U.S.
SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 FORM
10-Q/A
 
 x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
quarterly period ended: March
31, 2009
 
  ̈ 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 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    ̈ 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 xNo
 
 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 14, 2009 there were
22,863,200 shares of common stock outstanding.
  
  EXPLANATORY
NOTE
 
 On
November 10, 2009, the board of directors Vinyl Products, Inc. (“we,” “us,”
“our” or the “Company”), upon the identification by and recommendation of
management, concluded that the previously issued financial statements contained
in our Annual Report on Form 10-K ("2008 Annual Report") for the year ended
December 31, 2008, and our quarterly reports on Form 10-Q for the quarters
ended March 31, 2009 and June 30, 2009 should no longer be relied upon
because of errors in those financial statements, and that we would amend and
restate these consolidated financial statements to make the necessary accounting
corrections.
 
 We are
filing this Form 10-Q/A to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009 ("Amended March 2009 10-Q") as originally
filed with the Securities and Exchange Commission on May 15, 2009 ("Original
March 2009 10-Q") to:
 
 ·
              amend
      and restate the consolidated financial statements included the Original
      March 2009 10-Q to reflect the effect of the amendment and restatement of
      the audited consolidated financial statements for the years ended
      December 31, 2008 and 2007, as filed in an amendment on Form 10-K/A
      to the Annual Report on Form 10-K for the year ended December 31, 2009 on
      the date hereof (the “Amended 2008
10-K”);
 
 ·
              reclassify
      certain financial information included in the financial statements filed
      with Original March 2009 10-Q to reflect the effect of the
      reclassification of the audited consolidated financial statements filed
      with the Amended 2008 10-K;
 
 ·
              amend
      and restate the "Management's Discussion and Analysis of Financial
      Condition and Results of Operations";
and
 
 ·
              amend
      Item 4(T). Controls and Procedures.
 
 Concurrent
herewith, we are filing the Amended 2008 10-K and a Form 10-Q/A to our quarterly
report on Form 10-Q for the three months ended June 30, 2009, both of which
include amended, restated and reclassified consolidated financial statements and
certain other amendments required to be made to such reports to reflect the
amendment, restatement and reclassification of the financial statements filed
with such reports.
 
 Restatement.         The
audited consolidated financial statements for the year ended December 31,
2008 contained in the 2008 Annual Report (the "Original 2007/2008 Financial
Statements") understated the reported amount of our federal and state corporate
income tax returns for the year ended December 31, 2008 by approximately
$30,000.  The additional amount of federal and state corporate income
taxes to be paid is material to our financial statements.
 
 The
restatement of the Original 2007/2008 Financial Statements to report the
accurate amount of federal and state corporate income taxes owed affected
individual components of our Consolidated Balance Sheet as of December 31, 2008,
and our Consolidated Statement of Operations, Consolidated Statement of
Shareholders Equity and Consolidated Statements of Cash Flows for the year ended
December 31, 2008 and subsequent interim periods. However, this restatement
had no effect on reported consolidated net earnings per share for the years
ended December 31, 2008 and 2007.  For the period ended March 31,
2009, the restatement affected individual components of our Consolidated Balance
Sheet as of March 31, 2009 and on our Consolidated Statement of Operations,
Consolidated Statement of Shareholders Equity and Consolidated Statements of
Cash Flows.   The restatement had no effect on the earnings per share
for the period ended March 31, 2009.  We have added a restatement
footnote as Note J to the financial statements filed herewith, titled
"Reclassification and Restatement."
 
 Reclassification.         Our
board of directors has concluded that the Original 2007/2008 Financial
Statements improperly classified certain expenses as required in accordance with
generally accepted accounting principles. Specifically, in the Original
2007/2008 Financial Statements, we had included credit card fees and financing
discounts as an "interest expense" (a line item in the Statement of Operations
portion of our consolidated financial statements) when such expenses are
properly classified as selling, general and administrative
expenses.  In October 2009, the board of directors, upon the
recommendation of management, resolved to amend the Original 2007/2008 Financial
Statements and the financial statements for all subsequent interim periods to
reclassify credit card fees and financing discounts as selling, general and
administrative expenses.
  2
 
 The
reclassification of the Original 2007/2008 Financial Statements affected
individual components of the Company’s audited Consolidated Statements of
Operations for each of the years in the two-year period ended December 31, 2008
and subsequent interim periods.  This reclassification did not result
in any change to our reported Consolidated Balance Sheets as of December 31,
2008 and 2007 or the Consolidated Statements of Cash Flows or Consolidated
Statements of Operations for either of the years in the two-year period ended
December 31, 2008 and had no effect on the reported consolidated net income or
net earnings per share for either period (thought it did affect net operating
income and net other income in each of 2007 and 2008 periods).  For
the period ended March 31, 2008, the reclassification affected individual
components of the Company's unaudited Consolidated Statements of
Operations.  The reclassification did not result in any change to our
reported Consolidated Balance Sheets as of March 31, 2009, the Consolidated
Statements of Cash Flows or Consolidated Statements of Operations for the three
months then ended and had no effect on the reported consolidated net income or
net earnings per share for the period (thought it did affect net operating
income and net other income in each of 2007 and 2008 periods).  We
have added a reclassification footnote as Note J to the financial statements
filed herewith, titled "Reclassification and Restatement."
 
 Amendment of Management's
Discussion and Analysis of Financial Condition and Results of
Operations. We are
revising the data and information in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Item 2 of Part I of this
report to reflect the effects of the restatement and reclassification of
expenses included in our unaudited consolidated financial
statements.
 
 Amendment of Item
4(T).         As a result of
discovering the errors in the Company's financial statements giving rise to the
restatement, we are amending the disclosure under Item 4(T) of this report to
disclose the material weaknesses in our internal control over financial
reporting that existed as of the end of the period covered by this
report.
 
 In
accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as
amended, each item of the Original March 2009 10-Q that is amended by this Form
10-Q/A is restated in its entirety, and this Form 10-Q/A is accompanied by
currently dated certifications on Exhibits 31.1 and 31.2 by our Chief Executive
Officer and Chief Financial Officer, respectively, and Exhibit 32.1 by our Chief
Executive Officer and Chief Financial Officer.
  Except as
expressly set forth in this Amendment, we are not amending any other part of the
Original Filing.  This amendment continues to speak as of the date of
the Original March 2009 10-Q, and does not reflect events occurring after the
filing of the Original March 2009 10-Q or modify or update any related or other
disclosures, including forward-looking statements, unless expressly noted
otherwise. Accordingly, this amendment should be read in conjunction with the
Original March 2009 10-Q and with our other filings made with the Securities and
Exchange Commission subsequent to the filing of the Original March 2009 10-Q,
including any amendments to those filings. The filing of this amendment shall
not be deemed an admission that the Original March 2009 10-Q when made included
any untrue statement of a material fact or omitted to state a material fact
necessary to make a statement not misleading.
 
 The
following sections in this report have been amended as a result of the
restatement and reclassification:
 
 Part
II:
 
 Item
1. Financial Statements and Supplementary Data
 Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
 Item
4(T). Controls and Procedures
  3
  Item
1. Financial Statements and Supplementary Data
 
 Financial
Statement Index
 
 Unaudited
      Consolidated Financial Statements
                  for
      the Three Months Ended March 31, 2009PageConsolidated
      Balance Sheets as of March 31, 2009 (unaudited)and
      December 31, 2008 (audited)
                F–1Consolidated
      Statements of Operations for the three monthsended
      March 31, 2009 and 2008 (unaudited)
                F–2Consolidated
      Statements of Stockholders’ Deficit for thethree
      months ended March 31, 2009 and 2008 (unaudited)
                F-3Consolidated
      Statements of Cash Flows for the three monthsended
      March 30, 2009 and 2008 (unaudited)
                F–4Notes
      to the Financial Statements
                F–5
 4
 VINYL
      PRODUCTS, INC. (fka RED OAK CONCEPTS, INC.)CONSOLIDATED
      BALANCE SHEET—UNAUDITED
                        (Restated
      – Note J))
 
 As ofMarch 31, 2009
                        
                        
                        December 31, 2008ASSETSCURRENT
      ASSETS:Cash
      and Cash Equivalents
                        
                        $
                        110,624
                        
                        
                        $
                        114,901Accounts
      Receivable
                        
                        
                        42,508
                        
                        
                        
                        57,575Stock
      Receivable
                        
                        
                        -
                        
                        
                        
                        5,000Inventory
                        
                        
                        105,822
                        
                        
                        
                        156,865Prepaid
      Expenses
                        
                        
                        46,661
                        
                        
                        
                        38,651Total
      Current Assets
                        
                        
                        305,615
                        
                        
                        
                        372,992PROPERTY
      AND EQUIPMENT:Property
      and Equipment
                        
                        
                        429,254
                        
                        
                        
                        429,255Less
      Accumulated Depreciation
                        
                        
                        160,683
                        
                        
                        
                        148,084Net
      Property and Equipment
                        
                        
                        268,571
                        
                        
                        
                        281,171OTHER
      ASSETS:Security
      Deposits
                        
                        
                        8,690
                        
                        
                        
                        8,690Total
      Other Assets
                        
                        
                        8,690
                        
                        
                        
                        8,690TOTAL
      ASSETS
                        
                        $
                        582,876
                        
                        
                        $
                        662,8533LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIES:Current
      Portion of Long-Term Liabilities
                        
                        $
                        16,200
                        
                        
                        $
                        18,646Bank
      Line of Credit
                        
                        
                        51,266
                        
                        
                        
                        -Accounts
      Payable and Accruals
                        
                        
                        240,038
                        
                        
                        
                        255,401Customer
      Deposits
                        
                        
                        156,635
                        
                        
                        
                        161,658Income
      Taxes Payable
                        
                        
                        21,400
                        
                        
                        
                        21,200-Total
      Current Liabilities
                        
                        
                        485,539
                        
                        
                        
                        456,905LONG-TERM
      LIABILITIES:Vehicle
      and Installment Purchase Contracts
                        
                        
                        44,879
                        
                        
                        
                        48,824Less
      Current Portion Shown Above
                        
                        
                        16,200
                        
                        
                        
                        18,646Net
      Long-Term Liabilities
                        
                        
                        28,679
                        
                        
                        
                        30,178Total
      Liabilities
                        
                        
                        514,218
                        
                        
                        
                        487,083SHAREHOLDERS'
      EQUITY:Preferred
      Stock ($.0.0001 par value; 10,000,000 shares authorized; no shares issued
      and outstanding at March 31, 2009 and December 31, 2008)
                        
                        
                        -
                        
                        
                        
                        -Common
      Stock ($0.0001 par value; 100,000,00 shares authorized; 22,859,000 shares
      issued and outstanding at March 31, 2009 and December 31,
      2008)
                        
                        
                        2,286
                        
                        
                        
                        2,286Paid
      in Capital
                        
                        
                        92,914
                        
                        
                        
                        90,814Retained
      Earnings
                        
                        
                        (26,542
                        )
                        
                        
                        82,670Total
      Shareholders' Equity
                        
                        
                        68,658
                        
                        
                        
                        175,770TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                        
                        $
                        582,876
                        
                        
                        $
                        662,853
 
 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
                        (Reclassified
      – Note J)
 
 For
      the Three Months EndedMarch 31, 2009
                        
                        
                        March 31, 2008Income
                        
                        $
                        684,508
                        
                        
                        $
                        881,679Cost
      of Goods Sold:Labor
                        
                        
                        137,980
                        
                        
                        
                        188,077Materials
                        
                        
                        157,817
                        
                        
                        
                        290,743Other
                        
                        
                        7,291
                        
                        
                        
                        6,838Total
      Cost of Goods Sold
                        
                        
                        303,088
                        
                        
                        
                        485,658Gross
      Profit
                        
                        
                        381,420
                        
                        
                        
                        396,021Expenses:Advertising
      and Marketing
                        
                        
                        34,740
                        
                        
                        
                        38,187Selling,
      General and Administrative
                        
                        
                        92,583
                        
                        
                        
                        100,399Payroll
                        
                        
                        252,146
                        
                        
                        
                        314,201Professional
      Fees
                        
                        
                        83,869
                        
                        
                        
                        28,141Rent
                        
                        
                        26,070
                        
                        
                        
                        25,580Total
      Expenses
                        
                        
                        489,408
                        
                        
                        
                        506,508Net
      Operating Income
                        
                        
                        (107,988
                        )
                        
                        
                        (110,487
                        )Other
      Income (Expense):Interest
      Income
                        
                        
                        257
                        
                        
                        
                        1,583Interest
      Expense
                        
                        
                        (1,281
                        )
                        
                        
                        (954
                        )Total
      Other Income (Expense)
                        
                        
                        (1,024
                        )
                        
                        
                        629(Income
      Before Income Taxes
                        
                        
                        (109,012
                        )
                        
                        
                        (109,858
                        )Income
      Taxes
                        
                        
                        (200
                        )
                        
                        
                        (200
                        )Net
      Income
                        
                        $
                        (109,212
                        )
                        
                        $
                        (110,058
                        )Earnings
      per share:Basic
                        
                        $
                        (0.00
                        )
                        
                        $
                        (0.00
                        )Diluted
                        
                        $
                        (0.00
                        )
                        
                        $
                        (0.00
                        )Weighted
      average shares outstanding - basic
                        
                        
                        22,861,753
                        
                        
                        
                        22,800,000Weighted
      average shares outstanding - diluted
                        
                        
                        22,861,753
                        
                        
                        
                        22,800,000
 
 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
                        (Restated
      – Note J)
 
 Preferred Stock
                          
                          
                          Common Stock
                          
                          
                          Paid-In
                          
                          
                          RetainedShares
                          
                          
                          Stock
                          
                          
                          Shares
                          
                          
                          Stock
                          
                          
                          Capital
                          
                          
                          EarningsBalances,
      December 31, 2008
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          22,859,000
                          
                          
                          $
                          2,286
                          
                          
                          $
                          90,814
                          
                          
                          $
                          82,670Issuance
      of Common Stock
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,200
                          
                          
                          
                          -
                          
                          
                          
                          2,100
                          
                          
                          
                          -Net
      Income/(Loss) for the Period
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (109,212
                          )Balances,
      March 31, 2009
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          22,863,200
                          
                          
                          $
                          2,286
                          
                          
                          $
                          92,914
                          
                          
                          $
                          (26,542
                          )
 
 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 three months endedMarch 31, 2009
                              
                              
                              March 31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Income/(Loss)
                              
                              $
                              (109,212
                              )
                              
                              $
                              (110,058
                              )Adjustments
      to Reconcile Net Income to Net Cash Provided by
Operations:Depreciation
                              
                              
                              12,600
                              
                              
                              
                              10,029Changes
      in Assets and Liabilities:Decrease
      (Increase) in Accounts Receivable
                              
                              
                              15,067
                              
                              
                              
                              5,882Decrease
      (Increase) in Inventory
                              
                              
                              51,042
                              
                              
                              
                              (18,833
                              )Decrease
      (Increase) in Prepaid Expenses
                              
                              
                              (8,009
                              )
                              
                              
                              14,757Increase
      in Accounts Payable and Accrued Expenses
                              
                              
                              (3,784
                              )
                              
                              
                              55,491Decrease
      in Customer Deposits
                              
                              
                              (5,023
                              )
                              
                              
                              42,314Increase
      (Decrease) in Credit Card Balances
                              
                              
                              (11,579
                              )
                              
                              
                              (22,985
                              )Increase
      (Decrease) in Income Taxes Payable
                              
                              
                              200
                              
                              
                              
                              (9,532
                              )Net
      Cash Provided (Used) by Operating Activities
                              
                              
                              (58,698
                              )
                              
                              
                              (32,935
                              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of Fixed Assets
                              
                              
                              -
                              
                              
                              
                              (1,796
                              )Net
      Cash Provided (Used) by Investing Activities
                              
                              
                              -
                              
                              
                              
                              (1,796
                              )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of Common Stock
                              
                              
                              2,100
                              
                              
                              
                              2,100Collection
      of Stock Receivable
                              
                              
                              5,000Proceeds
      from Line of Credit Borrowings
                              
                              
                              51,266
                              
                              
                              
                              -Vehicle
      Loan Proceeds, net of Principal Payments
                              
                              
                              (3,944
                              )
                              
                              
                              (5,286
                              )Increase
      (Decrease) in Note Payable to Shareholder
                              
                              
                              -
                              
                              
                              
                              152,000Dividends
                              
                              
                              -
                              
                              
                              
                              (120,000
                              )Net
      Cash Provided by (Used in) Financing Activities
                              
                              
                              54,422
                              
                              
                              
                              28,814NET
      CASH INCREASE FOR THE PERIOD
                              
                              
                              (4,276
                              )
                              
                              
                              (5,917
                              )Cash
      at Beginning of Period
                              
                              
                              114,900
                              
                              
                              
                              134,252CASH
      AT END OF PERIOD
                              
                              $
                              110,624
                              
                              
                              $
                              128,335SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:CASH
      PAID DURING THE PERIOD FOR:INTEREST
                              
                              $
                              8,211
                              
                              
                              $
                              6,431TAXES
                              
                              $
                              -
                              
                              
                              $
                              -
 
 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 Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 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.
 
 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.
  F-5
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 NOTE A – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
 
 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 $34,740 in the three
months ended March 31, 2009, and $38,187 in the three months ended March 31,
2008.
 
 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.  See Note E.
 
 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 March 31, 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 three months ended March
31, 2009, and $-0- in the three months ended March 31, 2008.  Accounts
receivable were $42,508 at March 31, 2009.
 
 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%).  Under the terms of its agreement with its vinyl
supplier, the Company receives substantial discounts to product
prices.
 
 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.
  F-6
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 NOTE A – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
 
 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 $12,600 in the
three months ended March 31, 2009 and $10,029 in the three months ended March
31, 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.
 
 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.
  F-7
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 NOTE B – SUPPLEMENTAL CASH
FLOW INFORMATION
 
 Supplemental
disclosures of cash flow information for the three months ended March 31, 2009
are summarized as follows:
 
 NOTE B – SUPPLEMENTAL CASH
FLOW INFORMATION (CONTINUED)
 
 Cash paid
during the period for interest and income taxes:
 
 Interest
                          
                          $
                          8,211Income
      Taxes
                          
                          $
                          -0-
 
 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 $78,210 in 2009, $106,629 in 2010, and $26,853 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.
 
 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
                          
                          $
                          13,9852010
                          
                          $
                          18,6472011
                          
                          $
                          12,7392012
                          
                          $
                          3,261
 
 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 three months ended March 31, 2009 is as
follows:
 
 Federal
                          
                          $
                          -0-California
                          
                          $
                          200
 
 As of
December 31, 2008, the Company had a net operating loss carryforward for federal
tax purposes of $56,025 and a net operating loss carryforward for state tax
purposes of $42,209.
  F-8
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 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 three months ended March
31, 2008 and 2009:
 
 The
Company’s reconciliation of the numerators and denominators of the basic and
fully diluted income per share is as follows for the three months ended March
31, 2008 and 2009:
 
 For the Three Months Ended March 31,
      2008Income
                            
                            
                            Shares
                            
                            
                            Per-Share(Numerator)
                            
                            
                            (Denominator)
                            
                            
                            AmountNet
      Income (Loss)
                            
                            $
                            (110,058
                            )Basic
      EPSIncome
      available to Common shareholders
                            
                            $
                            (110,058
                            )
                            
                            
                            22,859,000
                            (A)
                            
                            $
                            (.00
                            )Effect
      of Dilutive SecuritiesStock
      Options
                            
                            
                            
                            
                            
                            
                            -0-Diluted
      EPSIncome
      available to Common shareholders
                            
                            $
                            (110,058
                            )
                            
                            
                            22,859,000
                            
                            
                            $
                            (.00
                            )
 
 For the Three Months Ended March 31,
      2009Income
                              
                              
                              Shares
                              
                              
                              Per-Share(Numerator)
                              
                              
                              (Denominator)
                              
                              
                              AmountNet
      Income (Loss)
                              
                              $
                              (109,212
                              )Basic
      EPSIncome
      available to Common shareholders
                              
                              $
                              (109,212
                              )
                              
                              
                              22,861,753
                              (A)
                              
                              $
                              (.00
                              )Effect
      of Dilutive SecuritiesStock
      Options - antidilutive
                              
                              
                              
                              
                              
                              
                              -Diluted
      EPSIncome
      available to Common shareholders
                              
                              $
                              (109,212
                              )
                              
                              
                              22,861,753
                              
                              
                              $
                              (.00
                              )
 
 (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 March 31, 2009, options to purchase 4,200 shares had been
exercised.
  F-9
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 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.
 
 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.  The complaint alleges (i) unlawful non-payment of wages,
(ii) breach of implied covenant of good faith and fair dealing, (iii) failure to
pay earned wages upon separation, (iv) defamation, and (v) wrongful
discharge.  The employee is seeking compensatory damages, attorneys'
fees, punitive damages and equitable relief but has made no specific monetary
demand for damages.  On January 5, 2009, company counsel filed a
demurrer requesting that the court dismiss most of the claims because they are
deficient as a matter of law.  Concurrently, company counsel filed a
motion to compel arbitration.  On April 28, 2009, the Court granted
the motion to compel arbitration, thereby rendering the demurrer moot and
keeping the employee’s causes of action under the complaint
intact.  The parties are currently in the process of selecting an
arbiter.
 
 Management
believes that the ultimate resolution of this matter will not have a material
adverse effect on the financial statements.
  F-10
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 NOTE I –
EQUITY
 
 Common
Shares
 
 The
Company is authorized to issue 100,000,000 shares of $.0001 par value common
stock, and as of March 31, 2009, the Company had 22,863,200 shares
outstanding.  During 2008 and 2007, the Company issued the following
shares of common stock:
 
 During
the three months ended March 31, 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.  As of March 31, 2008, the Company had no preferred shares
outstanding.  During 2009 and 2008, the Company did not issue any
preferred shares of preferred stock.
 
 NOTE J – RECLASSIFICATION
AND RESTATEMENT
 
 (A)
                    RECLASSIFICATION:  In
      prior years, the Company had included as a component of Interest
      Expense credit card fees charged by credit card companies to our
      Company for accepting payments from our customers by credit card, and
      financing discounts representing the amount we receive from companies that
      finance a customer's purchase of our products, which is less than the
      amount of our invoice to the customer.  The Company subsequently
      concluded that these two items were more appropriately classified as
      selling, general and administrative expenses.  Accordingly, the 2009
      and 2008 Statements of Operations have been reclassified to include these
      items in Selling, General and Administrative
  Expenses.
 
 The
following line items in the Statements of Operation were affected:
 
 2009
                                As Originally
                                Reported
                              
                              
                              2009
                                As
                                Reclassified
                              
                              
                              Effect
                                of
                                Change
                              
                              
                              2008
                                As Originally
                                Reported
                              
                              
                              2008
                                As
                                Reclassified
                              
                              
                              Effect
                                of
                                ChangeSelling,
      General and Administrative
                              
                              
                              85,653
                              
                              
                              
                              92,583
                              
                              
                              
                              6,930
                              
                              
                              
                              94,922
                              
                              
                              
                              100,399
                              
                              
                              
                              5,477Total
      Expenses
                              
                              
                              482,478
                              
                              
                              
                              489,408
                              
                              
                              
                              6,930
                              
                              
                              
                              501,031
                              
                              
                              
                              506,508
                              
                              
                              
                              5,477Net
      Operating Income
                              
                              
                              (101,058
                              )
                              
                              
                              107,988
                              )
                              
                              
                              (6,930
                              )
                              
                              
                              (105,010
                              )
                              
                              
                              (110,487
                              )
                              
                              
                              (5,477
                              )Interest
      Expense
                              
                              
                              (8,211
                              )
                              
                              
                              (1,281
                              )
                              
                              
                              (6,930
                              )
                              
                              
                              (6,431
                              )
                              
                              
                              (954
                              )
                              
                              
                              (5,477
                              )Net
      Other Income (Expense)
                              
                              
                              (7,954
                              )
                              
                              
                              (1,024
                              )
                              
                              
                              (6,930
                              )
                              
                              
                              (4,848
                              )
                              
                              
                              629
                              
                              
                              
                              5,477
 
 (B)
                    RESTATEMENT:
      Income Taxes for 2008 were previously reported as $50,000; the correct
      amount was $80,000.  Accordingly, the 2008 financial statements
      have been restated to reflect the correction of this
  error.
  F-11
  VINYL
PRODUCTS, INC.
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three Months Ended March 31, 2009
 (Reclassified
and Restated – Note J)
 
 The
following line items in the March 31, 2009, and December 31, 2008 Balance Sheets
were affected:
 
 As Originally
                          Reported
                        
                        
                        As Restated
                        
                        
                        Effect
                          of ChangeMarch
      31, 2009 Balance Sheet:Prepaid
      Expenses
                        
                        
                        55,461
                        
                        
                        
                        46,661
                        
                        
                        
                        (8,800
                        )Total
      Current Assets
                        
                        
                        314,415
                        
                        
                        
                        305,615
                        
                        
                        
                        (8,800
                        )Total
      Assets
                        
                        
                        591,676
                        
                        
                        
                        582,876
                        
                        
                        
                        (8,800
                        )Income
      Taxes Payable
                        
                        
                        200
                        
                        
                        
                        21,400
                        
                        
                        
                        21,200Total
      Current Liabilities
                        
                        
                        464,339
                        
                        
                        
                        485,539
                        
                        
                        
                        21,200Total
      Liabilities
                        
                        
                        493,018
                        
                        
                        
                        514,218
                        
                        
                        
                        21,200Retained
      Earnings
                        
                        
                        3,458
                        
                        
                        
                        (26,542
                        )
                        
                        
                        (30,000
                        )Total
      Shareholders’ Equity
                        
                        
                        98,658
                        
                        
                        
                        68,658
                        
                        
                        
                        (30,000
                        )Total
      Liabilities and Shareholders’ Equity
                        
                        
                        591,676
                        
                        
                        
                        582,876
                        
                        
                        
                        (8,800
                        )December
      31, 2008 Balance Sheet:Prepaid
      Expenses
                        
                        
                        47,451
                        
                        
                        
                        38,651
                        
                        
                        
                        (8,800
                        )Total
      Current Assets
                        
                        
                        381,792
                        
                        
                        
                        372,992
                        
                        
                        
                        (8,800
                        )Total
      Assets
                        
                        
                        671,653
                        
                        
                        
                        662,853
                        
                        
                        
                        (8,800
                        )Income
      Taxes Payable
                        
                        
                        0
                        
                        
                        
                        21,200
                        
                        
                        
                        21,200Total
      Current Liabilities
                        
                        
                        435,705
                        
                        
                        
                        456,905
                        
                        
                        
                        21,200Total
      Liabilities
                        
                        
                        465,883
                        
                        
                        
                        487,083
                        
                        
                        
                        21,200Retained
      Earnings
                        
                        
                        112,670
                        
                        
                        
                        82,670
                        
                        
                        
                        (30,000
                        )Total
      Shareholders’ Equity
                        
                        
                        205,770
                        
                        
                        
                        175,770
                        
                        
                        
                        (30,000
                        )Total
      Liabilities and Shareholders’ Equity
                        
                        
                        671,653
                        
                        
                        
                        662,853
                        
                        
                        
                        (8,800
                        )
  F-12
  Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
 
 You
should read the following discussion and analysis of financial condition and
results of operations, together with our consolidated financial statements and
related notes thereto appearing elsewhere in this 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.”
  Restatement
 
 The
following discussion and analysis of our financial condition and results of
operations includes the effects of the restated and reclassified amounts as
disclosed herein under the heading "Restatement and Reclassification" and in
"Note L" to our audited consolidated financial statements for the years ended
December 31, 2008 and 2007, titled "Restatement and Reclassification," which are
included in Part II, Item 8 of this Form 10-K/A we filed with the SEC on
November 13, 2009. For this reason, the data set forth in this section may not
be comparable to discussions and data in other reports or filings we have made
with the SEC.
 
 General
 
 We market
and install a wide variety of attractive, durable, low-maintenance vinyl
products, including fencing, patio covers, decking, railing and trim categories
from our retail location in Santa Ana, California.  During 2008,
fencing products represented approximately 61% of our gross income (revenue) and
patio covers represented approximately 28% of our gross income.  Our
products are used largely in renovation and remodeling by our customers who
include homeowners and homeowner associations.
 
 We
differentiate our Company from others in the industry on the basis of the manner
in which we market and sell our products and the level of service we offer our
customers.  Given that the purchase of our products represents a
substantial investment in a customer's home, typically their most significant
capital asset, we seek to connect with home owners' intrinsic desire to take the
time to make an informed, value-driven purchasing
decision.  Throughout the sales process, we invest the time and effort
to develop a relationship with a prospect, as opposed to home centers,
specialized retail distributors and independent contractors that typically
employ a hard-sell pitch and seek to make a sale only when a consumer is
prepared to make a purchase.
 
 Our
marketing efforts are designed to capture information about prospective
purchasers of exterior vinyl products early in the buying cycle.  We
maintain contact with them over the course of the decision-making process to
educate and consult with them about vinyl products generally, the purchasing and
installation process and the ownership experience.  We seek to
demonstrate to prospects that purchasing from us represents the best value for
their money in that we provide a worry-free ownership experience that we believe
is not available from other independent retailers, contractors or the national
home improvement chains.
 
 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 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; the availability
of disposable income to homeowners; the availability of consumer credit 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").
  5
 
 Summary
Financial Report
 
 Sales for
the first quarter of 2009 were $650,693 a decrease of 30.1% compared to sales of
$930,665 during the first quarter of 2008.  We believe that national
economic conditions affected our financial and operating results during the last
quarter.  Consumer confidence has been down, consumer financing has
been difficult to obtain, and, in our experience, 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 the most recent quarter as compared to
the corresponding 2008 period, we believe that the accounting controls and
procedures we implemented during the fourth quarter of 2008 have remediated the
material weaknesses in our controls and procedures 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 quarter 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 details of our public company obligations and 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 three months ended March 31, 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 technique,
which we believe is sophisticated when compared to our direct competitors, can
be conveyed effectively through written materials and training to motivated
entrepreneurs.  We currently are in discussions with two franchise
consultants.  The consultant we ultimately select will be expected to
assist us in conducting research and developing a franchise program and the
related materials required to execute our program.  We have not yet
established the parameters of our franchise program, including such matters as
franchise sale costs and ongoing fees and royalties, franchise territories or
the advertising and marketing approach we will take either as to sales of
franchises or the marketing campaign for the franchise
organization.
 
 Most
franchises are acquired by franchisees utilizing a combination of personal
investment and third party financing.  In light of current unfavorable
economic conditions marked by tight consumer credit and in which we believe it
would be difficult for potential franchisees to obtain the financing required to
purchase a franchise from us, we have elected to delay the development of our
franchise program.  Management will continue to monitor economic
conditions until credit is more readily available and at that time it expects
that it will engage a franchise consultant and take the steps necessary to
develop a franchise program.  We may require from 6 to 18 months to
develop and implement the program, once we determine to
proceed.
  6
 
 As we
await the advent of economic conditions more favorable to the implementation of
our franchising program, management has been exploring the possibility of
launching two or three new retail operations in Southern California over the
next 6 months in which our Company would own a majority of the
interest.  As currently contemplated, the Company would organize
limited liability companies to operate the locations.  The Company
would acquire its interest in these LLC's in consideration of offering the
entity the right to use its name and proprietary sales and marketing
information.  An investor would acquire its interest in the LLC for a
cash payment that would be utilized to pay all of the start-up costs associated
with the location, including the lease, inventory, marketing/advertising and
staff.  The Company would provide specified training and accounting
services to the location for a monthly fee.  The investor would manage
the day-to-day operations of the location as the general manager.  The
initial profits (net income) generated by the business, after establishing a
reserve account, would be used to repay the investor's cash
investment.  Thereafter, profits from operations would be distributed
on the basis of the parties' respective ownership positions in the
business.  Management currently is interviewing candidates to be
partners in the new locations.  Management believes that the Company
could begin recognizing income from the operation of a location approximately 18
months after the date of the investment.   Management views this
as a means not only to grow the Company's business in the short term without
expending significant capital resources or incurring other risks, but also to
provide us with experience incident to managing third party operations that we
believe will be of significant benefit when we commence our franchise
program.
 
 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 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%).  Under the terms of its agreement
with its vinyl supplier, the Company receives substantial discounts to product
prices.
 
 Reclassification
and Restatement
 
 On
November 10, 2009, our board of directors, upon the identification by and
recommendation of management, concluded that the previously issued financial
statements contained in our Annual Report on Form 10-K ("2008 Annual Report")
for the year ended December 31, 2008, and our quarterly reports on Form
10-Q for the quarters ended March 31, 2009 and June 30, 2009 should no
longer be relied upon because of errors in those financial statements, and that
we would amend and restate these consolidated financial statements to make the
necessary accounting corrections.  The board also concluded that
certain financial information included in the financial statements filed with
those reports should be reclassified
 
 Set forth below is a discussion of the
reasons for the restatement and the reclassification and a presentation of the
specific financial information that was amended and restated as a result
thereof.
  7
 
 Reclassification:  In
prior years, we had included as a component of Interest Expense, a line item in
the statement of operations portion of our consolidated financial statements,
the amount of credit card fees charged by credit card companies to our Company
for accepting payments from our customers by credit card, and the amount of
financing discounts, which represents the amount we receive from companies that
finance a customer’s purchase of our products, which is less than the amount of
our invoice to the customer (the difference being the financing
discount).  By letter dated April 22, 2009, the staff of the SEC
provided us with comments to a filing we made in which it alerted us to the fact
that we may not have classified these two items correctly in accordance with
generally accepted accounting principles in the consolidated Statement of
Operations we filed as part of the financial statements included in that
filing.  In response to these comments, the board of directors, upon
the recommendation of management, concluded that credit card fees and financing
discounts were more appropriately classified as selling, general and
administrative expenses.
 
 The
reclassification of the audited consolidated financial statements for the years
ended December 31, 2007 and 2008 to include credit card fees and financing
discounts as selling, general and administrative expenses affected individual
components of the Company’s Consolidated Statements of Operations for each of
the years in the two-year period ended December 31, 2008.  This
reclassification did not result in any change to our reported Consolidated
Balance Sheets as of December 31, 2008 and 2007 or the Consolidated Statements
of Cash Flows for either of the years in the two-year period ended December 31,
2008 and had no effect on the reported consolidated net income or earnings per
share for either period (thought it did affect net operating income and net
other income in each of 2007 and 2008 periods).  The reclassification
affected individual components of our Consolidated Statements of Operations for
the period ended June 30, 2009.  The reclassification did not result in any
change to our reported Consolidated Balance Sheets as of March 31, 2009 or the
Consolidated Statements of Cash Flows for the three months then ended and had no
effect on the reported consolidated net income or earnings per share for the
period (thought it did affect net operating income and net other income in each
of 2007 and 2008 periods).  The Company has added a reclassification
footnote as Note J to the financial statements filed herewith, titled
"Reclassification and Restatement."
 
 The
following table demonstrates the changes in certain line items in the Statements
of Operations for the three months ended March 31, 2009 and the year ended
December 31, 2008 that were affected by the restatement and the amount of the
change in each such period:
 
 2009 As
                        Originally
                        Reported
                      
                      
                      2009
                        As
                        Reclassified
                      
                      
                      Effect
                        of
                        Change
                      
                      
                      2008 As
                        Originally
                        Reported
                      
                      
                      2008
                        As
                        Reclassified
                      
                      
                      Effect
                        of
                        ChangeSelling,
      General and Administrative
                      
                      
                      85,653
                      
                      
                      
                      92,583
                      
                      
                      
                      6,930
                      
                      
                      
                      94,922
                      
                      
                      
                      100,399
                      
                      
                      $
                      5,477Total
      Expenses
                      
                      
                      482,478
                      
                      
                      
                      489,408
                      
                      
                      
                      6,930
                      
                      
                      
                      501,031
                      
                      
                      
                      506,508
                      
                      
                      
                      5,477Net
      Operating Income
                      
                      
                      (101,058
                      )
                      
                      
                      107,988
                      )
                      
                      
                      (6,930
                      )
                      
                      
                      (105,010
                      )
                      
                      
                      (110,487
                      )
                      
                      
                      (5,477
                      )Interest
      Expense
                      
                      
                      (8,211
                      )
                      
                      
                      (1,281
                      )
                      
                      
                      (6,930
                      )
                      
                      
                      (6,431
                      )
                      
                      
                      (954
                      )
                      
                      
                      (5,477
                      )Net
      Other Income (Expense)
                      
                      
                      (7,954
                      )
                      
                      
                      (1,024
                      )
                      
                      
                      (6,930
                      )
                      
                      
                      (4,848
                      )
                      
                      
                      629
                      
                      
                      
                      5,477
 
 Restatement: In
February 2009, we calculated our federal and state corporate income taxes due
for the year ended December 31, 2008 in reliance on advice from our professional
tax preparer that we could compute the taxes due on a consolidated basis after
giving effect to the acquisition of The Vinyl Fence Company, Inc. ("TVFC"),
which became our wholly owned subsidiary in November 2008.  The
Original 2007/2008 Financial Statements included the amount of the federal and
state taxes on a consolidated basis, which we reported as aggregating
approximately $50,000.  In March 2009, we filed for extensions of the
time in which to pay the taxes with the Internal Revenue Service and the
California Franchise Tax Board to defer payment of the taxes until September
2009.  In the course of finalizing our tax returns, which we were
required to file by September 15, 2009, we were advised by our tax preparer that
we could not file the returns of the parent (us) and our subsidiary, TVFC, on a
consolidated basis because we did not file the appropriate notification forms in
connection with our acquisition of TVFC and change in fiscal year end of our
Company.  As a result, we were required to file individual returns for
each entity.  The prohibition against preparing tax returns that
consolidated the operations of our Company and TVFC results in higher federal
and states corporate income taxes owed, the total amount of which is
approximately $80,000, representing a $30,000 difference between the amount of
the taxes we originally calculated and reported and the amount we actually
owed.  The additional amount of federal and state corporate income
taxes to be paid is material to our financial statements.
  8
 
 The
restatement of the audited consolidated financial statements for the years ended
December 31, 2007 and 2008 to report the accurate amount of federal and state
corporate income taxes owed affected individual components of our Consolidated
Balance Sheet as of December 31, 2008 and Consolidated Statement of Operations,
Consolidated Statements of Shareholders’ Equity, and Consolidated Statements of
Cash Flows for the year ended December 31, 2008.  The restatement had no
effect on earnings per share for that period.  The audited
consolidated financial statements for the 2007 fiscal year will not be affected
in any way.  For the period ended March 31, 2009, the restatement
affected individual components of the Company's unaudited Consolidated Balance
Sheets as of March 31, 2009 and Consolidated Statement of
Operations.   The restatement had no effect on the Consolidated
Statements of Cash Flows nor did it have an affect on reported consolidated net
income or earnings per share for the period ended March 31, 2009.  The
Company has added a restatement footnote as "Note J" to the financial statements
filed herewith, titled "Reclassification and Restatement."
 
 The
following table demonstrates the changes in certain line items in the
Consolidated Statements of Operations for the three months ended March 31, 2009
and the year ended December 31, 2008 and the Consolidated Balance Sheet as of
March 31, 2009 and December 31, 2008 that were affected by the reclassification
and the amount of the change in each period:
 
 As Originally
                      Reported
                    
                    
                    As Restated
                    
                    
                    Effect
                      of ChangeMarch
      31, 2009 Balance Sheet:Prepaid
      Expenses
                    
                    
                    55,461
                    
                    
                    
                    46,661
                    
                    
                    
                    (8,800
                    )Total
      Current Assets
                    
                    
                    314,415
                    
                    
                    
                    305,615
                    
                    
                    
                    (8,800
                    )Total
      Assets
                    
                    
                    591,676
                    
                    
                    
                    582,876
                    
                    
                    
                    (8,800
                    )Income
      Taxes Payable
                    
                    
                    200
                    
                    
                    
                    21,400
                    
                    
                    
                    21,200Total
      Current Liabilities
                    
                    
                    464,339
                    
                    
                    
                    485,539
                    
                    
                    
                    21,200Total
      Liabilities
                    
                    
                    493,018
                    
                    
                    
                    514,218
                    
                    
                    
                    21,200Retained
      Earnings
                    
                    
                    3,458
                    
                    
                    
                    (26,542
                    )
                    
                    
                    (30,000
                    )Total
      Shareholders’ Equity
                    
                    
                    98,658
                    
                    
                    
                    68,658
                    
                    
                    
                    (30,000
                    )Total
      Liabilities and Shareholders’ Equity
                    
                    
                    591,676
                    
                    
                    
                    582,876
                    
                    
                    
                    (8,800
                    )December
      31, 2008 Balance Sheet:Prepaid
      Expenses
                    
                    
                    47,451
                    
                    
                    
                    38,651
                    
                    
                    
                    (8,800
                    )Total
      Current Assets
                    
                    
                    381,792
                    
                    
                    
                    372,992
                    
                    
                    
                    (8,800
                    )Total
      Assets
                    
                    
                    671,653
                    
                    
                    
                    662,853
                    
                    
                    
                    (8,800
                    )Income
      Taxes Payable
                    
                    
                    0
                    
                    
                    
                    21,200
                    
                    
                    
                    21,200Total
      Current Liabilities
                    
                    
                    435,705
                    
                    
                    
                    456,905
                    
                    
                    
                    21,200Total
      Liabilities
                    
                    
                    465,883
                    
                    
                    
                    487,083
                    
                    
                    
                    21,200Retained
      Earnings
                    
                    
                    112,670
                    
                    
                    
                    82,670
                    
                    
                    
                    (30,000
                    )Total
      Shareholders’ Equity
                    
                    
                    205,770
                    
                    
                    
                    175,770
                    
                    
                    
                    (30,000
                    )Total
      Liabilities and Shareholders’ Equity
                    
                    
                    671,653
                    
                    
                    
                    662,853
                    
                    
                    
                    (8,800
                    )
 
 Results
of Operations
 
 Comparison
of the Three Months March 31, 2009 and 2008
 
 Income:
 Income for the first quarter covered by this report was $684,508, a
decrease of 22.5% compared to sales of $881,679 during the first quarter of the
2008 period.  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.
  9
 
 Cost of Goods Sold:
During 2008 and 2009, 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 periods.  Our cost of
goods sold for all periods reported in this Quarterly Report on Form 10-Q is net
of the discount we receive on the cost of raw materials. (In 2009, the supplier
eliminated the specified purchase quotas.)
 
 Gross
Profit:  Gross profit decreased from $396,021 for the 2008 period to
$381,420 for the 2009 period, a decrease of 3.7%; however, the gross profit
percentage increased from 44.9% in 2008 to 55.7% in 2009.  We
attribute the increase in gross profit directly to the various personnel
adjustments we made when we learned that certain employees who 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.  Accordingly, we are no longer paying for raw materials for
which we are not recognizing any revenue.  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 quarter of 2009 was $34,740, a decrease
of $3,447, or 9.0%, from the first quarter of 2008 in which we expended
$38,187.  The decrease represents 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 as reclassified decreased from $100,399
during the first quarter of 2008 to $92,583, or 7.8%, during the first quarter
of 2009.  The decrease was due primarily to decreases in travel,
entertainment and related expenses.
 
 Payroll
expenses decreased from $314,201 to $252,146, a decrease of $62,055, or 19.7%,
due primarily to a decrease in officer compensation.
 
 Professional
fees increased from $28,141 during the 2008 period to $83,869 during the
corresponding 2009 period, or 198%.  The increase was due primarily to
increases in information technology consulting of $7,000, legal fees of $32,000,
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.
  For the
three years ended December 31, 2008, 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,
2009 and March 31, 2008
 
 Cash
and Cash Equivalents
 
 Our cash
and cash equivalents were $128,335 at March 31, 2008, and decreased to $110,624
by March 31, 2009, due primarily to a decrease in net income in
2009..
 
 Net
cash provided by operating activities
 
 Net cash
used in operating activities was $58,698 for the three months ended March 31,
2009, compared to $32,935 for the three months ended March 31,
2008.  The $25,763 decrease was primarily attributable to an increase
in prepaid expenses of $23,000 and decreases in customer deposits of $47,000 and
other current liabilities of $39,000, all offset by a decrease in inventory of
$69,000 and accounts receivable of $10,000.
 
 Net
cash used in investing activities
 
 Net cash
used in investing activities was $-0- for the three months ended March 31, 2009,
and $1,796 for the three months ended March 31, 2008.
  10
  Net
cash used in financing activities
 
 Net cash
provided by financing activities was $54,422 for the three months ended March
31, 2009, compared to $28,814 for the three months ended March 31, 2008, a
decrease of $25,608, due primarily to line of credit borrowings of $51,000 in
2009,  and the payment of $120,000 of dividends and the decrease in
shareholder receivables of $152,000 in 2008.
 
 Liquidity
and Capital Resources
 
 Our
current capital requirements are allocated principally among payroll; selling,
general and administrative expenses; rent; and advertising and marketing
expenses.  Historically, we have financed our business with cash flow
from operations and use of a bank line of credit.  We do not
anticipate making any significant capital additions in 2009, other, possibly,
than in connection with the implementation of our proposed franchise
program.
 
 Our
growth strategy encompasses opening new retail locations in Southern California
and developing a national franchise organization.  We do not believe
that our plans to open new retail locations will require the investment of any
material amount of capital by our Company because our partner will contribute
all of the capital required to fund the launch of these
operations.  We believe that the additional expenses we may incur in
connection with opening these stores will comprise supplementary infrastructure
items, including purchasing or developing more robust accounting software so
that we can provide the accounting services we will furnish to the locations
and, perhaps, eventually, engaging additional accounting staff as conditions
warrant.
 
 With
respect to our franchise program, until we engage a franchise consultant and
establish the parameters of our organization, we can only estimate the costs
associated with developing the program.  We are advised that the costs
to implement the program and maintain the organization are highly variable and
are a function of numerous factors including the number of jurisdictions in
which franchisees are located and the specific jurisdictions selected, the
geographical location of our franchisees (close in proximity 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.  The cost to retain a franchise
consultant varies considerably based on the services to be rendered; however,
the cost to retain a quality consultant providing the full range of services
could approach $100,000.  These services may include concept research
and development, the preparation of program's organizational and cost structure,
internal documentation governing the relationship between us and our
franchisees, training materials and the other attendant administrative matters
and functions.  In addition, we will incur fees and expenses in
connection with obtaining franchise licenses as may be required by those
jurisdictions in which we may elect to offer franchises, including the fees of
specialized franchise counsel and application costs.  Further, we
expect to incur attorneys' fees in connection with the preparation of a
franchise offering circular by which we will offer and sell our franchises to
the public.    We expect that ongoing costs will include
advertising costs, marketing staff, accounting staff and general and
administrative expenses.  As we continue researching the development
and implementation of our franchise organization and gain a better understanding
of our initial and long-term goals, we will be better able to estimate the costs
involved.
 
 It has
been and continues to be our intention to fund the development of a franchise
organization internally from capital generated from operations.  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.
 
 Though we
believe that we have and will have available to us from operating revenue and
our line of credit the capital resources necessary to implement our proposed
franchise program, we may have underestimated the costs required or we may
encounter unanticipated costs and we may suffer delays and difficulties that may
necessitate obtaining cash from outside sources.  Moreover, in view of
the numerous variables attendant to the development of a franchise organization,
we cannot be certain that we will possess sufficient capital to fund fully the
program.  Our existing credit facility, comprising a $100,000 line of
credit (of which $48,000 is unused and available), likely would be insufficient
to fund substantial additional costs that may be associated with the development
of our franchise program.  Once a program has been developed, we
expect that we will allocate significant cash resources to advertising, both to
attract franchisees and to fund advertising of our franchisees' locations, for
which we may require additional capital.  We may not realize profit
from this investment for several years.  In the event we require
capital for any of these purposes, 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, if at all.
  11
 
 Outlook
 
 Demand
for our products is dependent on factors such as consumer confidence, reasonably
attainable consumer financing and an economy with relatively high levels of
disposable income. These factors are all currently in poor positions, and
indications are that they will remain that way in the
near-term.  While results of operations for the month of April
revealed an increase in sales, we cannot state with any certainty that there
will be significant improvements in market conditions at this time or that we
will experience an increase in sales in ensuing months or periods, and are
managing our business on that basis.
  While we
expect that current business conditions will persist for the remainder of
calendar year 2009, we remain optimistic that our strategy of possibly launching
multiple new locations that are majority-owned by the Company, developing a
national franchise program, and offering a range of quality products combined
with our conservative approach to business will be rewarded over the
longer-term.
 
 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.
  12
 
 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
4(T). Controls and Procedures.
 
 Controls
and Procedures
 
 We
maintain disclosure controls and procedures that are designed to ensure that
information we are required to disclose in the reports we file under the
Exchange Act, is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms,
and that such information is accumulated and communicated to management,
including our President (chief executive officer) and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required
disclosure.
 
 Our
management also is responsible for establishing and maintaining internal control
over financial reporting which is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of our
financial statements for external purposes in accordance with generally accepted
accounting principles.  Internal control over financial reporting
includes policies and procedures that (i) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of our financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of our
management and directors; and (iii) provide reasonable assurance regarding the
prevention or timely detection of the unauthorized acquisition, use or
disposition of our assets that could have a material effect on our financial
statements.
 
 Our
management does not expect that our disclosure controls and procedures or
internal control over financial reporting will be effective in all
instances.  There are inherent limitations in all control systems that
reflect both resource constraints and the human factor as it relates to the
application of a control system, including the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
errors or mistakes.  Controls also can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls.  The design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events and any design may not succeed in achieving its stated goals under
all potential future conditions.
  13
 
 Evaluation
of Disclosure Controls and Procedures
 
 As of
March 31, 2009, the Company’s management carried out an evaluation, under the
supervision and with the participation of the Company’s Chief Executive Officer
(principal executive officer, or PEO) and Chief Financial Officer (principal
financial officer, or PFO), of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and
15d-15 under the Exchange Act), pursuant to Exchange Act Rule
13a-15.
 
 As
previously disclosed under “Item 9A. Controls and Procedures” in our Amended
2008 10-K, our management identified material weaknesses in our internal control
over financial reporting at December 31, 2008 and each subsequent interim
period through June 30, 2009.  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.
 
 As a
result of our failure to accurately compute our federal and state corporate
income tax liability for the year ended December 31, 2008, as described in the
Amended 2008 10-K, management concluded that we had the following weaknesses in
our internal control over financial reporting:
 
 ·
              Inadequate
      Expertise in the Application of Federal and State Tax Laws as they Impact
      Financial Reporting: Our internal accounting personnel did not possess
      sufficient expertise in the application of federal and state tax laws as
      they apply to consolidation of an acquired business with a different
      fiscal year end.
 
 ·
              Reliance
      on Third Party Professionals: We retained a certified public accountant to
      prepare our tax returns for the year ended December 31,
      2008.  We may not have adequately assessed this person's
      qualifications to ascertain his level of experience to render the services
      for which we retained him.  Moreover, we did not adequately
      monitor this person's work and placed undue reliance on his expertise
      without confirming the accuracy of the finished
  product.
 
 Based on
management’s evaluation and as a result of the identified material weaknesses,
our Chief Executive Officer and Chief Financial Officer have concluded that as
of March 31, 2009, our disclosure controls and procedures were not effective to
ensure that we are able to accumulate and communicate to our management,
including our Chief Executive Officer and our Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure, information
that we are required to disclose in the reports that we file with the SEC, and
to record, process, summarize and report that information within the required
time periods.
 
 Changes
in Internal Controls
 
 During
the three months ended March 31, 2009, 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.
 
 Plan
of Remediation of Material Weakness
 
 We intend
to initiate remediation measures to address the material weakness identified
above but did not implement any such measures as of the date of this
report.  We currently are exploring all of the options available to us
and will consider each option carefully before taking any action.
 
 We intend
to continue to evaluate our internal controls on an ongoing basis and to upgrade
and enhance them as needed.
  14
 
 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/A for the quarter ended March 31,
  2009.31.2
                
                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/A for the quarter ended March 31,
  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.
  15
 
 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:
      November 12, 2009
                  By:
                  /s/  Gordon
  KnottName:
                  Gordon
      KnottTitle:
                  President,
      Chief Executive
Officer
  16