10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2017

OR

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

For the transition period from _____ to _____

Commission File No. 001-31354

Lapolla Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	13-3545304
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Intercontinental Business Park
15402 Vantage Parkway East, Suite 322
Houston, Texas	77032
(Address of principal executive offices)	(Zip Code)

(281) 219-4700

(Registrant’s telephone number, including area code)

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 whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ¨	Accelerated filer   ¨
Non-accelerated filer   ¨ (do not check if a smaller reporting company)
	Smaller reporting company  þ
	Emerging growth company  ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

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

The number of shares outstanding of the issuer's common stock, par value $0.01 per share, as of October 31, 2017, was 127,816,247.

LAPOLLA INDUSTRIES, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2017

TABLE OF CONTENTS

			Page
PART I	FINANCIAL INFORMATION
	Item 1	Financial Statements	1
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	22
	Item 4	Controls and Procedures	22
PART II	OTHER INFORMATION
	Item 1	Legal Proceedings	23
	Item 1A	Risk Factors	23
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	23
	Item 3	Defaults Upon Senior Securities	23
	Item 4	Mine Safety Disclosures	23
	Item 5	Other Information	23
	Item 6	Exhibits	23
SIGNATURES			24
INDEX OF EXHIBITS			25

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LAPOLLA INDUSTRIES, INC.

INDEX TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

UNAUDITED CONDENSED BALANCE SHEETS
	September 30, 2017 and December 31, 2016	2
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
	Three and Nine Months Ended September 30, 2017 and 2016	3
UNADUDITED CONDENSED STATEMENTS OF CASH FLOWS
	Nine Months Ended September 30, 2017 and 2016	4
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS		5

All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable, and therefore have been omitted.

1

LAPOLLA INDUSTRIES, INC.

UNAUDITED CONDENSED BALANCE SHEETS

(in thousands, except share data)

	September 30, 2017			December 31, 2016
ASSETS
Current Assets:
Cash	$	1,251		$	1,722
Trade Receivables, Net	16,990			12,508
Inventories, Net	7,149			6,610
Prepaid Expenses and Other Current Assets	1,621			2,074
Total Current Assets	27,011			22,914
Property, Plant and Equipment, Net	1,089			985
Goodwill	4,235			4,235
Other Intangible Assets, Net	1,443			1,180
Deposits and Other Non-Current Assets, Net	63			81
Total Assets	$	33,841		$	29,395
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	8,857		$	6,741
Accrued Expenses and Other Current Liabilities	2,598			2,938
Total Current Liabilities	11,455			9,679
Long-Term Debt, Net	5,960			8,945
Deferred Tax Liability	447			414
Total Liabilities	17,862			19,038
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $0.01 Par Value; 140,000,000 Shares Authorized; 123,569,129 and 123,494,129 Issued and Outstanding for September 30, 2017 and December 31, 2016, respectively.	1,236			1,235
Additional Paid-In Capital	93,067			93,600
Accumulated Deficit	(78,324		)	(84,478		)
Total Stockholders' Equity	15,979			10,357
Total Liabilities and Stockholders' Equity	$	33,841		$	29,395

The Accompanying Notes are an Integral Part of the Condensed Financial Statements

2

LAPOLLA INDUSTRIES, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Sales	$	28,828		$	20,917		$	77,627		$	61,647
Cost of Sales	21,535			14,773			57,163			43,719
Gross Profit	7,293			6,144			20,464			17,928
Operating Expenses:
Selling, General and Administrative	3,566			3,525			11,227			11,100
Professional Fees	458			339			1,299			969
Depreciation	30			20			73			79
Amortization of Other Intangible Assets	79			67			200			210
Consulting Fees	380			123			916			421
Total Operating Expenses	4,513			4,074			13,715			12,779
Operating Income	2,780			2,070			6,749			5,149
Other (Income) Expense:
Interest Expense	50			192			167			818
Interest Expense – Related Party	—			125			—			491
Interest Expense – Amortization of Discount	—			30			—			120
Loss on Extinguishment of Debt	—			306			—			306
Other Income	(9		)	(90		)	(57		)	(701		)
Total Other Expense	41			563			110			1,034
Income Before Income Taxes	2,739			1,507			6,639			4,115
Provision for Income Taxes	149			39			485			151
Net Income	$	2,590		$	1,468		$	6,154		$	3,964
Earnings Per Share:
Basic	$	0.02		$	0.01		$	0.05		$	0.03
Diluted	$	0.02		$	0.01		$	0.05		$	0.03
Weighted Average Shares Outstanding:
Basic	123,544			123,016			123,519			122,654
Diluted	125,979			123,050			123,031			122,655

The Accompanying Notes are an Integral Part of the Condensed Financial Statements

3

LAPOLLA INDUSTRIES, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,
	2017			2016
Cash Flows From Operating Activities:
Net Income	$	6,154		$	3,964
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation	187			202
Amortization of Other Intangible Assets	200			210
Provision for Losses on Accounts Receivable	261			169
Share Based Compensation Expense	708			711
Interest Expense – Related Party	—			491
Interest Expense – Amortization of Discount	—			120
(Gain) Loss on Foreign Currency Exchange	(2		)	8
Gain on Disposal of Assets	—			(9		)
Loss on Extinguishment of Debt	—			306
Deferred Income Tax Provision	33			39
Changes in Assets and Liabilities:
Trade Receivables	(4,749		)	(1,580		)
Inventories	(486		)	1,022
Prepaid Expenses and Other Current Assets	453			84
Other Intangible Assets	(463		)	(190		)
Deposits and Other Non-Current Assets	33			41
Accounts Payable	2,123			973
Accrued Expenses and Other Current Liabilities	(407		)	(490		)
Net Cash Provided by Operating Activities	4,045			6,071
Cash Flows From Investing Activities:
Additions to Property, Plant and Equipment	(276		)	(133		)
Net Cash Used in Investing Activities	(276		)	(133		)
Cash Flows From Financing Activities:
Proceeds from Line of Credit	4,250			9,953
Principal Repayments to Line of Credit	(7,250		)	(250		)
Cash Dividends Paid	(1,240		)	—
Proceeds from Revolver Loan	—			54,996
Principal Repayments to Revolver Loan	—			(61,732		)
Principal Repayments on Enhanced Notes	—			(7,688		)
Net Cash Used in Financing Activities	(4,240		)	(4,721		)
Net (Decrease) Increase in Cash	(471		)	1,217
Cash at Beginning of Period	1,722			—
Cash at End of Period	$	1,251		$	1,217
Supplemental Disclosure of Cash Flow Information:
Cash Payments for Income Taxes	$	202		$	27
Cash Payments for Interest	176			735
Supplemental Schedule of Non Cash Investing and Financing Activities:
Capital Additions in Accrued Expenses	$	67		$	—
Issuances of Common Stock for Guaranty by Related Party classified as Interest Expense	$	—		$	695

The Accompanying Notes are an Integral Part of the Condensed Financial Statements

4

LAPOLLA INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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

The condensed financial statements included herein are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes to the condensed financial statements.

These unaudited condensed financial statements should be read in conjunction with the risk factors and the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 15, 2017, in order to fully understand the basis of presentation. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year. The Company’s critical accounting policies were described in Note 1 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. There have been no significant changes in the Company’s accounting policies during the three and nine months ended September 30, 2017. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenue and expenses. Actual results could differ from these estimates.

Reclassifications

Certain reclassifications of prior year amounts have been made to confirm to the current year presentation. The reclassifications had no impact on net income.

Note 2 - Recent Accounting Pronouncements

Recently Adopted Accounting Standards

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 adoption did not have a material impact on the Company’s financial statements.

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 adoption did not have a material impact on the Company’s financial statements.

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.

5

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 2 - Recent Accounting Pronouncements, 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 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 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.

In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718)," which provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this guidance.

In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815)," which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of adopting this guidance.

Note 3 - Dependence on Few Suppliers

The Company is dependent on a few suppliers for certain raw materials and finished goods. For the three and nine month period ended September 30, 2017 and 2016, raw materials and finished goods purchased from the three largest suppliers accounted for approximately 43% and 43%, and 43% and 41% of purchases, respectively.

6

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 4 - Trade Receivables

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

	September 30, 2017			December 31, 2016
Trade Receivables	$	17,337		$	12,874
Less: Allowance for Doubtful Accounts	(347		)	(366		)
Trade Receivables, Net	$	16,990		$	12,508

Note 5 - Inventories

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

	September 30, 2017		December 31, 2016
Raw Materials	$	2,356	$	2,157
Finished Goods	4,793		4,453
Inventories, Net	$	7,149	$	6,610

Note 6 - Prepaid Expenses and Other Current Assets

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

	September 30, 2017		December 31, 2016
Prepaid Insurances	$	245	$	735
Prepaid Marketing	71		181
Prepaid Consulting	68		94
Prepaid Other	1,237		1,064
Total Prepaid Expenses and Other Current Assets	$	1,621	$	2,074

Note 7 - Property, Plant and Equipment

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

	September 30, 2017			December 31, 2016
Vehicles	$	194		$	244
Leasehold Improvements	303			269
Office Furniture and Equipment	199			159
Computers and Software	1,108			907
Machinery and Equipment	2,572			2,557
Total Property, Plant and Equipment	$	4,376		$	4,136
Less: Accumulated Depreciation	(3,287		)	(3,151		)
Total Property, Plant and Equipment, Net	$	1,089		$	985

7

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 8 - Goodwill and Other Intangible Assets

Goodwill

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

	September 30, 2017		December 31, 2016
Foam	$	2,932	$	2,932
Coatings	1,303		1,303
Total Goodwill	$	4,235	$	4,235

Other Intangible Assets

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

	September 30, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Product Formulation	$	138	$	(111	)	$	27	$	138	$	(104	)	$	34
Trade Names	750		(457		)	293		750		(419		)	331
Approvals and Certifications	3,926		(2,803		)	1,123		3,462		(2,647		)	815
	$	4,814	$	(3,371	)	$	1,443	$	4,350	$	(3,170	)	$	1,180

Note 9 - Deposits and Other Non-Current Assets

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

	September 30, 2017		December 31, 2016
Prepaid Expenses	$	6	$	8
Other Receivables	—		9
Deposits	57		64
Total Deposits and Other Non-Current Assets	$	63	$	81

Note 10 - Accrued Expenses and Other Current Liabilities

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

	September 30, 2017		December 31, 2016
Accrued Payroll	$	107	$	3
Accrued Commissions	176		172
Accrued Inventory Purchases	172		249
Accrued Taxes and Other	2,082		2,011
Accrued Insurance	35		490
Deferred Finance Charge Income	26		13
Total Accrued Expenses and Other Current Liabilities	$	2,598	$	2,938

8

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 11 - Long-Term Debt

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

Debt Facility	Effective Cash Interest Rate	September 30, 2017			December 31, 2016
Line of Credit	3.46%	$	6,000		$	9,000
Less Debt Issuance Costs		(40		)	(55		)
Long-Term Debt, Net		$	5,960		$	8,945

The Company entered into a loan agreement with Bank of America, N.A. (the “Bank”) on September 7, 2016 (the “Loan Agreement”), which amended and restated in its entirety that certain prior Loan and Security Agreement dated August 31, 2010 with the Bank. The Loan 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 Loan 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) 1.20 to 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% of 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 Loan 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 certain prior refinanced debt agreements, and distributions made, in each case for the immediately preceding four fiscal quarter period and determined on a consolidated basis. Upon closing of the Loan Agreement, an aggregate of $8.5 million was drawn from the Line of Credit and used to pay off certain prior refinanced debt agreements. 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 September 30, 2017, the balance outstanding on the Line of Credit, net of deferred financing costs, was $6.0 million, and the weighted-average interest rate was 2.46%. Cash available under our Line of Credit based on the Asset Coverage Ratio, and after giving effect to outstanding borrowings, at September 30, 2017 was $8.3 million. At September 30, 2017, the Company was in compliance with all of its Loan Agreement debt covenants.

Note 12 - Related Party Transactions

(a)    On January 1, 2017, the Company granted a stock bonus to the chairman of the board, Richard J. Kurtz, for the right to acquire 100,000 shares of the Company's common stock, par value $0.01. No monetary payment is required as a condition of receiving the shares of common stock, as the consideration is continued satisfactory chairman of the board services with the Company during the vesting period. The shares of common stock vest in four equal 25,000 share increments on March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, respectively, subject to continued chairman of the board services to the Company. Once vested, the shares of common stock are freely transferable. The transaction was valued at $53,000 (calculated by multiplying the 100,000 shares by the $0.53 closing price of the Company's common stock on the date of grant) and is being expensed over the requisite service period on the respective vesting dates. On March 31, 2017, the first tranche of 25,000 shares of common stock vested, which transaction was valued and recorded at $13,000.

(b)    On January 5, 2017, the Company granted eight-year stock options to non-employee directors, Richard J. Kurtz, Jay C. Nadel, Arthur J. Gregg, and Augustus J. Larson, each for the right to acquire 100,000 shares of the Company's common stock, par value $0.01, 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 $0.50 per share, which options vest 33,333, 33,333, and 33,334 on December 31, 2017, December 31, 2018, and December 31, 2019, respectively, subject to continued satisfactory board 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 period.

9

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 12 - Related Party Transactions, continued

(c)    On April 6, 2017, and effective January 1, 2017, the Company entered into an Executive Employment Agreement with Jomarc C. Marukot, chief financial officer and treasurer (the “Marukot Employment Agreement”), which superseded and replaced all prior employment agreements between the Company and Mr. Marukot. The Marukot Employment Agreement provides, among other things, that Mr. Marukot will receive base compensation of $210,000 per annum and shall be entitled to a bonus equal to 25% of his base salary for each fiscal year if the Company's earnings before interest, taxes, depreciation, amortization, and share based compensation (“Adjusted EBITDA”) for such fiscal year exceeds a target established by the Company's Board of Directors (which bonus shall be increased to: (a) 30% of Mr. Marukot’s annual base compensation if the Company achieves 110% of the Adjusted EBITDA target for such fiscal year and (b) 35% of Mr. Marukot’s annual base compensation if the Company achieves 120% of the Adjusted EBITDA target for such fiscal year). In addition, if the Company achieves Adjusted EBITDA greater than 120% of the target in any fiscal year, the Company's CEO, in his discretion, may pay Mr. Marukot a bonus greater than 35% of his annual base compensation, subject to review and approval by the Compensation Committee and Board of Directors. The Marukot Employment Agreement also provides for a transaction bonus equal to 0.25% of the consideration received by the Company's shareholders (the amount of such bonus being subject to the restrictions and further calculations set forth in the Marukot Employment Agreement) upon consummation of a change in control if Mr. Marukot is still employed at such time or in the event Mr. Marukot’s employment is terminated within one year immediately preceding the consummation of a change in control.

(d)    On April 6, 2017, the Company entered into an Executive Employment Agreement with Michael T. Adams, chief governance officer, vice president and corporate secretary (the “Adams Employment Agreement”), which superseded and replaced all prior employment agreements between the Company and Mr. Adams. The Adams Employment Agreement provides, among other things, that Mr. Adams will receive base compensation of $200,000 per annum and shall be entitled to a bonus equal to 25% of his base salary for each fiscal year if the Company's Adjusted EBITDA for such fiscal year exceeds a target established by the Company's Board of Directors (which bonus shall be increased to: (a) 30% of Mr. Adams' annual base compensation if the Company achieves 110% of the Adjusted EBITDA target for such fiscal year and (b) 35% of Mr. Adams' annual base compensation if the Company achieves 120% of the Adjusted EBITDA target for such fiscal year). In addition, if the Company achieves Adjusted EBITDA greater than 120% of the target in any fiscal year, the Company's CEO, in his discretion, may pay Mr. Adams a bonus greater than 35% of his annual base compensation, subject to review and approval by the Compensation Committee and Board of Directors. Also, the Adams Employment Agreement provides for a transaction bonus equal to 0.50% of the consideration received by the Company's shareholders (the amount of such bonus being subject to the restrictions and further calculations set forth in the Adams Employment Agreement) upon consummation of a change in control if Mr. Adams is still employed at such time or in the event Mr. Adams’ employment is terminated within one year immediately preceding the consummation of a change in control.

(e)    During the nine months ended September 30, 2017, Richard J. Kurtz, Chairman of the Board and majority stockholder of the Company, indirectly purchased the Company’s products in a series of arm’s length transactions at or above the prevailing selling prices for the products at the time of each transaction, which transactions were valued in the aggregate at $825,000, through entities in which he holds at least a 10% interest.

Note 13 - Net Income Per Common Share – Basic and Diluted

Basic income per share is based upon the net income applicable to common shares and upon the weighted average number of common shares outstanding during the period. Diluted income per share reflects the effect of the assumed exercise of stock options only in periods in which such effect would have been dilutive. The computation of the Company’s basic and diluted earnings per share (in thousands, except per share data):

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2017		2016		2017			2016
Income available to common shareholders (A)	$	2,590	$	1,468	$	6,154		$	3,964
Weighted average common shares outstanding (B)	123,544		123,016		123,519			122,654
Dilutive effect of equity incentive plans	1,935		34		(488		)	1
Weighted average common shares outstanding, assuming dilution (C)	125,479		123,050		123,031			122,655
Basic earnings per common share (A)/(B)	$	0.02	$	0.01	$	0.05		$	0.03
Diluted earnings per common share (A)/(C)	$	0.02	$	0.01	$	0.05		$	0.03

10

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 13 - Net Income Per Common Share – Basic and Diluted, continued

For the three and nine months ended September 30, 2017, a total of 1,415,000 shares of common stock underlying vested and exercisable stock options were excluded from the calculation of diluted earnings per common share as the exercise prices of the stock options were greater than the market value of the common shares (out-of-the-money).

For the three and nine months ended September 30, 2016, a total of 1,008,000 shares of common stock underlying vested and exercisable stock options were excluded from the calculation of diluted earnings per common share as the exercise prices of the stock options were out-of-the-money.

Out-of-the money 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 their exercise price.

Note 14 - Federal and State Income Taxes

The Company is a corporation subject to federal income tax at a statutory rate of 34% of pretax earnings. The Company estimated an annual effective income tax rate of 7.3% based on projected results for the year and applied this rate to income before taxes to calculate income tax expense. For the three months ended September 30, 2017 and 2016 the tax expense was approximately $149,000 and $39,000, resulting in an effective tax rate of approximately 5.4% and 2.6%, respectively. For the nine months ended September 30, 2017 and 2016 the tax expense was approximately $485,000 and $151,000, resulting in an effective tax rate of approximately 7.3% and 3.7%, respectively. The difference in the statutory and effective tax rates is primarily due to the company utilizing an available net operating loss carry-forward.

Based on management's analysis, the Company did not have any uncertain tax positions as of September 30, 2017.

Note 15 - Securities Transactions

(a)    On March 31, 2017, the Company vested 25,000 shares of common stock, par value $0.01, valued and recorded at $13,250 for a stock bonus.

(b)    On June 30, 2017, the Company vested 25,000 shares of common stock, par value $0.01, valued and recorded at $13,250 for a stock bonus.

(c)    On September 30, 2017, the Company vested 25,000 shares of common stock, par value $0.01, valued and recorded at $13,250 for a stock bonus.

Note 16 - Business Segment and Geographic Area Information

Business Segments

Summarized financial information for the reportable segments is as follows (in thousands):

	Three Months Ended September 30,
	2017						2016
	Foam		Coatings		Totals		Foam			Coatings			Totals
Sales	$	24,642	$	4,186	$	28,828	$	17,719		$	3,198		$	20,917
Depreciation	23		4		27		15			3			18
Amortization of Other Intangible Assets	61		10		71		51			9			60
Interest Expense	21		4		25		147			27			174
Segment Profit	3,502		886		4,388		2,713			541			3,254
Segment Assets (1)	26,830		5,299		32,129		21,315			4,564			25,879
Expenditures for Segment Assets	$	199	$	34	$	233	$	(38	)	$	(7	)	$	(45	)

11

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 16. Business Segment and Geographic Area Information, continued.

	Nine Months Ended September 30,
	2017						2016
	Foam		Coatings		Totals		Foam		Coatings		Totals
Sales	$	66,383	$	11,244	$	77,627	$	52,088	$	9,559	$	61,647
Depreciation	55		9		64		59		11		70
Amortization of Other Intangible Assets	165		26		191		160		29		189
Interest Expense	72		12		84		603		112		715
Segment Profit	9,399		2,120		11,519		7,517		1,580		9,097
Segment Assets (1)	26,830		5,299		32,129		21,315		4,564		25,879
Expenditures for Segment Assets	$	395	$	70	$	465	$	112	$	21	$	133

The following are reconciliations of reportable segment profit or loss, and assets, to the Company’s consolidated totals (in thousands): 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
Profit or Loss	2017			2016			2017			2016
Total Profit or Loss for Reportable Segments	$	4,388		$	3,254		$	11,519		$	9,097
Unallocated Amounts:
Corporate Expenses	(1,649		)	(1,747		)	(4,880		)	(4,982		)
Income Before Income Taxes	$	2,739		$	1,507		$	6,639		$	4,115

Assets	At September 30, 2017		At December 31, 2016
Total Assets for Reportable Segments (1)	$	32,129	$	27,104
Other Unallocated Amounts (2)	1,712		2,291
Consolidated Total	$	33,841	$	29,395

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

(2) Includes corporate assets which are principally cash and cash equivalents and deposits.

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.

Sales and Long-Lived Assets by geographic area are as follows (in thousands):

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
Sales	2017		2016		2017		2016
United States	$	27,353	$	19,564	$	75,051	$	57,507
Canada	503		247		729		878
Europe	765		921		1,443		1,870
Middle East	—		—		—		3
Rest of World	207		185		404		1,389
Total	$	28,828	$	20,917	$	77,627	$	61,647
Long Lived Assets (1)	6,774		6,464		6,774		6,464

(1) All segment assets are located in the United States.

12

LAPOLLA INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED-CONTINUED)

Note 17 - Subsequent Events

(a)    On October 2, 2017, in recognition of Jay C. Nadel's contribution and dedication in building the Company towards $200 million in value pursuant to his Advisory Agreement dated February 22, 2011 (the "Nadel Agreement"), the Compensation Committee of the Company's Board of Directors (the "Committee"), comprised of independent directors, deemed it in the best interest of the Company and its stockholders and upon recommendation of Richard J. Kurtz, Chairman of the Board and majority stockholder of the Company, granted a stock award to Mr. Nadel, of 3,747,118 shares of Common Stock (the “Nadel Stock Award”), which was approved by the Company’s Board of Directors. The Nadel Stock Award was fully vested as of the date of grant. The transaction was valued and recorded as $2,960,223 (calculated by multiplying the 3,747,118 shares by the $0.79 closing price of the Company's common stock on the date of grant).

(b)    On October 4, 2017, in recognition of Douglas Kramer’s many years of service and dedication to the Company, together with excellent service in creating value for stockholders, the Committee, comprised of independent directors, deemed it in the best interest of the Company and its stockholders to grant a stock award to Mr. Kramer of 500,000 shares of Common Stock (the “Kramer Stock Award”), which was approved by the Company’s Board of Directors. The Kramer Stock Award was fully vested as of the date of grant. The transaction was valued and recorded as $380,000 (calculated by multiplying the 500,000 shares by the $0.76 closing price of the Company's common stock on the date of grant).

(c)    On October 4, 2017, the Company entered into a definitive merger agreement with Icynene U.S. Holding Corp. ("Icynene") and Blaze Merger Sub Inc. ("Merger Sub"), pursuant to which Merger Sub will merge with and into the Company, with the Company as the surviving corporation and wholly-owned subsidiary of Icynene. The transaction is valued at approximately $160 million, including net debt.

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

13

Item 2. 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 the accompanying condensed interim financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the Securities and Exchange Commission (“SEC”) on February 15, 2017.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Lapolla,” “we,” “our” and “us” refer to Lapolla Industries, Inc.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 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.

14

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 our Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of the foregoing and other risks that relate to our business and investing in shares of our common stock.

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 operate out of our corporate headquarters located in Houston, Texas.

We operate our business on the basis of two reportable 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 application of our products.

This financial review presents our operating results for the three and nine months ended September 30, 2017 and 2016, and our financial condition at September 30, 2017.

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 other companies, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

EBITDA

EBITDA is defined 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 and property taxes.

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.

15

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.

Critical Accounting Policies

There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.

16

Performance for the Three Months Ended September 30, 2017 compared to the Three Months Ended September 30, 2016

Results of Operations

The following table presents selected financial and operating data derived from the unaudited 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.

	Three Months Ended September 30,
	2017		2016
Summary of Overall Results of Operations:
Sales	$	28,828	$	20,917
Operating Income	2,780		2,070
Other Expense	41		563
Net Income	2,590		1,468
EBITDA	$	2,936	$	2,287
Adjusted EBITDA	$	3,186	$	2,562
Reconciliation of EBITDA and Adjusted EBITDA to Net Income:
Net Income	$	2,590	$	1,468
Additions:
Interest Expense	50		192
Interest Expense – Related Party	—		125
Interest Expense – Amortization of Discount	—		30
Loss on Extinguishment of Debt	—		306
Income Tax Expense	149		39
Depreciation	68		60
Amortization of Other Intangible Assets	79		67
EBITDA	$	2,936	$	2,287
Additions:
Share Based Compensation (1)	201		247
Other Tax Related Expenses	49		28
Adjusted EBITDA	$	3,186	$	2,562

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

Sales

The following is a summary of sales for the three months ended September 30, 2017 and 2016 (in thousands):

	2017		2016		% Change
Foam	$	24,642	$	17,719	39.1	%
Coatings	4,186		3,198		30.9	%
Total Sales	$	28,828	$	20,917	37.8	%

For the three months ended September 30, 2017, our total sales increased by $7.9 million, or an increase of 37.8% from the same period in 2016. Foam sales increased $6.9 million while coatings sales increased $988,000. Both segment increases are primarily due to an increase in market share, which we believe is attributable to our focus on advancement of technology and marketing effort.

17

Gross Profit

The following is a summary of gross profit for the three months ended September 30, 2017 and 2016 (in thousands):

	2017			2016			% Change
Cost of Sales	$	21,535		$	14,773		45.8	%
Gross Profit	$	7,293		$	6,144		18.7	%
Gross Margin Percentage:
Foam	24.3		%	29.1		%	(16.5	)%
Coatings	31.2		%	30.8		%	1.3	%
Total	25.3		%	29.4		%	(13.9	)%

For the three months ended September 30, 2017, our gross profit increased by $1.1 million, or an increase of 18.7% from the same period in 2016. The increase in gross profit was driven by the increase in sales, which was partially offset by increases in raw material and freight costs.

Operating Expenses

Selling, general, and administrative expenses increased $41,000 or 1.2%, to $3.6 million for the three months ended September 30, 2017, compared to $3.5 million for the same period in 2016. The increase was primarily due to increases of $122,000 in sales commissions related to the overall increase in sales, offset by decreases in share based compensation and investor relations expenses of $33,000 and $36,000, respectively.

Professional fees increased $119,000 or 35.1%, to $458,000 for the three months ended September 30, 2017, compared to $339,000 for the same period in 2016. The increase in professional fees was primarily due to higher legal fees.

Depreciation expense increased $10,000 or 50.0%, to $30,000 for the three months ended September 30, 2017, compared to $20,000 for the same period in 2016, due to additions in depreciable assets.

Amortization of other intangible assets expense increased $12,000 or 17.9%, to $79,000 for the three months ended September 30, 2017, compared to $67,000 for the same period in 2016. The increase is mainly due to additions to the Company's product approvals and certifications.

Consulting increased $257,000 or 208.9%, to $380,000 for the three months ended September 30, 2017, compared to $123,000 for the same period in 2016, due to merger transaction costs related to diligence, marketing, and other expenses.

Other (Income) Expense

Interest expense decreased $142,000 or 74.0%, to $50,000 for the three months ended September 30, 2017, compared to $192,000 for the same period in 2016, due to the refinancing of the Enhanced Notes (as hereinafter defined) and former revolver loan into a new line of credit with Bank of America, N.A. in September of 2016.

Interest expense – related party decreased $125,000 or 100.0%, to $0 for the three months ended September 30, 2017, compared to $125,000 for the same period in 2016, due to the refinancing of the Enhanced Notes which eliminated the personal guaranty from the chairman.

Interest expense – amortization of discount decreased $30,000 or 100.0%, to $0 for the three months ended September 30, 2017, compared to $30,000 for the same period in 2016, due to the refinancing of the Enhanced Notes and former revolver loan into a new line of credit with Bank of America, N.A. in September of 2016 which eliminated the discount on the note.

Loss on extinguishment of debt decreased $306,000 or 100.0%, to $0 for the three months ended September 30, 2017 compared to $0 for the same period in 2016. The loss was related to the termination of the Enhanced Note and consists of the unamortized note discount, deferred financing fees, and unvested shares of common stock related to the guaranty of the debt.

Other income, net decreased $81,000 or 90.0%, to $9,000 for the three months ended September 30, 2017, compared to other income, net of $90,000 for the same period in 2016. The income in 2016 was primarily due to the receipt of a one-time insurance settlement check for an automobile that had been previously disposed.

18

Performance for the Nine Months Ended September 30, 2017 compared to the Nine Months Ended September 30, 2016

Results of Operations

The following table presents selected financial and operating data derived from the unaudited 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.

	Nine Months Ended September 30,
	2017		2016
Summary of Overall Results of Operations:
Sales	$	77,627	$	61,647
Operating Income	6,749		5,149
Other Expense	110		1,034
Net Income	6,154		3,964
EBITDA	$	7,193	$	6,262
Adjusted EBITDA	$	8,023	$	7,099
Reconciliation of EBITDA and Adjusted EBITDA to Net Income:
Net Income	$	6,154	$	3,964
Additions:
Interest Expense	167		818
Interest Expense – Related Party	—		491
Interest Expense – Amortization of Discount	—		120
Income Tax Expense	485		151
Loss on Extinguishment of Debt	—		306
Depreciation	187		202
Amortization of Other Intangible Assets	200		210
EBITDA	$	7,193	$	6,262
Additions:
Share Based Compensation (1)	708		711
Other Tax Related Expenses	122		126
Adjusted EBITDA	$	8,023	$	7,099

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

Sales

The following is a summary of sales for the nine months ended September 30, 2017 and 2016 (in thousands):

	2017		2016		% Change
Foam	$	66,383	$	52,088	27.4	%
Coatings	11,244		9,559		17.6	%
Total Sales	$	77,627	$	61,647	25.9	%

For the nine months ended September 30, 2017, our total sales increased by $16.0 million, or an increase of 25.9% from the same period in 2016. Foam sales increased $14.3 million while coatings sales increased $1.7 million. Both segment increases are primarily due to an increase in market share, which we believe is attributable to our focus on advancement of technology and marketing effort.

19

Gross Profit

The following is a summary of gross profit for the nine months ended September 30, 2017 and 2016 (in thousands):

	2017			2016			% Change
Cost of Sales	$	57,163		$	43,719		30.8	%
Gross Profit	$	20,464		$	17,928		14.1	%
Gross Margin Percentage:
Foam	25.7		%	28.8		%	(10.8	)%
Coatings	30.3		%	30.9		%	(1.9	)%
Total	26.4		%	29.1		%	(9.3	)%

For the nine months ended September 30, 2017, our gross profit increased by $2.5 million, or an increase of 14.1% from the same period in 2016. The increase in gross profit was primarily driven by the increase in sales, which was partially offset by increases in raw material and freight costs.

Operating Expenses

Selling, general, and administrative expenses increased $127,000 or 1.1%, to $11.2 million for the nine months ended September 30, 2017, compared to $11.1 million for the same period in 2016. The increase was primarily due to an increase of $230,000 in sales commissions related to the overall increase in sales, offset by a decrease in payroll and related employee benefit expenses of $92,000.

Professional fees increased $330,000 or 34.1%, to $1.3 million for the nine months ended September 30, 2017, compared to $969,000 for the same period in 2016. The increase in professional fees was primarily due to higher legal fees.

Depreciation expense decreased $6,000 or 27.1%, to $73,000 for the nine months ended September 30, 2017, compared to $79,000 for the same period in 2016, due to reductions in depreciable assets during the first part of the year.

Amortization of other intangible assets expense decreased $10,000 or 4.8%, to $200,000 for the nine months ended September 30, 2017, compared to $210,000 for the same period in 2016, due to certain approvals and certifications becoming fully amortized during 2016.

Consulting increased $495,000 or 117.6%, to $916,000 for the nine months ended September 30, 2017, compared to $421,000 for the same period in 2016, due to merger transaction costs related to diligence, marketing, and other expenses.

Other (Income) Expense

Interest expense decreased $651,000 or 79.6%, to $167,000 for the nine months ended September 30, 2017, compared to $818,000 for the same period in 2016, due to the refinancing of the Enhanced Notes and former revolver loan into a new line of credit with Bank of America, N.A. in September of 2016.

Interest expense – related party decreased $491,000 or 100.0%, to $0 for the nine months ended September 30, 2017, compared to $491,000 for the same period in 2016, due to the refinancing of the Enhanced Notes which eliminated the personal guaranty from the chairman.

Interest expense – amortization of discount decreased $120,000 or 100.0%, to $0 for the nine months ended September 30, 2017, compared to $120,000 for the same period in 2016, due to the refinancing of the Enhanced Notes and former revolver loan into a new line of credit with Bank of America, N.A. in September of 2016 which eliminated the discount on the note.

Loss on extinguishment of debt decreased $306,000 or 100.0%, to $0 for the nine months ended September 30, 2017 compared to $0 for the same period in 2016. The loss was related to the termination of the Enhanced Note and consists of the unamortized note discount, deferred financing fees, and unvested shares of common stock related to the guaranty of the debt.

Other income, net decreased $644,000 or 91.9%, to $57,000 for the nine months ended September 30, 2017, compared to other income, net of $701,000 for the same period in 2016. The income in 2016 was due to the receipt of a one time settlement check related to a class action lawsuit.

20

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) 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 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 nine months ending September 30, 2017 and 2016 (in thousands):

Cash Flow Activity	2017			2016			% Change
Cash Provided by (Used in):
Operating Activities	$	4,045		$	6,071		(33.4	)%
Investing Activities	(276		)	(133		)	107.5	%
Financing Activities	(4,240		)	(4,721		)	(10.2	)%
Net Decrease in Cash	$	(471	)	$	1,217

Net cash provided by operating activities decreased by $2.0 million, to $4.0 million for the nine months ended September 30, 2017, compared to $6.1 million for the same period in 2016. Net non-cash contributions to net income decreased $860,000, to $1.4 million for the nine months ended September 30, 2017 compared to $2.2 million for the same period in 2016, primarily due to interest expense-related party of $491,000 and a loss on debt extinguishment of $306,000 incurred in 2016, but not in 2017.

The following is a summary of Net Working Capital at September 30, 2017 and December 31, 2016 (in thousands):

Net Working Capital	2017		2016		% Change
Current Assets	$	27,011	$	22,914	17.9	%
Current Liabilities	11,455		9,679		18.3	%
Net Working Capital	15,556		13,235		17.5	%
Current Ratio	2.36:1		2.37:1

Net working capital increased by $2.3 million during the nine months ended September 30, 2017, from December 31, 2016. The increase in net working capital was primarily driven by increases in accounts receivable of $4.2 million, inventory of $539,000, and a decrease in accrued expenses of $389,000 offset by decreases in cash of $471,000, prepaid expenses of $453,000 and an increase in accounts payable of $2.1 million.

Net cash used in investing activities for the nine months ended September 30, 2017 was $276,000, compared to $133,000 during the same period in 2016. All investments were fully related to capital expenditures.

Net cash used in financing activities was $4.2 million for the nine months ended September 30, 2017, and related to repayments to our Line of Credit of $7.3 million, net of borrowings of $4.3 million, and cash dividends paid of $1.3 million. Net cash used in financing activities was $4.7 million for the nine months ended September 30, 2016, and consisted of proceeds of $9.7 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. 

Management believes that any cash generated from operations and the Line of Credit availability, subject to borrowing base limitations, based on budgeted sales and expenses and implemented minimum sales margin and cost controls, are sufficient to fund operations, including capital expenditures, for the next 12 months. Notwithstanding the foregoing, 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.

21

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 September 30, 2017, the cash available under our Line of Credit was $8.3 million based on the Asset Coverage Ratio and after giving effect to outstanding borrowings. At September 30, 2017, we were in compliance with all debt covenants under our Credit Agreement.

Off Balance Sheet Arrangements

 As of September 30, 2017, we had no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

As of September 30, 2017, we conducted an evaluation, under the supervision and participation of management including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended). There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2017.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

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 and results of operations.

During the fiscal quarter ended September 30, 2017, there were no material changes or developments in the Company’s legal proceedings disclosed in Part I, Item 3 “Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 1A. Risk Factors.

During the fiscal quarter ended September 30, 2017 there were no material changes from the risk factors previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities 

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

See Index of Exhibits.

23

SIGNATURES

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

		LAPOLLA INDUSTRIES, INC.
Date:	October 31, 2017	By:	/s/ Douglas J. Kramer
		Name:	Douglas J. Kramer
		Title:	CEO and President

		LAPOLLA INDUSTRIES, INC.
Date:	October 31, 2017	By:	/s/ Jomarc C. Marukot
		Name:	Jomarc C. Marukot
		Title:	CFO, Treasurer, and Principal Accounting Officer

24

INDEX OF EXHIBITS

Exhibit Number	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 for the quarterly period ended June 30, 2011, filed August 19, 2011).
3.2*	Bylaws, as amended, and currently in effect.
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).
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
101*	The following materials from the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language), (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Cash Flows, and (iv) Notes to Financial Statements.

* Filed herewith

25

EX-3.2

Exhibit 3.2

BY-LAWS

OF

LAPOLLA INDUSTRIES, INC.

(a Delaware Corporation)

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

(As Amended October 4, 2017)

ARTICLE I

Meetings of Stockholders

SECTION 1. Annual Meeting. The annual meeting of the stockholders of Lapolla Industries, Inc. (hereinafter, the “Corporation”) for the election of directors and for the transaction of such other proper business shall be held on such date and at such time as may be fixed by the Board of Directors or if no date and time are so fixed on the fourth Tuesday in May of each year, at the office of the Corporation or at such other place, and at such hour as shall be designated by the Board of Directors, or, if no such time be fixed, then at 10:00 A.M.

SECTION 2. Special Meetings. Special meetings of the stockholders, unless otherwise prescribed by statute, may be called at any time by the Board of Directors or by the holder or holders of more than a majority of the outstanding shares of Common Stock entitled to vote at such meeting.

SECTION 3. Notice of Meetings. Written notice of each meeting of the stockholders, which shall state the place, date and hour of the meeting and the purpose or purposes for which it is called, shall be given not less than ten nor more than sixty days before the date of such meeting to each stockholder entitled to vote at such meeting, and, if mailed, it shall be deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Any such notice for any meeting other than the annual meeting shall indicate that it is being issued at the direction of the Board. Whenever notice is required to be given, a written waiver thereof signed by the person entitled thereto, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. When a meeting is adjourned to another time or place, notice need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

SECTION 4. Quorum. At any meeting of the stockholders the holders of the majority of the shares, issued and outstanding and entitled to vote, shall be present in person or represented by proxy in order to constitute a quorum for the transaction of any business. In the absence of a quorum, the holders of a majority of the shares present in person or represented by proxy and entitled to vote may adjourn the meeting from time to time. At any such adjourned meeting at which a quorum may be present, the Corporation may transact any business which might have been transacted at the original meeting.

SECTION 5. Organization. At each meeting of the stockholders, the Chairman of the Board, or in his absence or inability to act, the President or, in his absence or inability to act, a Vice President or, in his absence of inability to act, any person chosen by the majority of those stockholders present in person or represented by proxy shall act as chairman of the meeting. The Secretary or, in his absence or inability to act, any person appointed by the chairman of the meeting shall act as secretary of the meeting and keep the minutes thereof.

SECTION 6. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting.

SECTION 7. Voting. Unless otherwise provided in the Certificate of Incorporation, and subject to statute, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder:

(a)    on the date fixed pursuant to the provisions of Section 5 of Article V of these By-laws as the record date for the determination of the stockholders to be entitled to notice of or to vote at such meeting; or

(b)    if no record date is fixed, then at the close of business on the day next preceding the day on which notice is given.

Each stockholder entitled to vote at any meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated in the order of business for so delivering such proxies. Except as otherwise required by statute, the Certificate of Incorporation or these By-laws, a majority of the votes cast at a meeting of the stockholders shall be necessary to authorize any corporate action to be taken by vote of the stockholders. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question other than the election of directors need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and shall state the number of shares voted.

SECTION 8. List of Stockholders. A list of the stockholders entitled to vote at any meeting shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

SECTION 9. Inspectors. The Board may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting shall appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and shall execute a certificate of any fact found by them. No director candidate for the office of director shall act as an inspector of an election or directors. Inspectors need not be stockholders.

ARTICLE II

Board of Directors

SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the stockholders.

SECTION 2. Number, Qualifications, Election and Term of Office. The Board of Directors shall initially consist of two Directors. Each director shall hold office until the annual meeting of stockholders of the Corporation next succeeding his election or until his successor is duly elected and qualified. Directors need not be stockholders. The Board of Directors, by the vote of a majority of the entire Board, may fix the number of Directors to a number not exceeding seven and may decrease the number of Directors to a number not less than one, but any such decrease shall not affect the term of office of any Director. Vacancies occurring by reason of any such increase or decrease shall be filled in accordance with section 13 of this Article II.

SECTION 3. Place of Meeting. The Board of Directors shall hold its meetings at such place, within or without the State of Delaware, as it may from time to time determine or as shall be specified in the notice of any such meeting.

SECTION 4. Annual Meeting. The Board shall meet for the purpose of organization, the election of officers and the transaction of other business as soon as practicable after each annual meeting of the stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. Such meeting may be held at any other time or place, within or without the State of Delaware, which shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article II.

SECTION 5. Regular Meetings. Regular meetings of the Board shall be held at such time as the Board may fix. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board need not be given except as otherwise required by statute or these By-laws.

SECTION 6. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board, the President or by a majority of the entire Board.

SECTION 7. Notice of Meetings. Notice of each special meeting of the Board (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 7, in which notice shall be stated the time and place of the meeting. Except as otherwise required by these By-laws, such notice need not state the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, addressed to him at his residence or usual place of business, by first-class mail, at least four (4) days before the day on which such meeting is to be held, or shall be sent addressed to him at such place by telegraph, telex, cable or wireless, or be delivered to him personally, by facsimile or by telephone, at least 24 hours before the time at which such meeting is to be held. A written waiver of notice, signed by the director entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him.

SECTION 8. Quorum and Manner of Acting. Except as hereinafter provided, a majority of the entire Board shall be present in person or by means of a conference telephone or similar communications equipment which allows all persons participating in the meeting to hear each other at the same time at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting; and, except as otherwise required by statue or the Certificate of Incorporation, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum at any meeting of the Board, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to the directors who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other directors, At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such.

SECTION 9. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of the Board.

SECTION 10. Telephonic Participation. Members of the Board of Directors may participate in a meeting of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation in such a meeting shall constitute presence in person at such meeting.

SECTION 11. Organization. At each meeting of the Board, the Chairman of the Board or, in his absence or inability to act, the President or, in his absence or inability to act, another director chosen by a majority of the directors present shall act as chairman of the meeting and preside thereat. The Secretary or, in his absence or inability to act, any person appointed by the chairman shall act as secretary of the meeting and keep the minutes thereof.

SECTION 12. Resignations. Any director may resign at any time upon written notice to the Corporation. Any such resignation shall take effect at the time specified therein or, it the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 13. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by the vote of a majority of the directors then in office, although less than a quorum. If there are no directors in office, then a special meeting of stockholders for the election of directors may be called and held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the entire Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office, in the manner provided by statute. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next election of directors and until their successors shall be elected and qualified.

SECTION 14. Removal of Directors. Except as otherwise provided in the Certificate of Incorporation or in these By-laws, any director may be removed, either with or without cause, at any time, by the affirmative vote of the holders of record or a majority of the issued and outstanding stock entitled to vote for the election of directors of the Corporation given at a special meeting of the stockholders called and held for the purpose; and the vacancy in the Board caused by such removal may be filled by such stockholders at such meeting, or, if the stockholders shall fail to fill such vacancy, as in these By-laws provided.

SECTION 15. Compensation. The Board of Directors shall have authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.

SECTION 16. The Chairman of the Board. The Chairman of the Board shall preside over the Board of Directors and shall have the general supervision and direction over the Chief Executive Officer. The Chairman of the Board shall see that the Chief Executive Officer's duties are properly performed. He shall, if present, preside at each meeting of the stockholders and of the Board and shall be an ex officio member of all committees of the Board. He shall perform all duties incident to the office of Chairman of the Board and such other duties as may from time to time be assigned to him by the Board.

ARTICLE III

Executive and Other Committees

SECTION 1. Executive and Other Committees. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that in the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep written minutes of its proceedings and shall report such minutes to the Board when required. All such proceedings shall be subject to revision or alteration by the Board; provided, however, that third parties shall not be prejudiced by such revision or alteration.

SECTION 2. General. A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. Notice of such meeting shall be given to each member of the committee in the manner provided for in Article II, Section 7. The Board shall have any power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not directors of the Corporation; provided, however, that no such committee shall have or may exercise any authority of the Board.

SECTION 3. Action Without a Meeting. Any action required or permitted to be taken by any committee at a meeting may be taken without a meeting if all of the members of the committee consent in writing to the adoption of the resolutions authorizing such action. The resolutions and written consents thereto shall be filed with the minutes of the committee.

SECTION 4. Telephone Participation. One or more members of a committee may participate in a meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting.

ARTICLE IV

Officers

SECTION 1. Number and Qualifications. The officers of the Corporation shall include the President, one or more Vice Presidents (including Executive Vice Presidents and Senior Vice Presidents), the Treasurer and the Secretary. Any number of offices may be held by the same person. Such officers shall be elected from time to time by the Board. Each officer shall hold his office until his successor is elected and qualified or until his earlier resignation or removal. The Board may from time to time elect, or delegate to the President the Power to appoint, such other officers (including one or more Assistant Treasurers and one or more Assistant Secretaries) and such agents as may be necessary or desirable for the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as may be prescribed by the Board or by the appointing authority.

SECTION 2. Resignations. Any officer may resign at any time upon written notice to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3. Removal. Any officer or agent of the corporation may be removed, either with or without cause, at any time, by the Board at any meeting of the Board or, except in the case of an officer or agent elected or appointed by the Board, by the Chairman of the Board or the President.

SECTION 4. Vacancies. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled for the un-expired portion of the term of the office which shall be vacant, in the manner prescribed in these By-laws for the regular election or appointment to such office.

SECTION 5. The Chief Executive Officer. The Chief Executive Officer of the Corporation shall have the responsibility for and direction over the President and shall see that the President's duties are properly performed. The Chief Executive Officer shall always be subject, however, to the direction of the Chairman of the Board and Board of Directors. At the request of the Chairman of the Board or, in the case of the Chairman of the Board's absence or inability to act, the Chief Executive Officer, if a director, shall perform the duties of the Chairman of the Board and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Chairman of the Board.

SECTION 6. The President. The President shall have the general and active supervision and direction over the other officers, agents and employees and shall see that their duties are properly performed; the President shall always be subject, however, to the direction of the Chief Executive Officer. In general, the President shall have such other powers and shall perform such other duties as usually pertain to the office of President or as from time to time may be assigned to him by the Chief Executive Officer or these By-laws. The President and Chief Executive Officer capacities may be combined upon approval of the Board of Directors.

SECTION 7. Vice Presidents. Each Vice President shall have such powers and perform such duties as from time to time may be assigned to him by the Board.

SECTION 8. The Treasurer. The Treasurer shall

(a)    have charge and custody of, and be responsible for, all the funds and securities of the Corporation;

(b)    keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation;

(c)    cause all monies and other valuables to be deposited to the credit of the Corporation in such depositories as may be designated by the Board;

(d)    receive, and give receipts for, monies due and payable to the Corporation from any source whatsoever;

(e)    disburse the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the Board, taking proper vouchers therefor; and

(f)    in general, have all the powers and perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board or the President.

SECTION 9. The Secretary. The Secretary shall

(a)    record the proceedings of the meetings of the stockholders and directors in a minute book to be kept for that purpose;

(b)    see that all notices are duly given in accordance with the provisions of these By-laws and as required by law;

(c)    be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal;

(d)    see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and

(e)    in general, have all the powers and perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board or the President.

SECTION 10. Officers’ Bonds or Other Security. The Board may secure the fidelity of any or all of its officers or agents by bond or otherwise, in such amount and with such surety or sureties as the Board may require.

SECTION 11. Compensation. The compensation of the officers of the Corporation for their services as such officers shall be fixed from time to time by the Board; provided, however, that the Board may delegate to the Chairman of the Board or the President the power to fix the compensation of officers and agents appointed by the Chairman of the Board or the President, as the case may be. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he is also a director of the Corporation, but any such officer who shall also be a director (except in the event there is only one director of the Corporation) shall not have any vote in the determination of the amount of compensation paid to him.

ARTICLE V

Shares, etc.

SECTION 1. Stock Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the chairman of the Board or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certifying the number of shares owned by him in the Corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may nevertheless be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

SECTION 2. Books of Account and Record of Stockholders. The books and records of the Corporation may be kept at such places, within or without the State of Delaware, as the Board of Directors may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or agent designated by the Board of Directors.

SECTION 3. Transfer of Shares. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation may hold any such stockholder of record liable for calls and assessments and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such shares or shares on the part of any other person whether or not it shall have express or other notice thereof. Whenever any transfers of shares shall be made for collateral security and not absolutely, and both the transferor and transferee request the Corporation to do so, such fact shall be stated in the entry of the transfer.

SECTION 4. Regulations. The Board may make such additional rules and regulations, not inconsistent with these By-laws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them.

SECTION 5. Fixing of Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action.

SECTION 6. Lost, Stolen or Destroyed Stock Certificates. The holder of any certificate representing shares of stock of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of such certificate, and the Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board may, in its discretion, require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient, as the Board in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Anything herein to the contrary notwithstanding, the Board, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to judicial proceedings under the laws of the State of Delaware.

ARTICLE VI

Contracts, Checks, Drafts, Bank Accounts, Etc.

SECTION 1. Execution of Contracts. Except as otherwise required by statute, the Certificate of Incorporation or these By-laws, any contract or other instrument may be executed and delivered in the name and on behalf of the Corporation by such officer or officers (including any assistant officer) of the Corporation as the Board may from time to time direct. Such authority may be general or confined to specific instances as the Board may determine. Unless authorized by the Board may determine. Unless authorized by the Board or expressly permitted by these By-laws, no officer or agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it pecuniarily liable for any purpose or to any amount.

SECTION 2. Loans. Except as otherwise required by statute, the Certificate of Incorporation or these By-laws, any officer (including any assistant officer) of the Corporation acting at the direction of the Board may effect loans and advances for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, but no officer or officers shall mortgage, pledge, hypothecate or transfer any securities or other property of the Corporation other than in connection with the purchase of chattels for use in the Corporation’s operations, except when authorized by the Board.

SECTION 3. Checks, Drafts, etc. All checks, drafts, bills of exchange or other orders for the payment of money out of the funds of the Corporation, and all notes or other evidence of indebtedness of the Corporation, shall be signed in the name and on behalf of the Corporation by such persons and in such manner as shall from time to time be authorized by the Board.

SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board may from time to time designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer or agent of the Corporation.

SECTION 5. General and Special Bank Accounts. The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these By-laws, as it may deem expedient.

ARTICLE VII

Offices

SECTION 1. Registered Office. The registered office and registered agent of the Corporation will be as specified in the Certificate of Incorporation of the Corporation.

SECTION 2. Other Offices. The Corporation may also have such offices, both within or without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE VIII

Fiscal Year

The fiscal year of the Corporation shall be the twelve consecutive calendar months ending on December 31.

ARTICLE IX

Seal

The seal of the Corporation shall be circular in form, shall bear the name of the Corporation and shall include the words and numbers “Corporate Seal”, “Delaware” and the year of incorporation.

ARTICLE X

Indemnification

SECTION 1. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, or by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, in accordance with and to the full extent permitted by statute and by the Certificate of Incorporation of the Corporation. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Section. The indemnification provided by this Section shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under these By-laws or any agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

SECTION 2. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of statute or of this section.

ARTICLE XI

Amendment

The By-laws may be amended, repealed or altered by vote of the holders of a majority of the outstanding shares of the Corporation’s capital stock; except as otherwise provided in the Certificate of Incorporation. The By-laws may also be amended, repealed or altered by the Board of Directors, but any By-law adopted by the Board of Directors may be amended, repealed or altered by the stockholders entitled to vote thereon as herein provided.

ARTICLE XII

Forum for Adjudication of Disputes.

Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation; (ii) any action asserting a claim of breach of fiduciary duty owed by any director or officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders; (iii) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL, the Certificate of Incorporation or these Bylaws (in each case, as may be amended from time to time); (iv) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine; or (v) any other internal corporate claim as defined in Section 115 of the DGCL or any successor provision, shall be in the Court of Chancery of the State of Delaware, or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware does not have jurisdiction, the United States District Court for the District of Delaware, subject to the court’s having personal jurisdiction over the indispensable parties named therein. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XII. If any action the subject matter of which is within the scope of this Article XII is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Failure to enforce the foregoing provisions would cause the Corporation irreparable harm and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Douglas J. Kramer, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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:	10/31/2017	LAPOLLA INDUSTRIES, INC.
		/s/ Douglas J. Kramer
		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 quarterly report on Form 10-Q 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:	10/31/2017	LAPOLLA INDUSTRIES, INC.
		/s/ Jomarc C. Marukot
		Jomarc C. Marukot
		Principal Financial Officer and
		Principal Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The following certifications are being furnished solely to accompany the Report (defined below) pursuant to 18 U.S.C. § 1350 and in accordance with SEC Release No. 33-8238. These certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Certification of Principal Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Lapolla Industries, Inc., a Delaware corporation (the “Company”), hereby certifies, to his knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2017 (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

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

Date:	10/31/2017	LAPOLLA INDUSTRIES, INC.
		/s/ Douglas J. Kramer
		Douglas J. Kramer
		Principal Executive Officer

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

Certification of Principal Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Lapolla Industries, Inc., a Delaware corporation (the “Company”), hereby certifies, to his knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2017 (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

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	10/31/2017	LAPOLLA INDUSTRIES, INC.
		/s/ Jomarc C. Marukot
		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 Lapolla Industries, Inc. and will be retained by Lapolla Industries, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 2017
Document And Entity Information
Entity Registrant Name	LAPOLLA INDUSTRIES INC
Entity Central Index Key	0000875296
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
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 Common Stock, Shares Outstanding		127,816,247
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets, Current [Abstract]
Cash	$ 1,251	$ 1,722
Trade Receivables, Net	16,990	12,508
Inventories, Net	7,149	6,610
Prepaid Expenses and Other Current Assets	1,621	2,074
Total Current Assets	27,011	22,914
Property, Plant and Equipment, Net	1,089	985
Goodwill	4,235	4,235
Other Intangible Assets, Net	1,443	1,180
Deposits and Other Non-Current Assets, Net	63	81
Total Assets	33,841	29,395
Current Liabilities:
Accounts Payable	8,857	6,741
Accrued Expenses and Other Current Liabilities	2,598	2,938
Total Current Liabilities	11,455	9,679
Long-Term Debt, Net	5,960	8,945
Deferred Tax Liability	447	414
Total Liabilities	17,862	19,038
Stockholders' Equity:
Common Stock, $0.01 Par Value; 140,000,000 Shares Authorized; 123,569,129 and 123,494,129 Issued and Outstanding for September 30, 2017 and December 31, 2016, respectively.	1,236	1,235
Additional Paid-In Capital	93,067	93,600
Accumulated Deficit	(78,324)	(84,478)
Total Stockholders' Equity	15,979	10,357
Total Liabilities and Stockholders' Equity	$ 33,841	$ 29,395

XML

Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Stockholders' Equity Attributable to Parent [Abstract]
Common Stock, Par Value (usd per share)	$ 0.01	$ 0.01
Common Stock, Shares Authorized (shares)	140,000,000	140,000,000
Common Stock, Shares Issued (shares)	123,569,129	123,494,129
Common Stock, Shares Outstanding (shares)	123,569,129	123,494,129

XML

Condensed Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Sales	$ 28,828	$ 20,917	$ 77,627	$ 61,647
Cost of Sales	21,535	14,773	57,163	43,719
Gross Profit	7,293	6,144	20,464	17,928
Operating Expenses:
Selling, General and Administrative	3,566	3,525	11,227	11,100
Professional Fees	458	339	1,299	969
Depreciation	30	20	73	79
Amortization of Other Intangible Assets	79	67	200	210
Consulting Fees	380	123	916	421
Total Operating Expenses	4,513	4,074	13,715	12,779
Operating Income	2,780	2,070	6,749	5,149
Other (Income) Expense:
Interest Expense	50	192	167	818
Interest Expense – Related Party	0	125	0	491
Interest Expense – Amortization of Discount	0	30	0	120
Loss on Extinguishment of Debt	0	306	0	306
Other Income	(9)	(90)	(57)	(701)
Total Other Expense	41	563	110	1,034
Income Before Income Taxes	2,739	1,507	6,639	4,115
Provision for Income Taxes	149	39	485	151
Net Income	$ 2,590	$ 1,468	$ 6,154	$ 3,964
Earnings Per Share:
Basic (usd per share)	$ 0.02	$ 0.01	$ 0.05	$ 0.03
Diluted (usd per share)	$ 0.02	$ 0.01	$ 0.05	$ 0.03
Basic, weighted average shares outstanding (shares)	123,544	123,016	123,519	122,654
Diluted, weighted average shares outstanding (shares	125,979	123,050	123,031	122,655

XML

Condensed Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Net Cash Provided by (Used in) Operating Activities [Abstract]
Net Income	$ 6,154	$ 3,964
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation	187	202
Amortization of Other Intangible Assets	200	210
Provision for Losses on Accounts Receivable	261	169
Share Based Compensation Expense	708	711
Interest Expense – Related Party	0	491
Interest Expense – Amortization of Discount	0	120
(Gain) Loss on Foreign Currency Exchange	(2)	8
Gain on Disposal of Assets	0	(9)
Loss on Extinguishment of Debt	0	306
Deferred Income Tax Provision	33	39
Changes in Assets and Liabilities:
Trade Receivables	(4,749)	(1,580)
Inventories	(486)	1,022
Prepaid Expenses and Other Current Assets	453	84
Other Intangible Assets	(463)	(190)
Deposits and Other Non-Current Assets	33	41
Accounts Payable	2,123	973
Accrued Expenses and Other Current Liabilities	(407)	(490)
Net Cash Provided by Operating Activities	4,045	6,071
Cash Flows From Investing Activities:
Additions to Property, Plant and Equipment	(276)	(133)
Net Cash Used in Investing Activities	(276)	(133)
Cash Flows From Financing Activities:
Proceeds from Line of Credit	4,250	9,953
Principal Repayments to Line of Credit	(7,250)	(250)
Cash Dividends Paid	(1,240)	0
Proceeds from Revolver Loan	0	54,996
Principal Repayments to Revolver Loan	0	(61,732)
Principal Repayments on Enhanced Notes	0	(7,688)
Net Cash Used in Financing Activities	(4,240)	(4,721)
Net (Decrease) Increase in Cash	(471)	1,217
Cash at Beginning of Period	1,722	0
Cash at End of Period	1,251	1,217
Supplemental Disclosure of Cash Flow Information:
Cash Payments for Income Taxes	202	27
Cash Payments for Interest	176	735
Supplemental Schedule of Non Cash Investing and Financing Activities:
Capital Additions in Accrued Expenses	67	0
Issuances of Common Stock for Guaranty by Related Party classified as Interest Expense	$ 0	$ 695

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

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

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

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

The condensed financial statements included herein are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes to the condensed financial statements.

These unaudited condensed financial statements should be read in conjunction with the risk factors and the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 15, 2017, in order to fully understand the basis of presentation. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year. The Company’s critical accounting policies were described in Note 1 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. There have been no significant changes in the Company’s accounting policies during the three and nine months ended September 30, 2017. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenue and expenses. Actual results could differ from these estimates.

Reclassifications

Certain reclassifications of prior year amounts have been made to confirm to the current year presentation. The reclassifications had no impact on net income.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2017

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

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 adoption did not have a material impact on the Company’s financial statements.

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 adoption did not have a material impact on the Company’s financial statements.

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.

Note 2 - Recent Accounting Pronouncements, 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 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 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.

In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718)," which provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this guidance.

In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815)," which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of adopting this guidance.

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Dependence on Few Suppliers

9 Months Ended

Sep. 30, 2017

Risks and Uncertainties [Abstract]

Dependence on Few Suppliers

Dependence on Few Suppliers

The Company is dependent on a few suppliers for certain raw materials and finished goods. For the three and nine month period ended September 30, 2017 and 2016, raw materials and finished goods purchased from the three largest suppliers accounted for approximately 43% and 43%, and 43% and 41% of purchases, respectively.

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Trade Receivables

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Trade Receivables

Trade Receivables

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

	September 30, 2017			December 31, 2016
Trade Receivables	$	17,337		$	12,874
Less: Allowance for Doubtful Accounts	(347		)	(366		)
Trade Receivables, Net	$	16,990		$	12,508

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Inventories

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventories

Inventories

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

	September 30, 2017		December 31, 2016
Raw Materials	$	2,356	$	2,157
Finished Goods	4,793		4,453
Inventories, Net	$	7,149	$	6,610

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Prepaid Expenses and Other Current Assets

9 Months Ended

Sep. 30, 2017

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): 

	September 30, 2017		December 31, 2016
Prepaid Insurances	$	245	$	735
Prepaid Marketing	71		181
Prepaid Consulting	68		94
Prepaid Other	1,237		1,064
Total Prepaid Expenses and Other Current Assets	$	1,621	$	2,074

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Property, Plant and Equipment

9 Months Ended

Sep. 30, 2017

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): 

	September 30, 2017			December 31, 2016
Vehicles	$	194		$	244
Leasehold Improvements	303			269
Office Furniture and Equipment	199			159
Computers and Software	1,108			907
Machinery and Equipment	2,572			2,557
Total Property, Plant and Equipment	$	4,376		$	4,136
Less: Accumulated Depreciation	(3,287		)	(3,151		)
Total Property, Plant and Equipment, Net	$	1,089		$	985

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill

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

	September 30, 2017		December 31, 2016
Foam	$	2,932	$	2,932
Coatings	1,303		1,303
Total Goodwill	$	4,235	$	4,235

Other Intangible Assets

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

	September 30, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Product Formulation	$	138	$	(111	)	$	27	$	138	$	(104	)	$	34
Trade Names	750		(457		)	293		750		(419		)	331
Approvals and Certifications	3,926		(2,803		)	1,123		3,462		(2,647		)	815
	$	4,814	$	(3,371	)	$	1,443	$	4,350	$	(3,170	)	$	1,180

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Deposits and Other Non-Current Assets

9 Months Ended

Sep. 30, 2017

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

Deposits and Other Non-Current Assets

Deposits and Other Non-Current Assets

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

	September 30, 2017		December 31, 2016
Prepaid Expenses	$	6	$	8
Other Receivables	—		9
Deposits	57		64
Total Deposits and Other Non-Current Assets	$	63	$	81

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Accrued Expenses and Other Current Liabilities

9 Months Ended

Sep. 30, 2017

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 (in thousands): 

	September 30, 2017		December 31, 2016
Accrued Payroll	$	107	$	3
Accrued Commissions	176		172
Accrued Inventory Purchases	172		249
Accrued Taxes and Other	2,082		2,011
Accrued Insurance	35		490
Deferred Finance Charge Income	26		13
Total Accrued Expenses and Other Current Liabilities	$	2,598	$	2,938

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Long-Term Debt

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

Debt Facility	Effective Cash Interest Rate	September 30, 2017			December 31, 2016
Line of Credit	3.46%	$	6,000		$	9,000
Less Debt Issuance Costs		(40		)	(55		)
Long-Term Debt, Net		$	5,960		$	8,945

The Company entered into a loan agreement with Bank of America, N.A. (the “Bank”) on September 7, 2016 (the “Loan Agreement”), which amended and restated in its entirety that certain prior Loan and Security Agreement dated August 31, 2010 with the Bank. The Loan 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 Loan 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) 1.20 to 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% of 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 Loan 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 certain prior refinanced debt agreements, and distributions made, in each case for the immediately preceding four fiscal quarter period and determined on a consolidated basis. Upon closing of the Loan Agreement, an aggregate of $8.5 million was drawn from the Line of Credit and used to pay off certain prior refinanced debt agreements. 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 September 30, 2017, the balance outstanding on the Line of Credit, net of deferred financing costs, was $6.0 million, and the weighted-average interest rate was 2.46%. Cash available under our Line of Credit based on the Asset Coverage Ratio, and after giving effect to outstanding borrowings, at September 30, 2017 was $8.3 million. At September 30, 2017, the Company was in compliance with all of its Loan Agreement debt covenants.

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Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

(a)    On January 1, 2017, the Company granted a stock bonus to the chairman of the board, Richard J. Kurtz, for the right to acquire 100,000 shares of the Company's common stock, par value $0.01. No monetary payment is required as a condition of receiving the shares of common stock, as the consideration is continued satisfactory chairman of the board services with the Company during the vesting period. The shares of common stock vest in four equal 25,000 share increments on March 31, 2017, June 30, 2017, September 30, 2017, and December 31, 2017, respectively, subject to continued chairman of the board services to the Company. Once vested, the shares of common stock are freely transferable. The transaction was valued at $53,000 (calculated by multiplying the 100,000 shares by the $0.53 closing price of the Company's common stock on the date of grant) and is being expensed over the requisite service period on the respective vesting dates. On March 31, 2017, the first tranche of 25,000 shares of common stock vested, which transaction was valued and recorded at $13,000.

(b)    On January 5, 2017, the Company granted eight-year stock options to non-employee directors, Richard J. Kurtz, Jay C. Nadel, Arthur J. Gregg, and Augustus J. Larson, each for the right to acquire 100,000 shares of the Company's common stock, par value $0.01, 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 $0.50 per share, which options vest 33,333, 33,333, and 33,334 on December 31, 2017, December 31, 2018, and December 31, 2019, respectively, subject to continued satisfactory board 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 period.

Note 12 - Related Party Transactions, continued

(c)    On April 6, 2017, and effective January 1, 2017, the Company entered into an Executive Employment Agreement with Jomarc C. Marukot, chief financial officer and treasurer (the “Marukot Employment Agreement”), which superseded and replaced all prior employment agreements between the Company and Mr. Marukot. The Marukot Employment Agreement provides, among other things, that Mr. Marukot will receive base compensation of $210,000 per annum and shall be entitled to a bonus equal to 25% of his base salary for each fiscal year if the Company's earnings before interest, taxes, depreciation, amortization, and share based compensation (“Adjusted EBITDA”) for such fiscal year exceeds a target established by the Company's Board of Directors (which bonus shall be increased to: (a) 30% of Mr. Marukot’s annual base compensation if the Company achieves 110% of the Adjusted EBITDA target for such fiscal year and (b) 35% of Mr. Marukot’s annual base compensation if the Company achieves 120% of the Adjusted EBITDA target for such fiscal year). In addition, if the Company achieves Adjusted EBITDA greater than 120% of the target in any fiscal year, the Company's CEO, in his discretion, may pay Mr. Marukot a bonus greater than 35% of his annual base compensation, subject to review and approval by the Compensation Committee and Board of Directors. The Marukot Employment Agreement also provides for a transaction bonus equal to 0.25% of the consideration received by the Company's shareholders (the amount of such bonus being subject to the restrictions and further calculations set forth in the Marukot Employment Agreement) upon consummation of a change in control if Mr. Marukot is still employed at such time or in the event Mr. Marukot’s employment is terminated within one year immediately preceding the consummation of a change in control.

(d)    On April 6, 2017, the Company entered into an Executive Employment Agreement with Michael T. Adams, chief governance officer, vice president and corporate secretary (the “Adams Employment Agreement”), which superseded and replaced all prior employment agreements between the Company and Mr. Adams. The Adams Employment Agreement provides, among other things, that Mr. Adams will receive base compensation of $200,000 per annum and shall be entitled to a bonus equal to 25% of his base salary for each fiscal year if the Company's Adjusted EBITDA for such fiscal year exceeds a target established by the Company's Board of Directors (which bonus shall be increased to: (a) 30% of Mr. Adams' annual base compensation if the Company achieves 110% of the Adjusted EBITDA target for such fiscal year and (b) 35% of Mr. Adams' annual base compensation if the Company achieves 120% of the Adjusted EBITDA target for such fiscal year). In addition, if the Company achieves Adjusted EBITDA greater than 120% of the target in any fiscal year, the Company's CEO, in his discretion, may pay Mr. Adams a bonus greater than 35% of his annual base compensation, subject to review and approval by the Compensation Committee and Board of Directors. Also, the Adams Employment Agreement provides for a transaction bonus equal to 0.50% of the consideration received by the Company's shareholders (the amount of such bonus being subject to the restrictions and further calculations set forth in the Adams Employment Agreement) upon consummation of a change in control if Mr. Adams is still employed at such time or in the event Mr. Adams’ employment is terminated within one year immediately preceding the consummation of a change in control.

(e)    During the nine months ended September 30, 2017, Richard J. Kurtz, Chairman of the Board and majority stockholder of the Company, indirectly purchased the Company’s products in a series of arm’s length transactions at or above the prevailing selling prices for the products at the time of each transaction, which transactions were valued in the aggregate at $825,000, through entities in which he holds at least a 10% interest.

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

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Net Income Per Common Share - Basic and Diluted

Net Income Per Common Share – Basic and Diluted

Basic income per share is based upon the net income applicable to common shares and upon the weighted average number of common shares outstanding during the period. Diluted income per share reflects the effect of the assumed exercise of stock options only in periods in which such effect would have been dilutive. The computation of the Company’s basic and diluted earnings per share (in thousands, except per share data):

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2017		2016		2017			2016
Income available to common shareholders (A)	$	2,590	$	1,468	$	6,154		$	3,964
Weighted average common shares outstanding (B)	123,544		123,016		123,519			122,654
Dilutive effect of equity incentive plans	1,935		34		(488		)	1
Weighted average common shares outstanding, assuming dilution (C)	125,479		123,050		123,031			122,655
Basic earnings per common share (A)/(B)	$	0.02	$	0.01	$	0.05		$	0.03
Diluted earnings per common share (A)/(C)	$	0.02	$	0.01	$	0.05		$	0.03

Note 13 - Net Income Per Common Share – Basic and Diluted, continued

For the three and nine months ended September 30, 2017, a total of 1,415,000 shares of common stock underlying vested and exercisable stock options were excluded from the calculation of diluted earnings per common share as the exercise prices of the stock options were greater than the market value of the common shares (out-of-the-money).

For the three and nine months ended September 30, 2016, a total of 1,008,000 shares of common stock underlying vested and exercisable stock options were excluded from the calculation of diluted earnings per common share as the exercise prices of the stock options were out-of-the-money.

Out-of-the money 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 their exercise price.

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Federal and State Income Taxes

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Federal and State Income Taxes

Federal and State Income Taxes

The Company is a corporation subject to federal income tax at a statutory rate of 34% of pretax earnings. The Company estimated an annual effective income tax rate of 7.3% based on projected results for the year and applied this rate to income before taxes to calculate income tax expense. For the three months ended September 30, 2017 and 2016 the tax expense was approximately $149,000 and $39,000, resulting in an effective tax rate of approximately 5.4% and 2.6%, respectively. For the nine months ended September 30, 2017 and 2016 the tax expense was approximately $485,000 and $151,000, resulting in an effective tax rate of approximately 7.3% and 3.7%, respectively. The difference in the statutory and effective tax rates is primarily due to the company utilizing an available net operating loss carry-forward.

Based on management's analysis, the Company did not have any uncertain tax positions as of September 30, 2017.

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Securities Transactions

9 Months Ended

Sep. 30, 2017

Securities Financing Transactions [Abstract]

Securities Transactions

Securities Transactions

(a)    On March 31, 2017, the Company vested 25,000 shares of common stock, par value $0.01, valued and recorded at $13,250 for a stock bonus.

(b)    On June 30, 2017, the Company vested 25,000 shares of common stock, par value $0.01, valued and recorded at $13,250 for a stock bonus.

(c)    On September 30, 2017, the Company vested 25,000 shares of common stock, par value $0.01, valued and recorded at $13,250 for a stock bonus.

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Business Segment and Geographic Area Information

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Business Segment and Geographic Area Information

Business Segment and Geographic Area Information

Business Segments

Summarized financial information for the reportable segments is as follows (in thousands):

	Three Months Ended September 30,
	2017						2016
	Foam		Coatings		Totals		Foam			Coatings			Totals
Sales	$	24,642	$	4,186	$	28,828	$	17,719		$	3,198		$	20,917
Depreciation	23		4		27		15			3			18
Amortization of Other Intangible Assets	61		10		71		51			9			60
Interest Expense	21		4		25		147			27			174
Segment Profit	3,502		886		4,388		2,713			541			3,254
Segment Assets (1)	26,830		5,299		32,129		21,315			4,564			25,879
Expenditures for Segment Assets	$	199	$	34	$	233	$	(38	)	$	(7	)	$	(45	)

Note 16. Business Segment and Geographic Area Information, continued.

	Nine Months Ended September 30,
	2017						2016
	Foam		Coatings		Totals		Foam		Coatings		Totals
Sales	$	66,383	$	11,244	$	77,627	$	52,088	$	9,559	$	61,647
Depreciation	55		9		64		59		11		70
Amortization of Other Intangible Assets	165		26		191		160		29		189
Interest Expense	72		12		84		603		112		715
Segment Profit	9,399		2,120		11,519		7,517		1,580		9,097
Segment Assets (1)	26,830		5,299		32,129		21,315		4,564		25,879
Expenditures for Segment Assets	$	395	$	70	$	465	$	112	$	21	$	133

The following are reconciliations of reportable segment profit or loss, and assets, to the Company’s consolidated totals (in thousands): 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
Profit or Loss	2017			2016			2017			2016
Total Profit or Loss for Reportable Segments	$	4,388		$	3,254		$	11,519		$	9,097
Unallocated Amounts:
Corporate Expenses	(1,649		)	(1,747		)	(4,880		)	(4,982		)
Income Before Income Taxes	$	2,739		$	1,507		$	6,639		$	4,115

Assets	At September 30, 2017		At December 31, 2016
Total Assets for Reportable Segments (1)	$	32,129	$	27,104
Other Unallocated Amounts (2)	1,712		2,291
Consolidated Total	$	33,841	$	29,395

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

(2) Includes corporate assets which are principally cash and cash equivalents and deposits.

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.

Sales and Long-Lived Assets by geographic area are as follows (in thousands):

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
Sales	2017		2016		2017		2016
United States	$	27,353	$	19,564	$	75,051	$	57,507
Canada	503		247		729		878
Europe	765		921		1,443		1,870
Middle East	—		—		—		3
Rest of World	207		185		404		1,389
Total	$	28,828	$	20,917	$	77,627	$	61,647
Long Lived Assets (1)	6,774		6,464		6,774		6,464

(1) All segment assets are located in the United States.

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

(a)    On October 2, 2017, in recognition of Jay C. Nadel's contribution and dedication in building the Company towards $200 million in value pursuant to his Advisory Agreement dated February 22, 2011 (the "Nadel Agreement"), the Compensation Committee of the Company's Board of Directors (the "Committee"), comprised of independent directors, deemed it in the best interest of the Company and its stockholders and upon recommendation of Richard J. Kurtz, Chairman of the Board and majority stockholder of the Company, granted a stock award to Mr. Nadel, of 3,747,118 shares of Common Stock (the “Nadel Stock Award”), which was approved by the Company’s Board of Directors. The Nadel Stock Award was fully vested as of the date of grant. The transaction was valued and recorded as $2,960,223 (calculated by multiplying the 3,747,118 shares by the $0.79 closing price of the Company's common stock on the date of grant).

(b)    On October 4, 2017, in recognition of Douglas Kramer’s many years of service and dedication to the Company, together with excellent service in creating value for stockholders, the Committee, comprised of independent directors, deemed it in the best interest of the Company and its stockholders to grant a stock award to Mr. Kramer of 500,000 shares of Common Stock (the “Kramer Stock Award”), which was approved by the Company’s Board of Directors. The Kramer Stock Award was fully vested as of the date of grant. The transaction was valued and recorded as $380,000 (calculated by multiplying the 500,000 shares by the $0.76 closing price of the Company's common stock on the date of grant).

(c)    On October 4, 2017, the Company entered into a definitive merger agreement with Icynene U.S. Holding Corp. ("Icynene") and Blaze Merger Sub Inc. ("Merger Sub"), pursuant to which Merger Sub will merge with and into the Company, with the Company as the surviving corporation and wholly-owned subsidiary of Icynene. The transaction is valued at approximately $160 million, including net debt.

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

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Basis of Presentation, Critical Accounting Policies, Estimates, and Assumptions (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Accounting

The condensed financial statements included herein are unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes to the condensed financial statements.

These unaudited condensed financial statements should be read in conjunction with the risk factors and the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 15, 2017, in order to fully understand the basis of presentation. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year. The Company’s critical accounting policies were described in Note 1 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. There have been no significant changes in the Company’s accounting policies during the three and nine months ended September 30, 2017. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenue and expenses. Actual results could differ from these estimates.

Recently Adopted Accounting Standards and New Accounting Standards Not Yet Adopted

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.

Note 2 - Recent Accounting Pronouncements, 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 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 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.

In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation (Topic 718)," which provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this guidance.

In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815)," which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of adopting this guidance.

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Trade Receivables (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Schedule of Trade Receivables

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

	September 30, 2017			December 31, 2016
Trade Receivables	$	17,337		$	12,874
Less: Allowance for Doubtful Accounts	(347		)	(366		)
Trade Receivables, Net	$	16,990		$	12,508

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Inventories (Tables)

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Summary of Inventories

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

	September 30, 2017		December 31, 2016
Raw Materials	$	2,356	$	2,157
Finished Goods	4,793		4,453
Inventories, Net	$	7,149	$	6,610

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Prepaid Expenses and Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2017

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): 

	September 30, 2017		December 31, 2016
Prepaid Insurances	$	245	$	735
Prepaid Marketing	71		181
Prepaid Consulting	68		94
Prepaid Other	1,237		1,064
Total Prepaid Expenses and Other Current Assets	$	1,621	$	2,074

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Property, Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Summary of Property, Plant and Equipment

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

	September 30, 2017			December 31, 2016
Vehicles	$	194		$	244
Leasehold Improvements	303			269
Office Furniture and Equipment	199			159
Computers and Software	1,108			907
Machinery and Equipment	2,572			2,557
Total Property, Plant and Equipment	$	4,376		$	4,136
Less: Accumulated Depreciation	(3,287		)	(3,151		)
Total Property, Plant and Equipment, Net	$	1,089		$	985

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Goodwill

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

	September 30, 2017		December 31, 2016
Foam	$	2,932	$	2,932
Coatings	1,303		1,303
Total Goodwill	$	4,235	$	4,235

Summary of Other Intangible Assets

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

	September 30, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Product Formulation	$	138	$	(111	)	$	27	$	138	$	(104	)	$	34
Trade Names	750		(457		)	293		750		(419		)	331
Approvals and Certifications	3,926		(2,803		)	1,123		3,462		(2,647		)	815
	$	4,814	$	(3,371	)	$	1,443	$	4,350	$	(3,170	)	$	1,180

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Deposits and Other Non-Current Assets (Tables)

9 Months Ended

Sep. 30, 2017

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):

	September 30, 2017		December 31, 2016
Prepaid Expenses	$	6	$	8
Other Receivables	—		9
Deposits	57		64
Total Deposits and Other Non-Current Assets	$	63	$	81

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Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2017

Payables and Accruals [Abstract]

Schedule of Accrued Expenses and Other Current Liabilities

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

	September 30, 2017		December 31, 2016
Accrued Payroll	$	107	$	3
Accrued Commissions	176		172
Accrued Inventory Purchases	172		249
Accrued Taxes and Other	2,082		2,011
Accrued Insurance	35		490
Deferred Finance Charge Income	26		13
Total Accrued Expenses and Other Current Liabilities	$	2,598	$	2,938

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Long-Term Debt Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Summary of Long-Term Debt

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

Debt Facility	Effective Cash Interest Rate	September 30, 2017			December 31, 2016
Line of Credit	3.46%	$	6,000		$	9,000
Less Debt Issuance Costs		(40		)	(55		)
Long-Term Debt, Net		$	5,960		$	8,945

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Net Income (Loss) per Common Share - Basic and Diluted (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The computation of the Company’s basic and diluted earnings per share (in thousands, except per share data):

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2017		2016		2017			2016
Income available to common shareholders (A)	$	2,590	$	1,468	$	6,154		$	3,964
Weighted average common shares outstanding (B)	123,544		123,016		123,519			122,654
Dilutive effect of equity incentive plans	1,935		34		(488		)	1
Weighted average common shares outstanding, assuming dilution (C)	125,479		123,050		123,031			122,655
Basic earnings per common share (A)/(B)	$	0.02	$	0.01	$	0.05		$	0.03
Diluted earnings per common share (A)/(C)	$	0.02	$	0.01	$	0.05		$	0.03

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Business Segment and Geographic Area Information (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Summarized financial information for the reportable segments is as follows (in thousands):

	Three Months Ended September 30,
	2017						2016
	Foam		Coatings		Totals		Foam			Coatings			Totals
Sales	$	24,642	$	4,186	$	28,828	$	17,719		$	3,198		$	20,917
Depreciation	23		4		27		15			3			18
Amortization of Other Intangible Assets	61		10		71		51			9			60
Interest Expense	21		4		25		147			27			174
Segment Profit	3,502		886		4,388		2,713			541			3,254
Segment Assets (1)	26,830		5,299		32,129		21,315			4,564			25,879
Expenditures for Segment Assets	$	199	$	34	$	233	$	(38	)	$	(7	)	$	(45	)

Note 16. Business Segment and Geographic Area Information, continued.

	Nine Months Ended September 30,
	2017						2016
	Foam		Coatings		Totals		Foam		Coatings		Totals
Sales	$	66,383	$	11,244	$	77,627	$	52,088	$	9,559	$	61,647
Depreciation	55		9		64		59		11		70
Amortization of Other Intangible Assets	165		26		191		160		29		189
Interest Expense	72		12		84		603		112		715
Segment Profit	9,399		2,120		11,519		7,517		1,580		9,097
Segment Assets (1)	26,830		5,299		32,129		21,315		4,564		25,879
Expenditures for Segment Assets	$	395	$	70	$	465	$	112	$	21	$	133

Reconciliation of Reportable Segment Profit or Loss

The following are reconciliations of reportable segment profit or loss, and assets, to the Company’s consolidated totals (in thousands): 

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
Profit or Loss	2017			2016			2017			2016
Total Profit or Loss for Reportable Segments	$	4,388		$	3,254		$	11,519		$	9,097
Unallocated Amounts:
Corporate Expenses	(1,649		)	(1,747		)	(4,880		)	(4,982		)
Income Before Income Taxes	$	2,739		$	1,507		$	6,639		$	4,115

Reconciliation of Assets from Segment to Consolidated

Assets	At September 30, 2017		At December 31, 2016
Total Assets for Reportable Segments (1)	$	32,129	$	27,104
Other Unallocated Amounts (2)	1,712		2,291
Consolidated Total	$	33,841	$	29,395

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

(2) Includes corporate assets which are principally cash and cash equivalents and deposits.

Summary of Sales and Long-Lived Assets by Geographic Area

Sales and Long-Lived Assets by geographic area are as follows (in thousands):

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
Sales	2017		2016		2017		2016
United States	$	27,353	$	19,564	$	75,051	$	57,507
Canada	503		247		729		878
Europe	765		921		1,443		1,870
Middle East	—		—		—		3
Rest of World	207		185		404		1,389
Total	$	28,828	$	20,917	$	77,627	$	61,647
Long Lived Assets (1)	6,774		6,464		6,774		6,464

(1) All segment assets are located in the United States.

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Dependence on Few Suppliers (Details) - Supplier Concentration Risk [Member] - Purchases [Member] - supplier	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Concentration Risk [Line Items]
Concentration Risk, Number of Suppliers	3	3	3	3
Concentration Risk (percent)	43.00%	43.00%	43.00%	41.00%

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Trade Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Receivables [Abstract]
Trade Receivables	$ 17,337	$ 12,874
Less: Allowance for Doubtful Accounts	(347)	(366)
Trade Receivables, Net	$ 16,990	$ 12,508

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Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw Materials	$ 2,356	$ 2,157
Finished Goods	4,793	4,453
Inventories, Net	$ 7,149	$ 6,610

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Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid Insurances	$ 245	$ 735
Prepaid Marketing	71	181
Prepaid Consulting	68	94
Prepaid Other	1,237	1,064
Total Prepaid Expenses and Other Current Assets	$ 1,621	$ 2,074

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Property, Plant and Equipment - Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 4,376	$ 4,136
Less: Accumulated Depreciation	(3,287)	(3,151)
Total Property, Plant and Equipment, Net	1,089	985
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	194	244
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	303	269
Office Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	199	159
Computers and Software [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	1,108	907
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 2,572	$ 2,557

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Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Goodwill [Line Items]
Total Goodwill	$ 4,235	$ 4,235
Operating Segments [Member] | Foam [Member]
Goodwill [Line Items]
Total Goodwill	2,932	2,932
Operating Segments [Member] | Coatings [Member]
Goodwill [Line Items]
Total Goodwill	$ 1,303	$ 1,303

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Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 4,814	$ 4,350
Accumulated Amortization	(3,371)	(3,170)
Net Amount	1,443	1,180
Product Formulation [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	138	138
Accumulated Amortization	(111)	(104)
Net Amount	27	34
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	750	750
Accumulated Amortization	(457)	(419)
Net Amount	293	331
Approvals and Certifications [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Amount	3,926	3,462
Accumulated Amortization	(2,803)	(2,647)
Net Amount	$ 1,123	$ 815

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Deposits and Other Non-Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid Expenses	$ 6	$ 8
Other Receivables	0	9
Deposits	57	64
Total Deposits and Other Non-Current Assets	$ 63	$ 81

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Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Accrued Liabilities and Other Liabilities [Abstract]
Accrued Payroll	$ 107	$ 3
Accrued Commissions	176	172
Accrued Inventory Purchases	172	249
Accrued Taxes and Other	2,082	2,011
Accrued Insurance	35	490
Deferred Finance Charge Income	26	13
Total Accrued Expenses and Other Current Liabilities	$ 2,598	$ 2,938

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Long-Term Debt - Summary of Long-Term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Less Debt Issuance Costs	$ (40)	$ (55)
Long-Term Debt, Net	$ 5,960	8,945
Line of Credit [Member] | Line of Credit [Member]
Debt Instrument [Line Items]
Effective Cash Interest Rate (as a percent)	3.46%
Long-Term Debt	$ 6,000	$ 9,000

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Long-Term Debt - Loan Agreement (Details) $ in Thousands		6 Months Ended	12 Months Ended	17 Months Ended
	Sep. 07, 2016 USD ($) covenant	Mar. 31, 2018	Sep. 30, 2017 USD ($)	Sep. 07, 2019	Jul. 01, 2019 USD ($)	Jan. 01, 2017 USD ($)	Dec. 31, 2016 USD ($)
Debt Instrument [Line Items]
Amounts outstanding net of deferred financing costs			$ 5,960				$ 8,945
Line of Credit [Member] | Loan Agreement [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 15,000
Debt instrument term (in years)	3 years
Quarterly decrease in borrowing capacity						$ 250
Number of debt covenants (in covenant) | covenant	2
Financial covenant, minimum asset coverage ratio			1.10
Financial covenant, book value of accounts receivable compared to all borrowings and interest bearing liabilities (percent)	85.00%
Financial covenant, book value of inventory compared to all borrowings and interest bearing liabilities (percent)	55.00%
Financial covenant, book value of plant, property and equipment compared to all borrowings and interest bearing liabilities (percent)	50.00%
Financial covenant, minimum fixed charge coverage ratio	1.20
Amounts outstanding net of deferred financing costs	$ 8,500		$ 6,000
Weighted average interest rate (percent)			2.46%
Remaining borrowing capacity			$ 8,300
Line of Credit [Member] | Loan Agreement [Member] | Daily Floating LIBOR [Member]
Debt Instrument [Line Items]
Interest rate (percent)	2.25%
Line of Credit [Member] | Loan Agreement [Member] | Forecast [Member]
Debt Instrument [Line Items]
Maximum borrowing capacity					$ 12,000
Financial covenant, minimum asset coverage ratio		1.15		1.20

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Related Party Transactions (Details) - USD ($)						9 Months Ended
	Jul. 31, 2017	Apr. 06, 2017	Mar. 31, 2017	Jan. 05, 2017	Jan. 01, 2017	Sep. 30, 2017	Dec. 31, 2016
Related Party Transaction [Line Items]
Common Stock, Par Value (usd per share)	$ 0.01					$ 0.01	$ 0.01
Board of Directors Chairman | Purchases Through Affiliated Entities [Member]
Related Party Transaction [Line Items]
Aggregate arm's length transaction purchases						$ 825,000
Board of Directors Chairman | Purchases Through Affiliated Entities [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Ownership interest in purchasing entities						10.00%
Chief Financial Officer [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Annual Base Salary		$ 210,000
Related Party Transaction, Annual Bonus Percentage of Base Salary		25.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, Increase Option One		30.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, EBITDA Threshold One		110.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, Increase Option Two		35.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, EBITDA Threshold Two		120.00%
Transaction Bonus, Percent		0.25%
Chief Financial Officer [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Annual Bonus Percentage of Base Salary, EBITDA Threshold Three		120.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, Increase Option Three		35.00%
Vice President [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Annual Base Salary		$ 200,000
Related Party Transaction, Annual Bonus Percentage of Base Salary		25.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, Increase Option One		30.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, EBITDA Threshold One		110.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, Increase Option Two		35.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, EBITDA Threshold Two		120.00%
Transaction Bonus, Percent		0.50%
Vice President [Member] | Minimum [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Annual Bonus Percentage of Base Salary, EBITDA Threshold Three		120.00%
Related Party Transaction, Annual Bonus Percentage of Base Salary, Increase Option Three		35.00%
Employee Stock Option [Member] | Board of Directors Chairman
Related Party Transaction [Line Items]
Options, grants in period					100,000
Common Stock, Par Value (usd per share)					$ 0.01
Options, intrinsic value					$ 53,000
Share price (usd per share)					$ 0.53
Employee Stock Option [Member] | Director
Related Party Transaction [Line Items]
Share price (usd per share)				$ 0.50
Right to acquire shares (shares)				100,000
Fair value of options vested in the period				$ 191,000
Employee Stock Option [Member] | Vice President [Member]
Related Party Transaction [Line Items]
Expiration period (years)	8 years
Share-based Compensation Award, Tranche One [Member] | Employee Stock Option [Member] | Board of Directors Chairman
Related Party Transaction [Line Items]
Options vested in period (in shares)			25,000
Fair value of options vested in the period			$ 13,000
Share-based Compensation Award, Tranche One [Member] | Employee Stock Option [Member] | Director
Related Party Transaction [Line Items]
Options vested in period (in shares)				33,333
Share-based Compensation Award, Tranche Two [Member] | Employee Stock Option [Member] | Board of Directors Chairman
Related Party Transaction [Line Items]
Options vested in period (in shares)					25,000
Share-based Compensation Award, Tranche Two [Member] | Employee Stock Option [Member] | Director
Related Party Transaction [Line Items]
Options vested in period (in shares)				33,333
Share-based Compensation Award, Tranche Three [Member] | Employee Stock Option [Member] | Board of Directors Chairman
Related Party Transaction [Line Items]
Options vested in period (in shares)					25,000
Share-based Compensation Award, Tranche Three [Member] | Employee Stock Option [Member] | Director
Related Party Transaction [Line Items]
Options vested in period (in shares)				33,334
Share-based Compensation Award, Tranche Four [Member] | Employee Stock Option [Member] | Board of Directors Chairman
Related Party Transaction [Line Items]
Options vested in period (in shares)					25,000

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Net Income (Loss) per Common Share - Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Earnings Per Share [Abstract]
Income available to common shareholders	$ 2,590	$ 1,468	$ 6,154	$ 3,964
Weighted average common shares outstanding (shares)	123,544	123,016	123,519	122,654
Dilutive effect of equity incentive plans	$ 1,935	$ 34	$ (488)	$ 1
Weighted average common shares outstanding, assuming dilution (shares)	125,479	123,050	123,031	122,655
Basic earnings per common share (usd per share)	$ 0.02	$ 0.01	$ 0.05	$ 0.03
Diluted earnings per common share (usd per share)	$ 0.02	$ 0.01	$ 0.05	$ 0.03

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Net Income (Loss) per Common Share - Basic and Diluted - Narrative (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Out-of-the-money [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (shares)	1,415	1,008	1,415	1,008

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Federal and State Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Tax Disclosure [Abstract]
Statutory tax rate (percent)			34.00%
Effective tax rate (percent)	5.40%	2.60%	7.30%	3.70%
Income tax expense	$ 149	$ 39	$ 485	$ 151

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Securities Transactions (Details) - USD ($) $ / shares in Units, shares in Thousands	Sep. 30, 2017	Jun. 30, 2017	Jul. 31, 2017	Dec. 31, 2016
Common Stock, Par Value (usd per share)	$ 0.01		$ 0.01	$ 0.01
Affiliated Entity [Member]
Common stock issued (shares)	25	25
Common Stock, Par Value (usd per share)	$ 0.01	$ 0.01
Value of common stock issued	$ 13,250	$ 13,250

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Business Segment and Geographic Area Information - Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Segment Reporting Information [Line Items]
Sales	$ 28,828	$ 20,917	$ 77,627	$ 61,647
Depreciation	27	18	64	70
Amortization of Other Intangible Assets	71	60	191	189
Interest Expense	25	174	84	715
Segment Profit	4,388	3,254	11,519	9,097
Segment Assets	32,129	25,879	32,129	25,879
Expenditures for Segment Assets	233	(45)	465	133
Operating Segments [Member] | Foam [Member]
Segment Reporting Information [Line Items]
Sales	24,642	17,719	66,383	52,088
Depreciation	23	15	55	59
Amortization of Other Intangible Assets	61	51	165	160
Interest Expense	21	147	72	603
Segment Profit	3,502	2,713	9,399	7,517
Segment Assets	26,830	21,315	26,830	21,315
Expenditures for Segment Assets	199	(38)	395	112
Operating Segments [Member] | Coatings [Member]
Segment Reporting Information [Line Items]
Sales	4,186	3,198	11,244	9,559
Depreciation	4	3	9	11
Amortization of Other Intangible Assets	10	9	26	29
Interest Expense	4	27	12	112
Segment Profit	886	541	2,120	1,580
Segment Assets	5,299	4,564	5,299	4,564
Expenditures for Segment Assets	$ 34	$ (7)	$ 70	$ 21

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Business Segment and Geographic Area Information - Reconciliation of Reportable Segment Profit or Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Segment Reporting [Abstract]
Total Profit or Loss for Reportable Segments	$ 4,388	$ 3,254	$ 11,519	$ 9,097
Corporate Expenses	(1,649)	(1,747)	(4,880)	(4,982)
Income Before Income Taxes	$ 2,739	$ 1,507	$ 6,639	$ 4,115

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Business Segment and Geographic Area Information - Reconciliation of Reportable Segment Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Segment Reporting [Abstract]
Total Assets for Reportable Segments	$ 32,129	$ 27,104
Other Unallocated Amounts	1,712	2,291
Consolidated Total	$ 33,841	$ 29,395

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Business Segment and Geographic Area Information - Geographic Area Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	$ 28,828	$ 20,917	$ 77,627	$ 61,647
Long-Lived Assets	6,774	6,464	6,774	6,464
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	27,353	19,564	75,051	57,507
Canada [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	503	247	729	878
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	765	921	1,443	1,870
Middle East [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	0	0	0	3
Rest of the World [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Sales	$ 207	$ 185	$ 404	$ 1,389

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Subsequent Events (Details) - USD ($)	Oct. 04, 2017	Oct. 02, 2017	Feb. 22, 2011
Common Stock Award | Director
Subsequent Event [Line Items]
Total net worth achievement target for stock award grants			$ 200,000,000
Common Stock Award | Director | Subsequent Event
Subsequent Event [Line Items]
Number of shares issued in a deferred compensation arrangement		3,747,118
Fair value of shares issued		$ 2,960,223
Exercise price of shares issued (dollars per share)		$ 0.79
Common Stock Award | Chief Executive Officer | Subsequent Event
Subsequent Event [Line Items]
Number of shares issued in a deferred compensation arrangement	500,000
Fair value of shares issued	$ 380,000
Exercise price of shares issued (dollars per share)	$ 0.76
Lapolla | Icynene | Subsequent Event
Subsequent Event [Line Items]
Consideration transferred in a merger agreement	$ 160,000,000