lake_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

	(Mark one)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended October 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________ to _______________

Commission File Number: 0-15535

LAKELAND INDUSTRIES, INC.

(Exact name of Registrant as specified in its charter)

Delaware		13-3115216
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1525 Perimeter Parkway, Suite 325 Huntsville, AL		35806
(Address of Principal Executive Offices)		(Zip Code)

(Registrant's telephone number, including area code) (256) 350-3873

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	LAKE	NASDAQ

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	Accelerated filer	☒
Nonaccelerated filer	Smaller reporting company	☒
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

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

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

Class		Outstanding at November 30, 2023
Common Stock, $0.01 par value per share		7,364,757 Shares

LAKELAND INDUSTRIES, INC.

AND SUBSIDIARIES

FORM 10-Q

The following information of the Registrant and its subsidiaries is submitted herewith:

PART I - FINANCIAL INFORMATION:

		Page

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Statements of Operations Three and Nine Months Ended October 31, 2023 and 2022	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Nine Months Ended October 31, 2023 and 2022	4

	Condensed Consolidated Balance Sheets October 31, 2023 and January 31, 2023	5

	Condensed Consolidated Statements of Stockholders’ Equity Three and Nine Months Ended October 31, 2023 and 2022	6

	Condensed Consolidated Statements of Cash Flows Nine Months Ended October 31, 2023 and 2022	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

	PART II - OTHER INFORMATION:

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 6.	Exhibits	28

	Signature Pages	29

Table of Contents

LAKELAND INDUSTRIES, INC.

AND SUBSIDIARIES

PART I FINANCIAL INFORMATION

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,
	2023			2022			2023			2022
Net sales	$	31,678		$	28,387		$	93,449		$	83,849
Cost of goods sold		18,317			16,083			53,461			48,862
Gross profit		13,361			12,304			39,988			34,987
Operating expenses		9,740			10,082			30,699			29,522
Operating profit		3,621			2,222			9,289			5,465
Other income (expense), net		(53	)		(72	)		(187	)		(140	)
Interest expense		(13	)		(4	)		(22	)		(25	)
Income before taxes		3,555			2,146			9,080			5,300
Income tax expense		937			715			2,677			3,610
Net income (loss)	$	2,618		$	1,431		$	6,402		$	1,690
Net income (loss) per common share:
Basic	$	0.35		$	0.19		$	0.87		$	0.22
Diluted	$	0.34		$	0.19		$	0.85		$	0.22
Weighted average common shares outstanding:
Basic		7,428,557			7,514,725			7,344,559			7,600,272
Diluted		7,614,404			7,704,695			7,528,723			7,787,662

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

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,
	2023			2022			2023			2022

Net income (loss)	$	2,618		$	1,431		$	6,402		$	1,690
Other comprehensive income (loss):
Foreign currency translation adjustments		(483	)		(1,744	)		(2,110	)		(2,916	)
Comprehensive income (loss)	$	2,135		$	(313	)	$	4,292		$	(1,226	)

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

Table of Contents

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(000’s except for share information)

ASSETS	October 31,			January 31,
	2023			2023
Current assets
Cash and cash equivalents	$	26,425		$	24,639
Accounts receivable, net of allowance for doubtful accounts of $769 and $800 at October 31, 2023 and January 31, 2023, respectively		18,227			17,296
Inventories		54,350			58,176
Prepaid VAT and other taxes		2,633			1,963
Income tax receivable and other current assets		2,385			2,908
Total current assets		104,020			104,982
Property and equipment, net		9,158			9,140
Operating leases right-of-use assets		10,495			5,472
Deferred tax assets		3,790			2,764
Other assets		134			100
Goodwill		8,473			8,473
Intangible assets, net		5,736			6,042
Investments		6,509			5,354
Total assets	$	148,315		$	142,327
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	6,803		$	6,558
Accrued compensation and benefits		3,670			2,522
Other accrued expenses		1,951			4,068
Income tax payable		1,057			-
Short-term borrowings		-			405
Accrued earnout agreement		492			3,182
Current portion of operating lease liabilities		1,538			1,253
Total current liabilities		15,511			17,988
Deferred income taxes		12			769
Long-term portion of operating lease liabilities		9,203			3,580
Total liabilities		24,726			22,337
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 8,722,965 and 8,655,699; outstanding 7,364,757 and 7,325,005 at October 31, 2023 and January 31, 2023, respectively		87			87
Treasury stock, at cost; 1,358,208 and 1,330,694 shares at October 31, 2023 and January 31, 2023, respectively		(19,979	)		(19,646	)
Additional paid-in capital		78,802			78,475
Retained earnings		70,480			64,765
Accumulated other comprehensive loss		(5,801	)		(3,691	)
Total stockholders' equity		123,589			119,990
Total liabilities and stockholders' equity	$	148,315		$	142,327

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

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
	Shares		Amount		Shares			Amount			Capital			Earnings			Loss			Total
			($000’s)					($000’s)			($000’s)			($000’s)			($000’s)			($000’s)

Balance, January 31, 2022		8,555,672	$	86		(939,705	)	$	(14,206	)	$	77,826		$	62,892		$	(1,498	)	$	125,100
Net income		—		—		—			—			—			1,690			—			1,690
Other comprehensive loss		—		—		—			—			—			—			(2,916	)		(2,916	)
Stock-based compensation:
Restricted stock issued		94,908		1		—			—			—			—			—			1
Restricted Stock Plan		—		—		—			—			1,141			—			—			1,141
Return of shares in lieu of payroll withholding		—		—		—			—			(805	)		—			—			(805	)
Treasury stock purchased		—		—		(390,989	)		(5,440	)		-			—			—			(5,440	)
Balance, October 31, 2022		8,650,580	$	87		(1,330,694	)	$	(19,646	)	$	78,162		$	64,582		$	(4,414	)	$	118,771
Balance, July 31, 2022		8,650,580	$	87		(1,135,855	)	$	(17,332	)	$	77,811		$	63,151		$	(2,670	)	$	121,047
Net income		—		—		—			—			—			1,431			—			1,431
Other comprehensive loss		—		—		—			—			—			—			(1,744	)		(1,744	)
Stock-based compensation:
Restricted stock issued		—		—		—			—						—			—			—
Restricted stock plan		—		—		—			—			351			—			—			351
Return of shares in lieu of payroll withholding		—		—		—			—			-			—			—			—
Treasury stock purchased		—		—		(194,839	)		(2,314	)		-			—			—			(2,314	)
Balance, October 31, 2022		8,650,580	$	87		(1,330,694	)	$	(19,646	)	$	78,162		$	64,582		$	(4,414	)	$	118,771
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	)
Treasury stock purchased		—		—								—			—			—
Balance, October 31, 2023		8,722,965	$	87		(1,358,208	)	$	(19,979	)	$	78,802		$	70,480		$	(5,801	)	$	123,589

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

Table of Contents

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

($000’s)

	Nine Months Ended October 31,
	2023			2022
Cash flows from operating activities:
Net income	$	6,402		$	1,690
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Provision for (recovery of) doubtful accounts		(31	)		92
Deferred income taxes		(1,783	)		1,788
Depreciation and amortization		1,609			1,370
Stock based and restricted stock compensation		747			1,141
(Gain) loss on disposal of property and equipment		(1	)		(4	)
Loss on equity investment		354			252
Revaluation of earnout consideration		(2,689	)		-
(Increase) decrease in operating assets
Accounts receivable		(963	)		(2,197	)
Inventories		3,211			(10,257	)
Prepaid VAT and other taxes		(670	)		(106	)
Other assets		285			(22	)
Increase (decrease) in operating liabilities
Accounts payable		141			613
Accrued expenses and other liabilities		235			499
Operating lease liabilities		886			(89	)
Net cash provided by (used in) operating activities		7,733			(5,230	)
Cash flows from investing activities:
Purchases of property and equipment		(1,505	)		(1,273	)
Investments		(1,510	)		(3,061	)
Net cash (used in) investing activities:		(3,015	)		(4,334	)
Cash flows from financing activities:
Short-term borrowings (repayments)		(405	)		-
Purchase of treasury stock under stock repurchase program		(333	)		(5,440	)
Dividends paid		(687	)		-
Shares returned to pay employee taxes under restricted stock program		(420	)		(805	)
Net cash (used in) financing activities		(1,845	)		(6,245	)
Effect of exchange rate changes on cash and cash equivalents		(1,087	)		(1,961	)
Net increase (decrease) in cash and cash equivalents		1,786			(17,770	)
Cash and cash equivalents at beginning of period		24,639			52,719
Cash and cash equivalents at end of period	$	26,425		$	34,949

Supplemental disclosure of cash flow information:
Cash paid for interest	$	22		$	25
Cash paid for taxes	$	1,745		$	2,614

Noncash investing and financing activities
Leased assets obtained in exchange for operating lease liabilities	$	4,099		$	34

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

Table of Contents

LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED 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 directly to a mixture of end users and 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 and countries within Southeast Asia.

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 entire fiscal year ending January 31, 2024, or for any future period. The January 31, 2023, 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, 2023 and 2022, and for each of the two years in the period ended January 31, 2023, included in our most recent annual report on Form 10-K filed on April 18, 2023.

In this Form 10-Q, (a) “FY” means fiscal year; thus for example, FY24 refers to the fiscal year ending January 31, 2024, (b) “Q” refers to quarter; thus, for example, Q3 FY24 refers to the third quarter of the fiscal year ending January 31, 2024, (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.

3. Investments and Acquisitions

Bodytrak

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 these additional investments, the Company owned 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 of Bodytrak, including internally developed intellectual property.

Table of Contents

On May 19, 2023, the Company entered into an agreement with Bodytrak to provide an additional investment 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. An initial investment funding of £500,000 ($0.6 million on the date of investment) was made on May 19, 2023. An additional investment funding of £700,000 ($0.9 million on the date of investment) was made on September 8, 2023. 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.

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 and $0.1 million for the three months ended October 31, 2023 and 2022, respectively, and recognized losses of $0.4 million and $0.3 million for the nine months ended October 31, 2023 and 2022, 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 Eagle

On December 2, 2022, the Company acquired 100% of Eagle Technical Products Limited’s (Eagle) common stock in an all-cash transaction valued at $10.5 million, net of net working capital acquired.

Headquartered in Manchester, UK, Eagle is a leading designer and provider of protective apparel to the fire and industrial sectors. Eagle provides differentiated product offerings through its innovative and technical solutions.

Eagle’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 Eagle acquisition agreement, the Company agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6 million GBP for the period May 1, 2022 through April 30, 2023. The Company also agreed to pay an earnout payment equal to the amount by which Eagle’s revenue exceeds 6.3 million GBP for the period May 1, 2023 through April 30, 2024. The estimated amount of the earnout payment developed using a Monte Carlo simulation included in the preliminary valuation was $3.2 million.

Eagle did not reach the revenue threshold for the period May 1, 2022 through April 30, 2023 and received no payment for that period. Based on the revised forecast for the period May 1, 2023 through April 30, 2024, the estimated amount of the earnout payment developed using a Monte Carlo simulation is $0.5 million. The adjustment to the accrued earnout payment of $1.5 million was recorded in the quarter ended October 31, 2023 and an adjustment of $2.7 million was recorded in the nine months ended October 31, 2023, and reflected as a reduction in operating expenses.

The following unaudited pro forma information presents our combined results as if the Eagle acquisition had occurred at the beginning of FY22. 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 and Eagle 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.

Table of Contents

Pro forma combined financial information (Unaudited)

(in millions, except per share amounts)	Three Months Ended October 31, 2022		Nine Months Ended October 31, 2022
Net sales	$	29.8	$	86.4
Net income (loss)	$	1.6	$	1.8
Basic earnings per share	$	0.21	$	0.24
Diluted earnings per share	$	0.21	$	0.24

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, 2023			January 31, 2023
Raw materials	$	26,798		$	29,036
Work-in-process		760			952
Finished goods		31,088			32,855
Excess and obsolete adjustments		(4,296	)		(4,668	)
	$	54,350		$	58,176

Table of Contents

5. Goodwill and Intangible Assets, Net

Changes in intangible assets, net, during the three and nine months ended October 31, 2023, were as follows (in $000s):

Balance at February 1, 2023	$	6,042
Amortization expense		(102	)
Balance at April 30, 2023	$	5,940
Amortization expense		(102	)
Balance at July 31, 2023	$	5,838
Amortization expense		(102	)
Balance at October 31, 2023	$	5,736

There were no material changes to goodwill during the three and nine month periods ended October 31, 2023.

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 sheet. The following is a roll-forward of the advances from January 31, 2023 through October 31, 2023 (in $000s):

Contract liability – January 31, 2023	$	1,627
Increases to contract liability		326
Decreases to contract liability		(1,752	)
Contract liability – October 31, 2023	$	201

7. Long-Term Debt

Revolving Credit Facility

On June 25, 2020, the Company entered into a Loan Agreement with Bank of America (“Lender”). The Loan Agreement, as amended to date (the “Loan Agreement”), provides the Company with a secured $25.0 million revolving credit facility, which includes a $5.0 million letter of credit sub-facility. The Company may 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 is 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 applies during periods when the Company’s quarterly funded debt to EBITDA ratio, as defined, exceeds 2.00 to 1.00. The Loan Agreement permits, without the prior consent of the Lender, acquisitions of a business or its assets by the Company or its subsidiaries 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. 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 will mature on June 25, 2025.

As of October 31, 2023, the Company had no borrowings outstanding on the letter of credit sub-facility and no borrowings outstanding under the revolving credit facility.

On November 30, 2023, the Company entered into Amendment No. 3 to the Loan Agreement. See Note 14, Subsequent Events, for additional information.

Borrowings in UK

There were $0 and $0.4 million in borrowings outstanding under the Company’s credit facility with HSBC Bank at October 31, 2023 and January 31, 2023.

Table of Contents

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); 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, and JSC Bank Centercredit in Kazakhstan. 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 $6.3 million total included in the U.S. bank accounts and approximately $20.1 million total in foreign bank accounts as of October 31, 2023, of which $25.6 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, 2023 and 2022.

Major Supplier

No vendor accounted for more than 10% of purchases during the three and nine-month periods ended October 31, 2023 and 2022.

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 Committee shall be deemed to include 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 (the “Amendment”) to the 2017 Plan. The Amendment increases the number of shares of common stock, par value $0.01 per share, of the Company reserved for issuance under the 2017 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, 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.

Table of Contents

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

	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
2017 Plan:
Total restricted stock and stock option programs	$	302	$	351	$	747	$	1,141
Total income tax expense recognized for stock-based compensation arrangements	$	63	$	74	$	157	$	240

Restricted Stock and Restricted Stock Units

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 nine months ended October 31, 2023 and 2022. 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 2021, April 2022, June 2022 and March 2023 grants.

	Performance- Based		Service-Based		Total		Weighted Average Grant Date Fair Value
Outstanding at January 31, 2023		127,480		40,665		168,145	$	22.95
Awarded		64,953		124,384		189,337	$	14.02
Vested		(

SEC Form 10-Q filed by Lakeland Industries Inc.