10-Q

                       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, 2004

                                       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 iden-
      of incorporation or                            tification number)
         organization)


                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 by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)

YES_______   NO       X
                ------------

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 - 4,381,631 shares as November 6, 2004.



INDEX

  LANGER, INC. AND SUBSIDIARIES




  PART I.   FINANCIAL INFORMATION                                         PAGE

  Item 1.   Financial Statements

            Consolidated Balance Sheets -                                      3
                As of September 30, 2004, and December 31, 2003

            Consolidated Statements of Operations -                            4
               Three-month and nine-month periods ended September 30, 2004
               and 2003

            Consolidated Statement of Stockholders' Equity -                   5
               Nine-month period ended September 30, 2004

            Consolidated Statements of Cash Flows                              6
                Nine-month period ended September 30, 2004 and 2003

            Notes to Consolidated Financial Statements                         7


  Item 2.   Management's Discussion and Analysis of Financial Condition       20
               and Results of Operations

  Item 3.   Quantitative and Qualitative Disclosures about Market Risk        23


  Item 4.   Controls and Procedures                                           24

  PART  II  OTHER INFORMATION

  Item 6.   Exhibits                                                          25


  SIGNATURES                                                                  26

                                       2



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                  LANGER, INC.
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS



                                                                               SEPTEMBER 30, 2004           DECEMBER 31, 2003
                                                                            --------------------------    -----------------------
                                ASSETS                                             (Unaudited)

     Current assets:
          Cash and cash equivalents                                                      $  3,529,303             $   5,533,946
          Accounts receivable, net of allowances for doubtful
          accounts and returns and allowances aggregating $265,273
          and $292,725, respectively                                                        7,119,536                 3,628,052
          Inventories                                                                       5,729,175                 2,496,583
          Prepaid expenses and other                                                        2,032,240                   495,386
                                                                            --------------------------    -----------------------
               Total current assets                                                        18,410,254                12,153,967

     Property and equipment, net                                                            6,979,983                 2,496,071
     Identifiable intangible assets, net                                                    9,502,124                 3,960,105
     Goodwill                                                                               8,903,498                 4,536,198
     Other assets                                                                           3,025,951                   876,856
                                                                            --------------------------    -----------------------
               Total assets                                                              $ 46,821,810             $  24,023,197
                                                                            ==========================    =======================

                 LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
          Current maturities of long-term debt                                           $      -                 $     800,000
          Secured promissory note payable                                                   7,500,000                     -
          Obligation under purchase agreement                                               2,500,000                     -
          Accounts payable                                                                  1,692,639                 1,133,149
          Other current liabilities                                                         3,980,832                 2,114,270
          Unearned revenue                                                                    686,731                   672,597
                                                                            --------------------------    -----------------------
               Total current liabilities                                                   16,360,202                 4,720,016
     Non-current liabilities:
          Long-term debt:
            Convertible notes                                                              14,589,000                14,589,000
            Promissory note payable                                                         3,000,000                     -
            Senior subordinated notes payable                                               4,764,100                     -
            Obligations under capital leases, excluding current
              installments                                                                  2,700,000                     -
     Unearned revenue                                                                         129,006                   166,757
     Accrued pension expense                                                                  171,893                   171,893
     Other liabilities                                                                        709,425                   600,338
                                                                            --------------------------    -----------------------
               Total liabilities                                                           42,423,626                20,248,004
                                                                            --------------------------    -----------------------

     Stockholders' Equity:
          Preferred stock, no par value; authorized 250,000 shares;
          no shares issued                                                                   -                             -
          Common stock, $.02 par value; authorized 50,000,000
          shares; issued 4,447,951 and 4,447,451, respectively                                88,959                     88,949
          Additional paid-in capital                                                      13,939,619                 13,202,129
          Accumulated deficit                                                             (9,256,869)                (9,159,140)
          Accumulated other comprehensive loss                                              (258,068)                  (241,288)
                                                                            --------------------------    -----------------------
                                                                                            4,513,641                 3,890,650

          Treasury stock at cost, 67,100 shares                                              (115,457)                 (115,457)
                                                                            --------------------------    -----------------------
               Total stockholders' equity                                                   4,398,184                 3,775,193
                                                                            --------------------------    -----------------------
               Total liabilities and stockholders' equity                                $ 46,821,810             $  24,023,197
                                                                            ==========================    =======================



 See the accompanying notes to the unaudited consolidated financial statements.

                                       3


                                  LANGER, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                                  THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                      SEPTEMBER 30,                    SEPTEMBER 30,
                                                                  2004            2003              2004             2003
                                                            --------------- ---------------  ---------------- -----------------

      Net sales                                               $ 6,285,384      $6,332,684      $ 18,596,823     $  18,282,606
      Cost of sales                                             4,007,133       4,113,520        11,957,703        11,981,180
                                                            --------------- ---------------  ---------------- -----------------
         Gross profit                                           2,278,251       2,219,164         6,639,120         6,301,426

      Selling expenses                                            790,038         783,423         2,384,172         2,333,850
      General and administrative expenses                       1,259,016       1,206,363         3,777,039         3,564,550
                                                            --------------- ---------------  ---------------- -----------------
         Operating income                                         229,197         229,378           477,909           403,026
                                                            --------------- ---------------  ---------------- -----------------

      Other income (expense):
      Interest income                                              47,347          33,462           135,715           111,235
      Interest expense                                           (196,689)       (205,725)         (602,860)         (628,606)
      Other                                                         2,013          30,454             4,507            58,684
                                                            --------------- ---------------  ---------------- -----------------

         Other expenses, net                                     (147,329)       (141,809)         (462,638)         (458,687)
                                                            --------------- ---------------  ---------------- -----------------
       Income (loss) before provision for income taxes             81,868          87,569            15,271           (55,661)
      Provision for income taxes                                   38,000          38,100           113,000           126,650
                                                            --------------- ---------------  ---------------- -----------------
         Net income (loss)                                    $    43,868      $   49,469      $    (97,729)    $    (182,311)
                                                            =============== ===============  ================ =================

      Weighted average number of common shares used
        in computation of net income (loss) per share:

         Basic                                                  4,380,851       4,377,255         4,380,707         4,372,525
                                                            =============== ===============  ================ =================
         Diluted                                                4,748,812       4,625,874         4,380,707         4,372,525
                                                            =============== ===============  ================ =================

      Net income (loss) per common share:

         Basic                                                $       .01      $      .01      $       (.02)    $        (.04)
                                                            =============== ===============  ================ =================
         Diluted                                              $       .01      $      .01      $       (.02)    $        (.04)
                                                            =============== ===============  ================ =================



 See the accompanying notes to the unaudited consolidated financial statements.

                                       4


                                  LANGER, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
                                   (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 January 1, 2004  4,447,451  $88,949   $(115,457)    $13,202,129    $(9,159,140)   $ 211,821    $ (453,109)  $  3,775,193

Net loss for the nine
months ended September 30,
2004                                                                              (97,729)                                  (97,729)

Foreign currency adjustment                                                                    (16,780)                     (16,780)

Issuance of warrants                                              735,900                                                   735,900

Exercise of Stock Options         500       10                      1,590                                                     1,600
                            --------------------------------------------------------------------------------------------------------

Balance at September 30,
2004                        4,447,951  $88,959   $(115,457)    $13,939,619  $(9,256,869)  $   195,041      $(453,109)   $ 4,398,184
                            ========================================================================================================



 See the accompanying notes to the unaudited consolidated financial statements.

                                       5


                          LANGER, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)



                                                                                   FOR NINE MONTHS ENDED SEPTEMBER 30,
                                                                                   2004                           2003
                                                                            --------------------            ------------------

Cash Flows From Operating Activities:
Net loss                                                                         $     (97,729)                  $  (182,311)

  Adjustments to reconcile net loss to net cash (used in) provided by
    operating activities:
    Depreciation and amortization                                                      685,988                       575,929
    Provision for doubtful accounts receivable                                          48,000                        63,565
    Deferred income taxes                                                              113,000                       100,216
    Changes in operating assets and liabilities:
    Accounts receivable                                                               (131,049)                     (344,217)
    Inventories                                                                       (598,644)                       (9,095)
    Prepaid expenses and other assets                                                 (389,184)                      182,510
    Accounts payable and other current liabilities                                    (431,089)                      (74,298)
    Unearned revenue and other liabilities                                             157,367                      (197,188)
                                                                            --------------------            ------------------
          Net cash (used in) provided by operating activities                         (643,340)                      115,111
                                                                            --------------------            ------------------

Cash Flows From Investing Activities:
  Purchase of business, net of cash acquired                                        (4,861,643)                   (1,747,913)
  Deferred performance-based consideration                                            (465,988)                        --
  Purchase of property and equipment                                                  (730,967)                   (1,127,145)
                                                                            --------------------            ------------------
          Net cash used in investing activities                                     (6,058,598)                   (2,875,058)
                                                                            --------------------            ------------------

Cash Flows From Financing Activities:
  Issuance of senior subordinated notes payable                                      5,500,000                       --
  Proceeds from the exercise of stock options                                            1,600                       --
  Payment of promissory notes                                                         (800,000)                   (1,000,000)
                                                                            --------------------            ------------------
          Net cash provided by (used in) financing activities                        4,701,600                    (1,000,000)
                                                                            --------------------            ------------------
          Effect of exchange rate changes on cash                                       (4,305)                       18,160
                                                                            --------------------            ------------------
Net decrease in cash and cash equivalents                                           (2,004,643)                   (3,741,787)

Cash and cash equivalents at beginning of period                                     5,533,946                     9,411,710
                                                                            --------------------            ------------------
Cash and cash equivalents at end of period                                       $   3,529,303                   $ 5,669,923
                                                                            ====================            ==================

Supplemental Disclosures of Cash Flow Information Cash paid during
  the period for:
    Interest                                                                     $     312,398                   $   337,384
                                                                            ====================            ==================
    Income taxes
                                                                                 $       --                      $   --
                                                                            ====================            ==================
Issuance of promissory notes in purchase of business                             $  10,500,000                   $   --
                                                                            ====================            ==================
Obligation under purchase agreement                                              $   2,500,000                   $   --
                                                                            ====================            ==================
Warrants issued in connection with senior subordinated notes payable             $     735,900                   $   --
                                                                            ====================            ==================



 See the accompanying notes to the unaudited consolidated financial statements.


                                       6


                                  LANGER, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 accounting principles generally accepted in the
     United States of America ("GAAP") 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 GAAP 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 consolidated financial statements, including the related notes,
     included in the Company's annual report on Form 10-K for the fiscal year
     ended December 31, 2003.

     Operating results for the three and nine months ended September 30, 2004
     are not necessarily indicative of the results that may be expected for the
     year ending December 31, 2004.


(B) PROVISION FOR INCOME TAXES

     For the three and nine months ended September 30, 2004, there was no
     current provision for income taxes on domestic and foreign operations. The
     provisions for income taxes on foreign operations for the three and nine
     month periods ended September 30, 2003 were $2,850 and $26,650,
     respectively.

     Prior to the adoption of Statement of Financial Accounting Standards
     ("SFAS") No. 142, the Company would not have needed a valuation allowance
     for the portion of the net operating losses equal to the amount of
     tax-deductible goodwill and trade names amortization expected to occur
     during the carry forward period of the net operating losses based on the
     timing of the reversal of these taxable temporary differences. As a result
     of the adoption of SFAS 142, the reversal will not occur during the carry
     forward period of the net operating losses. Therefore, the Company recorded
     a deferred income tax expense of approximately $38,000 and $113,000,
     respectively, during the three and nine months ended September 30, 2004 and
     $35,250 and $100,000, respectively during the three and nine month periods
     ended September 30, 2003, which would not have been required prior to the
     adoption of SFAS 142.


(C) RECLASSIFICATIONS

     Certain amounts have been reclassified in the prior period consolidated
     financial statements to present them on a basis consistent with the current
     period.


(D) SEASONALITY

     A substantial portion of the Company's revenue is derived from the sale of
     custom orthotics. 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.

                                       7


(E) STOCK OPTIONS

     At September 30, 2004, the Company has two stock-based employee
     compensation plans. The Company accounts for those plans under the
     recognition and measurement principles of APB Opinion No. 25, Accounting
     for Stock Issued to Employees, and related Interpretations. No stock-based
     employee compensation cost is reflected in net income (loss), as all
     options granted under those plans had an exercise price equal to market
     value of the underlying common stock on the date of grant. The following
     table illustrates the effect on net income (loss) and earnings (loss) per
     share if the company had applied the fair value recognition provisions of
     FASB Statement No. 123, Accounting for Stock-Based Compensation, to
     stock-based employee compensation.



                                                                   Three months ended                    Nine months ended
                                                                      September 30,                        September 30,
                                                            --------------     --------------    ---------------    --------------
                                                                 2004               2003              2004               2003
                                                            --------------     --------------    ---------------    --------------

     Net income (loss) - as reported                          $    43,868          $  49,469         $(97,729)       $ (182,311)

     Deduct:  Total stock-based employee
              compensation expense determined
              under fair value basis method for
              all rewards, net of tax                             (39,246)           (31,478)        (299,344)         (112,838)
                                                            --------------     --------------    -------------     --------------

     Pro forma net income (loss)                               $    4,622          $  17,991        $(397,073)       $ (295,149)
                                                            ==============     ==============    =============     ==============

     Earnings (loss) per share:

          Basic-as reported                                    $      .01          $     .01        $   (.02)        $     (.04)
                                                            ==============     ==============    =============     ==============
          Basic-pro forma                                      $      .00          $     .00        $   (.09)        $     (.07)
                                                            ==============     ==============    =============     ==============

          Diluted-as reported                                  $      .01          $     .01        $   (.02)        $     (.04)
                                                            ==============     ==============    =============     ==============
          Diluted-pro forma                                    $      .00          $     .00        $   (.09)        $     (.07)
                                                            ==============     ==============    =============     ==============



(F) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In early December 2003, the FASB issued SFAS No. 132, as revised,
        Employers' Disclosures about Pensions and Other Postretirement Benefits,
        ("Revised SFAS 132"), which requires additional disclosures about
        assets, obligation, cash flows, and net periodic benefit cost of defined
        benefit pension plans and other defined benefit postretirement plans.
        The Company adopted the required revised disclosure provisions of
        Revised SFAS 132 as of December 31, 2003, except for the disclosure of
        estimated future benefit payments, which the Company is required to and
        will disclose as of December 31, 2004. The adoption of SFAS No. 132 did
        not have a material impact on the Company's consolidated financial
        statements


NOTE 2 - ACQUISITIONS

A) BI-OP LABORATORIES, INC.

Effective January 1, 2003, the Company, through a wholly-owned subsidiary,
acquired all of the issued and outstanding stock of Bi-Op Laboratories, Inc.
("Bi-Op") pursuant to the terms of a Stock Purchase Agreement dated as of
January 13, 2003 (the "Stock Purchase Agreement").

                                       8


In connection with the acquisition, the Company paid consideration in Canadian
dollars, determined through arms-length negotiation of the parties. When
converted to U.S. dollars the total purchase price approximated $2.2 million, of
which approximately $1.8 million (including $0.5 million for transaction costs)
was paid in cash and approximately $0.4 million was paid by issuing 107,611
shares of the Company's common stock (the "Shares"). The purchase price was
funded by using a portion of the proceeds remaining from the sale of the
Company's 4% convertible subordinated notes due August 31, 2006. The Shares were
valued based upon the average of the market price of the Company's common stock
two days before, two days after, and on the date the acquisition was announced.

In connection with the Stock Purchase Agreement, the Company entered into an
employment agreement with Raynald Henry, Bi-Op's former principal owner, having
a term of three years and providing for an annual base salary of $75,000 CDN and
benefits, including certain severance payments. The allocation of the purchase
price among the assets and liabilities was based upon the Company's valuation of
the fair value of assets and liabilities of Bi-Op.

The following table sets forth the components of the purchase price:

   Cash consideration                                        $    1,368,756
   Common stock issued                                              369,106
   Transaction costs                                                495,383
                                                         --------------------
                               Total purchase price          $    2,233,245
                                                         ====================

The following table provides the allocation of the purchase price:




   Assets:    Cash and cash equivalents                                                    $   194,531
              Accounts receivables                                                             212,593
              Inventories                                                                      109,572
              Prepaid expenses and other                                                       232,394
              Property and equipment                                                           437,148
              Goodwill                                                                         820,056
              Identified intangible assets (non-competition agreement of $400,000
              and repeat customer base of $500,000)                                            900,000
              Other assets                                                                      41,802
                                                                                       -----------------
                                                                                             2,948,096
                                                                                       -----------------
   Liabilities: Accounts payable                                                               117,809
                Accrued liabilities                                                            140,217
                Deferred income tax                                                            270,000
                Long term debt and other liabilities                                           186,825
                                                                                       -----------------
                                                                                               714,851
                                                                                       -----------------
                                                 Total purchase price                     $  2,233,245
                                                                                       =================


The value allocated to goodwill in the purchase of Bi-Op is not deductible for
tax purposes.

B) 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. (collectively, "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 4% promissory notes (the "Promissory Notes") and $0.5 million
was paid by issuing 61,805 shares of common stock (the "Shares"), together with
certain registration rights. The Shares were valued based upon the average of
the market price of the Company's common stock two days before, two days after
and on the date the acquisition was announced. $1.0 million of the Promissory
Notes were repaid on

                                       9


May 6, 2003 and the balance of $0.8 million, plus interest was repaid on May 6,
2004. The Company also assumed certain liabilities of Benefoot, including
approximately $0.3 million of long-term indebtedness. The Company also agreed to
pay Benefoot up to an additional $1 million ("Performance-based Consideration")
upon achievement of certain performance targets on or prior to May 6, 2004
measured at various intervals. During the nine months ended September 30, 2004,
the Company recorded $163,952 of such Performance-based Consideration as
additional goodwill. As of May 6, 2004, the final measurement date for such
performance targets, the Company had paid or accrued a total of $767,190 with
respect to such Performance-based Consideration. The Company funded the entire
cash portion of the purchase price with proceeds from 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 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 and the second
contract expired in the second quarter of 2004. The Company also entered into an
agreement (which was amended in 2003 and 2004), with Sheldon Langer as a medical
consultant. 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 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                                                                            680,228
                Performance-based consideration                                                              767,190
                                                                                                   -------------------
                          Total purchase price                                                         $   7,884,492
                                                                                                   ===================



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                                                      155,110
                                 Goodwill                                                                  3,880,094
                                 Identified intangible assets (trade names of $1,600,000,
                                 non-competition agreements of $230,000, and license agreements
                                 and related technology of $1,600,000)                                     3,430,000
                                 Other assets                                                                  6,163
                                                                                                   -------------------
                                                                                                           9,241,222
                                                                                                   -------------------
               Liabilities:      Accounts payable                                                            647,873
                                 Accrued liabilities                                                         389,400
                                 Unearned revenue                                                            210,355
                                 Long term debt and other liabilities                                        109,102
                                                                                                   -------------------
                                                                                                           1,356,730
                                                                                                   -------------------
                                    Total purchase price                                              $    7,884,492
                                                                                                   ===================


                                       10


In accordance with the provisions of SFAS No. 142, the Company will not amortize
goodwill and intangible assets with indefinite lives (trade names with an
estimated fair value of $1,600,000). The value allocated to goodwill in the
purchase of Benefoot is deductible for tax purposes.


(C) ACQUISITION OF SILIPOS

On September 30, 2004, the Company acquired all of the outstanding stock of
Silipos, Inc. from SSL International plc ("SSL" or "Seller"). Silipos is a
manufacturer of gel-based products for the orthopedic, prosthetic and skincare
markets, and operates out of a 40,000 square-foot manufacturing facility in
Niagara Falls, NY, and a sales and marketing office in New York City.

The purchase price paid was $15.5 million, plus transaction costs, and was
comprised of $5.0 million of cash paid at closing, the $7.5 Million Note and the
$3 Million Note. (See Note 4, "Long Term Debt", for a complete description of
said notes). The purchase price is subject to reduction based upon adjustments
to tangible net worth, as defined, at September 30, 2004.

Silipos is a party to a supply agreement with Poly-Gel, LLC ("Poly-Gel") under
which the owners of Poly-Gel have the option to require Silipos to purchase
Poly-Gel at a purchase price equal to 1.5 times Poly-Gel's revenue for the
twelve month period ending immediately prior to the exercise of the option ("Put
Option"). The Put Option expires in February 2005. If (i) Poly-Gel exercises the
Put Option, or if we otherwise acquire Poly-Gel, (ii) the purchase price does
not exceed $4,500,000 and (iii) the liabilities and damages incurred by the
Seller and us do not exceed $2,000,000, we are obligated, pursuant to the terms
of the Silipos purchase agreement, to pay the Seller an aggregate amount of
$4,500,000 less the purchase price paid for Poly-Gel. If Poly-Gel does not
exercise the Put Option and we do not otherwise acquire Poly-Gel, we may be
obligated to pay the Seller between $1,000,000 and $1,500,000, depending on
whether Poly-Gel asserts claims as well as the resolution, timing and amount, if
any, of liabilities incurred relating to Poly-Gel. The Company has included the
full obligation of $2,500,000 in the purchase price of Silipos and as a current
liability in the Company's balance sheet as of September 30, 2004.

Allocation of Silipos' purchase price among the assets acquired and liabilities
assumed is based on the Company's preliminary evaluation of the fair value of
the assets and liabilities of Silipos. The Company may adjust these estimates
based upon analysis of third party appraisals and the determination of fair
value when finalized.

The following table sets forth the components of the estimated purchase price:


       Total Cash Consideration                          $  5,000,000
       Promissory Notes issued                             10,500,000
       Obligation under purchase agreement                  2,500,000
       Prepaid transactions costs                             241,757
       Accrued transaction costs                              579,497
                                                    ------------------

                 Total purchase price                    $ 18,821,254
                                                    ==================

                                       11


The following table provides the preliminary allocation of the purchase price
based upon the fair value of the assets acquired and liabilities assumed at
September 30, 2004:

         Assets:
                        Cash and cash equivalents            $   380,294
                        Accounts receivables                   3,365,847
                        Inventories                            2,638,228
                        Other current assets                   1,095,989
                        Property and equipment                 4,059,300
                        Goodwill                               4,203,348
                        Identifiable intangible assets         5,732,000
                        Deferred income taxes                  2,293,847
                                                         ----------------
                                                              23,768,853

         Liabilities:
                        Accounts payable                         846,631
                        Accrued liabilities                    1,400,968
                        Capital lease obligation               2,700,000
                                                         ----------------
                                                               4,947,599
                                                         ----------------
                             Total purchase price          $  18,821,254
                                                         ================

In June 2001, the Financial Accounting Standards Board issued statement of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for the fiscal years beginning
after December 15, 2001. Under these rules, goodwill and intangible assets
deemed to have indefinite lives are not amortized but are subject to an annual
impairment test 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, the Company will not amortize
goodwill and intangible assets with indefinite lives (trade names with an
estimated fair value of $2,688,000) recorded in this acquisition. The Company
expects to perform annual impairment tests of goodwill and indefinite lived
intangible assets related to the acquisition. Goodwill created by the
acquisition of Silipos is not deductible for tax purposes.

                                       12


     Summary unaudited pro forma condensed results of operations for the three
     and nine month periods ended September 30, 2004 and 2003, assuming the
     Silipos acquisition had occurred at the beginning of the earliest period
     presented, are as follows:

                                     THREE MONTHS ENDED      NINE MONTHS ENDED
                                     SEPTEMBER 30, 2004      SEPTEMBER 30, 2004
        Net sales                     $    11,874,220          $   33,078,317
        Net income (loss)             $       264,975          $     (323,832)
        Net income (loss) per share   $           .06          $         (.07)

                                     THREE MONTHS ENDED      NINE MONTHS ENDED
                                     SEPTEMBER 30, 2003      SEPTEMBER 30, 2003
        Net sales                     $    13,783,485          $   35,331,692
        Net income (loss)             $       977,403          $  (16,888,490)
        Net income (loss) per share   $           .16          $        (3.86)

     Included in the net loss for the nine months ended September 30, 2003 are a
     cumulative effect of a change in accounting principles which reduced net
     income by $14,132,353 and a loss on impairment of goodwill of $3,489,631,
     which are non-recurring items. If these items had not been recorded, net
     income and net income per share on a diluted basis would have been
     increased by $17,621,984 and $4.01, respectively.

     These pro forma results are not necessarily indicative of what would have
     occurred if the acquisition has been in effect for the period presented,
     and they may not be indicative of results expected in the future.

(D)  IDENTIFIABLE INTANGIBLE ASSETS

     Identifiable intangible assets at December 31, 2003 consisted of:



                                               AMORTIZATION      ORIGINAL             ACCUMULATED
                   ASSETS                         PERIOD            COST             AMORTIZATION         NET CARRYING VALUE
       ----------------------------------    ----------------    -------------    ------------------      ---------------------

       Trade Names                              indefinite          $1,600,000        $   -                 $         1,600,000
       Non-competition agreements               7/8 Years              630,000               104,339                    525,661
       License agreements and
            related technology                  11 Years             1,600,000               240,556                  1,359,444
       Repeat customer base                     20 Years               500,000                25,000                    475,000
                                                                 -------------    ------------------      ---------------------
                                                                    $4,330,000        $      369,895         $        3,960,105
                                                                 =============    ==================      =====================


     Identifiable intangible assets at September 30, 2004 consisted of:



                                                     AMORTIZATION                            ACCUMULATED         NET CARRYING
                      ASSETS                            PERIOD          ORIGINAL COST        AMORTIZATION            VALUE
       ---------------------------------------     ----------------    ---------------    -----------------    ----------------

       Trade Names                                 indefinite               $1,600,000        $     -             $   1,600,000
       Non-competition agreements                  7/8 Years                   630,000          166,478                 463,522
       License agreements and
            related technology                     11  Years                 1,600,000          349,648               1,250,352
       Repeat customer base                        20  Years                   500,000           43,750                 456,250
       Trade Names - Silipos                       indefinite                2,688,000              -                 2,688,000
       Repeat customer base - Silipos              7  Years                  1,680,000              -                 1,680,000
       License agreements and
          related technology - Silipos             9.5  Years                1,364,000              -                 1,364,000
                                                                       ---------------    -----------------    ----------------
                                                                           $10,062,000        $ 559,876           $   9,502,124
                                                                       ===============    =================    ================


     Aggregate amortization expense relating to the above identifiable
     intangible assets for each of the quarters and nine month periods ended
     September 30, 2004 and 2003 was $63,327 and $189,981, respectively. As of
     September 30, 2004, the estimated future amortization expense is
     approximately $362,000 for the year ended December 31, 2004, and future
     amortization expense is approximately $688,000 per annum for 2005 - 2008,
     and $677,000 for 2009.

                                       13


(E) GOODWILL

    Changes in goodwill for the nine months ended September 30, 2004, and for
    the year ended December 31, 2003, are as follows:



                                                 CUSTOM         DISTRIBUTED
                                                ORTHOTICS         PRODUCTS         SUBTOTAL           SILIPOS            TOTAL
                                              --------------    -------------    --------------    --------------    ---------------

Balance, January 1, 2003                         $1,191,986     $ 1,994,400          $3,186,386       $     -             $3,186,386

Purchase price adjustments related to
  achievement of milestones and
  acquisition costs                                 198,175         331,581             529,756                              529,756

     Acquisition - Bi-Op                            820,056          -                  820,056                              820,056
                                              --------------    -------------    --------------    --------------    ---------------

Balance, December 31, 2003                        2,210,217       2,325,981           4,536,198             -              4,536,198


Purchase price adjustments related to
  achievement of milestones and
  acquisition costs                                  61,332         102,620             163,952                              163,952

Acquisition of Silipos                               -                -                                4,203,348           4,203,348
                                              --------------    -------------    --------------    --------------    ---------------

Balance September 30, 2004                       $2,271,549     $ 2,428,601          $4,700,150       $4,203,348         $ 8,903,498
                                              ==============    =============    ==============    ==============    ===============


    Beginning in the quarter commencing October 1, 2004 the Company will report
    its financial results in two segments, orthopedics and skincare. Custom
    orthotics and distributed products (the two segments reported for periods
    prior to October 1, 2004) will be reported in the orthopedics segment.

    The goodwill generated by the Silipos acquisition has not yet been allocated
    between business segments.

    NOTE 3 - INVENTORIES

    Inventories consist of:

                              September 30, 2004           December 31, 2003
                           ------------------------    ------------------------
                                       (Unaudited)
          Raw materials            $    3,000,510              $    1,087,916
          Work-in-process                 572,153                     174,164
          Finished goods                2,156,512                   1,234,503
                           ------------------------    ------------------------
                                   $    5,729,175              $    2,496,583
                           ========================    ========================

    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. Langer Partners LLC, whose sole manager
    and voting member is Warren B. Kanders, our recently appointed Chairman of
    the Board of Directors, holds $2,000,000 principal amount of these Notes.
    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
    in the event that, among other things, the Company issues common stock or
    equity securities convertible into or exchangeable for common stock at a
    price below the conversion price of the Notes, 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 into the Company's common stock. Interest is payable semi-annually on
    the last day of June and December. Interest expense on these Notes for each
    of the nine and three month periods ended September 30, 2004 and 2003 was
    $437,670 and $145,890, respectively.

                                       14


    The Company received net proceeds of $13,668,067 from the offering of the
    Notes. The cost of raising these proceeds was $920,933, which is being
    amortized over the life of the Notes. The amortization of these costs for
    each of the nine and three month periods ended September 30, 2004 and 2003
    was $145,329 and $48,443, respectively.

    The Company issued $1,800,000 in Promissory Notes in connection with the
    acquisition of Benefoot. $1,000,000 of the notes were repaid on May 6, 2003
    and the balance was repaid on May 6, 2004. Related interest expense for the
    nine and three month period ended September 30, 2004 was $11,111 and $0,
    respectively. Interest expense with respect to the Promissory Notes for
    the nine and three month periods ended September 30, 2003 was $29,932 and
    $11,932, respectively.

    On September 30, 2004 the Company completed the acquisition of all of the
    outstanding stock of Silipos (see Footnote 2(c), "Acquisition of Silipos").
    In connection with the acquisition of Silipos, the Company issued:

     (i)   $5,500,000 principal amount of 7% senior subordinated notes due
           September 30, 2007 to ten accredited investors.

     (ii)  $7,500,000 principal amount of 5.5% secured promissory note due March
           31, 2006 (the "$7.5 Million Note") to the Seller.

     (iii) $3,000,000 principal amount of 5.5% promissory note due December 31,
           2009 (the "$3.0 Million Note") to the Seller.

    The $5,500,000 principal amount of 7% senior subordinated notes due
    September 30, 2007 were issued to fund the cash portion of the purchase
    price for Silipos. Langer Partners LLC, whose sole manager and voting member
    is Warren B. Kanders, our recently appointed Chairman of the Board of
    Directors, holds $750,000 principal amount of these 7% senior subordinated
    notes due September 30, 2007. As part of such issuance, the Company also
    issued warrants to purchase 110,000 shares of our common stock at an
    exercise price of $0.02 per share, subject to adjustments under certain
    circumstances, which are exercisable until September 30, 2009, commencing
    the earlier of (i) six months after the refinancing or prepayment of such
    notes, or (ii) September 30, 2005. The fair value of the warrants at
    September 30, 2004 was determined to be $735,900, using the Black-Scholes
    model and the following assumptions: risk free rate of 2.89%, dividend of
    0%, volatility of 83%, and an expected life of three years. Such amount will
    be amortized over the term of the 7% senior subordinated notes due September
    30, 2007, and recorded as an additional expense. Additionally, to the extent
    that the Company is required to make an additional payment under the $7.5
    Million Note, such additional payment would be recorded as an additional
    interest expense.

    The $7.5 Million Note is secured by the pledge of the stock of Silipos and,
    if not repaid in full on or before March 31, 2005, the Company is obligated
    to make an additional payment of $500,000 (which would be recorded as
    additional interest expense) or the principal amount will be increased by
    $1 million. Both the $7.5 Million Note and the $3.0 Million Note provide
    for semi-annual payments of interest at the rate of 5.5% per annum with the
    first payments due February 1, 2005. Additionally, the interest rate on the
    $7.5 Million Note increases from 5.5% to 7.5% on April 1, 2005, and if not
    repaid on or before March 31, 2006, the interest rate will increase to 12%
    per annum, escalating 3% per annum for each additional 90 days thereafter
    up to the maximum rate permitted by law. Financial covenants under the $7.5
    Million Note require that Silipos maintain a tangible net worth of at least
    $4.5 million and prohibits the Company from incurring any additional
    indebtedness except to borrow up to $3.5 million for working capital, any
    amounts required to pay for the purchase of Poly-Gel pursuant to the Put
    Option, and equipment or capital leases up to a maximum of $500,000.

    The $3.0 Million Note provides for a default interest rate of 11% per annum
    escalating by 3% per annum every 90 days thereafter up to the maximum rate
    permitted by law. A financial default under the $7.5 Million Note
    constitutes a default under the $3.0 Million Note. The $3.0 Million Note
    will be reduced by half of any additional payments actually made pursuant
    to the $7.5 Million Note.



                                       15


    Pursuant to the acquisition of Silipos, the Company is obligated under a
    capital lease covering the land and building at their facility in Niagara
    Falls, N.Y. that expires in 2018. This lease also contains two five-year
    renewal options. As of September 30, 2004, the Company's obligation under
    capital leases, excluding current installments is $2,700,000.

    Capital lease payments due in the fourth quarter of 2004 and annual future
    minimum capital lease payments are as follows:




                                                                             CAPITAL LEASES


         Quarter ended December 31, 2004                                       $    97,629

         Year ending December 31:
               2005                                                                401,016
               2006                                                                411,504
               2007                                                                422,052
               2008                                                                432,516
               2009                                                                443,016
               Later years through 2018                                          4,607,224
                                                                               -----------
                       Total minimum lease payments                              6,814,957

         Less amount representing interest                                       4,114,957
                                                                               -----------
                       Present value of net minimum
                            capital lease payments                               2,700,000

         Less current installments of obligations under capital leases
                       Obligations under capital leases,                       -----------
                        excluding current installments                         $ 2,700,000
                                                                               ===========

                                       16



    NOTE 5 - SEGMENT INFORMATION
    In the periods covered by these financial statements, the Company operated
    in two segments (custom orthotics and distributed products) 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 month periods ended September 30,
    2004 and 2003 is summarized as follows:



        THREE MONTHS ENDED SEPTEMBER 30, 2004             CUSTOM ORTHOTICS             DISTRIBUTED PRODUCTS           TOTAL
     -----------------------------------------------    ------------------------    --------------------------    -----------------

     Net sales                                                 $   4,852,286                  $  1,433,098          $ 6,285,384

     Gross profit                                                  1,715,381                       562,870            2,278,251

     Operating income (loss)                                        (109,726)                      338,923              229,197

        THREE MONTHS ENDED SEPTEMBER 30, 2003             CUSTOM ORTHOTICS             DISTRIBUTED PRODUCTS           TOTAL
     -----------------------------------------------    ------------------------    --------------------------    -----------------

     Net sales                                                  $  4,924,434                  $  1,408,250         $  6,332,684

     Gross profit                                                  1,777,956                       441,208            2,219,164

     Operating income (loss)                                         (45,263)                      274,641              229,378

        NINE MONTHS ENDED SEPTEMBER 30, 2004              CUSTOM ORTHOTICS             DISTRIBUTED PRODUCTS           TOTAL
    ------------------------------------------------    ------------------------    --------------------------    -----------------

    Net sales                                                  $  14,272,922                  $  4,323,901         $ 18,596,823

    Gross profit                                                   4,944,485                     1,694,635            6,639,120

    Operating income (loss)                                         (485,157)                      963,066              477,909

        NINE MONTHS ENDED SEPTEMBER 30, 2003              CUSTOM ORTHOTICS             DISTRIBUTED PRODUCTS           TOTAL
    ------------------------------------------------    ------------------------    --------------------------    -----------------

    Net sales                                                  $  14,075,019                   $ 4,207,587         $ 18,282,606

    Gross profit                                                   5,134,980                     1,166,446            6,301,426

    Operating income (loss)                                         (248,084)                      651,110              403,026

      Geographical segment information is summarized as follows:


         THREE MONTHS ENDED SEPTEMBER 30, 2004              NORTH AMERICA                UNITED KINGDOM             TOTAL
    ------------------------------------------------   -------------------------   ---------------------------  -------------------
    Net sales to external customers                           $    5,632,532                  $    652,852          $ 6,285,384
    Intersegment net sales                                            37,044                          -                  37,044
    Gross profit                                                   2,050,564                       227,687            2,278,251
    Operating income                                                 168,228                        60,969              229,197


         THREE MONTHS ENDED SEPTEMBER 30, 2003               NORTH AMERICA               UNITED KINGDOM             TOTAL
    ------------------------------------------------   --------------------------  ---------------------------   ------------------
    Net sales to external customers                           $    5,739,657                  $    593,027          $ 6,332,684
    Intersegment net sales                                            56,012                         -                   56,012
    Gross profit                                                   1,994,984                       224,180            2,219,164
    Operating  income                                                144,677                        84,701              229,378


                                       17




         NINE MONTHS ENDED SEPTEMBER 30, 2004                NORTH AMERICA               UNITED KINGDOM             TOTAL
    ------------------------------------------------   --------------------------  ---------------------------   ------------------

    Net sales to external customers                           $   16,531,334                 $   2,065,489          $18,596,823
    Intersegment net sales                                           244,140                        -                   244,140
    Gross profit                                                   5,900,811                       738,309            6,639,120
    Operating income                                                 196,276                       281,633              477,909


         NINE MONTHS ENDED SEPTEMBER 30, 2003                NORTH AMERICA                UNITED KINGDOM            TOTAL
    ------------------------------------------------   --------------------------   --------------------------  -------------------
    Net sales to external customers                           $   16,382,112                 $   1,900,494          $18,282,606
    Intersegment net sales                                           213,064                        -                   213,064
    Gross profit                                                   5,554,212                       747,214            6,301,426
    Operating income                                                  69,850                       333,176              403,026


    As a result of the Silipos acquisition, beginning in the fourth quarter of
    2004, the Company will report custom orthotics and distributed products as a
    single segment called orthopedics and will report a second segment called
    skincare

    NOTE 6 - COMPREHENSIVE INCOME (LOSS)

    The Company's comprehensive income (loss) was as follows:



                                                    --------------------------------------------------------------------------------
                                                        Three months ended September 30,          Nine months ended September 30,
                                                           2004                  2003                2004                2003
                                                    ------------------    -----------------    ---------------     ----------------

    Net income (loss)                                     $   43,868            $  49,469          $ (97,729)            $ (182,311)

    Other comprehensive income (loss) net of tax:

    Change in equity resulting from
    translation of financial statements
    into U.S. dollars                                         69,319               22,035            (16,780)               159,559
                                                    ------------------    -----------------    ---------------     ----------------
    Comprehensive income (loss)                            $ 113,187            $  71,504          $(114,509)             $ (22,752)
                                                    ==================    =================    ===============     ================


                                       18


    NOTE 7 - INCOME (LOSS) PER SHARE

    The following table provides a reconciliation between basic and diluted
    earnings per share:



                                                                    Three months ended September 30,
                                      ----------------------------------------------------------------------------------------------
                                                          2004                                             2003
                                      ----------------------------------------------    --------------------------------------------
                                         Income                            Per                                             Per
    Basic EPS                            (loss)          Shares           Share         Income (loss)    Shares           Share
    -----------------------------     -------------    -----------     -------------    ------------    ----------    --------------

    Income attributable to               $  43,868      4,380,851          $    .01     $   49,469      4,377,255           $   .01
    common stockholders

    Effect of Dilutive
    Securities
    -----------------------------
    Stock options and warrants             -              367,961           -               --            248,619          --
                                      -------------    -----------     -------------    ------------    ----------    --------------

    Diluted EPS
    -----------------------------
    Income attributable to
    common stockholders plus
    assumed exercise of stock
    options and warrants                $   43,868      4,748,812         $     .01     $   49,469      4,625,874           $   .01
                                      =============    ===========     =============    ============    ==========    ==============





                                                                     Nine months ended September 30,
                                      ----------------------------------------------------------------------------------------------
                                                          2004                                             2003
                                      ---------------------------------------------    ---------------------------------------------
    Basic EPS                         Income(loss)       Shares            Per         Income(loss)      Shares            Per
                                                                          Share                                           Share
    -----------------------------     -------------    -----------     ------------    ------------    -----------    --------------

    Loss attributable to common        $  (97,729)      4,380,707        $   (.02)     $ (182,311)      4,372,525          $  (.04)
    stockholders

    Effect of Dilutive
    Securities
    -----------------------------
    Stock options and warrants             -               -                               --              --              --
                                      -------------    -----------     ------------    ------------    -----------    --------------

    Diluted EPS
    -----------------------------
    Loss attributable to common
    stockholders plus assumed
    exercise  of  stock  options
    and warrants                       $  (97,729)      4,380,707        $   (.02)     $ (182,311)      4,372,525          $  (.04)
                                      =============    ===========     ============    ============    ===========    ==============


    Basic earnings per common share ("EPS") are computed based on the weighted
    average number of common shares outstanding during each period. Diluted
    earnings per common share are computed based on the weighted average number
    of common shares, after giving effect to dilutive common stock equivalents
    outstanding during each period. The diluted income (loss) per share
    computations for the nine months ended September 30, 2004 and 2003 exclude
    stock options and warrants totaling approximately 357,428 and 251,805,
    respectively. These shares are excluded due to their anti-dilutive effect as
    a result of the Company's loss during each of the periods. The impact of the
    convertible notes on the calculation of the fully-diluted earnings per share
    was anti-dilutive and is therefore not included in the computation for the
    three month and nine month periods ended September 30, 2004 and 2003. Had
    the impact of the convertible notes been included in the calculation of
    diluted earnings per share, net income would have increased by approximately
    $194,000 in each of the three month periods ended September 30, 2004 and
    2003 and approximately $582,000 in each of the nine month periods then
    ended. Additionally, the diluted weighted average shares would have
    increased by 2,431,500 for each of the three and nine month periods ended
    September 30, 2004 and 2003, to reflect the conversion of the convertible
    notes.

    NOTE 8 - RELATED PARTY TRANSACTIONS

    The Company has engaged a company which is owned by the brother-in-law of a
    senior executive of the Company to provide certain technology related
    products and services. Costs incurred for products and services provided by
    this company were approximately $2,000 and $27,000 in the quarters ended
    September 30, 2004 and 2003, respectively and $16,000 and $80,000 in the
    nine month periods ended September 30, 2004 and 2003, respectively. Langer
    also engaged a company owned by the father-in-law of a senior executive of
    the Company to provide certain promotional and marketing goods and services.
    Costs incurred with respect to such goods and services for the quarters
    ended September 30, 2004 and 2003 were $5,500 and $20,000, respectively and
    $36,000 and $55,000 for the nine month periods ended September 30, 2004 and
    2003, respectively. In April 2002, a senior executive of the Company
    borrowed $21,000 from the Company ("Executive Note"). The Executive Note
    accrued interest at a rate of 4% per annum and was repaid in April 2004.

    On November 12, 2004, we entered into a consulting agreement (the
    "Consulting Agreement") with Kanders & Company, Inc., the sole stockholder
    of which is Warren B. Kanders, who on November 12, 2004, became our Chairman
    of the Board of Directors, and who is the sole manager and voting member of
    Langer Partners LLC ("Langer Partners"), one of our principal stockholders.
    The Consulting Agreement provides that Kanders & Company, Inc., will act as
    our non-exclusive consultant providing general investment banking and
    financial advisory services for a term of three years, an annual fee of
    $200,000, options to purchase 240,000 shares of our common stock at a price
    of $7.50 per share vesting in three equal annual installments beginning on
    November 12, 2005, indemnification protection and a $200,000 payment if the
    Consulting Agreement is not renewed beyond the three year term. Langer
    Partners holds $2,000,000 principal amount of the Notes as well as $750,000
    principal amount of our 7% senior subordinated notes due September 30, 2007
    and related warrants to purchase 15,000 shares of our common stock at a
    price of $0.02 per share. In connection with our acquisition of Silipos, we
    granted 100,000 shares of restricted stock to Kanders & Company, Inc.,
    vesting on the third anniversary of the grant date, and 40,000 shares of
    restricted stock to W. Gray Hudkins, our recently appointed Chief Operating
    Officer, vesting in three equal annual tranches commencing on the first
    anniversary of the grant date, all of which accelerates upon a change of
    control of the Company.


                                       19


    NOTE 9 - PENSION



                                                                                     PENSION BENEFITS
                                                                         ------------------------------------------
          NINE MONTHS ENDED SEPTEMBER 30:                                       2004                   2003
          ----------------------------------------------------------     --------------------    ------------------

          Interest cost                                                          $   25,538             $  27,298
          Expected return on plan assets                                            (28,876)              (25,988)
          Amortization of transition (assets) or obligations                          5,843                 5,843
          Recognized actuarial (gain) loss                                           14,425                17,345
                                                                         --------------------    ------------------
          Net periodic benefit cost                                             $    16,930            $   24,498
                                                                         ====================    ==================

                                                                                     PENSION BENEFITS
                                                                         ------------------------------------------
          THREE MONTHS ENDED SEPTEMBER 30:                                      2004                   2003
          ----------------------------------------------------------     --------------------    ------------------
          Interest cost                                                          $   8,463             $   9,090
          Expected return on plan assets                                            (9,710)               (8,650)
          Amortization of transition (assets) or obligations                         1,947                 1,947
          Recognized actuarial (gain) loss                                           4,809                 5,782
                                                                         --------------------    ------------------
          Net periodic benefit cost                                              $   5,509             $   8,169
                                                                         ====================    ==================


    EMPLOYER CONTRIBUTIONS

    The Company previously disclosed in its financial statements for the year
    ended December 31, 2003, that it expected to contribute $72,000 to its
    pension plan in 2004. The contribution of $72,000 was made during the
    quarter ended September 30, 2004.


    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

    CRITICAL ACCOUNTING POLICIES AND ESTIMATES

    The Company disclosed its critical accounting policies and estimates in its
    Annual Report on Form 10-K for the year ended December 31, 2003. There have
    been no changes to those critical accounting policies and estimates during
    the nine months ended September 30, 2004.

    As a result of the Silipos acquisition, beginning in the fourth quarter 2004
    we will report custom orthotics and distributed products as a single segment
    called orthopedics, and will report a new, second reportable segment
    called skincare. Accordingly, the information appearing below, which relates
    to prior periods, does not reflect the basis for presentation of financial
    results that will be used for subsequent periods.

    In accordance with the provisions of SFAS No. 142, the Company no longer
    amortizes goodwill and identifiable assets with indefinite lives. Instead,
    these assets are reviewed for impairment on an annual basis by an
    independent appraiser.

    RESULTS OF OPERATIONS

    Net loss for the nine months ended September 30, 2004 was ($97,729) as
    compared to a loss of ($182,311) for nine months ended September 30, 2003.
    The principal reason for the decrease in the loss was an improvement in
    gross profit attributable to an increase in net sales offset by an increase
    in general and administrative expenses.

    Net income for the three months ended September 30, 2004 was $43,868 as
    compared to $49,469 for the three months ended September 30, 2003 and
    reflects a slight reduction in net sales and slightly higher general and
    administrative expenses offset by efficiencies, due to cost containment
    initiatives reflected in cost of sales.

    Net sales for the nine months ended September 30, 2004 were $18,596,823 or
    2% above net sales of $18,282,606 for the nine months ended September 30,
    2003. Net sales for the three months ended September 30, 2004 were
    $6,285,384 as compared to $6,332,684 for the three months ended September
    30, 2003, a decrease of 1%.

    Net sales of custom orthotics for the nine months ended September 30, 2004
    were $14,272,922 as compared to $14,075,019 for the nine months ended
    September 30, 2003, an increase of $197,903 or 1.4%. Net sales of custom
    orthotics for the three months ended September 30, 2004 were $4,852,286 as
    compared to $4,924,434 for the three months ended September 30, 2003, a
    decrease of $72,148 or 1.5%.

                                       20


    Net sales of distributed products for the nine months ended September 30,
    2004 were $4,323,901 as compared to $4,207,587 for the nine months ended
    September 30, 2003, an increase of $116,314 or 2.8%. Net sales of
    distributed products for the three months ended September 30, 2004 were
    $1,433,098 as compared to $1,408,250 for the three months ended September
    30, 2003, an increase of $24,848 or 1.8%.

    Cost of sales decreased $23,477 to $11,957,703 for the nine months ended
    September 30, 2004, as compared to $11,981,180 for the nine months ended
    September 30, 2003. This decrease was primarily due to the Company's focus
    on cost containment partially offset by price increases for certain
    materials. Cost of sales decreased by $106,387 for the three months ended
    September 30, 2004 as compared to the three months ended September 30, 2003
    due to a decrease in sales and continued cost containment measures and
    partially offset by increases in certain products costs.

    Gross profit as a percentage of net sales for the nine months ended
    September 30, 2004 was 35.7%, as compared to 34.5% for the nine months ended
    September 30, 2003. Gross profit as a percentage of net sales for the three
    months ended September 30, 2004 was 36.3% as compared to 35.0% for the three
    months ended September 30, 2003. Gross profit as a percentage of net sales
    increased due principally due to lower labor costs and lower manufacturing
    overhead.

    Selling expenses for the nine months ended September 30, 2004 were
    $2,384,172 or 12.8% of net sales as compared to $2,333,850 or 12.8% of net
    sales for the nine months ended September 30, 2003. Selling expenses for the
    three months ended September 30, 2004 were $790,038 or 12.6% of net sales as
    compared to $783,423 or 12.4% of net sales for the three months ended
    September 30, 2003.

    General and administrative expenses for the nine months ended September 30,
    2004 were $3,777,039 or 20.3% of net sales as compared to $3,564,550 or
    19.5% of net sales for the nine months ended September 30, 2003. General and
    administrative expenses for the three months ended September 30, 2004 were
    $1,259,016 or 20.0% as compared to $1,206,363 or 19.0% of net sales for the
    three months ended September 30, 2003. General and administrative costs
    increased in dollars as a result of increased costs incurred as we continue
    to strengthen our infrastructure.

    Other income (expense), net, was $(462,638) for the nine months ended
    September 30, 2004, as compared to $(458,687) for the nine months ended
    September 30, 2003. Other income (expense), net, was $(147,329) for the
    three months ended September 30, 2004, as compared to $(141,809) for the
    three months ended September 30, 2003. The reason for the increase in other
    expense is that the 2003 periods reflect non-recurring income (there were no
    such items in the 2004 period) that was partially offset in the 2004 periods
    by increases in financing charges (interest income), and a decrease in
    interest expense due to the repayment of the Benefoot Notes.

    Prior to the adoption of SFAS No. 142, the Company would not have needed a
    valuation allowance for the portion of the net operating losses equal to the
    amount of tax-deductible goodwill and trade names amortization expected to
    occur during the carryforward period of the net operating losses based on
    the timing of the reversal of these taxable temporary differences. As a
    result of the adoption of SFA 142, the reversal will not occur during the
    carryforward period of the net operating losses. Therefore, the Company
    recorded a deferred income tax expense of approximately $38,000 and $113,000
    during the three and nine-month periods ended September 30, 2004, as
    compared to $35,250 and $100,000 in the three and nine-month periods ended
    September 30, 2003 which would not have been required prior to the adoption
    of SFAS 142. Additionally, the Company recorded provisions for income taxes
    on its foreign operation of $2,850 and $26,650 for the three and nine-month
    periods ending September 30, 2003, respectively. No such amounts were
    recorded in the 2004 periods.


    LIQUIDITY AND CAPITAL RESOURCES

    Working capital as of September 30, 2004 was $2,050,052, as compared to
    $7,433,951 as of December 31, 2003. Cash balances at September 30, 2004 were
    $3,529,303, a decrease of $2,004,643 from the $5,533,946 at December 31,
    2003.

    The reduction in cash at September 30, 2004 as compared to December 31, 2003
    is primarily attributable to use of cash to repay $800,000 of Promissory
    Notes in connection with the Benefoot acquisition, to pay contingent
    consideration of $466,000 in connection with the Benefoot acquisition and to
    purchase and implement an enterprise wide computer software system totaling
    $528,000 and purchase of inventory. Such amounts were partially offset by
    the unused proceeds (as of September 30, 2004) from the 7% senior
    subordinated notes and the cash acquired in the Silipos transaction. The
    reduction in working capital is attributable to the classification of the
    $7.5 Million Note and the $2.5 Million obligation under the Silipos purchase
    agreement as current liabilities.

    In connection with the acquisition of Benefoot (which closed on May 6,
    2002), the Company issued $1,800,000 of 4% Promissory Notes. $1,000,000 of
    the Promissory Notes were paid on May 6, 2003 and the balance of $800,000
    was paid on May 6, 2004. Interest expense with the respect to the Benefoot
    notes for the nine months ended September 30, 2004 and 2003 was $11,111 and
    $37,932, respectively.

    On September 30, 2004, the Company purchased from SSL International, PLC
    (the "Seller") all of the outstanding stock of Silipos, Inc. ("Silipos") for
    $15,500,000 plus transaction costs. The Company paid $5,000,000 in cash and
    issued two promissory notes to the Seller: a $7.5 Million 5.5% secured
    promissory note due on or before March 31, 2006 and a $3 Million 5.5%
    promissory note due on or before December 31, 2009. The cash portion of the
    purchase price was paid

                                       21


    from the proceeds of the issuance of $5,500,000 of 7% senior subordinated
    notes due September 30, 2007. If the $7.5 Million Note is not repaid in full
    on or before March 31, 2005, we are obligated to make an additional payment
    of $500,000 (which would be recorded as additional interest expense) or the
    principal amount will be increased by $1 million. Both the $7.5 Million Note
    and the $3.0 Million Note provide for semi-annual payments of interest at
    the rate of 5.5% per annum with the first payments due February 1, 2005.
    Additionally, the interest rate on the $7.5 Million Note increases from 5.5%
    to 7.5% on April 1, 2005, and if not repaid on or before March 31, 2006, the
    interest rate will increase to 12% per annum, escalating 3% per annum for
    each additional 90 days thereafter up to the maximum rate permitted by law.
    The $3.0 Million Note provides for a default rate of 11% per annum
    escalating by 3% per annum every 90 days thereafter up to the maximum rate
    permitted by law. A financial default under the $7.5 Million Note
    constitutes a default under the $3.0 Million Note. The $3.0 Million Note
    will be reduced by half of any additional payments actually made pursuant to
    the $7.5 Million Note. Silipos is a party to a supply agreement with
    Poly-Gel, LLC ("Poly-Gel") under which the owners of Poly-Gel have the
    option to require Silipos to purchase Poly-Gel at a purchase price of 1.5
    times Poly-Gel's revenue for a twelve month period ending immediately prior
    to the exercise of the option ("Put Option"). If (i) Poly-Gel exercises the
    Put Option, or if we otherwise acquire Poly-Gel, (ii) the purchase price
    does not exceed $4,500,000 and (iii) the liabilities and damages incurred by
    the Seller and us do not exceed $2,000,000, we are obligated, pursuant to
    the terms of the Silipos purchase agreement, to pay the Seller an aggregate
    amount of $4,500,000 less the purchase price paid for Poly-Gel. If Poly-Gel
    does not exercise the Put Option and we do not otherwise acquire Poly-Gel,
    we may be obligated to pay the Seller between $1,000,000 and $1,500,000,
    depending on whether Poly-Gel asserts claims as well as the resolution,
    timing and amount, if any, of liabilities incurred relating to Poly-Gel. The
    Company has included the full obligation in the purchase price of Silipos in
    the Company's balance sheet as of September 30, 2004. Upon completion of the
    Silipos acquisition, the Company had approximately $35.8 million of
    outstanding indebtedness which matures on various dates in 2006, 2007 and
    2009, as well as payments on the capital lease are due monthly through 2018.
    Such amount excludes any obligations under the Put Option. The Company is
    exploring alternatives to raise equity funds for working capital and to
    restructure or reduce its long-term debt. The Company expects to incur
    significant expenses in connection with any such public or private offering
    of debt or equity. To the extent that the Company is unable to raise funds,
    its liquidity will be significantly reduced, and the Company may be required
    to restructure its indebtedness, which will have a materially adverse effect
    on its ability to follow through with its corporate strategy. No assurance
    can be given that the Company will be able to successfully raise additional
    capital on acceptable terms.




Contractual Obligations                                                          Payment due By Period
(in thousands)                                                                   ---------------------

                                                            Quarter ended                                               After 5
                                            Total         December 31, 2004        1 Year     2-3 Years   4-5 Years      Years
                                        --------------  ------------------------ ----------- ----------- ------------ ----------

Operating Lease Obligations                 $ 1,399          $   170               $   531     $   598      $   100      $  --
Capital Lease Obligations                     6,814               97                   401         833          876        4,607
Secured Promissory Note                       7,500             --                   7,500        --           --           --
Convertible Debentures                       14,589             --                    --        14,589         --           --
Senior Subordinated 7% Notes                  5,500             --                    --         5,500         --           --
Promissory Note                               3,000             --                    --          --          3,000         --
Obligation Under Purchase Agreement           2,500             --                   2,500        --           --           --
                                        --------------  ------------------------ ----------- ----------- ------------ ----------
Total                                       $41,302          $   267               $10,932     $21,520      $ 3,976      $ 4,607
                                        ==============  ======================== =========== =========== ============ ==========


    The above table reflects obligations due in the fourth quarter of 2004 and
    each column thereafter reflects the relevant full year periods beyond
    December 31, 2004.

    The above table assumes that the $7.5 Million Note due March 31, 2006 will
    be repaid in full before March 31, 2005, thereby avoiding the additional
    payments described above. The Company cannot assure that such repayment will
    be made on or before March 31, 2005.

    The above table excludes any obligations pursuant to the terms and
    conditions of a certain supply agreement, dated August 20, 1999, by and
    between Silipos and Poly-Gel. Pursuant to the terms of such supply
    agreement, Poly-Gel has the option to cause Silipos to purchase the assets
    or shares of Poly-Gel (the "Put Option") at a purchase price of 1.5 times
    Poly-Gel's revenues in the twelve month period ending immediately prior to
    the exercise of the Put Option. The Put Option expires in February 2005.

    Pursuant to the terms of the Silipos purchase agreement, we agreed to make
    up to an aggregate of $2,500,000 of additional payments to the Seller
    depending upon the purchase price of the Put Option, and the amount of
    liabilities actually incurred by the Seller and the Company, if any, arising
    out of certain alleged claims that may be asserted by Poly-Gel. If Poly-Gel
    does not exercise the Put Option, our obligation to make additional
    payments to the Seller will be reduced by $1,000,000. The full amount of
    $2,500,000 is included as a current liability on the balance sheet as of
    September 30, 2004 and in the above table.

                                       22


    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In December 2003, the FASB issued SFAS No. 132, as revised, Employers'
    Disclosures about Pensions and Other Postretirement Benefits, ("Revised SFAS
    132"), which requires additional disclosures about assets, obligation, cash
    flows, and net periodic benefit cost of defined benefit pension plans and
    other defined benefit postretirement plans. The Company adopted the required
    revised disclosure provisions of Revised SFAS 132 as of December 31, 2003,
    except for the disclosure of estimated future benefit payments, which the
    Company is required to and will disclose as of December 31, 2004. The
    adoption of SFAS No. 132 did not have a material impact on the Company's
    consolidated financial statements.


    CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

    Information contained or incorporated by reference in the 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. 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 and ability to integrate acquired
    companies and assets, 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 including
    those described from time to time in the Company's Registration Statement on
    Form S-3, most recent Form 10-K and 10-Q's and other Company filings with
    the Securities and Exchange Commission 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.


    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

                                       23


    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

    The Company's management carried out an evaluation, under the supervision
    and with the participation of the Company's Chief Executive Officer and
    Chief Financial Officer, its principal executive officer and principal
    financial officer, respectively, of the design and operation of the
    Company's disclosure controls and procedures (as such term is defined in
    Rules 13a-15 (e) and 15d - 15(e) under the Securities Exchange Act of 1934
    (the "Exchange Act") as of September 30, 2004, pursuant to Exchange Act Rule
    13a-15. Based upon that evaluation, the Company's Chief Executive Officer
    and Chief Financial Officer, concluded that the Company's disclosure
    controls and procedures as of September 30, 2004 are effective for
    gathering, analyzing and disclosing the information the Company is required
    to disclose in the reports it files under the Exchange Act, within the time
    periods specified in the Securities and Exchange Commission's rules and
    forms. The Company's Chief Executive Officer and Chief Financial Officer,
    also concluded that the Company's disclosure controls and procedures as of
    September 30, 2004 are effective in timely alerting them to material
    information relating to the Company (including its consolidated
    subsidiaries) required to be included in the Company's periodic filings
    under the Exchange Act. No changes in the Company's internal control over
    financial reporting occurred during the quarter ended September 30, 2004
    that have materially affected, or are reasonably likely to materially
    affect, the Company's internal control over financial reporting.


                                       24


     ITEM 6. EXHIBITS :

             10.1  Supply Agreement dated August 20, 1999, between Silipos,
                   Inc., a Delaware corporation (which became a wholly owned
                   subsidiary of the registrant on September 30, 2004), and
                   Poly-Gel, LLC a New Jersey limited liability company.

             31.1  Certification of Principal Executive Officer Pursuant to Rule
                   13a-14(a) (17 CFR 240.13a-14(a)).

             31.2  Certification of Principal Financial Officer Pursuant to Rule
                   13a-14(a) (17 CFR 240.13a-14(a)).

             32.1  Certification of Principal Executive Officer Pursuant to Rule
                   13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter
                   63 of Title 18 of the United States Code (18 U.S.C. 1350).

             32.2  Certification of Principal Financial Officer Pursuant to Rule
                   13a-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter
                   63 of Title 18 of the United States Code (18 U.S.C. 1350).


                                       25


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                          LANGER, INC.


Date: November 12, 2004     By: /s/
                                ------------------------
                                Andrew H. Meyers
                                President and
                                Chief Executive Officer
                                (Principal Executive Officer)


                            By: /s/
                                ------------------------
                                Joseph P. Ciavarella
                                Vice President and
                                Chief Financial Officer
                                (Principal Financial and Accounting Officer)


                                       26

EX-10.1

                                SUPPLY AGREEMENT

                  SUPPLY AGREEMENT (this "Agreement") made and entered into as
of this 20th day of August, 1999, by and between Silipos, Inc., a Delaware
corporation (the "Buyer"), and Poly-Gel, L.L.C., a New Jersey limited liability
company (the "Seller").


                             Preliminary Statements

                  Contemporaneous with the execution and delivery of this
Agreement, and pursuant to the provisions of that certain Stock Purchase
Agreement, dated the date hereof, among SSL Holdings, Inc., a Delaware
corporation and wholly owned subsidiary of Scholl Limited ("Holdings"), and the
former stockholders ("Former Stockholders") of the Buyer (the "Purchase
Agreement"), Holdings purchased all of the issued and outstanding shares of the
capital stock of the Buyer. The Seller intends to acquire the business and
assets of Thermo Cote, Inc., the present supplier of certain polymer raw
materials to the Buyer and in connection with the acquisition, and contingent
thereon, desires to ensure continued supply of such raw materials to the Buyer.
In connection with the transactions contemplated by, and as a condition to, the
Purchase Agreement, and subject to such acquisition of Thermo Cote, Inc., the
Buyer and the Seller are entering into this Agreement. Contemporaneously with
the completion of the Purchase Agreement, the Former Stockholders are each
entering into a Noncompetition, Nonsolicitation and Confidentiality Agreement
with Holdings (the "Non-Compete").

                  IN CONSIDERATION of the foregoing and of the mutual promises,
covenants and agreements contained in this Agreement, the Buyer and the Seller,
intending to be legally bound, hereby agree as follows:

                  1. APPOINTMENT. In accordance with the terms and subject to
the conditions contained in this Agreement, the Buyer hereby appoints the Seller
as the Buyer's exclusive supplier of medical-grade mineral oil, natural oil,
synthetic oil, vegetable oil and/or animal oil polymer gel ("Gel") and such
other materials as the Buyer and the Seller may mutually agree in writing from
time to time (the "Products"), and the Seller hereby accepts such appointment.
Notwithstanding the foregoing, if a Change in Control (as such term is defined
in Section 11) shall have occurred, the exclusivity of the Seller's appointment
shall be terminated.

                  2. EXCLUSIVITY.

                  (a) During the Term, neither the Buyer nor any Affiliate (as
such term is defined in Section 11 hereof) of the Buyer shall manufacture for
its own use or the use of any other entity or person any Gels or Products;
provided, however, that to the extent that the Seller is unable to fulfill its
obligations under this Agreement because (i) doing so would infringe on the
rights of another party, or (ii) the Seller does not have enough capacity to
meet the Buyer's requirements in accordance with the required delivery
schedules, in either case, the exclusivity provisions of this Agreement shall be
suspended so long as the conditions in clause (i) or (ii) exist.

                  (b) During the Term, neither the Seller nor any Affiliate of
the Seller shall (i) sell any Gel or any Product to any entity or person, other
than the Buyer and any Affiliates of the



Buyer, for use in the manufacture, sale, distribution, promotion or marketing of
any products or devices that:

                  (A) are products or devices offered for sale or under
development prior to the date of this Agreement;

                  (B) are improvements to such products or devices;

                  (C) are equivalent in function or use to such products or
devices or improvements;

                  (D) are range or product-line extensions of such products,
devices or improvements or equivalent; or

                  (E) use Gel or Products as a therapeutic, comfort or barrier
product or device applied on the skin; or

(ii) sell or transfer, directly or indirectly, any Gel or any Product to any
person or entity that, if such person or entity were the Former Stockholders,
would be restricted from making, using or selling such Gel or Product or
products or devices using such Gel or Product under the Non-Compete (together
with Section 2(b)(i) above, the "Restricted Business"). Nothing herein is
intended to or shall restrict or otherwise limit the ability of the Seller or
any Affiliate of the Seller to sell any Gel to any entity or person for use,
manufacture, sale, distribution, promotion or marketing of any product outside
of the Restricted Business.

         3.       SPECIFICATIONS AND QUALITY CONTROL.

         (a)      Specifications.

                  (i) The Seller shall manufacture, ship, store and handle each
of the Products in accordance with the Buyer's specifications as set forth on
Exhibit A attached to this Agreement for such Products (the "Initial Product
Specifications"), as such specifications may be modified or supplemented by the
Buyer in accordance with this Section 3(a). In addition, the Seller shall
manufacture, ship, store and handle the Products in conformity with all
applicable requirements of U.S. law including, without limitation, U.S. food and
drug laws and Food and Drug Administration (or any successor agency) rules and
regulations ("Legal Requirements"). If the Buyer desires to have the Seller make
Products with specifications different from the Initial Product Specifications
or any prior approved Modified Product Specifications (as defined below), then
the Buyer shall submit to the Seller in writing such different modified
specifications (the "Modified Product Specifications," and together with the
Initial Product Specifications, the "Product Specifications"). If such Modified
Product Specifications require, in the reasonable opinion of the Seller, an
adjustment to the Purchase Price set forth in Exhibit C, each party agrees to
negotiate in good faith for equitable adjustments reasonably sought by the other
party.

                  (ii) The Seller shall number each shipment of Products with a
Seller lot number that is traceable to the raw materials or components used in
the manufacture of such Products. The Seller shall provide a certification, in
form and substance reasonably acceptable to the Buyer and the Seller
("Specification Certification"), with each shipment of the Products that

                                      -2-


the Products included in such shipment have been manufactured, shipped, stored
and handled in accordance with the then applicable Product Specifications and
Legal Requirements.

                  (iii) The Seller shall, from time to time, propose any
improvements, range or line extensions, product equivalents and other
therapeutic, comfort or barrier products or other products that are applied to
the skin that are developed or conceived by it. The Product Specifications
thereof shall be owned by the Buyer. Each product or device added to such
Product Specifications shall be included in the Restricted Business.

         (b)      Inspection.

                  (i) At the Buyer's sole cost and expense, the Buyer may, in a
commercially reasonable manner, inspect, observe and test Products to be
supplied under this Agreement and the Seller's inspection and quality control
procedures applicable to the manufacture of the Products and any other
activities performed by the Seller under this Agreement. Such inspections,
testing and observations may be made at the Seller's manufacturing plant. The
Seller shall make available to the Buyer, in a commercially reasonable manner,
complete access to all data derived from such procedures.

                  (ii) Any such inspections made by the Buyer under Section
3(b)(i) of this Agreement are for the sole benefit of the Buyer and may not be
relied upon by the Seller nor shall such inspection or failure to inspect
diminish or impair the obligations of the Seller under this Agreement.

                  (iii) The Seller and the Buyer shall reasonably cooperate with
each other to (A) correct any problems identified by the Buyer as a result of
the Buyer's inspections or observations of the Seller's inspection and quality
control procedures, and (B) make improvements to such procedures as reasonably
suggested by the Buyer to the extent reasonably feasible and practicable.

                  (c) Warranties. The Seller warrants that all of the Products
delivered hereunder will conform strictly to the Product Specifications and to
production samples furnished by the Seller, and will be merchantable, of good
material and workmanship and free from defect. This warranty shall survive
inspection or acceptance of any Products by the Buyer and payment thereof by the
Buyer. The Seller's obligations under this Section 3(c) shall apply only to
failure to meet the foregoing warranties occurring within six (6) months from
the date of delivery, provided the Seller is given notice within thirty (30)
days following the Buyer's receipt of notification of any such occurrence and
provided the defective Products or part thereof are made available to the
Seller. If any of the Products or part thereof fails to meet the foregoing
warranties, the Seller shall repair or, at its option, replace such Products.
The Seller's obligation under this Section 3(c) shall not apply to any Products
or part thereof which:

                  (i) are not properly stored, used, or maintained, or are
modified other than pursuant to the Seller's instructions; or

                  (ii) have been subjected to any other kind of misuse or
detrimental exposure or have been involved in an accident.

                                      -3-


                  (d) The Buyer agrees to indemnify and hold harmless the
Seller, and any of the Seller's Affiliates, and their respective directors,
officers, employees, agents, successors and assigns, from and against any and
all liabilities, obligations, claims, demands, damages, penalties, settlements,
causes of action, costs and expenses, including, without limitation, all
reasonable attorney's fees, expenses and disbursements, that may be imposed
upon, incurred by or asserted against any of them resulting from or arising out
of the use of any Product in a manner or in connection with an application not
so used by the Buyer on or prior to the date hereof or that has been approved by
the Seller.

         4.       ORDERING; FORM OF PURCHASE ORDERS.

         (a)      Ordering.

                  (i) The Buyer from time to time may place written purchase
orders (each, a "Purchase Order" and collectively, the "Purchase Orders") with
the Seller for Products that the Buyer desires to purchase. Each Purchase Order
shall designate the quantities and types of Products to be purchased by the
Buyer from the Seller with respect to such Purchase Order, together with the
Buyer's proposed delivery schedule and shipment destinations therefor.

                  (ii) Within five (5) business days of the Buyer's delivery to
the Seller of a Purchase Order, the Seller shall provide to the Buyer written
confirmation of the Seller's receipt and written notice of the Seller's
acceptance or rejection of such Purchase Order. The Seller shall not reject any
Purchase Order that complies with the terms and conditions of this Agreement
unless the Seller objects to the Buyer's proposed delivery schedule. Any notice
of rejection (a "Notice of Rejection") shall describe in reasonable detail the
reasons for such rejection. If the Seller fails to deliver a timely Notice of
Rejection with respect to the Purchase Order, the Seller shall be deemed to have
accepted such Purchase Order.

                  (iii) If the Seller objects to the Buyer's proposed delivery
schedule contained in a Purchase Order, then, in the Seller's Notice of
Objection, the Seller shall provide to the Buyer the Seller's proposed delivery
schedule therefor. If the Buyer objects to the Seller's proposed delivery
schedule, then, within five (5) business days after the Seller's delivery
thereof, the Buyer shall give the Seller written notice of such objection. If
the Buyer gives any such written notice, then the Buyer and the Seller shall
negotiate in good faith to determine a mutually acceptable delivery schedule, it
being recognized that the manufacture of Products with different specifications
than the Initial Product Specifications or any prior approved Modified Product
Specifications may require additional lead time. Such mutually acceptable
delivery schedule shall be confirmed in a writing signed by each of the Buyer
and the Seller. If the Buyer does not give the Seller written notice of the
Buyer's objection to the Seller's proposed delivery schedule within the
foregoing five (5) day period, then the Buyer shall be deemed to have accepted
the Seller's proposed delivery schedule. In no event shall a delivery schedule
provide for a shipment date beyond the date on which this Agreement is set to
expire unless specifically agreed in writing by the Buyer and the Seller.

                  (b) Purchase Orders. Each Purchase Order shall be sent to the
Seller via facsimile (or such other means as the Seller and the Buyer may
mutually agree) and shall be in form and substance reasonably satisfactory to
the Buyer and the Seller. No purchase order,

                                      -4-


acknowledgment or other document shall be construed or deemed to be an amendment
of or supplement to this Agreement unless each of the following occurs: (i)
specific reference is made to this Agreement; (ii) there is a specific reference
to the Section numbers of this Agreement that are intended to be amended or
supplemented; (iii) the parties express their mutual intention to be legally
bound by such amendment or supplement; and (iv) such order, acknowledgment or
other document is manually signed by both parties.

         5.       SHIPMENT; RISK OF LOSS.

                  (a) Shipment. The Seller shall deliver the Products ordered by
the Buyer pursuant to a Purchase Order in accordance with the delivery schedule
set forth in such Purchase Order (or in accordance with a delivery schedule
mutually agreed upon by the Buyer and the Seller pursuant to the provisions of
Section 4(a)(iii) of this Agreement) or, if no delivery date is specified,
within thirty (30) days after the Seller's acceptance or deemed acceptance of
the Purchase Order relating thereto. The Buyer shall specify the common carrier
(if any) for shipment, and the Buyer shall, in coordination with the Seller,
make all necessary scheduling arrangements with such carrier. All Products shall
be shipped in the Seller's standard containers, which containers will be the
same as those previously used by Thermo Cote, Inc.; provided, however, that if
the Seller shall seek to change such containers, such change shall be subject to
the Buyer's approval.

                  (b) Risk of Loss. All shipments shall be designated F.O.B.
Seller's location. Title and risk of loss for casualty or damage to or loss of
the Products shall pass to the Buyer upon delivery thereof to the common carrier
designated by the Buyer. The Buyer will be responsible for filing freight
claims. The Seller shall cooperate with the Buyer with respect to any such
freight claims.

                  6. PURCHASE PRICE; PAYMENT TERMS. The Buyer shall pay the
Seller for the quantities of Product shipped pursuant to a Purchase Order at the
prices set forth on Exhibit B hereto. The Seller shall submit an invoice to the
Buyer for payment of Products corresponding to a Purchase Order upon or after
shipment of such Products to the Buyer. The Buyer shall pay such invoices within
thirty (30) days after date of invoice.

         7.       CONFIDENTIAL INFORMATION.

                  (a) Obligations of Confidentiality. During the Term and at all
times thereafter, neither the Seller nor the Buyer shall disclose any of the
other party's Confidential Information (as defined below). The foregoing shall
not prohibit disclosures (i) made to such party's employees or agents who have a
"need to know" the other party's Confidential Information to the extent
necessary to perform such party's duties and obligations under this Agreement or
(ii) compelled to be made by any requirement of law or pursuant to any legal or
investigative proceeding before any court, or governmental or regulatory
authority, agency or commission so long as the party so compelled to make
disclosure of Confidential Information pertaining to the other party provides
prior written notice to such other party and uses its commercially reasonable
efforts to cooperate with such other party to obtain a protective order or other
similar determination with respect to such Confidential Information.

                                      -5-


                  (b) Obligations of Non-Use. During the Term and at all times
thereafter, neither the Buyer nor the Seller shall use any of the other party's
Confidential Information for its own direct or indirect benefit, or the direct
or indirect benefit of any third party, except that each of the Buyer and the
Seller may use the other party's Confidential Information to the extent
necessary to perform its duties and obligations, or to enforce such party's
rights, under this Agreement.

         (c)      Safeguarding of Confidential Information.

                  (i) Each of the Seller and the Buyer shall safeguard the other
party's Confidential Information that is in its possession or control and shall
use at least that same care and caution that it affords its own Confidential
Information to protect the other party's Confidential Information from
disclosure to third parties. Upon request, and upon the expiration or earlier
termination of this Agreement, each of the Seller and the Buyer shall promptly
return and cause the return to the other party of all materials in its
possession or control that contain the other party's Confidential Information.

                  (ii) All employees of the Seller or the Buyer shall be
obligated to assign, turnover and never use for any purpose, other than in
connection with the employment of such Employee by such Seller or the Buyer, all
inventions, knowhow, methods, formulations or other data used in or useful for
the manufacture, use or sale of Gel. The respective Buyer and Seller shall be
responsible for the enforcement thereof.

                  (d) Definition of Confidential Information. As used in this
Agreement, the term "Confidential Information" shall mean any and all technical,
financial, commercial or other information of the Seller or the Buyer, as
applicable, other than information that (i) is readily available to the general
public through no fault or omission of the other party or any of such other
party's employees or agents or (ii) is already known to such other party (except
for information already known by reason of disclosure from the party about whom
such information pertains or from such party's employees or agents). Failure to
mark any information as confidential or proprietary shall not adversely affect
its status as "Confidential Information."

         8.       INSURANCE.

                  (a) Maintenance. The Seller shall purchase and maintain, from
an insurance company reasonably acceptable to the Buyer, appropriate commercial
product liability and blanket contractual liability insurance coverage for the
mutual benefit of the Seller and the Buyer, with coverage territory specified as
"World Wide," with limits not less than $1,000,000.00 per occurrence and in the
aggregate annually for bodily injury and property damage, and subject to not
less than the standard retentions adopted for similar products.

                  (b) Insurance Certificates; Subrogation Waiver. Within five
(5) business days after the execution and delivery of this Agreement, the Seller
shall furnish the Buyer with certificate(s) of insurance evidencing the required
insurance coverages, naming such other party as an additional insured, and
providing for at least thirty (30) days' prior written notice of cancellation or
modification. The Seller shall furnish similar certificate(s) to the Buyer upon
each renewal or procurement of such insurance coverage for so long as the Seller
is required to

                                      -6-


maintain insurance under this Agreement. The Seller, for itself and its
insurers, hereby waives, to the extent that such waiver does not invalidate the
applicable insurance policy, subrogation against the Buyer.

         9.       TERM AND TERMINATION; DEFAULT.

                  (a) Term. The term of this Agreement shall begin on the
Effective Date (as such term is defined in Section 11 hereof) and shall end on
the date that is the fifth (5th) anniversary of the Effective Date, or on such
earlier date as this Agreement may be terminated pursuant to Section 9(b) of
this Agreement (the "Initial Term"). Thereafter, this Agreement shall
automatically renew for successive periods of one (1) year each (each a "Renewal
Term," and together with the Initial Term, the "Term") unless either the Buyer
or the Seller shall have given the other written notice of its intent not to
renew this Agreement at least ninety (90) days before the end of the Initial
Term or the then current Renewal Term, as applicable.

         (b)      Early Termination.

                  (i) Either the Buyer, on the one hand, or the Seller, on the
other hand (the "non-breaching party"), may terminate this Agreement upon
written notice to the other party (the "breaching party") following the breach
of such breaching party's material obligations under this Agreement that
continue unremedied for a period of thirty (30) days after the delivery of
written notice by the non-breaching party to the breaching party specifying in
reasonable detail the nature of such breach. If such breach is not capable of
cure within such thirty (30) day period, so long as the breaching party is using
its commercially reasonable efforts to effect a cure (but not longer than ninety
(90) days), no notice of termination may be given.

                  (ii) Either the Buyer, on the one hand, or the Seller, on the
other hand, may terminate this Agreement upon written notice if the other party
shall (A) generally fail to pay its debts as such debts become due; (B) become
or otherwise declare itself insolvent; (C) file a voluntary petition for
bankruptcy protection; (D) have filed against it any involuntary bankruptcy
petition that remains undismissed for a period of thirty (30) days from the date
thereof; (E) make any assignment for the benefits of creditors; (F) have a
custodian, receiver, trustee, liquidator, administrator or person with similar
powers appointed against it or its properties, which appointment is not stayed
or vacated within sixty (60) days from the date of such appointment, or (G) take
any action to authorize, acquiesce in or for the purposes of effectuating any of
the foregoing.

                  (c) Effect of Expiration or Early Termination; Remedies;
Survival.

                  (i) The expiration or earlier termination of this Agreement
shall not relieve the parties of any obligations arising before the date of such
expiration or termination and shall not constitute a waiver of any right or
remedy of the parties as a result of breach or default.

                  (ii) If this Agreement is validly terminated under Section
9(b)(i) of this Agreement, any and all rights and remedies available to the
non-breaching party, whether under this Agreement, at law or in equity shall be
preserved and survive the termination of this Agreement.

                                      -7-


                  (iii) Section 7 of this Agreement shall survive the expiration
or earlier termination of this Agreement.

                  10. Buyer's Purchase Option; Seller's Put Option.

                  (a) Purchase Option. The Seller hereby grants to the Buyer or
any of the Buyer's Affiliates designated by the Buyer an irrevocable right and
option (the "Purchase Option") to purchase the assets or shares of the Seller's
gel manufacturing business (the "Business"). The Purchase Option shall be
exercisable by written notice delivered by the Buyer (or the applicable Buyer
Affiliate) to the Seller at any time from and after the third (3rd) anniversary
of the date of this Agreement and prior to the date one hundred eighty (180)
days after such third (3rd) anniversary. The purchase price to be paid by the
Buyer under the Purchase Option shall be determined in accordance with the
formula set forth on Exhibit C attached to this Agreement and shall be payable
in cash on the Closing (as such term is defined in Section 10(c) of this
Agreement). If the Purchase Option is exercised, then the applicable parties
shall negotiate in good faith (other than with respect to price) with a view
towards concluding a written definitive agreement containing representations,
warranties and indemnities similar to those set forth in the Purchase Agreement
and a non-competition agreement similar in scope and coverage, as applied to
Products, to the Non-Compete for the purchase of the Business within ninety (90)
days after the date on which the Buyer (or the Buyer's Affiliate) delivered the
exercise notice to the Seller.

                  (b) Put Qption. The Buyer hereby grants to the Seller an
irrevocable right and option (the "Put Option") to cause the Buyer to purchase
the assets or shares of the Business. The Put Option shall be exercisable by
written notice delivered by the Seller to the Buyer at any time from and after
the fifth (5th) anniversary of the date of this Agreement and prior to the date
one hundred eighty (180) days after such fifth (5th) anniversary. The purchase
price to be paid by the Buyer under the Put Option shall be determined in
accordance with the formula set forth on Exhibit C attached to this Agreement
and shall be payable in cash on the Closing (as such term is defined in Section
10(c) of this Agreement). If the Put Option is exercised, then the applicable
parties shall negotiate in good faith (other than with respect to price) with a
view towards concluding a written definitive agreement containing
representations, warranties and indemnities similar to those set forth in the
Purchase Agreement and a non-competition agreement similar in scope and
coverage, as applied to Products, to the Non-Compete for the purchase of the
Business within ninety (90) days after the date on which the Seller delivered
the exercise notice to the Buyer.

                  (c) Closing. The consummation of any conveyance resulting from
the exercise of the Purchase Option or the Put Option (as applicable, the
"Closing") shall occur on a date that is not later than ninety (90) days after
the date on which a definitive agreement providing for the purchase of the
Business is concluded. The Closing shall occur at a place and time as shall be
mutually agreeable among the applicable parties. At the Closing, the purchasing
party shall deliver the consideration to be paid for the Business against
delivery by the Seller of such endorsements, assignments and other instruments
of transfer and conveyance including, without limitation, waivers or consents
from lessors and other third parties, and releases, satisfactions, and
termination statements from secured parties, as may be necessary to vest in the

                                      -8-


purchasing party indefeasible legal and beneficial title to the Business, free
and clear of all liens, encumbrances, pledges and similar claims and burdens.

         11.      MISCELLANEOUS.

                  (a) Force Majeure. Notwithstanding anything to the contrary
set forth in this Agreement, neither the Buyer nor the Seller shall be liable in
damages, nor shall either the Buyer or the Seller have the right to terminate
this Agreement for any delay or default in performing any obligation hereunder,
if such delay or default is caused by acts of God, governmental restrictions or
regulations, wars or insurrections, labor strikes, fire, floods, or
work-stoppages; provided, however, that the party so affected shall employ such
reasonable actions to avoid or to remove such cause of non-performance, and
shall continue performance under this Agreement with the utmost dispatch
whenever the relevant cause is abated; provided, further, however, that if
either the Buyer or the Seller is unable to fulfill any relevant obligation
under this Agreement due to any such cause, and this situation continues for a
period of one hundred eighty (180) days, then the other party shall have the
right to terminate this Agreement by written notice.

                  (b) Specific Performance. The parties acknowledge that either
party's breach or threatened breach of any provision of Section 2 or Section 7
of this Agreement will cause continuing and irreparable injury to the other
party for which monetary damages would not be an adequate remedy. Accordingly,
each of the parties shall be entitled, as a matter of right, to injunctive
relief, including specific performance, with respect to any such breach or
threatened breach. In connection therewith, the party against whom such relief
is sought shall not, in any action or proceeding to so enforce any provision of
Section 2 or Section 7 of this Agreement assert the claim or defense that an
adequate remedy at law exists or that injunctive relief is not appropriate under
the circumstances.

                  (c) Independent Contractor. This Agreement is not intended to
create, a partnership or joint venture, and neither party shall have any
authority to create any obligations or make any representations or warranties on
behalf of any other party. The Seller is performing its duties and obligations
under this Agreement as an independent contractor. Nothing contained in this
Agreement shall be deemed to constitute the Seller or any of its employees or
agents as an employee of the Buyer or any of the Buyer's Affiliates, and neither
the Seller nor any of its employees or agents shall be entitled by virtue of
this Agreement to any benefits afforded generally to employees of the Buyer or
any of the Buyer's Affiliates.

                  (d) Assignment. This Agreement may not be assigned nor may any
right or obligation under this Agreement be assigned or delegated by any party
to this Agreement to a third party without the prior written consent of the
other party; provided, however, that, the Buyer may freely assign this Agreement
to any of the Buyer's Affiliates.

                  (e) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and shall be binding upon and, subject to
the provisions of this Agreement, inure to the benefit of each of the Buyer's
and the Seller's respective successors and permitted assigns.

                                      -9-


                  (f) Entire Agreement; Amendment. This Agreement constitutes
the entire agreement among the parties and supersedes all prior agreements,
whether written or oral, with respect to the subject matter of this Agreement.
This Agreement can be amended only by a written instrument signed by the
respective duly authorized representative of the party to be charged.

                  (g) Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of this Agreement or such
provisions, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

                  (h) No Waiver of Rights. No waiver of any right of any party
under this Agreement shall be effective unless it is in writing and executed by
a duly authorized representative of the party against whom enforcement of any
such waiver is sought. No failure or delay on the part of any party in the
exercise of any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right.
The waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach under this
Agreement.

                  (i) Notices. All notices, requests, demands, waivers and other
communications required or permitted under this Agreement shall be in writing
and shall be hand delivered or sent by registered or certified mail, postage
prepaid, or by telecopier or recognized overnight courier, to the intended
recipient at the address and attention designated for such party on the
signature pages to this Agreement or to such other address or attention as the
recipient may have designated in writing. Any such notice or communication shall
be deemed delivered as follows: if hand delivered, on the day so delivered; if
mailed, three (3) business days after the date so mailed; if telecopied, upon
telephone confirmation of receipt; and if sent by recognized overnight courier,
one (1) business day after the date deposited with such courier.

                  (j) Exhibits and Headings. The exhibits attached to this
Agreement are incorporated into this Agreement by reference. The headings used
in this Agreement are for convenience only and are not intended to define or
limit the contents or substance of any provision of this Agreement.

                  (k) Governing Law. This Agreement shall be governed and
construed as to its validity, interpretation and effect by the laws of the State
of New York without regard to the conflict or choice of law rules of New York.

                  (1) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                  (m) Expenses. The parties shall bear their own respective
expenses incident to the preparation, negotiation and execution of this
Agreement and to the performance of their respective obligations under this
Agreement.

                                      -10-

                  (n) "Affiliate" Defined. As used in this Agreement, the term
"Affiliate" shall mean, when used with reference to either the Buyer or the
Seller, any person or entity that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with the
Buyer or the Seller, as applicable. For purposes of this Agreement, "control"
(including with correlative meanings "controlling," "controlled by," or "under
common control with") means: (i) the direct or indirect ownership, in the
aggregate, of at least 50% of the outstanding voting securities of an entity;
(b) the right to receive directly or indirectly, in the aggregate, at least 50%
of the profits or earnings of an entity; or (c) the right or power, directly or
indirectly, to direct or cause the direction of the policy decisions of an
entity, whether by ownership of voting securities, contract or otherwise.

                  (o) "Effective Date" Defined. As used in this Agreement, the
term "Effective Date" shall mean the date of the consummation by the Seller of
the acquisition of the business of Thermo Cote, Inc., whether such acquisition
is in the form of a merger, stock purchase or acquisition of all, or
substantially all, of the assets of Thermo Cote, Inc. The parties hereto agree
that if such acquisition shall not have been consummated on or prior to December
31, 1999, this Agreement shall terminate and the provisions hereof shall be of
no further force and effect.

                  (p) "Change in Control" Defined. As used in this Agreement,
the term "Change in Control" shall mean and shall be deemed to have occurred on
the date on which Joel E. Bickell or his heirs and devisees shall cease to have,
directly or indirectly, beneficial ownership of, or voting control over, a
majority of the voting power of the Seller, whether by issuance, sale or
transfer of shares or by sale of all or substantially all of the assets of the
Seller that are used in connection with the Business.


                                      -11-


                  IN WITNESS WHEREOF, each of the parties have caused their
respective duly authorized representatives to execute this Agreement as of the
date first above written.

                         SILIPOS, INC.

                         By:___________________________
                                   (Signature)

                         Print Name:____________________

                         Title:_________________________

                         Address for Notices:
                         -------------------
                         Silipos, Inc.
                         7049 Williams Road
                         Niagara Falls, NY 14304
                         Attention: President
                         ---------

                         With a copy to:

                         SSL International plc
                         Toft Hall, Knutsford
                         Cheshire WA 16 9PD
                         England
                         Attention: Corporate Secretary

                         POLY-GEL, L.L.C.
                         By:  Gel Holdings L.L.C., Managing Member


                         By:___________________________
                            Joel E. Bickell, Managing Member

                         Address for Notices:
                         --------------------
                         Poly-Gel, L.L.C.
                         c/o Joel E. Bickell
                         435 East 79th Street, #10 C
                         New York, NY 10021


                                      -12-

EX-31.1

                                                                    EXHIBIT 31.1


                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

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 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 report;

3. Based on my knowledge, the financial statements and other financial
information included in this 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 report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


November 12, 2004                     By:         /s/
                                                  ----------------------
                                      Name:       Andrew H. Meyers
                                      Title:      President and
                                                  Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Joseph P. Ciavarella, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Langer, Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements and other financial
information included in this 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 report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


November 12, 2004                      By:         /s/
                                                   ------------------------
                                       Name:       Joseph P. Ciavarella
                                       Title:      Vice President and
                                                   Chief Financial Officer

EX-32.1

                                                                    EXHIBIT 32.1


                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Andrew H. Meyers, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Langer, Inc. on Form 10-Q for the period ended September 30, 2004,
fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Quarterly
Report on Form 10-Q fairly presents in all material respects the financial
condition and results of operations of Langer, Inc.


A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.


  November 12, 2004                       By:         /s/
                                                      ----------------------
                                          Name:       Andrew H. Meyers
                                          Title:      President and
                                                      Chief Executive Officer

EX-32.2

                                                                    EXHIBIT 32.2


                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
                                   PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Joseph P. Ciavarella, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Langer, Inc. on Form 10-Q for the period September 30, 2004, fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that information contained in such Quarterly Report on
Form 10-Q fairly presents in all material respects the financial condition and
results of operations of Langer, Inc.


A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.


  November 12, 2004                         By:         /s/
                                                        ----------------------
                                            Name:       Joseph P. Ciavarella
                                            Title:      Vice President and
                                                        Chief Financial Officer