| Section 16 Filings Only |
|
LAPOLLA
INDUSTRIES, INC.
NOTES
TO FINANCIAL STATEMENTS
(continued)
Note
4. Inventories.
The
following is a summary of inventories for the years ending December
31:
|
|
|
2008
|
|
|
2007
|
|
|
Raw
Materials
|
|
$ |
1,850,850 |
|
|
$ |
880,616 |
|
|
Finished
Goods
|
|
|
2,914,087 |
|
|
|
1,817,481 |
|
|
Total
|
|
$ |
4,764,937 |
|
|
$ |
2,698,097 |
|
Note
5. Property, Plant and Equipment.
The
following is a summary of property, plant and equipment for the years ending
December 31:
|
|
|
2008
|
|
|
2007
|
|
Estimated
Useful Life
|
|
Vehicles
|
|
$ |
604,507 |
|
|
$ |
381,714 |
|
5
Years
|
|
Leasehold
Improvements
|
|
|
137,878 |
|
|
|
67,910 |
|
13
– 15 Years
|
|
Office
Furniture and Equipment
|
|
|
191,000 |
|
|
|
161,733 |
|
3 –
7 Years
|
|
Computers
and Software
|
|
|
632,854 |
|
|
|
560,777 |
|
3 –
5 Years
|
|
Machinery
and Equipment
|
|
|
2,094,163 |
|
|
|
2,079,069 |
|
3 –
20 Years
|
|
Plant
Construction in Progress
|
|
|
158,750 |
|
|
|
140,116 |
|
|
|
Total
Property, Plant and Equipment
|
|
$ |
3,819,152 |
|
|
$ |
3,391,319 |
|
|
|
Less:
Accumulated Depreciation
|
|
|
(1,195,764 |
) |
|
|
(765,251 |
) |
|
|
Total
Property, Plant and Equipment, Net
|
|
$ |
2,623,388 |
|
|
$ |
2,626,068 |
|
|
Depreciation
expense for the years ended 2008 and 2007 was $430,717 and $245,526,
respectively.
Note
6. Dependence on Few Suppliers.
The
Company is dependent on a few suppliers for certain of its raw materials and
finished goods. For 2008, 2007 and 2006, raw materials and finished goods
purchased from the Company’s three largest suppliers accounted for approximately
43%, 28%, and 56%, of purchases, respectively.
Note
7. Asset Purchase Agreement.
Air-Tight
Marketing and Distribution, Inc.
On July
1, 2008, Lapolla entered into and closed an Amended and Restated Asset Purchase
Agreement (“Asset Purchase Agreement”) with Air-Tight Marketing and
Distribution, Inc., a Georgia corporation (“AirTight”) and its stockholders,
Larry P. Medford and Ted J. Medford (“Shareholders”), wherein the Company agreed
to pay $1,500,000 in cash, issue 2,000,000 shares of restricted common stock,
par value $.01, valued at $1,480,000 (calculated from the number of shares times
the Lapolla closing price per share of $.74 on the date of closing), and forgive
an outstanding trade receivable balance of $1,419,649 due from AirTight on the
date of the closing, in exchange for certain assets and liabilities of AirTight.
The Company paid $100,000 in cash at closing and issued a promissory note
totaling $1,400,000 to AirTight and the AirTight Shareholders, payable in
installments on the last day of each calendar year until paid in full by
December 31, 2012. Lapolla undertook efforts to audit the financial
statements of AirTight in accordance with SEC rules and prior to completion of
the audit determined based on the preliminary findings that certain adjustments
needed to be made to the AirTight financial statements as originally presented
to Lapolla. Lapolla notified the AirTight Shareholders of the adjustments and
recorded a purchase price reduction equal to the amount due under the Promissory
Note in accordance with the Asset Purchase Agreement and Promissory Note.
Lapolla purchased AirTight’s customer base which includes commercial and
residential spray foam insulation contractors. The basic assets purchased from
AirTight include, but are not limited to, trademarks, customer list, Shareholder
non-competes, inventories, equipment, accounts receivable, and goodwill. The
results of AirTight’s operations have been included in Lapolla’s financial
statements since July 1, 2008. See also
Note 14 – Commitments and Contingencies. The following table summarizes the
components of the adjusted AirTight purchase price at:
|
|
|
July
1, 2008
|
|
|
Cash
|
|
$ |
100,000 |
|
|
Promissory
Note
|
|
|
1,400,000 |
|
|
Purchase
Price Reduction
|
|
|
(1,400,000 |
) |
|
Restricted
Common Stock
|
|
|
1,480,000 |
|
|
Forgiven
Lapolla Accounts Receivable
|
|
|
1,419,649 |
|
|
Total
|
|
$ |
2,999,649 |
|
|
|
Prior SEC Filings are through the
SEC EDGAR SERVICE.
|
