Attached files
| file | filename |
|---|---|
| EX-32.2 - EXHIBIT 32.2 - PHYSICAL PROPERTY HOLDINGS, INC. | ex32-2.htm |
| EX-32.1 - EXHIBIT 32.1 - PHYSICAL PROPERTY HOLDINGS, INC. | ex32-1.htm |
| EX-31.2 - EXHIBIT 31.2 - PHYSICAL PROPERTY HOLDINGS, INC. | ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - PHYSICAL PROPERTY HOLDINGS, INC. | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934:
For the transition period from______ to _______
Commission File Number 0-26573
PHYSICAL PROPERTY HOLDINGS INC.
(Exact name of Registrant as specified in its charter)
|
Delaware |
98-0203281 |
|
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
23/F AIA Tower
No. 183 Electric Road, North Point
Hong Kong
(Address of principal executive offices)
(011) (852) 2917-0000
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large Accelerated Filer ☐ |
Accelerated Filer ☐ |
Non-accelerated Filer ☐ |
Smaller Reporting Company ☒ |
Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
August 14, 2017, 90,000,000 shares, $0.001 par value.
PHYSICAL PROPERTY HOLDINGS INC.
Form 10-Q for the quarter ended June 30, 2017
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||||||||||
|
2016 |
2017 |
2017 |
2016 |
2017 |
2017 |
|||||||||||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
HK$’000 |
HK$’000 |
US$’000 |
|||||||||||||||||||
|
Operating Revenues |
||||||||||||||||||||||||
|
Rental income |
260 | 288 | 37 | 554 | 516 | 66 | ||||||||||||||||||
|
Total operating revenues |
260 | 288 | 37 | 554 | 516 | 66 | ||||||||||||||||||
|
Operating Expenses |
||||||||||||||||||||||||
|
Rent and related expenses |
(38 |
) |
(38 |
) |
(5 |
) |
(80 |
) |
(76 |
) |
(10 |
) | ||||||||||||
|
Depreciation |
(71 |
) |
(71 |
) |
(9 |
) |
(142 |
) |
(142 |
) |
(18 |
) | ||||||||||||
|
Other selling and administrative expenses |
(291 |
) |
(315 |
) |
(40 |
) |
(601 |
) |
(619 |
) |
(79 |
) | ||||||||||||
|
Total operating expenses |
(400 |
) |
(424 |
) |
(54 |
) |
(823 |
) |
(837 |
) |
(107 |
) | ||||||||||||
|
Loss from operations |
(140 |
) |
(136 |
) |
(17 |
) |
(269 |
) |
(321 |
) |
(41 |
) | ||||||||||||
|
Non-operating expenses |
||||||||||||||||||||||||
|
Interest expenses |
(37 |
) |
(33 |
) |
(4 |
) |
(75 |
) |
(68 |
) |
(9 |
) | ||||||||||||
|
Total non-operating expenses |
(37 |
) |
(33 |
) |
(4 |
) |
(75 |
) |
(68 |
) |
(9 |
) | ||||||||||||
|
Loss before income taxes |
(177 |
) |
(169 |
) |
(21 |
) |
(344 |
) |
(389 |
) |
(50 |
) | ||||||||||||
|
Provision for income taxes |
-- | -- | -- | -- | -- | -- | ||||||||||||||||||
|
Net loss and total comprehensive loss |
(177 |
) |
(169 |
) |
(21 |
) |
(344 |
) |
(389 |
) |
(50 |
) | ||||||||||||
|
Loss per share of common stock (in cents) – Basic and diluted |
(0.20 |
) |
(0.19 |
) |
(0.02 |
) |
(0.38 |
) |
(0.43 |
) |
(0.06 |
) | ||||||||||||
|
Weighted average number of shares of common stock outstanding |
90,000,000 | 90,000,000 | 90,000,000 | 90,000,000 | 90,000,000 | 90,000,000 | ||||||||||||||||||
The condensed consolidated financial statements should be read in conjunction with the accompanying notes.
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
As of December 31, 2016 |
As of June 30, 2017 (Unaudited) |
|||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
||||||||||
|
ASSETS |
||||||||||||
|
Current assets |
||||||||||||
|
Cash and bank balances |
49 | 101 | 13 | |||||||||
|
Management fees and utility deposits |
27 | 26 | 3 | |||||||||
|
Prepayments |
1 | 3 | - | |||||||||
|
Total current assets |
77 | 130 | 16 | |||||||||
|
Bank deposits, collateralized |
83 | 83 | 11 | |||||||||
|
Property, plant and equipment, net of accumulated depreciation of HK$4,274,000 (US$548,000) as of June 30, 2017 (December 31, 2016: HK$4,132,000) |
8,656 | 8,514 | 1,092 | |||||||||
|
Total assets |
8,816 | 8,727 | 1,119 | |||||||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
||||||||||||
|
Current liabilities |
||||||||||||
|
Bank loans - (Note 3) |
6,641 | 6,333 | 812 | |||||||||
|
Other payables |
340 | 412 | 53 | |||||||||
|
Due to Principal Stockholder - (Note 5) |
5,689 | 6,225 | 798 | |||||||||
|
Total current liabilities |
12,670 | 12,970 | 1,663 | |||||||||
|
Commitments and contingencies - (Note 6) |
||||||||||||
|
Stockholders' deficit |
||||||||||||
|
Common stock, par value US$0.001 each, 100 million shares of stock authorized; 90,000,000 shares of stock issued and outstanding |
702 | 702 | 90 | |||||||||
|
Additional paid-in capital |
73,608 | 73,608 | 9,437 | |||||||||
|
Accumulated losses |
(78,164 |
) |
(78,553 |
) |
(10,071 |
) | ||||||
|
Total stockholders' deficit |
(3,854 |
) |
(4,243 |
) |
(544 |
) | ||||||
|
Total liabilities and stockholders' deficit |
8,816 | 8,727 | 1,119 | |||||||||
The condensed consolidated financial statements should be read in conjunction with the accompanying notes.
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Six Months Ended June 30, |
||||||||||||
|
2016 |
2017 |
2017 |
||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
||||||||||
|
Cash flows from operating activities |
||||||||||||
|
Net loss |
(344 |
) |
(389 |
) |
(50 |
) | ||||||
|
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
|
Depreciation |
142 | 142 | 18 | |||||||||
|
Changes in working capital: |
||||||||||||
|
Management fees and utility deposits |
(1 |
) |
1 | -- | ||||||||
|
Prepayments |
(8 |
) |
(2 |
) |
-- | |||||||
|
Other payables |
(95 |
) |
72 | 9 | ||||||||
|
Net cash used in operating activities |
(306 |
) |
(176 |
) |
(23 |
) | ||||||
|
Cash flows from investing activities |
||||||||||||
|
Increase in bank deposit, collateralized |
(1 |
) |
-- | -- | ||||||||
|
Net cash used in investing activities |
(1 |
) |
-- | -- | ||||||||
|
Cash flows from financing activities |
||||||||||||
|
Repayment of bank loans |
(301 |
) |
(308 |
) |
(39 |
) | ||||||
|
Net advance from Principal Stockholder - (Note 5) |
523 | 536 | 69 | |||||||||
|
Net cash provided by financing activities |
222 | 228 | 30 | |||||||||
|
Net (decrease) increase in cash and cash equivalents |
(85 |
) |
52 | 7 | ||||||||
|
Cash and cash equivalents at beginning of period |
102 | 49 | 6 | |||||||||
|
Cash and cash equivalents at end of period |
17 | 101 | 13 | |||||||||
The condensed consolidated financial statements should be read in conjunction with the accompanying notes.
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include the accounts of Physical Property Holdings Inc. and the subsidiaries that it controls (collectively referred to as the "Company"). The Company, through its subsidiaries, is engaged in the real estate business by holding five residential apartments in Hong Kong. Unless otherwise specified in the text, references to the Company include the Company and its subsidiaries. These financial statements should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet at December 31, 2016 has been derived from the audited consolidated financial statements at that date but the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
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 June 30, 2017 or at any other certain rate.
The Company had negative working capital of HK$12,840,000 as of June 30, 2017 and incurred losses of HK$389,000 and HK$344,000 for the six months ended June 30, 2017 and 2016 respectively. For the three months ended June 30, 2017 and 2016, the Company incurred losses of HK$169,000 and HK$177,000 respectively. These conditions raised substantial doubt about the Company’s ability to continue as a going concern.
Continuation of the Company as a going concern is dependent upon attaining profitable operations in the future, exercising tight cost and cash flow controls measures, and the financial support from the Principal Stockholder. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Principal Stockholder has undertaken to make available adequate funds to the Company as and when required to maintain the Company as a going concern. Having taken into consideration the undertaking provided by the Principal Stockholder, management believes that the Company will be able to settle its liabilities when they become due. However, there can be no assurance that the financing from the Principal Stockholder will be continued.
During the six months ended June 30, 2017, Ngai Keung Luk (“Mr. Luk”), Chairman, Chief Executive Officer and the Principal Stockholder, made a net advance of HK$536,000 or US$69,000 to the Company as described in Note 5 below. Mr. Luk owns 94.5% of the Company’s issued and outstanding shares of common stock as of the date this quarterly report is filed.
The Company has evaluated subsequent events through the date this quarterly report is filed.
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company is in the process of evaluating the impact of the following updates on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). The guidance requires the lessees to recognize the assets and liabilities for the rights and obligations created by leases with terms of 12 months or more. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct finance leases. The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods therein, with early adoption permitted.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in this update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable.
In November 2016, the FASB issued ASU 2016-18: Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this update require that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this update do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments in this update should be applied using a retrospective transition method to each period presented.
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. BANK LOANS
During the six-month periods ended June 30, 2017 and 2016, the Company repaid HK$308,000 and HK$301,000 of its existing bank loans, respectively. The outstanding loan balances as of June 30, 2017 and December 31, 2016 are analyzed as follows:
|
End of maturity |
Interest rate |
Principal |
||||||||||||
|
2016 |
2017 |
2017 |
||||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
||||||||||||
|
2026 |
2.1% per annum |
6,641 | 6,333 | 812 | ||||||||||
Payables during the following periods according to bank repayment terms notices
|
Principal |
||||||||||||
|
2016 |
2017 |
2017 |
||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
||||||||||
|
2017 / 2018 |
620 | 627 | 80 | |||||||||
|
2018 / 2019 |
633 | 640 | 82 | |||||||||
|
2019 / 2020 |
647 | 654 | 84 | |||||||||
|
2020 / 2021 |
661 | 668 | 86 | |||||||||
|
2021 / 2022 |
675 | 682 | 87 | |||||||||
|
Thereafter |
3,405 | 3,062 | 393 | |||||||||
| 6,641 | 6,333 | 812 | ||||||||||
As the bank loans are repayable on demand upon request at the bank’s discretion, regardless of the expected repayment dates of the outstanding loan principals as set out in the repayment terms notices issued by the bank, the entire balance of the bank loans is presented as current liabilities in the condensed consolidated balance sheet.
The collaterals of the bank loans include:
|
(i) |
leasehold properties in Hong Kong with a net book value of HK$8,514,000 and HK$8,656,000 as of June 30, 2017 and December 31, 2016 respectively; |
|
(ii) |
fixed deposits of HK$83,000 as of June 30, 2017 and December 31, 2016 respectively; and |
|
(iii) |
joint and several guarantee provided by the Principal Stockholder and his spouse. |
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||||||||||
|
2016 |
2017 |
2017 |
2016 |
2017 |
2017 |
|||||||||||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
HK$’000 |
HK$’000 |
US$’000 |
|||||||||||||||||||
|
Cash paid for: |
||||||||||||||||||||||||
|
Interest expenses |
37 | 33 | 4 | 75 | 68 | 9 | ||||||||||||||||||
5. RELATED PARTY TRANSACTIONS
During the six-month periods ended June 30, 2017 and 2016, the Company had net advance from the Principal Stockholder of HK$536,000 and HK$523,000 respectively. The movements of the amount due to the Principal Stockholder are analyzed as follows:
|
Six months ended June 30, |
||||||||||||
|
2016 |
2017 |
|||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
||||||||||
|
Balance at beginning of period |
4,657 | 5,689 | 729 | |||||||||
|
Net advance from the Principal Stockholder |
523 | 536 | 69 | |||||||||
|
Balance at end of period |
5,180 | 6,225 | 798 | |||||||||
In addition, during the three-month and six-month periods ended June 30, 2017 and 2016, a related company which is controlled by the Principal Stockholder of the Company, provided office space and general support for the Company’s activities with an aggregate charge of HK$210,000, HK$210,000, HK$420,000 and HK$420,000 respectively.
During the year ended December 31, 2016, cross corporate guarantees between the Company and companies which are controlled by the Principal Stockholder were executed for facilities at the aggregate amount of HK$127,000,000 to be utilized by the Company and these related companies. As of June 30, 2017 and December 31, 2016, an amount of HK$20,000,000 and HK$Nil had been drawn under the mentioned bank facilities respectively.
PHYSICAL PROPERTY HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES
The Company leases out its properties under operating leases with average lease terms of two years. The future aggregate minimum rental receivables under non-cancellable operating leases are as follows:
|
As of December 31, 2016 |
As of June 30, 2017 |
|||||||||||
|
HK$’000 |
HK$’000 |
US$’000 |
||||||||||
|
Within one year |
832 | 772 | 99 | |||||||||
|
In the second year |
336 | 180 | 23 | |||||||||
| 1,168 | 952 | 122 | ||||||||||
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS REPORT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS ABOUT OUR OPERATIONS. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN CONJUNCTION WITH OUR UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN PART 1, ITEM 1 OF THIS REPORT. THIS DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN. THESE FORWARD-LOOKING STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS, AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS THAT ARE NOT HISTORICAL FACTS AND CAN BE IDENTIFIED BY TERMS SUCH AS “ANTICIPATE,” “BELIEVE,” “COULD,” “SEEK,” “ESTIMATE,” “EXPECT,” “INTEND,” “MAY,” “PLAN,” “POTENTIAL,” “PREDICT,” “PROJECT,” “SHOULD,” “WILL,” “WOULD” OR SIMILAR EXPRESSIONS AND THE NEGATIVES OF THOSE TERMS. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT, THE COMPANY MAY ALTER ITS MARKETING, CAPITAL EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED.
Overview of Company's Business
The Company, through its wholly-owned subsidiary, Good Partner Limited, owns five residential apartments located in Hong Kong.
RESULTS OF OPERATIONS
The following table sets forth selected data as a percentage of total operating revenue for the periods indicated.
|
Three months ended June 30 |
Six months ended June 30 |
|||||||||||||||
|
2016 |
2017 |
2016 |
2017 |
|||||||||||||
|
Operating Revenues |
100.00 |
% |
100.00 |
% |
100.00 |
% |
100.00 |
% | ||||||||
|
Total operating expenses |
(153.85 |
%) |
(147.22 |
%) |
(148.56 |
%) |
(162.21 |
%) | ||||||||
|
Loss from operations |
(53.85 |
%) |
(47.22 |
%) |
(48.56 |
%) |
(62.21 |
%) | ||||||||
|
Loss before income taxes |
(68.08 |
%) |
(58.68 |
%) |
(62.09 |
%) |
(75.39 |
%) | ||||||||
|
Provision for income taxes |
-- | -- | -- | -- | ||||||||||||
|
Net loss |
(68.08 |
%) |
(58.68 |
%) |
(62.09 |
%) |
(75.39 |
%) | ||||||||
THREE MONTHS ENDED JUNE 30, 2017 (UNAUDITED) COMPARED TO THREE MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
OPERATING REVENUES. Operating revenues for the second quarter of 2017 totaled HK$288,000 (US$37,000) compared to HK$260,000 for the corresponding period in 2016. This represented an increase of 11% mainly because a unit being vacant for two months in the second quarter of last year was rented out subsequently.
OPERATING EXPENSES. The Company's operating expenses totaled HK$424,000 (US$54,000), or 147% of operating revenues, for the second quarter of 2017, compared to HK$400,000, or 154% of operating revenues, for the second quarter of 2016. This represented an increase of 6%, mainly due to increase in administration expenses in this quarter.
TOTAL NON-OPERATING EXPENSES. Total non-operating expenses for the second quarter of 2017 totaled HK$33,000 (US$4,000) compared to HK$37,000 for the second quarter of 2016. This represented a decrease of 11% due to reduction in interest expenses attributable to the decrease in average loan balances as a result of the progress on repayment.
PROVISION FOR INCOME TAXES. The Company did not make any tax provision for the second 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$169,000 (US$21,000) for the second quarter of 2017, compared to a net loss and total comprehensive loss of HK$177,000 for the second quarter of 2016. This represented a decrease in loss of 5% due to the net effect of the increase in rental income and operating expenses as mentioned above.
SIX MONTHS ENDED JUNE 30, 2017 (UNAUDITED) COMPARED TO SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
OPERATING REVENUES. Operating revenues for the six months of 2017 totaled HK$516,000 (US$66,000) compared to HK$554,000 for the corresponding period in 2016. This represented a decrease of 7% mainly due to a unit being vacant for a longer period than last year in the first six months of 2017.
OPERATING EXPENSES. The Company's operating expenses totaled HK$837,000 (US$107,000), or 162% of operating revenues, for the first six months of 2017, compared to HK$823,000, or 149% of operating revenues, for the first six months of 2016. This represented an increase of 2% mainly because of increase in agency fee in the first six months of 2017.
TOTAL NON-OPERATING EXPENSES. Total non-operating expenses for the first six months of 2017 totaled HK$68,000 (US$9,000) compared to HK$75,000 for the first six months of 2016. This represented a decrease of 9% due to reduction in interest expenses attributable to the decrease in average loan balances as a result of the progress on repayment.
PROVISION FOR INCOME TAXES. The Company did not make any tax provision for the 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$389,000 (US$50,000) for the first six months of 2017, compared to a net loss and total comprehensive loss of HK$344,000 for the first six months of 2016. This represented an increase in loss of 13% due to the combined effect of the decrease in rental income and the increase in expenses as mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through advances from the Principal Stockholder.
Cash and cash equivalent balances as of June 30, 2017 and December 31, 2016 were HK$101,000 (US$13,000) and HK$49,000, respectively.
Net cash used in operating activities was HK$176,000 (US$23,000) and HK$306,000 for the six-month periods ended June 30, 2017 and 2016, respectively.
Net cash used in investing activities, which mainly included increase in bank deposit, were Nil and HK$1,000 for the six-month periods ended June 30, 2017 and 2016, respectively.
Net cash provided by financing activities, which mainly includes repayment of bank loans and advances from the Principal Stockholder, were HK$228,000 (US$30,000) and HK$222,000 during the six-month periods ended June 30, 2017 and 2016, respectively.
During the six-month periods ended June 30, 2017 and 2016, the Company had not entered into any transactions using derivative financial instruments or derivative commodity instruments or held any marketable equity securities of publicly traded companies.
Consistent with the general practice of lessors of residential apartments, the Company receives monthly rentals, which are due on the first day of each billing period and are non-refundable. This practice creates working capital that the Company generally utilizes for working capital purposes.
The Company had no trade receivable balance as of June 30, 2017 and December 31, 2016. 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 had therefore been made for the period under review.
During the six-month periods ended June 30, 2017 and 2016, the Company had no purchases of investments.
Management believes that cash flow generated from the operations of the Company, the tight cost and cash flow control measures 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 as the Principal Stockholder has confirmed his intention to make available adequate funds to the Company as and when required to maintain the Company as a going concern. However, there can be no assurance that the financing from him will be continued.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (GAAP) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In recording transactions and balances resulting from business operations, the Company uses estimates based on the best information available for such items as depreciable lives. The Company revises the recorded estimates when better information is available, facts change or actual amounts can be determined. These revisions can affect operating results.
The critical accounting policies and use of estimates are discussed in and should be read in conjunction with the annual consolidated audited financial statements and notes included in the Company’s latest 10-K, as filed with the SEC on March 16, 2017, which includes audited consolidated financial statements for the year ended December 31, 2016.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The operations of the Company are solely in Hong Kong and they are subject to risks associated with, among others, interest rate and liquidity risk. These risks have similar considerations and risks typically associated with investments in the real estate market of the United States and Western European countries. These are described further in the following:
INTEREST RATE RISK
The Company’s exposure to the risk of changes in market interest rates relates primarily to its long term debt obligations with a floating interest rate. The Company monitors the movement of interest rates on an ongoing basis and evaluates the exposure of its debt obligations.
LIQUIDITY RISK
The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis. For the six months ended June 30, 2017, the Company reported a negative working capital of HK$12,840,000, of which HK$5,706,000 would be due for repayment over one year according to the latest repayment terms notices issued by the bank, and a net loss of HK$389,000. The Company has relied on private financing from the Principal Stockholder of the Company, who has confirmed his intention to make available adequate funds to the Company as and when required to maintain the Company as a going concern. However, there can be no assurance that the financing from him will be continued. The accompanying unaudited condensed consolidated financial statements do not include or reflect any adjustments that might result from the outcome of these uncertainties.
ITEM 4 - CONTROLS AND PROCEDURES
The Chief Executive Officer and Chief Financial Officer (the principal executive officer and principal financial officer, respectively) of the Company have concluded, based on their evaluation as of June 30, 2017, that the design and operation of the Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act")) are effective to ensure that information required to be disclosed in the reports filed or submitted by the Company under the Exchange Act is accumulated, recorded, processed, summarized and reported to the management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding whether or not disclosure is required.
During the six months ended June 30, 2017, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 – EXHIBITS
(a) Exhibits
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Exhibit No. |
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Description |
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31.1 |
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CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002* |
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31.2 |
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CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002* |
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32.1 |
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CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002* |
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32.2 |
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CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002* |
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101 |
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The following materials from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements,** |
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* |
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Filed herewith |
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** |
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Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
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)
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August 14, 2017 |
/s/ Ngai Keung Luk |
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Ngai Keung Luk |
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Chairman and Chief Executive Officer |
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(Principal Executive Officer) |
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August 14, 2017 |
/s/ Darrie Lam |
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Darrie Lam |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
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