UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): November 10, 2009
VINYL PRODUCTS,
INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
000-52769
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26-0295367
|
(State
or other jurisdiction
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(Commission
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(IRS
Employer
|
of
incorporation)
|
File
Number)
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Identification
No.)
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2210 South Ritchey Street, Santa Ana,
California
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92705
|
|
(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (714) 210-8888
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(Former
name or former address, if changed since last
report.)
|
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425).
|
o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12).
|
o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b)).
|
o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c)).
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Item 4.02. Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or Completed
Interim Review
(a) On
November 10, 2009, the board of directors of Vinyl Products, Inc. ("we," "us,"
"our," the "Company"), upon the recommendation of management and after
discussion with our independent registered public accounting firm, Traci J.
Anderson, CPA, concluded that the previously issued financial statements
contained in our Annual Report on Form 10-K for the year ended December 31,
2008 (the "2008 Annual Report")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 will
amend and restate these financial statements to make the necessary accounting
corrections and adjustments. We also will reclassify certain information
included in the consolidated financial statements in each of the foregoing
reports.
The
errors in the audited consolidated financial statements included in the 2008
Annual Report relate to:
(i) the
amount of federal and state corporate income taxes we reported as being owed to
the United States Treasury and the California Franchise Tax Board in the
previously issued financial statements; and
(ii) the
classification of credit card fees and financing discounts as interest expenses
in the previously issued financial statements when such items should have been
classified as selling, general and administrative expenses.
Our board
of directors has determined that the error relating to the calculation of
corporate income taxes requires us to restate the financial statements for the
periods referenced above and that the errors relating to the classification of
credit card fees and financing discounts as interest expenses require us to
reclassify those items as selling, general and administrative
expenses. Accordingly, we will file amendments to each of our 2008
Annual Report, our Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2009 and our Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2009 to include amended and restated consolidated financial
statements for the respective periods covered by each report that also
reclassifies certain financial information included in the consolidated
financial statements filed with those reports.
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 consolidated
federal and state taxes, 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 will affect individual components of our
Consolidated Balance Sheet, Consolidated Statement of Operations, Consolidated
Statement of Shareholders’ Equity and Consolidated Statement of Cash Flows for
the year ended December 31, 2008. The restatement will have no effect on
reported net earnings per share for 2008. The audited consolidated
financial statements for the 2007 fiscal year will not be 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 Balance Sheet as of December 31, 2008 and the Consolidated
Statements of Operations, Consolidated Statement of Shareholders’ Equity and
Consolidated Statement of Cash Flows for the year ended December 31, 2008 that
will be affected by the reclassification and the amount of the change in each
year:
2008
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Effect
of
Change
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||
As
Originally Reported
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As
Restated
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||
Statement
of Operations:
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|||
Income
Taxes
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(50,000)
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(80,000)
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(30,000)
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Net
Income
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$55,155
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$25,155
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(30,000)
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Balance
Sheet:
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|||
Prepaid
Expenses
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47,451
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38,651
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(8,800)
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Total
Current Assets
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381,792
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372,992
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(8,800)
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Total
Assets
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$671,653
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$662,853
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(8,800)
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Income
Taxes Payable
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0
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21,200
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21,200
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Total
Current Liabilities
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435,705
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456,905
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21,200
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Total
Liabilities
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465,883
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487,083
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21,200
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Retained
Earnings
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112,670
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82,670
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(30,000)
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Total
Shareholders’ Equity
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$205,770
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$175,770
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(30,000)
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Total
Liabilities and Shareholders’ Equity
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$671,653
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$662,853
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(8,800)
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Statement
of Shareholders’ Equity:
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|||
Retained
Earnings
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112,670
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82,670
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(30,000)
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Statement
of Cash Flows:
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|||
Net
Income (Loss)
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55,155
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25,155
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8,800
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Decrease
(Increase) in Prepaid Expenses
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(15,608)
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(6,808)
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21,200
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Increase
(Decrease) in Income Taxes Payable
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(9,732)
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11,468
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(30,000)
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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 them correctly under generally accepted
accounting principles. 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 will affect 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 will 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 will have 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).
2
The
following table demonstrates the changes in certain line items in the Statements
of Operations for the years ended December 31, 2008 and 2007 that will be
affected by the reclassification and the amount of the change in each such
year:
2008
As
Originally
Reported
|
2008
As
Reclassified
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Effect
of
Change
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2007
As
Originally
Reported
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2007
As
Reclassified
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Effect
of
Change
|
|
Selling,
General and
Administrative
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401,775
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442,930
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$41,155
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362,321
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379,524
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17,203
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Total
Expenses
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1,886,763
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1,927,918
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41,155
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1,406,388
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1,423,591
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17,203
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Net
Operating Income
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145,843
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104,688
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(41,155)
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663,936
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646,733
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(17,203)
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Interest
Expense
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(47,273)
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(6,118)
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41,155
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(21,987)
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(4,784)
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17,203
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Net
Other Income
(Expense)
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(40,688)
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467
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41,155
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(19,015)
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(1,812)
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17,203
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We will
add a restatement and reclassification footnote to the consolidated financial
statements we will file with the amendment to each of our Annual Report on Form
10-K for the fiscal year ended December 31, 2008, our Quarterly Report on Form
10-Q for the quarterly period ended March 31, 2009 and our Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2009.
We also
will amend and restate the following items in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2008, in our Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2009 and in our Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2009:
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·
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"Management's
Discussion and Analysis of Financial Condition and Results of Operations";
and
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·
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"Controls
and Procedures."
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Forward
Looking Statements
This
current report on Form 8-K contains forward-looking statements that involve
risks, uncertainties, assumptions and other factors which, if they do not
materialize or prove correct, could cause our results to differ materially from
historical results or those expressed or implied by such forward-looking
statements. All statements, other than statements of historical fact,
are statements that could be deemed forward-looking statements, including,
statements about our intention to restate our financial statements, the effects
of the corrections discussed on future periods and the timing of filing of our
restated financial statements, and statements containing the words “planned,”
“expects,” “believes,” “opportunity,” “anticipates” and similar
words. The potential risks and uncertainties which contribute to the
uncertain nature of these statements include, among others, risks associated
with timely completion of the audit on our prior financial statements to permit
filing of restated financial statements before the deadline for our quarterly
report on Form 10-Q for the quarter ended September 30, 2009, risks associated
with the continued uninterrupted availability of raw materials and the cost
thereof, launching a successful franchise program, continued customer acceptance
of the Company’s products, the availability of capital to us as required to
implement our franchise program and other expansion plans, the availability of
credit to prospective franchisees, products pricing in a changing market, the
success of our brand development efforts, 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, general economic
conditions, and the other risks and uncertainties described in our public
filings with the Securities and Exchange Commission, available
at www.sec.gov. We
assume no obligation to update any forward-looking statement to reflect events
or circumstances arising after the date on which it was made.
3
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
VINYL
PRODUCTS, INC.
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Date:
November 11, 2009
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By:
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/s/
Gordon
Knott
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Gordon
Knott, President
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4