UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For~~or the quarterly period ended ~~September~~March 3031, ~~2015~~2016

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934:

For the transition period from______ to _______

Commission File Number 0-26573

PHYSICAL PROPERTY HOLDINGS INC.

(Exact name of Registrant as specified in its charter)

Delaware	98-0203281
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

23/F AIA Tower

No. 183 Electric Road, North Point

Hong Kong

(Address of principal executive offices)

(011) (852) 2917-0000

(Registrant's telephone number)

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ☒ No ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer ☐

Accelerated Filer ☐

Non-accelerated Filer ☐

Smaller Reporting Company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

~~November~~May 1216, ~~2015~~2016, 90,000,000 shares, $0.001 par value.

PHYSICAL PROPERTY HOLDINGS INC.

Form 10-Q for the ~~period~~quarter ended ~~September~~March 3031, ~~2015~~2016

TABLE OF CONTENTS

			~~Page~~	Page
PART I - FINANCIAL INFORMATION
	ITEM 1 - FINANCIAL STATEMENTS
		Unaudited Condensed Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, 2014 and 2015	3
		Unaudited Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2015 and 2016		3
		Condensed Consolidated Balance Sheets as of December 31, 2014 and September 30, 2015 (Unaudited)	4
		Condensed Consolidated Balance Sheets as of December 31, 2015 and March 31, 2016 (Unaudited)		4
		Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2014 and 2015	5
		Unaudited Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2015 and 2016		5
		Notes to Condensed Consolidated Financial Statements	~~6 – 8~~	6 – 9
	ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		~~9 - 11~~	10-12
	ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		12	13
	ITEM 4 - CONTROLS AND PROCEDURES		12	13
PART II - OTHER INFORMATION				14
	ITEM 6 - EXHIBITS		13
	ITEM 1 - LEGAL PROCEEDINGS			14
		SIGNATURES	14
	ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			14
	ITEM 3 - DEFAULTS UPON SENIOR SECURITIES			14
	ITEM 4 - MINE SAFETY DISCLOSURES			14
	ITEM 5 - OTHER INFORMATION			14
	ITEM 6 - EXHIBITS			14
	SIGNATURES			15

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended September 30,									Nine months ended September 30,
	Three Months Ended March 31,
	2014			2015			2015			2014			2015			2015
	2015			2016			2016
	HK$’000			HK$’000			US$’000			~~HK$’000~~			~~HK$’000~~			~~US$’000~~
Operating Revenues
Rental income		~~265~~288			~~254~~294			3338			~~785~~			~~776~~			99
Total operating revenues		~~265~~288			~~254~~294			3338			~~785~~			~~776~~			99
Operating Expenses
Rent and related expenses		(3240	)		(3142	)		(45	)		~~(94~~	)		~~(101~~	)		~~(13~~	)
Depreciation		(71	)		(71	)		(9	)		~~(223~~	)		~~(213~~	)		~~(27~~	)
Other selling and administrative expenses		(~~288~~290	)		(~~299~~310	)		(3840	)		~~(936~~	)		~~(899~~	)		~~(115~~	)
Total operating expenses		(~~391~~401	)		(~~401~~423	)		(5154	)		~~(1,253~~	)		~~(1,213~~	)		~~(155~~	)
Loss from operations		(~~126~~113	)		(~~147~~129	)		(1816	)		~~(468~~	)		~~(437~~	)		~~(56~~	)
Non-operating expenses
Other income		--			--			--			--			1			--
Interest expenses		(41	)		(38	)		(5	)
Interest expenses		(43	)		(39	)		(5	)		(130	)		(120	)		(15	)
Total non-operating expenses		(41	)		(38	)		(5	)
Total non-operating expenses		(43	)		(39	)		(5	)		(130	)		(119	)		(15	)
Loss before income taxes		(154	)		(167	)		(21	)
Loss before income taxes		(169	)		(186	)		(23	)		(598	)		(556	)		(71	)
Provision for income taxes		--			--			--
Provision for income taxes		--			--			--			--			--			--
Net loss and total comprehensive loss		(154	)		(167	)		(21	)
Net loss and total comprehensive loss		(169	)		(186	)		(23	)		(598	)		(556	)		(71	)
Loss per share of common stock (in cents) - Basic and diluted		(0.17	)		(0.19	)		(0.02	)
Loss per share of common stock (in cents) – Basic and diluted		(0.19	)		(0.21	)		(0.02	)		(0.92	)		(0.62	)		(0.08	)
Weighted average number of shares of common stock outstanding		90,000,000			90,000,000			90,000,000
Weighted average number of shares of common stock outstanding		90,000,000			90,000,000			90,000,000			64,874,922			90,000,000			90,000,000

The condensed consolidated financial statements should be read in conjunction with the accompanying notes.

PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2014

As of September 30, 2015 (Unaudited)

As of December 31, 2015

As of March 31, 2016 (Unaudited)

HK$’000

US$’000

ASSETS

Current assets

Cash and bank balances

63102

~~193~~79

2510

Management fees and utility deposits

Prepayments

--1

Total current assets

91129

~~222~~111

2814

Bank deposits, collateralized

Property, plant and equipment, net of accumulated depreciation of HK$3,777,000 (US$484,000) as of September 30, 2015 (December 31, 2014: HK$3,564,000)

9,224

9,011

1,155

Property, plant and equipment, net of accumulated depreciation of HK$3,635,000 (US$466,000) as of March 31, 2016 (December 31, 2015: HK$3,564,000)

8,940

8,869

1,137

Total assets

9,~~397~~151

9,~~315~~062

1,~~194~~162

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities

Bank loans - (Note 3)

7,~~843~~248

7,~~447~~098

~~955~~910

Other payables

~~316~~370

~~306~~370

3947

Due to Principal Stockholder - (Note 5)

34,~~567~~657

4,~~447~~885

~~570~~626

Total current liabilities

1112,~~726~~275

12,~~200~~353

1,~~564~~583

Commitments and contingencies - (Note 6)

Stockholders' deficit

Common stock, par value US$0.001 each, 100 million shares of stock authorized; 90,000,000 shares of stock issued and outstanding

702

Additional paid-in capital

73,608

9,437

Accumulated losses

(7677,~~639~~434

)

(77,~~195~~601

)

(9,~~897~~948

)

Total stockholders' deficit

(23,~~329~~124

)

(23,~~885~~291

)

(~~370~~421

)

Total liabilities and stockholders' deficit

9,~~397~~151

9,~~315~~062

1,~~194~~162

The condensed consolidated financial statements should be read in conjunction with the accompanying notes.

PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2014			2015			2015
	2015			2016			2016
	HK$’000			HK$’000			US$’000
Cash flows from operating activities
Net loss		(~~598~~154	)		(~~556~~167	)		(7121	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		~~223~~71			~~213~~71			279
Changes in working capital:
Management fees and utility deposits		2			--			--
Prepayments		2			(5	)		(1	)
Prepayments		(5	)		(1	)		--
Other payables		18			--			--
Other payables		(79	)		(10	)		(1	)
Net cash used in operating activities		(63	)		(101	)		(13	)
Net cash used in operating activities		(457	)		(354	)		(45	)
Cash flows from financing activities
Repayment of bank loans		(~~436~~147	)		(~~396~~150	)		(5119	)
Net advance from Principal Stockholder - (Note 5)		~~906~~210			~~880~~228			~~113~~29
Net cash provided by financing activities		~~470~~63			~~484~~78			6210
Net increase in cash and cash equivalents		13			130			17
Net decrease in cash and cash equivalents		--			(23	)		(3	)
Cash and cash equivalents at beginning of period		2963			63102			813
Cash and cash equivalents at end of period		4263			~~193~~79			2510

The condensed consolidated financial statements should be read in conjunction with the accompanying notes.

PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Physical Property Holdings Inc. and the subsidiaries that it controls (collectively referred to as the "Company"). The Company, through its subsidiaries, is engaged in the real estate business by holding five residential apartments in Hong Kong. Unless otherwise specified in the text, references to the Company include the Company and its subsidiaries. These financial statements should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet at December 31, ~~2014~~2015 has been derived from the audited consolidated financial statements at that date but the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the ~~nine~~three-month period ended ~~September~~March 3031, ~~2015~~2016 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2015~~2016.

Translation of amounts from Hong Kong Dollars ("HK$") into United States Dollars ("US$") for the convenience of the reader has been made at the exchange rate of US$1.00 = HK$7.8. No representation is made that the Hong Kong Dollar amounts could have been, or could be, converted into United States Dollars, at that rate on ~~September~~March 3031, ~~2015~~2016 or at any other certain rate.

The Company had negative working capital of HK$1112,~~978~~242,000 as of ~~September~~March 3031, ~~2015~~2016 and incurred losses of HK$~~556~~167,000 and HK$~~598~~154,000 for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 respectively. These conditions raised substantial doubt about the Company’s ability to continue as a going concern.

Continuation of the Company as a going concern is dependent upon attaining profitable operations in the future, exercising tight cost and cash flow controls measures, and the financial support from ~~Mr. Ngai Keung Luk (~~the “Principal Stockholder”). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Principal Stockholder has undertaken to make available adequate funds to the Company as and when required to maintain the Company as a going concern. Having taken into consideration the undertaking provided by the Principal Stockholder, management believes that the Company will be able to settle its liabilities when they become due. However, there can be no assurance that the financing from the Principal Stockholder will be continued.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, Ngai Keung Luk (“Mr. Luk”), Chairman, Chief Executive Officer and the Principal Stockholder, made a net advance of HK$~~880~~228,000 or US$~~113~~29,000 to the Company as described in Note 5 below. Mr. Luk owns 94.5% of the Company’s issued and outstanding shares of common stock as of the date this quarterly report is filed.

The Company has evaluated subsequent events through the date this quarterly report is filed.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

As of the date this quarterly report is filed, there are no recently issued accounting pronouncements which adoption would have a material impact on the Company’s financial statements.

PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. BANK LOANS

During the ~~nine~~three-month periods ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, the Company repaid HK$~~396~~150,000 and HK$~~436~~147,000 of its existing bank loans, respectively. The outstanding loan balances as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015 are analyzed as follows:

End of maturity	Interest rate	Principal
		2014		2015		2015
		2015		2016		2016
		HK$’000		HK$’000		US$’000
2026	32.151% per annum ~~below Hong Kong Dollar Prime Rate~~		7,~~843~~248		7,~~447~~098		~~955~~910

Payables during the following periods according to bank repayment terms notices

	Principal
	2014		2015		2015
	2015		2016		2016
	HK$’000		HK$’000		US$’000
2015 / 2016		595		654		84
2016 / 2017		607		610		78
2016 / 2017		607		617		79
2017 / 2018		620		624		80
2017 / 2018		620		630		81
2018 / 2019		633		637		82
2018 / 2019		633		644		83
2019 / 2020		647		650		83
2019 / 2020		647		657		84
2020 / 2021		661		664		85
Thereafter		4,~~741~~080		43,~~245~~913		~~544~~502
		7,843		7,447		955
		7,248		7,098		910

As the bank loans are repayable on demand upon request at the bank’s discretion, regardless of the expected repayment dates of the outstanding loan principals as set out in the repayment terms notices issued by the bank, the entire balance of the bank loans is presented as current liabilities in the condensed consolidated balance sheets.

The collateral of the bank loans includes:

(i) leasehold properties in Hong Kong with a net book value of HK$98,~~011~~869,000 and HK$98,~~224~~940,000 as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015 respectively; (ii) fixed deposits of HK$82,~~000as~~000 as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015; and (iii) joint and several guarantee provided by the Principal Stockholder and his spouse.

4. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Three months ended September 30,						Nine months ended September 30,
	Three months ended March 31,
	2014		2015		2015		2014		2015		2015
	2015		2016		2016
	HK$’000		HK$’000		US$’000		~~HK$’000~~		~~HK$’000~~		~~US$’000~~
Cash paid for:
Interest expenses		4341		3938		5		~~130~~		~~120~~		15

5. RELATED PARTY TRANSACTIONS

During the nine-month periods ended September 30, 2015 and 2014, the Company had net advance from the Principal Stockholder of HK$880,000 and HK$906,000 respectively. The movements of the amount due to the Principal Stockholder are analyzed as follows:

PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. RELATED PARTY TRANSACTIONS ~~(Continued)~~

	Nine months ended September 30,
	2014			2015
	HK$’000			HK$’000		US$’000
Balance at beginning of period		2,932			3,567		457
Net advance from the Principal Stockholder		906			880		113
Cancellation by issuance of shares		(481	)		--		--
Balance at end of period		3,357			4,447		570

During the three-month periods ended March 31, 2016 and 2015, the Company had net advance from the Principal Stockholder of HK$228,000 and HK$210,000 respectively. The movements of the amount due to the Principal Stockholder are analyzed as follows:

In addition, during the nine-month periods ended September 30, 2015 and 2014, a related company which is controlled by the Principal Stockholder of the Company, provided office space and general support for the Company’s activities with an aggregate charge of HK$630,000 for both periods.

	Three months ended March 31,
	2015		2016
	HK$’000		HK$’000		US$’000
Balance at beginning of period		3,567		4,657		597

Net advance from the Principal Stockholder		210		228		29

Balance at end of period		3,777		4,885		626

6.In ~~COMMITMENTS~~addition, ~~AND~~during ~~CONTINGENCIES~~the three-month periods ended March 31, 2016 and 2015, a related company which is controlled by the Principal Stockholder of the Company, provided office space and general support for the Company’s activities with an aggregate charge of HK$210,000.

The Company leases out its properties under operating leases with average lease term of two years. The future aggregate minimum rental receivables under non-cancellable operating leases are as follows:

	As of December 31, 2014		As of September 30, 2015
	HK$’000		HK$’000		US$’000
Within one year		1,008		983		126
In the second year		529		240		31
		1,537		1,223		157

Potential administrative proceeding

On or about October 22, 2007, the Securities and Exchange Commission (the “SEC”) sent a “voluntary request letter” seeking certain information and documents about the Company and another company known as Score One, Inc, in connection with an investigation into alleged spam e-mail campaigns and potential securities fraud violations.

Subsequently, on or about January 11, 2008, the SEC sent a subpoena to the Company for additional information and documents concerning the Company and Score One, Inc. in furtherance of its investigation into potential spam e-mail campaigns and securities fraud violations. Management of the Company retained counsel and responded to the subpoena.

On or about September 16, 2010, the SEC sent a letter to the Company in which they stated that they intended to institute an administrative proceeding against the Company, pursuant to Section 12(j) of the Exchange Act to determine whether it is appropriate to suspend or revoke the registration of the Company’s securities. To be best knowledge of the Company, no action has ever been taken by SEC against the Company.

On or about February 1, 2011, the SEC filed a complaint in US District Court, Eastern District of Michigan, Southern District, SEC v. Gregg M.S. Berger, et al., for securities fraud involving spamming stock, pump and dump schemes, misleading press releases, violation of numerous SEC rules governing the issuance of S-8 stock, misleading reverse mergers, etc. The Company and its officers and directors were not named as defendants in the case.

Other than the above, as of September 30, 2015 and December 31, 2014, the Company had no material outstanding commitments and contingencies.

PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. COMMITMENTS AND CONTINGENCIES

The Company leases out its properties under operating leases with average lease terms of two years. The future aggregate minimum rental receivables under non-cancellable operating leases are as follows:

As of

December 31,

2015

As of March 31,

2016

HK$’000

US$’000

Within one year

769

535

In the second year

160

100

929

635

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS ABOUT OUR OPERATIONS. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN PART 1, ITEM 1 OF THIS REPORT. THIS DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN. THESE FORWARD-LOOKING STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS, AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS THAT ARE NOT HISTORICAL FACTS AND CAN BE IDENTIFIED BY TERMS SUCH AS “ANTICIPATE,” “BELIEVE,” “COULD,” “SEEK,” “ESTIMATE,” “EXPECT,” “INTEND,” “MAY,” “PLAN,” “POTENTIAL,” “PREDICT,” “PROJECT,” “SHOULD,” “WILL,” “WOULD” OR SIMILAR EXPRESSIONS AND THE NEGATIVES OF THOSE TERMS. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT, THE COMPANY MAY ALTER ITS MARKETING, CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED.

Overview of Company's Business

The Company, through its wholly-owned subsidiary, Good Partner Limited, owns five residential apartments located in Hong Kong.

RESULTS OF OPERATIONS

The following table sets forth selected data as a percentage of total operating revenue for the periods indicated.

	Three months ended September 30,						Nine months ended September 30,
	Three Months Ended March 31,
	2014			2015			2014			2015
	2015			2016
Operating Revenues		100.00	%		100.00	%		~~100.00~~	%		~~100.00~~	%
Total operating expenses		~~(147~~139.5524	%)		~~(157~~143.8788	%)		~~(159.62~~	%)		~~(156.31~~	%)
Loss from operations		(4739.5524	%)		(5743.8788	%)		~~(59.62~~	%)		~~(56.31~~	%)
Loss before income taxes		(6353.7747	%)		(7356.2380	%)		~~(76.18~~	%)		~~(71.65~~	%)
Provision for income taxes		--			--			--			--
Net loss		(6353.7747	%)		(7356.2380	%)		~~(76.18~~	%)		~~(71.65~~	%)

THREE MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2014 (UNAUDITED)

OPERATING REVENUES. Operating revenues for the third quarter of 2015 totaled HK$254,000 (US$33,000) compared to HK$265,000 for the corresponding period in 2014. This represented a decrease of 4% mainly due to a unit being vacant for two months in the third quarter of 2015.

OPERATING EXPENSES. The Company's operating expenses totaled HK$401,000 (US$51,000), or 158% of operating revenues, for the third quarter of 2015, compared to HK$391,000, or 148% of operating revenues, for the third quarter of 2014. This represented an increase of 3%, mainly because of an agency fee being incurred in relation to a new tenancy in this quarter.

TOTAL NON-OPERATING EXPENSES. Total non-operating expenses for the third quarter of 2015 totaled HK$39,000 (US$5,000) compared to HK$43,000 for the third quarter of 2014. This represented a decrease of 9% due to reduction in interest expenses attributable to the decrease in average loan balances as a result of the progress on repayment.

PROVISION FOR INCOME TAXES. The Company did not make any tax provision for the third quarter in view of the losses incurred.

NET LOSS AND TOTAL COMPREHENSIVE LOSS. The Company has recorded a net loss and total comprehensive loss of HK$186,000 (US$23,000) for the third quarter of 2015, compared to a net loss and total comprehensive loss of HK$169,000 for the third quarter of 2014. This represented an increase in loss of 10% due to the effect of the decrease in rental income and increase in operating expenses as mentioned above.

NINE MONTHS ENDED SEPTEMBER 30, 2015 (UNAUDITED) COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2014 (UNAUDITED)

OPERATING REVENUES. Operating revenues for the nine months of 2015 totaled HK$776,000 (US$99,000) compared to HK$785,000 for the corresponding period in 2014. This represented a slight decrease of 1% mainly due to rental increases for the properties, offset by a unit being vacant from early April, 2015 to mid-September, 2015.

OPERATING EXPENSES. The Company's operating expenses totaled HK$1,213,000 (US$155,000), or 156% of operating revenues, for the first nine months of 2015, compared to HK$1,253,000, or 160% of operating revenues, for the first nine months of 2014. This represented a decrease of 3%, primarily because of reduction in administrative expenses in the first nine months of 2015.

TOTAL NON-OPERATING EXPENSES. Total non-operating expenses for the first nine months of 2015 totaled HK$119,000 (US$15,000) compared to HK$130,000 for the first nine months of 2014. This represented a decrease of 8% due to reduction in interest expenses attributable to the decrease in average loan balances as a result of the progress on repayment.

PROVISION FOR INCOME TAXES. The Company did not make any tax provision for the period under review in view of the losses incurred.

NET LOSS AND TOTAL COMPREHENSIVE LOSS. The Company has recorded a net loss and total comprehensive loss of HK$556,000 (US$71,000) for the first nine months of 2015, compared to a net loss and total comprehensive loss of HK$598,000 for the first nine months of 2014. This represented a decrease in loss of 7% due to the net effect of the decrease in rental income and decrease in operating expenses as mentioned above.

THREE MONTHS ENDED MARCH 31, 2016 (UNAUDITED) COMPARED TO THREE MONTHS ENDED MARCH 31, 2015 (UNAUDITED)

OPERATING REVENUES. Operating revenues for the first quarter of 2016 totaled HK$294,000 (US$38,000) compared to HK$288,000 for the corresponding period in 2015. This represented an increase of 2% mainly due to rental increase for a property.

OPERATING EXPENSES. The Company's operating expenses totaled HK$423,000 (US$54,000), or 144% of operating revenues, for the first quarter of 2016, compared to HK$401,000, or 139% of operating revenues, for the first quarter of 2015. This represented an increase of 5%, mainly because of increase in legal retainer fee.

TOTAL NON-OPERATING EXPENSES. Total non-operating expenses for the first quarter of 2016 totaled HK$38,000 (US$5,000) compared to HK$41,000 for the first quarter of 2015. This represented a decrease of 7% due to reduction in interest expenses attributable to the decrease in average loan balances as a result of the progress on repayment.

PROVISION FOR INCOME TAXES. The Company did not make any tax provision for the first quarter in view of the losses incurred.

NET LOSS AND TOTAL COMPREHENSIVE LOSS. The Company has recorded a net loss and total comprehensive loss of HK$167,000 (US$21,000) for the first quarter of 2016, compared to a net loss and total comprehensive loss of HK$154,000 for the first quarter of 2015. This represented an increase in loss of 8% due to the net effect of the increase in rental income and the increase in operating expenses as mentioned above.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations primarily through advances from the Principal Stockholder.

Cash and cash equivalent balances as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015 were HK$~~193~~79,000 (US$2510,000) and HK$63102,000, respectively.

Net cash used in operating activities was HK$~~354~~101,000 (US$4513,000) and HK$~~457~~63,000 for the ~~nine~~three-month periods ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, respectively.

Net cash provided by financing activities, which mainly includes repayment of bank loans and advances from the Principal Stockholder, were HK$~~484~~78,000 (US$6210,000) and HK$~~470~~63,000 during the ~~nine~~three-month periods ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, respectively.

During the ~~nine~~three-month periods ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, the Company has not entered into any transactions using derivative financial instruments or derivative commodity instruments or held any marketable equity securities of publicly traded companies.

Consistent with the general practice of lessors of residential apartments, the Company receives monthly rentals, which are due on the first day of each billing period and are non-refundable. This practice creates working capital that the Company generally utilizes for working capital purposes.

The Company has no trade receivable balance as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015. The Company obtains rental deposits from its tenants and has never experienced any significant problems with collection of accounts receivable. No provision for doubtful receivables is therefore made for the period under review.

During the ~~nine~~three-month periods ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, the Company had no purchases of investments.

Management believes that cash flow generated from the operations of the Company, the tight cost and cash flow control measures, the existing cash and bank balances on hand and the unregistered sales of equity securities should be sufficient to satisfy the working capital requirement of the Company for at least the next 12 months as the Principal Stockholder has confirmed his intention to make available adequate funds to the Company as and when required to maintain the Company as a going concern. However, there can be no assurance that the financing from him will be continued.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (GAAP) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In recording transactions and balances resulting from business operations, the Company uses estimates based on the best information available for such items as depreciable lives. The Company revises the recorded estimates when better information is available, facts change or actual amounts can be determined. These revisions can affect operating results.

The critical accounting policies and use of estimates are discussed in and should be read in conjunction with the annual consolidated audited financial statements and notes included in the Company’s latest 10-K, as filed with the SEC on March 2623, ~~2015~~2016, which includes audited consolidated financial statements for the year ended December 31, ~~2014~~2015.

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The operations of the Company are solely in Hong Kong and they are subject to risks associated with, among others, interest rate and liquidity risk. These risks have similar considerations and risks typically associated with investments in the real estate market of the United States and Western European countries. These are described further in the following:

INTEREST RATE RISK

The Company’s exposure to the risk of changes in market interest rates relates primarily to its long term debt obligations with a floating interest rate. The Company monitors the movement of interest rates on an ongoing basis and evaluates the exposure of its debt obligations.

LIQUIDITY RISK

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis. AsFor ofthe ~~September~~three 30months ended March 31, ~~2015~~2016, the Company reported a negative working capital of HK$1112,~~978~~242,000, of which HK$6,~~793~~488,000 would be due for repayment over one year according to the latest repayment terms notices issued by the bank~~. In addition~~, itand ~~had~~ a net loss of HK$~~556~~167,000 ~~for the nine months ended September 30, 2015~~. The Company has relied on private financing from the Principal Stockholder of the Company, who has confirmed his intention to make available adequate funds to the Company as and when required to maintain the Company as a going concern. However, there can be no assurance that the financing from him will be continued. The accompanying unaudited condensed consolidated financial statements do not include or reflect any adjustments that might result from the outcome of these uncertainties.

ITEM 4 - CONTROLS AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer (the principal executive officer and principal financial officer, respectively) of the Company have concluded, based on their evaluation as of ~~September~~March 3031, ~~2015~~2016, that the design and operation of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act")) are effective to ensure that information required to be disclosed in the reports filed or submitted by the Company under the Exchange Act is accumulated, recorded, processed, summarized and reported to the management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding whether or not disclosure is required.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d- 15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

None.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable to our Company.

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 – EXHIBITS

31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934*
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934*
32.1	Certification of the Company's Chief Executive Officer Pursuant to 18 U.S.C. SS. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. SS. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

(a) Exhibits

101 The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.**

Exhibit No.		Description


31.1		CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002*

31.2		CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

32.1		CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

32.2		CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

101		The following materials from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.**

*		Filed herewith
**		Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

*	Filed herewith
**	Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PHYSICAL PROPERTY HOLDINGS INC.

(Registrant)

November 12, 2015	/s/ Ngai Keung Luk
May 16, 2016	/s/ Ngai Keung Luk
	Ngai Keung Luk
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
November 12, 2015	/s/ Darrie Lam
May 16, 2016	/s/ Darrie Lam
	Darrie Lam
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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