**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
   **FORM
          10-Q/A**
  
 **QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934**
 
 
 **For
        The Quarterly Period Ended March 31, 2007**
  
 Commission
        File No. **001-31354**
 
 
 
   **LaPolla
                  Industries, Inc.***(Exact
                  name of Registrant as Specified in its Charter)***Delaware**
                *(State
                  of Incorporation)*
              
              **13-3545304**
                *(I.R.S.
                  Employer Identification No.)***Intercontinental
                  Business Park**
                **15402
                  Vantage Parkway East, Suite 322**
                **Houston,
                  Texas**
                *(Address
                  of Principal Executive Offices)*
              
              **77032**
                *(Zip
                  Code)***(281)
                  219-4700**
                *(Registrant’s
                  Telephone Number)*
  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, and (2) has been subject to such filing requirements
        for
        the past 90 days. Yes þ No o
  Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act). Yes o No þ
 
 Indicate
        the number of shares outstanding of each of the issuer's classes of common
        stock, as of the latest practicable date.
  As
        of May
        4, 2007 there were 53,580,257 shares
        of Common Stock, par value $.01, outstanding.
  
 
 **ITEMS
              AMENDED HEREBY**
 
 
 As
              used
              in this amended report, “LaPolla” and the
“Company” or “Us” or “We” or “Our” refer to
              LaPolla Industries, Inc., a Delaware corporation, unless the context
              otherwise
              requires.
 
 As
              previously reported on our Form 8-K dated July 10, 2007, as amended,
              Section 4 –
Matters Related to Accountants and Financial Statements, Item 4.01
– Changes in
              Registrant’s Certifying Accountant, Paragraphs (a) and (b), the Company
              dismissed its former independent accountant, Baum & Company, PA (“Baum”),
              and engaged a new independent accountant, Hein & Associates LLP (“Hein”), on
              July 12, 2007. As part of the new engagement, Hein reviewed the Company’s
              unaudited interim financial information for the three and six months
              ended June
              30, 2007 and made certain recommendations to the Company regarding
              the
              accounting treatment and disclosure of certain matters.  We are
              amending this report to:
 
 1.      ***Reclassification
              of Other Current Assets to Trade Receivables, Net***– Classify credit
              insurance receivables as a Trade Receivables for the quarter ended
              March 31,
              2007. The Company reclassified the amount of claims filed under its
              credit
              insurance policies as Other Current Assets whenever it was determined
              that those
              trade receivables covered under its credit insurance policy were uncollectible
              on the face of the condensed consolidated balance sheet when these
              amounts
              should have maintained their classification as Trade Receivables. The
              aggregate
              financial data originally presented was not affected by the
              reclassification.
 
 2.      ***Reclassification
              of Prepaid Expenses to Other Non-Current Assets***– Classify the fees
              charged to the Company in connection with the Credit Facility entered
              into with
              ComVest Capital LLC (“ComVest”) on February 21, 2007 as an Other Non-Current
              Asset for the quarter ended March 31, 2007. The Company recorded the
              transaction
              fees related to the Credit Facility as a Prepaid Expense on the face
              of the
              condensed consolidated balance sheet when the amount should have been
              classified
              as an Other Non-Current Asset. The aggregate financial data originally
              presented
              was not affected by the reclassification.
 
 3.      ***Restatement
              of Deferred Income Tax Asset and Income Tax Benefit-Deferred*** -
              Fully reserve the carrying value of our deferred income tax asset for
              continuing
              operations for the quarters ended March 31, 2007 and 2006 and year
              ended
              December 31, 2006. The Company believed that an appropriate set of
              circumstances
              existed based on various management assumptions and projections in
              the fourth
              quarter and year ended December 31, 2005 that would make a certain
              portion of
              its eligible cumulative losses from continuing operations recoverable
              for income
              tax purposes and established a deferred income tax asset for an amount
              equal to
              the amount it deemed more likely than not would be realized during
              2006. The
              carrying amount of the deferred income tax asset was evaluated on a
              quarterly
              basis and adjusted in light of changing circumstances for each of the
              four
              quarters and year ended December 31, 2006 and the first quarter of
              2007. Baum
              concurred with the Company’s accounting treatment. Notwithstanding the
              foregoing, the Company reevaluated its recognition of a portion of
              its deferred
              income tax asset from continuing operations and is reversing the amounts
              previously recognized until such time that the Company exceeds break-even
              or
              marginal cumulative profitability. The Company has increased the valuation
              allowance related to its deferred income tax asset to fully reserve
              the carrying
              value of its deferred income tax asset and restated its results for
              each of the
              four quarters and year ended December 31, 2006 and the fourth quarter
              and year
              ended December 31, 2005 to reflect the adjustments. The aggregate financial
              data
              originally presented was affected by the restatement.
 
 4.      ***Reclassification
              of Revolving Credit Note***– Classify the Revolving Credit Note
              liability as an Other Liability on the face of the condensed consolidated
              balance sheets for the quarter ended March 31, 2007. The Company classified
              the
              Revolving Credit Note liability (originally reflected as “Line of Credit”) as a
              Current Liability on the condensed consolidated balance sheets when
              it should
              have been classified as an Other Liability based on its February 28,
              2009
              maturity date.  The aggregate financial data originally presented was
              not affected by the reclassification.
 
 5.      ***Restatement
              of Convertible Term Note and Revolving Credit Note Liabilities and
              Interest
              Expense***– Account for the fair value of warrants as additional
              paid-in capital and reduce the carrying values of the convertible term
              note and
              revolving credit note for the quarter ended March 31, 2007 by such
              amount. The
              Company did not account for the fair value of the warrants issued in
              connection
              with the Credit Facility entered into with ComVest. The fair value
              of the
              warrants was allocated between the convertible term note and revolving
              credit
              note based upon their relative values at the grant date and is being
              amortized
              over the life of the notes using the effective interest method. The
              aggregate
              financial data originally presented was affected by the
              restatement.
 
 6.      ***Disclosure
              of Accounting for Registration Payment Arrangements***– Disclose the
              registration payment arrangement entered into between the Company and
              ComVest in
              accordance with FASB Staff Position No. EITF 00-19-2. The Company entered
              into a
              Registration Rights Agreement contemporaneously with the establishment
              of a
              Credit Facility with ComVest on February 21, 2007, which agreement
              contains
              certain provisions that may require the Company to pay ComVest certain
              fees upon
              the happening of certain events.  Although the Company has determined
              that no liability is probable at this time under the agreement, the
              Company is
              required to fully disclose certain aspects of the agreement in case
              certain
              events occur which require the Company to record a liability under
              the
              agreement.
 
 The
              Company has fully updated all affected portions of this amended report,
              including the condensed consolidated financial statements and related
              notes and
              MD&A, to reflect the restatements, reclassification, and disclosure
              described above. In addition, certain scrivener’s errors and captions in the
              condensed consolidated financial statements and related notes and disclosures
              have been updated throughout this amended report to make the presentation
              more
              informative and transparent.
 (i)
  **LAPOLLA
        INDUSTRIES, INC.**
 **FORM
          10-Q/A**
 **FOR
        THE QUARTER ENDED MARCH 31, 2007**
 **INDEX**
 
 **Page****PART
                    I**
                
                
                **FINANCIAL
                    INFORMATION****Item
                    1**
                
                **Financial
                    Statements**
                
                **2****Item
                    2**
                
                **Management’s
                    Discussion and Analysis of Financial Condition
                    and Results of Operations**
                
                **12****Item
                    3**
                
                **Quantitative
                    and Qualitative Disclosures About Market
                    Risk**
                
                **14****Item
                    4**
                
                **Controls
                    and Procedures**
                
                **14****PART
                    II**
                
                
                **OTHER
                    INFORMATION****Item
                    1**
                
                **Legal
                    Proceedings**
                
                **15****Item
                  1A**
                
                **Risk
                  Factors**
                
                **15****Item
                    2**
                
                **Unregistered
                    Sales of Equity Securities and Use of
                    Proceeds**
                
                **16****Item
                    3**
                
                **Defaults
                    Upon Senior
                    Securities**
                
                **16****Item
                    4**
                
                **Submission
                    of Matters to a Vote of Security
                    Holders**
                
                **16****Item
                    5**
                
                **Other
                    Information**
                
                **16****Item
                    6**
                
                **Exhibits**
                
                **16****SIGNATURES**
                
                **17****INDEX
                    OF EXHIBITS**
                
                **18**
  1
 ***Index***
 
 **FORWARD
        LOOKING STATEMENTS**
 
 *Statements
        made by us in this report and in other reports and statements released by
        us
        that are not historical facts constitute “forward-looking statements” within the
        meaning of Section 27A of the Securities Act of 1933, Section 21 of
        the Securities Exchange Act of 1934 and the Private Securities Litigation
        Reform
        Act of 1995. These forward-looking statements are necessarily estimates
        reflecting the best judgment of senior management and express our opinions
        about
        trends and factors which may impact future operating results. You can identify
        these and other forward-looking statements by the use of words such as “may,”
“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “intends,” “potential,” “continue,” or the negative of such terms,
        or other comparable terminology. Such statements rely on a number of assumptions
        concerning future events, many of which are outside of our control, and involve
        risks and uncertainties that could cause actual results to differ materially
        from opinions and expectations. Any such forward-looking statements, whether
        made in this report or elsewhere, should be considered in context with the
        various disclosures made by us about our businesses including, without
        limitation, the risk factors discussed below. Although we believe our
        expectations are based on reasonable assumptions, judgments, and estimates,
        forward-looking statements involve known and unknown risks, uncertainties,
        contingencies, and other factors that could cause our or our industry's actual
        results, level of activity, performance or achievement to differ materially
        from
        those discussed in or implied by any forward-looking statements made by or
        on
        the Company and could cause our financial condition, results of operations,
        or
        cash flows to be materially adversely affected.* *Except
        as required under the federal securities laws and the rules and regulations
        of
        the U.S. Securities and Exchange Commission, we do not have any intention
        or obligation to update publicly any forward-looking statements, whether
        as a
        result of new information, future events, changes in assumptions, or
        otherwise.*
 
 **PART
        I — FINANCIAL INFORMATION**
 
 As
          used
          in this report, "LaPolla” and the "Company" or "Us" or "We" or “Our” refer to
          the LaPolla Industries, Inc., unless the context otherwise requires. Our
          Internet website address is www.lapollaindustries.com. We make
          our periodic and current reports, together with amendments to these reports,
          available on our website, free of charge, as soon as reasonably practicable
          after such material is electronically filed with, or furnished to, the
          Securities and Exchange Commission. The information on our Internet website
          is
          not incorporated by reference in this Quarterly Report on
          Form 10-Q/A.
 
 **Item
                  1.**
              **Financial
                  Statements.**
  **LAPOLLA
        INDUSTRIES, INC.**
 **INDEX
        TO FINANCIAL STATEMENTS AND**
 **FINANCIAL
        STATEMENT SCHEDULES**
  **CONDENSED
                    CONSOLIDATED BALANCE SHEETS****March
                    31, 2007 (Unaudited) and December 31, 2006**
                **3****CONDENSED
                    CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)****Three
                    Months Ended March 31, 2007 and 2006**
                **4****CONDENSED
                    CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)****Three
                    Months Ended March 31, 2007 and 2006**
                **5****NOTES
                    TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (UNAUDITED)**
                **6**
 
 All
        schedules for which provision is made in the applicable accounting regulations
        of the Securities and Exchange Commission are not required under the related
        instructions or are not applicable, and therefore have been
        omitted.
  2
 ***Index***
 
 **LAPOLLA
        INDUSTRIES, INC.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
   **March 31,**
                    **2007**
                  
                  
                  **December 31,**
                    **2006****(Unaudited)**
                  
                  
                  **Restated
                      (2)****Restated
                      (1)****ASSETS**Current
                      Assets:Cash
                  
                  $
                  107,028
                  
                  
                  $
                  382,116Trade
                      Receivables, Net
                  
                  
                  4,077,717
                  
                  
                  
                  3,595,431Inventories
                  
                  
                  3,277,635
                  
                  
                  
                  2,882,236Prepaid
                      Expenses and Other Current Assets
                  
                  
                  488,461
                  
                  
                  
                  537,253Deferred
                      Income Taxes, Net
                  
                  
                  —
                  
                  
                  
                  —Total
                      Current Assets
                  
                  
                  7,950,841
                  
                  
                  
                  7,397,036Property,
                      Plant and Equipment, Net
                  
                  
                  2,283,989
                  
                  
                  
                  1,489,639Other
                      Assets:Goodwill
                  
                  
                  1,951,000
                  
                  
                  
                  1,951,000Other
                      Intangible Assets, Net
                  
                  
                  159,626
                  
                  
                  
                  165,396Deposits
                      and Other Non-Current Assets
                  
                  
                  313,223
                  
                  
                  
                  149,237Total
                      Other Assets
                  
                  
                  2,423,850
                  
                  
                  
                  2,265,633Total
                      Assets
                  
                  $
                  12,658,681
                  
                  
                  $
                  11,152,308**LIABILITIES
                      AND STOCKHOLDERS’ EQUITY**Current
                      LiabilitiesAccounts
                      Payable
                  
                  $
                  5,505,561
                  
                  
                  $
                  5,069,478Accrued
                      Expenses and Other Current Liabilities
                  
                  
                  929,771
                  
                  
                  
                  1,091,947Line
                      of Credit
                  
                  
                  —
                  
                  
                  
                  1,007,120Current
                      Portion of Convertible Term Note
                  
                  
                  343,178
                  
                  
                  
                  —Current
                      Portion of Long-Term Debt
                  
                  
                  110,808
                  
                  
                  
                  97,589Current
                      Portion of Liabilities from Discontinued Operations
                  
                  
                  —
                  
                  
                  
                  232,479Total
                      Current Liabilities
                  
                  
                  6,889,317
                  
                  
                  
                  7,498,613Other
                      LiabilitiesRevolving
                      Credit Note
                  
                  
                  1,376,511
                  
                  
                  
                  —Non
                      Current Portion of Convertible Term Note
                  
                  
                  1,162,867
                  
                  
                  
                  —Non
                      Current Portion of Long-Term Debt
                  
                  
                  192,636
                  
                  
                  
                  202,923Non
                      Current Portion of Liabilities from Discontinued
                      Operations
                  
                  
                  2,108
                  
                  
                  
                  103,650Total
                      Other Liabilities
                  
                  
                  2,734,122
                  
                  
                  
                  306,573Total
                      Liabilities
                  
                  
                  9,623,439
                  
                  
                  
                  7,805,186Stockholders’
                      Equity:Preferred
                      Stock, $1.00 Par Value; 2,000,000 Shares Authorized, of which
                      Designations:Series
                      A Convertible, 750,000 Shares Authorized; 62,500 Issued and
                      Outstanding at
                      March 31, 2007 and December 31, 2006; $62,500 aggregate liquidation
                      preference at March 31, 2007 and December 31, 2006
                  
                  
                  55,035
                  
                  
                  
                  55,035Series
                      D, 25,000 Shares Authorized; 8,176 Issued and Outstanding at
                      March 31,
                      2007 and December 31, 2006; $8,176,000 aggregate liquidation
                      preference at
                      March 31, 2007 and December 31, 2006
                  
                  
                  8,176
                  
                  
                  
                  8,176Common
                      Stock, $.01 Par Value; 65,000,000 Shares Authorized; 53,586,251
                      and
                      53,574,251 Issued and Outstanding at March 31, 2007 and December
                      31, 2006,
                      respectively
                  
                  
                  535,863
                  
                  
                  
                  535,743Additional
                      Paid-In Capital
                  
                  
                  70,898,793
                  
                  
                  
                  70,201,151Accumulated
                      Deficit
                  
                  
                  (67,577,978
                  )
                  
                  
                  (67,452,983Total
                      Stockholders’ Equity
                  
                  
                  3,035,241
                  
                  
                  
                  3,347,122Total
                      Liabilities and Stockholders’ Equity
                  
                  $
                  12,658,681
                  
                  
                  $
                  11,152,308
 
 **(1)*****See***
            (**A**), (**B**), (**C**),
            (**D**), and (**E**) appearing on Consolidated
            Statement of Operations.
 **(2)*****See***
            (**C**) appearing on Consolidated Statement of
            Operations.
  See
        accompanying notes to condensed consolidated financial statements.
  3
 ***Index***
  
 **LAPOLLA
        INDUSTRIES, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**
 
 
 **Three
                    Months Ended March 31,****2007**
                
                **2006****Restated
                    (A)(B)(C)(D)(E)**
                
                **Restated (C)**Sales
                
                $
                7,269,322
                
                $
                5,999,935Cost
                    of Sales
                
                
                6,086,874
                
                
                5,163,187Gross
                    Profit
                
                
                1,182,448
                
                
                836,748Operating
                    Expenses:Selling,
                    General and Administrative
                
                
                1,987,503
                
                
                1,159,473Professional
                    Fees
                
                
                32,619
                
                
                69,478Depreciation
                    and Amortization
                
                
                65,694
                
                
                41,221Consulting
                    Fees
                
                
                25,580
                
                
                21,003Interest
                    Expense
                
                
                80,171
                
                
                15,173Interest
                    Expense - Related Party
                
                
                —
                
                
                45,370Other
                    (Income) Expense
                
                
                514
                
                
                —Total
                    Operating Expenses
                
                
                2,192,081
                
                
                1,351,718Operating
                    (Loss) Before Income Taxes
                
                
                (1,009,633
                )
                
                (514,970
                )Income
                    Tax (Expense) Benefit-Deferred
                
                
                —
                
                
                —Operating
                    (Loss)
                
                
                (1,009,633
                )
                
                (514,970
                )Income
                    (Loss) From Discontinued Operations, Net of Income Tax
                    Benefit-Deferred
                
                
                —
                
                
                295,069Net
                    (Loss)
                
                $
                (1,009,633
                )
                $
                (219,901
                )Plus:
                    Dividends on Preferred Stock
                
                
                (201,710
                )
                
                —Net
                    (Loss) Available to Common Stockholders
                
                
                (1,211,343
                )
                $
                (219,901
                )Net
                    Income (Loss) Per Share - Basic and DilutedContinuing
                    Operations
                
                $
                (0.019
                )
                $
                (0.009
                )Discontinued
                    Operations
                
                
                —
                
                
                0.005Total
                
                $
                (0.019
                )
                $
                (0.004
                )Weighted
                    Average Shares Outstanding
                
                
                53,584,903
                
                
                53,210,251
 
 (**A**)           ***Reclassification
                of Prepaid Expenses to Trade Receivables***– The Company reclassified
                the credit insurance receivables originally included in the Other
                Current Assets
                line item on the Condensed Consolidated Balance Sheet and included
                this amount
                in the Trade Receivables, Net line item for the quarter ended March
                31, 2007.
                Prepaid Expenses and Other Current Assets decreased $78,269 and Trade
                Receivables, Net increased $78,269.***See also*** Note 12,
                paragraph (A).
 
 (**B**)           ***Reclassification
                of Prepaid Expenses to Other Non-Current Assets***– The Company
                reclassified the fees charged in connection with the Credit Facility
                established
                with ComVest originally included in the Prepaid Expenses line item
                on the
                Condensed Consolidated Balance Sheet and included this amount in
                the Other
                Non-Current Assets line item for the quarter ended March 31, 2007.
                Prepaid
                Expenses and Other Current Assets decreased $163,987 and Deposits
                and Other
                Non-Current Assets increased $163,987.***See also*** Note
                12, paragraph (B).
 
 (**C**)           ***Restatement
                of Deferred Income Tax Asset and Income Tax Benefit-Deferred***– The
                Company fully reserved the carrying value of its deferred income
                tax asset for
                continuing operations for the quarters ended March 31, 2007 and 2006
                and year
                ended December 31, 2006. Deferred Income Taxes, Net, Total Current
                Assets, and
                Total Assets each decreased $867,989 and $938,548 for the quarter
                ended March
                31, 2007 and year ended December 31, 2006, respectively; and Income
                Tax
                (Expense) Benefit increased $70,559 and $7,263 and Operating (Loss)
                and Net
                (Loss) each decreased $70,559 and $7,263 for the quarters ended March
                31, 2007
                and 2006, respectively.***See*** Note 12, paragraph (C) for
                illustrative requirement.
 
 (**D**)           ***Reclassification
                of Revolving Credit Note***– The Company renamed the Line of Credit
                line item Revolving Credit Note and reclassified the Revolving Credit
                Note
                liability originally included in the Current Liability section of
                the Condensed
                Consolidated Balance Sheet and included this amount in the Other
                Liabilities
                section for the quarter ended March 31, 2007.  Total Current
                Liabilities decreased $1,500,000 and Total Other Liabilities increased
                $1,500,000.***See also*** Note 12, paragraph
                (D).
 
 (**E**)           ***Restatement
                of Convertible Term Note and Revolving Credit Note Liabilities and
                Interest
                Expense***– The Company, after the restatement in
                (**C**) and reclassification in (**D**) above,
                accounted for the fair value of warrants as additional paid-in capital,
                reduced
                the carrying values of the convertible term note and revolving credit
                note by
                the fair value of the warrants, and recorded interest expense for
                the quarter
                ended March 31, 2007. Current Portion of Convertible Term Note, Total
                Current
                Liabilities, Non-Current Portion of Convertible Term Note, Revolving
                Credit
                Note, Total Other Liabilities, and Total Liabilities decreased $123,489,
                $123,489, $123,489, $370,466, $493,955, and $617,445; and Interest
                Expense,
                Total Operating Expenses, Operating (Loss), and Net (Loss) each increased
                $16,649; for the quarter ended March 31, 2007, respectively.***See*** Note 12, paragraph (E) for illustrative
                requirement.
  See
        accompanying notes to condensed consolidated financial statements
  4
 ***Index***
  **LAPOLLA
        INDUSTRIES, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
  **Three
                      Months Ended March 31,****2007**
                  
                  
                  **2006****Restated(1)**
                  
                  
                  **Restated(2)***Cash
                      Flows From Operating Activities*Net
                      Income (Loss)Continuing
                      Operations
                  
                  $
                  (1,009,633
                  )
                  
                  $
                  (514,970
                  )Discontinued
                      Operations
                  
                  
                  —
                  
                  
                  
                  295,069Adjustments
                      to Reconcile Net Income (Loss) to Net Cash Provided by (Used
                      in) by
                      Operating Activities:Depreciation
                      and Amortization
                  
                  
                  95,229
                  
                  
                  
                  64,987Provision
                      for Losses on Trade Receivables
                  
                  
                  (127,454
                  )
                  
                  
                  36,257Amortization
                      of Discount on Convertible Term and Revolving Credit Notes
                  
                  
                  16,649
                  
                  
                  
                  —Deferred
                      Income Taxes
                  
                  
                  —
                  
                  
                  
                  —Share
                      Based Compensation Expense
                  
                  
                  265,370
                  
                  
                  
                  165,302Changes
                      in Assets and Liabilities, Net of Effects of Purchase of Business
                      Entity:Trade
                      Receivables
                  
                  
                  (354,833
                  )
                  
                  
                  69,973Inventories
                  
                  
                  (395,399
                  )
                  
                  
                  (803,464
                  )Prepaid
                      Expenses and Other Current Assets
                  
                  
                  48,793
                  
                  
                  
                  (115,215
                  )Deposits
                      and Other Non Current Assets
                  
                  
                  (163,987
                  )
                  
                  
                  1,449Accounts
                      Payable
                  
                  
                  436,083
                  
                  
                  
                  656,277Accrued
                      Expenses and Other Current Liabilities
                  
                  
                  (297,923
                  )
                  
                  
                  (169,240
                  )Other
                      Liabilities
                  
                  
                  (435
                  )
                  
                  
                  (162,290
                  )Net
                      Operating Activities of Discontinued Operations
                  
                  
                  (7,892
                  )
                  
                  
                  —Net
                      Cash Provided by (Used in) Operating Activities
                  
                  
                  (1,495,431
                  )
                  
                  
                  (770,933
                  )*Cash
                      Flows From Investing Activities*Additions
                      to Property, Plant and Equipment
                  
                  $
                  (883,811
                  )
                  
                  $
                  (150,615
                  )Payment
                      for Purchase of Business Entity, Net of Cash Acquired
                  
                  
                  —
                  
                  
                  
                  —Net
                      Cash Provided by (Used in) Investing Activities
                  
                  
                  (883,811
                  )
                  
                  
                  (150,615
                  )*Cash
                      Flows From Financing Activities*Proceeds
                      from Revolving Credit Note
                  
                  
                  1,500,000
                  
                  
                  
                  —Payments
                      on Revolving Credit Note
                  
                  
                  —
                  
                  
                  
                  —Proceeds
                      from Line of Credit
                  
                  
                  1,398,000
                  
                  
                  
                  (21,816
                  )Payments
                      on Line of Credit
                  
                  
                  (2,405,120
                  )
                  
                  
                  —Proceeds
                      from Loans Payable – Related Party
                  
                  
                  617,000
                  
                  
                  
                  220,000Payments
                      on Loans Payable – Related Party
                  
                  
                  (617,000
                  )
                  
                  
                  —Proceeds
                      from Convertible Term Note
                  
                  
                  2,000,000
                  
                  
                  
                  —Proceeds
                      from Note Payable – Other
                  
                  
                  —
                  
                  
                  
                  550,000Payments
                      on Note Payable – Other
                  
                  
                  (10,002
                  )
                  
                  
                  —Principal
                      Repayments on Long Term Debt
                  
                  
                  (52,595
                  )
                  
                  
                  (28,975
                  )Net
                      Financing Activities of Discontinued Operations
                  
                  
                  (326,129
                  )
                  
                  
                  —Net
                      Cash Provided by (Used in) Financing Activities
                  
                  
                  2,104,154
                  
                  
                  
                  719,209*Net
                      Increase In Cash*
                  
                  $
                  (275,088
                  )
                  
                  $
                  (202,339
                  )*Cash
                      at Beginning of Period*
                  
                  
                  382,116
                  
                  
                  
                  400,622*Cash
                      at End of Period*
                  
                  $
                  107,028
                  
                  
                  $
                  198,283*Supplemental
                      Disclosure of Cash Flow Information:*Cash
                      Payments for Income Taxes
                  
                  $
                  —
                  
                  
                  $
                  —Cash
                      Payments for Interest
                  
                  $
                  63,520
                  
                  
                  $
                  30,610*Supplemental
                      Schedule of Non Cash Investing and Financing
                      Activities*Common
                      Stock issued for Director Fees
                  
                  $
                  6,840
                  
                  
                  $
                  —
 **(1)*****See***
              (**A**), (**B**), (**C**),
              (**D**), and (**E**) appearing on Consolidated
              Statement of Operations.
 **(2)*****See***
              (**C**) appearing on Consolidated Statement of
              Operations.
  See
        accompanying notes to condensed consolidated financial statements.
  5
 ***Index***
 
 **LAPOLLA
        INDUSTRIES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  **Note
                  1.**
              **Basis
                  of Presentation.**
 
 The
          consolidated financial statements included herein are unaudited. Certain
          information and footnote disclosures normally included in financial statements
          prepared in accordance with U.S. generally accepted accounting principles
          have
          been condensed or omitted pursuant to pursuant to the rules and regulations
          of
          the Securities and Exchange Commission. In the opinion of the 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 consolidated financial statements.
          The
          consolidated financial statements included herein should be read in conjunction
          with the financial statements and Notes thereto included in LaPolla’s latest
          annual report on Form 10-K including any amendments thereto, 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.
          Certain amounts in the prior years have been reclassified to conform to
          the 2007
          unaudited consolidated financial statement presentation. Reference is made
          to
          Management’s Discussion and Analysis of Financial Condition and Results of
          Operations on page 11. Risk factors that could impact results are discussed
          in
          Part II - Other Information, *Item
          1A - Risk Factors* on page
          14. Refer also to the Company’s 2006 Annual Report on Form 10-K including any
          amendments thereto, for a description of major accounting policies. There
          have
          been no material changes to these accounting policies during the quarter
          ended
          March 31, 2007.  Certain amounts in prior periods have been reclassified to
          conform to the March 31, 2007 unaudited condensed consolidated financial
          statement presentation.  Refer to Note 12 - Reclassifications,
          Restatements, and Corrections to Previously Issued Financial
          Statements.
 
 **Note
                  2.**
              **Dependence
                  on Few Suppliers.**
 
 The
        Company is dependent on a few suppliers for certain of its raw materials
        and
        finished goods. For the quarters ended March 31, 2007 and 2006, raw materials
        and finished goods purchased from the Company’s three largest suppliers
        accounted for approximately 33% and 58% of purchases, respectively.
 
 **Note
                  3.**
              **Trade
                  Receivables.**
 
 The
        following is a summary of trade receivables at:
 
 **March 31,****2007**
                
                **December 31,****2006**Trade
                    Receivables
                
                $
                4,174,569
                
                $
                3,819,737Less:
                    Allowance for Doubtful Accounts
                
                
                (96,852
                )
                
                (224,306
                )Trade
                    Receivables, Net
                
                $
                4,077,717
                
                $
                3,595,431
 
 N**ote
                  4.**
              **Inventories.**
 
 The
        following is a summary of inventories at:
 
 **March 31,****2007**
              
              **December 31,****2006**Raw
                  Materials
              
              $
              807,507
              
              $
              866,859Finished
                  Goods
              
              
              2,470,128
              
              
              2,015,377Total
              
              $
              3,277,635
              
              $
              2,882,236
 
 **Note
                  5.**
              **Deferred
                  Income Taxes.**
 
 The
        following is a summary of deferred income taxes at:
  *Deferred
                      Tax Assets:*
                  
                  **March 31,****2007**
                  
                  **December 31,****2006**Net
                      Operating Loss Carry-Forwards
                  
                  $
                  34,201,478
                  
                  $
                  33,173,277Temporary
                      Differences:Nondeductible
                      Accruals
                  
                  
                  (1,306,953
                  )
                  
                  (1,175,878
                  )Net
                      Operating Loss Carry-Forward after Temporary Differences
                  
                  
                  32,894,525
                  
                  
                  31,997,399Statutory
                      Tax Rate
                  
                  
                  34
                  %
                  
                  34
                  %Total
                      Deferred Tax Assets
                  
                  
                  11,184,139
                  
                  
                  10,879,116Valuation
                      Allowance for Deferred Tax Assets
                  
                  
                  (11,184,139
                  )
                  
                  (10,885,429
                  )Net
                      Deferred Taxes
                  
                  $
                  —
                  
                  $
                  —
 
 ***See
        also*** Note 6
        for a summary of deferred income taxes for discontinued operations.
  6
 ***Index***
 
 **LAPOLLA
        INDUSTRIES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED-
        CONTINUED)**
  **Note
                  6.**
              **Discontinued
                  Operations.**
 
 The
        consolidated financial statements and the related notes reflect the financial
        position, results of operations and cash flows on an aggregated basis for
        the
        Company’s discontinued operations for the periods presented. The following is a
        summary of the liabilities of discontinued operations at:
 
 *Liabilities*
              
              **March 31, 2007**
              
              **December 31, 2006**Accrued
                  Expenses and Other Current Liabilities
              
              $
              2,108
              
              $
              10,000Line
                  of Credit
              
              
              —
              
              
              326,129Total
                  Liabilities
              
              $
              2,108
              
              $
              336,129
 
 The
        following is a summary of discontinued operations deferred income taxes
        at:
 
 *Deferred
                    Tax Assets:*
                
                **March 31, 2007**
                
                **December 31, 2006**Net
                    Operating Loss Carry-Forwards (No Temporary Differences)
                
                $
                33,189,532
                
                $
                33,189,532Statutory
                    Tax Rate
                
                
                34
                %
                
                34
                %Total
                    Deferred Tax Assets
                
                
                11,284,441
                
                
                11,284,441Valuation
                    Allowance for Deferred Tax Assets
                
                
                (11,284,441
                )
                
                (11,284,441
                )Net
                    Deferred Taxes
                
                $
                —
                
                $
                —
 
 Future
        tax benefit for net operating loss carry-forwards are subject to limitations
        based on the inability of discontinued operations to generate future taxable
        income.
 
 N**ote
                  7.**
              **Property,
                  Plant and Equipment.**
 
 The
        following is a summary of property, plant and equipment at:
 
 **March 31, 2007**
              
              **December 31, 2006**Vehicles
              
              $
              487,037
              
              $
              487,037Leasehold
                  Improvements
              
              
              12,400
              
              
              12,400Office
                  Furniture and Equipment
              
              
              141,334
              
              
              133,634Computers
                  and Software
              
              
              499,794
              
              
              445,491Machinery
                  and Equipment
              
              
              881,885
              
              
              718,210Plant
                  Construction in Progress
              
              
              870,726
              
              
              212,592Total
                  Property, Plant and Equipment
              
              $
              2,893,176
              
              $
              2,009,364Less:
                  Accumulated Depreciation
              
              
              (609,185
              )
              
              (519,725
              )Total
                  Property, Plant and Equipment, Net
              
              $
              2,283,991
              
              $
              1,489,639
 
 **Note
                  8.**
              **Goodwill
                  and Other Intangible
                  Assets.**
 
 The
        following is a summary of goodwill at:
 
 **March 31, 2007**
              
              **December 31, 2006**Coatings
              
              $
              1,049,458
              
              $
              1,049,458Foam
              
              
              640,577
              
              
              640,577Paints
              
              
              123,092
              
              
              123,092Sealants
              
              
              125,507
              
              
              125,507Adhesives
              
              
              172
              
              
              172Equipment
              
              
              12,194
              
              
              12,194Totals
              
              $
              1,951,000
              
              $
              1,951,000
  7
 ***Index***
 
 **LAPOLLA
        INDUSTRIES, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED-
        CONTINUED)**
 
 **Note
                  8.**
              **Goodwill
                  and Other Intangible Assets -
                  continued.**
 
 The
        following is a summary of other intangible assets at:
 
 **March 31, 2007**
              
              **December 31, 2006**Customer
                  List
              
              $
              69,235
              
              $
              69,235Product
                  Formulation
              
              
              138,471
              
              
              138,471Total
                  Other Intangible Assets
              
              $
              207,706
              
              $
              207,706Less:
                  Accumulated Amortization
              
              
              (48,079
              )
              
              (42,309
              )Total
                  Other Intangible Assets, Net
              
              $
              159,627
              
              $
              165,397
  **Note
                      9.**
                  **Revolving
                      Credit Note, Convertible Term Note, Warrants, and Registration
                      Payment
                      Arrangements.**
  The
          Company entered into a Revolving Credit and Term Loan Agreement on February
          21,
          2007 (“Loan Agreement”) under which ComVest agreed to loan the Company up to
          $3,500,000 under a revolving credit note (“Revolving Credit Note”) and
          $2,000,000 under a convertible term note (“Convertible Term Note”), and the
          Company agreed to issue ComVest three tranches of warrants (“Warrants”) and
          register the conversion shares under the Convertible Term Note and warrant
          shares underlying the Warrants (“Registration Rights”). The Company received
          $2,500,000 at closing, of which $373,181 was allocated to the Revolving
          Credit
          Note, $1,492,726 was allocated to the Convertible Term Note, and $634,093
          was
          allocated to the Warrants.
 
 (a)**Revolving
          Credit
          Note -**The Revolving Credit Note bears interest equal to the greater
          of
          (a) Prime Rate plus 1%, or 9.5%, and is good until February 28, 2009. At
          March
          31, 2007, the unamortized discount on the Revolving Credit Note was
          $123,489.
 
 (b)**Convertible
          Term
          Note -**The Convertible Note bears interest at the rate of 10% per
          annum, principle payments of $66,666.67 commence on September 30, 2007
          and end
          on February 28, 2010, and is convertible optionally by ComVest at any time
          or
          mandatorily by LaPolla subject to satisfaction of certain conditions to
          common
          stock at the rate of $.80 per share (“Conversion Shares”). The Company retired
          its line of credit with Wachovia Bank, N.A. at the closing.  The fees
          charged to the Company relating to the ComVest transaction are being amortized
          over the term of the Convertible Term Note. At March 31, 2007, the
          unamortized discount on the Convertible Term Note was $493,955.
 
 (c)**Warrants
          -**The Warrants are for the purchase of an aggregate of 1,500,000
          shares
          of LaPolla common stock at a price per share calculated based on the closing
          stock price over the last 20 days prior to the date of closing, immediately
          exercisable, and expire February 29, 2012 (“Warrant Shares”). The exercise
          prices for the Warrants are as follows (a) tranche 1 (110% of average closing
          price) = $0.68; (b) tranche 2 (125% of average closing price) = $0.77;
          and (c)
          tranche 3 (150% of average closing price) = $0.93. The fair value of the
          Warrants of $634,093 at the time of issuance, which was determined using
          alattice-based option-pricing
          model,
          was recorded as additional paid-in capital and reduced the carrying value
          of the
          Revolving Credit Note and Convertible Term Note (collectively the
“Notes”).  The discount on the Notes is being amortized to interest
          expense over the term of the Notes.  At March 31, 2007, the
          unamortized discount on the Notes is approximately $617,444.***See
          also***Items
          (b) and (c) above.
 
 (d)**Registration
          Rights**– The Registration Rights Agreement entered into on February 21,
          2007 requires the Company to file with the SEC not later than 90 days after
          the
          date of this agreement, a shelf registration (“Registration Statement”) to cover
          the resale of the Conversion Shares, Warrant Shares, and additional shares
          of
          common stock issuable pursuant to the anti-dilution provisions of the
          Convertible Term Note and Warrants (“Registrable Shares”). The Company is
          required to use its best efforts to cause the Registration Statement to
          be
          declared effective as promptly as possible after filing it with the SEC
          but in
          no event later than 150 days after the date of this agreement. If the
          Registration Statement is not declared effective within 150 days after
          the date
          of this agreement, or shall cease to be available for use by the Holders
          as
          selling stockholders (A) where such unavailability continues for a period
          in
          excess of 5 days beyond certain allowed time periods for circumstances
          such as
          when a distribution would require the public disclosure of material non-public
          information concerning any transaction or negotiations involving the Company
          or
          any of its affiliates, the Company proposes to file a Registration Statement
          for
          the offering and sale of securities for its own account in an underwritten
          offering, and after the filing of the Company’s annual report on Fork 10-K or
          other event that requires the filing of a post-effective amendment to any
          Registration Statement, or (B) for any other reason such as a stop order,
          a
          material misstatement or omission in such Registration Statement or the
          information contained in such Registration Statement having become outdated
          and
          continues to be unavailable for a period in excess of 30 days, then the
          Company
          is required to pay to the Holders, ratably in proportion to the number
          of
          Registrable Shares held by each respective Holder, a cash fee equal to
          the
          product of $1,000 multiplied by the number of calendar days during which
          any of
          the events described above occurs and is continuing up to a maximum of
          $500,000.
          The approximate term of the registration payment arrangement is the period
          of
          time from the effective date of such Registration Statement until such
          date as
          is the earlier of the date on which all of the Registrable Shares covered
          by the
          Registration Statement are sold to the public, or the date on which the
          Conversion Shares and the Warrant Shares issued or issuable upon cashless
          exercise of the Warrants may be immediately sold without restriction by
          each
          Holder thereof without registration. ***See also*** (b) and
          (c) above. The Company determined that no liability is recognizable at
          March 31,
          2007.
  8
 ***Index***
 **Note
                  10.**
              **Net
                  (Loss) Per Common Share - Basic and
                  Diluted.**
 
 The
        following table reflects the computation of the basic and diluted net loss
        per
        common share at March 31:
 
 **2007**
                
                **2006****Per
                    Share**
                
                
                
                **Per
                    Share****Amount**
                
                **Amount**
                
                **Amount**
                
                **Amount**Operating
                  (Loss) Before Income Taxes
                
                $
                (1,009,633
                )
                $
                (0.019
                )
                $
                (514,970
                )
                $
                (0.009
                )Income
                    Tax (Expense)-Deferred
                
                
                —
                
                
                —
                
                
                —
                
                
                —Operating
                    (Loss)
                
                $
                (1,009,633
                )
                $
                (0.019
                )
                $
                (514,970
                )
                $
                (0.009
                )Income
                    (Loss) from Discontinued Operations, Net of Income Tax
                    Benefit-Deferred
                
                
                —
                
                
                —
                
                
                295,069
                
                
                0.005Net
                    (Loss)
                
                $
                (1,009,633
                )
                $
                (0.019
                )
                $
                (219,901
                )
                $
                (0.004
                )Plus:
                    Dividends on Preferred Stock
                
                
                (201,710
                )
                
                (0.003
                )
                
                —
                
                
                —Net
                    (Loss) Available to Common Stockholders
                
                $
                (1,211,343
                )
                $
                (0.022
                )
                $
                (219,901
                )
                $
                (0.004
                )Weighted
                  Average Common Shares Outstanding
                
                53,584,903
                
                53,210,251
 
 Basic
        and
        diluted net (loss) per share are the same since (a) the Company has reflected
        net losses for all periods presented and (b) the potential issuance of common
        stock of the Company would be antidilutive. The common stock that could
        potentially dilute (loss) per share in the future that were not included
        in the
        computation of diluted (loss) per share were (i) 57,447 and 364,000 shares,
        of
        nonvested restricted common stock issued to eligible directors but held by
        the
        Company pursuant to vesting restrictions under the former Director Compensation
        Plan, (ii) 73,000 and 169,868 shares upon exercise of vested and exercisable
        stock options, (iii) 2,000,000 and -0- shares upon conversion of the Convertible
        Term Note, and (iv) 1,500,000 and -0- shares upon exercise of outstanding
        warrants, for the three months ended March 31, 2007 and 2006,
        respectively.
  **Note
                  11.**
              **Business
                  Segment Information.**
 
 The
        Company is a national manufacturer and distributor with seven segments:
        Coatings, Foam, Paints, Sealants, Adhesives, Equipment, and All Other. The
        Company’s segments are organized based on differences in products. The Company
        primarily manufactures coatings and distributes foam, paints, sealants,
        adhesives, equipment, and all other products. Production facilities are located
        in Texas, Florida and Arizona. The accounting policies of the segments are
        the
        same as those described in the summary of significant accounting policies.
        The
        Company allocates resources to segments and evaluates the performance of
        segments based upon reported segment income before income taxes. A substantial
        amount of administrative expenses are allocated to the segments. The portion
        not
        allocated to the segments represents the unallocated cost of certain corporate
        expenses, insurance, investor relations, and gains and losses related to
        the
        disposal of corporate assets and are included in *Unallocated
        Amounts* .
        There
        are no intersegment sales or transfers.
 
 **Reportable
        Segments**
 
 The
        following table includes information about our reportable segments at March
        31:
 
 **2007****Coatings**
                
                **Foam**
                
                **Paints**
                
                **Sealants**
                
                **Adhesives**
                
                **Equipment**
                
                **All Other**
                
                **Totals**Sales
                
                $
                2,142,998
                
                $
                4,457,440
                
                $
                273,038
                
                $
                293,688
                
                $
                —
                
                $
                100,605
                
                $
                1,553
                
                $
                7,269,322Depreciation
                    and Amortization
                
                
                52,555
                
                
                11,424
                
                
                700
                
                
                753
                
                
                —
                
                
                258
                
                
                4
                
                
                65,694Interest
                    Expense
                
                
                23,634
                
                
                49,160
                
                
                3,011
                
                
                3,239
                
                
                —
                
                
                1,110
                
                
                17
                
                
                80,171Segment
                    Profit (Loss)
                
                
                (41,744
                )
                
                (532,411
                )
                
                21,298
                
                
                (4,637
                )
                
                —
                
                
                (11,591
                )
                
                (21,323
                )
                
                (590,408
                )Segment
                    Assets(1)
                
                
                3,959,117
                
                
                6,692,674
                
                
                493,810
                
                
                524,262
                
                
                172
                
                
                148,791
                
                
                2,109
                
                
                11,820,935Expenditures
                    for Segment Assets
                
                $
                169,898
                
                $
                803,965
                
                $
                2,878
                
                $
                19,464
                
                $
                —
                
                $
                1,061
                
                $
                16
                
                $
                997,282**2006****Coatings**
                
                
                **Foam**
                
                
                **Paints**
                
                
                **Sealants**
                
                
                **Adhesives**
                
                
                **Equipment**
                
                
                **All Other**
                
                
                **Totals**Sales
                
                $
                2,061,298
                
                $
                3,151,100
                
                $
                326,121
                
                $
                228,554
                
                $
                4,032
                
                $
                148,149
                
                $
                80,682
                
                $
                5,999,936Depreciation
                    and Amortization
                
                
                32,977
                
                
                6,596
                
                
                683
                
                
                478
                
                
                8
                
                
                310
                
                
                169
                
                
                41,221Interest
                    Expense
                
                
                17,682
                
                
                27,031
                
                
                2,798
                
                
                1,961
                
                
                35
                
                
                1,271
                
                
                692
                
                
                51,470Segment
                    Profit (Loss)
                
                
                (43,979
                )
                
                (131,163
                )
                
                31,801
                
                
                14,822
                
                
                (692
                )
                
                (529
                )
                
                1,375
                
                
                (128,365
                )Segment
                    Assets(1)
                
                
                3,670,461
                
                
                4,647,297
                
                
                537,765
                
                
                416,120
                
                
                5,299
                
                
                200,570
                
                
                102,590
                
                
                9,580,102Expenditures
                    for Segment Assets
                
                $
                116,453
                
                $
                38,482
                
                $
                3,983
                
                $
                12,933
                
                $
                49
                
                $
                1,809
                
                $
                985
                
                $
                174,694
 
 (1) Segment
        assets are the total assets used in the operation of each segment.
 
 9
 ***Index***
  **Note 11**.
                **Business Segment
                    Information -
                    continued.**
  **Segment
        Profit or Loss**
 
 The
        following are reconciliations of reportable segment profit or loss, and assets,
        to the Company’s consolidated totals at March 31:
 
 **2007**
                
                **2006**Total
                    Profit or Loss for Reportable Segments
                
                $
                (590,408
                )
                $
                (128,365
                )Unallocated
                    Amounts:Corporate
                    Expenses
                
                
                (419,225
                )
                
                (386,605
                )Income
                    (Loss) Before Income Taxes
                
                $
                (1,009,633
                )
                $
                (514,970
                )**Assets****2007**
                
                
                **2006**Total
                    Assets for Reportable Segments(1)
                
                $
                11,820,935
                
                $
                9,580,102Other
                    Unallocated Amounts(2)
                
                
                1,705,735
                
                
                1,882,586Consolidated
                    Total
                
                $
                13,526,670
                
                $
                11,462,688
 
 (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 deferred
        tax assets.
  **Note
                      12.**
                  **Reclassifications,
                      Restatements, and Corrections to Previously Issued Financial
                      Statements.**
 
 (**A**)***Reclassification
            of
            Prepaid Expenses to Trade Receivables***– The Company recorded the
            amount of claims filed under its credit insurance policies as Other Current
            Assets whenever it was determined that those trade receivables covered
            under its
            credit insurance policy were uncollectible on the face of the condensed
            consolidated balance sheet when these amounts should have maintained
            their
            classification as Trade Receivables. The Company reclassified the credit
            insurance receivables and included this amount in the Trade Receivables,
            Net for
            the quarter ended March 31, 2007. *See
            also*******Condensed Consolidated Statement of
            Operations, Item (A), and Items Amended Hereby, paragraph (1) for more
            information.
 
 (**B**)***Reclassification
            of
            Prepaid Expenses to Other Non-Current Assets***– The Company recorded
            the transaction fees related to the Credit Facility as a Prepaid Expense
            on the
            face of the condensed consolidated balance sheet when the amount should
            have
            been classified as an Other Non-Current Asset. The Company reclassified
            the fees
            charged in connection with the Credit Facility established with ComVest
            originally included in the Prepaid Expenses line item on the Condensed
            Consolidated Balance Sheet and included this amount in the Other Non-Current
            Assets line item for the quarter ended March 31, 2007. Prepaid Expenses
            and
            Other Current Assets decreased $163,987 and Deposits and Other Non-Current
            Assets increased $163,987. *See
            also*******Condensed Consolidated Statement of
            Operations, Item (B), and Items Amended Hereby, paragraph (2) for more
            information.
 
 (**C**)***Restatement
            of Deferred Income Tax Asset and Income Tax Benefit-Deferred***– The
            Company believed that an appropriate set of circumstances existed based
            on
            various management assumptions and projections in the fourth quarter
            and year
            ended December 31, 2005 that would make a certain portion of its eligible
            cumulative losses from continuing operations recoverable for income tax
            purposes
            and established a deferred income tax asset for an amount equal to the
            amount it
            deemed more likely than not would be realized during 2006. The carrying
            amount
            of the deferred income tax asset was evaluated on a quarterly basis and
            adjusted
            in light of changing circumstances for each of the four quarters and
            year ended
            December 31, 2006 and the quarter ended March 31, 2007. Notwithstanding
            the
            foregoing, the Company reevaluated its recognition of a portion of its
            deferred
            income tax asset from continuing operations and reversing the amounts
            previously
            recognized until such time that the Company exceeds break-even or marginal
            cumulative profitability. The Company has increased the valuation allowance
            related to its deferred income tax asset to fully reserve the carrying
            value of
            its deferred income tax asset and restated its results for the quarters
            ended
            March 31, 2007 and 2006 to reflect the adjustments. To
            illustrate:
 
 **March
                      31, 2007**
                  
                  
                  **March
                      31, 2006**Net
                      Loss (As Previously Reported)
                  
                  $
                  (1,063,543
                  )
                  
                  $
                  (227,164
                  )Adjustments
                  
                  
                  70,559
                  
                  
                  
                  7,263As
                      Adjusted and Restated
                  
                  $
                  (992,984
                  )
                  
                  $
                  (219,901
                  )
 
 *See
            also*******Condensed Consolidated Statement of
            Operations, Item (C), Items Amended Hereby, paragraph (3), and (G) below,
            for
            more information.
  10
 ***Index***
  **Note
                      12.**
                  **Reclassifications,
                      Restatements, and Corrections to Previously Issued Financial
                      Statements -
                      continued.**
 
 (**D**)***Reclassification
            of
            Revolving Credit Note***– The Company classified the Revolving Credit
            Note liability (originally reflected as “Line of Credit”) as a Current Liability
            on the condensed consolidated balance sheets when it should have been
            classified
            as an Other Liability based on its February 28, 2009 maturity date. The
            Company
            reclassified the Revolving Credit Note liability originally included
            in the
            Current Liability section of the condensed consolidated balance sheet
            and
            included this amount in the Other Liabilities section for the quarter
            ended
            March 31, 2007.*See also*******Condensed
            Consolidated Statement of Operations, Item (D), Note 9, and Items Amended
            Hereby, paragraph (4) for more information.
 
 (**E**)***Restatement
            of Convertible Term Note and Revolving Credit Note Liabilities and Interest
            Expense***– The Company did not account for the fair value of the
            warrants issued in connection with the Credit Facility entered into with
            ComVest. The Company, after the restatement in (**C**) and
            reclassification in (**D**) above, accounted for the fair value of
            warrants as additional paid-in capital, reduced the carrying values of
            the
            convertible term note and revolving credit note by the fair value of
            the
            warrants, and recorded interest expense for the quarter ended March 31,
            2007. To
            illustrate:
 
 **March
                      31, 2007**Net
                      Loss (As Adjusted and Restated Per Footnote (C) Above)
                  
                  $
                  (992,984
                  )Adjustments
                  
                  
                  (16,649
                  )As
                      Adjusted and Restated
                  
                  $
                  (1,009,633
                  )
 
 *See
            also*******Condensed Consolidated Statement of
            Operations, Item (E), Note 9, and Items Amended Hereby, paragraph (5)
            for more
            information.
 
 (**F**)***Disclosure
            of
            Accounting for Registration Payment Arrangements***– The Company
            entered into a Registration Rights Agreement contemporaneously with the
            establishment of a Credit Facility with ComVest on February 21, 2007,
            which
            agreement contains certain provisions that may require the Company to
            pay
            ComVest certain fees upon the happening of certain events. The Company
            disclosed
            the registration payment arrangement as required. *See also* Note 9, Item
            (d), and Items Amended Hereby, paragraph (6) for more
            information.
 
 (**G**)***Restatement
            of
            Accrued Expenses and Other Current Liabilities, Cost of Sales, and
            Sales*****– The Company restated the accrued expenses
            and other current liabilities on the Consolidated Balance Sheets and
            Sales and
            Cost of Sales on the Consolidated Statements of Operations for the first
            quarters of 2006. This information was previously disclosed in the
            Company’s Form10-K for the year ended December 31, 2006 filed originally with
            the SEC on March 30, 2007, Form 10-K/A for the year ended December 31,
            2006
            filed with the SEC on August 20, 2007, and Form 10-Q for the quarter
            ended March
            31, 2007 filed with the SEC on August 20, 2007.  See also (C)
            above.
 11
 ***Index***
  **Item
                  2.**
              **Management’sDiscussion
                  and Analysis of Financial Condition and
                  Results of Operations.**
 
 **Performance
        in First Quarter of 2007 compared to First Quarter of 2006**
 
 *Overview*
 
 This
        financial review presents our operating results for the three months ended
        March
        31, 2007 and 2006, and our financial condition at March 31, 2007. Except
        for the
        historical information contained herein, the following discussion contains
        forward-looking statements that 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 some of these risks, uncertainties and other factors throughout
        this
        report and provide a reference to additional risks under the caption “Risk
        Factors” in Item 1A of Part II below. In addition, the following
        review should be read in connection with the information presented in our
        unaudited condensed consolidated financial statements and related notes for
        the
        three month period ended March 31, 2007 and our audited consolidated financial
        statements and related notes for the year ended December 31,
        2006.
 
 **Overall
        Results of Operations**
  The
        following is a summary of sales for the three months ended March
        31:
 
 **2007**
              
              **2006**Sales
              
              $
              7,269,322
              
              $
              5,999,935
 
 Our
        sales
        increased $1,269,387, or 21%, for the first quarter of 2007 compared to the
        first quarter of 2006, due to an increase in the number of sales personnel,
        independent representatives, and distributors selling our various products
        across all of our segments.
 
 Our
        gross
        profit increased $345,700, or 41%, for the three months ended March 31, 2007
        compared to the three months ended March 31, 2006, due to sales volume growth
        in
        our coatings, foam, and sealants segments offset by a decrease in our paints,
        adhesives, equipment, and all other segments. Gross margin increased 2.32
        percentage points, or 16.6%, for the first quarter of 2007 compared to the
        first
        quarter of 2006, due to economies of scale from increased purchasing power
        for
        the raw materials related to our manufactured and finished goods and improved
        manufacturing efficiencies.
 
 Our
        total
        costs and expenses are comprised of cost of sales, selling, general and
        administrative expenses, or SG&A, professional fees, depreciation,
        amortization, consulting fees, interest expense, and other expense. These
        total
        costs and expenses increased $1,747,401, or 27%, for the first quarter of
        2007
        compared to the first quarter of 2006, due to an increase of $923,687 for
        cost
        of sales, $828,030 for SG&A, $24,473 for depreciation, $4,577 for consulting
        fees, $2,979 for interest expense, and $514 for other expenses, offset by
        a
        decrease of $36,860 for professional fees.
 
 Cost
        of
        sales increased $923,687, or 18%, for the three months ended March 31, 2007
        compared to the three months ended March 31, 2006, due to an increase in
        purchases of raw materials for manufactured goods and finished goods, to
        support
        our sales volume growth.
 
 SG&A
        increased $828,030, or 71%, for the quarter ended March 31, 2007 compared
        to the
        quarter ended March 31, 2006, due to an increase of $182,467 for payroll
        and
        related employee benefits, $75,104 for sales commissions, $28,289 for travel
        and
        related services, $30,263 for marketing, promotions and trade shows, $28,825
        for
        insurances, $19,034 for advertising, $100,067 for share based compensation,
        $25,732 for rents, and $404,430 for corporate office expenses, offset by
        a
        decrease of $12,606 for recruiting fees, $11,375 for American Stock Exchange
        Fees, $5,943 for investor relations, and $36,257 for bad debts.
 
 Professional
        fees decreased $36,859, or 53%, for the first quarter of 2007 compared to
        the
        first quarter of 2006, due to a decrease of $33,047 for legal fees and $3,812
        for outside accountants, auditing and auditing related services.
 
 Depreciation
        and amortization expense increased $24,473, or 59%, for the three months
        ended
        March 31, 2007 compared to the three months ended March 31, 2006 due to an
        increase in depreciable property, plant and equipment.
 
 Consulting
        fees increased $4,577, or 22%, for the first quarter of 2007 compared to
        the
        first quarter of 2006 due to an increase in outside professional services
        for
        investor relations and insurance.
 
 Interest
        expense increased $48,350, or 319%, for the three months ended March 31,
        2007
        compared to the three months ended March 31, 2006, due to an increase in
        the
        amount of capital being used from our credit instruments required to fund
        our
        continuing operations.
  Interest
            expense increased $64,998, or 319%, for the three months ended March
            31, 2007
            compared to the three months ended March 31, 2006, due to an increase
            in the
            amount of capital being used from our credit instruments required to
            fund our
            continuing operations and amortization of the discount on the Convertible
            Term
            Note and Revolving Credit Note.
  12
 ***Index***
 
 Other
        (income) expense was $514 for the three months ended March 31, 2007. We did
        not
        have any other (income) expense for the comparable period in 2006.
 
 We
        did
        not have any recognizable expenses for discontinued operations for the first
        quarter of 2007 compared to income of $295,069 for the first quarter of 2006
        from gains related to writes offs of aged accounts payables and a reduction
        in
        the reserve for litigation.
 
 Net
            loss
            for the three months ended March 31, 2007 was $1,009,633 compared to
            $219,901
            for the three months ended March 31, 2006 due to an increase in SG&A,
            depreciation and amortization, consulting fees, interest expense, and
            other
            (income) expense, offset by a decrease in professional fees, an increase
            in
            sales, cost of sales, and gross profit.
 
 Net
        loss
        per share for the first quarter of 2007 was $.019 compared to $0.009 for
        the
        first quarter of 2006.
 
 Dividends
        accrued on our outstanding Series D Preferred Stock were $201,710 for the
        quarter ended March 31, 2007. We
        did
        not have any outstanding Series D Preferred Stock in the comparable period
        in
        2006.
 
 Net
          loss
          available to common stockholders and related loss per share for the three
          months
          ended March 31, 2007 were $1,211,343 and $0.022. The increase in net loss
          is
          attributable to dividends accrued for the outstanding Series D Preferred
          Stock
          for the three months ended March 31, 2007. We did not have an increase
          in net
          loss available to common stockholders for the comparable period in
          2006.
 
 **Results
        of Business Segments**
 
 The
        following is a summary of sales by segment at March 31:
 
 **Segments**
              
              **2007**
              
              **2006**Coatings
              
              $
              2,142,998
              
              $
              2,061,298Foam
              
              
              4,457,440
              
              
              3,151,100Paints
              
              
              273,038
              
              
              326,121Sealants
              
              
              293,688
              
              
              228,554Adhesives
              
              
              —
              
              
              4,032Equipment
              
              
              100,605
              
              
              148,149All
                  Other
              
              $
              1,553
              
              $
              80,682
 
 Coatings
        sales increased $81,700, or 4%, for the first quarter of 2007 compared to
        the
        first quarter of 2006, due to an increase in our sales force, advertising,
        marketing, and promotion programs. Segment loss decreased $7,143, or 16.2%,
        for
        the quarter ended March 31, 2007 compared to the quarter ended March 31,
        2006.
        The decrease in our coatings segment loss for the quarter ended March 31,
        2007
        was primarily attributable to increased sales volumes, manufacturing
        efficiencies, economies of scale realized from increased purchasing power
        for
        raw materials for manufactured and finished goods, partially offset by increases
        in expenses related to our growing sales force, trade shows, and promotional
        expenses.
 
 Foam
        sales increased $1,306,340, or 42%, for the quarter ended March 31, 2007
        compared to the quarter ended March 31, 2006, due to the same reasons enumerated
        in our coatings segment above. Segment loss increased $391,039, or 298%,
        for the
        three months ended March 31, 2007 compared to the three months ended March
        31,
        2006. The increase in our foam segment loss for the first quarter of 2007
        was
        primarily attributable to an increase in our foam products being sold through
        independent distributors at lower margins, partially offset by increased
        sales
        volumes of higher margin foam products for insulation markets and lower margin
        foam products for roofing markets direct to our customers, and increased
        purchasing power for finished goods.
 
 Paints
        sales decreased $53,083, or 16%, for the three months ended March 31, 2007
        compared to the three months ended March 31, 2006, due to a slight decline
        in
        market demand. Segment profit decreased $9,878, or 31%, for the quarter ended
        March 31, 2007 compared to the quarter ended March 31, 2006. The decrease
        in our
        paints segment profit for the three months ended March 31, 2007 was primarily
        attributable to decreased sales volumes, partially offset by increased
        purchasing power for finished goods.
 
 Sealants
        sales increased $65,134, or 29%, for the first quarter of 2007 compared to
        the
        first quarter of 2006, due to the same reasons enumerate in our coatings
        segment
        above. Segment profit decreased $18,786, or 127%, for the quarter ended March
        31, 2007 compared to the quarter ended March 31, 2006. The decrease in our
        sealants segment profit for the quarter ended March 31, 2007 was primarily
        attributable to lower sales prices resulting in reduced margin.
 
 13
 ***Index***
  Adhesives
        sales were -0- for the quarter ended March 31, 2007 compared to $4,032 for
        the
        quarter ended March 31, 2006, as a result of a decrease in demand. Segment
        loss
        decreased $692 for the first quarter of 2007 compared to the first quarter
        of
        2006. The decrease in our adhesives segment loss for the quarter ended March
        31,
        2007 was due to a decrease in sales resulting in a reduction in costs of
        sales.
 
 Equipment
        sales decreased $47,255, or 32%, for the three months ended March 31, 2007
        compared to the three months ended March 31, 2006, due to the same reasons
        enumerated in our paints segment. Segment loss increased $10,832, or 2,048%,
        for
        the quarter ended March 31, 2007 compared to the quarter ended March 31,
        2006.
        The decrease in our equipment segment loss for the three months ended March
        31,
        2007 was primarily attributable to decreased sales volumes, partially offset
        by
        increased purchasing power for finished goods.
 
 All
        Other
        sales decreased $79,129, or 98%, for the first quarter of 2007 compared to
        the
        first quarter of 2006, due to a decrease in walk-in customers in our Florida
        and
        Arizona locations needing sundry items. Segment loss was $21,319 for the
        quarter
        ended March 31, 2007 compared to a segment profit of $1,375 for the quarter
        ended March 31, 2006. The all other segment loss for the first quarter of
        2007
        was primarily attributable to decreased sales volumes.
 
 **Liquidity
        and Capital Resources**
 
 Net
          cash
          used in our operations was $1,495,431 for the first quarter of 2007 compared
          to
          $770,933 for the first quarter of 2006. The cash used in operations for
          the
          three months ended March 31, 2007 was attributable to our net income for
          the
          period, including
          the effect of adjustments to reconcile net income to cash provided by or
          used in
          operating activities and adjusting for non-cash items ,
          offset
          by increases in inventories, prepaid expenses and other current assets,
          deposits
          and other non current assets and accounts payable, and decreases in trade
          receivables, accrued expenses and other current liabilities, and other
          liabilities. For the first quarters ended March 31, 2007 and 2006, net
          cash used
          in discontinued operations was $7,892 and $-0-, respectively. Although
          cash from
          operations and funds available from the ComVest Credit Facility are expected
          to
          continue to be sufficient to meet our operating requirements and to fund
          our
          capital expenditures, we may seek to raise additional funds through private
          placements of common and preferred stock to accredited sophisticated investors
          to further fund our trade receivables growth, an acquisition as part of
          our
          strategy for accelerating growth, or to pay down our short and long term
          debts,
          depending on market conditions.
 
 Net
        cash
        used in investing activities was $883,811 for the three months ended March
        31,
        2007 compared to $150,615 for the three months ended March 31, 2006. We invested
        $7,700 in officer furniture and equipment, $54,303 in computers and software,
        $163,675 in machinery and equipment, and $658,134 towards a new manufacturing
        plant during the first quarter of 2007.
 
 Net
        cash
        provided by financing activities was $2,104,154 for the quarter ended March
        31,
        2007 compared to $719,209 for the quarter ended March 31, 2006.
        Contemporaneously with the closing of the ComVest Credit Facility on February
        21, 2007, we received $2,500,000, plus we borrowed another $1,000,000 against
        the Line of Credit during the quarter ended March 31, 2007, and used these
        funds
        to retire our former lines of credit, repay short term loans received by
        us from
        our Chairman of the Board, satisfy certain closing fees and transactional
        expenses, continue construction of manufacturing plants, and meet our quarterly
        working capital requirements.
 
 **Item
                  3.**
              **Quantitative
                  and Qualitative Disclosures About Market
                  Risk.**
 
 We
        do not
        issue or invest in financial instruments or their derivatives for trading
        or
        speculative purposes and are not subject to material foreign currency exchange
        risks at this time. Our outstanding debt and related interest expense, as
        it
        relates to interest rate exposure, in the United States is currently not
        material to our operations.
 
 **Item
                  4.**
              **Controls
                  and Procedures.**
 
 We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed in our Exchange Act reports is recorded,
        processed, summarized and reported within the time periods specified in the
        SEC’s rules and forms, and that such information is accumulated and communicated
        to our management, including our Principal Executive Officer and our Principal
        Financial Officer, as appropriate, to allow timely decisions regarding required
        disclosures. Our management, including our Principal Executive Officer and
        our
        Principal Financial Officer, does not expect that our disclosure controls
        or
        procedures will prevent all error and all fraud. A control system, no matter
        how
        well conceived and operated, can provide only reasonable, not absolute,
        assurance that the objectives of the control system are met. Further, the
        benefits of controls must be considered relative to their costs. Because
        of the
        inherent limitations in all control systems, no evaluation of controls can
        provide absolute assurance that all control issues and instances of fraud,
        if
        any, within LaPolla have been detected. These inherent limitations include
        the
        realities that judgments in decision-making can be faulty, and that breakdowns
        can occur because of simple error or mistake. Additionally, controls can
        be
        circumvented by the individual acts of some persons, by collusion of two
        or more
        people, or by management override of the control. The design of any system
        of
        controls is also based in part upon certain assumptions about the likelihood
        of
        future events, and there can be no assurance that any design will succeed
        in
        achieving its stated goals under all potential future conditions. Because
        of the
        inherent limitations in a cost-effective control system, misstatements due
        to
        error or fraud may occur and not be detected. We carried out an evaluation,
        under the supervision and with participation of our management, including
        our
        Principal Executive Officer and our Principal Financial Officer, of the
        effectiveness of the design and operation of our disclosure controls and
        procedures as of March 31, 2007. Based on the foregoing, our Principal Executive
        Officer and our Principal Financial Officer concluded that our disclosure
        controls and procedures were effective at the reasonable assurance level.
        There
        has been no change in our internal controls over financial reporting during
        our
        most recent fiscal quarter that has materially affected, or is reasonably
        likely
        to materially affect, our internal controls over financial
        reporting.
  14
 ***Index***
 We
            carried out an evaluation, under the supervision and with participation
            of our
            management, including our Principal Executive Officer and our Principal
            Financial Officer, of the effectiveness of the design and operation of
            our
            disclosure controls and procedures as of March 31, 2007, the end of the
            quarterly period covered by this report.  Based on the foregoing, our
            Principal Executive Officer and our Principal Financial Officer concluded
            that,
            as of the period covered by this report, as amended, our disclosure controls
            and
            procedures were not as effective as originally contemplated nor did such
            control
            operate at a level appropriate to provide reasonable assurance for a
            certain
            matter. A material weakness existed which originated when the Company
            entered
            into those certain agreements described elsewhere in this report relating
            to the
            establishment of a Credit Facility with ComVest on February 21, 2007.
            The
            Company was unaware of certain required accounting treatment relating
            to
            calculating the fair value of warrants, allocating such value to a variety
            of
            agreements issued in connection therewith, and amortizing such discount
            over the
            term of the agreements. Once the Company became aware of the particular
            matter,
            the Company consulted an outside CPA firm to review the matter in detail.
            The
            Company has accounted for the fair value of the warrants in this amended
            report
            and believes the material weakness identified above has been corrected.
            After
            correcting the material weakness identified above, our Principal Executive
            Officer and our Principal Financial Officer concluded that our disclosure
            controls and procedures are effective and operating at the requisite
            reasonable
            assurance level as of the date of this amended report. There were changes
            in our
            internal controls over financial reporting after the end of the first
            quarter of
            2007, namely: (a) the addition of a new CFO with a CPA license on June
            11, 2007;
            and (b) the engagement of a new larger independent registered public
            accounting
            firm, Hein & Associates LLP on July 12, 2007. Both of the aforementioned
            changes, as well as the early adoption of the attestation requirements
            for the
            year ended December 31, 2006, were encouraged by the Company’s
            former
            independent registered public accounting firm, Baum & Company, P.A., to
            ensure that our disclosure controls and procedures kept pace with the
            rapid
            growth of the Company. There has been no change in our internal controls
            over
            financial reporting that has materially affected, or is reasonably likely
            to
            materially affect, our internal controls over financial reporting subsequent
            to
            the date of this amended report.
 **PART
        II — OTHER INFORMATION**
  **Item 1.**
              **Legal
                  Proceedings.**
 
 The
        disclosures set forth under Part I, Item 3, “Legal Proceedings” in our
        Annual Report on Form 10-K for the year ended December 31, 2006 are hereby
        incorporated in their entirety herein by this reference.
 
 We
        are
        involved in various lawsuits and claims arising in the ordinary course of
        business, which are, in our opinion, immaterial both individually and in
        the
        aggregate with respect to our consolidated financial position, liquidity
        or
        results of operations.
 
 **Item 1A.**
              **Risk
                  Factors.**
 
 The
        risk
        factors presented below update, and should be considered in addition to,
        the
        risk factors previously disclosed by us in Part I, Item 1A of our
        Annual Report on Form 10-K for the fiscal year ended December 31,
        2006.
 
 ·  ***New
        Manufacturing Operations*** **** - **** Certain
        capital expenditures were made by us to establish new manufacturing operations
        relating to our foam segment, which operations are expected to improve our
        foam
        segment gross margins beginning in the second quarter of 2007. Although certain
        of our foam products will now be manufactured in our own facilities instead
        of
        purchased as finished goods and redistributed as we have done in the past
        and
        are field and third party tested and credentialed, we may experience technical
        and other difficulties with the ramp up and roll out of our foam products,
        which
        may significantly affect our operating results.
 
 Ÿ  ***Availability
        of Raw Materials*** **** - **** Certain
        raw materials are critical to our production processes. These include not
        only
        titanium dioxide and other resins in our coatings and paints segments, but
        also
        polyols and catalysts for our foam segment. The Company has made, and plans
        to
        continue to make, supply arrangements to meet the planned operating requirements
        for the future. However, an inability to obtain these critical raw materials
        would adversely impact our ability to produce products for these
        segments.
 
 Ÿ  ***Availability
        of Finished Goods*** *-* Certain
        finished goods are critical to our sales growth. These include polyurethane
        foam
        systems in the foam segment. Although the Company has made, and plans to
        continue to make, supply arrangements to meet planned requirements for the
        future, we may experience an inability to obtain these polyurethane foams
        systems like we have in the past based on the establishment of our own foam
        manufacturing operations which makes us a competitor to certain of our existing
        finished goods suppliers, which would likely adversely impact our sales growth
        and operating results.
  15
 ***Index***
  **Item
                    2.**
                **Unregistered
                    Sales of Equity SecuritiesandUse of
                    Proceeds.**
  **Recent
        Sales of Unregistered Securities**
 
 During
        the quarterly period ended March 31, 2007, we issued common stock for a certain
        private transaction, in reliance on Section 4(2) of the Act, as described
        below:
 
 (a) On
        January 11, 2007, due to the death of a non-employee director, we vested
        12,000
        shares of restricted common stock automatically granted and issued to him
        pursuant to the former Director Compensation Plan upon his election at the
        annual meeting of stockholders held on July 12, 2006. We did not consider
        these
        shares issued and outstanding due to a vesting provision and non-delivery
        of the
        shares pending vesting and as such no value was ascribed to these shares
        when
        originally issued. The value ascribed to these vested shares was recorded
        at
        $6,840.
  **Item
                  3.**
              **Defaults
                  Upon Senior Securities.**
  None.
 
 **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security Holders.**
  None.
  **Item 5.**
              **Other
                  Information.**
  None.
  **Item
                  6.**
              **Exhibits.**
  ***See*** Index of
          Exhibits on Page 18.
  16
 ***Index***
 
 **SIGNATURES**
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 **LAPOLLA
                INDUSTRIES, INC.**Date:
              August
                  20, 2007
              By:
              /s/
                  Douglas J. KramerName:
                  Douglas J. KramerTitle:
                  CEO and President
  **LAPOLLA
                INDUSTRIES, INC.**Date:
              August
                  20,2007
              By:
              /s/
                  Timothy J. NovakName:Timothy J.
                  NovakTitle:
                  CFO
  17
 ***Index***
  **INDEX
        OF EXHIBITS**
  **Exhibit
                      Number**
                  
                  **Description**10.1
                  
                  Revolving
                      Credit and Term Loan Agreement between LaPolla and ComVest
                      dated February
                      21, 2007 (incorporated by reference to Exhibit 10.1 to Form
                      8-K dated and
                      filed February 23, 2007).10.2
                  
                  Convertible
                      Term Note between LaPolla and ComVest dated February 21, 2007
                      (incorporated by reference to Exhibit 10.2 to Form 8-K dated
                      and filed
                      February 23, 2007).10.3
                  
                  Revolving
                      Credit Note between LaPolla and ComVest dated February 21,
                      2007
                      (incorporated by reference to Exhibit 10.3 to Form 8-K dated
                      and filed
                      February 23, 2007).10.4
                  
                  Warrant
                      No. CV-1 To Purchase Shares of Common Stock to ComVest dated
                      February 21,
                      2007 (incorporated by reference to Exhibit 10.3 to Form 8-K
                      dated and
                      filed February 23, 2007).10.5
                  
                  Warrant
                      No. CV-2 To Purchase Shares of Common Stock to ComVest dated
                      February 21,
                      2007 (incorporated by reference to Exhibit 10.3 to Form 8-K
                      dated and
                      filed February 23, 2007).10.6
                  
                  Warrant
                      No. CV-3 To Purchase Shares of Common Stock to ComVest dated
                      February 21,
                      2007 (incorporated by reference to Exhibit 10.3 to Form 8-K
                      dated and
                      filed February 23, 2007).99.1
                  
                  Collateral
                      Agreement between LaPolla and ComVest dated February 21, 2007
                      (incorporated by reference to Exhibit 10.3 to Form 8-K dated
                      and filed
                      February 23, 2007).99.2
                  
                  Registration
                      Rights Agreement between LaPolla and ComVest dated February
                      21, 2007
                      (incorporated by reference to Exhibit 10.3 to Form 8-K dated
                      and filed
                      February 23, 2007).31.1/A
                  
                  Certification
                      of Principal Executive Officer pursuant to Section 302 of the
                      Sarbanes-Oxley Act of 2002.31.2/A
                  
                  Certification
                      of Principal Financial Officer pursuant to Section 302 of the
                      Sarbanes-Oxley Act of 2002.32/A
                  
                  Certification
                      of Principal Executive Officer and Principal Financial Officer
                      pursuant to
                      § 906 of Sarbanes-Oxley Act of
                      2002.
  18