LAKELAND INDUSTRIES INC 10-Q

Item 1. Financial Statements LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ($000’s except for share and per share information) Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Net sales $ 45,761 $ 31,678 $ 120,583 $ 93,449 Cost of goods sold 27,201 18,317 70,603 53,461 Gross profit 18,560 13,361 49,980 39,988 Operating expenses 17,753 9,740 48,562 30,699 Operating profit 807 3,621 1,418 9,289 Other income (expense), net ( 84 ) ( 53 ) 93 ( 187 ) Interest expense ( 490 ) ( 13 ) ( 1,032 ) ( 22 ) Income before taxes 233 3,555 479 9,080 Income tax expense 147 937 116 2,678 Net income $ 86 $ 2,618 $ 363 $ 6,402 Net income per common share: Basic $ 0.01 $ 0.35 $ 0.05 $ 0.87 Diluted $ 0.01 $ 0.34 $ 0.05 $ 0.85 Weighted average common shares outstanding: Basic 7,428,451 7,428,557 7,379,835 7,344,559 Diluted 7,664,532 7,614,404 7,636,346 7,528,723 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Table of Contents LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) ($000’s) Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Net income $ 86 $ 2,618 $ 363 $ 6,402 Other comprehensive income (loss): Foreign currency translation adjustments ( 205 ) ( 483 ) 903 ( 2,110 ) Comprehensive income (loss) $ ( 119 ) $ 2,135 $ 1,266 $ 4,292 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Table of Contents LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (000’s except for share information) ASSETS October 31, January 31, 2024 2024 Current assets Cash and cash equivalents $ 15,839 $ 25,222 Accounts receivable, net of allowance for credit losses of $ 1,177 and $ 857 at October 31, 2024 and January 31, 2024, respectively 26,563 19,169 Inventories 72,721 51,250 Prepaid VAT and other taxes 2,815 2,753 Income tax receivable and other current assets 7,358 3,111 Total current assets 125,296 101,505 Property and equipment, net 12,681 10,685 Operating leases right-of-use assets 14,424 10,969 Deferred tax assets 3,319 3,097 Other assets 121 110 Goodwill 22,397 13,669 Intangible assets, net 15,528 6,830 Equity investments 4,379 4,719 Convertible debt instruments 3,068 2,161 Total assets $ 201,213 $ 153,745 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 16,711 $ 7,378 Accrued compensation and benefits 4,534 3,922 Other accrued expenses 4,939 2,487 Income tax payable - 1,454 Short-term borrowings - 298 Accrued earnout agreement - 643 Current portion of operating lease liabilities 3,453 2,164 Total current liabilities 29,637 18,346 Deferred income taxes 4,499 2,097 Loans payable – long term 31,051 731 Long-term portion of operating lease liabilities 11,339 9,121 Total liabilities 76,526 30,294 Commitments and contingencies Stockholders’ equity Preferred stock, $ 0.01 par; authorized 1,500,000 shares (none issued) - - Common stock, $ 0.01 par; authorized 20,000,000 shares Issued 8,763,812 and 8,722,965 ; outstanding 7,405,604 and 7,364,757 at October 31, 2024 and January 31, 2024, respectively 88 87 Treasury stock, at cost; 1,358,208 shares at October 31, 2024 and January 31, 2024, respectively ( 19,979 ) ( 19,979 ) Additional paid-in capital 80,054 79,420 Retained earnings 68,981 69,282 Accumulated other comprehensive loss ( 4,457 ) ( 5,360 ) Total stockholders' equity 124,687 123,450 Total liabilities and stockholders' equity $ 201,213 $ 153,745 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (000’s except for share information) Accumulated Additional Other Common Stock Treasury Stock Paid-in Retained Comprehensive Share Amount Share Amount Capital Earnings Loss Total Stockholder's Equity Balance, January 31, 2023 8,655,699 $ 87 ( 1,330,694 ) $ ( 19,646 ) $ 78,475 $ 64,765 $ ( 3,691 ) $ 119,990 Net income - - - - - 6,402 - 6,402 Other comprehensive loss - - - - - - ( 2,110 ) ( 2,110 ) Dividends - - - - - ( 687 ) ( 687 ) Stock-based compensation: Restricted stock issued 67,266 - - - - - - - Restricted stock plan - - - - 747 - - 747 Return of shares in lieu of payroll withholding - - - - ( 420 ) - - ( 420 ) Treasury stock purchased - - ( 27,514 ) ( 333 ) - - ( 333 ) Balance, October 31, 2023 8,722,965 $ 87 ( 1,358,208 ) $ ( 19,979 ) $ 78,802 $ 70,480 $ ( 5,801 ) $ 123,589 Balance, July 31, 2023 8,721,232 $ 87 ( 1,358,208 ) $ ( 19,979 ) $ 78,511 $ 68,084 $ ( 5,318 ) $ 121,385 Net income - - - - - 2,618 - 2,618 Other comprehensive loss - - - - - - ( 483 ) ( 483 ) Dividends - - - - - ( 222 ) - ( 222 ) Stock-based compensation: Restricted stock issued 1,733 - - - - - Restricted stock plan - - - - 302 - - 302 Return of shares in lieu of payroll withholding - - - - ( 11 ) - - ( 11 ) Balance, October 31, 2023 8,722,965 $ 87 ( 1,358,208 ) $ ( 19,979 ) $ 78,802 $ 70,480 $ ( 5,801 ) $ 123,589 Balance, January 31, 2024 8,722,965 $ 87 ( 1,358,208 ) $ ( 19,979 ) $ 79,420 $ 69,282 $ ( 5,360 ) $ 123,450 Net income - - - - - 363 - 363 Other comprehensive income - - - - - - 903 903 Dividends - - - - - ( 664 ) ( 664 ) Stock-based compensation: Restricted stock issued 40,847 1 - - - - 1 Restricted stock plan - - - - 1,081 - - 1,081 Return of shares in lieu of payroll withholding - - - - ( 447 ) - - ( 447 ) Balance, October 31, 2024 8,763,812 $ 88 ( 1,358,208 ) $ ( 19,979 ) $ 80,054 $ 68,981 $ ( 4,457 ) $ 124,687 Balance, July 31, 2024 8,754,812 $ 87 ( 1,358,208 ) $ ( 19,979 ) $ 79,743 $ 69,117 $ ( 4,252 ) $ 124,716 Net income - - - - - 86 - 86 Other comprehensive income - - - - - - ( 205 ) ( 205 ) Dividends - - - - - ( 222 ) - ( 222 ) Stock-based compensation: Restricted stock issued 9,000 1 - - - - 1 Restricted stock plan - - - - 455 - - 455 Return of shares in lieu of payroll withholding - - - - ( 144 ) - - ( 144 ) Balance, October 31, 2024 8,763,812 $ 88 ( 1,358,208 ) $ ( 19,979 ) $ 80,054 $ 68,981 $ ( 4,457 ) $ 124,687 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 Table of Contents LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ($000’s) Nine Months Ended October 31, 2024 2023 Cash flows from operating activities: Net income $ 363 $ 6,402 Adjustments to reconcile net income to net cash (used in) provided by operating activities Deferred income taxes ( 431 ) ( 1,783 ) Depreciation and amortization 3,011 1,609 Stock based and restricted stock compensation 1,081 747 (Gain) loss on disposal of property and equipment 75 ( 1 ) Equity in loss of equity investment 384 354 Change in fair value of earnout consideration ( 711 ) ( 2,689 ) (Increase) decrease in operating assets Accounts receivable ( 3,219 ) ( 994 ) Inventories ( 11,958 ) 3,211 Prepaid VAT and other taxes ( 218 ) ( 670 ) Other current assets ( 2,019 ) 285 Increase (decrease) in operating liabilities Accounts payable 7,197 141 Accrued expenses and other liabilities ( 4,147 ) 235 Operating lease liabilities ( 1,902 ) 886 Net cash (used in) provided by operating activities ( 12,494 ) 7,733 Cash flows from investing activities: Purchases of property and equipment ( 1,485 ) ( 1,505 ) Acquisitions, net of cash acquired ( 22,950 ) - Investments - ( 1,510 ) Investments in convertible debt instruments ( 952 ) - Net cash (used in) investing activities: ( 25,387 ) ( 3,015 ) Cash flows from financing activities: Credit facility borrowings 29,900 - Term loan borrowings 2,880 - Payments on debt facilities ( 3,418 ) ( 405 ) Purchase of treasury stock under stock repurchase program - ( 333 ) Dividends paid ( 664 ) ( 687 ) Shares returned to pay employee taxes under restricted stock program ( 447 ) ( 420 ) Net cash provided by (used in) financing activities 28,251 ( 1,845 ) Effect of exchange rate changes on cash and cash equivalents 247 ( 1,087 ) Net decrease in cash and cash equivalents ( 9,383 ) ( 1,786 ) Cash and cash equivalents at beginning of period 25,222 24,639 Cash and cash equivalents at end of period $ 15,839 $ 26,425 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,032 $ 22 Cash paid for taxes $ 2,631 $ 1,745 Noncash investing and financing activities Leased assets obtained in exchange for operating lease liabilities $ 1,601 $ 4,099 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 Table of Contents LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Business Lakeland Industries, Inc. and Subsidiaries (“Lakeland,” the “Company,” “we,” “our” or “us”), a Delaware corporation organized in April 1986, manufacture and sell a comprehensive line of industrial protective clothing and accessories for the industrial and public protective clothing market. Our products are sold globally by our in-house sales teams, our customer service group, and authorized independent sales representatives to a network of over 2,000 global safety and industrial supply distributors. Our authorized distributors supply end users, such as integrated oil, chemical/petrochemical, automobile, steel, glass, construction, smelting, cleanroom, janitorial, pharmaceutical, and high technology electronics manufacturers, as well as scientific, medical laboratories and the utilities industry. In addition, we supply federal, state and local governmental agencies and departments, such as fire and law enforcement, airport crash rescue units, the Department of Defense, the Department of Homeland Security and the Centers for Disease Control. 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, countries within the European Economic Community (“EEC”), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, Ecuador, India, Middle East, Southeast Asia, Australia, Hong Kong and New Zealand. 2. Basis of Presentation The condensed consolidated financial statements of the Company are unaudited. These condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Company's results. Intercompany accounts and transactions have been eliminated. The results reported in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, 2025, or for any future period. The January 31, 2024, Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Balance Sheet but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP). The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto as of January 31, 2024 and 2023, and for each of the two years in the period ended January 31, 2024, included in our most recent annual report on Form 10-K filed on April 11, 2024. In this Form 10-Q, (a) “FY” means fiscal year; thus, for example, FY25 refers to the fiscal year ending January 31, 2025, (b) “Q” refers to quarter; thus, for example, Q3 FY25 refers to the third quarter of the fiscal year ending January 31, 2025, (c) “Balance Sheet” refers to the unaudited condensed consolidated balance sheet, and (d) “Statement of Operations” refers to the unaudited condensed consolidated statement of operations. Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Income Taxes In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance requires a public entity to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance also requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted and this guidance should be applied prospectively but there is the option to apply it retrospectively. The Company is currently evaluating the impact and plans to adopt the provisions of this guidance in conjunction with our Form 10-K for our fiscal year ending January 31, 2026. 8 Table of Contents Segment Reporting In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This guidance requires a public entity to disclose for each reportable segment, on an interim and annual basis, the significant expense categories and amounts that are regularly provided to the chief operating decision-maker (“CODM”) and included in each reported measure of a segment’s profit or loss. Additionally, it requires a public entity to disclose the title and position of the individual or the name of the group or committee identified as the CODM. This guidance is effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the guidance should be applied retrospectively to all periods presented in the financial statements, unless it is impracticable. The Company is currently evaluating the impact and plans to adopt the provisions of this guidance in conjunction with our Form 10-K for the fiscal year ending January 31, 2025. 3. Investments and Acquisitions Bodytrak Investment 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. The Series A Shares issued to the Company at the closing represented approximately 11.43 % of Bodytrak’s total share capital. On April 28, 2022, the Company, under the terms of the Investment Agreement, acquired an additional 381,679 Series A1 Shares of Bodytrak for £1,500,000 ($ 1.9 million). On October 26, 2022, the Company acquired an additional 254,452 Series A Shares of Bodytrak for £1,000,000 ($ 1.2 million). After completion of the additional investments, the Company owns 22.5 % of Bodytrak’s total share capital. The investment in Bodytrak is accounted for under the equity method, given our board representation and the resulting ability to exercise significant influence. 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. On May 19, 2023, the Company entered into an agreement with Bodytrak to provide an additional investment of up to an aggregate of £1,500,000 ($ 1.9 million on the date of initial investment) in the form of a secured convertible loan with an option for an additional £1,000,000 investment at the Company’s discretion. An initial investment funding of £500,000 ($ 0.6 million on the date of investment) was made on May 19, 2023. Additional investment fundings of £700,000 ($ 0.9 million on the date of investment), £500,000 ($ 0.6 million on the date of investment), £500,000 ($ 0.6 million on the date of investment) and £200,000 ($ 0.3 million on the date of investment) were made on September 8, 2023, December 15, 2023, February 13, 2024 and August 28, 2024, respectively. The loaned amounts are due twenty-four months from the issue date, which can be extended upon mutual agreement. The convertible notes bear interest at either an annual rate of 12% for cash interest or 15% for payment in kind interest on the outstanding amount under the note, such rate being selected by Bodytrak. The notes can be converted into equity shares of Bodytrak under a number of conditions, including a qualified equity financing as defined in the agreement, a change of control, an IPO, default or conversion at the discretion of the Company and upon the occurrence of the specified event. The convertible notes are secured by Bodytrak’s intellectual property. 9 Table of Contents 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, cloud-based analytics, and hardware that includes a patented earpiece for physiological monitoring and audio communications. The Company recognized losses of $ 0.1 million for the three months ended October 31, 2024 and 2023, and recognized losses of $ 0.4 million for the nine months ended October 31, 2024 and 2023, respectively, as the Company’s share of Bodytrak’s net loss. The loss is reflected in other income (expense), net in the consolidated statements of operations. Acquisition of LHD On July 1, 2024, the Company acquired the fire and rescue business of LHD Group Deutschland GmbH and its subsidiaries in Hong Kong and Australia (collectively, "LHD") in an all-cash transaction subject to post-closing adjustments and customary holdback provisions. Total consideration was $ 15.9 million, net of $ 1.5 million cash acquired, of which $ 15.5 million was paid to retire LHD’s debt, $ 0.8 million was paid to the seller at closing, and $ 1.1 million remained unpaid subject to post-closing adjustments and customary holdback provisions. LHD is a leading provider of firefighter turnout gear, accessories, and personal protective equipment cleaning, repair, and maintenance. LHD has 111 employees worldwide and is headquartered in Wesseling, Germany, with operations in Hong Kong and Australia. LHD’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. LHD’s operating results and assets including acquired intangibles and goodwill are reported as part of Europe in our geographic segment reporting. The following table summarizes the fair values of the LHD assets acquired and liabilities assumed at the date of the acquisition: Net working capital acquired $ 4,405 Property, plant and equipment 801 Customer relationships 5,237 Trade names and trademarks 1,296 Technological know-how 270 Other ( 76 ) Goodwill 7,606 Other liabilities assumed ( 4,780 ) Total net assets acquired $ 14,759 10 Table of Contents Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges; the relief from royalty method for trade names and trademarks and technological know-how; and the cost method for the assembled workforce which was included in goodwill. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on LHD’s pre-acquisition forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, trade names and trademarks and technological know-how acquired in the LHD transaction are being amortized over periods of 20 years, 10 years and 15 years, respectively . Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of LHD with our operations. Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals, inventory, contractual relationships, tangible assets and intangible assets. These changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date. Acquisition of Jolly On February 5, 2024, the Company acquired Italy and Romania-based Jolly Scarpe S.p.A. and Jolly Scarpe Romania S.R.L. (collectively, "Jolly") in an all-cash transaction. Total consideration was $ 9.6 million, of which $ 7.5 million was paid to the seller at closing, $ 0.6 million paid to retire the remainder of Jolly’s debt and $ 1.5 million remained unpaid subject to post-closing adjustments and customary holdback provisions. Jolly is a leading designer and manufacturer of professional footwear for the firefighting, military, police, and rescue markets. The company is headquartered in Montebelluna, Italy, with manufacturing operations in Bucharest, Romania, and has 150 employees. Jolly’s primary customers are based in Europe. Jolly’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. Jolly’s operating results and assets including acquired intangibles and goodwill are reported as part of Europe in our geographic segment reporting. The following table summarizes the fair values of the Jolly assets acquired and liabilities assumed at the date of the acquisition: Net working capital acquired $ 6,240 Property, plant and equipment 1,277 Customer relationships 425 Trade names and trademarks 610 Technological know-how 272 Goodwill 1,363 Other liabilities assumed ( 541 ) Total assets acquired $ 9,647 11 Table of Contents Assets acquired and liabilities assumed in connection with the acquisition were recorded at estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by a third-party valuation specialist. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships using customer inputs and contributory charges; the relief from royalty method for trade names and trademarks and technological know-how; and the cost method for the assembled workforce which was included in goodwill. Several significant assumptions and estimates were involved in the application of these valuation methods, including forecasted sales volumes and prices, royalty rates, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. Cash flow forecasts were generally based on Jolly’s pre-acquisition forecasts. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives. The customer relationships, trade names and trademarks and technological know-how acquired in the Jolly transaction are being amortized over periods of 14 years, 10 years and 10 years, respectively . Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies and other benefits that we believe will result from combining the operations of Jolly with our operations. Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals, contractual relationships, tangible assets and intangible assets. These changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date. Acquisition of Pacific On November 30, 2023, the Company acquired New Zealand-based Pacific Helmets NZ Limited (“Pacific”) in an all-cash transaction valued at approximately NZ$14,000,000 ($ 8.6 million at the closing date exchange rate) including assumption of debt, subject to post-closing adjustments and customary holdback provisions. The acquisition enhances Lakeland’s product portfolio, particularly within fire service protective helmets. Headquartered in Whanganui, New Zealand, Pacific is a leading designer and provider of structural firefighting, wildland firefighting, and technical rescue helmets. The transaction was funded through the revolving credit facility and cash balances. Pacific’s operating results are included in our consolidated financial statements from the acquisition date. The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. As part of the acquisition agreement, Pacific will pay from the holdback an amount equal to the amount by which Pacific’s revenue fell below NZ$ 11.1 million for Pacific’s fiscal year ended March 31, 2024 subject to certain conditions. The amount of the reduction to the holdback to be paid by Pacific is $0.3 million . Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of provisional estimates of fair values, including, but not limited to, the completion of independent appraisals, contractual relationships, tangible assets and intangible assets. These changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date. 12 Table of Contents Based on the final valuation, the value of customer relationships was increased $ 1.0 million with a corresponding decrease in goodwill. The following unaudited pro forma information presents our combined results as if the LHD, Jolly and Pacific acquisitions had occurred at the beginning of FY24. The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the combined company's results. There were no material transactions between the Company, LHD, Jolly and Pacific during the periods presented that are required to be eliminated. The unaudited pro forma combined financial information does not reflect cost savings, operating synergies or revenue enhancements that the combined companies may achieve or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies or revenue enhancements. Pro forma combined financial information (Unaudited) (in millions, except per share amounts) Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Net sales $ 45,761 $ 44,311 $ 131,852 $ 130,275 Net income (loss) $ 96 $ 2,831 ($ 27 ) $ 6,764 Basic earnings per share $ 0.01 $ 0.38 $ $ 0.92 Diluted earnings per share $ 0.01 $ 0.37 $ $ 0.90 The unaudited pro forma combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that we would have reported had the acquisition been completed as of the date and for the periods presented and should not be taken as representative of our consolidated results of operations or financial condition following the acquisition. In addition, the unaudited pro forma combined financial information is not intended to project the future results of the combined company. The unaudited pro forma combined financial information was prepared using the acquisition method of accounting under existing U.S. GAAP. The Company has been treated as the acquirer. 4. Inventories Inventories consist of the following (in $000s): October 31, 2024 January 31, 2024 Raw materials $ 36,616 $ 27,417 Work-in-process 2,490 668 Finished goods 36,975 29,719 Excess and obsolete adjustments ( 3,360 ) ( 6,554 ) $ 72,721 $ 51,250 13 Table of Contents 5. Goodwill and Intangible Assets, Net Changes in goodwill during the nine months ended October 31, 2024, were as follows (in $000s): Balance at January 31 $ 13,669 Acquisitions 6,988 Measurement period adjustments 1,284 Currency translation 456 Balance at October 31 $ 22,397 Changes in intangible assets, net, during the nine months ended October 31, 2024, were as follows (in $000s): Balance at January 31 $ 6,830 Acquisitions 7,969 Measurement period adjustments 1,093 Amortization ( 610 ) Currency translation 246 Balance at October 31 $ 15,528 6. Contract Advances The Company receives advances under certain of its contracts for products sold by Eagle. Those advances are considered contract liabilities with revenues recorded upon delivery of promised goods to customers. These advances are included in Other Accrued Expenses on the Company’s consolidated balance sheets. The following is a roll-forward of the advances from January 31, 2024 through October 31, 2024 and from January 31, 2023 through October 31, 2023 (in $000s): 2024 2023 Contract liability – January 31 $ 104 $ 1,627 Increases to contract liability 910 326 Decreases to contract liability ( 650 ) ( 1,752 ) Contract liability – October 31 $ 363 $ 201 14 Table of Contents 7. Long-Term Debt Revolving Credit Facility On June 25, 2020, the Company entered into a Loan Agreement (the “Loan Agreement”) with Bank of America (the “Lender”). The Loan Agreement provided the Company with a secured $ 25.0 million revolving credit facility, which included a $ 5.0 million letter of credit sub-facility. The Company could request from time to time an increase in the revolving credit loan commitment of up to $5.0 million (for a total commitment of up to $30.0 million). Borrowing pursuant to the revolving credit facility was subject to a borrowing base amount calculated as (a) 80% of eligible accounts receivable, as defined, plus (b) 50% of the value of acceptable inventory, as defined, minus (c) certain reserves as the Lender may establish for the amount of estimated exposure, as reasonably determined by the Lender from time to time, under certain interest rate swap contracts. The borrowing base limitation only applied during periods when the Company’s quarterly funded debt to EBITDA ratio, as defined, exceeded 2.00 to 1.00 . The Loan Agreement permitted, without the prior consent of the Lender, acquisitions of a business or its assets by the Company or its subsidiaries if there was no default under the Loan Agreement and the aggregate consideration did not exceed $ 7.5 million for any individual acquisition or $ 15 .0 million on a cumulative basis for all such acquisitions. On March 3, 2023, the Company changed the benchmark interest rate in the credit facility from LIBOR to the Secured Overnight Financing Rate (“SOFR”). The credit facility was to mature on June 25, 2025 . On November 30, 2023, the Company entered into Amendment No. 3 to the Loan Agreement by and between the Lender and the Company (the “Third Amendment”). Pursuant to the Third Amendment, the Lender consented to the Company’s acquisition of one hundred percent (100%) of the equity interests of Pacific. The Third Amendment further provided for certain amendments to the Loan Agreement to permit additional indebtedness to be made available to Pacific, to exempt Pacific from certain requirements of the Loan Agreement pertaining to subsidiary guaranty and asset pledges that would otherwise be required under the Loan Agreement and to waive the Company’s borrowing base limitations through January 31, 2024. The Third Amendment also provided for the reaffirmation of representations, warranties and covenants under the Loan Agreement as are customary in connection with similar amendments of credit documents. On March 28, 2024, the Company entered into Amendment No. 4 to the Loan Agreement by and between the Lender and the Company (the “Fourth Amendment”). Pursuant to the Fourth Amendment, the Lender and the Company agreed to, among other things, (i) extend the expiration date of the credit facility to March 28, 2029, (ii) increase the availability under the revolving credit facility to $40.0 million with an accordion feature providing for the potential funding of an additional $10.0 million, (iii) remove the borrowing base component of the credit facility; and (iv) modify the interest rate based on Daily SOFR plus the Applicable Rate . The Applicable Rate is based upon a Funded Debt to EBITDA Ratio, as defined, and includes four (4) different levels constituting a SOFR margin range from 1.25 % to 2.00 %. In addition, the Fourth Amendment (i) modified the Funded Debt to EBITDA Ratio covenant so as not to exceed 3.5x (with step-downs to 3.25 and 3.0 in 2025 and 2026), (ii) modified the Basic Fixed Charge Coverage Ratio covenant to a minimum of 1.20x, (iii) includes a springing Asset Coverage Ratio covenant of at least 1.10x, but only to the extent that the maximum Total Leverage Ratio exceeds 3.00x at any reporting period, (iv) increases the sublimit for letters of credit to $10.0 million, and (v) imposes a floor to Daily SOFR of one percent (1.00%). The Fourth Amendment provides for additional indebtedness or the assumption of existing indebtedness for acquisitions of foreign subsidiaries (not to exceed $10.0 million in USD) and increased the size of Permitted Acquisitions, without prior approval from the Lender, to $17.5 million per occurrence and $35.0 million in the aggregate . We were in compliance with all financial covenants of the Loan Agreement as of October 31, 2024. As of October 31, 2024, the Company had no borrowings outstanding on the letter of credit sub-facility and borrowings of $ 26.9 million outstanding under the revolving credit facility. The revolving credit facility carried an interest rate of 6.17 % at October 31, 2024. Borrowings in UK There were no borrowings outstanding under the Company’s credit facility with HSBC Bank at October 31, 2024 and January 31, 2024. Pacific Borrowings Pacific has two facilities with the Bank of New Zealand. Pacific has a trade finance facility where the lender finances vendor purchases. The trade finance facility has a limit of 500,000 New Zealand dollars and carries an interest rate at the prevailing base rate for the relevant currency of the vendor plus a margin of 3.00% per annum. The facility includes two term loans. The first term loan of 1,500,000 New Zealand dollars matures on December 17, 2025, carries an interest rate of 2.3% per annum and requires monthly payments of 19,350 New Zealand dollars . The second term loan of 550,000 New Zealand dollars matured on November 18, 2024, carried an interest rate of 3.5% per annum and required monthly payments of 10,005 New Zealand dollars . The facilities expire in August 2026 and are secured by a security interest in Pacific’s real property. Borrowings under the trade finance facility and amounts due in FY25 under the term loans are reported as short-term borrowings. There were no borrowings under this facility at October 31, 2024 and $ 0.3 million at January 31, 2024. Borrowings under the term loans due after FY25 are reported as long-term borrowings and were $0.6 million and $ 0.7 million at October 31, 2024 and January 31, 2024, respectively. 15 Table of Contents Jolly Borrowings On May 9, 2024, Jolly entered into a term loan agreement for 1,500,000 Euros to support working capital requirements with Banca Intesa Spa. The term loan will expire on March 31, 2027 and carries an interest rate of 5.42%. The term loan will be repaid in 11 installments of 136,364 Euros paid quarterly and began September 30, 2024. Interest payments are made quarterly . The loan is guaranteed by SACE S.p.A., the Italian state-owned export credit finance agency. Jolly received an advance of 1,200,000 Euros from BNL Bank as an advance on an Italian firefighters contract that will conclude in FY26. Interest on the advance is Euribor plus 1.0%. Borrowings under the term loans due after FY25 are reported as long-term borrowings and were $ 2.7 million at October 31, 2024. LHD Borrowings Prior to the Company’s acquisition, LHD secured a federally guaranteed term loan of 800,000 Euros from Commerzbank AG under the “KfW Quick Loan 2020” program, launched by the German government in 2020 to support small and medium-sized enterprises affected by the COVID-19 crisis. Repayments of the loan, which matures on June 30, 2030 , began on September 30, 2022, with quarterly installments of 25,000 Euros . As of October 31, 2024, the outstanding balance was 575,000 Euros ($ 625,000 ). The loan carries an interest rate of 3 % per annum, with interest payments being due in arrears at the end of each quarter. 8. Concentration of Risk Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents, and trade receivables. Concentration of credit risk with respect to trade 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 Company’s foreign financial depositories are Bank of America; China Construction Bank; Bank of China; China Industrial and Commercial Bank; HSBC (UK); Royal Bank of Scotland, Rural Credit Cooperative of Shandong; Postal Savings Bank of China; Punjab National Bank; HSBC in India, Argentina and UK; Raymond James in Argentina; TD Canada Trust; Banco Itaú S.A., Banco Credito Inversione in Chile; Banco Mercantil Del Norte SA in Mexico; ZAO KB Citibank Moscow in Russia; JSC Bank Centercredit in Kazakhstan; BNL Banca Nazionale del Lavoro, Monte Dei Paschi di Siena and Banca delle Terre Venete in Italy; Commerzbank in Germany; and Bank of New Zealand in New Zealand. The Company monitors its financial depositories by their credit rating, which varies by country. In addition, cash balances in banks in the United States of America are insured by the Federal Deposit Insurance Corporation subject to certain limitations. There was approximately $ 0.3 million total included in U.S. bank accounts and approximately $ 15.5 million total in foreign bank accounts as of October 31, 2024, of which $ 15.0 million was uninsured. Major Customer No customer accounted for more than 10 % of net sales during the three and nine-month periods ended October 31, 2024 and 2023. Major Supplier No vendor accounted for more than 10 % of purchases during the three and nine-month periods ended October 31, 2024 and 2023. 16 Table of Contents 9. Stockholders’ Equity On June 21, 2017, the stockholders of the Company approved the Lakeland Industries, Inc. 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. The 2017 Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), except that with respect to all non-employee directors, the 2017 Plan is administered by the full Board. 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”). On June 16, 2021, the stockholders of the Company approved Amendment No. 1 ( “Amendment No. 1”) to the 2017 Plan. Amendment No. 1 increased the number of shares of common stock, par value $ 0.01 per share, of the Company reserved for issuance under the 2017 Plan from 360,000 to 840,000 shares. On June 13, 2024, the stockholders of the Company approved Amendment No. 2 (“Amendment No. 2”) to the 2017 Plan. Amendment No. 2 increased the number of shares of common stock, par value $ 0.01 per share, of the Company reserved for issuance under the 2017 Plan from 840,000 to 1,240,000 shares. An aggregate of 1,240,000 shares of the Company’s common stock are authorized for issuance under the 2017 Plan, as amended, 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 recognized the following stock-based compensation expense, which is reflected in operating expenses (in $000’s): Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 2017 Plan: Total restricted stock and stock option programs $ 455 $ 302 $ 1,081 $ 747 Total income tax expense recognized for stock-based compensation arrangements $ 96 $ 63 $ 227 $ 157 17 Table of Contents Restricted Stock and Restricted Stock Units Under the 2017 Plan, as described above, the Company has 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 nine months ended October 31, 2024 and 2023. This table reflects the amount of awards granted and the number of shares that would be vested if the Company were to achieve the maximum performance level under the June 2022, March 2023 and April 2024 grants. Performance- Based Service-Based Total Weighted Average Grant Date Fair Value Outstanding at January 31, 2024 82,330 112,890 195,220 $ 16.61 Awarded 27,042 135,756 162,798 $ 20.34 Vested - ( 48,062 ) ( 48,062 ) $ 14.02 Forfeited ( 4,281 ) ( 14,234 ) ( 18,515 ) Outstanding at October 31, 2024 105,091 186,350 291,441 $ 17.33 Performance- Based Service-Based Total Weighted Average Grant Date Fair Value Outstanding at January 31, 2023 127,480 401,665 168,145 $ 22.95 Awarded 64,953 124,384 189,337 $ 14.02 Vested ( 71,702 ) ( 26,336 ) ( 97,538 ) Forfeited ( 38,901 ) ( 31,829 ) ( 70,730 ) Outstanding at October 31, 2023 82,330 106,884 189,214 $ 14.68 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 revenue growth and Earnings Before Interest Taxes Depreciation and Amortization (“EBITDA”) margin for the April 2022 grants. Performance measures for the March 2023 grants are revenue growth, EBITDA margin and return on invested capital. Performance measures for the April 2024 grants are revenue growth, EBITDA margin and free cash flow margin. The performance targets have been set for each of the Minimum, Target, and Maximum levels. 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. As of October 31, 2024, unrecognized stock-based compensation expense totaled $ 2.9 million pursuant to the 2017 Plan based on outstanding awards under the 2017 Plan. This expense is expected to be recognized over approximately two years. Stock Repurchase Program 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 stock repurchase program of up to an additional $ 5 million of its outstanding common stock. 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, which became effective upon the completion of the prior share repurchase program. On December 1, 2022, the Board of Directors authorized an increase in the Company’s stock repurchase program, under which the Company may repurchase up to an additional $ 5 million of its outstanding common stock. No shares were repurchased during the nine months ended October 31, 2024, leaving $ 5.0 million remaining under the share repurchase program at October 31, 2024. The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time. 18 Table of Contents 10. Income Taxes The Company’s provision for income taxes for the three and nine months ended October 31, 2024, and 2023 is based on the estimated annual effective tax rate, in addition to discrete items. The Company’s effective tax rate for the third quarter of FY25 was 63.5%, which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and Global Intangible Low-Taxed Income (“GILTI”), and the impacts from stock compensation vestings during the quarter, partially offset by foreign withholding taxes accrued during the quarter in anticipation of additional repatriations of cash from China. The Company's effective tax rate for the third quarter of FY24 was 26.4% which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and GILTI. The Company's effective tax rate for the nine months ended October 31, 2024 was 24.3% which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI and impacts from the final earn-out adjustments related to the Pacific and Eagle acquisitions. The Company's effective tax rate for the nine months ended October 31, 2023 was 29.5%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI. The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. The valuation allowance was $ 7.9 million and $ 6.7 million as of October 31, 2024 and January 31, 2024, respectively. With the exception of our UK and China subsidiaries for which we accrue relevant deferred tax impacts related to non-indefinitely reinvested cash, we consider the excess of the amount for financial reporting over the tax basis (including undistributed and previously taxed earnings) of investments in our other foreign subsidiaries as of October 31, 2024 to be indefinitely reinvested in the foreign jurisdictions on the basis of our specific plan for reinvestment and estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. Therefore, we have not provided for deferred taxes related to such excess or the relevant portions thereof and concluded that the determination of any deferred taxes related to this excess is not practicable in those permanently reinvested jurisdictions. We have made no changes to our policy on indefinite reinvestment during the nine months ended October 31, 2024. 11. Net Income Per Share The following table sets forth the computation of basic and diluted net income per share as follows (in $000s except per share amounts): Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Numerator: Net income $ 86 $ 2,618 $ 363 $ 6,402 Denominator: Denominator for basic net income per share (weighted-average shares which exclude shares in the treasury, 1,358,208 at October 31, 2024 and 2023) 7,428,451 7,428,557 7,379,835 7,344,559 Effect of dilutive securities from restricted stock plan 236,081 185,847 256,512 184,164 Denominator for diluted net income per share (adjusted weighted average shares) 7,664,532 7,614,404 7,636,646 7,528,723 Basic net income per share $ 0.01 $ 0.35 $ 0.05 $ 0.87 Diluted net income per share $ 0.01 $ 0.34 $ 0.05 $ 0.85 19 Table of Contents 12. Contingencies Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, which inherently involve an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been or is probable of being incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. During the third quarter of FY24, the Company sent a letter to the landlord outlining certain structural defects on the newly constructed facility in Monterrey, Mexico that would inhibit the Company from effectively utilizing the facility for its intended purpose. The Company has initiated discussions with the landlord as to potential remedies which may inform our decision-making process with respect to this property. Changes in our long-term intended use for the building may impact the carrying value of the currently recorded right of use asset. General litigation contingencies The Company is involved in various litigation proceedings 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; however, there can be no assurance as to the ultimate outcome of these matters. As of October 31, 2024, to the best of the Company’s knowledge, there were no significant outstanding claims or litigation. 20 Table of Contents 13. Segment Reporting We manage our operations by evaluating each of our geographic locations. Our US operations include a facility in Alabama (primarily the distribution to customers of the bulk of our products and the light manufacturing of our chemical, wovens, reflective, and fire products). The Company also maintains one manufacturing company in China (primarily disposable and chemical suit production), a manufacturing facility in Mexico (primarily disposable, reflective, fire and chemical suit production), a manufacturing facility in Vietnam (primarily disposable production), a manufacturing facility in Argentina (primarily wovens), a manufacturing facility in New Zealand (helmets), a manufacturing facility in Romania (boots) and a small manufacturing facility in India. Our China facilities produce the majority of the Company’s products, and China generates a significant portion of the Company’s international revenues. We evaluate the performance of these entities based on operating profit, which is defined as income before income taxes, interest expense and other income and expenses. We have sales forces in the USA, Canada, Mexico, Europe, Latin America, India, Russia, Kazakhstan, Australia, New Zealand and China, which sell and distribute products shipped from the United States, Mexico, India or China. The table below represents information about reported segments for the three and nine month periods noted therein: Three Months Ended October 31, Nine Months Ended October 31, (in millions of dollars) (in millions of dollars) 2024 2023 2024 2023 Net Sales: USA Operations (including Corporate) $ 17.0 $ 16.2 $ 47.1 $ 46.3 Other foreign 4.5 3.9 13.9 10.2 Europe 14.8 3.2 28.2 12.7 Mexico 1.9 1.6 6.0 5.2 Asia 14.6 12.1 38.5 34.1 Canada 2.5 2.7 8.0 7.2 Latin America 5.1 4.2 17.3 12.0 Less intersegment sales ( 14.5 ) ( 12.2 ) ( 38.3 ) ( 34.3 ) Consolidated sales $ 45.8 $ 31.7 $ 120.6 $ 93.4 External Sales: USA Operations (including Corporate) $ 15.4 $ 15.1 $ 42.1 $ 42.6 Other foreign 3.6 2.4 11.4 6.6 Europe 14.4 3.2 27.5 12.6 Mexico 1.3 1.0 4.1 2.9 Asia 3.6 3.1 10.4 9.7 Canada 2.5 2.7 8.0 7.2 Latin America 5.0 4.2 17.2 11.8 Consolidated external sales $ 45.8 $ 31.7 $ 120.6 $ 93.4 21 Table of Contents Intersegment Sales: USA Operations (including Corporate) $ 1.6 $ 1.1 $ 5.0 $ 3.7 Other foreign 0.9 1.5 2.5 3.6 Europe 0.5 - 0.7 0.1 Mexico 0.6 0.6 1.9 2.3 Asia 11.0 9.0 28.1 24.4 Canada - - - - Latin America - - - 0.2 Consolidated intersegment sales $ 14.5 $ 12.2 $ 38.3 $ 34.3 Three Months Ended October 31, Nine Months Ended October 31, (in millions of dollars) (in millions of dollars) 2024 2023 2024 2023 Operating Profit (Loss): USA Operations (including Corporate) $ ( 4.3 ) $ 1.9 $ ( 8.3 ) $ 1.6 Other foreign 0.5 0.6 1.7 1.8 Europe 0.8 ( 0.4 ) ( 1.1 ) - Mexico 0.1 ( 0.4 ) ( 0.1 ) ( 1.3 ) Asia 3.4 1.3 6.4 3.1 Canada ( 0.2 ) 0.5 ( 0.2 ) 1.1 Latin America 0.5 0.8 4.6 2.9 Intersegment profit (loss) - ( 0.7 ) ( 1.6 ) 0.1 Consolidated operating profit $ 0.8 $ 3.6 $ 1.4 $ 9.3 October 31, 2024 January 31, 2024 (in millions of dollars) Total Assets Less Intersegment: USA Operations (including Corporate) $ 50.8 $ 47.1 Other foreign 19.8 19.6 Europe 73.8 27.2 Mexico 11.4 10.2 Asia 22.3 29.0 Canada 5.8 8.3 Latin America 17.3 12.3 Consolidated assets $ 201.2 $ 153.7 22 Table of Contents The table below presents external sales by product line: Three Months Ended October 31, (in millions of dollars) Nine Months Ended October 31, (in millions of dollars) 2024 2023 2024 2023 External Sales by product lines: Disposables $ 12.4 $ 11.9 $ 37.8 $ 36.7 Chemical 5.1 4.7 16.7 15.4 Fire service 19.3 5.6 41.8 20.0 Gloves 0.3 0.5 1.4 1.7 High Visibility 1.8 2.6 4.2 5.4 High Performance Wear 2.6 2.4 5.2 5.2 Wovens 4.2 4.0 13.4 9.0 Consolidated external sales $ 45.8 $ 31.7 $ 120.6 $ 93.4 23 Table of Contents 14. Subsequent Events Fourth Quarter Dividend On November 1, 2024, the Company’s Board of Directors declared a quarterly cash dividend. The quarterly dividend of $ 0.03 per share or approximately $ 0.2 million, was paid on November 22, 2024, to stockholders of record as of November 15, 2024. Additional BodyTrak Investment On November 8, 2024, the Company entered into an agreement with Bodytrak to provide an additional investment of up to an aggregate of £150,000 ($ 192,000 ) on the date of initial investment in the form of a secured convertible loan. An initial investment funding of £50,000 ($ 64,000 ) on the date of investment was made on November 12, 2024. The loaned amounts are due twenty-four months from the issue date, which can be extended upon mutual agreement. The convertible note bears interest at either an annual rate of 12% for cash interest or 15% for payment in kind interest on the outstanding amount under the note, such rate being selected by Bodytrak . The notes can be converted into equity shares of Bodytrak under a number of conditions, including a qualified equity financing as defined in the agreement, a change of control, an IPO, default or conversion at the discretion of the Company and upon the occurrence of the specified event. The convertible note is secured by Bodytrak’s intellectual property. 24 Table of Contents