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: June 30, 2009





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





Commission
file number: 000-52900





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 formerfiscal
      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   o  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).


oYes  o 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   o
              
              Accelerated
      filer     oNon-accelerated
      filer     o  (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). xYes  ̈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.  o  Yes   o  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 August 13, 2009 there were
22,863,200 shares of common stock outstanding.





PART
I — FINANCIAL INFORMATION




Item
      1. Financial Statements.Unaudited
      Consolidated Financial Statements for the Six Months Ended June 30,
      2009Consolidated
      Balance Sheets as of June 30, 2009 and December 31, 2008
                                F–1Consolidated
      Statements of Operations for the six months ended June 30, 2009 and
      2008
                                F–2Consolidated
      Statements of Stockholders’ Deficit for the six months ended June 30,
      2009 and 2008
                                F-3Consolidated
      Statements of Cash Flows for the six months ended June 30, 2009 and
      2008
                                F–4Notes
      to the Financial Statements
                                F–5







VINYL
      PRODUCTS, INC. (fka RED OAK CONCEPTS, INC.)CONSOLIDATED
      BALANCE SHEET—UNAUDITED
 
 As ofJune 30, 2009
                                    
                                    
                                    December 31, 2008ASSETSCURRENT
      ASSETS:Cash
      and Cash Equivalents
                                    
                                    $
                                    171,149
                                    
                                    
                                    $
                                    114,901Accounts
      Receivable
                                    
                                    
                                    34,200
                                    
                                    
                                    
                                    57,575Stock
      Receivable
                                    
                                    
                                    -
                                    
                                    
                                    
                                    5,000Inventory
                                    
                                    
                                    148,347
                                    
                                    
                                    
                                    156,865Prepaid
      Expenses
                                    
                                    
                                    63,860
                                    
                                    
                                    
                                    47,451Total
      Current Assets
                                    
                                    
                                    417,556
                                    
                                    
                                    
                                    381,792PROPERTY
      AND EQUIPMENT:Property
      and Equipment
                                    
                                    
                                    430,163
                                    
                                    
                                    
                                    429,255Less
      Accumulated Depreciation
                                    
                                    
                                    173,284
                                    
                                    
                                    
                                    148,084Net
      Property and Equipment
                                    
                                    
                                    256,879
                                    
                                    
                                    
                                    281,171OTHER
      ASSETS:Security
      Deposits
                                    
                                    
                                    8,690
                                    
                                    
                                    
                                    8,690Total
      Other Assets
                                    
                                    
                                    8,690
                                    
                                    
                                    
                                    8,690TOTAL
      ASSETS
                                    
                                    $
                                    683,125
                                    
                                    
                                    $
                                    671,653LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIES:Current
      Portion of Long-Term Liabilities
                                    
                                    $
                                    16,700
                                    
                                    
                                    $
                                    18,646Bank
      Line of Credit
                                    
                                    
                                    36,493
                                    
                                    
                                    
                                    -Accounts
      Payable and Accruals
                                    
                                    
                                    298,073
                                    
                                    
                                    
                                    255,401Customer
      Deposits
                                    
                                    
                                    260,607
                                    
                                    
                                    
                                    161,658Income
      Taxes Payable
                                    
                                    
                                    400
                                    
                                    
                                    
                                    -Total
      Current Liabilities
                                    
                                    
                                    612,273
                                    
                                    
                                    
                                    435,705LONG-TERM
      LIABILITIES:Vehicle
      and Installment Purchase Contracts
                                    
                                    
                                    40,870
                                    
                                    
                                    
                                    48,824Less
      Current Portion Shown Above
                                    
                                    
                                    16,700
                                    
                                    
                                    
                                    18,646Net
      Long-Term Liabilities
                                    
                                    
                                    24,170
                                    
                                    
                                    
                                    30,178Total
      Liabilities
                                    
                                    
                                    636,443
                                    
                                    
                                    
                                    465,883SHAREHOLDERS'
      EQUITY:Preferred
      Stock ($.0.0001 par value; 10,000,000 shares authorized;no
      shares issued and outstanding at June 30, 2009 and December 31,
      2008)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Common
      Stock ($0.0001 par value; 100,000,00 shares authorized;22,863,200
      shares issued and outstanding at June 30, 2009 and
                                      22,859,000
      shares issued and outstanding at December 31, 2008)
                                    
                                    
                                    2,286
                                    
                                    
                                    
                                    2,286Paid
      in Capital
                                    
                                    
                                    92,914
                                    
                                    
                                    
                                    90,814Retained
      Earnings (Deficit)
                                    
                                    
                                    (48,518
                                    )
                                    
                                    
                                    112,670Total
      Shareholders' Equity
                                    
                                    
                                    46,682
                                    
                                    
                                    
                                    205,770TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                                    
                                    $
                                    683,125
                                    
                                    
                                    $
                                    671,653
 
 The
accompanying unaudited notes are an integral part of these unaudited financial
statements.
  F-1
 
 VINYL
      PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)CONSOLIDATED
      STATEMENTS OF OPERATIONS—UNAUDITED
  For the Six Months EndedJune 30, 2009
                    
                    
                    June 30, 2008Income
                    
                    $
                    1,484,911
                    
                    
                    $
                    2,071,455Cost
      of Goods Sold:Labor
                    
                    
                    265,578
                    
                    
                    
                    402,481Materials
                    
                    
                    394,630
                    
                    
                    
                    654,061Other
                    
                    
                    13,296
                    
                    
                    
                    20,420Total
      Cost of Goods Sold
                    
                    
                    673,504
                    
                    
                    
                    1,076,962Gross
      Profit
                    
                    
                    811,407
                    
                    
                    
                    994,493Expenses:Advertising
      and Marketing
                    
                    
                    81,137
                    
                    
                    
                    96,116Selling,
      General and Administrative
                    
                    
                    164,904
                    
                    
                    
                    193,599Payroll
                    
                    
                    520,046
                    
                    
                    
                    509,759Professional
      Fees
                    
                    
                    134,654
                    
                    
                    
                    87,102Rent
                    
                    
                    52,140
                    
                    
                    
                    51,650Total
      Expenses
                    
                    
                    952,881
                    
                    
                    
                    938,226Net
      Operating Income
                    
                    
                    (141,474
                    )
                    
                    
                    56,267Other
      Income (Expense):Interest
      Income
                    
                    
                    349
                    
                    
                    
                    5,245Interest
      Expense
                    
                    
                    (19,662
                    )
                    
                    
                    (20,523
                    )Total
      Other Income (Expense)
                    
                    
                    (19,313
                    )
                    
                    
                    (15,278
                    )Income
      Before Income Taxes
                    
                    
                    (160,787
                    )
                    
                    
                    40,989Income
      Taxes
                    
                    
                    (400
                    )
                    
                    
                    (27,700
                    )Net
      Income
                    
                    $
                    (161,187
                    )
                    
                    $
                    13,289Earnings
      per share:Basic
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.00
                    )Diluted
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.00
                    )Weighted
      average shares outstanding - basic
                    
                    
                    22,862,481
                    
                    
                    
                    22,802,112Weighted
      average shares outstanding - diluted
                    
                    
                    22,969,387
                    
                    
                    
                    22,802,112
  The
accompanying unaudited notes are an integral part of these unaudited financial
statements.
  F-2
 
 VINYL
      PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)CONSOLIDATED
      STATEMENT OF SHAREHOLDERS'
DEFICIT—UNAUDITED
 
 Preferred Stock
                    
                    
                    Common Stock
                    
                    
                    Paid-In
                    
                    
                    RetainedShares
                    
                    
                    Stock
                    
                    
                    Shares
                    
                    
                    Stock
                    
                    
                    Capital
                    
                    
                    EarningsBalances,
      December 31, 2008
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    22,859,000
                    
                    
                    $
                    2,286
                    
                    
                    $
                    90,814
                    
                    
                    $
                    112,669Issuance
      of Common Stock
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    4,200
                    
                    
                    
                    -
                    
                    
                    
                    2,100
                    
                    
                    
                    -Net
      Income/(Loss) for the Period
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (161,187
                    )Balances,
      June 30, 2009
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    22,863,200
                    
                    
                    $
                    2,286
                    
                    
                    $
                    92,914
                    
                    
                    $
                    ( 48,518
                    )
  The
accompanying unaudited notes are an integral part of these unaudited financial
statements.
  F-3
 
 VINYL
      PRODUCTS, INC. (f/k/a RED OAKS CONCEPTS, INC.)CONSOLIDATED
      STATEMENTS OF CASH FLOWS—UNAUDITED
 
 For the Six Months EndedJune 30, 2009
                          
                          
                          June 30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Income/(Loss)
                          
                          $
                          (161,187
                          )
                          
                          $
                          13,289Adjustments
      to Reconcile Net Income to Net Cash Provided by
Operations:Depreciation
                          
                          
                          25,200
                          
                          
                          
                          22,928Changes
      in Assets and Liabilities:Decrease
      (Increase) in Accounts Receivable
                          
                          
                          23,375
                          
                          
                          
                          (6,659
                          )Decrease
      (Increase) in Inventory
                          
                          
                          8,517
                          
                          
                          
                          (1,152
                          )Decrease
      (Increase) in Prepaid Expenses
                          
                          
                          (18,807
                          )
                          
                          
                          4,102Increase
      in Accounts Payable and Accrued Expenses
                          
                          
                          49,713
                          
                          
                          
                          76,648Decrease
      in Customer Deposits
                          
                          
                          98,948
                          
                          
                          
                          130,376Increase
      (Decrease) in Credit Card Balances
                          
                          
                          (4,641
                          )
                          
                          
                          (14,304
                          )Increase
      (Decrease) in Income Taxes Payable
                          
                          
                          400
                          
                          
                          
                          (6,432
                          )Net
      Cash Provided (Used) by Operating Activities
                          
                          
                          21,518
                          
                          
                          
                          218,796CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of Fixed Assets
                          
                          
                          (908
                          )
                          
                          
                          (28,041
                          )Net
      Cash Provided (Used) by Investing Activities
                          
                          
                          (908
                          )
                          
                          
                          (28,041
                          )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of Common Stock
                          
                          
                          2,100
                          
                          
                          
                          2,100Collection
      of Stock Receivable
                          
                          
                          5,000
                          
                          
                          
                          -Proceeds
      from Line of Credit Borrowings, net of repayments
                          
                          
                          36,493
                          
                          
                          
                          -Vehicle
      Loan Proceeds, net of Principal Payments
                          
                          
                          (7,954
                          )
                          
                          
                          (10,115
                          )Increase
      (Decrease) in Note Payable to Shareholder
                          
                          
                          -
                          
                          
                          
                          152,000Dividends
                          
                          
                          -
                          
                          
                          
                          (230,000
                          )Net
      Cash Provided by (Used in) Financing Activities
                          
                          
                          35,639
                          
                          
                          
                          (86,015
                          )NET
      CASH INCREASE FOR THE PERIOD
                          
                          
                          56,249
                          
                          
                          
                          104,740Cash
      at Beginning of Period
                          
                          
                          114,900
                          
                          
                          
                          134,252CASH
      AT END OF PERIOD
                          
                          $
                          171,149
                          
                          
                          $
                          238,992SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:CASH
      PAID DURING THE PERIOD FOR:INTEREST
                          
                          $
                          19,662
                          
                          
                          $
                          20,523TAXES
                          
                          $
                          -
                          
                          
                          $
                          34,132
  The
accompanying unaudited notes are an integral part of these unaudited financial
statements.
  F-4
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Six Months Ended June 30, 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 The Vinyl Fence Company, Inc. (“TVFC”), a company
incorporated under the laws of the State of California.  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 is 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—The
Vinyl Fence Company, Inc. designs, fabricates and installs fencing, patio
covers, gates and railing made of co-extruded vinyl from its location in Santa
Ana, California.  The Company operates in one reportable segment, the
domestic vinyl products industry.
 
 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 routinely has deposits at a financial institution that exceed federal
depository insurance coverage.  Management
believes that maintaining the deposits at a large reputable institution
mitigates risks associated with these excess deposits.
  F-5
  NOTE A – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
 
 Management’s 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.
 
 Revenue Recognition —
Customer deposits are recorded as a current liability when
received.  Under California law, the customer has three days in which
to cancel the 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.
 
 Comprehensive
Income–The
Company adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income”, which
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements.  There were no items of
comprehensive income applicable to the Company during the periods covered in the
financial statements.
 
 Advertising and Marketing
Expense—The
Company expenses all advertising and marketing costs as
incurred.  Advertising and marketing expense was $81,137 in the six
months ended June 30, 2009, and $96,116 in the six months ended June 30,
2008.
 
 Interest Expense –
Interest expense includes credit card fees and financing discounts, both
relating to customers who finance their purchases.  Credit card fees
average 3%.  Financing discount rates range from 2.75% for three-month
financing to 7.25% for 18-month financing.
 
 Fair Value of Financial
Instruments—The
carrying value of cash and cash equivalents, accounts receivables, accounts
payable and accrued expenses approximate their fair value based on the
short-term nature of these accounts.  Long-term debt obligations bear
fixed interest rates, and their fair value was estimated using a discounted cash
flow analysis based on
the Company’s current incremental borrowing rate for similar types of borrowing
arrangements.  The estimated fair value of the Company’s long-term
debt obligations approximates the fair value at June 30, 2009 and
2008.
 
 Accounts
Receivable—The
Company sells to individual homeowners and homeowner
associations.  Accounts receivable are minimized by requiring a down
payment at the time a sales agreement is signed, and the balance at completion
of installation.  Bad debt
losses are recorded as incurred.  Bad debt expense was $-0- in the six
months ended June 30, 2009, and the six months ended June 30,
2008.  Accounts receivable were $34,200 at June 30,
2009.
  F-6
  NOTE A – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
 
 Inventory—Inventory is stated at the
lower of average cost or market value.  Inventory consists of raw
materials (approximately 80%) and fabricated materials awaiting installation
(approximately 20%).
 
 Impairment of Long-Lived
Assets– Using
the guidance of Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for the Impairment
or Disposal of Long-Lived Assets”, the Company reviews the carrying value
of property, plant, 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 and equipment are carried at cost, net of accumulated
depreciation.  Depreciation is computed using the straight-line method
over the following estimated useful lives:
 
 Vehicles
                  2 –
      7 yearsFurniture
      and Fixtures
                  7 –
      15 yearsMachinery
      and Equipment
                  5 –
      15 yearsOffice
      and Computer Equipment
                  3 –
      20 yearsSigns
                  7
      years
  Leasehold
improvements are classified as property and equipment and are amortized using
the straight-line method over 15 years and 39 years.  When assets are
retired or otherwise disposed of, the cost and related accumulated depreciation
are removed from the accounts and any resulting gain or loss is recognized in
operations for the period.  The cost of maintenance and repairs is
charged to operations as incurred.  Significant renewals and
betterments are capitalized.  Depreciation expense was $25,200 in the
six months ended June 30, 2009 and $22,928 in the six months ended June 30,
2008.
 
 Recent Accounting
Pronouncements – In February 2007, the FASB issued Statement of Financial
Standards No. 159, “The Fair Value for Financial Assets and Financial
Liabilities – including an amendment of FASB Statement No. 115”.  This
statement permits entities to choose to measure many financial instruments and
certain other items at fair value.  The objective is to improve
financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting at fair
value.  The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets
and liabilities differently without having to apply complex hedge accounting provisions.  This
Statement is expected to expand the use of fair value measurement, which is
consistent with the Board’s long-term measurement objectives for accounting for
financial instruments, and is effective as of the beginning of an entity’s first
fiscal year that begins after November 15, 2007.  Early adoption is
permitted as of the beginning of a fiscal year that begins on or before November
17, 2007, provided the entity also elects to apply the provisions of FASB
Statement No. 157, “Fair Value Measurements”.  No entity is permitted
to apply the Statement retrospectively to fiscal years preceding the effective
date unless the entity chooses early adoption.  Early adoption of the
standard is not expected to have a material effect on the Company’s results of
operations or its financial position.
  F-7
  NOTE A – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
  In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations (“SFAS 141R”).  SFAS 141R will significantly change the
accounting for business combinations in a number of areas, including the
treatment of contingent considerations, contingencies, acquisition costs,
IPR&D and restructuring costs.    In additions, under
SFAS 141R, changes in deferred tax asset valuation allowances and acquired
income tax uncertainties in a business combination after the measurement period
will impact income tax expense.  SFAS 141R is effective for fiscal
years beginning after December 15, 2008.  The Company has not yet
determined the impact, if any, of SFAS 141R on its financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 160, “Non Controlling Interests in
Financial Statements, an amendment of ARB No. 51”.  SFAS 160 will
change the accounting and reporting of minority interests, which will be
re-characterized as non-controlling interests (NCI) and classified as a
component of equity.  This new consolidation method will significantly
change the account with minority interest holders.  SFAS 160 is
effective for fiscal years beginning after December 15, 2008.  The
Company has not yet determined the impact, if any, of SFAS 160 on its financial
statements.
 
 NOTE B – SUPPLEMENTAL CASH
FLOW INFORMATION
 
 Supplemental
disclosures of cash flow information for the six months ended June 30, 2009 are
summarized as follows:
 
 Cash paid
for interest and income taxes during the six months ended June 30:
 
 2009
                      
                      
                      2008Interest
                      
                      $
                      19,662
                      
                      
                      $
                      20,523Income
      Taxes
                      
                      $
                      -0-
                      
                      
                      $
                      34,132
  F-8
  NOTE C –
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 $104,280 in 2009, $104, 280 in
2010, and $26,070 in 2011.
 
 The
Company has an available $100,000 line of credit which it opened in January
2006.  Borrowings under the line of credit were paid off in
2007.  The interest rate is prime plus 3 percentage
points.  In 2009, the Company drew down $52,000 under its line of
credit; the balance owed as of June 30, 2009 was $36,493.
 
 NOTE D — LONG-TERM DEBT
OBLIGATIONS
 
 The
Company acquired four vehicles under installment sales contracts with interest
rates varying from 4.9% to 6.9%.  Future payments under these
agreements are as follows:
 
 2009
                          
                          $
                          8,2092010
                          
                          $
                          17,0522011
                          
                          $
                          12,0382012
                          
                          $
                          3,571
  NOTE E – 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.
 
 Income
tax expense for the six months ended June 30, 2009 and June 30, 2008 is as
follows:
 
 2009
                      
                      
                      2008Federal
                      
                      $
                      -0-
                      
                      
                      $
                      21,000California
                      
                      $
                      400
                      
                      
                      $
                      6,700
  NOTE F – NET INCOME PER
COMMON SHARE
 
 The
Company’s reconciliation of the numerators and denominators of the basic and
fully diluted income per share is as follows for the six months ended June 30,
2008 and 2009:
  F-9
 
 For the Six Months Ended June 30,
      2008Income
                        
                        
                        Shares
                        
                        
                        Per-Share(Numerator)
                        
                        
                        (Denominator)
                        
                        
                        AmountNet
      Income (Loss)
                        
                        $
                        13,289Basic
      EPSIncome
      available toCommon
      shareholders
                        
                        $
                        13,289
                        
                        
                        
                        22,802,112
                        
                        
                        $
                        (.00
                        )(A)Effect
      of Dilutive SecuritiesStock
      Options
                        
                        
                        
                        
                        
                        
                        -0-Diluted
      EPSIncome
      available toCommon
      shareholders
                        
                        $
                        13,289
                        
                        
                        
                        22,802,112
                        
                        
                        $
                        (.00
                        )
  For the Six Months Ended June 30,
      2009Income
                        
                        
                        Shares
                        
                        
                        Per-Share(Numerator)
                        
                        
                        (Denominator)
                        
                        
                        AmountNet
      Income (Loss)
                        
                        $
                        (161,187
                        )Basic
      EPSIncome
      available toCommon
      shareholders
                        
                        $
                        (161,187
                        )
                        
                        
                        22,862,481
                        
                        
                        $
                        (.01
                        )(A)Effect
      of Dilutive SecuritiesStock
      Options
                        
                        
                        
                        
                        
                        
                        106,906Diluted
      EPSIncome
      available toCommon
      shareholders
                        
                        $
                        (161,187
                        )
                        
                        
                        22,969,387
                        
                        
                        $
                        (.01
                        )
 
 (A)
                See
      Note A.
 
 NOTE G – 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.  Three employees
subsequently left the Company and their options for 600 shares were
terminated.  The options expire on September 23, 2009.  As
of June 30, 2009, options to purchase 4,200 shares had been
exercised.
 
 NOTE H – 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 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.
  F-10
  NOTE H – THEFT LOSS
(CONTINUED)
 
 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.
  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.  On April 28, 2009, the Court granted Company counsel’s motion
to compel arbitration.  The parties are currently in the process of
selecting an arbiter.  The Company is advised by the insurance carrier
that all the claims made by the plaintiff are covered by an insurance policy
maintained for the benefit of the Company and its PEO and that any amount
awarded  the plaintiff, either by way of court decision, arbitration
or other settlement, are covered by such policy.  Accordingly, the
Company has no exposure or monetary damages that may be awarded the
plaintiff.
 
 F-11
  NOTE I –
EQUITY
 
 Common
Shares
 
 The
Company is authorized to issue 100,000,000 shares of $.0001 par value common
stock, and as of June 30, 2009, the Company had 22,863,200 shares
outstanding.  During the six months ended June 30, 2009, the Company
employees exercised options for 4,200 shares for cash in the amount of $2,100
($.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 issues any preferred shares of preferred
stock.
  F-12


Item
2. Management’s Discussion and Analysis or Plan 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 report.  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 report, 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.  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.





Our 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 is dependent upon the success
of our planned franchise program and there are numerous risks associated with
such program; the availability of disposable income to homeowners; the
availability of consumer credit; the availability of credit to prospective
purchasers of our franchises; the seasonality of our business, which ebbs prior
to the year-end holidays and during the first quarter of each calendar year,
corresponding to the rainy season in California, and general economic
conditions.  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, 2008 that we filed with the Securities and Exchange
Commission on March 31, 2009 (the "2008 10-K").








Summary
Financial Report





Sales for
the second quarter of 2009 were $1,079,000, a decrease of 21% compared to sales
of $1,360.000 during the second quarter of 2008.  Sales for the first
two quarters of 2009 were $1,723,000. A decrease of 25% compared to sales of
$2,291,000 during the first two quarters of 2008.  We believe that
national economic conditions affected our financial and operating results during
the last quarter.  Over the last year, consumer confidence has been
down, 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.  Accordingly, orders for our products were down and sales,
income and profits declined commensurately.  In response, we laid-off
one of our installer crews and reduced certain selling, general and
administrative expenses.





Notwithstanding
our lackluster financial performance for each of the first two quarters as
compared to the corresponding 2008 periods, we believe that the accounting
controls and procedures we implemented during the fourth quarter of 2008 have
remediated the material weaknesses in our internal controls over financial
reporting that we discovered in the third quarter of 2008, as reported in the
2008 10-K.  We base our conclusion on the significant increase in
gross profit as a percentage of revenue in the first two quarters of 2009 over
the prior four quarters, which we have determined demonstrates that we are
recognizing revenue on all the raw materials we purchase.  We continue
to fine-tune our disclosure controls as we gain greater fluency with the nuances
of our public company obligations and our personnel develop the skills and
expertise with respect to financial reporting under federal securities laws. As
described below under Item 4(T). Controls and Procedures, we did not made any
material changes to our internal control over financial reporting during the six
months ended June 30, 2009.





Business
Strategy





The
retail outdoor vinyl products is dominated by (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.  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.





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.  We are not
aware of any participant in the exterior vinyl products industry that operates
on a national basis and 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 model can be replicated 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.  We recently engaged a
franchise consultant to assist with the development of the
program.  We are only beginning to establish the parameters of our
organization, but we believe that we can complete the document preparation
process and develop a general program design over the next two to three
months.  Thereafter, we will file documents to register our
organization in the States of California and Washington.  We hope to
be able to offer franchises to the public in early 2010.








Critical
Accounting Policies and Estimates




Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States, which require us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods.  Management makes these estimates using the best
information available at the time the estimates are made; however actual results
could differ materially from those estimates (See Note A in the Notes to
Financial Statements).




Revenue
recognition





We record
customer deposits on sales as a current liability when received, and we
recognize revenues (i.e., income) when installations of the products are
complete.





Accounts
Receivable





We
require a down payment at the time a sales agreement is signed and the balance
at completion of installation, which minimizes our accounts
receivable.  Bad debt losses have been minimal (less than .3% of
revenue since inception of the Company), and we record them as they are
incurred.





Inventory





Inventory
is stated at the lower of average cost or market value.  Inventory
consists of raw materials (approximately 80%) and fabricated materials awaiting
installation (approximately 20%).





Results
of Operations





Comparison of the Three
Months Ended June 30, 2009 and 2008





Sales: “Sales”
represent the sales price of signed installation agreements, and the deposits we
receive at the time of signing are recorded as customer deposits (a current
liability).





Sales for
the second quarter were $1,079,000, a decrease of 21% compared to sales of
$1,360,000 during the second quarter of 2008.  We believe that such
decrease is directly correlated to the general weakness in the national economy,
the fact that homeowners either do not have the disposable income to allocate to
home renovation projects or have elected not to spend their disposable income on
fence or decking projects at this time and tight consumer credit conditions,
including a decline in the amount available to consumers under home equity
lines.





Income:  “Income”
represents the sales price of installed jobs.  Income for the second
quarter covered by this report was $800,403, a decrease of 33% compared to sales
of $1,189,776 during the second quarter of 2008.  We attribute the
decline in income to the factors referenced above under the heading
"Sales."





Gross
Profit:  Gross profit decreased from $598,472 for the 2008
period to $429,987 for the 2009 period, a decrease of 28%; however, the gross
profit percentage increased from 50.3% in 2008 to 53.7% in 2009.  We
attribute the increase in the gross profit percentage directly to the various
personnel adjustments we made when we learned that certain employees had been
defrauding the Company by stealing materials and reselling and installing them
for their own benefit.  These adjustments included terminating the
employees involved, re-defining the roles of our staff responsible for
fabrication and installation, improving control procedures, restructuring our
work force and increasing the involvement of our accounting manager in inventory
control.  These issues and our reaction and remediation efforts are
more fully described in our annual report on Form 10-K for the year ended
December 31, 2008.








Expenses:





Advertising
and marketing expense during the second quarter of 2009 was $46,397, a decrease
of $11,532, or 20%, from the second quarter of 2008 in which we expended
$57,929.  The decrease represents modifications to our advertising and
marketing programs resulting from our ongoing effort to identify and adjust the
proper mix of advertising media to maximize the effectiveness of the advertising
media we select and the return on advertising investment.





Selling,
general and administrative expenses decreased from $98,677 during the second
quarter of 2008 to $79,251, or 20%, during the second quarter of
2009.  The decrease was due primarily to decreases in travel, meals
and entertainment expenses.





Payroll
expenses increased from $195,558 to $267,900, an increase of $72,342, or 37%,
due primarily to officer pay increases.





Professional
fees decreased from $58,961 during the 2008 period to $50,785 during the
corresponding 2009 period, or 14%.  The decrease was due primarily to
decreases in legal and auditing fees, offset by franchise consulting of
$9,500.





Income
taxes decreased from $27,500 in 2008 to $200 in 2009, due to the Company making
a profit in 2008 and recording a loss in 2009.





For the
three years ended June 30, 2009, 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.





Comparison of the Six Months
Ended June 30, 2009 and 2008





Sales:  “Sales”
represent the sales price of signed installation agreements, and the deposits we
receive at the time of signing are recorded as customer deposits (a current
liability).  Our sales are seasonal and are typically negatively
impacted by weather in the first calendar quarter of every year during the rainy
season in Southern California.





Sales for
the first two quarters of the 2009 fiscal year were $1,723,000, a decrease of
25% compared to sales of $2,291,000 during the first two quarters of
2008.  We believe that such decrease is directly correlated to the
general weakness in the national economy, the fact that homeowners either do not
have the disposable income to allocate to home renovation projects or have
elected not to spend their disposable income on fence or decking projects at
this time and tight consumer credit conditions, including a decline in the
amount available to consumers under home equity lines.





Income:  “Income”
represents the sales price of installed jobs.  Income for the first
two quarters covered by this report was $1,484,911, a decrease of 28% compared
to sales of $2,071,455 during the first two quarters of 2008.  We
attribute the decline in income to the factors referenced above under the
heading "Sales."








Gross
Profit:  Gross profit decreased from $994,493 for the 2008
period to $811,407 for the 2009 period, a decrease of 18%; however, the gross
profit percentage increased from 48.0% in 2008 to 54.6% in 2009.  We
attribute the increase in the gross profit percentage directly to the various
personnel adjustments we made when we learned that certain employees had been
defrauding the Company by stealing materials and reselling and installing them
for their own benefit.  These adjustments included terminating the
employees involved, re-defining the roles of our staff responsible for
fabrication and installation, improving control procedures, restructuring our
work force and increasing the involvement of our accounting manager in inventory
control.  These issues and our reaction and remediation efforts are
more fully described in our annual report on Form 10-K for the year ended
December 31, 2008.





Expenses:





Advertising
and marketing expense during the first two quarters of 2009 was $81,137, a
decrease of $14,979, or 16%, from the first two quarters of 2008 in which we
expended $96,116.  The decrease represents modifications to our
advertising and marketing programs resulting from our ongoing effort to identify
and adjust the proper mix of advertising media to maximize the effectiveness of
the advertising media we select and the return on advertising
investment.





Selling,
general and administrative expenses decreased from $193,599 during the first two
quarters of 2008 to $164,904, or 15%, during the first two quarters of
2009.  The decrease was due primarily to decreases in travel, meals
and entertainment expenses.





Payroll
expenses increased from $509,759 to $520,046, an increase of $10,287, or 2%, due
primarily to employee pay increases.





Professional
fees increased from $87,102 during the 2008 period to $134,654 during the
corresponding 2009 period, or 55%.  The increase was due primarily to
increases in franchise consulting  of $9,500, legal fees of $26,000,
and auditing fees of $15,000, in the latter two cases for the professional
services rendered in connection with the share exchange we consummated in
November 2008 and the filings made with the SEC as a result
thereof.





Income
taxes decreased from $27,700 in 2008 to $400 in 2009, due to the Company making
a profit in 2008 and a loss in 2009.





For the
three years ended June 30, 2009, 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 June 30,
2009 and June 30, 2008





Cash
and Cash Equivalents





Our cash
and cash equivalents were $238,992 at June 30, 2008, and decreased to $171,149
by June 30, 2009, due primarily to a decrease in net income in
2009..





Net
cash provided by operating activities





Net cash
provided by operating activities was $80,216 for the three months ended June 30,
2009, compared to $251,731for the three months ended June 30,
2008.  The $171,515 decrease was primarily attributable to a decrease
in net income of $174,000.








Net
cash used in investing activities





Net cash
used in investing activities was $908 for the three months ended June 30, 2009,
compared to $26,245 for the three months ended June 30, 2008.  The
$25,377 decrease was due to the 2008 purchase of leasehold improvements and
equipment.




Net
cash used in financing activities





Net cash
used in financing activities was $18,783 for the three months ended June 30,
2009 compared to $114,829 for the three months ended June 30, 2008, an increase
of $96,046, due primarily to the payment of $110,000 of dividends in 2008,
offset by debt payments in 2009.





Six Months Ended June 30,
2009 and June 30, 2008





Cash
and Cash Equivalents





Our cash
and cash equivalents were $238,992 at June 30, 2008, and decreased to $171,149
by June 30, 2009, due primarily to a decrease in net income in
2009.





Net
cash provided by operating activities





Net cash
provided by operating activities was $21,518 for the six months ended June 30,
2009, compared to $218,796 for the six months ended June 30,
2008.  The $197,278 decrease was primarily attributable to a decrease
in net income of $174,000 and a decrease in customer deposits of
$32,000.





Net
cash used in investing activities





Net cash
used in investing activities was $$908 for the six months ended June 30, 2009,
compared to $28,041 for the six months ended June 30, 2008.  The
$27,133 decrease was due to the 2008 purchase of leasehold improvements and
equipment.




Net
cash provided by financing activities





Net cash
provided by financing activities was $35,639 for the six months ended June 30,
2009 compared to $86,015 net cash used in the six months ended June 30, 2008, an
increase of $121,654, due primarily to the payment of $230,000 of dividends in
2008, offset by an increase in note payable to shareholders of $152,000 in 2008
and net proceeds from line of credit borrowings of $36,000 in
2009..





Liquidity
and Capital Resources





Over the
next twelve months, we will commence building 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 States of California and Washington, will not exceed $50,000, as more
fully described below.





We
recently engaged a franchise consultant to assist us with the development of the
program.  We are only beginning to establish the parameters of our
organization and 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.  The first phase will
encompass 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 anticipate that
this approach will reduce the program's organizational costs
significantly.  In the second phase, we will apply to register to sell
franchises in the States of California and Washington, with the intent of
initially selling 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 and Washington 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.





We do not
currently expect to engage any additional internal personnel to manage the
process, and 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 building 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.





We hope
that we will be in a position to offer franchises in California and Washington
in early 2010.





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.  We
anticipate that these costs will be more than offset by franchise fees and
royalties we will earn from franchisees.  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 two phases of our franchise
organization internally from capital generated from operating revenue from our
existing retail location and our line of credit (of which $74,000 is available
for use at August 13, 2009).  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.





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.  These
activity levels, in turn, are affected by 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 are all currently in poor positions, and
indications are that they will remain that way in the near-term.  We
believe that these factors have resulted in decreased home improvement spending,
which caused our sales and results of operations to decline for the quarter
ended March 31, 2009.  We cannot at this time state with any certainty
when significant improvements in market conditions may occur and we are managing
our business on that basis.





While we
expect that current business conditions will persist or improve only slightly
over the remainder of calendar year 2009, 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.  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.





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 expansion 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 eased 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.





Recent
Accounting Pronouncements





In
February 2007, the FASB issued Statement of Financial Standards No. 159, “The
Fair Value for Financial Assets and Financial Liabilities – including an
amendment of FASB Statement No. 115”.  This statement permits entities
to choose to measure many financial instruments and certain other items at fair
value.








The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions.  This Statement is expected to expand the use
of fair value measurement, which is consistent with the Board’s long-term
measurement objectives for accounting for financial instruments, and is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007.  Early adoption is permitted as of the beginning of
a fiscal year that begins on or before November 17, 2007, provided the entity
also elects to apply the provisions of FASB Statement No. 157, “Fair Value
Measurements”.  No entity is permitted to apply the Statement
retrospectively to fiscal years preceding the effective date unless the entity
chooses early adoption.  Early adoption of the standard is not
expected to have a material effect on the Company’s results of operations or its
financial position.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations (“SFAS 141R”).  SFAS 141R will significantly change the
accounting for business combinations in a number of areas, including the
treatment of contingent considerations, contingencies, acquisition costs,
IPR&D and restructuring costs.    In additions, under
SFAS 141R, changes in deferred tax asset valuation allowances and acquired
income tax uncertainties in a business combination after the measurement period
will impact income tax expense.  SFAS 141R is effective for fiscal
years beginning after December 15, 2008.  The Company has not yet
determined the impact, if any, of SFAS 141R on its financial
statements.





In
December 2007, the FASB issued SFAS No. 160, “Non Controlling Interests in
Financial Statements, an amendment of ARB No. 51”.  SFAS 160 will
change the accounting and reporting of minority interests, which will be
re-characterized as non-controlling interests (NCI) and classified as a
component of equity.  This new consolidation method will significantly
change the account with minority interest holders.  SFAS 160 is
effective for fiscal years beginning after December 15, 2008.  The
Company has not yet determined the impact, if any, of SFAS 160 on its financial
statements.





Cautionary
Statement Relevant to Forward-Looking Information for the Purpose of “Safe
Harbor” Provisions of the Private Securities Litigation Reform Act of
1995




The
Company and its representatives may from time to time make written or oral
forward-looking statements with respect to long-term goals or anticipated
results of the Company, including statements contained in the Company’s filings
with the Securities and Exchange Commission and in its reports to
stockholders.




Statements, including those in this
Quarterly Report on Form 10-Q, which are not historical or current facts, are
“forward-looking statements” made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.  There are certain
important factors that could cause our results to differ materially from those
anticipated by some of the statements made herein.  Investors are
cautioned that all forward-looking statements involve risk and
uncertainty.  Some of the factors that could affect results are the
continued uninterrupted availability of raw materials and the cost thereof, our
ability to develop a successful franchise program, the availability of capital
to us as required to implement our franchise program and other expansion plans,
the sensitivity of our industry to prevailing national economic conditions, the
seasonal nature of the outdoor remodeling industry, the effectiveness of new
product introductions, the amount of sales generated and the profit margins
thereon, competition and general economic conditions. For further information
regarding these risks and uncertainties, see the “Risk Factors” section in Item
1A of the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.







The
Company specifically declines to undertake any obligation to publicly revise any
forward-looking statements that have been made to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.





Item
3. Quantitative and Qualitative Disclosures About Market Risk.





Not applicable.





Item
4(T). Controls and Procedures.





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports we file under the Securities
Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to management, including
the principal executive officer (PEO) and principal financial officer (PFO), as
appropriate, to allow timely decisions regarding required
disclosure.  Management necessarily applied its judgment in assessing
the costs and benefits of such controls and procedures, which, by their nature,
can provide only reasonable assurance regarding management’s control
objectives.





As of the
end of the period covered by this quarterly report, we carried out an
evaluation, under the supervision and with the participation of management,
including the PEO along with the PFO, of the effectiveness, design and operation
of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)).  The Company’s disclosure
controls and procedures are designed to provide a reasonable level of assurance
of achieving the Company’s disclosure control objectives.  Based upon
the foregoing, the PEO along with the PFO concluded that our disclosure controls
and procedures are effective at providing reasonable assurance that all material
information required to be included in our Exchange Act reports is reported in a
timely manner.  In addition, based on such evaluation, we have
identified no changes in our internal control over financial reporting that
occurred during the most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.




PART
II — OTHER INFORMATION





Item
1. Legal Proceedings.





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.  On April 28, 2009, the Court granted Company counsel’s motion
to compel arbitration.  The parties are currently in the process of
selecting an arbiter.  The Company is advised by the insurance carrier
that all the claims made by the plaintiff are covered by an insurance policy
maintained for the benefit of the Company and its PEO and that any amount
awarded  the plaintiff, either by way of court decision, arbitration
or other settlement, are covered by such policy.  Accordingly, the
Company has no exposure or monetary damages that may be awarded the
plaintiff.





Item
1A. Risk Factors.





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








Item
2. Changes in Securities and Small Business Issuer Purchase of Equity
Securities.





(a) During
the three months ended June 30, 2009, the Company did not issue any
securities.





(b) None.





(c)
None.





Item
3. Defaults Upon Senior Securities.





None.





Item
4. Submission of Matters to a Vote of Security Holders.





None.





Item
5. Other Information.





None.





Item
6. Exhibits.





Exhibit
            
            Description31.1
            
            Certification
      of the Company’s Principal Executive Officer and 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 June 30, 2009.32.1
            
            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.










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:
                      August 11, 2009
                      
                      By:
                      /s/  Gordon
  KnottGordon
Knott