**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 September 30, 2005**





Commission
      File No. **001-31354**
















**LaPolla
                Industries, Inc.****(formerly
                known as IFT Corporation)***(Exact
                name of Registrant as Specified in its
                Charter)*





**Delaware**
            
            **13-3545304***(State
                of Incorporation)*
            
            *(I.R.S.
                Employer Identification No.)*





**Intercontinental
                Business Park****15402
                Vantage Parkway East, Suite 322****Houston,
                Texas**
            
            **77032***(Address
                of Principal Executive Offices)*
            
            *(Zip
                Code)*





**(281)
                219-4700***(Registrant’s
                Telephone Number)*





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
      October 22, 2005 there were 50,572,986 shares of Common Stock, par value $.01,
      outstanding.










**ITEMS
        AMENDED HEREBY**




As
          used
          in this amended report, the "Company" or "Us" or "We" or “Our” refer to LaPolla
          Industries, Inc., a Delaware corporation, unless the context otherwise
          requires.
          Effective October 1, 2005, IFT Corporation, a Delaware corporation, merged
          its
          wholly owned subsidiary, LaPolla Industries, Inc., an Arizona corporation,
          into
          itself, whereupon the separate existence of LaPolla Industries, Inc., an
          Arizona
          corporation, ceased and IFT Corporation continued as the surviving corporation.
          Effective November 8, 2005, IFT Corporation changed its corporate name
          to
          LaPolla Industries, Inc. The information presented herein reflects the
          new
          corporation name, LaPolla Industries, Inc., which is the same name previously
          associated with the Company’s former wholly owned subsidiary LaPolla Industries,
          Inc. located in Arizona that was acquired on February 11, 2005 and merged
          into
          IFT Corporation as described above. Please find below a description of
          the items
          amended hereby:
 
 **(A)** ***Reclassification
          of Continuing and Discontinued Operations*** - The
          Company reevaluated the condensed consolidated financial statements and
          related
          notes as originally presented and filed with the Securities and Exchange
          Commission (“SEC”) based on comments received from the SEC regarding the manner
          in which the continuing and discontinued operations were originally presented
          and determined that certain reclassifications were required to make the
          presentation conform to applicable accounting principles. The Company
          discontinued certain operations that took place during the years 2000 throughout
          2004. At December 31, 2004, the current operations in effect related to
          the
          public company itself as a holding company and one wholly owned subsidiary,
          Infiniti Products, Inc. (“Infiniti Subsidiary”). The Infiniti Subsidiary was
          acquired effective September 1, 2001. The original report filed with the
          SEC did
          not fully separate and segregate all of the financial and other related
          information related to our discontinued operations from our continuing
          operations. The aggregate financial data originally presented was not affected
          by the reclassification.
 
 **(B)** ***Reclassification
          of Certain Cost of Sales and Selling, General and Administrative
          Expenses***  -
          The
          Company reevaluated the Condensed Consolidated Statements of Operations
          as
          originally presented and filed with the SEC based on comments received
          from the
          SEC regarding the manner in which other similarly situated public companies,
          like us, record certain direct labor expenses, shipping and handling costs,
          and
          warehousing costs, and determined that certain reclassifications were required
          to make the Company’s Condensed Consolidated Statements of Operations comparable
          to other similarly situated public companies. The Company recorded certain
          direct labor expenses related to receiving, purchasing and inspection,
          shipping
          and handling costs, and warehousing costs as Selling, General and
          Administrative. The aggregate amount of costs and expenses of the Company
          originally presented were not affected by these reclassifications. The
          Company
          reclassified certain direct labor expenses related to receiving, purchasing
          and
          inspection, shipping and handling costs (outbound freight) and warehousing
          costs
          originally included in the Selling, General and Administrative line item
          on the
          Condensed Consolidated Statements of Operations and included these amounts
          in
          the Cost of Sales line item.
 
 **(C)** ***Restatement
          of Inventory and Cost of Sales*** ** -
          The
          Company reevaluated the condensed consolidated financial statements and
          related
          notes as originally presented and filed with the SEC based on comments
          received
          from the SEC in paragraph (B) above and Accounting Research Bulletin 43,
          Chapter
          4, regarding the manner in which the acquisition and production costs relating
          to inventory were recorded and determined that a restatement of the value
          of
          inventory was necessary to make the presentation conform to applicable
          accounting principles. The Company recorded certain acquisition and production
          direct and indirect costs in the Costs of Sales line item related to
          manufacturing and distribution operations which should have been capitalized
          and
          included as part of the cost of acquisition and production of inventory.
          The
          aggregate amount of assets, cost of sales, net loss, and accumulated deficit
          of
          the Company originally reported were affected by the restatement. The Company,
          after the reclassifications in (A) and (B) above, restated the value of
          Inventories on the Condensed Consolidated Balance Sheets and Cost of Sales
          on
          the Condensed Consolidated Statements of Operations.
 
 **(D)** ***Restatement
          of Allowance for Doubtful Accounts and Bad Debt
          Expense*** ** -
          The
          Company reevaluated the condensed consolidated financial statements and
          related
          notes as originally presented and filed with the SEC based on comments
          received
          from the SEC regarding the manner in which the allowance for doubtful accounts
          was calculated and determined that a restatement was necessary to make
          the
          presentation conform to applicable accounting principles. As described
          in
          paragraph (A) above, the Company discontinued certain operations, one of
          which
          was its wholly-owned subsidiary RSM Technologies, Inc. (“RSM Subsidiary”), on
          November 5, 2004. The RSM Subsidiary’s operations related to the former RSM
          Products, which products were initially distributed through the Infiniti
          Subsidiary. The Infiniti Subsidiary also distributed its own Infiniti Products.
          The Infiniti Subsidiary’s accounting policy with respect to the method and
          percentages used to determine the valuation allowance for uncollectible
          receivables was based primarily on the historical data relating to bad
          debts of
          the former RSM products. The Company acquired LaPolla Industries, Inc.,
          an
          Arizona corporation, on February 11, 2005 (the “LaPolla Subsidiary”), which
          adopted the aforementioned Infiniti Subsidiary’s accounting policy to be
          consistent at the time. The Company, after the reclassifications in paragraph
          (A) above, reevaluated the historical data relating to bad debts for the
          Infiniti Products and determined a change in method and percentages used
          to
          calculate the valuation allowance for uncollectible receivables was required
          for
          the year 2004. The Company changed the method from the aging method to
          the
          percentage-of-sales method and adjusted the percentage used to match the
          historical data relating to bad debts and credit sales of the Infiniti
          Products
          for the year 2004. The Company reevaluated the percentage-of-sales method
          and
          percentage used for the 2004 year again for the first, second and third
          quarters
          of 2005 against the historical data relating to bad debts and credit sales
          of
          the Infiniti Products and LaPolla Products and determined that the 2004
          year
          criteria was also appropriate for the first, second and third quarters
          of 2005.
          The aggregate amount of assets, expenses, net loss, and accumulated deficit
          of
          the Company originally reported were affected by the restatement. The Company,
          after the reclassifications in paragraphs (A) and (B) and restatement in
          paragraph (C), restated the allowance for doubtful accounts on the Condensed
          Consolidated Balance Sheets and Bad Debt expense included in the Selling,
          General and Administrative line item on the Condensed Consolidated Statements
          of
          Operations.





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 reclassifications and restatements 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 useful,
        informative, transparent, and comparative.




A
          -
          2





**LAPOLLA
        INDUSTRIES, INC.**


**(F/K/A
        IFT CORPORATION)**


**FORM
      10-Q/A**


**FOR
      THE QUARTER ENDED SEPTEMBER 30, 2005**


**INDEX**





**Page****PART
                I**—**FINANCIAL INFORMATION****Item
                1. Financial Statements**
            **A-4****Item
                2. Management’s Discussion and Analysis of Financial
                Condition and Results of Operations**
            **A-14****Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk**
            **A-17****Item
                4. Controls and Procedures**
            **A-17****PART
                II****—****OTHER
                INFORMATION****Item
                1. Legal Proceedings**
            **A-18****Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds**
            **A-18****Item
                3. Defaults Upon Senior
                Securities**
            **A-18****Item
                4. Submission of Matters to a Vote of Security
                Holders**
            **A-18****Item
                5. Other Information**
            **A-18****Item
                6. Exhibits**
            **A-18****SIGNATURES**
            **A-19****INDEX
                OF EXHIBITS**
            **A-20**




A
          -
          3





**PART
      I— FINANCIAL INFORMATION**





**Item
                1.**
            **Financial
                Statements.**




**LAPOLLA
        INDUSTRIES, INC.**


**(F/K/A
        IFT CORPORATION)**


**INDEX
      TO FINANCIAL STATEMENTS AND**


**FINANCIAL
      STATEMENT SCHEDULES**


**CONDENSED
                  CONSOLIDATED BALANCE SHEETS****September
                  30, 2005 (Unaudited) and December 31, 2004**
              **A-5****CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)****Three
                  and Nine Months Ended September 30, 2005 and 2004**
              **A-6****CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)****Nine
                  Months Ended September 30, 2005 and 2004**
              **A-7****NOTES
                  TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  (UNAUDITED)**
              **A-8**




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.




A
          -
          4





**LAPOLLA
        INDUSTRIES, INC.**


**(F/K/A
        IFT CORPORATION)**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**





**September
                  30, **2005****
              
              **December
                  31, **2004******Restated**
              
              **Restated****(Unaudited)****ASSETS**Current
                  Assets:Cash
              
              $
              357,706
              
              $
              24,465Trade
                  Receivables, Net
              
              
              3,587,612
              
              
              691,926Inventories
              
              
              941,939
              
              
              267,995Prepaid
                  Expenses and Other Current Assets
              
              
              104,584
              
              
              41,053Assets
                  of Discontinued Operations
              
              
              2,500
              
              
              438Total
                  Current Assets
              
              
              4,994,341
              
              
              1,025,877Property,
                  Plant and Equipment, Net
              
              
              546,956
              
              
              287,784Other
                  Assets:Goodwill
              
              
              1,951,000
              
              
              774,000Other
                  Intangible Assets, Net
              
              
              194,245
              
              
              —Deposits
                  and Other Non-Current Assets
              
              
              143,768
              
              
              56,471Total
                  Other Assets
              
              
              2,289,013
              
              
              830,471Total
                  Assets
              
              $
              7,830,310
              
              $
              2,144,132**LIABILITIES
                  AND STOCKHOLDERS’ (DEFICIT)**Current
                  Liabilities:Accounts
                  Payable
              
              $
              3,958,573
              
              $
              1,126,847Accrued
                  Expenses and Other Current Liabilities
              
              
              336,952
              
              
              471,008Lines
                  of Credit
              
              
              62,665
              
              
              219,152Loans
                  Payable - Related Party
              
              
              4,302,500
              
              
              5,670,000Note
                  Payable - Other
              
              
              1,250,000
              
              
              —Current
                  Portion of Long-Term Debt
              
              
              49,548
              
              
              24,582Current
                  Portion of Liabilities from Discontinued Operations
              
              
              735,315
              
              
              1,220,485Total
                  Current Liabilities
              
              
              10,695,553
              
              
              8,732,074Other
                  LiabilitiesNon-Current
                  Portion of Long-Term Debt
              
              
              132,775
              
              
              14,243Non-Current
                  Portion of Liabilities from Discontinued Operations
              
              
              140,642
              
              
              525,000Reserve
                  for Litigation
              
              
              175,378
              
              
              15,000Total
                  Other Liabilities
              
              
              448,795
              
              
              554,243Total
                  Liabilities
              
              $
              11,144,348
              
              $
              9,286,317Stockholders’
                  (Deficit):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
                  (Less Offering Costs of $7,465) at September30,
                  2005 and December 31, 2004; $62,500 aggregate liquidation preference
                  at
                  September 30,
                  2005 and December 31, 2004
              
              
              55,035
              
              
              55,035Common
                  Stock, $.01 Par Value; 60,000,000 Shares Authorized; 50,572,986
                  and
                  32,014,369 Issued and Outstanding at September 30, 2005 and December
                  31,
                  2004, respectively
              
              
              505,730
              
              
              320,144Additional
                  Paid-In Capital
              
              
              59,958,097
              
              
              53,625,390Accumulated
                  (Deficit)
              
              
              (63,832,900
              )
              
              (61,142,754
              )Total
                  Stockholders’ (Deficit)
              
              
              (3,314,038
              )
              
              (7,142,185
              )Total
                  Liabilities and Stockholders’ (Deficit)
              
              $
              7,830,310
              
              $
              2,144,132





See
      accompanying notes to condensed consolidated financial
      statements.


A
          -
          5





**LAPOLLA
        INDUSTRIES, INC.**


**(F/K/A
        IFT CORPORATION)**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**





**Three
                  Months Ended September 30,**
              
              **Nine
                  Months Ended September 30,****2005**
              
              **2004**
              
              **2005**
              
              **2004****Restated**
              
              **Restated**
              
              **Restated**
              
              **Restated**Sales:Coatings,
                  Sealants and Other Products
              
              $
              5,559,461
              
              $
              521,852
              
              $
              13,223,290
              
              $
              1,569,378Total
                  Sales
              
              
              5,559,461
              
              
              521,852
              
              
              13,223,290
              
              
              1,569,378Cost
                  of Sales:Coatings,
                  Sealants and Other Products
              
              
              4,438,514
              
              
              433,405
              
              
              10,826,805
              
              
              1,262,988Total
                  Cost of Sales
              
              
              4,438,514
              
              
              433,405
              
              
              10,826,805
              
              
              1,262,988Gross
                  Profit
              
              
              1,120,947
              
              
              88,447
              
              
              2,396,485
              
              
              306,390Operating
                  Expenses:Selling,
                  General and Administrative
              
              
              1,509,665
              
              
              320,120
              
              
              4,219,879
              
              
              1,611,317Professional
                  Fees
              
              
              45,465
              
              
              57,000
              
              
              438,683
              
              
              322,521Depreciation
                  and Amortization
              
              
              25,009
              
              
              16,424
              
              
              73,721
              
              
              58,092Consulting
                  Fees
              
              
              51,203
              
              
              51,144
              
              
              176,595
              
              
              122,137Interest
                  Expense
              
              
              22,787
              
              
              9,797
              
              
              51,329
              
              
              55,589Interest
                  Expense - Related Party
              
              
              91,114
              
              
              101,493
              
              
              173,458
              
              
              184,898Gain
                  (Loss) on Disposal of Property, Plant and Equipment
              
              
              —
              
              
              —
              
              
              —
              
              
              761Other
                  (Income) Expense
              
              
              (5,269
              )
              
              26,148
              
              
              (22,511
              )
              
              26,148Total
                  Operating Expenses
              
              
              1,739,973
              
              
              582,126
              
              
              5,111,154
              
              
              2,381,463Operating
                  (Loss)
              
              
              (619,026
              )
              
              (493,679
              )
              
              (2,714,669
              )
              
              (2,075,073
              )Income
                  (Loss) from Discontinued Operations
              
              
              349,117
              
              
              (1,764,031
              )
              
              24,526
              
              
              (3,418,211
              )Net
                  (Loss)
              
              $
              (269,909
              )
              $
              (2,257,710
              )
              $
              (2,690,143
              )
              $
              (5,493,284
              )Net
                  Income (Loss) Per Share-Basic and Diluted:Continuing
                  Operations
              
              $
              (0.012
              )
              $
              (0.017
              )
              $
              (0.054
              )
              $
              (0.071
              )Discontinued
                  Operations
              
              
              0.006
              
              
              (0.061
              )
              
              0.000
              
              
              (0.117
              )Total
                  (Loss)
              
              $
              (0.006
              )
              $
              (0.078
              )
              $
              (0.054
              )
              $
              (0.188
              )Weighted
                  Average Shares Outstanding
              
              
              50,306,865
              
              
              28,921,173
              
              
              50,351,466
              
              
              28,830,536






**(A)** ***Reclassification
          of Certain Cost of Sales and Selling, General and Administrative
          Expenses***  -
          The
          Company reclassified certain direct labor expenses related to receiving,
          purchasing and inspection, shipping and handling costs (outbound freight)
          and
          warehousing costs originally included in the Selling, General and Administrative
          line item on the Condensed Consolidated Statements of Operations and included
          these amounts in the Cost of Sales line item for the three and nine months
          ended
          September 30, 2005. The reclassification affected Coatings, Sealants and
          Other
          Products in the Cost of Sales line item and Total Cost of Sales which each
          increased $172,352 and $391,829; Gross Profit decreased $172,352 and $391,829;
          Selling, General and Administrative decreased $155,410 and $357,641;
          Depreciation and Amortization decreased $16,942 and $34,188; and Total
          Operating
          Expenses decreased $172,352 and $391,829, for the three and nine months
          ended
          September 30, 2005, respectively.
 
 **(B)** ***Restatement
          of Inventory and Cost of Sales***  -
          The
          Company, after the reclassification in paragraph (A) above, restated the
          value
          of Inventories on the Consolidated Balance Sheets for quarter ended September
          30, 2005 and Cost of Sales on the Consolidated Statements of Operations
          for the
          for the three and nine months ended September 30, 2005. Inventories, Total
          Current Assets, and Total Assets each increased $105,132 for the quarter
          ended
          September 30, 2005; and Coatings, Sealants and Other Products in the Cost
          of
          Sales line item and Total Cost of Sales each decreased $40,329 and $92,719;
          Gross Profit increased $40,329 and $92,719; and Operating Loss and Net
          Loss each
          decreased $40,329 and $92,719, for the three and nine months ended September
          30,
          2005, respectively. No income tax effects were related to this
          restatement. ***See*** Note 18,
          paragraph (C) for illustrative requirement.
 
 **(C)** ***Restatement
          of Allowance for Doubtful Accounts and Bad Debt
          Expense*** ** -
          The
          Company, after the reclassification in paragraph (A) and restatement in
          paragraph (B) above, restated the Allowance for Doubtful Accounts for the
          quarter ended September 30, 2005, and Bad Debt expense included in the
          Selling,
          General and Administrative line item on the Condensed Consolidated Statements
          of
          Operations, for the three and nine months ended September 30, 2005. Allowance
          for Doubtful Accounts increased $27,797 and Total Current Assets and Total
          Assets each decreased $27,797, for the quarter ended September 30, 2005;
          and
          Selling, General and Administrative, Operating Loss, and Net Loss each
          increased
          $9,402 and decreased $10,709, for the three and nine months ended September
          30,
          2005, respectively. No income tax effects were related to this restatement. ***See*** Note 18,
          paragraph (D) for illustrative requirement.




See
      accompanying notes to condensed consolidated financial
      statements.


A
          -
          6




**LAPOLLA
        INDUSTRIES, INC.**


**(F/K/A
        IFT CORPORATION)**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**Nine
                    Months Ended September 30,****2005**
                
                **2004****Restated**
                
                **Restated***Cash
                    Flows From Operating Activities*Net
                    (Loss)Continuing
                    Operations
                
                $
                (2,714,672
                )
                $
                (2,075,073
                )Discontinued
                    Operations
                
                
                24,526
                
                
                (3,418,211
                )Adjustments
                    to Reconcile Net (Loss) to Net Cash Provided by (Used in) by
                    Operating
                    Activities:Depreciation
                    and Amortization
                
                
                107,492
                
                
                58,092Provision
                    for Losses on Trade Receivables
                
                
                53,295
                
                
                —Loss
                    on Disposition of Property, Plant and Equipment
                
                
                (2,657
                )
                
                26,909Stock
                    Based Operating Expenses:Other
                    Compensation
                
                
                178,980
                
                
                9,634Board
                    of Director Fees
                
                
                339,290
                
                
                251,820Changes
                    in Assets and Liabilities, Net of Effects from Purchase of LaPolla
                    SubsidiaryTrade
                    Receivables
                
                
                (1,436,770
                )
                
                107,987Inventories
                
                
                (362,374
                )
                
                (19,698
                )Prepaid
                    Expenses and Other Current Assets
                
                
                (166,941
                )
                
                (96,269
                )Deposits
                    and Other Non Current Assets
                
                
                (68,283
                )
                
                12,420Accounts
                    Payable
                
                
                1,663,572
                
                
                (253,973
                )Accrued
                    Expenses and Other Current Liabilities
                
                
                57,857
                
                
                97,494Other
                    Liabilities
                
                
                184,420Reserve
                    for Litigation
                
                
                160,378
                
                
                15,000Net
                    Operating Activities of Discontinued Operations
                
                
                (800,179
                )
                
                695,517Net
                    Cash (Used in) Operating Activities
                
                
                (2,782,066
                )
                
                (4,588,351
                )*Cash
                    Flows From Investing Activities*Additions
                    to Property, Plant and Equipment
                
                $
                (307,959
                )
                $
                (178,405
                )Payment
                    for Purchase of LaPolla Subsidiary, Net of Cash Acquired
                
                
                (1,931,825
                )
                
                —Net
                    Investing Activities of Discontinued Operations
                
                
                —
                
                
                2,100Net
                    Cash Provided by (Used in) Investing Activities
                
                
                (2,239,784
                )
                
                (176,305
                )*Cash
                    Flows From Financing Activities*Proceeds
                    from the Issuance of Stock
                
                $
                —
                
                $
                —Proceeds
                    from Line of Credit
                
                
                25,594
                
                
                12,043Payments
                    on Line of Credit
                
                
                (182,082
                )
                
                (9,600
                )Proceeds
                    from Loans Payable - Related Party
                
                
                4,302,500
                
                
                4,825,000Proceeds
                    from Note Payable - Other
                
                
                1,250,000
                
                
                —Principal
                    Repayments on Long Term Debt
                
                
                (39,143
                )
                
                (4,052
                )Principal
                    Payments under Capital Lease Obligation
                
                
                (1,778
                )
                
                (1,536
                )Net
                    Financing Activities of Discontinued Operations
                
                
                —
                
                
                (29,781
                )Net
                    Cash Provided by Financing Activities
                
                
                5,355,091
                
                
                4,792,074*Net
                    Increase In Cash*
                
                $
                333,241
                
                $
                27,418*Cash
                    at Beginning of Period*
                
                
                24,465
                
                
                35,385*Cash
                    at End of Period*
                
                $
                357,706
                
                $
                62,803*Supplemental
                    Disclosure of Cash Flow Information:*Cash
                    Payments for Income Taxes
                
                $
                —
                
                $
                —Cash
                    Payments for Interest
                
                $
                34,579
                
                $
                69,815*Supplemental
                    Schedule of Non Cash Investing and Financing
                    Activities*Property,
                    Plant and Equipment acquired via a Capital Lease
                    Obligation
                
                $
                -
                
                $
                7,200Property,
                    Plant and Equipment acquired via issuance of Long Term
                    Debt
                
                
                327,082
                
                
                —Grant
                    Date Fair Value Recognized for Share-Based Payment
                    Arrangements
                
                
                168,020
                
                
                —Common
                    Stock issued as Other Compensation pursuant to Employment
                    Agreements
                
                
                10,960
                
                
                9,634Common
                    Stock issued as Director Fees pursuant to Director Compensation
                    Plan
                
                
                339,290
                
                
                251,820Common
                    Stock issued in connection with Acquisition of Business
                    Entity
                
                
                22
                
                
                —Common
                    Stock extinguished pursuant to Settlement Agreement
                
                
                —
                
                
                (131,508
                )Common
                    Stock issued upon Conversion of Preferred Stock
                
                
                —
                
                
                674,315Common
                    Stock issued upon Cancellation of Indebtedness
                
                $
                6,000,000
                
                $
                —





See
      accompanying notes to condensed consolidated financial
      statements.


A
          -
          7


**LAPOLLA
        INDUSTRIES, INC.**


**(F/K/A
        IFT CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**




**Note
                1.**
            **Basis
                of Presentation.**





Effective
        October 1, 2005, IFT Corporation, a Delaware corporation, merged its wholly
        owned subsidiary, LaPolla Industries, Inc., an Arizona corporation, into
        itself,
        whereupon the separate existence of LaPolla Industries, Inc., an Arizona
        corporation, ceased and IFT Corporation continued as the surviving corporation.
        Effective November 8, 2005, IFT Corporation changed its corporate name to
        LaPolla Industries, Inc. ***See
        also*** *Note
        17 - Subsequent Events* ,
        Items
        (b) and (c). The unaudited condensed consolidated financial statements and
        related notes reflect the new corporation name, LaPolla Industries, Inc.,
        which
        is the same name previously associated with the Company’s former wholly owned
        subsidiary LaPolla Industries, Inc. that was merged into IFT Corporation
        subsequent to the current period. To be clear, references to the former wholly
        owned subsidiary are reflected as “LaPolla Subsidiary” or “LaPolla Products”,
        where applicable, in this presentation to aid the reader in understanding
        the
        current period presentation. In the opinion of management, the accompanying
        unaudited condensed consolidated financial statements contain all adjustments
        necessary (consisting only of normal recurring accruals) to present fairly
        the
        financial information contained therein. These statements do not include
        all
        disclosures required by accounting principles generally accepted in the United
        States of America (GAAP) for annual periods and should be read in
        conjunction with the Company’s audited consolidated financial statements and
        related notes for the year ended December 31, 2004, including any
        amendments thereto, as filed with the Securities and Exchange Commission.
        The
        Company prepared the condensed consolidated financial statements following
        the
        requirements of the rules promulgated by the Securities and Exchange Commission
        for interim reporting. As permitted under those rules, certain footnotes
        or
        other financial information that are normally required by GAAP can be condensed
        or omitted. The results of operations for the nine months ended September
        30,
        2005 are not necessarily indicative of the results to be expected for the
        year
        ending December 31, 2005 or any other period(s).





**Note
                  2.**
              **Reclassifications
                  and Changes in
                  Presentation.**





Certain
        amounts in the prior years have been reclassified to conform to the 2005
        unaudited condensed consolidated financial statement presentation. The Company
        has separately disclosed the operating, investing and financing portion of
        the
        cash flows attributable to its discontinued operations.





**Note
                  3.**
              **Recently
                  Adopted Accounting
                  Standards.**





In
        December 2004, Statement of Financial Accounting Standards No. 123
        (revised 2004), *Share-Based
        Payment* (“SFAS
        123R”), was issued. SFAS 123R requires companies to recognize in the income
        statement the grant-date fair value of stock options and other equity-based
        compensation issued to employees. On March 29, 2005, the Securities and
        Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107
        (“SAB 107”), “Share-Based Payment”. SAB 107 expresses the views of the SEC staff
        regarding the interaction between SFAS No. 123R and certain SEC rules and
        regulations, provides the staff’s views regarding the valuation of share-based
        payments by public companies, and provides guidance regarding share-based
        payments with non-employees. SFAS 123R sets accounting requirements for
        measuring, recognizing and reporting share-based compensation, including
        income
        tax considerations. In general, SFAS 123R does not express a preference for
        a
        type of valuation model for measuring the grant date fair value, generally
        requires equity- and liability-classified awards to be recognized in earnings
        over the requisite service period, generally the vesting period for service
        condition awards, allows for a one-time policy election regarding one of
        two
        alternatives for recognizing compensation cost for grant awards with graded
        vesting, and requires the use of the estimated forfeitures method. The Company
        adopted reporting under SFAS 123R, effective July 1, 2005 and began recognizing
        the cost of equity-based compensation using the modified prospective application
        method, whereby the cost of new awards and awards modified, repurchased or
        cancelled after the required effective date and the portion of awards for
        which
        the requisite service has not been rendered (unvested awards) that are
        outstanding as of the required effective date are recognized as the requisite
        service is rendered on or after the required effective date. ***See
        also*** Note 13 *-
        Share-Based Payment Arrangements* .





**Note
                  4.**
              **Going
                  Concern.**





While
        the
        accompanying unaudited condensed consolidated financial statements have been
        prepared on a going concern basis, which contemplates the realization of
        assets
        and liquidation of liabilities during the normal course of operations, certain
        adverse conditions and events cast doubt upon the validity of this assumption.
        The Company has experienced significant recurring operational losses and
        negative cash flows from operations, and at September 30, 2005 has an
        accumulated deficit, net of dividends, of $63,832,900, a working capital
        deficit
        of $5,701,212 and its total liabilities exceeded its total assets by $3,314,038.
        These factors raise doubt about the Company’s ability to continue as a going
        concern. The Company has relied principally on non-operational sources of
        financing, mainly from Richard J. Kurtz, Chairman of the Board (“Chairman”), to
        fund its operations for approximately seven years. Although the Company had
        no
        formal commitment from the Chairman to fund the Company’s operating requirements
        for the 2005 year, the Company received short term demand loans from the
        Chairman during the first half of the 2005 year to continue its operations.
        As
        of September 30, 2005, the Company’s indebtedness to the Chairman consists of
        $4,302,500, plus accrued interest of $147,412. ***See
        also*** Note 10 *-
        Loans Payable - Related Party* .
        On June
        2, 2005, the Company (and the Chairman for added security) signed a Promissory
        Note with a national institution granting access to funds in the amount of
        $2,000,000, which may be drawn against from time to time by the Company for
        operations. ***See*** Note 11 *-
        Note Payable - Other* .
        The
        Company’s ability to continue as a going concern is dependent on management’s
        ability to successfully execute its business plan, which includes increasing
        sales while decreasing operating costs and expenses, as well as, increasing
        operational cash flow, continued support from the Chairman, and obtaining
        additional funding to support longer term capital requirements. If management
        is
        unsuccessful in obtaining one or more of the above mentioned goals, the
        Company’s ability to continue as a going concern would be adversely impacted.
        These financial statements do not include adjustments or disclosures that
        may
        result from the Company’s inability to continue as a going
        concern.




**Note
                    5.**
                **Trade
                    Receivables.**





Trade
        receivables are comprised of the following:





**September
                  30, 2005**
              
              **December
                  31, 2004**Trade
                  Receivables
              
              $
              3,653,728
              
              $
              704,747Less:
                  Allowance for Doubtful Accounts
              
              
              (66,116
              )
              
              (12,821
              )Trade
                  Receivables, Net
              
              $
              3,587,612
              
              $
              691,926




A
          -
          8


**LAPOLLA
        INDUSTRIES, INC.**


**(F/K/A
        IFT CORPORATION)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED
      - CONTINUED)**





**Note
                  6.**
              **Inventories.**





Inventories
        are comprised of the following:





**September
                  30, 2005**
              
              **December
                  31, 2004**Raw
                  Materials
              
              $
              386,195
              
              $
              65,920Finished
                  Goods
              
              
              555,744
              
              
              202,074Total
              
              $
              941,939
              
              $
              267,995





**Note
                  7.**
              **Property,
                  Plant and Equipment.**





Property,
        Plant and Equipment are comprised of the following:





**September
                  30, 2005**
              
              **December
                  31, 2004**Vehicles
              
              $
              246,290
              
              $
              137,822Leasehold
                  Improvements
              
              
              14,191
              
              
              62,278Office
                  Furniture and Equipment
              
              
              93,713
              
              
              70,195Computers
                  and Software
              
              
              207,335
              
              
              192,284Displays
              
              
              62,278
              
              
              —Machinery
                  and Equipment
              
              
              325,246
              
              
              133,273Total
                  Property, Plant and Equipment
              
              $
              949,053
              
              $
              595,852Less:
                  Accumulated Depreciation
              
              
              (402,097
              )
              
              (308,068
              )Total
                  Property, Plant and Equipment, Net
              
              $
              546,956
              
              $
              287,784





**Note
                  8.**
              **Goodwill
                  and Other Intangible
                  Assets.**





*Goodwill*





**September
                  30, 2005**
              
              **December
                  31, 2004**Infiniti
                  Subsidiary
              
              $
              —
              
              $
              774,000LaPolla
                  Subsidiary
              
              
              1,951,000
              
              
              —$
              1,951,000
              
              $
              774,000





*Other
        Intangible Assets*





**September
                  30, 2005**Gross
                  Amount
              
              Accumulated
                  Amortization
              
              Amortization
                  PeriodCustomer
                  List
              
              $
              69,235
              
              $
              (8,078
              )
              
              5
                  YearsProduct
                  Formulation
              
              
              138,471
              
              
              (5,383
              )
              
              15
                  Years$
              207,706
              
              $
              (13,461
              )





The
        Customer List and Product Formulation were acquired in connection with the
        acquisition of the LaPolla Subsidiary.





**Note
                  9.**
              **Line
                  of Credit.**





Line
        of
        credit is comprised of the following:





**September
                  30, 2005**
              
              **December
                  31, 2004**$180,000
                  Line of Credit, maturing February 1, 2006, bears interest at prime
                  plus 1%
                  per annum, secured by all the assets of the LaPolla Subsidiary
                  and a
                  personal guarantee from the Chairman of the Board.
              
              $
              62,665
              
              $
              219,152




**Note
                  10.**
              **Loans
                  Payable - Related
                  Party.**





Loans
      Payable - Related Party is comprised of funds loaned to the Company for working
      capital and other corporate purposes from the Chairman. These loans are payable
      upon demand, unsecured and bear interest at 9% per annum through December 31,
      2004, and at 6% per annum for the nine months ended September 30, 2005. During
      the period from January 1, 2005 to May 20, 2005, the Chairman loaned the Company
      funds aggregating $4,302,500; $2,000,000 of which was used for the purchase
      of
      the LaPolla Subsidiary on February 11, 2005.





**Note
                  11.**
              **Note
                  Payable - Other.**





On
      June
      2, 2005, the Company and the Chairman signed a Promissory Note with a national
      institution granting the Company access to funds in the amount of $2,000,000,
      which may be drawn against from time to time for the operations of the Company.
      During the third quarter, the Company used $750,000, which added to the $500,000
      used during the second quarter of 2005, represents the balance as of September
      30, 2005. The Note bears interest at a rate equal to 1-month LIBOR plus two
      and
      one-quarter percent (2.25) per annum (“LIBOR-Based Rate”), and has a maturity
      date of June 1, 2006. ***See
      also*** *Note
      18 - Subsequent Events* ,
      Item
      (a).




A
          -
          9


**LAPOLLA
          INDUSTRIES, INC.**
 **(F/K/A
          IFT CORPORATION)**
 **NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED
      - CONTINUED)**





**Note
                  12.**
              **Net
                  (Loss) Per Common Share - Basic and
                  Diluted.**





The
      following table reflects the computation of the basic and diluted net loss
      per
      common share:





**Three
                  Months Ended September 30,**
              
              **Nine
                  Months Ended September 30,****2005**
              
              **2004**
              
              **2005**
              
              **2004****Per
                  Share**
              
              
              
              **Per
                  Share**
              
              
              
              **Per
                  Share**
              
              
              
              **Per
                  Share****Amount**
              
              **Amount**
              
              **Amount**
              
              **Amount**
              
              **Amount**
              
              **Amount**
              
              **Amount**
              
              **Amount**Operating
                  (Loss)
              
              $
              619,026
              
              $
              (0.012
              )
              $
              (493,679
              )
              $
              (0.017
              )
              $
              2,714,669
              
              $
              (0.054
              )
              $
              (2,075,073
              )
              $
              (0.071
              )Income
                  (Loss) from Discontinued Operations
              
              
              349,117
              
              
              0.006
              
              
              (1,764,031
              )
              
              (0.061
              )
              
              24,526
              
              
              0.000
              
              
              (3,418,211
              )
              
              (0.117
              )Net
                  (Loss)
              
              $
              (269,909
              )
              $
              (0.006
              )
              $
              (2,257,710
              )
              $
              (0.078
              )
              $
              (2,690,143
              )
              $
              (0.054
              )
              $
              (5,493,284
              )
              $
              (0.188
              )Weighted
                  Average Common Shares Outstanding
              
              
              50,306,865
              
              
              
              
              
              28,921,173
              
              
              
              
              
              50,351,466
              
              
              
              
              
              28,830,536





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 shares
      of
      the Company would be antidilutive. The securities that could potentially dilute
      (loss) per share in the future that were not included in the computation of
      diluted (loss) per share were (i) 364,000 and 680,000 shares, respectively,
      of
      nonvested restricted common stock issued to eligible directors but held by
      the
      Company pursuant to vesting restrictions under the Director Compensation Plan,
      (ii) exercise of 183,368 and 213,774 vested stock options, respectively, and
      (iii) conversion of securities (preferred stock) convertible into 2,250 and
      2,250 shares, respectively, of common stock, for the three and nine months
      ended
      September 30, 2005 and 2004, respectively.





**Note
                  13.**
              **Share-Based
                  Payment
                  Arrangements.**





The
        Company adopted reporting under SFAS 123R, effective July 1, 2005. ***See***  *Note
        3 - Recently Adopted Accounting Standards* .
        Previously, as allowed by Statement of Financial Accounting Standards No.
        123,
“ *Accounting
        for the Stock-Based Compensation* ”,
        the
        Company elected to apply the intrinsic-value-based method of accounting.
        Under
        this method, the Company measured stock based compensation for option grants
        to
        employees assuming that options granted at market price at the date of grant
        had
        no intrinsic value and restricted stock awards were valued based on a discounted
        market price of a share of unrestricted stock on the date the shares of
        restricted common stock were earned and vested. Prior to the adoption of
        the
        SFAS 123R, no compensation expense was ever recognized for stock options
        while
        compensation expense was recognized for restricted common stock only on the
        date
        when the shares were earned and vested. The Company has elected to use the
        modified prospective method, which requires compensation expense for all
        awards
        granted from the date of adoption, and for the unvested portion of previously
        granted awards that remain outstanding at the date of adoption, to be recorded.
        The fair value concepts were not changed significantly in SFAS 123R; however,
        in
        adopting SFAS 123R, companies must choose among alternative valuation models
        and
        amortization assumptions. After assessing alternative valuation models and
        amortization assumptions, the Company will begin using a lattice-based option
        valuation model to calculate compensation expense over the requisite service
        period of a grant(s). The Company uses historical data starting after November
        5, 2004 for estimated forfeitures and volatility based on the concentration
        of
        operating activities for the preceding seven years being related to the RSM
        Products, which were discontinued on November 5, 2004.





During
      the third quarter of 2005, the Company had four share-based compensation plans,
      which are described below. The compensation cost that has been charged against
      income for those plans was $173,380 and $1,060, respectively, for the three
      months ended September 30, 2005 and 2004, respectively, and $518,270 and
      $261,454, respectively, for the nine months ended September 30, 2005 and 2004,
      respectively.





***Equity
      Incentive Plan***





The
      Company’s Equity Incentive Plan (“Equity Plan”), which is shareholder-approved,
      permits the grant of share options and shares to its employees for up to
      3,250,000 shares of common stock. The Equity Plan replaced the Key Employee
      Stock Option Plan. The 2000 Stock Purchase and Option Plan, which was
      shareholder-approved, was amended by the Company to change its name to the
      Key
      Employee Stock Option Plan, combine its terms and conditions with the 2002
      Stock
      Option Plan (which was also shareholder-approved), and eliminate consultants
      and
      directors as Eligible Persons. The purpose of the Equity Plan is to advance
      the
      interests of the Company and its stockholders by providing an incentive to
      attract, retain and reward persons performing services for the Company and
      by
      motivating such persons to contribute to the growth and profitability of the
      Company. The Equity Plan provides, among other things, financial performance
      measures upon which specific performance goals applicable to certain awards
      would be based and limits on the numbers of shares or compensation that could
      be
      made subject to certain awards. Option awards are generally granted with an
      exercise price equal to the market price of the Company’s stock at the date of
      grant. Share options and shares may provide for accelerated vesting if there
      is
      a change in control (as defined in the Equity Plan). As described above, prior
      to the adoption of SFAS 123R, compensation expense was never recognized by
      the
      Company for share options. Therefore, certain portions of the following analysis
      only relate to share options beginning as of the adoption date for the current
      period presentation.





The
      fair
      value of each share option and share is estimated on the date of grant using
      a
      lattice-based valuation model that uses the assumptions noted in the following
      table. Because lattice-based valuation models incorporate ranges of assumptions
      for inputs, those ranges are disclosed. Expected volatilities are based on
      the
      historical volatility of the Company’s common stock. The Company uses historical
      data to estimate option exercise and employee termination within the valuation
      model. The expected term of options granted is derived from the output of the
      valuation model and represents the periods of time that options granted are
      expected to be outstanding; the range given below results from certain groups
      of
      employees exhibiting different behavior. The risk-free rate for periods within
      the contractual life of the option is based on the U.S. Treasury yield curve
      in
      effect at the time of grant.




**Three
                    Months Ended September 30,**
                
                **Nine
                    Months Ended September 30,****2005**
                
                **2004**
                
                **2005**
                
                **2004**Expected
                    Volatility
                
                
                152.73
                    % - 152.95
                %
                
                —
                
                
                152.73
                    % - 152.95
                %
                
                —Weighted-Average
                    Volatility
                
                
                152.92
                %
                
                —
                
                
                152.92
                %
                
                —Expected
                    Dividends
                
                
                —
                
                
                —
                
                
                —
                
                
                —Expected
                    Term (in years)
                
                
                1.2
                    - 6
                
                
                —
                
                
                1.2
                    - 6
                
                
                —Risk
                    Free Rate
                
                
                2.879
                    % - 3.259
                %
                
                —
                
                
                2.879
                    % - 3.259
                %
                
                —




A
          -
          10


**LAPOLLA
          INDUSTRIES, INC.**
 **(F/K/A
          IFT CORPORATION)**
 **NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED
      - CONTINUED)**





**Note
                  13.**
              **Share-Based
                  Payment Arrangements -
                  continued.**





A
      summary
      of option activity under the Equity Plan as of September 30, 2005, and changes
      during the nine months then ended is presented below:





**Options**
            
            **Shares**
            
            **Weighted-Average
                Exercise Price**
            
            **Weighted-Average
                Remaining Contractual Term**
            
            **Aggregate
                Intrinsic Value**Outstanding
                at January 1, 2005
            
            
            115,321
            
            $
            3.16Granted
            
            
            2,954,680
            
            
            .67Exercised
            
            
            —
            
            
            —Forfeited
                or Expired
            
            
            (50,133
            )
            
            .86Outstanding
                at September 30, 2005
            
            
            3,019,868
            
            $
            .76
            
            
            1.81
            
            $
            2,300,635Exercisable
                at September 30, 2005
            
            
            113,368
            
            $
            3.11
            
            
            1.13
            
            $
            353,085





The
      weighted-average grant-date fair value of options granted during the three
      months ended September 30, 2005 was $.56. There were no options exercised during
      the three months ended September 30, 2005.





A
      summary
      of the status of the nonvested share options under the Equity Plan as of
      September 30, 2005, and changes beginning from the date of adoption of SFAS
      123R
      to the nine months then ended is presented below:


**Nonvested
                Awards**
            
            **Shares**
            
            **Weighted-Average**
              **Grant-Date
                Fair Value**Nonvested
                at July 1, 2005
            
            
            24,000
            
            $
            .49Granted
            
            
            2,940,000
            
            
            .57Vested
            
            
            (12,500
            )
            
            .29Forfeited
            
            
            (45,000
            )
            
            .64Nonvested
                at September 30, 2005
            
            
            2,906,500
            
            $
            .57





As
      of
      September 30, 2005, there was $1,540,018 of total unrecognized compensation
      cost
      related to nonvested share-based compensation arrangements granted under the
      Equity Plan. The cost is expected to be recognized over a weighted-average
      period of 2.73 years. During the three months ended September 30, 2005, the
      Company accelerated the vesting of an aggregate of 12,500 out-of-the-money
      options held by the CEO (6,500 options) and two employees (6,000 options).
      As a
      result of that modification, the Company recognized additional compensation
      expense of $3,626 in the current period. The total fair value of share options
      vested during the three months ended September 30, 2005 was $3,626.





***Director
      Compensation Plan***





The
      Company’s Director Compensation Plan (“Director Plan”), which is
      shareholder-approved, permits the grant of up to 1,600,000 shares of restricted
      common stock to non-employee directors only. Each non-employee director who
      is
      then serving as a member of the Board is automatically granted an award
      consisting of a number of shares of restricted common stock of the Company
      equal
      to: 48,000 for the Chairman of the Board, who is also a non-employee director;
      and 12,000 for other non-employee directors, upon initial election to the Board
      for a one year term (or a lesser amount prorated monthly if the initial election
      is for a shorter period).  In addition to the automatic grant of shares to
      non-employee directors described above, a one-time grant on May 28, 2002 of
      1,168,000 post split shares of restricted stock was approved for the Chairman
      of
      the Board, which recognized his personal cost for substantially funding the
      Company and acting as Chairman of the Board without adequate compensation over
      a
      three-year period prior to the date of the grant. This one-time grant vests
      at
      the end of each year at the rate of 25% per year. The Company does not consider
      the shares of restricted common stock granted and issued under the Director
      Plan
      as outstanding at the time of grant due to vesting restrictions. The shares
      of
      restricted common stock when granted are issued by the Company with a second
      restriction and held in the custody of the Company until such time that they
      are
      earned and vested.





At
      September 30, 2005, there were 364,000 shares of restricted common stock granted
      and issued but held in the custody of the Company (until they are earned and
      vested), of which 292,000 shares are for the last 25% of the one time grant
      scheduled to vest on May 28, 2006 and 72,000 are for automatic grants awarded
      at
      the annual meeting of stockholders held on June 29, 2005 which vest at the
      next
      annual meeting of stockholders scheduled for May 23, 2006. The compensation
      cost
      that has been charged against income for the Director Plan was $44,676 and
      $-0-,
      respectively, for the three months ended September 30, 2005 and 2004,
      respectively, and $383,966 and $251,820, respectively, for the nine months
      ended
      September 30, 2005 and 2004, respectively. Prior to the adoption of SFAS 123R,
      compensation expense was recognized under the Director Plan only on the date
      when the shares were earned and vested. Therefore, the grant date fair value
      portions of the following analysis only take into consideration the 364,000
      shares of restricted common stock granted and nonvested as described above
      for
      the current period presentation. The fair value of each award is estimated
      on
      the date of grant using a lattice-based valuation model that uses the
      assumptions noted in the following table. Because lattice-based valuation models
      incorporate ranges of assumptions for inputs, those ranges are disclosed, where
      applicable. Expected volatilities are based on the historical volatility of
      the
      Company’s common stock. The Company uses historical data to estimate award
      vesting and director termination within the valuation model and the
      straight-line method for attribution of compensation expense. The expected
      term
      of the of the awards are derived from the output of the valuation model and
      represent the period of time that awards granted are expected to be outstanding.
      The risk-free rate for periods within the contractual life of the award is
      based
      on the U.S. Treasury yield curve in effect at the time of grant.




**Three
                  Months Ended September 30,**
              
              **Nine
                  Months Ended September 30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**Expected
                  Volatility
              
              
              152.73
              %
              
              —
              
              
              152.73
              %
              
              —Weighted-Average
                  Volatility
              
              
              152.73
              %
              
              —
              
              
              152.73
              %
              
              —Expected
                  Dividends
              
              
              —
              
              
              —
              
              
              —
              
              
              —Expected
                  Term (in years)
              
              
              .9
              
              
              —
              
              
              .9
              
              
              —Risk
                  Free Rate
              
              
              3.259
              %
              
              —
              
              
              3.259
              %
              
              —




A
          -
          11




**LAPOLLA
          INDUSTRIES, INC.**
 **(F/K/A
          IFT CORPORATION)**
 **NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED
      - CONTINUED)**




**Note
                    13.**
                **Share-Based
                    Payment Arrangements -
                    continued.**





A
      summary
      of awards activity under the Director Plan as of September 30, 2005, and changes
      during the nine months then ended is presented below:


**Awards**
            
            **Shares**
            
            **Aggregate
                Intrinsic Value**Outstanding
                at January 1, 2005
            
            
            652,767Granted
            
            
            72,000Vested
            
            
            360,767Forfeited
                or Expired
            
            
            —Outstanding
                at September 30, 2005
            
            
            364,000
            
            $
            309,400





A
      summary
      of the status of the nonvested awards under the Director Plan as of September
      30, 2005, and changes beginning from the date of adoption of SFAS 123R to the
      nine months then ended is presented below:





**Nonvested
                Awards**
            
            **Shares**
            
            **Weighted-Average
                Grant-Date Fair Value**Nonvested
                at July 1, 2005
            
            
            364,000
            
            $
            162,000Granted
            
            
            —
            
            
            —Vested
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —Nonvested
                at September 30, 2005
            
            
            364,000
            
            $
            162,000





As
      of
      September 30, 2005, there was $117,324 of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted under the
      Director Plan. The cost is expected to be recognized over a weighted-average
      period of .65 years. The total fair value of awards vested during the three
      months ended September 30, 2005 and 2004, respectively, was $-0- and $-0-,
      respectively, and nine months ended September 30, 2005 and 2004, respectively,
      was $339,290 and $251,820, respectively.





***Non
      Plan Restricted Stock Options***





The
      Company grants restricted options from time to time for special circumstances
      ("Non Plan Options").  The Company did not grant any Non Plan Options
      during 2004 or the three and nine months ended September 30, 2005.  At
      January 1, 2005, there were 70,000 Non Plan Options outstanding, of which 20,000
      were vested and 50,000 nonvested. During the three months ended September 30,
      2005, the Company accelerated the vesting of the 50,000 outstanding and
      nonvested options, which not only were out-of-the-money but the expected term
      was also expired in 2004. Therefore, notwithstanding the aforementioned
      acceleration, no fair value existed or was recorded for current period for
      Non
      Plan Options. As described above, prior to the adoption of SFAS 123R,
      compensation expense was never recognized by the Company for any share
      options.





***Restricted
      Stock Grants - Employment Agreements***





During
      the three months ended September 30, 2005, the Company accelerated and issued
      an
      aggregate of 8,000 shares of restricted common stock to the CEO, originally
      scheduled to vest in 4,000 share increments at the end of the third and fourth
      quarters of 2005 as other compensation, pursuant to an employment agreement,
      which were valued and recorded at $5,360. As described above, the Company did
      not recognize the fair value of restricted stock awards prior to the adoption
      of
      SFAS 123R until such time that they were earned and vested. As of September
      30,
      2005, there were no outstanding restricted stock grants.





**Note
                  14.**
              **Discontinued
                  Operations.**





On
      November 5, 2004, the Company discontinued the operations of its RSM
      Technologies, Inc. subsidiary (“RSM Subsidiary”). The condensed consolidated
      financial statements and the related notes have been recast to reflect the
      financial position, results of operations and cash flows on an aggregated basis
      for the RSM Subsidiary.





The
      assets and liabilities of the discontinued operations presented on an aggregated
      basis in the Condensed Consolidated Balance Sheets consist of the following
      at:





*Assets*
              
              **September
                  30, 2005**
              
              **December
                  31, 2004**Prepaid
                  Expenses and Other Current Assets
              
              $
              2,500
              
              $
              438Total
                  Assets
              
              $
              2,500
              
              $
              438*Liabilities*Accounts
                  Payable
              
              
              235,397
              
              
              662,696Accrued
                  Expenses and Other Current Liabilities
              
              
              —
              
              
              57,871Line
                  of Credit
              
              
              499,918
              
              
              499,918Reserve
                  for Litigation
              
              
              140,642
              
              
              525,000Total
                  Liabilities
              
              $
              875,957
              
              $
              1,745,485





**Note
                  15.**
              **Merger
                  of Subsidiary.**





Effective
      April 1, 2005, Infiniti Products, Inc. (“Infiniti Subsidiary”), a Florida
      corporation, merged with and into the LaPolla Subsidiary, an Arizona
      corporation, whereupon the separate existence of Infiniti ceased and the LaPolla
      Subsidiary continued as the surviving corporation.




A
          -
          12


**LAPOLLA
          INDUSTRIES, INC.**
 **(F/K/A
          IFT CORPORATION)**
 **NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED
      - CONTINUED)**





**Note
                  16.**
              **Business
                  Segment Information.**





Effective
        April 1, 2005, the Company determined that it had two distinct business
        segments. These two business segments were defined as Corporate and LaPolla
        Products. On April 1, 2005, the Company’s Infiniti Subsidiary ( ***See*** Note 15 *-
        Merger of Subsidiary* )
        merged
        with and into the LaPolla Subsidiary and, therefore, the Infiniti Subsidiary
        business segment, formerly reflected as Infiniti Products, has been combined
        with and into the LaPolla Products segment.





The
      business segment financial data reflected in the table below was derived from
      the Company’s condensed consolidated financial position and condensed
      consolidated results of operations as follows:





(i)
              Corporate
                  was derived from the financial data of the Company;
                  and


(ii)
            LaPolla
                Products was derived from the financial data of the LaPolla
                Subsidiary.





The
      following table reflects certain business segment financial data as of and
      for
      the nine months ended September 30, 2005:





**Corporate**
              
              **LaPolla
                  Products**
              
              **Total**Sales
              
              $
              ---
              
              $
              13,223,290
              
              $
              13,223,290Gross
                  Profit
              
              $
              ---
              
              $
              2,396,485
              
              $
              2,396,485Operating
                  (Loss)
              
              $
              (2,261,135
              )
              $
              (429,008
              )
              $
              (2,690,143
              )Capital
                  Expenditures (Net of Capital Leases)
              
              $
              81,728
              
              $
              434,930
              
              $
              516,658Depreciation
                  and Amortization Expense
              
              $
              52,586
              
              $
              23,135
              
              $
              73,721Identifiable
                  Assets
              
              $
              2,876,193
              
              $
              4,954,117
              
              $
              7,830,310





On
        November 5, 2004, the Company discontinued the operations of its RSM Subsidiary
        and the related business segment, formerly reflected as RSM Products, was
        eliminated at that time. The table above does not include any financial data
        relating to the discontinued RSM Products business segment, which is reported
        as
        discontinued operations in the Company’s financial statements. ***See
        also*** ** Note
        14 *-
        Discontinued Operations* .





On
        October 1, 2005, the Company merged its LaPolla Subsidiary into itself. ***See
        also*** ** Note
        15 *-
        Merger of Subsidiary* and Note
        18 *-
        Subsequent Events* ,
        Item
        (b). Based on the recent mergers, the Company, in future reporting periods,
        will
        no longer provide business segment data and information using the above business
        segment format. The Company is in the process of developing a new business
        segment reporting format, which will report the data and information required
        under SFAS 131 by product categories in future reporting
        periods.





**Note
                  17.**
              **Commitments
                  and Contingencies.**





**Reserve**





**September
                  30, 2005**
              
              **December
                  31, 2004**Accounts
                  Payable - Discontinued Operations
              
              $
              235,397
              
              $
              662,696Accrued
                  Expenses and Other Current Liabilities - Discontinued
                  Operations
              
              
              —
              
              
              57,871Line
                  of Credit - Discontinued Operations
              
              
              499,918
              
              
              499,918Reserve
                  for Litigation - Discontinued Operations
              
              
              140,642
              
              
              525,000Reserve
                  for Litigation - Current Operations
              
              
              175,378
              
              
              15,000Total
              
              $
              1,051,335
              
              $
              1,760,485





**Note
                  18.**
              **Subsequent
                  Events.**





(a) The
        Company borrowed an additional $250,000 under the Note Payable for working
        capital purposes. ***See***  *Note
        11 - Note Payable - Other* .





(b) Effective
      October 1, 2005, IFT Corporation, a Delaware corporation, merged its wholly
      owned subsidiary, the LaPolla Subsidiary, an Arizona corporation, into itself
      pursuant to the resolution of the board of directors of each respective entity,
      whereupon the separate existence of the LaPolla Subsidiary ceased and IFT
      Corporation continued as the surviving corporation.





(c) Effective
      November 8, 2005, IFT Corporation changed its corporate name to LaPolla
      Industries, Inc.





**Note
                  19.**
              **Reclassifications,
                  Restatements, and Corrections to Previously Issued Financial
                  Statements.**




**(A)** ***Reclassification
            of Continuing and Discontinued Operations*** - The
            Company discontinued certain operations that took place during the years
            2000
            throughout 2004. At December 31, 2004, the current operations in effect
            related
            to the public company itself as a holding company and one wholly owned
            subsidiary, Infiniti Products, Inc. (“Infiniti Subsidiary”). The original report
            filed with the SEC did not fully separate and segregate all of the financial
            and
            other related information related to the Company’s discontinued operations from
            its continuing operations. The aggregate financial data originally presented
            for
            the periods presented were not affected by the reclassification. ***See
            also*** Page A-2
            - Items Amended Hereby, paragraph (A) for more information.
 
 **(B)** ***Reclassification
            of Certain Cost of Sales and Selling, General and Administrative
            Expenses***  -
            The
            Company reclassified certain direct labor expenses related to receiving,
            purchasing and inspection, shipping and handling costs (outbound freight)
            and
            warehousing costs originally included in the Selling, General and Administrative
            line item on the Condensed Consolidated Statements of Operations and
            included
            these amounts in the Cost of Sales line item for the three and nine months
            ended
            September 30, 2005. The aggregate financial data originally presented
            for the
            periods presented were not affected by the reclassification. ***See
            also*** Page A-2
            - Items Amended Hereby, paragraph (B) for more
            information.
  A
              -
              13
 
 **LAPOLLA
          INDUSTRIES, INC.**
 **(F/K/A
          IFT CORPORATION)**
 **NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED
        - CONTINUED)**





**Note
                  19.**
              **Reclassifications,
                  Restatements, and Corrections to Previously Issued Financial Statements
                  -
                  continued.**





**(C)** ***Restatement
        of Inventory and Cost of Sales***  -
        The
        Company, after the reclassifications in paragraphs (A) and (B) above, restated
        the value of Inventories on the Consolidated Balance Sheets for the quarter
        ended September 30, 2005 and Cost of Sales on the Consolidated Statements
        of
        Operations for the for the three and nine months ended September 30, 2005.
        The
        aggregate amount of assets, cost of sales, net loss, and accumulated deficit
        of
        the Company originally reported were affected by the restatement. To
        illustrate:





**Three
                  Months Ended September 30, 2005**
              
              **Nine
                  Months Ended September 30, 2005**Net
                  Loss (As Previously Reported)
              
              $
              (300,836
              )
              $
              (2,793,572
              )Adjustments
              
              
              40,329
              
              
              92,719As
                  Adjusted
              
              $
              (260,507
              )
              $
              (2,700,853
              )





***See
        also*** Page A-2
        - Items Amended Hereby, paragraph (C) for more information.





**(D)** ***Restatement
        of Allowance for Doubtful Accounts and Bad Debt
        Expense*** ** -
        The
        Company, after the reclassifications in paragraphs (A) and (B) and restatement
        in paragraph (C) above, restated the Allowance for Doubtful Accounts for
        the
        quarter ended June 30, 2005, and Bad Debt expense included in the Selling,
        General and Administrative line item on the Condensed Consolidated Statements
        of
        Operations, for the three and six months ended June 30, 2005. The aggregate
        amount of assets, expenses, net loss, and accumulated deficit of the Company
        originally reported were affected by the restatement. To
        illustrate:





**Three
                  Months Ended September 30, 2005**
              
              **Nine
                  Months Ended September 30, 2005**Net
                  Loss (As Adjusted Per (C))
              
              $
              (260,507
              )
              $
              (2,700,853
              )Adjustments
              
              
              (9,402
              )
              
              10,709As
                  Adjusted and Restated
              
              $
              (269,909
              )
              $
              (2,690,143
              )





***See
        also*** Page A-2
        - Items Amended Hereby, paragraph (D) for more information.





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





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER
      30, 2005 AND 2004**





As
      used
      in this amended report, the "Company" or "Us" or "We" or “Our” refer to LaPolla
      Industries, Inc., a Delaware corporation, and its subsidiaries, unless the
      context otherwise requires. Effective October 1, 2005, IFT Corporation, a
      Delaware corporation, merged its wholly owned subsidiary, LaPolla Industries,
      Inc., an Arizona corporation, into itself, whereupon the separate existence
      of
      LaPolla Industries, Inc., an Arizona corporation, ceased and IFT Corporation
      continued as the surviving corporation. Effective November 8, 2005, IFT
      Corporation changed its corporate name to LaPolla Industries, Inc. The financial
      review reflects the new corporation name, LaPolla Industries, Inc., which is
      the
      same name previously associated with the Company’s former wholly owned
      subsidiary LaPolla Industries, Inc. that was merged into IFT Corporation
      immediately after the end of the current period. To be clear, references to
      this
      former wholly owned subsidiary are reflected as “LaPolla Subsidiary” or “LaPolla
      Products”, where applicable, in this review to aid the reader in understanding
      the current period review. The financial review below presents our operating
      results for the three and nine months ended September 30, 2005 and 2004, and
      our
      financial condition at September 30, 2005. Except for the historical information
      contained herein, the following discussion contains forward-looking statements,
      which are subject to known and unknown risks, uncertainties and other factors
      that may cause our actual results to differ materially from those expressed
      or
      implied by such forward-looking statements. We discuss such risks, uncertainties
      and other factors throughout this report and specifically under the caption
      “Forward Looking Statements” below. In addition, the following review should be
      read in conjunction with the information presented in our unaudited condensed
      consolidated financial statements and related notes for the three and nine
      months ended September 30, 2005 above.





*Overview*





We
      are a
      public business enterprise that markets, sells, manufactures and distributes
      acrylic roof coatings, roof paints, sealers, roofing adhesives, polyurethane
      foam and wall systems, and other related products to the commercial/industrial
      construction and home improvement retail chain store markets. Prior to October
      1, 2005, we were organized under a holding company and subsidiary structure.
      At
      September 30, 2004, we had two active subsidiaries, Infiniti Products, Inc.
      (“Infiniti Subsidiary”) and RSM Technologies, Inc. (“RSM Subsidiary”). We
      acquired our Infiniti Subsidiary, which was a Florida based coatings, sealants,
      paints, and foam distributor, effective September 1, 2001, to among other
      things, diversify our product lines (“Infiniti Products”). Our Infiniti
      Subsidiary started manufacturing some of its Infiniti Products instead of using
      outside toll blenders during the third quarter of 2004 as part of a strategy
      to
      become a manufacturer in addition to being a distributor for the Southeastern
      United States. On November 5, 2004, we discontinued the operations of our RSM
      Subsidiary and resulting RSM Products. The financial information relating to
      our
      discontinued RSM Subsidiary operations are reported and discussed as
      discontinued operations in our financial statements and this review. We
      implemented an aggressive sales and marketing strategy after discontinuing
      our
      RSM Products to substantially grow our Infiniti Products sales. During the
      first
      quarter of 2005, we engaged additional sales and marketing personnel in
      connection with our first acquisition to support our new strategic growth plan.
      On February 11, 2005, we closed our acquisition of the LaPolla Subsidiary,
      an
      Arizona based manufacturer of acrylic roof coatings and sealers, and provider
      of
      polyurethane foam systems to the commercial/industrial construction markets.
      We
      acquired 100% of the capital stock of the LaPolla Subsidiary for $2 Million
      in
      cash and stock. The LaPolla Subsidiary marketed, sold, manufactured and
      distributed acrylic roof coatings, sealers, and polyurethane foam systems to
      the
      commercial/industrial construction markets (“LaPolla Products”). The LaPollaTM
name has been recognized in the Southwestern United States for over 27 years
      by
      roofing contractors, building owners and design professionals. The acquisition
      broadened our customer base and established us as a leader in the roof coatings
      industry. Effective April 1, 2005, our Infiniti Subsidiary merged with and
      into
      our LaPolla Subsidiary, whereupon the separate existence of our Infiniti
      Subsidiary ceased and the LaPolla Subsidiary continued as the surviving
      corporation. To be clear, references to our former wholly owned subsidiary,
      Infiniti Products, Inc., are reflected as “Infiniti Subsidiary” or “Infiniti
      Products”; our Infiniti Products and LaPolla Products are sometimes collectively
      referred to as “Comprehensive Products”; and our Infiniti Subsidiary and LaPolla
      Subsidiary are sometimes collectively referred to as “Combined Subsidiary”,
      where applicable, to aid the reader in understanding the current period review.
      We are continuing to attract and recruit the best available talent to manage
      our
      existing and further propel our growth. Our sales offices are located in Texas,
      Florida, Arizona, Georgia, California, and Pennsylvania. LaPolla operates two
      manufacturing plants located in Tempe, Arizona and Deerfield Beach, Florida,
      and
      uses public warehousing in a multitude of locations throughout the United States
      to service customers. We moved our corporate headquarters to Houston, Texas
      during the third quarter of 2005, and will begin manufacturing products at
      this
      location in the fourth quarter of 2005.




A
          -
          14


**Results
      of Operations**





We
      operated our business on the basis of two reportable segments, which we refer
      to
      as Corporate and LaPolla Products, during the third quarter of 2005. LaPolla
      Products are collectively referred to as “Coatings, Sealants and Other Products”
in our condensed consolidated financial statements for this reporting period.


The
      following table compares 2005 and 2004 sales for the three and nine month
      periods ended September 30, 2005 and 2004:





**Three
                Months Ended September 30,**
            
            **Nine
                Months Ended September 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Sales:Coatings,
                Sealants and Other Products
            
            $
            5,559,461
            
            $
            521,852
            
            $
            13,223,290
            
            $
            1,569,378Total
                Sales
            
            $
            5,559,461
            
            $
            521,852
            
            $
            13,223,290
            
            $
            1,569,378





The
      $5,037,609 or 965% increase in sales for the three months ended September 30,
      2005 compared to the same 2004 period was primarily the result of an increase
      due to strong demand for our Comprehensive Products as compared to just our
      Infiniti Products in 2004. The increase in sales of $11,653,912, which
      represents an increase of 743% in sales for the nine months ended September
      30,
      2005 as compared to the nine months ended September 30, 2004 was due primarily
      to sales of our Infiniti Products in the amount of $799,815, LaPolla Products
      of
      $1,657,838 and Comprehensive Products of $9,196,259 compared to just our
      Infiniti Products of $1,569,378.





Our
          cost
          of sales for the three months ended September 30, 2005 was $4,438,514,
          or 79.8%,
          as compared to $433,405, or 83%, for the three months ended September 30,
          2004.
          The increase in the total cost of sales of $4,005,109 was primarily due
          to
          increased purchases of the raw materials and finished goods relating to
          the
          manufacturing and distribution of our Comprehensive Products as compared
          to just
          our Infiniti Products for 2004. This 3.2% decrease in cost of sales as
          a
          percentage of sales from the comparable 2004 period is attributable to
          the mix
          of Comprehensive Product margins as compared to just our Infiniti Products.
          For
          the nine months ended September 30, 2005, our cost of sales was $10,826,805,
          or
          81.8%, as compared to $1,262,988, or 80.4%, for the nine months ended September
          20, 2004. The $9,563,817 increase in cost of sales for the nine months
          ended
          September 30, 2005 compared to the same 2004 period was due primarily to
          cost of
          sales relating to our Infiniti Products in the amount of $594,253, LaPolla
          Products of $1,576,411 and Comprehensive Products of $8,656,141 compared
          to just
          our Infiniti Products of $1,262,988. Our cost of sales includes $73,861
          and
          $14,235 for direct labor, receiving, purchasing and inspection, respectively,
          and $114,697 and $10,297 inbound and outbound freight, respectively, for
          the
          three months ended September 30, 2005 for our Combined Subsidiary and September
          30, 2004 for our Infiniti Subsidiary, respectively. For the nine months
          ended
          September 30, 2005, our cost of sales include direct labor, receiving,
          purchasing and inspection, respectively, and inbound and outbound freight,
          respectively, of $8,900 and $9,331 for our Infiniti Subsidiary, $-0- and
          $18,095
          for our LaPolla Subsidiary and $63,329 and $212,711 for our Combined Subsidiary,
          respectively, versus $23,972 and $25,169 for just our Infiniti Subsidiary,
          respectively, for the comparable 2004 period.
 
 Gross
          profit as a percentage for the third quarter of 2005 was 20.1% of sales,
          which
          represents a 3.2 percentage point increase from the 16.9% rate for the
          third
          quarter of 2004. Our gross profit percentage increased in the third quarter
          of
          2005 compared to the third quarter of 2004 primarily as a result of an
          increase
          in sales of higher margin products as compared to lower margin products.
          Gross
          profit as a percentage for the nine months ended September 30, 2005 was
          18.1% of
          sales, which represents a 1.4 percentage point decrease from the 19.5%
          rate for
          the comparable 2004 period. The gross profit percentage decreased in the
          nine
          months ended September 30, 2005 compared to the nine months ended September
          30,
          2004 primarily as a result of an increase in sales of lower margin products
          as
          compared to higher margin products.
 
 Selling,
          general and administrative, or SG&A, expenses were $1,509,665 or 27.1% of
          sales, in the third quarter of 2005, of which $551,851 was for Corporate
          and
          $957,814 was for our Combined Subsidiary compared to $320,120, or 61.3%
          of
          sales, in the third quarter of 2004, of which $158,468 was for Corporate
          and
          $161,652 for our Infiniti Subsidiary. This $1,189,545 increase in SG&A
          expense dollars in the third quarter of 2005 compared to the third quarter
          of
          2004 is primarily the result of expenses related to Corporate and our Combined
          Subsidiary, as compared to just Corporate and our Infiniti Subsidiary.
          For the
          nine months ended September 30, 2005, our SG&A expenses were $4,219,879 as
          compared to $1,611,317 for the comparable 2004 period. The $2,608,562 increase
          in SG&A expenses for the nine months ended September 30, 2005 compared to
          the same 2004 period was due primarily to expenses related to Corporate
          of
          $1,502,676, our Infiniti Subsidiary of $334,889, LaPolla Subsidiary of
          $451,496,
          and Combined Subsidiary of $1,930,818 compared to just Corporate of $1,039,247
          and our Infiniti Subsidiary of $572,070. The SG&A as a percent of our sales
          was 31.9% for the nine months ended September 30, 2005 as compared to greater
          than 100% for the same 2004 period. The increase in SG&A expense dollars was
          a result of higher selling and marketing expenses in support of our sales
          growth, additional sales personnel, promotion and advertising costs, investor
          relations, and American Stock Exchange fees, sales travel, opening new
          sales
          offices, various insurance coverage premium increases connected to sales
          growth,
          opening warehouses in strategic locations nationally, stock compensation
          expenses to officers and directors, and relocating our corporate headquarters
          to
          Houston, Texas.


Professional
        fees consist of accounting, auditing, and legal fees. Our professional fees
        for
        the three months ended September 30, 2005 were $45,465, of which $29,877
        was for
        Corporate and $15,588 was for our Combined Subsidiary as compared to $57,000,
        of
        which $56,539 was for Corporate and $461 was for our Infiniti Subsidiary
        for the
        comparable 2004 period. The decrease of $11,535 was primarily due to a decrease
        in attorney’s fees for past and current litigation related to Corporate. For the
        nine months ended September 30, 2005, our professional fees were $438,683,
        of
        which $355,968 was for Corporate, $75 was for our Infiniti Subsidiary, $19,117
        was for our LaPolla Subsidiary, and $63,523 was for our Combined Subsidiary
        as
        compared to $322,521, of which $316,914 was for Corporate and $5,607 was
        for our
        Infiniti Subsidiary, in the comparable period in 2004. The $116,162 increase
        in
        professional fees in the first nine months of 2005 compared to the same 2004
        period was primarily the result of an increase in attorney’s fees related to
        past and current Corporate litigation as well as auditing and accounting
        fees
        related to our acquisition of the LaPolla Subsidiary.





Our
        depreciation and amortization expense was $25,009 for the third quarter of
        2005,
        of which $18,936 was for Corporate and $6,073 was for our Combined Subsidiary
        compared to $16,424 for the third quarter of 2004, of which $15,834 was for
        Corporate and $590 was for our Infiniti Subsidiary. The increase of $18,936
        was
        primarily the result of purchasing property, plant and equipment for our
        manufacturing plants in Florida, Arizona and Texas and amortization of our
        intangible assets relating to the acquisition of our LaPolla Subsidiary.
        For the
        nine months ended September 30, 2005, our depreciation and amortization expense
        was $73,721, of which $52,586 was for Corporate, $1,878 was for our Infiniti
        Subsidiary, $585 was for our LaPolla Subsidiary, and $10,980 was for our
        Combined Subsidiary, while our depreciation and amortization expense was
        $58,092
        for the comparable 2004 period, of which $56,442 was for Corporate and $1,650
        was for our Infiniti Subsidiary. The $15,626 increase in depreciation and
        amortization expense in the first nine months of 2005 compared to the same
        2004
        period was primarily due to the acquisition of additional property, plant
        and
        equipment from our acquisition of the LaPolla Subsidiary, additional purchases
        of property, plant and equipment for our manufacturing and distribution
        facilities in Florida, Arizona and Texas, and amortization of our intangible
        assets in connection with our acquisition of the LaPolla
        Subsidiary.





We
        did
        not incur any research and development costs in the three or nine months
        ended
        September 30, 2005 or 2004.





Consulting
        fees for the three months ended September 30, 2005 were $51,203, of which
        $22,267 was for Corporate and $28,936 was for the Combined Subsidiary as
        compared to $51,144 for the three months ended September 30, 2004, of which
        $45,902 was for Corporate and $5,242 was for our Infiniti Subsidiary. For
        the
        nine months ended September 30, 2005, consulting fees were $176,595, of which
        $98,225 was for Corporate, $12,445 was for our Infiniti Subsidiary, $10,558
        was
        for our LaPolla Subsidiary and $55,367 was for our Combined Subsidiary as
        compared to $122,137 for the nine months ended September 30, 2004, of which
        $116,125 was for Corporate and $6,012 was for our Infiniti Subsidiary. The
        $72,771increase for the nine months ended September 30, 2005 as compared
        to the
        same period in 2004 was the result of an increase in the number and type
        of
        consultants engaged to provide business and financial consulting services
        to
        us.


A
          -
          15


For
          the
          three months ended September 30, 2005, our interest expense was $113,901,
          of
          which $108,254 was for Corporate and $5,647 was for our Combined Subsidiary
          as
          compared to $111,290 for the three months ended September 30, 2004, of
          which
          $101,401 was for Corporate and $9,889 was for our Infiniti Subsidiary.
          Our
          interest expense for the nine months ended September 30, 2005 was $224,787,
          of
          which $210,553 was for Corporate, $3,569 was for our Infiniti Subsidiary,
          $4,485
          was for our LaPolla Subsidiary, and $6,180 was for our Combined Subsidiary
          as
          compared to $250,693 for the nine months ended September 30, 2004, of which
          $202,036 was for Corporate and $48,657 was for our Infiniti Subsidiary.
          The
          decreases were primarily attributable to a decrease in the interest rate
          on
          loans payable - related party from 9% per annum for the 2004 year to 6%
          per
          annum for the 2005 year, partially offset by an increase from the note
          payable -
          other commencing on June 1, 2005. In addition, the principal balance on
          the
          loans payable - related party was $4,302,500 with accrued interest of $147,412
          as of September 30, 2005, as compared to a principal balance of $4,885,000
          with
          accrued interest of $184,898 as of September 30, 2004. Moreover, the principal
          balance on the note payable - other was $1,250,000 with accrued interest
          of
          $16,751 for the nine months ended September 30, 2005 as compared to $ -0-
          in
          2004.
 
 Other
          income in the three months ended September 30, 2005 was $5,269, all of
          which
          related to our Combined Subsidiary, as compared to other expense of $26,148
          for
          the comparable 2004 period. Other income for the nine months ended September
          30,
          2005 was $22,511, all of which related to our Combined Subsidiary, as compared
          to other expense of $26,148 for the comparable period in
          2004.
 
 The
          income from discontinued operations for the three months ended September
          30,
          2005 was $349,117 compared to a loss of $1,764,031 for the three months
          ended
          September 30, 2004. The income of $349,117 resulted primarily from a gain
          related to the disposition of prior written off machinery and equipment
          during
          the third quarter of 2005, partially offset by a nominal rent expense,
          revised
          estimate related to our discontinued operations reserve for litigation
          and
          accrued workman’s compensation liability. Our income from discontinued
          operations for the nine months ended September 30, 2005 was $24,526 compared
          to
          a loss of $3,418,211 for the nine months ended September 30, 2004. The
          income of
          $24,526 resulted primarily from a gain related to the disposition of prior
          written off machinery and equipment during the third quarter of 2005, partially
          offset by a nominal rent expense, revised estimate related to our discontinued
          operations reserve for litigation and accrued workman’s compensation
          liability.


**Financial
        Condition, Liquidity and Capital Resources**





We
          assess
          our liquidity by our ability to generate cash to fund our operations.
          Significant factors in the management of liquidity are: funds
          generated by operations, levels of accounts receivable, inventories, accounts
          payable and capital expenditures, funds required for acquisitions, adequate
          credit facilities, and financial flexibility to attract long term capital
          on
          satisfactory terms. Historically, we have generated insufficient cash from
          operations to meet our working capital requirements and have relied principally
          on related party funding from our Chairman over the past six years and
          outside
          investors to meet our working capital and other corporate needs. With the
          discontinuation of our RSM Products, the acquisition of the LaPolla Subsidiary,
          merger of the Infiniti Subsidiary with and into the LaPolla Subsidiary,
          merger
          of the LaPolla Subsidiary with and into the Company, in conjunction with
          our
          initial and continuing retention of additional sales and marketing personnel
          during the first three quarters of 2005, we are experiencing substantial
          improvement in our ability to generate enough cash from our operations
          to meet
          our working capital requirements. The net cash used in operating activities
          for
          the nine months ended September 30, 2005 was $2,782,066 compared to cash
          used of
          $4,588,351 for the nine months ended September 30, 2004. The decrease in
          net
          cash used in operating activities of $1,806,285 was primarily due to the
          discontinuation of our RSM Subsidiary, partially offset by an increase
          in cash
          required to fund growth in trade receivables, and a net increase in cash
          required to fund changes in other net operating assets and liabilities.
          We were
          required to expend certain funds during the first three quarters of 2005
          to
          enhance our infrastructure to be able to effectively manage the growth
          surge we
          are continuing to experience in our sales, which included attracting and
          retaining new executives, integrating our LaPolla Subsidiary, creating
          sales,
          marketing and promotional materials, rolling out our LaPolla Products in
          national trade shows, implementing new software to centralize accounting
          processes, satisfying non-recurring liabilities related to our discontinued
          RSM
          Products business, adding more sales personnel to open up new markets for
          our
          Comprehensive Products in strategic locations, identifying and setting
          up a
          multitude of geographically situated public warehouses to support our national
          sales strategies, and relocating our corporate offices to Houston, Texas.
          The
          net cash for discontinued operations used in operating activities was $800,179
          and provided by operating activities was $695,517, for the nine months
          ended
          September 30, 2005 and 2004, respectively.
 
 Net
          cash
          used in investing activities in the first nine months of 2005 was $2,239,784
          as
          compared to $176,305 in the comparable 2004 period. We invested $307,959
          in
          property, plant and equipment during the nine months ended September 30,
          2005
          compared to $178,405 during the same period in 2004. Additionally, we invested
          $1,931,825, which is $2,000,000 net of $68,175 cash acquired, for the
          acquisition of our LaPolla Subsidiary, of which $1,384,707 was capitalized
          as
          goodwill and other intangible assets. The net cash provided by investing
          activities for discontinued operations was $-0- and $2,100 for the nine
          months
          ended September 30, 2005 and 2004, respectively.
 
 Net
          cash
          provided by financing activities was $5,355,091 in the first nine months
          of 2005
          compared to net cash provided by financing activities of $4,792,074 in
          the first
          nine months of 2004. During the first nine months of 2005, we repaid $182,082,
          $39,143, and $1,778, respectively, as compared to $9,600, $4,052, and $1,536,
          respectively, on our line of credit, long term debt, and capital lease
          obligation, respectively, in the first nine months of 2004. During the
          first
          nine months of 2005, we borrowed $25,594, $4,302,500, and $1,250,000,
          respectively, as compared to $12,043, $4,825,000, and $-0-, respectively,
          from
          our line of credit, loans payable - related party, and note payable - other,
          respectively, in the first nine months of 2004. We had proceeds from issuance
          of
          long term debt in the amount of $327,082 for the nine months ended September
          30,
          2005 compared to $-0- for the same period in 2004. The net cash used in
          financing activities for discontinued operations was $-0- and $29,781 for
          the
          nine months ended September 30, 2005 and 2004, respectively.
 
 As
          of
          September 30, 2005, we had $357,706 of cash on hand as compared to $24,465
          at
          December 31, 2004, representing a net increase in cash of $333,241 for
          the nine
          months ended September 30, 2005. During the nine months ended September
          30,
          2005, our working capital deficit decreased $2,004,985 from $7,706,197
          at
          December 31, 2004 to $5,701,212 as of September 30, 2005. This decrease
          in the
          working capital deficit resulted from a decrease of $1,367,500 in loans
          payable
          - related party and a decrease in interest of $138,454 due to the Chairman
          from
          debt cancellation, a $2,831,726 increase in accounts payable, a $134,056
          decrease in accrued expenses and other current liabilities and an increase
          of
          $143,498 in long-term debt, after taking into account a $2,895,686 increase
          in
          net trade receivables, an increase in inventories of $673,944, a $156,487
          decrease in a line of credit, an increase of $63,531 in prepaid expenses
          and
          other current assets, and a decrease of $869,528 in liabilities from
          discontinued operations. We also had an increase in the reserve for litigation
          in the amount of $160,378.
 
 We
          believe that the net cash provided by our operating activities, supplemented
          as
          necessary with borrowings available under our existing credit facilities,
          will
          provide us with sufficient resources to meet our working capital requirements
          during the remainder of this year and into the first quarter of 2006. Based
          on
          our sales growth trend, we will require additional funds to maintain and
          further
          improve our financial relationships with our main vendors and to fund growth
          in
          our trade receivables. The Chairman has loaned us $4,302,500 and is a
          co-borrower or has personally guaranteed $2,524,080 for added security
          on lines
          of credit, vendor accounts, and a note payable, which we are responsible
          to
          repay or otherwise settle. Based on the foregoing, the Company is anticipating
          raising monies during the fourth quarter of 2005 and first quarter of 2006,
          based on market conditions, through private placements of debt or equity,
          to
          obtain sufficient resources to meet its long term working capital requirements,
          debt service and other cash needs over the next twelve months or until
          we repay
          or settle the financial matters between us and the Chairman and become
          self
          sufficient with the cash received from our operating activities to operate
          our
          business without outside financial assistance. There can be no assurance
          that
          the Company will be able to obtain any funds, or if obtainable, on terms
          that
          are commercially feasible.
  A
            -
            16


**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. In evaluating these statements,
      some of the factors that you should consider include the following: (a)
      financial position and results of operations, including SG&A expense targets
      and effects on income from continuing operations; (b) cash position and cash
      requirements, including the sufficiency of our cash requirements for the next
      twelve months; (c) sales and margins; (d) sources, amounts, and concentration
      of
      sales; (e) costs and expenses; (f) accounting estimates, including treatment
      of
      goodwill and intangible assets, doubtful accounts, inventory, restructuring,
      and
      warranty, and product returns; (g) operations, supply chain, quality control,
      and manufacturing supply, capacity, and facilities; (h) products and services,
      price of products, product lines, and product and sales channel mix; (i)
      relationship with customers, suppliers and strategic partners; (j) raw material
      variations, substrate preparation, application specifications, operator
      techniques, and ambient weather fluctuations; (k) acquisition and disposition
      activity; (l) credit facility and ability to raise capital; (m) real estate
      lease arrangements; (n) global economic, social, and geopolitical conditions;
      (o) industry trends and our response to these trends; (p) tax position and
      audits; (q) cost-reduction efforts, including workforce reductions, and the
      effect on employees; (r) sources of competition; (s) protection of intellectual
      property; (t) outcome and effect of current and potential future litigation;
      (u)
      research and development efforts; (v) future lease obligations and other
      commitments and liabilities; (w) common stock, including trading price; (x)
      security of computer systems; and (y) changes in accounting policies and
      practices. We do not plan to update any such forward-looking statements and
      expressly disclaim any duty to update the information contained in this report
      except as required by law.





**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
        Securities and Exchange Commission’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 us 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. 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 the 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 September 30, 2005, 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 controls operate at a level appropriate
        to provide reasonable assurance for certain matters. A material weakness
        existed. The material weakness identified originated with the period immediately
        following the Company’s discontinuance of the operations of its RSM Subsidiary
        on November 5, 2004. The CFO that was originally responsible for the preparation
        of the financial statements and related notes for the quarter and year ended
        December 31, 2004 resigned on February 14, 2005 for title purposes and February
        28, 2005 for employment purposes. A new CFO was retained on February 25,
        2005.
        The new CFO reviewed and completed the worksheets relating to the evaluation
        of
        our disclosure controls and procedures. The CEO reviewed and approved the
        completed evaluation report. The Company also made an acquisition on February
        11, 2005. All of the changes in this report, as amended, requiring
        reclassifications, restatements, as well as other changes, pertain to knowledge
        and experience concerning the application of certain accounting principles.
        The
        material weakness as identified highlights the need to train accounting and
        executive personnel regarding the application of appropriate accounting
        principles for SEC reporting and for succession. The actions that the Company
        has taken to correct this material weakness include but are not limited to:
        (a)
        training of the CEO concerning the tools that are used to prepare and review
        financial statements and related disclosures and the application of certain
        accounting principles; (b) enhancement of the hiring practices of the Company
        to
        seek where practicable CFOs that have prior SEC reporting experience as a
        prerequisite for that position; (c) a training program has been initiated
        for
        all accounting personnel at various levels to facilitate accurate and punctual
        reporting; (d) the hiring of our current CFO with prior SEC reporting
        experience; and (e) an increase in the number of accounting related personnel
        as
        deemed required. The Company believes the material weakness identified above
        has
        been corrected. There were no changes in our internal controls during the
        third
        quarter of 2005. There were significant changes in our internal controls
        or in
        other factors after the end of the third quarter of 2005 as described above.
        There have been no significant changes in our internal controls or in other
        factors that could significantly affect the internal controls subsequent
        to the
        date of this amended report.


A
          -
          17


**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, 2004 and
      Part II, Item 1 in our Quarterly Reports on Form 10-Q for the quarters
      ended March 31, 2005 and June 30, 2005, as may be amended from time to
      time, are hereby incorporated in their entirety herein by this
      reference.





V *arious
      Lawsuits and Claims Arising in the Ordinary Course of Business*





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
                2.**
            **Changes
                in Securities and Use of
                Proceeds.**





**Recent
      Sales of Unregistered Securities**





During
      the quarterly period ended September 30, 2005, we issued restricted common
      stock
      for a certain private transaction, in reliance on Section 4(2) of the Act,
      as
      described below:





(a) On
      July
      12, 2005, we issued an aggregate of 8,000 shares of restricted common stock
      to
      our CEO, originally scheduled to vest in 4,000 share increments at the end
      of
      the third and fourth quarters of 2005 as other compensation, pursuant to his
      employment agreement, which were valued and recorded at $5,360.





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





None.





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





An
      Information Statement was provided to all of our stockholders to comply with
      the
      requirements of Section 14(c) of the Securities Exchange Act of 1934, as
      amended, and to provide information to all stockholders in connection with
      actions by written consent taken on July 12, 2005 by certain stockholders
      collectively owning 75.06% of our outstanding shares of common stock as of
      the
      record date of July 11, 2005. Such action constituted the approval and consent
      of stockholders representing a sufficient percentage of the total outstanding
      shares of common stock to approve the proposed Equity Incentive Plan.
      Accordingly, the actions were not submitted to our other stockholders for a
      vote. The written consent became effective on August 31, 2005.





**Item 5.**
            **Other
                Information.**





None.




**Item
                6.**
            **Exhibits.**




***See*** Index of
        Exhibits on Page A-20.




A
          -
          18


**SIGNATURES**




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




**LAPOLLA
                  INDUSTRIES, INC.**Date:  
                  March 27, 2006
              By:
              /s/
                  Michael T. Adams, CEOMichael
                  T. AdamsCEO**LAPOLLA
                  INDUSTRIES, INC.**Date:March
                  27, 2006
              By:
              /s/
                  John A. Campbell, CFOJohn
                  A. CampbellCFO
                  and Treasurer


A
          -
          19





**INDEX
      OF EXHIBITS**





**Exhibit**
                **Number**
              
              **Description**31.1
              
              Certification
                  of Principal Executive Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.31.1/A
              
              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 2002.31.2/A
              
              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 2002.32/A
              
              Certification
                  of Principal Executive Officer and Principal Financial Officer
                  pursuant to
                  § 906 of Sarbanes-Oxley Act of
                  2002.




A
      -
      20