INTERGROUP CORP

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders,

The InterGroup Corporation:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The InterGroup Corporation and its subsidiaries (the “Company”) as of June 30, 2024 and 2023, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 1, the outstanding balance as of June 30, 2024 of the hotel’s mortgage notes payable consists of a senior mortgage loan and mezzanine loan totaling $100,783,000, net of debt issuance costs amounting to $679,000. Both loans matured on January 1, 2024, and were subsequently extended to January 1, 2025 through forbearance agreements. In addition, the Company has recurring losses and has an accumulated deficit. These factors and the Company’s ability to successfully refinance the debt on favorable terms in the current lending environment raise substantial doubt about the Company’s ability to continue as a going concern for one year after the financial statement issuance date. Management’s plans in regard to this matter are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of these critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Description of the Matters:

Deferred Tax Asset Valuation Allowance

As discussed in Note 13 to the consolidated financial statements, it was determined that it is more likely than not that a substantial portion of the deferred tax assets at June 30, 2024 and 2023 will not be realized and thus a partial valuation allowance has been recorded.

We identified the deferred tax asset valuation allowance as a critical audit matter due to the uncertainty, subjectivity, estimates and judgments required by management when forecasting future profitability and determining whether or not it is likely that the deferred tax assets will be realized.

Stock Based Compensation

As discussed in Note 15 to the consolidated financial statements, the Company currently has one equity compensation plan, which is the Intergroup 2010 Omnibus Employee Incentive Plan. During the year ended June 30, 2024, the Company granted 18,000 stock options and extended the expiration date of 133,195 stock options, recording approximately $1,309,000 of stock-based compensation expense.

Auditing the Company’s accounting for stock based compensation required complex auditor judgment due to the subjectivity of assumptions used to value stock based awards. Option-pricing models require the input of various subjective assumptions, including the option’s expected life, estimated forfeiture rates and the price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock price history.

How We Addressed the Matters in Our Audit:

Deferred Tax Asset Valuation Allowance

To test the Company’s conclusions about their deferred tax valuation allowance, we audited the deferred tax assets and evaluated the need for a valuation allowance by considering both positive and negative conditions, with the assistance of an internal tax provision specialist. In addition to considering the impact of any subsequent events, we analyzed the Company’s history of cumulative losses in recent years.

Stock Based Compensation

To test the stock based compensation expense, we obtained an understanding of the Company’s process for determining stock based compensation expense, including management’s review controls over the underlying calculations and the significant assumptions used in valuing the awards. We assessed the appropriateness of judgments made by management in determining key assumptions related to the awards. We tested the accuracy of the data used in measuring the awards by agreeing the underlying inputs back to source documents, and assessed the reasonableness of certain inputs by comparing them to evidence obtained from third-party sources. We obtained and reviewed the underlying agreements and performed an independent calculation of the value of the compensation expense related to the awards.

/s/WithumSmith+Brown, PC

We have served as the Company’s auditor since 2022.

East Brunswick, NJ

September 30, 2024

PCAOB ID Number 100