U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2015

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

For the transition period from ________________to________________

Commission File Number 000-54810

PLH PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

California	95-4386777
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

6655 Knott Avenue Buena Park, CA 92640 USA
(Address of principal executive offices)

Issuer’s telephone number, including area code: (714) 739-6622

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [ X ]

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.
Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was Required to submit and post such files).
Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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
Yes [ X ] 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. (as defined in Rule 12b-2 of the Exchange Act). Check one:

Large accelerated filer [ ]	Non-accelerated filer [ ]
Accelerated Filer [ ]	Smaller reporting company [ X ]

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

As of December 31, 2015, there were outstanding 32,095,000 shares of the registrant’s common stock, par value $0.0001, which is the only outstanding class of common or voting stock of the registrant.

Documents incorporated by reference: None.

PLH Products, Inc.

Form 10-K

Table of Contents

		Page
PART I

Item 1.	Business	3
Item 1A	Risk Factors	9
Item 2.	Properties	16
Item 3.	Legal Proceedings	16

PART II

Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 8.	Financial Statements and Supplementary Data	19
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	19
Item 9A	Controls and Procedures	20
Item 9B.	Other Information	20

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	21
Item 11.	Executive Compensation	22
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	23
Item 13.	Certain Relationships and Related Transactions, and Director Independence	24
Item 14.	Principal Accountant Fees and Services	25

PART IV

Item 15.	Exhibits	26

Signatures		27

Financial Statements		28

PART I

ITEM 1.

BUSINESS

Corporate Background

PLH Products, Inc. (“we”, “us”, “our”, or the “Company”) was incorporated pursuant to the laws of the State of California on September 2, 1992.

We are an infrared home sauna design, engineering, manufacturing and development company focusing upon premium sauna cabins. We design, develop and sell infrared home saunas. Our saunas are made with the highest quality Western Red Cedar wood and come equipped with several features including, but not limited to, LED color lights, floor heaters and back heaters.

In addition to infrared home saunas, we design, develop and sell wellness thermal therapy units. Our Lower Body Thermal Therapy unit is designed for the back and lower extremities. Our Foot Warmer is designed for feet. Our Knee Comforter is designed for knees, legs and feet.

We intend to increase the sales of our small wellness thermal therapy units by establishing Digital Health Center, a franchise in China, which will be a health maintenance facility for senior citizens and will be equipped with exercise equipment, infrared saunas and equipment which measures weight, height, blood pressure, pulse and blood sugar levels. Members and non-members may purchase equipment used in the Digital Health Center including, but not limited to, our wellness thermal therapy units for their personal use.

We import and export lumber including, but not limited to, British Columbia’s Western Red Cedar (“WRC”), Hemlock and Spruce Pine Fir.

In addition, we produce sauna accessories and various other products including, but not limited to, chairs, tables, and shelving which can be used as garden furniture or indoor furniture.

We are constantly researching and developing new models and products in order to fulfill changing market demands. We currently own several patents and are in the process of applying for other patents throughout the world. In addition, we own numerous trademarks in China, Europe, Korea and the United States.

Industry and Market Trends

The infrared sauna industry has experienced growth in recent years, in large part because of the spending habits of consumers, especially baby boomers, are increasingly moving toward health-enhancing products. An estimated 15,000 saunas are sold annually in the United States, and sales are growing by about 10% a year. According to the National Sauna & Pool Institute (NSPI), three key consumer trends are helping expand sauna sales: “Stress levels in this country are at an all-time high, baby boomers are looking for new ways to stay fit and active longer, and the strong economy has spurred a home improvement boom.”

Euro monitor International, for instance, predicts that the global health and wellness market will hit a record high of $1 trillion by 2017. This bodes well for sauna purchases. “In the next decade, as the baby boomers reach their peak spending, we’ll see unprecedented growth in the sauna industry – and in any industry that deals with personal satisfaction and life improvement,” states the NSPI. Sauna trends also fall in line with major growth in the day spa industry, which has grown tremendously in the U.S. over the last 20 years. In 1990 there were 200 day spas in the US. Today there are nearly 20,000. The chart below further outlines the latest full-year data for this market nationally. On a global level, the health spa market is expected to exceed $77 billion by 2016, according to research from Global Industry Analysts. Factors fueling the market include “nutrition and health trends, and advances in science and medicine,” states Global Industry Analysts. “The increasingly fast pace of consumer lifestyles is leading to rising demand for relaxation services, including saunas, hammams and spas.”

¹Aqua Magazine. “Sauna Sales Bright.” June 2011. http://aquamagazine.com/content/post/Sauna-Sales-Bright.aspx
¹ Euro monitor International. “Health & Wellness to grow by $27 Billion in 2013.” Jan. 10, 2013.
http://www.nutraceuticalsworld.com/blog/marketwatch/2013-01-10/health-wellness-to-grow-by-27-billion-in-2013-key-research-highl ights
¹ ISPA. “U.S. Spa Industry - Fast Facts.” Obtained at: http://www.experienceispa.com/media/facts-stats/

Furthermore, Global Industry Analysts notes that, “The therapeutic benefits of saunas are gaining in recognition and attracting an increasing numbers of consumers. Saunas are popular not only for relaxation purposes but also as part of pain management treatments. Saunas in the U.S. and Australia are a popular feature in hotels and health clubs, while Asian customers visit sports centers and public bathhouses to use saunas. Single-gender saunas are popular in EU countries and are often places to socialize. Customers may also choose to have a sauna incorporated into their homes in the same way as hot tubs.”

Lumber

The lumber wholesaling market is $88 billion in the U.S. and has grown 3.4% annually since 2009. In Canada, the forest industry contributes C$19.8 billion to the nation’s economy, and it has the world’s largest net trade balance, with C$19.3 billion worth of products (2013) exported. Logging accounts for a full 20% of Canada’s forest products market. According to the Coast Forest Products Association, cedar accounts for 16% of British Columbia’s 1.1 billion board feet of annual production.

China wellness industry

China has a fast-growing health and wellness market that is expected to reach nearly $70 billion by 2020. According to a report from the Boston Consulting Group, “Chinese consumers are increasingly health conscious, buying a wide variety of products to treat common ailments, boost their energy, and strengthen their immune systems. The reasons for this growing trend are many: rising incomes, the stress effects of urbanization, an aging population, and the country’s ongoing issues with food safety and quality. More and more, consumers are self-medicating with health supplements and over-the-counter (OTC) health treatments—even buying brand names and higher-quality products that are more expensive.”

¹ Global Industry Analysts. “Global Sauna, Hamman & Spa industry.”
http://www.reportlinker.com/ci02151/Sauna-Hammam-and-Spa.html
¹ IBISWorld. “Lumber Wholesaling in the U.S.” Sept. 2014. http://www.ibisworld.com/industry/default.aspx?indid=921
¹ Statistics Canada. “Canada’s forest industry by the numbers.” http://www.nrcan.gc.ca/forests/industry/13311
¹ Coast Forest Products Association. “Economic Impact: Lumber and logging.”
http://www.coastforest.org/wp-content/uploads/2013/11/rf_cfpa_economic_impact_nov_2013.pdf
¹ Boston Consulting Group. “Capturing a share of China’s consumer health market.” Feb. 25, 2014.
https://www.bcgperspectives.com/content/articles/center_consumer_customer_insight_globalization_insight_action _capturing_share_chinas_consumer_health_market/

Business, Sales and Marketing Strategy

As a primarily business-to-business company, marketing for PLH largely includes direct sales of its sauna and wood products directly to the distributors and industrial users. As noted, these are distributors and OEM partners for saunas, and for wood products, sauna manufacturers, door and window manufacturers, garden products manufacturers, garage door manufacturers, home builders, construction companies and interior decorators, etc.

For the U.S. market, sauna sales are made through PLH’s own retail sales forces, PLH’s dealers, and OEM partners. For the international market, sauna sales are mostly made through PLH’s distributors and OEM partners. These include:

•	Arm stark Germany: The No. 1 spa and hot tub distributor in Germany
•	HM Products Ltd.: Exclusive Distributor of Health Mate Saunas in Belgium, Netherlands, Luxemburg
•	Healthria: Exclusive Distributor of Health Mate Saunas and other wellness thermal therapy units in Korea
•	Human Touch LLC, Long Beach, CA: Distributes through existing in-house sales network and also through large retail outlets such as Sharper Image and Relax the Back
•	High Tech Health International, Boulder, CO: PLH’s OEM partner in the U.S. that distributes its Thermal Life Sauna brand in the U.S., U.K and Australia through a network of health practitioners
•	Sharper Image, U.S.A.: OEM partner that distributes “Sharper Image” branded wellness thermal therapy units

PLH currently sells wood products and lumber to more than 50 companies in the U.S., Japan, Korea, Australia, New Zealand, Russia, Ukraine, Belgium, Netherlands, Taiwan and Indonesia. Here are some of the Company’s wood products and lumber buyers and their locations:

•	Weyerhaeuser Japan (MBKK Japan), Tokyo, Japan: Japanese branch of Weyerhaeuser, one of the world’s largest forest products company. It is considered the largest WRC importer and distributor in Japan
•	Fire and Flavor Grilling Company, Athens, GA: The largest culinary grilling planks and grilling paper company in the U.S. Distributes to Safeway, Whole Foods Markets, Ralph’s, Lowe’s, Bed, Bath & Beyond, and other large retailers. PLH became the exclusive supplier of grilling planks and grilling papers to Fire & Flavor in 2010
•	Helo Oy, Riihimaki, Finland: The world’s largest sauna and steam bath company. Helo has been purchasing WRC lumber panels from PLH since 2009
•	Ottolywood, Russia: Importer and distributor of premium lumber in Russia. Has been purchasing sauna grade WRC lumbers from PLH since 2006
•	Yamaha Piano, Japan: World famous piano manufacturer. Has been purchasing piano frame and back posts from PLH since 2005

The Company’s website, for example, will continue to be the public face for PLH and Health Mate Saunas, presenting a dynamic front for its operations. Publicity efforts will be kept to a minimum as well, only utilized when a favorable editorial presence is desired, and banner advertising on various sector and non-sector websites will occasionally be employed. The Company will also attend industry conventions and trade shows that target the general public as well as wholesale and major retail buyers.

For the Digital Health Centers in China, PLH will initially use advertising to announce the new health and wellness management facilities as sought-after wellness destinations to middle aged to senior citizens who are interested in health and well-being. Advertising will include online programs to direct consumers to our Digital Health Centers’ website, as well as select print, TV, and place-based media, such as signs/billboards in high-traffic areas near a Digital Health Center in China.

Public relations will also serve a critical role in the marketing plan; the intention is to gain media coverage to establish the Digital Health Centers brand among citizens in Northern China. All franchisees will be given extensive marketing materials to promote the stores and drive revenue growth. PLH, for example, has print catalogs of its products to show customers at the Centers as well as for online promotions.

Web Summary

PLH has an attractive and user-friendly site at PLHProducts.com that showcases the Company’s unique product offerings. The website features informational content such as company history, management, products, and contact information. The website is professionally designed and maintained, presenting customers with a trustworthy face for PLH. The site connects to Facebook and Twitter to promote a presence on social media, and it as excellent results for SEO (search engine optimization) when consumers seek out sauna and WRC products.

Products

PLH is a multifaceted business-development firm that is a leading manufacturer and distributor of in-home infrared saunas. Through years of industry experience, PLH has refined its business model to its present state, where it has an integrated vertical structure that includes direct sourcing of raw materials all the way to value-added finished products.

From the beginning, PLH has competed with the best products worldwide because of its ability to develop and design new products with beneficial and exciting features. PLH has never stopped working on developing new products. Currently, the Company is developing many innovative products, such as Lower Body Thermal Therapy units with Reclining Chair, Digital Health Sauna, Salt Rock Sauna, and the Aroma Oil Foot Warmer, etc. PLH also intends to continue to protect its intellectual properties by applying and registering its ideas and patents whenever possible.

Currently PLH has 3 design specialists and 4 electrical and hardware engineers who devote themselves to develop new and exciting products. PLH plans to double the size of both R&D personnel and its facility so that it can react much more quickly to new ideas and also to conduct more thorough inspections. Currently, besides costly inspection and verification from external agencies, PLH already conducts an in-house inspection and testing to ensure the highest quality products.

Products and services include:

Infrared Wellness Products

For more than 35 years, PLH has specialized in the industry’s highest-quality infrared saunas, sold to consumers around the world who desire their health benefits. Infrared saunas use radiant heat, unlike the indirect heat of traditional saunas, to deeply penetrate to body. Infrared heat penetrates the body’s tissues for a deep tissue sauna experience that promotes youthful energy, enhanced circulation, weight loss, and relaxation, among other benefits.

PLH’s solid-wood constructed full-body Health Mate saunas are sold by distributors throughout the U.S., Europe and Asia and also through PLH’s own distribution channels in the U.S. and China. PLH saunas are manufactured in China. Because of PLH’s vertical integration, costs are kept down and savings passed on to the customer. The knock-down saunas are marketed to the public as a plug-and-play product that is simple to install and has significant style and technology benefits compared to other brands.

To date, PLH’s primary product line has been its full-body infrared sauna cabins, Health Mate Saunas (patent and trademark). They are state-of-the-art full-body infrared saunas used in homes and businesses around the world. Each hand-crafted unit features quality components with safety certifications from the world’s leading certifying entities.

Health Mate Saunas can seat up to a maximum of six people, and are made from Western Red Cedar. The saunas have advanced features including, but not limited to: LED lights, Bluetooth audio systems, programmable dual side controllers, low back and foot heaters, and reclining lounge benches.

Health Mate Saunas feature UL®-Recognized Tecoloy® heaters by Backer, which is the highest quality heater in the market at this time. The heater consists of a warm core of compressed ceramic and is completely surrounded by a layer of Incoloy 800 alloy. Incoloy is produced with a range of super alloys and is strong enough for high temperatures and designed with corrosion resistance. It provides efficient heat and infrared energy to be very effective for the human body.

PLH’s newest product lines are smaller infrared sauna products that will be accessible by a wider range of consumers. PLH has a home sauna production capacity of 18,000 units per year, and its portable sauna (wellness thermal therapy unit) production capacity is 36,000 per year. The new line of wellness thermal therapy units, as illustrated below, include:

•	Lower body therapy
•	Knee comforter
•	Foot warmer

Lumber production

With a distinct emphasis on shop and clear-grade lumber, PLH supplies wood products and lumber to other sauna manufacturers, door and window manufacturers, industrial factories, lumber wholesale, and importers/distributors of building materials worldwide.

Western Red Cedar (WRC) is the primary product. WRC is prized for its beauty, versatility, and sustainability. It grows primarily in the Pacific Northwest, with British Columbia being the major producing region. WRC, in addition to a pleasant appearance and aroma, has a high natural resistance to decay and therefore is used extensively for outdoor construction such as posts, decking, shingles, and siding. It is also the best wood for use in the interior of saunas.

The Company’s decades of experience in the industry and extensive contacts in the lumber industry have given it a substantial edge in sourcing prime WRC for producing sauna-grade cedar lumber. The Company’s factory in China is dedicated to remanufacturing cedar panels for saunas and dimensional cedar lumber for wholesale. In addition to WRC, PLH is also engaged in worldwide import and export of British Columbia softwoods including Hemlock, Spruce-Pine-Fir (SPF), and other species.

All lumber production by PLH is environmentally responsible. PLH actively works toward the preservation and respect of natural resources and helps to contribute to the new growth of the earth’s forests. This helps ensure healthy forests for future generations. PLH follows the strict standards set forth by both the Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification (PEFC). These standards include stringent chain-of-custody regulations (COC) for the path taken by raw materials from a responsibly certified source through processing, manufacturing, and distribution until it is a final product ready for sale to the end consumer.

Regulation

PLH products are subject to federal, state and other governmental and quasi-governmental regulations that affect product development, design, testing, analysis, load rating, application, marketing, sales, exportation, installation and use. A substantial portion of PLH products have been evaluated and are recognized by governmental and product evaluation agencies.

Competition

PLH Products faces a variety of competition in all of the markets in which it participates. This competition ranges from subsidiaries of large national or international corporations to small regional manufacturers. While price is an important factor, PLH also competes on the basis of quality, breadth of product line, proprietary technology, technical support, availability of inventory, service (including custom design and manufacturing), field support and product innovation. As a result of differences in structural design and building practices and codes, PLH’s markets tend to differ by region. Within these regions, PLH competes with companies of varying size, several of which also distribute their products nationally or internationally. See “Item 1A — Risk Factors.”

Patents and Proprietary Rights

We currently own 23 patents, utility patents and design patents worldwide, and we have filed patent applications for an additional 30 patents. We hold patents in Canada, China, Korea and the U.S.

We have been granted the following patent – “Control Device for an Infrared Ray Sauna Facility” which is described as,

An infrared ray sauna facility includes a chamber into which a user can enter and sit. The chamber has a door to get into, and a seat for a user. A plurality of infrared ray generating units is installed on the inside wall of the chamber. A controller for controlling the infrared ray generating units is installed outside the chamber. The user controls the temperature inside the chamber or the operating time of the facility with the controller. …[W]hen the user wants to change the conditions inside the chamber, such as temperature, the user must open the door and come out of the chamber to access the controller. The user then goes into the chamber again. A disadvantage is that cold outside air flows into the chamber while the door is open, thereby dropping the temperature inside the chamber. It takes some time to return to the adequate temperature, especially when the ambient temperature is low. Also, electric power consumption is increased to compensate the lost heat, and the sauna effect that the user feels diminishes.” ¹ “The present invention relates to a control device for a sauna facility. More particularly, the invention relates to an infrared ray sauna facility that can be conveniently controlled both from inside and outside of the facility by a user of the facility.” We have been granted the following patent – “Lower Body Sauna Device” which is described as an invention which relates to a sauna device and more specifically,

_____________________________________

¹ United States Patent, Patent No.: US 6,965,097 B2, Date of Patent: December 15, 2005

… [this] invention relates to a sauna device that is adapted for bathing [the] lower half of the human body. In Asia and Europe, the practice of ‘Half Bath’ (immersing the lower half of body in hot or warm water) has been known or believed to have many health benefits. The core idea behind ‘Half Bath’ is to keep the lower half of body warm and the upper half of body cool. By doing so, circulation of blood is improved and excess toxins are purged out, thus promoting improvement in overall health condition. Even though many people realize and believe in the benefits of ‘Half Bath’, they find ‘Half Bath’ to be inconvenient in several ways. First, it is time consuming to wait for enough water to gather in your tub. Second, it is not economical as you continue to have to add hot water to maintain appropriate-water temperature.” “[This] invention provide[s] a lower body sauna device that includes a heat chamber that is adapted to enclose the lower body of a user, and a heater provided inside the heat chamber.” The advantage of the Lower Body Sauna Device is that the invention does not require heated water because the invention utilizes infrared heaters.

In addition, we own 38 trademarks in the following countries: Austria, Benelux, China, Estonia, France, Great Britain, Italy, Korea, Russia, Spain, Switzerland and the U.S.

Acquisitions and Expansion into New Markets

The Company’s growth potential depends, to some extent, on its ability to penetrate new markets, both domestically and internationally. See “Industry and Market Trends” and “Business Strategy.” Therefore, the Company may in the future pursue acquisitions of product lines or businesses. See “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Seasonality and Cyclicality

PLH Products’ sales are seasonal and cyclical. Operating results vary from quarter to quarter and with economic cycles. PLH maintains high inventory levels and typically ship orders as we receive them, so we operate with little backlog. See “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Environmental, Health and Safety Matters

The Company is subject to environmental laws and regulations governing emissions into the air, discharges into water, and generation, handling, storage, transportation, treatment and disposal of waste materials. The Company is also subject to other federal and state laws and regulations regarding health and safety matters. The Company believes that it has obtained all material licenses and permits required by environmental, health and safety laws and regulations in connection with the Company’s operations and that its policies and procedures comply in all material respects with existing environmental, health and safety laws and regulations. See “Item 1A — Risk Factors.”

Available Information

The SEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company makes available, free of charge, on its website at www.simpsonmfg.com, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statement, company governance guidelines and code of ethics and the charters of the Audit, the Compensation and Leadership Development, and the Governance and Nominating Committees of its Board of Directors. Printed copies of any of these materials will also be provided free of charge on request.

ITEM 1A

Risk FACTORS

Worldwide economic conditions and credit tightening materially and adversely affect our business. Our business has been materially and adversely affected by changes in regional, national or global economic conditions. Such changes have included or may include reduced consumer spending, reduced availability of capital, inflation, deflation, adverse changes in interest rates, reduced energy availability and increased energy costs, and government initiatives to manage economic conditions. Continuing instability in financial markets and the deterioration of other national and global economic conditions may have further material adverse effects on our operations, financial results or liquidity, including the following:

	•	the financial stability of our customers or suppliers may be compromised, which could result in additional bad debts for us or non-performance by suppliers;
	•	financial instability of the financial institutions where we have our cash balances invested could result in loss of our principal balance;
	•	one or more of the financial institutions that make available our revolving credit facility may become unable to fulfill their funding obligations, which could materially and adversely affect our liquidity;
	•	it may become even more costly or difficult for us to obtain the agreed or additional financing or to refinance our existing credit facility; and
	•	our assets may be impaired or subject to write down or write off.

Uncertainty about current global economic conditions may cause consumers of our products to postpone or refrain from spending in response to tighter credit, negative financial news, declines in income or asset values, or other adverse economic events or conditions, which could materially reduce demand for our products and materially and adversely affect our financial condition and operating results. Further deterioration of economic conditions would likely exacerbate these adverse effects, result in wide-ranging, adverse and prolonged effects on general business conditions, and materially and adversely affect our operations, financial results and liquidity.

Failure to comply with industry regulations could result in reduced sales and increased costs.

The design, capacity and quality of most of our products and manufacturing processes are subject to numerous and extensive regulations and standards promulgated by governmental, quasi-governmental and industry organizations. These regulations and standards are highly technical, complex and subject to frequent revision. If our products or manufacturing processes fail to comply with any regulations or standards, we may not be able to manufacture and market our products profitably. Failure to comply with regulations and standards could therefore materially reduce our sales and increase our costs.

If we fail to compete effectively, our revenue and profit margins could decline.

We face a variety of competition in all of the markets in which we participate. Many of our competitors have greater financial and other resources than we do. In addition, other technologies may render our products obsolete or noncompetitive. Other companies may find our markets attractive and enter those markets. Competitive pricing, including price competition or the introduction of new products, has in the past and may in the future have material adverse effects on our revenues and profit margins.

Our ability to compete effectively depends to a significant extent on the specification or approval of our products by architects, engineers, building inspectors, building code officials and customers. If a significant segment of those communities were to decide that the design, materials, manufacturing, testing or quality control of our products is inferior to that of any of our competitors, our sales and profits would be materially reduced.

If we lose all or part of a large customer, our sales and profits would decline.

We have substantial sales to a few large customers. Loss of all or part of our sales to a large customer would have a material adverse effect on our revenues and profits. Our largest customer accounted for 9%, 10% and 10% of net sales for the years ended December 31, 2013, 2012 and 2011, respectively. See Note 14 to the Company’s Consolidated Financial Statements. This customer may endeavor to replace our products in some or all markets, with lower-priced products supplied by others or may otherwise reduce its purchases of our products. We also might reduce our dependence on our largest customer by reducing or terminating sales to one or more of the customer’s subsidiaries. Any reduction in, or termination of, our sales to this customer would at least temporarily, and possibly longer cause a material reduction in our net sales, income from operations and net income. A reduction in or elimination of our sales to our largest customer, or another of our larger customers, would increase our relative dependence on our remaining large customers.

In addition, our customers include retailers and distributors. Retail and distribution businesses have consolidated over time, which could increase the material adverse effect of losing any of them.

Increases in prices of raw materials could negatively affect our sales and profits.

Our principal raw material is western cedar wood. The lumber industry is highly cyclical. Numerous factors beyond our control, such as general economic conditions, competition, worldwide demand, material and labor costs, energy costs, foreign exchange rates, import duties and other trade restrictions, influence prices for our raw materials. Consolidation among domestic integrated cedar wood producers, changes in supply and demand in lumber markets, changes in foreign currency exchange rates and economic conditions, and other events have led to volatility in lumber costs. The western cedar wood market is heavily influenced by three major Canadian and United States manufacturers. We have not always been able, and in the future we might not be able, to increase our product prices in amounts that correspond to increases in costs of raw materials, without materially and adversely affecting our sales and profits.

In recent years, however, we have increased our lumber purchases in an effort to mitigate the effects of rising lumber prices. In some years our sales have declined with the declines in the housing and financial markets. As a result, our inventory fluctuated substantially. Inventory fluctuation can materially and adversely affect our margins, cash flow and profits.

If we cannot protect our technology, we will not be able to compete effectively.

Our ability to compete effectively with other companies depends in part on our ability to maintain the proprietary nature of our technology, in part through patents. We might not be able to protect or rely on our patents. Patents might not issue pursuant to pending patent applications. Others might independently develop the same or similar technology, develop around the patented aspects of any of our products or proposed products, or otherwise obtain access to or circumvent our proprietary technology. We also rely on unpatented proprietary technology to maintain our competitive position. We might not be able to protect our know-how or other proprietary information. If we are unable to maintain the proprietary nature of our significant products, our sales and profits could be materially reduced.

In attempting to protect our proprietary information, we sometimes initiate lawsuits against competitors and others that we believe have infringed or are infringing our rights. In such an event, the defendant may assert counterclaims to complicate or delay the litigation or for other reasons. Litigation may be very costly and may result in adverse judgments that affect our sales and profits materially and adversely.

Our future growth may depend on our ability to penetrate new domestic and international markets, which could reduce our profitability.

International customs, standards, techniques and methods differ from those in the United States. Laws and regulations applicable in new markets may be unfamiliar to us. Compliance may be substantially costlier than we anticipate. As a result, we may need to redesign products, or invent or design new products, to compete effectively and profitably in new markets. We expect that we will need significant time, which may be years, to generate substantial sales or profits in new markets.

Other significant challenges to conducting business in foreign countries include, among other factors, local acceptance of our products, political instability, changes in import and export regulations, changes in tariff and freight rates, fluctuations in foreign exchange rates and currency controls. We might not be able to penetrate these markets and any market penetration that occurs might not be timely or profitable. If we do not penetrate these markets within a reasonable time, we will be unable to recoup part or all of the significant investments we will have made in attempting to do so.

We may decide to dispose of assets and incur material expenses in doing so.

We have terminated in the past and may terminate in the future product lines or businesses if we determine that the cost of operating them is not warranted by their expected profitability. In addition to employee severance, lease buy-outs and other shut-down costs, the net realizable value may be substantially less than our carrying cost of the assets of terminated operations, resulting in material costs and materially and adversely affecting our sales, assets, profitability and financial condition.

Seasons and business cycles affect our operating results.

Our sales are seasonal, with operating results varying from quarter to quarter. With some exceptions, our sales and income have historically been higher in the first and fourth quarters than in the second and third quarters of the year, as customers purchase materials in the early spring and winter months for the construction and manufacturing season. In addition, weather conditions, such as unseasonably warm, cold or wet weather, which affect, and sometimes delay or accelerate installation of some of our products, significantly affect our results of operations. Political and economic events can also affect our sales and profitability.

We have little control over the timing of customer purchases. Sales that we anticipate in one quarter may occur in another quarter, affecting both quarters’ results. In addition, we incur significant expenses as we develop, produce and market our products in anticipation of future orders. We maintain high inventory levels and typically ship orders as we receive them, so we operate with little backlog. As a result, net sales in any quarter generally depend on orders booked and shipped in that quarter. A significant portion of our operating expenses is fixed. Planned expenditures are based primarily on sales forecasts. When sales do not meet our expectations, our operating results will be reduced for the relevant quarters, as we will have already incurred expenses based on those expectations.

Our principal markets are in the sauna and construction industry. That industry is subject to significant volatility due to economical and real estate market cycles, fluctuations in interest rates, the availability, or lack thereof, of credit to builders and developers, inflation rates, weather, and other factors and trends. None of these factors or trends is within our control. Declines in commercial and residential construction, such as housing starts, and remodeling projects have reduced, and in the future can be expected to reduce, the demand for our products. Negative economic or construction industry performance adversely affects our business. Declines in construction activity or demand for our products have materially and adversely affected, and could in the future materially and adversely affect, our sales and profitability.

Product liability claims and product recalls could harm our reputation, sales and financial condition.

We design and manufacture most of our standard products and expect to continue to do so, although we buy raw materials and some manufactured products from others. We have on occasion found flaws and deficiencies in the manufacturing, design or testing of our products. We also have on occasion found flaws and deficiencies in raw materials and finished goods produced by others. Some flaws and deficiencies have not been apparent until after the products were installed by customers.

Even if a flaw or deficiency is discovered before any damage or injury occurs, we may need to recall products, and we may be liable for any costs necessary to replace recalled products or retrofit the affected structures. Any such recall or retrofit could entail substantial costs and adversely affect our reputation, sales and financial condition. We do not carry insurance against recall costs or the adverse business effect of a recall, and our product liability insurance may not cover retrofit costs.

Claims resulting from a natural disaster might be made against us with regard to damage or destruction of structures incorporating our products. Any such claims, if asserted, could materially and adversely affect our business and financial condition.

Claims that we infringe intellectual property rights of others may materially increase our expenses and reduce our profits.

Other parties have in the past and may in the future claim that our products or processes infringe their patent rights and other intellectual property rights. We may incur substantial costs and liabilities in investigating, defending and resolving such claims, whether or not they are meritorious, which may materially reduce our profitability and materially and adversely affect our business and financial condition. Litigation can be disruptive to normal business operations and may result in adverse rulings or decisions. If any such infringement claim is asserted against us, we may be required to obtain a license or cross-license, modify our existing technology or design a new non-infringing technology, any of which could be costly and time-consuming. A ruling against us in an infringement lawsuit could include an injunction barring our production or sale of any infringing product. A damage award against us could include an award of royalties or lost profits and, if the court finds willful infringement, treble damages and attorneys’ fees.

Complying or failing to comply with environmental, health and safety laws and regulations could affect us materially and adversely.

We are subject to environmental laws and regulations governing emissions into the air, discharges into water, and generation, handling, storage, transportation, treatment and disposal of waste materials. We are also subject to other federal and state laws and regulations regarding health and safety matters. Our manufacturing operations involve the use of solvents, chemicals, oils and other materials that are regarded as hazardous or toxic. We also use complex and heavy machinery and equipment that can pose severe safety hazards, especially if not properly and carefully used. Some of our products also incorporate materials that are hazardous or toxic in some forms, such as zinc and lead used in some steel galvanizing processes, chemicals used in our acrylic and epoxy anchoring products, and chemicals used in our concrete repair, strengthening and protecting products.

If we do not obtain all material licenses and permits required by environmental, health and safety laws and regulations, we may be subject to regulatory action by governmental authorities. If our policies and procedures do not comply in all respects with existing environmental, health and safety laws and regulations, our activities might violate such laws and regulations. Even if our policies and procedures do comply, but our employees fail or neglect to follow them in all respects, we might incur similar liability. Relevant laws and regulations could change or new ones could be adopted that require us to obtain additional licenses and permits and cause us to incur substantial expense.

Any change in laws or regulations, any legal or regulatory violations, or any contamination, could materially and adversely affect our business and financial condition.

We depend on key management and technical personnel, the loss of whom could harm our business.

We depend on our key management and technical personnel. The loss of one or more key employees could materially and adversely affect us.

Our success also depends on our ability to attract and retain highly qualified technical, marketing and management personnel necessary for the maintenance and expansion of our activities. We face strong competition for such personnel and may not be able to attract or retain such personnel. In addition, when we experience periods with little or no profits, a decrease in compensation based on our profits may make it difficult to attract and retain highly qualified personnel.

Any work stoppage or interruption by employees could materially and adversely affect our business and financial condition.

A work stoppage or interruption by a significant number of our employees could have a material and adverse effect on our sales and profitability.

International operations expose us to foreign exchange rate risk.

We have foreign exchange rate risk in our international operations and through purchases from foreign vendors. We do not currently hedge this risk. Changes in currency exchange rates could materially and adversely affect our sales and profitability.

Natural disasters could decrease our manufacturing capacity.

Our current manufacturing facilities are located in geographic regions that have not experienced major natural disasters, such as earthquakes, floods and hurricanes. However, heavy snow storm may occur in some winter times. Our disaster recovery plan is adequate or effective. We do not carry earthquake insurance. Other insurance that we carry is limited in the risks covered and the amount of coverage. Our insurance would be adequate to cover all of our resulting costs, business interruption and lost profits when a major natural disaster occurs. A natural disaster rendering one or more of our manufacturing facilities totally or partially unusable, whether or not covered by insurance, would materially and adversely affect our business and financial condition.

Additional financing, if needed, to fund our working capital, growth or acquisitions may not be available on reasonable terms, or at all.

If our cash requirements for working capital or to fund our growth increase to a level that exceeds the amount of cash that we generate from operations, or if we should decide to make an acquisition that requires more cash than we have available internally and through our current credit arrangements, we will need to seek additional financing. In that event, we may need to enter into additional or new borrowing arrangements or consider equity financing.

Additional or new borrowings may not be available on reasonable terms, or at all. Our ability to raise money by issuing and selling shares of our common or preferred stock would depend on general market conditions and the demand for our stock. We may be unable to raise adequate capital on reasonable terms by selling stock. If we sell stock, our existing stockholders could experience substantial dilution. Our inability to secure additional financing could prevent the expansion of our business, internally and through acquisitions.

Any issuance of preferred stock may dilute your investment and reduce funds available for dividends.

Our Board of Directors is authorized by our Certificate of Incorporation to determine the terms of one or more series of preferred stock and to authorize the issuance of shares of any such series on such terms as our Board of Directors may approve. Any such issuance could be used to impede an acquisition of our business that our Board of Directors does not approve, further dilute the equity investments of holders of our common stock and reduce funds available for the payment of dividends to holders of our common stock.

Our stock price is likely to be volatile and could drop.

The trading price of our common stock could be subject to wide fluctuations in response to period-to-period variations in operating results, changes in earnings estimates by analysts, announcements of technological innovations or new products by us or our competitors, general conditions in the sauna and construction materials industries, relatively low trading volume in our common stock and other events or factors. In addition, the stock market is subject to extreme price fluctuations. This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of those companies. Securities market fluctuations may materially and adversely affect the market price of our common stock.

Future sales of common stock could adversely affect our stock price.

Our issuance of substantial amounts of our common stock could adversely affect the prevailing market price for our common stock. If a substantial number of shares were sold in the public market pursuant to Rule 144 or on exercise of options, the trading price of our common stock in the public market could be adversely affected.

We are subject to a number of significant risks that might cause our actual results to vary materially from our plans, targets or projections, including:

	•	lack of market acceptance of new products;
	•	failing to develop new products with significant market potential;
	•	increased labor costs, including significant increases in worker’s compensation insurance premiums and health care benefits;
	•	failing to increase, or even maintain, sales and profits;
	•	failing to anticipate, appropriately invest in and effectively manage the human, information technology and logistical resources necessary to support the growth of our business, including managing the costs associated with such resources;
	•	failing to integrate, leverage and generate expected rates of return on investments, including expansion of existing businesses and expansion through acquisitions;
	•	failing to generate sufficient future positive operating cash flows and, if necessary, secure adequate external financing to fund our growth; and
	•	interruptions in service by common carriers that ship goods within our distribution channels.

If we change significantly the location, nature or extent of some of our manufacturing operations, we may reduce our net income.

If we decide to change significantly the location, nature or extent of a portion of our manufacturing operations, we may need to record an impairment of our goodwill. Other changes or events in the future could further impair our recorded goodwill, which could also materially and adversely affect our profitability.

Failure of our internal control over financial reporting could harm our business and financial results.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes:

	•	maintaining records that in reasonable detail accurately and fairly reflect our transactions;
	•	providing reasonable assurance that transactions are recorded as necessary for preparation of the consolidated financial statements;
	•	providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and
	•	providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements would be prevented or detected on a timely basis.

Because of the inherent limitations of internal control, our internal control over financial reporting might not detect or prevent misstatement of our consolidated financial statements. Our growth and entry into new, globally dispersed markets put significant additional pressure on our system of internal control over financial reporting. Failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.

Failure of our accounting systems could harm our business and financial results.

We have implemented a commercially available SBT third-party accounting software system, initially focused on replacing our internally developed general ledger and purchasing and payables systems, for use in our operations in the United States, Europe and Asia. Any errors or defects in, or unavailability of, third-party software or our implementation of the systems, could result in errors in our financial statements, which could materially and adversely affect our business. If we continue to use our other internally developed accounting systems and they are not able to accommodate our future business needs, or if we find that they or any new systems we may implement contain errors or defects, our business and financial condition could be materially and adversely affected.

Our international operations may be materially and adversely affected by factors beyond our control.

Economic, social and political conditions, laws, practices and customs vary widely among the countries where we produce or sell our products. Our operations outside of the United States are subject to a number of risks and potential costs, including, for example, lower profit margins, less protection of intellectual property and economic, political and social uncertainty in some countries. Our sales and profits depend, in part, on our ability to develop and implement policies and strategies that effectively anticipate and manage these and other risks in the countries where we do business. These and other risks may materially and adversely affect our operations in any particular country and our business as a whole. Inflation in emerging markets also makes our products more expensive there and increases the market and credit risks to which we are exposed.

Failure to comply with export, import, and sanctions laws and regulations could affect us materially and adversely.

We are subject to a number of export, import and economic sanction regulations, including the International Traffic in Arms Regulations (the “ITAR”), the Export Administration Regulations (the “EAR”) and U.S. sanction regulations administered by the U.S. Department of Treasury, Office of Foreign Assets (“OFAC”). Foreign governments where we have operations also implement export, import and sanction laws and regulations.

If we do not obtain all necessary import and export licenses required by applicable export and import regulations, including the ITAR and the EAR, we may be subject to fines, penalties and other regulatory action by governmental authorities, including, among other things, having our export or import privileges suspended. If we conduct business with any countries, entities or individuals sanctioned by OFAC or any equivalent foreign regulation or law, or otherwise fail to comply in any manner with applicable sanction regulations or laws, we may be subject to fines, penalties and other regulatory action. Even if our policies and procedures for exports, imports and sanction regulations comply, but our employees fail or neglect to follow them in all respects, we might incur similar liability.

Any change in applicable export, import or sanction laws or regulations or any legal or regulatory violations could materially and adversely affect our business and financial condition.

If we fail to keep pace with advances in our industry or fail to persuade customers to adopt new products we introduce, customers may not buy our products, which would adversely affect our sales and profits.

Constant development of new technologies and techniques, frequent new product introductions and strong price competition characterize the construction industry. The first company to introduce a new product or technique to the market gains a competitive advantage. Our future growth depends, in part, on our ability to develop products that are more effective or safer or incorporate emerging technologies better than our competitors’ products. Sales of our existing products may decline rapidly if a competitor were to introduce superior products, or even if we announce a new product of our own. If we fail to make sufficient investments in research and development or if we focus on technologies that do not lead to better products, our current and planned products could be surpassed by more effective or advanced products. If we fail to manufacture our products economically and market them successfully, our sales and profits would be materially and adversely affected.

Changes in accounting standards could materially and adversely affect our financial results.

The accounting rules applicable to public companies are subject to frequent revision. Future changes in accounting standards, guidance and interpretations could require us to change the way we measure revenue, expense or balance sheet amounts, which could result in material and adverse change to our reported results of operations or financial condition.

Climate change could materially and adversely affect our business.

Scientific reports indicate that, as a result of human activity:

	•	temperatures around the world have been increasing and are likely to continue to increase, as a result of increasing atmospheric concentrations of carbon dioxide and other carbon compounds,
	•	the frequency and severity of storms and flooding are likely to increase,
	•	severe weather is likely to occur in places where the climate has historically been more mild, and
	•	average sea levels have risen and are likely to continue to rise, threatening worldwide coastal development.

We cannot predict the effects that these phenomena may have on our business. They might, for example:

	•	depress or reverse economic development,
	•	reduce the demand for construction,
	•	increase the cost and reduce the availability of fresh water,
	•	destroy forests, increasing the cost and reducing the availability of wood products used in construction,
	•	increase the cost and reduce the availability of raw materials and energy,
	•	increase the cost of capital,
	•	increase the cost and reduce the availability of insurance covering damage from natural disasters,
	•	lead to claims regarding the content or adequacy of our public disclosures, and
	•	lead to new laws and regulations that increase our expenses and reduce our sales.

Any of these consequences, and other consequences of climate change that we do not foresee, could materially and adversely affect our sales, profits and financial condition.

We are subject to U.S. and international tax laws that could affect our financial results.

We conduct international operations through our subsidiaries. Tax laws affecting international operations are complex and subject to change. Our income tax liabilities in the different countries where we operate depend in part on internal settlement prices and administrative charges among us and our subsidiaries. These arrangements require us to make judgments with which tax authorities may disagree. Tax authorities may impose additional tariffs, duties, taxes, penalties and interest on us. For example, we manufacture steel products in foreign countries for importation into the U.S. and other countries, and government agencies may impose substantial prospective or retroactive tariffs on such products. Transactions that we have arranged in light of current tax rules could have material and adverse consequences if tax rules change, and changes in tax rules or imposition of any new or increased tariffs, duties and taxes could materially and adversely affect our sales, profits and financial condition.

If we are unable to protect our information systems against data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.

We depend on information technology networks and systems, including the internet, to process, transmit and store electronic information. We depend on our information technology infrastructure for electronic communications among our locations around the world and between our personnel and our subsidiaries, customers and suppliers. Security breaches of this infrastructure could create system disruptions, shutdowns or unauthorized disclosure of confidential information. Security breaches could disrupt our operations, and we could suffer financial damage or loss because of lost or misappropriated information.

ITEM 2.

PROPERTIES

The Company owns its home office in Buena Park, California.

ITEM 3.

LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock will be listed on the OTC Market (“OTC”) under the symbol “PLHI.”

ITEM 6.

SELECTED FINANCIAL DATA

Disclosure in response to this item is not required of a smaller reporting company.

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD-LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL", "HOPES", "SEEKS", "ANTICIPATES", "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD-LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD-LOOKING STATEMENT. SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-K AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Overview

The following discussion and analysis of the PLH Products, Inc. (“we,” “our,” “us”) financial condition and results of operations includes information with respect to our plans and strategies for our business and should be read in conjunction with our interim unaudited condensed financial statements and related notes (“Interim Financial Statements”) included herein and our consolidated financial statements, related notes, Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2015.

PLH Products, Inc. established and incorporated on September 2, 1992, a California corporation (collectively the “Company”), manufactures and distributes saunas. The Company’s corporate office is located in Buena Park, California. The Company designs, develops, manufactures, and distributes a wide variety of infrared saunas and cedar product for traditional saunas. The Company distributes a full range of saunas under brand names, Health Mate, Sun Spirit, Healspa, Aroma Steam, and Fin Heaven to distributors, retailers, and end-users.

Results of Operations

Net Sales - Net sales were $25,994,465 for the year ended December 31, 2015. The company has entered into the license agreement with 3^rd party company to supply lumbers exclusively which purchase from one of the major vendors in Canada. And also the agreement includes the dealership of sales of sauna in Canada. The License income incurred was $349,173.

Cost of Sales - Cost of sales was $19,070,912, or 73.3% of net sales, for the year ended December 31, 2015. The one of the company’s major vendors is in Canada to purchase lumber and woods and the another major vendor is related party in China.

Gross Profit – Gross margin was $6,923,553 for the year ended December 31, 2015. Our gross margin, as a percentage of net sales, was 26.7% for the year ended on December 31, 2015.

Selling and Administrative Expense – Selling and administrative expenses were $6,307,269 for the year ended on December 31, 2015. The certain expenses were incurred significantly in 2015 primarily due to:

	•	Professional fee increased due primarily reflecting increase of legal and accounting consulting fee in conjunction with IPO registration and patent registration.
	•	Outside service fee increased due to primarily reflecting the development of web-based of online sales which the Company expect to launch in year 2016.

Other Income (Expense) – Interest expense was incurred primarily due to company’s long term loans and loan from others in 2015.

Income Taxes – The provision for income taxes was $220,128 for the year ended December 31, 2015.

Liquidity and Capital Resources

Our principal liquidity requirements are for working capital, capital expenditures and cash dividends. We fund our liquidity requirements primarily through cash on hand, cash flows from operations and borrowings from our revolving credit facility. We believe our cash on hand, future cash flows from operations and borrowings from our revolving credit facility will be sufficient to fund our cash requirements for at least the next 12 months.

We ended the year of 2015 with $126,535 of cash. Our cash flows from operating, investing and financing activities are summarized as follows:

		December 31,
		2015
Net cash provided by (used in):
Operating activities	$	(919,836	)
Investing activities		-
Financing activities		957,114

Net increase in cash	$	37,278

Operating Activities. Net cash used in operating activities for the year ended December 31, 2015 was ($919,836). In the year ended on December 31, 2015, net cash was used primarily to increase of accounts receivable from related parties and to pay down of accounts payable to related parties.

Financing Activities. Net cash provided by financing activities for the year ended December 31, 2015 was $957,114. The net cash was provided primarily to borrowing (loan) from others.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's audited financial statements for the year ended December 31, 2015, together with the report of the independent certified public accounting firm thereon and the notes thereto, are presented beginning at page F-1.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on our assessment, we determined that, as of the end of the period covered by this report, our internal control over financial reporting was not effective based on those criteria.

During our assessment of the effectiveness of internal control over financial reporting as of the end of the period covered by this report, management identified the following material weaknesses:

	1.	Lack of Internal Audit Function – We lack qualified resources to perform the internal audit functions properly as well as oversight of recording and reporting of information. In addition, the scope and effectiveness of the internal audit function are yet to be developed.

	2.	Review of Financial Information and Financial Reporting – We do not have adequate levels of review of financial information necessary to ascertain the accounting for complex transactions as well as review of financial information presented.

	3.	Lack of Segregation of Duties – We do not have segregation of duties between recording, authorizing and testing.

Remediation Initiative

We are developing a plan to ensure that all information will be recorded, processed, summarized and reported accurately, and as of the date of this report, we have taken the following steps to address the above-referenced material weakness in our internal control over financial reporting:

	1.	We will continue to educate our management personnel to increase its ability to comply with the disclosure requirements and financial reporting controls; and

	2.	We will increase management oversight of accounting and reporting functions in the future; and

	3.	As soon as we can raise sufficient capital or our operations generate sufficient cash flow, we will hire additional personnel to handle our accounting and reporting functions.

While the first two steps of our remediation process are ongoing, we do not expect to remediate the weaknesses in our internal controls over financial reporting until the time when we start to commercialize our products (and, therefore, may have sufficient cash flow for hiring sufficient personnel to handle our accounting and reporting functions).

A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. 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.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm because as a smaller reporting company we are not subject to Section 404(b) of the Sarbanes-Oxley Act of 2002.

Changes in Internal Controls over Financial Reporting

No change in our system of internal control over financial reporting occurred during the fourth quarter of the fiscal year ended December 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table sets forth certain information as of April 12, 2016 concerning our directors and executive officers:

Name	Age	Position

Won Yong Lee	48	Director, Chief Financial Officer

Seung Woo Lee	68	Director, Chief Executive Officer

Kyung Min Park	68	Director, President

Our directors hold their positions on the board until our next annual meeting of the shareholders, and until their successors have been qualified after being elected or appointed. Officers serve at the discretion of the board of directors.

There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current board of directors.

Board Committees

We currently do not have standing audit, nominating or compensation committees. Currently, our entire board of directors is responsible for the functions that would otherwise be handled by these committees. We intend, however, to establish an audit committee, a nominating committee and a compensation committee of the board of directors as soon as practicable. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. The nominating committee would be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors. The nominating committee would also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures. The compensation committee will be primarily responsible for reviewing and approving our salary and benefit policies (including stock options), including compensation of executive officers.

Audit Committee Financial Expert

The Board of Directors does not currently have Audit Committee financial expert, as defined under Item 407(d)(5)(i) of Regulation S-K.

Code of Ethics

We do not have a code of ethics but intend to adopt one in the near future.

Potential Conflict of Interest

Since we do not have an audit or compensation committee comprised of independent Directors, the functions that would have been performed by such committees are performed by our Board of Directors. Thus, there is a potential conflict of interest in that our Directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or Directors.

Board’s Role in Risk Oversight

The Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive, and operational risks. The Board dedicates time at each of its meetings to review and consider the relevant risks faced by the Company at that time. In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment and oversight of the Company’s financial risk exposures.

ITEM 11.

EXECUTIVE COMPENSATION

The following is a summary of the compensation we paid to our executive officers, for the two fiscal year ended December 31, 2015.

Summary Compensation Table

		Salary
Name and Position	Year	($)
Won Yong Lee (1) CFO and Director of the Company	2015	80,736

Seung Woo Lee (2) CEO and Director of the Company	2015	255,000

Kyung Min Park (3) President and Director of the Company	2015	255,000

(1) Mr. Won Yong Lee was appointed as the Chief Financial Officer and Director of the Company on April 2001.

(2) Mr. Seung Woo Lee was appointed as the Chief Executive Officer and Director of the Company since the inception of the Company.

(3) Mr. Kyung Min Park was appointed as the President and Director of the Company since the inception of the Company

Compensation Discussion and Analysis

Overview

We intend to provide our named executive officers (as defined in Item 402 of Regulation S-K) with a competitive base salary that is in line with their roles and responsibilities when compared to peer companies of comparable size in similar locations.

Outstanding Equity Awards at Fiscal Year End

None.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding beneficial ownership of our common stock as of the date of this report by any person or group with more than 5% of any class of voting securities, president and our chief executive officer. Except as indicated in the footnotes to this table and subject to applicable community property laws, the persons named in the table to our knowledge have sole voting and investment power with respect to all shares of securities shown as beneficially owned by them.

		Shares
		Beneficially	Percent of
Name	Office	Owned (1)	Class (2)
Officers and Directors
Seung Woo Lee	Chief Executive Officer, Director	18,757,916	58.44%

Kyung Min Park	President, Director	10,100,417	31.47%

5% Securities Holders

None.

(1)	Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

(2)	Based on 32,095,000 shares of the Company’s common stock outstanding.

Change in Control

As of the date of this report, there were no arrangements which may result in a change in control of the Company.

Securities Authorized for Issuance under Equity Compensation Plan

None.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with related persons

The Company has two subsidiaries as follows:

	•	Pacific Cedar Supply, Ltd. (Yantai, China) – Provides designing and manufacturing of Infra-Red Home Saunas; and
	•	Pacific Cedar Supply, Inc. (Yantai, China) – Provides designing and manufacturing of specialty wood of Western Canadia n Red Cedar and other wood type products.

The Company sells and purchases inventories from and to related parties. These transactions undertaken on terms no better than for customers who are no related entities. Also The Company’s investments include wholly owned subsidiaries which are accounted to $5,850,500 as of December 31, 2015 for under the cost method under APB No. 18, Cost vs. Equity Method of Accounting (“APB 18”)

Other than the above transactions or as otherwise set forth in this report or in any reports filed by the Company with the SEC, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K. The Company is currently not a subsidiary of any company.

The Company’s Board conducts an appropriate review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations where appropriate. The Board has not adopted formal standards to apply when it reviews, approves or ratifies any related party transaction. However, the Board believes that the related party transactions are fair and reasonable to the Company and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time they are authorized by the Board.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following lists fees billed by the auditors for the Company, for the years ended December 31, 2015:

Financial Statements for the Year Ended December 31		Audit Services		Tax Fees

2015(1) (2)	$	145,000	$	6,000

(1)	These services were provided by Simon & Edward, LLP who were engaged on May 4^th, 2015.

(2)	These services were provided by Steven Hwang, Inc. who were engaged through December 31, 2015.

	•	Audit Fees. Represents fees for professional services provided for the audit of the Company’s annual financial statements and review of its quarterly financial statements, and for audit services provided in connection with other statutory or regulatory filings.

	•	Tax Fees. Represents fees for professional services provided primarily for tax compliance and advice.

In the event that we should require substantial non-audit services, the audit committee would pre-approve such services and fees.

PART IV

ITEM 15.

EXHIBITS

(a) Financial Statements and Schedules

The following financial statements and schedules listed below are included in this Form 10-K.

Audited Financial Statements	F-1
Balance Sheet	F-2
Statement of Income	F-3
Statement of Stockholders' Equity	F-4
Statement of Cash Flows	F-5
Notes to Financial Statements	F-6

(b) Exhibits

Number		Description

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002*

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002*

101		Interactive data files pursuant to Rule 405 of Regulation S-T**

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.

	PLH Products, Inc.

Date: April 14, 2016	By:	/s/ Won Y. Lee
		Name: Won Y. Lee
		Title: Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name and Title		Date

/s/ Won Y. Lee		April 14, 2016
Won Y. Lee
Chief Executive Officer



/s/ Seung W. Lee		April 14, 2016
Seung W. Lee,
Chief Financial Officer

PLH Products, Inc.

Index to Financial Statements

	Page

Report of Independent Registered Public Accounting Firm	F-1

Balance Sheet as of December 31, 2015	F-2

Statement of Income for the year ending December 31, 2015	F-3

Statement of Changes in Stockholders’ Equity for the year ending December 31, 2015	F-4

Statement of Cash Flows for the year ending December 31, 2015	F-5

Notes to Financial Statements	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
PLH Products, Inc.
Buena Park, California

Report on the Financial Statements

We have audited the accompanying financial statements of PLH Products, Inc. (the "Company"), which comprise the balance sheet as of December 31, 2015, and the related statement of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audits evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Qualified Opinion

As described further in Note 2 - "Basis of Presentation and Departures from Generally Accepted Accounting Principles", there has been a departure from generally accepted accounting principles regarding the Company’s foreign subsidiaries. The financial position and results of these subsidiaries have not been included in the financial statements as of December 31, 2015, but are shown as investments at cost.

Opinion

In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of PLH Products, Inc. as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Los Angeles, California
March 31, 2016

F-1

PLH PRODUCTS, INC.
BALANCE SHEET

*December 31,*		*2015*

ASSETS

Current Assets:
Cash	$	126,535
Accounts receivable, net		1,542,120
Accounts receivable - related parties		7,224,176
Inventories, net		5,205,633
Prepayments to vendor - related parties		202,285
Prepaid expenses and other current assets		70,528
Total current assets		14,371,277

Non-current Assets:
Property, plant and equipment, net		2,999,031
Investments in affiliates		5,850,000
Other assets		91,777
Total non-current assets		8,940,808

Total assets	$	23,312,085

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable	$	1,580,715
Bank overdraft		417,952
Accrued expenses		531,130
Customer deposits		332,056
Borrowing from others		1,490,000
Lines of credit		3,250,000
Current portion of capital lease obligation		32,945
Current portion of long-term debt		326,170
Total current liabilities		7,960,968

Long Term Liabilities:
Capital lease obligation		13,547
Mortgage and term loans, net of current portion		4,151,190
Deferred income taxes		50,706
Total liabilities		12,176,411

Stockholders’ Equity:
Common stock, no par value; 500,000,000 shares authorized, 32,095,000 shares issued and outstanding in 2015		3,210
Additional paid-in capital		8,923,571
Retained earnings		2,208,893
Total stockholders' equity		11,135,674

Total liabilities and stockholders’ equity	$	23,312,085

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

F-2

PLH PRODUCTS, INC.
STATEMENT OF INCOME

*Year Ended December 31,*		*2015*
Net sales	$	25,994,465
Cost of sales		19,070,912
Gross profit		6,923,553
Selling , general, and administrative expenses		6,307,269
Income from operations		616,284
Other income (expense):
Interest expense		(405,615	)
Other income (expense), net		11,217
Total other expense, net		(394,398	)
Income (loss) before income tax provision		221,886
Income tax provision		220,128
Net income	$	1,758

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

F-3

PLH PRODUCTS, INC.
STATEMENT OF STOCKHOLDERS’ EQUITY

					Additional					Total
	Common Stock				Paid-in		Retained			Stockholders'
	Shares		Amount		Capital		Earnings			Equity
Balance - December 31, 2014	32,095,000	$	3,210	$	8,923,571	$	2,394,135		$	11,320,916
Dividend	-		-		-		(187,000	)		(187,000	)
Net income	-		-		-		1,758			1,758
Balance - December 31, 2015	32,095,000	$	3,210	$	8,923,571	$	2,208,893		$	11,135,674

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

F-4

PLH PRODUCTS, INC.
STATEMENT OF CASH FLOWS

*Year Ended December 31,*		*2015*

Cash flows from operating activities:
Net income	$	1,758
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense - property, plant, and equipment		55,007
Amortization expense - intangible assets		34,300
Inventory reserve		17,712
Deferred taxes		7,098
Changes in assets and liabilities:
Accounts receivable		329,276
Accounts receivable - related parties		(3,027,856	)
Inventories		(422,461	)
Prepayment to vendor		5,440
Prepayment to vendor - related parties		1,361,985
Prepaid expense and other current assets		117,760
Accounts payable		693,126
Accounts payable - related parties		(350,000	)
Accrued expenses		85,042
Customer deposits		171,977
Net cash used in operating activities		(919,836	)

Cash flows from financing activities:
Repayments from mortgage and term loans		(233,319	)
Repayments on mortgage and term loans, net		(83,074	)
Repayments on capital lease obligation		(26,274	)
Borrowings (repayments) on additional loan from others, net		1,490,000
Dividend distribution		(187,000	)
Bank overdraft		(3,219	)
Net cash provided by financing activities		957,114

Net increase (decrease) in cash		37,278

Cash – beginning of year		89,257

Cash – end of year	$	126,535


Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	405,615
Income taxes	$	317,428

Non-cash investing activity:
Investment, netted against accounts payable - related parties	$	50,000

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

F-5

PLH PRODUCTS, INC.

Notes to the Financial Statements
December 31, 2015

1.	PRESENTATION AND NATURE OF OPERATIONS

PLH Products, Inc. (the “Company”), manufactures and distributes saunas. The Company’s corporate office, a California corporation, located in Buena Park, California was established and incorporated on September 8, 1992. The Company sells a full range of sauna under brand names, Health Mate, Sun Spirit, Healspa, Aroma Steam, and Fin Heaven to distributors, retailers, and end- users.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FASB Codification

In June 2009, the Financial Accounting Standards Board (“FASB”) (issued FASB Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of Financial Accounting Standard (“SFAS”) No. 168), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. ASC 105-10 became the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernment entities. It also modifies the GAAP hierarchy to include only two levels of GAAP; authoritative and non-authoritative. ASC 105-10 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of ASC 105-10 did not have a material impact on the Company’s consolidated financial statements.

Basis of Presentation and Departures from Generally Accepted Accounting Principles

The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America, which is based on the accrual method of accounting.

The Company’s wholly owned foreign subsidiaries have not been consolidated in the financial statements, but have been recorded at cost which does not adhere to generally accepted accounting principles (“GAAP”). As a result, the accompanying balance sheets of the Company as of December 31, 2015 and the related statements of income, stockholders’ equity and cash flows for the years then ended may not include any adjustments that may result if the financial statements were consolidated.

Use of Estimates

The preparation of consolidated 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered. Customer payments received prior to the recognition of revenue are recorded as deferred revenue included in accrued expenses.

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense amounted to $20,651 for the year ended December 31, 2015.

F-6

Shipping and Handling Costs

The Company records all charges for outbound shipping and handling as revenue. All outbound shipping and handling costs are included in selling, general, and administrative expenses. The Company incurred $880,368 of outbound shipping and handling costs for the year ended December 31, 2015.

Accounts Receivable

Accounts receivable are carried at original invoice amount less the allowance for doubtful accounts based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts based on a combination of write-off history, aging analysis, and any specific known troubled accounts. Trade receivables are written off when deemed uncollectible.

Inventories

Inventories primarily consist of finished goods and are stated at the lower of cost or market, cost being determined on the weighted average costing method which approximates actual cost. The Company maintains an allowance for potentially excess and obsolete inventories and inventories that are carried at costs that are higher than their estimated net realizable values.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation and amortization are provided using the straight-line method over the following estimated useful lives:

Building	39 years
Furniture and fixtures	5-8 years
Machinery and equipment	4-5 years
Vehicles	4-5 years

Leasehold improvements are amortized over the lesser of the useful lives of the improvements, the related lease term, or the life of the building.

Intangible Assets

In December 2009, the Company incurred approximately $171,500 to patent and trademark certain products. These amounts were classified as prepaid expenses at December 31, 2010 and 2009. The Company incurred significant revenue related to these products in 2013 and the Company believes that these products have life of approximately 5 years. As a result, these costs are capitalized and amortized over the life of 5 years. Total intangible assets, net of accumulated amortization, are included in other assets in the balance sheet as of December 31, 2015.

Fair Value of Financial Instruments

The Company is required to disclose the estimated fair value of certain assets and liabilities in accordance with ASC-825-10, “Financial Instruments”. As of December 31, 2015, the Company believes that the carrying value of cash, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities approximate fair value due to the short maturity of theses financial instruments.

F-7

Income Taxes

The Company follows ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company adopted ASC 740-10-25 on January 1, 2009, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25 for the year ended December 31, 2015.

Long-lived Assets

In accordance with ASC 360, “Property, Plant, and Equipment,” the Company reviews for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. The Company considers the carrying value of assets may not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount.

As of December 31, 2015, the Company was not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable and other receivables arising from its normal business activities. The Company has a diversified customer base. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for un-collectible accounts and, as a consequence, believes that its accounts receivable related credit risk exposure beyond such allowance is limited.

The Company maintains cash in two accounts located in Southern California. All funds in a non-interest bearing transaction account are insured in full by the Federal Deposit Insurance Corporation (FDIC). This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to depositors under the FDIC's general deposit insurance rules. Beginning January 1, 2013, the Federal Deposit Insurance Corporation (FDIC) will no longer provide unlimited deposit coverage to funds in a non-interest bearing transaction account. The standard insurance amount is $250,000 per deposits under the FDIC's general deposit insurance rules. At December 31, 2015, the Company did not have uninsured cash balance.

F-8

3.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

*December 31,*		*2015*

Land	$	1,777,116
Building		1,653,334
Furniture and fixtures		184,630
Machinery and equipment		227,227
Vehicles		28,004
Leasehold improvements		61,141

Total property, plant and equipment		3,931,452
Less – accumulated depreciation and amortization		(932,421	)

Total property, plant and equipment, net	$	2,999,031

Depreciation and amortization expense amounted to approximately $55,007 for the year ended December 31, 2015.

4.	INTANGIBLE ASSETS (INCLUDED IN OTHER ASSETS)

Intangible assets consisted of the following:

*December 31,*		*2015*
Trademark and patent	$	171,500
Less – accumulated amortization		(171,500	)
Total intangible assets, net	$	-

For the year ended December 31, 2015, amortization expense was $34,300.

F-9

5.	CAPITAL LEASE OBLIGATION

The Company leases certain equipment under capital leases, which require total monthly lease payments of approximately $2,800. The leases have interest rates of approximately 11.0% and expire on various dates through January 2019. The aggregate future payments under the capital lease obligations are as follows:

Years ending December 31,		Amount
2016		32,945
2017		8,908
2018		8,908
2019		1,842
Total		52,603
Less – portion representing interest		(6,111	)
Total		46,492
Less – non-current portion		(13,547	)

Current portion of capital lease obligation	$	32,945

6.	LINE OF CREDIT

The Company retains a revolving line of credit with a financial institution. The Company renewed its revolving line of credit with a financial institution on November 21, 2014. The line of credit has a maximum outstanding aggregate loan balance not to exceed $3,250,000 in 2015.

At December 31, 2015, the line of credit provides for variable interest based on the bank’s prime rate plus 0.75% (4.00% at December 31, 2015), payable monthly, with a maturity date of May 31, 2016. Borrowings under the line of credit are collateralized by the Company’s inventories and equipment. The Company had unused line of credit of $0 and outstanding balance of $3,250,000. The Company did not have any standby letters of credit as of December 31, 2015. Total interest expense was $127,778 for the year ended December 31, 2015.

The Company is required to comply with certain financial covenants under the line of credit agreement. The Company was not in compliance as of December 31, 2015.

F-10

7.	MORTGAGE AND TERM LOANS

Mortgage and term loans consisted of the following:

*December 31,*		*2015*

Note payable on a monthly basis (principal and interest) to a bank under a mortgage loan agreement dated November 21, 2013 with maturity date of November 21, 2020, secured by the Company’s building and land, interest rate at bank’s prime rate plus 0.75% or a floor of 4.00 (4.00% at December 31, 2015).	$	3,185,650

The term loan agreement mentioned above was refinanced on November 21, 2013. Under the refinanced term loan agreement, note payable on a monthly basis (principal and interest) to a bank with maturity date of November 21, 2020, secured by substantially all of the assets of the Company, interest rate at bank’s prime rate plus 0.75% or a floor of 4.00 (4.00% at December 31, 2015)		1,291,710

Total mortgage and term loans		4,477,360
Less – long term portion		(4,151,190	)

Current portion of mortgage and term loans	$	326,170

Total interest expense under mortgage and term loans was $188,587 for the year ended December 31, 2015. The aggregate future payments under the bank loan payable are as follows:

Years ending December 31,		Amount

2016	$	326,170
2017		341,948
2018		356,761
2019		372,210
2020		3,080,271

Total	$	4,477,360

The Company is required to comply with certain financial covenants under the mortgage and term loan agreements. The Company was not in compliance as of December 31, 2015.

8.	BORROWINGS FROM OTHERS

In 2015, the Company had uncollateralized borrowings from an unrelated party bearing various interest and due on demand. The loan that the Company borrowed from 3^rd party company was amounted to $1,000,000 at December 31, 2015, and the interest rate is 8.5% . The other loans were set to monthly fixed interest amount. The total outstanding balance was $1,490,000 at December 31, 2015.

F-11

9.	INCOME TAX

The provision for income taxes consisted of the following:

*December 31,*		*2015*
Current:
Federal	$	167,480
State		45,550
Total		213,030

Deferred:
Federal		5,892
State		1,206
Total		7,098

Provision for income taxes	$	220,128

The Company’s deferred income tax (liability) asset consisted of the following:

*December 31,*		*2015*
Current deferred income tax (liabilities) assets:
Depreciation and amortization	$	(50,706	)
Total	$	(50,706	)

10.

INVESTMENTS IN AFFILIATES

The Company’s investments include wholly owned subsidiaries which are accounted for under the cost method under APB No. 18, Cost vs. Equity Method of Accounting (“APB 18”) as follows:

*December 31,*		*2015*

Pacific Cedar Supplies, Inc.	$	3,850,000
Pacific Cedar Supplies, Ltd.		2,000,000

Total investments	$	5,850,000

F-12

11.

RELATED PARTY TRANSACTIONS

The Company sells and purchases inventories from and to related parties who are wholly owned subsidiaries of the Company. These transactions undertaken on terms no better than for customers who are no related entities. Amounts owed to related parties are as follows:

*December 31,*		*2015*

Accounts receivables:
Pacific Cedar Supply, Inc.	$	5,434,360
Pacific Cedar Supply, Ltd.		1,789,816
Total	$	7,224,176

Prepayment to vendor:
Pacific Cedar Supply, Inc.	$	156,970
Pacific Cedar Supply, Ltd.		45,315
Total	$	202,285

Sales to Company’s related parties accounted for approximately 15% of total sales for the years ended December 31, 2015. The Company purchased total of $9,741,151from related parties for the years ended December 31, 2015.

12.

MAJOR CUSTOMERS

At least 10% of sales and related Accounts receivable from customers consisted of the following:

				*Accounts*
*Year ended / As of December 31, 2015,*		*Total Sales*		*Receivable*

Customer:
Samsong Caster Co., Ltd.	$	6,636,617	$	172,940
Pacific Cedar Supply, Inc.		2,838,101		5,434,360
Total	$	9,474,718	$	5,607,300

13.

MAJOR SUPPLIERS

At least 10% of purchases and related Accounts payable from suppliers consisted of the following:

				*Accounts*
		*Total*		*Payable*
*Year ended / As of December 31, 2015,*		*Purchases*		*(Prepayment)*

Purchases:
Pacific Cedar Supply, Ltd.	$	6,397,298	$	(45,315	)
Western Forest Products, Inc.		4,438,547		1,036,027
Pacific Cedar Supply, Inc.		3,343,853		(156,970	)
Total	$	14,179,698	$	833,742

F-13

14.

COMMITMENTS AND CONTINGENCIES

The Company leases certain automobiles under operating leases. The future minimum lease payments under these operating leases are as follows:

Year ending December 31,		Amount

2016	$	5,454

Total	$	5,454

The Company is subject to various legal proceedings from time to time as part of its business. As of December 31, 2015, the Company was not currently party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, it believes would have a material adverse effect on its business, financial condition and results of operations.

15.

RETIREMENT PLAN

The Company has a 401(k) defined contribution retirement benefit plan for the U.S. employees. Contributions by the Company to the retirement plan and expense recognized for the year ended December 31, 2015 was $31,128.

16.

SUBSEQUENT EVENTS

In May 2009, the FASB issued ASC 855, “Subsequent Events.” ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009.

The Company evaluated all events or transactions that occurred after December 31, 2015 up through the date the financial statements were available to be issued. During these periods, the Company did not have any material recognizable subsequent events required to be disclosed as of and for the year ended December 31, 2015.

F-14

PLH Products, Inc. 10-K