Exhibit 99.1
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
As previously disclosed, Langer, Inc. (the "Company") completed the acquisition of all of the capital stock of Twincraft, Inc. (the “Twincraft Acquisition”) on January 23, 2007.
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2006 and the unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2007 give effect to the acquisition of Twincraft as if it had occurred on January 1, 2006. The pro forma consolidated balance sheet has not been included as the full operations of the acquisitions have been included in the Form 10-Q for the period ended September 30, 2007.
The unaudited pro forma consolidated statement of operations for the year ended December 31, 2006 has been prepared by combining Langer’s historical consolidated statement of operations for the year ended December 31, 2006 with the historical statement of operations of Twincraft for the year ended December 31, 2006. Appropriate pro forma adjustments have been applied to the historical accounts.
The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2007 has been prepared by combining Langer’s historical consolidated statement of operations for the nine months ended September 30, 2007 with the historical statement of operations of Twincraft for the period from January 1, 2007 to January 22, 2007. Appropriate pro forma adjustments have been applied to the historical accounts.
The unaudited pro forma consolidated statement of operations is presented for informational purposes only and it is not necessarily indicative of the results of operations that would have been achieved had the acquisition been completed as of the date indicated.
LANGER, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2006
(Unaudited)
| | | Historical | | Pro Forma | |
| | | Langer, Inc. | | Twincraft, Inc. | | Adjustments | | | | Total | |
| Net sales | | $ | 35,236,405 | | $ | 30,972,552 | | $ | — | | | | $ | 66,208,957 | |
| Cost of sales | | | 21,922,392 | | | 22,065,385 | | | 200,000 | | (14 | ) | | 44,187,777 | |
| Gross profit | | | 13,314,013 | | | 8,907,167 | | | (200,000 | ) | | | | 22,021,180 | |
| | | | | | | | | | | | | | | | |
| General and administrative expenses | | | 10,357,628 | | | 2,386,164 | | | 1,107,144 | | (1-8 | ) | | 13,850,936 | |
| Selling expenses | | | 6,516,229 | | | 2,717,290 | | | — | | | | | 9,233,519 | |
| Research and development expenses | | | 528,421 | | | 453,960 | | | — | | | | | 982,381 | |
| Operating (loss) income | | | (4,088,265 | ) | | 3,349,753 | | | (1,307,144 | ) | | | | (2,045,656 | ) |
| | | | | | | | | | | | | | | | |
| Other expense, net: | | | | | | | | | | | | | | | |
| Interest income | | | 631,961 | | | — | | | — | | | | | 631,961 | |
| Interest expense | | | (947,361 | ) | | (391,285 | ) | | (1,284,254 | ) | (9-12 | ) | | (2,622,900 | ) |
| Other | | | (3,731 | ) | | 112,313 | | | — | | | | | 108,582 | |
| Other expense, net | | | (319,131 | ) | | (278,972 | ) | | (1,284,254 | ) | | | | (1,882,357 | ) |
| (Loss) income before income taxes | | | (4,407,396 | ) | | 3,070,781 | | | (2,591,398 | ) | | | | (3,928,013 | ) |
| Provision for income taxes | | | 446,093 | | | — | | | — | | (13 | ) | | 446,093 | |
| Net (loss) income | | $ | (4,853,489 | ) | $ | 3,070,781 | | $ | (2,591,398 | ) | | | $ | (4,374,106 | ) |
| | | | | | | | | | | | | | | | |
| Net loss per common share: | | | | | | | | | | | | | | | |
| Basic and diluted | | $ | (.49 | ) | | | | | | | | | $ | (.40 | ) |
| | | | | | | | | | | | | | | | |
| Weighted average number of common shares used in computation of net (loss) income per share: | | | | | | | | | | | | | | | |
| Basic and diluted | | | 9,977,972 | | | | | | 999,375 | | | | | 10,977,347 | |
See accompanying notes to pro forma consolidated statement of operations
LANGER, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2007
(Unaudited)
| | | Historical | | Pro Forma | |
| | | Langer, Inc. | | Twincraft, Inc. from Jan. 1, 2007 to Jan. 22, 2007 | | Adjustments | | | | Total | |
| Net sales | | $ | 49,941,321 | | $ | 1,891,484 1,891,484 | | $ | — | | | | $ | 51,832,805 | |
| Cost of sales | | | 31,927,784 | | | 1,383,211 | | | (200,000 | ) | | | | 33,110,995 | |
| Gross profit | | | 18,013,537 | | | 508,273 | | | 200,000 | | | | | 18,721,810 | |
| | | | | | | | | | | | | | | | |
| General and administrative expenses | | | 10,823,379 | | | 139,609 | | | 81,432 | | (1-8 | ) | | 11,044,420 | |
| Selling expenses | | | 7,405,377 | | | 185,494 | | | — | | | | | 7,590,871 | |
| Research and development expenses | | | 630,296 | | | 22,787 | | | — | | | | | 653,083 | |
| Operating (loss) income | | | (845,515 | ) | | 160,383 | | | 118,568 | | | | | (566,564 | ) |
| | | | | | | | | | | | | | | | |
| Other (expense) income: | | | | | | | | | | | | | | | |
| Interest income | | | 230,683 | | | — | | | — | | | | | 230,683 | |
| Interest expense | | | (1,632,973 | ) | | (26,931 | ) | | 21,201 | | (9- | 12) | | (1,638,703 | ) |
| Other | | | (13,582 | ) | | (29,635 | ) | | — | | | | | (43,217 | ) |
| Other income (expense), net | | | (1,415,872 | ) | | (56,566 | ) | | 21,201 | | | | | (1,451,237 | ) |
| (Loss) income before income taxes | | | (2,261,387 | ) | | 103,817 | | | 139,769 | | | | | (2,017,801 | ) |
| Provision for income taxes | | | 210,199 | | | — | | | — | | (13 | ) | | 210,199 | |
| Net (loss) income | | $ | (2,471,586 | ) | $ | 103,817 | | $ | 139,769 | | | | $ | (2,228,000 | ) |
| | | | | | | | | | | | | | | | |
| Net loss per common share: | | | | | | | | | | | | | | | |
| Basic and diluted | | $ | (.22 | ) | | | | | | | | | $ | (.20 | ) |
| | | | | | | | | | | | | | | | |
| Weighted average number of common shares used in computation of net (loss) income per share: | | | | | | | | | | | | | | | |
| Basic and diluted | | | 11,383,193 | | | | | | — | | | | | 11,383,193 | |
See accompanying notes to pro forma consolidated statement of operations
LANGER, INC. AND SUBSIDIARIES
Notes to Pro Forma Consolidated statement of Operations
(Unaudited)
(1) | Reflects adjustment to reduce consulting fees to a former owner of Twincraft, Inc. (“Twincraft”) totaling $275,629 in 2006 and $5,339 in the period from January 1, 2007 to January 22, 2007 that will not be recurring. |
(2) | Reflects adjustment to reduce certain transaction costs totaling $84,441 incurred by Twincraft in 2006 relating to the sale of Twincraft. No transaction costs were incurred by Twincraft in the period from January 1, 2007 to January 22, 2007. |
(3) | Reflects an increase to depreciation expense of $517,073 for 2006 and $30,580 for the period from January 1, 2007 to January 22, 2007, due to a net increase from purchase accounting in the fair value of fixed assets. |
(4) | Reflects adjustment to reduce depreciation expense by $105,085 for 2006 and $6,215 for the period from January 1, 2007 to January 22, 2007 for capital leases not classified as such post transaction. |
(5) | Reflects adjustment to record increases in salaries of $67,000 for 2006 and $3,962 for the period from January 1, 2007 to January 22, 2007 pursuant to the employment agreements for four Twincraft executives. |
(6) | Reflects an increase to amortization expense of $384,178 for 2006 and $22,720 for the period from January 1, 2007 to January 22, 2007, due to a net increase from the purchase accounting in the fair value of identifiable intangible assets with definite useful lives. |
(7) | Reflects adjustment to record compensation expense of $164,477 for 2006 and $9,727 for the period from January 1, 2007 to January 22, 2007 for options granted to Twincraft employees. |
(8) | Reflects rent expense of $439,571 for the Twincraft office and warehouse for 2006 and $25,996 for the period from January 1, 2007 to January 22, 2007 (originally accounted for as a capital lease with payments to debt and interest expense). |
(9) | Reflects recording of amortization expense of debt costs of $226,685 for 2006 on $28,880,000 of 5% convertible subordinated notes (the “5% Convertible Notes”), net of actual expenses booked. This cost is included in Langer’s historical statement of operations for the nine months ended September 30, 2007. |
(10) | Reflects an increase of interest expense of $1,351,957 for 2006 related to the 5% Convertible Notes to reflect interest expense as if the 5% Convertible Notes were outstanding at January 1, 2006. This cost is included in the Langer’s historical statement of operations for the nine months ended September 30, 2007. |
(11) | Reflects interest expense of $96,897 for 2006 and $5,730 for the period from January 1, 2007 to January 22, 2007 using the effective interest method on the accretion of the discount of the 5% Convertible Notes. |
(12) | Reflects the reversal of all interest expense recorded on the books of Twincraft (capital leases, notes payable, long-term debt, and other) totaling $391,285 for 2006 and $26,931 for the period from January 1, 2007 to January 22, 2007, which were paid off on the acquisition date. |
(13) | Prior to the acquisition, Twincraft was an S Corporation and therefore had no corporate income tax liability. Upon acquisition, Twincraft converted to a C Corporation. Subsequent to the acquisition, Twincraft will be included in the Company’s consolidated Federal income tax return. The Company has significant net operating loss carryforwards. On a consolidated pro forma basis, the Company had a net loss and consequently, no current provision or benefit for taxes has been recorded. Effects related to the change of any deferred tax amounts have not been included in these pro forma financial statements. |
(14) | To reflect the increase in cost of sales of $200,000 at the beginning of 2006 and a reduction of cost of sales of $200,000 for the nine months ended September 30, 2007 due to the step-up in the value of inventory. |
