Lapolla Launches Another Ultra High Yield Spray Foam

Lapolla Industries, Inc., a global supplier and manufacturer of high performance, energy efficient building products, today introduced its all-new FOAM-LOK 400 Spray Polyurethane Foam Insulation. An open-cell solution for homes and commercial structures, the high-performance material is notable for providing ultra-high yield and enhanced energy efficiency, passing benefits to builders, contractors and inhabitants. Lapolla’s FOAM-LOK 400 and FOAM-LOK 500, another recently introduced open-cell insulation, have both been approved for use in the construction of Meritage Home’s new communities nationwide and will be on display at PCBC in Lapolla Industries’ booth #940.

Lapolla Industries Introduces All-New FOAM-LOK 400 Ultra High-Yield, Energy-Efficient Spray Polyurethane Foam InsulationFOAM-LOK 400 is a great insulation for use in attics, cavity walls and other critical insulation areas. The professionally-installed spray applied material seals the structure, providing a continuous air barrier, offering exceptional performance in the reduction of heat transfer. These performance characteristics work to maintain indoor comfort and temperature, greatly reducing heating and cooling demands and the ongoing costs associated with them.

The exceptional yield achieved with FOAM-LOK 400 is meaningful in that it passes cost savings to builders, contractors and consumers. Additionally, Lapolla believes that the material outperforms fiberglass and blown-in insulation options and comes close to being cost competitive with traditional insulations, while potentially offering a return on investment.

“The noteworthy yield, energy efficiency and cost advantages of FOAM-LOK 400 are significant attractions for both builders and contractors,” said Doug Kramer, president and CEO of Lapolla Industries. “With FOAM-LOK 400’s potential to surpass the performance of competing products at a competitive price, we believe demand for this insulation will be high for use in new and retrofit home and commercial applications.”

FOAM-LOK 400, like the recently introduced FOAM-LOK 500, firmly adheres to framing members and substrates and can be used to fill stud wall construction in a single application. Additionally, it has also passed the AC 377 End Use Configuration Criteria and meets building code requirements for use with no additional ignition barrier required.

Thinking About Going Global?

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Thinking About Going Global?
CONSIDER THESE FOUR THINGS BEFORE YOU DECIDE
By Doug Kramer

International markets represent a wealth of opportunity for Texas businesses looking to expand revenue
streams. However, growing the footprint of a business outside of the United States comes with serious
challenges. Fortunately, whether an organization provides goods or services to its customers, many of
the considerations for going global will be the same. These four keys form the necessary baseline for
planning an expansion beyond U.S. soil.

Global Demand
Before pursuing markets outside of the U.S., it is important to understand current demand for products or
services intended for export, and to identify growth potential. This potential may be based on (or limited
by) a number of elements such as pricing, technology, innovation, competition, population and the
maturity and general acceptance of the product or service to be provided in the global market. These
analyses may be available through industry organizations and other market research firms, but it is likely
best to seek answers from known and knowledgeable industry contacts with experience in the markets of
interest.

Competitiveness
It is essential to identify the organization’s potential to be competitive in international markets where
demand exists. Remember, demand alone does not represent opportunity. There are other important
variables that must align with demand for a global expansion to make sense. For example, one
consideration specific to goods-based businesses is the amount of freight and import duties assigned in
the target expansion regions. It’s imperative to understand the impact of these duties and their influence
on the cost structure of the company’s sales model.

Evaluating the true impact of duties and other costs requires a number of examinations, including the
feasibility of the business model to turn profit in markets where demand exists, the ability of the
organization to compete against alternative providers in those same markets and the likelihood of the
business to accrue market share.

Reliable, Local Partnerships
After global demand and competitive potential, a local partner should be the next key consideration. The
benefits of a partner with boots on the ground include an increased likelihood of buy-in from foreign
customers, inside cultural knowledge and minimization of the inherent risk of conducting business outside
the organization and its personnel’s home region.

Despite all its benefits, local partnership still brings another party to the table, which means it’s imperative
to find a trustworthy partner with whom to build a strong relationship. When vetting potential partners,
make sure they are not only experts in the industry and members of the regional business community, but
that they are respected business people. The right partner should speak the local language and possess a
deep level of cultural and customary knowledge — specifically pertaining to business. This cultural
knowledge will prove essential for the organization in all negotiations, contracts and business
development initiatives.

The right partner should also be able to provide access to channels in the market and represent the
company’s values and brand in the local region — all while maintaining the reputation of a true “local”
among potential clients and customers.

Don’t leave the partner relationship to chance. Invest in training partners to ensure they fully understand
the brand, corporate values and growth goals. In much the same way a local partner learns from training,
company leadership should invest in learning as much from its local partner as possible.

Marketing 101: One Size Does Not Fit All
As all marketers know, one size doesn’t fit all, and adapting the company’s marketing strategy for
international audiences is another primary consideration for taking a business global. As a domestic
marketing strategy must align with its intended target audience, so must an international marketing
campaign.

First, make sure all marketing is culturally appropriate, utilizing the local language, dialect and
nomenclatures, and ensuring the messages both incorporate and address regional expectations for the
industry. Employ imagery and graphics that speak to the local culture and belief system, and pay
attention to the smallest detail. For example, even measurements, which may seem like minutiae, should
be presented in the local measurement system. And finally, use the local marketing channels, which will
likely differ from the ones the company’s domestic audience uses. Just like at home, it’s important to
identify the correct channels — otherwise, even the most perfect marketing will go unseen.

Does Everything Align? Go for It.
If all of these considerations align — global demand and regional competitiveness are established, a
trustworthy and well-respected regional partner can be identified, and there is a firm grasp on culturally
appropriate international marketing across the right channels — the baseline essentials for a successful
global expansion have been established. In addition to eliminating unnecessary risk, this foundation will
provide a path to additional avenues for increasing profitability, competitiveness, market share and the
rewards of a global business.

Doug Kramer is President and CEO of Houston-based Lapolla Industries, a spray foam and coatings manufacturer. In 2010, he led the global expansion of the company and Lapolla’s products are now distributed in over 40 countries.

Lapolla Industries Supports Amendment to Montreal Protocol

Lapolla Industries Supports Amendment to Montreal Protocol, Joins Hundreds of National and International Companies, Organizations and Governments Calling for Hydrofluorocarbon (HFC) Phasedown Designed to Deliver on Climate Goals Set Forth by Paris Agreement

If Passed the Amendment Will Reduce Climate Warming Up to 0.5°C by Century’s End

 

Houston, TX (September 22, 2016) – Lapolla Industries, Inc. (OTCQX: LPAD), a manufacturer and global supplier of high performance, energy efficient building products, today announced the company’s support of an ambitious amendment to the 1989 Montreal Protocol on Substances that Deplete the Ozone Layer. Joining forces with more than 500 national and international companies and organizations, as well as hundreds of sub-national governments, the company is calling for world leaders to pass the Montreal Protocol hydrofluorocarbon (HFC) phase down amendment, which will be voted on in October during a meeting in Kigali, Rwanda amongst signatories to the original Montreal Protocol.

“The significance of getting this amendment passed lies in its ability to help deliver on the goals set forth by the December 2015 Paris Agreement,” said Doug Kramer, President and CEO of Lapolla Industries. “In essence, the amendment will allow us to further reduce the use of HFCs and, in doing so, avoid up to 0.5°C of global climate warming by the end of the century. The importance of this to the health of the global environment, economy and our nation cannot be overstated.”

If world leaders adopt the amendment, it will enact an early first reduction step in HFC use for Article 2 countries and a freeze date for Article 5 countries. The amendment represents global action toward reducing the use and emissions of high-global-warming potential HFCs as well as a transition over time to more sustainable alternatives that enhance energy efficiency.

Lapolla Industries is a Houston, Texas-based manufacturer and global supplier of building products including high performance spray polyurethane foam for insulation and roofing applications, reflective roof coatings and equipment. In 2014, Lapolla Industries became the first in the global spray polyurethane foam sector to eliminate ozone depletion potential (ODP) and reduce global warming potential (GWP) in its product line. The company accomplished these initiatives through an aggressive re-engineering of its product chemistry.

Development of Lapolla’s product line innovation commenced approximately four years ago. CEO Doug Kramer was subsequently invited to participate in the prestigious President’s Climate Action Plan roundtable at the White House alongside the Environmental Protection Agency (EPA) and some of the nation’s most recognized business leaders.

“Lapolla’s foremost commitment across all of its products is maximizing energy conservation in the building environment,” added Kramer. “While our products already ranked high in energy efficiency benefits, we pushed to deliver a next generation spray foam line that protected the ozone and the climate as well. This effort has fared well for both the environment as well as for our business.”

In addition to the proven environmental benefits, the innovation in Lapolla Industries’ fourth generation spray polyurethane foam product line produces additional product yield, resulting in lower installation cost and greater ROI and savings to the consumer.

Lapolla’s fourth generation spray polyurethane foam products include: FOAM-LOK™ 2000-4G Spray Foam Insulation, FOAM-LOK™, and FOAM-LOK™ 2800-4G Spray Foam for Roofing and all other closed cell spray foam systems. While applications for each vary, all provide standout performance in energy efficiency by reducing the energy consumption of a home or commercial building up to 45 percent.

“Not only are we protecting the ozone and climate, but our next generation spray foam line also reduces fossil fuel use for heating and cooling,” said Kramer. “This is a major win-win all around.”

White House Press Release 

About Lapolla Industries, Inc.

Lapolla Industries, Inc. (OTCQX: LPAD) is a global supplier and manufacturer of spray polyurethane foam for insulation and roofing applications, reflective roof coatings and equipment. Based in Houston, Texas, the company’s building envelope and roofing product solutions are designed to reduce energy consumption in the building environment, across the residential, commercial and industrial sectors, in both new construction and retrofits. Visit Lapolla Industries at www.lapolla.com.

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 as of date hereof. Company undertakes no duty to update any forward-looking statement.

 

Investor Relations Contact:

Michael T. Adams, EVP

Tel: (281) 219-4700

Email: info@lapolla.com

Lapolla Industries Closes on New Line of Credit

Lapolla Industries Closes on New Line of Credit
New Facility and Reduction of Debt Provides Substantial Savings

Houston, TX, September 12, 2016 – Lapolla Industries, Inc. (“Lapolla” or the “Company”) (OTCQX: LPAD), a Houston-based global supplier and manufacturer of spray polyurethane foam insulation, roofing foam, reflective roof coatings, and equipment for their application, announced today that by significantly reducing outstanding debt and obtaining a $15 million line of credit with Bank of America, N.A. on September 7, 2016, the Company will be able to reduce interest expense by 78%.

Douglas J. Kramer, CEO and President of Lapolla stated, “During the first half of 2016, we reduced our debt by $5.9 million, reducing interest by $373,000 on an annual basis. We have also amended our Loan and Security Agreement with Bank of America which now provides the Company with a $15 million line of credit that has a substantially lower interest rate and very favorable terms. This allowed us to pay off our higher interest Term Notes, which reduced our average cost of capital from 9.7% to 3.0%, resulting in further interest savings of $583,000 on an annual basis. The overall interest savings will be $936,000 on an annual basis.”

“This is a significant milestone for Lapolla and is the direct result of our corporate commitment to success and financial diligence. The reduction of debt and lower cost of capital will provide significant value to Lapolla and our shareholders while supporting our continued growth. We have been extremely fortunate to have had Enhanced Capital and Bank of America as our partners over the years and we are very appreciative of their support.” concluded Mr. Kramer.

Lapolla’s Chief Financial Officer, Jomarc C. Marukot added, “The Agreement with Bank of America provides the Company with greater flexibility and significantly reduces interest expense, this will have a positive impact on cash flow and increase net income, further strengthening the Company’s balance sheet.”

About Lapolla Industries, Inc.

Lapolla Industries, Inc. is a global supplier and manufacturer of spray polyurethane foam insulation, roofing foam, reflective roof coatings, and equipment for their application 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.

Forward Looking Statements

Certain statements in this press release that are forward-looking and not statements of historical fact are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by the use of words like “may,” “will,” “should,” “could,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties outside of our control that can make such statements untrue. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s web site at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

Investor Relations:
Michael T. Adams, EVP
Phone: 281-219-4700
Email: info@lapolla.com

The Unintended Results of Doing the Right Thing

by Doug Kramer, President & CEO for Entrepreneur Magazine

Click here to view the article in Entrepreneur Magazine

Typically, a company’s success is commonly measured by financial indicators, such as growth in revenue, market share and profitability. But what happens when you apply a different standard of measurement to the success of your company?

Environmental responsibility is one such standard that some organizations are now striving to achieve. Rather than measure success in financial terms, environmental responsibility assesses whether a company is doing the right thing for the community and environment.

So another question to ask is: Can doing the right thing create potential business opportunities? And can these opportunities – in addition to financial measurements — be another indicator of organizational success?

Companies are often driven by, and toward, financial results. But environmental responsibility is often associated with higher costs.

Because of that, many companies do not view sustainability practices as a measurement of success, which makes it uncommon for companies to do the right thing for the environment. There usually needs to be an expectation that the environmental effort will also benefit the business in some way.

When our team began to consider making environmentally positive changes to its product line, we believed there would be a benefit to our business.

In a previous post, I mentioned that we expected our environmental stewardship to positively influence our bottom line, as we had conducted a lot of research and identified ways to achieve both savings and greater product yield through this innovation.

These assumptions proved to be correct. But what our team did not presume was that there would be additional positive results beyond those directly affecting the environment and our bottom line. We’ve been pleasantly surprised.

First and foremost, environmental stewardship has the power to showcase the organization as a true leader. If you are the first in your industry to uniquely employ sustainability measures, that effort will be recognized by your clients and industry.

Depending on how you are driving that stewardship, you may also showcase innovation of other kinds via technology advancements, efficiencies and new ideas. And you may be able to achieve and drive additional product or service enhancements through your environmental stewardship efforts.

Driving sustainability practices within your company may lead to something else you haven’t even thought of – improved employee morale. When workers know that their company is influencing positive change in the world, they tend to feel good about working for that organization. In essence, they are proud to be part of it. This in turn will likely lead to increased loyalty, good word-of-mouth referrals, PR and even improved performance.

In addition to the positive influence on your company and its team members, you may also be able to forge a path within your industry. This can showcase your organization as the catalyst for positive change industry-wide, garnering improved recognition for the company and even attracting new talent, who want to be part of the movement you’ve started.

When you decide as an organization to employ sustainability measures, it also puts you in the unique position to stay ahead of regulators and to be a model of inspiration to them, rather than a subject that needs to be policed. As such, you become an example of what to do, rather than what not to do, spotlighting the organization as one that is both progressive and responsible.

In 2014, in parallel with our commitment to re-engineer the chemistry of our product line to eliminate ozone depletion potential and reduce global warming impacts, we were invited to participate in the President’s Climate Action Plan Executive Roundtable at the White House alongside both the U.S. Environmental Protection Agency (EPA), Department of Energy and a short list of CEOs from some of the country’s most recognized companies.

The goal of the roundtable was to lead the discussion toward real actions that would “green” American made products in an effort to protect the climate.

Our invitation to participate in this prestigious discussion was a catalyst that allowed us to help drive environmental change in both its industry and the business community at-large, prior to regulations being instated which would force those changes upon us. In essence, we were able to drive positive change, rather than be driven reluctantly by regulations.

We had never expected to have a seat at a discussion of this caliber, and we never would have had we not been the first in our industry sector to drive the environmental stewardship we believed was truly needed. Our product innovations led us to not only being invited to participate in the President’s Climate Action Plan roundtable discussions two years in a row, but it also resulted in the EPA showcasing Lapolla as an environmental leader with both domestic and international business audiences.

For example, in 2015, the EPA and State Department brought a delegation from India to our headquarters to educate them on the company’s innovations and the positive environmental impacts garnered from them.

In short, if you drive sustainability measures and practices in your company and industry, it is not only possible to positively impact your bottom line, but also to garner surprising results.

Whether these include an elevated reputation in the business community, improved employee morale or being showcased by regulators as a model of best practices, you might be surprised what positives await you through environmental stewardship.

Lapolla Industries Announces Upgrade to OTCQX®

Lapolla Industries Announces Upgrade to OTCQX

HOUSTON–(BUSINESS WIRE) — Lapolla Industries, Inc. (“Lapolla” or “Company”) (LPAD), a Houston-based global supplier of energy saving products, today announced it has qualified and started trading on the OTCQX® Best Market, operated by OTC Markets Group, effective July 1, 2016.

The OTCQX market is reserved for established, investor-focused U.S. and global companies that meet high financial standards, provide timely news and disclosure to investors, and are sponsored by a professional third-party advisor.

Douglas J. Kramer, President and CEO of Lapolla, stated, “Moving up to OTCQX is an important strategic step in our investor outreach commitment. Being traded on OTCQX will allow for greater exposure, accessibility, and liquidity from the investment community as we execute on our global strategy to deliver our energy saving products to key markets around the world.”

Lapolla is the first manufacturer, globally, to commercialize a third party tested and approved wall foam insulation system that uses an HFO cutting edge technology, offering an environmentally friendly, zero ODP and ultra low GWP. Lapolla’s FOAM-LOK 2000-4G (4th Generation) not only delivers environmental benefits that are 99.9 percent better than today’s most commonly-used blowing agents, the 4G now provides enhanced insulation values and yield from previous generation technology, bringing economic and bottom-line value to contractors and consumers.

Kramer continued, “Our global network of independent distribution and installing contractors continues to grow. The technology is at a tipping point of becoming mainstream around the world, providing Lapolla an opportunity to lead the transition from traditional insulation systems to advanced technology, literally changing the way in which we design and construct buildings, with an outcome of tighter, stronger and more energy efficient structures. Lapolla’s 4G advanced technology enters the global markets well ahead of eventual mandates by the US EPA and other foreign government mandates for change. These changes come as a result of the globally recognized initiatives, such as the Montreal Protocol, requiring reductions in greenhouse gases. Many countries around the world, from Europe, Scandinavia, the Middle East and South America, have already set required timelines for change, some currently implementing tariffs on old technology to encourage quicker adoption.”

As a result of Lapolla’s leadership in driving change, Kramer was invited to the White House to participate in the Executive Roundtable of the President’s Climate Action Plan. Kramer is now a regular participant at this annual event at the White House and Lapolla has since been named a Partner to the White House in the President’s Climate Action Plan. Kramer commented, “It’s been gratifying to get this recognition and to help lead such an important charge while knowing that the ultimate consumer value is so profound.”

Ty Pennington, from two time Emmy award winning Extreme Makeover – Home Edition (broadcasted on ABC), is the celebrity spokesman for Lapolla. Kramer said, “Driving consumer awareness and pull through is our goal as all consumers are looking for ways to gain not only energy savings, but also high performance homes.” Pennington commented, “This is personal for me. My mother struggled for many years with asthma and we are all aware of the growing epidemic levels of respiratory sensitivities. Lapolla’s 4G helps create better air quality by eliminating unwanted, unconditioned air, from entering the building. These airborne pollutants are one of the growing reasons for the surge in asthma among children. I have Lapolla 4G technology in my home,” said Pennington.

“At the end of the day, the clear global strategy, the strong management team, the 4G advanced technology, the global network, the consumer messaging, and the financial results, will drive shareholder value,” Kramer concluded.

U.S. investors can find current financial disclosure and Real-Time Level 2 quotes for Lapolla on www.otcmarkets.com.

About Lapolla Industries, Inc.

Lapolla Industries, Inc. is a global supplier and manufacturer of spray polyurethane foam for insulation and roofing applications, reflective roof coatings and equipment. Based in Houston, Texas, the company’s building envelope and roofing product solutions are designed to reduce energy consumption in the built environment, across the residential, commercial and industrial sectors, in both new construction and retrofits. Visit Lapolla Industries at www.lapolla.com.

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 as of date hereof. Company undertakes no duty to update any forward-looking statement.

 

Investor Relations Contact:

Michael T. Adams, EVP

Tel: (281) 219-4700

Email: info@lapolla.com

Entrepreneur Magazine Logo

Why Environmental Responsibility Is Good for Your Bottom Line

by Doug Kramer, President & CEO for Entrepreneur Magazine

Click here to view the article in Entrepreneur Magazine

“Greening” your company, via any number of means, obviously brings multiple benefits to the physical environment. But while going green may be the responsible thing to do, many companies shy away from these sustainability measures. The reason is their (common) misconception that the costs will outweigh any benefit, that there is no bottom-line value in environmentally responsible business practices.

In fact, this belief may be false, because setting a green path can often improve your bottom line.

So, why set a green path for your own company?

“Sustainability” is a catch-all phrase that refers to the science, or practice, of acting so as not to harm the environment, protecting (rather than depleting) natural resources and supporting long-term ecological balance.

In business, sustainability may refer to any number of operational, technological or product efforts that support environmental protection. For example, some companies set a green path by utilizing environmentally-friendly materials and/or locally sourcing those materials for the manufacture of their products.

Other activities include: producing products that may be recycled at the end of their lifespan for material reuse; reducing energy consumption in operations; or even re-engineering distribution methods as a means of reducing long-distance travel during product delivery, ultimately reducing fossil fuel consumption (and the disease-causing air pollution that is its byproduct).

These represent just a handful of ways to improve sustainability in business. There are many additional ones that will help ensure the protection of the environment. Some of these green measures also have the power to meet customer demands, representing a positive image for the business as well as a positive move for the environment.

Keep in mind something else: Very few businesses can claim no competition. When done well, innovation in environmental sustainability can create market differentiation as well as opportunity. And most entrepreneurs understand that you are either leading or following. Thus, innovation may be a matter of survival. And, what’s more, not all sustainable innovation needs to be profound, or novel. It is more important that the effort deliver value, perceived or otherwise, to your customers.

Where to start

When determining how your organization may best employ sustainability measures, keep in mind that research and development cannot dictate your customers’ needs; your customers do that. Start by analyzing your market to determine what your customers’ needs truly are, then develop a plan to provide a solution to meet them.

The challenge will be finding ways to effectively incorporate meaningful “green value” to the solutions you aim to provide, whether they lie in technology, operations, end product for sale, etc.  Ideally, the green value will carry not only the marketable perception among customers that your company is being green, but should also yield a potential net value, such as cost savings or efficiency.

One benefit of setting a green path is the likely belief among customers, business partners, employees and others stakeholders in your company’s goodwill.  Some customers will even pay more for eco-friendly products. Unfortunately, scale in business is critical and the potential consumers interested in goodwill or sustainable products only may not be sufficient in number to justify the expense of the innovation.

So, instead, focus on net cost savings to your company, market differentiation or savings to the consumer to help ensure ultimate success.

In 2014, the company I lead — Lapolla Industries — decided to forge a path ahead of our competition by re-engineering the chemistry of our core product line. This innovation in materials technology aimed to mitigate two negative environmental impacts common to all competing products in our space: ozone depletion and global warming impact.

Essentially, the innovation allowed us to bring to market a “next-generation” product line of spray polyurethane foam for insulation and roofing that represented a much more environmentally friendly solution for homes, commercial structures and consumers at-large.

While many of our competitors hesitated to make similar product sustainability improvements (presumably for cost reasons), it was important for us to complete this move ahead of them or any future regulation. Not only was it the right thing to do, but we also recognized the power it gave us to set ourselves apart from the group, as well as to positively impact our bottom line.

Innovation for bottom-line value

Many business leaders today refuse to employ sustainability measures, as they believe the cost will outweigh the benefit. However, viewing sustainability measures simply from a cost perspective may be shortsighted. Focus, instead, on the innovation fundamentals that will deliver both consumer and bottom-line value.

Because bottom-line value can be defined in two ways — as an increase in market share or as a reduction in costs — different avenues exist for linking your environmental responsibility to such growth. As long as your efforts grow your financial stability, it doesn’t matter which direction that growth comes from.

When our company sought to make our spray foam products more eco-conscious, we collaborated with raw material suppliers to innovate through technology. This allowed us to achieve the new thresholds while also achieving a net cost savings for our customers.  Although the technology cost was 10 percent more than our previous generation of products, the net savings to our customers was approximately 10 percent, achieved through a pick-up of 20 percent in added efficiency.

This resulted in a market interpretation of innovation, market leadership and goodwill, as well as consumer cost savings — a true win-win all around. We believe success of this kind is achievable by businesses of many types, and that if more leaders jump on board, our planet will be much better off.

Test Booklet

spray foam manufacturer houston tx elastomeric coatings cool roof

10-K: Lapolla Industries Inc

(EDGAR Online via COMTEX) — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations for the Two-Year Period Ended December 31, 2014

Overview

This financial review presents our operating results for each of the two years in the period ended December 31, 2014, and our financial condition at December 31, 2014. To supplement our financial statements presented on a GAAP basis, we disclose non-GAAP measures as EBITDA and Adjusted EBITDA because management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in its business, and to establish operational goals and forecasts that are used in allocating resources. In addition, we believe many investors use these non-GAAP measures to monitor the Company’s performance. Our presentation includes these non-GAAP financial measures, and a reconciliation of EBITDA and Adjusted EBITDA to the GAAP measures most directly comparable thereto. The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income or loss. The non-GAAP financial measures of EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or loss or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and have important limitations as analytical tools. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income and is defined differently by different companies, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Except for the historical information contained herein, the following discussion contains forward-looking statements which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this report and specifically under Item 1A of Part I of this report, “Risk Factors.” In addition, the following review should be read in conjunction with information presented in Part I, Item 1 – Business relating to non-GAAP financial measures EBITDA and Adjusted EBITDA, as well as the information presented in our financial statements and the related notes to our financial statements.

Refer to Note 18 – Business Segments and Geographical Area information in our financial statements listed under Item 15 of Part IV of this report for further information regarding our business segment structure.

Non-GAAP Financial Measures

EBITDA

We define EBITDA as net income or loss before interest, income taxes, depreciation and amortization of other intangible assets.

Adjusted EBITDA

Adjusted EBITDA is defined as EBITDA increased by total share based compensation included in net income or loss.

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

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

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

See also to Part I, Item 1 – Businessfor more information on our Non-GAAP financial measures.

Overall Results of Operations

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

Year Ended December 31, 2014 2013 Summary of Overall Results of Operations Sales $ 72,065,015 $ 71,176,971 Operating Income (Loss) (1,515,296) (616,170) Other (Income) Expense 2,145,653 1,354,875 Net Loss (3,660,949) (1,971,045) EBITDA (Unaudited) $ (586,234) $ 921,13 Adjusted EBITDA (Unaudited) $ 504,961 $ 2,240,865 Reconciliation of EBITDA and Adjusted EBITDA to Net Loss: Net Loss: $ (3,660,949) $ (1,971,045) Additions / (Deductions): Interest Expense 1,193,298 1,093,184 Interest Expense – Related Party 805,608 749,291 Interest Expense – Amortization of Discount 182,444 10,697 Tax Expense (Benefit) 220,230 160,755 Depreciation 394,309 453,827 Amortization of Other Intangible Assets 278,826 424,426 EBITDA $ (586,234) $ 921,135 Additions / (Deductions): Share Based Compensation (1) 1,091,195 1,319,730 Adjusted EBITDA $ 504,961 $ 2,240,865

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

Sales The following is a summary of sales for the years ending December 31: 2014 2013 % Change Foam $ 62,477,449 $ 61,080,736 2.3% Coatings 9,587,566 10,096,235 -5.0% Total Sales $ 72,065,015 $ 71,176,971 1.2%

For the year ended December 31, 2014, our total sales increased by $888,044, from $71,176,971 to $72,065,015, or an increase of 1.2% from the same period in 2013. Foam sales increased $1,396,713 primarily due to higher demand for our foams attributed to cost conscious residential and commercial building owners transitioning from traditional fiberglass insulation to energy efficient spray polyurethane foam, offset by a $508,669 decrease in coatings sales due to lower demand attributed to general market conditions.

Gross Profit The following is a summary of gross profit for the years ending December 31: 2014 2013 % Change Cost of Sales $ 58,460,940 $ 56,152,602 4.1% Gross Profit $ 13,604,075 $ 15,024,369 -9.5% Gross Margin Percentage: Foam 17.8% 19.6% -1.8% Coatings 25.6% 30.3% -4.7% Total 18.9% 21.1% -2.2%

For the year ended December 31, 2014, our gross profit decreased by $1,420,294, from $15,024,369 to $13,604,075, or a decrease of 9.5% from the same period in 2013. The decrease in gross profit was due to lower gross profit in coatings as a result of lower coatings sales and an increase in raw material costs resulting in a decline of $460,995, additional freight expense of $334,306 related to an increase in domestic sales versus international sales in 2014 compared to 2013, higher freight rates resulting in additional expense of $613,538, and a net increase in manufacturing absorption of $297,556, partially offset by an increase in gross profit from foam of $286,101 as a result of increased sales.

Selling, general and administrative expenses decreased $229,537 or 1.7%, to $13,259,920 in 2014, compared to $13,489,457 in 2013, primarily due to a $261,402 decrease in share-based compensation related to fully vested shares in connection with an advisory and consultant agreement, augmented by decreases in payroll and related employee benefits, distribution, and rents.

Professional fees decreased $160,784 or 14.9%, to $915,369 in 2014, compared to $1,076,153 in 2013, primarily due to the recovery of legal fees from our insurance companies and various settlements relating to litigation.

Depreciation expense decreased $7,963 or 4.6%, to $166,293 in 2014, compared to $174,256 in 2013, due to reductions in depreciable assets.

Amortization of other intangible assets expense decreased $145,600 or 34.3%, to $278,826 in 2014, compared to $424,426 in 2013, due to a decrease in amortizable assets including customer lists and trade names.

Consulting fees increased $22,716 or 4.8%, to $498,963 in 2014, compared to $476,247 in 2013, primarily due to an increase in the need for business consulting services for The AirTight Division.

Interest expense increased $100,114 or 9.2%, to $1,193,298 in 2014, compared to $1,093,184 in 2013, primarily due to a higher amount outstanding on the New Enhanced Note.

Interest expense – related party increased $56,317 or 7.5%, to $805,608 in 2014, compared to $749,291 in 2013, due to an increase in share based compensation classified as interest expense relating to restricted shares of common stock being issued to the Chairman of the Board in connection with his personal guarantees required on the New Enhanced Note

Interest expense – amortization of discount increased $171,747 or 1,605.6%, to $182,444 in 2014, compared to $10,697 in 2013, due to a full year amortization of the New Enhanced Note discount.

Other income, net increased $1,942 or 5.8%, to $35,697 in 2014, compared to $33,755 in 2013, due primarily to a favorable settlement relating to litigation, and gain on disposals of vehicles for more than book value.

Outlook for 2015

The Company’s outlook remains aggressive and positive, as we expect sales to grow globally to record levels in 2015 and beyond. Our optimism is based on growing global consumer awareness about energy efficient foams and coatings and reductions in energy costs. The markets for our products are highly competitive; however, we believe that our competitive advantages are rooted in our management, product formulations, credentials, approvals, performance, pricing, and technical customer service. In addition, we offer the flexibility, quality of products and responsiveness that a smaller more dynamic company can offer. This outlook is based on a number of assumptions relating to our business and operations which are subject to change, some of which are outside our control. Any variation in our assumptions may result in a change in this outlook.

Liquidity and Capital Resources

We do not maintain any cash on hand by design. Instead, we maintain a $13 Million asset based revolver loan as part of our Loan Agreement with Bank of America (“Revolver Loan”) that includes an automatic cash sweep feature that identifies any cash available in our bank accounts at the end of a banking business day and then applies that cash to reduce our outstanding Revolver Loan balance for that day to fund our continuing operations. The reduction serves to decrease our daily interest expense to the extent cash is available and swept over to reduce the Revolver Loan. Disbursements are paid daily from cash being made available under our Revolver Loan based on a borrowing base calculation prepared daily for funding.

Net cash used in operating activities was $997,146 in 2014 and $2,132,440 in 2013. The cash used in operations for 2014 as compared to 2013 was attributable to the net loss of $3,660,949 for the year, including the effect of adjustments to reconcile net loss to cash used in or provided by operating activities and adjusting for non-cash items, decreases of $59,518 in depreciation due to a decrease in depreciable assets, $145,600 in amortization of other intangible assets due to a decrease in amortizable assets including customer lists and non-competes from previous acquisitions, and $261,403 in share-based compensation expense due to completion of vesting of shares originally granted by the Company pursuant to an advisory and consultant agreement, offset by increases of $91,697 in provision for losses due to an increase in customer insolvencies, $56,317 in interest expense due to the issuance of New Guaranty Shares being classified as interest expense, and $171,747 in interest expense due to the purchase discount being amortized over the life of the New Enhanced Note, which matures in December 2016. The foregoing was augmented by decreases of $153,910 in inventories, $101,035 in prepaid expenses and other current assets, and $287,575 in deposits and other non-current assets, and increases of $1,839,626 in trade receivables, $297,121 in other intangible assets, $18,411 in costs and estimated earnings in excess of billings, and $293,935 in accounts payable, and $301,765 in accrued expenses and other current liabilities.

Net cash used in investing activities was $144,096 in 2014 and $69,825 in 2013. We invested $207,191 in property, plant and equipment in 2014, of which $118,047 was for vehicles, $43,473 was for upgrades to our IT systems, $39,214 was for machinery and equipment related to our manufacturing facilities, and $6,457 was for computers and software. We disposed of certain assets for net proceeds of $63,095, all of which were vehicles. We invested $118,611 in property, plant and equipment in 2013, of which $64,633 was for vehicles, $3,090 was for office equipment, $30,050 was for computers and software upgrades, $16,022 was for machinery and equipment for our plant, and $4,816 was for leasehold improvements. We disposed of certain assets for net proceeds of $48,786, all of which were vehicles.

Net cash provided by financing activities was $1,141,242 in 2014 and $2,204,470 in 2013. In 2014, we borrowed a cumulative aggregate of $74,459,796 and made principal repayments for a cumulative aggregate of $74,563,955 under our Revolver Loan, $250,000 from our Chairman of the Board, and $4,599 on our long term debt primarily related to financed vehicles. In 2013, we borrowed a cumulative aggregate of $81,608,230 under our Revolver Loan, and an aggregate of $7,200,000 under our New Enhanced Note, of which $3,214,003 was refinanced from the Note Purchase Agreement with Enhanced Jobs for Texas Fund, LLC and Enhanced Capital Texas Fund LP dated June 29, 2012 (“Prior Enhanced Note”), and made principal repayments for a cumulative aggregate of $82,101,515 under our Revolver Loan, an aggregate of $4,337,334 under our Prior Enhanced Note, and $20,911 on our long term debt primarily related to financed vehicles. We had a net working capital of $6,572,046 in 2014 and $6,210,711 in 2013. Our current assets were approximately 1.8 times our current liabilities in 2014 and 2013. Cash available under our Revolver Loan based on the borrowing base calculation at December 31, 2014 and 2013 was $2,754,601 and $1,761,427, respectively.

Management believes that any cash generated from operations and the Revolver Loan availability, subject to borrowing base limitations which may adversely impact our ability to raise capital, 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. If we raise additional capital from the sale of capital stock (except for permitted issuances) or debt (other than permitted indebtedness), we are required under the New Enhanced Note to prepay, including any prepayment penalty, the amount raised up to the amount outstanding under the New Enhanced Note as of the date of the closing of the transaction out of the net proceeds of the capital raised.

Credit Agreements and Other Debt

On September 1, 2010, we entered into our Loan Agreement with Bank of America, N.A., which, as amended from time to time, provides for our $13,000,000 Revolver Loan. At December 31, 2014 and 2013, the balance outstanding on the Revolver Loan was $5,435,005 and $4,539,163 respectively. The Company has four material debt covenants to comply with relating to its Loan Agreement: (i) Capital expenditures are limited to $625,000 on an annual basis, (ii) The amount outstanding under the Revolver Loan may not exceed the borrowing base (calculation defined as an amount determined by a detailed calculation and includes an amount equal to 85% of eligible accounts receivable, plus 55% of eligible inventory); (iii) Maintain an FCCR, tested monthly as of the last day of each calendar month for the twelve month period then ended, of at least 1.0 to 1.0, and (iv) Maintain minimum liquidity of $500,000. The Company is required to submit its borrowing base calculation to Bank of America daily. If, at any time, the Company’s borrowing base calculation is less than the amount outstanding under the Revolver Loan, and that amount remains unpaid or future borrowing base calculations do not increase to an amount equal to the balance outstanding under the Revolver Loan, Bank of America, in its sole discretion, may accelerate any and all amounts outstanding under the Revolver Loan. At December 31, 2014, we were in compliance with our Loan Agreement and debt covenants.

On December 10, 2013, we entered into our New Enhanced Note with Enhanced Jobs for Texas Fund, LLC and Enhanced Credit Supported Loan Fund, LP, which, as amended from time to time, provided us with an aggregate of $7.2 Million in cash to refinance the remaining $3,346,762 balance outstanding on December 10, 2013 on our prior Note Purchase Agreement dated as of June 29, 2012 entered into with Enhanced Jobs For Texas Fund, LLC and Enhanced Capital Texas Fund LP (“Prior Enhanced Note”)(under the Prior Enhanced Note, we borrowed an aggregate of $4.4 Million under subordinated secured variable rate notes due June 29, 2014, of which $2.2 Million was with Enhanced Jobs For Texas Fund, LLC and $2.2 Million was from Enhanced Capital Texas Fund LP Enhanced Texas), and increase our working capital for the remaining difference. Repayment of the $7.2 Million is required on the maturity date of December 10, 2016. Interest is payable monthly and broken down into current pay interest at the rate of 7.25% per annum, and PIK Interest at the rate of 4.25% (increased from 3.75% to 4.25% by amendment on November 14, 2014)(which is added to the principal balance of the outstanding notes) to create the aggregate interest rate of 11.5%. The Company has the right to prepay the New Enhanced Note, subject to a prepayment premium equal to 3% for the first year or 2% for the second year. The Company also entered into a security agreement with the New Enhanced Note providing for a second lien on all assets of the Company after Bank of America, which has a first lien on all asset of the Company. The Company has four material debt covenants to comply with relating to its New Enhanced Note: (i) Capital expenditures are limited to $625,000 on an annual basis, (ii) A minimum Adjusted EBITDA which cannot, for the three (3) months ending on the last day of each month set forth in a schedule, be less than the corresponding amount set forth in the schedule for such period, (iii) Maintain an FCCR, tested monthly as of the last day of each calendar month, in each case for the most recently completed twelve calendar months, equal to at least 1.0 to 1.0, and (iv) Maintain minimum liquidity equal of $500,000. At December 31, 2014, we were in compliance with our New Enhanced Note and debt covenants.

We also borrowed an aggregate of $500,000 from our chairman of the board and majority stockholder, of which $250,000 was received on November 12, 2014 and $250,000 was received on January 21, 2015.

Future Minimum Principal Payments on Long-Term Debt At December 31, 2014, future minimum principal payments of long-term debt are as follows: Payments Due By Period Less Than 1 to 3 4 to 5 More Than 1 Year Years Years 5 Years Total Revolver Loan $ – $ 5,435,005 $ – $ – $ 5,435,005 New Enhanced Note – 7,157,852 – – 7,157,852 Note Payable – Related Party – 250,000 – – 250,000 Long Term Debt Obligations – – – – – Total $ – $ 12,842,857 $ – $ – $ 12,842,857

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting policies that we believe require more significant estimates and assumptions include: the valuation of goodwill, other intangible assets, and allowances for doubtful accounts. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ significantly from these estimates under different assumptions or conditions. There have been no material changes to these estimates for the periods presented in this Annual Report.

We believe that of our significant accounting policies, which are described below in this Item 7, and in Note 1 to our audited financial statements, of this Annual Report, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net tangible and identifiable intangible asset of an acquired business. The Company operates two reporting units, Foam and Coatings. The Company evaluates goodwill for impairment on an annual basis, or more frequently if Management believes indicators of impairment exist, by comparing the carrying value of each of reportable unit to their estimated fair values. The impairment test requires the Company to compare the fair value of each reporting unit to its carrying value, including assigned goodwill. In the fourth quarter of 2014 and 2013, the Company conducted the required annual test of goodwill for impairment. Management uses the income approach to estimate the fair market value of the business segments based on expected future economic benefits. This approach serves to estimate the value of the specific income stream with consideration given to the risk inherent in that income stream. The income approach is most relevant when valuing an equity interest that is based on the premise that Lapolla is considered a going concern or a viable business for the foreseeable future. Lapolla used the discounted cash flow method under the income approach in its analysis. In applying the discounted cash flow method, Lapolla identified the level of cash flow estimated for five years. The annual estimated cash flows and terminal value were then discounted to present value, at an appropriate discount rate, to arrive to the indication of fair market value for each reporting unit. The discount rate utilized reflected the estimate of investor-required rates of return for investments that are seen as similar to an investment in similarly situated companies like Lapolla. The assumptions were consistent with those utilized in the Company’s operating plan and long term financial planning process and considered historical experience and current and future expected market and industry conditions. Management judgment is required in the determination of each assumption used in the valuation model, and actual results could differ from the estimates. There were no goodwill impairment charges recorded during the years ended December 31, 2014 or 2013.

Other Intangible Assets

The Company had other intangible assets consisting of product formulations, and trade names that were acquired as part of business combinations, and trademarks and approvals and certifications obtained as part of entering into new markets. Other intangible assets are tested for impairment as part of the long-lived asset grouping impairment tests. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Impairment testing of the assets occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances would include a significant decrease in the market value of an asset, a significant adverse change in the manner in which the asset is being used or in its physical condition, a history of operating or cash flow losses associated with the use of the asset, or changes in the expected useful life of the asset. If such circumstances are determined to exist, an estimate of undiscounted future cash.

Mar 31, 2015