2004 Annual Report

June 2005 Dear Fellow Share Owners: 2004 was a year of significant change for Langer. In September, Langer acquired Silipos, Inc., a leading designer, manufacturer and marketer of gel-based products focusing on the orthopedic, orthotic, prosthetic, and skincare markets. 

The acquisition of Silipos broadens our distribution capability in our existing orthopedic market and provides us with an entrance into the skincare market. The acquisition significantly increased the size of the company based upon pro forma annualized net sales. Silipos sells most of its products through regional and national distributors while Langer’s sales force historically targeted individual healthcare professionals. Our goal is to use Silipos’ well-defined distribution channels to leverage Langer’s products and services beyond individual healthcare professionals. 

Our entry into the skincare market is a new and exciting opportunity. This market is expanding due to the growing emphasis on skin preservation and the increase in elective anti-aging procedures by the Baby Boomer generation. 

In 2004, our revenue grew 22% to a record $30.1 million as a result of the Silipos acquisition. Gross profit margin improved to 40.2% in 2004 which reflected the higher gross profit margin from Silipos. The Company has also changed the way we segment the reporting of our revenue. Previously, the Company reported its operations in two segments, custom orthotics and distributed products. Beginning October 1, 2004, the Company started reporting its operations in two new segments: orthopedics and skincare. Custom orthotics and the distributed products are now included in our orthopedics segment. We believe this realignment more accurately reflects the way in which we focus on business opportunities in the skincare markets and broader portions of the orthopedic markets. 

Expanding product offerings was again one of management’s key corporate initiatives. Both Langer and Silipos have a history of introducing new products. Since 2002 we have introduced over 30 products which were responsible, on a pro forma basis, for 11% of our 2004 revenue. We expect to introduce at least ten new products in 2005. 

Product expansion is supported by the sales and marketing team. One of the first departments we integrated with Silipos was orthopedic sales and marketing. We combined our outside sales forces and created one marketing team. 

Langer and Silipos continued to support education during 2004, holding 100 programs, including educational seminars, workshops, in-services and trade shows. We believe practitioners appreciate this training as a way to better understand utilization of our products in the non-invasive treatment of lower extremity disabilities. 

During 2004, we continued to enhance our CAD/CAM operations. We improved the efficiency of our proprietary scanner which creates electronic images from plaster and foam impressions. This technology is expected to electronically link all of our orthotic fabrication facilities allowing us to redirect fabrication to any location where excess capacity exists. We expect this project to be completed by the end of 2005. Our professional customer scanner is proceeding through beta testing and we anticipate a new product launch during the fourth quarter of 2005. This scanner is the culmination of over four years of clinical research and development efforts. Initial demand indications for this product have been strong. 

We emerge from 2004 as a more robust and energized organization. Since February 2001 the Company has increased sales by approximately 283% primarily as a result of three acquisitions. The Company continues to look for strategic acquisition opportunities to further strengthen our position within the orthopedic lower extremity and skincare markets. We continually look to add innovative and quality orthopedic offerings to our existing line of 500 products. We also plan on developing and marketing new skincare products to add to our existing line of over fifty product offerings. 

We appreciate the support of our Company’s Board of Directors, the diligence and hard work of our employees, and the loyalty of our customers. As always, we thank you for your support as well. Sincerely,

Warren B. Kanders
Chairman

Andrew H. Meyers
President and CEO 

Burtt R. Ehrlich
Consultant 

Jonathon R. Foster
Vice President,E-Trade Financial, Inc. 

Arthur Goldsein
Consultant 

Gregory Nelson
Consultant 

---

Management 

Warren B. Kanders
Chairman 

Andrew H. Meyers, CPO
President and CEO 

W. Gray Hudkins
Chief Operating Officer 

Joseph P. Ciavarella
Vice President and Chief Financial Officer 

---

Stockholder Information

Headquarters

Langer Inc.
450 Commack Road
Deer Park, NY 11729
(631) 667-1200

Investor Relations Contact

Joseph P. Ciavarella
(203) 428-2000 

Stock Quotation

The Company’s common stock is quoted on the Nasdaq Small Cap under the symbol GAIT. 

Registrar and Transfer Agent

Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572 

Independent Accountants

Deloitte & Touche LLP
2 Jericho Plaza
Jericho, NY 11753-1683 

Legal Counsel

Kane Kessler, P.C.
1350 Ave. of the Americas
New York, NY 10019 

Annual Meeting

The Annual Meeting of Stockholders will be held on Thursday, June 23, 2005, at 10:30 am Eastern Daylight Time at One Landmark Square, 22nd Floor, Stamford, CT 06901. Detailed information about the meeting is contained in the Notice of Annual Meeting and Proxy Statement sent with a copy of this Annual Report. 

Market Quotes

Current quotes for Langer common stock can be viewed at www.langerinc.com. No cash dividends have been declared.

 

www.langerinc.com