UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549








FORM
10-Q





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





For the
quarterly period ended September 30,
2009








Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12 b - 2 of the Exchange Act)   Yes  ̈Nox








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 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.    Yesx 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 o   Accelerated
Filer o   Non-accelerated
Filer o   Smaller
Reporting Company x





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





State the
number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date: November 13, 2009, 28,329,353
shares.









PHYSICAL
PROPERTY HOLDINGS INC.





Form
10-Q for the period ended September 30, 2009





TABLE
OF CONTENTS







PagePART
      I - FINANCIAL INFORMATIONITEM
      1 - FINANCIAL STATEMENTSCondensed
      Consolidated Statements of Operations for the three-month and nine-month
      periods ended September 30, 2008 and 2009 (Unaudited)
            3Condensed
      Consolidated Balance Sheets as of December 31, 2008 and September 30,
      2009 (Unaudited)
            4Condensed
      Consolidated Statements of Cash Flows for the nine-month periods ended
      September 30, 2008 and 2009 (Unaudited)
            5Notes
      to Financial Statements
            6 –
      7ITEM
      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS
            8ITEM
      3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
            11ITEM
      4 - CONTROLS AND PROCEDURES
            11ITEM
      4T – INTERNAL CONTROL OVER FINANCIAL REPORTING
            11PART
      II - OTHER INFORMATIONITEM
      1 - LEGAL PROCEEDINGS
            11ITEM
      6 - EXHIBITS
            11SIGNATURES
            12








- 2
-




PHYSICAL
PROPERTY HOLDINGS INC. AND SUBSIDIARIES


UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


(In
thousands, except share and per share data)







Three
      months ended September 30,
                                                                                                                              
                                                                                                                              
                                                                                                                              Nine
      months ended September 30,2008
                                                                                                                              
                                                                                                                              
                                                                                                                              2009
                                                                                                                              
                                                                                                                              
                                                                                                                              2009
                                                                                                                              
                                                                                                                              
                                                                                                                              2008
                                                                                                                              
                                                                                                                              
                                                                                                                              2009
                                                                                                                              
                                                                                                                              
                                                                                                                              2009HK$
                                                                                                                              
                                                                                                                              
                                                                                                                              HK$
                                                                                                                              
                                                                                                                              
                                                                                                                              US$
                                                                                                                              
                                                                                                                              
                                                                                                                              HK$
                                                                                                                              
                                                                                                                              
                                                                                                                              HK$
                                                                                                                              
                                                                                                                              
                                                                                                                              US$Operating
      RevenueRental
      income
                                                                                                                              177
                                                                                                                              
                                                                                                                              
                                                                                                                              171
                                                                                                                              
                                                                                                                              
                                                                                                                              22
                                                                                                                              
                                                                                                                              
                                                                                                                              544
                                                                                                                              
                                                                                                                              
                                                                                                                              418
                                                                                                                              
                                                                                                                              
                                                                                                                              54Total
      operating revenues
                                                                                                                              177
                                                                                                                              
                                                                                                                              
                                                                                                                              171
                                                                                                                              
                                                                                                                              
                                                                                                                              22
                                                                                                                              
                                                                                                                              
                                                                                                                              544
                                                                                                                              
                                                                                                                              
                                                                                                                              418
                                                                                                                              
                                                                                                                              
                                                                                                                              54Operating
      ExpensesRent
      and related expenses
                                                                                                                              (23
                                                                                                                              )
                                                                                                                              
                                                                                                                              (23
                                                                                                                              )
                                                                                                                              
                                                                                                                              (3
                                                                                                                              )
                                                                                                                              
                                                                                                                              (69
                                                                                                                              )
                                                                                                                              
                                                                                                                              (70
                                                                                                                              )
                                                                                                                              
                                                                                                                              (9
                                                                                                                              )Depreciation
                                                                                                                              (71
                                                                                                                              )
                                                                                                                              
                                                                                                                              (86
                                                                                                                              )
                                                                                                                              
                                                                                                                              (11
                                                                                                                              )
                                                                                                                              
                                                                                                                              (213
                                                                                                                              )
                                                                                                                              
                                                                                                                              (248
                                                                                                                              )
                                                                                                                              
                                                                                                                              (32
                                                                                                                              )Other
      selling and administrative expenses
                                                                                                                              (147
                                                                                                                              )
                                                                                                                              
                                                                                                                              (79
                                                                                                                              )
                                                                                                                              
                                                                                                                              (10
                                                                                                                              )
                                                                                                                              
                                                                                                                              (1,195
                                                                                                                              )
                                                                                                                              
                                                                                                                              (243
                                                                                                                              )
                                                                                                                              
                                                                                                                              (31
                                                                                                                              )Total
      operating expenses
                                                                                                                              (241
                                                                                                                              )
                                                                                                                              
                                                                                                                              (188
                                                                                                                              )
                                                                                                                              
                                                                                                                              (24
                                                                                                                              )
                                                                                                                              
                                                                                                                              (1,477
                                                                                                                              )
                                                                                                                              
                                                                                                                              (561
                                                                                                                              )
                                                                                                                              
                                                                                                                              (72
                                                                                                                              )Loss
      from operations
                                                                                                                              (64
                                                                                                                              )
                                                                                                                              
                                                                                                                              (17
                                                                                                                              )
                                                                                                                              
                                                                                                                              (2
                                                                                                                              )
                                                                                                                              
                                                                                                                              (933
                                                                                                                              )
                                                                                                                              
                                                                                                                              (143
                                                                                                                              )
                                                                                                                              
                                                                                                                              (18
                                                                                                                              )Non-operating
      income (expenses)Other
      income, net
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              2
                                                                                                                              
                                                                                                                              
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --Interest
      expenses
                                                                                                                              (65
                                                                                                                              )
                                                                                                                              
                                                                                                                              (56
                                                                                                                              )
                                                                                                                              
                                                                                                                              (7
                                                                                                                              )
                                                                                                                              
                                                                                                                              (221
                                                                                                                              )
                                                                                                                              
                                                                                                                              (169
                                                                                                                              )
                                                                                                                              
                                                                                                                              (22
                                                                                                                              )Total
      non-operating expenses
                                                                                                                              (65
                                                                                                                              )
                                                                                                                              
                                                                                                                              (56
                                                                                                                              )
                                                                                                                              
                                                                                                                              (7
                                                                                                                              )
                                                                                                                              
                                                                                                                              (219
                                                                                                                              )
                                                                                                                              
                                                                                                                              (169
                                                                                                                              )
                                                                                                                              
                                                                                                                              (22
                                                                                                                              )Loss
      before income taxes
                                                                                                                              (129
                                                                                                                              )
                                                                                                                              
                                                                                                                              (73
                                                                                                                              )
                                                                                                                              
                                                                                                                              (9
                                                                                                                              )
                                                                                                                              
                                                                                                                              (1,152
                                                                                                                              )
                                                                                                                              
                                                                                                                              (312
                                                                                                                              )
                                                                                                                              
                                                                                                                              (40
                                                                                                                              )Provision
      for income taxes
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --
                                                                                                                              
                                                                                                                              
                                                                                                                              --Net
      loss and total comprehensive loss
                                                                                                                              (129
                                                                                                                              )
                                                                                                                              
                                                                                                                              (73
                                                                                                                              )
                                                                                                                              
                                                                                                                              (9
                                                                                                                              )
                                                                                                                              
                                                                                                                              (1,152
                                                                                                                              )
                                                                                                                              
                                                                                                                              (312
                                                                                                                              )
                                                                                                                              
                                                                                                                              (40
                                                                                                                              )Loss
      per share of common stock (in cents)
                                                                                                                              (0.46
                                                                                                                              )
                                                                                                                              
                                                                                                                              (0.26
                                                                                                                              )
                                                                                                                              
                                                                                                                              (0.03
                                                                                                                              )
                                                                                                                              
                                                                                                                              (4.07
                                                                                                                              )
                                                                                                                              
                                                                                                                              (1.10
                                                                                                                              )
                                                                                                                              
                                                                                                                              (0.14
                                                                                                                              )Weighted
      average number of shares of common stock outstanding
                                                                                                                              28,329,353
                                                                                                                              
                                                                                                                              
                                                                                                                              28,329,353
                                                                                                                              
                                                                                                                              
                                                                                                                              28,329,353
                                                                                                                              
                                                                                                                              
                                                                                                                              28,329,353
                                                                                                                              
                                                                                                                              
                                                                                                                              28,329,353
                                                                                                                              
                                                                                                                              
                                                                                                                              28,329,353








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 30, 2009 or at any other certain rate.











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


- 3
-




PHYSICAL
PROPERTY HOLDINGS INC. AND SUBSIDIARIES


UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS


(In
thousands, except share and per share data)







As
      ofNote
                                                                              
                                                                              December
      31, 2008
                                                                                (Audited)
                                                                              
                                                                              
                                                                              September
      30, 2009
                                                                                (Unaudited)HK$
                                                                              
                                                                              
                                                                              HK$
                                                                              
                                                                              
                                                                              US$ASSETSCurrent
      assetsCash and bank balances
                                                                              
                                                                              
                                                                              1,255
                                                                              
                                                                              
                                                                              621
                                                                              
                                                                              
                                                                              80Rental and utility deposits
                                                                              
                                                                              
                                                                              25
                                                                              
                                                                              
                                                                              24
                                                                              
                                                                              
                                                                              3Prepayments and other current assets
                                                                              
                                                                              
                                                                              90
                                                                              
                                                                              
                                                                              --
                                                                              
                                                                              
                                                                              --Total
      current assets
                                                                              
                                                                              
                                                                              1,370
                                                                              
                                                                              
                                                                              645
                                                                              
                                                                              
                                                                              83Bank deposits, collateralized
                                                                              
                                                                              
                                                                              82
                                                                              
                                                                              
                                                                              82
                                                                              
                                                                              
                                                                              11Pr    Property, plant and equipment, net of
      accumulated depreciation of HK$1,809as
      of September 30, 2009 (December 31, 2008: HK$1,561)
                                                                              
                                                                              
                                                                              10,927
                                                                              
                                                                              
                                                                              10,979
                                                                              
                                                                              
                                                                              1,407Total
      assets
                                                                              
                                                                              
                                                                              12,379
                                                                              
                                                                              
                                                                              11,706
                                                                              
                                                                              
                                                                              1,501LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesLong-term bank loans - current portion
                                                                              3
                                                                              
                                                                              527
                                                                              
                                                                              
                                                                              535
                                                                              
                                                                              
                                                                              69Due to a stockholder
                                                                              5
                                                                              
                                                                              7
                                                                              
                                                                              
                                                                              --
                                                                              
                                                                              
                                                                              --Other payables
                                                                              
                                                                              
                                                                              159
                                                                              
                                                                              
                                                                              200
                                                                              
                                                                              
                                                                              26Total
      current liabilities
                                                                              
                                                                              
                                                                              693
                                                                              
                                                                              
                                                                              735
                                                                              
                                                                              
                                                                              95Commitments
      and contingencies
                                                                              6Long-term bank loans - non-current portion
                                                                              3
                                                                              
                                                                              10,640
                                                                              
                                                                              
                                                                              10,237
                                                                              
                                                                              
                                                                              1,312Stockholders'
      equityon    Common
      stock, par value US$0.001 each, 100 million  shares of stock
      authorized; 28,329,353 shares of stock issued and
    outstanding
                                                                              
                                                                              
                                                                              221
                                                                              
                                                                              
                                                                              221
                                                                              
                                                                              
                                                                              28Additional paid-in capital
                                                                              
                                                                              
                                                                              73,608
                                                                              
                                                                              
                                                                              73,608
                                                                              
                                                                              
                                                                              9,437Accumulated losses
                                                                              
                                                                              
                                                                              (72,783
                                                                              )
                                                                              
                                                                              (73,095
                                                                              )
                                                                              
                                                                              (9,371
                                                                              )Total
      stockholders' equity
                                                                              
                                                                              
                                                                              1,046
                                                                              
                                                                              
                                                                              734
                                                                              
                                                                              
                                                                              94Total
      liabilities and stockholders' equity
                                                                              
                                                                              
                                                                              12,379
                                                                              
                                                                              
                                                                              11,706
                                                                              
                                                                              
                                                                              1,501







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 30, 2009 or at any other certain rate.









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


- 4
-






PHYSICAL
PROPERTY HOLDINGS INC. AND SUBSIDIARIES


UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)







Nine
      Months Ended September 30,Note
                                                                    
                                                                    2008
                                                                    
                                                                    
                                                                    2009
                                                                    
                                                                    
                                                                    2009HK$
                                                                    
                                                                    
                                                                    HK$
                                                                    
                                                                    
                                                                    US$Cash
      flows from operating activitiesNet
      loss
                                                                    
                                                                    
                                                                    (1,152
                                                                    )
                                                                    
                                                                    (312
                                                                    )
                                                                    
                                                                    (40
                                                                    )Adjustments
      to reconcile net loss to net cash (used in) provided
      by  operating activities:Depreciation
                                                                    
                                                                    
                                                                    213
                                                                    
                                                                    
                                                                    248
                                                                    
                                                                    
                                                                    32Changes
      in working capital:Trade
      and other receivables
                                                                    
                                                                    
                                                                    22
                                                                    
                                                                    
                                                                    --
                                                                    
                                                                    
                                                                    --Deposits,
      prepayments and other current assets
                                                                    
                                                                    
                                                                    781
                                                                    
                                                                    
                                                                    91
                                                                    
                                                                    
                                                                    12Other
      payables
                                                                    
                                                                    
                                                                    2
                                                                    
                                                                    
                                                                    41
                                                                    
                                                                    
                                                                    5Net
      cash (used in) provided by operating activities
                                                                    
                                                                    
                                                                    (134
                                                                    )
                                                                    
                                                                    68
                                                                    
                                                                    
                                                                    9Cash
      flows from investing activitiesPurchase
      of property, plant and equipment
                                                                    
                                                                    
                                                                    --
                                                                    
                                                                    
                                                                    (300
                                                                    )
                                                                    
                                                                    (38
                                                                    )Increase
      in bank deposit, collateralized
                                                                    
                                                                    
                                                                    (2
                                                                    )
                                                                    
                                                                    --
                                                                    
                                                                    
                                                                    --Net
      cash used in investing activities
                                                                    
                                                                    
                                                                    (2
                                                                    )
                                                                    
                                                                    (300
                                                                    )
                                                                    
                                                                    (38
                                                                    )Cash
      flows from financing activitiesRepayment
      of long-term bank loans
                                                                    
                                                                    
                                                                    (365
                                                                    )
                                                                    
                                                                    (395
                                                                    )
                                                                    
                                                                    (51
                                                                    )Net
      repayment to a stockholder
                                                                    6
                                                                    
                                                                    (452
                                                                    )
                                                                    
                                                                    (7
                                                                    )
                                                                    
                                                                    (1
                                                                    )Net
      cash used in financing activities
                                                                    
                                                                    
                                                                    (817
                                                                    )
                                                                    
                                                                    (402
                                                                    )
                                                                    
                                                                    (52
                                                                    )Net
      decrease in cash and cash equivalents
                                                                    
                                                                    
                                                                    (953
                                                                    )
                                                                    
                                                                    (634
                                                                    )
                                                                    
                                                                    (81
                                                                    )Cash
      and cash equivalents at beginning of period
                                                                    
                                                                    
                                                                    2,549
                                                                    
                                                                    
                                                                    1,255
                                                                    
                                                                    
                                                                    161Cash
      and cash equivalents at end of period
                                                                    
                                                                    
                                                                    1,596
                                                                    
                                                                    
                                                                    621
                                                                    
                                                                    
                                                                    80








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 30, 2009 or at any other certain rate.








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





- 5
-




PHYSICAL
PROPERTY HOLDINGS INC. AND SUBSIDIARIES


NOTES TO
FINANCIAL STATEMENTS


(Amounts
in thousands, except share and per share data)








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. The Company, through its subsidiaries, 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, 2008.





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 balance sheet at December 31, 2008 has been derived
from the audited 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-month period
ended September 30, 2009 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2009.





The
Company has evaluated subsequent events after the balance sheet date of
September 30, 2009 through the date this quarterly report is filed on November
13, 2009.





2.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS





During
the third quarter of 2009, the Company adopted the new Accounting Standards
Codification (ASC) as issued by the FASB. The ASC has become the source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental
entities. The ASC is not intended to change or alter existing GAAP. The adoption
of the ASC did not have a material impact on the financial
statements.





SFAS 166
- In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets - an amendment of FASB Statement No. 140.  SFAS 166
requires entities to provide more information about sales of securitized
financial assets and similar transactions, particularly if the seller retains
some risk to the assets.  The statement eliminates the concept of a
qualifying special-purpose entity, changes the requirements for the
de-recognition of financial assets, and calls upon sellers of the assets to make
additional disclosures about them.  SFAS 166 is effective occurring on
or after November 15, 2009.  The Company does not expect the adoption
of SFAS 166 will have a material impact on its financial
statements.





SFAS 167
- In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R).  SFAS 167 amends Interpretation No. 46(R) to require
enhanced disclosures that will provide users of financial statements with more
transparent information about an enterprise's involvement in a variable interest
entity.  SFAS 167 is effective for an entity's first fiscal period
that begins after November 15, 2009.  The Company does not expect the
adoption of SFAS 167 will have a material impact on its financial
statements.




3.
LONG-TERM BANK LOANS





During
the nine-month periods ended September 30, 2009 and 2008, the Company repaid
HK$395 and HK$365 of its existing bank loans, respectively. The outstanding loan
balances as of September 30, 2009 are analyzed as follows:





End
      of maturity
                      
                      Interest
      rate
                      
                      PrincipalUS$
                      
                      HK$2026
                      
                      2.1%
      per annum
                      
                      1,381
                      
                      10,772




Payable
      during the following periods
                        
                        PrincipalUS$
                        
                        HK$2009-2010
                        
                        69
                        
                        5352010-2026
                        
                        1,312
                        
                        10,2371,381
                        
                        10,772




The
collateral of the long-term bank loans includes:





(i)
            leasehold
      properties in Hong Kong with a net book value of HK$10,714
      (US$1,374);(ii)
            fixed
      deposits of HK$82; and(iii)
            joint
      and several guarantee provided by the Principal Stockholder and his
      spouse.




- 6
-




PHYSICAL
PROPERTY HOLDINGS INC. AND SUBSIDIARIES
 NOTES TO
FINANCIAL STATEMENTS
 (Amounts
in thousands, except share and per share data)






4.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION





THREE
      MONTHS ENDEDSEPTEMBER
      30,
                                                      
                                                      NINE
      MONTHS ENDEDSEPTEMBER
      30,2008
                                                      
                                                      2009
                                                      
                                                      2009
                                                      
                                                      2008
                                                      
                                                      2009
                                                      
                                                      2009HK$
                                                      
                                                      HK$
                                                      
                                                      US$
                                                      
                                                      HK$
                                                      
                                                      HK$
                                                      
                                                      US$Cash
      paid for:Interest
      expenses
                                                      65
                                                      
                                                      56
                                                      
                                                      7
                                                      
                                                      221
                                                      
                                                      169
                                                      
                                                      22





5. RELATED
PARTY TRANSACTIONS





During
the nine months ended September 30, 2009 and 2008, the Company has made a net
repayment of HK$7 and HK$452 respectively to the Principal
Stockholder.  The movements of the amount due to the Principal
Stockholder are analyzed as follows:





Nine
      months ended September 30,2008
                                            
                                            
                                            2009HK$
                                            
                                            
                                            HK$
                                            
                                            
                                            US$Balance
      at beginning of period
                                            531
                                            
                                            
                                            7
                                            
                                            
                                            1Advance
      from the Principal Stockholder
                                            7,236
                                            
                                            
                                            2,526
                                            
                                            
                                            323Repayment
      to the Principal Stockholder
                                            (7,743
                                            )
                                            
                                            (2,561
                                            )
                                            
                                            (328
                                            )Expenses
      paid by the Principal Stockholder on behalf of the Company
                                            55
                                            
                                            
                                            28
                                            
                                            
                                            4Net
      repayment to the Principal Stockholder
                                            (452
                                            )
                                            
                                            (7
                                            )
                                            
                                            (1
                                            )Balance
      at end of period
                                            79
                                            
                                            
                                            --
                                            
                                            
                                            --





In
addition, during the nine months ended September 30, 2009 and 2008, a related
company has provided office space for the Company’s administrative activities
for free.





6.
COMMITMENTS AND CONTINGENCIES





As of
September 30, 2009 and December 31, 2008, the Company had no material
outstanding commitment and contingency.




- 7
-




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





PRELIMINARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS





ALL
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. 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. 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 had historically been an established commercial operator through its
subsidiaries of fitness and spa centers in Hong Kong and China since 1986. On
October 31, 2006, the Company entered into two material definitive agreements:
(a) a Share Exchange Agreement (the “Share Exchange Agreement”) with Mr. Ngai
Keung Luk, the Chairman, CEO, and a majority shareholder of the Company (“Mr.
Luk”), pursuant to which Mr. Luk agreed to transfer 100% of the shares which he
owned of Ableforce International Limited, a British Virgin Islands
corporation (“Ableforce”), to the Company in exchange for the issuance by the
Company to Mr. Luk of 12,000,000 shares of our common stock, $0.001 par value,
and the issuance of an additional 3,328,070 shares of common stock as the
repayment of amounts due to Mr. Luk on Ableforce’s books and records as of
September 30, 2006, or a total of 15,328,070 shares of common
stock.  Ableforce is primarily engaged in the real estate business in
Hong Kong, and through Good Partner Limited, its wholly-owned subsidiary, owns
five residential apartments that it  leases to tenants; and (b) a
Disposal Agreement  (the “Disposal Agreement”), with Mr. Luk, pursuant
to which the Company agreed to transfer to Mr. Luk the sole outstanding common
share of Physical Limited, which is a holding company for subsidiaries that
operate fitness and spa centers located in Hong Kong and the People’s Republic
of China (including one in Macau), in exchange for the indemnification of the
Company by Mr. Luk for all liabilities associated with the operations and assets
of Physical Limited.  The transactions contemplated by the Share
Exchange Agreement were consummated on February 5, 2007 and the transactions
contemplated by the Disposal Agreement were consummated on February 27,
2007.  As a result of the transactions contemplated by the Disposal
Agreement, including the sale of the stock of Physical Limited, the Company is
no longer engaged in the fitness and spa center business, and owns and operates
residential apartments.  Mr. Luk continues to own 100% of the stock of
Physical Limited and plans to continue to operate the spa and fitness centers.
In addition, the Company changed its name to Physical Property Holdings Inc. on
March 5, 2007.  Reference is made to a Definitive Information
Statement on Schedule 14C, which was filed with the Commission on February 2,
2007 for additional details concerning these matters.





The
Company continued to engage in the spa and fitness business during the first
quarter of fiscal 2007, until February 27, 2007, when the transactions
contemplated by the Disposal Agreement were consummated. Accordingly, the
Company’s results of operations included in this Quarterly Report on Form 10-Q
do not include the results of operations of the disposed
businesses.





On
February 5, 2007, the transactions contemplated by the Share Exchange Agreement
were consummated, resulting in the Company’s acquisition of all of the issued
and outstanding shares of common stock of Ableforce.  As discussed
above, Ableforce, through its wholly-owned subsidiary Good Partner Limited, owns
five residential apartments located in Hong Kong.  The results of
operations after the closing represent only the results of Ableforce,
which are reflected on the Company’s financial statements commencing from
the fiscal year ended December 31, 2007.





- 8
-






RESULTS
OF OPERATIONS





Prior to
February 27, 2007, the Company's revenues were mainly derived from its business
of fitness and spa services. Subsequent to the entering into and consummation of
the two material definitive agreements as mentioned above, the Company’s
principal activities have been changed from fitness and spa businesses to
properties investments.





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




Three
      Months Ended September 30,
                        
                        
                        Nine
      Months Ended September 30,2008
                        
                        
                        2009
                        
                        
                        2008
                        
                        
                        2009Operating
      Revenues
                        100.00%
                        
                        
                        100.00%
                        
                        
                        100.00%
                        
                        
                        100.00%Total
      operating expenses
                        (136.16%)
                        
                        
                        (109.94%)
                        
                        
                        (271.51%)
                        
                        
                        (134.21%)Operating
      loss
                        (36.16%)
                        
                        
                        (9.94%)
                        
                        
                        (171.51%)
                        
                        
                        (34.21%)Loss
      before income taxes
                        (72.88%)
                        
                        
                        (42.69%)
                        
                        
                        (211.76%)
                        
                        
                        (74.64%)Provision
      for income taxes
                        --
                        
                        
                        --
                        
                        
                        --
                        
                        
                        --Net
      loss
                        (72.88%)
                        
                        
                        (42.69%)
                        
                        
                        (211.76%)
                        
                        
                        (74.64%
                        )





THREE
MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED) COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2008 (UNAUDITED)





OPERATING
REVENUES. Operating revenues for the third quarter of 2009 totaled HK$171,000
(US$22,000) compared to HK$177,000 (US$23,000) for the third quarter of 2008.
This represented a decrease of 3%, mainly due to the vacancy period of a
property in the third quarter of 2009 being slightly longer than in
2008.





OPERATING
EXPENSES. The Company's operating expenses totaled HK$188,000 (US$24,000), or
110% of operating revenues, for the third quarter of 2009, compared to
HK$241,000 (US$31,000), or 136% of operating revenues, for the third quarter of
2008. This represented a decrease of HK$53,000 (US$7,000), or 22%, as a result
of savings in administrative expenses.





TOTAL
NON-OPERATING EXPENSES. Total non-operating expenses for the third quarter of
2009 were HK$56,000 (US$7,000) compared to HK$65,000 (US$8,000) for the third
quarter of 2008. This represented a decrease of 14% due to reduction in interest
expenses attributable to the decrease in interest rate.





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$73,000 (US$9,000) for the third quarter of 2009,
compared to a net loss and total comprehensive loss of HK$129,000 (US$16,000)
for the third quarter of 2008. This represented a decrease of HK$56,000
(US$7,000) mainly due to the reduction in operating expenses.







- 9
-






NINE
MONTHS ENDED SEPTMEBER 30, 2009 (UNAUDITED) COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 2008 (UNAUDITED)





OPERATING
REVENUES. Operating revenues for the first nine months of 2009 totaled
HK$418,000 (US$54,000) compared to HK$544,000 (US$70,000) of the same period of
last year. This represented a decrease of 23% mainly due to vacancy of certain
properties in the first seven months of 2009.





OPERATING
EXPENSES. The Company's operating expenses totaled HK$561,000 (US$72,000), or
134% of operating revenues, for the first nine months of 2009, compared to
HK$1,477,000 (US$189,000), or 272% of operating revenues, for the first nine
months of 2008. This represented a decrease of HK$916,000 (US$117,000), or 62%,
resulting from the full amortization of prepaid management consultancy service
fees in June 2008.





TOTAL
NON-OPERATING EXPENSES. Total non-operating expenses for the first nine months
of 2009 were HK$169,000 (US$22,000) compared to HK$219,000 (US$28,000) for the
first nine months of 2008. This represented a decrease of 23% due to reduction
in interest expenses attributable to the decrease in interest rate.





PROVISION
FOR INCOME TAXES. The Company did not make any tax provision for the period
under review because there were losses incurred.





NET LOSS
AND TOTAL COMPREHENSIVE LOSS. The Company has recorded a net loss and total
comprehensive loss of HK$312,000 (US$40,000) for the first nine months of 2009,
compared to a net loss and total comprehensive loss of HK$1,152,000 (US$148,000)
for the first nine months of 2008. This represented a decrease of HK$840,000
(US$108,000) mainly due to less operating expenses incurred than last
year.





LIQUIDITY
AND CAPITAL RESOURCES





The
Company has financed its operations primarily through cash generated from
operations and long-term bank loans.





Cash and
cash equivalent balances as of September 30, 2009 and December 31, 2008 were
HK$621,000 (US$80,000) and HK$1,255,000 (US$161,000).





Net cash
provided by (used in) operating activities were HK$68,000 (US$9,000) and
HK$(134,000) (US$(17,000)) for the nine-month periods ended September 30, 2009
and 2008, respectively. The Company's operating activities are currently
financed by cash flows from operations and cash and bank balances.





Net cash
used in investing activities were HK$300,000 (US$38,000) and HK$2,000 (US$256)
for the nine-month periods ended September 30, 2009 and 2008, respectively,
which decrease was primarily a result of capital expenditure on leasehold
improvement.





Net cash
used in financing activities, which mainly include repayment of bank loans and
amounts due to the Principle Stockholder, were HK$402,000 (US$52,000) and
HK$817,000 (US$105,000) during the nine-month periods ended September 30, 2009
and 2008, respectively.





During
the nine-month period ended September 30, 2009, the Company has not entered into
any transactions using derivative financial instruments or derivative commodity
instruments nor 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 did not have a trade receivable balance at September 30, 2009. 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-month period ended September 30, 2009, the Company has no material
purchases of investments.





Management
believes that cash flow generated from the operations of the Company, the tight
cost and cash flow control measures and the existing cash and bank balances on
hand should be sufficient to satisfy the working capital requirement of the
Company for at least the next 12 months.





CRITICAL
ACCOUNTING POLICIES





The
preparation of financial statements in conformity with accounting principles
generally accepted in the U.S., or 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 financial statements and notes
included in the latest 10-K, as filed with the SEC, which includes audited
consolidated financial statements for the three fiscal years ended December 31,
2008.





- 10
-




ITEM
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Since the
operations of the Company are solely operated in Hong Kong, they are subject to
similar considerations and risks typically associated with investments in the
real estate market of the United States and Western European countries. These
include risks associated with, among others, interest rate and liquidity risk.
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 and the costs of available hedging for
its debt obligations.





LIQUIDITY
RISK





The
Company’s objective is to maintain a balance between continuity of funding and
flexibility through the use of its available cash and banking
facilities.





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 30, 2009, that the design and
operation of the Company's "disclosure controls and procedures" (as defined in
Rule 13a-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 quarter ended September 30, 2009, there were no changes in the internal
controls of the Company over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that have materially affected, or are reasonably likely
to materially affect, the internal controls of the Company over financial
reporting.





ITEM
4T – INTERNAL CONTROL OVER FINANCIAL REPORTING





The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended). Management conducted an
evaluation of the effectiveness of the Company’s internal control over financial
reporting based on the criteria set forth in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management has concluded that the
Company’s internal control over financial reporting was effective as of
September 30, 2009.





There
were no changes in the Company's internal controls over financial reporting,
known to the chief executive officer or the chief financial officer that
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.





PART
II - OTHER INFORMATION





ITEM
1 - LEGAL PROCEEDINGS





There are
no pending material legal proceedings to which the Company or any of its
properties is subject, nor to the knowledge of the Company, are any such legal
proceedings threatened, except as described below.





On or
about October 22, 2007, the Securities and Exchange Commission (the “SEC”) sent
a “voluntary request letter” for certain information about a company known as
Score One Inc, which had been the subject of a spam email campaign, and for
information about various matters concerning individuals allegedly connected
with this company.





Subsequently,
on or about January 11, 2008, the SEC sent a subpoena to the Company for
additional information concerning Score One Inc. and about allegedly connected
individuals. Management of the Company has retained counsel and is in the
process of dealing with the subpoena.




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 193431.2
            Certification
      of the Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule
      15d-14(a) of the Securities Exchange Act of 193432.1
            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
      200232.2
            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




- 11
-




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
      13, 2009
              /s/ Ngai Keung LukNgai
      Keung LukChairman
      and Chief Executive Officer(Principal
      Executive Officer)November
      13, 2009
              /s/ Darrie LamDarrie
      LamChief
      Financial Officer(Principal
      Financial and Accounting
Officer)









- 12
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