10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For The Fiscal Year Ended December 31, 2016

Commission File No. 001-31354

Lapolla Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	13-3545304 (I.R.S. Employer Identification No.)
Intercontinental Business Park 15402 Vantage Parkway East, Suite 322 Houston, Texas (Address of principal executive offices)	77032 (Zip Code)

(281) 219-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:

Common Stock, $.01 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.  YES ¨  NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES ¨  NO þ

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 þ  NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES þ  NO ¨

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. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer  ¨ Accelerated Filer  ¨ Non-Accelerated Filer  ¨ Smaller Reporting Company þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES ¨  NO þ

As of June 30, 2016, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $38,678,186 based on the closing sales price as quoted on the OTCQX on such date. For purposes of this computation only, all officers, directors and 10% or greater stockholders of the registrant are deemed to be affiliates.

Common Stock outstanding as of February 14, 2017 — 122,366,001 shares.

DOCUMENTS INCORPORATED BY REFERENCE

None.

LAPOLLA INDUSTRIES, INC.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2016

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business	2
	Item 1A.	Risk Factors	6
	Item 1B.	Unresolved Staff Comments	12
	Item 2.	Properties	12
	Item 3.	Legal Proceedings	12
	Item 4.	Mine Safety Disclosures	13
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
	Item 6.	Selected Financial Data	14
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	20
	Item 8.	Financial Statements and Supplementary Data	20
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	20
	Item 9A.	Controls and Procedures	20
	Item 9B.	Other Information	21
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	22
	Item 11.	Executive Compensation	24
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	33
	Item 14.	Principal Accountant Fees and Services	35
PART IV
	Item 15.	Exhibits and Financial Statement Schedules	36
SIGNATURES			37
INDEX OF EXHIBITS			38

(i)

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

• General economic conditions and their effect on demand for foams and coatings, particularly in the commercial construction and insulation markets, but also in the energy savings industries.

• The effects of fluctuations in sales on our business, revenues, expenses, net income, earnings per share, margins and profitability.

• The fact that many of our larger competitors are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services, which may make it difficult for us to attract and retain customers.

• Our dependence on a few large suppliers for a large portion of our materials required for production and sales of our products, any change in the availability of which could have a significant impact on our results of operations.

• The potential loss or departure of key personnel, including Richard J. Kurtz, our chairman of the board and majority stockholder.

• Our ability to generate internal growth, maintain market acceptance of our existing products and gain acceptance for our new products.

• Unanticipated increases in raw material prices or disruptions in supply, which could increase production costs and adversely affect our profitability.

• Restrictive loan covenants and/or our ability to repay or refinance debt under our credit facilities, which could limit our future financing options and liquidity position and may limit our ability to grow our business.

• Operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk.

• The impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in our markets and our ability to access capital markets.

• The fact that our chairman controls a majority of our combined voting power, and may have, or may develop in the future, interests that may diverge from those of other stockholders.

• Future sales of large blocks of our common stock, which may adversely impact our stock price.

• The liquidity and trading volume of our common stock.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. Moreover, new risks regularly emerge and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. You should review carefully the risks and uncertainties described under the heading “Item 1A. Risk Factors” in this Annual Report on Form 10-K for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.

As used in this report, “Lapolla,” the “Company,” “us,” “we” and “our” refer to Lapolla Industries, Inc., unless the context otherwise requires. Our Internet website address is www.lapolla.com. We make our periodic and current reports, together with amendments to these reports, available on our website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The information on our website is not incorporated by reference in this Annual Report on Form 10-K.

1

PART I

Item 1. Business.

General Overview

Lapolla is a leading United States based manufacturer and global distributor of foam, coatings and equipment, focused on developing and commercializing foams and coatings targeted at commercial and industrial and residential applications in the insulation and construction industries. We believe that being vertically integrated in both foam and coating systems puts Lapolla in a strong competitive position as both product lines reduce energy consumption and ultimately lead to direct savings for consumers. Lapolla’s products address growing consumer awareness of the building envelope. The building envelope is the separation between the interior and the exterior environments of a building and serves as the outer shell to protect the indoor environment as well as to facilitate its climate control. Building envelopes with increased insulation levels are becoming standard practice. Consumers are increasingly involved in the selection of green building products due to rising energy costs and the recent availability of tax credits and energy rebates.

Operating Segments

We manage our business through two business segments - Foam and Coatings. The Foam segment involves producing, and in limited instances applying through subcontractors, building envelope insulation foam for interior application, and roofing systems. The Coatings segment involves producing protective elastomeric coatings and primers. Both segments include supplying equipment and related ancillary items used in the application of our products. Information about our business should be read together with Management's Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

Foam Segment

Our foam business involves supplying spray polyurethane foam for insulation and roofing to the construction industry. Lapolla provides open and closed cell spray polyurethane foams for insulation, as well as closed cell technology for roofing applications.

Principal Products and Services and Markets

Spray foam insulation applications consist of perimeter wall, crawl space, and attic space for commercial, industrial, and residential applications. Roofing applications consist of new and retrofit commercial, industrial, and residential applications.

Open-cell spray foam technology is a cost-effective solution to improve the energy efficiency of a building. The material expands to 120 times its initial volume and fills cavities of any shape providing a continuous, protective air barrier that helps to minimize air leakage and air intrusion. Open-cell foam insulation is a performance upgrade over conventional insulation that leads to energy efficiency, improved occupant comfort, a cleaner indoor environment and greater noise reduction for building/home owners.

Closed-cell spray foam insulation is one of the most efficient insulating materials commercially available, with aged R-Values above 6.0 per inch. The description “closed-cell” comes from the cell structure of the finished insulation material. One cubic inch of polyurethane foam insulation contains millions of tiny plastic thermal resistant closed cells. The blowing agent is captured within the cells, which contributes to highly efficient insulating properties. In addition, closed-cell foam provides an inherent air barrier with low moisture vapor permeability, and excellent resistance to water. The density for closed-cell spray foam is approximately two pounds per cubic foot. The medium density foam provides sheer and racking strength to wall assemblies in building applications. The solid nature and sealing capability of closed-cell spray foam, inhibits moisture-driven elements.

Lapolla was the first manufacturer to globally offer a third party tested and approved wall foam system that uses the Solstice® Liquid Blowing Agent (“Solstice LBA”). Lapolla achieved this fourth generation (4G) benchmark while working closely with Honeywell to incorporate the Solstice LBA, a next-generation blowing agent from Honeywell. The product not only improves foam performance, but also delivers environmental benefits. Solstice LBA has an ultra-low global warming potential of 1, which is 99.9 percent lower than today’s most commonly-used blowing agent, HFC-245fa, a hydrofluorocarbon, while retaining its insulating performance. Solstice LBA is nonflammable, has received Environmental Protection Agency approval under the Significant New Alternatives Policy (SNAP) Program and is not a volatile organic compound.

We have attained, and continue to attain, third party credentials for our spray polyurethane foam systems, which means our products are tested by independent parties to meet applicable building and construction codes, thereby enabling greater acceptance of our proprietary foam products in our target markets globally. This segment also supplies adhesives and equipment for applications. We use our own distribution facility, as well as public warehousing in strategic local areas in our target markets, to serve customers. Technology, performance, availability, product credentials, approvals, technical and customer service, and pricing are major competitive factors in our foam business.

The Foam segment includes revenue from The AirTight Division. The AirTight Division primarily focuses on marketing, promoting, and selling energy saving products and energy reduction services through subcontractors. The AirTight Multi-Family Energy Savings Program is a turn-key project service that provides energy assessments and analysis with the assistance of independent consultants, project design, regulatory assistance to facilitate potential rebates from state and utility authorities, and project management services. The program is designed to save landlords substantial energy costs while dramatically reducing a property's carbon footprint and increasing the tenant's comfort.

2

Coating Segment

Our coatings businessinvolves supplying protective coatings for roofing and wall systems for new and retrofit commercial and industrial applications to the roofing and construction industries. Lapolla provides an economical and effective roof coating system for application over new and existing roof substrates.

Principal Products and Services and Markets

Spray polyurethane foam roofing consists of two components: (i) a closed-cell polyurethane foam insulation; and (ii) a protective coating. The polyurethane foam adheres to the building substrate and any items that penetrate the roof surface, making it self-flashing and giving it resistance to high winds. Spray polyurethane foams also offer enhanced impact resistance. Roofs featuring spray polyurethane foam can last 20 to 30 years with minimal maintenance requirements. While sprayed foam can be applied to a new roof, the majority of applications involve reroofing as spray polyurethane roofing can be applied over an existing roof without requiring the removal of the old roof. Spray polyurethane foam roofing is particularly suited for roofs with unusual configurations or with multiple penetrations, as the sprayed material is self-flashing. Coatings often wear or need replacement before the foam, resulting in less tear offs and reducing waste. Spray polyurethane foam roofs are also selected by architects and designers because they can be coated with compounds that enhance reflectivity. Thus, spray polyurethane foam roofs can be considered cool roofs. Additionally, spray polyurethane foam is an excellent insulator and increases the energy efficiency of a building.

Thermo-Flex™ products include technologically advanced, high solid, fire retardant, thixotropic, acrylic, elastomeric coatings uniquely formulated for the protection of spray polyurethane foam insulation. Its various formulations are designed to withstand the intense heat and ultra-violet rays of low humidity desert environments and damp heat and ultra-violet rays of humid environments.

Thermo-Prime™ products are single component, water based, acrylic primers that promote adhesion of spray polyurethane foam to a variety of roofing substrates including built-up roof (BUR), modified bitumen, concrete, masonry, galvanized metal and wood, and eliminate odor problems normally associated with solvent borne primers.

Thermo-Caulk™ products are single component, water-based, high performance, elastomeric, knife-grade caulking, that when cured forms a tough, flexible membrane that seals out moisture. The products are used as a waterproof sealer for roof seams, termination points, cracks, flashing, vents, skylights, fasteners, parapets, protrusions and duct work. They can also be used with roof fabric for three coursing weak areas of the roof.

We use our own distribution facility, as well as public warehousing in strategic local areas in our target markets to better serve our customers. Product credentials, approvals and performance, pricing, technology, technical customer service, and availability are major competitive factors in our coatings business.

Industries

The industries in which we operate involve the sale and distribution of spray polyurethane foam, coatings and the equipment used in such application process. We manufacture our spray polyurethane foam and coating products and purchase equipment manufactured by large global manufacturers.  The majority of our products are sold to contractors and distributors that apply the products or sell to local contractors.

We believe the demand for spray polyurethane foam and reflective roof coatings is growing rapidly due to enhanced consumer awareness due to energy efficiency programs promoted by governmental agencies, energy companies, and private organizations and building code changes that call for houses to be better sealed to prevent air leaks. According to the Freedonia Group, U.S. demand for plastic foams is forecast to increase 2.3 percent annually to 8.8 billion pounds in 2020, valued at $25.2 billion. We believe that this growth reflects the advantages of spray polyurethane foam as an insulator and a means of saving energy. Underlying factors driving plastic foams demand include general economic conditions, construction activity, manufacturing output, population growth, and advantages over competitive materials such as fiberglass.  Demand for spray polyurethane foam can be cyclical, however, and can be negatively impacted by depressed construction markets and general economic conditions. Environmental and regulatory issues may additionally influence the market as changing building codes and higher energy efficiency standards can affect demand for plastic foam insulation.

Demand for commercial roofing products is forecast to grow as well. According to the Freedonia Group, US demand for commercial roofing products is forecast to advance 1.6 percent per year to 110 million squares in 2020, valued at $9.2 billion. Reroofing applications have historically accounted for the larger share of demand and we believe will continue to do so going forward. Many commercial structures -- particular those large in size -- feature low-slope roofs susceptible to damage caused by moisture, impacts, and general wear and tear. We believe building owners and managers looking to save money over the long term will increasingly implement regular inspection and maintenance programs to repair and replace damaged roofing materials. In many cases, these newly installed products will feature enhanced performance properties or can serve as cool roofing to lower utility bills. Plastic roofing, including spray polyurethane foam, has overtaken bituminous membranes as the leading commercial roofing material installed in the US, which we believe will see above-average gains in demand through 2020, totaling 34.4 million squares. We believe demand for plastic roofing will be supported by its favorable performance properties, ease of installation, and suitability for use as cool roofing. Demand for roofing depends on patterns in building construction, as the only applications for roofing products are in new structures, additions to existing structures, and repair or reroofing of existing structures. Nonresidential building construction activity is closely related to trends in the business cycle, interest rates, and the effects of previous building activity on the supply of structures within a given area.

3

Sales and Marketing

We maintain a growing global sales force. Sales are concentrated on contractors and distributors in the insulation and roofing industries. Lapolla utilizes direct sales, independent sales representatives and distributors, and stores its products in select public warehouses that it does not own to increase penetration in select target markets and facilitate availability of products for customers. Lapolla utilizes advertising campaigns, articles in industry periodicals, trade show exposure, public relations, printed case studies, Internet and website exposure, mailers and direct sales, distribution, and marketing to obtain greater product branding and recognition. Lapolla places a high priority on sales trending to create preparedness and processes to better serve customers. Information is gathered from sales, customers, management experience, and historical trending to predict needed supply for stock and warehousing to meet the needs of customers on a timely basis. Public warehousing, distribution and direct sales allow us to supply customers in a timely and efficient manner. The combined volumes of our products are disbursed throughout a broad customer base, which decreases vulnerability from the loss of one key customer. Most of our significant customers are contractors and general distributors that apply and resell our products for insulation and energy efficiency.  They generally do not provide us with data on where they apply our products.  Our sales are affected by our contractors and the level of our distributors’ inventory and their ability to resell such inventory, which in turn is affected by industry trends.  Our marketing and growth strategies are aimed at meeting the needs of our contractors and distributors and providing whatever products they may need at any given time rather than targeting any one particular product or seeking to expand our sales into any particular region of the world.

International

We have a global presence. Our international presence represented approximately 4.53% and 4.47% of our total product sales for the year ended December 31, 2016 and 2015, respectively. We use independent distributors to provide access to our products internationally in select target markets.

Competition

Competition is based on a combination of product credentials, approvals, price, technology, availability, performance, and limited warranties. Lapolla is expanding through aggressive sales and marketing, competitive pricing, a selective sales force comprised of direct salespersons, independent representatives, and distributors, and building owner and contractor brand awareness.

Lapolla differentiates itself from competitors by offering personalized sales support and providing efficient response time on issues ranging from technical service to delivery of products. Product credentials and approvals differentiate product lines and suppliers that are more readily suited to broad use and industry acceptance. We currently maintain certain credentials and approvals to assure minimal restrictions in markets and uses.

Within the industries for our products, we believe that we are a market leader with prices generally competitive with those of our competitors. More specifically, our customers generally purchase foam and coatings products from a select few sources besides us, and our products generally comprise a large percentage of the foam and coatings products purchased by our customers. In addition, we offer customers technical service and training unlike many of our competitors.  We believe the fact that most of our customers find it important to maintain us as a valued supplier, coupled with our highly credentialed products, competitive prices and a high level of service has shielded us from the potential negative impact of volatility in raw material prices that affects our industry as a whole.

Foam

We are one of the largest suppliers of spray polyurethane foam for insulation and roofing foam in the United States and are expanding globally. The foam manufacturing industry consists of a limited number of large and medium sized manufacturing companies with global, national and regional presence primarily relying on distributors to service markets. We are able to access distribution channels and penetrate target markets through direct sales more effectively as a manufacturer of foam resins (versus being just a distributor). Our products are supplied to large, medium and small insulation, roofing, and general contractors, as well as selective distributors with connections to local markets in target areas.

In large volume insulation areas, foamed plastic intensely competes with fiberglass and, to a lesser extent, mineral wool and cellulose. We believe that the physical characteristics of foamed plastic give us a competitive advantage in this marketplace. The two primary plastic foam insulation materials, polyurethane and polystyrene, generally have higher R-values (the per inch values reflecting the insulating ability of a material) than fiberglass and mineral wool. A material with a high R-value can insulate better and at thinner thicknesses than a material of lower R-value. Foamed plastics are also more versatile and offer a tighter insulation bond by providing a more uniform level of thermal resistance without any material gaps, if properly installed. Building codes that call for houses to be more tightly sealed to prevent air leaks may spur builders and homeowners to use spray foams to fill gaps, while foam boards may see increasing use because of their higher R-values.

Coatings

The market for our coatings products is fragmented and characterized by the preferences of the coatings applicators as manufacturers have specifically focused on energy efficient acrylic coatings for roofing and construction as their primary line. We have experienced and expect to continue to experience intense competition from a number of companies.

4

Materials and Principal Suppliers

We place a high priority on forecasting material demand to meet customer demands in the most expedient and cost effective manner and manage cash flow. The primary materials incorporated in our foams and coatings are isocyanates, polyols, catalysts, resins, titanium dioxide, and blowing agents. On the supply side, suppliers to our industry include large chemical and equipment companies.  In addition, some of our largest competitors are vertically integrated, selling products they manufactured with raw materials they can source from within.  Maintaining and expanding our relationships and access with our raw material suppliers is critical given our high dependence on the raw materials and equipment we purchase.  Since we purchase mainly from domestic suppliers, the main factor influencing our supply is our ability to maintain and expand our existing relationships with suppliers and add new suppliers.

The suppliers of the necessary raw materials are industry leaders in both the specific chemistries and basic in the manufacturing of the raw materials for supply. The principal suppliers are Wanhua Chemical (America) Co. Ltd., Honeywell International, Inc., DowDuPont, and Evonik Industries AG. Although we maintain strong relationships and have commitments for continuing supply through times of shortage, a lengthy interruption of the supply of one of these materials could adversely affect our ability to manufacture and supply commercial product. With our volume potential, we believe that we are a potentially lucrative target for vendors to assure their own growth and demand in 2017 and beyond. Our foam resins and acrylic coatings are manufactured in our Houston, Texas facility and we maintain sufficient manufacturing capacity to support our current forecasted demand as well as a substantial safety margin of additional capacity to meet peaks of demand and sales growth in excess of our current expectations.

Proprietary Information, Trade Secrets and Trademarks

We rely on our proprietary technologies and trade secrets in our foam and coating segments for finished goods formulations.  Additionally, we rely on trade secrets and proprietary know-how that we seek to protect, in part, through confidentiality agreements with our vendors, customers, employees and consultants. We market our products under various trademarks, for which we have registered and unregistered trademark protection. We consider these valuable because of their contribution to market identification of our products. Our principal registered trademarks are:

	Trademark	Registration Number	Registration Date
l	LAPOLLA	U.S. Registration No. 4,104,321	February 28, 2012
l	LAPOLLA	U.S. Registration No. 4,104,322	February 28, 2012
l	AIRTIGHT SPRAY FOAM INSULATION	U.S. Registration No. 4,139,386	May 8, 2012
l	AIRTIGHT	U.S. Registration No. 3,888,457	December 14, 2010
l	AIRTIGHT SPRAYFOAM	U.S. Registration No. 3,888,458	December 14, 2010
l	AIRTIGHT SPRAYFOAM	U.S. Registration No. 3,888,459	December 14, 2010
l	AIRTIGHT SPRAY FOAM INSULATION	U.S. Registration No. 4,374,681	July 30, 2013
l	THERM-O-FLEX	U.S. Registration No. 4,482,902	February 18, 2014
l	THERMO-FLEX	U.S. Registration No. 4,605,677	September 16, 2014
l	FOAM-LOK	U.S. Registration No. 5,031,323	August 30, 2016
l	FOAM-LOK	EUIPO Registration No. 014877071	November 5, 2016

Lapolla’s federal and European Union trademark registrations expire ten years after the registration date, unless renewed within one year prior to the expiration. It is the Company’s intent to renew all registered trademarks still in use within the one year period prior to their expiration.

Research and Development

We incurred costs of $378,000 and $269,000 for research and development in the years ended December 31, 2016 and 2015, respectively, none of which costs were borne by customers.

Employees

As of December 31, 2016, we employed 77 full time individuals, none of whom are represented by a union. We believe that our relations with our employees are generally good.

Environmental Matters

We are subject to various national, federal, state, and local environmental laws and regulations and believe that our operations comply in all material respects where we have a business operation. No significant expenditures are anticipated in order to comply with environmental laws and regulations that would have a material impact on our Company in 2017.

5

Historical Information

We were incorporated in the state of Delaware on October 20, 1989 initially under the name of Natural Child Collection, Inc. and have undergone a variety of name changes and discontinued operations. For our current operations, the Company acquired 100% of the capital stock of Infiniti Paint Co., Inc., a Florida corporation, effective September 1, 2001, which was engaged in the business of developing, marketing, selling, and distributing acrylic roof coatings, roof paints, polyurethane foam systems, sealants, and roof adhesives in the Southeastern United States (the "Infiniti Subsidiary"). On December 20, 2004, we changed our Company name from Urecoats Industries, Inc. to IFT Corporation. During the latter part of 2004, our Infiniti Subsidiary built and began operating an acrylic coatings manufacturing plant in the Southeastern United States. On February 11, 2005, the Company acquired 100% of the capital stock of Lapolla Industries, Inc., an Arizona corporation, which was engaged in the business of manufacturing acrylic roof coatings and sealants, and distributing polyurethane foam systems in the Southwestern United States (the "Lapolla Subsidiary"). On April 1, 2005, our Infiniti Subsidiary merged with and into our Lapolla Subsidiary whereas the existence of our Infiniti Subsidiary ceased. On October 1, 2005, our Lapolla Subsidiary merged with and into the Company whereas the existence of our Lapolla Subsidiary ceased. On November 8, 2005, we changed our Company name from IFT Corporation to Lapolla Industries, Inc.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below, together with the financial and other information contained in this Annual Report on Form 10-K for the year ended December 31, 2016 and other periodic filings with the Securities and Exchange Commission. We operate in a changing environment that involves a number of risks. Although the factors listed below are considered to be the most significant factors, they should not be considered a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles which may adversely affect our business. These known and unknown risks could materially and adversely affect our business, financial condition, operating results or liquidity, which could cause the trading price of our common stock to decline.

Risks Relating to Our Business and Industry

Our operating results may vary significantly from quarter to quarter, which makes our operating results difficult to predict and can cause our operating results in any particular period to be less than comparable quarters and expectations from time to time.

Our quarterly results may fluctuate significantly from quarter to quarter due to a variety of factors, many of which are outside our control and have the potential to materially and adversely affect our results. Factors that affect our operating results include the following:

• a change in demand or production of our products caused by severe weather conditions. Sales of our products tend to be lowest during the first fiscal quarter, with sales during the second, third, and fourth fiscal quarters being comparable and marginally higher;

• the size, timing and terms of sales and orders, especially large customer orders;

• variations caused by customers delaying, deferring or canceling purchase orders or making smaller purchases than expected;

• the spending patterns of customers;

• a change in the mix of our products having different margins;

• a change in the mix of our customers and business;

• changes in pricing by us or our competitors, or the need to provide discounts to win business;

• our ability to control costs, including operating expenses;

• losses experienced in our operations not otherwise covered by insurance;

• the ability and willingness of customers to pay amounts owed to us;

• the timing of significant investments in the growth of our business, as the revenue and profit we hope to generate from those expenses may lag behind the timing of expenditures;

• costs related to the acquisition and integration of companies or assets;

• general economic trends, including changes in construction and retrofitting spending or national or geopolitical events such as economic crises, wars or incidents of terrorism; and

• future accounting pronouncements and changes in accounting policies.

Accordingly, our operating results in any particular quarter may not be indicative of the results that you can expect for any other quarter or for an entire year.

Our industries are highly competitive.

The spray polyurethane foam and coatings industries are highly competitive. Although we are one of the largest suppliers of spray polyurethane foam, many of our competitors are significantly larger and have substantially greater resources than we do and are able to achieve greater economies of scale than us and may, therefore, be able to provide their products and services to customers at lower prices than we are able to. Moreover, our competitors could develop the expertise, experience and resources to offer products that are superior in both price and quality to our products. While we seek to compete by providing more state-of-the-art products, there are few technical or other barriers to prevent much larger companies in our industry from putting more emphasis on this same strategy. Similarly, we cannot be certain that we will be able to market our business effectively in the face of competition or to maintain or enhance our competitive position within our industry, maintain our customer base at current levels or increase our customer base. Our inability to manage our business in light of the competitive forces we face could have a material adverse effect on our results of operations.

6

Because we currently purchase a significant portion of our materials from a few suppliers, any decrease in availability of these materials could have an adverse effect on our business, financial condition and operating results.

We depend on Wanhua Chemical (America) Co. Ltd., DowDuPont, and Evonik Industries AG for a large portion of our spray polyurethane foam and acrylic coatings material purchases, and require blowing agents from Honeywell International, Inc. Any change in the availability of such materials and blowing agents, when needed to meet our manufacturing requirements, will have a significant impact on our results of operations. If any of these suppliers were to cancel, delay or reduce the amount of business we do with them for any reason, there would be a material adverse effect on our business, financial condition and operating results.

The departure or loss of key personnel could disrupt our business.

We depend on the continued efforts of Richard J. Kurtz, our chairman of the board and majority stockholder, and on executive officers who are responsible for the day-to-day management of our business. In addition, we rely on our current directors, all of whom are important to our operations and would be difficult to replace. We cannot be certain that any of these individuals will continue in their respective capacities for any particular period of time. The departure or loss of key personnel, or the inability to hire and retain qualified employees, could negatively impact our ability to manage our business.

General global economic, credit and capital market conditions have had and could continue to have an adverse impact on our business, operating results and financial condition.

We are susceptible to macroeconomic downturns in the U.S. and abroad which have had, and in the future may continue to have, an adverse effect on demand for our products and consequently our operating results, financial condition and cash flows. Future negative economic conditions could lead to reduced demand for our products, increased price competition, reduced gross margins, increased risk of obsolete inventories and higher operating costs as a percentage of revenue. Disruption of the capital and credit markets may negatively impact our business, including our ability to access additional financing at a time when we would like, or need, to access those markets to run or expand our business. These events may also make it more costly for us to raise capital through the issuance of our equity securities and could reduce our net income by increasing our interest expense and other costs of capital. The diminished availability of credit and other capital could also affect the industries we serve and could result in reduction in sales volumes and increased credit and collection risks.

Any acquisitions that we complete may not perform as planned and could disrupt our business and harm our financial condition and operations.

A key element of our long term business strategy is to pursue strategic acquisitions in order to increase revenue and earnings. In the event of any future acquisitions, we could:

• issue additional securities that would dilute our current stockholders’ percentage ownership or provide the purchasers of the additional securities with certain preferences over those of common stockholders, such as dividend or liquidation preferences;

• incur debt and assume liabilities; and

• incur large and immediate write-offs of intangible assets, accounts receivable or other assets.

These events could result in significant expenses and decreased revenue, which could adversely affect the market price of our common stock. In addition, integrating product acquisitions and completing any future acquisitions involve numerous operational and financial risks. These risks include difficulty in assimilating acquired operations, diversion of management’s attention, and the potential loss of key employees or customers of acquired operations. Furthermore, companies acquired by us may not generate financial results consistent with our management’s plans at the time of acquisition. Moreover, we will need to conduct a due diligence investigation of one or more target businesses. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process. We may have limited time to conduct such due diligence. Even if we conduct extensive due diligence on a target business that we acquire, we cannot assure you that this diligence will uncover all material issues relating to a particular target business, or that factors outside of the target business and outside of our control will not later arise. If our diligence fails to identify issues specific to a target business or the environment in which the target business operates, we may be forced to write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in us reporting losses. Even though these charges may be non-cash items and may not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our common stock. In addition, charges of this nature may cause us to violate net worth or other covenants that we may be subject to as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing.

Our revenue and demand for our products may be adversely affected by fluctuations in currency exchange rates against the U.S. dollar.

We are seeking to expand globally and fluctuations between the U.S. dollar and other currencies, such as Canadian dollars, Euro currency, Czech Koruna, British Pound Sterling, and Swedish Krona, could negatively impact the amount of our revenues and earnings and demand for our products in the future. Demand also could differ materially from the Company’s expectations since the Company’s prices on goods sold outside the United States are typically quoted in U.S. dollars. For example, if the Canadian dollar or Euro currency appreciates relative to the U.S. dollar, the fluctuation could result in a positive impact on revenues and demand for our products in those markets. However, if the Canadian dollar or Euro currency depreciates relative to the U.S. dollar, there could be a negative impact on the revenues and demand for our products, and such depreciation relative to the U.S. dollar could stall revenue generation due to non-competitive product pricing in such target markets. The exchange rate from the U.S. dollar to other currencies has fluctuated substantially in the past and may continue to do so in the future.

7

Fluctuations in the price and supply of materials used to manufacture our products may reduce our profits.

Our material costs represented approximately 65% and 69% of our revenues for the years ended December 31, 2016 and 2015, respectively. The principal materials purchased by us are isocyanates, polyols, catalysts, resins, titanium dioxide, and blowing agents. These materials and components are available from, and supplied by, a few sources at competitive prices. Unanticipated increases in material prices or disruptions in supply could increase production costs and adversely affect our profitability. We cannot provide any assurances that we will not experience difficulties sourcing our materials in the future.

We have, and expect to continue to have, credit facilities with restrictive loan covenants that may impact our ability to operate our business and to pursue our business strategies, and our failure to remain in compliance with these covenants could result in an acceleration of our indebtedness.

We will continue to rely on our credit facilities with Bank of America, N.A. for a significant portion of the working capital to operate our business and execute our strategy. These credit facilities contain certain covenants that restrict our ability to, among other things:

• undergo a change in control;

• incur new indebtedness or other obligations, subject to certain exceptions;

• pay cash dividends, subject to permitted distribution guidelines;

• create or incur new liens, subject to certain exceptions;

• make new acquisitions or investments in other entities, subject to certain exceptions;

• wind up, liquidate or dissolve our affairs;

• change the nature of our core business;

• alter our capital structure in a manner that would be materially adverse to our lenders; and

• make investments or advancements to affiliated or related companies.

The majority of the liquidity derived from our credit facilities is based on availability determined by a borrowing base formula. Specifically, the availability of credit is dependent upon receivables, inventory, and fixed assets. We may not be able to maintain adequate levels of assets to support our required liquidity. In addition, our credit facilities require us to meet asset and fixed charge coverage ratio tests. Our ability to meet these financial provisions may be affected by events beyond our control. If, as or when required, we are unable to repay, refinance or restructure our indebtedness under, or amend the covenants contained in, our credit facilities, our lenders could institute foreclosure proceedings against the assets securing borrowings under those facilities, which would harm our business, financial condition and results of operations.

The indebtedness under our credit facility with Bank of America, N.A. is secured by substantially all of our assets. As a result of these security interests, such assets would only be available to satisfy claims of our general creditors or to holders of our equity securities if we were to become insolvent to the extent the value of such assets exceeded the amount of our indebtedness and other obligations. In addition, the existence of these security interests may adversely affect our financial flexibility.

Indebtedness under our credit facility with Bank of America, N.A. is secured by a lien on substantially all of our assets. Accordingly, if an event of default were to occur under our credit facilities, Bank of America, N.A. would have a priority right to our assets, to the exclusion of our general creditors in the event of our bankruptcy, insolvency, liquidation, or reorganization. In that event, our assets would first be used to repay in full all indebtedness and other obligations secured by them (including all amounts outstanding under our senior secured credit agreement), resulting in all or a portion of our assets being unavailable to satisfy the claims of our unsecured indebtedness. Only after satisfying the claims of our unsecured creditors and our subsidiaries’ unsecured creditors would any amount be available for our equity holders. The pledge of these assets and other restrictions may limit our flexibility in raising capital for other purposes. Because substantially all of our assets are pledged under these financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.

We rely on third parties for key elements of our business whose operations are outside our control.

We rely on arrangements with third party shippers and carriers such as independent shipping companies for timely delivery of our products to our customers. As a result, we may be subject to carrier disruptions and increased costs due to factors that are beyond our control, including labor strikes, inclement weather, natural disasters and rapidly increasing fuel costs. If the services of any of these third parties become unsatisfactory, we may experience delays in meeting our customers’ product demands and we may not be able to find a suitable replacement on a timely basis or on commercially reasonable terms. Any failure to deliver products to our customers in a timely and accurate manner may damage our reputation and could cause us to lose customers. We also utilize third party distributors and manufacturers’ representatives to sell our products. While we are selective in whom we choose to represent us, it is difficult for us to ensure that our distributors and manufacturers’ representatives consistently act in accordance with the standards we set for them. To the extent any of our end-customers have negative experiences with any of our distributors or manufacturers’ representatives, it could reflect poorly on us and damage our reputation, thereby negatively impacting our financial results.

Our risk management activities may leave us exposed to unidentified or unanticipated risks.

Although we maintain insurance policies for our business, these policies contain deductibles and limits of coverage. Insurance liabilities are difficult to estimate due to various factors and we may be unable to effectively anticipate or measure potential risks to our company. If we suffer unexpected or uncovered losses, or if any of our insurance policies or programs are terminated for any reason or are not effective in mitigating our risks, we may incur losses that are not covered or that exceed our coverage limits and could adversely impact our results of operations, cash flows and financial position.

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We may face impairment charges if economic environments in which our business operates and key economic and business assumptions substantially change.

Assessment of the potential impairment of property, plant and equipment, goodwill and other identifiable intangible assets is an integral part of our normal ongoing review of operations. Testing for potential impairment of long-lived assets is dependent on numerous assumptions and reflects our best estimates at a particular point in time, which may vary from testing date to testing date. The economic environments in which our businesses operate and key economic and business assumptions with respect to projected product selling prices and materials costs, market growth and inflation rates, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on both the existence and magnitude of impairments, as well as the time at which such impairments are recognized. Future changes in the economic environment and the economic outlook for the assets being evaluated could also result in additional impairment charges. Any significant asset impairments would adversely impact our financial results.

Existing and future litigation could impact our financial results and condition.

Our business, results of operations and financial condition could be affected by significant existing and future litigation or claims adverse to us. Types of potential litigation cases include product liability, contract, employment-related, personal injury or property damage, intellectual property, stockholder claims and claims arising from any injury or damage to persons, property or the environment from hazardous substances used, generated or disposed of in the conduct of our business. We have been in the past, and continue to be, subject to various product liability lawsuits and claims related to our products due to alleged personal injuries. Although we continue to challenge various court opinions on the subject matter, we are largely self-insured for some existing and possibly future product liability losses that may arise related to alleged personal injuries due to total pollution exclusions in some of our insurance policies for certain periods of time. None of the existing allegations against us for alleged personal injuries have been proved in court. Due to the uncertainties of litigation, we can give no assurance that we will prevail on any claims made against us in any such lawsuit. While it is not feasible to predict the outcome of any pending lawsuits and claims, we do not believe that the disposition of any such pending matters is likely to have an adverse effect on our financial condition or liquidity, although the resolution in any reporting period of one of more of these matters could have an adverse effect on our operating results for that period. Also, we can give no assurance that any other lawsuits or claims brought in the future will not have an adverse effect on our financial condition, liquidity or operating results.

Market disruptions caused by domestic or international financial crises could affect our ability to meet our liquidity needs at a reasonable cost and our ability to meet long-term commitments, which could adversely affect our financial condition and results of operations.

We rely on credit facilities with our lenders, amongst other avenues, to satisfy our liquidity needs. Disruptions in the domestic or international credit markets or deterioration of the banking industry’s financial condition, may discourage or prevent our lenders and other lenders from meeting their existing lending commitments, extending the terms of such commitments or agreeing to new commitments, such as for acquisitions or to refinance existing credit facilities. Market disruptions may also limit our ability to issue debt securities in the capital markets. We can provide no assurances that our lenders or any other lenders we may have will meet their existing commitments or that we will be able to access the credit markets in the future on terms acceptable to us or at all. Longer term disruptions in the domestic or international capital and credit markets as a result of uncertainty, reduced financing alternatives or failures of significant financial institutions could adversely affect our access to the liquidity needed for our business. Any disruption could require us to take measures to conserve cash until the market stabilizes or until alternative financing can be arranged. Such measures could include deferring capital expenditures and reducing other discretionary expenditures. Market disruptions could cause a broad economic downturn that may lead to increased incidence of customers’ failure to pay for services delivered, which could adversely affect our financial condition, results of operations and cash flow.

The failure of our key computer-based systems for our administrative activities and manufacturing operations could have a material adverse effect on our business.

We currently maintain computer-based systems in the operation of our business and we depend on these systems to a significant degree for all areas of business operations. These systems are vulnerable to, among other things, damage or interruption from fire, flood, tornado, and other natural disasters, power loss, computer system and network failures, operator negligence, physical and electronic loss of data or security breaches and computer viruses. The destruction or failure of any one of our computer-based systems for any significant period of time could materially adversely affect our business, financial condition, results of operations and cash flows.

A shut down of our production could adversely affect our financial results and condition.

We maintain a foam resin blending and acrylic coatings production facility and are subject to various national, federal, state, and local environmental laws and regulations. Although we believe that our operations comply in all material respects with the various rules and regulations, we cannot ensure that environmental problems relating to our facility’s operations will not develop in the future or, if they were to develop, would not require significant expenditures on our part. If any environmental problems should occur in the future, our operating results may be adversely affected. Further, if our production facility’s processing equipment breaks down or malfunctions for a prolonged period of time, we will have to rely on third party toll blenders to produce our products for us. Such alternate production methods are more costly and start up times may lead to cancellation of orders and adversely affect our business.

9

We may be unable to generate internal growth.

Our ability to generate internal growth will be affected by, among other factors, our ability to attract new customers, increases or decreases in the number or size of orders received from existing customers, hiring and retaining skilled employees and increasing volume utilizing our existing facilities. Many of the factors affecting our ability to generate internal growth may be beyond our control, and we cannot be certain our strategies will be implemented with positive results or that we will be able to generate cash flow sufficient to fund our operations and to support internal growth. If we do not achieve internal growth, our results of operations will suffer and we will likely not be able to expand our operations or grow our business.

Risks Relating to Our Common Stock

Our common stock is quoted on the OTCQX, and we are a “controlled company.” As a controlled Company, our common stock may be less attractive to some investors or otherwise harm our stock price.

Because we are quoted on the OTCQX and, even if we were to be listed on a securities exchange, we believe we would qualify as a “controlled company,” we are not required to have a majority of our board of directors be independent. Accordingly, should the interests of our controlling stockholder differ from those of other stockholders, the other stockholders may not have the same protections afforded by independent directors to stockholders of companies that are not controlled companies. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Our board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the voting or other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if that change of control might benefit our stockholders. In addition, we are subject to Section 203 of the Delaware General Corporation Law. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless (i) prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. Section 203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Your ability to influence corporate decisions may be limited because Richard J. Kurtz owns a controlling percentage of our common stock and our lenders have final authority to approve or reject certain transactions.

Our company is controlled by Richard J. Kurtz, our chairman of the board, who beneficially owns approximately 55.23% of our outstanding common stock. As a result of this stock ownership, Mr. Kurtz can control all matters submitted to our stockholders for approval, including the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. In addition, as the interests of Mr. Kurtz and our minority stockholders may not always be the same, this large concentration of voting power may lead to stockholder votes that are inconsistent with the best interests of our minority stockholders or the best interest of us as a whole. Furthermore, pursuant to the terms of our credit agreement with Bank of America, N.A., we are restricted from, among other things, entering into merger agreements or agreements for the sale of any or all of our assets outside the course of ordinary business without consent. As such, even if certain corporate transactions may be approved by our stockholders, Bank of America, N.A., as the lender under our credit agreement, have final authority to approve or reject certain of our transactions. This could lead to us not being able to effect certain transactions that may be in the best interests of our stockholders or our business.

There has been a limited market for our common stock and we cannot ensure investors that an active market for our common stock will be sustained.

There has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will be maintained. Due to the illiquidity of our common stock, the market price may not accurately reflect our relative value. There can be no assurance that an active market for our shares of common stock will develop in the future. Because our common stock is so thinly traded, even limited trading in our shares has in the past, and might in the future, lead to dramatic fluctuations in share price and investors may not be able to liquidate their investment in us at all or at a price that reflects the value of the business.

10

Our stock price may be volatile, which could result in substantial losses for investors.

The market price of our common stock is highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:

• additions or departures of key personnel, including Richard J. Kurtz, our chairman and majority stockholder;

• sales of our common stock, including management shares;

• our ability to execute our business plan;

• operating results that fall below expectations;

• loss of any strategic relationship;

• industry developments;

• economic and other external factors;

• our ability to manage the costs of maintaining adequate internal financial controls and procedures in connection with the acquisition of additional businesses;

• period-to-period fluctuations in our financial results; and

• announcements of acquisitions.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also significantly affect the market price of our common stock.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock and make it more difficult for us to raise funds through future offerings of common stock. Our stockholders and the holders of our options may sell substantial amounts of our common stock in the public market. The availability of these shares of our common stock for resale in the public market has the potential to cause the supply of our common stock to exceed investor demand, thereby decreasing the price of our common stock. In addition, the fact that our stockholders and option holders can sell substantial amounts of our common stock in the public market, whether or not sales have occurred or are occurring, could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have research coverage by securities and industry analysts and you should not invest in our common stock in anticipation that we will obtain such coverage. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared.

We are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 requires us to conduct management assessments of the effectiveness of our internal controls over financial reporting. These reporting and other obligations place significant demands on our management, administrative, operational, internal audit and accounting resources. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price. In addition, our internal controls will also include those of any company or business that we may acquire in the future. Acquired companies or businesses are likely to have different standards, controls, contracts, procedures and policies, making it more difficult to implement and harmonize company-wide financial, accounting, information and other systems. As a result, our internal controls may become more complex and we may require significantly more resources to ensure they remain effective. Failure to implement required new or improved controls, or difficulties encountered in their implementation, either in our existing business or in businesses that we may acquire, could harm our operating results or cause us to fail to meet our reporting obligations.

The requirements of being a public company may strain our resources and divert management’s attention.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act, the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations has increased and will continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. We may need to hire more employees in the future, which will increase our costs and expenses.

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In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Our operations are conducted in leased facilities located in Houston, Texas and Englewood Cliffs, New Jersey. Our corporate headquarters and primary administrative facility is located in Houston, Texas. We manufacture our foam resins and acrylic coatings, build spray rigs, perform research and development, provide warehousing, and distribute our products from our Houston, Texas facility. We lease an additional facility in Englewood Cliffs, New Jersey, primarily for inside sales. The Company has leases as follows:

Location	Square Footage	Term
Houston, Texas	56,375	06-01-2016 to 05-31-2023
Englewood Cliffs, New Jersey	4,500	Month-to-Month

We believe our present facilities are well maintained, in proper condition to operate at higher than current levels and are adequately insured. We do not anticipate significant difficulty in renewing or extending existing leases as they expire, or in replacing them with equivalent facilities or office locations.

Item 3. Legal Proceedings

Legal Proceedings

(a)Neil and Kristine Markey, et al., Plaintiffs v. Lapolla Industries, Inc., Delfino Insulation, et al, Defendants.

A complaint initially entitled Neil and Kristine Markey, individually, and on behalf of all others similarly situated, Plaintiffs, vs. Lapolla industries, Inc., a Delaware corporation; Lapolla International, Inc., a Delaware corporation; and Delfino Insulation Company, Inc., a New York Corporation, Defendants, was filed in the United States District Court for the Eastern District of New York and served on or about October 10, 2012 and amended last on November 11, 2013.  Plaintiffs brought this lawsuit only individually, having amended out any request for a class action. The complaint alleged, among other things, that Lapolla designed, labeled, distributed, and manufactured spray polyurethane foam insulation, which created a highly toxic compound when applied as insulation resulting in exposure to harmful gases. Plaintiffs sought: actual, compensatory, and punitive damages; injunctive relief; and attorney fees. Lapolla considered the allegations to be without merit and vigorously defended the allegations. On February 4, 2015, the Court dismissed the litigation with prejudice, per the voluntary request of Plaintiffs upon the advice of their new counsel and after their original litigation counsel withdrew citing irreconcilable differences with the Plaintiffs.  The Court retained jurisdiction to address a pending motion for sanctions filed by Lapolla.  The primary basis for Lapolla’s motion for sanctions is the Plaintiffs’ and their original attorney’s filing of the lawsuit without sufficient factual basis for the claims of personal injury and for failing to comply with discovery obligations to produce numerous potentially dispositive documents that Plaintiffs knew existed and their original counsel either knew or should have known existed.  Lapolla seeks to recover over $800,000 in legal fees for the defense of the lawsuit. All motions have been filed with the Court and Lapolla is awaiting a final ruling. The final outcome of this litigation cannot be determined at this time.

(b)Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel, Plaintiffs v. Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements, Perfect Wall, LLC, and Jozsef Finta, Defendants.

Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements filed a third-party complaint against Lapolla in the Superior Court, Judicial District of Stamford/Norwalk, in Connecticut on January 3, 2013.  Guzzo is alleging Lapolla’s spray polyurethane foam product is a defective product under Connecticut law and seeking indemnification and attorney’s fees.  On August 28, 2013, Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel filed an amended complaint against Lapolla also asserting the spray polyurethane foam is a defective product.  Plaintiffs seek monetary damages, punitive damages, and attorney’s fees, among other relief. Lapolla considers the allegations to be without merit and is vigorously defending the allegations. The outcome of this litigation cannot be determined at this time.

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(c)Various Lawsuits and Claims Arising in the Ordinary Course of Business

We are involved in various lawsuits and claims arising in the ordinary course of business, which are, in our opinion, immaterial both individually and in the aggregate with respect to our consolidated financial position, liquidity or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The following table shows the range of high and low bid information for our common stock for each full quarterly period within the two most recent fiscal years. Our common stock is quoted on the OTCQX under the symbol “LPAD” and such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

	2016				2015
Calendar Quarter	High		Low		High		Low
First	$	0.500	$	0.125	$	0.450	$	0.350
Second	$	0.570	$	0.324	$	0.440	$	0.350
Third	$	0.510	$	0.311	$	0.380	$	0.180
Fourth	$	0.540	$	0.350	$	0.350	$	0.151

Holders

As of February 14, 2017, there were 336 registered holders of record of our common stock.

Dividends

We have not declared or paid cash dividends on our common stock during the two most recent fiscal years. On February 15, 2017, the Company announced a cash dividend of one cent per share, payable to shareholders of record as of March 30, 2017.

Our Credit Agreement with Bank of America, N.A., effective September 7, 2016 (the “Credit Agreement”), limits our ability to pay cash dividends due to the limitation on the amount of distributions we are able to pay in order to be in compliance with our fixed charge coverage ratio (“FCCR”) debt covenant of at least 1.20 to 1.00. The FCCR is tested quarterly based upon the ratio of (a) Adjusted EBITDA (as defined in the Credit Agreement), to (b) the sum of capital expenditures, cash taxes paid, interest expenses, principal payments made on borrowed money other than the Line of Credit, and distributions made, in each case for the immediately preceding four fiscal quarter period and determined on a consolidated basis. See Part II, Item 7 “Management Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources” for more information.

Recent Sales of Unregistered Securities.

None.

Issuer Purchases of Equity Securities.

We did not repurchase any of our securities during the fourth quarter of the fiscal year ended December 31, 2016.

Item 6. Selected Financial Data.

Not applicable.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk factors” included under Part I, Item 1A and elsewhere in this report. See “Special note regarding forward-looking statements.” In addition, the following review should be read in conjunction with information presented in Part I, Item 1 - Business relating to non-GAAP financial measures EBITDA and Adjusted EBITDA, as well as the information presented in our financial statements and the related notes to our financial statements.

Overview

Lapolla is a leading United States based manufacturer and global distributor of foam, coatings, and equipment, focused on developing and commercializing foams and coatings targeted at commercial and industrial and residential applications in the insulation and construction industries. We manage our business through two business segments - Foam and Coatings. The Foam segment involves producing, and in limited instances applying through subcontractors, building envelope insulation foam for interior application, and roofing systems. The Coatings segment involves producing protective elastomeric coatings and primers. Both segments include supplying equipment and related ancillary items used in the application of our products.

This financial review presents our operating results for each of the two years in the period ended December 31, 2016, and our financial condition at December 31, 2016.

Non-GAAP Financial Measures

To supplement our financial statements presented on a generally accepted accounting principles ("GAAP") basis, we disclose non-GAAP measures as EBITDA and Adjusted EBITDA because management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in its business, and to establish operational goals and forecasts that are used in allocating resources. In addition, we believe many investors use these non-GAAP measures to monitor the Company’s performance. Our presentation includes these non-GAAP financial measures, and a reconciliation of EBITDA and Adjusted EBITDA to the GAAP measures most directly comparable thereto. The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income or loss. The non-GAAP financial measures of EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or loss or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and have important limitations as analytical tools. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income and is defined differently by different companies, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

EBITDA

We define EBITDA as earnings or loss before interest, income taxes, depreciation and amortization.

Adjusted EBITDA

Adjusted EBITDA is defined as EBITDA increased by total share based compensation, property taxes, and loss on debt extinguishment.

We believe that presenting EBITDA and Adjusted EBITDA, in addition to the corresponding GAAP financial measures, provides investors greater transparency to the information used by management for financial and operational decision-making and allows investors to see the Company’s results “through the eyes” of management. We further believe that providing this information assists investors in understanding the Company’s operating performance and the methodology used by management to evaluate and measure such performance.

We recognize that the usefulness of EBITDA and Adjusted EBITDA as an evaluative tool may have certain limitations, including:

• EBITDA and Adjusted EBITDA do not include interest expense. Because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and impacts our ability to generate profits and cash flows. Therefore, any measure that excludes interest expense may have material limitations;

• EBITDA and Adjusted EBITDA do not include depreciation and amortization of other intangible assets expense. Because we use capital assets, depreciation and amortization of other intangible assets expense is a necessary element of our costs and ability to generate profits. Therefore, any measure that excludes depreciation and amortization of other intangible assets expense may have material limitations;

• EBITDA and Adjusted EBITDA do not include provision for income taxes. Because the payment of income taxes is a necessary element of our costs, any measure that excludes income tax expense may have material limitations;

• EBITDA and Adjusted EBITDA do not reflect capital expenditures or future requirements for capital expenditures or contractual commitments;

• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs.

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Results of Operations

Summary

The following table presents selected financial and operating data derived from the audited financial statements of the Company as of the dates and for the periods indicated. In addition, the table presents our unaudited non-GAAP financial measures, EBITDA and Adjusted EBITDA, and includes our reconciliation to net income or loss, its most directly comparable financial measure calculated and presented in accordance with GAAP. The table is presented in thousands.

	Year Ended December 31,
	2016		2015
Summary of Overall Results of Operations
Sales	$	86,386	$	78,649
Operating Income	7,797		2,055
Other Expense	1,108		2,240
Net Income (Loss)	6,378		(577		)
EBITDA (Unaudited)	$	8,727	$	2,732
Adjusted EBITDA (Unaudited)	$	10,180	$	4,088
Reconciliation of EBITDA and Adjusted EBITDA to Net Income (Loss):
Net Income (Loss):	$	6,378	$	(577	)
Additions:
Interest Expense	885		1,319
Interest Expense – Related Party	491		775
Interest Expense – Amortization of Discount	120		181
Income Tax Expense	311		392
Depreciation	265		358
Amortization of Other Intangible Assets	277		284
EBITDA	$	8,727	$	2,732
Additions:
Share Based Compensation (1)	$	988	$	1,229
Property Tax Expense	159		127
Loss on Debt Extinguishment	306		—
Adjusted EBITDA	$	10,180	$	4,088

(1) Represents non-cash share-based compensation expense for the periods then ended.

Sales

The following is a summary of sales for the years ending December 31 (in thousands):

	2016		2015		% Change
Foam	$	73,919	$	66,030	11.9	%
Coatings	12,467		12,619		(1.2	)%
Total Sales	$	86,386	$	78,649	9.8	%

For the year ended December 31, 2016, our total sales increased by $7.7 million, or an increase of 9.8% from the same period in 2015. Foam sales increased $7.9 million primarily due to an increase in market share, which we believe is attributable to our focus on advancement of technology and marketing effort. The increase in foam sales was slightly offset by a decrease in coatings sales of $152,000, primarily due to heightened competition.

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Gross Profit

The following is a summary of gross profit for the years ending December 31 (in thousands):

	2016			2015			% Change
Cost of Sales	$	61,345		$	60,264		1.8	%
Gross Profit	25,041			18,385			36.2	%
Gross Margin Percentage:
Foam	28.7		%	22.2		%	29.3	%
Coatings	30.8		%	29.7		%	3.7	%
Total	29.0		%	23.4		%	23.9	%

For the year ended December 31, 2016, our gross profit increased by $6.7 million, or an increase of 36.2% from the same period in 2015. The increase in gross profit was driven by operational and manufacturing efficiencies, including a decrease of $4.3 million in purchased feedstock, freight, and other manufacturing costs. The Company's increase in sales contributed an additional $2.3 million of gross profit year over year. The remaining increase in gross profit is attributable to minor fluctuations in manufacturing depreciation and absorption.

Operating Expenses

Selling, general and administrative expenses increased $1.2 million or 8.3%, to $15.1 million in 2016, compared to $13.9 million in 2015. The increase was primarily due to increases of $466,000 in selling expenses, including the hiring of additional sales personnel and travel expenses related to the solicitation of sales and maintenance of customer relationships, $145,000 in costs related to marketing and promotions, $132,000 in costs related to an increase in headcount for research and development, and $234,000 in costs related to our technical service department, including the hiring of additional technical service representatives to support our customers.

Professional fees increased $28,000 or 2.4% to $1.2 million. Professional fees consist of costs related to legal defense and required auditing fees.

Depreciation expense decreased $49,000 or 33.6%, to $97,000 in 2016, compared to $146,000 in 2015, due to reductions in depreciable assets.

Amortization of other intangible assets expense decreased $7,000 or 2.5%, to $277,000 in 2016, compared to $284,000 in 2015.

Consulting fees decreased $212,000 or 26.2% to $597,000 in 2016, compared to $809,000 in 2015, primarily due to a decrease in the need for recruiting services.

Other (Income) Expense

Interest expense decreased $434,000 or 32.9%, to $885,000 in 2016, compared to $1.3 million in 2015, due to a lower average balance and lower interest rate on our Revolver Loan, augmented by the refinancing of the Enhanced Notes and the Revolver Loan into a new Line of Credit with Bank of America, N.A. on September 7, 2016. The effective interest rates on the Revolver Loan and Enhanced Notes were 4.6% and 11.7%, respectively, while the effective interest rate on our current Line of Credit is 2.8%.

Interest expense – related party decreased $284,000 or 36.6%, to $491,000 in 2016, compared to $775,000 in 2015, due to a decrease in accrued interest for the promissory notes between the Company and the chairman and principal stockholder that were paid in full at the end of 2015, augmented by the termination of the Enhanced Notes and related Guaranty Agreement on September 7, 2016.

Interest expense – amortization of discount decreased $61,000 or 33.7%, to $120,000 in 2016, compared to $181,000 in 2015. The amortization relates to the purchase discount associated with the Enhanced Notes, which was terminated on September 7, 2016.

Other income, net increased $659,000 or 1,882.9%, to $694,000 in 2016, compared to $35,000 in 2015. The increase was primarily due to the receipt of a settlement check related to a class action lawsuit.

Outlook for 2017

Based on our belief that there is growing global consumer awareness about energy efficient foams and coatings and reductions in energy cost, our outlook remains aggressive and positive, and we expect sales to grow globally in 2017. The markets for our products will continue to be highly competitive, but we believe, however, that our competitive advantages are rooted in our management, product formulations, credentials, approvals, performance, pricing, and technical customer service. In addition, we offer the flexibility, quality of products and responsiveness that only a smaller more dynamic company can offer. This outlook is based on a number of assumptions relating to our business and operations which are subject to change, some of which are outside our control. Any variation in our assumptions may result in a change in this outlook.

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Liquidity and Capital Resources

We entered into a loan agreement with Bank of America, N.A. (the “Bank”) on September 7, 2016 (the “Credit Agreement”), under which we maintain a line of credit up to $15 million (the “Line of Credit”). The Company, in connection with the closing of the Credit Agreement, used the Line of Credit to pay off the outstanding balances under: (i) the a note purchase agreement with Enhanced Jobs for Texas Fund, LLC and Enhanced Credit Supported Loan Fund, LP (collectively “Enhanced”) on December 10, 2013 (the “Note Purchase Agreement”) for promissory notes aggregating $5.8 million (collectively referred to as the “Enhanced Notes”); and (ii) the Loan and Security Agreement with the Bank dated August 31, 2010 (the “Loan Agreement”) aggregating $2.7 million (the “Revolver Loan”). Refer to Credit Agreement and Other Debt below for more information.

The following is a summary of operating, investing, and financing activities as reflected in the statement of cash flows for the years ending December 31 (in thousands):

	2016			2015			% Change
Cash provided by (used in):
Operating activities	$	7,289		$	(825	)	983.5	%
Investing activities	(143		)	(76		)	88.2	%
Financing activities	(5,424		)	901			702.0	%
Net change in cash	$	1,722		$	—

Net cash provided by operating activities increased by $8.1 million, to $7.3 million in 2016, compared to net cash used in operating activities of $825,000 in 2015. The increase was primarily attributable to net income of $6.4 million driven by increases in sales of $7.7 million and gross profit of $6.7 million. The increase in net income included significant decreases in interest expense of $434,000 and interest expense - related party of 284,000.

Net Working Capital	2016		2015		% Change
Current assets	$	22,914	$	19,396	18.1	%
Current liabilities	9,679		9,208		5.1	%
Net working capital	13,235		10,188		29.9	%
Current ratio	2.37:1		2.11:1

Net working capital increased by $3.0 million, or 29.9%, in 2016 compared to 2015. The increase is primarily due to increases in cash of $1.7 million and accounts receivable of $2.5 million, which were offset by a combination of minimal fluctuations.

Net cash used in investing activities was $143,000 in 2016 and $76,000 in 2015. The investments in 2016 were for capital expenditures of $34,000 for vehicles, $83,000 for machinery and equipment, $10,000 for office furniture and equipment, and $16,000 for computers and software. The investments for 2015 were for capital expenditures of $4,000 for vehicles, $14,000 for machinery and equipment, $4,000 for office furniture and equipment, and $54,000 for computers and software.

Net cash used in financing activities was $5.4 million in 2016, compared to net cash provided by financing activities of $901,000 in 2015. Net cash used in 2016, consisted of proceeds of $9 million from our line of credit, net of repayments, repayments of $6.7 million on our former Revolver Loan, net of borrowings, and a repayment of $7.7 million on the Enhanced Notes payable. Net cash provided in 2015 consisted of proceeds of $1.3 million on our former Revolver Loan, net of repayments, borrowings of $250,000 from the Chairman of the Board in January 2015, which the Company paid in December 2015 including an additional $250,000 owed from November 2014. The Chairman of the Board paid $150,000 towards the Enhanced Notes on behalf of the Company in December 2015 which was repaid to the Chairman of the Board by the Company in December 2016.

Management believes that, based on budgeted sales and expenses and implemented minimum sales margin and cost controls, any cash generated from operations and the Line of Credit availability, subject to borrowing base limitations which may adversely impact our ability to raise capital, are sufficient to fund operations, including capital expenditures, for the next 12 months. Additionally, we evaluate capital raising opportunities for private placements of debt or common or preferred stock from accredited sophisticated investors from time to time to not only gauge market conditions but also to ensure additional capital is readily available to fund aggressive growth developments.

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Credit Agreement and Other Debt

Credit Agreement

On September 7, 2016, we entered into the Credit Agreement with the Bank, which amended and restated the Loan Agreement in its entirety. The Credit Agreement provides an initial line of credit of $15 million for a 3 year term maturing on September 7, 2019. The amount available under the Line of Credit will be reduced by $250,000 at the beginning of each fiscal quarter starting on January 1, 2017 and ending on July 1, 2019, thereby reducing the Company’s unused line fee. The Company's interest rate is the daily floating LIBOR rate plus 2.25%. The Credit Agreement requires the Company to comply with two material financial covenants, including: (i) an asset coverage ratio of at least (a) 1.10 to 1.00 from September 30, 2016 through September 30, 2017, (b) 1.15 to 1.00 from October 1, 2017 through March 31, 2018, and (c) 1.20 to 1.00 after April 1, 2018, tested quarterly, which in each case will be determined based upon the ratio of (x) 85% of book value of all accounts receivable, plus 55% of book value of all inventory, plus 50% net book value of plant, property and equipment of the Company (the “Total Margined Value”) to (y) all outstanding liabilities for borrowed money and other interest-bearing liabilities arising under the Line of Credit (the “Total Line of Credit”); and (ii) a fixed charge coverage ratio of at least 1.20 to 1.00, tested quarterly based upon the ratio of (a) Adjusted EBITDA (as defined in the Credit Agreement), to (b) the sum of capital expenditures, cash taxes paid, interest expenses, principal payments made on borrowed money other than the Line of Credit and the Enhanced Notes, and distributions made, in each case for the immediately preceding four fiscal quarter period and determined on a consolidated basis. Upon closing of the Credit Agreement, an aggregate of $8.5 million was drawn from the Line of Credit and used to pay off the Enhanced Notes and the Loan Agreement. The Company granted the Bank a continuing security interest in and lien upon substantially all assets of the corporation. If, at any time, the Company’s Total Margined Value is less than the amount outstanding under the Total Line of Credit and that amount remains unpaid or future Total Margined Value calculations do not increase to an amount equal to the balance outstanding under the Total Line of Credit, the Bank, in its sole discretion, may accelerate any and all amounts outstanding under the Line of Credit. At December 31, 2016, the cash available under our Line of Credit was $4.7 million based on the Asset Coverage Ratio and after giving effect to outstanding borrowings. At December 31, 2016, we were in compliance with all debt covenants under our Credit Agreement.

Future Minimum Payments on Long-Term Debt

At December 31, 2016, future minimum principal payments of long-term debt are as follows (in thousands):

	Payments Due By Period
	Less Than 1 Year		1 to 3 Years		4 to 5 Years		More Than 5 Years		Total
Line of Credit	$	—	$	9,000	$	—	$	—	$	9,000

Off Balance Sheet Arrangements

As of December 31, 2016, we had no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ significantly from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail below in the notes to our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net tangible and identifiable intangible assets of an acquired business. Goodwill was $4.2 million at December 31, 2016 and 2015. The Company operates two reporting units, Foam and Coatings. Disclosures related to goodwill are included in Note 8 to the financial statements. The Company evaluates goodwill for impairment on an annual basis or more frequently if Management believes indicators of impairment exist. Under GAAP, the Company has the option to perform a qualitative assessment to test for impairment of goodwill. If it is determined that it is more likely than not that the fair value of each reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of each reporting unit and comparing the carrying value of each reporting unit to its estimated fair value. If the fair value of a reporting unit is greater than its carrying value then goodwill is not impaired; otherwise, the second step of the impairment test shall be performed to measure the amount of impairment loss. Based on the qualitative assessment performed as of December 31, 2016, the Company concluded that it was more likely than not that the fair value of its reporting units was greater than their carrying amount. Accordingly, no further testing was required. There were no goodwill impairment charges recorded during the years ended December 31, 2016 or 2015.

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Other Intangible Assets

The Company's other intangible assets, net of $1.2 million at December 31, 2016 and 2015, consist of product formulations and trade names that were acquired as part of business combinations, and trademarks and approvals and certifications obtained as part of entering into new markets. Amortization of other intangible assets totaled $277,000 and $284,000 for the years ended December 31, 2016 and 2015, respectively. Other intangible assets are tested for impairment as part of the long-lived asset grouping impairment tests. We test impairment of the asset group whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. See impairment discussion above under Property, Plant and Equipment for a description of how impairment losses are determined. Disclosures related to other intangible assets are included in Note 8 to the financial statements. Significant management judgment is required in the forecasts of future operating results that are used in the Company’s impairment evaluations. The estimates used are consistent with the plans and estimates that Management uses to manage its business. It is possible, however, that the plans may change and estimates used may prove to be inaccurate. If the Company’s actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, then the Company could incur future impairment charges, which would adversely affect financial performance. The Company concluded that there were no material events or significant changes in circumstances that led to impairment during fiscal 2016 and 2015. There were no long-lived asset impairment charges recorded during the years ended December 31, 2016 or 2015.

Allowance for Doubtful Accounts

The Company presents trade receivables, net of allowances for doubtful accounts, to ensure trade receivables are not overstated due to uncollectible accounts. Allowances, when required, are calculated based on a detailed review of certain individual customer accounts, including credit insurance and other security when applicable, and an estimation of the overall economic conditions affecting our customer base. The Company reviews a customer’s credit history before extending credit. The allowance for doubtful accounts was approximately $366,000 and $545,000 at December 31, 2016 and 2015, respectively. If the financial condition of customers were to deteriorate based on worsening overall economic conditions, resulting in an impairment of their ability to make payments to the Company, then additional allowances may be required in future periods.

See also generallyNote 1 – Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates, and Assumptions in our financial statements listed under Item 15 of Part IV of this report.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

The information required by this Item is incorporated herein by reference to the financial statements set forth in Item 15 of Part IV of this report, “Exhibits and Financial Statement Schedules.”

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a)    Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2016, the end of the period covered by this Annual Report on Form 10-K. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on such evaluation, our chief executive officer and chief financial officer have concluded that, as of December 31, 2016, our disclosure controls and procedures were effective at the reasonable assurance level.

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(b)    Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, we used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013).

Based on this evaluation under the framework in Internal Control - Integrated Framework (2013) issued by the COSO, management concluded the Company’s internal control over financial reporting was effective as of December 31, 2016.

(c)    Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

Set forth below is the biographical information and the qualifications and skills for each director and named executive officer, their ages, and their principal occupations for at least the past five years and their public-company directorships. All directors hold office for one-year terms or until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.

Richard J. Kurtz	76	Chairman of the Board
Mr. Kurtz was appointed to our board of directors on November 23, 1998 and chairman of the board on February 8, 1999. He has been chief executive officer of the Kamson Corporation, a privately held corporation, in business for the past 40 years. The Kamson Corporation owns and operates 87 investment properties in the Northeastern U.S. Mr. Kurtz is a graduate of the University of Miami and a member of its President's Club. Most notably, the Chamber of Commerce in Englewood Cliffs and the Boy Scouts of America chose him Man of the Year. Mr. Kurtz is currently vice president and a member of the board of directors for the Jewish Community Center on the Palisades in Tenafly, New Jersey. He is also an elected member of the Board of Trustees and Foundation Board for the Englewood Hospital and Medical Center of New Jersey and the Board of Governors for the Jewish Home and Rehabilitation Center. We believe that Mr. Kurtz’ leadership, drive and determination, as well as his background in the real estate and property management industries, make him a valuable resource on our board of directors.

Jay C. Nadel	58	Vice Chairman of the Board
Mr. Nadel was appointed to our board of directors on January 16, 2007 and, in connection with an advisory agreement, became vice chairman of the board on February 22, 2011. He has been chairman of the board of Englewood Hospital and Medical Center Foundation since October 1, 2013 and was previously chairman of Englewood Hospital and Medical Center and Englewood Healthcare System. In addition to being an independent consultant since 2004, Mr. Nadel currently serves on the Boards of two mutual fund groups, The City National Rochdale Family of Funds and The Advisors' Inner Circle III and related funds. As a senior financial services executive, Mr. Nadel has extensive business management and operations experience. From 2002 to 2004, he was executive vice president of Bank of New York’s Clearing Services, where he oversaw strategic planning.  From 1986 to 2001, he was a partner in the investment firm of Weiss, Peck & Greer/Robeco, where he was chairman of the operations committee and managing director of the firm’s Clearing Services Division.  From 1980 to 1986, he worked at KPMG Peat Marwick, New York, where he provided audit services attaining the position of manager. Mr. Nadel has been a Certified Public Accountant since 1980 and has a Bachelor of Science degree from the University of Maryland. We believe that Mr. Nadel's leadership and management experiences, as well as his financial background and qualifications, makes him a valuable resource on our board of directors.

Lt. Gen. Arthur J. Gregg (US Army) (Ret.)	86	Director
Lt. Gen. Gregg was appointed to our board of directors on February 21, 2000 and is the chairperson of the compensation committee.  He enlisted in the United States Army in January 1946, and was commissioned through Officer’s Candidate School in May 1950. He served for more than 35 years and retired in August 1981 in the grade of Lieutenant General. His most significant assignments included Commander, Army and Air Force Exchange System, Europe; Deputy Chief of Staff for Logistics, United States Army, Europe; Director for Logistics in the Organization of the Joint Chiefs of Staff; and the Army’s Deputy Chief of Staff for Logistics. Following retirement in 1981, Lt. Gen. Gregg held several corporate assignments at the vice president, president, and chief executive officer levels. He retired from active management in 1998, but continues to serve on several corporate boards. He chairs three of these boards. A graduate of Saint Benedict College, Atchison, Kansas, with a Bachelor of Science degree in Business Administration [summa cum laude], the Army War College and the Command and General Staff College. Lt. Gen. Gregg also attended the Executive Program in National Security at the Harvard University’s John F. Kennedy School of Government. We believe that Lt. Gen. Gregg’s extensive business experience, as well as his executive leadership experience, make him a valuable resource on our board of directors.

Augustus J. Larson	62	Director
Mr. Larson was appointed to our board of directors on January 16, 2007 and is the chairperson of the audit committee. He is a principal of Larson Capital, LLC, a commercial real estate finance and investment company in Bernardsville, New Jersey. He founded Larson Capital, LLC in 2004. From 1985 to 2001, Mr. Larson was a principal of Larson Financial Resources, a New Jersey based commercial mortgage banking firm. In 2001, Larson Financial Resources was sold to PW Funding; and Mr. Larson served as a managing director of PW Funding and directed its commercial and multi-family real estate loan production in the metro New Jersey and New York markets until 2004. Mr. Larson is a former councilman in the Borough of Far Hills, New Jersey. He has a Bachelor of Arts degree from Colgate University. He is also a Certified Mortgage Banker and an active member in numerous professional and charitable organizations. We believe that Mr. Larson’s extensive background in finance makes him a valuable member of our board of directors.

Douglas J. Kramer	52	Director, CEO and President
Mr. Kramer joined the Company in January 2005 as president and chief operating officer and was named chief executive officer and president on July 12, 2006. He was appointed to the board of directors on January 16, 2007. Mr. Kramer has 26 years’ experience in the spray polyurethane foam and acrylic coatings business. Prior to joining Lapolla, he was vice president of the Construction Products Division for Foam Enterprises, LLC, a wholly-owned subsidiary of the BASF Corporation, where he was employed from 1997 to 2004. Mr. Kramer has a background in Liberal Arts from Penn State University and the University of Texas. We believe that Mr. Kramer’s extensive background in the building and construction products industries, as well as his familiarity with our day-to-day operations, make him a valuable member of our board of directors.

22

Michael T. Adams	51	Director, CGO, EVP and Secretary
Mr. Adams is one of the founders of the Company starting on January 1, 1997.  He was appointed to the board of directors on December 20, 2004 and is chairperson of the corporate governance committee pursuant to an exception. Mr. Adams was appointed chief governance officer on July 12, 2006, and has been executive vice president and secretary since March 1, 1999. During his term with Lapolla, Mr. Adams also served as president and interim chief executive officer, treasurer and interim chief financial officer (including from December 18, 2014 until December 31, 2014), to facilitate management successions, and held various officer positions in the Company’s former subsidiaries starting on January 1, 1997. Mr. Adams earned his Bachelor of Science and Master of Science in business administration, and Juris Doctor degrees from Nova Southeastern University, Fort Lauderdale, Florida. We believe that Mr. Adams’ extensive background in business administration, as well as corporate governance, and his long experience with our Company make him a valuable member of our board of directors.

Harvey L. Schnitzer	58	Director and COO
Mr. Schnitzer was appointed to our board of directors on February 15, 2017. He joined Lapolla on April 5, 2012 as chief operating officer. Before joining Lapolla, Mr. Schnitzer held positions as chief operating officer, chief financial officer, and executive vice president at Energy Maintenance Services Group I, LLC (EMS), a private equity-backed oil and gas services company, from 2003 to 2011, where he was responsible for raising over $210 million in equity and debt and completed 25 acquisitions. He earned his Bachelor of Science degree in Accounting from Fairleigh Dickenson University in Madison, New Jersey, and Executive MBA from Loyola College in Baltimore, Maryland. Mr. Schnitzer has completed MIT Executive Education in Negotiation and Managing Change in a Complex Organization. He is a certified public accountant. We believe that Mr. Schnitzer’s extensive background in finance, operations and management, and his knowledge of the Company’s day-to-day operations and his past board experience make him a valuable member of our board of directors.

Jomarc C. Marukot	40	CFO and Treasurer
Mr. Marukot joined Lapolla on January 1, 2015 as chief financial officer and treasurer. Mr. Marukot was previously the Company’s corporate controller, from January 2012 to October 2014, and senior accountant, from May 2009 to December 2011. Prior to rejoining the Company, he worked for KLX Energy Services, a division of KLX, Inc., as assistant controller from November 2014 to December 2014. Prior to May 2009, Mr. Marukot served in various accounting roles with Key Energy Services, Inc. and Continental Airlines, Inc. He earned his Bachelor of Science degree in Business Administration with a specialization in Accounting from the University of Houston, Texas.

The board of directors of the Company regards all of our directors as competent professionals with many years of experience in the business community. Additionally, the board of directors believes that the overall experience and knowledge of such directors will contribute to the overall success of our business.

Family Relationships

There are no family relationships among any of the directors or executive officers of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and officers, and persons who own more than ten percent of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Directors, officers and persons who own more than ten percent of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2016, each of our directors, officers and greater than ten percent stockholders complied with all Section 16(a) filing requirements applicable to our directors, officers and greater than ten percent stockholders.

Code of Business Ethics and Conduct

We have adopted a Code of Business Ethics and Conduct, as amended (the “Code”), which contains general guidelines for conducting our business and is designed to help directors, employees and independent consultants resolve ethical issues in an increasingly complex business environment. The Code applies to all directors, consultants and employees, including our principal executive officer and our principal financial officer and any other employee with any responsibility for the preparation and filing of documents with the SEC. The Code covers topics including, but not limited to, conflicts of interest, confidentiality of information and compliance with laws and regulations. A copy of the Code, as amended from time to time, is available in the Corporate Governance section of our website at https://www.lapolla.com/corporate-governance/. The information on our website is not incorporated by reference in this Annual Report. We intend to disclose future amendments to provisions of the Code, or waivers of such provisions, as applicable, on this website within four business days following the date of such amendment or waiver.

Board Committees

Our board of directors has an established audit committee, corporate governance committee, and compensation committee, each of which has the composition described below.

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Audit Committee

Our audit committee is currently comprised of Augustus J. Larson and Lt. Gen. Arthur J. Gregg, US Army (Ret), each of whom our board has determined to be financially literate and qualify as an independent director. Mr. Larson is the chairperson of our audit committee. In addition, Mr. Larson qualifies as our financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K. Our audit committee operates under a written charter that satisfies the applicable rules and regulations of the SEC. A copy of our audit committee charter is available on our website at https://www.lapolla.com/corporate-governance/.

Corporate Governance Committee

Our corporate governance committee is currently comprised of Michael T. Adams, Arthur J. Gregg, and Augustus J. Larson. Our board has determined that Lt. Gen. Gregg and Mr. Larson qualify as independent directors. Mr. Adams is the chairperson of our corporate governance committee pursuant to an exception. Our director selection process criterion and corporate governance committee charter are available on our website at https://www.lapolla.com/corporate-governance/.

Compensation Committee

Our compensation committee is currently comprised of Arthur J. Gregg and Augustus J. Larson, each of whom our board has determined to qualify as an independent director, an “outside director” for purposes of Section 162(m) of the Internal Revenue Code, and a “non-employee director” for purposes of Section 16b-3 under the Exchange, and does not have a relationship to us which is material to his ability to be independent from management in connection with the duties of a compensation committee member. Lt. Gen. Gregg is the chairperson of our compensation committee. Our compensation committee operates under a written charter that satisfies the applicable rules and regulations of the SEC. A copy of our compensation committee charter is available on our website at https://www.lapolla.com/corporate-governance/.

Item 11. Executive Compensation

Overview

The compensation committee administers the compensation policies and programs for our named executive officers, as well as the cash-and equity-based incentive compensation plans in which those persons may participate. The compensation committee has not retained the services of any compensation consultants in connection with the compensation of our executive officers.

Compensation Objectives

The compensation committee’s philosophy is to provide a compensation package that attracts, motivates and retains executive talent, and delivers rewards for superior performance as well as consequences for underperformance. The objectives of the Compensation Committee’s compensation practices are to:

• provide a total compensation program that is competitive in the industry in which we compete for executive talent;

• place a significant portion of executive compensation at risk by linking such compensation to the achievement of corporate financial performance objectives and individual objectives;

• provide long-term incentive compensation that focuses executives’ efforts on building stockholder value by aligning their interests with our stockholders; and

• provide incentives that promote executive retention. In designing and administering our executive compensation programs, we attempt to strike an appropriate balance among these elements, as discussed below.

The major compensation elements for our named executive officers are base salary, annual and other bonuses, equity awards, insurance benefits, and company provided vehicle or vehicle allowances. Each of these elements is an integral part of and supports our overall compensation objectives. Base salaries (other than increases), insurance benefits and perquisites form stable parts of our named executive officers’ compensation packages that are not necessarily dependent on our performance during a particular year. We set these compensation elements at competitive levels so that we are able to attract, motivate and retain highly qualified executive officers. Consistent with our performance-based philosophy, we reserve the largest potential compensation for performance- and incentive-based awards. These awards include annual bonuses and long-term awards that are primarily based on our financial performance and consisting of compensation in the form of cash, stock bonuses, and stock options to provide incentives that are tied to both our short-term and long-term performance. Our performance-based annual bonuses reward short-term and long-term performance, while our stock options reward long-term performance and align the interests of management with our stockholders. We additionally provide for retention of certain named executive officers through bonuses in the case of a change in control.

2016 and 2015 Summary Compensation Table

The table below sets forth, for the fiscal years ended December 31, 2016 and 2015, the compensation paid to our named executive officers: (i) Douglas J. Kramer, our chief executive officer and president and a member of our board; (ii) Jomarc C. Marukot, our chief financial officer and treasurer; and (iii) Michael T. Adams, our chief governance officer, executive vice president and corporate secretary and a member of our board; and (iv) Harvey L. Schnitzer, our chief operating officer and a member of our board.

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SUMMARY COMPENSATION TABLE

					Stock	Options	All Other
Name and	Year	Salary	Bonus		Awards	Awards	Compensation		Total
Principal Position	($)	($)	($)		($) (1)	($) (1)	($)		($)
Douglas J. Kramer	2016	400,000	120,000	(2)	—	369,155	43,133	(4)	932,288
CEO and President	2015	350,000	200,000		—	224,784	46,451		821,235
Jomarc C. Marukot	2016	190,000	47,500	(2)	—	—	24,459	(5)	261,959
CFO and Treasurer	2015	184,154	66,500		—	—	22,214		272,868
Michael T. Adams	2016	200,000	55,000	(3)	—	51,047	18,920	(6)	324,967
CGO, EVP and Secretary	2015	180,000	68,000		—	49,663	16,930		314,593
Harvey L. Schnitzer	2016	275,000	68,750	(2)	16,250	82,506	20,471	(7)	462,977
COO	2015	250,000	87,500		16,250	72,906	24,025		450,681

(1) The amounts reported represent the aggregate grant date fair value of the awards, calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718—Compensation—Stock Compensation (“ASC 718”), recognized by us in 2016. The actual value, if any, an executive may realize will depend for options on the excess of the market price over the option exercise price on the date the option is exercised and for stock on the excess of the market price over the cost basis of the stock. There is no assurance that the value realized by an executive will be at or near the value estimated. Assumptions used in the calculation of these amounts are included in Note 1 – Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates, and Assumptions—Share-Based Compensation and Note 17 – Share-Based Payment Arrangements, Equity Incentive Plan, of our Notes to Financial Statements included in this Annual Report on Form 10-K.

(2) Represents an annual performance bonus based on the Company achieving 100% of its budgeted Adjusted EBITDA for the 2016 year.

(3) Represents an annual non-discretionary bonus for $5,000 and an annual performance bonus based on the Company achieving at least 100% of its budgeted Adjusted EBITDA for the 2016 year for the remainder.

(4) Comprised of $22,432 for personal use of a Company automobile and $20,701 for medical, dental, vision, life, and disability insurances.

(5) Comprised of $8,400 for a car allowance and $16,059 for medical, dental, vision, life, and disability insurances.

(6) Comprised of $9,000 for a car allowance and $9,920 for medical, dental, vision, life, and disability insurances.

(7) Comprised of $9,000 for a car allowance and $11,471 for medical, dental, vision, life, and disability insurances.

Agreements with Executive Officers

We are party to executive employment and stock option agreements with the named executive officers employed by us at December 31, 2016. The information provided below is supplemented by the Summary Compensation and Grants of Plan-Based Awards tables above and Outstanding Equity Awards at Fiscal Year-End (Option and Stock Awards) and Stock Vested at Fiscal Year-End (Stock Awards) tables below.

Douglas J. Kramer

The Company entered into an executive employment agreement with its chief executive officer and president, Mr. Kramer, effective from January 1, 2014 to, as amended, December 31, 2017, pursuant to which he is entitled to:

• annual base salary for the 2016 calendar year of $400,000;

• annual performance bonus of $120,000, $160,000, or $200,000 if Company achieves 100%, 120%, or 140%, respectively, of its budgeted Adjusted EBITDA for a particular fiscal year, payable in a single lump sum within thirty days after the issuance of the Company's audited financial statements for such fiscal year, and, in all events, by December 31 of the fiscal year following the fiscal year to which the bonus applies;

• sales bonus of 1% for all new and ½% for certain existing international accounts, subject to such sales meeting certain gross profit margin criteria and credit and payment terms;

• a transaction bonus, subject to certain limitations, upon consummation of a change in control if he is still employed at the time or in the event his employment is terminated within one year immediately preceding the consummation of a change in control, and including upon consummation of the change in control, the transfer to Mr. Kramer of ownership of the Company-provided automobile then being used by him. A transaction bonus is payable as soon as practicable after the closing of such transaction but in no event later than March 15 of the year following the year in which the closing of such transaction occurs. Any transaction bonus payable on account of the occurrence of a transaction that constitutes a change in the ownership of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated pursuant thereto (“Section 409A”), shall be paid on the same schedule, under the same terms and conditions and in the same form of consideration (e.g., cash, stock in the acquiring company, promissory note or a combination thereof) as is the consideration received by the holders of the majority of the outstanding voting securities of the Company who participate in the transaction; provided, however, that in no event shall any portion of the transaction bonus be paid to executive on a date that is later than five years after such transaction. In the Company’s sole and absolute discretion, it may pay in cash all or any portion of the transaction bonus that would otherwise be paid in a form of consideration other than cash;

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Douglas J. Kramer - continued

• upon termination by the Company without cause or by Mr. Kramer for good reason, which the agreement defines as: (i) a reduction in his base salary; (ii) a substantial diminution of his duties and responsibilities (the Company’s employment of another officer in a newly created position or otherwise, at a position beneath that of Mr. Kramer, shall not be deemed to constitute, or result in, a substantial diminution of his duties or responsibilities); or (iii) a relocation of his primary workplace that is not agreed to by him and is to a location that is greater than 50 miles from his primary workplace, provided, however, that any required travel related to the business of the Company, including but not limited to its planned expansion in the international market, shall not be deemed to constitute, or result in, the relocation of the his primary workplace:

◦ severance equal to the lesser of 24 months base salary, or base salary for the remainder of the term, reduced by any earned income during the severance period;

◦ the product of the value, as of the last day of the calendar year of termination, of any Company equity or equity-based awards, which he can show that he reasonably would have received had he remained employed through the end of the calendar year, or 4 months after the termination date, whichever is greater, multiplied by a fraction, the numerator of which is the number of days in the calendar year of termination through the termination date and the denominator of which is 365, but only to extent not previously vested, exercised and/or paid;

◦ for 12 months from termination, continued participation in any plans providing medical, hospitalization and dental coverage; and

◦ all bonuses and stock options previously earned, or which may be earned in the event of a consummation of a change of control within one year immediately following termination;

• upon termination by the Company for cause or by Mr. Kramer without good reason, which the agreement defines as: (i) willful malfeasance or willful misconduct by Mr. Kramer in connection with his employment, (ii) continuing refusal by him to perform his duties hereunder or follow any lawful direction of the Board, (iii) any material breach of the nonsolicitation, noncompetition, or confidentiality provisions of his agreement by him, (iv) engaging in conduct detrimental to the interest or reputation of the Company, without regard to whether such conduct was in connection with his employment, or (v) his conviction of, or plea of nolo contendere to, a felony (other than a traffic violation), which, in each event in (i), (ii) or (iii), actually has a material effect on the Company and its business:

◦ any bonuses, salaries, benefits or other compensation accrued through the date of employment termination or required by law to be provided;

• upon termination on account of Mr. Kramer’s death or disability, the Company shall treat his termination as a termination without cause;

• upon termination following a change of control,

◦ an amount equal to the base salary which would otherwise be payable over the remaining term of his agreement, payable in a lump sum within 30 days after the date of such termination,

◦ any outstanding awards held by him or other benefits under any Company plan or program which have not vested in accordance with their terms will become fully vested and exercisable at the time of such termination; and

◦ all bonuses and stock options previously earned, or which may be earned in the event of the consummation of a change of control within one year immediately following the termination of his employment.

Mr. Kramer is also entitled to earn awards under equity or other plans or programs that the Company, in its discretion, determines to put into effect and to participate in compensation and benefit programs offered by the Company to its executive officers. Mr. Kramer's employment agreement also provides for a non-competition provision during employment and for a period of twenty-four months after the termination of his employment.

On March 14, 2016, the Company granted an eight-year -year option to Douglas J. Kramer, CEO and president, for the right to acquire 2,000,000 shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.40 per share, which options vest monthly on a pro rata basis over 3 years, subject to continued satisfactory employment. The transaction was valued at $766,217, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

Jomarc C. Marukot

The Company entered into an executive employment agreement with its chief financial officer and corporate treasurer, Mr. Marukot, effective from January 1, 2015 to, as amended, December 31, 2017, pursuant to which he is entitled to:

• an annual base salary of $190,000, increased to $210,000 as of January 1, 2017;

• annual bonus equal to 25% of his annual base salary if the Company achieves its budgeted Adjusted EBITDA per calendar year, which annual bonus may be increased to 30%, 35%, or more than 35% in the chief executive officer’s discretion, of his annual base salary if the Company achieves 110%, 120%, or more than 120%, respectively, of its budgeted Adjusted EBITDA, payable in a single lump sum within thirty days after the issuance of the Company's audited financial statements for such fiscal year, and, in all events, by December 31 of the fiscal year following the fiscal year to which the bonus applies;

• change in control bonus of 25% of his annual base salary upon consummation of a change in control if he is still employed at the time;

• medical, dental, life insurance, and disability benefits;

• auto allowance of $700.00 per month;

• four months of his annual base salary for termination due to death or disability;

• four months of his annual base salary, awards and medical and dental benefits and the change in control bonus in the event of a termination without cause by the Company;

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Jomarc C. Marukot - continued

• upon termination by the Company for cause as defined in the agreement as Mr. Marukot's: (i) commission of any act of fraud, embezzlement or dishonesty, (ii) unauthorized use or disclosure of any confidential information or trade secrets of the Company, (iii) any intentional misconduct or violation of the Company's Code of Business Ethics by him which has a materially adverse effect upon the Company's business or reputation, (iv) continued failure to perform the major duties, functions and responsibilities of his position after written notice from the Company identifying the deficiencies in his performance and a reasonable cure period of not less than ten (10) days, or (v) a material breach of his fiduciary duties as an officer of the Company:

◦ any bonuses, salaries, benefits or other compensation accrued through the date of employment termination or required by law to be provided;

• upon termination following a change of control:

◦ an amount equal to one times the annual base salary if such termination occurs within the first twelve months of his agreement, or the annual base salary which would otherwise be payable over the remaining term of the agreement if such termination occurs after the first twelve months of the agreement, payable in a lump sum within 90 days after the date of such termination of employment;

◦ any outstanding awards held by him or other benefits under any Company plan or program which have not vested in accordance with their terms will become fully vested and exercisable at the time of such termination.

Mr. Marukot is also entitled to earn awards under equity or other plans or programs that the Company, in its discretion, determines to put into effect and to participate in compensation and benefit programs offered by the Company to its executive officers. Mr. Marukot's employment agreement also provides for a non-competition provision for the Employment Term and for a period of twelve months after the termination of his employment.

Michael T. Adams

The Company entered into an executive employment agreement with its chief governance officer, executive vice president and corporate secretary, Mr. Adams, effective from December 31, 2014 to December 31, 2017, pursuant to which he is entitled to:

• an annual base salary of $200,000 (Mr. Adams' annual base salary was increased, effective January 1, 2016, to $200,000);

• annual bonus equal to 25% of his annual base salary if the Company achieves its budgeted Adjusted EBITDA per calendar year, which annual bonus may be increased to 30%, 35%, or more than 35% in the chief executive officer’s discretion, of his annual base salary if the Company achieves 110%, 120%, or more than 120%, respectively, of its budgeted Adjusted EBITDA, payable in a single lump sum within thirty days after the issuance of the Company's audited financial statements for such fiscal year, and, in all events, by December 31 of the fiscal year following the fiscal year to which the bonus applies;

• annual non-discretionary bonus of $5,000;

• a transaction bonus, subject to certain limitations, upon consummation of a change in control if he is still employed at the time or in the event his employment is terminated within one year immediately preceding the consummation of a change in control. A transaction bonus is payable as soon as practicable after the closing of such transaction but in no event later than March 15 of the year following the year in which the closing of such transaction occurs. Any transaction bonus payable on account of the occurrence of a transaction that constitutes a change in the ownership of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A, shall be paid on the same schedule, under the same terms and conditions and in the same form of consideration (e.g., cash, stock in the acquiring company, promissory note or a combination thereof) as is the consideration received by the holders of the majority of the outstanding voting securities of the Company who participate in the transaction; provided, however, that in no event shall any portion of the transaction bonus be paid to executive on a date that is later than five years after such transaction. In the Company’s sole and absolute discretion, it may pay in cash all or any portion of the transaction bonus that would otherwise be paid in a form of consideration other than cash;

• medical, dental, life insurance, and disability benefits;

• auto allowance of $750.00 per month;

• twelve months of his annual base salary for termination due to death or disability;

• twelve months of his annual base salary, awards and medical and dental benefits and the transaction bonus in the event of a termination without cause by the Company or by him for good reason, which the agreements defines as: (i) a reduction in his base salary; (ii) a substantial diminution of his duties and responsibilities (the Company’s employment of another officer in a newly created position or otherwise, at a position beneath that of Mr. Adams, shall not be deemed to constitute, or result in, a substantial diminution of his duties or responsibilities); or (iii) a relocation of his primary workplace that is not agreed to by him and is to a location that is greater than 50 miles from his primary workplace, provided, however, that any required travel related to the business of the Company, including but not limited to its planned expansion in the international market, shall not be deemed to constitute, or result in, the relocation of the his primary workplace; and

• upon termination by the Company for cause or by Mr. Adams without good reason, which the agreements defines as: (i) willful malfeasance or willful misconduct by Mr. Adams in connection with his employment, (ii) continuing refusal by him to perform his duties hereunder or follow any lawful direction of the Board, (iii) any material breach of the nonsolicitation, noncompetition, or confidentiality provisions of his agreement by him, (iv) engaging in conduct detrimental to the interest or reputation of the Company, without regard to whether such conduct was in connection with his employment, or (v) his conviction of, or plea of nolo contendere to, a felony (other than a traffic violation), which, in each event in (i), (ii) or (iii), actually has a material effect on the Company and its business:

◦ any bonuses, salaries, benefits or other compensation accrued through the date of employment termination or required by law to be provided;

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Michael T. Adams - continued

• upon termination following a change of control:

◦ an amount equal to the base salary which would otherwise be payable over the remaining term of the agreement, payable in a lump sum within 90 days after the date of such termination of employment;

◦ any outstanding awards held by him or other benefits under any Company plan or program which have not vested in accordance with their terms will become fully vested and exercisable at the time of such termination; and

◦ all bonuses and stock options previously earned, or which may be earned in the event of the consummation of a change of control within one year immediately following the termination of his employment.

Mr. Adams is also entitled to earn awards under equity or other plans or programs that the Company, in its discretion, determines to put into effect and to participate in compensation and benefit programs offered by the Company to its executive officers. Mr. Adams' employment agreement also provides for a non-competition provision during employment and for a period of twelve months after the termination of his employment.

On January 16, 2015, the Company granted Mr. Adams 300,000 options, each for shares of the Company’s common stock, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on date of grant, determined based on the per share closing price on such date, or $0.325 per share, for a term of eight years, which vest in three equal end of calendar year increments, subject to Mr. Adams meeting certain performance criteria, commencing on December 31, 2015 and ending December 31, 2017, or upon consummation of a change in control. Once vested, the stock options are immediately exercisable.

Harvey L. Schnitzer

The Company entered into an executive employment agreement with its chief operating officer, Mr. Schnitzer, effective from December 31, 2014 to December 31, 2017, pursuant to which he is entitled to:

• an annual base salary of $275,000 (Mr. Schnitzer's annual base salary was automatically increased, effective January 1, 2016, from $250,000 to $275,000);

• annual bonus equal to 25% of his annual base salary if the Company achieves its budgeted Adjusted EBITDA per calendar year, which annual bonus may be increased to 30%, 35%, or more than 35% in the chief executive officer’s discretion, of his annual base salary if the Company achieves 110%, 120%, or more than 120%, respectively, of its budgeted Adjusted EBITDA, payable in a single lump sum within thirty days after the issuance of the Company's audited financial statements for such fiscal year, and, in all events, by December 31 of the fiscal year following the fiscal year to which the bonus applies;

• transaction bonus, subject to certain limitations, upon consummation of a change in control if he is still employed at the time or in the event his employment is terminated within one year immediately preceding the consummation of a change in control. A transaction bonus is payable as soon as practicable after the closing of such transaction but in no event later than March 15 of the year following the year in which the closing of such transaction occurs. Notwithstanding, any transaction bonus payable on account of the occurrence of a transaction that constitutes a change in the ownership of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A, shall be paid on the same schedule, under the same terms and conditions and in the same form of consideration (e.g., cash, stock in the acquiring company, promissory note or a combination thereof) as is the consideration received by the holders of the majority of the outstanding voting securities of the Company who participate in the transaction; provided, however, that in no event shall any portion of the transaction bonus be paid to executive on a date that is later than five years after such transaction. In the Company’s sole and absolute discretion, it may pay in cash all or any portion of the transaction bonus that would otherwise be paid in a form of consideration other than cash;

• medical, dental, life insurance, and disability benefits;

• auto allowance of $800 per month;

• eight months of his annual base salary for termination due to death or disability;

• eight months of his annual base salary, awards and medical and dental benefits and the transaction bonus in the event of voluntary termination by the Company or by him for good reason, which the agreement defines as: (i) a reduction in his base salary; (ii) a substantial diminution of his duties and responsibilities (the Company’s employment of another officer in a newly created position or otherwise, at a position beneath that of Mr. Schnitzer, shall not be deemed to constitute, or result in, a substantial diminution of his duties or responsibilities); or (iii) a relocation of his primary workplace that is not agreed to by him and is to a location that is greater than 50 miles from his primary workplace, provided, however, that any required travel related to the business of the Company, including but not limited to its planned expansion in the international market, shall not be deemed to constitute, or result in, the relocation of the his primary workplace; and

• upon termination by the Company for cause or by Mr. Schnitzer without good reason, which the agreement defines as: (i) willful malfeasance or willful misconduct by Mr. Schnitzer in connection with his employment, (ii) continuing refusal by him to perform his duties hereunder or follow any lawful direction of the Board, (iii) any material breach of the nonsolicitation, noncompetition, or confidentiality provisions of his agreement by him, (iv) engaging in conduct detrimental to the interest or reputation of the Company, without regard to whether such conduct was in connection with his employment, or (v) his conviction of, or plea of nolo contendere to, a felony (other than a traffic violation), which, in each event in (i), (ii) or (iii), actually has a material effect on the Company and its business:

◦ any bonuses, salaries, benefits or other compensation accrued through the date of employment termination or required by law to be provided;

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Harvey L. Schnitzer - continued

• upon termination following a change of control:

◦ an amount equal to the base salary which would otherwise be payable over the remaining term of the agreement, payable in a lump sum within 90 days after the date of such termination of employment;

◦ any outstanding bonus or other benefits under any Company plan or program which have been earned will be paid as provided under the terms of such Company plan or program; and

◦ all bonuses and stock options previously earned, or which may be earned in the event of the consummation of a change of control within one year immediately following the termination of his employment.

Mr. Schnitzer is also entitled to earn awards under equity or other plans or programs that the Company, in its discretion, determines to put into effect and to participate in compensation and benefit programs offered by the Company to its executive officers. Mr. Schnitzer's employment agreement also provides for a non-competition provision during employment and for a period of twelve months after the termination of his employment.

On March 23, 2015, the Company granted Mr. Schnitzer 300,000 options, each for shares of the Company’s common stock, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on date of grant, determined based on the per share closing price on such date, or $0.41 per share, for a term of eight years, which vests in three equal end of calendar year increments, subject to Mr. Schnitzer meeting certain performance criteria, commencing on December 31, 2015 and ending December 31, 2017, or upon consummation of a change in control. Once vested, the stock options are immediately exercisable.

Outstanding Equity Awards

The following table sets forth summary information for outstanding equity awards held by our named executive officers at December 31, 2016.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

Option Awards

	Number of Securities Underlying Unexercised Options (#)			Option Exercise	Option Expiration
Name	Exercisable	Unexercisable		Price ($)	Date
Douglas J. Kramer	333,334	166,666	(1)	0.72	1/21/2019
Douglas J. Kramer	350,000	—		0.42	4/28/2019
Douglas J. Kramer	531,366	1,468,634	(2)	0.40	3/14/2024
Michael T. Adams	150,000	—		0.42	4/28/2019
Michael T. Adams	80,000	—		0.38	7/12/2017
Michael T. Adams	200,000	100,000	(3)	0.325	1/16/2023
Harvey L. Schnitzer	66,666	33,334	(4)	0.65	1/21/2019
Harvey L. Schnitzer	150,000	—		0.42	4/28/2019
Harvey L. Schnitzer	200,000	100,000	(3)	0.41	3/23/2023

(1) Vests on January 22, 2017.

(2) Vests on pro-rata monthly basis over 26 months (total grant vests on a pro-rata monthly basis over 36 month period).

(3) Vests on December 31, 2017.

(4) Vests on February 6, 2017.

There were no outstanding stock awards at December 31, 2016.

Potential Payments Upon Termination or Change of Control

The employment agreements with our named executive officers provide for transaction bonuses based on a percentage of a transaction value subject to certain limitations (Mr. Kramer, Mr. Adams, and Mr. Schnitzer) or a change in control bonus based on a percentage of annual base salary (Mr. Marukot).

A transaction bonus is calculated as follows: (a) no transaction bonus shall be paid to the extent the transaction value (defined as the consideration realized, or assumed to be realized, by the Company’s shareholders in connection with the transaction, minus any Company debt that remains with the Company upon the consummation of a change-in-control or any debt or personal guarantee of Company debt which a selling shareholder is relieved of in connection with a change-in-control), does not exceed the sum of $25,940,000, (b) to the extent the transaction value does not exceed $90,000,000, an amount equal to each respective executive’s agreed to percentage of the transaction value less $25,940,000, multiplied by the percentage of the Company sold, to the extent the transaction value exceeds $90,000,000, an amount equal to respective executive’s agreed to percentage (see above) of the transaction value multiplied by the percentage of the Company sold. Notwithstanding the foregoing, no transaction bonus shall be payable on any portion of the transaction value in excess of $200,000,000.

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In the event of a transaction, which does not constitute a change-in-control as the stockholders of the Company immediately before the transaction do not relinquish 50% or more of the total combined voting power of the outstanding voting securities of the Company, but do relinquish 20% or more of the total combined voting power of the outstanding securities of the Company, the transaction bonus shall be calculated in the manner as set forth above upon a change in control. However, such amount shall then be reduced by the percentage of the sales proceeds of the transaction allocable to the Company’s then majority shareholder that is not currently distributed to such shareholder as a result of the transaction. If a transaction bonus is payable to the executive upon a change in control, he shall not be entitled to any additional transaction bonus upon the occurrence of a subsequent transaction unless: (i) the subsequent transaction is related to the change in control; and (ii) the executive is still employed with the Company upon the consummation of the subsequent transaction or is no longer so employed as a result of having been terminated without cause or having resigned for good reason. In the event a series of related transactions occurs subsequent to a change-in-control, the executive shall be entitled to a transaction bonus on each transaction in the series, provided the requirements of (i) and (ii) above are satisfied with respect to each such transaction. As provided for in the employment agreements, for purposes of this provision, a subsequent transaction shall be “related” to a change in control if it was agreed upon at the time of, and is consummated within 2 years of the consummation of, the change in control.

A change in control bonus is based on an amount equal to one times the annual base salary if such termination occurs within the first twelve months of his agreement, or the annual base salary which would otherwise be payable over the remaining term of the agreement if such termination occurs after the first twelve months of the agreement, payable in a lump sum within 90 days after the date of such termination of employment.

We define change of control in all of our named executive office executive employment agreements as ownership change events or series of related ownership change events (collectively, a “Transaction”) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, direct or indirect beneficial ownership of fifty percent (50%) or more of the total combined voting power of the outstanding voting securities of the Company, or the entity to which the assets of the Company were transferred. The following would be ownership change events: (i) the direct or indirect sale or exchange by the stockholders of the Company of all or substantially all of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company); or (iv) a liquidation or dissolution of the Company. Notwithstanding the foregoing, no change of control, ownership change event or Transaction shall be deemed to have occurred as a result or on account of: (i) a transfer or other disposition, by sale, gift or otherwise, of an interest in the Company by Richard J. Kurtz to his spouse, children or grandchildren, or the spouses of his children, either directly or indirectly for their benefit, in trust or otherwise; or (ii) the death or incapacity of Kurtz wherein his interest is transferred to his heirs only. Our named executive officers shall not be entitled to any payment under their respective executive employment agreements upon the occurrence of, or calculated with reference to, any such transfer or disposition.

Acceleration of Benefits Under Certain Other Plans

Our Equity Plan contains provisions for the accelerated vesting of stock options to participating named executive officers in the event of a change of control, where the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be ("Acquiror"), may, without the consent of any participant, either assume the Company's rights and obligations under outstanding options or substitute for outstanding options substantially equivalent options to purchase the Acquiror's stock. If the Acquiror elects not to assume or substitute for outstanding options, the compensation committee shall provide that any unexercised and/or unvested portions of outstanding options shall immediately vest and become exercisable in full as of the date 30 days prior to the date of the change-in-control. Vesting and/or exercise of any option shall be conditioned upon the consummation of the change of control. Any options which are not assumed by the Acquiror nor exercised by optionee terminate and cease to be outstanding effective as of the consummation of the change of control.

Equity Incentive Plan (“Equity Plan”)

Our board of directors adopted the Equity Incentive Plan on July 12, 2005, which was approved by our stockholders effective August 31, 2005. The purpose of our Equity Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward employees, directors and consultants performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Equity Plan provides financial performance measures upon which specific performance goals would be based and limits on the numbers of shares or compensation that could be made. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock awards may provide for accelerated vesting if there is a change in control. In addition, our Equity Plan is expected to provide flexibility to our compensation methods in order to adapt the compensation of employees, directors, and consultants to a changing business environment, after giving due consideration to competitive conditions and the impact of federal tax laws. Our Equity Plan is administered by our compensation committee. A total of 9,800,000 shares of common stock are reserved for awards under the Equity Plan, of which 1,982,500 shares were available for future awards as of December 31, 2016.

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Director Compensation

Directors receive cash, option, and stock compensation. Each director who is not an employee is reimbursed for actual expenses incurred in attending annual stockholder, board and committee meetings. Non-employee outside directors receive cash compensation at the rate of $12,500 per year, payable quarterly. The Chairman of the Board, who is also a non-employee director and did not receive any cash compensation in years prior to 2016, received a one-time cash payment of $75,500 for his service for the 2016 year. Effective January 1, 2017, all non-employee directors, including the Chairman of the Board, will receive $20,000 in cash compensation per year, payable quarterly. The following table summarizes compensation for non-employee directors for the year ended December 31, 2016, including costs incurred during 2016 for awards in 2016.

DIRECTOR COMPENSATION TABLE

							All Other
Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)(3)		Option Awards ($)(3)		Compensation ($)(3)		Total ($)
Richard J. Kurtz	75,500		53,000	(4)	120,840	(6)	698,480	(7)(8)	947,820
Arthur J. Gregg	12,500	(1)	—		56,863	(6)	—		69,363
Jay C. Nadel	212,500	(1)(2)	38,064	(5)	56,815	(6)	—		307,379
Augustus J. Larson	12,500	(1)	—		56,863	(6)	—		69,363

(1) Represents cash payments paid for director services.

(2) Includes cash payments paid to Mr. Nadel pursuant to his February 22, 2011 advisory agreement, as amended, pursuant to which, the Company agreed to pay him $200,000 per year in cash and granted 5,000,000 shares of restricted common stock, which originally vested monthly on a pro-rata basis over a 3 year period ended February 22, 2014, with anti-dilution rights, in exchange for providing consulting and advisory services, including business development and planning, and assisting management on strategic initiatives (“Nadel Agreement”). Anti-dilution rights continue as long as the Nadel Agreement is in force.

(3) The amounts reported represent the aggregate grant date fair value of the awards recognized by us in fiscal year 2016, calculated in accordance with FASB ASC 718. The actual value, if any, a director may realize will depend, in the case of stock options, on the excess of the market price over the option exercise price on the date the option is exercised, and, in the case of stock, on the excess of the market price over the cost basis of the stock. There is no assurance that the value realized by a director will be at or near the value estimated. Assumptions used in the calculation of these amounts are included in Note 1 - Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates, and Assumptions-Share-Based Compensation and Note 17 - Share-Based Payment Arrangements, Equity Incentive Plan, Advisor Plan, and Guaranty Plan of our Notes to Financial Statements included in this Annual Report on Form 10-K.

(4) Represents the compensation cost recognized by us for a stock award.

(5) Represents the compensation cost recognized by us related to the Nadel Agreement. For 2016, an aggregate of 86,404 shares of restricted common stock were issued and valued and recorded at $38,064. See also Note 17 – Share-Based Payment Arrangements, Advisor Plan, of Notes to Financial Statements included in this Annual Report on Form 10-K for more discussion.

(6) Represents the compensation cost recognized by us for options activity under the Equity Plan for director services during 2016:

			Number of Shares	Number of Shares	Option
			of Stock Underlying	of Stock Underlying	Expiration	2016 Fiscal Year
Director	Grant Date	Exercise Price ($)	Options Granted	Options Expired	Date	Compensation Cost ($)
Jay C. Nadel	4/28/2014	0.42	100,000	—	4/28/2019	6,389
Arthur J. Gregg	4/28/2014	0.42	100,000	—	4/28/2019	6,437
Augustus J. Larson	4/28/2014	0.42	100,000	—	4/28/2019	6,437
Richard J. Kurtz	5/14/2014	0.54	400,000	—	5/14/2019	36,757
Jay C. Nadel	12/22/2014	0.35	450,000	—	12/22/2022	50,426
Arthur J. Gregg	12/22/2014	0.35	450,000	—	12/22/2022	50,426
Augustus J. Larson	12/22/2014	0.35	450,000	—	12/22/2022	50,426
Richard J. Kurtz	3/14/2016	0.40	800,000	—	3/14/2024	84,083

(7) Includes amount of interest expense – related party of $3,888 paid by the Company in 2016 related to the 11/14/14 Kurtz Note and 1/21/15 Kurtz Note, the principal of which was repaid by the Company on December 21, 2015. Refer to Item 13 – Certain Relationships and Related Transactions, Items (a), (b) and (d) for more information.

(8) Includes the amount of share based compensation expense recognized and classified by us as interest expense – related party for the vested portion of the 3,681,000 Guaranty Shares granted to the chairman of the board for his personal guaranty of the obligations under the Enhanced Note. For 2016, an aggregate of 1,157,653 Guaranty Shares vested and were valued and recorded in the aggregate at $694,592. See also Note 17 – Share-Based Payment Arrangements, Guaranty Plan, of Notes to Financial Statements included in annual report on Form 10-K for year ended December 31, 2016 for more discussion.

See also Certain Relationships and Related Transactions for more information.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information with respect to the beneficial ownership of our common stock as of February 14, 2017 by:

• each person known by us to beneficially own more than 5.0% of our common stock;

• each of our directors;

• each of the named executive officers; and

• all of our directors and executive officers as a group.

Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, or has the right to acquire beneficial ownership of that security within 60 days. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have or will have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose, including for purposes of Sections 13(d) and 13(g) of the Securities Act. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o Lapolla Industries, Inc., 15402 Vantage Parkway East, Suite 322, Houston, Texas 77032. As of February 14, 2017, we had 123,494,129 shares of common stock outstanding.

	Total Shares of Common Stock		Percent
Beneficial Owner	Beneficially Owned (1)		of Class
Directors:
Richard J. Kurtz, Chairman of the Board	70,975,322	(2)	55.23	%
Jay C. Nadel, Vice Chairman	9,197,472	(3)	7.15	%
Lt. Gen. Arthur J. Gregg, US Army (Ret)	600,000	(4)	0.47	%
Augustus J. Larson	600,000	(5)	0.47	%
Douglas J. Kramer (9)	1,381,366	(6)	1.2	%
Michael T. Adams (9)	430,000	(7)	0.33	%
Harvey L. Schnitzer (9)	550,000	(8)	0.43	%
Executive Officers:
Jomarc C. Marukot, CFO and Treasurer	—		—
All Directors and Executive Officers as a Group (8 persons)	83,734,160		65.28	%

(1) Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assumes the exercise of all options and unvested stock granted beneficially owned by such person or entity currently exercisable or exercisable or subject to vesting within 60 days of February 14, 2017. Shares issuable pursuant to the exercise of options exercisable and unvested stock granted that is subject to vesting within 60 days are deemed outstanding and held by the holder of such options or stock for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person.

(2) Comprised of: (i) 69,837,601 shares of our common stock owned directly by Mr. Kurtz; (ii) 1,112,721 shares of our common stock issuable upon the exercise of vested and exercisable options; and (iii) 25,000 shares of our common stock upon vesting of a stock award.

(3) Comprised of: (i) 8,697,472 shares of our common stock owned directly by Mr. Nadel; and (ii) 500,000 shares of our common stock issuable upon the exercise of vested and exercisable options.

(4) Comprised of: (i) 100,000 shares of our common stock owned directly by Mr. Gregg; and (ii) 500,000 shares of our common stock issuable upon the exercise of vested and exercisable options.

(5) Comprised of: (i) 100,000 shares of our common stock owned directly by Mr. Larson; and (ii) 500,000 shares of our common stock issuable upon the exercise of vested and exercisable options.

(6) Comprised of 1,381,366 shares of our common stock issuable upon the exercise of vested and exercisable options.

(7) Comprised of 430,000 shares of our common stock issuable upon the exercise of vested and exercisable options.

(8) Comprised of: (i) 100,000 shares of our common stock owned directly by Mr. Schnitzer; and (ii) 450,000 shares of our common stock issuable upon the exercise of vested and exercisable options.

(9) Mr. Kramer is also our CEO and President; Mr. Adams is also our CGO, EVP, and Secretary; and Mr. Schnitzer is also our COO.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes information about our common stock that may be issued upon the exercise of options, warrants and rights under all equity compensation plans, as of December 31, 2016: 

Equity Compensation Plan Information
				Number of Securities
				Remaining Available for
	Number of Securities to	Weighted-Average		Future Issuance Under
	Be Issued Upon Exercise	Exercise Price of		Equity Compensation Plans
	of Outstanding Options,	Outstanding Options,		(excluding Securities
	Warrants and Rights	Warrants and Rights		Reflected in Column (a))
Plan Category	(a)	(b)		(c)
Equity Compensation Plans
Approved by Security Holders	7,817,500	$	0.42	1,982,500
Equity Compensation Plans Not
Approved by Security Holders	—	—		—	(1)
Total	7,817,500	$	0.42	1,982,500

(1) We entered into the Nadel Agreement dated February 22, 2011 with Mr. Nadel, a director, for advisory services (the “Advisor Plan”). The Advisor Plan, which is not stockholder-approved, includes the issuance of anti-dilution shares when the anti-dilution provision in the Nadel Agreement is triggered. The anti-dilution shares issuable are incalculable until such time that the anti-dilution provision is triggered. See also Note 18 – Share-Based Payment Arrangements, Advisor Plan, of our Notes to Financial Statements included in this Annual Report on Form 10-K for the year ended December 31, 2016 for more discussion.

Item 13.Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

(a)    On January 21, 2015, the Company borrowed $250,000 from Richard J. Kurtz, chairman of the board and majority stockholder, as a condition precedent to the Company entering into the twelfth amendment dated January 23, 2015 (the “Twelfth Amendment”) to that certain Loan Agreement with the Bank and entered into a promissory note (the “1/21/15 Kurtz Note”). Pursuant the 1/21/15 Kurtz Note, the Company agreed to pay 8% per annum on the principal balance of $250,000 and repay the principle balance on June 10, 2017. The 1/21/15 Kurtz Note was subordinated to the Loan Agreement and Note Purchase Agreement. See also Items (b) and (d) below for more information.

(b)    On January 23, 2015, the Company and the Bank entered into the Twelfth Amendment pursuant to which certain definitions were changed and a new definition was added in the Loan Agreement as follows: (1) Fixed Charge Coverage Ratio was changed to the ratio, determined for any period on a consolidated basis for the Company, of (a) the sum of (i) EBITDA, (ii) Subordinated Debt incurred during such period on or after August 31, 2014 (other than the Twelfth Amendment Subordinated Debt), and (iii) up to $267,000 in Accounts charged off by the Company in August, 2014, to (b) the sum of Capital Expenditures (except those financed with Borrowed Money other than Revolver Loans), cash taxes paid, interest expense (other than payment-in-kind), principal payments made on Borrowed Money other than Revolver Loans, excluding (solely) principal payments made on the Subordinated Term Debt due December 10, 2013, in an amount not exceeding $150,000, and Distributions made, in each case determined for such period; (2) Revolver Termination Date was changed (extended) to March 31, 2016; and (3) Subordinated Debt was added defining Subordinated Debt loaned to the Company by Richard Kurtz in an amount at least equal to $250,000, required as a condition to the effectiveness of the Twelfth Amendment. Refer to Item (a) above and Item (d) below for more information on the Subordinated Debt.

(c)    On November 12, 2015 (effective as of October 31, 2016), Richard J. Kurtz, chairman of the board and majority stockholder, provided a commitment letter assuring funding to the Company (the “Commitment”) on or before August 31, 2016 to pay off: (i) the Enhanced Notes (consisting of aggregate amount of $7.2 million, plus any accrued and unpaid interest (including, but not limited to, PIK interest)); and (ii) the Company, which was owed a $2 million payment on or before April 30, 2016. The Commitment could either be satisfied from personal funds or an appropriate lending or other institution directed by Mr. Kurtz, and would be superseded and become null and void in the event and to the extent that, at or before the time the Commitment is due, the obligations are repaid in full in immediately available cash on or prior to the required due dates by the Company. As consideration for the Commitment, the Company granted Mr. Kurtz a fully vested and exercisable stock option to purchase 500,000 shares of the Company’s common stock, with an exercise price per share equal to the fair market value of a share of the Company’s common stock on November 12, 2015, determined based on the per share closing price of the Company's common stock as quoted on the OTC Markets on such date ($0.294 per share), for a term of eight (8) years. The transaction was valued at approximately $47,000, which was estimated using the Black-Scholes option pricing model and fully expensed on the date of grant. On August 25, 2016, Enhanced agreed to extend the August 31, 2016 pay off date to on or prior to September 16, 2016. Refer to Items (d), (j) and (k) below for more information on the repayment of the Enhanced Notes.

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(d)    On December 21, 2015, the Company, with the consent of the Bank and Enhanced, repaid an aggregate of $500,000 in principal to Richard J. Kurtz, chairman of the board and majority stockholder, of which $250,000 was for the principal amount of the 1/21/15 Kurtz Note (See Item (a) above) and $250,000 was for the principal amount of the promissory note issued by the Company to Mr. Kurtz for cash he provided to the Company on November 14, 2014 (the "11/14/14 Kurtz Note"). The Company entered into the 11/14/14 Kurtz Note in connection with borrowing $250,000 from Mr. Kurtz as a condition precedent to the Company entering into that certain second amendment dated as of November 14, 2014 to the Note Purchase Agreement with Enhanced and that certain eleventh amendment dated November 14, 2014 to the Loan Agreement with the Bank. As a result of the $500,000 principal payment to Mr. Kurtz by the Company, Mr. Kurtz was required by Enhanced to pay down the Enhanced Notes by $150,000. The Company initially offset the $150,000 that Mr. Kurtz paid on its behalf direct to Enhanced against certain arms' length sales transactions made to entities controlled by him for the Company's products; subsequently those amounts were paid by those entities and as a result, the Company repaid Mr. Kurtz the $150,000 paid to Enhanced on December 21, 2016. See also Items (a) and (c) above for more information.

(e)    During the year ended December 31, 2015, the Company vested an aggregate of 1,224,763 shares of restricted common stock, par value $.01, issued to Richard J. Kurtz, chairman of the board and majority stockholder, for a personal guaranty, which transactions were valued and recorded in the aggregate at $735,000 and classified as interest expense – related party. In connection with the Company's entry into the Note Purchase Agreement entered into with Enhanced by the Company, Mr. Kurtz was required to enter into a guaranty agreement with Enhanced to secure the Company’s performance under the Enhanced Notes. The Company, in exchange for Mr. Kurtz’ personal guaranty of the obligations under the Enhanced Notes, granted him 3,681,000 shares of common stock, par value $.01 per share, which shares vest monthly on a pro rata basis over the term of the Enhanced Notes (the “Guaranty Shares”). The Guaranty Shares were valued at $0.60 per share, the closing price of the Company’s common stock as quoted on OTC Markets on the day preceding the closing date of the Note Purchase Agreement on December 10, 2013, for an aggregate amount of $2.2 million. See also Item (k) below for more information on the repayment of the Enhanced Notes.

(f)    During the year ended December 31, 2015, the Company issued an aggregate of 1,035,743 shares of restricted common stock to its vice chairman, Jay C. Nadel, pursuant to the anti-dilution provisions in the Nadel Agreement, which transactions were valued and recorded in the aggregate at $418,000. Under the Nadel Agreement, the Company agreed to an initial grant of 5,000,000 shares of restricted common stock, which originally vested monthly on a pro-rata basis over a 3 year period ended February 22, 2014, with anti-dilution rights, in exchange for Mr. Nadel providing consulting and advisory services, including business development and planning, and assisting management on strategic initiatives. Anti-dilution rights continue as long as the Nadel Agreement is in force.

(g)    On March 14, 2016, the Company granted an eight-year option to Richard J. Kurtz, chairman of the board and majority stockholder, for the right to acquire 800,000 shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.40 per share, which options vest monthly on a pro rata basis over three (3) years, subject to Mr. Kurtz' continued satisfactory board service. The transaction was valued at $306,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(h)    On March 14, 2016, the Company granted an eight-year option to Douglas J. Kramer, chief executive officer and president, for the right to acquire 2 million shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price of the Company's common stock as quoted on the OTC Markets on such date, or $0.40 per share, which options vest monthly on a pro rata basis over three (3) years, subject to Mr. Kramer's continued satisfactory employment. The transaction was valued at $766,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(i)    On March 18, 2016, the Company and the Bank entered into a fourteenth amendment to the Loan Agreement, which: (i) established a new tiered level for the applicable margin providing for varying interest rates based on the fixed charge coverage ratio, effective March 31, 2016; (ii) reduced the basic reserve to zero; (iii) established a new inventory formula amount allowing, if the Company elects to have an inventory appraisal performed, the lesser of, 65% of the value of eligible inventory or 85% of the net orderly liquidation value of eligible inventory and up to $6 million; (iv) reduced the amount of the Revolver Loan to provide for an aggregate amount of $12 million (to save on unused revolver loan fees); (v) adjusted the Revolver Loan termination date to the earlier to occur of March 31, 2019 or 90 days prior to the maturity date of subordinated secured Enhanced Notes, which mature on December 10, 2017; (vi) adjusted the formula for determining the unused line fee, which provides for a new varying percentage unused line fee based on the amount by which the revolver commitment exceeds the average daily balance of the revolver loans and stated amount of letters of credit; (vii) changed the borrowing base reporting frequency from daily to weekly, subject to certain availability requirements; and (viii) added a new section to allow for repayments of principal amounts by the Company on the Enhanced Notes, subject to meeting certain borrowing base limitations. Refer to Items (c) and (d) above and Items (j) and (k) below for more information on repayment of the Enhanced Notes.

(j)    On April 21, 2016, the Company made a payment of $1.9 million on the outstanding principal of the Enhanced Notes to Enhanced. Refer to Items (c) and (d) above and (k) below for more information on repayment of the Enhanced Notes.

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(k)    On September 7, 2016, the Company entered into the Credit Agreement with the Bank, which amended and restated the Loan Agreement in its entirety. The Credit Agreement provides for the Line of Credit which will be reduced each quarter by $250,000 beginning January 1, 2017and ending on July 1, 2019. In connection with the closing of the Credit Agreement, an aggregate amount of $8.5 million was drawn from the Line of Credit, of which $5.8 million was used to pay off and satisfy in full the outstanding debt obligations under the Enhanced Notes and $2.7 million was used to pay off and satisfy in full the outstanding debt obligations under the Loan Agreement. Refer to Items (c), (d) and (j) above for more information on repayment of the Enhanced Notes.

(l)    During the year ended December 31, 2016, the Company vested the remaining 1,157,653 Guaranty Shares, issued to Richard J. Kurtz, chairman of the board and majority stockholder, which transactions were valued and recorded in the aggregate at $696,000 and classified as interest expense – related party. Refer to Item (e) above for more information on the Guaranty Shares. See also Item (k) above for more information on the repayment of the Enhanced Notes.

(m)    On January 5, 2017, the Company granted an aggregate of 400,000 eight-year options to non-employee directors, including Messrs Kurtz, Nadel, Gregg, and Larson, for the right to each acquire 100,000 shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price of the Company's common stock as quoted on the OTC Markets on such date, or $0.50 per share, which options vest over a 3 year period in the amount of 33,333; 33,333; and 33,334 on December 31, 2017, December 31, 2018, and December 31, 2019, respectively, subject to their continued satisfactory board service. The transactions were valued in the aggregate at $191,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting periods.

Director Independence

Lapolla uses its own definition for determining whether its directors and members of specific committees of the board of directors, are independent. In order to be considered to be independent, a member of the board of directors or any board committee may not, other than in his or her capacity as a member of the board of directors or any board committee: (i) accept any consulting, advisory, or other compensatory fee from the Company; or (ii) be an affiliated person of the Company or any subsidiary thereof. Independent directors are not officers of the Company and are in view of the Company’s board of directors, free of any relationship that would interfere with the exercise of independent judgment. Although we are a “controlled company” because more than 50% of our voting power is held by Mr. Kurtz, our chairman of the board, our board of directors has reviewed the relationships between the Company, including any affiliates, and each board member (and each such director’s immediate family members) and has affirmatively determined that Lt. Gen. Gregg (Ret) and Mr. Larson are, independent directors. No information other than what has been disclosed in this report was considered by our board of directors in determining that Lt. Gen. Gregg (Ret) and Mr. Larson were “independent” within the Company’s independence standards.

Item 14. Principal Accountant Fees and Services

Independent Registered Public Accounting Firm Fees

The audit committee has appointed Hein & Associates LLP (“Hein”) as our independent registered public accounting firm. Hein audited our financial statements for the years ended December 31, 2016 and 2015. The table below shows the aggregate fees billed to us by our independent registered public accounting firm for the fiscal years ended December 31:

Fee Category	2016			2015
Audit Fees	$	110,000	(1)	$	107,250	(1)
Audit-Related Fees	—			—
Tax Fees	—			16,675		(2)
All Other Fees	—			—
Total	$	110,000		$	123,925

(1) Represents the aggregate fees billed to us by Hein for professional services rendered for the audit of our annual financial statements, and for the reviews of our financial statements included in our Form 10-Q filings for the second, third and fourth fiscal quarters.

(2) Represents the aggregate fees billed to us by Hein for professional services rendered for the preparation of Federal income tax reports. The audit committee and board of directors determined in advance of retaining Hein that the rendering of such services does not impair the independence of Hein as an auditor of the financial statements of Lapolla.

Policy on Audit Committee Pre-Approval

As part of its required duties, the audit committee pre-approves audit and non-audit services performed by our independent registered public accounting firm to assure that the provision of such services does not impair the independent registered public accounting firm’s independence. The policy generally provides that services in the defined categories of audit services, audit-related services, tax services and all other services, are deemed pre-approved up to specified amounts, and sets requirements for specific case-by-case pre-approval of discrete projects that are not otherwise pre-approved or for services over the pre-approved amounts. Pre-approval may be given as part of the audit committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual basis. The pre-approval of services may be delegated to one or more of the audit committee’s members, but the decision must be presented to the full audit committee at its next scheduled meeting. The policy prohibits retention of the independent registered public accounting firm to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act of 2002 or the rules of the SEC, and also considers whether proposed services are compatible with the independence of the independent registered public accounting firm. All services provided by our independent registered public accounting firm in 2016 were pre-approved in accordance with the audit committee’s pre-approval requirements. 

35

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) 1. Financial Statements and Supplementary Data:

The following financial statements are included herein under Item 8 of Part II of this report, “Financial Statements and Supplementary Data”:

Index to Financial Statements	i
Report of Independent Registered Public Accounting Firm	F-1
Balance Sheets at December 31, 2016 and 2015	F-2
Statements of Operations for Each of the Years in the Two Year Period Ended December 31, 2016	F-3
Statements of Stockholders’ Equity for Each of the Years in the Two Year Period Ended December 31, 2016	F-4
Statements of Cash Flows for Each of the Years in the Two Year Period Ended December 31, 2016	F-5
Notes to Financial Statements	F-6

2. Financial Statement Schedules:

All other schedules have been omitted for the reason that the required information is presented in the financial statements or notes thereto, the amounts involved are not significant or the schedules are not applicable.

(b) Exhibits:

See Index of Exhibits below.

36

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LAPOLLA INDUSTRIES, INC.

By:  /s/ Douglas J. Kramer

Douglas J. Kramer

Chief Executive Officer and President

February 15, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

LAPOLLA INDUSTRIES, INC.

By:  /s/ Richard J. Kurtz

Richard J. Kurtz

Chairman of the Board

February 15, 2017

By:  /s/ Jay C. Nadel

Jay C. Nadel

Vice Chairman of the Board

February 15, 2017

By:  /s/ Arthur J. Gregg

Arthur J. Gregg

Director

February 15, 2017

By:  /s/ Augustus J. Larson

Augustus J. Larson

Director

February 15, 2017

By:  /s/ Douglas J. Kramer

Douglas J. Kramer

Director

February 15, 2017

By:  /s/ Michael T. Adams

Michael T. Adams

Director

February 15, 2017

By:  /s/ Harvey L. Schnitzer

Harvey L. Schnitzer

Director

February 15, 2017

By:  /s/ Jomarc C. Marukot

Jomarc C. Marukot

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

February 15, 2017

37

INDEX OF EXHIBITS

Exhibit No.	Description
3.1	Proforma Restated Certificate of Incorporation, as amended, and currently in effect (incorporated by reference to Exhibit 3.2 to Form 10-Q dated June 30, 2011, filed August 19, 2011).
3.2	Bylaws, as amended, and currently in effect, of the Company (incorporated by reference to Exhibit 3.11 to Form 10-KSB dated December 31, 2005, filed March 31, 2006).
4.1	Certificate of Designation of Preferences of Series B Convertible Preferred Stock dated September 30, 2001 filed with the State of Delaware November 2, 2001 (incorporated by reference to Exhibit 3.1 to Form 8-K dated September 30, 2001, filed October 25, 2001).
4.2	Amendment to Certificate of Designation of Preferences of Series B Convertible Preferred Stock dated December 31, 2001 (incorporated by reference to Exhibit 3.1.1 to Form 8-K dated December 31, 2001, filed January 31, 2002).
4.3	Certificate of Designation of Preferences of Series C Convertible Preferred Stock dated January 8, 2002 filed with the State of Delaware on February 28, 2002 (incorporated by reference to Exhibit 3.2 to Form 8-K dated January 8, 2002, filed January 31, 2002).
4.4	Amendment to Certificate of Designation of Preferences of Series C Convertible Preferred Stock dated September 27, 2006 filed with the State of Delaware on November 1, 2006 (incorporated by reference to Exhibit 4.1 to Form 10-Q dated September 30, 2006, filed November 1, 2006).
4.5	Certificate of Designation of Preferences of Series D Preferred Stock dated September 28, 2006 as filed with the State of Delaware on November 1, 2006 (incorporated by reference to Exhibit 4.2 to Form 10-Q dated September 30, 2006, filed November 1, 2006).
10.1	Equity Incentive Plan, as amended, and currently in effect (incorporated by reference to Exhibit 10.2 to Form 10-Q dated June 30, 2008, filed August 20, 2008).
10.2+	Option Agreement dated July 12, 2005 between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.3 to Form 8-K dated July 12, 2005, filed July 18, 2005).
10.3+	Amendment to Option Agreement dated July 28, 2005 between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.2 to Form 8-K dated July 25, 2005, filed July 29, 2005).
10.4+	Option Agreement dated May 5, 2008 between Douglas J. Kramer and the Company (incorporated by reference to Appendix C to DEF 14C dated and filed on May 19, 2008).
10.5+	Option Agreement dated July 12, 2005 between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.2 to Form 8-K dated July 12, 2005, filed July 18, 2005).
10.6+	Amendment to Option Agreement dated July 28, 2005 between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated July 25, 2005, filed July 29, 2005).
10.7+	Executive Employment Agreement dated July 25, 2005 between Douglas J. Kramer and the Company (incorporated by to reference Exhibit 10.8 to Form 8-K dated July 25, 2005, filed July 29, 2005).
10.8+	Executive Employment Agreement dated May 5, 2008 between Douglas J. Kramer and the Company (incorporated by to reference Exhibit 10.8 to Form 8-K dated July 25, 2005, filed July 29, 2005).
10.9+	Executive Employment Agreement dated July 25, 2005 between Michael T. Adams and the Company (incorporated by to reference Exhibit 10.7 to Form 8-K dated July 25, 2005, filed July 29, 2005).
10.10+	Employment Agreement dated May 18, 2009 between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated May 18, 2009, filed May 20, 2009).
10.11+	Option Agreement dated May 18, 2009 between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.2 to Form 8-K dated May 18, 2009, filed May 20, 2009).
10.12+	First Amendment, effective January 1, 2010, to Employment Agreement dated May 5, 2008 between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated May 5, 2010, filed May 11, 2010).
10.13+	First Amendment, effective January 1, 2010, to Employment Agreement dated May 18, 2008 between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated June 11, 2010, filed June 16, 2010).
10.14	Bank of American Loan and Security Agreement dated August 31, 2010 and effective September 1, 2010 (incorporated by reference to Exhibit 10.1 to Form 8-K dated September 1, 2010, filed September 7, 2011).
10.15	Guaranty Agreement between Richard J. Kurtz as Guarantor of Term Loan and Bank of America (incorporated by reference to Exhibit 10.2 to Form 8-K dated September 1, 2010, filed September 7, 2011).
10.16	First Amendment dated November 10, 2010 and effective August 31, 2010, to Bank of America Loan Agreement dated August 31, 2010 (incorporated by reference to Exhibit 10.1 to Form 8-K dated November 10, 2010, filed November 18, 2010).
10.17+	Agreement dated February 22, 2011 between Jay C. Nadel and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated February 22, 2011, filed February 28, 2011).
10.18	Third Amendment dated May 11, 2011 to that certain Loan and Security Agreement between Lapolla and Bank of America dated August 31, 2010 (incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarterly period ended March 31, 2011, filed May 16, 2011).
10.19+	Second Amendment, effective January 1, 2011, to Employment Agreement dated May 5, 2008, between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.2 to Form 10-Q dated June 30, 2011, filed August 19, 2011).
10.20+	Second Amendment, effective January 1, 2011, to Employment Agreement dated May 18, 2009, between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.3 to Form 10-Q dated June 30, 2011, filed August 19, 2011).
10.21	Fourth Amendment dated August 17, 2011 to that certain Loan and Security Agreement between Lapolla and Bank of America dated August 31, 2010 (incorporated by reference to Exhibit 10.5 to Form 10-Q dated June 30, 2011, filed August 19, 2011).
10.22+	Third Amendment, effective December 31, 2011, to Employment Agreement dated May 18, 2009, between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.49 to Form 10-K for the year ended December 31, 2011, filed April 16, 2012).
10.23+	Executive Employment Agreement dated April 9, 2012 and effective April 5, 2012 between Harvey L. Schnitzer and the Company (incorporated by reference to Exhibit 10.47 to Form 10-K for the year ended December 31, 2011, filed April 16, 2012).
10.24	Sixth Amendment dated April 16, 2012 to that certain Loan and Security Agreement between Lapolla and Bank of America dated August 31, 2010 (incorporated by reference to Exhibit 10.48 to Form 10-K for the year ended December 31, 2011, filed April 16, 2012)

38

10.25	Note Purchase Agreement between Lapolla and Enhanced Jobs for Texas Funds, LLC and Enhanced Capital Texas Fund, LP dated June 29, 2012 (incorporated by reference to Exhibit 10.1 to Form 8-K dated June 29, 2012, filed July 6, 2012)
10.26	Promissory Note between Lapolla and Enhanced Jobs for Texas Fund, LLC dated June 29, 2012 (incorporated by reference to Exhibit 10.2 to Form 8-K dated June 29, 2012, filed July 6, 2012)
10.27	Promissory Note between Lapolla and Enhanced Capital Texas Fund, LP dated June 29, 2012 (incorporated by reference to Exhibit 10.3 to Form 8-K dated June 29, 2012, filed July 6, 2012)
10.28	Security Agreement between Lapolla and Enhanced Capital Texas Fund, LP, dated June 29, 2012 (incorporated by reference to Exhibit 10.4 to Form 8-K dated June 29, 2012, filed July 6, 2012)
10.29	Guaranty Agreement between Richard J. Kurtz and Enhanced Capital Texas Fund, LP dated June 29, 2012 (incorporated by reference to Exhibit 10.5 to Form 8-K dated June 29, 2012, filed July 6, 2012)
10.30	Seventh Amendment dated June 29, 2012 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.6 to Form 8-K dated June 29, 2012, filed July 6, 2012)
10.31+	Third Amendment, effective July 1, 2012, to Employment Agreement dated May 5, 2008, between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.7 to Form 10-Q dated June 30, 2012, filed August 20, 2012).
10.32+	Fourth Amendment, effective July 1, 2012, to Employment Agreement dated May 18, 2009, between Michael T. Adams and the Company  (incorporated by reference to Exhibit 10.8 to Form 10-Q dated June 30, 2012, filed August 20, 2012).
10.33+	First Amendment, effective July 1, 2012, to Advisory/Consultant Agreement, effective February 22, 2011, between Jay C. Nadel and the Company  (incorporated by reference to Exhibit 10.10 to Form 10-Q dated June 30, 2012, filed August 20, 2012).
10.34	Eighth Amendment dated November 15, 2012 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to Form 10-Q dated September 30, 2012, filed November 19, 2012).
10.35	First Amendment dated November 15, 2012 to that certain Note Purchase Agreement dated June 29, 2012 between Lapolla and Enhanced Jobs for Texas Fund, LLC and Enhanced Capital Texas Fund, LP (incorporated by reference to Exhibit 10.2 to Form 10-Q dated September 30, 2012, filed November 19, 2012).
10.36	Ninth Amendment dated May 3, 2013 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to Form 10-Q dated March 31, 2013, filed May 13, 2013).
10.37	Note Purchase Agreement between Lapolla and Enhanced dated December 10, 2013 (incorporated by reference to Exhibit 10.1 to Form 8-K dated December 10, 2013, filed December 16, 2013).
10.38	Promissory Note between Lapolla and Enhanced Jobs for Texas Fund, LLC dated December 10, 2013 (incorporated by reference to Exhibit 10.2 to Form 8-K dated December 10, 2013, filed December 16, 2013).
10.39	Promissory Note between Lapolla and Enhanced Capital Texas Fund, LP dated December 10, 2013 (incorporated by reference to Exhibit 10.3 to Form 8-K dated December 10, 2013, filed December 16, 2013).
10.40	Security Agreement between Lapolla and Enhanced Capital Texas Fund, LP dated December 10, 2013 (incorporated by reference to Exhibit 10.4 to Form 8-K dated December 10, 2013, filed December 16, 2013).
10.41	Guaranty Agreement b/w Richard J. Kurtz and Enhanced Capital Texas Fund, LP dated December 10, 2013 (incorporated by reference to Exhibit 10.5 to Form 8-K dated December 10, 2013, filed December 16, 2013).
10.42	Tenth Amendment dated December 10, 2013 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.6 to Form 8-K dated December 10, 2013, filed December 16, 2013).
10.43+	Executive Employment Agreement, effective January 1, 2014, between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated January 22, 2013, filed January 28, 2013).
10.44+	Option Agreement dated January 22, 2014, between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.2 to Form 8-K dated January 22, 2013, filed January 28, 2013).
10.45+	Option Agreement dated February 7, 2014, between Harvey L. Schnitzer and the Company (incorporated by reference to Exhibit 10.72 to Form 10-K dated December 31, 2013, filed April 10, 2014).
10.46+	Stock Bonus Agreement dated February 7, 2014, between Harvey L. Schnitzer and the Company (incorporated by reference to Exhibit 10.73 to Form 10-K dated December 31, 2013, filed April 10, 2014).
10.47	First Amendment dated April 8, 2014 to that certain Note Purchase Agreement between Lapolla and Enhanced dated December 10, 2013 (incorporated by reference to Exhibit 10.74 to Form 10-K dated December 31, 2013, filed April 10, 2014).
10.48+	Option Agreement dated April 28, 2014, between Jay C. Nadel and the Company (incorporated by reference to Exhibit 10.62 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.49+	Option Agreement dated April 28, 2014, between Arthur J. Gregg and the Company (incorporated by reference to Exhibit 10.63 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.50+	Option Agreement dated April 28, 2014, between Augustus J. Larson and the Company (incorporated by reference to Exhibit 10.64 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.51+	Option Agreement dated April 28, 2014, between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.65 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.52+	Option Agreement dated April 28, 2014, between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.66 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.53+	Option Agreement dated April 28, 2014, between Harvey L. Schnitzer and the Company (incorporated by reference to Exhibit 10.67 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.54+	Option Agreement dated May 14, 2014, between Richard J. Kurtz and the Company (incorporated by reference to Exhibit 10.68 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.55+	Option Agreement dated October 14, 2014, between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.69 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.56+	Option Agreement dated November 26, 2014, between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.70 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.57+	Option Agreement dated December 22, 2014, between Jay C. Nadel and the Company (incorporated by reference to Exhibit 10.71 to Form 10-K dated December 31, 2014, filed March 31, 2015).

39

10.58+	Option Agreement dated December 22, 2014, between Arthur J. Gregg and the Company (incorporated by reference to Exhibit 10.72 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.59+	Option Agreement dated December 22, 2014, between Augustus J. Larson and the Company (incorporated by reference to Exhibit 10.73 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.60	Eleventh Amendment dated November 14, 2014 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.1 to Form 10-Q dated September 30, 2014, filed November 17, 2014).
10.61	Financial Commitment from Richard J. Kurtz dated November 14, 2014 (incorporated by reference to Exhibit 10.2 to Form 10-Q dated September 30, 2014, filed November 17, 2014).
10.62	Second Amendment dated November 14, 2014 to that certain Note Purchase Agreement between Lapolla and Enhanced dated December 10, 2013 (incorporated by reference to Exhibit 10.3 to Form 10-Q dated September 30, 2014, filed November 17, 2014).
10.63+	Executive Employment Agreement effective December 31, 2014, between Michael T. Adams and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated January 16, 2015, filed January 23, 2015).
10.64+	Executive Employment Agreement effective December 31, 2014, between Harvey L. Schnitzer and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated February 23, 2015, filed February 27, 2015).
10.65+	Executive Employment Agreement dated and effective January 1, 2015, between Jomarc C. Marukot and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated January 1, 2015, filed January 6, 2015).
10.66+	Option Agreement dated January 16, 2015, between Douglas J. Kramer and the Company  (incorporated by reference to Exhibit 10.3 to Form 8-K dated January 16, 2013, filed January 23, 2015).
10.67+	Option Agreement dated January 16, 2015, between Michael T. Adams and the Company  (incorporated by reference to Exhibit 10.2 to Form 8-K dated January 16, 2013, filed January 23, 2015).
10.68	Promissory Note between Lapolla and Richard J. Kurtz dated January 21, 2015 (incorporated by reference to Exhibit 10.15 to Form 8-K dated January 21, 2015, filed January 27, 2015).
10.69	Twelfth Amendment dated January 23, 2015 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.11 to Form 8-K dated January 21, 2015, filed January 27, 2015).
10.70+	Executive Employment Agreement effective January 1, 2015, between Jomarc C. Marukot and the Company (incorporated by reference to Exhibit 10.1 to Form 8-K dated January 1, 2015, filed January 6, 2015).
10.71+	Option Agreement dated March 23, 2015, between Harvey L. Schnitzer and the Company (incorporated by reference to Exhibit 10.63 to Form 10-K dated December 31, 2014, filed March 31, 2015).
10.72	Thirteenth Amendment dated May 29, 2015 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.12 to Form 8-K dated May 29, 2015, filed June 10, 2015).
10.73	Subordination Agreement dated April 16, 2012 by and among Lapolla Industries, Inc., Richard J. Kurtz, and Bank of America (incorporated by reference to Exhibit 10.18 to Form 8-K dated May 29, 2015, filed June 10, 2015).
10.74	First Amendment dated November 13, 2014 to that certain Subordination Agreement dated April 16, 2012 by and among Lapolla Industries, Inc., Richard J. Kurtz, and Bank of America (incorporated by reference to Exhibit 10.19 to Form 8-K dated May 29, 2015, filed June 10, 2015).
10.75	Promissory Note dated November 14, 2014 between Lapolla Industries, Inc. and Richard J. Kurtz (incorporated by reference to Exhibit 10.20 to Form 8-K dated May 29, 2015, filed June 10, 2015).
10.76	Promissory Note dated January 21, 2015 between Lapolla Industries, Inc. and Richard J. Kurtz (incorporated by reference to Exhibit 10.15 to Form 8-K dated January 21, 2015, filed January 27, 2015).
10.77	Second Amendment dated May 29, 2015 to that certain Subordination Agreement dated April 16, 2012 by and among Lapolla Industries, Inc., Richard J. Kurtz, and Bank of America (incorporated by reference to Exhibit 10.22 to Form 8-K dated May 29, 2015, filed June 10, 2015).
10.78+	First Amendment, effective January 1, 2014, to Employment Agreement dated January 1, 2014, between Douglas J. Kramer and the Company (incorporated by reference to Exhibit 10.1 to Form 10-Q dated September 30, 2015, filed November 12, 2015).
10.79	Third Amendment dated December 15, 2015 to that certain Note Purchase Agreement between Lapolla and Enhanced dated December 10, 2013 (incorporated by reference to Exhibit 10.6 to Form 8-K dated December 15, 2015, filed December 18, 2015).
10.80	Amended and Restated Guaranty Agreement dated December 15, 2015 by and among Richard J. Kurtz and Enhanced Credit Supported Loan Fund, LP, as Agent for Enhanced Jobs for Texas Fund, LLC, and Enhanced Capital Texas Fund, LP (incorporated by reference to Exhibit 10.7 to Form 8-K dated December 15, 2015, filed December 18, 2015).
10.81	Fourteenth Amendment dated March 18, 2016 to that certain Loan and Security Agreement dated August 31, 2010 between Lapolla and Bank of America, N.A. (incorporated by reference to Exhibit 10.13 to Form 8-K dated March 18, 2016, filed March 24, 2016).
10.82	Commitment Letter dated November 12, 2015 from Richard J. Kurtz (incorporated by reference to Exhibit 10.2 to Form 10-Q dated September 30, 2015, filed November 12, 2015).
10.83+	Option Agreement dated November 12, 2015, between Richard J. Kurtz and the Company.
10.84+	Option Agreement dated March 14, 2016, between Richard J. Kurtz and the Company.
10.85+	Option Agreement dated March 14, 2016, between Douglas J. Kramer and the Company.
10.86	Loan Agreement between Lapolla Industries, Inc. and Bank of America, N.A., dated September 7, 2016 (incorporated by reference to to Exhibit 10.1 to Form 8-K dated September 7, 2016, filed September 12, 2016).
10.87	Security Agreement between Lapolla Industries, Inc., Bank of America Corporation, and Bank of America, N.A., dated September 7, 2016 (incorporated by reference to Exhibit 10.2 to Form 8-K dated September 7, 2016, filed September 12, 2016).
10.88+	Second Amendment to Executive Employment Agreement dated December 30, 2016, between Douglas J. Kramer and Lapolla Industries, Inc. (incorporated by reference to Exhibit 10.1 to Form 8-K dated December 31, 2016, filed January 9, 2017).
10.89+	First Amendment to Executive Employment Agreement dated December 30, 2016, between Jomarc C. Marukot and Lapolla Industries, Inc. (incorporated by reference to Exhibit 10.2 to Form 8-K dated December 31, 2016, filed January 9, 2017).
10.90*+	Stock Bonus Agreement dated December 31, 2016, between Richard J. Kurtz and the Company.
10.91*+	Stock Bonus Agreement dated January 1, 2017, between Richard J. Kurtz and the Company.

40

10.92*+	Option Agreement dated January 5, 2017, between Richard J. Kurtz and the Company.
10.93*+	Option Agreement dated January 5, 2017, between Jay C. Nadel and the Company.
10.94*+	Option Agreement dated January 5, 2017, between Arthur J. Gregg and the Company.
10.95*+	Option Agreement dated January 5, 2017, between Augustus J. Larson and the Company.
23.1*	Consent of Hein & Associates LLP incorporated by reference in Registration Statement (Form S-8 No. 333-174272) of February 15, 2017 report.
31.1*	Certification of Principal Executive Officer Required Under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Principal Financial Officer Required Under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32*	Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350.
101*	The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language), (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Stockholders’ Equity, (iv) Statements of Cash Flows, and (v) Notes to Financial Statements

* Filed herewith

+ Management contract or compensation plan or arrangement

41

2016 Annual Audit

Lapolla Industries, Inc.

Intercontinental Business Park

15402 Vantage Parkway East, Suite 322

Houston, Texas 77032

www.lapolla.com

(i)

LAPOLLA INDUSTRIES, INC.

INDEX TO FINANCIAL STATEMENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
BALANCE SHEETS
As of December 31, 2016 and 2015	F-2
STATEMENTS OF OPERATIONS
Years Ended December 31, 2016 and 2015	F-3
STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2016 and 2015	F-4
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2016 and 2015	F-5
NOTES TO FINANCIAL STATEMENTS	F-6

(ii)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Lapolla Industries, Inc.

Houston, Texas

We have audited the accompanying balance sheets of Lapolla Industries, Inc. as of December 31, 2016 and 2015 and the related statements of operations, change in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lapolla Industries, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Hein & Associates LLP

Hein & Associates LLP

Houston, Texas

February 15, 2017

F-1

LAPOLLA INDUSTRIES, INC.

BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2016			2015
ASSETS
Current Assets:
Cash	$	1,722		$	—
Trade Receivables, Net	12,508			10,006
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	—			42
Inventories, Net	6,610			8,174
Prepaid Expenses and Other Current Assets	2,074			1,174
Total Current Assets	22,914			19,396
Property, Plant and Equipment	985			1,087
Goodwill	4,235			4,235
Other Intangible Assets, Net	1,180			1,197
Deposits and Other Non-Current Assets, Net	81			94
Total Assets	$	29,395		$	26,009
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	6,741		$	6,384
Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	21			51
Accrued Expenses and Other Current Liabilities	2,917			2,773
Total Current Liabilities	9,679			9,208
Long-Term Debt, Net	8,945			14,137
Accrued Interest – Note Payable – Related Party	—			4
Deferred Tax Liability	414			365
Total Liabilities	19,038			23,714
Commitments and Contingencies (Note 14)
Stockholders' Equity:
Common Stock, $0.01 Par Value; 140,000,000 Shares Authorized; 123,494,129 and 122,125,072 Issued
and Outstanding for 2016 and 2015, respectively.	1,235			1,221
Additional Paid-In Capital	93,600			91,930
Accumulated Deficit	(84,478		)	(90,856		)
Total Stockholders' Equity	10,357			2,295
Total Liabilities and Stockholders' Equity	$	29,395		$	26,009

The Accompanying Notes are an Integral Part of the Financial Statements 

F-2

LAPOLLA INDUSTRIES, INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended December 31,
	2016			2015
Sales	$	86,386		$	78,649
Cost of Sales	61,345			60,264
Gross Profit	25,041			18,385
Operating Expenses:
Selling, General and Administrative	15,087			13,933
Professional Fees	1,186			1,158
Depreciation	97			146
Amortization of Other Intangible Assets	277			284
Consulting Fees	597			809
Total Operating Expenses	17,244			16,330
Operating Income	7,797			2,055
Other (Income) Expense:
Interest Expense	885			1,319
Interest Expense – Related Party	491			775
Interest Expense – Amortization of Discount	120			181
Loss on Extinguishment of Debt	306			—
Other, Net	(694		)	(35		)
Total Other Expense	1,108			2,240
Income (Loss) Before Income Taxes	6,689			(185		)
Income Tax Expense	311			392
Net Income (Loss)	$	6,378		$	(577	)
Earnings Per Share:
Basic	$	0.05		$	0.00
Diluted	$	0.05		$	0.00
Weighted Average Shares Outstanding
Basic	122,813			121,283
Diluted	123,297			121,283

The Accompanying Notes are an Integral Part of the Financial Statements

F-3

LAPOLLA INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

	Common Stock
	Shares	Par $0.01		Additional Paid-In Capital			Accumulated (Deficit)			Total Stockholders' Equity
As of December 31, 2014	119,840	$	1,198	$	89,989		$	(90,279	)	$	908
Net Loss	—	—		—			(577		)	(577		)
Issuance of Common Stock	2,286	23		(23		)	—			—
Share Based Compensation Expense	—	—		1,229			—			1,229
Interest Expense – Related Party	—	—		735			—			735
As of December 31, 2015	122,126	$	1,221	$	91,930		$	(90,856	)	$	2,295
Net Income	—	—		—			6,378			6,378
Issuance of Common Stock	1,369	14		(14		)	—			—
Share Based Compensation Expense	—	—		988			—			988
Interest Expense – Related Party	—	—		696			—			696
As of December 31, 2016	123,495	$	1,235	$	93,600		$	(84,478	)	$	10,357

The Accompanying Notes are an Integral Part of the Financial Statements

F-4

LAPOLLA INDUSTRIES, INC.

STATEMENT OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2016			2015
Cash Flows From Operating Activities
Net Income (Loss)	$	6,378		$	(577	)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:
Depreciation	265			358
Amortization of Other Intangible Assets	277			284
Provision for Losses on Accounts Receivable	(16		)	297
Share Based Compensation Expense	988			1,229
Interest Expense – Enhanced Notes PIK	—			330
Interest Expense – Related Party	491			775
Interest Expense – Amortization of Discount	120			181
Deferred Income Tax Provision	49			365
Gain on Disposal of Assets	(9		)	(4		)
Loss on Debt Extinguishment	306			—
Loss on Foreign Currency Exchange	14			60
Changes in Assets and Liabilities:
Trade Receivables	(2,497		)	(1,487		)
Inventories	1,541			(2,906		)
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	42			(24		)
Prepaid Expenses and Other Current Assets	(900		)	(65		)
Other Intangible Assets	(260		)	(298		)
Deposits and Other Non-Current Assets	34			187
Accounts Payable	356			(595		)
Accrued Expenses and Other Current Liabilities	140			1,014
Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	(30		)	51
Net Cash Provided by (Used in) Operating Activities	$	7,289		$	(825	)
Cash Flows From Investing Activities
Additions to Property, Plant and Equipment	(143		)	(76		)
Cash Flows From Financing Activities
Proceeds from Line of Credit	10,953			—
Principal Repayments to Line of Credit	(1,953		)	—
Proceeds from Revolver Loan	54,996			83,858
Principal Repayments to Revolver Loan	(61,732		)	(82,557		)
Proceeds from Note Payable – Related Party	—			250
Principal Repayments to Note Payable - Related Party	—			(500		)
Principal Repayments to Note Payable - Enhanced Note	(7,688		)	(150		)
Net Cash (Used in) Provided by Financing Activities	(5,424		)	901
Net Change In Cash	1,722			—
Cash at Beginning of Year	—			—
Cash at End of Year	$	1,722		$	—
Supplemental Disclosure of Cash Flow Information:
Cash Payments for Income Taxes	$	307		$	—
Cash Payments for Interest	752			850
Supplemental Schedule of Non Cash Investing and Financing Activities:
Issuances of Restricted Stock for Personal Guaranty by Related Party Classified as Interest Expense	$	696		$	735
Accrued Interest – Related Party	—			4

The Accompanying Notes are an Integral Part of the Financial Statements

F-5

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1 - Summary of Organization, Basis of Presentation, and Critical Accounting Policies Estimates and Assumptions

This summary briefly describes the Company’s organization, basis of presentation, and critical accounting policies, estimates, and assumptions, which are presented to assist in understanding these financial statements. The financial statements and notes are representations of management who are responsible for their integrity and objectivity. The accounting policies used conform to Generally Accepted Accounting Principles (GAAP) in the United States of America and have been consistently applied in the preparation of these financial statements. Judgments and estimates of uncertainties are required in applying our accounting policies in many areas. However, application of the critical accounting policies discussed below requires management’s significant judgments, often as the result of the need to make estimates of matters that are inherently uncertain. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Organization History

The Company was incorporated in the state of Delaware on October 20, 1989 initially under the name of Natural Child Collection, Inc. and has undergone a variety of name changes and discontinued operations. For current operations, the Company acquired 100% of the capital stock of Infiniti Paint Co., Inc., a Florida corporation, effective September 1, 2001, which was engaged in the business of developing, marketing, selling, and distributing acrylic roof coatings, roof paints, polyurethane foam systems, sealants, and roof adhesives in the Southeastern United States (the "Infiniti Subsidiary"). On December 20, 2004, the Company changed its name from Urecoats Industries, Inc. to IFT Corporation. During the latter part of 2004, the Company's Infiniti Subsidiary built and began operating an acrylic coatings manufacturing plant in the Southeastern United States. On February 11, 2005, the Company acquired 100% of the capital stock of Lapolla Industries, Inc., an Arizona corporation, which was engaged in the business of manufacturing acrylic roof coatings and sealants, and distributing polyurethane foam systems in the Southwestern United States (the "Lapolla Subsidiary"). On April 1, 2005, the Company's Infiniti Subsidiary merged with and into the Lapolla Subsidiary whereas the existence of the Infiniti Subsidiary ceased. On October 1, 2005, the Company's Lapolla Subsidiary merged with and into the Company whereas the existence of the Lapolla Subsidiary ceased. On November 8, 2005, the Company changed its name from IFT Corporation to Lapolla Industries, Inc.

Trade Receivables and Credit Risk

Trade receivables are the primary financial instruments that may subject the Company to significant concentrations of credit risk. The Company’s trade receivables consist primarily of uncollateralized obligations from its diverse customer base, including personal guarantees when obtainable, due under normal trade terms, which generally require payment within 30 days of the invoice date. However, these payment terms may be extended in select cases and many customers do not pay within stated trade terms. The Company has a credit insurance policy in place covering most customer account balances. The Company evaluates the creditworthiness of its customers’ financial position and monitors accounts on a regular basis. Provisions to the allowance for doubtful accounts are reviewed quarterly and adjustments are made periodically (as circumstances warrant) based upon management’s best estimate of collectability of accounts. No customer represented more than 10% of sales for each of the years ended December 31, 2016 and 2015. No customer represented more than 10% of trade receivables at December 31, 2016 or 2015. As of the date of this report, the Company believes no significant concentration of credit risk exists.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost over the fair value of net tangible and identifiable intangible assets of acquired businesses. Identifiable intangible assets acquired in business combinations are recorded based upon their fair value at the date of acquisition. According to GAAP, goodwill is required to be tested for impairment, on an annual basis and between annual tests in certain circumstances, and written down when impaired. The goodwill impairment test is performed by comparing the fair value of the associated reporting unit to its carrying value. GAAP also requires that intangible assets with estimable useful lives be amortized over their respective estimated lives to their estimated residual values, and reviewed for impairment, unless these lives are determined to be indefinite.

Fair Value of Financial Instruments

The Company adopted authoritative GAAP guidance regarding disclosures about fair value of financial instruments, which requires the disclosure of the fair value of off-and-on balance sheet financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments (none of which are held for trading purposes), approximate the carrying values of such amounts. The Company adopted authoritative GAAP guidance regarding fair value measurements, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. This guidance establishes three levels of inputs that may be used to measure fair value: (a) Level 1 - Quoted prices in active markets for identical assets or liabilities. (b) Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities; and (c) Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 1, 2, or 3 assets or liabilities at December 31, 2016 and 2015, respectively. The carrying value of cash and cash equivalents, trade receivables and payables, prepaid expenses and other current assets, and other payables and accruals approximate fair value due to short period of time to maturity.

F-6

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Litigation

The Company is occasionally involved in legal proceedings in the normal course of business. The Company accrues a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.

Cash and Cash Equivalents

The Company considers cash, checks, credit card and ACH payments deposited with financial institutions, with original maturities of three months or less, to be cash and cash equivalents.

Fixed-Price Contracts

The Company’s AirTight Division performs work under fixed-price contracts. The fixed-price contracts vary in length but are typically less than one year. In accordance with industry practice, the Company includes asset and liability accounts relating to fixed-price contracts, including related deferred income taxes, if applicable, in current assets and liabilities even when such amounts are realizable or payable over a period in excess of one year. Revenues from fixed-price contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Fixed-price contract costs include all direct material, labor costs, equipment and those indirect costs related to contract performance, such as indirect labor, supplies, tools, and repairs costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. The asset "costs and estimated earnings in excess of billings on uncompleted contracts" represents revenues recognized in excess of amounts billed. The liability "billings in excess of costs and estimated earnings on uncompleted contracts" represents billings in excess of revenues recognized.

Inventories

Cost is determined on an actual and/or standard cost basis that approximates the first-in, first-out (FIFO) method using a perpetual inventory system. Inventories are valued at the lower of cost or market (replacement cost), which does not exceed net realizable value.

Income Taxes

The Company's provision for income taxes is determined using the U.S. federal statutory rate. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating losses and tax credit carryovers. The Company's net deferred tax asset was approximately $21.9 million and $27.4 million at December 31, 2016 and 2015, respectively. The Company's federal income tax returns are open to audit under the statute of limitations for the years ended December 31, 2013 through 2015. The Company recorded a valuation allowance against the deferred tax asset of $22.3 million and $27.8 million at December 31, 2016 and 2015, creating a deferred tax liability of $414,000 and $365,000, respectively. The Company has no unrecognized income tax benefits. Accordingly, the annual effective tax rate is unaffected. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and operating expense, respectively. At December 31, 2016, the Company had no increase or decrease in unrecognized income tax benefits for the year. There was no accrued interest or penalties relating to tax uncertainties at December 31, 2016. Unrecognized tax benefits are not expected to increase or decrease within the next twelve months.

Depreciable Lives of Property, Plant and Equipment

Property, plant and equipment is recorded at cost and depreciated using the straight-line method, which deducts equal amounts of the cost of each asset from earnings every year over its estimated economic useful life. Economic useful life is the duration of time an asset is expected to be productively employed by the Company, which may be less than its physical life. Assumptions on the following factors, among others, affect the determination of estimated economic useful life: wear and tear, obsolescence, technical standards, contract life, market demand, competitive position, raw material availability, and geographic location. The estimated economic useful life of an asset is monitored to determine its appropriateness, especially in light of changed business circumstances. For example, changes in technology and changes in the estimated future demand for products may result in a shorter estimated useful life than originally anticipated. In these cases, we would depreciate the remaining net book value over the new estimated remaining life, thereby increasing depreciation expense per year on a prospective basis. Net property, plant and equipment totaled $985,000 and depreciation expense totaled $265,000 as of and for the year ended December 31, 2016. Net property, plant and equipment totaled $1.1 million and depreciation expense totaled $358,000 as of and for the year ended December 31, 2015.

F-7

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Impairment of Long-Lived Assets

Property, Plant and Equipment

Property, plant, and equipment held for use is grouped for impairment testing at the lowest level for which there is an identifiable cash flow. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances would include a significant decrease in the market value of a long-lived asset grouping, a significant adverse change in the manner in which the asset grouping is being used or in its physical condition, a history of operating or cash flow losses associated with the use of the asset grouping, or changes in the expected useful life of the long-lived assets. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by that asset group is compared to the carrying value to determine whether impairment exists. If an asset group is determined to be impaired, the loss is measured based on the difference between the asset group’s fair value and its carrying value. An estimate of the asset group’s fair value is based on the discounted value of its estimated cash flows. Assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell. The assumptions underlying cash flow projections represent our best estimates at the time of the impairment review. Factors that we must estimate include industry and market conditions, sales volume and prices, costs to produce, etc. Changes in key assumptions or actual conditions that differ from estimates could result in an impairment charge. Management believes it uses reasonable and supportable assumptions when performing impairment reviews and cannot predict the occurrence of future events and circumstances that could result in impairment charges. There were no property, plant and equipment impairment charges recorded during the years ended December 31, 2016 or 2015.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net tangible and identifiable intangible assets of an acquired business. Goodwill was $4.2 million at December 31, 2016 and 2015. The Company operates two reporting units, Foam and Coatings. Disclosures related to goodwill are included in Note 8 to the financial statements. The Company evaluates goodwill for impairment on an annual basis, or more frequently if management believes indicators of impairment exist. Under generally accepted accounting principles, the Company has the option to perform a qualitative assessment to test for impairment of goodwill. If it is determined that it is more likely than not that the fair value of each reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of each reporting unit and comparing the carrying value of each reporting unit to its estimated fair value. If the fair value of a reporting unit is greater than its carrying value then goodwill is not impaired; otherwise, the second step of the impairment test shall be performed to measure the amount of impairment loss. Based on the qualitative assessment performed as of December 31, 2016, the Company concluded that it was more likely than not that the fair value of its reporting units was greater than their carrying amount. Accordingly, no further testing was required. There were no goodwill impairment charges recorded during the years ended December 31, 2016 or 2015.

Other Intangible Assets

The Company had other intangible assets, net of $1.2 million at December 31, 2016 and 2015, consisting of product formulations and trade names that were acquired as part of business combinations, and trademarks and approvals and certifications obtained as part of entering into new markets. Amortization of other intangible assets totaled $277,000 and $284,000 for the years ended December 31, 2016 and 2015, respectively. Other intangible assets are tested for impairment as part of the long-lived asset grouping impairment tests. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. See impairment discussion above under Property, Plant and Equipment for a description of how impairment losses are determined. Disclosures related to other intangible assets are included in Note 8 to the financial statements. Significant management judgment is required in the forecasts of future operating results that are used in the Company’s impairment evaluations. The estimates used are consistent with the plans and estimates that Management uses to manage its business. It is possible, however, that the plans may change and estimates used may prove to be inaccurate. If the Company’s actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, then the Company could incur future impairment charges, which would adversely affect financial performance. The Company concluded that there were no material events or significant changes in circumstances that led to impairment during fiscal 2016 and 2015. There were no long-lived asset impairment charges recorded during the years ended December 31, 2016 or 2015.

Revenue Recognition

Sales are recognized (i) as risk and title to products transfers to the customer (which generally occurs at the time shipment is made), (ii) the sales price is fixed or determinable, and (iii) collectability is reasonably assured. Sales channels include direct sales, distributors, and independent representatives. Irrespective of the sales channel, returns and allowances are not a business practice in the industry. Amounts billed for shipping and handling are included in revenues (freight). Freight included in revenue was $834,000 and $958,000 in 2016 and 2015, respectively. Costs incurred for shipping and handling are included in cost of sales. Freight included in cost of sales was $4.3 million and $4.2 million in 2016 and 2015, respectively. Revenues are recorded net of sales tax.

F-8

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Research and Development

Research and development costs related to both future and present products are charged to operations as incurred.

Share-Based Compensation

The Company accounts for the cost of employee or director services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of share based awards is estimated at the grant date using a Black-Scholes valuation model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The determination of fair value is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. Employee stock option exercise behavior is based on actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. The Company applies an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates are subject to revision in future periods if actual forfeitures differ from the estimates and changes impact compensation cost in the period in which the change in estimate occurs. Disclosures related to share-based compensation are included in Note 17 to our financial statements. Share-based compensation expense was $988,000 and $1.2 million in 2016 and 2015, respectively. If additional share based awards are granted, financial performance may be negatively affected, and if outstanding share based awards are forfeited or canceled, resulting in non-vesting of such stock awards, financial performance may be positively affected. In either instance, the Company’s financial performance may change depending on share based award activities in future periods.

Allowance for Doubtful Accounts

The Company presents trade receivables, net of allowances for doubtful accounts, to ensure trade receivables are not overstated due to uncollectible accounts. Allowances, when required, are calculated based on a detailed review of certain individual customer accounts, including credit insurance and other security when applicable, and an estimation of the overall economic conditions affecting our customer base. The Company reviews a customer’s credit history before extending credit. The allowance for doubtful accounts was approximately $366,000 and $545,000 at December 31, 2016 and 2015, respectively. If the financial condition of customers were to deteriorate based on worsening overall economic conditions, resulting in an impairment of their ability to make payments to the Company, then additional allowances may be required in future periods.

Cost of Sales and Selling, General and Administrative Costs

The Cost of Sales line item includes all the material, overhead, packaging, and freight costs associated with products shipped, including resale finished goods and raw materials, as well as payroll costs associated with manufacturing the finished goods, inbound freight, sales tax expense, product containers, labels, and other miscellaneous items that are indirectly used in the manufacturing, packaging, and shipping (outbound freight) of finished goods, including inspection, and internal transfer costs, as well as depreciation of machinery, amortization of approvals and certifications, and an allocated portion of overhead. The Selling, General and Administrative line item includes selling, advertising, marketing, customer service, and technical support, as well as the costs of providing corporate functional support for all other areas of our business.

Advertising and Marketing Expenses

Advertising and marketing costs are generally expensed as they are incurred. Expenditures for certain advertising and marketing activities related to trade shows and trade magazines are deferred within the Company’s fiscal year when the benefits clearly extend beyond the interim period in which the expenditure is made, generally not to exceed 90 days. There were $181,000 and $116,000 costs for advertising deferred on the Company’s balance sheets as of December 31, 2016 and 2015, respectively. Other advertising and marketing expenditures that do not meet the deferred criteria are expensed when the advertising and marketing occurs. Total advertising and marketing costs expensed were approximately $1.1 million in 2016 and 2015, respectively.

Debt Issuance Costs

The Company capitalizes debt issuance costs, which are netted against long-term debt in the Company’s balance sheets. These costs are amortized over the term of the financial instrument. Amortization of debt issuance costs is included in “Interest Expense” in the statements of operations.

Net Income (Loss) Per Common Share

Basic income (loss) per share is based upon the net income (loss) applicable to common shares after preferred dividend requirements and upon the weighted average number of common shares outstanding during the period. Diluted income (loss) per share reflects the effect of the assumed exercise of stock options and warrants only in periods in which such effect would have been dilutive. Disclosures related to net income (loss) per common share are included in Note 15 to our financial statements.

F-9

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Recently Adopted Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-15, “Presentation of Financial Statements—Going Concern:  Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.”  The amendments in this ASU are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.  This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the financial statement footnotes.  The pronouncement is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. The Company adopted the provisions of the guidance in the fourth quarter of 2016. The adoption did not have a material impact on the Company’s financial statements.

In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from GAAP the concept of extraordinary items and the need for an entity to separately classify, present, and disclose extraordinary events and transactions, while retaining certain presentation and disclosure guidance for items that are unusual in nature or occur infrequently. The pronouncement is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period and may be applied retrospectively, with early application permitted. The Company adopted the provisions of the guidance in the fourth quarter of 2015. The adoption did not have a material impact on the Company’s financial statements.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs." The accounting guidance requires that debt issuance costs related to a recognized debt liability be reported on the Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The pronouncement is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted for financial statements that have not been previously issued. The Company adopted the provisions of the guidance in the first quarter of 2016, and retrospectively for 2015. The adoption did not have a material impact on the Company’s financial statements.

In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The Company adopted the provisions of the guidance in the fourth quarter of 2016. The adoption did not have a material impact on the Company’s financial statements. There was not a need to retrospectively adjust prior periods.

New Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." The ASU will supersede most of the existing revenue recognition requirements in U.S. generally accepted accounting principles ("GAAP") and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity's nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. The Company is currently evaluating the impact of adopting this guidance.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," which applies to inventory that is measured using first-in, first-out ("FIFO") or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, last-out ("LIFO"). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting this guidance.

In January 2016, the FASB issued ASU 2016-01, "Financial Instruments--Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

F-10

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

In February 2016, the FASB issued ASU 2016-02, "Leases: Amendments to the FASB Accounting Standards Codification," which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. This ASU retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting literature. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model, the effect of leases in a consolidated statement of comprehensive income and a consolidated statement of cash flows is largely unchanged from previous GAAP. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. The Company is currently evaluating the impact of adopting this guidance.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which simplifies several aspects of the accounting for share-based payment awards to employees, including the accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company is currently evaluating the impact of adopting this guidance.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," which contains amendments designed to make current GAAP clear or provide specific guidance on eight cash flow classification issues relating to how certain cash receipts and cash payments are presented and classified in the statement of cash flows, thereby reducing the current and potential future diversity in practice. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact of adopting this guidance.

In December 2016, the FASB issued ASU 2016-19, "Technical Corrections and Improvements." Since the FASB Accounting Standards Codification® ("ASC") was established in September 2009 as the source of authoritative GAAP to be applied by nongovernmental entities, stakeholders have provided suggestions for minor corrections and clarifications. The ASC’s About the Codification describes the FASB’s procedure for responding to submissions, which involves the staff analyzing and processing the submissions and including any resulting changes to the ASC in maintenance updates or in an ASU. The amendments in this ASU cover a wide range of Topics in the ASC, including: (i) amendments related to differences between original guidance and the ASC; (ii) guidance clarification and reference corrections; (iii) simplification; and (iv) minor improvements. The Company is currently evaluating the impact of adopting this guidance.

In December 2016, the FASB Issued ASU 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers." On May 28, 2014, the FASB and the International Accounting Standards Board ("IASB") issued a converged standard on recognition of revenue from contracts with customers. The FASB guidance was issued as ASU 2014-09, Revenue from Contracts with Customers (Topic 606). In addition to the new revenue Topics and Subtopics, the Board made approximately 800 consequential amendments to the FASB ASU. The FASB decided to issue a separate ASU for technical corrections and improvements to Topic 606 and other Topics amended by ASU 2014-09 to increase stakeholders’ awareness of the proposals and to expedite improvements to ASU 2014-09. The amendments in this ASU affect the guidance in ASU 2014-09, which is not yet effective. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," defers the effective date of ASU 2014-09 by one year. The Company is currently evaluating the impact of adopting this guidance.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which contains amendments to simplify the subsequent measurement of goodwill. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments of this ASU are effective for fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of adopting this guidance.

F-11

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 2 - Dependence on Few Suppliers

The Company is dependent on a few suppliers for certain of its raw materials and finished goods. For 2016 and 2015, raw materials and finished goods purchased from the Company’s three largest suppliers accounted for approximately 42% and 39% of purchases, respectively.

Note 3 - Trade Receivables

Trade receivables are comprised of the following (in thousands): 

	December 31,
	2016			2015
Trade Receivables	$	12,874		$	10,551
Less: Allowance for Doubtful Accounts	(366		)	(545		)
Trade Receivables, Net	$	12,508		$	10,006

Note 4 - Contracts

The following is a summary of contracts in progress (in thousands):

	December 31,
	2016			2015
Costs Incurred on Uncompleted Contracts	$	274		$	1,089
Estimated Earnings on Uncompleted Contracts	83			306
Earned Revenues	357			1,395
Less: Billings to Date	(378		)	(1,404		)
Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	$	(21	)	$	(9	)

Included in the accompanying balance sheets under the following captions as of December 31 (in thousands):

	2016			2015
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	$	—		$	42
Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	21			51
Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	$	(21	)	$	(9	)

Note 5 - Inventories

The following is a summary of inventories (in thousands): 

	December 31,
	2016		2015
Raw Materials	$	2,157	$	2,599
Finished Goods	4,453		5,575
Inventories, Net	$	6,610	$	8,174

Note 6 - Prepaid Expenses and Other Current Assets

The following is a summary of prepaid expenses and other current assets (in thousands): 

	December 31,
	2016		2015
Prepaid Insurances	$	735	$	637
Prepaid Marketing	181		116
Prepaid Consulting	94		58
Prepaid Other	1,064		363
Total Prepaid Expenses and Other Current Assets	$	2,074	$	1,174

F-12

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 7 - Property, Plant and Equipment

The following is a summary of property, plant and equipment (in thousands): 

	December 31,
	2016			2015			Estimated Useful Life
Vehicles	$	244		$	462		5 Years
Leasehold Improvements	269			289			13 – 15 Years
Office Furniture and Equipment	159			307			3 – 7 Years
Computers and Software	907			946			3 – 5 Years
Machinery and Equipment	2,557			2,517			3 – 20 Years
Total Property, Plant and Equipment	$	4,136		$	4,521
Less: Accumulated Depreciation	(3,151		)	(3,434		)
Total Property, Plant and Equipment, Net	$	985		$	1,087

Depreciation expense was $265,000 and $358,000 for the years ended 2016 and 2015, of which $168,000 and $212,000 were included in cost of sales for 2016 and 2015, respectively.

Note 8 -    Goodwill and Other Intangible Assets

The following is a summary of Goodwill (in thousands):

Goodwill

	December 31,
	2016		2015
Foam	$	2,932	$	2,932
Coatings	1,303		1,303
	$	4,235	$	4,235

The following is a summary of Other Intangible Assets (in thousands):

Other Intangible Assets

	December 31,
	2016							2015
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Amortization Period
Product Formulations	$	138	(104		)	$	34	138		$	(95	)	43		15 Years
Trade Names	750		(419		)	331		750		(369		)	381		15 Years
Approvals and Certifications	3,462		(2,647		)	815		3,202		(2,429		)	773		5 Years
	$	4,350	$	(3,170	)	$	1,180	$	4,090	$	(2,893	)	$	1,197

Based on the other intangible assets in service as of December 31, 2016, estimated amortization expense for the years ending December 31, 2017 through December 31, 2021 and thereafter is as follows (in thousands): 

	2017		2018		2019		2020		2021		Thereafter
Product Formulations	$	9	$	9	$	9	$	7	$	—	$	—
Trade Names	50		50		50		50		50		81
Approvals and Certifications	205		205		205		200		—		—
	$	264	$	264	$	264	$	257	$	50	$	81

F-13

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 9 - Deposits and Other Non-Current Assets, Net

The following is a summary of deposits and other non-current assets (in thousands):

	December 31,
	2016		2015
Prepaid Expenses	8		25
Other Receivables	9		5
Deposits	64		64
Total Deposits and Other-Non-Current Assets	$	81	$	94

Note 10 - Accrued Expenses and Other Current Liabilities

The following is a summary of accrued expenses and other current liabilities as (in thousands): 

	December 31,
	2016		2015
Accrued Payroll	$	3	$	(6	)
Accrued Commissions	172		129
Accrued Inventory	249		438
Accrued Taxes and Other	1,990		1,725
Accrued Insurance	490		459
Deferred Finance Charge Income	13		28
Total Accrued Expenses and Other Current Liabilities	$	2,917	$	2,773

Note 11 - Long-Term Debt

The following is a summary of long-term debt (in thousands):

		December 31,
Debt Facility	Effective Cash Interest Rate	2016			2015
Line of Credit	2.78%	$	9,000		$	—
Revolver Loan	4.59%	—			6,736
Enhanced Notes	11.66%	—			7,688
Total Long-Term Debt		9,000			14,424
Less Debt Issuance Costs and Unamortized Discount		(55		)	(287		)
Long-Term Debt, Net		$	8,945		$	14,137

(a)    Credit Agreement. The Company entered into a loan agreement with Bank of America, N.A. (the "Bank") on September 7, 2016 (the “Credit Agreement”), which amended and restated in its entirety that certain Loan and Security Agreement dated August 31, 2010 with the Bank (as amended, the "Loan Agreement"). The Credit Agreement provides an initial line of credit of $15 million for a 3 years term maturing on September 7, 2019 (the “Line of Credit”). The available amount of the Line of Credit will be reduced each quarter by $250,000 starting January 1, 2017, until it reaches $12 million on July 1, 2019, thereby reducing the Company’s unused line fee. The interest rate used by the Company is the daily floating LIBOR rate plus 2.25%. The Credit Agreement requires the Company to comply with two financial covenants, including: (i) an asset coverage ratio of at least (a) 1.10 to 1.00 from September 30, 2016, until September 30, 2017, (b) 1.15 to 1.00 from October 1, 2017, through March 31, 2018, and (c) 1.20to 1.00 from April 1, 2018, and thereafter, tested quarterly, which in each case will be determined based upon the ratio of (x) 85% of book value of all accounts receivable, plus 55%of book value of all inventory, plus 50% net book value of plant, property and equipment of the Company (the "Total Margined Value") to (y) all outstanding liabilities for borrowed money and other interest-bearing liabilities arising under the Line of Credit (the "Total Line of Credit"); and (ii) a fixed charge coverage ratio of at least 1.20 to 1.00, tested quarterly based upon the ratio of (a) Adjusted EBITDA (as defined in the Credit Agreement), to (b) the sum of capital expenditures, cash taxes paid, interest expenses, principal payments made on borrowed money other than the Line of Credit and the Enhanced Notes (as defined in (c) below), and distributions made, in each case for the immediately preceding four fiscal quarter period and determined on a consolidated basis. Upon closing of the Credit Agreement, an aggregate of $8.5 million was drawn from the Line of Credit and used to pay off the Enhanced Notes and the Loan Agreement. The Company granted the Bank a continuing security interest in and lien upon substantially all assets of the corporation. If, at any time, the Company’s Total Margined Value is less than the amount outstanding under the Total Line of Credit, and that amount remains unpaid or future Total Margined Value calculations do not increase to an amount equal to the balance outstanding under the Total Line of Credit, the Bank, in its sole discretion, may accelerate any and all amounts outstanding under the Line of Credit. At December 31, 2016, the balance outstanding on the Line of Credit, net of deferred financing costs, was $9.7 million, and the weighted-average interest rate was 2.78%. Cash available under our Line of Credit based on the Asset Coverage Ratio, after giving effect to our outstanding borrowings, at December 31, 2016 was $3.2 million. At December 31, 2016, the Company was in compliance with all of its Credit Agreement debt covenants.

F-14

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 11 - Long-Term Debt - continued

(b)    Loan Agreement. The Company entered into the Loan Agreement with the Bank on September 1, 2010, which, as amended from time to time, provided for a $12 million Revolver Loan. The Loan Agreement was replaced in its entirety and the Revolver Loan provided in connection therewith, which had an outstanding balance of $2.7 million, was paid in full from a draw against our Line of Credit upon closing of the Credit Agreement with the Bank on September 7, 2016. At December 31, 2015, the balance outstanding on the Revolver Loan, net of deferred financing costs, was $6.7 million, and the weighted-average interest rate was 4.6%. Cash available under the Revolver Loan based on the borrowing base calculation (defined as an amount determined by a detailed calculation that includes an amount equal to 85%of eligible accounts receivable, 65% of eligible finished goods and 30% of eligible raw materials, up to $6 million) at December 31, 2015 was $2.2 million. See also Item (a) above for more information.

(c)    Note Purchase Agreement.

(i)    Enhanced Notes. The Company entered into a Note Purchase Agreement with Enhanced Jobs for Texas Fund, LLC ("Enhanced Jobs") and Enhanced Credit Supported Loan Fund, LP ("Enhanced Credit"), on December 10, 2013, originally issuing an aggregate of $7.2 million in subordinated secured promissory notes maturing December 10, 2017 (the “Enhanced Notes”), of which $5.7 million was to Enhanced Credit and $1.5 million was to Enhanced Jobs. This Note Purchase Agreement was terminated and the Enhanced Notes issued in connection therewith, which had an aggregate outstanding balance, net of repayments plus accrued interest including PIK, of $5.8 million, were paid in full from a draw against our Line of Credit upon closing of the Credit Agreement with the Bank on September 7, 2016. Upon satisfaction and termination of the Note Purchase Agreement by the Company, the chairman of the board's commitment to ensure funding upon maturity of the Enhanced Notes and his personal guaranty on the Note Purchase Agreement were terminated. At December 31, 2015, the balance outstanding on the Enhanced Notes, net of deferred financing costs, was $7.5 million, and the effective interest rate was 25.6%. See also Item (a) above for more information.

(ii)    Guaranty Agreement. In connection with the Enhanced Notes described in (c)(i) above, the chairman of the board and majority stockholder of the Company (the “Guarantor”), entered into a Guaranty Agreement to secure the Company’s performance under the Enhanced Notes. The Company, in exchange for Guarantor’s personal guarantee of the obligations under the Enhanced Notes, granted Guarantor 3.7 millionshares of common stock, par value $.01 per share, which shares vest monthly on a pro rata basis over the life of the Enhanced Notes (the “Guaranty Shares”). The Guaranty Shares were valued at $0.60 per share, the closing price of the Company’s common stock as quoted on OTC Markets on the day preceding the closing date of December 10, 2013, for an aggregate amount of $2.2 million. The Guaranty Shares were recorded as interest expense – related party, thereby increasing the effective interest rate of the Enhanced Notes. Upon repayment of the Enhanced Notes by the Company, the chairman of the board's personal guaranty on the Note Purchase Agreement terminated and all remaining unvested Guaranty Shares vested on an accelerated basis. At December 31, 2016 and 2015, there were 3,681,000 and 2,523,347 Guaranty Shares vested, valued and recorded at $2.2 million and $1.5 million, respectively. See also Item (a) above for more information.

(iii)    Chairman of the Board Commitment. On November 12, 2015, pursuant to a commitment letter, effective as of October 31, 2015 (the “Commitment”), the Company's chairman of the board and majority stockholder, Richard J. Kurtz, committed to ensure the Company had funding to pay off the aggregate amount of $7.2 million by August 31, 2016, plus any accrued and unpaid interest, outstanding with respect to the Enhanced Notes, of which $2 millionis required from him by April 30, 2016 if the Company does not repay that amount ("the Commitment”). As consideration for the Commitment, the Company granted Mr. Kurtz a fully vested and exercisable stock option to purchase 500,000 shares of the Company’s common stock, with an exercise price per share equal to the fair market value of a share of the Company’s common stock on November 12, 2015, determined based on the per share closing price on such date, or $0.294per share, for a term of eight (8) years. The transaction was valued at approximately $47,000, which was estimated using the Black-Scholes option pricing model and fully expensed on the date of grant. In connection with the Company's payment of $500,000in principal to Mr. Kurtz during the fourth quarter of 2015 for the Notes Payable - Related Party, Mr. Kurtz made a principal payment of $150,000towards paying down the Enhanced Notes. The Company initially offset the $150,000 that Mr. Kurtz paid on its behalf direct to Enhanced against certain arms length sales transactions made to entities controlled by him for the Company's products; subsequently those amounts were paid by those entities and as a result, the Company repaid Mr. Kurtz the $150,000 paid to Enhanced on December 21, 2016. On April 21, 2016, the Company made a payment of $1.9 million on the outstanding principal of the Enhanced Notes. On August 25, 2016, Enhanced agreed to extend the August 31, 2016 pay off date for the Enhanced Notes to on or prior to September 16, 2016. On September 7, 2016, the Company repaid the Enhanced Notes and the chairman of the board's Commitment was terminated. See also Item (a) above for more information.

F-15

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 12 - Related Party Transactions

(a)    On January 1, 2015, Jomarc C. Marukot and the Company entered into an Executive Employment Agreement, dated as of January 1, 2015 (the “Marukot Agreement”), pursuant to which Mr. Marukot shall serve as the Company’s CFO and Corporate Treasurer for a term commencing on January 1, 2015 and ending December 31, 2016 (the “Employment Term”). Pursuant to the Marukot Agreement, Mr. Marukot is entitled to: (i) an annual base salary of $190,000; (ii) annual bonus equal to 25% of his annual base salary if the Company achieves its budgeted earnings before interest, taxes, depreciation, amortization, and share based compensation (“Adjusted EBITDA”) per calendar year, which annual bonus may be increased to 30%, 35%, or more than 35% in the CEO’s discretion, of his annual base salary if the Company achieves 110%, 120%, or more than 120%, respectively, of its budgeted Adjusted EBITDA; (iii) change in control bonus of 25% of his annual base salary upon consummation of a change in control if he is still employed at the time; (iv) medical, dental, life insurance, and disability benefits; (v) four months’ portion of his annual base salary for termination due to death or disability; (vi) four months’ portion of his annual base salary, awards and benefit plans and, if he would have received it had he remained employed for four months after his actual termination date, the change in control bonus in the event of termination without cause by the Company; and (vii) twelve months annual base salary if terminated within the first twelve months of the Employment Term or the remaining annual base salary if terminated after twelve months of his employment due to a change in control. Mr. Marukot is also entitled to earn awards under equity or other plans or programs that the Company, in its discretion, determines to put into effect and to participate in compensation and benefit programs offered by the Company to its executive officers. The Marukot Agreement also provides for a non-competition provision for the Employment Term and for a period of twelve months after the termination of Mr. Marukot’s employment.

(b)    On January 16, 2015, the Company granted Douglas J. Kramer, CEO and President, the right to acquire 850,000 shares of the Company’s common stock, $0.01 par value per share, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.325 per share, which options were immediately vested and exercisable at the time of grant (“Kramer Option”). The Kramer Option was granted as final replacement for 2,000,000 stock options granted on July 12, 2005 which expired July 12, 2013 (the “Prior Expired Options”). The Prior Expired Options were inadvertently extended to December 31, 2015, however, due to an eight year life limitation under the Company’s Equity Incentive Plan, as amended (the “Equity Plan”), they were deemed canceled at the end of eight years. Moreover, the Equity Plan only permits the grant of a total of 2,000,000 stock options during any calendar year. Mr. Kramer had exceeded this limit during the 2014 year and as a result, the Company was only able to grant Mr. Kramer 1,150,000 stock options during the 2014 year as partial replacement for the 2,000,000 Prior Expired Options. The transaction was valued at $86,000, which was estimated using the Black-Scholes option pricing model and expensed on the date of grant.

(c)    On January 16, 2015, the Company granted an eight-year stock option to Michael T. Adams, CGO, EVP, and Corporate Secretary, for 300,000 shares of the Company’s common stock, $0.01 par value per share, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the closing price on such date, or $0.325 per share (“Adams Option”). The Adams Option vests in three equal end of calendar year increments, subject to Mr. Adams meeting certain performance criteria, commencing on December 31, 2015 and ending December 31, 2017, or upon consummation of a change in control. Once vested, the stock options are immediately exercisable. The transaction was valued at $94,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(d)    On January 21, 2015, the Company borrowed $250,000 from the chairman of the board and majority stockholder as a condition precedent to entering into the Twelfth Amendment and entered into a promissory note (the “1/21/15 Kurtz Note”). Pursuant the 1/21/15 Kurtz Note, the Company agreed to pay 8% per annum on the principal balance of $250,000 and repay the principle balance on June 10, 2017. The 1/21/15 Kurtz Note is subordinated to the Loan Agreement and Enhanced Note. See also Item (e) below.

(e)    On January 23, 2015, the Company and Bank of America, N.A. entered into a Twelfth Amendment (the “Twelfth Amendment”) to the Loan Agreement. Pursuant to the Twelfth Amendment, certain definitions were changed and a new definition was added in the Loan Agreement as follows: (1) Fixed Charge Coverage Ratio was changed to the ratio, determined for any period on a consolidated basis for the Company, of (a) the sum of (i) EBITDA, (ii) Subordinated Debt incurred during such period on or after August 31, 2014 (other than the Twelfth Amendment Subordinated Debt), and (iii) up to $267,000 in Accounts charged off by the Company in August, 2014, to (b) the sum of Capital Expenditures (except those financed with Borrowed Money other than Revolver Loans), cash taxes paid, interest expense (other than payment-in-kind), principal payments made on Borrowed Money other than Revolver Loans, excluding (solely) principal payments made on the Subordinated Term Debt due December 10, 2013, in an amount not exceeding $150,000, and Distributions made, in each case determined for such period; (2) Revolver Termination Date was changed (extended) to March 31, 2016; and (3) Subordinated Debt was added defining Subordinated Debt loaned to the Company by Richard Kurtz in an amount at least equal to $250,000, required as a condition to the effectiveness of the Twelfth Amendment. Refer to Item (d) above for more information on the Subordinated Debt.

(f)    On March 23, 2015, the Company granted an eight-year stock option to Harvey L. Schnitzer, COO, for 300,000 shares of the Company’s common stock, $0.01 par value per share, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the closing price on such date, or $0.41 per share (“Schnitzer Option”). The Schnitzer Option vests in three equal end of calendar year increments, subject to Mr. Schnitzer meeting certain performance criteria, commencing on December 31, 2015 and ending December 31, 2017, or upon consummation of a change in control. Once vested, the stock options are immediately exercisable. The transaction was valued at $118,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

F-16

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 12 - Related Party Transactions - continued

(g)    On November 12, 2015, and effective as of October 31, 2015, the Company's chairman of the board and principal stockholder, Richard J. Kurtz, committed to provide the Company with funding to pay off the Enhanced Notes, of which $2 million is required to be paid on or before April 30, 2016, under the commitment letter (the "Commitment"). As consideration for the Commitment, the Company granted Mr. Kurtz a fully vested and exercisable stock option to purchase 500,000 shares of the Company’s common stock, with an exercise price per share equal to the fair market value of a share of the Company’s common stock on November 12, 2015, determined based on the per share closing price on such date, or $0.294 per share, for a term of eight (8) years. The transaction was valued at approximately $47,000, which was estimated using the Black-Scholes option pricing model and fully expensed on the date of grant. The Commitment will be superseded and become null and void in the event and to the extent that, at or before the time the Commitment is due, the Enhanced obligations are repaid in full in immediately available cash on or prior to August 31, 2016. On August 25, 2016, Enhanced agreed to extend the August 31, 2016 pay off date for the Enhanced Notes to on or prior to September 16, 2016. On September 7, 2016, the Company repaid the Enhanced Notes in full and the chairman of the board's Commitment was terminated. See also (h) below for more information.

(h)    On December 21, 2015, the Company, with the consent of the Bank and Enhanced, repaid an aggregate of $500,000 in principal to the chairman for the Notes Payable - Related Party. Refer to Note 11 - Long-Term Debt, Item (c)(i) and (ii) for more information. As a result of the $500,000 principal payment to the chairman by the Company, the chairman was required by Enhanced to pay down the Enhanced Note by $150,000. The Company initially offset the $150,000 that the chairman paid on its behalf direct to Enhanced against certain arms length sales transactions made to entities controlled by him for the Company's products; subsequently those amounts were paid by those entities and as a result, the Company repaid Mr. Kurtz the $150,000 paid to Enhanced on December 21, 2016.

(i)On December 31, 2015, the Company vested 25,000 shares of common stock, par value $.01, pursuant to an agreement with the chief operating officer, Harvey L. Schnitzer, for a stock bonus, which transaction was valued and recorded at $16,000. Under the stock bonus agreement, the Company granted Mr. Schnitzer 100,000 shares of the Company’s common stock, par value $.01, which vests in four equal 25,000 share increments, on February 7, 2014, December 31, 2014, December 31, 2015, and February 6, 2016, respectively, subject to continued employment with the Company.

(j)    During the year ended December 31, 2015, the Company issued an aggregate of 1,035,743 shares of restricted common stock pursuant to the anti-dilution provisions in an agreement with the Vice Chairman, Jay C. Nadel, for advisory and consulting services, which transactions were valued and recorded in the aggregate at $418,000.

(k)    During the year ended December 31, 2015, the Company vested an aggregate of 1,224,763 shares of restricted common stock issued as Guaranty Shares, to the chairman of the board and majority stockholder in connection with his personal guaranty required with the Enhanced Note, which transactions were valued and recorded in the aggregate at $735,000, and classified as interest expense – related party.

(l)On February 7, 2016, the Company vested the last tranche of 25,000 shares of common stock, par value $.01, pursuant to an agreement with the chief operating officer, Harvey L. Schnitzer, for a stock bonus, which transaction was valued and recorded at $16,000. Under the stock bonus agreement, the Company granted Mr. Schnitzer 100,000 shares of the Company’s common stock, par value $.01, which vest in four equal 25,000 share increments, on February 7, 2014, December 31, 2014, December 31, 2015, and February 6, 2016, respectively, subject to continued employment with the Company.

(m)On March 14, 2016, the Company granted an eight-year option to Richard J. Kurtz, chairman of the board and principal stockholder, for the right to acquire 800,000 shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.40 per share, which options vest monthly on a pro rata basis over 3 years, subject to continued satisfactory board services. The transaction was valued at $306,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(n)On March 14, 2016, the Company granted an eight-year option to Douglas J. Kramer, chief executive officer and president, for the right to acquire 2 million shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.40 per share, which options vest monthly on a pro rata basis over 3 years, subject to continued satisfactory employment. The transaction was valued at $766,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(o)On December 31, 2016, the Company granted and vested 100,000 shares of common stock, par value $.01, pursuant to an agreement with Richard J. Kurtz, for a stock bonus, for serving as chairman of the board, which transaction was valued and recorded at $53,000.

The 100,000 shares of common stock were valued at $0.53 per share, the closing price of the Company’s common stock as quoted on OTC Markets on the date of grant.

F-17

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 12 - Related Party Transactions - continued

(p)    On December 30, 2016, the Company entered into a second amendment to that certain Executive Employment Agreement, effective January 1, 2014, as amended, with Douglas J. Kramer, CEO and President, which extends his Employment Term for an additional one (1) year from December 31, 2016 to December 31, 2017.

(q)    On December 30, 2016, the Company entered into a first amendment to that certain Executive Employment Agreement, effective January 1, 2015, with Jomarc C. Marukot, CFO and Treasurer, which: (a) extends his Employment Term for an additional one (1) year from December 31, 2016 to December 31, 2017; and (b) provides for an annual base salary increase, effective January 1, 2017, from $190,000 to $210,000. See also Item (a) above.

(r)    During the year ended December 31, 2016, the Company issued an aggregate of 1,035,743 shares of restricted common stock pursuant to the anti-dilution provisions in an agreement with the Vice Chairman, Jay C. Nadel, for advisory and consulting services, which transactions were valued and recorded in the aggregate at $418,000.

(s)    During the year ended December 31, 2016, the Company vested the remaining an aggregate of 1,157,653 shares of restricted common stock issued as Guaranty Shares, to the chairman of the board and majority stockholder in connection with his personal guaranty required with the Enhanced Note, which transactions were valued and recorded in the aggregate at $696,000, and classified as interest expense – related party. See also Note 11 (c) below for more information.

See also Note 19 - Subsequent Events for more information.

Note 13 - Income Taxes

The components of income tax expense are as follows (in thousands):

	Years Ended December 31,
	2016		2015
Current:
Federal	$	162	$	—
State	100		27
Total Current	262		27
Deferred:
Federal	49		365
State	—		—
Total Deferred	49		365
Total Tax Provision	$	311	$	392

The following is a reconciliation of expected tax expense to actual expense (in thousands):

	Years Ended December 31,
	2016			2015
Federal Income Tax Expense/(Benefit)	$	2,274		$	(62	)
State Income Tax	198			494
Nondeductible Expenses	168			40
Provision to Return Reconciling Items	3,112			(3,211		)
Change in Valuation Allowance	(5,442		)	3,229
Other	1			(98		)
Total Tax Provision	$	311		$	392

F-18

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 13 - Income Taxes - continued

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities, for financial reporting purposes, and amounts used for Federal income tax purposes. The components of deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2016			2015
Deferred Tax Assets:
Federal and State Net Operating Loss Carry-Forward	$	20,361		$	25,986
Share-Based Compensation	1,084			1,151
Other Temporary Differences	1,167			1,051
Total	$	22,612		$	28,188
Deferred Tax Liabilities
Tax Goodwill	$	(414	)	$	(365	)
Depreciation	(276		)	(280		)
Other Temporary Differences	—			(130		)
Total	$	(690	)	$	(775	)
Net Deferred Tax Asset	$	21,922		$	27,413
Valuation Allowance	(22,336		)	(27,778		)
Deferred Tax Liability	$	(414	)	$	(365	)

At December 31, 2016, the Company had available, net operating loss carry-forwards of approximately $59.5 million for Federal income tax purposes and net operating loss carry-forwards of approximately $2.7 million for State income tax purposes, which will begin to expire in 2019. Utilization by the Company is subject to limitations based on the Company's future income, and pursuant to Section 382 of the Internal Revenue Code. The usage of some of these net operating loss carry-forwards may be limited due to changes in ownership that have occurred or may occur in the future.

Note 14 - Commitments and Contingencies

Leases

The Company conducts operations in leased facilities located in Texas and New Jersey. The Texas lease includes lease concessions which amounts are included as part of the aggregate minimum lease payments and recognized on a straight-line basis over the minimum lease terms.

Future minimum lease payments required under the non-cancelable operating lease as and for the years ending December 31 are as follows (in thousands):

2017		2018		2019
$	483	$	487	$	490

Rent expense for the years ended December 31, 2016 and 2015 was $328,000 and $343,000, respectively.

Legal Proceedings

(a)    Neil and Kristine Markey, et al., Plaintiffs v. Lapolla Industries, Inc., Delfino Insulation, et al, Defendants.

A complaint initially entitled Neil and Kristine Markey, individually, and on behalf of all others similarly situated, Plaintiffs, vs. Lapolla industries, Inc., a Delaware corporation; Lapolla International, Inc., a Delaware corporation; and Delfino Insulation Company, Inc., a New York Corporation, Defendants, was filed in the United States District Court for the Eastern District of New York and served on or about October 10, 2012 and amended last on November 11, 2013. Plaintiffs brought this lawsuit only individually, having amended out any request for a class action. The complaint alleged, among other things, that Lapolla designed, labeled, distributed, and manufactured spray polyurethane foam insulation, which created a highly toxic compound when applied as insulation resulting in exposure to harmful gases. Plaintiffs sought: actual, compensatory, and punitive damages; injunctive relief; and attorney fees. Lapolla considered the allegations to be without merit and vigorously defended the allegations. On February 4, 2015, the Court dismissed the litigation with prejudice, per the voluntary request of Plaintiffs upon the advice of their new counsel and after their original litigation counsel withdrew citing irreconcilable differences with the Plaintiffs.  The Court retained jurisdiction to address a pending motion for sanctions filed by Lapolla.  The primary basis for Lapolla’s motion for sanctions is the Plaintiffs’ and their original attorney’s filing of the lawsuit without sufficient factual basis for the claims of personal injury and for failing to comply with discovery obligations to produce numerous potentially dispositive documents that Plaintiffs knew existed and their original counsel either knew or should have known existed.  Lapolla seeks to recover over $800,000 in legal fees for the defense of the lawsuit. All motions have been filed with the Court and Lapolla is awaiting a final ruling. The final outcome of this litigation cannot be determined at this time.

F-19

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 14 - Commitments and Contingencies - continued

(b)    Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel, Plaintiffs v. Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements, Perfect Wall, LLC, and Jozsef Finta, Defendants.

Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements filed a third-party complaint against Lapolla Industries, Inc. in the Superior Court, Judicial District of Stamford/Norwalk, in Connecticut on January 3, 2013.  Guzzo is alleging Lapolla’s spray polyurethane foam product is a defective product under Connecticut law and seeking indemnification and attorney’s fees.  On August 28, 2013, Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel filed an amended complaint against Lapolla also asserting the spray polyurethane foam is a defective product.  Plaintiffs seek monetary damages, punitive damages, and attorney’s fees, among other relief. Lapolla considers the allegations to be without merit and is vigorously defending the allegations. The outcome of this litigation cannot be determined at this time.

(c)    Various Lawsuits and Claims Arising in the Ordinary Course of Business

We are involved in various lawsuits and claims arising in the ordinary course of business, which are, in our opinion, immaterial both individually and in the aggregate with respect to our consolidated financial position, liquidity or results of operations.

Note 15 - Earnings (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding during the period.  Common stock equivalents were not considered in calculating diluted net loss per common share for the years ended December 31, 2015 as their effect would be anti-dilutive. The computation of the Company’s basic and diluted earnings per share is as follows (in thousands, except per share data):

	Year Ended December 31,
	2016		2015
Net income or (loss) available to common shareholders (A)	$	6,378	$	(577	)
Weighted average common shares outstanding (B)	122,813		121,283
Dilutive effect of employee equity incentive plans	484		—
Weighted average common shares outstanding, assuming dilution (C)	123,297		121,283
Basic earnings per common share (A)/(B)	$	0.05	$	(0.00	)
Diluted earnings per common share (A)/(C)	$	0.05	$	(0.00	)

For 2016, a total of 400,000 shares of common stock were excluded from the calculation of diluted earnings per common share, all of which shares were for outstanding, vested and exercisable stock options that had an exercise price greater than the market value of the common share as of the period then ended (out-of-the-money"). For 2015, a total of 2,667,500 shares of common stock were excluded from the calculation of diluted earnings per common share due to the net loss incurred by the company and all of which shares were for outstanding, vested and exercisable stock options that had an exercise price equal to or lesser than the market value of the common share as of the period then ended (“in-the-money”). Outstanding, vested and exercisable out-of-the money stock options could be included in the calculation in the future if the market value of the Company’s common shares increases and is greater than the exercise price, and outstanding, vested and exercisable in-the-money stock options could be included in the calculation in the future for periods then ended when the Company reports a profit.

Note 16 - Securities Transactions

(a) During 2016, the Company issued an aggregate of 86,404 shares of restricted common stock, par value $.01, valued and recorded in the aggregate at $38,000 for advisory and consulting services.

(b) During 2016, the Company issued an aggregate of 1,157,653 shares of restricted common stock, par value $.01, valued and recorded in the aggregate at $696,000 and classified as interest expense – related party pursuant to a guaranty made in connection with a financing. See also Note 11 (c) below for more information.

(c) During 2016, the Company issued 25,000 shares of common stock, par value $.01 per share, for a stock bonus to an executive officer, employee, which transaction was valued and recorded at $16,000.

F-20

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 17 -    Share–Based Payment Arrangements

The Company reports share-based compensation arrangements using a straight-line fair valuation model for stock awards and Black-Scholes fair valuation model for option awards to calculate compensation expense over the requisite service period of grants. At December 31, 2016, the Company had three share based compensation plans, including the Equity Incentive Plan (“Equity Plan”), Advisory and Consulting Agreement Plan (“Advisor Plan”), and Guaranty Agreement Plan (“Guaranty Plan”) in effect. Compensation cost charged against income for all compensation and incentive plans for 2016 and 2015 was $1.7 million and $2.0 million, respectively.

Equity Incentive Plan

The Company’s Equity Plan, which is shareholder-approved, permits the grant of stock awards to eligible participants for up to 10,000,000 shares of common stock. The purpose of the Equity Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward employees, directors and consultants performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Equity Plan provides financial performance measures upon which specific performance goals would be based and limits on the numbers of shares or compensation that could be made. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock awards may provide for accelerated vesting if there is a change in control. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model and spread over the requisite service period. For 2016, there was an aggregate of 2,925,000 awards granted and/or vested to directors, officers, and key employees, of which 2,800,000 were for options granted and 125,000 were for stock awards vested. For 2015, there was an aggregate of 5,417,500 awards granted to directors, officers, and key employees, of which 5,317,500 were for options and 100,000 were for stock awards. As of December 31, 2016, total compensation cost related to non-vested stock options was $896,000, which is expected to be recognized over 2.12 years after December 31, 2016 (25.5 months on a weighted-average basis). As of December 31, 2015, total compensation cost related to non-vested stock options was $1.4 million. There were 1,982,500 shares issuable and available for grant at December 31, 2016. Stock option and bonus activity under the Company’s Equity Plan as of the years ended December 31, is summarized below:

Option Awards 

	2016			2015
	Number	Weighted-Average		Number		Weighted-Average
Options	of Options	Exercise Price		of Options		Exercise Price
Outstanding-Beginning of Year	5,017,500	$	0.48	7,277,500		$	0.47
Granted	2,800,000	0.40		2,100,000		0.33
Exercised	—	—		—		—
Canceled, Expired or Forfeited	—	—		(4,360,000	)	0.46
Outstanding - End of Year	7,817,500	0.42		5,017,500		0.48
Exercisable - End of Year	5,032,420	$	0.41	2,667,500		$	0.73

The weighted-average grant-date fair value of option awards granted during 2016 and 2015 was $634,866 and $79,387, respectively.

The following table summarizes options outstanding at: 

	Outstanding				Exercisable			Outstanding				Exercisable
		Weighted Average	Weighted			Weighted			Weighted Average	Weighted			Weighted
Range of	Number	Remaining	Average		Number	Average		Number	Remaining	Average		Number	Average
Exercise	Outstanding	Contractual	Exercise		Exercisable	Exercise		Outstanding	Contractual	Exercise		Exercisable	Exercise
Prices	at 12/31/16	Life (Years)	Price		at 12/31/16	Price		at 12/31/15	Life (Years)	Price		at 12/31/15	Price
$.20 - $.39	2,380,000	5.5	$	0.33	2,205,000	$	0.33	3,230,000	6.5	$	0.29	1,580,000	$	0.24
$.40 - $.59	4,837,500	3.9	0.42		2,427,420	0.43		3,587,500	4.2	$	0.44	887,500	$	0.45
$.60 - $.80	600,000	2.1	$	0.71	400,000	0.71		600,000	3.1	$	0.71	200,000	$	0.71

F-21

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 17 -    Share–Based Payment Arrangements, continued

Stock Awards 

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	25,000		$	16,250		50,000		$	32,500
Granted	100,000		53,000			—		—
Vested	(125,000	)	(69,250		)	(25,000	)	(16,250		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		25,000		$	16,250

Advisor Plan

The Company entered into an advisory and consultant agreement on February 22, 2011 with a non-employee director, Jay C. Nadel, wherein the Company granted 5,000,000 shares of restricted common stock, par value $.01, which vested monthly over 3 years, and includes certain anti-dilution provisions (the "Nadel Agreement"). The grant-date fair value for the 5,000,000 shares was calculated by taking the closing price of the Company's common stock of $.57 per share on the date of grant and multiplying it by the number of shares granted, equaling $2,850,000, all of which has been recorded. The anti-dilution aspects continue so long as the Nadel Agreement is in force. For 2016, anti-dilution transactions occurred, which required the Company to grant and vest an additional 86,404 shares of restricted common stock. The grant-date fair value for the anti-dilution shares was calculated by taking the closing price of the Company’s common stock on the anti-dilution dates for a weighted-average of approximately $0.44 per share and multiplying it by the number of shares granted, equaling $38,000. For 2015, anti-dilution transactions occurred, which required the Company to grant and vest an additional 1,035,743 shares of restricted common stock. The grant-date fair value for the anti-dilution shares was calculated by taking the closing price of the Company’s common stock on the anti-dilution dates for a weighted-average of approximately $0.40 per share and multiplying it by the number of shares granted, equaling $418,000. A summary of awards activity under the Advisor Plan at December 31, 2016 and 2015, and changes during the years then ended, are as follows:

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	—		$	—		—		$	—
Granted	86,404		38,063			1,035,743		417,662
Vested	(86,404	)	(38,063		)	(1,035,743	)	(417,662		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		—		$	—

Guaranty Plan

The Company made a grant of restricted common stock in connection with a personal guarantee provided by the chairman of the board and majority stockholder to secure working capital on favorable terms and the Company’s performance under a financing instrument. Refer to Note 12 – Financing Instruments, Items (b)(i) – Enhanced Note for more information on the financial instrument.

The Company granted 3,681,000 shares of restricted common stock, par value $0.01, which shares vest monthly on a pro rata basis over the life of the Enhanced Note (“Guaranty Shares”). The Guaranty Shares were valued at $.60 per share, the closing price of the Company’s common stock as quoted on the OTC Markets on the day preceding the closing date of December 10, 2013, for an aggregate amount of $2.2 million. The Guaranty Shares are being recorded as interest expense – related party, thereby increasing the effective interest rate on the Enhanced Note.

The following table summarizes grant activity under the Guaranty Plan at December 31, 2016 and 2015, and changes during the years then ended: 

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	1,157,653		$	694,591		2,382,416		$	1,429,449
Granted	—		—			—		—
Vested	(1,157,653	)	(694,591		)	(1,224,763	)	(734,858		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		1,157,653		$	694,591

F-22

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 18 - Business Segments and Geographic Area Information

Business Segments

The Company is a leading United States based manufacturer and global supplier operating two segments: Foam and Coatings. The Company’s segments are organized based on manufacturing competencies.

Foam. The Foam segment primarily supplies both roofing and building envelope insulation applications. Roofing applications consist of foam and coatings systems in new and retrofit commercial and industrial applications. Insulation is used in commercial and industrial, as well as residential, applications. We manufacture our own roofing and wall insulation foams. Additionally, this segment also supplies polyurethane as an adhesive for board stock insulation to roofing substrates for commercial and industrial applications, sundry items, and application equipment. Spray Rigs are an integral part of our business insofar that they are required for the application of our foam and used for large scale coating jobs. We began making and selling our own spray rigs during 2008. This is a basic assembly operation and we undertake this task to provide turnkey service to our customers. We allocate sales amounts for Spray Rigs to either our foam or coatings segments, as applicable. The AirTight Division involves application of interior insulation foams that we produce and installation of other energy reducing products in multi-family properties by subcontractors hired by the Company on a limited basis. We allocate sales amounts for The AirTight Division to our foam segment.

Coatings. The Coatings segment primarily supplies a variety of protective coatings for roofing systems for new and retrofit commercial and industrial applications, as well as residential, applications. Additionally, this segment also supplies caulking for general application in the construction industry, and sundry items. We manufacture our own roof coatings.

The Company maintains centralized manufacturing and spray rig building operations in Houston, Texas. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1. The Company allocates resources to segments and evaluates the performance of segments based upon reported segment income before income taxes. A substantial amount of administrative expenses are allocated to the segments. The portion not allocated to the segments represents the unallocated cost of certain corporate expenses and are included in Unallocated Amounts. There are no intersegment sales or transfers.

The following are selected results of reportable segments (in thousands):

Segments
2016	Foam		Coatings		Totals
Sales	$	73,919	$	12,467	$	86,386
Depreciation	75		13		88
Amortization of Other Intangible Assets	213		36		249
Interest Expense	640		108		748
Segment Profit	10,213		1,984		12,197
Segment Assets (1)	22,538		4,566		27,104
Expenditures for Segment Assets	$	123	$	21	$	144
2015	Foam		Coatings		Totals
Sales	$	66,030	$	12,619	$	78,649
Depreciation	110		21		131
Amortization of Other Intangible Assets	215		41		256
Interest Expense	955		183		1,138
Segment Profit	4,514		1,815		6,329
Segment Assets (1)	19,341		4,372		23,713
Expenditures for Segment Assets	$	48	$	9	$	57

F-23

LAPOLLA INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

(Continued)

Note 18 - Business Segments and Geographic Area Information - continued

The following are reconciliations of reportable segment profit or loss, and assets, to the Company’s totals for the years indicated: 

Segments Profit
	2016			2015
Total Profit for Reportable Segments	$	12,197		$	6,329
Unallocated Amounts:
Corporate Expenses	(5,508		)	(6,514		)
Income (Loss) Before Income Taxes	$	6,689		$	(185	)

Assets	2016		2015
Total Assets for Reportable Segments (1)	$	27,104	$	23,713
Other Unallocated Amounts (2)	2,291		2,296
Total	$	29,395	$	26,009

⁽¹⁾Segment assets are the total assets used in the operation of each segment.

⁽²⁾Includes corporate assets which are principally cash and prepaid expenses.

Geographic Area Information

The Company does not operate any manufacturing sites nor maintain a permanent establishment in any particular country outside of the United States at this time. The Company’s products are sold to independent distributors globally for select target markets. Sales are attributed to geographic areas based on customer location. Long-lived assets are attributable to geographic areas based on asset location.

Geographic Area (in thousands):
	United						Rest of
2016	States		Europe		Middle East		World		Total
Sales	$	81,393	$	2,567	$	3	$	2,423	$	86,386
Long-Lived Assets	$	6,431	$	—	$	—	$	—	$	6,431
	United						Rest of
2015	States		Europe		Middle East		World		Total
Sales	$	76,589	$	687	$	—	$	1,373	$	78,649
Long-Lived Assets	$	6,838	$	—	$	—	$	—	$	6,838

Note 19 -   Subsequent Events

(a)    On January 1, 2017, the Company granted 100,000 shares of common stock, par value $.01, pursuant to an agreement with Richard J. Kurtz, for a stock bonus. Under the stock bonus agreement, the Company granted Mr. Kurtz 100,000 shares of the Company’s common stock, par value $.01, which vests in four equal 25,000 share increments, on March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, subject to continued service as chairman of the board of the Company. The 100,000 shares of common stock were valued in the aggregate at $0.53 per share, the closing price of the Company’s common stock as quoted on OTC Markets on the date of grant.

(b)    On January 5, 2017, the Company granted an aggregate of 400,000eight-year options to non-employee directors, including Messrs Kurtz, Nadel, Gregg, and Larson, for the right to each acquire 100,000 shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price of the Company's common stock as quoted on the OTC Markets on such date, or $0.50 per share, which options vest over a 3 year period in the amount of 33,333; 33,333; and 33,334 on December 31, 2017, December 31, 2018, and December 31, 2019, subject to continued satisfactory board of director services. The transactions were valued in the aggregate at $191,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting periods.

(c)    On February 15, 2017, the Company announced a cash dividend of one cent per share, payable to shareholders of record as of March 30, 2017.

(d)    The Company has evaluated subsequent events through the date of this report.

F-24

EX-10.90

Exhibit 10.90

STOCK BONUS AGREEMENT

THE BOARD OF DIRECTORS of Lapolla Industries, Inc. (the “Company”) authorized and approved the Equity Incentive Plan, as amended (the "Plan"). The Plan provides for the grant of a Stock Bonus to directors of the Company. Unless otherwise provided herein all defined terms shall have the respective meanings ascribed to them under the Plan.

1.    Grant of Stock Bonus. Pursuant to authority granted to it under the Plan, the Committee responsible for administering the Plan hereby grants to Richard J. Kurtz, a director of the Company (“Participant”) and as of December 31, 2016 (the "Grant Date"), a Stock Bonus award of one hundred thousand (100,000) shares of the Company’s Common Stock, par value $.01 per share (the “Shares”), subject to the terms and conditions in this Agreement and the Plan.

2.    Purchase Price. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving the Shares, as the consideration for which shall be Participant serving as the chairman of the board of the Company at time of vesting as hereinafter defined.

3.    Vesting and Restrictions on Transfer. The Shares issued under this Agreement shall immediately vest and may be sold, exchanged, transferred, pledged, assigned or otherwise disposed only as defined or provided in the Plan.

4.    Determination of Final Value. The final value for the Shares when vested shall be computed by multiplying the closing market price of the Company’s Common Stock (currently quoted on the OTC Market) on the vesting date thereof by the number of Shares vesting (i.e. 100,000 Shares multiplied by the $0.53 closing price equals $53,000). Once any Shares vest, such vested Shares are freely transferable, subject to satisfaction of tax withholding obligations by Participant as provided for in the Plan.

5.    Voting Rights; Dividends and Distributions. During the Vesting Period applicable to the Shares, Participant shall have all of the rights of a stockholder of the Company holding shares of Common Stock, including the right to vote such Shares and to receive all dividends and other distributions paid with respect to such Shares. However, in the event of a dividend or distribution paid in shares of Common Stock or any other adjustment made upon a change in the capital structure of the Company (as described in Section 4.2 of the Plan), then any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant's Stock Bonus shall be immediately subject to the same Vesting Conditions as the Shares subject to the Stock Bonus with respect to which such dividends or distributions were paid or adjustments were made.

6.    Termination of Service. If Participant's Service is terminated for any reason, whether voluntarily or involuntarily (including the Participant's death or disability), then the Participant shall forfeit to the Company any Shares acquired by the Participant pursuant to this Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant's termination of Service.

7.    Nontransferability of Stock Bonus Rights. Rights to acquire the Shares are not subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant's beneficiary, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, only by the Participant or the Participant's guardian or legal representative.

8.    Dividend Equivalents. Participant shall not be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Shares having a record date prior to the date on which the Shares are settled or forfeited.

9.    Restriction; Securities Exchange Listing. All certificates for Shares delivered upon the vesting granted herein shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a national securities exchange, the Company shall not be required to deliver any Shares unless and until such Shares have been admitted for trading on such securities exchange.

10.    Adjustments for Changes in Capital Structure. If there is any change in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether by stock dividend, stock split, reclassification or recapitalization of such Stock, then the number and kind of shares then subject to the Stock Bonus shall be appropriately adjusted by the Committee in accordance with the Plan; provided, however, that in no event shall any such adjustment result in the Company's being required to sell or issue any fractional shares.

11.    Change in Control. In the event of a Change in Control (as defined in the Plan), the lapsing of the Vesting Period applicable to the Shares subject to the Stock Bonus held by a Participant whose Service is not terminated prior to such date shall be accelerated effective as of the date of the Change in Control. Any acceleration of the lapsing of the Vesting Period shall be conditioned upon the consummation of the Change in Control.

12.    Amendment to Stock Bonus Herein Granted. The Stock Bonus granted herein may not be amended without Participant’s consent.

13.    Withholding Taxes. The Company shall have the right to require the Participant to make adequate provision for, the federal, state, local and foreign taxes, if any, required by law to be withheld by the Company with respect to the Shares acquired pursuant to the Stock Bonus. The Company shall have no obligation to deliver or release the Shares until the tax withholding obligations have been satisfied by the Participant. The Company shall have the right, but not the obligation, to deduct from the Shares issuable to Participant upon settlement of the Stock Bonus, or any applicable vested portion thereof, or to accept from the Participant the tender of, a number of whole Shares having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of Company. The Fair Market Value of any Shares withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates.

14.    The Plan. A copy of the Plan has been provided to the Participant and the applicable terms and conditions of the Plan relating to Stock Bonuses are incorporated herein by this reference.

LAPOLLA INDUSTRIES, INC.

/s/ Michael T. Adams, Secretary

Corporate Secretary

OPTIONEE

/s/ Richard J. Kurtz

Richard J. Kurtz

EX-10.91

Exhibit 10.91

STOCK BONUS AGREEMENT

THE BOARD OF DIRECTORS of Lapolla Industries, Inc. (the “Company”) authorized and approved the Equity Incentive Plan, as amended (the "Plan"). The Plan provides for the grant of a Stock Bonus to directors of the Company. Unless otherwise provided herein all defined terms shall have the respective meanings ascribed to them under the Plan.

1.    Grant of Stock Bonus. Pursuant to authority granted to it under the Plan, the Committee responsible for administering the Plan hereby grants to Richard J. Kurtz, a director of the Company (“Participant”) and as of January 1, 2017 (the "Grant Date"), a Stock Bonus award of one hundred thousand (100,000) shares of the Company’s Common Stock, par value $.01 per share (the “Shares”), subject to the terms and conditions in this Agreement and the Plan.

2.    Purchase Price. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving the Shares, as the consideration for which shall be Participant serving as the chairman of the board of the Company during the applicable vesting period as hereinafter defined.

3.    Vesting and Restrictions on Transfer. The Shares issued under this Agreement shall vest in four equal 25,000 share increments on March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, respectively (the “Vesting Period”), subject to continued service as chairman of the board with the Company (the “Vesting Conditions”). During the Vesting Period, any unvested Shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event, or as otherwise defined or provided in the Plan.

4.    Determination of Final Value. The final value for the Shares when vested shall be computed by multiplying the closing market price of the Company’s Common Stock (currently quoted on the OTC Market) on the vesting date thereof by the number of Shares vesting (e.g. 25,000 Shares multiplied by a $0.53 closing price equals $13,250), subject to adjustment for any Leave of Absence (as provided for in the Plan). Once any Shares vest, such vested Shares are freely transferable, subject to satisfaction of tax withholding obligations by Participant as provided for in the Plan.

5.    Voting Rights; Dividends and Distributions. During the Vesting Period applicable to the Shares, the Participant shall have all of the rights of a stockholder of the Company holding shares of Common Stock, including the right to vote such Shares and to receive all dividends and other distributions paid with respect to such Shares. However, in the event of a dividend or distribution paid in shares of Common Stock or any other adjustment made upon a change in the capital structure of the Company (as described in Section 4.2 of the Plan), then any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant's Stock Bonus shall be immediately subject to the same Vesting Conditions as the Shares subject to the Stock Bonus with respect to which such dividends or distributions were paid or adjustments were made.

6.    Termination of Service. If Participant's Service is terminated for any reason, whether voluntarily or involuntarily (including the Participant's death or disability), then the Participant shall forfeit to the Company any Shares acquired by the Participant pursuant to this Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant's termination of Service.

7.    Nontransferability of Stock Bonus Rights. Rights to acquire the Shares are not subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant's beneficiary, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, only by the Participant or the Participant's guardian or legal representative.

8.    Dividend Equivalents. Participant shall not be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Shares having a record date prior to the date on which the Shares are settled or forfeited.

9.    Restriction; Securities Exchange Listing. All certificates for Shares delivered upon the vesting granted herein shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a national securities exchange, the Company shall not be required to deliver any Shares unless and until such Shares have been admitted for trading on such securities exchange.

10.    Adjustments for Changes in Capital Structure. If there is any change in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether by stock dividend, stock split, reclassification or recapitalization of such Stock, then the number and kind of shares then subject to the Stock Bonus shall be appropriately adjusted by the Committee in accordance with the Plan; provided, however, that in no event shall any such adjustment result in the Company's being required to sell or issue any fractional shares.

11.    Change in Control. In the event of a Change in Control (as defined in the Plan), the lapsing of the Vesting Period applicable to the Shares subject to the Stock Bonus held by a Participant whose Service is not terminated prior to such date shall be accelerated effective as of the date of the Change in Control. Any acceleration of the lapsing of the Vesting Period shall be conditioned upon the consummation of the Change in Control.

12.    Amendment to Stock Bonus Herein Granted. The Stock Bonus granted herein may not be amended without Participant’s consent.

13.    Withholding Taxes. The Company shall have the right to require the Participant to make adequate provision for, the federal, state, local and foreign taxes, if any, required by law to be withheld by the Company with respect to the Shares acquired pursuant to the Stock Bonus. The Company shall have no obligation to deliver or release the Shares until the tax withholding obligations have been satisfied by the Participant. The Company shall have the right, but not the obligation, to deduct from the Shares issuable to Participant upon settlement of the Stock Bonus, or any applicable vested portion thereof, or to accept from the Participant the tender of, a number of whole Shares having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of Company. The Fair Market Value of any Shares withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates.

14.    The Plan. A copy of the Plan has been provided to the Participant and the applicable terms and conditions of the Plan relating to Stock Bonuses are incorporated herein by this reference.

LAPOLLA INDUSTRIES, INC.

/s/ Michael T. Adams, Secretary

Corporate Secretary

OPTIONEE

/s/ Richard J. Kurtz

Richard J. Kurtz

EX-10.92

Exhibit 10.92

OPTION AGREEMENT

THE BOARD OF DIRECTORS of Lapolla Industries, Inc. (the “Company”) authorized and approved the Equity Incentive Plan, as amended (the "Plan"). The Plan provides for the grant of an Option to directors of the Company. Unless otherwise provided herein all defined terms shall have the respective meanings ascribed to them under the Plan.

1.Grant of Option. Pursuant to authority granted to it under the Plan, the Committee responsible for administering the Plan hereby grants to RICHARD J. KURTZ, a director of the Company (the “Optionee”) and as of January 5, 2017 (the "Grant Date"), the following stock options: 100,000 stock options (the “Option”). Each Option permits the Participant to purchase one share of the Company’s common stock, $.01 par value, at the Exercise Price (the "Shares").

2.Character of Options. The Option granted herein is a Nonstatutory Stock Option.

3.Exercise Price. The exercise price for each Option granted herein is 50¢ ($ 0.50) per Share (the “Exercise Price”).

4.Vesting and Exercisability. The Option shall vest in three increments of 33,333, 33,333, and 33,334 on December 21, 2017, December 31, 2018, and December 31, 2019, respectively (the “Vesting Period”), subject to continued service as a director with the Company (the “Vesting Conditions”), and once vested, are immediately exercisable in accordance with the terms and conditions of this Agreement and the Plan.

5.Term of Option. The term of each Option granted herein shall be for a term of eight (8) years from the Grant Date.

6.Payment of Exercise Price. The Option represented hereby may be exercised in whole or in part by Participant delivering to the Company payment of the Exercise Price for the number of the Option so exercised: (i) in cash, by check or cash equivalent; (ii) by tender to the Company of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price for the number of the Option exercised; (iii) by tender to the Company of a written consent to accept a reduction in the number of Shares of Stock issuable upon exercise (“Reduced Number of Shares”), which Reduced Number of Shares, when ascribed a value, shall have a value equal to the Exercise Price for the number of the Option exercised; (iv) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the Shares being acquired upon the exercise of the Option or portion thereof exercised (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"); (v) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law; or (vi) by any combination thereof. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of the Option by means of a Cashless Exercise.

7.Limits on Transfer of Options. The Option granted herein shall not be transferable by Participant otherwise than by will or by the laws of descent and distribution, except for gifts to family members subject to any specific limitation concerning such gift by the Committee in its discretion; provided, however, that Participant may designate a beneficiary or beneficiaries to exercise Participant’s rights and receive any Shares purchased with respect to any Option upon Participant’s death. Each Option shall be exercisable during Participant’s lifetime only by Participant or, if permissible under applicable law, by Participant’s legal representative. No Option herein granted or Shares underlying any Option shall be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 Registration Statement under the Securities Act of 1933, as amended.

8.Termination of Service. If Participant’s Service is terminated with the Company, the Option and any unexercised portion shall be subject to the provisions below:

(a)Upon the termination of Participant’s Service with the Company, to the extent not theretofore exercised, the Option shall continue to be valid; provided, however, that: (i) If the Participant’s Service is terminated by dismissal by the Company other than for cause (as defined below), disability (as described in Section 22(e) of the Code) or death while providing Service to the Company and at a time when such Participant was entitled to exercise an Option as herein provided, any unvested Options shall automatically vest and become exercisable as of the date of termination, and the Participant or their legal representative of such Participant, as the case may be, or such Person who acquired such Option by bequest or inheritance or by reason of the death of the Participant, may, not later than fifteen (15) months from the date of death, exercise such Option, to the extent not theretofore exercised, in respect of any or all of such number of Shares specified by the Committee in such Option; and (ii) If the Service of any Participant to whom such Option shall have been granted shall terminate by reason of the Participant's retirement (at such age upon such conditions as shall be specified by the Board of Directors), and while such Participant is entitled to exercise such Option as herein provided, any unvested Option shall automatically vest and become exercisable as of the date of retirement, such Participant shall have the right to exercise such Option so granted, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option, at any time up to one (1) year from the date of termination of the Optionee's Service by reason of retirement.

(b)If Participant voluntarily terminates Service, Participant shall have the right to exercise such Option that has vested, to the extent not theretofore exercised, at any time up to ninety (90) days from the date of termination of the Optionee's Service, or if Participant is discharged for cause, any Option granted hereunder shall forthwith terminate with respect to any unexercised portion thereof.

(c)If any Option granted hereunder shall be exercised by Participant’s legal representative if Participant should die or become disabled, or by any person who acquired any Option granted hereunder by bequest or inheritance or by reason of death of any such person, written notice of such exercise shall be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative or other person to exercise such Option.

(d)For all purposes of the Plan, the term "for cause" shall mean "cause" as defined in the Plan.

9.Restriction; Securities Exchange Listing. All certificates for Shares delivered upon the exercise of the Option granted herein shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a national securities exchange, the Company shall not be required to deliver any Shares covered by an Option unless and until such Shares have been admitted for trading on such securities exchange.

10.Adjustments for Changes in Capital Structure. If there is any change in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether by stock dividend, stock split, reclassification or recapitalization of such stock, or because the Company has merged or consolidated with one or more other corporations (and provided the Option does not thereby terminate pursuant to this Agreement or the Plan), then the number and kind of shares then subject to the Option and the price to be paid therefor shall be appropriately adjusted by the Committee; provided, however, that in no event shall any such adjustment result in the Company's being required to sell or issue any fractional shares. Any such adjustment shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option, but with an appropriate adjustment to the price of each Share or other unit of security covered by this Option.

11.Change in Control. In the event of a Change in Control (as defined in the Plan), the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the "Acquiror"), may, without the consent of any Participant, either assume the Company's rights and obligations under the outstanding Option or substitute for the outstanding Option substantially equivalent options for the Acquiror's stock. In the event the Acquiror elects not to assume or substitute for the outstanding Option in connection with a Change in Control, the Committee shall provide that any unexercised and/or unvested portions of outstanding Options shall be immediately exercisable and vested in full as of the date thirty (30) days prior to the date of the Change in Control. The exercise and/or vesting of any Option that was permissible solely by reason of this Section 11 shall be conditioned upon the consummation of the Change in Control. Any Options which are not assumed by the Acquiror in connection with the Change in Control nor exercised as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

12.Amendment to Options Herein Granted. The Option granted herein may not be amended without Participant’s consent.

13.Withholding Taxes. As provided in the Plan, the Company may withhold from sums due or to become due to Optionee from the Company an amount necessary to satisfy its obligation to withhold taxes incurred by reason of the disposition of the Shares acquired by exercise of the Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code), or may require you to reimburse the Company in such amount.

LAPOLLA INDUSTRIES, INC.

/s/ Michael T. Adams, Secretary

Corporate Secretary

OPTIONEE

/s/ Richard J. Kurtz

Richard J. Kurtz

EX-10.93

Exhibit 10.93

OPTION AGREEMENT

THE BOARD OF DIRECTORS of Lapolla Industries, Inc. (the “Company”) authorized and approved the Equity Incentive Plan, as amended (the "Plan"). The Plan provides for the grant of an Option to directors of the Company. Unless otherwise provided herein all defined terms shall have the respective meanings ascribed to them under the Plan.

1.    Grant of Option. Pursuant to authority granted to it under the Plan, the Committee responsible for administering the Plan hereby grants to JAY C. NADEL, a director of the Company (the “Optionee”) and as of January 5, 2017 (the "Grant Date"), the following stock options: 100,000 stock options (the “Option”). Each Option permits the Participant to purchase one share of the Company’s common stock, $.01 par value, at the Exercise Price (the "Shares").

2.    Character of Options. The Option granted herein is a Nonstatutory Stock Option.

3.    Exercise Price. The exercise price for each Option granted herein is 50¢ ($ 0.50) per Share (the “Exercise Price”).

4.    Vesting and Exercisability. The Option shall vest in three increments of 33,333, 33,333, and 33,334 on December 21, 2017, December 31, 2018, and December 31, 2019, respectively (the “Vesting Period”), subject to continued service as a director with the Company (the “Vesting Conditions”), and once vested, are immediately exercisable in accordance with the terms and conditions of this Agreement and the Plan.

5.    Term of Option. The term of each Option granted herein shall be for a term of eight (8) years from the Grant Date.

6.    Payment of Exercise Price. The Option represented hereby may be exercised in whole or in part by Participant delivering to the Company payment of the Exercise Price for the number of the Option so exercised: (i) in cash, by check or cash equivalent; (ii) by tender to the Company of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price for the number of the Option exercised; (iii) by tender to the Company of a written consent to accept a reduction in the number of Shares of Stock issuable upon exercise (“Reduced Number of Shares”), which Reduced Number of Shares, when ascribed a value, shall have a value equal to the Exercise Price for the number of the Option exercised; (iv) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the Shares being acquired upon the exercise of the Option or portion thereof exercised (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"); (v) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law; or (vi) by any combination thereof. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of the Option by means of a Cashless Exercise.

7.    Limits on Transfer of Options. The Option granted herein shall not be transferable by Participant otherwise than by will or by the laws of descent and distribution, except for gifts to family members subject to any specific limitation concerning such gift by the Committee in its discretion; provided, however, that Participant may designate a beneficiary or beneficiaries to exercise Participant’s rights and receive any Shares purchased with respect to any Option upon Participant’s death. Each Option shall be exercisable during Participant’s lifetime only by Participant or, if permissible under applicable law, by Participant’s legal representative. No Option herein granted or Shares underlying any Option shall be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 Registration Statement under the Securities Act of 1933, as amended.

8.    Termination of Service. If Participant’s Service is terminated with the Company, the Option and any unexercised portion shall be subject to the provisions below:

(a)    Upon the termination of Participant’s Service with the Company, to the extent not theretofore exercised, the Option shall continue to be valid; provided, however, that: (i) If the Participant’s Service is terminated by dismissal by the Company other than for cause (as defined below), disability (as described in Section 22(e) of the Code) or death while providing Service to the Company and at a time when such Participant was entitled to exercise an Option as herein provided, any unvested Options shall automatically vest and become exercisable as of the date of termination, and the Participant or their legal representative of such Participant, as the case may be, or such Person who acquired such Option by bequest or inheritance or by reason of the death of the Participant, may, not later than fifteen (15) months from the date of death, exercise such Option, to the extent not theretofore exercised, in respect of any or all of such number of Shares specified by the Committee in such Option; and (ii) If the Service of any Participant to whom such Option shall have been granted shall terminate by reason of the Participant's retirement (at such age upon such conditions as shall be specified by the Board of Directors), and while such Participant is entitled to exercise such Option as herein provided, any unvested Option shall automatically vest and become exercisable as of the date of retirement, such Participant shall have the right to exercise such Option so granted, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option, at any time up to one (1) year from the date of termination of the Optionee's Service by reason of retirement.

(b)    If Participant voluntarily terminates Service, Participant shall have the right to exercise such Option that has vested, to the extent not theretofore exercised, at any time up to ninety (90) days from the date of termination of the Optionee's Service, or if Participant is discharged for cause, any Option granted hereunder shall forthwith terminate with respect to any unexercised portion thereof.

(c)    If any Option granted hereunder shall be exercised by Participant’s legal representative if Participant should die or become disabled, or by any person who acquired any Option granted hereunder by bequest or inheritance or by reason of death of any such person, written notice of such exercise shall be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative or other person to exercise such Option.

(d)    For all purposes of the Plan, the term "for cause" shall mean "cause" as defined in the Plan.

9.    Restriction; Securities Exchange Listing. All certificates for Shares delivered upon the exercise of the Option granted herein shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a national securities exchange, the Company shall not be required to deliver any Shares covered by an Option unless and until such Shares have been admitted for trading on such securities exchange.

10.    Adjustments for Changes in Capital Structure. If there is any change in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether by stock dividend, stock split, reclassification or recapitalization of such stock, or because the Company has merged or consolidated with one or more other corporations (and provided the Option does not thereby terminate pursuant to this Agreement or the Plan), then the number and kind of shares then subject to the Option and the price to be paid therefor shall be appropriately adjusted by the Committee; provided, however, that in no event shall any such adjustment result in the Company's being required to sell or issue any fractional shares. Any such adjustment shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option, but with an appropriate adjustment to the price of each Share or other unit of security covered by this Option.

11.    Change in Control. In the event of a Change in Control (as defined in the Plan), the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the "Acquiror"), may, without the consent of any Participant, either assume the Company's rights and obligations under the outstanding Option or substitute for the outstanding Option substantially equivalent options for the Acquiror's stock. In the event the Acquiror elects not to assume or substitute for the outstanding Option in connection with a Change in Control, the Committee shall provide that any unexercised and/or unvested portions of outstanding Options shall be immediately exercisable and vested in full as of the date thirty (30) days prior to the date of the Change in Control. The exercise and/or vesting of any Option that was permissible solely by reason of this Section 11 shall be conditioned upon the consummation of the Change in Control. Any Options which are not assumed by the Acquiror in connection with the Change in Control nor exercised as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

12.    Amendment to Options Herein Granted. The Option granted herein may not be amended without Participant’s consent.

13.    Withholding Taxes. As provided in the Plan, the Company may withhold from sums due or to become due to Optionee from the Company an amount necessary to satisfy its obligation to withhold taxes incurred by reason of the disposition of the Shares acquired by exercise of the Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code), or may require you to reimburse the Company in such amount.

LAPOLLA INDUSTRIES, INC.

/s/ Michael T. Adams, Secretary

Corporate Secretary

OPTIONEE

/s/ Jay C. Nadel            

Jay C. Nadel

EX-10.94

Exhibit 10.94

OPTION AGREEMENT

THE BOARD OF DIRECTORS of Lapolla Industries, Inc. (the “Company”) authorized and approved the Equity Incentive Plan, as amended (the "Plan"). The Plan provides for the grant of an Option to directors of the Company. Unless otherwise provided herein all defined terms shall have the respective meanings ascribed to them under the Plan.

1.    Grant of Option. Pursuant to authority granted to it under the Plan, the Committee responsible for administering the Plan hereby grants to ARTHUR J. GREGG, a director of the Company (the “Optionee”) and as of January 5, 2017 (the "Grant Date"), the following stock options: 100,000 stock options (the “Option”). Each Option permits the Participant to purchase one share of the Company’s common stock, $.01 par value, at the Exercise Price (the "Shares").

2.    Character of Options. The Option granted herein is a Nonstatutory Stock Option.

3.    Exercise Price. The exercise price for each Option granted herein is 50¢ ($ 0.50) per Share (the “Exercise Price”).

4.    Vesting and Exercisability. The Option shall vest in three increments of 33,333, 33,333, and 33,334 on December 21, 2017, December 31, 2018, and December 31, 2019, respectively (the “Vesting Period”), subject to continued service as a director with the Company (the “Vesting Conditions”), and once vested, are immediately exercisable in accordance with the terms and conditions of this Agreement and the Plan.

5.    Term of Option. The term of each Option granted herein shall be for a term of eight (8) years from the Grant Date.

6.    Payment of Exercise Price. The Option represented hereby may be exercised in whole or in part by Participant delivering to the Company payment of the Exercise Price for the number of the Option so exercised: (i) in cash, by check or cash equivalent; (ii) by tender to the Company of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price for the number of the Option exercised; (iii) by tender to the Company of a written consent to accept a reduction in the number of Shares of Stock issuable upon exercise (“Reduced Number of Shares”), which Reduced Number of Shares, when ascribed a value, shall have a value equal to the Exercise Price for the number of the Option exercised; (iv) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the Shares being acquired upon the exercise of the Option or portion thereof exercised (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"); (v) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law; or (vi) by any combination thereof. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of the Option by means of a Cashless Exercise.

7.    Limits on Transfer of Options. The Option granted herein shall not be transferable by Participant otherwise than by will or by the laws of descent and distribution, except for gifts to family members subject to any specific limitation concerning such gift by the Committee in its discretion; provided, however, that Participant may designate a beneficiary or beneficiaries to exercise Participant’s rights and receive any Shares purchased with respect to any Option upon Participant’s death. Each Option shall be exercisable during Participant’s lifetime only by Participant or, if permissible under applicable law, by Participant’s legal representative. No Option herein granted or Shares underlying any Option shall be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 Registration Statement under the Securities Act of 1933, as amended.

8.    Termination of Service. If Participant’s Service is terminated with the Company, the Option and any unexercised portion shall be subject to the provisions below:

(a)    Upon the termination of Participant’s Service with the Company, to the extent not theretofore exercised, the Option shall continue to be valid; provided, however, that: (i) If the Participant’s Service is terminated by dismissal by the Company other than for cause (as defined below), disability (as described in Section 22(e) of the Code) or death while providing Service to the Company and at a time when such Participant was entitled to exercise an Option as herein provided, any unvested Options shall automatically vest and become exercisable as of the date of termination, and the Participant or their legal representative of such Participant, as the case may be, or such Person who acquired such Option by bequest or inheritance or by reason of the death of the Participant, may, not later than fifteen (15) months from the date of death, exercise such Option, to the extent not theretofore exercised, in respect of any or all of such number of Shares specified by the Committee in such Option; and (ii) If the Service of any Participant to whom such Option shall have been granted shall terminate by reason of the Participant's retirement (at such age upon such conditions as shall be specified by the Board of Directors), and while such Participant is entitled to exercise such Option as herein provided, any unvested Option shall automatically vest and become exercisable as of the date of retirement, such Participant shall have the right to exercise such Option so granted, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option, at any time up to one (1) year from the date of termination of the Optionee's Service by reason of retirement.

(b)    If Participant voluntarily terminates Service, Participant shall have the right to exercise such Option that has vested, to the extent not theretofore exercised, at any time up to ninety (90) days from the date of termination of the Optionee's Service, or if Participant is discharged for cause, any Option granted hereunder shall forthwith terminate with respect to any unexercised portion thereof.

(c)    If any Option granted hereunder shall be exercised by Participant’s legal representative if Participant should die or become disabled, or by any person who acquired any Option granted hereunder by bequest or inheritance or by reason of death of any such person, written notice of such exercise shall be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative or other person to exercise such Option.

(d)    For all purposes of the Plan, the term "for cause" shall mean "cause" as defined in the Plan.

9.    Restriction; Securities Exchange Listing. All certificates for Shares delivered upon the exercise of the Option granted herein shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a national securities exchange, the Company shall not be required to deliver any Shares covered by an Option unless and until such Shares have been admitted for trading on such securities exchange.

10.    Adjustments for Changes in Capital Structure. If there is any change in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether by stock dividend, stock split, reclassification or recapitalization of such stock, or because the Company has merged or consolidated with one or more other corporations (and provided the Option does not thereby terminate pursuant to this Agreement or the Plan), then the number and kind of shares then subject to the Option and the price to be paid therefor shall be appropriately adjusted by the Committee; provided, however, that in no event shall any such adjustment result in the Company's being required to sell or issue any fractional shares. Any such adjustment shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option, but with an appropriate adjustment to the price of each Share or other unit of security covered by this Option.

11.    Change in Control. In the event of a Change in Control (as defined in the Plan), the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the "Acquiror"), may, without the consent of any Participant, either assume the Company's rights and obligations under the outstanding Option or substitute for the outstanding Option substantially equivalent options for the Acquiror's stock. In the event the Acquiror elects not to assume or substitute for the outstanding Option in connection with a Change in Control, the Committee shall provide that any unexercised and/or unvested portions of outstanding Options shall be immediately exercisable and vested in full as of the date thirty (30) days prior to the date of the Change in Control. The exercise and/or vesting of any Option that was permissible solely by reason of this Section 11 shall be conditioned upon the consummation of the Change in Control. Any Options which are not assumed by the Acquiror in connection with the Change in Control nor exercised as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

12.    Amendment to Options Herein Granted. The Option granted herein may not be amended without Participant’s consent.

13.    Withholding Taxes. As provided in the Plan, the Company may withhold from sums due or to become due to Optionee from the Company an amount necessary to satisfy its obligation to withhold taxes incurred by reason of the disposition of the Shares acquired by exercise of the Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code), or may require you to reimburse the Company in such amount.

LAPOLLA INDUSTRIES, INC.

/s/ Michael T. Adams, Secretary

Corporate Secretary

OPTIONEE

/s/ Arthur J. Gregg    

Arthur J. Gregg

EX-10.95

Exhibit 10.95

OPTION AGREEMENT

THE BOARD OF DIRECTORS of Lapolla Industries, Inc. (the “Company”) authorized and approved the Equity Incentive Plan, as amended (the "Plan"). The Plan provides for the grant of an Option to directors of the Company. Unless otherwise provided herein all defined terms shall have the respective meanings ascribed to them under the Plan.

1.    Grant of Option. Pursuant to authority granted to it under the Plan, the Committee responsible for administering the Plan hereby grants to AUGUSTUS J. LARSON, a director of the Company (the “Optionee”) and as of January 5, 2017 (the "Grant Date"), the following stock options: 100,000 stock options (the “Option”). Each Option permits the Participant to purchase one share of the Company’s common stock, $.01 par value, at the Exercise Price (the "Shares").

2.    Character of Options. The Option granted herein is a Nonstatutory Stock Option.

3.    Exercise Price. The exercise price for each Option granted herein is 50¢ ($ 0.50) per Share (the “Exercise Price”).

4.    Vesting and Exercisability. The Option shall vest in three increments of 33,333, 33,333, and 33,334 on December 21, 2017, December 31, 2018, and December 31, 2019, respectively (the “Vesting Period”), subject to continued service as a director with the Company (the “Vesting Conditions”), and once vested, are immediately exercisable in accordance with the terms and conditions of this Agreement and the Plan.

5.    Term of Option. The term of each Option granted herein shall be for a term of eight (8) years from the Grant Date.

6.    Payment of Exercise Price. The Option represented hereby may be exercised in whole or in part by Participant delivering to the Company payment of the Exercise Price for the number of the Option so exercised: (i) in cash, by check or cash equivalent; (ii) by tender to the Company of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price for the number of the Option exercised; (iii) by tender to the Company of a written consent to accept a reduction in the number of Shares of Stock issuable upon exercise (“Reduced Number of Shares”), which Reduced Number of Shares, when ascribed a value, shall have a value equal to the Exercise Price for the number of the Option exercised; (iv) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the Shares being acquired upon the exercise of the Option or portion thereof exercised (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"); (v) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law; or (vi) by any combination thereof. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of the Option by means of a Cashless Exercise.

7.    Limits on Transfer of Options. The Option granted herein shall not be transferable by Participant otherwise than by will or by the laws of descent and distribution, except for gifts to family members subject to any specific limitation concerning such gift by the Committee in its discretion; provided, however, that Participant may designate a beneficiary or beneficiaries to exercise Participant’s rights and receive any Shares purchased with respect to any Option upon Participant’s death. Each Option shall be exercisable during Participant’s lifetime only by Participant or, if permissible under applicable law, by Participant’s legal representative. No Option herein granted or Shares underlying any Option shall be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 Registration Statement under the Securities Act of 1933, as amended.

8.    Termination of Service. If Participant’s Service is terminated with the Company, the Option and any unexercised portion shall be subject to the provisions below:

(a)    Upon the termination of Participant’s Service with the Company, to the extent not theretofore exercised, the Option shall continue to be valid; provided, however, that: (i) If the Participant’s Service is terminated by dismissal by the Company other than for cause (as defined below), disability (as described in Section 22(e) of the Code) or death while providing Service to the Company and at a time when such Participant was entitled to exercise an Option as herein provided, any unvested Options shall automatically vest and become exercisable as of the date of termination, and the Participant or their legal representative of such Participant, as the case may be, or such Person who acquired such Option by bequest or inheritance or by reason of the death of the Participant, may, not later than fifteen (15) months from the date of death, exercise such Option, to the extent not theretofore exercised, in respect of any or all of such number of Shares specified by the Committee in such Option; and (ii) If the Service of any Participant to whom such Option shall have been granted shall terminate by reason of the Participant's retirement (at such age upon such conditions as shall be specified by the Board of Directors), and while such Participant is entitled to exercise such Option as herein provided, any unvested Option shall automatically vest and become exercisable as of the date of retirement, such Participant shall have the right to exercise such Option so granted, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option, at any time up to one (1) year from the date of termination of the Optionee's Service by reason of retirement.

(b)    If Participant voluntarily terminates Service, Participant shall have the right to exercise such Option that has vested, to the extent not theretofore exercised, at any time up to ninety (90) days from the date of termination of the Optionee's Service, or if Participant is discharged for cause, any Option granted hereunder shall forthwith terminate with respect to any unexercised portion thereof.

(c)    If any Option granted hereunder shall be exercised by Participant’s legal representative if Participant should die or become disabled, or by any person who acquired any Option granted hereunder by bequest or inheritance or by reason of death of any such person, written notice of such exercise shall be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative or other person to exercise such Option.

(d)    For all purposes of the Plan, the term "for cause" shall mean "cause" as defined in the Plan.

9.    Restriction; Securities Exchange Listing. All certificates for Shares delivered upon the exercise of the Option granted herein shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a national securities exchange, the Company shall not be required to deliver any Shares covered by an Option unless and until such Shares have been admitted for trading on such securities exchange.

10.    Adjustments for Changes in Capital Structure. If there is any change in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether by stock dividend, stock split, reclassification or recapitalization of such stock, or because the Company has merged or consolidated with one or more other corporations (and provided the Option does not thereby terminate pursuant to this Agreement or the Plan), then the number and kind of shares then subject to the Option and the price to be paid therefor shall be appropriately adjusted by the Committee; provided, however, that in no event shall any such adjustment result in the Company's being required to sell or issue any fractional shares. Any such adjustment shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option, but with an appropriate adjustment to the price of each Share or other unit of security covered by this Option.

11.    Change in Control. In the event of a Change in Control (as defined in the Plan), the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the "Acquiror"), may, without the consent of any Participant, either assume the Company's rights and obligations under the outstanding Option or substitute for the outstanding Option substantially equivalent options for the Acquiror's stock. In the event the Acquiror elects not to assume or substitute for the outstanding Option in connection with a Change in Control, the Committee shall provide that any unexercised and/or unvested portions of outstanding Options shall be immediately exercisable and vested in full as of the date thirty (30) days prior to the date of the Change in Control. The exercise and/or vesting of any Option that was permissible solely by reason of this Section 11 shall be conditioned upon the consummation of the Change in Control. Any Options which are not assumed by the Acquiror in connection with the Change in Control nor exercised as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

12.    Amendment to Options Herein Granted. The Option granted herein may not be amended without Participant’s consent.

13.    Withholding Taxes. As provided in the Plan, the Company may withhold from sums due or to become due to Optionee from the Company an amount necessary to satisfy its obligation to withhold taxes incurred by reason of the disposition of the Shares acquired by exercise of the Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code), or may require you to reimburse the Company in such amount.

LAPOLLA INDUSTRIES, INC.

/s/ Michael T. Adams, Secretary

Corporate Secretary

OPTIONEE

/s/ Augustus J. Larson    

Augustus J. Larson

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (No. 333-174272) on Form S-8 of Lapolla Industries, Inc. of our report dated February 15, 2017, relating to our audit of the financial statements, which appear in the Annual Report on Form 10-K of Lapolla Industries, Inc. for the year ended December 31, 2016.

/s/ Hein & Associates LLP

Hein & Associates LLP

Houston, Texas

February 15, 2017

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Douglas J. Kramer, Certify That:

1.    I have reviewed this annual report on Form 10-K of Lapolla Industries, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date:	February 15, 2017	LAPOLLA INDUSTRIES, INC.
		By:	/s/ Douglas J. Kramer, PEO
			Douglas J. Kramer
			Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Jomarc C. Marukot, Certify That:

1.    I have reviewed this annual report on Form 10-K of Lapolla Industries, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date:	February 15, 2017	LAPOLLA INDUSTRIES, INC.
		By:	/s/ Jomarc C. Marukot, PFO/PAO
			Jomarc C. Marukot
			Principal Financial Officer and Principal Accounting Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, for the purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, in his capacity as an officer of Lapolla Industries, Inc., a Delaware corporation, (the “Company”) that, to his knowledge, the accompanying Annual Report on Form 10-K of the Company for the period ended December 31, 2016 (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	February 15, 2017	LAPOLLA INDUSTRIES, INC.
		By:	/s/ Douglas J. Kramer, PEO
			Douglas J. Kramer
			Principal Executive Officer

By:	/s/ Jomarc C. Marukot, PFO/PAO
	Jomarc C. Marukot
	Principal Financial Officer and Principal Accounting Officer

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

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Feb. 14, 2017	Jun. 30, 2016
Document And Entity Information
Entity Registrant Name	LAPOLLA INDUSTRIES INC
Entity Central Index Key	0000875296
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 38,678,186
Entity Common Stock, Shares Outstanding		122,366,001
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2016

XML

Balance Sheets - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Current Assets:
Cash	$ 1,722,000	$ 0
Trade Receivables, Net	12,508,000	10,006,000
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	0	42,000
Inventories, Net	6,610,000	8,174,000
Prepaid Expenses and Other Current Assets	2,074,000	1,174,000
Total Current Assets	22,914,000	19,396,000
Property, Plant and Equipment	985,000	1,087,000
Other Assets:
Goodwill	4,235,000	4,235,000
Other Intangible Assets, Net	1,180,000	1,197,000
Deposits and Other Non-Current Assets, Net	81,000	94,000
Total Assets	29,395,000	26,009,000
Current Liabilities:
Accounts Payable	6,741,000	6,384,000
Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	21,000	51,000
Accrued Expenses and Other Current Liabilities	2,917,000	2,773,000
Total Current Liabilities	9,679,000	9,208,000
Other Liabilities:
Long-Term Debt, Net	8,945,000	14,137,000
Accrued Interest – Note Payable – Related Party	0	4,000
Deferred Tax Liability	414,000	365,000
Total Liabilities	19,038,000	23,714,000
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $0.01 Par Value; 140,000,000 Shares Authorized; 122,125,072 and 119,839,566 Issued and Outstanding for 2015 and 2014, respectively.	1,235,000	1,221,000
Additional Paid-In Capital	93,600,000	91,930,000
Accumulated Deficit	(84,478,000)	(90,856,000)
Total Stockholders' Equity	10,357,000	2,295,000
Total Liabilities and Stockholders' Equity	$ 29,395,000	$ 26,009,000

XML

Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2016	Dec. 31, 2015
Stockholders' Equity:
Common stock par value (in USD per share)	$ 0.01	$ 0.01
Common stock shares authorized	140,000,000	140,000,000
Common stock shares issued	123,494,129	122,125,072
Common stock shares outstanding	123,494,129	122,125,072

XML

Statements of Operations - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Income Statement [Abstract]
Sales	$ 86,386,000	$ 78,649,000
Cost of Sales	61,345,000	60,264,000
Gross Profit	25,041,000	18,385,000
Operating Expenses:
Selling, General and Administrative	15,087,000	13,933,000
Professional Fees	1,186,000	1,158,000
Depreciation	97,000	146,000
Amortization of Other Intangible Assets	277,000	284,000
Consulting Fees	597,000	809,000
Total Operating Expenses	17,244,000	16,330,000
Operating Income	7,797,000	2,055,000
Other (Income) Expense:
Interest Expense	885,000	1,319,000
Interest Expense – Related Party	491,000	775,000
Interest Expense – Amortization of Discount	120,000	181,000
Loss on Extinguishment of Debt	306,000	0
Other, Net	(694,000)	(35,000)
Total Other Expense	1,108,000	2,240,000
Income (Loss) Before Income Taxes	6,689,000	(185,000)
Income Tax Expense	311,000	392,000
Net Income (Loss)	$ 6,378,000	$ (577,000)
Earnings Per Share, Basic	$ 0.05	$ 0.00
Earnings Per Share, Diluted	$ 0.05	$ 0.00
Weighted Average Shares Outstanding (in shares)	122,812,680	121,283,000
Weighted Average Number of Shares Outstanding, Diluted	123,297,069	121,283,000

XML

Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated (Deficit) [Member]
Beginning Balance, Shares at Dec. 31, 2014		119,840,000
Beginning Balance, Amount at Dec. 31, 2014	$ 908	$ 1,198	$ 89,989	$ (90,279)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Loss	(577)			(577)
Issuance of Common Stock, Shares		2,286,000
Issuance of Common Stock	0	$ 23	(23)
Share Based Compensation Expense	1,229		1,229
Interest Expense – Related Party	735		735
Ending Balance, Shares at Dec. 31, 2015		122,126,000
Ending Balance, Amount at Dec. 31, 2015	2,295	$ 1,221	91,930	(90,856)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Loss	6,378			6,378
Issuance of Common Stock, Shares		1,369,000
Issuance of Common Stock	0	$ 14	(14)
Share Based Compensation Expense	988		988
Interest Expense – Related Party	696		696
Ending Balance, Shares at Dec. 31, 2016		123,495,000
Ending Balance, Amount at Dec. 31, 2016	$ 10,357	$ 1,235	$ 93,600	$ (84,478)

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Statement of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Cash Flows From Operating Activities
Net Loss	$ 6,378,000	$ (577,000)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities:
Depreciation	265,000	358,000
Amortization of Other Intangible Assets	277,000	284,000
Provision for Losses on Accounts Receivable	(16,000)	297,000
Share Based Compensation Expense	988,000	1,229,000
Interest Expense – Enhanced Notes PIK	0	330,000
Interest Expense – Related Party	491,000	775,000
Interest Expense – Amortization of Discount	120,000	181,000
Deferred Income Tax Provision	49,000	365,000
Gain on Disposal of Assets	(9,000)	(4,000)
Loss on Extinguishment of Debt	306,000	0
Loss on Foreign Currency Exchange	14,000	60,000
Changes in Assets and Liabilities:
Trade Receivables	(2,497,000)	(1,487,000)
Inventories	1,541,000	(2,906,000)
CostsAndEstimatedEarningsInExcessOfBillingsOnUncompletedContracts	(42,000)	24,000
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	(30,000)	51,000
Prepaid Expenses and Other Current Assets	(900,000)	(65,000)
Other Intangible Assets	(260,000)	(298,000)
Deposits and Other Non-Current Assets	34,000	187,000
Accounts Payable	356,000	(595,000)
Accrued Expenses and Other Current Liabilities	140,000	1,014,000
Net Cash Provided by (Used in) Operating Activities	7,289,000	(825,000)
Cash Flows From Investing Activities
Additions to Property, Plant and Equipment	(143,000)	(76,000)
Proceeds from Lines of Credit	10,953,000	0
Repayments of Lines of Credit	(1,953,000)	0
Cash Flows From Financing Activities
Proceeds from Revolver Loan	54,996,000	83,858,000
Principal Repayments to Revolver Loan	(61,732,000)	(82,557,000)
Proceeds from Note Payable – Related Party	0	250,000
Principal Repayments to Note Payable - Related Party	0	(500,000)
Principal Repayments to Note Payable - Enhanced Note	(7,688,000)	(150,000)
Net Cash (Used in) Provided by Financing Activities	(5,424,000)	901,000
Net Change In Cash	1,722,000	0
Cash at Beginning of Year	0	0
Cash at End of Year	1,722,000	0
Supplemental Disclosure of Cash Flow Information:
Cash Payments for Income Taxes	307,000	0
Cash Payments for Interest	752,000	850,000
Supplemental Schedule of Non Cash Investing and Financing Activities:
Issuances of Restricted Stock for Personal Guaranty by Related Party Classified as Interest Expense	696,000	735,000
Accrued Interest – Related Party	$ 0	$ 4,000

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Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates, and Assumptions

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates, and Assumptions

Summary of Organization, Basis of Presentation, and Critical Accounting Policies Estimates and Assumptions

This summary briefly describes the Company’s organization, basis of presentation, and critical accounting policies, estimates, and assumptions, which are presented to assist in understanding these financial statements. The financial statements and notes are representations of management who are responsible for their integrity and objectivity. The accounting policies used conform to Generally Accepted Accounting Principles (GAAP) in the United States of America and have been consistently applied in the preparation of these financial statements. Judgments and estimates of uncertainties are required in applying our accounting policies in many areas. However, application of the critical accounting policies discussed below requires management’s significant judgments, often as the result of the need to make estimates of matters that are inherently uncertain. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Organization History

The Company was incorporated in the state of Delaware on October 20, 1989 initially under the name of Natural Child Collection, Inc. and has undergone a variety of name changes and discontinued operations. For current operations, the Company acquired 100% of the capital stock of Infiniti Paint Co., Inc., a Florida corporation, effective September 1, 2001, which was engaged in the business of developing, marketing, selling, and distributing acrylic roof coatings, roof paints, polyurethane foam systems, sealants, and roof adhesives in the Southeastern United States (the "Infiniti Subsidiary"). On December 20, 2004, the Company changed its name from Urecoats Industries, Inc. to IFT Corporation. During the latter part of 2004, the Company's Infiniti Subsidiary built and began operating an acrylic coatings manufacturing plant in the Southeastern United States. On February 11, 2005, the Company acquired 100% of the capital stock of Lapolla Industries, Inc., an Arizona corporation, which was engaged in the business of manufacturing acrylic roof coatings and sealants, and distributing polyurethane foam systems in the Southwestern United States (the "Lapolla Subsidiary"). On April 1, 2005, the Company's Infiniti Subsidiary merged with and into the Lapolla Subsidiary whereas the existence of the Infiniti Subsidiary ceased. On October 1, 2005, the Company's Lapolla Subsidiary merged with and into the Company whereas the existence of the Lapolla Subsidiary ceased. On November 8, 2005, the Company changed its name from IFT Corporation to Lapolla Industries, Inc.

Trade Receivables and Credit Risk

Trade receivables are the primary financial instruments that may subject the Company to significant concentrations of credit risk. The Company’s trade receivables consist primarily of uncollateralized obligations from its diverse customer base, including personal guarantees when obtainable, due under normal trade terms, which generally require payment within 30 days of the invoice date. However, these payment terms may be extended in select cases and many customers do not pay within stated trade terms. The Company has a credit insurance policy in place covering most customer account balances. The Company evaluates the creditworthiness of its customers’ financial position and monitors accounts on a regular basis. Provisions to the allowance for doubtful accounts are reviewed quarterly and adjustments are made periodically (as circumstances warrant) based upon management’s best estimate of collectability of accounts. No customer represented more than 10% of sales for each of the years ended December 31, 2016 and 2015. No customer represented more than 10% of trade receivables at December 31, 2016 or 2015. As of the date of this report, the Company believes no significant concentration of credit risk exists.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost over the fair value of net tangible and identifiable intangible assets of acquired businesses. Identifiable intangible assets acquired in business combinations are recorded based upon their fair value at the date of acquisition. According to GAAP, goodwill is required to be tested for impairment, on an annual basis and between annual tests in certain circumstances, and written down when impaired. The goodwill impairment test is performed by comparing the fair value of the associated reporting unit to its carrying value. GAAP also requires that intangible assets with estimable useful lives be amortized over their respective estimated lives to their estimated residual values, and reviewed for impairment, unless these lives are determined to be indefinite.

Fair Value of Financial Instruments

The Company adopted authoritative GAAP guidance regarding disclosures about fair value of financial instruments, which requires the disclosure of the fair value of off-and-on balance sheet financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments (none of which are held for trading purposes), approximate the carrying values of such amounts. The Company adopted authoritative GAAP guidance regarding fair value measurements, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. This guidance establishes three levels of inputs that may be used to measure fair value: (a) Level 1 - Quoted prices in active markets for identical assets or liabilities. (b) Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities; and (c) Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 1, 2, or 3 assets or liabilities at December 31, 2016 and 2015, respectively. The carrying value of cash and cash equivalents, trade receivables and payables, prepaid expenses and other current assets, and other payables and accruals approximate fair value due to short period of time to maturity.

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Litigation

The Company is occasionally involved in legal proceedings in the normal course of business. The Company accrues a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.

Cash and Cash Equivalents

The Company considers cash, checks, credit card and ACH payments deposited with financial institutions, with original maturities of three months or less, to be cash and cash equivalents.

Fixed-Price Contracts

The Company’s AirTight Division performs work under fixed-price contracts. The fixed-price contracts vary in length but are typically less than one year. In accordance with industry practice, the Company includes asset and liability accounts relating to fixed-price contracts, including related deferred income taxes, if applicable, in current assets and liabilities even when such amounts are realizable or payable over a period in excess of one year. Revenues from fixed-price contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Fixed-price contract costs include all direct material, labor costs, equipment and those indirect costs related to contract performance, such as indirect labor, supplies, tools, and repairs costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. The asset "costs and estimated earnings in excess of billings on uncompleted contracts" represents revenues recognized in excess of amounts billed. The liability "billings in excess of costs and estimated earnings on uncompleted contracts" represents billings in excess of revenues recognized.

Inventories

Cost is determined on an actual and/or standard cost basis that approximates the first-in, first-out (FIFO) method using a perpetual inventory system. Inventories are valued at the lower of cost or market (replacement cost), which does not exceed net realizable value.

Income Taxes

The Company's provision for income taxes is determined using the U.S. federal statutory rate. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating losses and tax credit carryovers. The Company's net deferred tax asset was approximately $21.9 million and $27.4 million at December 31, 2016 and 2015, respectively. The Company's federal income tax returns are open to audit under the statute of limitations for the years ended December 31, 2013 through 2015. The Company recorded a valuation allowance against the deferred tax asset of $22.3 million and $27.8 million at December 31, 2016 and 2015, creating a deferred tax liability of $414,000 and $365,000, respectively. The Company has no unrecognized income tax benefits. Accordingly, the annual effective tax rate is unaffected. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and operating expense, respectively. At December 31, 2016, the Company had no increase or decrease in unrecognized income tax benefits for the year. There was no accrued interest or penalties relating to tax uncertainties at December 31, 2016. Unrecognized tax benefits are not expected to increase or decrease within the next twelve months.

Depreciable Lives of Property, Plant and Equipment

Property, plant and equipment is recorded at cost and depreciated using the straight-line method, which deducts equal amounts of the cost of each asset from earnings every year over its estimated economic useful life. Economic useful life is the duration of time an asset is expected to be productively employed by the Company, which may be less than its physical life. Assumptions on the following factors, among others, affect the determination of estimated economic useful life: wear and tear, obsolescence, technical standards, contract life, market demand, competitive position, raw material availability, and geographic location. The estimated economic useful life of an asset is monitored to determine its appropriateness, especially in light of changed business circumstances. For example, changes in technology and changes in the estimated future demand for products may result in a shorter estimated useful life than originally anticipated. In these cases, we would depreciate the remaining net book value over the new estimated remaining life, thereby increasing depreciation expense per year on a prospective basis. Net property, plant and equipment totaled $985,000 and depreciation expense totaled $265,000 as of and for the year ended December 31, 2016. Net property, plant and equipment totaled $1.1 million and depreciation expense totaled $358,000 as of and for the year ended December 31, 2015.

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Impairment of Long-Lived Assets

Property, Plant and Equipment

Property, plant, and equipment held for use is grouped for impairment testing at the lowest level for which there is an identifiable cash flow. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances would include a significant decrease in the market value of a long-lived asset grouping, a significant adverse change in the manner in which the asset grouping is being used or in its physical condition, a history of operating or cash flow losses associated with the use of the asset grouping, or changes in the expected useful life of the long-lived assets. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by that asset group is compared to the carrying value to determine whether impairment exists. If an asset group is determined to be impaired, the loss is measured based on the difference between the asset group’s fair value and its carrying value. An estimate of the asset group’s fair value is based on the discounted value of its estimated cash flows. Assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell. The assumptions underlying cash flow projections represent our best estimates at the time of the impairment review. Factors that we must estimate include industry and market conditions, sales volume and prices, costs to produce, etc. Changes in key assumptions or actual conditions that differ from estimates could result in an impairment charge. Management believes it uses reasonable and supportable assumptions when performing impairment reviews and cannot predict the occurrence of future events and circumstances that could result in impairment charges. There were no property, plant and equipment impairment charges recorded during the years ended December 31, 2016 or 2015.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net tangible and identifiable intangible assets of an acquired business. Goodwill was $4.2 million at December 31, 2016 and 2015. The Company operates two reporting units, Foam and Coatings. Disclosures related to goodwill are included in Note 8 to the financial statements. The Company evaluates goodwill for impairment on an annual basis, or more frequently if management believes indicators of impairment exist. Under generally accepted accounting principles, the Company has the option to perform a qualitative assessment to test for impairment of goodwill. If it is determined that it is more likely than not that the fair value of each reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of each reporting unit and comparing the carrying value of each reporting unit to its estimated fair value. If the fair value of a reporting unit is greater than its carrying value then goodwill is not impaired; otherwise, the second step of the impairment test shall be performed to measure the amount of impairment loss. Based on the qualitative assessment performed as of December 31, 2016, the Company concluded that it was more likely than not that the fair value of its reporting units was greater than their carrying amount. Accordingly, no further testing was required. There were no goodwill impairment charges recorded during the years ended December 31, 2016 or 2015.

Other Intangible Assets

The Company had other intangible assets, net of $1.2 million at December 31, 2016 and 2015, consisting of product formulations and trade names that were acquired as part of business combinations, and trademarks and approvals and certifications obtained as part of entering into new markets. Amortization of other intangible assets totaled $277,000 and $284,000 for the years ended December 31, 2016 and 2015, respectively. Other intangible assets are tested for impairment as part of the long-lived asset grouping impairment tests. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. See impairment discussion above under Property, Plant and Equipment for a description of how impairment losses are determined. Disclosures related to other intangible assets are included in Note 8 to the financial statements. Significant management judgment is required in the forecasts of future operating results that are used in the Company’s impairment evaluations. The estimates used are consistent with the plans and estimates that Management uses to manage its business. It is possible, however, that the plans may change and estimates used may prove to be inaccurate. If the Company’s actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, then the Company could incur future impairment charges, which would adversely affect financial performance. The Company concluded that there were no material events or significant changes in circumstances that led to impairment during fiscal 2016 and 2015. There were no long-lived asset impairment charges recorded during the years ended December 31, 2016 or 2015.

Revenue Recognition

Sales are recognized (i) as risk and title to products transfers to the customer (which generally occurs at the time shipment is made), (ii) the sales price is fixed or determinable, and (iii) collectability is reasonably assured. Sales channels include direct sales, distributors, and independent representatives. Irrespective of the sales channel, returns and allowances are not a business practice in the industry. Amounts billed for shipping and handling are included in revenues (freight). Freight included in revenue was $834,000 and $958,000 in 2016 and 2015, respectively. Costs incurred for shipping and handling are included in cost of sales. Freight included in cost of sales was $4.3 million and $4.2 million in 2016 and 2015, respectively. Revenues are recorded net of sales tax.

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Research and Development

Research and development costs related to both future and present products are charged to operations as incurred.

Share-Based Compensation

The Company accounts for the cost of employee or director services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of share based awards is estimated at the grant date using a Black-Scholes valuation model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The determination of fair value is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. Employee stock option exercise behavior is based on actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. The Company applies an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates are subject to revision in future periods if actual forfeitures differ from the estimates and changes impact compensation cost in the period in which the change in estimate occurs. Disclosures related to share-based compensation are included in Note 17 to our financial statements. Share-based compensation expense was $988,000 and $1.2 million in 2016 and 2015, respectively. If additional share based awards are granted, financial performance may be negatively affected, and if outstanding share based awards are forfeited or canceled, resulting in non-vesting of such stock awards, financial performance may be positively affected. In either instance, the Company’s financial performance may change depending on share based award activities in future periods.

Allowance for Doubtful Accounts

The Company presents trade receivables, net of allowances for doubtful accounts, to ensure trade receivables are not overstated due to uncollectible accounts. Allowances, when required, are calculated based on a detailed review of certain individual customer accounts, including credit insurance and other security when applicable, and an estimation of the overall economic conditions affecting our customer base. The Company reviews a customer’s credit history before extending credit. The allowance for doubtful accounts was approximately $366,000 and $545,000 at December 31, 2016 and 2015, respectively. If the financial condition of customers were to deteriorate based on worsening overall economic conditions, resulting in an impairment of their ability to make payments to the Company, then additional allowances may be required in future periods.

Cost of Sales and Selling, General and Administrative Costs

The Cost of Sales line item includes all the material, overhead, packaging, and freight costs associated with products shipped, including resale finished goods and raw materials, as well as payroll costs associated with manufacturing the finished goods, inbound freight, sales tax expense, product containers, labels, and other miscellaneous items that are indirectly used in the manufacturing, packaging, and shipping (outbound freight) of finished goods, including inspection, and internal transfer costs, as well as depreciation of machinery, amortization of approvals and certifications, and an allocated portion of overhead. The Selling, General and Administrative line item includes selling, advertising, marketing, customer service, and technical support, as well as the costs of providing corporate functional support for all other areas of our business.

Advertising and Marketing Expenses

Advertising and marketing costs are generally expensed as they are incurred. Expenditures for certain advertising and marketing activities related to trade shows and trade magazines are deferred within the Company’s fiscal year when the benefits clearly extend beyond the interim period in which the expenditure is made, generally not to exceed 90 days. There were $181,000 and $116,000 costs for advertising deferred on the Company’s balance sheets as of December 31, 2016 and 2015, respectively. Other advertising and marketing expenditures that do not meet the deferred criteria are expensed when the advertising and marketing occurs. Total advertising and marketing costs expensed were approximately $1.1 million in 2016 and 2015, respectively.

Debt Issuance Costs

The Company capitalizes debt issuance costs, which are netted against long-term debt in the Company’s balance sheets. These costs are amortized over the term of the financial instrument. Amortization of debt issuance costs is included in “Interest Expense” in the statements of operations.

Net Income (Loss) Per Common Share

Basic income (loss) per share is based upon the net income (loss) applicable to common shares after preferred dividend requirements and upon the weighted average number of common shares outstanding during the period. Diluted income (loss) per share reflects the effect of the assumed exercise of stock options and warrants only in periods in which such effect would have been dilutive. Disclosures related to net income (loss) per common share are included in Note 15 to our financial statements.

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

Recently Adopted Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-15, “Presentation of Financial Statements—Going Concern:  Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.”  The amendments in this ASU are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.  This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the financial statement footnotes.  The pronouncement is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. The Company adopted the provisions of the guidance in the fourth quarter of 2016. The adoption did not have a material impact on the Company’s financial statements.

In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from GAAP the concept of extraordinary items and the need for an entity to separately classify, present, and disclose extraordinary events and transactions, while retaining certain presentation and disclosure guidance for items that are unusual in nature or occur infrequently. The pronouncement is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period and may be applied retrospectively, with early application permitted. The Company adopted the provisions of the guidance in the fourth quarter of 2015. The adoption did not have a material impact on the Company’s financial statements.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs." The accounting guidance requires that debt issuance costs related to a recognized debt liability be reported on the Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The pronouncement is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted for financial statements that have not been previously issued. The Company adopted the provisions of the guidance in the first quarter of 2016, and retrospectively for 2015. The adoption did not have a material impact on the Company’s financial statements.

In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The Company adopted the provisions of the guidance in the fourth quarter of 2016. The adoption did not have a material impact on the Company’s financial statements. There was not a need to retrospectively adjust prior periods.

New Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." The ASU will supersede most of the existing revenue recognition requirements in U.S. generally accepted accounting principles ("GAAP") and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity's nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. The Company is currently evaluating the impact of adopting this guidance.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory," which applies to inventory that is measured using first-in, first-out ("FIFO") or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, last-out ("LIFO"). This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting this guidance.

In January 2016, the FASB issued ASU 2016-01, "Financial Instruments--Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

Note 1 -    Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates and Assumptions - continued.

In February 2016, the FASB issued ASU 2016-02, "Leases: Amendments to the FASB Accounting Standards Codification," which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. This ASU retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting literature. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model, the effect of leases in a consolidated statement of comprehensive income and a consolidated statement of cash flows is largely unchanged from previous GAAP. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. The Company is currently evaluating the impact of adopting this guidance.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which simplifies several aspects of the accounting for share-based payment awards to employees, including the accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company is currently evaluating the impact of adopting this guidance.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," which contains amendments designed to make current GAAP clear or provide specific guidance on eight cash flow classification issues relating to how certain cash receipts and cash payments are presented and classified in the statement of cash flows, thereby reducing the current and potential future diversity in practice. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact of adopting this guidance.

In December 2016, the FASB issued ASU 2016-19, "Technical Corrections and Improvements." Since the FASB Accounting Standards Codification® ("ASC") was established in September 2009 as the source of authoritative GAAP to be applied by nongovernmental entities, stakeholders have provided suggestions for minor corrections and clarifications. The ASC’s About the Codification describes the FASB’s procedure for responding to submissions, which involves the staff analyzing and processing the submissions and including any resulting changes to the ASC in maintenance updates or in an ASU. The amendments in this ASU cover a wide range of Topics in the ASC, including: (i) amendments related to differences between original guidance and the ASC; (ii) guidance clarification and reference corrections; (iii) simplification; and (iv) minor improvements. The Company is currently evaluating the impact of adopting this guidance.

In December 2016, the FASB Issued ASU 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers." On May 28, 2014, the FASB and the International Accounting Standards Board ("IASB") issued a converged standard on recognition of revenue from contracts with customers. The FASB guidance was issued as ASU 2014-09, Revenue from Contracts with Customers (Topic 606). In addition to the new revenue Topics and Subtopics, the Board made approximately 800 consequential amendments to the FASB ASU. The FASB decided to issue a separate ASU for technical corrections and improvements to Topic 606 and other Topics amended by ASU 2014-09 to increase stakeholders’ awareness of the proposals and to expedite improvements to ASU 2014-09. The amendments in this ASU affect the guidance in ASU 2014-09, which is not yet effective. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date," defers the effective date of ASU 2014-09 by one year. The Company is currently evaluating the impact of adopting this guidance.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which contains amendments to simplify the subsequent measurement of goodwill. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments of this ASU are effective for fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of adopting this guidance.

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Dependence on Few Suppliers

12 Months Ended

Dec. 31, 2016

Risks and Uncertainties [Abstract]

Dependence on Few Suppliers

Dependence on Few Suppliers

The Company is dependent on a few suppliers for certain of its raw materials and finished goods. For 2016 and 2015, raw materials and finished goods purchased from the Company’s three largest suppliers accounted for approximately 42% and 39% of purchases, respectively.

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Trade Receivables

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Trade Receivables

Trade Receivables

Trade receivables are comprised of the following (in thousands): 

	December 31,
	2016			2015
Trade Receivables	$	12,874		$	10,551
Less: Allowance for Doubtful Accounts	(366		)	(545		)
Trade Receivables, Net	$	12,508		$	10,006

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Contracts

12 Months Ended

Dec. 31, 2016

Contractors [Abstract]

Contracts

Contracts

The following is a summary of contracts in progress (in thousands):

	December 31,
	2016			2015
Costs Incurred on Uncompleted Contracts	$	274		$	1,089
Estimated Earnings on Uncompleted Contracts	83			306
Earned Revenues	357			1,395
Less: Billings to Date	(378		)	(1,404		)
Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	$	(21	)	$	(9	)

Included in the accompanying balance sheets under the following captions as of December 31 (in thousands):

	2016			2015
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	$	—		$	42
Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	21			51
Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	$	(21	)	$	(9	)

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Inventories

12 Months Ended

Dec. 31, 2016

Inventory Disclosure [Abstract]

Inventories

Inventories

The following is a summary of inventories (in thousands): 

	December 31,
	2016		2015
Raw Materials	$	2,157	$	2,599
Finished Goods	4,453		5,575
Inventories, Net	$	6,610	$	8,174

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Prepaid Expenses and Other Current Assets

12 Months Ended

Dec. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

The following is a summary of prepaid expenses and other current assets (in thousands): 

	December 31,
	2016		2015
Prepaid Insurances	$	735	$	637
Prepaid Marketing	181		116
Prepaid Consulting	94		58
Prepaid Other	1,064		363
Total Prepaid Expenses and Other Current Assets	$	2,074	$	1,174

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Property, Plant and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, Plant and Equipment

The following is a summary of property, plant and equipment (in thousands): 

	December 31,
	2016			2015			Estimated Useful Life
Vehicles	$	244		$	462		5 Years
Leasehold Improvements	269			289			13 – 15 Years
Office Furniture and Equipment	159			307			3 – 7 Years
Computers and Software	907			946			3 – 5 Years
Machinery and Equipment	2,557			2,517			3 – 20 Years
Total Property, Plant and Equipment	$	4,136		$	4,521
Less: Accumulated Depreciation	(3,151		)	(3,434		)
Total Property, Plant and Equipment, Net	$	985		$	1,087

Depreciation expense was $265,000 and $358,000 for the years ended 2016 and 2015, of which $168,000 and $212,000 were included in cost of sales for 2016 and 2015, respectively.

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Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

The following is a summary of Goodwill (in thousands):

Goodwill

	December 31,
	2016		2015
Foam	$	2,932	$	2,932
Coatings	1,303		1,303
	$	4,235	$	4,235

The following is a summary of Other Intangible Assets (in thousands):

Other Intangible Assets

	December 31,
	2016							2015
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Amortization Period
Product Formulations	$	138	(104		)	$	34	138		$	(95	)	43		15 Years
Trade Names	750		(419		)	331		750		(369		)	381		15 Years
Approvals and Certifications	3,462		(2,647		)	815		3,202		(2,429		)	773		5 Years
	$	4,350	$	(3,170	)	$	1,180	$	4,090	$	(2,893	)	$	1,197

Based on the other intangible assets in service as of December 31, 2016, estimated amortization expense for the years ending December 31, 2017 through December 31, 2021 and thereafter is as follows (in thousands): 

	2017		2018		2019		2020		2021		Thereafter
Product Formulations	$	9	$	9	$	9	$	7	$	—	$	—
Trade Names	50		50		50		50		50		81
Approvals and Certifications	205		205		205		200		—		—
	$	264	$	264	$	264	$	257	$	50	$	81

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Deposits and Other Non-Current Assets, Net

12 Months Ended

Dec. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Deposits and Other Non-Current Assets, Net

Deposits and Other Non-Current Assets, Net

The following is a summary of deposits and other non-current assets (in thousands):

	December 31,
	2016		2015
Prepaid Expenses	8		25
Other Receivables	9		5
Deposits	64		64
Total Deposits and Other-Non-Current Assets	$	81	$	94

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Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2016

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

The following is a summary of accrued expenses and other current liabilities as (in thousands): 

	December 31,
	2016		2015
Accrued Payroll	$	3	$	(6	)
Accrued Commissions	172		129
Accrued Inventory	249		438
Accrued Taxes and Other	1,990		1,725
Accrued Insurance	490		459
Deferred Finance Charge Income	13		28
Total Accrued Expenses and Other Current Liabilities	$	2,917	$	2,773

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Financing Instruments

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Financing Instruments

(a)    Credit Agreement. The Company entered into a loan agreement with Bank of America, N.A. (the "Bank") on September 7, 2016 (the “Credit Agreement”), which amended and restated in its entirety that certain Loan and Security Agreement dated August 31, 2010 with the Bank (as amended, the "Loan Agreement"). The Credit Agreement provides an initial line of credit of $15 million for a 3 years term maturing on September 7, 2019 (the “Line of Credit”). The available amount of the Line of Credit will be reduced each quarter by $250,000 starting January 1, 2017, until it reaches $12 million on July 1, 2019, thereby reducing the Company’s unused line fee. The interest rate used by the Company is the daily floating LIBOR rate plus 2.25%. The Credit Agreement requires the Company to comply with two financial covenants, including: (i) an asset coverage ratio of at least (a) 1.10 to 1.00 from September 30, 2016, until September 30, 2017, (b) 1.15 to 1.00 from October 1, 2017, through March 31, 2018, and (c) 1.20to 1.00 from April 1, 2018, and thereafter, tested quarterly, which in each case will be determined based upon the ratio of (x) 85% of book value of all accounts receivable, plus 55%of book value of all inventory, plus 50% net book value of plant, property and equipment of the Company (the "Total Margined Value") to (y) all outstanding liabilities for borrowed money and other interest-bearing liabilities arising under the Line of Credit (the "Total Line of Credit"); and (ii) a fixed charge coverage ratio of at least 1.20 to 1.00, tested quarterly based upon the ratio of (a) Adjusted EBITDA (as defined in the Credit Agreement), to (b) the sum of capital expenditures, cash taxes paid, interest expenses, principal payments made on borrowed money other than the Line of Credit and the Enhanced Notes (as defined in (c) below), and distributions made, in each case for the immediately preceding four fiscal quarter period and determined on a consolidated basis. Upon closing of the Credit Agreement, an aggregate of $8.5 million was drawn from the Line of Credit and used to pay off the Enhanced Notes and the Loan Agreement. The Company granted the Bank a continuing security interest in and lien upon substantially all assets of the corporation. If, at any time, the Company’s Total Margined Value is less than the amount outstanding under the Total Line of Credit, and that amount remains unpaid or future Total Margined Value calculations do not increase to an amount equal to the balance outstanding under the Total Line of Credit, the Bank, in its sole discretion, may accelerate any and all amounts outstanding under the Line of Credit. At December 31, 2016, the balance outstanding on the Line of Credit, net of deferred financing costs, was $9.7 million, and the weighted-average interest rate was 2.78%. Cash available under our Line of Credit based on the Asset Coverage Ratio, after giving effect to our outstanding borrowings, at December 31, 2016 was $3.2 million. At December 31, 2016, the Company was in compliance with all of its Credit Agreement debt covenants.

Note 11 - Long-Term Debt - continued

(b)    Loan Agreement. The Company entered into the Loan Agreement with the Bank on September 1, 2010, which, as amended from time to time, provided for a $12 million Revolver Loan. The Loan Agreement was replaced in its entirety and the Revolver Loan provided in connection therewith, which had an outstanding balance of $2.7 million, was paid in full from a draw against our Line of Credit upon closing of the Credit Agreement with the Bank on September 7, 2016. At December 31, 2015, the balance outstanding on the Revolver Loan, net of deferred financing costs, was $6.7 million, and the weighted-average interest rate was 4.6%. Cash available under the Revolver Loan based on the borrowing base calculation (defined as an amount determined by a detailed calculation that includes an amount equal to 85%of eligible accounts receivable, 65% of eligible finished goods and 30% of eligible raw materials, up to $6 million) at December 31, 2015 was $2.2 million. See also Item (a) above for more information.

(c)    Note Purchase Agreement.

(i)    Enhanced Notes. The Company entered into a Note Purchase Agreement with Enhanced Jobs for Texas Fund, LLC ("Enhanced Jobs") and Enhanced Credit Supported Loan Fund, LP ("Enhanced Credit"), on December 10, 2013, originally issuing an aggregate of $7.2 million in subordinated secured promissory notes maturing December 10, 2017 (the “Enhanced Notes”), of which $5.7 million was to Enhanced Credit and $1.5 million was to Enhanced Jobs. This Note Purchase Agreement was terminated and the Enhanced Notes issued in connection therewith, which had an aggregate outstanding balance, net of repayments plus accrued interest including PIK, of $5.8 million, were paid in full from a draw against our Line of Credit upon closing of the Credit Agreement with the Bank on September 7, 2016. Upon satisfaction and termination of the Note Purchase Agreement by the Company, the chairman of the board's commitment to ensure funding upon maturity of the Enhanced Notes and his personal guaranty on the Note Purchase Agreement were terminated. At December 31, 2015, the balance outstanding on the Enhanced Notes, net of deferred financing costs, was $7.5 million, and the effective interest rate was 25.6%. See also Item (a) above for more information.

(ii)    Guaranty Agreement. In connection with the Enhanced Notes described in (c)(i) above, the chairman of the board and majority stockholder of the Company (the “Guarantor”), entered into a Guaranty Agreement to secure the Company’s performance under the Enhanced Notes. The Company, in exchange for Guarantor’s personal guarantee of the obligations under the Enhanced Notes, granted Guarantor 3.7 millionshares of common stock, par value $.01 per share, which shares vest monthly on a pro rata basis over the life of the Enhanced Notes (the “Guaranty Shares”). The Guaranty Shares were valued at $0.60 per share, the closing price of the Company’s common stock as quoted on OTC Markets on the day preceding the closing date of December 10, 2013, for an aggregate amount of $2.2 million. The Guaranty Shares were recorded as interest expense – related party, thereby increasing the effective interest rate of the Enhanced Notes. Upon repayment of the Enhanced Notes by the Company, the chairman of the board's personal guaranty on the Note Purchase Agreement terminated and all remaining unvested Guaranty Shares vested on an accelerated basis. At December 31, 2016 and 2015, there were 3,681,000 and 2,523,347 Guaranty Shares vested, valued and recorded at $2.2 million and $1.5 million, respectively. See also Item (a) above for more information.

(iii)    Chairman of the Board Commitment. On November 12, 2015, pursuant to a commitment letter, effective as of October 31, 2015 (the “Commitment”), the Company's chairman of the board and majority stockholder, Richard J. Kurtz, committed to ensure the Company had funding to pay off the aggregate amount of $7.2 million by August 31, 2016, plus any accrued and unpaid interest, outstanding with respect to the Enhanced Notes, of which $2 millionis required from him by April 30, 2016 if the Company does not repay that amount ("the Commitment”). As consideration for the Commitment, the Company granted Mr. Kurtz a fully vested and exercisable stock option to purchase 500,000 shares of the Company’s common stock, with an exercise price per share equal to the fair market value of a share of the Company’s common stock on November 12, 2015, determined based on the per share closing price on such date, or $0.294per share, for a term of eight (8) years. The transaction was valued at approximately $47,000, which was estimated using the Black-Scholes option pricing model and fully expensed on the date of grant. In connection with the Company's payment of $500,000in principal to Mr. Kurtz during the fourth quarter of 2015 for the Notes Payable - Related Party, Mr. Kurtz made a principal payment of $150,000towards paying down the Enhanced Notes. The Company initially offset the $150,000 that Mr. Kurtz paid on its behalf direct to Enhanced against certain arms length sales transactions made to entities controlled by him for the Company's products; subsequently those amounts were paid by those entities and as a result, the Company repaid Mr. Kurtz the $150,000 paid to Enhanced on December 21, 2016. On April 21, 2016, the Company made a payment of $1.9 million on the outstanding principal of the Enhanced Notes. On August 25, 2016, Enhanced agreed to extend the August 31, 2016 pay off date for the Enhanced Notes to on or prior to September 16, 2016. On September 7, 2016, the Company repaid the Enhanced Notes and the chairman of the board's Commitment was terminated. See also Item (a) above for more information.

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Related Party Transactions

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

(a)    On January 1, 2015, Jomarc C. Marukot and the Company entered into an Executive Employment Agreement, dated as of January 1, 2015 (the “Marukot Agreement”), pursuant to which Mr. Marukot shall serve as the Company’s CFO and Corporate Treasurer for a term commencing on January 1, 2015 and ending December 31, 2016 (the “Employment Term”). Pursuant to the Marukot Agreement, Mr. Marukot is entitled to: (i) an annual base salary of $190,000; (ii) annual bonus equal to 25% of his annual base salary if the Company achieves its budgeted earnings before interest, taxes, depreciation, amortization, and share based compensation (“Adjusted EBITDA”) per calendar year, which annual bonus may be increased to 30%, 35%, or more than 35% in the CEO’s discretion, of his annual base salary if the Company achieves 110%, 120%, or more than 120%, respectively, of its budgeted Adjusted EBITDA; (iii) change in control bonus of 25% of his annual base salary upon consummation of a change in control if he is still employed at the time; (iv) medical, dental, life insurance, and disability benefits; (v) four months’ portion of his annual base salary for termination due to death or disability; (vi) four months’ portion of his annual base salary, awards and benefit plans and, if he would have received it had he remained employed for four months after his actual termination date, the change in control bonus in the event of termination without cause by the Company; and (vii) twelve months annual base salary if terminated within the first twelve months of the Employment Term or the remaining annual base salary if terminated after twelve months of his employment due to a change in control. Mr. Marukot is also entitled to earn awards under equity or other plans or programs that the Company, in its discretion, determines to put into effect and to participate in compensation and benefit programs offered by the Company to its executive officers. The Marukot Agreement also provides for a non-competition provision for the Employment Term and for a period of twelve months after the termination of Mr. Marukot’s employment.

(b)    On January 16, 2015, the Company granted Douglas J. Kramer, CEO and President, the right to acquire 850,000 shares of the Company’s common stock, $0.01 par value per share, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.325 per share, which options were immediately vested and exercisable at the time of grant (“Kramer Option”). The Kramer Option was granted as final replacement for 2,000,000 stock options granted on July 12, 2005 which expired July 12, 2013 (the “Prior Expired Options”). The Prior Expired Options were inadvertently extended to December 31, 2015, however, due to an eight year life limitation under the Company’s Equity Incentive Plan, as amended (the “Equity Plan”), they were deemed canceled at the end of eight years. Moreover, the Equity Plan only permits the grant of a total of 2,000,000 stock options during any calendar year. Mr. Kramer had exceeded this limit during the 2014 year and as a result, the Company was only able to grant Mr. Kramer 1,150,000 stock options during the 2014 year as partial replacement for the 2,000,000 Prior Expired Options. The transaction was valued at $86,000, which was estimated using the Black-Scholes option pricing model and expensed on the date of grant.

(c)    On January 16, 2015, the Company granted an eight-year stock option to Michael T. Adams, CGO, EVP, and Corporate Secretary, for 300,000 shares of the Company’s common stock, $0.01 par value per share, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the closing price on such date, or $0.325 per share (“Adams Option”). The Adams Option vests in three equal end of calendar year increments, subject to Mr. Adams meeting certain performance criteria, commencing on December 31, 2015 and ending December 31, 2017, or upon consummation of a change in control. Once vested, the stock options are immediately exercisable. The transaction was valued at $94,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(d)    On January 21, 2015, the Company borrowed $250,000 from the chairman of the board and majority stockholder as a condition precedent to entering into the Twelfth Amendment and entered into a promissory note (the “1/21/15 Kurtz Note”). Pursuant the 1/21/15 Kurtz Note, the Company agreed to pay 8% per annum on the principal balance of $250,000 and repay the principle balance on June 10, 2017. The 1/21/15 Kurtz Note is subordinated to the Loan Agreement and Enhanced Note. See also Item (e) below.

(e)    On January 23, 2015, the Company and Bank of America, N.A. entered into a Twelfth Amendment (the “Twelfth Amendment”) to the Loan Agreement. Pursuant to the Twelfth Amendment, certain definitions were changed and a new definition was added in the Loan Agreement as follows: (1) Fixed Charge Coverage Ratio was changed to the ratio, determined for any period on a consolidated basis for the Company, of (a) the sum of (i) EBITDA, (ii) Subordinated Debt incurred during such period on or after August 31, 2014 (other than the Twelfth Amendment Subordinated Debt), and (iii) up to $267,000 in Accounts charged off by the Company in August, 2014, to (b) the sum of Capital Expenditures (except those financed with Borrowed Money other than Revolver Loans), cash taxes paid, interest expense (other than payment-in-kind), principal payments made on Borrowed Money other than Revolver Loans, excluding (solely) principal payments made on the Subordinated Term Debt due December 10, 2013, in an amount not exceeding $150,000, and Distributions made, in each case determined for such period; (2) Revolver Termination Date was changed (extended) to March 31, 2016; and (3) Subordinated Debt was added defining Subordinated Debt loaned to the Company by Richard Kurtz in an amount at least equal to $250,000, required as a condition to the effectiveness of the Twelfth Amendment. Refer to Item (d) above for more information on the Subordinated Debt.

(f)    On March 23, 2015, the Company granted an eight-year stock option to Harvey L. Schnitzer, COO, for 300,000 shares of the Company’s common stock, $0.01 par value per share, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the closing price on such date, or $0.41 per share (“Schnitzer Option”). The Schnitzer Option vests in three equal end of calendar year increments, subject to Mr. Schnitzer meeting certain performance criteria, commencing on December 31, 2015 and ending December 31, 2017, or upon consummation of a change in control. Once vested, the stock options are immediately exercisable. The transaction was valued at $118,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

Note 12 - Related Party Transactions - continued

(g)    On November 12, 2015, and effective as of October 31, 2015, the Company's chairman of the board and principal stockholder, Richard J. Kurtz, committed to provide the Company with funding to pay off the Enhanced Notes, of which $2 million is required to be paid on or before April 30, 2016, under the commitment letter (the "Commitment"). As consideration for the Commitment, the Company granted Mr. Kurtz a fully vested and exercisable stock option to purchase 500,000 shares of the Company’s common stock, with an exercise price per share equal to the fair market value of a share of the Company’s common stock on November 12, 2015, determined based on the per share closing price on such date, or $0.294 per share, for a term of eight (8) years. The transaction was valued at approximately $47,000, which was estimated using the Black-Scholes option pricing model and fully expensed on the date of grant. The Commitment will be superseded and become null and void in the event and to the extent that, at or before the time the Commitment is due, the Enhanced obligations are repaid in full in immediately available cash on or prior to August 31, 2016. On August 25, 2016, Enhanced agreed to extend the August 31, 2016 pay off date for the Enhanced Notes to on or prior to September 16, 2016. On September 7, 2016, the Company repaid the Enhanced Notes in full and the chairman of the board's Commitment was terminated. See also (h) below for more information.

(h)    On December 21, 2015, the Company, with the consent of the Bank and Enhanced, repaid an aggregate of $500,000 in principal to the chairman for the Notes Payable - Related Party. Refer to Note 11 - Long-Term Debt, Item (c)(i) and (ii) for more information. As a result of the $500,000 principal payment to the chairman by the Company, the chairman was required by Enhanced to pay down the Enhanced Note by $150,000. The Company initially offset the $150,000 that the chairman paid on its behalf direct to Enhanced against certain arms length sales transactions made to entities controlled by him for the Company's products; subsequently those amounts were paid by those entities and as a result, the Company repaid Mr. Kurtz the $150,000 paid to Enhanced on December 21, 2016.

(i)On December 31, 2015, the Company vested 25,000 shares of common stock, par value $.01, pursuant to an agreement with the chief operating officer, Harvey L. Schnitzer, for a stock bonus, which transaction was valued and recorded at $16,000. Under the stock bonus agreement, the Company granted Mr. Schnitzer 100,000 shares of the Company’s common stock, par value $.01, which vests in four equal 25,000 share increments, on February 7, 2014, December 31, 2014, December 31, 2015, and February 6, 2016, respectively, subject to continued employment with the Company.

(j)    During the year ended December 31, 2015, the Company issued an aggregate of 1,035,743 shares of restricted common stock pursuant to the anti-dilution provisions in an agreement with the Vice Chairman, Jay C. Nadel, for advisory and consulting services, which transactions were valued and recorded in the aggregate at $418,000.

(k)    During the year ended December 31, 2015, the Company vested an aggregate of 1,224,763 shares of restricted common stock issued as Guaranty Shares, to the chairman of the board and majority stockholder in connection with his personal guaranty required with the Enhanced Note, which transactions were valued and recorded in the aggregate at $735,000, and classified as interest expense – related party.

(l)On February 7, 2016, the Company vested the last tranche of 25,000 shares of common stock, par value $.01, pursuant to an agreement with the chief operating officer, Harvey L. Schnitzer, for a stock bonus, which transaction was valued and recorded at $16,000. Under the stock bonus agreement, the Company granted Mr. Schnitzer 100,000 shares of the Company’s common stock, par value $.01, which vest in four equal 25,000 share increments, on February 7, 2014, December 31, 2014, December 31, 2015, and February 6, 2016, respectively, subject to continued employment with the Company.

(m)On March 14, 2016, the Company granted an eight-year option to Richard J. Kurtz, chairman of the board and principal stockholder, for the right to acquire 800,000 shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.40 per share, which options vest monthly on a pro rata basis over 3 years, subject to continued satisfactory board services. The transaction was valued at $306,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(n)On March 14, 2016, the Company granted an eight-year option to Douglas J. Kramer, chief executive officer and president, for the right to acquire 2 million shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price on such date, or $0.40 per share, which options vest monthly on a pro rata basis over 3 years, subject to continued satisfactory employment. The transaction was valued at $766,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting period.

(o)On December 31, 2016, the Company granted and vested 100,000 shares of common stock, par value $.01, pursuant to an agreement with Richard J. Kurtz, for a stock bonus, for serving as chairman of the board, which transaction was valued and recorded at $53,000.

The 100,000 shares of common stock were valued at $0.53 per share, the closing price of the Company’s common stock as quoted on OTC Markets on the date of grant.

Note 12 - Related Party Transactions - continued

(p)    On December 30, 2016, the Company entered into a second amendment to that certain Executive Employment Agreement, effective January 1, 2014, as amended, with Douglas J. Kramer, CEO and President, which extends his Employment Term for an additional one (1) year from December 31, 2016 to December 31, 2017.

(q)    On December 30, 2016, the Company entered into a first amendment to that certain Executive Employment Agreement, effective January 1, 2015, with Jomarc C. Marukot, CFO and Treasurer, which: (a) extends his Employment Term for an additional one (1) year from December 31, 2016 to December 31, 2017; and (b) provides for an annual base salary increase, effective January 1, 2017, from $190,000 to $210,000. See also Item (a) above.

(r)    During the year ended December 31, 2016, the Company issued an aggregate of 1,035,743 shares of restricted common stock pursuant to the anti-dilution provisions in an agreement with the Vice Chairman, Jay C. Nadel, for advisory and consulting services, which transactions were valued and recorded in the aggregate at $418,000.

(s)    During the year ended December 31, 2016, the Company vested the remaining an aggregate of 1,157,653 shares of restricted common stock issued as Guaranty Shares, to the chairman of the board and majority stockholder in connection with his personal guaranty required with the Enhanced Note, which transactions were valued and recorded in the aggregate at $696,000, and classified as interest expense – related party. See also Note 11 (c) below for more information.

See also Note 19 - Subsequent Events for more information.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income tax expense are as follows (in thousands):

	Years Ended December 31,
	2016		2015
Current:
Federal	$	162	$	—
State	100		27
Total Current	262		27
Deferred:
Federal	49		365
State	—		—
Total Deferred	49		365
Total Tax Provision	$	311	$	392

The following is a reconciliation of expected tax expense to actual expense (in thousands):

	Years Ended December 31,
	2016			2015
Federal Income Tax Expense/(Benefit)	$	2,274		$	(62	)
State Income Tax	198			494
Nondeductible Expenses	168			40
Provision to Return Reconciling Items	3,112			(3,211		)
Change in Valuation Allowance	(5,442		)	3,229
Other	1			(98		)
Total Tax Provision	$	311		$	392

Note 13 - Income Taxes - continued

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities, for financial reporting purposes, and amounts used for Federal income tax purposes. The components of deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2016			2015
Deferred Tax Assets:
Federal and State Net Operating Loss Carry-Forward	$	20,361		$	25,986
Share-Based Compensation	1,084			1,151
Other Temporary Differences	1,167			1,051
Total	$	22,612		$	28,188
Deferred Tax Liabilities
Tax Goodwill	$	(414	)	$	(365	)
Depreciation	(276		)	(280		)
Other Temporary Differences	—			(130		)
Total	$	(690	)	$	(775	)
Net Deferred Tax Asset	$	21,922		$	27,413
Valuation Allowance	(22,336		)	(27,778		)
Deferred Tax Liability	$	(414	)	$	(365	)

At December 31, 2016, the Company had available, net operating loss carry-forwards of approximately $59.5 million for Federal income tax purposes and net operating loss carry-forwards of approximately $2.7 million for State income tax purposes, which will begin to expire in 2019. Utilization by the Company is subject to limitations based on the Company's future income, and pursuant to Section 382 of the Internal Revenue Code. The usage of some of these net operating loss carry-forwards may be limited due to changes in ownership that have occurred or may occur in the future.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases

The Company conducts operations in leased facilities located in Texas and New Jersey. The Texas lease includes lease concessions which amounts are included as part of the aggregate minimum lease payments and recognized on a straight-line basis over the minimum lease terms.

Future minimum lease payments required under the non-cancelable operating lease as and for the years ending December 31 are as follows (in thousands):

2017		2018		2019
$	483	$	487	$	490

Rent expense for the years ended December 31, 2016 and 2015 was $328,000 and $343,000, respectively.

Legal Proceedings

(a)    Neil and Kristine Markey, et al., Plaintiffs v. Lapolla Industries, Inc., Delfino Insulation, et al, Defendants.

A complaint initially entitled Neil and Kristine Markey, individually, and on behalf of all others similarly situated, Plaintiffs, vs. Lapolla industries, Inc., a Delaware corporation; Lapolla International, Inc., a Delaware corporation; and Delfino Insulation Company, Inc., a New York Corporation, Defendants, was filed in the United States District Court for the Eastern District of New York and served on or about October 10, 2012 and amended last on November 11, 2013. Plaintiffs brought this lawsuit only individually, having amended out any request for a class action. The complaint alleged, among other things, that Lapolla designed, labeled, distributed, and manufactured spray polyurethane foam insulation, which created a highly toxic compound when applied as insulation resulting in exposure to harmful gases. Plaintiffs sought: actual, compensatory, and punitive damages; injunctive relief; and attorney fees. Lapolla considered the allegations to be without merit and vigorously defended the allegations. On February 4, 2015, the Court dismissed the litigation with prejudice, per the voluntary request of Plaintiffs upon the advice of their new counsel and after their original litigation counsel withdrew citing irreconcilable differences with the Plaintiffs.  The Court retained jurisdiction to address a pending motion for sanctions filed by Lapolla.  The primary basis for Lapolla’s motion for sanctions is the Plaintiffs’ and their original attorney’s filing of the lawsuit without sufficient factual basis for the claims of personal injury and for failing to comply with discovery obligations to produce numerous potentially dispositive documents that Plaintiffs knew existed and their original counsel either knew or should have known existed.  Lapolla seeks to recover over $800,000 in legal fees for the defense of the lawsuit. All motions have been filed with the Court and Lapolla is awaiting a final ruling. The final outcome of this litigation cannot be determined at this time.

Note 14 - Commitments and Contingencies - continued

(b)    Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel, Plaintiffs v. Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements, Perfect Wall, LLC, and Jozsef Finta, Defendants.

Pasquale Guzzo a/k/a Pasqualino Guzzo PDB Home Improvements filed a third-party complaint against Lapolla Industries, Inc. in the Superior Court, Judicial District of Stamford/Norwalk, in Connecticut on January 3, 2013.  Guzzo is alleging Lapolla’s spray polyurethane foam product is a defective product under Connecticut law and seeking indemnification and attorney’s fees.  On August 28, 2013, Michael Commaroto, Kimberly S. Commaroto, and Gretchen Schlegel filed an amended complaint against Lapolla also asserting the spray polyurethane foam is a defective product.  Plaintiffs seek monetary damages, punitive damages, and attorney’s fees, among other relief. Lapolla considers the allegations to be without merit and is vigorously defending the allegations. The outcome of this litigation cannot be determined at this time.

(c)    Various Lawsuits and Claims Arising in the Ordinary Course of Business

We are involved in various lawsuits and claims arising in the ordinary course of business, which are, in our opinion, immaterial both individually and in the aggregate with respect to our consolidated financial position, liquidity or results of operations.

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Net Income (Loss) Per Common Share - Basic and Diluted

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Net Income (Loss) Per Common Share - Basic and Diluted

(Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock and common stock equivalents outstanding during the period.  Common stock equivalents were not considered in calculating diluted net loss per common share for the years ended December 31, 2015 as their effect would be anti-dilutive. The computation of the Company’s basic and diluted earnings per share is as follows (in thousands, except per share data):

	Year Ended December 31,
	2016		2015
Net income or (loss) available to common shareholders (A)	$	6,378	$	(577	)
Weighted average common shares outstanding (B)	122,813		121,283
Dilutive effect of employee equity incentive plans	484		—
Weighted average common shares outstanding, assuming dilution (C)	123,297		121,283
Basic earnings per common share (A)/(B)	$	0.05	$	(0.00	)
Diluted earnings per common share (A)/(C)	$	0.05	$	(0.00	)

For 2016, a total of 400,000 shares of common stock were excluded from the calculation of diluted earnings per common share, all of which shares were for outstanding, vested and exercisable stock options that had an exercise price greater than the market value of the common share as of the period then ended (out-of-the-money"). For 2015, a total of 2,667,500 shares of common stock were excluded from the calculation of diluted earnings per common share due to the net loss incurred by the company and all of which shares were for outstanding, vested and exercisable stock options that had an exercise price equal to or lesser than the market value of the common share as of the period then ended (“in-the-money”). Outstanding, vested and exercisable out-of-the money stock options could be included in the calculation in the future if the market value of the Company’s common shares increases and is greater than the exercise price, and outstanding, vested and exercisable in-the-money stock options could be included in the calculation in the future for periods then ended when the Company reports a profit.

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Securities Transactions

12 Months Ended

Dec. 31, 2016

Securities Financing Transactions [Abstract]

Securities Transactions

Securities Transactions

(a) During 2016, the Company issued an aggregate of 86,404 shares of restricted common stock, par value $.01, valued and recorded in the aggregate at $38,000 for advisory and consulting services.

(b) During 2016, the Company issued an aggregate of 1,157,653 shares of restricted common stock, par value $.01, valued and recorded in the aggregate at $696,000 and classified as interest expense – related party pursuant to a guaranty made in connection with a financing. See also Note 11 (c) below for more information.

(c) During 2016, the Company issued 25,000 shares of common stock, par value $.01 per share, for a stock bonus to an executive officer, employee, which transaction was valued and recorded at $16,000.

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Share-Based Payment Arrangements

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Payment Arrangements

Share–Based Payment Arrangements

The Company reports share-based compensation arrangements using a straight-line fair valuation model for stock awards and Black-Scholes fair valuation model for option awards to calculate compensation expense over the requisite service period of grants. At December 31, 2016, the Company had three share based compensation plans, including the Equity Incentive Plan (“Equity Plan”), Advisory and Consulting Agreement Plan (“Advisor Plan”), and Guaranty Agreement Plan (“Guaranty Plan”) in effect. Compensation cost charged against income for all compensation and incentive plans for 2016 and 2015 was $1.7 million and $2.0 million, respectively.

Equity Incentive Plan

The Company’s Equity Plan, which is shareholder-approved, permits the grant of stock awards to eligible participants for up to 10,000,000 shares of common stock. The purpose of the Equity Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward employees, directors and consultants performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Equity Plan provides financial performance measures upon which specific performance goals would be based and limits on the numbers of shares or compensation that could be made. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock awards may provide for accelerated vesting if there is a change in control. The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation model and spread over the requisite service period. For 2016, there was an aggregate of 2,925,000 awards granted and/or vested to directors, officers, and key employees, of which 2,800,000 were for options granted and 125,000 were for stock awards vested. For 2015, there was an aggregate of 5,417,500 awards granted to directors, officers, and key employees, of which 5,317,500 were for options and 100,000 were for stock awards. As of December 31, 2016, total compensation cost related to non-vested stock options was $896,000, which is expected to be recognized over 2.12 years after December 31, 2016 (25.5 months on a weighted-average basis). As of December 31, 2015, total compensation cost related to non-vested stock options was $1.4 million. There were 1,982,500 shares issuable and available for grant at December 31, 2016. Stock option and bonus activity under the Company’s Equity Plan as of the years ended December 31, is summarized below:

Option Awards 

	2016			2015
	Number	Weighted-Average		Number		Weighted-Average
Options	of Options	Exercise Price		of Options		Exercise Price
Outstanding-Beginning of Year	5,017,500	$	0.48	7,277,500		$	0.47
Granted	2,800,000	0.40		2,100,000		0.33
Exercised	—	—		—		—
Canceled, Expired or Forfeited	—	—		(4,360,000	)	0.46
Outstanding - End of Year	7,817,500	0.42		5,017,500		0.48
Exercisable - End of Year	5,032,420	$	0.41	2,667,500		$	0.73

The weighted-average grant-date fair value of option awards granted during 2016 and 2015 was $634,866 and $79,387, respectively.

The following table summarizes options outstanding at: 

	Outstanding				Exercisable			Outstanding				Exercisable
		Weighted Average	Weighted			Weighted			Weighted Average	Weighted			Weighted
Range of	Number	Remaining	Average		Number	Average		Number	Remaining	Average		Number	Average
Exercise	Outstanding	Contractual	Exercise		Exercisable	Exercise		Outstanding	Contractual	Exercise		Exercisable	Exercise
Prices	at 12/31/16	Life (Years)	Price		at 12/31/16	Price		at 12/31/15	Life (Years)	Price		at 12/31/15	Price
$.20 - $.39	2,380,000	5.5	$	0.33	2,205,000	$	0.33	3,230,000	6.5	$	0.29	1,580,000	$	0.24
$.40 - $.59	4,837,500	3.9	0.42		2,427,420	0.43		3,587,500	4.2	$	0.44	887,500	$	0.45
$.60 - $.80	600,000	2.1	$	0.71	400,000	0.71		600,000	3.1	$	0.71	200,000	$	0.71

Note 17 -    Share–Based Payment Arrangements, continued

Stock Awards 

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	25,000		$	16,250		50,000		$	32,500
Granted	100,000		53,000			—		—
Vested	(125,000	)	(69,250		)	(25,000	)	(16,250		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		25,000		$	16,250

Advisor Plan

The Company entered into an advisory and consultant agreement on February 22, 2011 with a non-employee director, Jay C. Nadel, wherein the Company granted 5,000,000 shares of restricted common stock, par value $.01, which vested monthly over 3 years, and includes certain anti-dilution provisions (the "Nadel Agreement"). The grant-date fair value for the 5,000,000 shares was calculated by taking the closing price of the Company's common stock of $.57 per share on the date of grant and multiplying it by the number of shares granted, equaling $2,850,000, all of which has been recorded. The anti-dilution aspects continue so long as the Nadel Agreement is in force. For 2016, anti-dilution transactions occurred, which required the Company to grant and vest an additional 86,404 shares of restricted common stock. The grant-date fair value for the anti-dilution shares was calculated by taking the closing price of the Company’s common stock on the anti-dilution dates for a weighted-average of approximately $0.44 per share and multiplying it by the number of shares granted, equaling $38,000. For 2015, anti-dilution transactions occurred, which required the Company to grant and vest an additional 1,035,743 shares of restricted common stock. The grant-date fair value for the anti-dilution shares was calculated by taking the closing price of the Company’s common stock on the anti-dilution dates for a weighted-average of approximately $0.40 per share and multiplying it by the number of shares granted, equaling $418,000. A summary of awards activity under the Advisor Plan at December 31, 2016 and 2015, and changes during the years then ended, are as follows:

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	—		$	—		—		$	—
Granted	86,404		38,063			1,035,743		417,662
Vested	(86,404	)	(38,063		)	(1,035,743	)	(417,662		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		—		$	—

Guaranty Plan

The Company made a grant of restricted common stock in connection with a personal guarantee provided by the chairman of the board and majority stockholder to secure working capital on favorable terms and the Company’s performance under a financing instrument. Refer to Note 12 – Financing Instruments, Items (b)(i) – Enhanced Note for more information on the financial instrument.

The Company granted 3,681,000 shares of restricted common stock, par value $0.01, which shares vest monthly on a pro rata basis over the life of the Enhanced Note (“Guaranty Shares”). The Guaranty Shares were valued at $.60 per share, the closing price of the Company’s common stock as quoted on the OTC Markets on the day preceding the closing date of December 10, 2013, for an aggregate amount of $2.2 million. The Guaranty Shares are being recorded as interest expense – related party, thereby increasing the effective interest rate on the Enhanced Note.

The following table summarizes grant activity under the Guaranty Plan at December 31, 2016 and 2015, and changes during the years then ended: 

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	1,157,653		$	694,591		2,382,416		$	1,429,449
Granted	—		—			—		—
Vested	(1,157,653	)	(694,591		)	(1,224,763	)	(734,858		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		1,157,653		$	694,591

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Business Segments and Geographic Area Information

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Business Segments and Geographic Area Information

Business Segments and Geographic Area Information

Business Segments

The Company is a leading United States based manufacturer and global supplier operating two segments: Foam and Coatings. The Company’s segments are organized based on manufacturing competencies.

Foam. The Foam segment primarily supplies both roofing and building envelope insulation applications. Roofing applications consist of foam and coatings systems in new and retrofit commercial and industrial applications. Insulation is used in commercial and industrial, as well as residential, applications. We manufacture our own roofing and wall insulation foams. Additionally, this segment also supplies polyurethane as an adhesive for board stock insulation to roofing substrates for commercial and industrial applications, sundry items, and application equipment. Spray Rigs are an integral part of our business insofar that they are required for the application of our foam and used for large scale coating jobs. We began making and selling our own spray rigs during 2008. This is a basic assembly operation and we undertake this task to provide turnkey service to our customers. We allocate sales amounts for Spray Rigs to either our foam or coatings segments, as applicable. The AirTight Division involves application of interior insulation foams that we produce and installation of other energy reducing products in multi-family properties by subcontractors hired by the Company on a limited basis. We allocate sales amounts for The AirTight Division to our foam segment.

Coatings. The Coatings segment primarily supplies a variety of protective coatings for roofing systems for new and retrofit commercial and industrial applications, as well as residential, applications. Additionally, this segment also supplies caulking for general application in the construction industry, and sundry items. We manufacture our own roof coatings.

The Company maintains centralized manufacturing and spray rig building operations in Houston, Texas. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1. The Company allocates resources to segments and evaluates the performance of segments based upon reported segment income before income taxes. A substantial amount of administrative expenses are allocated to the segments. The portion not allocated to the segments represents the unallocated cost of certain corporate expenses and are included in Unallocated Amounts. There are no intersegment sales or transfers.

The following are selected results of reportable segments (in thousands):

Segments
2016	Foam		Coatings		Totals
Sales	$	73,919	$	12,467	$	86,386
Depreciation	75		13		88
Amortization of Other Intangible Assets	213		36		249
Interest Expense	640		108		748
Segment Profit	10,213		1,984		12,197
Segment Assets (1)	22,538		4,566		27,104
Expenditures for Segment Assets	$	123	$	21	$	144
2015	Foam		Coatings		Totals
Sales	$	66,030	$	12,619	$	78,649
Depreciation	110		21		131
Amortization of Other Intangible Assets	215		41		256
Interest Expense	955		183		1,138
Segment Profit	4,514		1,815		6,329
Segment Assets (1)	19,341		4,372		23,713
Expenditures for Segment Assets	$	48	$	9	$	57

Note 18 - Business Segments and Geographic Area Information - continued

The following are reconciliations of reportable segment profit or loss, and assets, to the Company’s totals for the years indicated: 

Segments Profit
	2016			2015
Total Profit for Reportable Segments	$	12,197		$	6,329
Unallocated Amounts:
Corporate Expenses	(5,508		)	(6,514		)
Income (Loss) Before Income Taxes	$	6,689		$	(185	)

Assets	2016		2015
Total Assets for Reportable Segments (1)	$	27,104	$	23,713
Other Unallocated Amounts (2)	2,291		2,296
Total	$	29,395	$	26,009

⁽¹⁾Segment assets are the total assets used in the operation of each segment.

⁽²⁾Includes corporate assets which are principally cash and prepaid expenses.

Geographic Area Information

The Company does not operate any manufacturing sites nor maintain a permanent establishment in any particular country outside of the United States at this time. The Company’s products are sold to independent distributors globally for select target markets. Sales are attributed to geographic areas based on customer location. Long-lived assets are attributable to geographic areas based on asset location.

Geographic Area (in thousands):
	United						Rest of
2016	States		Europe		Middle East		World		Total
Sales	$	81,393	$	2,567	$	3	$	2,423	$	86,386
Long-Lived Assets	$	6,431	$	—	$	—	$	—	$	6,431
	United						Rest of
2015	States		Europe		Middle East		World		Total
Sales	$	76,589	$	687	$	—	$	1,373	$	78,649
Long-Lived Assets	$	6,838	$	—	$	—	$	—	$	6,838

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Subsequent Events

12 Months Ended

Dec. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

(a)    On January 1, 2017, the Company granted 100,000 shares of common stock, par value $.01, pursuant to an agreement with Richard J. Kurtz, for a stock bonus. Under the stock bonus agreement, the Company granted Mr. Kurtz 100,000 shares of the Company’s common stock, par value $.01, which vests in four equal 25,000 share increments, on March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, subject to continued service as chairman of the board of the Company. The 100,000 shares of common stock were valued in the aggregate at $0.53 per share, the closing price of the Company’s common stock as quoted on OTC Markets on the date of grant.

(b)    On January 5, 2017, the Company granted an aggregate of 400,000eight-year options to non-employee directors, including Messrs Kurtz, Nadel, Gregg, and Larson, for the right to each acquire 100,000 shares of the Company's common stock, par value $.01, at an exercise price per share equal to the fair market value of a share of the Company’s common stock on the date of grant, determined based on the per share closing price of the Company's common stock as quoted on the OTC Markets on such date, or $0.50 per share, which options vest over a 3 year period in the amount of 33,333; 33,333; and 33,334 on December 31, 2017, December 31, 2018, and December 31, 2019, subject to continued satisfactory board of director services. The transactions were valued in the aggregate at $191,000, which was estimated using the Black-Scholes option pricing model and will be expensed over the requisite vesting periods.

(c)    On February 15, 2017, the Company announced a cash dividend of one cent per share, payable to shareholders of record as of March 30, 2017.

(d)    The Company has evaluated subsequent events through the date of this report.

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Summary of Organization, Basis of Presentation and Critical Accounting Policies, Estimates and Assumptions (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Trade Receivables and Credit Risk

Trade Receivables and Credit Risk

Trade receivables are the primary financial instruments that may subject the Company to significant concentrations of credit risk. The Company’s trade receivables consist primarily of uncollateralized obligations from its diverse customer base, including personal guarantees when obtainable, due under normal trade terms, which generally require payment within 30 days of the invoice date. However, these payment terms may be extended in select cases and many customers do not pay within stated trade terms. The Company has a credit insurance policy in place covering most customer account balances. The Company evaluates the creditworthiness of its customers’ financial position and monitors accounts on a regular basis. Provisions to the allowance for doubtful accounts are reviewed quarterly and adjustments are made periodically (as circumstances warrant) based upon management’s best estimate of collectability of accounts.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost over the fair value of net tangible and identifiable intangible assets of acquired businesses. Identifiable intangible assets acquired in business combinations are recorded based upon their fair value at the date of acquisition. According to GAAP, goodwill is required to be tested for impairment, on an annual basis and between annual tests in certain circumstances, and written down when impaired. The goodwill impairment test is performed by comparing the fair value of the associated reporting unit to its carrying value. GAAP also requires that intangible assets with estimable useful lives be amortized over their respective estimated lives to their estimated residual values, and reviewed for impairment, unless these lives are determined to be indefinite.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company adopted authoritative GAAP guidance regarding disclosures about fair value of financial instruments, which requires the disclosure of the fair value of off-and-on balance sheet financial instruments. Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments (none of which are held for trading purposes), approximate the carrying values of such amounts. The Company adopted authoritative GAAP guidance regarding fair value measurements, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. This guidance establishes three levels of inputs that may be used to measure fair value: (a) Level 1 - Quoted prices in active markets for identical assets or liabilities. (b) Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities; and (c) Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 1, 2, or 3 assets or liabilities at December 31, 2016 and 2015, respectively. The carrying value of cash and cash equivalents, trade receivables and payables, prepaid expenses and other current assets, and other payables and accruals approximate fair value due to short period of time to maturity.

Litigation

Litigation

The Company is occasionally involved in legal proceedings in the normal course of business. The Company accrues a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers cash, checks, credit card and ACH payments deposited with financial institutions, with original maturities of three months or less, to be cash and cash equivalents.

Fixed-Price Contracts

Fixed-Price Contracts

The Company’s AirTight Division performs work under fixed-price contracts. The fixed-price contracts vary in length but are typically less than one year. In accordance with industry practice, the Company includes asset and liability accounts relating to fixed-price contracts, including related deferred income taxes, if applicable, in current assets and liabilities even when such amounts are realizable or payable over a period in excess of one year. Revenues from fixed-price contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Fixed-price contract costs include all direct material, labor costs, equipment and those indirect costs related to contract performance, such as indirect labor, supplies, tools, and repairs costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. The asset "costs and estimated earnings in excess of billings on uncompleted contracts" represents revenues recognized in excess of amounts billed. The liability "billings in excess of costs and estimated earnings on uncompleted contracts" represents billings in excess of revenues recognized.

Inventories

Inventories

Cost is determined on an actual and/or standard cost basis that approximates the first-in, first-out (FIFO) method using a perpetual inventory system. Inventories are valued at the lower of cost or market (replacement cost), which does not exceed net realizable value.

Income Taxes

Income Taxes

The Company's provision for income taxes is determined using the U.S. federal statutory rate. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities along with net operating losses and tax credit carryovers. The Company's net deferred tax asset was approximately $21.9 million and $27.4 million at December 31, 2016 and 2015, respectively. The Company's federal income tax returns are open to audit under the statute of limitations for the years ended December 31, 2013 through 2015. The Company recorded a valuation allowance against the deferred tax asset of $22.3 million and $27.8 million at December 31, 2016 and 2015, creating a deferred tax liability of $414,000 and $365,000, respectively. The Company has no unrecognized income tax benefits. Accordingly, the annual effective tax rate is unaffected. Should the Company incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense and operating expense, respectively.

Depreciable Lives of Property, Plant and Equipment

Depreciable Lives of Property, Plant and Equipment

Property, plant and equipment is recorded at cost and depreciated using the straight-line method, which deducts equal amounts of the cost of each asset from earnings every year over its estimated economic useful life. Economic useful life is the duration of time an asset is expected to be productively employed by the Company, which may be less than its physical life. Assumptions on the following factors, among others, affect the determination of estimated economic useful life: wear and tear, obsolescence, technical standards, contract life, market demand, competitive position, raw material availability, and geographic location. The estimated economic useful life of an asset is monitored to determine its appropriateness, especially in light of changed business circumstances. For example, changes in technology and changes in the estimated future demand for products may result in a shorter estimated useful life than originally anticipated. In these cases, we would depreciate the remaining net book value over the new estimated remaining life, thereby increasing depreciation expense per year on a prospective basis.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant, and equipment held for use is grouped for impairment testing at the lowest level for which there is an identifiable cash flow. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances would include a significant decrease in the market value of a long-lived asset grouping, a significant adverse change in the manner in which the asset grouping is being used or in its physical condition, a history of operating or cash flow losses associated with the use of the asset grouping, or changes in the expected useful life of the long-lived assets. If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by that asset group is compared to the carrying value to determine whether impairment exists. If an asset group is determined to be impaired, the loss is measured based on the difference between the asset group’s fair value and its carrying value. An estimate of the asset group’s fair value is based on the discounted value of its estimated cash flows. Assets to be disposed of by sale are reported at the lower of carrying amount or fair value less cost to sell. The assumptions underlying cash flow projections represent our best estimates at the time of the impairment review. Factors that we must estimate include industry and market conditions, sales volume and prices, costs to produce, etc. Changes in key assumptions or actual conditions that differ from estimates could result in an impairment charge. Management believes it uses reasonable and supportable assumptions when performing impairment reviews and cannot predict the occurrence of future events and circumstances that could result in impairment charges.

Goodwill

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net tangible and identifiable intangible assets of an acquired business. Goodwill was $4.2 million at December 31, 2016 and 2015. The Company operates two reporting units, Foam and Coatings. Disclosures related to goodwill are included in Note 8 to the financial statements. The Company evaluates goodwill for impairment on an annual basis, or more frequently if management believes indicators of impairment exist. Under generally accepted accounting principles, the Company has the option to perform a qualitative assessment to test for impairment of goodwill. If it is determined that it is more likely than not that the fair value of each reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if the Company concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of each reporting unit and comparing the carrying value of each reporting unit to its estimated fair value. If the fair value of a reporting unit is greater than its carrying value then goodwill is not impaired; otherwise, the second step of the impairment test shall be performed to measure the amount of impairment loss. Based on the qualitative assessment performed as of December 31, 2016, the Company concluded that it was more likely than not that the fair value of its reporting units was greater than their carrying amount. Accordingly, no further testing was required. There were no goodwill impairment charges recorded during the years ended December 31, 2016 or 2015.

Other Intangible Assets

Other Intangible Assets

The Company had other intangible assets, net of $1.2 million at December 31, 2016 and 2015, consisting of product formulations and trade names that were acquired as part of business combinations, and trademarks and approvals and certifications obtained as part of entering into new markets. Amortization of other intangible assets totaled $277,000 and $284,000 for the years ended December 31, 2016 and 2015, respectively. Other intangible assets are tested for impairment as part of the long-lived asset grouping impairment tests. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. See impairment discussion above under Property, Plant and Equipment for a description of how impairment losses are determined. Disclosures related to other intangible assets are included in Note 8 to the financial statements. Significant management judgment is required in the forecasts of future operating results that are used in the Company’s impairment evaluations. The estimates used are consistent with the plans and estimates that Management uses to manage its business. It is possible, however, that the plans may change and estimates used may prove to be inaccurate. If the Company’s actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used to assess the recoverability of these assets, then the Company could incur future impairment charges, which would adversely affect financial performance.

Revenue Recognition

Revenue Recognition

Sales are recognized (i) as risk and title to products transfers to the customer (which generally occurs at the time shipment is made), (ii) the sales price is fixed or determinable, and (iii) collectability is reasonably assured. Sales channels include direct sales, distributors, and independent representatives. Irrespective of the sales channel, returns and allowances are not a business practice in the industry. Amounts billed for shipping and handling are included in revenues (freight). Freight included in revenue was $834,000 and $958,000 in 2016 and 2015, respectively. Costs incurred for shipping and handling are included in cost of sales. Freight included in cost of sales was $4.3 million and $4.2 million in 2016 and 2015, respectively. Revenues are recorded net of sales tax.

Research and Development

Research and Development

Research and development costs related to both future and present products are charged to operations as incurred.

Share-Based Compensation

Share-Based Compensation

The Company accounts for the cost of employee or director services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The fair value of share based awards is estimated at the grant date using a Black-Scholes valuation model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The determination of fair value is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. Employee stock option exercise behavior is based on actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. The Company applies an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates are subject to revision in future periods if actual forfeitures differ from the estimates and changes impact compensation cost in the period in which the change in estimate occurs. Disclosures related to share-based compensation are included in Note 17 to our financial statements. Share-based compensation expense was $988,000 and $1.2 million in 2016 and 2015, respectively. If additional share based awards are granted, financial performance may be negatively affected, and if outstanding share based awards are forfeited or canceled, resulting in non-vesting of such stock awards, financial performance may be positively affected. In either instance, the Company’s financial performance may change depending on share based award activities in future periods.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company presents trade receivables, net of allowances for doubtful accounts, to ensure trade receivables are not overstated due to uncollectible accounts. Allowances, when required, are calculated based on a detailed review of certain individual customer accounts, including credit insurance and other security when applicable, and an estimation of the overall economic conditions affecting our customer base. The Company reviews a customer’s credit history before extending credit. The allowance for doubtful accounts was approximately $366,000 and $545,000 at December 31, 2016 and 2015, respectively. If the financial condition of customers were to deteriorate based on worsening overall economic conditions, resulting in an impairment of their ability to make payments to the Company, then additional allowances may be required in future periods.

Cost of Sales and Selling General and Administrative Costs

Cost of Sales and Selling, General and Administrative Costs

The Cost of Sales line item includes all the material, overhead, packaging, and freight costs associated with products shipped, including resale finished goods and raw materials, as well as payroll costs associated with manufacturing the finished goods, inbound freight, sales tax expense, product containers, labels, and other miscellaneous items that are indirectly used in the manufacturing, packaging, and shipping (outbound freight) of finished goods, including inspection, and internal transfer costs, as well as depreciation of machinery, amortization of approvals and certifications, and an allocated portion of overhead. The Selling, General and Administrative line item includes selling, advertising, marketing, customer service, and technical support, as well as the costs of providing corporate functional support for all other areas of our business.

Advertising and Marketing Expenses

Advertising and Marketing Expenses

Advertising and marketing costs are generally expensed as they are incurred. Expenditures for certain advertising and marketing activities related to trade shows and trade magazines are deferred within the Company’s fiscal year when the benefits clearly extend beyond the interim period in which the expenditure is made, generally not to exceed 90 days. There were $181,000 and $116,000 costs for advertising deferred on the Company’s balance sheets as of December 31, 2016 and 2015, respectively. Other advertising and marketing expenditures that do not meet the deferred criteria are expensed when the advertising and marketing occurs.

Debt Issuance Costs

Debt Issuance Costs

The Company capitalizes debt issuance costs, which are netted against long-term debt in the Company’s balance sheets. These costs are amortized over the term of the financial instrument. Amortization of debt issuance costs is included in “Interest Expense” in the statements of operations.

Net Income (Loss) Per Common Share

Net Income (Loss) Per Common Share

Basic income (loss) per share is based upon the net income (loss) applicable to common shares after preferred dividend requirements and upon the weighted average number of common shares outstanding during the period. Diluted income (loss) per share reflects the effect of the assumed exercise of stock options and warrants only in periods in which such effect would have been dilutive.

Recently Adopted Accounting Standards and New Accounting Standards Not Yet Adopted

Recently Adopted Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-15, “Presentation of Financial Statements—Going Concern:  Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern.”  The amendments in this ASU are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.  This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the financial statement footnotes.  The pronouncement is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. The Company adopted the provisions of the guidance in the fourth quarter of 2016. The adoption did not have a material impact on the Company’s financial statements.

In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from GAAP the concept of extraordinary items and the need for an entity to separately classify, present, and disclose extraordinary events and transactions, while retaining certain presentation and disclosure guidance for items that are unusual in nature or occur infrequently. The pronouncement is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period and may be applied retrospectively, with early application permitted. The Company adopted the provisions of the guidance in the fourth quarter of 2015. The adoption did not have a material impact on the Company’s financial statements.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs." The accounting guidance requires that debt issuance costs related to a recognized debt liability be reported on the Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The pronouncement is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, with early application permitted for financial statements that have not been previously issued. The Company adopted the provisions of the guidance in the first quarter of 2016, and retrospectively for 2015. The adoption did not have a material impact on the Company’s financial statements.

In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The Company adopted the provisions of the guidance in the fourth quarter of 2016. The adoption did not have a material impact on the Company’s financial statements. There was not a need to retrospectively adjust prior periods.

New Accounting Standards Not Yet Adopted

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Trade Receivables (Tables)

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Trade Receivables

Trade receivables are comprised of the following (in thousands): 

	December 31,
	2016			2015
Trade Receivables	$	12,874		$	10,551
Less: Allowance for Doubtful Accounts	(366		)	(545		)
Trade Receivables, Net	$	12,508		$	10,006

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Contracts (Tables)

12 Months Ended

Dec. 31, 2016

Contractors [Abstract]

Costs and Estimated Earnings on Uncompleted Contract

(in thousands):

	December 31,
	2016			2015
Costs Incurred on Uncompleted Contracts	$	274		$	1,089
Estimated Earnings on Uncompleted Contracts	83			306
Earned Revenues	357			1,395
Less: Billings to Date	(378		)	(1,404		)
Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	$	(21	)	$	(9	)

Included in the accompanying balance sheets under the following captions as of December 31 (in thousands):

	2016			2015
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	$	—		$	42
Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	21			51
Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	$	(21	)	$	(9	)

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Inventories (Tables)

12 Months Ended

Dec. 31, 2016

Inventory Disclosure [Abstract]

Summary of Inventories

The following is a summary of inventories (in thousands): 

	December 31,
	2016		2015
Raw Materials	$	2,157	$	2,599
Finished Goods	4,453		5,575
Inventories, Net	$	6,610	$	8,174

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Prepaid Expenses and Other Current Assets (Tables)

12 Months Ended

Dec. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Summary of Prepaid Expenses and Other Current Assets

The following is a summary of prepaid expenses and other current assets (in thousands): 

	December 31,
	2016		2015
Prepaid Insurances	$	735	$	637
Prepaid Marketing	181		116
Prepaid Consulting	94		58
Prepaid Other	1,064		363
Total Prepaid Expenses and Other Current Assets	$	2,074	$	1,174

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Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Summary of Property, Plant and Equipment

The following is a summary of property, plant and equipment (in thousands): 

	December 31,
	2016			2015			Estimated Useful Life
Vehicles	$	244		$	462		5 Years
Leasehold Improvements	269			289			13 – 15 Years
Office Furniture and Equipment	159			307			3 – 7 Years
Computers and Software	907			946			3 – 5 Years
Machinery and Equipment	2,557			2,517			3 – 20 Years
Total Property, Plant and Equipment	$	4,136		$	4,521
Less: Accumulated Depreciation	(3,151		)	(3,434		)
Total Property, Plant and Equipment, Net	$	985		$	1,087

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Goodwill and Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The following is a summary of Goodwill (in thousands):

Goodwill

	December 31,
	2016		2015
Foam	$	2,932	$	2,932
Coatings	1,303		1,303
	$	4,235	$	4,235

Other Intangible Assets

The following is a summary of Other Intangible Assets (in thousands):

Other Intangible Assets

	December 31,
	2016							2015
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount		Amortization Period
Product Formulations	$	138	(104		)	$	34	138		$	(95	)	43		15 Years
Trade Names	750		(419		)	331		750		(369		)	381		15 Years
Approvals and Certifications	3,462		(2,647		)	815		3,202		(2,429		)	773		5 Years
	$	4,350	$	(3,170	)	$	1,180	$	4,090	$	(2,893	)	$	1,197

Schedule of Future Amortization Expense

Based on the other intangible assets in service as of December 31, 2016, estimated amortization expense for the years ending December 31, 2017 through December 31, 2021 and thereafter is as follows (in thousands): 

	2017		2018		2019		2020		2021		Thereafter
Product Formulations	$	9	$	9	$	9	$	7	$	—	$	—
Trade Names	50		50		50		50		50		81
Approvals and Certifications	205		205		205		200		—		—
	$	264	$	264	$	264	$	257	$	50	$	81

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Deposits and Other Non-Current Assets, Net (Tables)

12 Months Ended

Dec. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Summary of Deposits and Other Non-Current Assets

The following is a summary of deposits and other non-current assets (in thousands):

	December 31,
	2016		2015
Prepaid Expenses	8		25
Other Receivables	9		5
Deposits	64		64
Total Deposits and Other-Non-Current Assets	$	81	$	94

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Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2016

Payables and Accruals [Abstract]

Summary of Accrued Expenses and Other Current Liabilities

The following is a summary of accrued expenses and other current liabilities as (in thousands): 

	December 31,
	2016		2015
Accrued Payroll	$	3	$	(6	)
Accrued Commissions	172		129
Accrued Inventory	249		438
Accrued Taxes and Other	1,990		1,725
Accrued Insurance	490		459
Deferred Finance Charge Income	13		28
Total Accrued Expenses and Other Current Liabilities	$	2,917	$	2,773

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense are as follows (in thousands):

	Years Ended December 31,
	2016		2015
Current:
Federal	$	162	$	—
State	100		27
Total Current	262		27
Deferred:
Federal	49		365
State	—		—
Total Deferred	49		365
Total Tax Provision	$	311	$	392

Schedule of Effective Income Tax Rate Reconciliation

he following is a reconciliation of expected tax expense to actual expense (in thousands):

	Years Ended December 31,
	2016			2015
Federal Income Tax Expense/(Benefit)	$	2,274		$	(62	)
State Income Tax	198			494
Nondeductible Expenses	168			40
Provision to Return Reconciling Items	3,112			(3,211		)
Change in Valuation Allowance	(5,442		)	3,229
Other	1			(98		)
Total Tax Provision	$	311		$	392

Schedule of Deferred Tax Assets and Liabilities

:

	December 31,
	2016			2015
Deferred Tax Assets:
Federal and State Net Operating Loss Carry-Forward	$	20,361		$	25,986
Share-Based Compensation	1,084			1,151
Other Temporary Differences	1,167			1,051
Total	$	22,612		$	28,188
Deferred Tax Liabilities
Tax Goodwill	$	(414	)	$	(365	)
Depreciation	(276		)	(280		)
Other Temporary Differences	—			(130		)
Total	$	(690	)	$	(775	)
Net Deferred Tax Asset	$	21,922		$	27,413
Valuation Allowance	(22,336		)	(27,778		)
Deferred Tax Liability	$	(414	)	$	(365	)

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Commitments and Contingencies (Table)

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Schedule of Capital Leased Assets

Future minimum lease payments required under the non-cancelable operating lease as and for the years ending December 31 are as follows (in thousands):

2017		2018		2019
$	483	$	487	$	490

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Net Income (Loss) Per Common Share - Basic and Diluted (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The computation of the Company’s basic and diluted earnings per share is as follows (in thousands, except per share data):

	Year Ended December 31,
	2016		2015
Net income or (loss) available to common shareholders (A)	$	6,378	$	(577	)
Weighted average common shares outstanding (B)	122,813		121,283
Dilutive effect of employee equity incentive plans	484		—
Weighted average common shares outstanding, assuming dilution (C)	123,297		121,283
Basic earnings per common share (A)/(B)	$	0.05	$	(0.00	)
Diluted earnings per common share (A)/(C)	$	0.05	$	(0.00	)

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Share-Based Payment Arrangements (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock Option Activity

Stock option and bonus activity under the Company’s Equity Plan as of the years ended December 31, is summarized below:

Option Awards 

	2016			2015
	Number	Weighted-Average		Number		Weighted-Average
Options	of Options	Exercise Price		of Options		Exercise Price
Outstanding-Beginning of Year	5,017,500	$	0.48	7,277,500		$	0.47
Granted	2,800,000	0.40		2,100,000		0.33
Exercised	—	—		—		—
Canceled, Expired or Forfeited	—	—		(4,360,000	)	0.46
Outstanding - End of Year	7,817,500	0.42		5,017,500		0.48
Exercisable - End of Year	5,032,420	$	0.41	2,667,500		$	0.73

Summary of Options Outstanding by Exercise Price

following table summarizes options outstanding at: 

	Outstanding				Exercisable			Outstanding				Exercisable
		Weighted Average	Weighted			Weighted			Weighted Average	Weighted			Weighted
Range of	Number	Remaining	Average		Number	Average		Number	Remaining	Average		Number	Average
Exercise	Outstanding	Contractual	Exercise		Exercisable	Exercise		Outstanding	Contractual	Exercise		Exercisable	Exercise
Prices	at 12/31/16	Life (Years)	Price		at 12/31/16	Price		at 12/31/15	Life (Years)	Price		at 12/31/15	Price
$.20 - $.39	2,380,000	5.5	$	0.33	2,205,000	$	0.33	3,230,000	6.5	$	0.29	1,580,000	$	0.24
$.40 - $.59	4,837,500	3.9	0.42		2,427,420	0.43		3,587,500	4.2	$	0.44	887,500	$	0.45
$.60 - $.80	600,000	2.1	$	0.71	400,000	0.71		600,000	3.1	$	0.71	200,000	$	0.71

Equity Incentive Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Nonvested Share Activity

Stock Awards 

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	25,000		$	16,250		50,000		$	32,500
Granted	100,000		53,000			—		—
Vested	(125,000	)	(69,250		)	(25,000	)	(16,250		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		25,000		$	16,250

Advisor Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Nonvested Share Activity

A summary of awards activity under the Advisor Plan at December 31, 2016 and 2015, and changes during the years then ended, are as follows:

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	—		$	—		—		$	—
Granted	86,404		38,063			1,035,743		417,662
Vested	(86,404	)	(38,063		)	(1,035,743	)	(417,662		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		—		$	—

Guaranty Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Nonvested Share Activity

The following table summarizes grant activity under the Guaranty Plan at December 31, 2016 and 2015, and changes during the years then ended: 

	2016					2015
	Number		Weighted-Average			Number		Weighted-Average
Nonvested Awards	of Shares		Grant-Date Fair Value			of Shares		Grant-Date Fair Value
Nonvested - Beginning of Year	1,157,653		$	694,591		2,382,416		$	1,429,449
Granted	—		—			—		—
Vested	(1,157,653	)	(694,591		)	(1,224,763	)	(734,858		)
Canceled, Expired or Forfeited	—		—			—		—
Nonvested - End of Year	—		$	—		1,157,653		$	694,591

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Business Segments and Geographic Area Information (Tables)

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Schedule of Segment Reporting Information By Segment

The following are selected results of reportable segments (in thousands):

Segments
2016	Foam		Coatings		Totals
Sales	$	73,919	$	12,467	$	86,386
Depreciation	75		13		88
Amortization of Other Intangible Assets	213		36		249
Interest Expense	640		108		748
Segment Profit	10,213		1,984		12,197
Segment Assets (1)	22,538		4,566		27,104
Expenditures for Segment Assets	$	123	$	21	$	144
2015	Foam		Coatings		Totals
Sales	$	66,030	$	12,619	$	78,649
Depreciation	110		21		131
Amortization of Other Intangible Assets	215		41		256
Interest Expense	955		183		1,138
Segment Profit	4,514		1,815		6,329
Segment Assets (1)	19,341		4,372		23,713
Expenditures for Segment Assets	$	48	$	9	$	57

Schedule of Reconciliations of Reportable Segment Profit or Loss

The following are reconciliations of reportable segment profit or loss, and assets, to the Company’s totals for the years indicated: 

Segments Profit
	2016			2015
Total Profit for Reportable Segments	$	12,197		$	6,329
Unallocated Amounts:
Corporate Expenses	(5,508		)	(6,514		)
Income (Loss) Before Income Taxes	$	6,689		$	(185	)

Schedule of Reconciliation of Assets From Segment to Consolidated

Assets	2016		2015
Total Assets for Reportable Segments (1)	$	27,104	$	23,713
Other Unallocated Amounts (2)	2,291		2,296
Total	$	29,395	$	26,009

⁽¹⁾Segment assets are the total assets used in the operation of each segment.

⁽²⁾Includes corporate assets which are principally cash and prepaid expenses.

Schedule of Revenue from External Customers and Long-Lived Assets By Geographical Areas [Table Text Block]

Geographic Area (in thousands):
	United						Rest of
2016	States		Europe		Middle East		World		Total
Sales	$	81,393	$	2,567	$	3	$	2,423	$	86,386
Long-Lived Assets	$	6,431	$	—	$	—	$	—	$	6,431
	United						Rest of
2015	States		Europe		Middle East		World		Total
Sales	$	76,589	$	687	$	—	$	1,373	$	78,649
Long-Lived Assets	$	6,838	$	—	$	—	$	—	$	6,838

XML

Summary of Organization, Basis of Presentation, and Critical Accounting Policies, Estimates, and Assumptions (Details)	12 Months Ended
	Dec. 31, 2016 USD ($) segment	Dec. 31, 2015 USD ($)	Feb. 11, 2005	Sep. 01, 2001
Business Acquisition [Line Items]
Deferred tax assets	$ 21,900,000	$ 27,400,000
Valuation allowance	22,300,000	27,800,000
Deferred tax assets at carrying value	414,000	365,000
Unrecognized tax benefits	0
Increase (decrease) in unrecognized tax benefit	0
Accrued interest and penalties	0
Net property, plant, and equipment	985,000	1,087,000
Depreciation expense	265,000	358,000
Impairment of property, plant, and equipment	0	0
Goodwill	$ 4,235,000	4,235,000
Number of reporting units | segment	2
Goodwill impairment		0
Other intangible assets, net	$ 1,180,000	1,197,000
Amortization of other intangible assets	277,000	284,000
Impairment of long-lived assets	0	0
Shipping and handling revenue	834,000	958,000
Freight costs	4,335,000	4,219,000
Share-based compensation expense	988,000	1,180,000
Allowance for doubtful accounts	366,000	545,000
Deferred advertising costs	$ 181,000	116,000
Total advertising and marketing costs expensed		$ 1,100,000
Infiniti Products, Inc. [Member]
Business Acquisition [Line Items]
Capital stock acquired (percent)				100.00%
Lapolla Industries, Inc. [Member]
Business Acquisition [Line Items]
Capital stock acquired (percent)			100.00%

XML

Dependence on a few suppliers (Details)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Supplier Concentration Risk [Member] | Raw Materials and Finished Goods [Member] | Three Largest Suppliers [Member]
Concentration Risk [Line Items]
Concentration risk percentage	42.00%	39.00%

XML

Trade Receivables (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Receivables [Abstract]
Trade Receivables	$ 12,874	$ 10,551
Less: Allowance for Doubtful Accounts	(366)	(545)
Trade Receivables, Net	$ 12,508	$ 10,006

XML

Contracts - Costs, Estimated Earnings and Billings on Uncompleted Contracts (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Costs in Excess of Billings on Uncompleted Contracts or Programs [Abstract]
Costs Incurred on Uncompleted Contracts	$ 274,000	$ 1,089,000
Estimated Earnings on Uncompleted Contracts	83,000	306,000
Uncompleted Contracts	357,000	1,395,000
Less: Billings to Date	(378,000)	(1,404,000)
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	$ 21,000	$ 9,000

XML

Contracts - Costs and Estimated Earnings on Uncompleted Contract in the Accompanying Balance Sheets (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Contractors [Abstract]
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	$ 0	$ 42,000
Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts	21,000	51,000
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts	$ 21,000	$ 9,000

XML

Inventories (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw Materials	$ 2,157,000	$ 2,599,000
Finished Goods	4,453,000	5,575,000
Inventories, Net	$ 6,610,000	$ 8,174,000

XML

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid Insurances	$ 735	$ 637
Prepaid Marketing	181	116
Prepaid Consulting	94	58
Prepaid Other	1,064	363
Total Prepaid Expenses and Other Current Assets	$ 2,074	$ 1,174

XML

Property, Plant and Equipment - Summary of Property, Plant and Equipment (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Total Property, Plant and Equipment	$ 4,136,000	$ 4,521,000
Less: Accumulated Depreciation	(3,151,000)	(3,434,000)
Total Property, Plant and Equipment, Net	$ 985,000	1,087,000
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Total Property, Plant and Equipment	$ 244,000	462,000
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total Property, Plant and Equipment	$ 269,000	289,000
Leasehold Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	13 years
Leasehold Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	15 years
Office Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total Property, Plant and Equipment	$ 159,000	307,000
Office Furniture and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Office Furniture and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	7 years
Computers and Software [Member]
Property, Plant and Equipment [Line Items]
Total Property, Plant and Equipment	$ 907,000	946,000
Computers and Software [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Computers and Software [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total Property, Plant and Equipment	$ 2,557,000	$ 2,517,000
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	20 years

XML

Property, Plant and Equipment Property, Plant and Equipment - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Depreciation	$ 265	$ 358
Cost of Sales [Member]
Property, Plant and Equipment [Line Items]
Depreciation	$ 168	$ 212

XML

Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Goodwill [Line Items]
Goodwill	$ 4,235,000	$ 4,235,000
Operating Segments [Member] | Foam [Member]
Goodwill [Line Items]
Goodwill	1,303,000	2,932,000
Operating Segments [Member] | Coatings [Member]
Goodwill [Line Items]
Goodwill	$ 2,932,000	$ 1,303,000

XML

Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 4,350	$ 4,090
Accumulated Amortization	(3,170)	(2,893)
Net Amount	1,180	1,197
Product Formulations [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	138	138
Accumulated Amortization	(104)	(95)
Net Amount	$ 34	43
Amortization Period	15 years
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 750	750
Accumulated Amortization	(419)	(369)
Net Amount	$ 331	381
Amortization Period	15 years
Approvals and Certifications [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 3,462	3,202
Accumulated Amortization	(2,647)	(2,429)
Net Amount	$ 815	$ 773
Amortization Period	5 years

XML

Goodwill and Other Intangible Assets - Schedule of Future Amortization Expense (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Finite-Lived Intangible Assets [Line Items]
2016	$ 264
2017	264
2018	264
2019	257
2020	50
Thereafter	81
Product Formulations [Member]
Finite-Lived Intangible Assets [Line Items]
2016	9
2017	9
2018	9
2019	7
2020	0
Thereafter	0
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
2016	50
2017	50
2018	50
2019	50
2020	50
Thereafter	81
Approvals and Certifications [Member]
Finite-Lived Intangible Assets [Line Items]
2016	205
2017	205
2018	205
2019	200
2020	0
Thereafter	$ 0

XML

Deposits and Other Non-Current Assets, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid Expenses	$ 8	$ 25
Other Receivables	9	5
Deposits	64	64
Total Deposits and Other-Non-Current Assets	$ 81	$ 94

XML

Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Accrued Liabilities and Other Liabilities [Abstract]
Accrued Payroll	$ 3	$ (6)
Accrued Commissions	172	129
Accrued Inventory	249	438
Accrued Taxes and Other	1,990	1,725
Accrued Insurance	490	459
Deferred Finance Charge Income	13	28
Total Accrued Expenses and Other Current Liabilities	$ 2,917	$ 2,773

XML

Financing Instruments Financing Instruments - Summary of Long-Term Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Outstanding balance on loan	$ 9,000	$ 14,424
Debt Instrument, Unamortized Discount (Premium) And Debt Issuance Costs, Net	(55)	(287)
Long-term Debt	$ 8,945	14,137
Secured Debt [Member]
Debt Instrument [Line Items]
Effective interest rate (percent)	11.66%
Outstanding balance on loan	$ 0	7,688
Line of Credit [Member] | Line of Credit [Member]
Debt Instrument [Line Items]
Effective interest rate (percent)	2.78%
Outstanding balance on loan	$ 9,000	0
Line of Credit [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Effective interest rate (percent)	4.60%
Outstanding balance on loan	$ 0	$ 6,736

XML

Financing Instruments - Loan and Security Agreement (Details)					6 Months Ended	12 Months Ended	17 Months Ended
	Sep. 07, 2016 USD ($) covenant	Apr. 30, 2016 USD ($)	Apr. 21, 2016 USD ($)	Sep. 01, 2010 USD ($)	Mar. 31, 2018	Sep. 30, 2017	Sep. 07, 2019	Jul. 01, 2019 USD ($)	Jan. 01, 2017 USD ($)	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 10, 2013 USD ($)
Line of Credit Facility [Line Items]
Long-term Debt										$ 8,945,000		$ 14,137,000
Repayments of debt		$ 2,000,000
Outstanding balance on loan										9,000,000		14,424,000
Line of Credit [Member] | Loan Agreement [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 15,000,000
Term of debt instrument	3 years
Number of debt covenants | covenant	2
Debt covenant, book value of accounts receivable to all borrowing and interest bearing liabilities, percentage	85.00%
Debt covenant, book value of inventory to all borrowings and interest bearing liabilities, percentage	55.00%
Debt covenant, book value of property, plant and equipment to all borrowings and interest bearing liabilities, percentage	50.00%
Debt instrument, covenant, fixed charge coverage ratio	1.20
Long-term Debt	$ 8,500,000										$ 9,700,000
Long-term debt, weighted average interest rate											2.78%
Cash available under loan											$ 3,200,000
Line of Credit [Member] | Loan Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Interest rate	2.25%
Line of Credit [Member] | Revolver Loan [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity				$ 12,000,000						2,200,000
Repayments of debt	$ 2,700,000
Outstanding balance on loan										$ 6,700,000
Weighted average interest rate										4.60%
Percentage of eligible accounts receivable				85.00%
Percentage of eligible inventory				65.00%
Debt borrowing base, percentage of eligible inventory, raw materials				30.00%
Inventory included in base rate calculation (up to)				$ 6,000,000
Secured Debt [Member]
Line of Credit Facility [Line Items]
Outstanding balance on loan										$ 0		$ 7,688,000
Secured Debt [Member] | Note Purchase Agreement [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity													$ 7,200,000.0
Repayments of debt	$ 5,800,000		$ 1,900,000
Weighted average interest rate										25.60%
Scenario, Forecast [Member] | Line of Credit [Member] | Loan Agreement [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity								$ 12,000,000
Debt covenant, asset coverage ratio					1.15	1.10	1.20
Subsequent Event [Member] | Line of Credit [Member] | Loan Agreement [Member]
Line of Credit Facility [Line Items]
Line of credit facility borrowing capacity, quarterly decrease in borrowing capacity									$ 250,000

XML

Financing Instruments - Note Purchase Agreements - Enhanced Note (Details) - USD ($)	Sep. 07, 2016	Apr. 30, 2016	Apr. 21, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 10, 2013
Line of Credit Facility [Line Items]
Outstanding balance on loan				$ 9,000,000	$ 14,424,000
Repayments of debt		$ 2,000,000
Secured Debt [Member]
Line of Credit Facility [Line Items]
Outstanding balance on loan				$ 0	$ 7,688,000
Effective interest rate (percent)				11.66%
Secured Debt [Member] | Note Purchase Agreement [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity						$ 7,200,000.0
Repayments of debt	$ 5,800,000		$ 1,900,000
Notes Payable, Noncurrent				$ 7,500,000
Weighted average interest rate				25.60%
Secured Debt [Member] | Enhanced Jobs for Texas [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity						5,700,000.0
Secured Debt [Member] | Enhanced Texas Fund [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity						$ 1,500,000.0

XML

Financing Instruments - Note Purchase Agreements - Guaranty Agreement (Details) - USD ($) $ / shares in Units, $ in Millions	Dec. 10, 2013	Dec. 31, 2016	Dec. 31, 2015
Line of Credit Facility [Line Items]
Common stock shares outstanding		123,494,129	122,125,072
Note Purchase Agreement [Member]
Line of Credit Facility [Line Items]
Stock issued during the period (shares)	3,700,000
Restricted common stock par value (in USD per share)	$ 0.01
Stock closing price (in USD per share)	$ 0.60
Stock issued during the period, value	$ 2.2
Common stock shares outstanding		3,681,000	2,523,347
Common stock outstanding, value		$ 2.2	$ 1.5

XML

Financing Instruments - Note Purchase Agreements - Chairman of the Board Commitment (Details) - USD ($)								3 Months Ended	12 Months Ended
	Dec. 31, 2016	Sep. 07, 2016	Apr. 30, 2016	Apr. 21, 2016	Mar. 14, 2016	Dec. 21, 2015	Nov. 12, 2015	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 10, 2013
Debt Instrument [Line Items]
Repayments of debt			$ 2,000,000
Repayments of related party debt									$ 0	$ 500,000
Board of Directors Chairman [Member]
Debt Instrument [Line Items]
Granted							500,000
Share price (in USD per share)					$ 0.40		$ 0.294
Term of stock option acquisition rights (years)					3 years		8 years
Grant-date fair value of option awards							$ 47,000
Repayments of related party debt	$ 150,000					$ 500,000		$ 500,000
Repurchase of principal	$ 150,000					$ 150,000			$ 150,000
Secured Debt [Member] | Note Purchase Agreement [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity											$ 7,200,000.0
Repayments of debt		$ 5,800,000		$ 1,900,000

XML

Related Party Transactions - Executive Employee Agreement (Details) - Adams Employment Agreement [Member]	Jan. 01, 2015 USD ($) month
Related Party Transaction [Line Items]
Annual base salary | $	$ 190,000
Annual bonus as a percentage of base salary	25.00%
Annual bonus as a percentage of base salary increase option one	30.00%
Annual bonus as a percentage of base salary increase option two	35.00%
Annual bonus as a percentage of base salary increase option three	35.00%
EBITDA threshold one for increase in annual bonus	110.00%
EBITDA threshold two for increase in annual bonus	120.00%
EBITDA threshold three for increase in annual bonus	120.00%
Change in control bonus as a percentage of annual base salary	25.00%
Number of months salary for termination due to death or disability	4
Number of months salary for termination without cause	4
Change in control bonus threshold period	4 months
Number of months salary for termination within first twelve months	12
Bonus period threshold	12 months
Non-competition provision period	12 months

XML

Related Party Transactions - Related Party Transactions (Details) - USD ($)															3 Months Ended	12 Months Ended
	Jan. 01, 2017	Dec. 31, 2016	Dec. 31, 2016	Dec. 30, 2016	Apr. 30, 2016	Mar. 14, 2016	Feb. 07, 2016	Dec. 21, 2015	Nov. 12, 2015	Mar. 23, 2015	Jan. 23, 2015	Jan. 21, 2015	Jan. 16, 2015	Feb. 07, 2014	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Related Party Transaction [Line Items]
Common stock par value (in USD per share)		$ 0.01	$ 0.01												$ 0.01	$ 0.01	$ 0.01
Repayments of debt					$ 2,000,000
Repayments of related party debt																$ 0	$ 500,000
Richard J. Kurtz Option [Member]
Related Party Transaction [Line Items]
Common stock (shares)						800,000
Common stock par value (in USD per share)						$ 0.01
Share price (in USD per share)						$ 0.40			$ 0.294
Term of options granted						8 years
Award vesting period (years)						3 years			8 years
Grant-date fair value of option awards						$ 306,000			$ 47,000
Granted									500,000
Repayments of related party debt			$ 150,000					$ 500,000							$ 500,000
Repurchase of principal		$ 150,000	$ 150,000					$ 150,000								$ 150,000
Kramer Options [Member]
Related Party Transaction [Line Items]
Common stock (shares)						2,000,000							850,000
Common stock par value (in USD per share)						$ 0.01							$ 0.01
Share price (in USD per share)						$ 0.40							$ 0.325
Forfeitures in period (shares)																	2,000,000
Term of options granted						8 years							8 years
Award vesting period (years)						3 years
Options granted (shares)																	1,150,000
Grant-date fair value of option awards						$ 766,000							$ 86,000
Related Party Transaction, Additional Employment Term				1 year
1/16/15 Adams Option [Member]
Related Party Transaction [Line Items]
Common stock (shares)													300,000
Common stock par value (in USD per share)													$ 0.01
Share price (in USD per share)													$ 0.325
Term of options granted													8 years
Grant-date fair value of option awards													$ 94,000
1/16/15 Adams Option [Member] | Tranche One [Member]
Related Party Transaction [Line Items]
Award vesting rights (percent)																33.00%
1/16/15 Adams Option [Member] | Tranche Two [Member]
Related Party Transaction [Line Items]
Award vesting rights (percent)																33.00%
1/16/15 Adams Option [Member] | Tranche Three [Member]
Related Party Transaction [Line Items]
Award vesting rights (percent)																33.00%
Kurtz Note [Member]
Related Party Transaction [Line Items]
Principal repayments to note payable - related party												$ 250,000
Effective interest rate (percent)												8.00%
Twelfth Amendment [Member]
Related Party Transaction [Line Items]
Principal repayments to note payable - related party											$ 250,000
Allowance for doubtful accounts receivable write-offs											267,000
Capital expenditures incurred but not yet paid											$ 150,000
3/23/15 Schnitzer Option [Member]
Related Party Transaction [Line Items]
Common stock (shares)										300,000
Common stock par value (in USD per share)										$ 0.01
Share price (in USD per share)										$ 0.41
Term of options granted										8 years
Grant-date fair value of option awards										$ 118,000
3/23/15 Schnitzer Option [Member] | Tranche One [Member]
Related Party Transaction [Line Items]
Award vesting rights (percent)																33.00%
3/23/15 Schnitzer Option [Member] | Tranche Two [Member]
Related Party Transaction [Line Items]
Award vesting rights (percent)																33.00%
3/23/15 Schnitzer Option [Member] | Tranche Three [Member]
Related Party Transaction [Line Items]
Award vesting rights (percent)																33.00%
Richard J. Kurtz Option [Member]
Related Party Transaction [Line Items]
Common stock par value (in USD per share)		$ 0.01	$ 0.01													$ 0.01
Share price (in USD per share)		$ 0.53	$ 0.53													$ 0.53
Options granted (shares)		100,000
Grant-date fair value of option awards		$ 53,000
Servicing Contracts [Member]
Related Party Transaction [Line Items]
Shares issued for services (shares)																1,035,743
Restricted common stock issued for services																$ 418,000
Majority Shareholder [Member]
Related Party Transaction [Line Items]
Shares issued for services (shares)																1,157,653	1,224,763
Restricted common stock issued for services																$ 696,000	$ 735,000
Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Common stock par value (in USD per share)							$ 0.01
Grant-date fair value of option awards							$ 16,000										$ 16,000
Granted														100,000
Vested							25,000							25,000			25,000
Related Party Transaction, Additional Employment Term				1 year
Annual base salary		$ 190,000
Subsequent Event [Member] | Chief Operating Officer [Member]
Related Party Transaction [Line Items]
Annual base salary	$ 210,000

XML

Income Taxes - Components of Tax (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Current:
Federal	$ 162,000
State	100,000
Total Current	262,000
Deferred:
Federal	49,000
State	0
Total Deferred	49,000	$ 365,000
Total Tax Provision	$ 311,000	392,000
Selling, General and Administrative Expenses [Member]
Current:
Federal		0
State		27,000
Total Current		27,000
Deferred:
Federal		365,000
State		0
Total Deferred		365,000
Total Tax Provision		$ 392,000

XML

Income Taxes - Reconciliation of Tax (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Line Items]
Federal Income Tax Expense/(Benefit)	$ 2,274,000
State Income Tax	198,000
Nondeductible Expenses	168,000
Provision to Return Reconciling Items	3,112,000
Change in Valuation Allowance	(5,442,000)
Other	1,000
Total Tax Provision	$ 311,000	$ 392,000
Selling, General and Administrative Expenses [Member]
Income Tax Disclosure [Line Items]
Federal Income Tax Expense/(Benefit)		(62,000)
State Income Tax		494,000
Nondeductible Expenses		40,000
Provision to Return Reconciling Items		(3,211,000)
Change in Valuation Allowance		3,229,000
Other		(98,000)
Total Tax Provision		$ 392,000

XML

Income Taxes - Deferred Income Taxes (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Deferred Tax Assets:
Federal and State Net Operating Loss Carry-Forward	$ 20,361,000	$ 25,986,000
Share-Based Compensation	1,084,000	1,151,000
Other Temporary Differences	1,167,000	1,051,000
Total	22,612,000	28,188,000
Deferred Tax Liabilities
Tax Goodwill	(414,000)	(365,000)
Depreciation	(276,000)	(280,000)
Other Temporary Differences	0	(130,000)
Total	(690,000)	(775,000)
Net Deferred Tax Asset	21,922,000	27,413,000
Valuation Allowance	(22,336,000)	(27,778,000)
Deferred Tax Liability	$ (414,000)	$ (365,000)

XML

Income Taxes Income Taxes - Narrative (Details) $ in Millions	Dec. 31, 2015 USD ($)
Federal [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforward	$ 59.5
State [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforward	$ 2.7

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Commitments and Contingencies - Operating Lease (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2016	$ 483
2017	487
2018	490
Rent expense	$ 328	$ 343

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Commitments and Contingencies - Legal Proceedings (Details) $ in Thousands	Feb. 04, 2015 USD ($)
Neil and Kristine Markey Litigation [Member]
Loss Contingencies [Line Items]
Damages sought	$ 800

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Net Income (Loss) Per Common Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share, Basic and Diluted [Abstract]
Net loss available to common shareholders	$ 6,378,124	$ (577,000)
Weighted average common shares outstanding (shares)	122,812,680	121,283,000
Dilutive effect of employee equity incentive plans (shares)	484,389	0
Weighted average common shares outstanding, assuming dilution (shares)	123,297,069	121,283,000
Basic earnings per common share (usd per share)	$ 0.05	$ 0.00
Diluted earnings per common share (usd per share)	$ 0.05	$ 0.00

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Net Income (Loss) Per Common Share - Narrative (Details) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share [Abstract]
Number of antidilutive securities excluded from computation of earnings per share (shares)	400,000	2,667,500

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Securities Transactions (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Securities Financing Transaction [Line Items]
Common stock par value (in USD per share)	$ 0.01	$ 0.01
Servicing Contracts [Member]
Securities Financing Transaction [Line Items]
Shares issued for services (shares)	86,404
Restricted common stock par value (in USD per share)	$ 0.01
Value of stock issued for service	$ 38,000
Affiliated Entity [Member]
Securities Financing Transaction [Line Items]
Restricted common stock par value (in USD per share)	$ 0.01
Shares issued during the period (shares)	1,157,653
Value of shares issued in the period	$ 696,000
Shares issued during the period for a stock bonus (shares)	25,000
Common stock par value (in USD per share)	$ 0.01
Value of shares issued for stock bonus plan	$ 16,000

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Share-Based Payment Arrangements - Narrative (Details)			12 Months Ended
	Dec. 10, 2013 shares	Feb. 22, 2011 USD ($) $ / shares shares	Dec. 31, 2016 USD ($) plan $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2014 USD ($)	Dec. 09, 2013 USD ($) $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of share-based compensation plans | plan			3
Share based compensation expense | $			$ 1,683,000	$ 1,964,000
Common stock par value (in USD per share) | $ / shares			$ 0.01	$ 0.01
Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (shares)			10,000,000
Shares issuable and available for grant (shares)			1,982,500
Equity Incentive Plan [Member] | Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted			2,800,000	2,100,000
Total unrecognized compensation cost | $			$ 896,000	$ 1,415,168
Grant-date fair value of option awards | $			$ 634,866	$ 79,387
Shares Price (in USD per share) | $ / shares			$ 0.00	$ 0.00
Options (in USD per share) | $ / shares			$ 0.41	$ 0.73
Period for recognition of costs not yet recognized			2 years 1 month 13 days
Equity Incentive Plan [Member] | Stock Option [Member] | Weighted Average [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Period for recognition of costs not yet recognized			25 months 15 days
Equity Incentive Plan [Member] | Stock Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted			100,000	0
Vested			125,000	25,000
Grant-date fair value of option awards | $			$ 0	$ 16,250	$ 32,500
Weightd average grant date fair value | $			$ 53,000	$ 0
Equity Incentive Plan [Member] | Directors, Officers, and Key Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted			2,925,000	5,417,500
Vested			125,000
Equity Incentive Plan [Member] | Directors, Officers, and Key Employees [Member] | Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted			2,800,000	5,317,500
Equity Incentive Plan [Member] | Directors, Officers, and Key Employees [Member] | Stock Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested				100,000
Advisor Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation expense | $		$ 2,850,000
Granted		5,000,000	86,404	1,035,743
Vested			86,404	1,035,743
Grant-date fair value of option awards | $			$ 0	$ 0	0
Common stock par value (in USD per share) | $ / shares		$ 0.01
Award vesting period (years)		3 years
Shares Price (in USD per share) | $ / shares		$ 0.57		$ 0.40
Weightd average grant date fair value | $			$ 38,000	$ 418,000
Advisor Plan [Member] | Weighted Average [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Price (in USD per share) | $ / shares			$ 0.44
Guaranty Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted	3,681,000		0	0
Vested			1,157,653	1,224,763
Grant-date fair value of option awards | $			$ 0	$ 694,591	$ 1,429,449	$ 2,208,600
Common stock par value (in USD per share) | $ / shares						$ 0.01
Weightd average grant date fair value | $			$ 0	$ 0
Options (in USD per share) | $ / shares						$ 0.60

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Share-Based Payment Arrangements - Equity Incentive Plan (Details) - Stock Option [Member] - Equity Incentive Plan [Member] - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Number of Options
Outstanding-Beginning of Year	5,017,500	7,277,500
Granted	2,800,000	2,100,000
Exercised	0	0
Canceled, Expired or Forfeited	0	(4,360,000)
Outstanding - End of Year	7,817,500	5,017,500
Exercisable - End of Year	5,032,420	2,667,500
Weighted-Average Exercise Price
Outstanding - Beginning of year (in USD per share)	$ 0.48	$ 0.47
Granted (in USD per share)	0.40	0.33
Exercised (in USD per share)	0.00	0.00
Canceled, Expired or Forfeited (in USD per share)	0.00	0.46
Outstanding - End of year (in USD per share)	0.42	0.48
Options exercisable (in USD per share)	$ 0.41	$ 0.73

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Share-Based Payment Arrangements - Equity Plan and Warrant Summary (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
$.29-$.59 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower limit (in USD per share)	$ 0.20
Range of exercise prices, upper limit (in USD per share)	0.39
$.60-$.64 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower limit (in USD per share)	0.40
Range of exercise prices, upper limit (in USD per share)	0.59
$.65-$.80 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, lower limit (in USD per share)	0.60
Range of exercise prices, upper limit (in USD per share)	$ 0.80
Stock Option [Member] | Equity Incentive Plan [Member] | $.29-$.59 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Number Outstanding (in shares)	2,380,000	3,230,000
Weighted Average Remaining Contractual Life (Years)	5 years 6 months	6 years 6 months
Outstanding, Weighted Average Exercise Price (in USD per share)	$ 0.33	$ 0.29
Number Exercisable (in shares)	2,205,000	1,580,000
Exercisable, Weighted Average Exercise Price (in USD per share)	$ 0.33	$ 0.24
Stock Option [Member] | Equity Incentive Plan [Member] | $.60-$.64 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Number Outstanding (in shares)	4,837,500	3,587,500
Weighted Average Remaining Contractual Life (Years)	3 years 10 months 24 days	4 years 2 months 12 days
Outstanding, Weighted Average Exercise Price (in USD per share)	$ 0.42	$ 0.44
Number Exercisable (in shares)	2,427,420	887,500
Exercisable, Weighted Average Exercise Price (in USD per share)	$ 0.43	$ 0.45
Stock Option [Member] | Equity Incentive Plan [Member] | $.65-$.80 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Number Outstanding (in shares)	600,000	600,000
Weighted Average Remaining Contractual Life (Years)	2 years 1 month 6 days	3 years 1 month 6 days
Outstanding, Weighted Average Exercise Price (in USD per share)	$ 0.71	$ 0.71
Number Exercisable (in shares)	400,000	200,000
Exercisable, Weighted Average Exercise Price (in USD per share)	$ 0.71	$ 0.71

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Share-Based Payment Arrangements - Stock Awards Plan (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Weighted-Average Grant-Date Fair Value
Canceled, Expired or Forfeited		$ 0
Stock Award [Member] | Equity Incentive Plan [Member]
Number of Shares
Nonvested - Beginning of Year	25,000	50,000
Granted	100,000	0
Vested	(125,000)	(25,000)
Canceled, Expired or Forfeited	0	0
Nonvested - End of Year	0	25,000
Weighted-Average Grant-Date Fair Value
Nonvested - Beginning of Year	$ 16,250	$ 32,500
Granted	53,000	0
Vested	(69,250)	(16,250)
Canceled, Expired or Forfeited	0	0
Nonvested - End of Year	$ 0	$ 16,250

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Share-Based Payment Arrangements - Stock Advisor Plan (Details) - USD ($)		12 Months Ended
	Feb. 22, 2011	Dec. 31, 2016	Dec. 31, 2015
Weighted-Average Grant-Date Fair Value
Canceled, Expired or Forfeited			$ 0
Advisor Plan [Member]
Number of Shares
Nonvested - Beginning of Year		0	0
Granted	5,000,000	86,404	1,035,743
Vested		(86,404)	(1,035,743)
Canceled, Expired or Forfeited		0	0
Nonvested - End of Year		0	0
Weighted-Average Grant-Date Fair Value
Nonvested - Beginning of Year		$ 0	$ 0
Granted		38,000	418,000
Vested		(38,063)	(417,662)
Canceled, Expired or Forfeited		0
Nonvested - End of Year		$ 0	$ 0

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Share-Based Payment Arrangements - Guaranty Plan (Details) - USD ($)		12 Months Ended
	Dec. 10, 2013	Dec. 31, 2016	Dec. 31, 2015
Weighted-Average Grant-Date Fair Value
Canceled, Expired or Forfeited			$ 0
Guaranty Plan [Member]
Number of Shares
Nonvested - Beginning of Year		1,157,653	2,382,416
Granted	3,681,000	0	0
Vested		(1,157,653)	(1,224,763)
Canceled, Expired or Forfeited		0	0
Nonvested - End of Year		0	1,157,653
Weighted-Average Grant-Date Fair Value
Nonvested - Beginning of Year	$ 2,208,600	$ 694,591	$ 1,429,449
Granted		0	0
Vested		(694,591)	(734,858)
Canceled, Expired or Forfeited		0	0
Nonvested - End of Year		$ 0	$ 694,591

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Business Segments and Geographic Area Information - Reportable Segments (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) segment	Dec. 31, 2015 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment	2
Segment Reporting Information [Line Items]
Sales	$ 86,386	$ 78,649
Depreciation	88	131
Amortization of Other Intangible Assets	249	256
Interest Expense	748	1,138
Segment Profit	12,197	6,329
Segment Assets	27,104	23,713
Expenditures for Segment Assets	144	57
Operating Segments [Member] | Foam [Member]
Segment Reporting Information [Line Items]
Sales	73,919	66,030
Depreciation	75	110
Amortization of Other Intangible Assets	213	215
Interest Expense	640	955
Segment Profit	10,213	4,514
Segment Assets	22,538	19,341
Expenditures for Segment Assets	123	48
Operating Segments [Member] | Coatings [Member]
Segment Reporting Information [Line Items]
Sales	12,467	12,619
Depreciation	13	21
Amortization of Other Intangible Assets	36	41
Interest Expense	108	183
Segment Profit	1,984	1,815
Segment Assets	4,566	4,372
Expenditures for Segment Assets	$ 21	$ 9

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Business Segments and Geographic Area Information - Reconciliation of Reportable Segment Profit or Loss (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract]
Total Profit for Reportable Segments	$ 12,197	$ 6,329
Unallocated Amounts:
Corporate Expenses	(5,508)	(6,514)
Income (Loss) from Continuing Operations before Income Taxes, Domestic	$ 6,689	$ (185)

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Business Segments and Geographic Area Information - Reconciliation of Reportable Segment Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting [Abstract]
Total Assets for Reportable Segments	$ 27,104	$ 23,713
Other Unallocated Amounts	2,291	2,296
Total Assets	$ 29,395	$ 26,009

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Business Segments and Geographic Area Information - Geographic Area Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	$ 86,386	$ 78,649
Long-Lived Assets	6,431	6,838
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	81,393	76,589
Long-Lived Assets	6,431	6,838
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	2,567	687
Long-Lived Assets	0	0
Middle East [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	3	0
Long-Lived Assets	0	0
Rest of the World [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	2,423	1,373
Long-Lived Assets	$ 0	$ 0

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Subsequent Events (Details) - USD ($)	Mar. 31, 2017	Feb. 15, 2017	Jan. 05, 2017	Jan. 01, 2017	Mar. 14, 2016	Nov. 12, 2015	Dec. 31, 2016	Dec. 31, 2015
Subsequent Event [Line Items]
Common stock par value (in USD per share)							$ 0.01	$ 0.01
Board of Directors Chairman [Member]
Subsequent Event [Line Items]
Common stock par value (in USD per share)					$ 0.01
Share price (in USD per share)					$ 0.40	$ 0.294
Term of options granted					8 years
Award vesting period (years)					3 years	8 years
Grant-date fair value of option awards					$ 306,000	$ 47,000
Subsequent Event [Member]
Subsequent Event [Line Items]
Dividends declared (USD per share)		$ 0.01
Stock Option [Member] | Subsequent Event [Member] | Board of Directors Chairman [Member]
Subsequent Event [Line Items]
Options granted (shares)				100,000
Common stock par value (in USD per share)				$ 0.01
Share price (in USD per share)				$ 0.53
Stock Option [Member] | Subsequent Event [Member] | Director [Member]
Subsequent Event [Line Items]
Options granted (shares)			400,000
Common stock par value (in USD per share)			$ 0.01
Share price (in USD per share)			$ 0.50
Term of options granted			8 years
Right to acquire shares			100,000
Award vesting period (years)			3 years
Grant-date fair value of option awards			$ 191,000
Tranche One [Member] | Stock Option [Member] | Subsequent Event [Member] | Board of Directors Chairman [Member]
Subsequent Event [Line Items]
Vesting in period	25,000
Tranche One [Member] | Stock Option [Member] | Subsequent Event [Member] | Director [Member]
Subsequent Event [Line Items]
Vesting in period			33,333
Tranche Two [Member] | Stock Option [Member] | Subsequent Event [Member] | Board of Directors Chairman [Member]
Subsequent Event [Line Items]
Vesting in period				25,000
Tranche Two [Member] | Stock Option [Member] | Subsequent Event [Member] | Director [Member]
Subsequent Event [Line Items]
Vesting in period			33,333
Tranche Three [Member] | Stock Option [Member] | Subsequent Event [Member] | Board of Directors Chairman [Member]
Subsequent Event [Line Items]
Vesting in period				25,000
Tranche Three [Member] | Stock Option [Member] | Subsequent Event [Member] | Director [Member]
Subsequent Event [Line Items]
Vesting in period			33,334
Tranche Four [Member] | Stock Option [Member] | Subsequent Event [Member] | Board of Directors Chairman [Member]
Subsequent Event [Line Items]
Vesting in period				25,000