----

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**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-Q**

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

**For        The Quarterly Period Ended March 31, 2007**

**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)* |   |

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**LAPOLLA        INDUSTRIES, INC.**

**FORM        10-Q**

**FOR        THE QUARTER ENDED MARCH 31, 2007**

**INDEX**

|                                   |                        |   |                                                                                                                              |   | **Page** |
|----------------------------------------|-----------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                                   |                        |   |                                                                                                                              |   |     |
| **PART                  I**            |                        |   | **FINANCIAL                  INFORMATION**                                                                                        |   |     |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  1** |   | **Financial                  Statements**                                                                                         |   | **3**    |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  2** |   | **Management’s                  Discussion and Analysis of Financial Condition                  and Results of Operations** |   | **11**   |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  3** |   | **Quantitative                  and Qualitative Disclosures About Market                  Risk**                                  |   | **13**   |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  4** |   | **Controls                  and Procedures**                                                                                      |   | **13**   |
|                                   |                        |   |                                                                                                                              |   |     |
| **PART                  II**           |                        |   | **OTHER                  INFORMATION**                                                                                            |   |     |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  1** |   | **Legal                  Proceedings**                                                                                            |   | **14**   |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  2** |   | **Unregistered                  Sales of Equity Securities and Use of                  Proceeds**                                 |   | **14**   |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  3** |   | **Defaults                  Upon Senior Securities**                                                                              |   | **14**   |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  4** |   | **Submission                  of Matters to a Vote of Security                  Holders**                                         |   | **14**   |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  5** |   | **Other                  Information**                                                                                            |   | **14**   |
|                                   |                        |   |                                                                                                                              |   |     |
|                                   | **Item                  6** |   | **Exhibits**                                                                                                                      |   | **14**   |
|                                   |                        |   |                                                                                                                              |   |     |
| **SIGNATURES**                         |                        | **15** |
|                                   |                        |   |                                                                                                                              |   |     |
| **INDEX                  OF EXHIBITS** |                        | **16** |

----

*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**

| **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** | **4** |
|                                                                                                   |   |   |   |
| **CONDENSED                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**                       |   |
|                                                                                                   |   |   |   |
|                                                                                                   |   | **Three                  Months Ended March 31, 2007 and 2006** | **5** |
|                                                                                                   |   |   |   |
| **CONDENSED                  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**                       |   |
|                                                                                                   |   |   |   |
|                                                                                                   |   | **Three                  Months Ended March 31, 2007 and 2006** | **6** |
|                                                                                                   |   |   |   |
| **NOTES                  TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                  (UNAUDITED)** | **7**  |

----

*Index*

**LAPOLLA        INDUSTRIES, INC.**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

|                                                                                                                                                                                                                                                                                                                                          |   | **March 31,****2007** |        | **December 31,****2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|-------------|-------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                          |   | **(Unaudited)**            |        |                          |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                    |   |                       |        |                          |   |
| Current                    Assets:                                                                                                                                                                                                                                                                                                            |   |                       |        |                          |   |
| Cash                                                                                                                                                                                                                                                                                                                                          |   | $                          | 107,028     |           | $      | 382,116 |   |
| Trade                    Receivables, Net                                                                                                                                                                                                                                                                                                     |   |                       | 3,999,449   |                          |   | 3,595,431 |   |
| Inventories                                                                                                                                                                                                                                                                                                                                   |   |                       | 3,277,635   |                          |   | 2,882,236 |   |
| Prepaid                    Expenses and Other Current Assets                                                                                                                                                                                                                                                                                  |   |                       | 730,717     |                          |   | 537,253 |   |
| Deferred                    Income Taxes, Net                                                                                                                                                                                                                                                                                                 |   |                       | 867,989     |                          |   | 938,548 |   |
| Total                    Current Assets                                                                                                                                                                                                                                                                                                       |   |                       | 8,982,818   |                          |   | 8,335,584 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Property,                    Plant and Equipment, Net                                                                                                                                                                                                                                                                                         |   |                       | 2,283,989   |                          |   | 1,489,639 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Other                    Assets:                                                                                                                                                                                                                                                                                                              |   |                       |        |                          |   |   |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                      |   |                       | 1,951,000   |                          |   | 1,951,000 |   |
| Other                    Intangible Assets, Net                                                                                                                                                                                                                                                                                               |   |                       | 159,626     |                          |   | 165,396 |   |
| Deposits                    and Other Non-Current Assets                                                                                                                                                                                                                                                                                      |   |                       | 149,237     |                          |   | 149,237 |   |
| Total                    Other Assets                                                                                                                                                                                                                                                                                                         |   |                       | 2,259,863   |                          |   | 2,265,633 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Total                    Assets                                                                                                                                                                                                                                                                                                               |   | $                          | 13,526,670  |                          | $      | 12,090,856 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| **LIABILITIES                    AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                             |   |                       |        |                          |   |   |   |
| Current                    Liabilities                                                                                                                                                                                                                                                                                                        |   |                       |        |                          |   |   |   |
| Accounts                    Payable                                                                                                                                                                                                                                                                                                           |   | $                          | 5,505,561   |                          | $      | 5,069,478 |   |
| Accrued                    Expenses and Other Current Liabilities                                                                                                                                                                                                                                                                             |   |                       | 929,771     |                          |   | 1,091,947 |   |
| Line                    of Credit                                                                                                                                                                                                                                                                                                             |   |                       | 1,500,000   |                          |   | 1,007,120 |   |
| Current                    Portion of Convertible Term Note                                                                                                                                                                                                                                                                                   |   |                       | 466,667     |                          |   | — |   |
| Current                    Portion of Long-Term Debt                                                                                                                                                                                                                                                                                          |   |                       | 110,808     |                          |   | 97,589 |   |
| Current                    Portion of Liabilities from Discontinued Operations                                                                                                                                                                                                                                                                |   |                       | —     |                          |   | 232,479 |   |
| Total                    Current Liabilities                                                                                                                                                                                                                                                                                                  |   |                       | 8,512,807   |                          |   | 7,498,613 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Other                    Liabilities                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Non                    Current Portion of Convertible Term Note                                                                                                                                                                                                                                                                               |   |                       | 1,533,333   |                          |   | — |   |
| Non                    Current Portion of Long-Term Debt                                                                                                                                                                                                                                                                                      |   |                       | 192,636     |                          |   | 202,923 |   |
| Non                    Current Portion of Liabilities from Discontinued                    Operations                                                                                                                                                                                                                                         |   |                       | 2,108       |                          |   | 103,650 |   |
| Total                    Other Liabilities                                                                                                                                                                                                                                                                                                    |   |                       | 1,728,077   |                          |   | 306,573 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Total                    Liabilities                                                                                                                                                                                                                                                                                                          |   |                       | 10,240,884  |                          |   | 7,805,186 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Stockholders’                    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      |                          |   | 55,035 |   |
| Series                    D, 25,000 Shares Authorized; 8,176 Issued and Outstanding atMarch                    31, 2007 and December 31, 2006; $8,176,000 aggregate liquidation                    preference at March 31,                    2007 and December 31, 2006                                                                      |   |                       | 8,176       |                          |   | 8,176 |   |
| Common                    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     |                          |   | 535,743 |   |
| Additional                    Paid-In Capital                                                                                                                                                                                                                                                                                                 |   |                       | 70,264,690  |                          |   | 70,201,151 |   |
| Accumulated                    Deficit                                                                                                                                                                                                                                                                                                        |   |                       | (67,577,978 | )                             |   | (66,514,435 | ) |
| Total                    Stockholders’ Equity                                                                                                                                                                                                                                                                                           |   |                       | 3,285,786   |                          |   | 4,285,670 |   |
|                                                                                                                                                                                                                                                                                                                                          |   |                       |        |                          |   |   |   |
| Total                    Liabilities and Stockholders’ Equity                                                                                                                                                                                                                                                                           |   | $                          | 13,526,670  |                          | $      | 12,090,856 |   |

----

*Index*

**LAPOLLA        INDUSTRIES, INC.**

**CONDENSED        CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**

|                                                                                                             |   |  **Three                  Months Ended March 31,** |       |
|------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|
|                                                                                                             |   | **2007**                                                     |       | **2006** |   |
|                                                                                                             |   |                                                         |       |   |   |
| Sales                                                                                                            |   | $                                                            | 7,269,322  |      | $ | 5,999,935 |   |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Cost                  of Sales                                                                                   |   |                                                         | 6,086,874  |   |   | 5,163,187 |   |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Gross                  Profit                                                                                    |   |                                                         | 1,182,448  |   |   | 836,748 |   |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Operating                  Expenses:                                                                             |   |                                                         |       |   |   |   |   |
| Selling,                  General and Administrative                                                             |   |                                                         | 1,987,503  |   |   | 1,159,473 |   |
| Professional                  Fees                                                                               |   |                                                         | 32,619     |   |   | 69,478 |   |
| Depreciation                  and Amortization                                                                   |   |                                                         | 65,694     |   |   | 41,221 |   |
| Consulting                  Fees                                                                                 |   |                                                         | 25,580     |   |   | 21,003 |   |
| Interest                  Expense                                                                                |   |                                                         | 63,522     |   |   | 15,173 |   |
| Interest                  Expense - Related Party                                                                |   |                                                         | —    |   |   | 45,370 |   |
| Other                  (Income) Expense                                                                          |   |                                                         | 514        |   |   | 45,370 |   |
| Total                  Operating Expenses                                                                        |   |                                                         | 2,175,432  |   |   | — |   |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Operating                  (Loss) Before Income Taxes                                                            |   |                                                         | (992,984   | ) |   | (514,970 | ) |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Income                  Tax (Expense) Benefit-Deferred                                                           |   |                                                         | (70,559    | ) |   | (7,263 | ) |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Operating                  (Loss)                                                                                |   |                                                         | (1,063,543 | ) |   | (522,233 | ) |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Income                  (Loss) From Discontinued Operations, Net of Income Tax                  Benefit-Deferred |   |                                                         | —    |   |   | 295,069 |   |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Net                  (Loss)                                                                                      |   | $                                                            | (1,063,543 | ) | $ | (227,164 | ) |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Plus:                  Dividends on Preferred Stock                                                              |   |                                                         | (201,710   | ) |   | — |   |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Net                  (Loss) Available to Common Stockholders                                                     |   |                                                         | (1,265,253 | ) | $ | (227,164 | ) |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Net                  Income (Loss) Per Share - Basic and Diluted                                                 |   |                                                         |       |   |   |   |   |
| Continuing                  Operations                                                                           |   | $                                                            | (0.019     | ) | $ | (0.009 | ) |
| Discontinued                  Operations                                                                         |   |                                                         | —    |   |   | 0.005 |   |
| Total                                                                                                            |   | $                                                            | (0.019     | ) | $ | (0.004 | ) |
|                                                                                                             |   |                                                         |       |   |   |   |   |
| Weighted                  Average Shares Outstanding                                                             |   |                                                         | 53,584,903 |   |   | 53,210,251 |   |

----

*Index*

**LAPOLLA        INDUSTRIES, INC.**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                                                                           |   | **Three                    Months Ended March 31,** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|
|                                                                                                                                                           |   | **2007**                                                 |       | **2006** |   |
| *Cash                    Flows From Operating Activities*                                                                                                      |   |                                                     |       |   |   |
| Net                    Income (Loss)                                                                                                                           |   |                                                     |       |   |   |
| Continuing                    Operations                                                                                                                       |   | $                                                        | (1,063,543 | )   | $ | (522,234 | ) |
| Discontinued                    Operations                                                                                                                     |   |                                                     | —    |   |   | 295,069 |   |
| Adjustments                    to Reconcile Net Income (Loss) to Net Cash Provided by (Used                    in) by                    Operating Activities: |   |                                                     |       |   |   |   |   |
| Depreciation                    and Amortization                                                                                                               |   |                                                     | 95,229     |   |   | 64,987 |   |
| Provision                    for Losses on Trade Receivables                                                                                                   |   |                                                     | (127,454   | ) |   | 36,257 |   |
| Deferred                    Income Taxes                                                                                                                       |   |                                                     | 70,559     |   |   | 7,263 |   |
| Share                    Based Compensation Expense                                                                                                            |   |                                                     | 265,370    |   |   | 165,302 |   |
| Changes                    in Assets and Liabilities, Net of Effects of Purchase of Business                    Entity:                                        |   |                                                     |       |   |   |   |   |
| Trade                    Receivables                                                                                                                           |   |                                                     | (276,564   | ) |   | 69,973 |   |
| Inventories                                                                                                                                                    |   |                                                     | (395,399   | ) |   | (803,464 | ) |
| Prepaid                    Expenses and Other Current Assets                                                                                                   |   |                                                     | (115,256   | ) |   | (115,215 | ) |
| Deposits                    and Other Non Current Assets                                                                                                       |   |                                                     | (78,207    | ) |   | 1,449 |   |
| Accounts                    Payable                                                                                                                            |   |                                                     | 435,136    |   |   | 656,277 |   |
| Accrued                    Expenses and Other Current Liabilities                                                                                              |   |                                                     | (297,923   | ) |   | (626,187 | ) |
| Other                    Liabilities                                                                                                                           |   |                                                     | (435       | ) |   | (410 | ) |
| Net                    Operating Activities of Discontinued Operations                                                                                         |   |                                                     | (7,892     | ) |   | — |   |
| Net                    Cash Provided by (Used in) Operating Activities                                                                                         |   |                                                     | (1,496,379 | ) |   | (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 Line of Credit                                                                                                                |   |                                                     | 2,898,000  |   |   | (21,816 | ) |
| Payments                    on Line of Credit                                                                                                                  |   |                                                     | (2,405,120 | ) |   | — |   |
| Proceeds                    from Loans Payable - Related Party                                                                                                 |   |                                                     | 617,000    |   |   | 220,000 |   |
| Payments                    on Loans Payable - Related Party                                                                                                   |   |                                                     | (617,000   | ) |   | — |   |
| Proceeds                    from Convertible Term Note                                                                                                         |   |                                                     | 2,000,000  |   |   | — |   |
| Proceeds                    from Note Payable - Other                                                                                                          |   |                                                     | —    |   |   | 550,000 |   |
| Payments                    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*                                                                                                                      |   | $                                                        | (276,036   | ) | $ | (202,339 | ) |
|                                                                                                                                                           |   |                                                     |       |   |   |   |   |
| *Cash                    at Beginning of Period*                                                                                                               |   |                                                     | 383,064    |   |   | 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      |   | $ | — |   |

----

*Index*

**LAPOLLA        INDUSTRIES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

| **Note                  1.** | **Basis                  of Presentation.** |
|------------------------------|---------------------------------------------|

*Item        1A - Risk Factors*

| **Note                  2.** | **Dependence                  on Few Suppliers.** |
|------------------------------|---------------------------------------------------|

| **Note                  3.** | **Trade                  Receivables.** |
|------------------------------|-----------------------------------------|

|                                                   |   | **March 31, ****2007** |      | **December 31, ****2006** |   |
|--------------------------------------------------------|--------|----------------------------------|-----------|-------------------------------------|--------|
| Trade                  Receivables                     |   | $                                | 4,096,301 |                      | $      | 3,819,737 |   |
| Less:                  Allowance for Doubtful Accounts |   |                             | (96,852   | )                                   |   | (224,306 | ) |
| Trade                  Receivables, Net                |   | $                                | 3,999,449 |                                | $      | 3,595,431 |   |

| N**ote                  4.** | **Inventories.** |
|------------------------------|------------------|

|                            |   | **March 31, ****2007** |      | **December 31, ****2006** |   |
|---------------------------------|--------|----------------------------------|-----------|-------------------------------------|--------|
| Raw                  Materials  |   | $                                | 807,507   |                      | $      | 866,859 |   |
| Finished                  Goods |   |                             | 2,470,128 |                                |   | 2,015,377 |   |
| Total                           |   | $                                | 3,277,635 |                                | $      | 2,882,236 |   |

| **Note                  5.** | **Deferred                  Income Taxes.** |
|------------------------------|---------------------------------------------|

| *Deferred                    Tax Assets:*                                       |   | **March 31, ****2007** |        | **December 31, ****2006** |   |
|---------------------------------------------------------------------------------|--------|----------------------------------|-------------|-------------------------------------|--------|
| Net                    Operating Loss Carry-Forwards                            |   | $                                | 34,166,261  |                      | $      | 33,173,277 |   |
| Temporary                    Differences:                                       |   |                             |        |                                |   |   |   |
| Nondeductible                    Accruals                                       |   |                             | (1,306,953  | )                                   |   | (1,175,878 | ) |
| Net                    Operating Loss Carry-Forward after Temporary Differences |   |                             | 32,859,308  |                                |   | 31,997,399 |   |
| Statutory                    Tax Rate                                           |   |                             | 34          | %                                   |   | 34 | % |
| Total                    Deferred Tax Assets                                    |   |                             | 11,172,165  |                                |   | 10,879,116 |   |
| Valuation                    Allowance for Deferred Tax Assets                  |   |                             | (10,304,176 | )                                   |   | (9,940,568 | ) |
| Net                    Deferred Taxes                                           |   | $                                | 867,989     |                                | $      | 938,548 |   |

***See        also***

----

*Index*

**LAPOLLA        INDUSTRIES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED-        CONTINUED)**

| **Note                  6.** | **Discontinued                  Operations.** |
|------------------------------|-----------------------------------------------|

| *Liabilities*                                                   |   | **March 31, 2007** |    | **December 31, 2006** |   |
|-----------------------------------------------------------------|--------|------------------------------|---------|---------------------------------|--------|
| Accrued                  Expenses and Other Current Liabilities |   | $                            | 2,108   |                  | $      | 10,000 |   |
| Line                  of Credit                                 |   |                         | — |                            |   | 326,129 |   |
| Total                  Liabilities                              |   | $                            | 2,108   |                            | $      | 336,129 |   |

| *Deferred                  Tax Assets:*                                       |   | **March 31, 2007** |        | **December 31, 2006** |   |
|-------------------------------------------------------------------------------|--------|------------------------------|-------------|---------------------------------|--------|
| Net                  Operating Loss Carry-Forwards (No Temporary Differences) |   | $                            | 33,522,070  |                  | $      | 33,522,070 |   |
| Statutory                  Tax Rate                                           |   |                         | 34          | %                               |   | 34 | % |
| Total                  Deferred Tax Assets                                    |   |                         | 11,397,504  |                            |   | 11,397,504 |   |
| Valuation                  Allowance for Deferred Tax Assets                  |   |                         | (11,397,504 | )                               |   | (11,397,504 | ) |
| Net                  Deferred Taxes                                           |   | $                            | —     |                            | $      | — |   |

| N**ote                  7.** | **Property,                  Plant and Equipment.** |
|------------------------------|-----------------------------------------------------|

|                                                      |   | **March 31, 2007** |      | **December 31, 2006** |   |
|-----------------------------------------------------------|--------|------------------------------|-----------|---------------------------------|--------|
| Vehicles                                                  |   | $                            | 487,037   |                  | $      | 487,037 |   |
| Leasehold                  Improvements                   |   |                         | 12,400    |                            |   | 12,400 |   |
| Office                  Furniture and Equipment           |   |                         | 141,334   |                            |   | 133,634 |   |
| Computers                  and Software                   |   |                         | 499,794   |                            |   | 445,491 |   |
| Machinery                  and Equipment                  |   |                         | 881,885   |                            |   | 718,210 |   |
| Plant                  Construction in Progress           |   |                         | 870,726   |                            |   | 212,592 |   |
| Total                  Property, Plant and Equipment      |   | $                            | 2,893,176 |                            | $      | 2,009,364 |   |
| Less:                  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.** |
|------------------------------|-----------------------------------------------------------------------------|

|      |   | **March 31, 2007** |      | **December 31, 2006** |   |
|-----------|--------|------------------------------|-----------|---------------------------------|--------|
| Coatings  |   | $                            | 1,049,458 |                  | $      | 1,049,458 |   |
| Foam      |   |                         | 640,577   |                            |   | 640,577 |   |
| Paints    |   |                         | 123,092   |                            |   | 123,092 |   |
| Sealants  |   |                         | 125,507   |                            |   | 125,507 |   |
| Adhesives |   |                         | 172       |                            |   | 172 |   |
| Equipment |   |                         | 12,194    |                            |   | 12,194 |   |
| Totals    |   | $                            | 1,951,000 |                            | $      | 1,951,000 |   |

----

*Index*

**LAPOLLA        INDUSTRIES, INC.**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED-        CONTINUED)**

| **Note                  8.** | **Goodwill                  and Other Intangible Assets -                  continued.** |
|------------------------------|-----------------------------------------------------------------------------------------|

|                                                |   | **March 31, 2007** |    | **December 31, 2006** |   |
|-----------------------------------------------------|--------|------------------------------|---------|---------------------------------|--------|
| Customer                  List                      |   | $                            | 69,235  |                  | $      | 69,235 |   |
| Product                  Formulation                |   |                         | 138,471 |                            |   | 138,471 |   |
| Total                  Other Intangible Assets      |   | $                            | 207,706 |                            | $      | 207,706 |   |
| Less:                  Accumulated Amortization     |   |                         | (48,079 | )                               |   | (42,309 | ) |
| Total                  Other Intangible Assets, Net |   | $                            | 159,627 |                            | $      | 165,397 |   |

| **Note                    9.** | **Line                    of Credit, Convertible Term Note, and                    Warrants.** |
|--------------------------------|------------------------------------------------------------------------------------------------|

**(a)        Line of Credit - **

**(b)        Convertible Term Note - **

**(c)        Warrants - **

| **Note                  10.** | **Net                  (Loss) Per Common Share - Basic and                  Diluted.** |
|-------------------------------|----------------------------------------------------------------------------------------|

|                                                                                                             |   | **2007**               |       | **2006**                       |   |
|------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|--------------------------------|--------|
|                                                                                                             |   |                   |       | **Per                  Share** |   |   |   | **Per                  Share** |   |
|                                                                                                             |   | **Amount**             |       | **Amount**                     |   | **Amount** |   | **Amount** |   |
|  Operating                (Loss) Before Income Taxes                                                        |   | $                      | (992,984   | )                              | $      | (0.018 | ) | $ | (514,970 | ) | $ | (0.009 | ) |
| Income                  Tax (Expense)-Deferred                                                                   |   |                   | (70,559    | )                              |   | (0.001 | ) |   | (7,263 | ) |   | (0.000 | ) |
| Operating                  (Loss)                                                                                |   | $                      | (1,063,543 | )                              | $      | (0.019 | ) | $ | (522,233 | ) | $ | (0.009 | ) |
| Income                  (Loss) from Discontinued Operations, Net of Income Tax                  Benefit-Deferred |   |                   | —    |                           |   | — |   |   | 295,069 |   |   | 0.005 |   |
| Net                  (Loss)                                                                                      |   | $                      | (1,063,543 | )                              | $      | (0.019 | ) | $ | (227,164 | ) | $ | (0.004 | ) |
| Plus:                  Dividends on Preferred Stock                                                              |   |                   | (201,710   | )                              |   | (0.003 | ) |   | — |   |   | — |   |
| Net                  (Loss) Available to Common Stockholders                                                     |   | $                      | (1,265,253 | )                              | $      | (0.022 | ) | $ | (227,164 | ) | $ | (0.004 | ) |
| Weighted                Average Common Shares Outstanding                                                        |   |   53,584,903 |       |  53,210,251          |

----

*Index*

| **Note                  11.** | **Business                  Segment Information.** |
|-------------------------------|----------------------------------------------------|

*Unallocated        Amounts*

**Reportable        Segments**

| **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 |   | $ | 7,269,322 |   |
| Depreciation                  and Amortization   |   |   | 52,555 |   |   | 11,424 |   |   | 700 |   |   | 753 |   |   | — |   |   | 258 |   |   | 4 |   |   | 65,694 |   |
| Interest                  Expense                |   |   | 18,726 |   |   | 38,951 |   |   | 2,386 |   |   | 2,566 |   |   | — |   |   | 879 |   |   | 14 |   |   | 63,522 |   |
| Segment                  Profit (Loss)           |   |   | (36,836 | ) |   | (522,202 | ) |   | 21,923 |   |   | (3,964 | ) |   | — |   |   | (11,361 | ) |   | (21,319 | ) |   | (573,759 | ) |
| Segment                  Assets(1)               |   |   | 3,959,117 |   |   | 6,692,674 |   |   | 493,810 |   |   | 524,262 |   |   | 172 |   |   | 148,791 |   |   | 2,109 |   |   | 11,820,935 |   |
| Expenditures                  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 |   | $ | 5,999,936 |   |
| Depreciation                  and Amortization   |   |   | 32,977 |   |   | 6,596 |   |   | 683 |   |   | 478 |   |   | 8 |   |   | 310 |   |   | 169 |   |   | 41,221 |   |
| Interest                  Expense                |   |   | 17,682 |   |   | 27,031 |   |   | 2,798 |   |   | 1,961 |   |   | 35 |   |   | 1,271 |   |   | 692 |   |   | 51,470 |   |
| Segment                  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 |   |   | 9,580,102 |   |
| Expenditures                  for Segment Assets |   | $ | 116,453 |   | $ | 38,482 |   | $ | 3,983 |   | $ | 12,933 |   | $ | 49 |   | $ | 1,809 |   | $ | 985 |   | $ | 174,694 |   |

**Segment        Profit or Loss**

|                                                          |   | **2007** |       | **2006** |   |
|---------------------------------------------------------------|--------|----------|------------|----------|--------|
| Total                  Profit or Loss for Reportable Segments |   | $        | (573,759   | )        | $      | (128,365 | ) |
| Unallocated                  Amounts:                         |   |     |       |     |   |   |   |
| Corporate                  Expenses                           |   |     | (419,225   | )        |   | (386,605 | ) |
| Income                  (Loss) Before Income Taxes            |   | $        | (992,984   | )        | $      | (514,970 | ) |
|                                                          |   |     |       |     |   |   |   |
| **Assets**                                                    |   |     |       |     |   |   |   |
|                                                          |   |     | **2007**   |     |   | **2006** |   |
| Total                  Assets for Reportable Segments (1)     |   | $        | 11,820,935 |     | $      | 9,580,102 |   |
| Other                  Unallocated Amounts (2)                |   |     | 1,705,735  |     |   | 1,882,586 |   |
| Consolidated                  Total                           |   | $        | 13,526,670 |     | $      | 11,462,688 |   |

----

----

*Index*

| **Item                  2.** | **Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations.** |
|------------------------------|------------------------------------------------------------------------------------------------------------------------------------|

**Performance        in First Quarter of 2007 compared to First Quarter of 2006**

*Overview*

**Overall        Results of Operations**

|   |   | **2007** |      | **2006** |   |
|--------|--------|----------|-----------|----------|--------|
| Sales  |   | $        | 7,269,322 |     | $      | 5,999,935 |   |

----

*Index*

**Results        of Business Segments**

| **Segments**               |   | **2007**  |      | **2006**  |   |
|----------------------------|--------|----------------|-----------|----------------|--------|
| Coatings                   |   | $              | 2,142,998 |           | $      | 2,061,298 |   |
| Foam                       |   |           | 4,457,440 |           |   | 3,151,100 |   |
| Paints                     |   |           | 273,038   |           |   | 326,121 |   |
| Sealants                   |   |           | 293,688   |           |   | 228,554 |   |
| Adhesives                  |   |           | —   |           |   | 4,032 |   |
| Equipment                  |   |           | 100,605   |           |   | 148,149 |   |
| All                  Other |   | $              | 1,553     |           | $      | 80,682 |   |

----

*Index*

**Liquidity        and Capital Resources**

| **Item                  3.** | **Quantitative                  and Qualitative Disclosures About Market                  Risk.** |
|------------------------------|---------------------------------------------------------------------------------------------------|

| **Item                  4.** | **Controls                  and Procedures.** |
|------------------------------|-----------------------------------------------|

----

*Index*

**PART        II — OTHER INFORMATION**

| **Item 1.** | **Legal                  Proceedings.** |
|------------------|-----------------------------------------|

| **Item 1A.** | **Risk                  Factors.** |
|-------------------|------------------------------------|

***New        Manufacturing Operations***
** **
** **

***Availability        of Raw Materials***
** **
** **

***Availability        of Finished Goods***
*        -*

| **Item                  2.** | **Changes                  in Securities and Use of                  Proceeds.** |
|------------------------------|----------------------------------------------------------------------------------|

**Recent        Sales of Unregistered Securities**

| **Item                  3.** | **Defaults                  Upon Senior Securities.** |
|------------------------------|-------------------------------------------------------|

| **Item                  4.** | **Submission                  of Matters to a Vote of Security                  Holders.** |
|------------------------------|--------------------------------------------------------------------------------------------|

| **Item 5.** | **Other                  Information.** |
|------------------|-----------------------------------------|

| **Item                  6.** | **Exhibits.** |
|------------------------------|---------------|

***See***

----

*Index*

**SIGNATURES**

|   |                                |  **LAPOLLA                INDUSTRIES, INC.** |
|--------|-------------------------------------|---------------------------------------------------|
|   |                                |                                              |   |
|   |                                |                                              |   |
| Date:  |  May                  14, 2007 | By:                                               | /s/                  Douglas J. Kramer, CEO |   |
|   |                                | Name:                                             | Douglas                  J. Kramer |
|   |                                | Title:                                            | CEO                  and President |

|   |                                |  **LAPOLLA                INDUSTRIES, INC.** |
|--------|-------------------------------------|---------------------------------------------------|
|   |                                |                                              |   |
|   |                                |                                              |   |
| Date:  |  May                  14, 2007 | By:                                               | /s/                  John A. Campbell, CFO |   |
|   |                                | Name:                                             | John                  A. Campbell |
|   |                                | Title:                                            | CFO |

----

*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).       |
| 31.1                          |   | Certification                  of Principal Executive Officer pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002.                                                                                                                                    |
| 31.2                          |   | Certification                  of Principal Financial Officer pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002.                                                                                                                                    |
| 32                            |   | Certification                  of Principal Executive Officer and Principal Financial Officer                  pursuant to                  § 906 of Sarbanes-Oxley Act of                  2002.                                                                  |

----