EX-99.2/A-2 2 ex99_2.htm EXHIBIT 99.2/A-2 Exhibit 99.2/A-2

Exhibit 99.2/A-2
 

 
 
UNAUDITED PRO FORMA


CONSOLIDATED FINANCIAL INFORMATION

FOR

LAPOLLA INDUSTRIES, INC.
(F/K/A IFT CORPORATION AND SUBSIDIARIES)

AND

THE LAPOLLA SUBSIDIARY
(F/K/A LAPOLLA INDUSTRIES, INC.)

 
LAPOLLA INDUSTRIES, INC.
(F/K/A IFT CORPORATION AND SUBSIDIARIES)
AND
THE LAPOLLA SUBSIDIARY
(F/K/A LAPOLLA INDUSTRIES, INC.)
INDEX TO UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION

 
Page
 
 
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
PF/A-2-1
 
 
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
PF/A-2-2
 
 
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
PF/A-2-3
 
 
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
PF/A-2-4
 
i

LAPOLLA INDUSTRIES, INC.
(F/K/A IFT CORPORATION AND SUBSIDIARIES)
AND
THE LAPOLLA SUBSIDIARY
(F/K/A LAPOLLA INDUSTRIES, INC.)
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

On January 25, 2005, LaPolla Industries, Inc. (f/k/a IFT Corporation and subsidiaries), a Delaware corporation (the “Company”), entered into a Stock Purchase Agreement with the LaPolla Subsidiary (f/k/a LaPolla Industries, Inc.), a privately held Arizona corporation and Billi Jo Hagan, Trustee of the Billi Jo Hagan Trust dated October 6, 2003, wherein the Company agreed to pay $2 Million in cash and shares in exchange for 100% of the issued and outstanding capital stock of the LaPolla Subsidiary. On February 11, 2005, the parties entered into an Amendment to Stock Purchase Agreement and Closing Statement to close the transaction. The acquisition of the LaPolla Subsidiary was accounted for using the purchase method of accounting. The LaPolla Subsidiary is located in Tempe, Arizona and has 10 employees. The LaPolla Subsidiary has provided quality products and roofing solutions to contractors, building owners and design professionals in the Southwestern United States for over 20 years.

The following unaudited pro forma consolidated balance sheets are based on the historical financial statements of the Company as of December 31, 2004 and the LaPolla Subsidiary as of October 31, 2004, after giving effect to the Company’s acquisition of the LaPolla Subsidiary, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma consolidated financial statements, as if it occurred on December 31, 2004.

The unaudited pro forma consolidated statements of operations of the Company and the LaPolla Subsidiary for the years ended December 31, 2004 and October 31, 2004, respectively, are presented as if the acquisition had taken place on January 1, 2004.

The column headed "LaPolla Subsidiary" in the unaudited pro forma statement of operations gives effect to the revenues and expenses of the acquisition for the periods being reported, and was not included in our historical financial statements.

The pro forma financial data are based upon assumptions and include adjustments as explained in the notes to the unaudited pro forma financial statements, and the actual recording of the transactions could differ. The unaudited pro forma financial data are not intended to represent or be indicative of the consolidated results of operations or financial position of the Company that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations of the Company.

The unaudited pro forma financial data have been included as required by the rules of the Securities and Exchange Commission and are provided for comparative purposes only. The unaudited pro forma financial data presented are based upon the historical consolidated financial statements of the Company and the LaPolla Subsidiary and should be read in conjunction with the historical consolidated financial statements and accompanying notes of the Company included in its annual reports on Form 10-K and quarterly reports on Form 10-Q, as may be amended from time to time.

PF/A-2-1

LAPOLLA INDUSTRIES, INC.
(F/K/A IFT CORPORATION AND SUBSIDIARIES)
AND
THE LAPOLLA SUBSIIDIARY
(F/K/A LAPOLLA INDUSTRIES, INC.)
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS


   
 
 
 
 
Pro Forma Adjustments
 
 
 
 
 
Company December 31, 2004
 
LaPolla Subsidiary October 31, 2004
 
Net Assets Not Acquired
 
Acquisition Funding/
Adjustments
 
Pro Forma Consolidated
  
ASSETS
                      
Current Assets
                      
Cash
  
$
24,465
  
$
—
  
$
—
  
$
—
  
$
24,465
  
Accounts Receivable, Net
    
691,926
    
1,334,326
    
—
    
—
    
2,026,252
  
Inventories
    
267,995
    
294,415
    
—
    
—
    
562,410
  
Deferred Tax Benefit
    
—
    
60,000
    
—
    
(60,000)
(E)
  
—
  
Prepaid Expenses and Other Current Assets
    
41,053
    
25,353
    
—
    
—
    
66,406
  
Current Portion of Assets of Discontinued Operations
    
438
    
—
    
—
    
—
    
438
  
Total Current Assets
    
1,025,877
    
1,714,094
    
—
    
(60,000)
 
  
2,679,971
  
 
                      
Property, Plant and Equipment
                      
Land
    
—
    
92,169
    
(92,169)
(A)
  
—
    
—
  
Building and Improvements
    
—
    
424,719
    
(424,719)
(A)
  
—
    
—
  
Plant and Equipment
    
595,852
    
171,394
    
(48,581)
(A)
  
—
    
718,665
  
Less: Accumulated Depreciation
    
(308,068
)
  
(149,600
)
  
64,429
(A)
  
—
    
(393,239
)
Net Property, Plant and Equipment
    
287,784
    
538,682
    
(501,040)
 
  
—
    
325,426
  
 
                      
Other Assets
                      
Intangibles
    
—
    
—
    
—
    
207,706
(C)
  
207,706
  
Acquisition Goodwill
    
774,000
    
—
    
—
    
1,102,530
(C)
  
1,876,530
  
Deposits and Other Non Current Assets
    
56,471
    
—
    
—
    
—
    
56,471
  
Total Other Assets
    
830,471
    
—
    
—
    
1,310,236
    
2,140,707
  
 
                      
Total Assets
  
$
2,144,132
  
$
2,252,776
  
$
(501,040)
 
$
1,250,236
  
$
5,146,104
  
 
                      
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                                
 
                      
Current Liabilities
                      
Accounts Payable
  
$
1,126,847
  
$
832,517
  
$
—
  
$
—
  
$
1,959,364
  
Accrued Expenses and Other Current Liabilities
   
471,008
    
144,822
    
—
    
—
    
615,830
  
Bank Overdraft
    
—
    
84,633
    
—
    
—
    
84,633
  
Lines of Credit
    
219,152
    
—
    
—
    
—
    
219,152
  
Loans Payable - Related Parties
    
5,670,000
    
244,989
    
(244,989)
(A)
  
2,000,000
   
7,670,000
  
Current Portion of Long Term Debt
    
24,582
    
511,225
    
(511,225)
(A)
        
24,582
  
Current Portion of Liabilities from Discontinued Operations
    
1,220,485
    
—
    
—
    
—
    
1,220,485
  
Total Current Liabilities
    
8,732,074
    
1,818,186
    
(756,214)
 
  
2,000,000
    
11,794,046
  
 
                      
Other Liabilities
                      
Non Current Portion of Long Term Debt
    
14,243
    
—
    
—
    
—
    
14,243
  
Non Current Portion of Liabilities from Discontinued Operations
    
525,000
    
—
    
—
    
—
    
525,000
  
Reserve for Litigation
    
15,000
    
—
    
—
    
—
    
15,000
  
Total Other Liabilities
    
554,243
    
—
    
—
    
—
    
554,243
  
                                 
Total Liabilities
    
9,286,317
    
1,818,186
    
(756,214)
 
  
2,000,000
    
12,348,289
  
 
                      
Stockholders’ Equity (Deficit)
                      
Preferred Stock, $1.00 Par Value:
                      
Series A Convertible
    
55,035
    
—
    
—
    
—
    
55,035
  
Common Stock, $.01 Par Value
    
320,144
    
91,563
    
—
    
(91,563)
(D)
  
320,144
  
Additional Paid-In Capital
    
53,625,390
    
—
    
255,174
(A)
  
(315,174)
(D)(E)
  
53,565,390
  
Accumulated Earnings (Deficit)
    
(61,142,754
)
  
343,027
    
—
    
(343,027)
(D)
  
(61,142,754
)
Total Stockholders' Equity (Deficit)
    
(7,142,185
)
  
434,590
    
255,174
    
(749,764)
_____
  
(7,202,185
)
 
                      
Total Liabilities and Stockholders' Equity
  
$
2,144,132
  
$
2,252,776
  
$
(501,040)
 
$
1,250,236
  
$
5,146,104
  
 
The accompanying notes are an integral part of the financial statements.
 
PF/A-2-2

LAPOLLA INDUSTRIES, INC.
(F/K/A IFT CORPORATION AND SUBSIDIARIES)
AND
THE LAPOLLA SUBSIIDIARY
(F/K/A LAPOLLA INDUSTRIES, INC.)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS


   
 Company
Year Ending December 31, 2004
  
 LaPolla
Subsidiary
Year Ending October 31,
2004
  
 Pro Forma Expenses
  
Pro Forma Income (Loss)
  
Revenue
  
$
2,564,163
  
$
7,797,765
  
$
—
  
$
10,361,928
  
 
                  
Cost of Sales
    
2,091,931
    
6,667,172
    
—
    
8,759,103
  
                           
Gross Profit
    
472,232
    
1,130,593
    
—
    
1,602,825
  
 
                  
Operating Expenses
    
2,707,495
    
1,379,514
    
113,967
(G)(I)
  
4,200,976
  
 
                  
Net (Loss) before Other Income (Expense) and Provision for Income Taxes
    
(2,235,263
)
  
(248,921
)
  
(113,967)
 
  
(2,598,151
)
 
             _____    
Other Income (Expense)
                  
Customer Finance Charges
    
—
    
107,445
    
—
    
107,445
  
Interest Income
    
—
    
1,157
    
—
    
1,157
  
Interest (Expense)
    
(391,912
)
  
(33,831
)
  
(180,000)
(F)
  
(605,743
)
Total Other Income (Expense)
    
(391,912
)
  
74,771
    
(180,000)
 
  
(497,141
)
 
                  
Net Income (Loss) before Provision for Income Taxes
    
(2,627,175
)
  
(174,150
)
  
(293,967)
 
  
(3,095,292
)
 
                  
Provision (Benefit) for Income Taxes
    
—
    
(60,000
)
  
60,000
(H)
  
—
  
 
                  
Net Income (Loss) - Continuing Operations
  
$
(2,627,175
)
$
(114,150
)
$
(353,967)
 
$
(3,095,292
)
 
                  
Net (Loss) Per Share-Basic and Diluted-Continuing Operations
  
$
(0.091
)
        
$
(0.107
)
 
                  
Weighted Average Shares Outstanding
    
28,866,604
            
28,866,604
  

The accompanying notes are an integral part of the financial statements.
 
PF/A-2-3

LAPOLLA INDUSTRIES, INC.
(F/K/A IFT CORPORATION AND SUBSIDIARIES)
AND
THE LAPOLLA SUBSIIDIARY
(F/K/A LAPOLLA INDUSTRIES, INC.)
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

On February 11, 2005, the Company completed the acquisition of the LaPolla Subsidiary. Under the terms of the agreement, the purchase price paid at closing for the LaPolla Subsidiary was $2 Million in cash and a nominal number of shares of restricted common stock. The acquisition was accounted for using the purchase method of accounting. The acquisition was a strategic opportunity for the Company to become an industry leader in the roof coating industry. The transaction was funded through borrowings from our Chairman of the Board.

Assumptions underlying the pro forma adjustments necessary to present this pro forma information are described in notes herein. Discontinued operations and the related (loss) per share data have been excluded from the presentation of the unaudited pro forma consolidated statements of operations pursuant to applicable law.

The following pro forma adjustments are included in the unaudited pro forma consolidated balance sheets:

 
A.
Assets and liabilities retained by shareholder, not transferred.

 
B.
$2 Million loan from related party, at 9% per annum, to purchase the LaPolla Subsidiary.

 
C.
The estimated purchase price and preliminary adjustments to the value of the LaPolla Subsidiary, as a result of the acquisition, are as follows:

Estimated Value of Cash and Common Stock Issued
  
$
2,000,000
  
Value of Net Assets Acquired (*)
    
(689,764
)
Customer List
    
(69,235
)
Product Formulation
    
(138,471
)
Total Estimated Goodwill
  
$
1,102,530
  

(*) For the net current and fixed assets acquired, the book value approximated fair market value at acquisition.

 
D.
Acquisition equity eliminations.

 
E.
Elimination of deferred tax benefit of acquired company.

The following pro forma adjustments are included in the unaudited pro forma consolidated statement of operations:

 
F.
Interest on $2,000,000 acquisition debt at 9%.

 
G.
New annual rent expense $100,692, net of depreciation of $9,803 on assets not acquired.

 
H.
Elimination of deferred tax benefit of acquired company.

 
I.
Annual amortization of customer list ($13,847 for 5 years) and product formulation ($9,231 for 15 years)
 
 PF/A-2-4