UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K


(Mark
One)


x     ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended: December
31, 2009




 ̈   
 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934





For the
transition period from ________ to ________





Commission
file number: 000-52769





VINYL PRODUCTS, INC.


(Name of
Small Business Issuer in its charter)





Nevada
                26-0295367(State
      or other jurisdiction of Identification No.)
                (I.R.S.
      Employer incorporation or
organization)





2210 South Ritchey
      Street, Santa Ana, California
              92705(Address
      of principal executive offices)
              (Zip
      Code)





Registrant’s
telephone number, including area code: (714)
210-8888





Securities
registered under Section 12(b) of the Exchange Act:





None





Securities
registered under Section 12(g) of the Exchange Act:





Common Stock, par value
$0.0001 per share


(Title
of Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


 ̈Yes x No





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. ̈  Yes   x  No





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 (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


x  Yes    ̈  No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


 ̈  Yes   x  No





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.


 ̈  Yes   x  No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer    ̈
            Accelerated
      filer      ̈Non-accelerated
      filer      ̈
            Smaller
      reporting company     x(Do
      not check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


 ̈  Yes   x  No





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.    $2,764,200





APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:





Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. ̈  Yes    ̈  No





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date. At April 8, 2010 there were 22,864,200
shares of common stock outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE


None





TABLE
OF CONTENTS





FORWARD-LOOKING STATEMENTS
                                                                  iiPART I
                                                                  1Item 1. Description of
    Business
                                                                  1Item 1A. Risk Factors.
                                                                  13Item 2. Properties.
                                                                  21Item 3. Legal Proceedings.
                                                                  21Item 4. Reserved
                                                                  21PART II
                                                                  21Item 5. Market for Registrant’s Common Equity,
      Related Stockholder Matters and Issuer Purchases of Equity
      Securities.
                                                                  21Item 6. Selected Financial
      Data.
                                                                  22Item 7A. Quantitative and Qualitative Disclosures
      About Market Risk.
                                                                  30Item 8. Financial Statements and Supplementary
      Data.
                                                                  31Item 9. Changes in and Disagreements With
      Accountants on Accounting and Financial Disclosure.
                                                                  32Item 9A. Controls and
      Procedures.
                                                                  32Item 9B. Other Information.
                                                                  35PART III
                                                                  35Item 10. Directors, Executive Officers and
      Corporate Governance.
                                                                  35Item 11. Executive
      Compensation.
                                                                  38Item 12. Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder
    Matters.
                                                                  40Item 13. Certain Relationships and Related
      Transactions, and Director Independence.
                                                                  40Item 7. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations.
                                                                  22Item 14. Principal Accounting Fees and
      Services.
                                                                  42PART IV
                                                                  42Item 15. Exhibits, Financial Statement
      Schedules.
                                                                  42SIGNATURES
                                                                  45


i


FORWARD-LOOKING
STATEMENTS




This
Annual Report on Form 10-K and the documents incorporated by reference into the
Annual Report on Form 10-K include forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.  These forward-looking statements can be
identified by the use of forward-looking terminology, including the words
“believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,”
“will,” “potential,” “continue,” or “should,” or, in each case, their negative
or other variations or comparable terminology.  We believe that the
expectations reflected in such forward-looking statements are
accurate.  However, we cannot assure you that such expectations will
occur.  Our actual results, performance, or outcomes could differ
materially from those expressed or implied in the forward-looking
statements.  Factors that could cause or contribute to such
differences include, but are not limited to:





·
              an
      interruption in supply from our sole vendor of vinyl
    products;


·
              our
      lack of product
diversification;


·
              a
      change in consumer preferences away from outdoor products manufactured
      from vinyl;


·
              the
      sensitivity of our industry to prevailing national economic
      conditions;


·
              our
      inability to develop a successful franchise
  program;


·
              the
      ability of prospective franchisees to obtain credit to finance the
      purchase of franchises from
us;


·
              the
      failure of our franchise operations to generate the revenues we expect or
      the need to subsidize our franchise
operations;


·
              our
      ability to raise capital if necessary to fund the development of our
      franchise program or for other corporate
  purposes;


·
              competition
      from one or more other companies that seek to develop national vinyl
      products chains;


·
              our
      ability to retain our officers, directors, key personnel, and
      management;


·
              our
      inability to manage growth;
and


·
              the
      other factors set forth under “Risk Factors” included in this Annual
      Report.




In
addition, the Company’s views about the restatement of our historical financial
statements and the effectiveness of our remediation of material weaknesses in
our controls also constitute “forward-looking statements.”





We
caution you that the foregoing list of important factors is not
exclusive.  You should not rely on these forward-looking statements,
which speak only as of the date of this Annual Report.  We operate in
a very competitive environment.  New risks emerge from time to
time.  It is not possible for our management to predict all risks, nor
can we assess the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements we may
make.  Except as required by law, we are not obligated to publicly
release any revisions to these forward-looking statements to reflect events and
circumstances occurring after the date of this Annual Report or to reflect the
occurrence of unanticipated events.





By their
nature, forward-looking statements involve risks and uncertainties because they
relate to events and depend on circumstances that may or may not occur in the
future.  We caution you that forward-looking statements are not
guarantees of future performance and that our actual results of operations,
financial condition and liquidity, and developments in the industry in which we
operate may differ materially from those made in or suggested by the
forward-looking statements contained in this Annual Report on Form
10-K.  In addition, even if our results of operations, financial
condition and liquidity, and developments in the industry in which we operate
are consistent with the forward-looking statements contained in this Annual
Report on Form 10-K, those results or developments may not be indicative of
results or developments in subsequent periods.


ii


PART
I





Item
1. Description of Business





Unless
the context otherwise requires, any reference to “the Company,” “we,” “us,” or,
“our” in this Annual Report on Form 10-K  refers to Vinyl Products,
Inc., a Nevada corporation, together with its wholly-owned subsidiary, The Vinyl
Fence Company, Inc., a California corporation, which we refer to individually as
"TVFC."





General





We market
and install a variety of aesthetically durable, low-maintenance vinyl products,
including fencing, patio covers, decking, railing and trim categories, for the
residential market.  Our products are used largely in renovation and
remodeling by our customers who include homeowners and homeowner
associations.  During 2009, fencing products represented approximately
56% of our gross income (revenue) and patio covers represented approximately 32%
of our gross income.





Development
of the Business





We
originally were incorporated under the name Red Oak Concepts, Inc. in the State
of Delaware on May 24, 2007 to serve as a vehicle for a business combination
through a merger, capital stock exchange, asset acquisition or other similar
business combination.  On October 9, 2007, our board of directors and
the holders of all of our outstanding shares of common stock approved a change
of domicile of the corporation by merging with a Nevada corporation titled Red
Oak Concepts, Inc.  The merger between the Delaware corporation and
the Nevada corporation was effective on December 4, 2007.





On August
15, 2007, we filed a registration statement on Form 10-SB to register our class
of common stock under the Exchange Act that became effective as of October 14,
2007.





On
November 20, 2008, we entered into the Share Exchange Agreement with TVFC and
all of its shareholders to acquire all of the outstanding shares of that
corporation's common stock in exchange for an aggregate of 22,100,000 shares of
our common stock, as described below.





On
November 21, 2008, we amended our articles of incorporation to change our name
to Vinyl Products, Inc.





TVFC was
organized under the laws of the State of California on April 18,
2003.  TVFC funded its organization and operations through founder
contributions.  In the spring of 2003, TVFC began marketing its
products to the public and in November 2003, it entered into a vinyl products
supply agreement with U.S. Polymers, Inc.  The principals of TVFC
began to formulate the sales and marketing plan currently employed by the
Company prior to organizing the Company and have continually refined their
approach based on carefully monitored results of marketing
activities.





TVFC
began generating revenues from operations and realized a net profit from
operations, exclusive of payments to shareholders, in its first year of
operations.





Through
2007, TVFC elected to be treated as a Subchapter S corporation under the
Internal Revenue Code of 1986, as amended (the "Code"), and all of its profits
were distributed to its shareholders as dividends.   The
shareholders of TVFC elected to convert the Company to a Subchapter C
corporation under the Code as of January 1, 2008.





The
Share Exchange





On
November 20, 2008, we entered into a Share Exchange Agreement with TVFC and its
shareholders to acquire all of the outstanding shares of that corporation's
common stock in exchange for an aggregate of 22,100,000 shares of our common
stock.  Upon the acquisition, TVFC became our wholly owned subsidiary
and we acceded to the business conducted by TVFC.


1


Under the
Share Exchange Agreement:





·
              we
      exchanged one share of our common stock for each outstanding common share
      of TVFC;





·
              we
      agreed to honor and assume options granted by TVFC to its employees to
      purchase up to 133,800 shares of common stock, which are exercisable at a
      price of $.50 per share through September 24,
  2010;





·
              the
      board of directors and management of our Company as of the date of the
      agreement resigned and appointed Gordon Knott and Garabed Khatchoyan ,
      each of whom serves as a director of TVFC, to serve on our board of
      directors and serve as the president and secretary of our Company,
      respectively;





·
              we
      agreed to amend our articles of incorporation to change our name to "Vinyl
      Products, Inc."; and





·
              the
      transaction was structured to qualify as a “tax-free transaction” under
      the Internal Revenue Code of
1986;





Other
Agreements of the Parties under the Share Exchange Agreement





In
addition to the transactions described above, the parties entered into the
following transactions as provided in or required by the Share Exchange
Agreement:





·
              On
      the closing of the share exchange, Susan Zachmann, Katherine Daniels and
      Barbara Deadwiley, the three holders of the Company's outstanding shares
      of common stock prior to the share exchange, returned an aggregate of
      300,000 shares of common stock to the treasury of the Company, so that
      after giving effect to the return of such shares, these persons owned an
      aggregate of 700,000 shares of our common
stock;





·
              Susan
      Zachmann and Katherine Daniels contributed to the capital of the Company
      all amounts of principal and interest due to them under promissory amounts
      evidencing loans made by each them to the Company in the principal amount
      of $14,950 ($29,950 of principal in the aggregate);
  and





·
              We
      agreed to register for public resale under the Securities Act pursuant to
      a registration rights agreement described below, an aggregate of 3,133,800
      shares of our common stock, including (i) 2,300,000 exchange shares; (ii)
      700,000 shares of our common stock held by holders thereof upon to the
      closing of the share exchange (representing all outstanding shares of
      common stock on such date prior giving effect to the issuance of the
      shares under the Share Exchange Agreement), subject to their entering into
      a Lock-Up/Leak Out Agreement, described below, and (iii) 133,800 shares of
      common stock issuable upon the exercise of options we assumed under the
      Share Exchange Agreement.  The holders 2,000,000 shares in the
      share exchange subsequently declined to cause the Company to register the
      shares they received.





On the
closing of the share exchange, we entered into a registration rights agreement
with the holders of the shares of common stock described in the foregoing
paragraph which governs the terms and conditions upon which we agreed to
register their shares of common stock and the shares of common stock issuable
upon exercise of the options for public resale under the Securities
Act.  We agreed to file such registration statement within 90 days of
the closing of the share exchange, subject to our right to withdraw or delay the
filing of the registration statement under certain circumstances without
penalty, and to pay all costs and expenses incident to such
registration.  We agreed to maintain the effectiveness of the
registration statement for a minimum of twelve months following its effective
date.  A more detailed discussion of the registration rights agreement
is set forth under the heading "Description of Securities – Registration
Rights."


2


Also on
the closing of the share exchange, we entered into a series of Lock Up/Leak Out
Agreements with the holders of an aggregate of 2,700,000 shares of our common
stock, which includes those persons who held all 700,000 outstanding shares of
our common stock prior to the closing of the share exchange and those holders of
TVFC's common stock who were not affiliates of TVFC on the date of the share
exchange with TVFC, who received a total of 2,000,000 shares of our common stock
in the share exchange.  Under the Lock Up/Leak Out Agreements, all
stockholders have agreed that (i) they will not sell or transfer any shares of
our common stock held as of the consummation of the share exchange until six
months after the effective date of the registration statement that includes
their shares to be filed pursuant to the Registration Rights Agreement (other
than to their affiliates, who must agree to the terms of the Lock Up/Leak Out
Agreement upon such transfer), and (ii) after the end of that six-month lock up
period, such persons (or their transferees) will not sell or transfer more than
1/36th of the
number of share of common stock originally owned by such person during each
month thereafter.





The Share
Exchange Agreement and the transactions described therein were approved by the
unanimous written consent of the respective boards of directors and stockholders
of our Company and TVFC.





For
accounting purposes, the share exchange transaction was treated as a reverse
acquisition with TVFC as the acquirer and Red Oak Concepts, Inc. as the acquired
party.  The accounting rules for reverse acquisitions require that
beginning November 20, 2008, the date of the reverse acquisition, our balance
sheet includes the consolidated assets and liabilities of TVFC and our equity
accounts were recapitalized to reflect the net equity of TVFC.  When
we refer in this Annual Report to business and financial information for periods
prior to the consummation of the reverse acquisition, we are referring to the
business and financial information of TVFC unless the context suggests
otherwise.





Our
Industry





In 2006,
the total demand for commercial and residential fencing in North America was
estimated to be over 1 billion linear feet of installed fence valued at over $6
billion.  In 2006, demand for residential fencing was estimated to be
nearly $3 billion of the total fence market value.





The
residential fencing market consists of five major fence styles: privacy, post
and rail, chain link, ornamental, and post and wire/wire
mesh.  Privacy fence is the most prevalent fence style installed in
the residential market, accounting for over 50% of total sales.  The
fencing market may be segmented among the four distinct material categories:
wood, metal, plastic and mineral-based or masonry
materials.  Currently, wood is the dominant construction material used
in residential fencing, followed by metal, together accounting for over 70% of
total fence sales.





Plastics
are relatively new materials in the fencing industry.  The dominant
plastic material is polyvinyl chloride, or vinyl, which was introduced to the
market in the late 1970s.  Vinyl achieved its product growth stage in
the early 1990s and demand for vinyl fence has grown steadily.  Market
acceptance of vinyl fence varies by region from over 30% penetration to less
than 5% penetration.  Vinyl post-and-rail fence has successfully
penetrated and displaced as much as 50% of wood in many regional
markets.  However, vinyl only has about a 16% share of the North
American privacy fence market.





In
addition to vinyl fence, other plastic-based fence materials include
polyethylene, polystyrene, polypropylene and wood-plastic
composites.  A recent study estimates demand for all plastic-based
fence materials in the North American residential market to be over $600 million
of the total market in 2006.





Management
believes that plastic-based fence will continue to grow in market share over the
next five years, with the most significant growth in demand for vinyl and for
new wood-plastic composite privacy fence.  It is expected that both
materials will be replacing wood.  While the new wood-plastic fence
products seem to have an edge over vinyl with respect to availability of a wide
range of darker colors and the look and texture of wood, which seem to be
preferable to consumers, plastic fence manufacturers have developed new privacy
fence products with embossed wood grain and earth tone colors as well as low
gloss to mimic wood.  Both vinyl and wood-plastic suppliers are
looking to take advantage of the growing consumer demand for low-maintenance,
non-shiny, plastic fence by tapping into the huge portion of the wood privacy
market that will not consider white vinyl as an option.





The
fencing industry in North America comprises: (i) manufacturers of fencing
products, including all of the product material groups, numbering in the
hundreds, (ii) distributors, including lumber yards and home centers that carry
wood and vinyl fencing and (iii) independent sellers, contractors and installers
of all sizes, such as our Company.  There are also numerous mail order
companies that focus on the do-it-yourself consumer.  Manufacturers
sell their products to all segments of the downstream supply
chain.  Home centers and lumber yards generally sell products to
contractors and homeowners.  Typically, homebuilders and home centers
subcontract the installation of fencing to contractors.  Most
product-specific retailer and general contractors install or arrange for
installation of products.


3


Given the number of manufacturers of residential fencing products, components
and systems in North America and the limited capital required to operate in our
space, the barriers to entering into the market are insignificant.  In
the retail space in which we operate, retailers that sell and install only
fence, decks and related products and in which marketing and sales are directed
to retail consumers, the market is typified by numerous small companies that
seek to gain market share only in their limited geographic operating
areas.  It is our experience that these entities typically employ
rudimentary marketing and advertising programs and tend to be concerned with
immediate product sales rather than building a business.  There are no
national chains dedicated exclusively to the retail sale and installation of
vinyl fencing and patio products, though we are aware of a company that is
seeking to build a regional presence in the Western portion of the U.S. by
acquiring local sellers/installers.





Recent studies suggest that certain trends are developing in the residential
fence industry that may directly or indirectly impact our business,
including:





·
            Pressure-treated
      lumber, the industry standard, is being challenged by new materials, such
      as vinyl and wood composites, that are available in colors and supported
      by extended warranties similar to other building
  products.


·
            With
      both contractors and homeowners faced with an array of new choices,
      branding is playing an increasingly important
  role.


·
            Time-pressed
      homeowners are expecting to do less routine maintenance, including fence
      painting and repair.


·
            Distributors
      are carrying a broader selection of fence and gates, and more brands than
      ever before.


·
            A
      modular approach to fence design and construction has made it easier for
      contractors to install more product in less
  time.


·
            New
      materials and their technical differences make distributor knowledge more
      important than ever for informing their
  customers.


·
            Manufacturers
      in other building products areas have adapted their proprietary material
      technologies to fence, which could signify the entry of larger
      participants into the industry, which could alter the market
      significantly.





During
periods of economic uncertainty, when spending on discretionary items is
reduced, many homeowners forego the purchase of new homes and choose to improve
their existing residences.  As the majority of our business is geared
to remodeling, we do not believe that our business is as sensitive to these
economic trends as the new home construction market.  We believe
renovation or the addition of fences, patio covers, decks and railings to
existing homes is an increasing trend and reflects an extension of the
home.  However, we are uncertain as to the effect tightening credit
and declining home values will have on our business, if any.





Strategy





We
are committed to enhancing profitability and cash flows through the following
strategies:





Maximizing Efficiency and
Profitability at our Existing Retail Locations:  We will examine all
facets of our operations at our existing retail facilities, including the number
of our sales and installation personnel and their duties and responsibilities,
to maximize operating efficiencies and achieve optimum
profitability.


4


Franchising:  We are
not aware of any participant in the exterior vinyl products industry that
operates on a national basis nor are we aware of any organization that is
seeking to establish a nation-wide presence in the exterior vinyl product
industry.  We believe that a significant opportunity exists to develop
a national franchise to establish our products and Company as a unique brand and
to exploit the anticipated increase in sales of outdoor vinyl
products.  We will seek to become the dominant participant in the sale
of exterior vinyl products on a national basis by developing a franchise program
that will utilize our well-conceived and sophisticated marketing and sales
program.  We believe that our marketing and sales program represents a
significant advancement compared to the techniques used by other retail sellers
in the industry and that our approach can be replicated successfully in any
geographic area.  A key element of our franchise program will be to
offer franchise opportunities for relatively small markets that will be priced
commensurate with the level of potential revenues that can be generated from
that market.  We believe that we will benefit from the economies of
scale derived from multiple franchises that will give us the opportunity to
deploy national advertising and promotional programs that are beyond the
financial and creative capabilities of other retail sellers of exterior vinyl
products.  The development of a successful franchise operation would
represent the possibility to compound revenue growth without requiring a
corresponding increase in infrastructure, which we expect would add to our
bottom line.  We believe that this will allow us to capture market
share and build strong consumer brand awareness, which eventually may serve as a
barrier to competitive entry to others on a national level.





Branding:  The
development of a successful franchise operation would give us the opportunity to
build and establish our Company and our products as national
brands.  We will not seek to develop or implement a campaign to
develop a brand but rather employ advertising and marketing strategies that
focus on product sales.  As our franchise base grows in size and
geographic scope, we believe that our products and Company name could develop
naturally into a national brand.  We believe that our franchise
program can provide the revenue to deploy a creative and sophisticated
advertising and marketing campaign that is atypical in our industry and beyond
the financial and creative means of other industry participants.





Our
Products and Services





We
offer a comprehensive line of aesthetically durable, low-maintenance
products.  We believe that the range and variety of our product
offerings allow consumers to design much of their outdoor living space using our
products.  Our products include:





·
            Fencing;


·
            Patio
      Covers;


·
            Decking;


·
            Gazebos;


·
            Railings;
      and


·
            Gates.





We
also sell the various hardware, accessories and other fixtures to finish the
products we install.





The
products we sell and install are manufactured from the highest quality polyvinyl
chloride.  The vinyl is "co-extruded," which maximizes strength and
durability and allows for the application of multiple surface layers to impart
specific properties such as ultra-violet (UV) absorption, soft touch, matted
finishes and energy reflection.  The manufacturer of our vinyl
products, U.S. Polymers, Inc., advises us that the vinyl is manufactured with
the highest UV inhibitors and Titanium DiOxide, a UV absorber that efficiently
transforms destructive UV light energy into heat, in the industry.





Our
products offer a number of significant advantages over wood in that they
eliminate many of wood’s major functional disadvantages, which include warping,
splitting and other damage from moisture.  Unlike wood, our products
are resistant to moisture damage, provide a splinter-free surface, do not rot
and are not subject to insect infestation.  These features eliminate
most of the on-going maintenance requirements associated with wood products and
contribute to a worry-free ownership experience.  Though initially
more expensive than comparable wood products, the durability and
maintenance-free characteristics of our products render them less costly than
wood over the life of the products.  Customers inform us that these
attributes contribute significantly to their selection of vinyl over products
manufactured from wood and other materials.





Vinyl
manufactured by U.S. Polymers carries a limited 30-year replacement
warranty.  In furtherance of our effort to provide the highest quality
purchasing and ownership experience, we offer a one- year limited warranty on
the installation workmanship.


5


Our
project designers/salesmen work closely with clients, first to educate them
about exterior vinyl product offerings, and then to develop customized designs
to satisfy virtually any preference and achieve a personalized feel and
appearance that reflects the home's architecture and customer's
personality.  The manner in which we deal with our customers and seek
to secure sales is closely associated with our marketing strategy, described
more fully below under the heading "Sales and Marketing."





Sales
generally are consummated either at our showroom, where we maintain samples of
virtually all of our products, or at the customer's
home.  Installation typically occurs six to eight weeks after
receiving the 50% deposit on an order, the balance being due upon
installation.  We work with a national bank to provide financing to
customers who require financial assistance.





Installation
is accomplished by a crew of two of our employees and generally is completed
within a day or two of commencement.





We
generally carry $100,000 to $150,000 of inventory to meet anticipated
requirements for installations that will occur during the ensuing two-week
period.





Sales
and Marketing





Our goal
is to position and brand our Company as the category leader and standard-bearer
in the outdoor vinyl product marketplace.  The strategy we have
implemented to achieve our goal closely unites our approach to marketing and
consumer sales with corporate branding and has application at the local store
level (our retail locations and potential future franchises) and on a national
corporate level.  Since our inception, we have carefully monitored the
various sales approaches to which consumers favorably respond and have made
deductions about buying patterns that we have incorporated into our sales and
marketing approach.





Our
principal retail showroom is located in Santa Ana, California, which also serves
as our corporate office, fabrication facility and warehouse.  During
February 2010, we opened a new showroom in Redondo Beach, California (Los
Angeles County), as we await the roll out of our franchise program.





Consumer
Sales





Strategy.





The home
is typically the largest capital purchase people make.  It is
management's experience that people are willing to invest the time and effort to
ensure they have made the right decision in connection with expenditures for
improvements and additions.  We have found that the average prospect
often takes in excess of six months to research a home-improvement project, such
as fencing, patio covers and decks, before seeking estimates and then taking
additional time before actually consummating the purchase.  Homeowners
may talk with numerous home centers, specialized retail distributors and
independent contractors before deciding what specific product to purchase and
from whom to make the purchase.  We also have found that in many cases
the lowest price point is not the foremost concern of consumers; rather, value
for the dollar (after a decision as to aesthetics) represents the most important
consideration.  In management's estimation, value can be measured as a
combination of the purchasing and ownership
experience.  Value-conscious consumers ultimately are seeking to
determine if their expectations have been met – asking if they received what
they were promised, from the product itself and its installation.





Our sales
efforts seek to connect with home owners' intrinsic desire to take the time to
make an informed, value-driven purchasing decision.  We employ an
educational and consultative approach to our initial contacts with
prospects.  We seek to strategically educate prospects as to exterior
vinyl products and the selection, purchasing and installation
process.   For example, we provide prospects with literature
compiled from third-party (neutral) consumer protection agencies, which we find
carries a tremendous amount of credibility with the prospect.  Through
this approach, we are able to discreetly reveal the multiple short-cuts that our
competitors (typically contractors) take to minimize their individual overhead
costs at the expense of the consumer, while highlighting the advantages of the
buying and ownership experience our Company provides.  It is our
experience that most contractors do not employ a systematic and effective
approach to properly educate prospects as to how to obtain the best value for
their money.  Consequently, there are no apparent differences among
contractors, which may result in purchasers opting for the lowest
bidder.


6


Our
approach differentiates us from other retail distributors of exterior vinyl
products because throughout the sales process we have taken the time and made
the effort to develop a relationship with a prospect and have avoided the
hard-sell pitch so prevalent in the home improvement industry.  When a
consumer makes a decision as to what product to purchase and from whom, it is
our intention that they feel as if they are making the most informed,
appropriate decision and receiving the best value for their
dollar.  We seek to establish good-will with prospects that takes them
through the consummation of the purchase and through the ownership
experience.  Management believes that the value-driven consumer
ultimately is willing to pay more for the product that offers peace-of-mind and
a stress-free purchasing and ownership experience.





Tactical
Implementation





We employ
virtually all media (other than television) to elicit interest in our Company,
including direct mail, print, roadside signage, tradeshows, a proactive referral
program and internet advertising.  Our advertisements and promotional
materials are designed to capture information from prospective purchasers with
each response to an advertisement or request for information.  Our
objective is to be aware of those prospects who may be considering making a
purchase and who are conducting their research and educating
themselves.  Once in our data base, we can continue to provide these
prospects with additional sales literature and purchasing incentives to shorten
the timeframe of their individual buying cycles.  As we provide
prospects with more information about our Company, we are afforded further
opportunities to differentiate our Company from our competitors by highlighting
our operational advantages.  We believe that we are the only vinyl
exterior product company in Southern California collecting this information
because our competitors are focused only on prospects who are prepared to
receive an estimate, which represents a smaller portion of the overall prospect
base.  Ultimately, it is our intention to close sales with prospects
before our competitors have an opportunity to bid on the job.





The
preponderance of our advertising budget currently is allocated to print
media.  However, we carefully track the cost-per-lead and cost-of-sale
for each individual advertising medium which allows us to strategically redirect
and adjust marketing and advertising dollars to the media that yield the highest
return on expenditures.  We will continue to systematically test the
effectiveness of direct mail, tradeshows, canvassing, pay-per-click, and other
online and off-line lead generation services to determine which are most
effective in generating revenue at any given time and adjust our efforts
appropriately.





We expect
to employ this technique as we seek to build our network of franchises, as
described below.  Our plan is to determine the message and mediums
that have proven to be effective in Orange County and utilize these as the
initial elements to conceive a marketing and advertising mix on a national basis
or within the geographic scope of our franchisees' locations.  In
addition, we may engage a marketing company to assist us to identify demographic
and cultural tendencies in each of the geographic areas in which we may have
franchises and develop appropriate marketing campaigns on behalf of our
franchisees.





Growth
Strategy





Franchising





We
believe that our business model can be replicated successfully throughout the
country and that the fundamental elements of our proprietary sales and marketing
technique, which we believe is sophisticated when compared to our direct
competitors, can be conveyed effectively through written materials and training
to motivated entrepreneurs.  We will seek to leverage our business
model by initiating a franchise organization and establishing our Company and
brand as the first national vinyl products retail chain.





We are
not aware of any participant in the exterior vinyl products industry that
operates on a national basis nor are we aware of any organization that is
seeking to establish a nation-wide presence.  We believe that a
significant opportunity exists for us to develop a national franchise to
establish our products and Company as a unique brand.  We believe that
our business approach and operating model encompasses many of the elements that
lend themselves to franchising, including that our business:


7


·
            incorporates
      a proprietary marketing system that can be replicated in other locations
      and that differentiates us from others in our
  industry;





·
            has
      a multi-year record of
profitability;





·
            has
      broad geographic appeal; and





·
            is
      relatively easy and inexpensive to
operate.





We
will seek to become the dominant participant in the sale of vinyl fencing and
patio covers on a national basis by developing a franchise program that will
utilize our well-conceived and sophisticated marketing and sales
program





The
franchise structure represents an attractive approach to growing our Company,
because it:





·
            will
      afford us access to investment capital without forcing us to cede control
      of our Company to new investors;





·
            ultimately
      may permit us to benefit from the economies of scale associated with
      larger organizations, such as by allowing us to enter into long-term/high
      volume contracts with suppliers which could reduce the cost of
      inventory;





·
            would
      give us the opportunity to deploy national advertising and promotional
      programs that are beyond the financial and creative capabilities of other
      direct competition;





·
            eventually,
      may provide us with the capacity to leverage our organization to develop a
      distribution network among our
franchisees;





·
            provide
      us with access to motivated entrepreneurs who have greater incentive than
      employees to operate their businesses successfully because they have a
      direct stake in the operation; and





·
            would
      represent the possibility to compound revenue growth without requiring a
      corresponding increase in infrastructure (if we outsource some of the
      franchise related services), which we expect would add to our bottom
      line.





Development
of Our Franchise Program





In
June 2009, we retained Franchise 123, Inc., which does business under the name
Frandocs, to serve as our franchise consultant.  Frandocs has been
providing a wide range of franchise-related consulting services to the business
community since 1980.  Our relationship with Frandocs entitles us to
utilize certain proprietary software under the terms of a license agreement and
to consult with its representatives regarding any issues relating to the
development of our franchise program for a period of twelve
months.  Thereafter, we may retain Frandocs on a fee basis to render
consulting services as necessary.





The
software we are licensing from Frandocs encompasses templates of all of the
documents required to develop a franchise program.  The forms were
developed and are frequently updated and vetted by franchise lawyers and comply
with the Federal Trade Commission regulations that became effective on July 1,
2008, the last substantive changes to the regulations.  The documents
required by the Federal Trade Commission comprise the Franchise Disclosure
Document, formerly known as the Uniform Franchise Offering Circular; the
franchise agreement and the exhibits thereto, including the personal guaranty by
franchisee, directory of franchise regulators, operations manual outline, list
of franchisees and financial statements.  The software also includes
templates of all documents required to establish the parameters of a franchise
that will be delivered by us to franchisees, such as operations manuals, royalty
payment forms, non-compete agreements, personnel manuals, procedures manuals and
employee manuals.   Also included is information pertaining to
state regulation of franchising, including states that require
registration.


8


Management
favors the template approach to completing the organizational document because
it has direct responsibility for the business-specific input required to
generate the documents.  Management believes that this approach will
conserve significant time and reduce organizational costs.





We have
substantially completed the  preparation of our franchise
documentation, though we have not yet established the program's parameters or
specific attributes.   We will be deliberate both in our
preparation of the documents to ensure that the documents satisfy federal
requirements and adequately communicate our franchise vision.  We will
work closely with our franchise consultant to establish appropriate guiding
principles relating to such matters as franchise sale cost; ongoing franchise
fees and royalties; franchise territories; franchise recruitment  and
the advertising approach we will take on behalf of our
franchisees.  We believe that we can complete the document preparation
process and develop a general program design over the next two-to-three
months.





From time
to time, we may seek to outsource ongoing franchise service requirements to
franchise operations professionals, which would allow us to maintain financial
control over our infrastructure and take advantage of the experience these
organizations have developed.  Services subject to outsourcing
include: operations management and quality control; advertisement placement and
media management; advertisement fund management; centralized print fulfillment;
franchise recruitment, franchise prospect qualification and franchise sales
management (coaching).  We will assess our requirements as we proceed
with the development of the program.





Initially,
we will seek to offer franchises in the State of California, one of fourteen
states that requires franchise registration, a process that entails filing our
offering documents with state regulators and obtaining approval before we can
offer franchises.  Until 2009, we were advised that the registration
and approval process in California extended over at least a nine-month period,
and possibly longer, in the State's effort to protect its residents from
fraudulent franchise operators.  We are advised by Frandocs that
California recently took action to substantially reduce the time frame in which
it will grant registration.  We expect to be registered and qualified
to offer franchises in the State of California in the second half of
2010.   We hope that by that time the credit crisis will have
dissipated somewhat and that credit will be more readily available to
prospective franchisees from private sources and from the government sector,
such as through the Small Business Investment Company (SBIC), or that the Small
Business Administration will be in a position to guarantee loans to
entrepreneurs.





Initially,
it is our intention to sell franchises relatively close to our principal offices
in Orange County, California, though not so close as to impinge upon sales at
our Orange County or Los Angeles County showrooms, where we believe that we can
more competently and efficiently monitor, manage, support and oversee the
development of our franchisees.  We believe that this will allow us to
optimize brand marketing within our geographic area and reduce our marketing and
advertising costs, as our retail locations and our Orange County franchisees can
benefit from our advertising and marketing efforts.  Initially, senior
management, who developed our sales and marketing techniques, will be directly
responsible for interviewing prospective franchisees and selecting the ultimate
franchise owners to ensure that they possess the qualities our management is
seeking in franchisees.





We expect
that the success of our efforts in California will influence directly our
decision as to when to commence offering franchises in other
jurisdictions.  We will measure success both by the number of
franchises we sell and their performance and upon our ability to manage our
operations and provide the level of support necessary to ensure the success of
our franchisees.





Branding





Our
objective is for our organization to become the national leader in exterior
vinyl product sales.  The essence of this process will be to build our
brand so that prospects regard our Company as the preeminent value-driven
solution to their exterior vinyl product requirements.


9


Despite
the sheer size of the fencing industry, beyond the home centers in which
exterior vinyl products represent only a small portion of their business, our
industry is characterized by a profusion of small, local retail stores that lack
focus and a clear marketing message.  In our view, all of our
competitors look, sound and act alike and there exists a void to be filled by a
company that is credible, trustworthy, professional and focused on assisting
customers rather than on selling customers.





We
are seeking to become the dominant participant in the exterior vinyl products
industry on a national basis through our franchises by deploying a focused
advertising campaign and building our brand.  In an industry noted for
its lack of marketing creativity, we will deploy a sophisticated and
well-conceived marketing strategy to advance our Company to a position of
national leadership.  We expect that the economies of scale afforded
by multiple franchises will give us the opportunity to deploy advertising and
promotional programs that are beyond the financial and creative capabilities of
our competitors, and coincidentally allow us to build strong consumer brand
awareness, which may serve as a barrier to competitive entry on a national
level.





Building
brand awareness through advertising is expensive and, in management's
estimation, does not provide an immediate and measurable return on invested
capital.  Rather, it is our intention to continue to utilize a
direct-response advertising campaign in which there will be a strong and
immediate call-to-action to drive leads and generate revenue.  We
believe that a cohesive direct-response campaign will build our brand naturally
because of the repetition and penetration of the advertisements in the
marketplace.





During
the first years of our franchising efforts, we expect to allocate the most
significant portion of our operating budget, as a percentage of revenue
generated, to marketing and advertising.  We will closely monitor lead
and sales generation relative to advertising dollars expended to a particular
media to determine the highest rate of return and apportion our advertising
expenditures accordingly.  We believe that this approach will afford
us with the greatest latitude to quickly and systematically determine which
advertising mediums are the most effective in generating revenues.  By
implementing an aggressive approach early in the franchising phase, we believe
that we will have the opportunity to:





·
            determine
      which mediums provide the highest return on
  capital;


·
            quickly
      convey our brand to the market;


·
            overcome
      any “small business/new business” stigma that prospects in an expansion
      area may experience; and


·
            capture
      most of the prospects in the area who are in the early stages of the
      buying cycle, allowing us to build a database of “future
      buyers.”





Product
Supply





We
have entered into an agreement to purchase all our vinyl product requirements
from U.S. Polymers, Inc., located in Montebello, California, approximately
twenty miles from our headquarters.  We use vinyl provided by U.S.
Polymers in all of our jobs.  In return, U.S. Polymers granted us the
exclusive license to sell its products in Orange County and provides us with
significant price discounts.  Under the agreement, we purchase raw
materials consisting of extruded vinyl that has been formed into a variety of
16-foot-length profiles (posts, rails, pickets, etc.), which represents
approximately 80% of all materials we use in our business.   We
utilize three computerized routing machines to cut and route the vinyl products
to the required specifications for each purchase order.  The original
agreement, as subsequently amended to extend the termination date, is effective
through August 29, 2010.





Our
agreement with U.S. Polymers does not provide for rebates or
incentives.   The right of return does exist and there is a 20%
restocking fee; however, returns have not been significant, and restocking
fees always have been waived by the supplier.  The agreement also
provides for U.S. Polymers to pay us a small advertising incentive for including
its name in our advertising materials and on our website.





U.S.
Polymers has been a reliable provider of high-quality vinyl products and has
satisfied our supply requirements on a timely basis to date. The products have
proven to be easy to install and trouble-free for our customers to maintain.
Products manufactured by U.S. Polymers carry a limited 30-year replacement
warranty. We have not experienced any significant difficulties working with U.S.
Polymers nor have we received any serious customer complaints about the quality
of the product.


10


We
believe that in the event U.S. Polymers is unable to supply our requirements for
vinyl fencing products, there are numerous other suppliers available to us that
could provide substantially similar quality products at comparable prices on
short notice.





Any
disruption in the supply of the materials comprising the products we sell could
have a material adverse effect on our business in the short term until we were
able to negotiate purchase terms with new suppliers.





Employees





We employ
25 persons on a full-time basis, including: our two executive officers who are
responsible for the direction and hands-on management of our Company; seven
project designers (marketing and sales persons); fifteen operations personnel
who schedule, fabricate and install product and provide customer service; and
two accounting personnel who, together with Douglas Wells, our CFO (who provides
his services through CFO Services, Inc.), assist with financial planning,
maintaining financial records and preparing monthly and interim financial
statements and reports.





We have
an agreement with a professional employer organization (PEO), to manage all
payroll processing, workers’ compensation, health insurance, and other
employment-related benefits for our employees.  The PEO is a
co-employer of our employees along with us.  Although the PEO
processes our payroll and pays our workers’ compensation, health insurance and
other employment-related benefits, we are ultimately responsible for such
payments and are responsible for complying with state and federal employment
regulations.  The fees we pay the PEO are determined as a percentage
of our payroll and the additional services we may request from it.





We are
not party to any employment agreements and all of our employees are hired on an
at-will basis.  None of our employees are members of a
union.  We believe that we maintain good relations with all of our
employees.





Backlog





The
Company's backlog of unfilled orders was $264,000 as of December 31, 2009 and
$322,000 as of December 31, 2008.  We anticipate that we will fill all
of this current backlog within one-to-three months.  The amount of our
backlog at any given time may not be representative of our potential annual
earnings both because orders turn over quickly and the seasonal nature of our
business may not accurately reflect our level of activity.  Orders
tend to diminish during the holiday season and into the rainy season, which
typically encompasses the early winter months in Southern
California.




Competition





We market
our exterior vinyl products to the home improvement sector where we compete with
entries manufactured from lumber, wood-plastic composites, other
high-performance plastics, metal-based products, masonry products and other
construction materials.  Currently, wood and metal are the most
prevalent materials used in residential fencing, accounting for over 70% of the
total market value, and wood is by far the most common material used in decking
products.  Though the appearance of vinyl products is improving
rapidly, many purchasers prefer the look and feel of wood, which also is
somewhat less expensive than vinyl in initial purchase price but, we believe,
has a higher cost of ownership given its on-going maintenance
costs.  Superior product quality and ease of ownership is the
principal means by which our products compete against wood.  We
believe that our products compete favorably with vinyl products offered by our
competitors as to price, quality, aesthetics and variety.





Our
industry is populated by (i) numerous small, local retail stores that specialize
in vinyl products, (ii) home improvement contractors and (iii) home improvement
centers for which exterior vinyl products represent a small portion of their
total product offerings and that typically subcontract installation to third
parties.  In the space in which we operate, retailers that sell and
install only fence, decks and related products and in which marketing and sales
is directed to consumers, the market is characterized by numerous small
companies that limit their operational scope to their immediate geographic
operating areas.  We believe that we compete effectively against these
entities based upon our sophisticated sales and marketing techniques not
typically employed by the local retailers


11


As we
develop our franchise operations, we expect that we will compete with numerous
other franchisors for franchisees.  Most of these franchisors will
have greater market recognition and greater financial, marketing and human
resources than we do and we can not be certain that we will be able to compete
effectively to attract franchisees.





Government
Regulations





Our
operations and those of our franchisees are and will be subject to licensing and
regulation by a number of governmental authorities, which may include
construction, labor, sanitation, safety, fire, building and other agencies in
the state or municipality in which an operation is
located.  Difficulties in obtaining or failure to obtain the required
licenses or approvals could delay or prevent the development of a new franchise
in a particular area.  We and our franchisees are and will be subject
to federal and state environmental regulations, but these regulations have not
had a material effect on our operations.





Our
future franchise operations will be subject to Federal Trade Commission
regulation and state laws which regulate the offer and sale of
franchises.  The FTC’s Trade Regulation Rule on Franchising
requires the Company to furnish to prospective franchisees a franchise offering
circular containing information prescribed by this rule.





State
laws that regulate the offer and sale of franchises and the franchisor —
franchisee relationship presently exist in a substantial number of
states.  Such laws generally require registration of the franchise
offering with state authorities and regulate the franchise relationship by, for
example, requiring the franchisor to deal with its franchisees in good faith,
prohibiting interference with the right of free association among franchisees,
limiting the imposition of standards of performance on a franchisee and
regulating discrimination against franchisees in charges, royalties or
fees.  Certain laws may restrict a franchisor in the termination of a
franchise agreement by, for example, requiring “good cause” to exist as a basis
for the termination, advance notice to the franchisee of the
termination.  These laws could negatively impact our franchise
operations.  The Company is not aware of any pending franchise
legislation which in its view is likely to affect significantly the operations
of the Company.


12


Item
1A. Risk Factors.





An
investment in our securities involves a high degree of risk. You should consider
carefully all of the risks described below, together with the other information
contained in this Annual Report on Form 10-K including our financial statements
and the related notes thereto appearing elsewhere in this Annual Report, before
making a decision to invest in our securities.  If any of the
following risks occur, our business, financial condition and results of
operations may be materially adversely affected.





RISKS
RELATED TO OUR BUSINESS




We
derive all of our revenues from the sale of outdoor home products manufactured
from vinyl and the growth of our business and the success of our franchises may
depend upon continuing consumer acceptance of vinyl products as an alternative
to products manufactured from wood and other traditional materials.





All
of the products we offer are manufactured from vinyl.  Vinyl was
introduced into the outdoor fencing, decking and home accessory industry in the
1970's and as of 2006 estimates suggest that demand for all plastic-based fence
materials in the North American residential market to be over $600
million.  The continued growth of sales at our Company-owned showroom
and at our future franchises may depend upon a continuing increase in consumer
acceptance of vinyl products as a construction material for outdoor home
products as an alternative to outdoor products manufactured from wood and other
traditional materials such, as stone and metal.  If consumer
preferences change and there is a decline in the acceptance and sales of outdoor
products manufactured from vinyl our business and operating results could be
negatively impacted.  Moreover, if other materials are employed or
developed for use in the outdoor home products market that supplant outdoor
products manufactured from vinyl, our business and operating results could be
harmed.





We currently purchase all of our
vinyl products from a single source and any interruption in supply, decline in
quality or increase in price could adversely affect our business and results of
operations.





We
purchase all of our major vinyl components of the products we sell from one
source that manufactures its products at a single facility in Southern
California.  Our business could be adversely affected in the
event:





·
            there
      is any interruption in supply from this entity, which could occur if,
      among other things, its equipment malfunctions or it experiences a fire or
      other catastrophic event,  in which case it might not be able to
      satisfy our demand, which would require us to locate another
      source;





·
            the
      quality of the product we purchase from our supplier declines, which could
      prompt customers to purchase products from our competitors;
    or





·
            our
      supplier significantly increases costs that we cannot pass on to our
      customers, in which case our customers may purchase products from our
      competitors.





Our
reliance on a single supplier of vinyl product exposes our business to these and
other risks and potential problems that we cannot now foresee.  Any
such event could have a material adverse affect on our business and results of
operations.





The
current economic downturn and tight credit markets negatively impacted our sales
during 2009.





We
believe that the demand for our products is correlated to changes in the health
of the economy in general and the level of activity in home
improvements.  These activity levels, in turn, are affected by such
factors as consumer confidence, housing turnover, home equity values, home
equity loan withdrawals, consumer spending habits, reasonably attainable
consumer financing, income and interest rates.  Existing home sales
were relatively flat in 2009 and during the first two months of 2010 while new
housing starts during 2009 were the worst since World War II.  Home
equity values in many markets have decreased significantly, adversely affecting
the availability of home equity withdrawals.  In addition, consumer
credit generally has been more difficult to secure.  These factors
resulted in a decrease in home improvement spending, which caused our sales and
results of operations to decline for the 2009 year, a trend which we believe
could continue for the foreseeable future.


13


In
2008, the U.S. economy entered into a recession.  We cannot predict
how long the recession will last and whether the downward trend in home
remodeling and renovation will continue or worsen.  The economic
downturn could continue to affect consumer confidence, income and equity capital
available for spending on discretionary items such as fencing and decking, which
could adversely affect the demand for our products.  While our current
liquidity and financial condition is adequate to maintain our business as we
currently operate and satisfy our anticipated capital requirements over the next
twelve months, a prolonged period of reduced sales and corresponding reduction
in income could jeopardize our ability to implement our franchise program or
reduce capital for other corporate purposes as they arise.  If we fail
to implement our franchise program, our growth prospects, liquidity and
financial position would suffer.





Existing
tight credit conditions could impair the ability of prospective franchisees to
obtain financing to purchase franchises which could negatively affect our growth
prospects.





Most
franchises are acquired by franchisees utilizing a combination of personal
investment and third-party financing.  In light of current adverse
economic conditions marked by tight credit, potential franchisees may have
difficulty obtaining the financing required to purchase a franchise from
us.  The failure to develop a profitable and viable franchise program
would negatively impact our anticipated growth, results of operations and
liquidity.  Moreover, to the extent we allocate a significant
percentage of our financial resources to the development and support of our
franchise program and do not realize the expected return on such investment, we
may not have capital available for other corporate purposes as they
arise.





Our
business growth strategy and future earnings will depend in large part on the
development and success of our franchise program and there are a substantial
number of risks associated with this strategy.





We
will pursue the development of a franchise program that we anticipate will be
the cornerstone of our future growth and expansion.  We expect to
dedicate significant financial and personnel resources to the development of our
franchise program and to derive substantial returns from our investment, both
from the payment of the initial franchise fees and from ongoing royalty and
other fees.  There are numerous significant risks attendant to
developing the program, including:





·
            We
      have never undertaken any research to establish the franchise potential of
      our business and we may not sell a sufficient number of franchises to
      recoup our initial investment in the program or to fund the ongoing costs
      of operating a franchise program;





·
            Neither
      we nor any member of our management team has any prior experience
      developing or operating a franchise program and we may not successfully
      manage this business;





·
            We
      may face delays and difficulties in connection with implementing our
      franchise program, which could increase costs and delay the recognition of
      revenue from such operations;





·
            Placing
      significant demands on our management, technical, financial and other
      resources;





·
            Diverting
      management's attention from our core business of selling vinyl fence;
      and





·
            We
      may not accurately assess the qualifications of our franchisees and they
      may not possess the business abilities and access to financial resources
      necessary to successfully operate the franchise or to operate it in a
      manner consistent with our
standards;





We
cannot assure you that we will successfully manage the problems and difficulties
we may encounter in developing a franchise program.  To the extent
that we do not manage and surmount the problems and difficulties we may
encounter, our results of operations and financial condition may not meet our
expectations.  Moreover, such problems and difficulties may permeate
our existing operations to our financial and operational detriment which would
materially and adversely affect our financial condition and results of
operations.


14





We
may require additional cash both to implement our franchise program and, if we
do not generate sufficient revenue from such operations, to maintain
it.





As of the
date hereof, we believe that we will possess sufficient financial resources,
from cash on hand and revenue from existing operations, to fund the development
of and maintain our proposed franchise program.  However, no member of
our management has experience building a franchise program and we may not have
evaluated or gauged our cash requirements adequately.  Moreover, we
may not have properly accounted for factors beyond our control which could
increase the cost of developing and maintaining our franchise
program.  If the revenue we generate from our franchise operations
(both from sales of franchises and from ongoing franchising fees and royalties)
is not sufficient to support our franchise program, we will deplete our cash
position, suffer losses, and may require outside financing to maintain such
operations which may not be available to us on acceptable terms, if at
all.  If we do not have access to cash on acceptable terms when and as
required, we will not grow as quickly as we have anticipated and our business
and results of operations will suffer.





Our
business growth strategy and future earnings will depend in large part on the
success of our franchisees, over whose operations and business success we will
exercise limited control.





Our
franchisees will own, operate and oversee their franchise's daily operations and
will be independent third parties over whom we will not exercise
control.  Although we will attempt to properly select, train and
support franchisees and the franchisees will be contractually obligated to
operate their franchises in accordance with our standards, the ultimate success
and quality of any franchise rests with the franchisee.  If
franchisees do not successfully operate in a manner consistent with our
standards, our image and reputation could be harmed, which could affect our
ability to attract additional franchisees and which in turn could adversely
affect our business and operating results.  Further, we expect that a
significant portion of the fees we would earn from franchisees would be derived
from royalties calculated based on net sales and to the extent that our
franchisees do not operate their franchise profitably or remain financially
viable, we will not earn the revenues we expect, which would negatively impact
our business and results of operations.





We
may not be able to successfully integrate and oversee the growth of new
franchises, which could adversely affect our business, results of operations and
financial condition.





Our
efforts to develop a franchise operation will be accompanied by certain
extensive risks with respect to integrating new franchises into our operations,
including, the potential disruption of our ongoing business, additional expenses
associated with managing a larger organization and the maintenance of uniform
standards, controls and policies.  We may not be successful in
overcoming these risks or any other potential problems that arise from the
development of a franchise program.  If any of these risks
materialize, our operating results could be materially impacted, which could
negatively impact our financial condition.





Our franchisees could take actions
that could be harmful to our business.





Our
franchisees will be contractually obligated to operate their franchises in
accordance with all applicable laws but ultimately, franchisees are independent
third parties that we do not control.   Franchisees could take
actions that subject them to legal and financial liabilities and we may,
regardless of the actual validity of such a claim, be named as a party in an
action relating to, and/or be held liable for, the conduct of our franchisees if
it is shown that we exercise a sufficient level of control over a particular
franchisee’s operations.  Defending claims made against our
franchisees and being held liable for their actions could be costly and
adversely impact our operating results.


15





Our franchise operations will be
subject to government regulation that may adversely hinder or impact the growth
of our business.





As we
develop our franchise operations, our business will become subject to Federal
Trade Commission regulation and several state laws which regulate the offer and
sale of franchises.  We also will become subject to state laws that
regulate substantive aspects of the franchisor - franchisee
relationship.  The FTC’s Trade Regulation Rule on franchising
requires the Company to furnish to prospective franchisees a franchise
disclosure document containing information prescribed by the
rule.  State laws that regulate the offer and sale of franchises and
the franchisor - franchisee relationship presently exist in a substantial number
of states.   Any failure by us to obtain or maintain approvals to
sell franchises could cause us to lose franchise revenues and any failure to
comply with these laws could expose us to liability for damages to franchisees
and fines or other penalties as well as causing us to incur expensive legal
cost.





Past
seasonal fluctuations in our net sales and quarterly operating results may not
be a reliable indicator of future seasonal fluctuations.





Our
historical seasonality may not be a reliable indicator of our future
seasonality.  Quarterly variations in our net sales and income from
operations are principally attributable to seasonal trends in the demand for our
products.  We generally experience lower net sales levels during the
first and fourth quarters of each year, in which holidays and adverse weather
conditions in Southern California usually reduce the level of home improvement
activity.





Our
business could be harmed if we are unable to manage growth
effectively.





We have
experienced significant growth since our inception and believe that sustained
growth, including as may be achieved through our expansion plans, places a
strain on operational, human and financial resources.  To manage our
growth, we must continue to improve operating and administrative systems and
services and attract and retain qualified management and sales
personnel.  We believe that maintaining and enhancing both our systems
and personnel at reasonable cost are instrumental to our success.  We
cannot give any assurances that we will be able to attract and retain qualified
personnel.  We cannot give any assurance that we will be able to
develop internal systems that will keep pace with the growth we expect over the
next five years.  Failure to manage growth effectively could have an
adverse effect on our business and operating results.





Our
performance will suffer if we do not compete effectively in the highly
competitive fencing market.





We must
compete with a significant number of companies in the fencing market, including
wood producers that we believe currently have more production capacity than is
required to meet the demand for their products, and manufacturers of
wood/plastic compound fencing that are seeking to capture market share from wood
and that are aggressively pricing their products to that end.  In
addition, we compete against numerous retailers of vinyl products, many of which
may offer products at prices lower than we can.  If price became the
most significant purchasing consideration, we might not be able to compete with
wood products or other vinyl products retailers.  Our failure to
compete successfully in this market could have a material adverse effect on our
business and results of operations.





We
will compete against larger, better known entities to attract franchisees and we
may not be successful.





As we
develop our franchise operations, we expect that we will compete with numerous
other franchisors for franchisees.  Most of these franchisors have
greater market recognition and greater financial, marketing and human resources
than we do and we cannot be certain that we will be able to compete effectively
to attract franchisees.  If we fail to attract a sufficient number of
franchisees and develop a material revenue stream from these operations, we
could suffer a loss of our investment and may have to allocate funds from our
showroom operations to our franchise business and our financial results could be
negatively impacted.





Our
business depends on our senior management team and the loss of any member of the
team could harm our business.





We
believe that our success will depend on the continued employment of Gordon Knott
and Garabed Khatchoyan, our president and secretary, respectively, who have
significant experience in our industry and who developed our sales and marketing
techniques.  Currently, neither Mr. Knott nor Mr. Khatchoyan has an
employment agreement with our Company.  Our future business and
financial results could be adversely affected if we were to lose the services of
either of such persons.  If either of these persons were unable or
unwilling to continue in his present position, that person could be difficult to
replace and our business could be harmed.  If either of these persons
left to join a competitor or form a competing company, some of our customers
might choose to use the services of that competitor or new company instead of
our services.


16





We
have no independent audit committee. Our full board of directors functions as
our audit committee and is comprised of two directors who are not considered
independent. This may hinder our board of directors’ effectiveness in fulfilling
the functions of the audit committee.





Currently,
we have no independent audit committee, though we are not required to have
one.  Our full board of directors functions as our audit committee and
is comprised of directors who are not considered to be “independent” in
accordance with the requirements of Rule 10A-3 under the Exchange
Act.  An independent audit committee plays a crucial role in the
corporate governance process, assessing a company’s processes relating to its
risks and control environment, overseeing financial reporting and evaluating
internal and independent audit processes.  The lack of an independent
audit committee may prevent the board of directors from being independent from
management in its judgments and decisions and its ability to pursue the
committee’s responsibilities without undue influence.  We may have
difficulty attracting and retaining directors with the requisite
qualifications.  If we are unable to attract and retain qualified,
independent directors, the management of our business could be
compromised.





Our
full board of directors acts as our compensation committee, which presents the
risk that compensation and benefits paid to these executive officers who are
board members and other officers may not be commensurate with our financial
performance.





A
compensation committee consisting of independent directors is a safeguard
against self-dealing by Company executives.  Our board of directors
acts as the compensation committee and determines the compensation and benefits
of our executive officers and reviews policies relating to the compensation and
benefits of our employees.  Although all board members have fiduciary
obligations in connection with compensation matters, our lack of an independent
compensation committee presents the risk that our executive officers on the
board may set their personal compensation and benefits at levels that are not
commensurate with our financial performance.





RISKS
RELATED TO OUR COMMON STOCK





Our
officers and directors control us through their positions and stock ownership
and their interests may differ from other stockholders.





As of
April 8, 2010, there were 22,864,200 shares of our common stock issued and
outstanding.  Messrs. Knott and Khatchoyan, our directors and
president and secretary, respectively, collectively own 87.48% of our common
stock.  As a result, if they were to vote in concert with each other,
they are able to influence the outcome of stockholder votes on various matters,
including the election of directors and extraordinary corporate transactions
including business combinations.  Yet, their interests may differ from
those of other stockholders.  Furthermore, ownership of 87.91% of our
common stock by our all of officers and directors reduces the public float and
liquidity, and may affect the market price, of our common stock when and if our
common stock becomes eligible to trade on the OTC Bulletin Board or other
trading medium.





There
is currently no trading market for our common stock which will limit the ability
of stockholders to dispose of their common stock.





Our
common stock is not quoted on any exchange or inter-dealer quotation system.
There is no trading market for our common stock and our common stock may never
be included for trading on any stock exchange or through any quotation system
(including, without limitation, the NASDAQ Stock Market and the OTC Bulletin
Board).  You may not be able to sell your shares due to the absence of
a trading market.


17





Any
market that develops for our common stock likely will be illiquid and the price
of our common stock could be subject to volatility unrelated to our
operations.





If a
market for our common stock develops, its market price could fluctuate
substantially due to a variety of factors, including market perception of our
ability to achieve the development of our franchise program and otherwise meet
our growth projections and expectations, quarterly operating results of other
companies in the same industry, trading volume in our common stock, changes in
general conditions in the economy and the financial markets or other
developments affecting our business and the business of others in our
industry.  In addition, the stock market itself is subject to extreme
price and volume fluctuations.  This volatility has had a significant
effect on the market price of securities issued by many companies for reasons
unrelated to their operating performance and could have the same effect on our
common stock.





Limitations
on liability and indemnification matters.





As
permitted by the corporate laws of the State of Nevada, we have included in our
Articles of Incorporation a provision to eliminate the personal liability of our
directors for monetary damages for breach or alleged breach of their fiduciary
duties as directors, subject to certain exceptions, including, for example, if
the director did not act in good faith and in a manner which she reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe her conduct was unlawful.  In addition, our bylaws provide
that we are required to indemnify our officers and directors under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and we will be required to advance expenses to our
officers and directors as incurred in connection with proceedings against them
for which they may be indemnified.  If we are required to indemnify,
both for the costs of their defense in any action or to pay monetary damages
upon a finding of a court or in any settlement, our business and financial
condition could be materially and adversely affected.





Issuance
of stock to fund our operations may dilute your investment and reduce your
equity interest.




We may
need to raise capital in the future to fund the development and maintenance of
our franchise program or for other purposes.  Any equity financing may
have significant dilutive effect to stockholders and a material decrease in our
stockholders’ equity interest in us.  Equity financing, if obtained,
could result in substantial dilution to our existing stockholders.  At
its sole discretion, our board of directors may issue additional securities
without seeking stockholder approval, and we do not know when if we will need
additional capital or whether it will be available to us.





We
are authorized to issue "blank check" preferred stock without stockholder
approval, which could adversely impact the rights of holders of our common
stock.





Our
Articles of Incorporation authorize our Company to issue up to 10,000,000 shares
of blank check preferred stock.  Currently no preferred shares are
issued; however, we can issue shares of our preferred stock in one or more
series and can set the terms of the preferred stock without seeking any further
approval from our common stockholders.  Any preferred stock that we
issue may rank ahead of our common stock in terms of dividend priority or
liquidation premiums and may have greater voting rights than our common
stock.  In addition, such preferred stock may contain provisions
allowing those shares to be converted into shares of common stock, which could
dilute the value of common stock to current stockholders and could adversely
affect the market price, if any, of our common stock.  In addition,
the preferred stock could be utilized, under certain circumstances, as a method
of discouraging, delaying or preventing a change in control of the
Company.  Although we have no present intention to issue any shares of
authorized preferred stock, there can be no assurance that we will not do so in
the future.




Substantial
sales of our common stock, or the perception that such sales are likely to
occur, could cause the price of our common stock to decline in any market that
may develop for our common stock.




The
market price, if any, of our common stock could decline as a result of sales of
substantial amounts of our common stock in any market that may develop for our
stock, or the perception that these sales could occur.  In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock.  We have an aggregate of 22,864,200 shares
of common stock outstanding as of April 8, 2010.  Of the outstanding
shares, 1,064,200 are available for public resale; in addition, 123,200 shares
underlying options have been registered for public resale and may be resold
without restriction upon exercise of the options.  All of the
remaining shares of common stock may be available for resale in the public
market, subject to the restrictions on sale or transfer imposed by Rule 144
under the Securities Act.  The market price of our common stock could
drop significantly if the holders of these shares sell them or are perceived by
the market as intending to sell them.


18





We
have had to restate our historical financial statements.





We have
had to restate our audited financial statements for the year ended December 31,
2008 on two occasions, most recently when our new independent accountant
discovered a material error relating to our failure to record a compensation
expense upon the issuance of options to our employees in the course of auditing
our financial statements for the 2009 fiscal year.  A more detailed
discussion of the restatements and the caused thereof is included in this Annual
Report under "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations – Restatement and Reclassification of
Historical Consolidated Financial Statements," "Item 9A – Controls and
Procedures" and in Note K of the notes to our audited consolidated financial
statements accompanying this Annual Report.





In
connection with the restatements, we identified material weaknesses in our
internal control over financial reporting as of December 31, 2008 and 2009
and the quarterly periods subsumed therein and that our internal control over
financial reporting was not effective as of the close of those
periods.  Under standards established by the Public Company Accounting
Oversight Board, a “material weakness” is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the Company’s annual or
interim financial statements will not be prevented or detected on a timely
basis.





Since the
date we identified the errors in our financial statements, we have implemented
measures to remediate the errors and plan to implement further remediative
measure over the course of 2010.  However, we cannot assure you that
these measures will be effective in mitigating or preventing these specific
material weaknesses or the incidence of other significant deficiencies or
material weaknesses in our internal control over financial reporting in the
future.  The execution of restatements creates a significant strain on
our internal resources and could cause delays in our filing of quarterly or
annual financial results, increase our costs, cause management distraction,
impair investors' perception of the reliability of our financial statements and
otherwise negatively impact our reputation.   In addition, we may
become the subject of private or government actions regarding these matters
which could have a material adverse effect on our business, financial condition,
results of operations, cash flows and the trading price for our securities in
any market that may develop for them.





Failure
to implement and maintain effective internal controls over financial reporting
could negatively affect our ability to provide accurate and timely financial
information and harm our business in many other ways.





Over the
course of the last fourteen months, we have identified material weaknesses in
our disclosure controls and procedures and internal control over financial
reporting on two distinct occasions.  We cannot assure you that the
remediation measures we have taken or expect to take in the future with respect
to the weaknesses we identified will be adequate to enable us to remedy the
specific material weaknesses and deficiencies in our controls and procedures and
permit us to avoid other material weaknesses or significant deficiencies in the
future.





Commencing
with the filing of our annual report on Form 10-K with the Securities and
Exchange Commission, or SEC, for the year ending December 31, 2010, both we and
our independent registered public accounting firm will be required to attest to
the effectiveness of our internal control over financial reporting as required
by Section 404 of the Sarbanes-Oxley Act.  While we anticipate
being compliant with the requirements of Section 404 for our fiscal year
ending December 31, 2010, we cannot be certain as to the impact negative
conclusions in our report or our auditor's report thereon may have on our
operations.





Our
failure to implement and maintain the appropriate internal control over
financial reporting or the requirements of Section 404 could negatively affect
our ability to provide accurate and timely financial information, require us to
restate past financial statements at great cost to us; subject us to liability
for misstatements under federal and state securities laws; may cause investors
to lose confidence in our reported financial information, which could lead to a
decline in the price of our stock in any market that may develop; make it more
difficult and costly to attract and retain independent board members; limit our
ability to access the capital markets in the future; and require us to incur
additional costs to improve our internal control systems and
procedures.


19





Our
compliance with changing laws and rules regarding corporate governance and
public disclosure may result in additional expenses to us which, in turn, may
adversely affect our ability to continue our operations.




Keeping
abreast of, and in compliance with, changing laws, regulations and standards
relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002, new SEC regulations and, in the event we are ever
approved for listing on either a registered exchange or through any quotation
system, and stock exchange or system rules, will require an increased amount of
management attention and external resources.  We intend to continue to
invest all reasonably necessary resources to comply with evolving standards,
which may result in increased general and administrative expenses and a
diversion of management time and attention from revenue-generating activities to
compliance activities.  This could have an adverse impact on our
operations.





The
designation of our common stock as a "penny stock" would limit the liquidity of
the shares.





Our
common stock may be deemed a “penny stock” (as that term is defined under Rule
3a51-1 of the Exchange Act) in any market that may develop in the
future.  Generally, a "penny stock" is a common stock that is not
listed on a securities exchange and trades for less than $5.00 a
share.  Prices often are not available to buyers and sellers and the
market may be very limited.  Penny stocks in start-up companies are
among the riskiest equity investments.  Broker-dealers who sell penny
stocks must provide purchasers of these stocks with a standardized
risk-disclosure document prepared by the SEC.  The document provides
information about penny stocks and the nature and level of risks involved in
investing in the penny stock market.  A broker must also provide
purchasers with bid and offer quotations and information regarding broker and
salesperson compensation, make a written determination that the
penny stock is a suitable investment for the purchaser and obtain the
purchaser's written agreement to the purchase. Many brokers choose not to
participate in penny stock transactions.  Because of the penny stock
rules, there may be less trading activity in penny stocks in any market that
develops for our common stock in the future and stockholders are likely to have
difficulty selling their shares.





FINRA
sales practice requirements may also limit a stockholder’s ability to buy and
sell our stock.




In
addition to the “penny stock” rules described above, the Financial Industry
Regulatory Authority (“FINRA”) has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that
customer.  Prior to recommending speculative low priced securities to
their non-institutional customers, broker-dealers must make reasonable efforts
to obtain information about the customer’s financial status, tax status,
investment objectives and other information. Under interpretations of these
rules, the FINRA believes that there is a high probability that speculative low
priced securities will not be suitable for at least some
customers.  The FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock stocks in
any market that develops for our common stock in the future, which may limit the
ability to buy and sell our stock and which will have an adverse effect on any
market that develops for our shares.




We
do not foresee paying cash dividends in the foreseeable future.





We
currently intend to retain any future earnings for funding growth. We do not
anticipate paying any dividends in the foreseeable future. As a result, you
should not rely on an investment in our securities if you require dividend
income. Capital appreciation, if any, of our shares may be your sole source of
gain for the foreseeable future. Moreover, you may not be able to resell your
shares in our Company at or above the price you paid for them.





Item
1B. Unresolved Staff Comments.





Not applicable.


20





Item
2. Properties.





The
Company leases two facilities in Southern California.  We occupy
approximately 10,000 total square feet of office, showroom, fabrication and
warehouse space at 2210 South Ritchey Street, Santa Ana, California (Orange
County) pursuant to four-year lease that expires on March 31,
2011.   We currently pay monthly rent of $8,690 for the
premises.  We anticipate that the total annual rental expense for 2010
will be approximately $106,629.  In February 2010, we opened a new
showroom at 2707 Artesia Blvd, Redondo Beach, California (Los Angeles County),
where we lease approximately 1,000 square feet of space at a monthly rent of
$2,800.  We anticipate that the total annual rental expense for 2010
will be approximately $25,200.





Management
believes that our current facilities satisfy our current and anticipated future
requirements but that alternative space is available upon comparable terms, if
necessary.





Item
3. Legal Proceedings.





On
December 5, 2008, a former employee of the Company filed a complaint in Superior
Court against the Company and its principals, seeking compensatory damages,
attorneys' fees, punitive damages and equitable relief in connection with our
termination of the employee for what we deemed to be cause.  In 2009,
the Company paid its $12,500 share of the insurance deductible.  In
March 2010, the case was settled in arbitration, with no further liability for
the Company.





Item
4. Reserved





PART
II





Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.





Market
Information





As of
April 8, 2010, there were 22,864,200 shares of our common stock outstanding held
by 40 record holders and no outstanding shares of preferred stock.  In
addition, there are outstanding options to purchase an aggregate of 123,200
shares of common stock at a price of $.50 per share through September 24, 2010
that are held by 19 persons.





Our
common stock is not traded or quoted on any exchange or inter-dealer quotation
system.  We will seek to identify a market maker to file an
application with the Financial Industry Regulatory Authority, Inc. to initiate
quotation of our common stock on the OTC Bulletin Board.  We have not
identified a market maker that has agreed to file such application.





We cannot
assure you that a trading market for our common stock will ever
develop.  We have not registered our class of common stock for resale
under the blue sky laws of any state and current management does not anticipate
doing so.  The holders of shares of common stock, and persons who may
desire to purchase shares of our common stock in any trading market that might
develop in the future, should be aware that, in addition to transfer
restrictions imposed by federal securities laws, significant state blue sky law
restrictions may exist which could limit the ability of stockholders to sell
their shares and limit potential purchasers from acquiring our common
stock.





Dividend
Policy




To date,
we have not declared or paid any cash dividends on our common
stock.  The payment of dividends, if any, is at the discretion of the
Board of Directors and is contingent on many factors, including our revenues and
earnings, capital requirements and financial conditions.  We currently
intend to retain all earnings, if any, for use in business
operations.  Accordingly, we do not anticipate declaring any dividends
in the near future.


21





Equity
Compensation Plan Information





As of the
date of this Annual Report, we have not adopted any equity compensation
plans.





Recent
Sales of Unregistered Securities.





During the fourth quarter of the 2009
fiscal year, we did not issue any securities during the last fiscal year the
sale of which was not disclosed in the other reports we filed under the Exchange
Act during 2009.





Item
6. Selected Financial Data.





The
information to be furnished under this Item 6 is not required of small reporting
issuers.





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





MANAGEMENT’S
DISCUSSION AND ANALYSIS OF


FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





You
should read the following discussion and analysis of financial condition and
results of operations, together with our consolidated financial statements and
related notes thereto appearing elsewhere in this prospectus.  In
addition to historical financial information, the following discussion contains
forward-looking statements that reflect our plans, estimates, and
beliefs.  Our actual results could differ materially from those
discussed in the forward-looking statements.  Factors that could cause
or contribute to these differences include those discussed below and elsewhere
in this prospectus, particularly in the section entitled “Risk
Factors.”




General





We market
and install a wide variety of attractive, durable, low-maintenance vinyl
products, including fencing, patio covers, decking, railing and trim categories
from our retail location in Santa Ana, California.  During 2009,
fencing products represented approximately 55% of our gross income (revenue) and
patio covers represented approximately 35% of our gross income.  Our
products are used largely in renovation and remodeling by our customers who
include homeowners and homeowner associations.





We
differentiate our Company from others in the industry on the basis of the manner
in which we market and sell our products and the level of service we offer our
customers.  Given that the purchase of our products represents a
substantial investment in a customer's home, typically their most significant
capital asset, we seek to connect with home owners' intrinsic desire to take the
time to make an informed, value-driven purchasing
decision.  Throughout the sales process, we invest the time and effort
to develop a relationship with a prospect, as opposed to home centers,
specialized retail distributors and independent contractors that typically
employ a hard-sell pitch and seek to make a sale only when a consumer is
prepared to make a purchase.





Our
marketing efforts are designed to capture information about prospective
purchasers of exterior vinyl products early in the buying cycle.  We
maintain contact with them over the course of the decision-making process to
educate and consult with them about vinyl products generally, the purchasing and
installation process and the ownership experience.  We seek to
demonstrate to prospects that purchasing from us represents the best value for
their money in that we provide a worry-free ownership experience that we believe
is not available from other independent retailers, contractors or the national
home improvement chains.





We
believe that our business model can be replicated successfully throughout the
country and that the fundamental elements of our proprietary sales and marketing
techniques, which we believe are sophisticated when compared to our direct
competitors, can be conveyed effectively through written materials and training
to motivated entrepreneurs.  We will seek to leverage our business
model by initiating a franchise organization and establishing our Company and
brand as the first national vinyl products retail chain.


22





Our
existing and proposed business is subject to numerous substantial risks,
including, among others, that we purchase all of our vinyl products from a
single source; our future growth will, in large part, be dependent upon the
success of our franchise program and our franchisees, and there are numerous
risks associated with such model; the availability of disposable income and
credit to homeowners; the availability of credit to prospective franchisees and
general economic conditions.





Review
of Annual Operations and Summary Operational Performance





The 2009
fiscal year was a momentous one for our Company as an
organization.  We successfully completed the registration of
securities under the Securities Act.  Equally as important, we
embarked on the franchise phase of our business model, which management believes
will allow us to develop a national presence and corporate brand.  We
believe that these initiatives will serve as the foundation for our future
growth and enhance shareholder value in our Company.





Management believes that the economic
recession that persisted throughout 2009 impacted both our results of operations
and delayed the roll out of our franchise program.





Income
for the 2009 year declined by 17% from 2008 to $3,447,733, a decrease of
$710,127, and our gross profit decreased by 11% from 2008, while the gross
profit percentage increased from 48.9% in 2008 to 52.7% in 2009 as we made
personnel adjustments and implemented practices that allowed us to operate more
efficiently.





Expenses in connection with the
registration of our securities and our efforts to address corporate governance
issues contributed to an increase in professional fees of approximately
21%.  We expect that these costs will decline significantly during the
2010 fiscal year.





Home
improvement spending declined for the third consecutive year in
2009.  While low interest rates throughout the year made borrowing for
home renovations attractive, credit availability remained
challenging.  Housing turn-over (sales of existing home and new
housing starts), a significant driver and indicator of home improvement
spending, declined during 2009.  In addition, declining home prices
and the tightening of lending standards made it more difficult and expensive for
homeowners to finance home improvement and remodeling
projects.  Additionally, we believe that unstable home prices, near
record levels of foreclosures and other distressed sales discouraged households
from undertaking discretionary home projects during 2009.  Our sales
and results of operations suffered accordingly.





The recession and credit crunch also
caused us to defer the roll out of our franchise program to mid
2010.  We have been reluctant to commit the corporate resources, both
personnel and financial, required to define, document and implement the
program.  We have made substantial headway toward completing the
preparation of the foundation documents (pre-operating, operations, procedural
and employee manuals; royalty payment forms, non-compete agreements,
etc.).   We continue to refine the financial parameters of the
program, such as franchise pricing and royalty structures, and develop a
strategy to attract potential franchisees.  We expect to conclude our
efforts in the next few months in advance of the submission of an application to
register our franchise program in the State of California, which we expect to
file during the second quarter.  Our application also will encompass
the franchise offering documents to be provided to prospective
franchisees.  We will not commence marketing franchises until we
receive approval from the State of California and we cannot provide an estimate
when approval would be granted.





During 2009, our Company was challenged
in its efforts to comply with the corporate governance standards applicable to
our operations since becoming subject to SEC laws and other regulations
applicable to public companies in November 2008 when we completed the share
exchange.   We identified several weaknesses in our internal
control over financial reporting and disclosure controls and procedures and have
restated our financial statements for the 2008 fiscal year on two occasions, as
described in the audited financial statements for 2008 included in this Annual
Report.   We learned a great deal about corporate governance and
internal operations procedures during the last fiscal year.  We have
implemented numerous measures to remediate existing weaknesses and taken steps
to improve our control environment and transform our corporate
culture.  During the year, we implemented the principles and standards
presented in "Internal Control — Integrated Framework," issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).  We
engaged a new independent public accountant to audit the Company's financial
statements for the 2009 year that is larger and has access to more resources
than our prior auditor.  In addition, we retained a new tax
preparation firm that has substantially more experience and expertise than our
former tax professional.


23





Restatement and Reclassification of Historical Consolidated
Financial Statements





Restatements:





In April 2010, we determined that we
should have recognized a compensation expense equal to the value of stock
options we granted to employees in September 2008, as required by Financial
Accounting Standard 123R ("FAS 123R").  We calculated that the options
had an aggregate value of $67,000 using the Black-Scholes option pricing
model.   As a result of identifying the error, we concluded that
accounting adjustments were necessary to correct the previously issued financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2008, that the financial statements contained in that report should
no longer be relied upon, and that we would restate the financial statements for
the period .





The
restatement of the audited consolidated financial statements for the year ended
December 31, 2008 to record a compensation expense for the employee stock
options affected individual components of our Consolidated Balance Sheet as of
December 31, 2008, and our Consolidated Statements of Operations, Consolidated
Statement of Shareholders’ Equity and Consolidated Statement of Cash Flows for
the year the ended.  The restatement had no effect on reported earnings per
share for that period and no impact on cash flows.  The audited
consolidated financial statements for the 2007 fiscal year were not affected in
any way.  The Company added a restatement footnote as "Note K" to the
audited consolidated financial statements accompanying this Annual Report,
titled "Reclassification and Restatement" which describes the restatement and
demonstrates the impact of the restatement on each line item in our consolidated
financial statements that was affected thereby.





In October 2009, we determined that we
underreported our federal and state corporate income tax liability for the year
ended December 31, 2008 by $30,000, an amount material to our financial
statements.  As a result of identifying the error, in November 2009,
we concluded that accounting adjustments were necessary to correct the
previously issued financial statements contained in our Annual Report on Form
10-K for the year ended December 31, 2008 and in our Quarterly Reports on Form
10-Q for the quarterly periods ended March 31, 2009 and June 30, 2009 and that
the financial statements contained in those reports should no longer be relied
upon.  Accordingly, we restated those financial statements and filed
an amendment to each of the foregoing reports that included amended and restated
financial statements.





The
restatement of the audited consolidated financial statements for the year ended
December 31, 2008 to report the accurate amount of our federal and state
corporate income tax liability affected individual components of our
Consolidated Balance Sheet as of December 31, 2008, and our Consolidated
Statements of Operations, Consolidated Statement of Shareholders’ Equity and
Consolidated Statement of Cash Flows for the year the ended.  The
restatement had no effect on reported earnings per share for that
period.  The audited consolidated financial statements for the 2007
fiscal year were not affected in any way.  The Company added a
restatement footnote as "Note K" to the audited consolidated financial
statements accompanying this Registration Statement, titled "Reclassification
and Restatement" which describes the restatement and demonstrates the impact of
the restatement on each line item in our consolidated financial statements that
was affected thereby.





Reclassification:        Through
the quarterly period ended June 30, 2009, we had included as a component of
Interest Expense, a line item in the statement of operations portion of our
consolidated financial statements, the amount of credit card fees charged by
credit card companies to our Company for accepting payments from our customers
by credit card, and the amount of financing discounts, which represents the
amount we receive from companies that finance a customer’s purchase of our
products, which is less than the amount of our invoice to the customer (the
difference being the financing discount).  By letter dated April 22,
2009, the staff of the SEC alerted us to the fact that we may not have
classified these two items correctly under generally accepted accounting
principles in the United States, or US GAAP.  In response to these
comments, the board of directors concluded that credit card fees and financing
discounts should be classified as selling, general and administrative expenses
under US GAAP.  The consolidated financial statements contained in the
amended reports we filed as a result of the restatement also were reclassified
to reflect the adjustments referred to above.


24





The
reclassification of the audited consolidated financial statements for the years
ended December 31, 2007 and 2008 to include credit card fees and financing
discounts as selling, general and administrative expenses affected individual
components of our Consolidated Statements of Operations for the years ended
December 31, 2008 and 2007.  This reclassification did not result in
any change to our reported Consolidated Balance Sheets as of December 31, 2008
and 2007 or the Consolidated Statements of Cash Flows or Statement of
Stockholders Equity for either of the years in the two-year period ended
December 31, 2008 and had no effect on the reported consolidated net income or
net earnings per share for either period (thought it did affect net operating
income and net other income in each of 2007 and 2008 periods).  We
added a reclassification footnote as "Note K" to the audited consolidated
financial statements accompanying this Registration Statement, titled
"Reclassification and Restatement" which demonstrates the impact of the
reclassification of each line item in our consolidated financial statements that
was affected thereby.





Critical
Accounting Policies and Estimates




We refer readers to Note A titled
"Summary of Significant Accounting Policies" appearing on page F- 12 of the
audited financial statements included with this Annual Report for a discussion
of the critical accounting policies affecting our Company.





Results
of Operations





Comparison
of the Years Ended December 31, 2009 and 2008





Income: Income for
the year ended December 31, 2009 was $3,447,732, a decrease of $710,128 or 17%,
from $4,157,860 for the comparable period in 2008. The decrease was
the result of current economic conditions, including tight credit
markets. The decrease in income is a direct result of lower sales volume,
principally related to lower consumer demand attributable to poor macroeconomic
conditions, which includes suppressed home renovation and remodeling
expenditures and lower housing starts as compared to 2008.





Cost of Goods Sold:
Our contract with our vinyl supplier provides for significant discounts on raw
materials we purchase.  We benefitted materially from the discount for
the 2009 and 2008 fiscal years.  Our cost of goods sold for all
periods reported in this Annual Report on Form 10-K is net of the discount we
receive on the cost of raw materials.





Gross
Profit:  Gross profit decreased from $2,032,606 in 2008 to
$1,816,230 in 2009, a decrease of $216,376 or 11%, while the gross profit
percentage increased from 48.9% in 2008 to 52.7% in 2009.  The
decrease in gross profit was due to the 17% decrease in income due to current
economic conditions, offset to some degree by addressing personnel problems in
our fabrication and installation departments and improving operating
procedures.




Expenses:





Advertising
and marketing expense decreased $35,244 or 18% from $196,660 in 2008 to $161,416
in 2009, as we identified the proper mix of advertising media to attract
customers and grow our business.





Selling,
general and administrative expenses as restated (see above) decreased slightly
from $442,930 in 2008 to $437,676 in 2009.





Payroll
expenses as restated were $1,051,605 in 2008 and $995,334 in 2009, a decrease of
$56,271 or 5 %.  The was due primarily to the granting of employee
stock options in 2008 that were valued at $67,000.





Professional
fees increased from $199,933 in 2008 to $242,284 in 2009, an increase of $42,351
or 21 %.  This was due primarily to increases in CFO services of
$15,000; and legal, audit and filing fees relating to the annual audit and SEC
filings of $23,000.





Rent
expense was relatively unchanged between periods.


25





Income
Taxes as restated (see above) were $80,000 in 2008, compared to $1,600 in
2009.  This decrease resulted from 2009 having a loss before income
taxes and thus requiring minimum state franchise taxes, whereas 2008’s taxes
were applied separately to the Company and its wholly-owned
subsidiary.





Liquidity
and Capital Resources





Our
current capital requirements are allocated principally among payroll; selling,
general and administrative expenses; professional fees; rent; and advertising
and marketing expenses.  Historically, we have financed our business
with cash flow from operations and borrowings under a revolving bank line of
credit.  We do not anticipate making any significant capital additions
in 2010 other than in connection with the development and implementation of our
franchise program.





We
believe that our existing capital resources and liquidity position will be
sufficient to satisfy all of our purposes over the next twelve months, including
the development and implementation of the first phases of a franchise
organization, as more fully described below under the heading "Capital
Requirements."





Even in
the event that the economic recession persists over the remainder of 2010 and we
do not return to or exceed pre-recession sales levels during the current fiscal
year, we are optimistic that we will have available the capital resources
necessary from revenue and our line of credit to develop and implement the
initial phases of our franchise program and other corporate purposes, as
necessary.





If
product sales do not rebound during the remainder of 2010 or if they decline
significantly, we will seek to reduce overhead by discharging installers and
administrative personnel.  Since our sales personnel are remunerated
by way of commissions only, a decline in sales results in a corresponding
reduction in our sales commissions expense.  A continued decline in
sales would reduce income which would reduce the Company’s liquidity
position.  However, unless there is a further significant downturn in
the economy and our sales, we believe that we can maintain or improve our
current financial position.





Historically,
our operating results, financial condition and liquidity position were enhanced
significantly by virtue of substantial discounts we receive on vinyl products
from our supplier to the retail market price at which such products are
sold.  Until October 2009, the discounts were conferred upon our
achieving certain minimum quarterly purchases of products, which we had met in
each prior quarter of our existence.  In October 2009, our supplier
eliminated the minimum purchase requirements that triggered the discount and we
now receive the discount on all products we purchase from our
supplier.  We anticipate that our agreement will be renewed in
September 2010 on materially similar terms.





The
agreement with our vinyl products supplier includes other terms that may impact
our liquidity and financial condition.  For example, our supplier does
not offer us any rebates or incentives, provisions that might be expected to be
included in agreements of this nature.   Moreover, we have a
right of return but there is a 20% restocking fee; however, returns have not
been significant, and restocking fees always have been waived by the
supplier.





Cash
Flows





Years
Ended December 31, 2009 and 2008





Cash
and Cash Equivalents




Our cash
and cash equivalents were $114,901 at December 31, 2008, and decreased to
$12,333 by December 31, 2009, as explained below.





Net
cash provided by operating activities





Net cash
used by operating activities was $93,331 for the year ended December 31, 2009, a
decrease of $258,144 from $164,815 provided by operations for the year ended
December 31, 2008.  The decrease was primarily attributable to an
increase in the net loss of $90,241, the non-cash charge for employee stock
options of $67,000 in 2008, and a smaller increase in accounts payable and
accrued expenses in 2009 of $116,403.


26





Net
cash used in investing activities





Net cash
used in investing activities was $20,988 for the year ended December 31, 2009, a
decrease of $130,679 from $109,691 provided by operations for the year ended
December 31, 2008. The decrease was primarily attributable to a $152,000
decrease in receivable from shareholders in 2008.




Net
cash used in financing activities





Net cash
provided in financing activities was $11,751 for the year ended December 31,
2009, compared to $293,857 used in financing activities for the year ended
December 31, 2008, an increase of $305,608.  The increase was
attributable to a decrease in dividends of $330,000 paid to the principals of
TVFC in 2008, net borrowings under our line of credit of $22,207, offset by a
decrease in proceeds from the sale of common stock of $58,500.





Contractual Obligations and
Off-Balance Sheet Arrangements





We have
certain fixed contractual obligations and commitments.  The table
below summarizes our contractual obligations as of December 31, 2009 and for the
future periods identified.  The development of our franchise program,
changes in our business needs and other factors may result in our incurring
significant future obligations which would impact our cash and liquidity
position and requirements.  We cannot provide certainty regarding the
timing and amounts of payments.





Payments Due By PeriodContractual
                    Cash Obligations
                  
                  Total
                  
                  
                  Less than
                    One Year
                  
                  
                  1-3
                    Years
                  
                  
                  3-5
                    Years
                  
                  
                  After5
                    YearsCapital
      Leases (1)
                  
                  $
                  30,768
                  
                  
                  $
                  16,900
                  
                  
                  $
                  13,868
                  
                  
                  
                  -
                  
                  
                  
                  -Operating
      Leases (2)
                  
                  $
                  203,482
                  
                  
                  $
                  131,829
                  
                  
                  $
                  71,653
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      Contractual Cash Obligations
                  
                  $
                  234,250
                  
                  
                  $
                  148,729
                  
                  
                  $
                  85,521
                  
                  
                  
                  -
                  
                  
                  
                  -




(1)
            Capital
      Leases – Represents amounts due under purchase contracts for vehicles and
      equipment with interest rates varying from 4.9% to
  6.9%.


(2)
            Operating
      Leases – Represents non-cancellable leases for real property that expire
      in March 2011 (Santa Anna location) and March 2012 (Redondo Beach
      location).


(3)
            TVFC
      has available to it a $100,000 line of credit.  Borrowings under
      the line of credit totaled approximately $81,000 as of March 31,
      2010.  The interest rate is prime plus 3 percentage points
      (6.25% at December 31, 2009).





Off-Balance-Sheet  Arrangements





We are
not party to any off-balance sheet arrangements.





Capital
Requirements





Over the
next twelve months, we will commence building a franchise program.  As
described below, we expect that the net cost to us to implement the first two
phases of our franchise program, including the fees of our franchise consultant
and franchise license fees and costs for registration of our franchise program
in the State of California, will not exceed an additional $50,000, as more fully
described below.  Once we receive approval from California to offer
franchises, we expect to retain two or three additional employees to manage our
franchise operations and we expect to require additional capital for such
purpose.


27





In June
2009, we engaged a franchise consultant to assist with the development of the
franchise program.  We cannot estimate the costs associated with its
deployment on a national basis.  We are advised by our franchise
consultant that the costs to develop and implement the program and maintain the
organization are highly variable and are a function of numerous factors, such as
the number of jurisdictions in which franchisees are located and the specific
jurisdictions selected (which will bear on franchise registration fees to be
paid); the geographical location of our franchises (close in proximity to each
other or widely separated – which will bear on advertising and other costs); the
extent of the advertising efforts we may employ and the additional
infrastructure we may require to manage the organization.





We expect
to implement our franchise program in phases.  Our initial step
encompasses the preparation, with the assistance and guidance of our franchise
consultant, of the preponderance of the documentation required to develop and
implement the program.  This includes documents mandated by the
government and internal organizational documentation.  We have
substantially completed the preparation of these
documents.  Thereafter, we will register to sell franchises in the
State of California and expect to submit our application during the second
quarter of 2010.  We anticipate that we will expend an additional
$5,000 on finalizing the documentation of our franchise program and submitting
our franchise registration application to California.  We expect to be
in a position to offer franchises in California in the second half of
2010.





Initially,
it is our intent to sell franchises in relatively close proximity to our
principal offices in Orange County, California.  We believe that we
can more competently and efficiently manage, support and oversee the development
of franchises closer to our home office.  We expect that the success
of our efforts in California will influence directly our decision as to when to
commence offering franchises in other jurisdictions.  Success will be
measured not only by the number of franchises we sell and their performance but
also by our ability to manage our operations and provide the level of support
necessary to ensure the success of our franchisees.





As we
have advanced through the process of establishing the parameters of our
franchise program and have become more familiar with franchising generally, we
have gained a sense of our internal requirements and the capital we will be
required to allocate to the program once we begin to offer and sell
franchises.  For example, we believe that it will be necessary to add
personnel to manage the administrative and accounting components of the
program.  Toward this end, we anticipate that we will hire two or
three additional internal personnel in 2010 to manage the process and we will
allocate capital to engage such personnel.  Consideration as to future
staffing requirements will be dictated by the growth and requirements of the
program.  We may seek to outsource facets of the development and
operation of the franchise program to avoid the burdens of enlarging our
infrastructure and to take advantage of the expertise of industry
professionals.  We may engage consultants to assist with franchise
organizational matters, such as legal counsel to assist with preparation of
franchise registration applications, and professionals who engage in franchisee
recruitment, to whom we may pay finders' fees, and advertising.





Once a
franchise program has been developed, we expect to allocate significant cash
resources to advertising, both to recruit franchisees and to fund advertising on
behalf of our franchisees, marketing staff, accounting staff and general and
administrative expenses, as well as the costs and expenses of any outsourced
operations.  We cannot currently estimate the costs associated with
these elements of the program, as they may vary
significantly.  However, we do not believe that the extent of the
additional personnel or other infrastructure and other services we may require
will necessarily correspond to the scale of the program so that there will not
substantial additional expenses incurred as we enroll franchisees or enter into
new jurisdictions.  Future costs will be contingent on the performance
of the program, the speed with which we determine to expand into additional
jurisdictions into which we will offer franchises and the size of the
organization.





It is our
intention to fund the above described first phases of our franchise organization
internally from capital generated from operating revenue from our existing
retail locations and our line of credit (of which approximately $19,000 is
available for use at April 5, 2010).  We will seek to develop a
program and organization within the constraints of our cash resources and take a
conservative approach, growing as conditions, return on investment and available
capital, among other factors, warrant.  In the event that we have
underestimated the costs associated with the development of our franchise
program, that we encounter unanticipated costs, delays or difficulties, or that
the recession deepens or extends significantly longer than economists
anticipate, we may be required to seek external funding.  As of
December 31, 2009, we have incurred costs and expenses in connection with the
development of our franchise program of approximately $37,000 and expect that we
will expend no more than an additional $50,000 through the first two quarters of
2010.  Thereafter, we will allocate capital as the program requires
and as economic conditions improve and our sales and income
recover.


28





In the
event we require capital for any purpose, we may seek to secure third-party
financing.  The nature of the financing, debt or equity will be
dependent upon current market conditions and availability.  We cannot
be certain that such capital will be available to us on favorable or acceptable
terms, or at all.





Outlook





Demand
for our products can be linked to changes in the health of the economy in
general and the level of activity in home improvements and
remodeling.  These activity levels, in turn, are affected by housing
turnover (sales of existing home and new housing starts) and such factors as
consumer confidence, home equity values, home equity loan withdrawals, consumer
spending habits, reasonably attainable consumer credit, income, interest rates
and inflation.  These factors have been in poor positions over the
last eighteen (or more) months and indications are that they will remain that
way in the near-term.  For example, existing home sales were
relatively flat in 2009 and during the first two months of 2010, while new
housing starts during 2009 were the worst since World War II.  We
believe that these factors have resulted in decreased home improvement and
remodeling spending, which caused our sales and results of operations to decline
during 2009.  We continue to manage our business on the basis that
there will not be any significant improvements in market conditions during the
foreseeable future.





While we
expect that current business conditions will persist for the remainder of 2010,
we continue to believe that our business model is fundamentally
sound.  We believe that the range of quality products we offer
combined with our marketing approach will continue to attract customers and that
we can return quickly to pre-recession sales levels at our retail location as
the economy rebounds and that we will see growth in total sales and revenues as
our new retail location ramps up marketing and sales efforts.  We
think that these key elements of our business will be attractive factors to
franchisees and leads us to believe that our growth strategy, predicated on
launching a national franchise program in 2010, will fill a niche that can
generate significant growth over the longer term.





We
continue to believe that the franchise model represents a promising prospect for
significant growth of our Company.  We believe that franchising has
become an attractive option for baby boomers who desire to remain active after
retirement or who have been squeezed out of current positions by mergers,
downsizing and the declining economy.  In fact, we believe that many
of these people will make the best franchise owners given their business
experience.  We believe that the franchise industry will continue to
grow both because more baby boomers are reaching retirement age every year and
these people frequently have accumulated the savings required to launch an
entrepreneurial business.  However, we believe that the performance of
our franchise program may depend, in part, on the availability of credit to
prospective franchisees.  Most franchises are acquired by franchisees
utilizing a combination of personal investment and third-party
financing.  In light of current adverse economic conditions marked by
tight credit, prospective franchisees may have difficulty obtaining the
financing required to purchase a franchise from us.  If credit is not
available to these prospects, franchise sales may be sluggish or we may not sell
any franchises, which would adversely affect our results of operations and
liquidity and impact our ability to expand the franchise program into additional
jurisdictions.





Until the
advent of more promising economic conditions, we will take a conservative
approach to our business generally and to the development of our franchise
program specifically.  We will be deliberate in the development of our
franchise organization, to avoid over-extending our financial resources, and we
will carefully plan when and how we penetrate new territories.  We are
hoping that the credit crisis will have abated to some degree by the time we are
prepared to launch our franchise program in 2010 and that credit will be more
readily available from private sources and from the government sector, such as
through the Small Business Investment Company (SBIC), or that the Small Business
Administration will be in a position to guarantee more loans to entrepreneurs,
which would facilitate the acquisition of loans by our prospects.





Quantitative
and Qualitative Disclosures About Market Risk





We do not
use derivative financial instruments in our investment portfolio and have no
foreign exchange contracts.  Our financial instruments consist of cash
and cash equivalents, trade accounts receivable and accounts
payable.


29





Effects
of Inflation





We do not
believe that our sales or operating results have been materially impacted by
inflation during the periods presented in our financial statements. There can be
no assurance, however, that our sales or operating results will not be impacted
by inflation in the future.





Recent
Accounting Pronouncements





We refer
readers to Note A titled "Summary of Significant Accounting Policies - Recently
Adopted and Recently Enacted Accounting Pronouncements " appearing on page F- 12
of the audited financial statements included with this Annual Report for a
discussion of the recently adopted accounting pronouncements affecting our
Company.





Item
7A. Quantitative and Qualitative Disclosures About Market Risk.





The
information to be furnished under this Item 7A is not required of small
reporting issuers.


30


Item
8. Financial Statements and Supplementary Data.





Report
      of Independent Registered Accounting Firm - 2009
                                                      F-1Report
      of Independent Registered Accounting Firm - 2008
                                                      F-2Consolidated
      Balance Sheets as of December 31, 2009 and 2008 (restated)
                                                      F-3Consolidated
      Statements of Operations for the years ended December 31, 2009 and 2008
      (restated)
                                                      F-4Consolidated
      Statements of Stockholders’ Deficit for the years ended December 31, 2009
      and 2008 (restated)
                                                      F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2009 and 2008
      (restated)
                                                      F-6Notes
      to Financial Statements
                                                      F-7




31


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and
 Stockholders
of Vinyl Products, Inc. (f/k/a Red Oak Concepts, Inc.):
  We have
audited the accompanying consolidated balance sheet of Vinyl Products, Inc. (the
“Company”) as of December 31, 2009 and the related consolidated statements of
operations, stockholders' equity and cash flows for the twelve month period then
ended.  The financial statements for the year ended December 31, 2008
were audited by other auditors whose report expressed an unqualified opinion on
those statements.  These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
  We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Vinyl Products, Inc. as of
December 31, 2009 and the results of its operations and cash flows for the
period described above in conformity with accounting principles generally
accepted in the United States of America.
  /s/
M&K CPAS, PLLC
  www.mkacpas.com
 Houston,
Texas
 April 9,
2010
  F-1
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and
  Stockholders
of Vinyl Products, Inc. (f/k/a Red Oak Concepts, Inc.):
  We have
audited the accompanying consolidated balance sheets of Vinyl Products, Inc.
(f/k/a Red Oak Concepts, Inc.) as of December 31, 2008, and the related
statements of operations, shareholders’ equity, income, and cash flows for the
year then ended. Vinyl Products, Inc.’s management is responsible for these
financial statements. My responsibility is to express an opinion on these
financial statements based on my audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Vinyl Products, Inc. (f/k/a Red Oak
Concepts, Inc.) as of December 31, 2008, and the results of its operations and
its cash flows for the year then in conformity with accounting principles
generally accepted in the United States of America.
  As
discussed in Note K to the financial statements, the Company has restated its
financial statements as of and for the year ended December 31, 2008 to correct
errors in its accounting for stock options granted to employees.
  /s/
      Traci J. Anderson, CPAHuntersville,
      NCFebruary 27, 2009, except for
      Note K as to which the date is April 5,
    2010
  F-2
  VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
 Consolidated
Balance Sheets
 December
31, 2009 and 2008 (Restated – Note K)
  2009
                      
                      
                      2008(Restated)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                      
                      $
                      12,333
                      
                      
                      $
                      114,901Accounts
      receivable, net
                      
                      
                      36,189
                      
                      
                      
                      57,575Stock
      receivable
                      
                      
                      -
                      
                      
                      
                      5,000Inventory
                      
                      
                      137,961
                      
                      
                      
                      156,865Prepaid
      expenses
                      
                      
                      54,251
                      
                      
                      
                      38,651Total
      current assets
                      
                      
                      240,734
                      
                      
                      
                      372,992PROPERTY
      AND EQUIPMENT:Property
      and equipment, net of accumulated depreciation of $214,260 and
      $148,084, respectively
                      
                      
                      235,982
                      
                      
                      
                      281,171Net
      property and equipment
                      
                      
                      235,982
                      
                      
                      
                      281,171OTHER
      ASSETS:Security
      deposit
                      
                      
                      8,690
                      
                      
                      
                      8,690Total
      other assets
                      
                      
                      8,690
                      
                      
                      
                      8,690TOTAL
      ASSETS
                      
                      $
                      485,406
                      
                      
                      $
                      662,853LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIES:Current
      portion notes payable - vehicle
                      
                      $
                      16,900
                      
                      
                      $
                      18,646Accounts
      payable and accrued liabilities
                      
                      
                      287,855
                      
                      
                      
                      276,601Bank
      line of credit
                      
                      
                      22,207
                      
                      
                      
                      -Customer
      deposits
                      
                      
                      103,292
                      
                      
                      
                      161,658Total
      current liabilities
                      
                      
                      430,254
                      
                      
                      
                      456,905LONG-TERM
      LIABILITIES:Notes
      payable – vehicles, net of current portion of $16,900 and $18,646,
      respectively
                      
                      
                      13,868
                      
                      
                      
                      30,178Total
      long-term liabilities
                      
                      
                      13,868
                      
                      
                      
                      30,178Total
      Liabilities
                      
                      
                      444,122
                      
                      
                      
                      487,083SHAREHOLDERS'
      EQUITY:Preferred
      stock, $0.0001 par value; 10,000,000 shares authorized; no shares
      issued and outstanding at December 31, 2009 and 2008
                      
                      
                      -
                      
                      
                      
                      -Common
      stock, $0.0001 par value; 100,000,000 shares authorized; 22,864,200
      and 22,859,000 shares issued and outstanding at December 31, 2009) at
      December 31, 2009 and 2008, respectively
                      
                      
                      2,287
                      
                      
                      
                      2,286Paid-in
      capital
                      
                      
                      160,413
                      
                      
                      
                      157,814Retained
      earnings (deficit)
                      
                      
                      (121,416
                      )
                      
                      
                      15,670Total
      equity
                      
                      
                      41,284
                      
                      
                      
                      175,770TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                      
                      $
                      485,406
                      
                      
                      $
                      662,853
  The
accompanying notes are an integral part of these financial
statements.
  F-3
  VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
 Consolidated
Statements of Operations
 For
the Years Ended December 31, 2009 and 2008 (Restated – Note K)
  2009
                      
                      
                      2008(Restated)Income
                      
                      $
                      3,447,732
                      
                      
                      $
                      4,157,860Cost
      of goods sold:Labor
                      
                      
                      645,040
                      
                      
                      
                      806,356Materials
                      
                      
                      947,801
                      
                      
                      
                      1,278,524Other
                      
                      
                      38,661
                      
                      
                      
                      40,374Total
      cost of goods sold
                      
                      
                      1,631,502
                      
                      
                      
                      2,125,254Gross
      profit
                      
                      
                      1,816,230
                      
                      
                      
                      2,032,606Expenses:Advertising
      and marketing
                      
                      
                      161,416
                      
                      
                      
                      196,660Selling,
      general, and administrative
                      
                      
                      443,476
                      
                      
                      
                      442,930Payroll
                      
                      
                      995,334
                      
                      
                      
                      1,051,605Professional
      fees
                      
                      
                      242,284
                      
                      
                      
                      199,933Rent
                      
                      
                      104,280
                      
                      
                      
                      103,790Total
      expenses
                      
                      
                      1,946,790
                      
                      
                      
                      1,994,918Net
      Operating Income (Loss)
                      
                      
                      (130,560
                      )
                      
                      
                      37,688Other
      Income (Expense):Interest
      income
                      
                      
                      391
                      
                      
                      
                      6,585Interest
      expense
                      
                      
                      (5,317
                      )
                      
                      
                      (6,118
                      )Net
      other income (expense)
                      
                      
                      (4,926
                      )
                      
                      
                      467Income
      (loss) before income taxes
                      
                      
                      (135,486
                      )
                      
                      
                      38,155Income
      taxes
                      
                      
                      (1,600
                      )
                      
                      
                      (80,000
                      )Net
      loss
                      
                      $
                      (137,086
                      )
                      
                      $
                      (41,845
                      )Earnings
      per share:Basic
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.00
                      )Diluted
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.00
                      )Weighted
      average shares outstanding - basic
                      
                      
                      22,862,500
                      
                      
                      
                      22,805,981Weighted
      average shares outstanding - diluted
                      
                      
                      22,862,500
                      
                      
                      
                      22,805,981
  The
accompanying notes are an integral part of these financial
statements.
  F-4
  VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
 Consolidated
Statements of Shareholders' Equity
 For
the Years Ended December 31, 2009 and 2008 (Restated – Note K)
  TotalPreferred
                      
                      
                      Common
                      
                      
                      Paid-In
                      
                      
                      Retained
                      
                      
                      Shareholders’Shares
                      
                      
                      Stock
                      
                      
                      Shares
                      
                      
                      Stock
                      
                      
                      Capital
                      
                      
                      Earnings (Deficit)
                      
                      
                      DeficitBalances,
      December 31, 2007
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      
                      
                      
                      
                      $
                      2,280
                      
                      
                      $
                      (180
                      )
                      
                      $
                      387,515
                      
                      
                      
                      389,615Issuance
      of common stock for cash
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      59,000
                      
                      
                      
                      6
                      
                      
                      
                      61,094
                      
                      
                      
                      -
                      
                      
                      
                      61,100Issuance
      of employee stock Options
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      67,000
                      
                      
                      
                      -
                      
                      
                      
                      67,000Contribution
      of capital
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      29,900
                      
                      
                      
                      -
                      
                      
                      
                      29,900Dividends
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (330,000
                      )
                      
                      
                      (330,000
                      )Net
      Income (loss) for the year
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (41,845
                      )
                      
                      
                      (41,845
                      )Balances,
      December 31, 2008 (restated)
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      22,859,000
                      
                      
                      
                      2,286
                      
                      
                      
                      157,814
                      
                      
                      
                      15,670
                      
                      
                      
                      175,770Options  Exercised
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      5,200
                      
                      
                      
                      1
                      
                      
                      
                      2,599
                      
                      
                      
                      -
                      
                      
                      
                      2,600Net
      Income (Loss) for the Year
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (137,086
                      )
                      
                      
                      (137,086
                      )Balances,
      December 31, 2009
                      
                      
                      
                      
                      
                      $
                      -
                      
                      
                      
                      22,864,200
                      
                      
                      $
                      2,287
                      
                      
                      $
                      160,413
                      
                      
                      $
                      (121,416
                      )
                      
                      
                      (41,284
                      )
  The
accompanying notes are an integral part of these financial
statements.
  F-5
  VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
 Consolidated
Statements of Cash Flows
 For
the Years Ended December 31, 2009 and 2008 (Restated – Note K)
  2009
                        
                        
                        2008(Restated)OPERATING
      ACTIVITIES:Net
      Loss
                        
                        $
                        (137,086
                        )
                        
                        $
                        (41,845
                        )Adjustments
      to Reconcile Net Loss to Net Cash Used In Operating
      Activities:Depreciation
                        
                        
                        66,177
                        
                        
                        
                        48,545Decrease
      (increase) in accounts receivable, net
                        
                        
                        21,386
                        
                        
                        
                        11,372Decrease
      (increase) in inventory
                        
                        
                        18,904
                        
                        
                        
                        (20,194
                        )Decrease
      (increase) in prepaid expenses
                        
                        
                        (15,600
                        )
                        
                        
                        (6,808
                        )Issuance
      of employee stock options
                        
                        
                        -
                        
                        
                        
                        67,000Increase
      in accounts payable and accrued expenses
                        
                        
                        11,254
                        
                        
                        
                        127,657Decrease
      in customer deposits
                        
                        
                        (58,366
                        )
                        
                        
                        (20,912
                        )Net
      cash provided (used) by operating activities
                        
                        
                        (93,331
                        )
                        
                        
                        164,815INVESTING
      ACTIVITIESLeasehold
      improvements
                        
                        
                        -
                        
                        
                        
                        (36,494
                        )Machinery
      and equipment purchases
                        
                        
                        (13,000
                        )
                        
                        
                        3,813Office
      and computer equipment purchases
                        
                        
                        (7,988
                        )
                        
                        
                        (9,628
                        )Decrease
      in receivable from shareholders
                        
                        
                        -
                        
                        
                        
                        152,000Net
      cash provided (used) by investing activities
                        
                        
                        (20,988
                        )
                        
                        
                        109,691FINANCING
      ACTIVITIESIssuance
      of common stock for cash
                        
                        
                        2,600
                        
                        
                        
                        61,100Contribution
      of capital
                        
                        
                        -
                        
                        
                        
                        29,900Line
      of credit principal borrowings
                        
                        
                        52,600
                        
                        
                        
                        -Line
      of credit principal repayments
                        
                        
                        (30,393
                        )
                        
                        
                        -Vehicle
      loans principal payments
                        
                        
                        (18,056
                        )
                        
                        
                        (15,168
                        )Stock
      receivable
                        
                        
                        5,000
                        
                        
                        
                        (5,000
                        )Note
      payable principal payments
                        
                        
                        -
                        
                        
                        
                        (4,789
                        )Increase
      (decrease) in note payable to shareholder
                        
                        
                        -
                        
                        
                        
                        (29,900
                        )Dividends
      paid
                        
                        
                        -
                        
                        
                        
                        (330,000
                        )Net
      cash provided (used) by financing activities
                        
                        
                        11,751
                        
                        
                        
                        (293,857
                        )NET
      CASH DECREASE FOR THE YEAR
                        
                        
                        (102,568
                        )
                        
                        
                        (19,351
                        )CASH
      AT BEGINNING OF THE YEAR
                        
                        
                        114,901
                        
                        
                        
                        134,252CASH
      AT END OF THE YEAR
                        
                        $
                        12,333
                        
                        
                        $
                        114,901SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:CASH
      PAID DURING THE PERIOD FOR:INTEREST
                        
                        $
                        4,926
                        
                        
                        $
                        6,118TAXES
                        
                        $
                        800
                        
                        
                        $
                        58,532
  The
accompanying notes are an integral part of these financial
statements.
  F-6
  VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2009 and 2008 (Restated – Note K)
  NOTE A – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
  Organization–Vinyl Products, Inc. (“the
Company”) was incorporated in the State of Delaware on May 24, 2007, under the
name Red Oak Concepts, Inc. to serve as a vehicle for a business combination
through a merger, capital stock exchange, asset acquisition or other similar
business combination. The Company filed a registration statement on Form 10
under the Securities Exchange Act of 1934, as amended, to register its class of
common stock on September 15, 2007, that was effective as of November 14, 2007.
On December 4, 2007, the Company changed its jurisdiction of domicile by merging
with a Nevada corporation titled Red Oak Concepts, Inc. On November 21, 2008,
the Company changed its name to Vinyl Products, Inc. in connection with a
reverse acquisition transaction with The Vinyl Fence Company, Inc. (“TVFC”), a
California corporation.
  On November 20, 2008, the Company entered into a
Share Exchange Agreement (the “Exchange Agreement”) with TVFC. Pursuant to the
terms of the Exchange Agreement, the Company acquired all of the outstanding
capital stock of TVFC from the TVFC shareholders in exchange for 22,100,000
shares of the Company’s common stock. Because the acquisition was treated as a
reverse acquisition, the financial statements of the Company have been
retroactively adjusted to reflect the acquisition from the beginning of the
reported periods. The stock exchange transaction has been accounted as a reverse
acquisition and recapitalization of the Company whereby TVFC is deemed to be the
accounting acquirer (legal acquiree) and the Company to be the accounting
acquiree (legal acquirer). The basis of the assets, liabilities and retained
earnings of TVFC has been carried over in the recapitalization, and earnings per
share have been retroactively restated to reflect the reverse
acquisition.
   Pursuant
to the Exchange Agreement, on November 21, 2008, the Company filed a Certificate
of Amendment to its Articles of Incorporation with the Secretary of State for
the State of Nevada to change its corporate name to “Vinyl Products, Inc.” to
better reflect its business.
  Business
Activity
 Vinyl
Products, Inc. designs, fabricates and installs fencing, patio covers, gates,
decking and railings made of co-extruded vinyl from its location in Santa Ana,
California.  The Company operates in one reportable segment, the
domestic vinyl products industry.
 
 Basis of Presentation and
Principles of Consolidation
 The
Company maintains its accounting records on an accrual basis in accordance with
generally accepted accounting principles in the United States of America
("U.S. GAAP").
 
 The
consolidated financial statements include the accounts of all controlled
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
  Cash and Cash
Equivalents
 The
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.  The Company did not have
any cash equivalents at December 31, 2009 and 2008.
  F-7
  Use of
Estimates
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
  Stock Based
Compensation
 The
Company accounts for stock-based employee compensation arrangements using the
fair value method in accordance with the accounting provisions relating to
share-based payments (“Codification Topic 718”). The company accounts for the
stock options issued to non-employees in accordance with these provisions. Stock
options are valued using a Black-Scholes options pricing model which requires
estimates such as expected term, discount rate and stock
volatility.
  Revenue
Recognition
 Customer
deposits are recorded as a current liability when received. Under California
law, the customer has three days in which to cancel a contract. Revenues are
recognized when the installations of the products are complete. The related cost
of goods sold includes materials, installation labor, and miscellaneous other
costs. Revenue is always deferred until the price is fixed, our obligation to
perform has been relieved and collectability is reasonably assured.
  Advertising and Marketing
Expense
 The
Company expenses all advertising and marketing costs as incurred.
  Fair Value of Financial
Instruments
 In the
first quarter of fiscal year 2009, the Company adopted Accounting Standards
Codification subtopic 820-10, Fair Value Measurements and Disclosures ("ASC
820-10"). ASC 820-10 defines fair value, establishes a framework for measuring
fair value and enhances fair value measurement disclosure. ASC 820-10 delays,
until the first quarter of fiscal year 2009, the effective date for ASC 820-10
for all non-financial assets and non-financial liabilities, except those that
are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The adoption of ASC 820-10 did not have a
material impact on the Company's consolidated financial position or operations,
but does require that the Company disclose assets and liabilities that are
recognized and measured at fair value on a non-recurring basis, presented in a
three-tier fair value hierarchy, as follows:
  •
                Level
      1. Observable inputs such as quoted prices in active
    markets;
  •
                  Level
      2. Inputs, other than the quoted prices in active markets, that are
      observable either directly or indirectly;
and
  •
                  Level
      3. Unobservable inputs in which there is little or no market data, which
      require the reporting entity to develop its own
    assumptions.
  Accounts
Receivable
 The
Company sells to individual homeowners and homeowner associations. The Company
provides an allowance for doubtful accounts receivable equal to the estimated
uncollectible amounts. That estimate is based on historical collection
experience, current economic and market conditions and a review of the current
status of each customer's trade accounts receivable. The allowance for doubtful
accounts receivable was $9,946 and $0 at December 31, 2009 and 2008,
respectively.
  F-8
  Inventory
 Inventory
is stated at the lower of average cost or market value. Inventory consists of
raw materials and fabricated materials awaiting installation. Inventory is
periodically reviewed to determine if it is marketable, obsolete or impaired.
Inventory that is determined to not be marketable is written down to market
value. Inventory that is determined to be obsolete or impaired is written off to
expense at the time the impairment is identified.
  Income
Taxes
 The
Company accounts for income taxes using the asset and liability method, which
requires the establishment of deferred tax assets and liabilities for the
temporary differences between the financial reporting basis and the tax basis of
the Company’s assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. A valuation allowance is provided to
the extent deferred tax assets may not be recoverable after consideration of the
future reversal of deferred tax liabilities, tax planning strategies, and
projected future taxable income.
  Restatements
 The 2008
financial results have been restated. See Note K for details.
  Impairment of Long-Lived
Assets
 Using the
guidance of the Accounting Standards Codification, the Company reviews the
carrying value of property and equipment for impairment whenever events and
circumstances indicate that the carrying value of an asset may not be
recoverable from the estimated future cash flows expected to result from its use
and eventual disposition. In cases where undiscounted expected future cash flows
are less than the carrying value, an impairment loss is recognized equal to an
amount by which the carrying value exceeds the fair value of assets. The factors
considered by management in performing this assessment include current operating
results, trends and prospects, the manner in which the property is used, and the
effects of obsolescence, demand, competition and other economic
factors.
  Property and
Equipment
 Property,
plant and equipment are stated at cost less accumulated depreciation. The cost
of property, plant and equipment is depreciated using the straight-line method
over the estimated useful life of the asset. Long-lived assets are reviewed for
impairment whenever in management's judgment conditions indicate a possible
loss. Such impairment tests compare estimated undiscounted cash flows to the
recorded value of the asset. If impairment is indicated, the asset is written
down to its fair value or, if fair value is not readily determinable, to an
estimated fair value based on discounted cash flows. Fully depreciated assets
are retained in property, plant and equipment and accumulated depreciation
accounts until they are removed from service. In case of disposals of assets,
the assets and related accumulated depreciation are removed from the accounts,
and the net amounts after proceeds from disposal are credited or charged to
income.
  Depreciation
and amortization are computed using the straight-line method over the following
estimated useful lives:
  Vehicles
                  2 –
      7 yearsFurniture
      and Fixtures
                  7 –
      15 yearsLeasehold
      Improvements
                  4 –
      8 yearsMachinery
      and Equipment
                  5 –
      15 yearsOffice
      and Computer Equipment
                  3 –
      7 yearsSigns
                  7
      years
  F-9
  Property
and equipment are carried at cost and consisted of the following at December 31,
2009 and 2008:
  2009
                      
                      
                      2008Vehicles
                      
                      $
                      160,551
                      
                      
                      $
                      160,551Furniture
      and Fixtures
                      
                      
                      31,665
                      
                      
                      
                      31,665Leasehold
      Improvements
                      
                      
                      84,897
                      
                      
                      
                      84,897Machinery
      and Equipment
                      
                      
                      100,274
                      
                      
                      
                      87,275Office
      and Computer Equipment
                      
                      
                      61,385
                      
                      
                      
                      53,396Signs
                      
                      
                      11,470
                      
                      
                      
                      11,471Total
                      
                      
                      450,242
                      
                      
                      
                      429,255Less:
      Accumulated Depreciation and Amortization
                      
                      
                      214,260
                      
                      
                      
                      148,084Property
      and Equipment, net
                      
                      $
                      235,982
                      
                      
                      $
                      281,171
  Recently Adopted and
Recently Enacted Accounting Pronouncements:
  In April
2008, the FASB issued ASC 350-10, "Determination of the Useful Life of
Intangible Assets." ASC 350-10 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under ASC 350-10, "Goodwill and Other Intangible
Assets." ASC No. 350-10 is effective for fiscal years beginning after December
15, 2008. The adoption of this ASC did not have a material impact on our
consolidated financial statements.
  In April
2009, the FASB issued ASC 805-10, "Accounting for Assets Acquired and
Liabilities assumed in a Business Combination That Arise from Contingencies—an
amendment of FASB Statement No. 141 (Revised December 2007), Business
Combinations". ASC 805-10 addresses application issues raised by preparers,
auditors and members of the legal profession on initial recognition and
measurement, subsequent measurement and accounting and disclosure of assets and
liabilities arising from contingencies in a business combination. ASC 805-10 is
effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. ASC
805-10 will have an impact on our accounting for any future acquisitions and its
consolidated financial statements.
  In May
2009, the FASB issued ASC Topic 855, Subsequent Events. ASC Topic 855
established principles and requirements for evaluating and reporting subsequent
events and distinguishes which subsequent events should be recognized in the
financial statements versus which subsequent events should be disclosed in the
financial statements. ASC Topic 855 also requires disclosure of the date through
which subsequent events are evaluated by management. ASC Topic 855 was effective
for interim periods ending after June 15, 2009 and applies prospectively.
Because ASC Topic 855 impacts the disclosure requirements, and not the
accounting treatment for subsequent events, the adoption of ASC Topic 855 did
not impact our consolidated results of operations or financial condition. See
Note K for disclosures regarding our subsequent events.
  Effective
July 1, 2009, we adopted the Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 105-10, Generally Accepted Accounting
Principles—Overall ("ASC 105-10"). ASC 105-10 establishes the FASB Accounting
Standards Codification (the "Codification") as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in conformity with U.S.
GAAP. Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative U.S. GAAP for SEC registrants.
All guidance contained in the Codification carries an equal level of authority.
The Codification superseded all existing non-SEC accounting and reporting
standards. All other non-grandfathered, non-SEC accounting literature not
included in the Codification is non-authoritative. The FASB will not issue new
standards in the form of Statements, FASB Staff Positions or Emerging Issues
Task Force Abstracts. Instead, it will issue Accounting Standards Updates
("ASUs"). The FASB will not consider ASUs as authoritative in their own right.
ASUs will serve only to update the Codification, provide background information
about the guidance and provide the bases for conclusions on the change(s) in the
Codification. References made to FASB guidance throughout these consolidated
financials have been updated for the Codification.
  F-10
  In August
2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value,
which provides additional guidance on how companies should measure liabilities
at fair value under ASC 820. The ASU clarifies that the quoted price for an
identical liability should be used. However, if such information is not
available, an entity may use the quoted price of an identical liability when
traded as an asset, quoted prices for similar liabilities or similar liabilities
traded as assets, or another valuation technique (such as the market or income
approach). The ASU also indicates that the fair value of a liability is not
adjusted to reflect the impact of contractual restrictions that prevent its
transfer and indicates circumstances in which quoted prices for an identical
liability or quoted price for an identical liability traded as an asset may be
considered level 1 fair value measurements. This ASU is effective October 1,
2009. We are currently evaluating the impact of this standard, but would not
expect it to have a material impact on our consolidated results of operations or
financial condition.
  NOTE B –
COMMITMENTS/LEASES
  The
Company leases its 10,000 square foot facility under a non-cancellable lease
arrangement that expires on March 31, 2011, with an option to renew for an
additional two-year period. The lease is guaranteed by one of the Company’s
shareholders. Future minimum payments under the current operating lease are as
follows:
 
 2010
                        
                        $
                        106,6292011
                        
                        
                        26,8532012
                        
                        
                        -2013
                        
                        
                        -2014
                        
                        
                        -
 
 The
Company also leases a 1,000 square foot sales office under a non-cancellable
lease arrangement that expires on March 31, 2012, with options to renew for
three additional one-year periods.  Future minimum payments under
these operating leases are as follows:
 
 2010
                        
                        $
                        25,2002011
                        
                        
                        33,6002012
                        
                        
                        11,2002013
                        
                        
                        -2014
                        
                        
                        -
 
 The
Company has an available $100,000 line of credit with no stated maturity which
it opened in January 2006. The interest rate is prime plus 3 percentage points,
which rate was 6.25% at December 31, 2009. In 2009, the Company drew down
$52,000 under its line of credit; the balance owed as of December 31, 2009 was
$22,207. The line of credit is guaranteed by the President and Vice
President.
  F-11
  NOTE C — LONG-TERM DEBT
OBLIGATIONS
 
 The
Company acquired four vehicles under installment sales contracts with interest
rates varying from 4.9% to 6.9%.  Future principal payments under
these agreements are as follows:
 
 2010
                        
                        $
                        16,9002011
                        
                        $
                        10,6942012
                        
                        $
                        3,1742013
                        
                        $
                        -2014
                        
                        $
                        -
 
 NOTE D – INCOME
TAXES
  Prior to
2008, the Company had elected to be taxed as a Subchapter S corporation, and as
such the net income of the Company was passed through to the Company’s two
shareholders. The Company is now a Subchapter C corporation and is subject to
Federal and State income taxes.
  The
Company accounts for income taxes and the related accounts under the liability
method. Deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted rate expected to be in effect during the year in which
the basis differences reverse.
  The
provision for income taxes is comprised of the following:
  2009
                      
                      
                      2008Current
      federal
                      
                      $
                      -
                      
                      
                      $
                      61,000Provision
      for income taxes
                      
                      $
                      -
                      
                      
                      $
                      61,000Current
      state
                      
                      $
                      1,600
                      
                      
                      $
                      19,000Provision
      for income taxes
                      
                      $
                      1,600
                      
                      
                      $
                      19,000
 
 Deferred
income tax assets and liabilities consist of the following:
 
 Deferred
      Tax asset (net NOL carryfoward)
                      
                      $
                      50,000Valuation
      allowance
                      
                      
                      (50,000
                      )Net
      deferred tax assets
                      
                      $
                      0
 
 The
Company estimates that it has an NOL carryfoward of approximately $120,000 that
expires in 2029.
  The NOL
formerly associated with Red Oaks Concepts, Inc. was lost due to the change in
control as a result of the reverse merger in 2008.
  After
evaluating any potential tax consequence from the former shell company and our
own potential tax uncertainties, the Company has determined that there are no
material uncertain tax positions that have a greater than 50% likelihood of
reversal if the Company were to be audited. Our tax return for the year ended
December 31, 2008 may be subject to IRS audit; prior to 2008 we filed S
corporation tax returns taxed at the shareholder level.
  F-12
  NOTE E –Basic and Diluted Net Loss
Per Common Share
  Basic and
diluted net loss per share calculations are calculated on the basis of the
weighted average number of common shares outstanding during the periods
presented. The per share amounts include the dilutive effect of common stock
equivalents in years with net income. Basic and diluted loss per share is the
same due to the anti dilutive nature of potential common stock
equivalents.
  2009 and
2008 information is not presented as the effect of all potential common stock
equivalents would be anti-dilutive.
  NOTE F – EMPLOYEE STOCK
OPTION PLAN
  On
September 24, 2008, the Company granted stock options to employees to purchase
133,800 shares of common stock at $.50 a share, with immediate vesting. Four
employees subsequently left the Company and their options for 5,400 shares were
terminated. As of December 31, 2009, options to purchase 5,200 shares had been
exercised, and options to purchase 123,200 remained unexercised. The options
expire on September 23, 2010. The Company valued these options using a
Black-Scholes valuation model with an estimated volatility of 39%, discount rate
of 1.69% and an expected term of less than one year. The value of these grants
was estimated to be approximately $67,000. The options were originally only
disclosed with no compensation expense being recorded, see Note K – Restatement
for a correction of this error.
  NOTE G – THEFT
LOSS
  In
connection with the preparation of unaudited financial statements for the
quarter ended September 30, 2008, management of TVFC became aware of accounting
irregularities that resulted in being unable to account for approximately
$200,000 of inventory that TVFC had purchased that was not the subject of
corresponding sales orders. During the course of TVFC's preliminary
investigation of the matter, management discovered that certain employees were
committing fraud against the company by stealing inventory and reselling it
pursuant to fraudulent sales orders that were never submitted to the company.
These employees were retaining the sale price of the inventory and, in some
cases, using company employees to fabricate and install the products on company
time using company vehicles.
  During
the last quarter of 2008, management believed that it had identified most if not
all of the perpetrators of the fraud, and some of the instances in which
inventory was stolen and the jobs to which the inventory was allocated. The
fraud extended not only to the loss of the inventory and man hours for the labor
associated with the jobs at which the inventory was applied, but also some
degree of lost income that TVFC might have recognized if it had completed the
jobs. However, since the sales prices for these fraudulent jobs were
substantially below TVFC’s normal sales prices, management believes that it
would not have been able to obtain many of these fraudulent sales as company
sales.
  Management
has taken what it believes to be appropriate action to address the material
weaknesses in internal control over financial reporting, including terminating
three employees, making other personnel changes, and implementing improved
physical and documentary controls and procedures. However, management does not
expect that its disclosure controls and procedures or internal control over
financial reporting will prevent all errors or all instances of fraud in the
future. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system’s objectives
will be met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Inherent limitations in all control systems include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple errors or mistakes. Controls can also be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the controls. The design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and any design may not succeed in achieving its stated goals
under all potential future conditions.
  F-13
  On
December 5, 2008, one of the terminated employees referred to above filed a
complaint in Superior Court against the company and its principals, seeking
compensatory damages, attorneys' fees, punitive damages and equitable relief. In
2009, the Company paid its $12,500 share of the insurance deductible. In March
2010, the case was settled in arbitration, with no further liability for the
Company.
  NOTE H – SHAREHOLDERS’
EQUITY
  Common
Shares
 The
Company is authorized to issue 100,000,000 shares of $.0001 par value common
stock, and had 22,864,200 shares outstanding at December 31, 2009 and 22,859,000
shares outstanding at December 31, 2008.
  During
2008:
  ·
                The
      Company issued options to employee to purchase 133,800 shares of common
      stock.  These were valued at $67,000.  See Note K –
      Restatement.
 ·
                The
      Company issued 59,000 shares to accredited investors at a price of $1.00
      per share.
 ·
                Two
      of the shareholders of Red Oak Concepts, Inc. (see Note A) contributed to
      the capital of the Company all amounts of principal and interest due to
      them under promissory note totaling
$29,900.
 ·
                Prior
      to the reverse merger (see Note A), the Company paid dividends of $330,000
      to the two founders of The Vinyl Fence Company,
  Inc.
 
 During
2009, the Company employees exercised options for 5,200 shares for cash in the
amount of $2,600 ($.50 per share).
  Preferred
Shares
 The
Company is authorized to issue 10,000,000 shares of $.0001 par value preferred
stock. The Company has never issued any shares of preferred stock.
  NOTE I –
CONTINGENCIES
  Lawsuits
occur in the normal course of business, but the Company is not aware of any
pending litigation at this time.
  NOTE J – SUBSEQUENT
EVENT
  We have
evaluated subsequent events through April 9, 2010; no events have occurred
through this period that requires disclosure.
  F-14
  NOTE K –
RESTATEMENT
  The
Company has restated its annual financial statements from amounts previously
reported for periods ended December 31, 2008. The Company has determined that
there were certain errors in the amounts as reported previously.
  In 2008,
the Company issued options to employees to purchase 133,800 shares of common
stock (see Note F). These options should have been valued at $67,000 and
reflected in the 2008 financial statements. Accordingly, the 2008 financial
statements have been restated to reflect the correction of this
error.
  The
following line items in the 2008 financial statements were
affected:
  2008
      as
                              Originally
                              Reported
                            
                            
                            2008
                              As
      Restated
                            
                            
                            Effect
                              Of
      ChangeBalance
      Sheet:Paid-in
      Capital
                            
                            A
                            
                            
                            
                            90,814
                            
                            
                            
                            157,814
                            
                            
                            
                            67,000Retained
      Earnings
                            
                            A
                            
                            
                            
                            82,670
                            
                            
                            
                            15,670
                            
                            
                            
                            (67,000
                            )Statement
      of Operations:Payroll
                            
                            A
                            
                            
                            
                            984,605
                            
                            
                            
                            1,051,605
                            
                            
                            
                            67,000Total
      Expenses
                            
                            A
                            
                            
                            
                            1,927,918
                            
                            
                            
                            1,994,918
                            
                            
                            
                            67,000Net
      Operating Income (Loss)
                            
                            A
                            
                            
                            
                            104,688
                            
                            
                            
                            37,688
                            
                            
                            
                            (67,000
                            )Net
      Income (Loss)
                            
                            A
                            
                            
                            $
                            25,155
                            
                            
                            $
                            (41,845
                            )
                            
                            $
                            (67,000
                            )Basic
      and Diluted Earnings Per Share
                            
                            
                            
                            
                            $
                            .00
                            
                            
                            $
                            (.00
                            )
                            
                            
                            -Statement
      of Shareholders’ Equity:Paid-in
      Capital
                            
                            A
                            
                            
                            
                            90,814
                            
                            
                            
                            157,814
                            
                            
                            
                            67,000Retained
      Earnings
                            
                            A
                            
                            
                            
                            82,670
                            
                            
                            
                            15,670
                            
                            
                            
                            (67,000
                            )
  Legend:
  A –
Amounts adjusted due to options issued in 2008 that were not
expensed.
  F-15




Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.





Effective
December 22, 2009, the client-auditor relationship between Vinyl Products, Inc.
(the "Company") and Traci J. Anderson, CPA ("TJA") was terminated upon the
dismissal of TJA as the Company’s independent registered accounting
firm.  Effective December 22, 2009, the Company engaged M&K CPAS,
PLLC ("M&K") as its principal independent public accountant to audit the
Company's financial statements for the year ending December 31,
2009.  The decision to change accountants was recommended and approved
by the Company's Board of Directors effective December 22, 2009.





There are
not and have not been any disagreements between the Company and our independent
accountants on any matter of accounting principles, practices or financial
statement disclosure since our inception.





Item
9A. Controls and Procedures.





We
maintain disclosure controls and procedures that are designed to ensure that
information we are required to disclose in the reports we file under the
Exchange Act, 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 management,
including our President (PEO) and Chief Financial Officer (PFO), as appropriate,
to allow timely decisions regarding required disclosure.





Our
management also is responsible for establishing and maintaining internal control
over financial reporting which is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of our
financial statements for external purposes in accordance with generally accepted
accounting principles.  Internal control over financial reporting
includes policies and procedures that (i) pertain to the maintenance
of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of our financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding the prevention or
timely detection of the unauthorized acquisition, use or disposition of our
assets that could have a material effect on our financial
statements.





Our
management does not expect that our disclosure controls and procedures or
internal control over financial reporting will be effective in all
instances.  There are inherent limitations in all control systems that
reflect both resource constraints and the human factor as it relates to the
application of a control system, including the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
errors or mistakes.  Controls also can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls.  The design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events and any design may not succeed in achieving its stated goals under
all potential future conditions.





Evaluation
of Disclosure Controls and Procedures





As of
December 31, 2009, the Company’s management carried out an evaluation, under the
supervision and with the participation of the Company’s Chief Executive Officer
(principal executive officer, or PEO) and Chief Financial Officer (principal
financial officer, or PFO), of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and
15d-15 under the Exchange Act), pursuant to Exchange Act Rule
13a-15.  As a result of the material weaknesses we identified in our
internal control over financial reporting described below, our PEO and PFO
concluded that the Company's disclosure controls and procedures were not
effective as of December 31, 2009.





Identification
of Material Weaknesses in Controls and Procedures





In view
of the two restatements and the reclassification of our financial statements for
the 2008 year, as described under the heading Management's Discussion and
Analysis of Financial Condition and Results of Operations - Restatement and
Reclassification of Historical Consolidated Financial Statements, and in
connection with the evaluation of our controls and procedures for the 2009
period, we have determined that we have numerous material weaknesses in our
controls and procedures, as more fully described below.


32


A
material weakness in internal control over financial reporting is defined in
Section 210.1-02(4) of Regulation S-X as a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely.  A
significant deficiency is a deficiency, or a combination of deficiencies, in
internal control over financial reporting that is less severe than a material
weakness, yet important enough to merit attention by those responsible for
oversight of the Company's financial reporting.





Prior to
our acquisition of The Vinyl Fence Company, Inc. ("TVFC") in November 2008, we
were a "shell" company that had no operations and TVFC had operated its business
as a private company.  Accordingly, we were not subject to the
rigorous rules and regulations relating to controls and procedures under the
Sarbanes Oxley Act of 2002 or the Exchange Act.





A.
            Failure
      to Institute Procedures to Accurately Compute Taxes; Reliance on
      Third-Party Professionals





In
October 2009, we determined that we underreported our federal and state
corporate income tax liability for the year ended December 31, 2008 by $30,000,
an amount material to our financial statements.  As a result of
identifying the error, we concluded that accounting adjustments were necessary
to correct previously issued financial statements and that the reports we filed
with the SEC that included the financial statements that reported the erroneous
information should no longer be relied upon.  Accordingly, we restated
the effected financial statements.





We
determined that our failure to accurately compute our federal and state
corporate income tax liability for the year ended December 31, 2008 was a result
of the following weaknesses in our internal control over financial
reporting:





·
            Inadequate
      Expertise in the application of Federal and State Tax Laws as they Impact
      Financial Reporting: Our internal accounting personnel did not possess
      sufficient expertise in the application of federal and state tax laws as
      they apply to consolidation of an acquired business with a different
      fiscal year end.





·
            Reliance
      on Third Party Professionals: We retained a certified public accountant to
      prepare our tax returns for the year ended December 31,
      2008.  We may not have adequately assessed this person's
      qualifications to ascertain his level of experience to render the services
      for which we retained him.  Moreover, we did not adequately
      monitor this person's work and placed undue reliance on his expertise
      without confirming the accuracy of the finished
  product.





B.           Failure
to Record Compensation Expense Upon Grant of Options





In April 2010, in connection with
auditing our financial statements for the 2009 fiscal year, our new independent
accountant advised us that we had failed to recognize a compensation expense
equal to the value of stock options we granted to employees in September 2008,
as required by Financial Accounting Standard 123R ("FAS 123R").  The
error had the effect of overstating income and understating paid-in capital by
$67,000 (the fair value of the options calculated using the Black-Scholes option
pricing model) for the 2008 period.  As a result of identifying the
error, we concluded that accounting adjustments were necessary to correct the
previously issued financial statements for the 2008 year and that the financial
statements for that period should no longer be relied upon.  We have
restated our financial statements for the 2008 period included with this Annual
Report.





We
determined that our failure to recognize a compensation expense equal to the
value of stock options we granted to employees demonstrated the following
weaknesses in our internal control over financial reporting:





·
            Accounting
      and Finance Personnel Weaknesses — The Company lacks appropriate resources
      within the accounting function.  Our accounting staff comprises
      two people and lacks the required infrastructure and expertise to meet the
      higher demands of being a public company.  The Company lacks
      appropriate resources within the accounting function.  This lack
      of resources has led to a lack of segregation of duties and insufficient
      attention to the internal control process over financial
      reporting.


33


·
            Lack
      of an Audit Committee — We do not have an audit committee, resulting in
      ineffective oversight in establishing and monitoring of required financial
      reporting internal control
procedures.





·
            Reliance
      on Third-Party Professionals: We retained an auditing firm to audit our
      2008 financial statements.    We may not have
      adequately assessed this firm's qualifications to ascertain its level of
      experience to render the services for which we retained the
      firm.  Moreover, we did not adequately monitor the firm's work
      and placed undue reliance on its expertise without confirming the accuracy
      of the finished product.





Remediation
Plan for Material Weakness in Internal Control over Financial
Reporting





In light
of the foregoing, we have introduced and plan to implement a number of
remediation measures to address the material weaknesses described
above.  Many of these measures are entity level in nature and we
believe that the organizational and process changes we intend to adopt will
improve our internal controls and governance environment.  Management
recognizes that many of these enhancements require continual monitoring and
evaluation for effectiveness.  The development of these actions is an
iterative process and will evolve as the Company continues to evaluate and
improve our internal controls over financial reporting.  Initially, we may
be foreclosed from implementing some of the more obvious measures, such as
retaining additional accounting personnel who have particular areas of
expertise, given our resource constraints.  However, as we grow, we
expect to adopt and implement those measures and to retain additional qualified
personnel as management deems necessary to satisfy our control and governance
requirements.





Specifically,
we have:





·
            Retained
      a new accounting firm to prepare the Company's tax reports and filings
      that has considerably more expertise and resources than our previous tax
      preparer.





·
            Engaged
      a new independent accounting firm to audit our financial statements that
      is larger and has more greater resources at its disposal than our prior
      independent accountant.





Over the
balance of the 2010 year, we will undertake an entity-level review of and test
our control procedures and analyze the application of our controls and our
control environment generally.  In addition, we plan to establish an
audit committee that we expect to seat prior to the end of the 2010 calendar
year that will include a member who qualifies as an "audit committee financial
expert," as such term is defined in Item 407(d)(5) of
Regulation S-K.  We expect that the audit committee will set a
tone for effective entity-wide corporate governance; inspire rigorous, uniform
application of our internal controls and provide ongoing oversight of the
preparation and review of our financial statements.  We expect that
the audit committee will review and propose improvements to our entity level
controls and procedures and other process level controls.  We believe
that the audit committee and our new financial professionals will substantially
decrease the possibility of the occurrence of errors in our financial
statements.





Management
will review progress on these activities on a consistent and ongoing basis at
the senior management level in conjunction with our Board of
Directors.  We also plan to take additional steps to elevate Company
awareness about, and communication of, these important issues through formal
channels such as Company meetings and training.





We cannot
assure you at this time that the actions and remediation efforts we have taken
or ultimately will implement will effectively remediate the material weakness
described above or prevent the incidence of other significant deficiencies or
material weaknesses in our internal control over financial reporting in the
future


34


Management’s
Report on Internal Control over Financial Reporting





As of the
end of the period covered by this Annual Report, management conducted an
evaluation of the effectiveness of our internal control over financial reporting
using the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control—Integrated
Framework.  In view of the material weaknesses in the Company's
internal control over financial reporting that existed as of December 31, 2009,
management has concluded that the Company's internal control over financial
reporting was not effective as of said date.





This
Annual Report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this Annual Report.





Changes
in Internal Controls





We
believe that the material weaknesses we identified with respect to our
disclosure controls and procedures also represented weaknesses in our internal
control over financial reporting.  During the three months ended
December 31, 2009, we made changes to our internal control over financial
reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) that
have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.





Item
9B. Other Information.





None.





PART
III





Item
10. Directors, Executive Officers and Corporate Governance.





The table
sets forth information as of the date of this Annual Report with respect to our
management:





Name
                
                Age
                
                PositionGordon
      Knott
                
                50
                
                President
      and DirectorGarabed
      Khatchoyan
                
                45
                
                Secretary and
      DirectorDouglas
      Wells
                
                69
                
                Chief
      Financial Officer





The
Company's directors are elected to hold office until the next annual meeting of
stockholders and until their respective successors have been elected and
qualified.  The Company's officers serve at the pleasure of the board
of directors.





Set forth
below is biographical information concerning our directors and executive
officers for at least the past five years.





Gordon
Knott has served as a member of our board of directors and our president since
our inception.  Mr. Knott has in excess of twenty years of sales and
sales management experience in the telecommunications industry servicing large
national accounts.  From 2000 to 2003 he was a senior account manager
for CopperCom, Inc., a leading manufacturer and designer of a full suite of
telecommunications products for the access network.  As a national
account representative, he was responsible for, among other things, sales of a
broad line of products in California and Hawaii, capturing a significant
opportunity with a wide range of hotels in Anaheim to provide all voice,
Internet and video.  From 1994 to 2000, he served as a national
account manager for Convergent Communications / TIE Comm. Inc., a provider of
data and telephone networking systems located in Irvine, California where he was
responsible for sales in the company's western region and establishing new
national accounts, among other things


35


Garabed
(Gary) Khatchoyan served as a member of our board of directors and our corporate
secretary since our inception.  Gary has over 20 years experience in
sales, business management and production management in the vinyl fence industry
and can handle virtually any issue that arises in our business.  From
1996 to 2002, he was associated with Quality Vinyl Products, a licensed fence
contractor located in North Hollywood, California, where he was responsible for
sales and marketing and training of fabrication and sales
staff.  Prior thereto has served in a variety of sales and marketing
positions in Southern California.





Douglas
Wells has served as the Chief Financial Officer of the Company since September
1, 2008.  Since 2007, he has been the president and sole shareholder
of CFO Services, Inc., a consulting firm that provides business advice and
CFO-type services to several companies.  From 2004 to August
2008,  he was employed by Avitus Group, a professional employer
organization, and provided CFO-type services to small business companies,
including our Company.  From 2001 to 2004, he was chief financial
officer of Vital Imaging, Inc., which had eight medical imaging centers in the
western U.S.  From 1999 to 2001, he served as the chief financial
officer of Care Network, Inc., a managed care company that provided workers
compensation medical management services to other businesses.  Prior
to 1999, he served in various executive capacities with a number of
companies.  Mr. Wells was an audit partner with Arthur Andersen where
he was in charge of its healthcare practice in Southern
California.  Mr. Wells is a Certified Public
Accountant.  Mr. Wells does not devote his full time to the business
of the Company.





Section
16 Compliance





Section
16(a) of the Exchange requires officers, directors and persons who own more than
10% of a registered class of our equity securities of a company that has a class
of common stock registered under the Exchange Act to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and to
furnish us with copies of all forms filed pursuant to Section
16(a).





Based
solely on a review of the copies of such reports furnished to us and written
representations from our officers, directors and principal stockholders that no
other reports were required, to our knowledge, we believe that our all persons
required to file reports pursuant to Section 16(a) of the Exchange Act complied
with all of the Section 16(a) filing requirements applicable to them with
respect to 2009, except that the annual statements to report changes in
beneficial ownership were filed late.





Board
Committees





The board
of directors has responsibility for establishing broad corporate policies and
reviewing our overall performance rather than day-to-day
operations.  The primary responsibility of our board of directors is
to oversee the general direction and management of our Company and, in doing so,
serve the best interests of the Company and our stockholders.  The
board of directors selects, evaluates and provides for the succession of
executive officers and, subject to stockholder election,
directors.  It reviews and approves corporate objectives and
strategies, and evaluates significant policies and proposed major commitments of
corporate resources.  Our board of directors also participates in
decisions that have a potential major economic impact on our
Company.  Management keeps the directors informed of Company activity
through regular communication.





The board
of directors is currently composed of 2 people. All board action requires the
approval of a majority of the directors in attendance at a meeting at which a
quorum is present.  We will increase the size of our board of
directors as we deem necessary to accommodate the growth of our
business.





Board
Determination of Independence





As of the
date hereof, the Company has not adopted a standard of independence nor does it
have a policy with respect to independence requirements for its Board members or
that a majority of its board be comprised of "independent
directors."  As of the date hereof, none of our directors would
qualify as "independent" under any recognized standards of
independence.


36


Board
of Directors Committees





We do not
currently have a standing audit, nominating or compensation committee of the
board of directors, or any committee performing similar
functions.  Our board of directors currently performs the functions of
audit, nominating and compensation committees.  As of the date of this
Annual Report, no member of our board of directors qualifies as an “audit
committee financial expert” as defined in Item 407(d)(5) of
Regulation S-K promulgated under the Securities Act.





In our
continuing efforts to enhance corporate governance, bolster our internal
controls and procedures and eliminate accounting and other financial statement
issues, we have determined to establish an audit committee before the close of
the 2010 fiscal year.  Initially, we expect that the composition of
the audit committee will comprise both independent members and persons
associated with our Company and will include an “audit committee financial
expert” as defined in Item 407(d)(5) of
Regulation S-K.  We will keep investors apprised of our ongoing
efforts, including when we adopt an audit committee charter and seat an audit
committee.





The Board
will consider establishing other independent committees of the board as and when
we expand the board and circumstances necessitate.





Stockholder Communications





We do not
presently provide a process for security holders to send communications to the
board of directors.  We expect to adopt a process for security holders
to send communications to the board of directors prior to the call of the
Company's next annual meeting of stockholders.  We will disclose the
stockholder communication process we adopt in the proxy statement we will mail
to all stockholders prior to the next annual stockholders meeting.





Code
of Ethics





We have
adopted a Code of Ethics that applies to our principal executive officers and
principal financial officer (or persons performing similar functions) that is
designed to comply with Item 406 of Regulation S-K.  A copy of our Code of
Ethics will also be furnished, without charge, in print to any person who
requests such copy by writing to the Company’s Secretary at: Vinyl Products,
Inc., 2210 South Ritchey Street, Santa Ana, California 92705.


37


Item
11. Executive Compensation.





Executive
Compensation





The
following table shows information concerning all compensation paid for services
to the Company in all capacities during the year ended December 31, 2009 as
to the principal executive officer, principal financial officer, and each person
whose total annual salary and bonus exceeded $100,000 at the end of the last
fiscal year (the “Named Executive Officers”):





Summary
Compensation Table


Name (a)
                                    
                                    Year
                                      (b)
                                    
                                    Salary
                                      ($) (c)
                                    
                                    
                                    Bonus
                                      ($) (d)
                                    
                                    
                                    Stock
                                      Awards
                                      ($) (e)
                                    
                                    
                                    Option
                                      Awards
                                      ($) (f)
                                    
                                    
                                    Non-Equity
                                      Incentive Plan
                                      Compensation
                                      ($) (g)
                                    
                                    
                                    Nonqualified
                                      Deferred
                                      Compensation
                                      Earnings
                                      ($) (h)
                                    
                                    
                                    All Other
                                      Compensation
                                      ($) (i)
                                    
                                    
                                    Total ($)Gordon
      Knott,
                                    
                                    2009
                                    
                                    $
                                    202,806
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    30,971
                                    (1)
                                    
                                    $
                                    233,777President
      and Director
                                    
                                    2008
                                    
                                    $
                                    60,000
                                    
                                    
                                    $
                                    45,500
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    258,355
                                    (1)
                                    
                                    $
                                    363,8552007
                                    
                                    $
                                    60,000
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    218,335
                                    (2)(3)
                                    
                                    $
                                    278,335Garabed
      Khatchoyan,
                                    
                                    2009
                                    
                                    $
                                    202,806
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    40,238
                                    (4)
                                    
                                    $
                                    243,044Secretary
      and Director
                                    
                                    2008
                                    
                                    $
                                    60,000
                                    
                                    
                                    $
                                    45,500
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    270,032
                                    (4)
                                    
                                    $
                                    375,5322007
                                    
                                    $
                                    60,000
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    220,100
                                    (2)(5)
                                    
                                    $
                                    280,100Douglas
      Wells,
                                    
                                    2009
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    65,000
                                    (6)
                                    
                                    $
                                    65,000Chief
      Financial
                                    
                                    2008
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    20,000
                                    (6)
                                    
                                    $
                                    20,000Officer
                                    
                                    2007
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -




1.
            During
      2009, Mr. Knott received the total additional compensation referenced in
      column i, which consisted of: $5,950 paid into a health savings account,
      $250 for tax return preparation, $14,835 for vehicle leases and $9,936 in
      health insurance premiums.


During
2008, Mr. Knott received the total additional compensation referenced in column
i consisting of: $165,000 paid as dividends by TVFC prior to the share exchange,
$5,800 toward a health savings account, $980 for tax return preparation, $14,835
for vehicle leases and the conversion into salary of all amounts due by Mr.
Knott under a certain promissory note evidencing monies he borrowed from the
Company totaling $71,740.




2.
            Through
      2007, TVFC elected to be treated as a Subchapter S corporation under the
      Internal Revenue Code of 1986, as amended (the "Code"), and the amounts
      paid by the Company to the persons named in the table in column i
      represent profits distributed to its sole shareholders.  As of
      January 1, 2008, the shareholders of TVFC revoked their intention to treat
      the Company as an "S" corporation and the Company is now treated as a "C"
      corporation under the Code.  During 2007, Mr. Knott received a
      distribution from TVFC of $203,500 and Mr. Khatchoyan received a
      distribution from TVFC of $203,500.  During 2006, Mr. Knott
      received a distribution from TVFC of $161,000 and Mr. Khatchoyan received
      a distribution from TVFC of
$161,000.




3.
            Includes
      $14,835 paid as an automobile
allowance.




4.
            During
      2009, Mr. Khatchoyan received the total additional compensation referenced
      in column i, which consisted of: $5,950 paid into a health savings
      account, $250 for tax return preparation, $6,500 paid on his behalf to a
      tax consulting firm, $17,388 for vehicle leases and $10,150 in health
      insurance premiums.


During
2008, Mr. Khatchoyan received the total additional compensation referenced in
column i consisting of: $165,000 paid as dividends by TVFC prior to the share
exchange, $5,800 toward a health savings account, $17,388 for vehicle leases and
the conversion into salary of all amounts due by Mr. Khatchoyan under a certain
promissory note evidencing monies he borrowed from the Company totaling
$81,844.




5.
            Includes
      $16,600 paid as an automobile
allowance.




6.
            Payments
      to CFO Services, Inc., which is wholly owned by Douglas E.
      Wells.





Employment
Contracts





We are
not party to any employment agreements.


Other
Compensatory Arrangements





We do not
currently have any stock option, incentive, equity, non-equity or compensatory
plans in place.  We may adopt such plans when and if our board of
directors deems them appropriate and will present any such plan adopted by our
board for approval by our stockholders at the next annual meeting after the
adoption thereof.


38


Outstanding
Equity Awards at Fiscal Year-End





As of
December 31, 2009, we had not approved any equity compensation plans and no
awards of any kind were outstanding.  None of our executive officers
has ever received any equity awards, including, options, restricted stock or
other equity incentives.





Compensation
of Directors





During
the 2008 and 2009 fiscal years, no member of our board of directors received any
compensation solely for service as a director.We do not have any
non-employee directors at this time and we have not adopted a policy for
compensating or reimbursing non-employee directors that may join our board of
directors.





We are
not party to any compensation arrangement with any of our directors nor have we
entered into any specific indemnification agreements with any member of our
board, though our Articles of Incorporation and bylaws provide that we are
required to indemnify our directors and officers to the fullest extent permitted
by Nevada law, as described below.





Indemnification
of Directors and Officers





Our
articles of incorporation provide for the indemnification of our directors,
officers, employees and agents to the fullest extent permitted by the laws of
the State of Nevada.  Section 78.7502 of the Nevada Revised Statutes
permits a corporation to indemnify any of its directors, officers, employees or
agents against expenses actually and reasonably incurred by such person in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (except for an action
by or in right of the corporation), by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, provided that it
is determined that such person acted in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.




Section
78.751 of the Nevada Revised Statutes requires that the determination that
indemnification is proper in a specific case must be made by (a) the
stockholders, (b) the board of directors by majority vote of a quorum consisting
of directors who were not parties to the action, suit or proceeding or (c)
independent legal counsel in a written opinion (i) if a majority vote of a
quorum consisting of disinterested directors is not possible or (ii) if such an
opinion is requested by a quorum consisting of disinterested
directors.





Our
bylaws provide that: (a) no director shall be liable to the Company or any of
its stockholders for monetary damages for breach of fiduciary duty as a director
except with respect to (i) a breach of the director’s loyalty to the Company or
its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) liability which may
be specifically defined by law or (iv) a transaction from the director derived
an improper personal benefit; and (b) the Company shall indemnify to the fullest
extent permitted by law each person that such law grants to the Company power to
indemnify.





Any
amendment to or repeal of our articles of incorporation or by-laws shall not
adversely affect any right or protection of any of our directors or officers for
or with respect to any acts or omissions of such director or officer occurring
prior to such amendment or repeal.





We may enter into indemnification
agreements with each of our directors and officers that are, in some cases,
broader than the specific indemnification provisions permitted by Nevada law,
and that may provide additional procedural protection.  As of the date
of this Annual Report, we have not entered into any indemnification agreements
with our directors or officers, but may choose to do so in the
future.  Such indemnification agreements may require us, among other
things, to:


39


·
            indemnify officers and directors
      against certain liabilities that may arise because of their status as
      officers or
directors;


·
            advance expenses, as incurred, to
      officers and directors in connection with a legal proceeding, subject to
      limited exceptions;
or


·
            obtain directors’ and officers’
      insurance.





We are
permitted to apply for insurance on behalf of any director, officer, employee or
other agent for liability arising out of his actions.




Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.





The following table sets forth certain information, as of
April 8, 2010 with respect to the beneficial ownership of our outstanding common
stock by (i) any holder of more than five (5%) percent; (ii) each of our
executive officers and directors and (iii) our directors and executive officers
as a group. Except as otherwise indicated, each of the stockholders listed below
has sole voting and investment power over the shares beneficially
owned.





Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities.  Securities that entitle a holder to acquire
shares of common stock that are currently exercisable or exercisable within 60
days of April 8, 2010 are deemed to be beneficially owned by the person holding
such securities for the purpose of computing the percentage of ownership of such
person, but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.





The
applicable percentage ownership is based on 22,864,200 shares of common stock
outstanding as of April 8, 2010.  The business address of the
stockholders set forth below is 2210 South Ritchey Street, Santa Ana, California
92705.





Holder
                
                Number of Shares
                  Beneficially Owned
                
                
                Percent of ClassGordon
      Knott
                
                
                10,000,000
                
                
                
                43.74
                %Garabed
      Khatchoyan
                
                
                10,000,000
                
                
                
                43.74
                %Douglas
      Wells (1)
                
                
                100,000
                
                
                
                *All
      directors and officers and as a group (3 persons)
                
                
                20,100,000
                
                
                
                87.91
                %


*
Indicates less than one percent.





(1)
            Mr.
      Wells owns these shares through The Wells Family
  Trust.





Item
13. Certain Relationships and Related Transactions, and Director
Independence.





Related
Party Loans




On March
15, 2008, Gordon Knott and Garabed Khatchoyan, directors and officers of the
Company, each executed a promissory note in favor of the Company entitling them
to borrow up to $250,000 from the Company.  The notes provided for
interest at the rate of 5% per year and were due on March 15 2009.  At
March 15, 2008, Mr. Knott had borrowed the sum of $71,000 under the note, which
had accrued interest equal to $740, and Mr. Khatchoyan had borrowed the sum of
$81,000 under the note, which had accrued interest equal to $844.  At
March 15, 2008, the parties converted all amounts due under the notes, including
accrued interest, into salary and cancelled the promissory
notes.


40


Related
Party Transactions





Douglas
Wells, our chief financial officer, was employed by Avitus Group and provided
CFO-type services to a number of companies.  We utilized the services
of Avitus Group from February 2006 through August 2008.  During our
engagement, we paid Avitus Group fees of $125,000.  We discontinued
utilizing these services when we engaged Mr. Wells to become our chief financial
officer as of September 1, 2008.





Registration
Rights





In
connection with the share exchange, our officers and directors, who are our
principal stockholders, were granted registration rights with respect to 300,000
shares of the common stock issued to them in that transaction.  The
shares were registered in a registration statement under the Securities Act that
became effective on February 4, 2010.





Promoters
and Certain Control Persons





Except as
set forth in our discussion above, none of our directors or executive officers
has been involved in any transactions with us or any of our directors, executive
officers, affiliates or associates which are required to be disclosed pursuant
to the rules and regulations of the SEC.





Policies
and Procedures for Review, Approval or Ratification of Transactions with Related
Persons




We did
not previously have a formal policy concerning transactions with related
persons.  We are in the process of adopting a written related-person
transactions policy that sets forth our policies and procedures regarding the
identification, review, consideration and approval or ratification of
“related-persons transactions.”  For purposes of our policy only, a
“related-person transaction” will be a transaction, arrangement or relationship
(or any series of similar transactions, arrangements or relationships) in which
we and any “related person” are participants involving an amount that exceeds
$50,000.  Transactions involving compensation for services provided to
us as an employee, director, consultant or similar capacity by a related person
will not be covered by this policy.  A related person will be any
executive officer, director or a holder of more than five percent of our common
stock, including any of their immediate family members and any entity owned or
controlled by such persons.




Under the
policy, we expect that where a transaction has been identified as a
related-person transaction, management must present information regarding the
proposed related-person transaction to our board of directors for consideration
and approval or ratification. The presentation will be expected to include a
description of, among other things, the material facts, and the direct and
indirect interests of the related persons, the benefits of the transaction to us
and whether any alternative transactions are available. To identify
related-person transactions in advance, we will rely on information supplied by
our executive officers, directors and certain significant
stockholders.  In considering related-person transactions, our board
of directors will take into account the relevant available facts and
circumstances including, but not limited to:





·
            the risks, costs and benefits to
      us;


·
            the impact on a director’s
      independence in the event the related person is a director, immediate
      family member of a director or an entity with which a director is
      affiliated;


·
            the terms of the
      transaction;


·
            the availability of other sources
      for comparable services or products;
and


·
            the terms available to or
      from, as the case may be, unrelated third parties or to or from our
      employees generally.





Under the
policy, we expect that in the event a director has an interest in the proposed
transaction, the director must excuse himself or herself form the deliberations
and approval.  Our policy will require that, in determining whether to
approve, ratify or reject a related-person transaction, our board of directors
must consider, in light of known circumstances, whether the transaction is in,
or is not inconsistent with, the best interests of our Company and our
stockholders, as our board of directors determines in the good faith exercise of
its discretion.


41


Item
14. Principal Accounting Fees and Services.





Effective
December 22, 2009, we retained M&K CPAs, PLLC ("M&K") to be our
independent registered public accounting firm is.  Our independent
registered public accounting firm prior to December 22, 2009 was Traci J.
Anderson, CPAs ("TJA").  Set forth below are the fees and expenses invoiced
by M&K and TJA for audit services and tax services provided to us in 2009
and 2008.  The following table summarizes the approximate aggregate
fees billed to us or expected to be billed to us by our independent registered
accounting firms for our 2009 and 2008 fiscal years:





Fiscal Year Ended December 31,2009
                                            
                                            
                                            2008Audit
      Fees
                                            
                                            $
                                            23,300
                                            1
                                            
                                            $
                                            13,000
                                            2Audit
      Related Fees
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0Tax
      Fees
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0All
      Other Fees
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0





1.
Represents the amount of fees invoiced to date.


2. TJA
reviewed the financial statements included in our Quarterly Reports on Form-10
during the 2009 year and has not invoiced us for services rendered.





Audit
Fees comprise the aggregate fees billed for professional services rendered for
the audits of the Company's annual financial statements and for the reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-Q for the fiscal year.





Audit-Related
Fees comprise the aggregate fees billed for audit-related services rendered for
the Company.  Audit-related fees generally include fees in support of
the Company's filing of registration statements with the SEC and similar
matters.





Tax Fees
comprise the fees billed for tax-related services rendered for the Company for
the 2009.





The
Company has not established an audit committee nor adopted an audit committee
charter.  Rather, it is the responsibility of the entire board of
directors to serve the functions of an audit committee and to pre-approve all
audit and permitted non-audit services to be performed by the independent
auditors, such approval to take place in advance of such services when required
by law, regulation, or rule, subject to the de minimis exceptions for non-audit
services described in Section 10A(i)(1)(B) of the Securities Exchange Act of
1934 that are approved by the board prior to completion of the
audit.





PART
IV





Item
15. Exhibits, Financial Statement Schedules.





(a)          Financial
Statements





The
following financial statements are filed as part of this Annual
Report:





The
audited consolidated financial statements of Vinyl Products, Inc. and the report
of independent registered public accounting firm thereon are set forth under
Part II, Item 8 of this Annual Report.





(b)          Exhibits.





The
exhibits listed below are either included or incorporated by reference as
indicated:


42





Exhibit No.
              
              Exhibit Description
              
              Location
                Reference2.1
              
              Agreement
      and Plan of Merger October 10, 2007, among Red Oak Concepts, Inc., a
      Delaware corporation, Red Oak Concepts, Inc., a Nevada corporation, and
      the holders of all of the outstanding shares of common stock of each such
      corporation.
              
              22.2
              
              Share
      Exchange Agreement dated  November 20, 2008
              
              33.1
              
              Certificate
      of Incorporation of Red Oak Concepts, Inc., a Delaware
      corporation.
              
              13.2
              
              By-laws
      of Red Oak Concepts, Inc., a Delaware corporation.
              
              13.3
              
              Articles
      of Incorporation of Red Oak Concepts, Inc., a Nevada
      corporation.
              
              23.4
              
              By-laws
      of Red Oak Concepts, Inc., a Nevada corporation.
              
              23.5
              
              Certificate
      of Amendment to Articles of Incorporation of Red Oak Concepts,
      Inc.
              
              34.1
              
              Specimen
      common stock certificate of Red Oak Concepts, Inc.
              
              14.2
              
              Registration
      Rights Agreement dated November 20, 2008 among the registrant and the
      recipients of the common stock received pursuant to the Share Exchange
      Agreement filed as Exhibit 2.1 hereto, the holders of the registrant's
      common stock immediately prior to the closing of the Share Exchange
      Agreement, the holders of certain options assumed by the registrant under
      the Share Exchange Agreement and the purchasers of shares of common stock
      in the registrant's private placement completed on November 24,
      2008.
              
              34.3
              
              Lock
      Up/Leak Out Agreement dated November 20, 2008 between the registrant and
      each of Susan D. Zachmann, Katherine Daniels and Barbara
      Deadwiley.
              
              34.4
              
              Form
      of Lock Up/Leak Out dated November 20, 2008 between the registrant and
      each of Haber LLC, Themis LLC and Tailor Made Financial
    LLC.
              
              34.5
              
              Form
      of Subscription Agreement between the Registrant and the purchasers in the
      private offering of securities completed on November 24,
    2008.
              
              34.6
              
              Registration
      Rights Agreement dated November 24, 2008 among the registrant and the
      purchasers of shares of common stock in the registrant's private placement
      completed on November 24, 2008.
              
              34.7
              
              Form
      of Option Agreement issued by The Vinyl Fence Company, Inc., the
      obligations of which were assumed by the registrant pursuant to the Share
      Exchange Agreement.
              
              34.8
              
              Specimen
      common stock certificate of Vinyl Products, Inc.
              
              55.1
              
              Opinion
      of Ruffa & Ruffa, P.C.
              
              710.1
              
              Lease
      agreement between AGA Partners and The Vinyl Fence Company, Inc., a
      California corporation dated January 31, 2005.
              
              310.2
              
              Fabricator
      Agreement dated November 11, 2003 between U.S. Polymers, Inc., and The
      Vinyl Fence Company, Inc. as amended and extended on August 29,
      2008.
              
              310.3
              
              Professional
      Employer Agreement dated June 23, 2005 between Better Business Systems,
      Inc. (now Avitus Group) and The Vinyl Fence Company, Inc.
              
              410.4
              
              Form
      of demand promissory note executed by the registrant in favor of Gordon
      Knott.
              
              510.5
              
              Form
      of demand promissory note executed by the registrant in favor of Garabed
      Khatchoyan.
              
              510.6
              
              License
      Agreement dated June 17, 2009 between Franchise 123, Inc. and the
      registrant.
              
              510.7
              
              Form
      of Demand Promissory Note made by the registrant in favor of each of Susan
      Zachmann and Katherine Daniels in the principal amount of $124,950 on June
      18, 2007.
              
              610.8
              
              Lease
      Agreement between 2407 Artesia LLS, a limited liability
      company,  and The Vinyl Fence Company, Inc., a California
      corporation, dated January 18, 2010
              
              814.1
              
              Code
      of Business and Ethical Conduct
              
              321
              
              Subsidiaries
      of the Registrant
              
              4





1.
            Incorporated
      by reference to the registrant's filing on Form 10-SB as filed with the
      Securities and Exchange Commission on August 15,
  2007.


2.
            Incorporated
      by reference to the registrant's filing on Form 10-QSB for the three
      months ended December 31, 2007 as filed with the Securities and Exchange
      Commission on February 15, 2008.


3.
            Incorporated
      by reference to the registrant's Current Report on Form 8-K as filed with
      the Securities and Exchange Commission on November 26,
    2008.


43


4.
            Previously
      filed with the registrant's Registration Statement on Form S-1 as filed
      with the Securities and Exchange Commission on March 27,
    2009.


5.
            Previously
      filed with Amendment No. 1 to Registration Statement on Form S-1 Filed
      with Securities and Exchange Commission on July 27,
  2009.


6.
            Previously
      filed as exhibit 4.2 to the registrant's filing on Form 10-SB as filed
      with the Securities and Exchange Commission on August 15, 2007 and
      incorporated herein by reference.


7.
            Previously
      filed with Amendment No. 2 to Registration Statement on Form S-1 as filed
      with Securities and Exchange Commission on September 18,
    2009.


8.
            Filed
      herewith.


44





SIGNATURES





Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on April 9, 2010.





VINYL
      PRODUCTS, INC.By:
              /s/ Gordon KnottGordon
      Knott





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on April 9, 2010.





Signature
                  
                  Title/s/ Gordon Knott
                  
                  President,
      Principal Executive Officer and DirectorGordon
      Knott/s/ Douglas E. Wells
                  
                  Chief
      Financial Officer and Principal Accounting OfficerDouglas
      E. Wells/s/ Garabed Khatchoyan
                  
                  Secretary
      and DirectorGarabed
      Khatchoyan




45