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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
--------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-12991
-------
LANGER, INC.
------------
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2239561
-------- ----------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
450 COMMACK ROAD, DEER PARK, NEW YORK 11729 - 4510
--------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (631) 667-1200
--------------
* * * * * * * * * * *
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ______
-----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, Par Value $.02 - 4,336,744 shares as of November 13, 2002.
1
INDEX
LANGER, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets 3
Unaudited Consolidated Statements of Operations 4
Unaudited Consolidated Statements of Stockholders' Equity 5
Unaudited Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 15
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LANGER, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2002 DECEMBER 31, 2001
-------------------- -----------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 10,184,963 $ 15,796,922
Accounts receivable, net of allowance for doubtful
accounts of $106,500 and $43,300, respectively 2,868,899 1,646,696
Inventories, net 2,200,455 1,141,151
Prepaid expenses and other current receivables 401,921 185,740
-------------- -------------
Total current assets 15,656,238 18,770,509
Property and equipment, net 975,548 701,996
Identifiable intangible assets, net 3,357,990 -
Goodwill 3,011,694 -
Other assets 1,104,996 1,227,741
-------------- -------------
$ 24,106,466 $ 20,700,246
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,000,000 $ -
Accounts payable 1,024,743 429,531
Accrued liabilities 2,048,954 1,224,444
Unearned revenue 659,254 461,355
-------------- -------------
Total current liabilities 4,732,951 2,115,330
Long-term debt 15,389,000 14,589,000
Unearned revenue 162,727 113,740
Other 100,267 15,967
-------------- -------------
Total liabilities 20,384,945 16,834,037
-------------- -------------
Stockholders' Equity
Common stock, $.02 par value, authorized
50,000,000 and 10,000,000 shares respectively;
issued 4,336,744 and 4,268,022 respectively 86,735 85,361
Additional paid-in capital 12,818,724 12,258,724
Accumulated deficit (8,771,924) (8,048,012)
Accumulated other comprehensive loss (296,557) (314,407)
-------------- -------------
3,836,978 3,981,666
Less: treasury stock at cost, 67,100 shares (115,457) (115,457)
-------------- -------------
Total stockholders' equity 3,721,521 3,866,209
-------------- -------------
$ 24,106,466 $ 20,700,246
============== =============
See accompanying notes to unaudited consolidated financial statements.
3
LANGER, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
------------------ ----------------- ----------------- --------------
Net sales $ 5,230,438 $ 3,434,507 $12,704,043 $ 9,210,072
Cost of sales 3,206,064 2,072,966 7,732,793 6,099,846
--------- --------- ---------- -----------
Gross profit 2,024,374 1,361,541 4,971,250 3,110,226
Selling expenses 874,237 397,415 2,190,188 1,207,312
Research and development expenses 38,165 42,972 127,740 129,281
General and administrative expenses 1,005,108 912,289 2,875,388 2,158,597
Change in control and restructuring expenses - - - 795,667
--------- --------- ---------- -----------
Income (loss) from operations 106,864 8,865 (222,066) (1,180,631)
--------- --------- ---------- -----------
Other income (expense):
Interest income 43,966 20,478 176,987 22,974
Interest expense (165,548) (654) (471,182) (14,619)
Other (79,717) (7,305) (187,151) (3,986)
---------- ---------- ---------- -----------
Other income (expense), net (201,299) 12,519 (481,346) 4,369
---------- ---------- ---------- -----------
Income (loss) before income taxes (94,435) 21,384 (703,412) (1,176,262)
Provision for income taxes 7,000 9,500 20,500 21,500
---------- ---------- ---------- -----------
Net income (loss) $ (101,435) $ 11,884 $ (723,912) $ (1,197,762)
=========== ========== ============ ===========
Weighted average number of common
shares used in computation of net
income (loss) per share:
Basic 4,269,644 4,190,054 4,237,645 3,857,981
Diluted 4,269,644 4,534,492 4,237,645 3,857,981
Net income (loss) per common share:
Basic $ (0.02) $ 0.00 $ (0.17) $ (.31)
=========== ============ ============= ============
Diluted $ (0.02) $ 0.00 $ (0.17) $ (.31)
=========== ============ ============= ============
4
LANGER, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
Accumulated Other
Comprehensive Loss
------------------
Common Stock
------------ Additional Foreign Minimum Total
Treasury Paid-in Accumulated Currency Pension Stockholders'
Shares Amount Stock Capital Deficit Translation Liability Equity
------------------------------------------------------------------------------------------------------
Balance at
December 31, 2001 4,268,022 $ 85,361 $ (115,457) $ 12,258,724 $ (8,048,012) $ (52,787) $ (261,620) $ 3,866,209
Net loss for nine
months ended
September 30, (723,912) (723,912)
Foreign currency
adjustment 17,850 17,850
Issuance of stock to
purchase business 64,895 1,298 528,214 529,512
Issuance of common
stock and exercise of
stock options 3,827 76 11,729 11,805
Compensation expense to
accelerate stock options 20,057 20,057
--------------------------------------------------------------------------------------------------------
Balance at September 30,
2002 4,336,744 $ 86,735 $ (115,457) $ 12,818,724 $ (8,771,924) $ (34,937) $ (261,620) $ 3,721,521
========================================================================================================
5
LANGER, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
--------------- ------------------- ---------------- ------------------
Cash Flows From Operating Activities:
Net income (loss) $ (101,435) $ 11,884 $ (723,912) $ (1,197,762)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 203,752 91,356 531,262 238,470
Compensation expense for options acceleration -- -- 20,057 --
Provision for doubtful accounts receivable 26,476 6,000 45,556 31,051
Deferred income taxes (44) (43) (118) 1,735
Issuance of common stock and options for
consulting services -- -- 5,242 245,000
Changes in operating assets and liabilities:
Accounts receivable (292,750) (62,182) (430,833) (77,268)
Inventories (240,247) (73,861) (376,150) 42,043
Prepaid expenses and other assets (926) 51,455 (165,785) (28,595)
Accounts payable and accrued liabilities 36,636 95,916 340,448 247,723
Unearned revenue and other liabilities 10,280 20,261 (1,871) 28,529
--------------- ------------------- ---------------- ----------------
Net cash (used in) provided by operating
activities (358,258) 140,786 (756,104) (469,074)
--------------- ------------------- ---------------- ----------------
Cash Flows From Investing Activities:
Purchase of businesses, net of cash acquired (38,068) -- (6,858,426) --
Purchases of fixed assets (128,330) (79,032) (333,504) (121,303)
--------------- ------------------- --------------- ----------------
Net cash used in investing activities (166,398) (79,032) (7,191,930) (121,303)
--------------- ------------------- --------------- ----------------
Cash Flows From Financing Activities:
Proceeds from the exercise of stock options -- 30,562 6,563 66,912
Issuance of promissory notes for purchase of
businesses -- -- 1,800,000 --
Issuance of common stock for purchase of businesses -- -- 529,512 --
Payments on debt -- -- -- (87,646)
Issuance of shares from Options exercise -- -- -- 2,135,000
Proceeds from the issuance of common stock -- -- -- 225,000
--------------- ------------------- ---------------- ----------------
Net cash provided by financing activities -- 30,562 2,336,075 2,339,266
--------------- ------------------- ---------------- ----------------
Net (decrease) increase in cash and cash equivalents (524,656) 92,316 (5,611,959) 1,748,889
Cash and cash equivalents at beginning of period 10,709,619 2,074,526 15,796,922 417,953
--------------- ------------------- ---------------- ----------------
Cash and cash equivalents at end of period $ 10,184,963 $ 2,166,842 $ 10,184,963 $ 2,166,842
=============== =================== ================ ================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest expense $ 165,548 $ 654 $ 471,182 $ 14,619
=============== =================== ================ =================
Income taxes $ -- $ -- $ -- $ --
=============== =================== ================ =================
See notes to condensed consolidated financial statements.
6
LANGER, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2002 AND SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
------------------------------------------------------------
(A) BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. These unaudited consolidated financial statements should be
read in conjunction with the financial statements and footnotes
included in the Company's annual report on Form 10-K and any amendments
thereto for the fiscal period ended December 31, 2001.
Operating results for the three and nine months ended September 30,
2002 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2002.
(B) CHANGE IN NAME AND FISCAL YEAR END
----------------------------------
At the Company's July 17, 2001 annual meeting, the stockholders
approved changing the name of the Company from The Langer Biomechanics
Group, Inc. to Langer, Inc. Additionally, the stockholders approved
changing the fiscal year end from February 28 to December 31.
(C) CHANGE IN STATE OF INCORPORATION
--------------------------------
At the Company's June 27, 2002 annual meeting, the stockholders
approved the changing of the State of Incorporation of the Company from
New York to Delaware. The new Certificate of Incorporation authorizes
the issuance of 50,000,000 shares of common stock, par value $.02
per share and the issuance of 250,000 shares of blank check preferred
stock. No shares of preferred stock are issued or outstanding.
(D) INCOME (LOSS) PER SHARE
-----------------------
Basic earnings per share are based on the weighted average number of
shares of common stock outstanding during the period. Diluted earnings
per share are based on the weighted average number of shares of common
stock and common stock equivalents (options and warrants) outstanding
during the period, except where the effect would be antidilutive,
computed in accordance with the treasury stock method.
(E) PROVISION FOR INCOME TAXES
--------------------------
For the three and nine months ended September 30, 2002 and 2001, there
was no provision for income taxes on losses related to domestic
operations. The provision for income taxes on foreign operations for
the three and nine months ended September 30, 2002 was estimated at
$7,000 and $20,500 respectively. The provision for income taxes on
foreign operations for the three and nine months ended September 30,
2001 was estimated at $9,500 and $21,500 respectively.
(F) RECLASSIFICATIONS
-----------------
Certain amounts have been reclassified in the prior year consolidated
financial statements to present them on a basis consistent with the
current year.
7
NOTE 2-ACQUISITION OF BENEFOOT, INC. AND BENEFOOT PROFESSIONAL PRODUCTS, INC.
- -----------------------------------------------------------------------------
On May 6, 2002 the Company, through a wholly owned subsidiary, acquired
substantially all of the assets and liabilities of each of Benefoot, Inc. and
Benefoot Professional Products, Inc. (jointly, "Benefoot"), pursuant to the
terms of an asset purchase agreement (the "Asset Purchase Agreement"). The
assets acquired include machinery and equipment, other fixed assets, inventory,
receivables, contract rights, and intangible assets.
In connection with the acquisition, the Company paid consideration of $6.1
million, of which $3.8 million was paid in cash, $1.8 million was paid through
the issuance of promissory notes (the "Promissory Notes") and $500,000 was paid
by issuing 61,805 shares of common stock (the "Shares"), together with certain
registration rights. $1,000,000 of the Promissory Notes will be paid on May 6,
2003 and the balance will be paid on May 6, 2004. The Promissory Notes bear
interest at 4%. The Company also assumed certain liabilities of Benefoot,
including approximately $300,000 of long-term indebtedness. The Company also
agreed to pay Benefoot up to an additional $1,000,000 upon satisfaction of
certain performance targets on or prior to May 6, 2004. The Company funded the
entire cash portion of the purchase price through working capital generated
principally through the prior sale of the Company's 4% convertible subordinated
notes due August 31, 2006.
In connection with the Asset Purchase Agreement, the Company entered into an
employment agreement with each of two former shareholders of Benefoot, each
having a term of two years and providing for an annual base salary of $150,000
and benefits, including certain severance arrangements. One of these
shareholders subsequently terminated his employment agreement with the Company.
As a result, the Company accrued $94,000 for termination costs. The Company also
entered into an agreement with Sheldon Langer as a medical consultant providing
for an annual fee of $45,000 and a one-time grant of 3,090 shares of common
stock, together with certain registration rights. The allocation of the purchase
price among the assets acquired and liabilities assumed is based on the
Company's valuation of the fair value of the assets and liabilities of Benefoot.
The following table sets forth the components of the estimated purchase price:
Cash consideration $ 3,800,351
Benefoot long term debt paid at closing 307,211
------------------
Total cash paid at closing $ 4,107,562
Promissory note issued 1,800,000
Common stock issued 529,512
Transaction costs 647,305
-----------
Total purchase price $ 7,084,379
===========
The following table provides the allocation of the purchase price:
Assets: Cash and cash equivalents $ 225,953
Accounts receivables 806,370
Inventories 660,559
Prepaid expenses and other 76,973
Property and equipment 223,398
Goodwill 3,011,694
Identified intangible assets 3,430,000
Other assets 6,162
-------------------
8,441,109
-------------------
Liabilities: Accounts payable 647,873
Accrued liabilities 389,400
Unearned revenue 210,355
Long term debt & other liabilities 109,102
-------------------
1,356,730
-------------------
Total purchase price $ 7,084,379
===================
8
In June 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with SFAS No. 142. Other intangible
assets will continue to be amortized over their useful lives.
In accordance with the provisions of SFAS No. 142, Langer will not amortize
goodwill and intangible assets with indefinite lives (trade names with an
estimated fair value of $1,600,000) recorded in this acquisition.
Unaudited pro forma results of operations for the nine months ended September
30, 2002 and 2001, as if the Company acquired Benefoot at the beginning of each
year, include estimates and assumptions which management believes are
reasonable. However, pro forma results do not include the realization of cost
savings from operating efficiencies, synergies or other effects resulting from
the acquisition, and are not necessarily indicative of the actual consolidated
results of operations had the acquisition occurred on the date assumed, nor are
they necessarily indicative of future consolidated results of operations.
Unaudited Pro forma results were:
Nine months ended
September 30,
2002 2001
-------------- ---------------
Net sales $ 15,092,623 $ 14,668,172
Net income (loss) $ (650,003) $ (1,014,809)
Diluted earnings per share $ (.15) $ (.26)
NOTE 3 - INVENTORIES
-----------
Inventories consist of:
September 30, December 31
2002 2001
---- ----
(Unaudited)
Raw Materials $ 1,250,486 $ 994,186
Work in progress 156,222 105,453
Finished goods 1,017,161 255,418
-------------- ------------
2,423,869 1,355,057
Less: Allowance for obsolescence 223,414 213,906
-------------- ------------
$ 2,200,455 $ 1,141,151
============== =============
9
NOTE 4 - LONG TERM DEBT
--------------
On October 31, 2001, the Company completed the sale of $14,589,000 principal
amount of its 4% convertible subordinated notes due August 31, 2006 (the
"Notes"), in a private placement. The Notes are convertible into shares of the
Company's common stock at a conversion price of $6.00 per share, (equal to the
market value of the Company's stock on October 31, 2001), subject to
anti-dilution protections and are subordinated to existing or future senior
indebtedness of the Company. Among other provisions, the Company may, at its
option, call, prepay, redeem, repurchase, convert or otherwise acquire
(collectively, "Call") the Notes, in whole or in part, (1) after August 31, 2003
or (2) at any time if the closing price of the Company's common stock equals or
exceeds $9.00 per share for at least ten consecutive trading days. If the
Company elects to call any of the Notes, the holders of the Notes may elect to
convert the Notes for the Company's common stock. Interest is payable
semi-annually on the last day of June and December. Interest expense for the
three and nine months ended September 30, 2002 on these Notes was $145,890 and
$437,670 respectively.
The Company received net proceeds of $13,668,067 from the offering of the Notes.
The cost of raising these proceeds of $920,933 is being amortized over the life
of the Notes. The amortization of these costs for the three and nine months
ended September 30, 2002 was $48,443 and $144,662 respectively.
The Company issued $1,800,000 in Promissory Notes in connection with the
acquisition of Benefoot. $1,000,000 of the notes will be paid on May 6, 2003 and
the balance will be paid on May 6, 2004. Interest expense for the three months
ended September 30, 2002 was $18,000 and from the date of acquisition was
$29,200.
NOTE 5 - SEASONALITY
-----------
A substantial portion of the Company's revenue is derived from the sale of
custom orthotic devices. North American custom orthotic revenue has historically
been significantly higher in the warmer months of the year, while custom
orthotic revenue of the Company's United Kingdom subsidiary has historically not
evidenced any seasonality.
10
NOTE 6 - SEGMENT INFORMATION
-------------------
The Company operates in two segments (North America and United Kingdom)
principally in the design, development, manufacture and sale of foot and
gait-related products. Intersegment net sales are recorded at cost. Segment
information for the three and nine months ended September 30, 2002 and September
30, 2001 are summarized as follows:
UNITED
THREE MONTHS ENDED SEPTEMBER 30, 2002 NORTH AMERICA KINGDOM TOTAL
---------------------------------------------------------------------------------------------------
Net sales to external customers $ 4,694,630 $535,808 $5,230,438
Intersegment net sales $ 66,180 $ -- $ 66,180
Gross margins $ 1,762,320 $262,054 $2,024,374
Operating (loss) profit $ (174) $107,038 $ 106,864
UNITED
THREE MONTHS ENDED SEPTEMBER 30, 2001 NORTH AMERICA KINGDOM TOTAL
-------------------------------------------------------------------------------------------------
Net sales to external customers $2,945,476 $489,031 $3,434,507
Intersegment net sales $ 74,700 $ -- $ 74,700
Gross margins $1,145,336 $216,205 $1,361,541
Operating (loss) profit $ (70,594) $ 79,459 $ 8,865
UNITED
NINE MONTHS ENDED SEPTEMBER 30, 2002 NORTH AMERICA KINGDOM TOTAL
--------------------------------------------------------------------------------------------------
Net sales to external customers $11,134,986 $1,569,057 $12,704,043
Intersegment net sales $ 231,581 $ -- $ 231,581
Gross margins $ 4,221,428 $ 749,822 $ 4,971,250
Operating (loss) profit $ (542,418) $ 320,352 $ (222,066)
UNITED
NINE MONTHS ENDED SEPTEMBER 30, 2001 NORTH AMERICA KINGDOM TOTAL
--------------------------------------------------------------------------------------------------
Net sales to external customers $ 7,828,371 $1,381,701 $ 9,210,072
Intersegment net sales $ 196,729 $ -- $ 196,729
Gross margins $ 2,503,306 $ 606,920 $ 3,110,226
Operating (loss) profit $(1,390,391) $ 209,760 $(1,180,631)
11
NOTE 7 - COMPREHENSIVE INCOME
--------------------
The Company's comprehensive income (loss) was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
Net income (loss) $ (101,435) $ 11,884 $ (723,912) $ (1,197,762)
Other comprehensive income (loss) net
of tax:
Change in equity resulting from
translation of financial statements
into U.S. dollars 5,758 8,825 17,850 (1,075)
------------ ---------- ------------ ------------
Comprehensive income (loss) $ (95,677) $ 20,709 $ (706,062) $ (1,198,837)
============= ========== ============ =============
12
NOTE 8 - INCOME (LOSS) PER SHARE
-----------------------
The following table provides a reconciliation between basic and diluted earnings
per share:
Three months ended September 30,
2002 2001
Income Shares Per Share Income Shares Per Share
-------------- ---------- -------------- ----------------- ------------ ---------
Basic income (loss) per common share
Income (loss) available to common
stockholders $(101,435) 4,269,644 $ (.02) $ 11,884 4,190,054 $ 0.00
Stock options -- -- -- -- 344,438 --
-------------- -------- -------------- ------------- ----------- ---------
Diluted income (loss) per common share
Income (loss) available to common
stockholders plus assumed
exercise of stock options $(101,435) 4,269,644 $ (.02) $ 11,884 4,534,492 $ 0.00
============== ========== ============= ============= =========== =========
Nine months ended September 30,
2002 2001
Income Shares Per Share Income Shares Per Share
-------------- -------- ---------------- ------------------ ----------- ----------
Basic income (loss) per common share
Income (loss) available to common
stockholders $(723,912) 4,237,645 $ (.17) $(1,197,762) 3,857,981 $ (.31)
Stock options -- -- -- -- -- --
-------------- ------- ---------------- ------------------ ---------- ----------
Diluted income (loss) per common share
Income (loss) available to common
stockholders plus assumed
exercise of stock options $(723,912) 4,237,645 $ (.17) $(1,197,762) 3,857,981 $ (.31)
============== ========= =============== ================== ========== ===========
13
NOTE 9 - CHANGE IN CONTROL
-----------------
Effective February 13, 2001, Andrew H. Meyers, Greg Nelson and Langer Partners
LLC, and its designees ("Offerors"), acquired a controlling interest in the
Company when they purchased 1,362,509 validly tendered shares of the Company at
$1.525 per share, or approximately 51% of the then outstanding common stock of
the Company, under the terms of a December 27, 2000 Tender Offer Agreement (the
"Tender") under which the Offerors offered to purchase up to 75% of the
Company's common stock. In order to provide the Company with adequate equity to
maintain the Company's compliance with the listing requirements of the NASDAQ
small cap market and to enable the Company to finance its ongoing operations as
well as potentially take advantage of opportunities in the marketplace and in
order to induce the Offerors to enter into the Tender Offer Agreement, pursuant
to its terms, the Offerors were granted 180 day options to purchase up to
1,400,000 shares of the Company's common stock, with an initial exercise price
of $1.525 per share, rising up to $1.60 per share (the "Options"). These Options
have been recorded as a non-cash dividend of $3,206,000, the fair market value
of the Options on the date of grant. Upon the closing of the Tender, the Board
of Directors of the Company resigned in favor of Andrew H. Meyers (President and
Chief Executive Officer), Burtt Ehrlich (Chairman of the Board), Jonathan R.
Foster, Greg Nelson and Arthur Goldstein. The Company issued 30,000
non-qualified options at $1.525 to each of the four new outside members of the
Board of Directors in connection with their services as members of the Board.
In connection with the Tender and the resultant change in control, the Company
recorded expenses of approximately $1,008,000, of which $795,667 was incurred in
the first quarter of 2001. These expenses included legal fees of $263,000,
valuation and consultant fees of $95,000, severance and related expenses for
terminated employees and executives of approximately $236,000, and other costs
directly attributable to the change in control of approximately $169,000. As
part of the change in control, a consulting firm, which is owned by the sole
manager and voting member of Langer Partners LLC, a principal shareholder of the
Company, was granted 100,000 fully vested stock options with an exercise price
of $1.525 per share. Accordingly, the Company immediately recognized the fair
value of the options of $245,000 as consulting fees associated with these
options. Additionally, the Company entered into a consulting agreement with this
consulting firm, whereby the consulting firm would receive an annual fee of
$100,000 for three years for services provided.
Upon closing of the Tender and the resultant change in control, the Company's
existing revolving credit facility with a bank was terminated. In order to
provide for the Company's short-term cash needs, in February 2001, the Company's
Chief Executive Officer loaned the Company $500,000. As part of the change in
control, new management determined that the Company required additional cash to
potentially take advantage of opportunities in the marketplace. On February 13,
2001, three Directors of the Company purchased 147,541 restricted shares at
$1.525 for total proceeds of $225,000.
On May 11, 2001, the Offerors fully exercised the Options at $1.525 per share
for $2,135,000, which was invested in the Company. The Company's Chief Executive
Officer, Andrew H. Meyers, converted the $500,000 loan plus accrued interest as
partial proceeds toward the exercise of these Options.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------
REVENUES
- --------
Net sales for the three months ended September 30, 2002 were $5,230,438 or 52%
above net sales of $3,434,507 for the comparable quarter in 2001. Net sales for
the nine months ended September 30, 2002 were $12,704,043 or 38% above net sales
of $9,210,072 for the nine months ended September 30, 2001. Net sales for the
quarter and the nine-month period includes $1,909,337 and $3,139,636
respectively related to the acquisition of Benefoot on May 6, 2002. The increase
in net sales for the quarter is primarily as a result of the acquisition of
Benefoot. The increase in net sales for the nine month period is a result of the
acquisition of Benefoot as well as increased sales in the Company's base
business.
Net sales for custom orthotic devices for the three months ended September 30,
2002 were $3,962,385 as compared to $3,046,089 for the comparable prior period,
an increase of $916,296. Net sales of custom orthotic devices for the nine
months ended September 30, 2002 were $10,099,730 as compared to $8,148,827 for
the comparable prior period, an increase of $1,950,903. Net sales of custom
orthotic devices related to the Benefoot acquisition were $1,088,387 and
$1,844,700 respectively for the quarter and nine month period.
Net sales of distributed products for the three months ended September 30, 2002
were $1,268,053 as compared to $388,418 for the three months ended September 30,
2001, an increase of 226%. Net sales of distributed products for the nine months
ended September 30, 2002 were $2,604,313 as compared to $1,061,246 for the
comparable prior period. Net sales of distributed products attributable to the
Benefoot acquisition were $820,950 and $1,293,936 respectively for the quarter
and the nine-month period.
GROSS PROFIT
- ------------
Gross profit as a percentage of sales for the three months ended September 30,
2002 was 38.7%, as compared to 39.6% for the three months ended September 30,
2001. Gross profit as a percentage of sales for the nine months ended September
30, 2002 was 39.1% as compared to 33.8% for the comparable prior quarter. Gross
profit for the nine months in 2001 was impacted by the effects of recording
reserves for product obsolescence and material cost variances, which were not
encountered in 2002. Gross profit for 2002 continued to improve as a result of
improvements in efficiencies in the manufacturing process, reductions in
overhead costs and increased sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling expenses for the three months ended September 30, 2002, were $874,237 or
16.7% of sales as compared to $397,415 or 11.6% of sales in the prior year.
Selling expenses for the nine months ended September 30, 2002 was $2,190,188 or
17.2% of sales compared to $1,207,312 or 13.1% of sales for the 2001 comparable
period. Selling expense increased due to the effect of the acquisition of
Benefoot as well as increases in salaries and related costs for the investments
made in the sales and marketing infrastructure.
General and administrative expenses were $1,005,108 or 19.2% of sales for the
three months ended September 30, 2002 as compared to $912,289 or 26.6% of sales
for the comparable quarter of the prior year. General and administrative
expenses for the nine months ended September 30, 2002 were $2,875,388 or 22.6%
of sales as compared to $2,158,597 or 23.4% of sales for the comparable prior
period. General and administrative expenses improved in the quarter as a
percentage of sales as a result of the integration of the Benefoot acquisition
into the Company. General and administrative expenses for the nine month period
increased in dollars as a result of increased salary costs, costs attributable
to a Company wide incentive program as well as integration costs attributable to
the acquisition of Benefoot.
15
OTHER INCOME (EXPENSE), NET
- ---------------------------
Other income (expense), net was $(201,299) for the three months ended September
30, 2002 as compared to $12,519 for the comparable prior period. The increase in
expense is primarily attributable to the interest expense on the Company's 4%
Convertible Subordinated Notes, net of related interest income on the unused
cash proceeds.
INTEGRATION COSTS
- -----------------
Costs included in the nine month period ended September 30, 2002 attributable to
the integration of Benefoot into the Company approximated $184,000 or $.04 per
share. Integration costs which were primarily attributable to severance and
related costs were charged to expense in the second quarter of 2002 as follows:
Cost of sales $ 3,000
Selling 28,000
General and administrative 153,000
-----------------
$ 184,000
=================
CHANGE IN CONTROL
- -----------------
Effective February 13, 2001, Andrew H. Meyers, Greg Nelson and Langer Partners
LLC, and its designees ("Offerors"), acquired a controlling interest in the
Company when they purchased 1,362,509 validly tendered shares of the Company at
$1.525 per share, or approximately 51% of the then outstanding common stock of
the Company, under the terms of a December 27, 2000 Tender Offer Agreement (the
"Tender") under which the Offerors offered to purchase up to 75% of the
Company's common stock. In order to provide the Company with adequate equity to
maintain the Company's compliance with the listing requirements of the NASDAQ
small cap market and to enable the Company to finance its ongoing operations as
well as potentially take advantage of opportunities in the marketplace and in
order to induce the Offerors to enter into the Tender Offer Agreement, pursuant
to its terms, the Offerors were granted 180 day options to purchase up to
1,400,000 shares of the Company's common stock, with an initial exercise price
of $1.525 per share, rising up to $1.60 per share (the "Options"). These Options
have been recorded as a non-cash dividend of $3,206,000, the fair market value
of the Options on the date of grant. Upon the closing of the Tender, the Board
of Directors of the Company resigned in favor of Andrew H. Meyers (President and
Chief Executive Officer), Burtt Ehrlich (Chairman of the Board), Jonathan R.
Foster, Greg Nelson and Arthur Goldstein. The Company issued 30,000
non-qualified options at $1.525 to each of the four new outside members of the
Board of Directors in connection with their services as members of the Board.
In connection with the Tender and the resultant change in control, the Company
recorded expenses of approximately $1,008,000, of which $795,667 was incurred in
the first quarter of 2001. These expenses included legal fees of $263,000,
valuation and consultant fees of $95,000, severance and related expenses for
terminated employees and executives of approximately $236,000, and other costs
directly attributable to the change in control of approximately $169,000. As
part of the change in control, a consulting firm, which is owned by the sole
manager and voting member of Langer Partners LLC, a principal shareholder of the
Company, was granted 100,000 fully vested stock options with an exercise price
of $1.525 per share. Accordingly, the Company immediately recognized the fair
value of the options of $245,000 as consulting fees associated with these
options. Additionally, the Company entered into a consulting agreement with this
consulting firm, whereby the consulting firm would receive an annual fee of
$100,000 for three years for services provided.
16
Upon closing of the Tender and the resultant change in control, the Company's
existing revolving credit facility with a bank was terminated. In order to
provide for the Company's short-term cash needs, in February 2001, the Company's
Chief Executive Officer loaned the Company $500,000. As part of the change in
control, new management determined that the Company required additional cash to
potentially take advantage of opportunities in the marketplace. On February 13,
2001, three Directors of the Company purchased 147,541 restricted shares at
$1.525 for total proceeds of $225,000.
On May 11, 2001, the Offerors fully exercised the Options at $1.525 per share
for $2,135,000, which was invested in the Company. The Company's Chief Executive
Officer, Andrew H. Meyers, converted the $500,000 loan plus accrued interest as
partial proceeds toward the exercise of these Options.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital as of September 30, 2002 was $10,923,287 as compared to
$16,655,179 as of December 31, 2001. Cash balances at September 30, 2002 were
$10,184,963, a decrease of $5,611,959 from December 31, 2001. This decrease is
attributable to cash payments in connection with the acquisition of Benefoot,
payments in the first quarter for annual insurance premiums, payout of the
Company incentive plan and a consulting agreement, which were included in
accrued liabilities at the fiscal year ended December 31, 2001.
On October 31, 2001, the Company sold $14,589,000 of its 4% convertible
subordinated notes, due August 31, 2006, in a private placement (the "Notes").
The Notes are convertible into the Company's common stock at a conversion price
of $6.00 per share and are subordinated to all existing or future senior
indebtedness of the Company. The Company received net proceeds of $13,668,067
from this offering. The costs of raising these proceeds, including placement and
legal fees, was $920,933, which is being amortized over the life of the Notes.
The amortization of these costs for the three month and nine month period ended
September 30, 2002 was $48,443 and $144,662 respectively. Interest is payable
semi-annually on the last day of June and December. Interest expense for the
three month and nine month period ended September 30, 2002 on these Notes was
$145,890 and $437,670 respectively.
In connection with the Tender, the Company's then existing revolving credit
facility with a bank was terminated. In order to provide for the Company's
short-term cash needs, in February 2001, the Company's Chief Executive Officer
loaned the Company $500,000 evidenced by a promissory note, bearing interest at
prime plus 1%. Upon exercise of the Options on May 11, 2001, the principal
amount of the loan, together with accrued interest in the amount of $11,112 was
exchanged as partial consideration for the payment of the shares of stock. On
May 11, 2001, the Offerors fully exercised the Options at $1.525 per share for
$2,135,000, which was invested in the Company.
In connection with the acquisition of Benefoot, the Company issued $1,800,000 of
4% Promissory notes. $1,000,000 of the Promissory notes are due on May 6, 2003
with the remaining balance due on May 6, 2004. Interest expense, which is
payable quarterly, for the three months and nine months ended September 30, 2002
on these notes was $18,000 and $29,200 respectively.
The Company's United Kingdom subsidiary maintains a line of credit with a local
bank in the amount of 50,000 British pounds, which is guaranteed by the Company
pursuant to a standby Letter of Credit. If this credit facility, which has been
renewed through February 2003, would not be available, the Company believes it
can readily find a suitable replacement or the Company would supply the
necessary capital.
Repurchases of the Company's common stock may be made from time to time in the
open market at prevailing prices or in privately negotiated transactions,
subject to available resources. The Company may also finance acquisitions of
other companies or product lines in the future from existing cash balances, from
borrowings from institutional lenders, and/or the public or private offerings of
debt or equity securities. Management believes that its existing cash balances
will be adequate to meet the Company's cash needs during the fiscal year ending
December 31, 2002.
17
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
- -----------------------------------------------------------------
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations". SFAS No. 141 applies prospectively to all business
combinations initiated after June 30, 2001, and all business combinations
accounted using the purchase method for which the date of acquisition is July 1,
2001, or later. This statement requires all business combinations to be
accounted for using one method, the purchase method. Under previously existed
accounting rules, business combinations were accounted for using one of two
methods, pooling-of-interests method or the purchase method. As of January 1,
2002 the Company adopted the provisions of SFAS No. 141. The adoption of SFAS
No. 141 did not have a significant impact on the Company's financial statements.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets. Under SFAS No. 142, goodwill and some
intangible assets will no longer be amortized, but rather reviewed for
impairment on a periodic basis. The provisions of the statement are required to
be applied starting with fiscal years beginning after December 15, 2001. This
statement is required to be applied at the beginning of the Company's fiscal
year and to be applied to all goodwill and other intangible assets recognized in
its financial statements at that date. Impairment losses for goodwill and
certain intangible assets that arise due to the initial application of this
statement are to be recorded as resulting from a change in accounting principle.
Goodwill and intangible assets acquired after June 30, 2001, will be subject
immediately to the provisions of this statement. As of January 1, 2002 the
Company adopted the provisions of SFAS No. 142. The adoption of SFAS No. 142 did
not have a significant impact on the Company's financial statements.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This standard requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time the liability is accreted to its present value each period and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. The standard is
effective for fiscal years beginning after June 15, 2002. The adoption of SFAS
No. 143 is not expected to have a material impact on the Company's financial
statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 144 requires that long-lived assets be measured at the lower of
carrying amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. Therefore, discontinued operations
will no longer be measured at net realizable value or include amounts for
operating losses that have not yet occurred. SFAS No. 144 also broadens the
reporting of discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that will
be eliminated from the ongoing operations of the entity in a disposal
transaction. The provisions of SFAS No. 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001. As of
January 1, 2002 the Company adopted the provisions of SFAS No. 144. The adoption
of SFAS No. 144 did not have a significant impact on the Company's financial
statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145, among other things, rescinds SFAS No. 4, which required all gains
and losses from the extinguishment of debt to be classified as an extraordinary
item and amends SFAS No. 13 to require that certain lease modifications that
have economic effects similar to sale-leaseback transactions be accounted for in
the same manner as sale-leaseback transactions. The rescission of SFAS No. 4 is
effective for fiscal years beginning after May 15, 2002. The remainder of the
statement is generally effective for transactions occurring after May 15, 2002
with earlier application encouraged. The Company does not expect the adoption of
SFAS No. 145 to have a material impact on its results of operations, financial
position or cash flows.
18
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities." This statement addresses the recognition, measurement and reporting
of costs that are associated with exit and disposal activities. This statement
includes the restructuring activities that are currently accounted for pursuant
to the guidance set forth in EITF 94-3, "Liability Recognition for Certain
Employee Termination Benefits and other Costs to exit an Activity (including
Certain Costs Incurred in a Restructuring)," costs related to terminating a
contract that is not a capital lease and one-time benefit arrangements received
by employees who are involuntarily terminated- nullifying the guidance under
EITF 94-3. Under SFAS No. 146 the cost associated with an exit or disposal
activity is recognized in the periods in which it is incurred rather than at the
date the company committed to the exit plan. This statement is effective for
exit or disposal activities initiated after December 31, 2002 with earlier
application encouraged. The Company is currently evaluating the impact that SFAS
No. 146 will have on its consolidated financial statements.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
- ----------------------------------------------
Information contained or incorporated by reference in this quarterly report on
Form 10-Q, in other SEC filings by the Company, in press releases, and in
presentations by the Company or its management, contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 which can be identified by the use of forward-looking terminology such
as "believes," "expects," "plans," intends," "estimates," "projects," "could,"
"may," "will," "should," or "anticipates" or the negative thereof, other
variations thereon or comparable terminology, or by discussions of strategy. No
assurance can be given that future results covered by the forward-looking
statements will be achieved, and other factors could also cause actual results
to vary materially from the future results covered in such forward-looking
statements. Such forward-looking statements include, but are not limited to,
those relating to the Company's financial and operating prospects, future
opportunities, the Company's acquisition strategy, outlook of customers, and
reception of new products, technologies, and pricing. In addition, such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results expressed or
implied by such forward-looking statements. Also, the Company's business could
be materially adversely affected and the trading price of the Company's common
stock could decline if any such risks and uncertainties develop into actual
events. The Company undertakes no obligation to publicly update or revise
forward-looking statements to reflect events or circumstances after the date of
this Form 10-Q or to reflect the occurrence of unanticipated events.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
In general, business enterprises can be exposed to market risks, including
fluctuation in commodity and raw materials prices, foreign currency exchange
rates, and interest rates that can adversely affect the cost and results of
operating, investing, and financing. In seeking to minimize the risks and/or
costs associated with such activities, the Company manages exposure to changes
in commodities and raw material prices, interest rates and foreign currency
exchange rates through its regular operating and financing activities. The
Company does not utilize financial instruments for trading or other speculative
purposes, nor does the Company utilize leveraged financial instruments or other
derivatives. The following discussion about our market rate risk involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements.
The Company's exposure to market rate risk for changes in interest rates relates
primarily to the Company's short-term monetary investments. There is a market
rate risk for changes in interest rates earned on short-term money market
instruments. There is inherent rollover risk in the short-term money market
instruments as they mature and are renewed at current market rates. The extent
of this risk is not quantifiable or predictable because of the variability of
future interest rates and business financing requirements. However, there is no
risk of loss of principal in the short-term money market instruments, only a
risk related to a potential reduction in future interest income. Derivative
instruments are not presently used to adjust the Company's interest rate risk
profile.
The majority of the Company's business is denominated in United States dollars.
There are costs associated with the Company's operations in foreign countries,
primarily the United Kingdom and Canada, that require payments in the local
currency and payments received from customers for goods sold in these countries
are typically in the local currency. The Company partially manages its foreign
currency risk related to those payments by maintaining operating accounts in
these foreign countries, and by having customers pay the Company in those same
currencies.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
(a) Based on their evaluation of the Company's disclosure controls and
procedures as of a date within 90 days of the filing of this report, the
Company's principal executive officer and chief financial officer have
concluded that such controls and procedures are effective.
(b) There were no significant changes in the Company's internal controls or in
other factors that could significantly affect such controls subsequent to
the date of their evaluation.
20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Form of Indemnification Agreement for Directors and Executive Officers
of the Registrant.
99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on May 13, 2002 to
report the acquisition of substantially all of the assets and
liabilities of Benefoot, Inc. and Benefoot Professional Products, Inc.
On July 2, 2002, the Company amended such Form 8-K to report the filing
of financial statements and proforma financial information relating to
the acquisition.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LANGER, INC.
Date: November 13, 2002 By: /s/ Andrew H. Meyers
---------------------
Andrew H. Meyers
President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Anthony J. Puglisi
----------------------
Anthony J. Puglisi
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
22
CERTIFICATIONS
I, Andrew H. Meyers, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Langer, Inc.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/s/ Andrew H. Meyers
- --------------------
Andrew H. Meyers
President and
Chief Executive Officer
23
CERTIFICATIONS
I, Anthony J. Puglisi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Langer, Inc.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/s/ Anthony J. Puglisi
- ----------------------
Anthony J. Puglisi
Vice President and
Chief Financial Officer
24