Lapolla Industries Reports Third Quarter 2014 Results

HOUSTON — Lapolla Industries, Inc. (“Lapolla”) (OTCQB: LPAD), a Houston-based global supplier and manufacturer of spray polyurethane foam insulation, reflective roof coatings, and equipment designed to reduce energy consumption in the residential, industrial and commercial markets for both new construction and retrofit applications, today announced financial results for the three month period ended September 30, 2014.

Third Quarter Financial Highlights

For the third quarter of 2014, Lapolla generated sales of $17.9 million, as compared to $18.1 million during the same period in 2013. During the third quarter of 2014, Lapolla’s gross profit was $3.3 million, as compared to $3.9 million for the third quarter of 2013. Adjusted EBITDA for the third quarter was a loss of $20,630, as compared to a gain of $689,602 in the same period of 2013.

For the third quarter of 2014, Lapolla reported foam segment sales were $15.4 million as compared to $15.3 million in the same period of 2013. Foam segment profit was $90,515 during the third quarter 2014, as compared to $695,746 for the same quarter in 2013. The third quarter 2014 coatings segment sales were $2.5 million versus $2.8 million for the same period in 2013. Coatings segment profit was $204,884, as compared to $412,992 for the third quarter in 2013.

“During the third quarter of 2014, our revenues roughly held in line with last year and our operating expenses were lower by over 3%,” stated Doug Kramer, CEO and President of Lapolla Industries. “While this past quarter did not show substantial changes from a financial perspective, there were notable shifts in the regulatory landscape in United States and internationally that are promising for Lapolla moving forward. As noted in last quarter’s results, Lapolla is the industry’s first-mover on Next Generation technology, utilizing the latest blowing agent that essentially eliminates ODP and GDP, making our product green and environmentally friendly. This innovation was rewarded in September, when the White House named Lapolla an official private sector partner of the President’s Climate Action Plan, and further announced an Executive Action requiring US government agencies to show preference to low-HFC products. Positive regulatory news has continued since the third quarter’s close with the European Union committing to lowering greenhouse gases to 40% of 1990 levels by 2030, and in late November, the United States, Canada, and Mexico will formally propose an amendment to the Montreal Protocol at a meeting of the UNEP that will further phase down use of HFCs. Notably, Lapolla remains the only firm in the world to deliver this cutting edge technology for wall foam insulation. To maximize this new market opportunity, Lapolla has engaged communications and government relations consultants to assist in accessing new potential customers. Aside from these regulatory considerations, market trends remain strong as SPF insulation continues to move mainstream with consumers, building owners and multi-family facility managers recognizing the environmental and financial benefits Lapolla products provide,” concluded Mr. Kramer.

For further information regarding risks, uncertainties, and other factors associated with Lapolla’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Lapolla’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, available at www.lapolla.com.

About Lapolla Industries, Inc.

Lapolla Industries, Inc. is a global supplier, and manufacturer of spray polyurethane foam insulation, reflective roof coatings, and equipment, designed to reduce energy consumption in the residential, industrial and commercial markets, for both new construction and retrofit applications. More information is available at www.lapolla.com.

Non-GAAP Financial Measures:

Lapolla Industries utilizes Adjusted EBITDA to assist it in reviewing financial results and for management incentives. Adjusted EBITDA is defined as EBITDA increased by total share based compensation included in net income or loss. Lapolla’s management utilizes Adjusted EBITDA in an effort to provide information that reflects the Company’s economic performance. Lapolla’s management team reviews their monthly financial results on an Adjusted EBITDA basis. Adjusted EBITDA has no impact on reported sales. Adjusted EBITDA is used as a supplemental financial measure by management to describe Lapolla’s operations and economic performance to financial institutions, including the economic results of Lapolla’s operations; and repeatable operating performance that is not distorted by non-recurring items, certain other non-cash items, or market volatility. Adjusted EBITDA is not prepared in accordance with GAAP. Adjusted EBITDA should not be considered as an alternative to net income or loss, income or loss from operations, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.

Forward Looking Statements

Statements made in this press release that are not historical facts constitute “forward-looking statements” pursuant to Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and Private Securities Litigation Reform Act of 1995. Any such forward-looking statements should be considered in context with various disclosures made by Company about its business. All information herein is as of date hereof. Company undertakes no duty to update any forward-looking statement.

LAPOLLA INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)

	September 30, 2014				December 31, 2013
Assets
Current Assets:
Cash		$	–			$	–
Trade Receivables, Net			8,865,019				7,694,589
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contract			226,033				–
Inventories			4,117,012				5,421,935
Prepaid Expenses and Other Current Assets			628,702				1,250,314
Total Current Assets			13,836,766				14,366,838

Property, Plant and Equipment			1,457,539				1,600,679

Other Assets:
Goodwill			4,234,828				4,234,828
Other Intangible Assets, Net			1,177,837				1,165,157
Deposits and Other Non-Current Assets, Net			449,832				686,658
Total Other Assets			5,862,497				6,086,643

Total Assets		$	21,156,802			$	22,054,160

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable		$	5,994,722			$	6,694,633
Accrued Expenses and Other Current Liabilities			1,156,979				1,456,895
Current Portion of Long-Term Debt			–				4,599
Total Current Liabilities			7,151,701				8,156,127

Other Liabilities:
Non-Current Portion of Revolver Loan			5,442,030				4,539,163
Non-Current Portion of Notes Payable – New Enhanced Note			7,027,882				6,683,561
Non-Current Portion of Note Payable – Related Party			1,300,000				1,300,000
Accrued Interest – Note Payable – Related Party			172,300				117,633
Total Other Liabilities			13,942,212				12,640,357

Total Liabilities			21,093,913				20,796,484

Stockholders’ Equity:
Common Stock, $.01 Par Value; 140,000,000 Shares Authorized; 115,423,903 and 114,148,378
Issued and Outstanding for September 30, 2014 and December 31, 2013, respectively.			1,154,239				1,141,484
Additional Paid-In Capital			87,855,480				86,734,757
Accumulated (Deficit)			(88,823,919	)			(86,495,654	)
Accumulated Other Comprehensive (Loss)			(122,911	)			(122,911	)
Total Stockholders’ Equity			62,889				1,257,676

Total Liabilities and Stockholders’ Equity		$	21,156,802			$	22,054,160


LAPOLLA INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013

Sales	$	17,874,308		$	18,074,101		$	52,661,376		$	52,837,387

Cost of Sales		14,588,682			14,136,145			42,437,341			41,416,495

Gross Profit		3,285,626			3,937,956			10,224,035			11,420,892

Operating Expenses:
Selling, General and Administrative		3,341,230			3,396,028			9,774,425			9,873,835
Professional Fees		129,295			192,196			485,243			816,688
Depreciation		42,216			41,786			126,995			131,046
Amortization of Other Intangible Assets		78,653			80,325			212,428			338,776
Consulting Fees		130,309			133,327			365,072			351,656
Total Operating Expenses		3,721,703			3,843,662			10,964,163			11,512,001

Operating Income (Loss)		(436,077	)		94,294			(740,128	)		(91,109	)

Other (Income) Expense:
Interest Expense		306,505			226,808			879,052			783,590
Interest Expense – Related Party		203,877			187,870			604,298			557,585
Interest Expense – Amortization of Discount		46,007			–			136,512			–
(Gain) Loss on Derivative Liability		–			–			–			(65,656	)
Other, Net		21,893			(23,206	)		(31,725	)		(41,540	)
Total Other (Income) Expense		578,282			391,472			1,588,137			1,233,979

Net (Loss)	$	(1,014,359	)	$	(297,178	)	$	(2,328,265	)	$	(1,325,088	)

Net (Loss) Per Share – Basic and Diluted	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Weighted Average Shares Outstanding		115,204,510			112,155,974			114,821,758			110,945,316

Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment (Loss)											(2,205	)
Total Other Comprehensive (Loss)	$	–		$	–		$	–		$	(2,205	)

Comprehensive (Loss)	$	(1,014,359	)	$	(297,178	)	$	(2,328,265	)	$	(1,327,293	)


LAPOLLA INDUSTRIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2014			2013

Cash Flows From Operating Activities
Net Loss:	$	(2,328,265	)	$	(1,325,088	)
Adjustments to Reconcile Net Loss to Net Cash (Used in) Operating Activities:
Depreciation		300,619			343,538
Amortization of Other Intangible Assets		212,428			338,776
Provision for Losses on Accounts Receivable		603,796			190,654
Share Based Compensation Expense		583,844			1,008,063
Interest Expense – Related Party		604,298			557,585
Interest Expense – Enhanced Notes PIK		207,809			–
Interest Expense – Amortization of Discount		136,512			–
Loss on Foreign Currency Exchange		46,391			–
Gain on Derivative Liability		–			(65,656	)
Gain on Disposal of Asset		(4,052	)		(7,148	)
Changes in Assets and Liabilities:
Trade Receivables		(1,821,303	)		(1,179,635	)
Costs and Estimated Earnings in Excess of Billings on Uncompleted Contract		(226,033	)		–
Inventories		1,304,923			(313,396	)
Prepaid Expenses and Other Current Assets		621,612			(4,804	)
Other Intangible Assets		(225,108	)		(96,715	)
Deposits and Other Non-Current Assets		236,826			(274,871	)
Accounts Payable		(699,221	)		711,582
Accrued Expenses and Other Current Liabilities		(299,916	)		105,651
Net Cash (Used in) Operating Activities		(744,840	)		(11,464	)

Cash Flows From Investing Activities
Acquisitions of Property, Plant and Equipment		(206,427	)		(40,401	)
Proceeds from Disposal of Property, Plant and Equipment		53,000			28,786
Net Cash Provided by (Used in) Investing Activities	$	(153,427	)	$	(11,615	)

Cash Flows From Financing Activities
Proceeds from Revolver Loan		54,567,575			56,715,217
Principal Repayments to Revolver Loan		(53,664,709	)		(56,000,604	)
Principal Repayments to Notes Payable – Enhanced					(673,331	)
Principal Repayments on Long Term Debt		(4,599	)		(15,998	)
Net Cash Provided by Financing Activities		898,267			25,284

Net Effect of Exchange Rate Changes on Cash		–			(2,205	)

Net Change in Cash		–			–
Cash at Beginning of Period		–			–
Cash at End of Period	$	–		$	–

Supplemental Disclosure of Cash Flow Information:
Cash Payments for Interest	$	790,575		$	598,769

Supplemental Schedule of Non Cash Investing and Financing Activities:
Issuance of Restricted Common Stock for Related Party Personal Guaranty on Note Payable	$	329,074		$	504,863


Reconciliation of EBITDA and Adjusted EBITDA to Net Loss (Unaudited)

	Nine Months Ended September 30,
	2014			2013
Net Loss:	$	(2,328,265	)	$	(1,325,088	)
Additions / (Deductions):
Interest Expense		879,052			783,590
Interest Expense – Related Party		604,298			557,585
Interest Expense – Amortization of Discount		136,512			–
Tax Expense (Benefit)		108,131			129,463
Depreciation		300,619			343,538
Amortization of Other Intangible Assets		212,428			338,776
EBITDA	$	(87,225	)	$	827,864
Additions / (Deductions):
Share Based Compensation ⁽¹⁾		583,844			969,676
Adjusted EBITDA	$	496,619		$	1,797,540