<PAGE>
                        SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC 20549
 
                                    FORM 10-K 
        FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934

                            -------------------------
 
    [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934

                 For the fiscal year ended February 28, 1997

                                       OR

 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT OF 1934
 
                           Commission File No. 0-12991
 
                     THE LANGER BIOMECHANICS GROUP, INC. 
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)
 

         New York                                  11-2239561
-----------------------------                ---------------------------
(State or other jurisdiction                  (I.R.S. employer 
 of incorporation or                           identification number)
 organization)  

              450 Commack Road, Deer Park, New York 11729
             ----------------------------------------------
           (Address of principal executive offices) (Zip code)
 
    Registrant's telephone number, including area code:(516) 667-1200
 
     Securities registered pursuant to Section 12(b) of the Act: NONE
 
       Securities registered pursuant to Section 12(g) of the Act:
 
              Common Stock, par value $.02 per share
              --------------------------------------
                          TITLE OF CLASS
 
                       * * * * * * * * * * *
 
    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       
       ------              ------
 

<PAGE>

    Indicate by check mark if disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-K is not contained herein, and will not be 
contained, to the best of Registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of this Form 
10-K or any amendment to this Form 10-K. (X)
 
    As of May 15, 1997, the aggregate market value of voting stock held by 
non-affiliates of the Registrant was $2,766,253 as computed by reference to 
the average bid and ask prices of the stock (1 11/16) multiplied by the 
number of shares of voting stock outstanding on May 15, 1997 held by 
non-affiliates (1,639,261).
 
    Indicate the number of shares outstanding of each of the Registrant's 
classes of common stock as of May 15, 1997.
 
<TABLE>
<CAPTION>

                                                              OUTSTANDING AT
CLASS OF COMMON STOCK                                          MAY 15, 1997
---------------------                                         --------------
<S>                                                         <C>
Common Stock, par value................................       2,584,281 shares
 $.02 per share

</TABLE>

                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Not applicable.
 

 
                                       2
<PAGE>

                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
    The Langer Biomechanics Group, Inc. ("LBG" or the "Company") is engaged 
in the design, manufacture and marketing of foot and gait-related 
biomechanical products. The Company's largest product line, custom-made, 
prescription orthotic devices, accounted for approximately 85.5% of revenues 
for the fiscal year ended February 28, 1997. Foot orthoses are contoured 
molds made from plastic, graphite, leather or composite materials, which are 
placed in patients' shoes to (i) correct or mitigate abnormalities in their 
gait and (ii) relieve symptoms associated with foot or postural malalignment. 
These devices function by maintaining the proper relationships between a 
patient's forefoot, rearfoot, leg and horizontal walking surface. To the 
Company's knowledge, it has the greatest overall unit volume and revenue in 
the custom foot orthoses industry. The Company's customers are primarily 
podiatrists, and also include orthopedists, physical therapists and Orthotic 
& Prosthetic (O&P) centers. The Company also makes ankle foot orthoses 
("AFO"), boot-like devices which assist individuals afflicted with 
neurological impairments, foot deformities and injuries to achieve a more 
natural gait.
 
    In addition to its line of orthotics products, the Company has developed 
and markets a number of other products that help treat biomechanical medical 
problems related to feet and gait, including: 

- A proprietary medical grade soft tissue cushioning material named 
    PPT-Registered Trademark-, which the Company believes provides 
    superior protection against forces of pressure, shock and shear. 
    PPT conforms and bonds to a broad array of orthotic and prosthetic devices,
    braces and assemblies; and 

- The Pediatric Counter-Rotation System ("CRS"-Registered Trademark-), a device
    which corrects in-toe/out-toe disorders of infancy, while allowing 
    unrestricted movement of the feet and legs.
 
BACKGROUND
 
    Since its formation under the laws of the state of New York in 1971, the 
Company has engaged in activities relating to the application of scientific 
and quantitative methods for the diagnosis and treatment of foot and 
gait-related problems. To date, the majority of the Company's revenues have 
been derived from the sale of prescription biomechanical foot orthotic 
devices to health care practitioners in the field of podiatric biomechanics. 
Podiatric biomechanics deals essentially with the structure and function of 
segments of the feet as they relate to each other and to the function of the 
legs, hips and spine.
 
    The Company has also endeavored to manufacture and market complementary 
products relating to locomotor dysfunctions. Building on its experience in 
treating disorders associated with the biomechanics of the foot and leg, the 
Company has directed efforts towards producing therapeutic products which can 
treat and improve patients' motor capabilities, biomechanical alignment and 
function.
 
                                       3
<PAGE>

    Sales by product category of the Company as derived from its accounting
records are set forth below (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                                   FISCAL YEARS ENDED:
                                                                        ------------------------------------------

                                                                         FEB. 28   FEB. 29,   FEB. 28,   FEB. 28,
PRODUCT CATEGORY                                                          1997       1996       1995       1994
-------------------                                                     ---------  ---------  ---------  ---------
<S>                                                                     <C>        <C>        <C>        <C>
Custom Orthoses.......................................................  $   8,994  $   8,652  $   8,746  $   9,671
PPT Products..........................................................      1,085      1,121      1,168      1,433
Counter Rotation System (CRS).........................................        129        165        207        219
Materials and Other (including Superform).............................        307        175        194        101
Discontinued Product Line.............................................     --         --            152        240
                                                                        ---------  ---------  ---------  ---------
Total.................................................................  $  10,515  $  10,113  $  10,467  $  11,664
                                                                        ---------  ---------  ---------  ---------
                                                                        ---------  ---------  ---------  ---------
</TABLE>
 
    Export and foreign sales constituted approximately 25%, 24% and 22% of
revenues for the fiscal years ended February 28, 1997, February 29, 1996 and
February 28, 1995, respectively.
 
CUSTOM ORTHOTIC DEVICES
 
    The Company is engaged in the design, development, manufacture and sale 
of custom-made foot orthoses. Biomechanical orthotic devices help provide 
near normal function by maintaining the angular anatomical relationships 
between the patient's forefoot, rearfoot, leg and horizontal walking surface. 
This is achieved by the inherent contours of the neutral position shell of 
the device and by the angled posts on the front and/or rear ends which cause 
the orthotic device to move into specific positions at specific times during 
the gait cycle. Accordingly, muscle action is enhanced and the efficiency and 
smoothness of weight stress transmission through the feet and legs is 
improved. The result is a reduction of abnormal motion without total 
restriction of normal motion and an increase in foot and leg stability. Foot 
problems may be alleviated or eliminated, as may leg and back fatigue caused 
by improper muscle use. The formation and further growth of excrescences 
(e.g., corns or callouses) may be prevented, decreased in size or eliminated. 
In addition, the future formation of bunions may be prevented.
 
    During the twelve months ended February 28, 1997, sales of orthotic
products totaled $8,994,000, compared to $8,652,000 for the twelve months 
ended February 29, 1996. Increased revenues resulted from increased unit 
volume.
 
    While sales were primarily made to practitioners within the United 
States, the Company also sold its orthotic products in approximately 
twenty-one foreign countries. No single orthotic customer presently accounts 
for more than 1% of the Company's annual sales. The primary market for custom 
orthotic devices is podiatrists who prescribe such devices for their 
patients. There are approximately 12,800 practitioners of podiatry licensed 
in the United States. Orthotic devices are also sold to other health care 
professionals, such as orthopedists, engaged in the treatment of the foot. 
The cost of the device to the patient is typically included by the 
practitioner as part of his fee for treatment. The Company does not sell the 
devices directly to the user-patient. Orthotic devices are made in the 
Company's three facilities in Deer Park, New York; Brea, California; and 
Stoke-on-Trent, England. The prescribing practitioner furnishes plaster 
impression casts of the patient's feet and necessary clinical information on 
an appropriate prescription order form. In addition to its six-month 
warranty, the Company offers an optional "Protect Program" at an additional 
cost of $52 per pair of orthoses. Under the program, the 


                                       4
<PAGE>

Company will repair or replace the orthotics at no charge, or at a reduced 
charge, during the first 24 months following sale.
 
    Biomechanical orthotic devices can be fabricated with different 
functional capabilities and from various materials, depending upon the 
requirements of the patient. The Company has designed orthotic devices to 
address the needs of particular segments of the market. For example, the 
general interest in physical fitness has resulted in demand for orthotic 
devices and it has heightened the awareness of the importance of proper foot 
function and foot care. To address this segment of the market, the Company 
manufactures an extensive line of orthotics called Sporthotics-Registered 
Trademark-, designed for the specific needs of runners and other 
sport-specific athletes, including football, basketball and tennis players. 
Other specialized products include: Healthflex-Registered Trademark-(designed 
for the needs of aerobic dance, walking and exercise enthusiasts), 
DesignLine-Registered Trademark- (a functional orthotic designed to fit into 
dress shoes, such as high fashion shoes and loafers which cannot accommodate 
a full-size orthotic), DressFlex-TM- (a unique proprietary device for use in 
women's high-heeled shoes), Slimthotics-TM- (designed to fit into shoes, such 
as high heels and ballet slippers), Lyte Fit-TM- (ultra-thin and lightweight 
devices made from LBG's exclusive Superform-TM-carbon graphite material), the 
Golden Series-TM- (designed for the needs of active individuals who are over 
50 years of age), Bioflex-Registered Trademark-(devices suitable for younger, 
more active individuals), BlueLine-TM-(a flexible, durable, accommodative 
device that provides a moderate level of control), D.S.I.S.-Registered 
Trademark- (a patented device for the effective treatment of pediatric flat 
foot), and Diab-A-Thotics-Registered Trademark- (designed to meet the needs 
of diabetic patients in the growing diabetic population).
 
    An additional product line called "FirstChoice" was introduced in fiscal 
1995 in order to address price-sensitive market areas, including managed care 
organizations. The product offering is limited to several basic products and 
has flat rate pricing. The manufacturing and service areas are also limited 
in order to reduce costs.
 
    Superform-C- is a proprietary composite material believed to be superior 
to other composite materials available for orthotic fabrication. Superform 
was first introduced in fiscal 1994 in several of the Company's orthotic 
products due to its strength and mouldability. During fiscal 1995, the 
Company began to market Superform to other orthotic labs.
 
    Ankle Foot Orthoses ("AFO") are plastic devices which are composed of a 
foot plate and leg support. They assist individuals afflicted with 
neurological impairments, previous trauma, ankle and leg instability, and 
arthritic deformities, to achieve a more natural gait. These products include 
the Hinged Ankle Foot Orthosis ("HAFO") used for neurological problems, the 
Supra-Malleoloar Orthosis ("SMO") for instability of the ankle joint, the 
Solid Ankle Foot Orthoses ("SAFO") to restrict motion at the ankle to treat 
arthritis and other joint conditions, and the Posterior Leaf Spring ("PLS"), 
useful in tendon ruptures and flaccid drop foot. AFO devices are prescribed 
by podiatrists, physical therapists and rehabilitation therapists.
 
    While the Company obtains a number of its fabrication materials from 
single sources, it has not experienced any significant shortages other than 
occasional backorders. In most cases, any needed materials can usually be 
obtained from a distributor.
 
    The Company believes that a relatively small percentage of custom 
orthotic devices continue to be made by practitioners in their own offices or 
laboratories. The vast majority of the market is serviced by professional 
laboratories based on casts and prescriptions furnished by practitioners. 
There are several other custom orthotic laboratories that are national in 
scope which the Company believes hold approximately a combined 40% to 45% of 
the overall custom market. The remainder of the market is fragmented among 
smaller regional and local facilities.
 
    PPT-Registered Trademark- Products
 
    PPT is a medical grade soft tissue cushioning material with a high density,
open-celled urethane foam structure. PPT, a registered trademark of the Company,
is manufactured, pursuant to an agreement, for the 


                                       5
<PAGE>

Company by a large industrial manufacturing company. This company 
manufactures urethane foam materials of which PPT is a derivative. Pursuant 
to the agreement, the Company has the exclusive worldwide rights to serve 
footcare, orthopedic and related medical markets with such materials. The 
exclusive agreement has an initial 5-year term (expiring in 1997) followed 
by, absent notice to the contrary, automatic annual renewals. The Company 
plans to continue this agreement.

    The Company has developed and sells a variety of products fabricated from 
PPT including moulded insoles, components for orthotic devices, laminated 
sheets, and diabetic products. Some manufacturing operations associated with 
these products are performed by outside vendors.
 
    Sales of PPT products for the twelve months ended February 28, 1997 were 
$1,085,000 versus $1,121,000 in the prior fiscal year. The decline is 
attributable to an increase in competition from other substitute materials.
 
    In April of 1993, the Company introduced a new generation of PPT, which 
independent tests show to have improved properties over competitive 
materials. The essential function of PPT and other soft tissue supplements is 
to provide protection against forces of pressure, shock and shear. The 
Company believes that PPT's characteristics make it a superior product in its 
field. PPT has a superior "memory" that enables it to return to its original 
shape faster and more accurately than other materials used for similar 
purposes. PPT is also odorless and non-sensitizing to the skin, and has a 
porosity which helps the skin to remain dry, cool and comfortable. These 
factors are especially important in sports medicine applications.
 
    Besides podiatric use, PPT is suitable for other orthopedic and 
medical-related uses such as liners for braces and prosthetics, as shock 
absorbers and generally in devices used in sports and physical therapy.
 
    The Company has awarded exclusive distribution arrangements to certain 
leading distributors serving selected end-use markets in the United States 
and other countries. The Company sells direct to practitioners in 
non-exclusive and new markets.
 
    The market for soft tissue supplements is highly competitive. Brand 
products as well as commodity type foam rubber are all widely used. Brand 
name products include Spenco, Sorbothane, medical-grade Poron, and DCS. The 
remainder of the market is fragmented. The Company competes directly with one 
other manufacturer of cellular urethane foam.
 
THE PEDIATRIC COUNTER-ROTATION SYSTEM ("CRS")
 
    The Company introduced the CRS-Registered Trademark- device in fiscal 1987
for the correction and management of a variety of in-toe and out-toe disorders
of infancy. The disorders manifest themselves in an excessive angle, either
inward or outward, from that which is normal in the relationship of the foot to
the direction of movement.
 
    Sales for CRS totaled $129,000 during the twelve months ended February 28,
1997 compared to sales of $165,000 in the prior twelve-month period. The
decrease in revenues resulted from a reduced level of direct promotion with a
shift toward wholesale sales to distributors in the United States and overseas.
 
    The CRS is designed to replace rigid bars or splints which have
traditionally been used (since 1934) and which not only inhibit normal leg
movement and are cumbersome and inconvenient, but can also lead to permanent
knee and hip damage. Unlike rigid bars or splints, the CRS requires no specific
measurement for sizing and may be used with almost any type of children's shoes.
Also, unlike other devices, it will allow the infant unrestricted movement of
the feet and legs while maintaining the abnormal foot or feet in the corrected
position. The CRS is also designed to compensate automatically for the rapid
growth of an infant's legs and hips, thus avoiding the possibility of damage to
the hips and knees. The potential for permanent knee and hip joint damage is a
significant drawback of rigid bar therapy.

 
                                       6
<PAGE>

    The CRS is prescribed by pediatricians, orthopedists and podiatrists and 
is sold by the Company directly to practitioners as well as through selected 
distributors. The level of reimbursement from third-party insurers for the 
CRS varies from one state to another.
 
    The CRS was developed by BioResearch Ithaca, Inc. of Ithaca, New York, 
which has obtained patents on the device in the United States and certain 
other countries. In accordance with a license agreement entered into in July 
l986 between the Company and BioResearch Ithaca, Inc., the Company has been 
granted an exclusive license, with the right to grant sublicenses, to make, 
use and sell the CRS. Food and Drug Administration acceptance to market the 
CRS has been obtained by the Company. See "Governmental Regulation".
 
    The primary competitive products for the CRS are rigid bars and splints.
 
MARKETING
 
    The Company seeks to be recognized as an educator, and leader in product 
quality, customer service, technical knowledge and product innovation. The 
marketing mix includes trade shows, trade advertising, sponsorship of 
educational programs, public relations and maintenance marketing with a 
strong emphasis on customer service. The Company maintains a staff of 
customer representatives at each of its facilities.
 
    The Company believes that the increase in orthotic sales is due to 
aggressive promotion and discount programs, which resulted in increased unit 
volume together with an approximate 3.5% sales price increase effective in 
late October, 1996. Management will continue a number of marketing and 
operational initiatives to promote awareness of and incentives to purchase 
Company orthotic products. These include a volume incentive program ("VIP") 
and a practice building program. Also, the Company's marketing program 
entails the sponsorship of seminars. It includes a comprehensive program in 
biomechanics and gait analysis coupled with addressing the cost effectiveness 
of orthotic therapy.
 
RESEARCH AND DEVELOPMENT
 
   The Company incurred no research and development costs for the twelve months
ended February 28, 1997.
 
PATENTS AND TRADEMARKS
 
    The Company believes that patent and trademark protection are beneficial. 
It holds 13 patents, 107 trademarks and 9 copyrights. Various patents and 
trademarks are held in 12 countries. The Company has exclusive licenses to 
three types of orthotic devices which are patented in the U.S. and several 
foreign countries. In addition, patents have also been granted to a third 
party in the U.S. and numerous foreign countries with respect to the CRS (as 
to which the Company has exclusive marketing rights).
 
    Although a patent would have a statutory presumption of validity in the 
United States, in the event that any patent awarded to the Company or a third 
party is later tested in litigation, the issuance of a patent is not 
conclusive as to such validity or as to the enforceable scope of the claims 
therein. The validity and enforceability of a patent can be attacked after 
its issuance. If the outcome of such litigation is adverse to the owner or 
licensor of the patent, third parties may use the invention or technology 
pertaining to the patent without restriction. Accordingly, any patents 
granted to the Company or to third parties from whom the Company obtained 
licenses may not afford any protection against competitors with similar 
products. Loss of patent protection could have an adverse effect on the 
Company's business by permitting competitors to utilize techniques developed 
by the Company.

 
                                       7
<PAGE>

 
GOVERNMENTAL REGULATION
 
    Rules of the Food and Drug Administration ("FDA") may require the 
submission of a 510(k) notification of intent to market certain products. 
Upon submission of a 510(k), the FDA may determine the product to be 
substantially equivalent to products previously marketed in interstate 
commerce. Such submissions have been made and determined to be substantially 
equivalent for the CRS.
 
EMPLOYEES
 
    At March 1, l997, the Company had 157 employees, of which 106 were 
located in Deer Park, New York, 28 in Brea, California, and 23 in 
Stoke-on-Trent, England. The Stoke-on-Trent facility is operated by a 75% 
owned subsidiary of the Company. Included among the Deer Park employees are 
the four executive officers of the Company, including the Company's 
co-founder who is a licensed Doctor of Podiatric Medicine and a faculty 
member of the New York School of Podiatric Medicine.
 
    The Company considers its employee relations to be excellent. The employees
are not represented by a union.
 
CONSULTANTS AND FIELD EVALUATION FORCE
 
    The Company has oral or written agreements with four medical specialists 
with respect to their providing professional consultative services to the 
Company in their areas of specialization. Two of the consultants are on the 
faculties of the colleges of podiatric medicine in the United States.
 
    The consultants test and evaluate the Company's products, act as speakers 
for the Company at symposiums and professional meetings, generally 
participate in the development of the Company's products and services and 
disseminate information about them. The Company also has entered into oral or 
written agreements with practitioners in various parts of the country to act 
as field evaluators of the Company's products. Generally, the evaluators are 
among the leading practitioners in their areas.
 
ITEM 2. PROPERTIES
 
    The Company's executive offices, and its primary manufacturing 
facilities, are located in Deer Park, New York. The Deer Park facility is 
leased through July 31, l999, with a four year extension option, and with 
monthly lease payments of $23,414. The Company also leases space in Brea, 
California (manufacturing facility) and Northbrook, Illinois (sales office), 
under separate leases which expire through 1998, and with aggregate monthly 
lease payments of $8,265. The Northbrook Illinois facility was closed in 
October 1996 with the space sublet at $1,200 per month or approximately $150 
per month below the Company's lease cost. This sub-lease expires at the end 
of the Company's lease on July 31, 1998. A 75% owned subsidiary of the 
Company currently leases facilities in Stoke-on-Trent, England under a lease 
expiring December 31, 1998 and for which it currently pays $1,550 (at the 
current exchange rate) per month. The Company believes that its manufacturing 
facilities are suitable and adequate and provide the productive capacity 
necessary for its current and reasonably foreseeable future needs. The 
Company believes that while these manufacturing facilities are being 
adequately utilized, they could be more fully utilized (e.g. with extended 
night shift operations) should this become necessary.
 
ITEM 3. LEGAL PROCEEDINGS
  None.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    None.
 
 
                                       8
<PAGE>

                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
 
PRICE RANGE OF COMMON STOCK
 
    The Registrant's common stock, par value $.02 per share ("Common Stock"), 
is traded on the over-the-counter market with quotations reported on the 
National Association of Securities Dealers Automated Quotation System 
(NASDAQ) under the symbol GAIT. The following table sets forth the high and 
low closing bid prices for the Common Stock for the fiscal years ended 
February 29, 1996 and February 28, 1997. The NASDAQ quotations represent 
prices between dealers, do not include retail markups, markdowns or 
commissions, and may not represent actual transactions.
 
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED FEBRUARY 29, 1996                 HIGH        LOW
--------------------------------------             ---------   ---------
<S>                                                <C>         <C>
1st quarter........................                 15/16          5/8
2nd quarter........................                 2 1/8        1
3rd quarter........................                 1 7/8        1 5/16
4th quarter........................                 1 1/2        1 1/2
</TABLE>
 
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED FEBRUARY 28, 1997                 HIGH        LOW
---------------------------------------            ---------   ---------
<S>                                                <C>         <C>
1st quarter........................                 1 7/8        1 1/2
2nd quarter........................                 2 1/4        1 5/8
3rd quarter........................                 2            1 5/8
4th quarter........................                 2 1/8        1 9/16
</TABLE>
 
    On February 28, 1997, there were approximately 300 holders of record of 
the Common Stock. However, this figure is exclusive of all owners whose stock 
is held beneficially or in "street" name. Based on information supplied by 
various securities dealers, the Company believes that there are in excess of 
650 shareholders in total, including holders of record as well as those whose 
shares are beneficially held.
 
DIVIDEND HISTORY AND POLICY
 
    The Registrant has never paid cash dividends on its Common Stock and 
anticipates that, for the foreseeable future, it will follow a policy of 
retaining earnings to finance the expansion and development of its business. 
In any event, future dividend policy will depend upon the Company's earnings, 
financial condition, working capital requirements and other factors.
 
                                       9
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                 (In thousands, except per share data.)

                                                               Fiscal Year Ended:
                                                 --------------------------------------
                                                 Feb. 28,     Feb. 29,    Feb 28,    Feb. 28,    Feb. 28,
                                                   1997         1996       1995        1994        1993
                                                 --------     --------    -------    --------    --------
<S>                                            <C>          <C>         <C>        <C>         <C>
Consolidated Statement of Operations:

 Net sales                                       $10,515      $10,113     $10,467     $11,664     $13,291

 Income (loss) before non-recurring charges
   and income taxes                                  331          113        (266)       (950)        313

Non-recurring charges:
 Discontinuance of CAD-CAM project                     -         (499)          -           -           -
 Lab closings, write down of selected assets
  and legal fees                                       -          (49)       (363)          -         (61)

Income (loss) before income taxes                    331         (435)       (629)       (950)        252

Provision for (benefit from) income taxes             28           (2)          8          13          28

Net income (loss)                                    303         (433)       (637)       (963)        224

Earnings per share:

Income (loss) before non-recurring charges
 and income taxes                                    .12          .04        (.11)       (.38)        .12


Non-recurring charges:
 Discontinuance of CAD-CAM project                     -         (.19)          -           -           -
 Lab closings, write down of selected assets
  and legal fees                                       -         (.02)       (.14)          -        (.03)

Net income (loss) per common and
 common equivalent share:
  Primary                                            .11         (.17)       (.25)       (.38)        .09
  Fully Diluted                                      .11         (.17)       (.25)       (.38)        .09 

Weighted average number of common and
   common equivalent shares:
    Primary                                        2,666         2,568       2,547       2,553       2,611
    Fully Diluted                                  2,666         2,568       2,547       2,553       2,611

Cash dividends per share                               -             -           -           -           -

Consolidated Balance Sheets:

 Working Capital                                   2,050         1,576       1,456       1,871       3,115

 Total Assets                                      4,445         4,035       4,535       5,426       6,340

Long-term Indebtedness
 (excluding current maturities)                      444           430         482         551         542

Stockholders' Equity                               2,291         1,978       2,311       2,850       3,866

</TABLE>
  
                                                 10

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS
 
STATEMENTS OF OPERATIONS:
 
    The Company's net sales of $10,515,000 for the twelve months ended February
28, 1997 were 3.9 percent above net sales of $10,113,000 for the twelve months
ended February 29, 1996. Net sales in fiscal 1996 were 3.4 percent below net
sales of $10,467,000 for the twelve months ended February 28, 1995.
 
    Sales of orthotic products, which accounted for 85.5 percent of the
Company's fiscal 1997 sales, increased by approximately $342,000 or 4.0 percent
to approximately $8,994,000 in the most recent twelve-month period. Increased
revenues resulted from increased unit volume which more than offset a shift in
doctor preferences toward lower priced orthoses. A unit price increase equal to
approximately 3.5% on an annual basis became effective at the end of October,
1996. Sales of orthotic products in fiscal 1996 decreased by $94,000 or 1.1
percent to $8,652,000 from fiscal 1995. Decreased revenues resulted from
discontinuance of marginal accounts, including elimination of the unprofitable
subcontract business at a subsidiary, the earlier loss of business at a branch
lab due to poor delivery times and an unusually severe winter in the eastern
half of the United States which substantially reduced patient visits to
podiatrists in March 1994.
 
    Sales of PPT (the Company's soft tissue supplement material) for the recent
twelve months were $1,085,000, which decreased by $36,000 or 3.2 percent from
sales in the prior fiscal year. For the year ended February 29, 1996, sales were
$1,121,000 representing a 4.0 percent decrease of $47,000 from the prior year.
The decline in PPT sales over the past two fiscal years is due to an increased
level of competition.
 
    Sales of the Counter Rotation System ("CRS"-Registered Trademark-) were
$129,000 for the twelve months ended February 28, 1997, representing a $36,000
or 21.8 percent decrease from the prior twelve-month period. Sales for fiscal
1996 declined by $42,000 or 20.3 percent from the prior fiscal year. The
decreased revenue resulted from a reduced level of direct promotion together
with a shift toward wholesale sales to distributors in the United States and
overseas.
 
    Gross profit (net sales less cost of sales) as a percentage of sales
increased from 40.5 percent for the twelve months ended February 29, 1996 to
41.5 percent for the recent twelve-month period. The increased gross profit
percentage resulted from increased labor efficiencies, higher unit volumes and
the sales price increase. In addition, gross profit as a percentage of sales
increased from 39.1 percent in fiscal 1995 to 40.5 percent in fiscal 1996. This
increase was due primarily to improved labor efficiencies achieved by
consolidation of lab facilities.
 
    For the twelve-month period ended February 28, 1997, selling, general and
administrative expenses increased by $14,000 from the prior year's expense of
$4,080,000. Expense increases were due primarily to higher promotion expense in
fiscal 1997, however, as a percent of sales, these expenses were down to 38.9%
versus 40.3% in the prior fiscal year. Expenses for the fiscal year ended
February 29, 1996 were $427,000 below the prior fiscal year, a reduction as a
percent of sales from 43.1% to 40.3%. The above reductions of selling, general
and administrative expenses, as a percentage of sales, were due to tighter
controls over operational expenditures and staff reductions.
 
    The Company incurred no research and development expenses in fiscal 1997 or
fiscal 1996. All related costs ($499,000) associated with the decision to
discontinue the in-house CAD-CAM project were written off during fiscal 1996.
 
    Interest income for the recent twelve-month period of $49,000 increased
$12,000 from the prior twelve-month period. This was primarily due to higher
cash balances and more effective short-term investment of excess cash. Interest
income of $42,000 for fiscal 1995 was above fiscal 1996 because of higher
prevailing interest rates in fiscal 1995.
 
                                       11
<PAGE>

    Other income for fiscal year 1997 was $20,000. For the twelve months ended
February 29, 1996 other income was $14,000 compared with an expense of $107,000
for the prior fiscal year, a result of a write-off of certain fixed assets of
$128,000 in fiscal 1995.
 
    For the year ended February 28, 1997, the Company had net income of $303,000
compared with a profit of $115,000 before non-recurring expenses for the prior
fiscal year. Income increased primarily due to higher unit volume, a sales price
increase effective in the last four months of the year, improved manufacturing
efficiencies and reduced general and administrative expenses.
 
    For the year ended February 29, 1996, the Company had a net loss of $433,000
or $.17 per share, of which $548,000 were non-recurring expenses ($499,000 for
discontinuance of the Company's in-house CAD-CAM project and $49,000 for the
closing of our New Jersey manufacturing facility). Fiscal 1996 income of
$115,000, before non-recurring expenses, exceeded the prior year's loss of
$274,000, before non-recurring expenses, by $389,000. The increase was mainly
due to savings achieved by closing the Company's Wheeling, Illinois
manufacturing facility plus staffing cutbacks in corporate departments.
 
    For the year ended February 28, 1995, the Company had a loss of $637,000 or
$.25 per share, of which $363,000 were non-recurring expenses (Illinois lab
closing and write-down of selected assets), which compared favorably with a loss
of $963,000 or $.38 per share in the year-earlier period and reflected the
effects of improved pricing on marginal accounts, productivity improvement and
decreased staffing in lab personnel, tighter control of operating expenditures
and reduced occupancy costs.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Working capital as of February 28, 1997 increased $474,000 to $2,050,000
from $1,576,000 at February 29, 1996. The increase is due to increases in
accounts receivable, inventories and cash of $153,000, $34,000 and $386,000,
respectively. Total current liabilities also increased by $82,000 in fiscal 1997
versus fiscal 1996.
 
    Cash balances at February 28, 1997 of $1,126,000 were $386,000 above the
prior year-end balance of $739,000. The Company's net income in fiscal 1997 of
$303,000 together with $191,000 of depreciation and amortization expense were
major contributors to the cash increase. Capital expenditures in fiscal 1997
amounted to $53,000, partially offsetting this increase.
 
    The Company anticipates that cash generated from operations as well as
existing funds will be adequate to finance its present and contemplated future
level of operations for a period of at least twelve months.
 
                                       12

<PAGE>

REVOLVING CREDIT
 
    The Company has a one year (August 1, 1996--July 31, 1997) agreement for
revolving credit of $750,000, at an interest rate of prime plus 2 percent, from
a bank, but to date has not found it necessary to use this credit line. The
agreement contains, among other items, restrictions relating to incurrence of
additional indebtedness and the payment of dividends. Additionally, the Company
is required to maintain certain minimum financial ratios. Borrowings under this
agreement are collateralized by substantially all of the assets of the Company.
 
SEASONALITY
 
    Revenue derived from the Company's sale of orthotic devices, a substantial
portion of the Company's operations, have historically been significantly higher
in the warmer months of the year.

INFLATION
 
    The Company has in the past been able to increase the prices of its products
or reduce overhead costs sufficiently to offset the effects of inflation on
wages, materials and other expenses, and anticipates that it will be able to
continue to do so in the future.
 
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
 
    Recent pronouncements of the Financial Accounting Standards Board 
("FASB"), which are not required to be adopted at this date, include 
Statement of Financial Accounting Standards ("SFAS") No. 129, "Disclosure of
Information about Capital Structure" ("SFAS No. 129") and SFAS No. 128, 
"Earnings Per Share" ("SFAS No. 128"). SFAS No. 129 and 128 specify 
guidelines as to the method of computation as well as presentation and 
disclosure requirements for earnings per share ("EPS"). The objective of 
these statements is to simplify the calculation and to make the U.S. standard 
for computing EPS more compatible with the EPS standards of other countries 
and with that of the International Accounting Standards Committee. These 
statements are effective for fiscal years ending after December 15, 1997 and 
earlier application is not permitted. The Company does not expect that the 
adoption of SFAS No. 129 and 128 will have a material effect on the Company's 
consolidated financial statements.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
 
    Begins on the next page.

                                       13
<PAGE>

                      THE LANGER BIOMECHANICS GROUP, INC.
                                AND SUBSIDIARIES
 
            Index to Consolidated Financial Statements and Schedule
           February 28, 1997, February 29, 1996 and February 28, 1995
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                      ---------
<S>                                                                                   <C>
Independent Auditors' Report........................................................         15
Consolidated Financial Statements:
Consolidated Balance Sheets as of February 28, 1997 and February 29, 1996...........         16
Consolidated Statements of Operations for the years ended February 28, 1997,
  February 29, 1996 and February 28, 1995...........................................         17
Consolidated Statements of Stockholders' Equity for the years ended February 28,
  1997, February 29, 1996 and February 28, 1995.....................................         18
Consolidated Statements of Cash Flows for the years ended February 28, 1997,
  February 29, 1996 and February 28, l995...........................................         19
Notes to Consolidated Financial Statements..........................................      20-29
Consolidated Financial Statement Schedule II -
Valuation and Qualifying Accounts for the years ended February 28, 1997, February
  29, 1996 and February 28, 1995....................................................         30
</TABLE>
 
    All other schedules have been omitted because they are not applicable, not
required or the information is disclosed in the consolidated financial
statements, including the notes thereto.
 
                                       14

<PAGE>

INDEPENDENT AUDITORS' REPORT
 
To the Stockholders and Board of Directors of
The Langer Biomechanics Group, Inc. and Subsidiaries
 
We have audited the accompanying consolidated balance sheets of The Langer 
Biomechanics Group, Inc. and subsidiaries (the "Company") as of February 28, 
1997 and February 29, 1996, and the related consolidated statements of 
operations, stockholders' equity, and cash flows for each of the three years 
in the period ended February 28, 1997. Our audits also included the 
consolidated financial statement schedule listed in the foregoing index for 
the three years in the period ended February 28, 1997. These consolidated 
financial statements and financial statement schedule are the responsibility 
of the Company's management. Our responsibility is to express an opinion on 
the consolidated financial statements and financial statement schedule based 
on our audits.
 
We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the consolidated financial 
statements are free of material misstatement. An audit includes examining, on 
a test basis, evidence supporting the amounts and disclosures in the 
consolidated financial statements. An audit also includes assessing the 
accounting principles used and significant estimates made by management, as 
well as evaluating the overall consolidated financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements present fairly, in all 
material respects, the financial position of the Company at February 28, 1997 
and February 29, 1996, and the results of their operations and their cash 
flows for each of the three years in the period ended February 28, 1997 in 
conformity with generally accepted accounting principles. Also, in our 
opinion, such consolidated financial statement schedule, when considered in 
relation to the basic consolidated financial statements taken as a whole, 
presents fairly, in all material respects, the information set forth therein.
 
Jericho, New York
May 16, 1997

                                       15

<PAGE>

                        THE LANGER BIOMECHANICS GROUP, INC.
                                 AND SUBSIDIARIES
                            Consolidated Balance Sheets
                      February 28, 1997 and February 29, 1996
 
<TABLE>
<CAPTION>
                                                                       1997          1996
                                                                    -----------  ------------
<S>                                                                 <C>           <C>
                                Assets
Current assets:
 Cash and cash equivalents........................................  $  1,125,589  $    739,460
 Accounts receivable, net of allowance for doubtful accounts of
  approximately $20,000 in 1997 and $21,000 in 1996...............     1,431,567     1,278,865
 Inventories, net (Note 2)........................................       922,346       868,562
 Prepaid expenses and other current receivables...................       279,558       316,651
                                                                    ------------  ------------
   Total current assets...........................................     3,759,060     3,203,538
Property and equipment, net (Note 3 and 6)........................       507,195       644,029
Other assets (Note 8).............................................       178,771       187,666
                                                                    ------------  ------------
   Total Assets (Note 13).........................................  $  4,445,026  $  4,035,233
                                                                    ------------  ------------
                                                                    ------------  ------------
                Liabilities and Stockholders' Equity
Current liabilities:
 Current maturities of note payable (Note 6)......................  $        301  $      3,707
 Accounts payable.................................................       341,078       270,291
 Accrued liabilities:
  Accrued payroll and related payroll taxes.......................       299,519       366,122
  Other (Note 4)..................................................       677,669       599,218
 Unearned revenue.................................................       390,727       388,084
                                                                    ------------  ------------
   Total current liabilities......................................     1,709,294     1,627,422
Accrued pension expense (Note 8)..................................       287,315       299,182
Unearned revenue..................................................       151,732       126,281
Deferred income taxes (Note 5)....................................         5,376         4,629
                                                                    ------------  ------------
   Total liabilities..............................................     2,153,717     2,057,514
                                                                    ------------  ------------
Commitments and contingencies (Note 7)

Stockholders' equity (Note 9):
 Common stock, $.02 par value. Authorized 10,000,000 shares;
  outstanding 2,584,281 shares in 1997 and 2,581,281 in 1996......        51,686        51,627
 Additional paid-in capital.......................................     6,276,782     6,274,497
 Accumulated deficit..............................................    (3,740,402)   (4,043,449)
 Aggregate adjustment resulting from foreign currency
  translation.....................................................       (48,509)      (49,788)
 Minimum pension liability adjustment (Note 8)....................      (248,248)     (255,168)
                                                                    ------------  ------------
   Total stockholders' equity.....................................     2,291,309     1,977,719
                                                                    ------------  ------------
Total Liabilities and Stockholders' Equity........................  $  4,445,026  $  4,035,233
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>
 
              See accompanying notes to consolidated financial statements.
 
                                       16


<PAGE>

                      THE LANGER BIOMECHANICS GROUP, INC.
                                AND SUBSIDIARIES
                    Consolidated Statements of Operations 
For the years ended February 28, 1997, February 29, 1996 and February 28, 1995
 
<TABLE>
<CAPTION>
                                                               1997          1996           1995
                                                           ------------  -------------  -------------
<S>                                                        <C>           <C>            <C>
Net sales (Note 11)......................................  $ 10,514,842  $  10,113,486  $  10,467,151
Cost of sales............................................     6,149,872      6,012,690      6,374,708
                                                           ------------  -------------  -------------
  Gross profit...........................................     4,364,970      4,100,796      4,092,443
Selling expenses.........................................     1,828,144      1,761,498      1,964,636
General and administrative expenses......................     2,266,217      2,318,495      2,542,128
Research and development expenses........................        --             --            141,574
Discontinuance of in-house
  CAD-CAM project (Note l0)..............................        --            498,735         --
                                                           ------------  -------------  -------------
  Operating profit (loss)................................       270,609       (477,932)      (555,895)
                                                           ------------  -------------  -------------
Other income (expense):
 Interest income.........................................        48,978         37,412         42,040
 Interest expense........................................        (9,298)        (8,753)        (7,571)
 Other...................................................        20,261         14,162       (107,483)
                                                           ------------  -------------  -------------  
Other income (expense), net..............................        59,941         42,821        (73,014)
Income (loss) before income taxes........................       330,550       (435,111)      (628,909)
Provision for (benefit from) income taxes (Note 5).......        27,503         (2,126)         8,250
                                                           ------------  -------------  -------------  
Net income (loss)........................................  $    303,047     $ (432,985) $    (637,159)
                                                           ------------  -------------  -------------  
Weighted average number of common and common equivalent
  shares used in computation of net income (loss) per
  share:
  Primary................................................     2,666,420      2,568,458      2,547,281
  Fully Diluted..........................................     2,666,420      2,568,458      2,547,281

Net income (loss) per common and common equivalent share:
  Primary................................................  $       0.11  $       (0.17) $       (0.25)
                                                           ------------  -------------  -------------
  Fully Diluted..........................................  $       0.11  $       (0.17) $       (0.25)
                                                           ------------  -------------  -------------
</TABLE>
 
            See accompanying notes to consolidated financial statements.
 
                                      17
<PAGE>
<TABLE>
<CAPTION>
                                              THE LANGER BIOMECHANICS GROUP, INC.                      
                                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                
                         FOR THE YEARS ENDED FEBRUARY 28, 1997, FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
                                                                                  AGGREGATE
                                                                                 ADJUSTMENT
                                                                                  RESULTING         MINIMUM
                                              ADDITIONAL                        FROM FOREIGN        PENSION           TOTAL
                                  COMMON        PAID-IN       ACCUMULATED         CURRENCY         LIABILITY       STOCKHOLDERS'
                                   STOCK        CAPITAL         DEFICIT          TRANSLATION       ADJUSTMENT         EQUITY
                                -----------  -------------  ----------------  -----------------  --------------   ---------------
<S>                              <C>          <C>            <C>                 <C>              <C>               <C>
Balance at February 28,
   1994........................   $  50,947    $ 6,248,755    $  (2,973,305)       $ (57,490)      $   (419,088)    $  2,849,819 
Minimum pension  liability                                                                                             
adjustment.....................         --            --               --               --               88,302           88,302 
Aggregate adjustment resulting from                                                                                   
translation of financial statements 
into U.S. dollars..............         --            --               --             10,216             --               10,216 
Net loss for year..............         --            --           (637,159)            --               --             (637,159)
                                -----------  -------------  ----------------     ------------     --------------  ---------------
Balance at February 28, 1995...      50,947      6,248,755       (3,610,464)         (47,274)          (330,786)       2,311,178 

Minimum pension liability                                                                                         
adjustment.....................         --            --               --               --               75,618           75,618 
Aggregate adjustment resulting from                                                                                            
translation of financial statements 
into U.S. dollars..............         --            --               --             (2,514)            --               (2,514)
Exercise of stock options......         680         25,742             --               --               --               26,422 
Net loss for year...                    --            --           (432,985)            --               --             (432,985)
                                -----------  -------------  ----------------     ------------     --------------  ---------------
Balance at February 29, 1996...      51,627      6,274,497       (4,043,449)         (49,788)          (255,168)       1,977,719 

Minimum pension liability                                                                                                        
adjustment.....................         --            --               --               --                6,920            6,920 
Aggregate adjustment resulting from                                                                                              
translation of financial                                                                                                         
statements into U.S. dollars...         --            --               --              1,279             --                1,279

Exercise of stock options......          59          2,285             --               --               --                2,344
Net income for year............         --            --            303,047             --               --              303,047
                                -----------  -------------  ----------------     ------------     --------------  ---------------
Balance at February  28, 1997..   $  51,686    $ 6,276,782    $  (3,740,402)       $ (48,509)      $   (248,248)    $  2,291,309
                                -----------  -------------  ----------------     ------------     --------------  ---------------
                                -----------  -------------  ----------------     ------------     --------------  ---------------
</TABLE>
 
    See accompanying notes to consolidated financial statements.
 
                                       18
<PAGE>


                    THE LANGER BIOMECHANICS GROUP, INC
                              AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows
 For the years ended February 28, 1997, February 29, 1996 and February 28, 1995

<TABLE>
<CAPTION>

                                                         1997                 1996                   1995
                                                         ----                 ----                   ----
<S>                                                      <C>                  <C>                    <C>
Cash Flows From Operating Activities:

Net income (loss)                                      $303,047             ($432,985)           ($637,159)

Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Deferred foreign tax provision                            747                     -                1,589
  Depreciation and amortization                         190,618               223,778              261,407
  Loss on disposal of property and equipment                  -               392,584              196,593
Changes in operating assets and liabilities:
  Acounts receivable                                   (151,344)               (3,149)             230,900
  Inventories                                           (52,516)              (61,402)             339,727
  Prepaid expenses and other assets                      38,435                   678               50,267
  Net Pension liability                                   2,845                42,702               36,920
  Accounts payable and accrued liabilities               81,157               (96,672)            (248,914)
  Unearned revenue                                       27,484               (16,173)             (15,764)
                                                     ----------            ----------           ---------- 
Net cash provided by operating activities               440,473                49,361              215,566
                                                     ----------            ----------           ---------- 
Cash Flows From Investing Activities-
  
  Capital expenditures                                  (53,282)             (138,443)            (271,710)
                                                     ----------            ----------           ---------- 
       Net cash used in investing activities            (53,282)             (138,443)            (271,710)
                                                     ----------            ----------           ---------- 
Cash Flows From Financing Activities:

  Common stock options exercised                          2,344                26,422                    -
  Principal payments of notes payable                    (3,406)               (6,631)              (4,116)
  Principal payments under capital lease obligations          -                (2,906)             (35,470)
                                                     ----------            ----------           ---------- 
     Net cash provided by (used in) financing
       activities                                        (1,062)               16,885              (39,586)
                                                     ----------            ----------           ----------
  Net increase (decrease) in cash and cash equivalents  386,129               (72,197)             (95,730)
  Cash and cash equivalents at beginning of year        739,460               811,657              907,387
                                                     ----------            ----------           ----------
Cash and cash equivalents at end of year             $1,125,589              $739,460             $811,657
                                                     ----------            ----------           ----------
                                                     ----------            ----------           ----------
Supplemental Disclosures of Cash Flow Information-
      Cash paid (refunded) during the year for:
                   
                Interest                                 $9,298                $8,636               $7,564
                                                     ----------            ----------           ----------
                                                     ----------            ----------           ----------
                Income taxes                             $8,286                 ($488)             ($4,803)
                                                     ----------            ----------           ----------
                                                     ----------            ----------           ----------

</TABLE>

See accompanying notes to consolidated financial statements.   

                                       19
<PAGE>

                           THE LANGER BIOMECHANICS GROUP, INC.
                                   AND SUBSIDIARIES
 
                       Notes to Consolidated Financial Statements
    For the years ended February 28,l997, February 29, l996 and
February 28, 1995


(1) Summary of Significant Accounting Policies
 
    (a) Principles of Consolidation
 
        The accompanying consolidated financial statements include the accounts
        of The Langer Biomechanics Group, Inc. and its subsidiaries
        (the "Company"). All significant intercompany transactions and balances
        have been eliminated in consolidation.
 
    (b) Revenue Recognition
 
        Revenue from the sale of the Company's products is recognized at
        shipment. Revenues derived from extended warranty contracts relating to
        sales of orthotics are recorded as deferred revenue and recognized over
        the lives of the contracts (24 months) on a straight-line basis.
 
    (c) Cash Equivalents
 
        For purposes of the statement of cash flows, the Company considers all
        short-term, highly liquid investments purchased with a maturity of three
        months or less to be cash equivalents (money market funds and short-term
        commercial paper).
 
    (d) Inventories
 
        Inventories are stated at the lower of cost or market. Cost is
        determined using the first-in, first-out (FIFO) method.
 
    (e) Property and Equipment
 
        Property and equipment is stated at cost less accumulated depreciation
        and amortization. Depreciation and amortization are calculated using the
        straight-line method. The lives on which depreciation and amortization
        are computed are as follows:
 
<TABLE>
<S>                                           <C>
        Leasehold improvements...............  Lesser of 5 years or life of lease
        Machinery and equipment..............  5--10 years
        Office equipment.....................  5--10 years
        Diagnostic equipment.................  7--10 years
        Automobiles..........................  3--5 years
</TABLE>
 
        In March 1995, the Financial Accounting Standards Board issued 
        Statement of Financial Accounting Standards ("SFAS") No. 121, 
        "Accounting for the Impairment of Long-Lived Assets and for 
        Long-Lived Assets to Be Disposed Of" ("Statement 121"). Statement 121 
        establishes accounting standards for the impairment of long-lived 
        assets, certain identifiable intangibles, and goodwill related to 
        those assets to be held and used for long-lived assets and certain 
        identifiable intangibles to be disposed of. Statement 121 requires 
        review of long-lived assets and certain identifiable intangibles 
        whenever events or changes in circumstances indicate that the 
        carrying amount of an asset may not be recoverable. The adoption of 
        Statement 121, during fiscal 1997, did not have a material effect on 
        the consolidated financial statements.
 
                                       20


<PAGE>

                           THE LANGER BIOMECHANICS GROUP, INC.
                                   AND SUBSIDIARIES
 
                       Notes to Consolidated Financial Statements, Continued

    (f) Income Taxes
 
        The Company accounts for income taxes using an asset and liability
        method. Under this method, deferred tax assets and liabilities are
        determined based on differences between financial reporting and tax
        bases of assets and liabilities and are measured using the enacted tax
        rates and laws that will be in effect when the differences are expected
        to reverse. Income tax expense (benefit) is the tax payable or
        refundable for the period plus or minus the change during the period in
        deferred tax assets and liabilities.
 
    (g) Net Income (Loss) Per Share
 
        Net income (loss) per common share and common share equivalent is
        computed based on the weighted average number of common shares
        outstanding during the periods presented. Per share amounts include the
        effect of common stock equivalents comprised of stock options granted
        under the Company's qualified and non-qualified stock option plans and
        warrants, except where the effect would be antidilutive.
 
    (h) Foreign Currency Translation
 
        Assets and liabilities of the foreign subsidiary have been translated at
        year-end exchange rates, while revenues and expenses have been
        translated at average exchange rates in effect during the year.
        Resulting cumulative translation adjustments have been recorded as a
        separate component of stockholders' equity.
 
    (i) Reclassifications
 
        Certain amounts in the prior years' financial statements have been
        reclassified to conform to the current year's presentation.
 
    (j) Use of Estimates
 
        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosure of contingent assets and liabilities at the date of the
        financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
 
    (k) Fair Value of Financial Instruments
 
        At February 28, 1997 and February 29, 1996, the carrying amount of the
        Company's financial instruments, including cash and cash equivalents,
        accounts receivable, accounts payable, accrued liabilities, and note
        payable, approximated fair value because of their short-term maturity.
 
    (l) Recent Pronouncements of the Financial Accounting Standards Board
 
        Recent pronouncements of the Financial Accounting Standards Board
        ("FASB"), which are not required to be adopted at this date, include
        Statement of Financial Accounting Standards ("SFAS") No. 129, 
        "Disclosure of Information about Capital Structure" ("SFAS No. 129) and 
        SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). SFAS No. 129 and 
        128 specify guidelines as to the method of computation as well

                                       21


<PAGE>

        as presentation and disclosure requirements for earnings per share
        ("EPS"). The objective of these statements is to simplify the
        calculation and to make the U.S. standard for computing EPS more
        compatible with the EPS standards of other countries and with that of
        the International Accounting Standards Committee. These statements are
        effective for fiscal years ending after December 15, 1997 and earlier
        application is not permitted. The Company does not expect that the
        adoption of SFAS No. 129 and 128 will have a material effect on the
        Company's consolidated financial statements.
 
    (2) INVENTORIES
 
        At February 28, l997 and February 29, l996, inventories consist of the
        following:
 
<TABLE>
<CAPTION>
                                                        1997        1996
                                                    ----------  ----------
<S>                                                 <C>         <C>
Raw materials                                       $  706,184  $  645,517
Work-in-process                                        156,421     169,523
Finished goods                                         119,353     131,542
                                                    ----------  ----------
Total inventories                                      981,958     946,582
Less allowance for obsolescence                         59,612      78,020
                                                    ----------  ----------
Net inventories                                     $  922,346  $  868,562
                                                    ----------  ----------
                                                    ----------  ----------
</TABLE>
 
(3) PROPERTY AND EQUIPMENT
 
    Property and equipment, at cost, at February 28, l997 and February 29, l996,
    is comprised of the following:
 
<TABLE>
<CAPTION>
                                                        1997        1996
                                                    ----------  ----------
<S>                                                 <C>         <C>
Leasehold improvements                              $  445,069  $  436,827
Machinery and equipment                                825,689     814,046
Office equipment                                     1,364,386   1,325,186
Automobiles                                             26,024      34,567
                                                     ----------  ----------
                                                     2,661,168   2,610,626
Less accumulated depreciation and amortization       2,153,973   1,966,597
                                                     ----------  ----------
Property and equipment, net                         $  507,195  $  644,029
                                                     ----------  ----------
                                                     ----------  ----------
</TABLE>
 
(4) OTHER ACCRUED LIABILITIES
 
    Other accrued liabilities consist of the following at February 28, l997 and
    February 29, l996:
 
<TABLE>
<CAPTION>
                                                        1997       1996
                                                     ----------  ---------
<S>                                                  <C>         <C>
Sales credits payable                                $   97,057  $  95,215
Accrued professional fees                                52,100     60,683
Warranty reserve                                         33,797     31,479
Other accrued liabilities                               494,715    411,841
                                                     ----------  ---------

Total other accrued liabilities                      $  677,669  $ 599,218
                                                     ----------  ---------
                                                     ----------  ---------
                                               
</TABLE>
 
                                       22

<PAGE>

                      THE LANGER BIOMECHANICS GROUP, INC.
                               AND SUBSIDIARIES
                     Notes to Consolidated Financial Statements, Continued

(5) INCOME TAXES
 
    The provision for (benefit from) income taxes is comprised of the following
for the years ended February 28, l997, February 29, l996 and February 28, l995:
 
<TABLE>
<CAPTION>
                                                     1997       1996       1995
                                                   ---------  ---------  ---------
<S>                                                <C>        <C>        <C>
Current:
    Federal                                      $  --      $    --    $    --
    State                                           4,639     (4,294)     2,972
    Foreign                                        22,864      2,168      5,278
                                                 ---------  ---------  ---------
                                                 $ 27,503   $ (2,126)  $  8,250
                                                 ---------  ---------  ---------
                                                 ---------  ---------  ---------
</TABLE>
 
    As of February 28, l997, the Company has net Federal operating loss
carryforwards of approximately $3.2 million, which may be applied against future
taxable income and expire from 2000 through 2011. The Company also has available
tax credit carryforwards of approximately $141,000.
 
    Included in the provision for foreign income taxes are deferred income taxes
of $747 for 1997, $0 for 1996, and $1,589 for 1995.
 
    The following is a summary of deferred tax assets and liabilities as of
February 28, 1997 and February 29, 1996:
 
<TABLE>
<CAPTION>
                                                       1997         1996
                                                    -----------  -----------
<S>                                                 <C>          <C>
Current deferred tax assets                         $   336,490  $   361,633
                                                    -----------  -----------
Non-current:
Deferred tax assets                                   1,310,023    1,441,346
Deferred tax liability                                   (5,376)     (20,965)
                                                    -----------  -----------
Non-current deferred tax assets, net                  1,304,647    1,420,381
                                                    -----------  -----------
Total deferred tax assets, net                        1,641,137    1,782,014
Valuation allowance                                  (1,646,513)  (1,786,643)
                                                    -----------  -----------
Net                                                 $    (5,376) $    (4,629)
                                                    -----------  -----------
                                                    -----------  -----------
</TABLE>
 
    The current deferred tax assets are primarily composed of deferred revenue,
inventory and accounts receivable reserves, and accrued vacation. The
non-current deferred tax assets are primarily composed of deferred revenue and
Federal net operating loss carryforwards. The non-current deferred tax liability
is primarily composed of excess tax depreciation over book depreciation. The
decrease in the valuation allowance during fiscal 1997 resulted from a reduction
in the net deferred tax assets.
 
                                       23
<PAGE>
 
                      THE LANGER BIOMECHANICS GROUP, INC.
                                 AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued 

    The Company's effective provision for (benefit from) income taxes differs
from the Federal statutory rate. The reasons for such differences are as
follows:
 
<TABLE>
<CAPTION>
                                                            FEBRUARY 28,             FEBRUARY 29,              FEBRUARY 28,     
                                                                1997                     1996                      1995         
                                                        ---------------------   ----------------------    ----------------------
                                                          AMOUNT        %         AMOUNT         %          AMOUNT         %     
                                                        ----------  ---------   -----------  ---------    -----------  ---------
<S>                                                     <C>         <C>         <C>          <C>          <C>          <C>       
Provision (benefit) at Federal statutory rate           $  112,387       34.0%  $  (147,938)     (34.0)%  $  (216,634)    (34.0)%
Increase (decrease) in taxes resulting from:                                                                                     
  State income taxes, net of Federal benefit                 4,639        1.4        (4,294)      (1.0)         2,972       0.4  
  Foreign taxes                                             22,864        6.9         2,168        0.5          5,278       0.8  
  (Use) creation of net operating loss                                                                                           
    carryforwards                                         (112,387)     (34.0)      147,938       34.0        216,634      34.0  
                                                        ----------        ---   -----------  ---------    -----------  ---------
Effective tax rate                                      $   27,503        8.3%  $    (2,126)      (0.5)%  $     8,250       1.2%
                                                        ----------        ---   -----------  ---------    -----------  ---------
                                                        ----------        ---   -----------  ---------    -----------  ---------
</TABLE>
 
(6) LONG-TERM NOTE PAYABLE
 
    Long-term note payable, less current maturities, at February 28, l997 and
February 29, l996 consists of the following:
 
<TABLE>
<CAPTION>
                                               1997         1996
                                           ------------  ----------
<S>                                        <C>            <C>
Equipment note bearing interest at 10.5%   
  due March 1997 The note is payable in 
  monthly installments of principal and 
  interest of $304. The note is 
  collateralized by certain equipment 
  with a carrying value of approximately 
  $4,600 at February 28, l997.                $ 301        $ 3,707
                                           -------------  ---------
Less current maturities                         301          3,707
                                           -------------  ---------
Long-term note payable                        $ --         $  --
                                           -------------  ---------
</TABLE>
 

                                       24

<PAGE>

                      THE LANGER BIOMECHANICS GROUP, INC.
                                 AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued 


(7) COMMITMENTS AND CONTINGENCIES
 
     (a) Leases

    Certain of the Company's facilities and equipment are leased under
noncancellable lease agreements and certain operating leases contain minimum
annual escalations in base rent. Rental expense amounted to $439,972, $500,429
and $550,403 for the years ended February 28, 1997, February 29, 1996 and
February 28, 1995, respectively.
 
    The following is a schedule, by fiscal year, of future minimum rental
payments required under operating leases as of February 28, l997:
 
<TABLE>
<CAPTION>
                 FISCAL YEAR ENDED FEBRUARY:     AMOUNT
                 ----------------------------  ----------
                       <S>                   <C> 
                        1998                   $  430,752
                        1999                      342,731
                        2000                      134,047
                                               ----------
                        Total                  $  907,530
                                               ----------
                                               ----------
</TABLE>
 
    (b) Royalties
 
    The Company has entered into a number of agreements with licensors,
consultants and suppliers, including:
 
    1. The Company has an agreement with a licensor, which provides for the
Company to pay royalties of l5 percent, with a minimum annual royalty of
$25,000, on the net sales of a product named the Pediatric Counter Rotation
System.
 
    2. The Company has agreements with certain licensors, which provide for the
Company to pay royalties ranging from 2.5 percent to 4 percent on the net sales
of certain biomechanical devices.
 
    Royalties under the above-mentioned agreements aggregated $37,881, $36,016
and $36,797 for the years ended February 28, 1997, February 29, l996 and
February 28, l995, respectively.
 
    (c) Employment Agreements
 
    Two officers of the company have employment agreements.  In April 1997, 
one agreement was terminated and replaced by another agreement. Under these 
revised agreements, the Company is committed to maximum severance pay of 
approximately $80,000 upon termination of one of these officers. In addition, 
the employment agreements commit the Company to pay these two officers annual 
salaries and allowances of approximately $235,000 and additional bonus 
compensation depending on performance and profits achieved by the Company.
 
    (d) Litigation
 
    The Company is involved in certain litigation in the normal course of
business. The outcome of such litigation is not expected to have a material
impact on the consolidated financial statements. 



                                       25

<PAGE>


                      THE LANGER BIOMECHANICS GROUP, INC.
                                 AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued 


(8) Pension Plan and 401(k) Plan
 
         The Company maintains a non-contributory defined benefit pension plan
covering substantially all employees. In l986, the Company adopted an amendment
to the plan under which future benefit accruals to the plan will cease (freezing
of the maximum benefits available to employees as of July 30, l986), other than
those required by law. Previously accrued benefits will remain in effect and
will continue to vest under the original terms of the plan.
 
The following table sets forth the Company's defined benefit plan status at
February 28, l997 and February 29, l996, determined by the plan's actuary in
accordance with Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions":
 
<TABLE>
<CAPTION>
                                                                      1997         1996
                                                                   -----------  -----------
<S>                                                                   <C>          <C>
Actuarial present value of benefit obligation:
 Accumulated benefit obligation, including
  vested benefits of $388,431 and $372,061
  in l997 and l996, respectively                                   $ 388,431    $ 372,061
                                                                   -----------  -----------
                                                                   -----------  -----------
Projected benefit obligation for services rendered to date         $(388,431)   $(372,061)
Market value of plan net assets (primarily bond mutual funds)        101,116       72,879
                                                                   -----------  -----------
Projected benefit obligation in excess of plan assets               (287,315)    (299,182)
Unrecognized transition liability                                    166,856      174,647
Unrecognized net loss                                                248,248      255,168
Adjustment required to recognize minimum liability                  (415,104)    (429,815)
                                                                   -----------  -----------
Accrued pension expense                                            $(287,315)   $(299,182)
                                                                   -----------  -----------
                                                                   -----------  -----------
</TABLE>

Net pension expense is comprised of the following for the years ended
February 28, 1997, February 29, 1996 and February 28, 1995:


<TABLE>
<CAPTION>
                                1997       1996       1995
                             ---------  ---------  ---------
<S>                           <C>        <C>        <C>
Interest cost                  $ 27,585   $ 24,775   $ 22,362
Return on assets                  7,882     (8,921)    13,049
Net amortization and deferral     4,775     26,848      1,509
                             ---------  ---------  ---------
Net pension expense            $ 40,242   $ 42,702   $ 36,920
                             ---------  ---------  ---------
                             ---------  ---------  ---------
</TABLE>
 
The weighted average discount rate used in determining the actuarial present 
value of the projected benefit obligation was 7.5 percent in l997 and l996. 
No assumed increase in compensation levels was used since future benefit 
accruals have ceased (as discussed above). The rate of return on assets used 
was 7.5 percent in l997 and l996. The unrecognized transition liability and 
unrecognized net loss are being amortized over 30.4 and 21.5 years, 
respectively.


                                       26

<PAGE> 


                      THE LANGER BIOMECHANICS GROUP, INC.
                                 AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued 


       In l997 and l996, as required by Statement of Financial Accounting 
Standards No. 87, the Company recorded additional pension liability to 
reflect the excess of accumulated benefits over the fair value of pension 
plan assets. Since this liability is in excess of the related unrecognized 
prior service cost (unrecognized transition liability), an amount equal to 
the unrecognized prior service cost has been recognized as an intangible 
asset (included in "Other assets" on the accompanying Consolidated Balance 
Sheets). The remaining liability required to be recognized is reported as a 
separate component of stockholders' equity.

       The Company has a defined contribution retirement and savings plan 
(the "401(k) Plan") designed to qualify under Section 401(k) of the Internal 
Revenue Code (the "Code"). Eligible employees include those who are at least 
twenty-one years old and who have worked at least 1,000 hours during any one 
year. The Company may make matching contributions in amounts that the Company 
determines at its discretion at the beginning of each year. In addition, the 
Company may make further discretionary contributions. Participating employees 
are immediately vested in amounts attributable to their own salary or wage 
reduction elections, and are vested in Company matching and discretionary 
contributions under a vesting schedule that provides for ratable vesting over 
the second through sixth years of service. The assets of the 40l(k) Plan are 
invested in stock, bond and money market mutual funds. For the years ended 
February 28, 1997, February 29, 1996 and February 28, 1995, the Company made 
contributions totaling $25,734, $33,547 and $25,076, respectively, to the 
401(k) Plan.
 
(9) STOCK OPTIONS AND WARRANTS
 
       On July 27, l992, the Company adopted a qualified stock option plan 
for employees, officers, directors, consultants and advisors of the Company 
covering 125,000 shares of common stock. On January 4, 1995, the Board of 
Directors increased the number of shares authorized to be issued under the 
plan to 350,000 shares, which amendment has been approved by shareholders at 
the September 13, 1995 shareholders' meeting. Options granted under the plan 
are exercisable during a period of five years at an exercise price at least 
equal to l00 percent of the fair market value of the Company's common stock 
at date of grant. Options become exercisable under various cumulative 
increments over a three-year period. The Board of Directors has the 
discretion as to the persons to be granted options as well as the number of 
shares and terms of the option agreements. The expiration date of the plan is 
July 26, 2002.
 
       The Company has also granted non-incentive stock options. These 
options are generally exercisable for a period of five years and are issued 
at a price equal to or higher than the fair market value of the Company's 
common stock at the date of grant. At February 28, 1997, 82,000 non-incentive 
stock options were outstanding.

                                       27


<PAGE>


                      THE LANGER BIOMECHANICS GROUP, INC.
                                 AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued 


The following is a summary of activity related to the Company's incentive
and non-incentive stock options:

<TABLE>
<CAPTION>
                                                                                                                                  
                                                              Exercise    Weighted average
                                                 Number of   price range   exercise price
                                                  shares     per share       per share
                                                -----------  ----------  -----------------
<S>                                             <C>          <C>           <C>
Outstanding  at February 28, 1994                 100,250     .75- 2.75     $ 1.75
        Granted                                   121,750     .56-  .88        .83
        Cancelled                                 (89,000)   1.50- 2.75       1.80
        Expired                                   (14,750)   1.56- 2.75       1.70
                                                  --------   ---------       -----
Outstanding at February 28, 1995                  118,250      .56- .88        .77
        Granted                                    90,000      .75-1.31       1.00
        Exercised                                 (34,000)     .75- .78        .77
        Expired                                   (18,000)          .78        .78
                                                  ---------  ---------       -----
Outstanding at February 29, 1996                  156,250      .78-1.31        .90
        Granted                                    58,000     1.56-2.19       2.14
        Exercised                                  (3,000)          .78        .78
        Cancelled                                  (2,000)          .78        .78
                                                  ---------  ----------      -----
Outstanding at February 28, 1997                  209,250      .78-2.19      $1.25
                                                  ---------  ----------      -----
                                                  ---------  ----------      -----
</TABLE>
 
       At February 28, l997, 181,250 options were exercisable and 108,250 
options were available for issuance. The 209,250 shares outstanding at 
February 28, 1997 had remaining lives of between less than one year and less 
than five years, with a weighted average life of 3.92 years.
 
       Warrants to purchase up to 10,000 shares of common stock at an 
exercise price of $.78125 (the market value at date of grant) were granted on 
November 15, 1994. Such warrants are exercisable during the three-year period 
commencing from the date of grant. All previous warrants issued have either 
expired or were cancelled.
 
       At February 28, 1997, there were 327,500 shares of common stock 
reserved for issuance under the Company's stock option plan and for issued 
and outstanding warrants.
 
ADDITIONAL STOCK PLAN INFORMATION
 
       The Company continues to account for its stock-based awards using the
intrinsic value method in accordance with APB 25, "Accounting for Stock Issued
to Employees", and its related interpretations. Accordingly, no compensation
expense has been recognized in the financial statements for employee stock
arrangements.
 
    SFAS 123, "Accounting for Stock-Based Compensation", requires the disclosure
of pro forma net income (loss) and net income (loss) per share had the Company
adopted the fair value method as of the beginning of fiscal 1997. Under SFAS
123, the fair value of stock-based awards to employees is calculated through the
use of option pricing models, even though such models were developed to estimate
the fair value of freely tradeable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option

                                       28


<PAGE>


                      THE LANGER BIOMECHANICS GROUP, INC.
                                 AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued 


awards. Theses models also require subjective assumptions, including future
stock price volatility and expected time to exercise, which greatly affect the
calculated values. The Company's calculations were made using the Black-Scholes
option pricing model with the following weighted average assumptions: expected
life, 60 months following vesting; stock volatility of 44.95% and 100.76%, and
risk free interest rates of 7.0% and 6.5% in fiscal 1997 and fiscal 1996,
respectively, and no dividends during the expected term. The Company's
calculations are on a multiple option valuation approach and forfeitures are
recognized as they occur. If the computed fair values of the award had been
amortized to expense over the vesting period of the awards, the pro forma net
income (loss) and net income (loss) per share for the fiscal years ended
February 28, 1997 and February 29, 1996 would have been income of $280,553, 
or $.11 per share, and loss of $440,347, or $(17) per share, respectively, on
both a primary and full diluted basis.
 
(10) Discontinuance of In-House CAD-CAM Project
 
       In fiscal 1996, the Company concluded that it was no longer appropriate
to devote capital resources to in-house development of proprietary
computer-controlled milling equipment, laser scanning devices and related
software. Therefore, the Company expensed approximately $499,000 of costs
related to this CAD-CAM project in the fourth quarter of fiscal 1996.
 
(11) Export Sales
 
       The Company had export sales from its United States operations of 
approximately 16, 16 and 15 percent of net sales for the years ended February
28, 1997, February 29, l996 and February 28, 1995, respectively.
 
(12) Segment Information
 
       The Company operates in one segment, principally in the design,
development, manufacture and sale of foot and gait-related products.
 
(13) Revolving Credit Line
 
       The company has a credit facility with a bank.  The agreement, which
expires July 31, 1997, provides for a revolving credit line not to exceed the
lesser of $750,000 or 70 percent of eligible receivables, as defined. Interest
on the outstanding balance is payable at prime (8.25 percent at February 28,
1997) plus 2 percent per annum.
 
       The agreement contains, among other items, restrictions relating to the
incurrence of additional indebtedness and the payment of dividends.
Additionally, the Company is required to maintain certain minimum financial
ratios. Borrowings under this agreement are collateralized by substantially all
of the assets of the Company.
 
       At February 28, 1997 and February 29, 1996, there were no borrowings
outstanding under this credit facility.
 
                                       29


<PAGE>
                      THE LANGER BIOMECHANICS GROUP, INC.
                             AND SUBSIDIARIES
                          VALUATION AND QUALIFYING ACCOUNTS

                                                                     SCHEDULE II

 For the years ended February 28, 1997, February 29, 1996 and February 28, 1995
 
<TABLE>
<CAPTION>
                                      SALES
                                   RETURNS AND         BAD           WARRANTY     INVENTORY
                                   ALLOWANCES         DEBTS           RESERVE      RESERVE
                                   -----------         ----           -------      --------
<S>                              <C>             <C>              <C>          <C>
At March 1, 1994                     $  23,409    $  63,356         $ 24,337     $  48,580

Additions                                   --       27,048            3,638        78,494
Deletions                                2,123       42,188            1,724        18,632
                                   -----------      -------           -------      --------
At February 28, 1995                    21,286       48,216           26,251       108,442

Additions                               10,772           --            7,741            --
Deletions                                   --       27,646            2,513        30,422
                                   -----------      -------           -------      --------
At February 29, 1996                    32,058       20,570           31,479        78,020

Additions                                   --        7,524            6,207            --
Deletions                                   --        8,319            3,889        18,408
                                   -----------      --------         --------      --------
At February 28, 1997                 $  32,058    $  19,775         $ 33,797     $  59,612
                                   -----------      --------         --------      --------
                                   -----------      --------         --------      --------

</TABLE>
 
                                       30


<PAGE>

                                                                     EXHIBIT 11




                      THE LANGER BIOMECHANICS GROUP, INC.
                               AND SUBSIDIARIES
                       COMPUTATION OF PER SHARE AMOUNTS

For the years ended February 28, 1997, February 29, 1996 and February 28, 1995

<TABLE>
<CAPTION>
                                                                                1997        1996         1995
                                                                             ----------  -----------  -----------
<S>                                                                          <C>         <C>          <C>
Primary:
Net income (loss)..........................................................  $  303,047  $  (432,985) $  (637,159)
                                                                             ----------  -----------  -----------
Weighted average number of common shares...................................   2,583,344    2,568,458    2,547,281
Assumed number of shares issued from common share equivalents..............      83,076           --           --
                                                                             ----------  -----------  -----------
Weighted average number of common and common equivalent shares.............   2,666,420    2,568,458    2,547,281
                                                                             ----------  -----------  -----------
Net income (loss) per share:
Primary....................................................................  $     0.11  $     (0.17) $     (0.25)
                                                                             ----------  -----------  -----------
Fully Diluted:
Net income (loss)..........................................................  $  303,047  $  (432,985) $  (637,159)
                                                                             ----------  -----------  -----------
Weighted average number of common shares...................................   2,583,344    2,568,458    2,547,281
Assumed number of shares issued from common share equivalents..............      83,076           --           --
                                                                             ----------  -----------  -----------
Weighted average number of common and common equivalent shares.............   2,666,420    2,568,458    2,547,281
                                                                             ----------  -----------  -----------
Net income (loss) per share:
Fully Diluted..............................................................  $     0.11  $     (0.17) $     (0.25)
                                                                             ----------  -----------  -----------
</TABLE>





                                     31
<PAGE>


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE

Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME                           AGE                             OFFICE
-------------------------      ---      -----------------------------------------------------
<S>                           <C>       <C>

Kenneth Granat                 52       Chairman of the Board

Gary L. Grahn                  53       President and Chief Executive Officer

Dr. Justin Wernick             61       Executive Vice President,
                                        Secretary and Director

Thomas F. Belleau              53       Vice President--Finance,
                                        and Chief Financial Officer

Howell S. Schorr               51       Vice President--Operations

Dr. Irwin A. Horowitz          61       Director

Daniel J. Feld                 51       Director

</TABLE>


    Mr. Granat has been Chairman of the Board of Directors of the Company since
January 4, 1995. Since 1987, he has been President of Active Screw and Fastener
Inc., an Elk Grove Village, Illinois company, engaged in full line distribution
of fasteners with plants in Chicago, Illinois and Tucson, Arizona. Since 1991,
he has also been Vice President and a Director of Trigran Investments Inc.,
Deerfield, Illinois, the general partner and investment advisor for Trigran
Investments, L.P., a more than 10 percent shareholder of the Company. Mr. Granat
holds a J.D. from the University of Illinois as well as a B.B.A. degree in
Business from the University of Michigan.

    Mr. Grahn has been President and Chief Executive Officer of the Company
since January 3, 1995 and a director since August 1995. From 1992 to 1994, he
was President of PML Inc., a management consulting firm which specializes in
marketing and business development assignments for consumer businesses. From
1989 to 1992, Mr. Grahn was Vice President--General Manager of R. Stevens, Inc.,
subsidiary of Delphi Technology, Inc., a privately-held company which markets
Automated Photo Machines. Previously, he had been Executive Vice President for
the American Photo Group, a multi-plant processor of consumer products, located
in Atlanta, Georgia. He holds an M.B.A. in Marketing Management from the
University of Rochester Graduate School of Business and a B.A. in
Mathematics/Economics from Gettysburg College.

    Dr. Wernick is the co-founder and Executive Vice President, Secretary and 
a director of the Company since its formation. Dr. Wernick is a Diplomate of 
the American Board of Podiatric Orthopedics, a Fellow of the American College 
of Foot Orthopedics and of the Academy of Podiatric Sports Medicine and a 
member of several other professional societies. In l975, he was the President 
of the Nassau County Division, Podiatry Society of the State of New York and 
was granted the Podiatrist of the Year Award from that Society in that same 
year. Since l969, he has held various academic positions at the New York 
College of Podiatric Medicine

                                       32
<PAGE>


and since l979 has been serving as a professor with the Department of 
Orthopedic Sciences at the New York College of Podiatric Medicine. He has 
guest lectured and directed educational programs, both nationally and 
internationally, at many other podiatric colleges and seminars during the 
past 20 years. He has co-authored a book entitled "A Practical Manual for a 
Basic Approach to Biomechanics" in l972 and a report entitled "A Radiologic 
Study of Motion of the Foot within a Ski Boot" which was published in the 
Journal of the American Podiatry Association for which he is also a 
corresponding consultant. Dr. Wernick received his podiatric medical degree 
from M.J. Lewi College of Podiatry (now known as the New York College of 
Podiatric Medicine).

    Mr. Belleau has been Vice President-Finance/CFO of the Company since l996.
From l988 to l995, he was employed by TII Industries, Inc., a fabricator of
various types of telephone surge protectors as Vice President--Finance/CFO.
Previously, Mr. Belleau was Corporate Controller/Treasurer for American
Technical Ceramics, Inc. He holds a B.A. Degree in Economics from the University
of Notre Dame and an M.B.A. in Corporate Finance from New York University and is
a CPA.

    Mr. Schorr has been Vice President of Operations since l99l. From l988 to
1991, prior to becoming an executive officer of the Company, he was the
Operations Manager for the Deer Park, New York, and Branch Manager for the Brea,
California, facilities of the Company. From l966 to l987, Mr. Schorr was
employed by Hazeltine Corporation/Esprit Systems, Inc. During his 21 years of
service with Hazeltine Corporation/Esprit Systems, Inc., he held the positions
of Director of Operations, National Service Manager, Customer Service/Production
Manager, as well as other various supervisory and managerial positions. He has a
B.S. in Business Administration from New York Institute of Technology.

    Dr. Horowitz has been a director of the Company since 1994. Since 
November 1993, Dr. Horowitz has been the Chairman of the Board, Chief 
Executive Officer and President of Diversifax, Inc., a public company engaged 
in the operation of public fax machines and copiers. From July 1993 to 
October 1993, he was Chief Operating Officer of Diversifax, Inc. From 1969 to 
November 1993, Dr. Horowitz was Chairman of the Board and President of IMSG 
Systems, Inc. and certain affiliated companies, which are engaged in the 
operation of public, coin-operated copying machines, which was merged into 
Diversifax in November 1993. Dr. Horowitz received his podiatric medical 
degree from M.J. Lewi College of Podiatry (now known as the New York College 
of Podiatric Medicine).
 
    Mr. Feld has been a director of the Company since August 1995. He has been
President of Traverse Bay Corporation, a consulting company since October, 1994.
From 1988 to 1994, he was President of Saratoga Brands, a publicly held food
manufacturer and distributor which he founded. Previously, he directed marketing
and advertising for several companies including Gloria Vanderbilt Jeans while he
was President of Fisher & Feld, an advertising firm he co-founded. Prior to
that, he supervised several Procter & Gamble Co. Brands while employed at Grey
Advertising. He holds M.A. and B.A. degrees from the University of Michigan.
 
    All directors are normally elected at the annual meeting of shareholders to
hold office until the next annual meeting and until their successors are duly
elected and qualified. The Company's By-Laws provide that the annual meeting of
shareholders be held each year at a time and place to be designated by the Board
of Directors. Directors may be removed at any time for cause by the Board of
Directors and with or without cause by a majority of the votes cast at a meeting
of shareholders entitled to vote for the election of directors.
 
    The Company is not aware of any late filings of, or failures to file, during
the fiscal year ended February 28, 1997, the reports required by Section 16(a)
of the Securities Exchange Act of 1934.
 
LIMITATION ON LIABILITY OF DIRECTORS
 
    As permitted by New York law, the Company's Certificate of Incorporation
contains an article providing for the elimination of the personal liability of
the directors of the Company to the fullest extent permitted by the provisions
of paragraph (b) of Section 402 of the New York Business Corporation Law.
Accordingly, a director's personal liability would be eliminated for any breach
of a director's duty, unless, among other things, the director's actions or
omissions were in bad faith, involved intentional misconduct or a knowing
violation of the

                                       33
<PAGE>

law, or personal gain in fact of a financial profit to which
the director was not lawfully entitled. This article is intended to afford
directors additional protection, and limit their potential liability, from suits
alleging a breach of the duty of care by a director. The Company believes this
article enhances the Company's ability to attract and retain qualified persons
to serve as directors. As a result of the inclusion of such a provision,
shareholders may be unable to recover monetary damages against directors for
actions taken by them which constitute negligence or gross negligence or which
are in violation of their fiduciary duties, although it may be possible to
obtain injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to shareholders for any
particular case, shareholders may not have any effective remedy against the
challenged conduct.


                                       34
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

    The following table shows the cash compensation received by the two
executive officers whose compensation exceeded $100,000 during the fiscal year
ended February 28, 1997:
<TABLE>
<CAPTION>
                                                   ANNUAL COMPENSATION
   NAME AND                                ---------------------------------   COMPENSATION
   PRINCIPAL                    FISCAL      SALARY      BONUS       OTHER         OPTIONS
   POSITION                      YEAR          $          $           $       (NO. OF SHARES)
---------------               -----------  ---------  ---------  -----------  ---------------
<S>                            <C>          <C>        <C>        <C>          <C>

Gary L. Grahn                    1997       160,000      28,000      (2)           30,000
President and                    1996       159,846          --      (2)           50,000
Chief Executive Officer          1995        21,538(1)       --      (2)               --


Dr. Justin Wernick               1997        138,996      7,000      (2)               --
Executive Vice President         1996        139,000         --      (2)               --
and Secretary                    1995        138,996         --      (2)               --

</TABLE>

------------------------
(1) Mr. Grahn's employment with the Company commenced January 2, 1995.
 
(2) Less than 10% of the total annual salary and bonus.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                                                                                                              POTENTIAL REALIZABLE
                                                                                                                VALUE AT ASSUMED  
                                                               INDIVIDUAL GRANTS                                ANNUAL RATES OF   
                                                 NUMBER OF     PERCENT OF TOTAL                                   STOCK PRICE     
                                                SECURITIES       OPTIONS/SARS                                     APPRECIATION    
                                                UNDERLYING        GRANTED TO        EXERCISE OR               FOR OPTION TERM (1) 
                                                OPTION/SARS      EMPLOYEES IN       BASE PRICE   EXPIRATION   --------------------
NAME                                            GRANTED (#)       FISCAL YEAR         ($/SH)        DATE       5% ($)     10% ($)
----------------------------------------------  -----------  ---------------------  -----------  -----------  ---------  ---------
<S>                                             <C>          <C>                    <C>          <C>          <C>        <C>

Gary L. Grahn.................................      30,000                54            2.1875      6/26/01      18,131     40,065

Dr. Justin Wernick............................          --                --                --           --          --         --
</TABLE>

------------------------

(1) The potential realizable value portion of the foregoing table illustrates
    value that might be received upon exercise of the options immediately prior
    to the expiration of their term, assuming the specified compounded rates of
    appreciation on the Company's Common Stock over the term of the options.
    These numbers do not take into account provisions of certain options
    providing for termination of the option following termination of employment.



FISCAL YEAR-END OPTION VALUES

    The table below sets forth information regarding unexercised options held by
the Company's named executive officers as of February 28, 1997. No options were
exercised by the Company's executive officers during fiscal 1997.

<TABLE>
<CAPTION>
                            NUMBER OF SECURITIES UNDERLYING    VALUE OF UNEXERCISED
                              UNEXERCISED OPTIONS AT           IN-THE-MONEY OPTIONS
                                  FISCAL YEAR END               AT FISCAL YEAR END
                              EXERCISABLE/UNEXERCISABLE      EXERCISABLE/UNEXERCISABLE
NAME                                   (#)                          $    (1)
--------------------------  -------------------------------  -------------------------
<S>                         <C>                              <C>

Gary L. Grahn.............         48,335/31,665               25,001/12,499

Dr. Justin Wernick........              --                          --      
</TABLE>

                                       35
<PAGE>

     (1) The closing bid price of the Company's Common Stock as reported by 
NASDAQ on February 28, 1997 was $1.75. Value is calculated on the difference 
between the option exercise price of in-the-money options and $1.75 
multiplied by the number of shares of Common Stock underlying the option.

LONG-TERM INCENTIVE PLAN-AWARDS IN LAST FISCAL YEAR

    None.
 
COMPENSATION OF DIRECTORS
 
    Directors, who are not executive officers of the Company, are compensated at
a rate of $1,500 per Board of Directors' meeting attended.
 
EMPLOYMENT AGREEMENTS
 
    On December 13, 1994, the Company entered into an employment agreement (the
"Employment Agreement") with Gary L. Grahn, President and Chief Executive
Officer, commencing March 1, 1995 and continuing for a one year period, with
automatic renewal for additional one year terms unless sooner terminated in
accordance with the Employment Agreement. The Employment Agreement provides for
Mr. Grahn to receive an annual base salary of $160,000, subject to adjustment as
determined by the Board of Directors of the Company. Pursuant to the Employment
Agreement, Mr. Grahn may be entitled to receive up to 50% of base salary as
additional bonus compensation depending on profits achieved by the Company. In
addition, pursuant to the Employment Agreement, Mr. Grahn was granted options to
purchase 50,000 shares of the common stock of the Company at an exercise price
of $.75 per share for a five year term. Such options may be exercised, on a
cumulative basis, as to 33 1/3% thereof per year commencing on the date of
grant. The Employment Agreement also provides for competitive restrictions on
Mr. Grahn's business activities, absent the Company's prior written approval,
for a period of two years after the termination or expiration of the Employment
Agreement.
 
    On June 25, 1992, the Company entered into an employment agreement (the 
"Wernick Employment Agreement") with Dr. Justin Wernick, Executive Vice 
President of the Company, commencing as of July 1, l992 and continuing for a 
two year period, with automatic renewal for additional one year terms unless 
sooner terminated in accordance with the Wernick Employment Agreement. The 
Wernick Employment Agreement provides for Dr. Wernick to receive an annual 
base salary of $139,000, subject to adjustment as determined by the Board of 
Directors of the Company, plus a discretionary annual bonus up to $10,000 
based upon performance, as determined by the Board of Directors and President 
of the Company. The Wernick Employment Agreement also provides for 
competitive restrictions on Dr. Wernick's business activities, absent the 
Company's prior written approval, for a period of two years after the 
termination or expiration of the Wernick Employment Agreement.
 
    On May 2, 1997, the Company entered into a new employment agreement (the
"Revised Wernick Employment Agreement") with Dr. Justin Wernick, commencing July
1, 1997 and continuing for one year. Under the terms of the Revised Wernick
Employment Agreement, Dr. Wernick will serve as Chief Medical Director and
Corporate Secretary at an annual salary of $65,000 plus approximately $10,400 in
office allowance. Among other duties, he will represent the Company at various
educational seminars and conventions as well as provide technical advice in
medical areas with respect to product development. The Revised Wernick
Employment Agreement is also subject to the same competitive restrictions
present in the original Wernick Employment Agreement. After the first year,
automatic renewal for one additional year is specified, but may be terminated by
either party with ninety days written notice.

                                       36
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth, as of May 9, l997, the shares of Common
Stock owned beneficially and of record (unless otherwise indicated) by each
person owning more than five percent (5%) of the outstanding shares, each
director of the Company, each named executive officer of the Company and all
directors and officers of the Company as a group.
 
<TABLE>
<CAPTION>

                                                 NUMBER OF
                                                  SHARES
NAME (AND ADDRESS OF 5% HOLDERS)                   OWNED        PERCENT
---------------------------------------------  -------------  -----------
<S>                                            <C>            <C>

Kenneth Granat                                    636,153(1)     24.0%
155 Pfingsten, Suite 360
Deerfield, Illinois 60015

Dr. Justin Wernick                                267,867        10.4%
450 Commack Road
Deer Park, New York ll729

Donald Cecil                                      244,153         9.4%
lll4 Avenue of the Americas
New York, New York l0036

Gary L. Grahn                                     170,000(2)      6.4%
450 Commack Road
Deer Park, New York 11729

Dr. Irwin A. Horowitz                              15,000(3)       (5)

Daniel J. Feld                                      1,000          (5)
 
All Directors and Officers                      1,130,020(4)     40.8%
as a Group (7 persons)
</TABLE>

------------------------

(1) Includes 65,000 shares issuable under outstanding stock options and 530,753
    held by Trigran Investments LP. Mr. Granat is a Director and Vice President
    of the general partner of Trigran Investments, LP. An additional 30,000
    shares are owned by the Granat Family Limited Partnership of which Mr.
    Granat is a general partner and 10,400 shares are owned by a trust of which
    Mr. Granat is a beneficiary.

(2) Includes 80,000 shares issuable under outstanding stock options.

(3) Shares are issuable under outstanding stock options.

(4) Includes an aggregate of 185,000 shares issuable under outstanding stock
    options.

(5) Less than 1%.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

                                       37
<PAGE>
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

    The following consolidated financial statements are filed as part of this
    Form l0-K:

    INDEPENDENT AUDITORS' REPORT

    Consolidated Financial Statements:

       Consolidated Balance Sheets as of February 28, l997 and February 29, l996

       Consolidated Statements of Operations for the years ended
       February 28, l997, February 29, l996 and February 28, 1995

       Consolidated Statements of Stockholders' Equity for the years ended
       February 28, l997, February 29, l996 and February 28, l995

       Consolidated Statements of Cash Flows for the years ended
       February 28, l997, February 29, l996 and February 28, l995

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.  FINANCIAL STATEMENT SCHEDULES

    The following Financial Statement Schedule is filed as part of this Form
    10-K:

    Schedule II--Valuation and Qualifying Accounts for the years ended February
                 28, l997, February 29, l996 and February 28, l995
 
    All other schedules have been omitted because they are not applicable, not
        required or the information is disclosed in the consolidated financial
        statements, including the notes thereto.

3.  EXHIBITS

<TABLE>
<CAPTION>
NUMBER                      DOCUMENT
------------  ------------------------------------
<S>           <C>

(3)     (a)      Copy of Restated Certificate of
                 Incorporation and amendments
                 thereto. (l)(4)

(b)              Copy of Bylaws, as amended through
                 July 2, 1987. (3)

(4)     (a)      Specimen of Common Stock
                 Certificate. (1)

        (b)      Copy of l983 Stock Option Plan, as
                 amended through January l3, l987. (3)

        (c)      Copy of 1992 Stock Option Plan. (7)

(10)    (a)      Copy of Agreements, dated February
                 23, l993, relating to the Company's
                 75% ownership interest in Langer
                 Orthotic Laboratory (U.K.) Limited. (7)

        (b)      Copy of The Langer Biomechanics
                 Group Retirement Plan, restated as
                 of July 30, l979. (1)

                                       38
<PAGE>


        (c)      Copy of Leases related to the
                 Company's Deer Park facilities. (7)

        (d)      Copy of Agreement, dated July 8,
                 l986, between BioResearch Ithaca,
                 Inc. and the Company relating to the
                 licensing of the Pediatric Counter
                 Rotation System. (2)

        (e)      Copy of Leases relating to the
                 Company's Brea, California
                 facilities. (5)

        (f)      Copy of Agreement, dated March 26,
                 l992 and effective as of March l,
                 l992, relating to the Company's
                 40l(k) Tax Deferred Savings Plan. (5)

        (g)      Copy of Employment Agreement, dated
                 as of June 25, l992, between the Company and Dr.
                 Justin Wernick. (6)

        (h)      Copy of Employment Agreement, dated
                 December 13, 1994, between the
                 Company and Gary L. Grahn. (8)
 
        (i)      Copy of letter agreement, dated
                 January 27, 1995, between the
                 Company and Tekscan, Incorporated. (9)
 
        (j)      Copy of Employment Agreement, dated
                 as of May 2, 1997, between the
                 Company and Dr. Justin Wernick. 

(11)    Computation of Earnings Per Share

(22)    List of subsidiaries (11) computation earnings per share.

(24)    Consent of Independent Auditors

        (l)      Incorporated by reference to the
                 Company's Registration Statement on
                 Form S-l (No. 2-87l83), which became
                 effective with the Securities and
                 Exchange Commission on January l7, l984.

        (2)      Incorporated by reference to the
                 Company's Form l0-K for the fiscal
                 year ended July 3l, l986.
 
        (3)      Incorporated by reference to
                 Post-Effective Amendment No. l to
                 the Company's Registration Statement
                 on Form S-8.
 
        (4)      Incorporated by reference to the
                 Company's Form l0-K for the fiscal
                 year ended February 28, l989.
 
        (5)      Incorporated by reference to the
                 Company's Form 10-K for the fiscal
                 year ended February 29, 1992.
 
        (6)      Incorporated by reference to the
                 Company's Form l0-Q for the quarter
                 ended August 3l, l992.
 
        (7)      Incorporated by reference to the
                 Company's Form 10-K for the
                 fiscal year ended February 28, 1993.

        (8)      Incorporated by reference to the
                 Company's Form 8-K, the Date of
                 Report which was January 3, 1995.
 
        (9)      Incorporated by reference to the
                 Company's Form 10-K for the fiscal
                 year ended February 28, 1995.

(27)   Financial Statement Schedule

(b)    Reports on Form 8-K:

       None.

</TABLE>

                                       39
<PAGE>


                                   SIGNATURES

    Pursuant to the requirements of Section l3 or l5(d) of the Securities
Exchange Act of l934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                THE LANGER BIOMECHANICS GROUP, INC.

DATE: JUNE 3, 1997                     BY: /s/ GARY L. GRAHN
                                          --------------------------------
                                           GARY L. GRAHN, PRESIDENT AND
                                           CHIEF EXECUTIVE OFFICER
                                           (PRINCIPAL EXECUTIVE OFFICER)

DATE: JUNE 3, 1997                     BY: /s/ THOMAS F. BELLEAU
                                          --------------------------------
                                           THOMAS F. BELLEAU,
                                           VICE PRESIDENT AND
                                           CHIEF FINANCIAL OFFICER
                                           (PRINCIPAL FINANCIAL OFFICER
                                           AND PRINCIPAL ACCOUNTING OFFICER)


Pursuant to the requirements of the Securities Exchange Act of l934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.



Date: June 3, 1997                         By:   /s/ Kenneth Granat   
                                              --------------------------------
                                              Kenneth Granat, Director

Date: June 3, 1997                         By:   /s/ Gary L. Grahn   
                                              --------------------------------
                                              Gary L. Grahn, Director

Date: June 3, 1997                         By:   /s/ Justin Wernick
                                              --------------------------------
                                              Dr. Justin Wernick, Director

Date: June 3, 1997                         By:
                                              --------------------------------
                                              Dr. Irwin A. Horowitz, Director

Date: June 3, 1997                         By:
                                              --------------------------------
                                              Daniel J. Feld, Director

                                      40