May 10, 2005
Mail Stop 03-06
Andrew H. Meyers
Chief Financial Officer
Langer, Inc.
450 Commack Road
Dear Park, NY 11729-4510
Re: Langer, Inc.
Amendment No. 4 to Registration Statement on Form S-1
Filed April 14, 2005
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
Financial Statements
Note 6. Long-Term Debt - Page F-20
1. Please describe for us the terms of the embedded derivative in
the
$7.5 million note and the terms of the embedded derivative in the
$3.0 million note as if each of these derivatives were
freestanding
instruments separate from their respective host contracts. Please
ensure you explicitly identify the underlying and notional or
payment
provision for both of these derivatives.
2. In your April 26, 2005 response 1, you provide a SFAS 133
analysis
on the basis that the embedded derivative in the $7.5 million note
and the embedded derivative in the $3.0 million note are
"protection
payments." In our telephone conference on May 10, 2005, you
indicated the embedded derivatives may be a term extending option
and/or purchased options. Please consider the need to revise
and/or
supplement your April 26, 2005 SFAS 133 analysis based on your
response to comment 1 above.
3. Please tell us how you accounted for the embedded derivative in
the $7.5 million note and the embedded derivative in the $3.0
million
note upon issuance at September 30, 2004. Please ensure your
response addresses the following points:
A. Tell us whether you determined the fair value of the embedded
derivatives at September 30, 2004 based on market participant
assumptions. If not, please tell us how you considered the
requirements of paragraph 20 of SFAS 141.
B. Tell us where you presented the embedded derivatives on the
balance sheet. Please cite the basis for your presentation.
C. In our telephone conference on May 10, 2005 you suggested that
the
fair value of the embedded derivative in the $7.5 million note and
the embedded derivative in the $3.0 million note may be de
minimus.
Please explain your basis for this assertion.
D. We understood you to indicate in our May 10, 2005 telephone
conference that the recognition of the derivative embedded in the
$7.5 million note and the derivative embedded in the $3.0 million
note results in a premium and discount, respectively, on the
respective debt hosts which are then amortized/accreted using the
effective interest method. Please confirm our understanding.
Please
tell us the terms used for each debt host to account for the
respective premium or discount.
E. To facilitate our analysis, please provide us with the journal
entries you recorded to account for these derivatives at issuance.
4. For each reporting period subsequent to issuance, please
identify
for us the changes in the carrying value of the embedded
derivative
in the $7.5 million note and the embedded derivative in the $3.0
million note. For each such change, please address the following:
A. Please identify for us the changes in market participant
assumptions that resulted in the change in carrying value.
B. Please reconcile this response to the financial statement Note
6
disclosure in the last paragraph on page F-22 and the table on
page
F-23.
C. To facilitate our analysis, please provide us with the journal
entries you recorded to account for these derivatives in each
reporting period.
5. In our May 10, 2005 telephone conference, you suggested that
the
embedded derivative in the $7.5 million note may be a term-
extending
option. Please tell us if you believe this view is appropriate.
If
it is a term-extending option, which would appear to be an asset,
please tell us how it can have a negative fair value.
6. In our May 10, 2005 telephone conference, you suggested that
the
embedded derivative in the $7.5 million note may be a purchased
option to call the debt at March 31, 2005. Please tell us if you
believe this view is appropriate. Please clarify whether under
this
view the purchased call option would have more than de minimus
value
at each reporting date. If you view the embedded derivative as a
purchased option, please also tell us how you considered the
guidance
EITF 86-15 in determining your accounting for the debt host.
7. Please tell us how under your accounting model the $3.0 million
note and related embedded derivative would be accounted for if the
$7.5 million note and the related protection payment were paid.
8. It appears that your financial statement footnote disclosure
may
not clearly describe the terms of and your accounting for the
embedded derivative in the $7.5 million note and the embedded
derivative in the $3.0 million note and the respective debt hosts.
For example, in the last paragraph on page F-22 it is not clear
what
the underlying of the embedded derivatives are and whether those
embedded derivatives represent assets or liabilities. Similarly,
it
is unclear how you are accounting for the premium and/or discount
on
the debt host which results from recognizing the embedded
derivatives. Please consider the need for revised disclosure.
* * *
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.
You may contact Thomas Dyer at (202) 824-5564 or Jay Webb at
(202) 942-1812 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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Langer, Inc.
May 10, 2005
Page 4