LAKELAND INDUSTRIES INC

Three Months ended July 31, 2025, Compared to the Three Months Ended July 31, 2024

Net Sales. Net sales were $52.5 million for the three months ended July 31, 2025, an increase of $14.0 million or 36.4%, compared to $38.5 million for the three months ended July 31, 2024. Sales of our Fire Service product line increased $13.6 million due to $5.1 million in sales from Veridian, and a net increase in sales of $8.5 million from LHD and Jolly acquired in FY25. Sales of our Disposable products increased $1.6 million and High Performance products sales increased by $0.8 million, offset by weakness in Wovens as sales declined $2.5 million, primarily in Latin America.

Gross Profit. Gross profit for the three months ended July 31, 2025 was $18.8 million, an increase of $3.6 million, or 23.7%, compared to $15.2 million for the three months ended July 31, 2024. Gross profit as a percentage of net sales decreased to 35.8% for the three-month period ended July 31, 2025, from 39.6% for the three months ended July 31, 2024. The gross profit percentage decreased in the second quarter of fiscal year 2026 due to increased material costs and tariffs, higher inbound freight expenses, and amortization of the step-up in the basis of acquired inventory.

Operating Expenses. Operating expenses increased by $2.5 million, or 14.6%, from $16.8 million for the three months ended July 31, 2024 to $19.3 million for the three months ended July 31, 2025. This increase is attributable to the acquisitions of Veridian in December 2024 and LHD in July 2024, which resulted in an increase of $1.6 million in operating expenses. Equity compensation expense increased $1.0 million as a number of board members, executives and senior managers voluntarily elected to receive equity compensation in lieu of a portion of their cash compensation pursuant to a program approved by the Compensation Committee and the Board under the Lakeland Industries, Inc. 2017 Equity Incentive Plan. Depreciation and amortization expenses increased $0.4 million due to the acquisitions of LHD and Veridian. These increases were offset by reductions in acquisition, restructuring expenses and legal fees. Operating expenses as a percentage of net sales were 36.7% for the three months ended July 31, 2025, down from 43.7% for the three months ended July 31, 2024, primarily due to the factors noted above.

Lease Impairment. The Company recorded a $3.6 million impairment primarily related to the right-of-use asset for the Monterrey, Mexico facility. There were no lease impairment charges recorded for the three months ended July 31, 2024.

Operating (Loss) Income. Operating loss was $(4.0) million for the three months ended July 31, 2025, compared to an operating loss of $(1.6) million for the three months ended July 31, 2024, due to the impacts detailed above. Operating margins were (7.6%) for the three months ended July 31, 2025, as compared to (4.1%) for the three months ended July 31, 2024.

Income Tax (Benefit) Expense. Income tax (benefit) expense consists of federal, state and foreign income taxes. Income tax benefit was $5.2 million for the three months ended July 31, 2025, compared to a benefit of $0.4 million for the three months ended July 31, 2024. The Company’s effective tax rate for the second quarter of FY26 was 117.2% which differs from the U.S. federal statutory rate of 21% primarily due to the forecasted allocation of income for the current fiscal year and from the mix of jurisdictional income at differing statutory rates. The Company’s effective tax rate for the second quarter of FY25 was 23.4%, which differs from the U.S. federal statutory rate of 21% primarily due to the mix of income in various foreign tax jurisdictions, the impacts from GILTI and stock compensation vestings, offset by foreign withholding taxes accrued during the respective periods.

Net Income (Loss). Net income was $0.8 million for the three months ended July 31, 2025, compared to net loss of $(1.4) million for the three months ended July 31, 2024.

Six Months ended July 31, 2025, Compared to the Six Months Ended July 31, 2024

Net Sales. Net sales were $99.2 million for the six months ended July 31, 2025 as compared to $74.8 million for the six months ended July 31, 2024, an increase of 32.6%. Our Fire Service product line increased by $24.1 million in the period due to the impact of the acquisitions of Veridian, LHD, Jolly and Pacific, which contributed $22.8 million in sales growth coupled with organic growth of $1.3 million. Sales of our Disposable product line increased $1.6 million, which was offset by declines in our Woven products of $2.3 million. Our remaining product lines delivered growth of $1.2 million.

Gross Profit. Gross profit was $34.5 million for the six months ended July 31, 2025, an increase of $3.1 million, or 9.9%, from $31.4 million for the six months ended July 31, 2024. Gross profit as a percentage of net sales decreased to 34.7% for the six months ended July 31, 2025, from 42.0% for the six months ended July 31, 2024 primarily due to higher manufacturing costs, increased tariff and inbound freight costs and the impact of deferred profit in ending inventory and amortization of the step-up in basis of acquired inventory.

Operating Expenses. Operating expenses increased $8.8 million, or 28.6%, to $39.6 million for the six months ended July 31, 2025 from $30.8 million for the six months ended July 31, 2024. The acquisitions of Veridian and LHD accounted for $4.4 million of the increase in operating expenses. Equity compensation expense increased $1.1 million as a number of board members, executives and senior managers voluntarily elected to receive equity compensation in lieu of a portion of their cash compensation pursuant to a program approved by the Compensation Committee and the Board under the Lakeland Industries, Inc. 2017 Equity Incentive Plan. The impact of the adjustment to the earnout consideration accrual related to the Eagle acquisition was a reduction in operating expenses of $0.7 million for the six months ended July 31, 2024. The remaining increase was related to additional selling expenses including travel and trade shows, professional fees and administrative expenses of $2.4 million. Operating expenses as a percentage of net sales were 39.9% for the six months ended July 31, 2025, down from 41.1% for the six months ended July 31, 2024.

Lease Impairment. The Company recorded a $3.6 million impairment primarily related to the right-of-use asset for the Monterrey, Mexico facility. There were no lease impairment charges recorded for the six months ended July 31, 2024.

Operating (Loss) Income. Operating loss was $(8.7) million for the six months ended July 31, 2025 compared to an operating income of $0.6 million for the six months ended July 31, 2024, due to the impacts detailed above. Operating margins were (8.8%) for the six months ended July 31, 2025, as compared to 0.8% for the six months ended July 31, 2024.

Income Tax (Benefit) Expense. Income tax expense consists of federal, state and foreign income taxes. Income tax benefit was $6.4 million for the six months ended July 31, 2025, compared to a benefit of less than $0.1 million for the six months ended July 31, 2024.

The Company’s effective rate was (67.1%) for the six months ended July 31, 2025 and (13.1%) for the six months ended July 31, 2024.

Net (Loss) Income. Net loss was $(3.1) million for the six months ended July 31, 2025 and net income was $0.3 million for the six months ended July 31, 2024.

Liquidity and Capital Resources

At July 31, 2025, cash and cash equivalents were approximately $17.7 million, and working capital was approximately $106.9 million. Cash and cash equivalents increased $0.3 million, and working capital increased $5.3 million from January 31, 2025 due to the balance sheet fluctuations described below.

Of the Company’s total cash and cash equivalents of $17.7 million as of July 31, 2025, cash held in Latin America of $1.6 million, cash held in the UK of $2.3 million, cash held in Russia and Kazakhstan of $1.6 million, cash held in the EEC of $4.5 million, cash held in India of $0.2 million, cash held in Vietnam of $0.2 million, and cash held in Hong Kong of $1.1 million would not be subject to additional U.S. tax in the event such cash was repatriated due to the change in the U.S. tax law as a result of the December 22, 2017 enactment of the 2017 Tax Cuts and Jobs Act (the “Tax Act”). When the Company repatriates cash from China, of the $3.0 million balance at July 31, 2025, an additional 10% withholding tax may be incurred in that country. The Company expects to repatriate cash from China during FY 26 and in anticipation of doing so, has accrued withholding tax expense of $0.3 million as of July 31, 2025.

Cash used in operations was $9.7 million due to a net loss of $(3.1) million, an increase in working capital of $5.3 million andnon-cash credits of $1.7 million. Net cash used in investing activities was $2.1 million, primarily for capital expenditures related to ERP implementation costs and the replacement of manufacturing equipment. Net cash provided by financing activities was $10.9 million due to $13.8 million borrowed under our credit facility to fund working capital increases and the addition of a $2.1 million working capital loan for Jolly to support their operations, offset by dividends of $0.6 million, repayment of debt facilities of $4.1 million and $0.3 million in shares returned to pay income taxes on shares vested under our equity compensation program.

We believe our current cash, cash equivalents, borrowing capacity under our Loan Agreement, and the cash to be generated from expected product sales will be sufficient to meet our projected operating and investing requirements (including planned capital expenditures) for at least the next twelve months. However, our liquidity assumptions may prove to be incorrect, and we may need to utilize our available financial resources sooner than we currently expect.

On June 25, 2020, the Company entered into a Loan Agreement (the “Original Loan Agreement”) with Bank of America, N.A. (“Lender”), as amended by Amendment No. 1 to the Loan Agreement, dated June 18, 2021 (“Amendment No. 1”), Amendment No. 2 to the Loan Agreement, dated March 3, 2023 (“Amendment No. 2”), Amendment No. 3 to the Loan Agreement, dated November 30, 2023 (“Amendment No. 3”), Amendment No. 4 to the Loan Agreement, dated March 28, 2024 (“Amendment No. 4”), Amendment No. 5 to the Loan Agreement, dated December 12, 2024 (“Amendment No. 5”) and Amendment No. 6 to the Loan Agreement, dated July 7, 2025 (“Amendment No. 6” and, collectively with Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, and Amendment No. 5, the “Loan Agreement Amendments”; and the Original Loan Agreement, as amended by the Loan Agreement Amendments, the “Amended Loan Agreement”).

The Amended Loan Agreement provides the Company with a secured revolving credit facility of up to $60.0 million of borrowings from December 12, 2024 through January 31, 2026 and of up to $50.0 million of borrowings from February 1, 2026 through January 31, 2027 (in each case, such limits remain subject to a reduction to no less than $40.0 million from the net proceeds of equity issuances if the Company raises capital during such periods). The revolving credit facility includes a $10.0 million letter of creditsub-facility. On January 24, 2025, as required by the Amended Loan Agreement, the Company used certain net proceeds of its equity issuance to reduce the principal amount outstanding under the Amended Loan Agreement. As a result thereof, the maximum principal amount under the revolving credit facility was reduced to $40.0 million. The credit facility matures on December 12, 2029.

Borrowings under the revolving credit facility bear interest at a rate per annum equal to the sum of (i) the greater of the daily Secured Overnight Financing Rate (“SOFR”) or an index floor of 1% plus (ii) the Applicable Rate (as defined in the Amended Loan Agreement). The Applicable Rate is based on a funded debt-to-EBITDA ratio (discussed below) and includes four different levels, constituting a SOFR margin range of 1.25% to 2.00%. All outstanding principal and unpaid accrued interest under the revolving credit facility are due and payable on the maturity date. On aone-time basis, and subject to there not existing an event of default, the Company may elect to convert up to $5.0 million of the then outstanding principal of the revolving credit facility to a term loan facility with an assumed amortization of 15 years and the same interest rate and maturity date as the revolving credit facility. The Amended Loan Agreement provides for a fee on any difference between the line of credit commitment and the amount of credit it actually uses, determined by the daily amount of credit outstanding during the specified period. Such fee is calculated at the Applicable Rate and is payable quarterly.

The Company made certain representations and warranties to the Lender in the Amended Loan Agreement that are customary for credit arrangements of this type. The Company also agreed to maintain, as of the end of each fiscal quarter a minimum “basic fixed charge coverage ratio” (as defined in the Amended Loan Agreement) of at least 1.20x and a “funded debt to EBITDA ratio” (as defined in the Amended Loan Agreement) not to exceed 3.5x (with step-downs to 3.25x and 3.0x on February 1, 2026 and February 1, 2027, respectively), in each case for the trailing 12-month period ending with the applicable quarterly reporting period. In addition, the Company has agreed to maintain a springing “asset coverage ratio” (as defined in the Amended Loan Agreement) of at least 1.10x, provided that this ratio is only applicable to the extent that the maximum funded debt to EBITDA ratio exceeds 3.25x at any reporting period. The Company was in compliance with all of its debt covenants as of July 31, 2025.

Stock Repurchase Program. On April 7, 2022, the Board of Directors authorized a stock repurchase program under which the Company may repurchase up to $5.0 million of its outstanding common stock, which became effective upon the completion of a 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 $5.0 million of its outstanding common stock.

No shares were repurchased in the six months ended July 31, 2025 leaving $5.0 million remaining under the share repurchase program at July 31, 2025. The share repurchase program has no expiration date but may be terminated by the Board of Directors at any time.

Quarterly Cash Dividend. On May 1, 2025, the Board of Directors declared a quarterly cash dividend. The quarterly dividend of $0.03 per share was paid on May 22, 2025, to stockholders of record as of May 15, 2025.

Capital Expenditures. Our capital expenditures were $2.1 million for the six months ended July 31, 2025 which principally relate to capital investment in our new ERP system and some replacement equipment for our manufacturing sites. We anticipate FY26 capital expenditures to be approximately $4.0 million to replace existing equipment in the normal course of operations, expand our fire services products manufacturing capabilities and invest in our new ERP system. We expect to fund the capital expenditures from our cash flows from operations. The Company may also expend funds in connection with potential acquisitions.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements in our fiscal year 2025 Form 10-K. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult, or complex judgments, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2025 Form 10-K. There have been no significant changes in the application of our critical accounting policies and estimates during the six months ended July 31, 2025.