U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-Q





x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended: March
31, 2010





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934





Commission
file number: 000-52769





VINYL PRODUCTS,
INC.


(Exact
name of registrant as specified in its charter)





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





2210 South Ritchey Street,
Santa Ana, California 92705


(Address
of principal executive offices)





(714)
210-8888


(Registrant's
telephone number)





(Former
name, former address and former


fiscal
year, if changed since last report)





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   ̈ 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      ̈
                          (Do
      not check if a smaller reporting company)
                        Smaller
      reporting company     x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  ̈ Yes x No





APPLICABLE
ONLY TO ISSUERS 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 ISSUERS





State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date:  At May 20, 2010 there were
22,864,200 shares of common stock outstanding.





Forward-Looking
Statements




This
Quarterly Report on Form 10-Q ("Report") and the documents incorporated by
reference into the Report 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 generally 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;
and


our
inability to manage growth.





In
addition, the Company’s views about 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.  We refer readers to the Item 1A Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2009 for a discussion of
many of the known risks we face.   We operate in a very competitive
environment.  New risks may 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.




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 Report.  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 Report, those results or
developments may not be indicative of results or developments in subsequent
periods. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this
Report.





We are
under no duty to update any of these forward-looking statements after the date
of this filing to conform our prior forward-looking statements to actual results
or revised expectations, except as required by Federal securities
law.


2


Item
1. Financial Statements and Supplementary Data





Financial
Statement Index





Unaudited
Consolidated Financial Statements


for
the Three Months Ended March 31, 2010





PageConsolidated
      Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009
      (audited)
                F–1Consolidated
      Statements of Operations (unaudited) for the three months ended March 31,
      2010 and 2009
                F–2Consolidated
      Statements of Stockholders’ Deficit (unaudited) for the three months ended
      March 31, 2010
                F-3Consolidated
      Statements of Cash Flows (unaudited) for the three months ended March 31,
      2010 and 2009
                F–4Notes
      to the Financial Statements
                F–5




3




VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)




Consolidated
Balance Sheets




March 31, 2010 and
December 31, 2009




March 31
                                    
                                    
                                    December 312010 (Unaudited)
                                    
                                    
                                    2009ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                    
                                    $
                                    36,383
                                    
                                    
                                    $
                                    12,333Accounts
      receivable, net
                                    
                                    
                                    23,842
                                    
                                    
                                    
                                    36,189Inventory
                                    
                                    
                                    115,590
                                    
                                    
                                    
                                    137,961Prepaid
      expenses
                                    
                                    
                                    29,984
                                    
                                    
                                    
                                    54,251Total
      current assets
                                    
                                    
                                    205,799
                                    
                                    
                                    
                                    240,734PROPERTY
      AND EQUIPMENT:Property
      and equipment, net of accumulated depreciationof
      $230,860 and $214,260, respectively
                                    
                                    
                                    232,839
                                    
                                    
                                    
                                    235,982Net
      property and equipment
                                    
                                    
                                    232,839
                                    
                                    
                                    
                                    235,982OTHER
      ASSETS:Security
      deposits
                                    
                                    
                                    11,490
                                    
                                    
                                    
                                    8,690Total
      other assets
                                    
                                    
                                    11,490
                                    
                                    
                                    
                                    8,690TOTAL
      ASSETS
                                    
                                    $
                                    450,128
                                    
                                    
                                    $
                                    485,406LIABILITIES
      AND SHAREHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIES:Current
      portion notes payable - vehicles
                                    
                                    $
                                    14,700
                                    
                                    
                                    $
                                    16,900Accounts
      payable and accrued liabilities
                                    
                                    
                                    289,357
                                    
                                    
                                    
                                    287,855Bank
      line of credit
                                    
                                    
                                    81,177
                                    
                                    
                                    
                                    22,207Customer
      deposits
                                    
                                    
                                    70,684
                                    
                                    
                                    
                                    103,292Total
      current liabilities
                                    
                                    
                                    455,918
                                    
                                    
                                    
                                    430,254LONG-TERM
      LIABILITIES:Notes
      payable – vehicles, net of current portion of$14,700
      and $16,900, respectively
                                    
                                    
                                    10,752
                                    
                                    
                                    
                                    13,868Total
      long-term liabilities
                                    
                                    
                                    10,752
                                    
                                    
                                    
                                    13,868Total
      Liabilities
                                    
                                    
                                    466,670
                                    
                                    
                                    
                                    444,122SHAREHOLDERS'
      EQUITY (DEFICIT):Preferred
      stock, $0.0001 par value; 10,000,000 shares authorized;no
      shares issued and outstanding at March 31,2010 and December
      31,2009
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Common
      stock, $0.0001 par value; 100,000,000 shares authorized;22,864,200
      and 22,864,200 shares issued and outstanding atMarch
      31, 2010 and December 31, 2009, respectively
                                    
                                    
                                    2,287
                                    
                                    
                                    
                                    2,287Paid-in
      capital
                                    
                                    
                                    160,413
                                    
                                    
                                    
                                    160,413Retained
      earnings (deficit)
                                    
                                    
                                    (179,242
                                    )
                                    
                                    
                                    (121,416
                                    )Total
      equity (deficit)
                                    
                                    
                                    (16,542
                                    )
                                    
                                    
                                    41,284TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                                    
                                    $
                                    450,128
                                    
                                    
                                    $
                                    485,406




The
accompanying notes are an integral part of these financial
statements.


F-1


VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)


Consolidated
Statements of Operations


Unaudited


For
the Three Months Ended March 31, 2010 and 2009




Three Months Ended March 312010
                      
                      
                      2009Income
                      
                      $
                      773,475
                      
                      
                      $
                      684,508Cost
      of goods sold:Labor
                      
                      
                      133,607
                      
                      
                      
                      137,980Materials
                      
                      
                      216,402
                      
                      
                      
                      157,817Other
                      
                      
                      11,586
                      
                      
                      
                      7,291Total
      cost of goods sold
                      
                      
                      361,595
                      
                      
                      
                      303,088Gross
      profit
                      
                      
                      411,880
                      
                      
                      
                      381,420Expenses:Advertising
      and marketing
                      
                      
                      52,597
                      
                      
                      
                      34,740Selling,
      general and administrative
                      
                      
                      109,113
                      
                      
                      
                      85,653Payroll
                      
                      
                      236,200
                      
                      
                      
                      252,146Professional
      fees
                      
                      
                      42,440
                      
                      
                      
                      83,869Rent
                      
                      
                      26,070
                      
                      
                      
                      26,070Total
      expenses
                      
                      
                      466,420
                      
                      
                      
                      482,478Net
      Operating Income (Loss)
                      
                      
                      (54,540
                      )
                      
                      
                      (101,058
                      )Other
      Income (Expense):Interest
      income
                      
                      
                      -
                      
                      
                      
                      257Interest
      expense
                      
                      
                      (1,686
                      )
                      
                      
                      (8,211
                      )Net
      other income (expense)
                      
                      
                      (1,686
                      )
                      
                      
                      (7,954
                      )Loss
      before income taxes
                      
                      
                      (56,226
                      )
                      
                      
                      (109,012
                      )Income
      taxes
                      
                      
                      (1,600
                      )
                      
                      
                      (200
                      )Net
      loss
                      
                      $
                      (57,826
                      )
                      
                      $
                      (109,212
                      )Earnings
      per share:Basic
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )Diluted
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )Weighted
      average shares outstanding - basic
                      
                      
                      22,864,200
                      
                      
                      
                      22,861,716Weighted
      average shares outstanding - diluted
                      
                      
                      22,864,200
                      
                      
                      
                      22,861,716




The
accompanying notes are an integral part of these financial
statements.


F-2


VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)




Consolidated
Statements of Shareholders' Equity




Unaudited




TotalPreferred
                        
                        
                        Common
                        
                        
                        Paid-In
                        
                        
                        Retained
                        
                        
                        Shareholders’Shares
                        
                        
                        Stock
                        
                        
                        Shares
                        
                        
                        Stock
                        
                        
                        Capital
                        
                        
                        Earnings (Deficit)
                        
                        
                        DeficitBalances,
      December 31, 2009
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        22,864,200
                        
                        
                        $
                        2,287
                        
                        
                        $
                        160,413
                        
                        
                        $
                        (121,416
                        )
                        
                        $
                        41,284Net
      Loss for the Period
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (57,826
                        )
                        
                        
                        (57,826
                        )Balances,
      March 31, 2010
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        22,864,200
                        
                        
                        $
                        2,287
                        
                        
                        $
                        160,413
                        
                        
                        $
                        (179,242
                        )
                        
                        $
                        (16,542
                        )





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 Cash Flows




Unaudited




For
the Three Months Ended March 31, 2010 and 2009




For the Three Months Ended2010
                      
                      
                      2009OPERATING
      ACTIVITIES:Net
      Loss
                      
                      $
                      (57,826
                      )
                      
                      $
                      (109,212
                      )Adjustments
      to Reconcile Net Loss to Net Cash Used In Operating
      Activities:Depreciation
                      
                      
                      16,600
                      
                      
                      
                      12,600Decrease
      (increase) in accounts receivable, net
                      
                      
                      12,347
                      
                      
                      
                      15,067Decrease
      (increase) in inventory
                      
                      
                      22,371
                      
                      
                      
                      51,042Decrease
      (increase) in prepaid expenses
                      
                      
                      24,267
                      
                      
                      
                      (8,009
                      )Decrease
      (increase) in security deposit
                      
                      
                      (2,800
                      )
                      
                      
                      -Increase
      (decrease) in accounts payable and accrued expenses
                      
                      
                      5,408
                      
                      
                      
                      (15,363
                      )Increase
      (decrease) in customer deposits
                      
                      
                      (32,607
                      )
                      
                      
                      (5,023
                      )Increase
      (decrease) in income taxes payable
                      
                      
                      (3,904
                      )
                      
                      
                      200Net
      cash provided (used) by operating activities
                      
                      
                      (16,144
                      )
                      
                      
                      (58,698
                      )INVESTING
      ACTIVITIESLeasehold
      improvements
                      
                      
                      (12,598
                      )
                      
                      
                      -Office
      and computer equipment purchases
                      
                      
                      (859
                      )
                      
                      
                      -Net
      cash provided (used) by investing activities
                      
                      
                      (13,457
                      )
                      
                      
                      -FINANCING
      ACTIVITIESIssuance
      of common stock for cash
                      
                      
                      -
                      
                      
                      
                      2,100Collection
      of stock receivable
                      
                      
                      -
                      
                      
                      
                      5,000Line
      of credit principal borrowings
                      
                      
                      61,970
                      
                      
                      
                      53,266Line
      of credit principal repayments
                      
                      
                      (3,000
                      )
                      
                      
                      (2,000
                      )Vehicle
      loans principal payments
                      
                      
                      (5,319
                      )
                      
                      
                      (3,944
                      )Net
      cash provided (used) by financing activities
                      
                      
                      53,651
                      
                      
                      
                      54,422NET
      CASH INCREASE (DECREASE) FOR THE PERIOD
                      
                      
                      24,050
                      
                      
                      
                      (4,276
                      )CASH
      AT BEGINNING OF THE PERIOD
                      
                      
                      12,333
                      
                      
                      
                      114,900CASH
      AT END OF THE PERIOD
                      
                      $
                      36,383
                      
                      
                      $
                      110,624SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:CASH
      PAID DURING THE PERIOD FOR:INTEREST
                      
                      $
                      1,686
                      
                      
                      $
                      8,211TAXES
                      
                      $
                      1,600
                      
                      
                      $
                      -




The
accompanying notes are an integral part of these financial
statements.


F-4


VINYL
PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)


Notes
to Unaudited Consolidated Financial Statements


For
the Three Months Ended March 31, 2010 and 2009




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.


F-5


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.




The
financial information included in this quarterly report should be read in
conjunction with the consolidated financial statements and related notes thereto
in our Form 10-K for the year ended December 31, 2009.




The
results of operations for the three months ended March 31, 2010 are not
necessarily indicative of the results to be expected for the full year ending
December 31, 2010.


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 March 31, 2010 and December 31, 2009.




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.




F-6


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 at March 31, 2010, and December 31,
2009.




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.





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.


F-7


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
                
                2 –
      8 yearsMachinery
      and Equipment
                
                5 –
      15 yearsOffice
      and Computer Equipment
                
                3 –
      7 yearsSigns
                
                7
      years




Property
and equipment are carried at cost and consisted of the following at March 31,
2010 and December 31, 2009:





2010
                  
                  
                  2009Vehicles
                  
                  $
                  160,551
                  
                  
                  $
                  160,551Furniture
      and Fixtures
                  
                  
                  31,665
                  
                  
                  
                  31,665Leasehold
      Improvements
                  
                  
                  97,494
                  
                  
                  
                  84,897Machinery
      and Equipment
                  
                  
                  100,274
                  
                  
                  
                  100,274Office
      and Computer Equipment
                  
                  
                  62,245
                  
                  
                  
                  61,385Signs
                  
                  
                  11,470
                  
                  
                  
                  11,470Total
                  
                  
                  463,699
                  
                  
                  
                  450,242Less:
      Accumulated Depreciation
                  
                  
                  230,860
                  
                  
                  
                  214,260Property
      and Equipment, net
                  
                  $
                  232,839
                  
                  
                  $
                  235,982




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.


F-8




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.




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
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 March 31, 2010.  The
balance owed was $81,177 as of March 31, 2010, and $22,207 as of December 31,
2009.  The line of credit is guaranteed by the President and the
Secretary.





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:


F-9




2010
                  
                  $
                  11,3732011
                  
                  $
                  10,6812012
                  
                  $
                  3,3982013
                  
                  $
                  -2014
                  
                  $
                  -





NOTE D –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.




2010 and
2009 information is not presented as the effect of all potential common stock
equivalents would be anti-dilutive.





NOTE E – 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 March 31, 2010 and
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.




NOTE F – 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 March 31, 2010 and December 31,
2009.





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 G –
CONTINGENCIES




Lawsuits
occur in the normal course of business, but the Company is not aware of any
pending litigation at this time.




NOTE H – SUBSEQUENT
EVENT




We have
evaluated subsequent events through May 19, 2010; no events have occurred
through this period that requires disclosure.


F-10




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





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 Quarterly
Report.




Overview





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 locations in Santa Ana and Redondo Beach,
California.  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 are
not aware of any participant in the exterior vinyl products industry that
operates on a national basis and we believe that a significant opportunity
exists for us to develop a national franchise.  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.





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 planned franchise program and there
are numerous risks associated with such model; the availability of disposable
income to homeowners; the availability of consumer credit; the availability of
credit to prospective purchasers of our franchises and general economic
conditions, including the level of activity in home improvements and housing
turnover.  These risks and other important factors relating to our
current and proposed business are detailed in our Annual Report on Form 10-K for
the year ended December 31, 2009 that we filed with the Securities and Exchange
Commission on April 9, 2010 (the "2009 Annual Report").





First Quarter
Summary:





Operational highlights of the first
quarter of 2010 include:





·
            We
      opened a new retail location in Redondo Beach California to serve southern
      Los Angeles County.  The showroom expands the reach of our
      retail operations to provide us with access to a significant potential
      customer base and affords our Company the opportunity to manage a
      satellite operation in anticipation of and preparation for launching our
      franchise program.


4





·
            We
      have substantially completed the preparation of the preponderance of the
      documentation required to develop and implement our franchise
      program.  We expect to submit our application to offer
      franchises in the State of California and be in a position to offer
      franchises in California in the second half of
  2010.





Financial
highlights for the first quarter of 2010 include





·
            Income
      for the first quarter of 2010 was $773,475, an increase of 13% compared to
      income of $684,508 during the first quarter of 2009.  We believe
      that national economic conditions have negatively affected our financial
      and operating results over the last several quarters but we believe that
      conditions are improving, if only slightly . However, we believe that
      consumer confidence in the economy remains low, consumer financing has
      been difficult to obtain, home equity values have deteriorated, the amount
      available for home equity loan withdrawals has declined and it has been
      our experience that many homeowners have elected not to use their
      disposable income to undertake home renovation
  projects.





·
            In
      an effort to drive sales, we increased our advertising budget by 51%
      during the last quarter as compared to the like 2009
    period.





Results
of Operations





Comparison of the Three
Months Ended March 31, 2010 and 2009





Income:   Income
for the first quarter of 2010 was $773,475, an increase of 13% compared to
income of $684,508 during the first quarter of 2009.  We believe that
such increase is correlated to subtle improvements in the national economy,
enhancements in our marketing approach, including increasing our advertising
budget, and the launch of our new retail location in Los Angeles County in
February 2010.





Cost of Goods Sold:
During 2009 and 2010, the contract with our vinyl supplier provided for
significant discounts on raw materials we purchased upon achieving certain
specified purchase quotas, which we met.  We benefitted materially
from the discount for the 2008 and 2009 fiscal years.  Our cost of
goods sold for all periods reported in this Quarterly Report is net of the
discount we receive on the cost of raw materials. (In October 2009, the supplier
eliminated the specified purchase quotas.)





Cost of
goods sold increased from $303,088 in 2009 to $361,595 in
2010.  Although the resulting gross profit increased from $381,420 for
the 2009 period to $411,880 for the 2010 period, an increase of 4%, the gross
profit percentage decreased from 55% in 2009 to 53% in 2010.  We
attribute the decrease in the gross profit percentage to pricing pressure from
our competitors.





Expenses:





Advertising
and marketing expense during the first quarter of 2010 was $52,597, an increase
of $17,857, or 51%, from the first quarter of 2009 in which we expended
$34,740.  We increased our advertising expenditures during the last
quarter in an effort to drive sales in a weak economy and in connection with the
launch our new sales location in Los Angeles County.  In addition, we
continued to adjust the mix of our advertising and marketing programs in our
ongoing effort to maximize the effectiveness of our advertising strategy and the
return on advertising investment.





Selling,
general and administrative expenses increased from $85,653 during the first
quarter of 2009 to $109,113, or 38%, during the first quarter of
2010.  The increase was due to $3,000-to-$4,000 increases in
depreciation, printing and filing fees, vehicle expenses and insurance plus
increases in various other expenses.





Payroll
expenses decreased from $252,146 to $236,200, a decrease of $15,946,
or  6%, due primarily to a decrease in officer compensation offset by
compensation paid to a sales manager in 2010.





Professional
fees decreased from $83,869 during the 2009 period to $42,440 during the
corresponding 2010 period, or 49%.  The decrease was due primarily to
a decrease in legal fees.


5





For the
three years ended March 31, 2010, inflation and changing prices have had little
impact on revenues and net income.  As our sole vinyl supplier has
increased prices, we have been able to increase our prices
correspondingly.





Cash
Flows





Three Months Ended March 31,
2010 and  2009





Cash
and Cash Equivalents





Our cash
and cash equivalents were $12,333 at December 31, 2009, and increased to $36,383
by March 31, 2010, as explained below.





Net
cash provided by operating activities





Net cash
used by operating activities was $16,144 for the three months ended March 31,
2010, compared to $58,698 for the three months ended March 31,
2010.  The decrease in cash used by operating activities of
approximately $43,000 was primarily attributable to a decrease in net loss of
$51,000, offset by decreases and increases in other current assets and
liabilities.





Net
cash used in investing activities





Net cash
used in investing activities was $13,457 for the three months ended March 31,
2010, compared to $-0- for the three months ended March 31, 2009.  The
$16,255 was applied to leasehold improvements for our new Los Angeles County
showroom.




Net
cash provided by financing activities





Net cash
provided by financing activities was $53,651 for the three months ended March
31, 2010 compared to $54,422 in the three months ended March 31, 2009. In both
periods, the increase was attributable primarily to line of credit
borrowings.





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 for 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.


6





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.





Capital
Requirements.





Over the
next twelve months, we will commence developing a franchise
program.  As described below, we expect that the cost to us to
implement the first phase of our franchise program, including the fees of our
franchise consultant and franchise license fees and costs for registration of
our franchise organization 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.





In June
2009, we engaged a franchise consultant to assist us with the development of the
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.   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 and to whom we may pay finders' fees, and
advertising.


7





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 location and our line of credit.  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 financial experts
anticipate, we may be required to seek external funding.  As of
December 31, 2009, we had 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.





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 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 to pre-recession sales levels at our retail location as the
economy rebounds.  We expect that sales at our new retail location in
Los Angeles County will continue to grow as we achieve market penetration
through continued advertising efforts and by employing the proven sales and
marketing techniques that represent the foundation of the success of our primary
sales office in Santa Ana.   The proximity of our two retail
operations (they are less than 40 miles apart) allows us to take advantage of
certain economies of scale.  Our Los Angeles County location is a lean
operation that employs two people.  All support services, including
administrative, accounting and product fabrication, are undertaken at our
principal facility in Santa Ana, from which installation crews are
dispatched.  The relative proximity of the locations also allows, in
large part, for confluent marketing efforts with respect to the two
operations.  We believe that the new location provides us with access
to a significant potential market for our products at a relatively low operating
cost and that we will derive meaningful revenue from this location by the end of
2010 that will boost our gross income and net income.


8





We
continue to believe that the franchise model represents a promising prospect for
significant growth of our Company.  We think that the key elements of
our business will be attractive factors to franchisees and lead 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 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 semi-private  and government
sources  such as a Small Business Investment Company or the Small
Business Administration  to provide 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.





Critical Accounting Policies and
Estimates





Our
discussion and analysis of our financial condition and results of operations is
based upon the consolidated financial statements and notes to the consolidated
financial statements, which have been prepared in conformity with accounting
principles generally accepted in the United States of America.  The
preparation of the consolidated financial statements requires us to make
estimates, judgments and assumptions, which we believe to be reasonable, based
on the information available.  These estimates and assumptions affect
the reported amounts of assets, liabilities, revenues and expenses and related
disclosures of contingent assets and liabilities.  Variances in the
estimates or assumptions used could yield materially different accounting
results.  On an ongoing basis, we evaluate the continued
appropriateness of our accounting policies and resulting estimates to make
adjustments we consider appropriate under the facts and
circumstances.





We have
chosen accounting policies we believe are appropriate to report accurately and
fairly our operating results and financial position, and we apply those
accounting policies in a consistent manner.  As described in
Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of our 2009 Annual Report, we consider our policies on
accounting for revenue recognition, inventory, accounts receivable, income
taxes, advertising and marketing expenses, stock-based compensation and property
and equipment to be the most critical in the preparation of the consolidated
financial statements because they involve the most difficult, subjective, or
complex judgments about the effect of matters that are inherently uncertain.
There have been no material changes to our application of critical accounting
policies and significant judgments and estimates since December 31,
2009.





Recent
Accounting Pronouncements





See Note
A of Notes to Consolidated Financial Statements for a discussion of new and
recently adopted accounting pronouncements.


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Item
3. Quantitative and Qualitative Disclosures About Market Risk.





Not applicable.





Item
4(T). Controls and Procedures.





Evaluation of Disclosure Controls and
Procedures





As of
March 31, 2010 and the date of this Report, the Company’s management carried out
an evaluation, under the supervision and with the participation of the Company’s
President (PEO) and Chief Financial Officer (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 our continuing efforts to remediate
the material weaknesses in our internal control over financial reporting that
existed as of December 31, 2009 and which remained, in part, extant as of the
close of the period covered by this Report, our PEO and PFO concluded that the
Company's disclosure controls and procedures were not effective as of March 31,
2010.





The
weaknesses in our disclosure and procedures encompassed weaknesses in certain
elements of our internal control over financial reporting (ICFR) that are
subsumed within our disclosure controls and procedures.  A material
weakness 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 basis.  The specific weaknesses relate to
elements of our ICFR that provide reasonable assurances that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles and comprise the
following:





·
            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 did not adequately monitor work performed
      by our independent accountants or our tax preparer and placed undue
      reliance on their expertise without confirming the accuracy of the
      finished product.





·
            Accounting
      and Finance Personnel Weaknesses — 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.





·
            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.





Changes
in Internal Controls





During
the three months ended March 31, 2010 through the date of this Report, we did
not make any changes to our internal control over financial reporting (as
defined in Rules 13a-15 and 15d-15 under the Exchange Act) that materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.





PART
II — OTHER INFORMATION





Item
1. 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.


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Item
1A. Risk Factors.





Smaller
reporting companies are not required to provide the information required by this
item.





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.





(a) During
the three months ended March 31, 2010, the Company did not issue any
securities.





(b) Not
applicable.





(c)
During the three months ended March 31, 2010, neither the issuer nor any
"affiliated purchaser," as defined in Rule 10b-18(a)(13), purchased any shares
or other units of any class of the issuer's equity securities.





Item
3. Defaults Upon Senior Securities.





None.





Item
4. (Removed and Reserved)





Item
5. Other Information.





(a) None.





(b) The Company has not adopted any
procedures by which security holders may recommend nominees to the registrant's
board of directors.





Item
6. Exhibits.





Exhibit
              Description31.1
              Certification
      of the Company’s Principal Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
      Report on Form 10-Q for the quarter ended March 31,
  2010.31.2
              Certification
      of the Company’s Principal Financial Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly
      Report on Form 10-Q for the quarter ended March 31,
  2010.32.1*
              Certification
      of the Company’s Principal Executive Officer and Principal Financial
      Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes Oxley Act of
2002.





*  Pursuant
to Commission Release No. 33-8238, this certification will be treated as
“accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of
such report for purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liability of Section 18 of
the Securities Exchange Act of 1934, as amended, and this certification will not
be deemed to be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
except to the extent that the registrant specifically incorporates it by
reference.


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SIGNATURES





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





VINYL
      PRODUCTS, INC.Date:
      May 20, 2010
                      
                      /s/  Gordon
  KnottGordon
      KnottPresident
      and Chief Executive OfficerDate:
      May 20, 2010
                      
                      /s/  Douglas E.
    WellsDouglas
      E. WellsChief
      Financial Officer and Principal Financial
  Officer




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