilities arising in connection with the operations of Lakeland Brazil, which was shut down in late March 2019.

The Company understands that under the laws of Brazil, a parent company may be held liable for the liabilities of a former Brazilian subsidiary in the event of fraud, misconduct, or under various theories.

In this respect, as regards labor claims, a parent company could conceivably be held liable for the liabilities of a former Brazilian subsidiary.

Although the Company would have the right of adversary system, full defense and due process, in case of a potential litigation, there can be no assurance as to the findings of the courts in Brazil.

VAT Tax Issues in Brazil

Value Added Tax (“VAT”) in Brazil is charged at the state level.

We commenced operations in Brazil in May 2008 through the acquisition of Lakeland Brazil.

Having successfully settled that largest of the VAT claims against Lakeland Brazil, three claims remain open.

Our attorney informs us the three claims totaling R$1.3 million (USD $ 0.5 million) excluding interest, penalties and fees of R$2.7 million (USD $ 0.9 million) were likely to be successfully defended based on state auditor misunderstanding.

Furthermore, with regards to foreign tax claims, our US attorney informs us that the US courts will not hear foreign tax claims and therefore will not enforce them.

Labor Claims in Brazil

As disclosed in our periodic filings with the SEC, we agreed to make certain payments in connection with ongoing labor litigation involving our former Brazilian subsidiary.

While the vast majority of these labor suits have been resolved, two significant claims remain;

one labor claim and one civil claim filed by separate former officers of our former Brazilian subsidiary.

While Lakeland was initially named as a co-defendant in the labor suit, Lakeland was dismissed from the case by the labor judge.

Lakeland is a named co-defendant in the civil matter.

In the labor case filed in 2014, the former Brazilian manager was initially awarded USD $ 100,000 and appealed the award amount.

Having recently completed that appeals process, the case has been returned to the initial hearing phase for witness testimony and collection of evidence before the same judge that previously dismissed Lakeland.

Currently, Lakeland is not a co-defendant in this case, but that could change should the judge change his prior ruling.

In the civil matter, a former Lakeland Brazil manager is seeking approximately USD $ 700,000 he alleges is due to him against an unpaid promissory note.

Lakeland has not been served with process and no decision on the merits has been issued in this case yet.

These two cases are the only two cases filed within he the last 5 years and represent the majority of the remaining exposure for Lakeland.

Lakeland Brazil may face new labor lawsuits in the short term as a result of the shutdown of its operations in March 2019.

The Company has no obligation under the Shares Transfer Agreement to make any additional payments in connection with these potential new labor lawsuits.

The Company also understands that under the labor laws of Brazil, a parent company may be held liable for the labor liabilities of a former Brazilian subsidiary in the case of fraud, misconduct, or under various theories.

Although the Company would have the right of adversary system, full defense and due process in case of a potential litigation, there can be no assurance as to the findings of the courts of Brazil.

There are additional cases in Labor and Civil courts against Lakeland Brazil in which Lakeland is not a party, and other outstanding monetary allegations of Lakeland Brazil.

In FY19, the Company recorded an additional accrual of $ 1.2 million for professional fees and litigation reserves associated with labor claims in Brazil.

In FY20 the Company recorded an additional expense of $ 0.4 million and paid $ 1.4 million in professional fees and labor claims.

The accrual on the balance sheet at January 31, 2021 and 2020 is $ 0.03 million and $ 0.2 million, respectively.

General litigation contingencies

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however, there can be no assurance as to the ultimate outcome of these matters.

As of January 31, 2021, to the best of the Company’s knowledge, there were no outstanding claims or litigation, except for the labor contingencies in Brazil described above.

As of January 31, 2022, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation.

We lease real property, equipment and automobiles.

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Classification

January 31, 2022

January 31, 2021

Operating lease cost

2 unchanged sentences

Short-term lease cost

Maturity of Lease Liabilities

Maturity of lease liabilities as of January 31, 2021 was as follows (in $000’s):

Year ending January 31,

Total lease payments

Present value of lease liability

Weighted-average lease terms and discount rates are as follows:

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Leased assets obtained in exchange for new operating lease liabilities

Maturity of Lease Liabilities

Maturity of lease liabilities as of January 31, 2022 was as follows (in $000’s):

Year ending January 31,

Operating Leases

Total lease payments

Present value of lease liability

SEGMENT REPORTING

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

Year Ended January 31,

International

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Consolidated depreciation and amortization expense

Interest Expense:

USA Operations (including Corporate)

Latin America

Consolidated interest expense

Income Tax Expense (Benefit):

USA Operations (including Corporate)

Other foreign

Latin America

Less intersegment

Consolidated income tax expense

Year Ended January 31,

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Consolidated capital expenditure

USA Operations (including Corporate)

Consolidated goodwill

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The unaudited quarterly financial information reflects all normal and recurring accruals and adjustments necessary for a fair presentation of net income for interim periods including, the result of the correction of immaterial errors discussed in Note 1.

“Business and Summary of Significant Accounting Policies.”

These corrections decreased cost of goods sold by $ 0.1 million for the quarters ended October 31, 2021 and July 31, 2021 and $ 0.4 million for the quarter ended April 30, 2021.

These corrections increased income tax expense by $ 0.03 million for the quarter ended October 31, 2021, decreased income tax expense by $ 0.3 million for the quarter ended July 31, 2021 and increased income tax expense by $ 0.03 million for the quarter ended April 30, 2021.

These corrections increased net income by $ 0.1 million for the quarter ended October, 31, 2021 and increased net income by $ 0.4 million for the quarters ended July 31, 2021 and April 30, 2021.

Basic EPS increased $ 0.01 for the quarter ended October 31, 2021,by $ 0.05 for the quarters ended July 31, 2021 and April 30, 2021.

Diluted EPS increased $ 0.01 for quarter ended October 31, 2021, increased $ 0.05 for the quarter ended July 31, 2021 and increased $ 0.04 for the quarter April 30, 2021.

These corrections decreased cost of goods sold by $ 0.1 million for the quarters ended October 31, 2020, July 31, 2020 and April 30, 2020.

These corrections increased cost of goods sold by $ 0.2 million for the quarter ended January 31, 2021.

These corrections decreased income tax expense by $ 0.05 million for the quarters ended January 31, 2021, October, 31, 2020, July 31, 2020 and April 30, 2020.

These corrections decreased net income by $ 0.1 million for the quarter ended January 31, 2021.

These corrections increased net income by $ 0.1 million for the quarters ended October, 31, 2020, July 31, 2020 and April 30, 2020.

Basic EPS decreased $ 0.02 for the quarter ended January 31, 2021.

Basic EPS increased $ 0.02 for the quarters ended October 31, 2020, July 31, 2020 and April 30, 2020.

Diluted EPS decreased $ 0.02 for the quarter ended January 31, 2021.

Diluted EPS increased $ 0.02 for the quarters ended October 31, 2020 and April 30, 2020 and increased $ 0.01 for the quarter ended July 31, 2020.

Quarterly results are not necessarily indicative of a full year’s operations because of various factors.

The following tables present unaudited quarterly financial information for the periods presented:

Fiscal Year 2022

In thousands except EPS

Fourth Quarter Ended January 31, 2022

Third Quarter Ended October 31, 2021

Second Quarter Ended July 31, 2021

First Quarter Ended April 30, 2021

Cost of goods sold

Operating profit

Income tax expense

Weighted average shares used in computing basic EPS

Weighted average shares used in computing diluted EPS

Fiscal Year 2021

In thousands except EPS

Fourth Quarter Ended January 31, 2021

Third Quarter Ended October 31, 2020

Second Quarter Ended July 31, 2020

First Quarter Ended April 30, 2020

Cost of goods sold

Operating profit

Income tax expense

Weighted average shares used in computing basic EPS

Weighted average shares used in computing diluted EPS

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data