LAPOLLA
INDUSTRIES, INC.
NOTES
TO FINANCIAL STATEMENTS
(continued)
Note
12. Related Party Transactions -
continued.
(b) On
June 30, 2008, pursuant to the Loan Agreement, the Chairman of the Board and
majority stockholder converted $2,000,000 in principal of the short term loans
he advanced to the Company during the second quarter of 2008 into 2,564,103
shares of restricted common stock at the rate of $.78 per
share. See Note
10. Revolving Credit and Term Loan Agreement and Related Agreements,
Item (d).
(c) On
May 5, 2008, the Company granted to its CEO and President an additional
2,000,000 stock options under the Company’s Equity Incentive Plan, as amended
(“Plan”), for the purchase of common stock, at an exercise price of $.74 per
share (100% of closing price) which vests in 250,000 option increments, with the
first increment vesting on the earlier of June 30, 2008, provided the Company
has net pre-tax income for the fiscal quarter ending on that date, or the last
day of the Company’s first fiscal quarter ending after June 30, 2008 for which
the Company has a quarterly profit, and each of the remaining increments on the
last day of each the next seven fiscal quarters for which the Company has a
quarterly profit, and once vested, is exercisable on an inclining cumulative
basis over a four year period, subject in all cases to continued satisfactory
employment through the last day of each such quarter, and expiring December 31,
2013 (“New Option”). The New Option amended existing stock options previously
granted on July 12, 2005 also for 2,000,000 shares, at an exercise price of $.67
per share (100% of closing price), and expiring December 31, 2012 (“Existing
Option”). There were 1,520,000 options remaining unvested under the Existing
Option, all of which automatically vested when the New Option was granted on May
5, 2008, resulting in the Company recording the remaining fair value of $258,371
on said date.
Note
13. Deferred Income Taxes.
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities, for financial reporting purposes,
and amounts used for Federal income tax purposes. Significant components of the
Company's continuing operations deferred tax asset at December 31:
|
|
|
2008
|
|
|
2007
|
|
|
Deferred
Tax Assets:
|
|
|
|
|
|
|
|
Net
Operating Loss Carry-Forward
|
|
$ |
39,000,000 |
|
|
$ |
36,000,000 |
|
|
Statutory
Tax Rate
|
|
|
34 |
% |
|
|
34 |
% |
|
Total
Deferred Tax Assets
|
|
|
13,260,000 |
|
|
|
12,240,000 |
|
|
Valuation
Allowance for Deferred Tax Assets
|
|
|
(13,260,000 |
) |
|
|
(12,240,000 |
) |
|
Net
Deferred Taxes
|
|
$ |
— |
|
|
$ |
— |
|
At
December 31, 2008, the Company had available, net current operations operating
loss carry-forwards of approximately $39,000,000 for Federal income tax
purposes. The loss carry-forwards, if not used, will expire between 2017 through
2028. Utilization by the Company is subject to limitations based on the
Company's future income and pursuant to section 382 of the Internal Revenue
Code, the usage of some of these net operating loss carry-forwards may be
limited due to changes in ownership that have occurred or may occur in the
future.
Note 14. Commitments and
Contingencies.
Leases
The
Company has operating leases as follows:
|
Location
|
Description
of Operations
|
Terms
|
|
Houston,
Texas
|
Corporate,
Sales, Marketing, Customer Service, Manufacturing, and
Distribution
|
09-01-2005
to 12-31-2010
|
|
Tempe,
Arizona
|
Customer
Service and Distribution
|
11-01-2006
to 02-28-2010
|
|
Rutledge,
Georgia
|
Customer
Service, Distribution, and Spray Rig Assembly
|
07-01-2008
to 12-31-2012
|
The
Houston, Texas and Tempe, Arizona leases include a lease concession which amount
is included as part of the aggregate minimum lease payments and recognized on a
straight-line basis over the minimum lease term.
Future
minimum lease payments required under the non-cancelable operating leases for
the years ending December 31:
|
Year
|
|
Amount
|
|
|
2009
|
|
$ |
478,427 |
|
|
2010
|
|
|
343,521 |
|
|
2011
|
|
|
84,000 |
|
|
2012
|
|
|
84,000 |
|
|
Total
Minimum Lease Payments
|
|
$ |
989,948 |
|
Rent
expense for the years ended December 31, 2008 and 2007 was $530,377 and
$523,893, respectively.
