AAA CENTURY GROUP USA, INC. - FORM 10-K/A

Attached files

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EX-31.2 - AAA CENTURY GROUP USA, INC.	v166057_ex31-2.htm
EX-31.1 - AAA CENTURY GROUP USA, INC.	v166057_ex31-1.htm
EX-32.1 - AAA CENTURY GROUP USA, INC.	v166057_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/1

(Amendment No. 1)

(Mark One)

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

For the fiscal year ended: December 31, 2008

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

For the transition period from ________ to ________

Commission file number: 000-52769

VINYL PRODUCT, INC.

(Name of Small Business Issuer in its charter)

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

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

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

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

None

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

Common Stock, par value $0.0001 per share

(Title of Class)

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

¨Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

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

(Do not check if a smaller reporting company)

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

¨Yes x No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $0

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

¨ Yes ¨ No

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.At March 30, 2009 there were 22,263,200 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

EXPLANATORY NOTE

In this Amendment to Annual Report on Form 10-K (this “Form 10K/A”), we refer to Vinyl Products, Inc., a Nevada corporation, as “we,” “us,” “our” or “our company.”

We are filing this Amendment No. 1 on Form 10-K/A ("Amendment") to our Annual Report on Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2009 (the “Original Filing”) to:

restate our audited consolidated financial statements for the years ended December 31, 2008 and 2007 previously included in the Original Filing (the "Original 2007/2008 Financial Statements");

reclassify certain financial information included in the Original 2007/2008 Financial Statements;

amend Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; and

amend Item 9A. Controls and Procedures.

Restatement. In November 2009, management concluded that the previously issued financial statements contained in the Original Filing and in 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 the error in those financial statements relating to our computation of the amount of federal and state income tax owed which caused us to understate the amount of our tax liability by approximately $30,000. Management recommended to our board of directors that we restate the Original 2007/2008 Financial Statements to report the accurate amount of our liability for federal and state corporate income taxes and make the necessary accounting corrections and adjustments. The board of directors adopted these recommendations on November 10, 2009.

The restatement of the Original 2007/2008 Financial Statements affected individual components of our audited Consolidated Balance Sheet and Consolidated Statement of Operations for the year ended December 31, 2008. The restatement had no effect on the Consolidated Statement of Cash Flows nor did it have an affect on reported net earnings per share for that period. The audited consolidated financial statements for the 2007 fiscal year were not affected in any way. The Company has added a restatement footnote as "Note L" to the financial statements filed herewith, titled "Reclassification and Restatement."

Reclassification. 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 certain expenses in the Original 2007/2008 Financial Statements 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 our consolidated Statement of Operations) when such expenses were more properly classified under generally accepted accounting principles 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 to reclassify credit card fees and financing discounts as selling, general and administrative expenses.

The reclassification of the Original 2007/2008 Financial Statements affected individual components of our 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 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). The Company has added a reclassification footnote as "Note L" to the financial statements filed herewith, titled "Reclassification and Restatement."

As a result of the reclassification and restatement, we are filing concurrent herewith an amendment to each of our Quarterly Reports on Form 10-Q for the periods ended March 31, 2009 and June 30, 2009..

Amendment of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. We are revising the data and information under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II of this report accordingly to reflect the effects of the restatement and reclassification on our audited consolidated financial statements

Amendment of Item 9A. Controls and Procedures We are amending Item 9A in this Amendment to (a) disclose material weaknesses in our disclosure controls and procedures and internal control over financial reporting relating to issues of which we became aware in September 2009 and (b) respond to comments to the Original Filing we received from the staff of the SEC relating to our disclosure of material weaknesses we identified in our internal control over financial reporting in the fourth quarter of 2008, as disclosed in the Original Filing.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), each item of the original Form 10-K that is amended by this Form 10-K/A is restated in its entirety, and this Form 10-K/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 Filing, and does not reflect events occurring after the filing of the Original Filing 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 Filing and with our other filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing, including any amendments to those filings. The filing of this Amendment shall not be deemed an admission that the Original Filing 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 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 8. Financial Statements and Supplementary Data

Item 9A. Controls and Procedures

Item 7. 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, Amendment No. 1. For this reason, the data set forth in this section may not be comparable to discussions and data in our previously filed 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. During 2008, fencing products represented approximately 62% 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 have increased sales and revenue in each of our five years of existence, and our gross profit has exceeded 44% in each year of existence after our first year of operations.

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.

There are no national chains dedicated exclusively to the retail sale and installation of vinyl fencing and patio products. During 2009, we will seek to develop a franchise program to take advantage of the considerable growth expected by industry experts in sales of vinyl fencing and patio covers relative to other fencing and patio cover materials. Through this franchise program we will seek to establish a national chain of vinyl fence and patio cover distributorships to fill the void in the national vinyl fencing market. Our ultimate goal is to build a national brand. Though we have never undertaken detailed research regarding our franchising potential, we believe that with proper training and motivation our well-conceived and sophisticated marketing and sales program can be replicated throughout the country. We believe that we can benefit from the economies of scale derived from multiple franchises that will give us the opportunity to deploy national advertising and promotional programs that are beyond the financial and creative capabilities of others in our industry and negotiate improved pricing of the vinyl material from which our products are manufactured. We believe that this will allow us to capture significant national market share and build strong consumer brand awareness, which eventually may serve as a barrier to competitive entry to others on a national level.

As of the date hereof, we believe that we will possess sufficient financial resources, from cash on hand and revenue from operations, to fund the development of our franchise program. However, no member of our management has experience building a franchise program. We may not have evaluated or gauged our cash requirements adequately or properly accounted for factors beyond our control which could increase the cost of developing and maintaining our franchise program and cause us to seek outside financing which may not be available to us on acceptable terms, if at all. In addition, expansion into a franchise program presents other possible risks for which we may not adequately have accounted, including diversion of our management's time from our core retail business, the failure of our franchisees and the potential economic impact such failure could have on our business and the time and cost of complying with laws and regulations relating to franchises and multi-state operations.

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.

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.

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 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.

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, the Consolidated Statements of Operations, Consolidated Statement of Shareholders’ Equity and Consolidated Statement of Cash Flows for the year ended December 31, 2008. The restatement had no effect on reported earnings per share for that period. The audited consolidated financial statements for the 2007 fiscal year were not affected in any way. The Company has added a restatement footnote as "Note L" 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 year ended December 31, 2008 and the Consolidated Balance Sheet as of December 31, 2008 that were affected by the restatement and the amount of the change in each year:

	2008
	As Originally Reported			As Restated			Effect of Change
Statement of Operations:
Income Taxes		(50,000	)		(80,000	)		(30,000	)
Net Income	$	55,155		$	25,155			(30,000	)

Statement of Cash Flows:
Net Income		55,155			25,155			(30,000	)
Decrease (Increase) in Prepaid Expenses		(15,608	)		(6,808	)		8,800
Increase (Decrease) in Income Taxes Payable		(9,732	)		11,468			21,200
Balance Sheet:
Prepaid Expenses		47,451			38,651			(8,800	)
Total Currant Assets		381,792			372,992			(8,800	)
Total Assets	$	671,653		$	662,853			(8,800	)
Income Taxes Payable		0			21,200			21,200
Total Current Liabilities		435,705			456,905			21,200
Total Liabilities		465,883			487,083			21,200
Retained 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	)

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 under 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 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). The Company has added a reclassification footnote as Note L 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 years ended December 31, 2008 and 2007 that were affected by the reclassification and the amount of the change in each such year:

	2008 As Originally Reported			2008 As Reclassified			Effect of Change			2007 As Originally Reported			2007 As Reclassified			Effect of Change
Selling, General and Administrative	$	401,775		$	442,930		$	41,155		$	362,321		$	379,524		$	17,203
Total Expenses		1,886,763			1,927,918			41,155			1,406,388			1,423,591			17,203
Net Operating Income		145,843			104,688			(41,155	)		663,936			646,733			(17,203	)
Interest Expense		(47,273	)		(6,118	)		1,155			(21,987	)		(4,784	)		17,203
Net Other Income (Expense)		(40,688	)		467			41,155			(19,015	)		(1,812	)		17,203

Results of Operations

Comparison of the Years Ended December 31, 2008 and 2007

(as restated and reclassified – see above)

Income: Income for the year ended December 31, 2008 was $4,157,860, an increase of $224,648, or 5.75%, from $3,933,212 for the comparable period in 2007. The increase was the result of increased focus on marketing and sales.

Cost of Goods Sold: During 2007 and 2008, 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 2007 and 2008 fiscal years. Our cost of goods sold for all periods reported in this Annual Report on Form 10-K is net of the discount we receive on the cost of raw materials.

Gross Profit: Gross profit decreased from $2,070,324 in 2007 to $2,032,606 in 2008, a decrease of 1.8%, and the gross profit percentage declined from 52.6% in 2007 to 48.9% in 2008. These decreases were due to personnel problems in our fabricating and installation departments. We have addressed these issues by terminating three employees. re-defining the roles of our staff responsible for fabrication and installation, by restructuring our work force, and increasing the involvement of the accounting manager in inventory control, which we believe have rectified the problem.

Expenses:

Advertising and marketing expense increased $10,648 or 5.7%, as we identified the proper mix of advertising media to attract customers and grow our business.

Selling, general and administrative expenses as restated (see above) increased from $379,524 in 2007 to $442,930, or 16.7%, in 2008. The $63,406 was due primarily to increases of $20,000 in vehicle expense, $16,000 in depreciation, $27,000 in insurance (health, liability and umbrella coverage), and $24,000 in credit card fees and financing discounts (both of which relate to customers who finance their purchases), offset by a $30,000 decrease in travel and meals expense.

Payroll expenses increased from $646,918 to $984,605, an increase of $337,687 or 52.2%. The was due to the conversion of $152,000 of notes receivable from the two principals to salary, and the classification of distributions in October, November and December 2008 to the two principals as salary rather than as dividends.

Professional fees increased from $110,267 to $199,933, or 81.3%. This was due primarily to increases in information technology of $18,000, marketing of $13,000, and legal and accounting fees relating to the Share Exchange Agreement and annual audit of $56,000.

Rent expense was relatively unchanged between periods.

Income Taxes as restated (see above) were $80,000 in 2008, an increase of $70,268 over 2007. This resulted from TVFC's election to be treated as a Subchapter C corporation under the Internal Revenue Code of 1986, as amended (the "Code") as opposed to a Subchapter S corporation under the Code, as of January 1, 2008. As of December 31, 2008, the Company has 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.

Comparison of the Years Ended December 31, 2007 and 2006

(as reclassified – see above)

Income: Income for the year ended December 31, 2007 was $3,933,212, an increase of $1,207,586, or 44.3%, from $2,725,626 for the comparable period in 2006. The increase was the result of increased focus on marketing and sales, including increased advertising and marketing expenses.

Gross Profit: Gross profit increased from $1,382,483 in 2006 to $2,070,324 in 2007, an increase of 49.8%, and the gross profit percentage increased from 50.7% in 2007 to 52.6% in 2007. These increases were due to improved management of labor and material costs.

Expenses:

Advertising and marketing expense increased $31,100 or 20.1%, which contributed to the increase in income.

Selling, general and administrative expenses (as reclassified – see above) increased from $245,931 in 2006 to $379,524, or 54.3%, in 2007. The $133,593 increase was due primarily to increases of approximately $16,000 in vehicle expense, $28,000 in insurance (health, liability and umbrella coverage), $40,000 in small tools and supplies, $22,000 in travel and entertainment expenses and $13,000 in credit card fees and financing discounts (both of which relate to customers who financed their purchases).

Payroll expenses increased from $468,215 to $646,918, an increase of $178,703 or 38.2%. This was due primarily to the addition of staff personnel to handle the increased volume of business.

Professional fees increased from $79,278 to $110,267, or 39.1%. The $30,989 increase was due primarily to an increase of approximately $43,000 for marketing and $14,000 for legal fees, offset by a decrease in financial consulting of approximately $30,000.

Rent expense was relatively unchanged between periods.

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 borrowings under our line of credit.

Though we believe that we have and will have available to us from operating revenue 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. Currently, we have a $100,000 line of credit available to us (of which $48,000 was unused and available as of March 27, 2009) that likely would be insufficient to fund substantial additional unanticipated costs that may be associated with the development of our franchise program. Additional cash may not be available to us on acceptable terms, if at all. Initially, a significant portion of the cash required to develop and execute our franchise program will be allocated to the engagement of a franchise consultant to undertake the research and surveys necessary to confirm our franchising potential, to establish franchise pricing and territory and to provide the complete range of information, implementation strategies, policies, procedures, operating manuals, marketing tools and other materials required to develop and implement a competitive 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 products. We may not realize profit from this investment for several years.

Cash and Cash Equivalents

Our cash and cash equivalents were $134,251 at December 31, 2007, and decreased to $114,901 by December 31, 2008.

Net cash provided by operating activities

Net cash provided by operating activities was $164,815 for the year ended December 31, 2008, a decrease of $434,500 from $599,315 for the year ended December 31, 2007. The decrease was primarily attributable to a decrease in net income of $610,034, offset by increases in accounts payable, accrued expenses and credit card balances of $78,000 and other working capital items, net.

Net cash used in investing activities

Net cash provided by investing activities was $109,691 for the year ended December 31, 2008, a decrease of $78,060 from $120,369 for the year ended December 31, 2007. The decrease was primarily attributable to the purchase of four vans and machinery in 2007.

Net cash used in financing activities

Net cash used in financing activities was $293,857 for the year ended December 31, 2008, compared to $371,191 for the year ended December 31, 2007, a decrease of $77,334, or 21%. The decrease was attributable to a decrease in dividends of $77,000 paid to the principals of TVFC; and an increase in the sale of common stock of $61,000, all offset by a net change in vehicle and equipment financing proceeds less principal payments of $44,628 and line of credit payments of $17,945 in 2007.

Contractual Obligations and Off-Balance Sheet Arrangements.

We have certain fixed contractual obligations and commitments. The table below summarizes our contractual obligations as of December 31, 2008 and for the future periods identified. The development of our franchise program, changes in our business needs and other factors may result in our incurring significant future obligations which would impact our cash and liquidity position and requirements. We cannot provide certainty regarding the timing and amounts of payments.

Contractual Cash Obligations	Total		Less than One Year		1-3 Years		3-5 Years		After 5 Years
Capital Leases (1)	$	53,295	$	18,647	$	34,648	$	-0-	$	-0-
Operating Leases (2)	$	237,762	$	104,280	$	133,482	$	-0-	$	-0-
Total Contractual Cash Obligations	$	291,057	$	122,927	$	168,130	$	-0-	$	-0-

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

(2)	Operating Leases - TVFC leases its 10,000 square foot facility under a non-cancelable lease arrangement that expires in March 2011. The lease is guaranteed by one of the TVFC’s stockholders.

(3)	TVFC has available to it a $100,000 line of credit. Borrowings under the line of credit totaled $52,000 as of March 27, 2009. The interest rate is prime plus 3 percentage points.

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

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.

Item 8. Financial Statements and Supplementary Data

Financial Statement Index

Independent Auditor’s Report	F-1
Audited Balance Sheet for the years ended December 31, 2008 and 2007	F-2
Audited Statement of Operations for the years ended December 31, 2008 and 2007	F-3
Audited Statement of Stockholders’ Deficit for the years ended December 31, 2008	F-4
Audited Statement of Cash Flows for the years ended December 31, 2008 and 2007	F-5
Notes to Financial Statements	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Vinyl Products, Inc. (f/k/a Red Oak Concepts, Inc.):

We have audited the accompanying consolidated balance sheets of Vinyl Products, Inc. (f/k/a Red Oak Concepts, Inc.) as of December 31, 2008 and 2007, and the related statements of operations, shareholders’ equity, income, and cash flows for each of the years in the two-year period ended December 31, 2008. Vinyl Products, Inc.’s management is responsible for these financial statements. My responsibility is to express an opinion on these financial statements based on my audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vinyl Products, Inc. (f/k/a Red Oak Concepts, Inc.) as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.


Traci J. Anderson, CPA
Huntersville, NC

February 27, 2009, except for Note L as to which the date is November 9, 2009

F-1

VINYL PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
CONSOLIDATED BALANCE SHEETS (2008 Restated - Note L)
December 31, 2008 and 2007
	2008		2007
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents	$	114,901	$	134,251
Accounts Receivable		57,575		68,947
Receivable from Shareholders		-		152,000
Stock Receivable		5,000		-
Inventory		156,865		136,671
Prepaid Expenses - restated		38,651		31,843
Total Current Assets		372,992		523,712
PROPERTY AND EQUIPMENT:
Property and Equipment		429,255		386,946
Less Accumulated Depreciation		148,084		99,539
Net Property and Equipment		281,171		287,407
OTHER ASSETS:
Security Deposits		8,690		8,690
Total Other Assets		8,690		8,690
TOTAL ASSETS	$	662,853	$	819,809
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-Term Liabilities	$	18,646	$	23,716
Note Payable to Shareholder		-		29,900
Accounts Payable and Accruals		255,401		139,212
Customer Deposits		161,658		182,570
Income Taxes Payable - restated		21,200-		9,732
Total Current Liabilities		456,905		385,130
LONG-TERM LIABILITIES:
Vehicle and Installment Purchase Contracts		48,824		68,780
Less Current Portion Shown Above		18,646		23,716
Net Long-Term Liabilities		30,178		45,064
Total Liabilities		487,083		430,194
SHAREHOLDERS' EQUITY:
Preferred Stock ($.0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2008)		-		-
Common Stock ($0.0001 par value; 100,000,000 shares authorized; 22,859,000 shares issued and outstanding at December 31, 2008)		2,286		2,280
Paid in Capital		90,814		(180	)
Retained Earnings - restated		82,670		387,515
Total Shareholders' Equity		175,770		389,615
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	662,853	$	819,809

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

F-2

VINYL PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated – Note L)

	2008			2007

Income	$	4,157,860		$	3,933,212

Cost of Goods Sold:
Labor		806,356			687,116
Materials		1,278,524			1,137,187
Other		40,374			38,585
Total Cost of Goods Sold		2,125,254			1,862,888
Gross Profit		2,032,606			2,070,324

Expenses:
Advertising and Marketing		196,660			186,012
Selling, General, and Administrative - reclassified		442,930			379,524
Payroll Expense		984,605			646,918
Professional Fees		199,933			110,267
Rent Expense		103,790			100,870
Total Expenses		1,927,918			1,423,591

Net Operating Income		104,688			646,733

Other Income (Expense):
Interest Income		6,585			2,972
Interest Expense - reclassified		(6,118	)		(4,784	)
Net Other Income (Expense)		467			(1,812	)

Income Before Income Taxes		105,155			644,921

Income Taxes		(80,000	)		(9,732	)

Net Income	$	25,155		$	635,189

Basic and fully diluted earnings per share	$	0.00		$	0.03

Weighted average shares outstanding — basic		22,805,981			22,800,000

Weighted average shares outstanding — diluted		22,842,105			22,800,000

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

F-3

VINYL PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2008 (Restated) and 2007

												Retained
	Preferred Stock				Common Stock				Paid-in			Earnings –
	Shares		Stock		Shares		Stock		Capital			Restated – Note L

Balances, December 31, 2006		-	$	-		2,000	$	2,000	$	-		$	159,326

Shareholder Distributions		-		-		-		-		-			(407,000	)

Reverse Merger		-		-		22,798,000		280		(180	)		-

Net Income for the year		-		-		-		-		-			635,189

Balances, December 31, 2007		-	$	-		22,800,000	$	2,280	$	(180	)	$	387,515

Issuance of Common Stock		-		-		59,000		6		61,094			-

Contribution of Capital		-		-		-		-		29,900			-

Shareholder Distributions		-		-		-		-		-			(330,000	)

Net Income for the year		-		-		-		-		-			25,155

Balances, December 31, 2008		-	$	-		22,859,000	$	2,286	$	90,814		$	82,670

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

F-4

VINYL PRODUCTS, INC. (f/k/a RED OAK CONCEPTS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008 (Restated – Note L) and 2007
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	25,155		$	635,189
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:
Depreciation		48,545			36,101
Changes in Assets and Liabilities:
Decrease (Increase) in Accounts Receivable		11,372			(29,391	)
Decrease (Increase) in Inventory		(20,194	)		(42,605	)
Decrease (Increase) in Prepaid Expenses		(6,808	)		(27,715	)

Increase (Decrease) in Accounts Payable & Accrued Expenses		136,509			16,230
Increase (Decrease) in Customer Deposits		(20,912	)		(20,569	)
Increase (Decrease) in Credit Card Balances		(20,320	)		22,343
Increase (Decrease) in Income Taxes Payable		11,468			9,732
Net Cash Provided by (Used in) Operating Activities		164,815			599,315
CASH FLOWS FROM INVESTING ACTIVITIES
Vehicle Purchases		-			(53,064	)
Leasehold Improvements		(36,494	)		(13,552	)
Machinery and Equipment Purchases		3,813			(45,721	)
Office and Computer Equipment Purchases		(9,628	)		(8,032	)
Decrease in Receivable from Shareholders		152,000			-
Net Cash Provided by (Used in) Investing Activities		109,691			(120,369	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock		61,100			100
Contribution of Capital		29,900			-
Line of Credit Payments		-			(17,945	)
Vehicle Loan Proceeds, Net of Principal Payments		(15,168	)		29,460
Issuance of Stock Receivable		(5,000	)		-
Note Payable Principal Payments		(4,789	)		(5,706	)
Increase (Decrease) in Note Payable to Shareholder		(29,900	)		29,900
Dividends Paid		(330,000	)		(407,000	)
Net Cash Provided by (Used in) Financing Activities		(293,857	)		(371,191	)

NET CASH INCREASE FOR THE PERIOD		(19,351	)		107,755

CASH AT THE BEGINNING OF THE YEAR		134,252			26,496

CASH AT END OF THE YEAR	$	114,901		$	134,251

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
INTEREST	$	44,881		$	21,988
TAXES	$	58,532		$	-

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

F-5

VINYL PRODUCTS, INC.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated)

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.

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.

F-6

VINYL PRODUCTS, INC.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated)

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Advertising and Marketing Expense — The Company expenses all advertising and marketing costs as incurred. Advertising and marketing expense was $196,660 in the year ended December 31, 2008, and $186,012 in the year ended December 31, 2007.

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 December 31, 2008 and 2007.

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 $13,049 in 2008 and $6,801 in 2007. Accounts receivable were $57,575 at December 31, 2008.

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

Impairment of Long-Lived Assets – Using the guidance of Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.

Property and Equipment — Property and equipment are carried at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives:

Vehicles		2 – 7 years
Furniture and Fixtures		7 – 15 years
Machinery and Equipment		5 – 15 years
Office and Computer Equipment		3 – 20 years
Signs		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 $48,545 in 2008 and $36,101 in 2007.

F-7

VINYL PRODUCTS, INC.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated)

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

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.

NOTE B – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the year ended December 31, 2008 are summarized as follows:

Cash paid during the period for interest and income taxes:

Interest		$	6,118
Income Taxes		$	58,532

NOTE C – COMMITMENTS/LEASES

The Company leases its 10,000 square foot facility under a non-cancellable lease arrangement that expires on March 31, 2009. The lease is guaranteed by one of the Company’s shareholders. The Company intends to renew the lease for a two-year period at the current rental rate, with an option to renew for an additional two-year period. Future minimum payments under the current operating lease and the planned operating lease are $104,280 in 2009, $104, 280 in 2010, and $26,070 in 2011.

The Company has an available $100,000 line of credit which it opened in January 2006. Borrowings under the line of credit were paid off in 2007. The interest rate is prime plus 3 percentage points. See Note K.

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%. The Company also acquired equipment under a capital lease agreement with interest at 4.9%. Future payments under these agreements are as follows:

F-8

VINYL PRODUCTS, INC.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated)

2009	$	18,647
2010	$	18,647
2011	$	12,739
2012	$	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 year ended December 31, 2008 is as follows:

Federal		$	61,000
California		$	19,000

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.

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 years ended December 31, 2007 and 2008:)

	For the Year Ended December 30, 2007
	Income		Shares			Per-Share
	(Numerator)		(Denominator)			Amount
Net Income	$	635,189
Basic EPS
Income available to Common shareholders	$	635,189		22,800,000	(A)	$	.03

Effect of Dilutive Securities
Stock Options				-0-

Diluted EPS
Income available to Common shareholders	$	635,189		22,800,000		$	.03

	For the Year Ended December 31, 2008
	Income		Shares			Per-Share
	(Numerator)		(Denominator)			Amount
Net Income	$	25,155
Basic EPS
Income available to Common shareholders	$	25,155		22,805,981	(A)	$	.00

Effect of Dilutive Securities
Stock Options				36,128

Diluted EPS
Income available to Common shareholders	$	25,155		22,842,109		$	.00

(A) See Note A.

F-9

VINYL PRODUCTS, INC.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated)

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 expired on September 23, 2009, at which time options to purchase 5,200 shares had been exercised.

NOTE H – THEFT LOSS

In connection with the preparation of unaudited financial statements for the quarter ended September 30, 2008, management of TVFC became aware of accounting irregularities that resulted in being unable account for approximately $200,000 of inventory that TVFC had purchased that was not the subject of corresponding sales orders. During the course of TVFC's preliminary investigation of the matter, management discovered that certain employees were committing fraud against the company by stealing inventory and reselling it pursuant to fraudulent sales orders that were never submitted to the company. These employees were retaining the sale price of the inventory and, in some cases, using company employees to fabricate and install the products on company time using company vehicles.

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.

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 Consolidated Financial Statements

For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated)

NOTE I – EQUITY

Common Shares

The Company is authorized to issue 100,000,000 shares of $.0001 par value common stock, and as of December 31, 2008, the Company had 22,859,000 shares outstanding. During 2008 and 2007, the Company issued the following shares of common stock:

During 2008, the Company issued 59,000 shares for cash in the amount of $59,000 ($1.00 per share).

During 2007, the Company issued 22,700,000 as a result of the reverse merger (see Note A).

Preferred Shares

The Company is authorized to issue 10,000,000 shares of $.0001 par value preferred stock. As of December 31, 2008, the Company had no preferred shares outstanding. During 2008 and 2007, the Company did not issue any preferred shares of preferred stock.

NOTE J – STOCK RECEIVABLE

The Company had $5,000 in Stock Receivable which represents stock that was purchased in 2008 and paid for in February 2009.

NOTE K – SUBSEQUENT EVENTS

In 2009, the Company drew down $52,000 under its line of credit and subsequently repaid $27,000, leaving an outstanding balance as of October 12, 2009, of $25,000 (see Note C).

NOTE L – 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 2008 and 2007 audited 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:

	2008 As Originally Reported			2008 As Reclassified			Effect of Change			2007 As Originally Reported			2007 As Reclassified			Effect of Change
Selling, General and Administrative	$	401,775		$	442,930		$	41,155		$	362,321		$	379,524		$	17,203
Total Expenses		1,886,763			1,927,918			41,155			1,406,388			1,423,591			17,203
Net Operating Income		145,843			104,688			(41,155	)		663,936			646,733			(17,203	)
Interest Expense		(47,273	)		(6,118	)		41,155			(21,987	)		(4,784	)		17,203
Net Other Income (Expense)		(40,688	)		467			41,155			(19,015	)		(1,812	)		17,203

F-11

VINYL PRODUCTS, INC.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2008 and 2007 (Reclassified and Restated)

(B)

RESTATEMENT: Income Taxes for 2008 was 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.

The following line items in the 2008 Statement of Operations, Balance Sheet and Statement of Cash Flows were affected:

	2008 As Originally Reported			2008 As Restated			Effect of Change
Statement of Operations:
Income Taxes		(50,000	)		(80,000	)		(30,000	)
Net Income	$	55,155		$	25,155			(30,000	)

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			21,200
Total Current Liabilities		435,705			456,905			21,200
Total Liabilities		465,883			487,083			21,200
Retained 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	)

Statement of Cash Flows:
Net Income		55,155			25,155			(30,000	)
Decrease (Increase) in Prepaid Expenses		(15,608	)		(6,808	)		8,800
Increase (Decrease) in Income Taxes Payable		(9,732	)		11,468			21,200

F-12

Item 9A. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in the reports we file under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our President 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.

Evaluation of Disclosure Controls and Procedures

As of December 31, 2008, the Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer (principal executive officer, or PEO) and Chief Financial Officer (principal financial officer, or PFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Exchange Act), pursuant to Exchange Act Rule 13a-15. As a result of our evaluation we identified the following material weaknesses in our disclosure controls and procedures, which are more fully described below under the heading "Identification of Material Weakness":

failure to implement entity level controls;

failure to institute adequate inventory and labor utilization controls;

failure to institute procedures to accurately compute taxes; and

undue reliance on third party professionals.

In view of the results of our evaluation, the Company’s PEO and PFO concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2008.

Changes in Internal Controls

We believe that the material weaknesses we identified with respect to our disclosure controls and procedures also represented weaknesses in our internal control over financial reporting. During the three months ended December 31, 2008, we made changes to our internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, as more fully described below under the heading "Identification of Material Weakness."

Identification of Material Weaknesses in Controls and Procedures

In the course of preparing the audited consolidated financial statements we filed with the Form 10-K for the year ended December 31, 2008 (the "Original Filing") and the periods thereafter, and in connection with the evaluation of our controls and procedures, we discovered the material weaknesses in our controls and procedures enumerated above under the heading "Evaluation of Disclosure Controls and Procedures."

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

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

A.	Failure to Implement Entity Level Controls and Inventory and Labor Utilization Controls

In connection with the preparation of unaudited financial statements for the quarter ended September 30, 2008, management of TVFC, which became our subsidiary after the share exchange transaction consummated on November 20, 2008, determined that TVFC had material weaknesses in its internal controls over financial reporting and, consequently, weaknesses in our disclosure controls and procedures. We are reporting the weaknesses in this Form 10-K because it is the first periodic report we are filing under the Exchange Act.

Management became aware of the accounting irregularities in the course of reviewing monthly financial operations reports for the month ended September 30, 2008 that demonstrated a significant decline in TVFC's gross profit percentage over the previous several months. In an itemized review of the monthly financial information for the several prior quarters, management of TVFC was unable to account for approximately $200,000 of inventory that TVFC had purchased that was not the subject of corresponding sales orders. During the course of TVFC's preliminary investigation of the matter in September 2008, 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 equipment and vehicles.

We reported the loss resulting from the theft of inventory in our unaudited financial statements for the quarter ended September 30, 2008 and the numerical information included in those financial statements is accurate. However, the notes to the financial statements did not discuss the theft or provide an explanation for the declining financial performance, as we continued to investigate the circumstances surrounding the incidents. Furthermore, while the management's discussion and analysis portion of the Current Report on Form 8-K (filed with the SEC on November 26, 2008) made reference to a decline in our gross profit resulting from personnel problems in our fabricating and installation departments, noting that we addressed these issues by re-defining the roles of our staff responsible for fabrication and installation and by restructuring our work force, it did not make reference to the theft or the weaknesses in our internal controls and procedures.

In connection with its investigation of the unaccounted for inventory, management of TVFC identified the following material weaknesses to TVFC’s (and, after consummation of share exchange on November 20, 2008, the Company's) internal control over financial reporting:

Entity Level Controls: The Company failed to develop and maintain a company-wide anti-fraud program over the initiating and processing of financial transactions, as well as other company-wide procedures which may have an impact on internal controls over financial reporting.

Inventory and Labor Utilization Control: Senior management failed to maintain sufficient oversight over inventory usage and labor utilization. As an example, this lack of proper oversight allowed certain trusted employees to fabricate ship and install products for fraudulent jobs.

During the last fiscal quarter of 2008, management implemented measures to address these material weaknesses in our internal control over financial reporting. These actions have materially affected the Company’s internal control over financial reporting for that period, and included:

Personnel Changes: Our primary responses to rooting out the fraud were to terminate those identified as the perpetrators and to redefine the roles of the managers of our accounting department, customer service department and installation department. The underlying premise of the changes in our managers' roles is to distribute accountability for transactions within each of the core elements of our operations among multiple departments. These changes are intended to ensure that each material transaction is examined by more than one individual; a safeguard that we believe will significantly reduce the possibility that a fraudulent transaction would go undetected or unreported to senior management.

Inventory Control Procedures: We developed a series of controls and procedures to monitor the flow of inventory through each stage of our operations. Inventory is reconciled with materials purchased and received against jobs scheduled and the analysis reports are reviewed by senior management. Material variances between inventory inspected and inventory requirements for booked orders are reported to management immediately. We also are developing returned goods procedures that will account for materials returned from jobsites (for scrap or reuse) which will allow us to determine the true material usage and gross profit.

In addition to the foregoing, management more closely oversees all aspects of operations. More importantly, management reviews gross profit components and percentages on a monthly basis to ensure that we properly account for all inventory.

There can be no assurance at this time that the actions taken to date will effectively remediate the material weakness described above. We are continuing to closely monitor and assess the effectiveness of our processes, procedures and controls, and our board of directors (which serves as our audit committee) will make adjustments as and when necessary.

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

We determined that our failure to accurately compute our federal and state corporate income tax liability for the year ended December 31, 2008, as described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations – Reclassification and Restatement," was a result of the following weaknesses in our internal control over financial reporting:

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

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

Our failure to accurately compute our federal and state corporate income taxes for the year ended December 31, 2008 resulted in an understatement of our tax liability at December 31, 2008, which impacted our financial statements in each subsequent interim period through June 30, 2009. As further described in Note L to the audited consolidated financial statements accompanying this report, this error resulted in the restatement of the Company’s financial statements for the year ended December 31, 2008.

We have not yet taken any action to remediate the material weaknesses identified above. We currently are exploring all of the options available to us and will consider each option carefully before taking any action. The remediation of these material weaknesses will be among our highest priorities.

We cannot assure you at this time that the actions and remediation efforts we ultimately implement will effectively remediate the material weakness described above.

Management’s Report on Internal Control over Financial Reporting

We are required to evaluate our internal control over financial reporting in order to allow management to report on their effectiveness on an annual basis, as required by Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC. These laws and regulations provide that management's evaluation of the effectiveness of our internal control over financial reporting is based on a suitable, recognized control framework that is established by a body or group that has followed due-process procedures, including the broad distribution of the framework for public comment. We are in the process of implementing the components and principles presented in "Internal Control — Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as the basis for our internal control over financial reporting. We expect to base assessments of and reports on our internal control over financial reporting on the COSO framework commencing with the year ending December 31, 2009.

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

Item 15. Exhibits, Financial Statement Schedules.

(b) Exhibits.

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

Exhibit No.		Exhibit Description
2.1#		Agreement and Plan of Merger October 10, 2007, among Red Oak Concepts, Inc., a Delaware corporation, Red Oak Concepts, Inc., a Nevada corporation, and the holders of all of the outstanding shares of common stock of each such corporation.
2.2*		Share Exchange Agreement dated November 20, 2008
3.1^		Certificate of Incorporation of Red Oak Concepts, Inc., a Delaware corporation.
3.2^		By-laws of Red Oak Concepts, Inc., a Delaware corporation.
3.3#		Articles of Incorporation of Red Oak Concepts, Inc., a Nevada corporation.
3.4#		By-laws of Red Oak Concepts, Inc., a Nevada corporation.
3.5*		Certificate of Amendment to Articles of Incorporation of Red Oak Concepts, Inc.
4.1#		Specimen common stock certificate of Vinyl Products, Inc.
4.2*		Form of Option Agreement issued by The Vinyl Fence Company, Inc., the obligations of which were assumed by the registrant pursuant to the Share Exchange Agreement.
4.3*		Registration Rights Agreement dated November 20, 2008 among the registrant and the recipients of the common stock received pursuant to the Share Exchange Agreement filed as Exhibit 2.1 hereto, the holders of the registrant's common stock immediately prior to the closing of the Share Exchange Agreement, the holders of certain options assumed by the registrant under the Share Exchange Agreement and the purchasers of shares of common stock in the registrant's private placement completed on November 24, 2008.
4.4*		Lock Up/Leak Out Agreement dated November 20, 2008 between the registrant and each of Susan D. Zachmann, Katherine Daniels and Barbara Deadwiley.
4.5*		Form of Lock Up/Leak Out dated November 20, 2008 between the registrant and each of Haber LLC, Themis LLC and Tailor Made Financial LLC.

4.6*		Form of Subscription Agreement between the Registrant and the purchasers in the private offering of securities completed on November 24, 2008.
4.7*		Registration Rights Agreement dated November 24, 2008 among the registrant and the purchasers of shares of common stock in the registrant's private placement completed on November 24, 2008.
10.1#		Form of demand promissory note dated June 17, 2007 executed by Red Oak Concepts, Inc. in favor each of Susan Zachmann and Katherine Daniels each in the principal amount of $14,950.
10.2*		Lease agreement between AGA Partners and The Vinyl Fence Company, Inc., a California corporation dated January 31, 2005.
10.3*		Fabricator Agreement dated November 11, 2003 between U.S. Polymers, Inc., and The Vinyl Fence Company, Inc. as amended and extended on August 29, 2008.
10.4†		Professional Employer Agreement dated June 23, 2005 between Better Business Systems, Inc. (now Avitus Group) and The Vinyl Fence Company, Inc.
10.5◊		Lease Renewal dated February 10, 2009 between AGA Partners and The Vinyl Fence Company, Inc.
14.1*		Code of Business and Ethical Conduct
31.1+		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 Annual Report on Form 10-K/A for the year ended December 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 Annual Report on Form 10-K/A for the year ended December 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.

#	Incorporated by reference to the registrant's filing on Form 10-SB as filed with the Securities and Exchange Commission on August 15, 2007.
^	Incorporated by reference to the registrant's filing on Amendment No. 1 to Form 10-SB as filed with the Securities and Exchange Commission on September 4, 2007.
*	Incorporated by reference to the registrant's Current Report on Form 8K as filed with the Securities and Exchange Commission on November 26, 2008.
†	Incorporated by reference to the registrant's registration statement on Form S-1 as filed with the Securities and Exchange Commission on March 27, 2009.
◊	Incorporated by reference to the registrant's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 31, 2009.
+	Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 12, 2009.

	VINYL PRODUCTS, INC.

	By:	/s/ Gordon Knott
		Gordon Knott

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on November 12, 2009.

Signature		Title

/s/ Gordon Knott		President, Principal Executive Officer and Director
Gordon Knott

/s/ Douglas E. Wells		Chief Financial Officer and Principal Financial Officer
Douglas E. Wells

/s/ Garabed Khatchoyan		Secretary and Director
Garabed Khatchoyan

Attached files

AAA CENTURY GROUP USA, INC. Reports

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