February 7, 2004
Andrew H. Meyers
Chief Financial Officer
Langer, Inc.
450 Commack Road
Dear Park, NY 11729-4510
Re: Langer, Inc.
Amendment No. 1 to Registration Statement on Form S-1
File No. 333-120718
Dear Mr. Meyers:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form S-1
Prospectus Summary - Page 1
1. Please add a "Recent Developments" paragraph to discuss briefly
your financial results for the three months ended December 31,
2004.
Also discuss the recent financial statement adjustments made in
connection with the Silipos acquisition and that the pro forma
financial statements in the original Form S-1 should not be relied
upon, as disclosed in the Form 8-K filed January 28, 2005.
Risk Factors - Page 8
We may face difficulties integrating the operations of Silipos -
Page
10
2. We note your response to prior comment 6 and reissue the last
sentence of that comment. To date, please tell us whether you
have
experienced any such material integration delays or unexpected
costs
that have resulted in or are expected to result in a materially
adverse impact to your business and operations.
Use of Proceeds - Page 23
3. We have read and reviewed your response to comment 25 and the
marked changes on pages 23 and 27. We believe it is unclear how
approximately $3 million of the proceeds (noting $16 million will
be
used to pay off debt, $2.5 million used on the exercise of the put
option and approximately $13.4 million to be used for working
capital) reconciles to the change in capitalization. Please
revise
the filing to clearly state how the proceeds are expected to be
used.
Unaudited Pro Forma Condensed Consolidated Financial Statements -
Page 30
4. We see you indicate herein that these unaudited pro forma
condensed consolidated financial statements do not give effect to
your possible acquisition of Poly-Gel and do not include any
potential cost savings or synergies that you may achieve in the
event
you acquire Poly-Gel whether pursuant to the Put Option or
otherwise.
If the exercise of the Put Option is probable, the pro forma
financial statements should also disclose the pro forma financial
statement impact thereof. If not probable, please so disclose.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations -
Page 36
Results of Operations - Page 40
5. We have read and reviewed your response to comment 31. We note
that you revised the document to include the cost of sales and
gross
profit variances by segment, but did not discuss the significant
causes (by segment) of the variances. Please revise the document
to
provide this information.
6. We have read and reviewed your response to comment 32. We note
that there continue to be many general explanations which we
believe
should be quantified and further discussed. For example, quantify
the reason for changes in net sales due to "price increase
initiatives" and "loss in volume" (see page 41). Also, quantify
the
impact on cost of sales of the "cost containment measures"
discussed
on page 42. Note these examples are not all-inclusive. Revise
the
filing to address our concerns.
Business - Page 56
Acquisition History - Page 56
7. We note your response to prior comment 42 and your statement
that
Sheldon Langer has not been an affiliate during the past three
years.
Supplementally advise whether he has any relationship to Langer
Partners, your largest shareholder. If so, disclose the material
terms of the consulting agreement. Also explain the reason for
entering into the consulting agreement and Mr. Langer`s
relationship
to Benefoot.
Patents and Trademarks - Page 62
8. We note your response to prior comment 45 and the additional
disclosure on page 62. Please disclose the duration of your AEI
and
Zook licenses.
Executive Compensation - Page 63
9. Update the disclosure to provide all compensation information
for
2004.
Principal Stockholders - Page 67
10. We reissue prior comment 48 with respect to Atlas Capital.
11. In footnote 2, disclose the number of shares held by Langer
Partners, LLC.
Notes to December 31, 2003 Consolidated Financial Statements of
Langer, Inc.
Note 1. Summary of Significant Accounting Policies
Revenue Recognition - Page F-8
12. We have read and reviewed your response to comment 56. Please
confirm to us supplementally that you are not continuing Silipos`
practice of offering sales incentives to vendors.
(i) Goodwill and Identifiable Intangible Assets with Indefinite
Lives
- Page F-9
13. Refer to our prior comment 58. We see pages 39 and F-41 still
refer to appraisers. As previously noted, if you elect to make a
reference to appraisers in your financial statements (or elsewhere
in
the filing) you will be required to identify the appraisal firm
under
"Experts" and include their consent in the registration statement.
Alternatively, you could revise the filing to omit this reference.
Note 14. Related Party Transactions - Page F-30
14. Please revise this Note and Note 8 to the September 30, 2004
financial statements as necessary to conform to information
disclosed
on pages 80 to 82 for the applicable periods.
Notes to September 30, 2004 Consolidated Financial Statements of
Langer, Inc.
Note 2. Acquisitions - Page F-37
15. We have read and reviewed your response to comment 62. Please
address the following concerns supplementally:
* We note that you have recorded the Put Option at fair value and
subsequently marked it to market through earnings. Please
specifically tell us how the guidance in EITF 00-6, which
addresses
freestanding financial instruments indexed to, and potentially
settled in, the stock of a consolidated subsidiary, applies to the
Put Option, which if exercised, would be settled in cash. Provide
us
supplementally with an analysis of how SFAS 150 impacts the
accounting for the instrument.
* While we see that the option is exercisable at any time from and
after August 20, 2004 and prior to February 16, 2005, it is not
clear
why your March 31, 2004 and earlier financial statements are not
impacted by the Put Option. That is, why is it a footnote
disclosure
only matter on and prior to March 31, 2004?
* We see that you have restated Silipos` September 30, 2004
financial
statements to record the fair value of the Put Option as of
September
30, 2004 (the difference between the estimated purchase price of
Poly-Gel pursuant to the terms of the supply agreement and your
valuation of Poly-Gel). Why, then, have you not accounted for the
Put Option on your books as part of the acquisition of Silipos,
whereby you would have assumed this obligation as part of the deal
rather than considering it part of the purchase price?
* Confirm that you have not yet recorded an expense (or income)
for
the fair value (or changes therein) of the Put Option in your
financial statements.
* If Poly-Gel were to exercise the Put Option, please tell us how
you
would account for the purchase of Poly-Gel.
* We see you indicate your valuation of the Option "was based upon
the difference between the estimated purchase price under the Put
Option ($2,355,000) and the valuation of Poly-Gel which was
estimated
at zero. The valuation of Poly-Gel was based upon various factors
including that the supply agreement was expiring, the Company was
no
longer purchasing under the supply agreement and Silipos was Poly-
Gel`s only customer, the development by Silipos` of the capability
to
make the gel it had previously purchased from Poly-Gel, and the
Company`s belief based on its due diligence investigation of Poly-
Gel, that the net assets of Poly-Gel were not significant. The
Company, therefore, concluded that Poly-Gel had no future cash
flow
stream." As such, revise the filing to disclose why the Silipos
acquisition made financial and business sense given it included
your
assumption of the Put Option. Also, why did Silipos agree to this
Put Option provision in the supply agreement? In other words,
what
was its business purpose?
Revise the filing as necessary based on our comment.
16. Refer to our prior comment 63. We see you indicate in your
response to comment 62 "Because the obligation under the Silipos
purchase agreement to pay Silipos could range from $0 to
$4,500,000,
the Company can not determine the outcome of an amount within the
range beyond a reasonable doubt and, therefore, has determined to
not
record a liability for such obligation but to disclose such
contingent consideration in the notes to the unaudited condensed
consolidated financial statements for the nine months ended
September
30, 2004." Please revise the related disclosures on page F-41, 49
and 50 to include this fact.
Note 5. Segment Information - Page F-46
17. Refer to prior comment 67. We see your revised disclosures
indicate "On a consolidated basis, assets of $42,274,979 were
allocated to orthopedics and $6,546,831 was allocated to skin
care."
Please revise the disclosures to make sure that the sum of each
segment`s assets equal the total of consolidated assets per your
balance sheet.
Silipos, Inc. Financial Statements for the Year Ended March 31,
2004
Consolidated Statements of Operations - Page F-51
18. Refer to our prior comment 68. As previously requested,
please
revise to include the loss per share information required by
paragraphs 6, 38 and 40 of Statement 128. Note that when Silipos
financial statements were included in this registration statement
they became subject to the reporting requirements of a public
company.
December 31, 2001 Benefoot, Inc. and Affiliate Financial
Statements -
Page F-79
19. Refer to our prior comment 59. Please also revise the filing
to
include March 31, 2002 and 2001 interim income statements of
Benefoot. Note these interim financial statements will be
required
herein even if the filing is updated with your audited December
31,
2004 financial statements.
20. Please revise your document to include the signature of the
independent auditor on their report.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
You may contact Thomas Dyer at (202) 824-5564 or Daniel
Gordon
at (202) 942-2813 if you have questions regarding comments on the
financial statements and related matters. Please contact Adelaja
Heyliger at (202) 824-5082 or me at (202) 942-1880 with any other
questions.
Sincerely,
Peggy A. Fisher
Assistant Director
cc (via fax): Robert L. Lawrence, Esq., Kane Kessler P.C.
212.245.3009
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Andrew H. Meyers
Langer, Inc.
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