INTERGROUP CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

NOTE 1 -BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Description of the Business

The InterGroup Corporation, a Delaware corporation, (“InterGroup” or the “Company”) was formed to buy, develop, operate and dispose of real property and to engage in various investment activities to benefit the Company and its shareholders.

Effective February 19, 2021, the Company’s 83.7% owned subsidiary, Santa Fe Financial Corporation (“Santa Fe”), a public company (OTC: SFEF), was liquidated and all of its assets including its 68.8% interest in Portsmouth Square, Inc. (“Portsmouth”), a public company (OTC: PRSI) were distributed to its shareholders in exchange for their Santa Fe common stock. In June 2022, InterGroup received distribution of $1,159,000 from Santa Fe as the entity received federal and state tax refunds from previously filed final tax returns. As of June 30, 2025, InterGroup owns approximately 75.9% of the outstanding common shares of Portsmouth and the Company’s President, Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of Portsmouth. Mr. Winfield also serves as the Chairman of the Board and Chief Executive Officer of Portsmouth.

Portsmouth’s primary business has historically been conducted through its general and limited partnership interest in Justice Investors Limited Partnership, a California limited partnership (“Justice” or the “Partnership”). Effective July 15, 2021, Portsmouth completed the purchase of 100% of the limited partnership interest of Justice through the acquisition of the remaining 0.7% non-controlling interest. Effective December 23, 2021, the partnership was dissolved. The financial statements of Justice were consolidated with those of Portsmouth.

Prior to its dissolution effective December 23, 2021, Justice owned and operated a 544-room hotel property located at 750 Kearny Street, San Francisco California, known as the Hilton San Francisco Financial District (the “Hotel”) and related facilities including a five-level underground parking garage through its subsidiaries Justice Operating Company, LLC (“Operating”) and Justice Mezzanine Company, LLC (“Mezzanine”). Mezzanine was a wholly owned subsidiary of the Partnership; Operating was a wholly owned subsidiary of Mezzanine. Effective December 23, 2021, Portsmouth replaced Justice as the single member of Mezzanine. Mezzanine is the borrower under certain mezzanine indebtedness of Justice, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating. The Hotel is a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030.

Aimbridge Hospitality (“Aimbridge”) manages the Hotel, along with its five-level parking garage, under a certain hotel management agreement (the “HMA”) with Operating. The term of the management agreement is for an initial period of ten years commencing on February 3, 2017 and automatically renews for successive one (1) year periods, not to exceed five years in the aggregate, subject to certain conditions. Under the terms of the HMA, base management fee (“Basic Fee”) payable to Aimbridge equals one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge may be entitled to an annual incentive fee for each fiscal year equal to ten percent (10%) of the amount by which Gross Operating Profit in the current fiscal year exceeds the previous fiscal year’s Gross Operating Profit.

In addition to the operations of the Hotel, the Company also generates income from the ownership of real estate and investments in marketable securities. Properties include apartment complexes, commercial real estate, and three single-family houses as strategic investments. The properties are located throughout the United States, but are concentrated in Texas and Southern California. The Company also has investments in unimproved real property. All of the Company’s residential rental properties are managed in-house.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and Portsmouth. All significant inter-company transactions and balances have been eliminated. The Company evaluates its interests in other entities to determine whether such entities are variable interest entities (“VIEs”) and consolidates any VIEs for which the Company is the primary beneficiary pursuant to ASC 810.

Investment in Hotel, Net

Property and equipment are stated at cost. Building improvements are depreciated on a straight-line basis over their useful lives ranging from 3 to 39 years. Furniture, fixtures, and equipment are depreciated on a straight-line basis over their useful lives ranging from 3 to 7 years.

Repairs and maintenance are charged to expense as incurred. Costs of significant renewals and improvements are capitalized and depreciated over the shorter of the remaining estimated useful life or life of the asset. The cost of assets sold or retired, and the related accumulated depreciation are removed from the accounts; any resulting gain or loss is included in other income (expense).

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360. If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company records an impairment loss equal to the difference between the asset’s carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset becomes its new cost. For a depreciable asset, the new cost is depreciated over the asset’s remaining useful life. Generally, fair values are estimated using discounted cash flow, replacement cost or market comparison analyses. The process of evaluating for impairment requires estimates as to future events and conditions, which are subject to varying market and economic factors. Therefore, it is reasonably possible that a change in estimate resulting from judgments as to future events could occur which would affect the recorded amounts of the property. No impairment losses were recorded for the years ended June 30, 2025 and 2024.

Investment in Real Estate, Net

Rental properties are stated at cost less accumulated depreciation. Depreciation of rental property is provided on the straight-line method based upon estimated useful lives of 5 to 40 years for buildings and improvements and 5 to 10 years for equipment. Expenditures for repairs and maintenance are charged to expense as incurred and major improvements are capitalized.

The Company also reviews its rental property assets for impairment. No impairment losses on the investment in real estate have been recorded for the years ended June 30, 2025 and 2024.

The fair value of the tangible assets of an acquired property, which includes land, building and improvements, is determined by valuing the property as if it were vacant, and incorporates costs during the lease-up periods considering current market conditions and costs to execute similar leases such as lost rental revenue and tenant improvements. The value of tangible assets is depreciated using straight-line method based upon the assets estimated useful lives.

Investment in Marketable Securities

Marketable equity securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date in accordance with ASC 321; changes in fair value are recognized in earnings. Marketable debt securities, if any, are classified as trading and measured at fair value with changes recognized in earnings (ASC 320/ASC 825).

Other Investments, Net

Other investments include non-marketable securities (carried at cost, net of any impairment loss) and non-marketable debt instruments. The Company has no significant influence or control over the entities that issue these investments. These investments are reviewed on a periodic basis for other-than-temporary impairment. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. For certain equity interests without readily determinable fair values, the Company applies the ASC 321 measurement alternative (cost less impairment, adjusted for observable price changes in orderly transactions). For the years ended June 30, 2025 and 2024, the Company recorded impairment losses related to other investments of $0 and $5,000, respectively.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased and are carried at cost, which approximates fair value. As of June 30, 2025 and 2024, the Company didnot have any cash equivalents.

Restricted Cash

Restricted cash is comprised of amounts held by lenders for payment of real estate taxes, insurance, furniture, fixtures and equipment (“FF&E”) reserves, and amounts subject to cash-management lockbox arrangements under certain loan agreements.

Other Assets

Other assets include prepaid insurance, accounts receivable, prepaid expenses, and other miscellaneous assets.

Accounts receivable from the Hotel and rental property customers are carried at cost less an allowance for doubtful accounts measured under ASC 326 (CECL) using historical loss experience, current conditions, and reasonable and supportable forecasts. As of June 30, 2025, and 2024, the accounts receivable was $525,000 and $654,000, respectively, net of allowance of $772,000 and $653,000 at June 30, 2025 and 2024, respectively.

The Company extends unsecured credit to its customers but mitigates the associated credit risk by performing ongoing credit evaluations of its customers. Collection experience may be affected by local tenant-protection measures and economic conditions in the markets in which we operate.

Due to Securities Broker

The Company may utilize margin for its marketable securities purchases through the use of standard margin agreements with national brokerage firms. Various securities brokers have advanced funds to the Company for the purchase of marketable securities under standard margin agreements. These advanced funds are recorded as a liability and are collateralized by the related marketable securities; related interest is recognized in interest expense.

Obligation for Securities Sold

Obligations for securities sold short and written options are recognized as liabilities and measured at fair value with changes in fair value recognized in earnings (ASC 815/ASC 860). Short positions may be covered with current holdings or subsequent purchases.

Accounts Payable and Other Liabilities

Accounts payable and other liabilities include trade payables, advanced customer deposits, accrued wages, accrued real estate taxes, and other liabilities.

Treasury Stock

The Company records the acquisition of treasury stock under the cost method. During the years ended June 30, 2025 and 2024, the Company purchased 24,550 and 26,972 shares of treasury stock, respectively.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

Level 1–inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2–inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3–inputs to the valuation methodology are unobservable and significant to the fair value.

Assets Held for Sale – Accounting Policy (Continuing Operations)

Long-lived assets are classified as held for sale when management commits to a plan to sell, the assets are available for immediate sale in their present condition, an active program to locate a buyer has been initiated, the sale is probable and expected to be completed within one year, and it is unlikely that the plan will be significantly changed or withdrawn.

Upon classification as held for sale, the assets are measured at the lower of their carrying amount or fair value less costs to sell. Any loss resulting from remeasurement is recognized in the consolidated statements of operations. Depreciation of assets classified as held for sale ceases at the time of classification.

Assets meeting the held-for-sale criteria are presented separately as Assets held for sale in the consolidated balance sheets. Because the planned sale does not represent a strategic shift that would have a major effect on the Company’s operations or financial results, the results of operations and cash flows of the property continue to be reported within continuing operations. No liabilities have been reclassified to Liabilities held for sale as the related obligations are not expected to transfer to the buyer.

Interest Rate Cap

The Company uses interest rate cap agreements to manage exposure to increases in interest rates on its variable-rate debt obligations. Interest rate cap premiums are recorded on the balance sheets at fair value on the date the agreements are executed and are subsequently remeasured to fair value at each reporting date.

All changes in fair value are recognized in earnings within other income (expense). The Company is required, pursuant to certain debt agreements, to maintain interest rate caps for specified periods or replace them upon expiration.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 (Hotel and ancillary services) and ASC 842 (real estate leasing)

Performance Obligations

We identified the following performance obligations for which revenue is recognized as the respective performance obligations are satisfied, which results in recognizing the amount we expect to be entitled to for providing the goods or services:

Hotel revenue primarily consists of hotel room rentals, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales and other ancillary goods and services (e.g., parking). Revenue is recognized when rooms are occupied or goods and services have been delivered or rendered, respectively. Payment terms typically align with when the goods and services are provided. For package reservations, the transaction price is allocated to the performance obligations within the package based on the estimated standalone selling prices of each component. Service charges are similar amounts collected from customers and are evaluated to determine whether the Company is acting as principal or agent.

We do not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less. Due to the nature of our business, our revenue is not significantly impacted by refunds. Cash payments received in advance of guests staying at our hotel are refunded to hotel guests if the guest cancels within the specified time period, before any services are rendered. Refunds related to service are generally recognized as an adjustment to the transaction price at the time the hotel stay occurs or services are rendered. See Note 3 – Revenue.

Revenue recognition from apartment rental commences when an apartment unit is placed in service and occupied by a rent-paying tenant. Apartment units are leased on a short-term basis, with no lease extending beyond one year. Rental income is recognized on a straight-line basis over the lease term; variable consideration (e.g., fees) is recognized as earned.

Advertising Costs

Advertising costs are expensed as incurred and are included in Hotel operating expenses in the consolidated statements of operations. Advertising costs were $263,000 and $150,000 for the years ended June 30, 2025 and 2024, respectively.

Income Taxes

Deferred income taxes are calculated under the liability method. Deferred income tax assets and liabilities are based on differences between the financial statement and tax basis of assets and liabilities at the current enacted tax rates. Changes in deferred income tax assets and liabilities are included as a component of income tax expense. Changes in deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets where realization is not likely.

As of June 30, 2025 and 2024, the Company had $1,665,000 of unrecognized tax benefits, the recognition of which would affect the effective tax rate. Management does not expect these unrecognized tax benefits to reverse within the next twelve months. Interest and penalties related to income tax matters are recognized as a component of income tax expense, and no such amounts were recorded as of June 30, 2025 or June 30, 2024.

Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the “more-likely-than-not” threshold based on the technical merits of the positions.

Earnings Per Share

Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. The computation of diluted net income per share is similar to the computation of basic net income per share except that the weighted-average number of common shares is increased to include the number of additional common shares that would have been outstanding if potential dilutive common shares had been issued. The basic and diluted earnings per share are the same for the fiscal year ended June 30, 2025 and 2024 because the Company had a net loss. Potentially dilutive securities were anti-dilutive for all periods presented.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Actual results may differ from those estimates. Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets and when appropriate, records tax valuation allowances based on that evidence and estimates. As of June 30, 2025 based on taxable income that may be available under tax law, the deferred tax asset is not more likely than not to be realized.

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the debt liability and are amortized over the life of the debt. Loan amortization costs are included in interest expense in the consolidated statements of operations.

Recently Issued and Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU No 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). We adopted ASU 2023-07 effective July 1, 2024 (fiscal 2025). The amendments expanded annual segment disclosure (including significant segment expenses and CODM measures) and will expand interim segment disclosures beginning in fiscal 2026. Adoption did not have a material impact on our consolidated financial statements, but resulted in enhanced segment disclosures.

In December 2023, the FASB issued ASU No 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 (our fiscal 2026). We expect the standard to expand our income tax rate reconciliation and cash taxes paid disclosures; we do not expect a material impact on our consolidated financial position or results of operations.

Going Concern Basis and Management’s Evaluation (ASC 205-40) – Subsidiary-Only (Portsmouth)

The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP and on a going concern basis. InterGroup (the parent) has not had a going-concern uncertainty. The disclosure below is provided solely to summarize the going-concern matter at the Company’s majority-owned subsidiary, Portsmouth Square, Inc. (“Portsmouth”); it does not indicate or imply a going-concern issue for InterGroup.

As disclosed in prior filings, Portsmouth’s senior mortgage and mezzanine loans secured by the Hilton San Francisco Financial District matured on January 1, 2024 and, after a forbearance period ended in January 2025, default notices were issued. These subsidiary-level factors raised substantial doubt about Portsmouth’s ability to continue as a going concern at that time.

On March 28, 2025, Portsmouth completed a comprehensive refinancing of its senior mortgage and modified its mezzanine loan, resulting in extended maturities, favorable interest terms, and improved covenant compliance. Since closing, Portsmouth has remained current on required debt service and continued property upgrades intended to support performance. In March 2025 and May 2025, Portsmouth’s related-party revolving credit facility with InterGroup was amended to increase capacity to $40,000,000, extend maturity to July 31, 2027, and reduce the interest rate to 9%, providing contingency liquidity. (See the notes on mortgage notes payable and related-party financing for terms.)

Management evaluated Portsmouth’s ability to continue as a going concern for the twelve months following issuance and concluded that the conditions and events that initially raised substantial doubt have been alleviated and that substantial doubt does not exist for Portsmouth as of issuance under ASC 205-40.

While management believes available liquidity and cash generation are sufficient for near-term needs, uncertainties related to the San Francisco hospitality market and broader macroeconomic factors—including potential pressure on occupancy and RevPAR—could adversely affect Portsmouth’s results and, indirectly, consolidated liquidity (e.g., through covenant or cash-management constraints on distributions). Management will continue to monitor conditions and adjust operations and capital allocation as necessary. (See Item 7 MD&A and the notes on mortgage notes payable.)

This disclosure relates to Portsmouth and reflects management’s fiscal year 2025 evaluation of that subsidiary; it does not modify or supersede going-concern disclosures in previously issued fiscal year 2024 financial statements and interim filings, and it does not indicate a going-concern uncertainty for InterGroup.

NOTE 2 –LIQUIDITY

Historically, the Company has relied primarily on cash flows generated by its multi-family and commercial real estate portfolio and, to a lesser extent, returns from its investment portfolio. Cash generated by the Hilton San Francisco Financial District (the “Hotel”) is owned by our consolidated subsidiary, Portsmouth Square, Inc. (“Portsmouth”), is subject to lender-controlled cash-management arrangements, and is not available for InterGroup’s general corporate purposes. Portsmouth has not paid dividends to its shareholders in over a decade. Although conditions in the San Francisco hospitality market remain a headwind for Portsmouth—reflecting the pace of business-travel recovery and certain municipal factors—those trends affect consolidated results but do not represent InterGroup’s source of liquidity.

For the year ended June 30, 2025, consolidated net cash provided by operating activities was $5,893,000. In response to ongoing market pressures at the Hotel, Portsmouth continued capital-preservation initiatives (including deferral of non-essential projects, selective service reductions, vendor negotiations and other controllable cost actions) while investing in property enhancements, incurring $2,252,000 of Hotel capital expenditures, including the renovation of 14 rooms previously used as administrative offices back to guest-room inventory. During the same period, InterGroup made $1,739,000 of capital improvements across its multi-family and commercial real estate portfolio.

As of June 30, 2025, the Company had:

Marketable securities are considered liquid and available for near-term needs, subject to market risk and any account-level margin requirements. Restricted cash primarily reflects lender-controlled reserves at Portsmouth (e.g., taxes, insurance, FF&E) and funds held under the Hotel’s cash-management arrangements and is not available for InterGroup’s general corporate purposes.

Related Party Financing

InterGroup maintains access to an unsecured related-party facility with Portsmouth as previously disclosed; however, the Hotel is currently self-funded under its lender-controlled cash-management structure, and no additional borrowings were required by Portsmouth to fund Hotel operations following the March 28, 2025 refinancing. The initial facility, dated July 2, 2014, has undergone several amendments.

In March 2025, the facility was amended to:

In May 2025, the facility was amended to:

During the year ended June 30, 2025, Portsmouth borrowed an additional $11,615,000 under the facility primarily to reduce its senior loan balance and established a $5.0 million cash operating reserve required by the new senior lender in connection with the March 28, 2025 refinancing. As of June 30, 2025, the outstanding intercompany balance was $38,108,000, with no principal repayments made to date. The facility is interest-only, prepayable without penalty, and bears interest at 9% per annum; principal and accrued interest are due at maturity All material intercompany accounts and transactions have been eliminated in consolidation.

Cash Management and Distribution Restrictions (Hotel Subsidiary)

Under Portsmouth’s March 28, 2025 refinancing, a lender-controlled lockbox and ongoing DSCR requirements apply to hotel cash flows. Until DSCR thresholds are met for two consecutive quarters, substantially all hotel receipts are deposited into lender-controlled accounts and disbursed pursuant to lender-approved budgets for operating expenses, debt service, and required reserves (e.g., taxes, insurance, and FF&E).

During the fiscal year ending June 30, 2025, the Company refinanced the mortgage on its 157-unit apartment located in Florence, Kentucky in the amount of $9,800,000. The term of the loan is approximately 10 years with an interest rate at 5.40%. The loan matures in January 2035. In May 2025 the Company amended the agreement on its St. Louis, Missouri property to a new loan maturity of June 5, 2028. In May 2025 the Company made a principal reduction payment of $344,000.

Liquidity Outlook and Going Concern

Management has concluded there are no conditions or events, considered in the aggregate and know or reasonably knowable, that raise substantial doubt about Portsmouth’s ability to continue as a going concern within one year after the date these financial statements are issued (ASC 205-40). This conclusion is based on the successful refinancing of the senior mortgage loan and modification of the mezzanine debt on March 28, 2025, resulting in improved maturity profiles, covenant compliance, and a stable capital structure. Portsmouth remains current on all debt service obligations, and management’s forecasts indicate adequate liquidity for the twelve-month period following the issuance of these financial statements.

Forward-looking risks remain primarily tied to the performance of the San Francisco hospitality market, including:

Management will continue to monitor these market-specific conditions and adjust operations, capital allocation, and marketing strategies to maintain the Hotel’s competitive position.

The Hotel debt and cash-management/lockbox reside at Portsmouth’s subsidiaries; while these provisions may limit distributions upstream to InterGroup while in effect, they do not encumber InterGroup’s non-Hotel properties or parent-level liquidity. InterGroup’s exposure to the Hotel financing is limited to its guaranties of specified non-recourse carve-outs and defined springing recourse events (see Note 10; ASC 460).

Material Cash Requirements – Contractual Obligations

The following table provides a summary as of June 30, 2025 of the Company’s material contractual financial obligations, including estimated interest payments.

NOTE 3 –REVENUE

Our revenue from real estate is primarily rental income from residential and commercial property leases that is accounted for under ASC 842 (Leases). Lease income is recognized on a straight-line basis over the lease term (generally one year or less for residential units). Variable consideration such as reimbursement and fee is recognized as earned. Lease income is outside the scope of ASC 606. Hotel-related revenues (rooms, food and beverage, parking, and other ancillary services) are within the scope of ASC 606 and are recognized as described below.

Hotel revenue recognition. We recognize hotel revenues in accordance with ASC 606. Room revenue is recognized over the stay as the services are provided; food and beverage, parking, and other ancillary revenues are recognized when the good or services are delivered. Package arrangements are allocated to performance obligations based on relative standalone selling prices. Advance deposits are recorded as contract liabilities and recognized as revenue when the related services are rendered or upon cancellation consistent with contract terms. We assess taxes collected from customers on a net basis (excluded from revenues). We do not adjust the transaction price for a financing component when the period between payment and performance is one year or less.

The following table presents our Hotel revenue disaggregated by revenue streams:

Real estate revenue. Real estate revenue primarily consists of base rents from the Company’s multifamily portfolio and its commercial property, plus other property income (e.g., parking, utilities reimbursements, month-to-month premiums, pet rent, laundry and other fees). Lease income is accounted for under ASC 842 and recognized on a straight-line basis over the lease term (generally month-to-month or <12 months for residential). Variable consideration is recognized as earned. We assess collectability each period; when collections of lease payments is not probable, revenue is limited to amounts collected.

Disaggregation by major revenue source:

Real estate revenues increased to $18,015,000 in fiscal 2025 from $16,254,000 in fiscal 2024, primarily due to higher occupancy and rent levels across the multifamily portfolio, partially offset by market-specific dynamics noted in Item 7.

Contract Assets and Liabilities

The Company does not have any material contract assets as of June 30, 2025 and 2024, other than trade and other receivables, net on our consolidated balance sheets. Our receivables are primarily the result of contracts with customers, which are reduced by an allowance for doubtful accounts that reflects our estimate of amounts that will not be collected.

Portsmouth records contract liabilities when cash payments are received or due in advance of guests staying at our hotel, which are presented within Accounts payable and other liabilities-Hotel on our consolidated balance sheets had an opening balance on July 1, 2024 of $370,000. As of June 30, 2025 contract liabilities were $505,000. The increase during fiscal 2025 primarily reflects higher advance deposits for services to be performed after June 30, 2025.

Contract liabilities were $370,000 as of June 30, 2024 compared to $290,000 as of June 30, 2023. The increase for the twelve months ended June 30, 2024 was primarily driven by an increase in advance deposits received from customers for services to be performed after June 30, 2024. Contract liabilities are generally recognized as revenue within twelve months. We do not disclose remaining performance obligations because our customer contracts have an original expected duration of one year or less.

Contract Costs

We consider sales commissions earned to be incremental costs of obtaining a contract with our customers. We expense incremental costs of obtaining a contract when the amortization period would be one year or less. Travel-agent and group booking commissions related to completed stays are expensed as incurred.

NOTE 4 –INVESTMENT IN HOTEL, NET

Investment in Hotel consisted of the following as of:

**Note:**Accumulated amounts include amortization of finance-lease right-of-use assets. Depreciation and amortization expense related to Hotel assets were $3,634,000 and $3,494,000 for the years ended June 30, 2025 and 2024, respectively.

NOTE 5 -INVESTMENT IN REAL ESTATE, NET

At June 30, 2025, the Company’s investment in real estate consisted of twenty properties located throughout the United States. These properties include sixteen apartment complexes, three single-family houses and one commercial real estate property. The Company also owns unimproved land located in Maui, Hawaii. Properties are held for use; one is classified as held for sale. See Note 10 for mortgage information and Note 1 for depreciation policies and impairment considerations.

Investment in real estate included the following:

In April 2025, the Company determined that one multifamily property located in Los Angeles met the criteria for classification as held for sale, as described in Note 18 — Assets Held for Sale. Accordingly, the property is reported separately as Assets held for sale in the consolidated balance sheet as of June 30, 2025. The amounts presented in Note 5 — Investment in Real Estate, net exclude this property as of June 30, 2025.

The following table reconciles investment in real estate, net from June 30, 2024 to June 30, 2025.

Additions reflect capital improvements to the Company’s multifamily and commercial properties during the year. Depreciation expense reflects the change in accumulated depreciation for the period (from $52,846,000 to $55,842,000). There were no disposals or transfers, and one property was classified as held for sale during the period.

NOTE 6 -INVESTMENT IN MARKETABLE SECURITIES

The Company’s investment in marketable securities consists primarily of corporate equities. The Company has also periodically invested in corporate bonds and income producing securities, which may include interests in real estate-based companies and REITs, where financial benefit could inure to its shareholders through income and/or capital gain.

At June 30, 2025 and 2024, the Company’s marketable securities are accounted for under ASC 321 and measured at fair value with changes recognized in earnings; and marketable debt securities, if held, are classified as trading with changes recognized in earnings. The following table summarizes cost and fair value information for marketable securities:

Net loss on marketable securities in the consolidated statements of operations comprises realized and unrealized components, as follows:

Gains and losses on marketable securities may continue to fluctuate significantly from period to period, and past results are not necessarily indicative of future performance. There were no material changes to related accounting policies during the periods presented.

As of June 30, 2025, one equity security represented approximately 99% of the fair value of the Company’s marketable equity portfolio.

NOTE 7 -FAIR VALUE MEASUREMENTS

The carrying values of the Company’s financial instruments that are not measured at fair value on a recurring basis approximate fair value due to their short maturities (including accounts receivable, other assets, accounts payable and other liabilities, due to securities broker and obligations for securities sold) or the nature and terms of the obligation (such as other notes payable and mortgage notes payable). Management evaluates their instruments in accordance with ASC 820 and has determined that there are no material differences between the carrying amounts and estimated fair values of these financial instruments as of June 30, 2025 and 2024. There were no transfers between Levels 1, 2, and 3 during years ended June 30, 2025 and 2024.

The assets measured at fair value on a recurring basis are as follows:

The fair values of investments in marketable securities are determined by the most recently traded price of each security at the balance sheet date (quoted prices in active markets; Level 1 inputs).

On March 31, 2025, Portsmouth, through its affiliate Justice Operating Company, LLC, entered into an interest rate cap agreement (the “Interest Rate Cap”) with Goldman Sachs Bank USA as required under the March 28, 2025 senior Loan Agreement, intended to economically limit the Company’s exposure to increases in Term SOFR. The Interest Rate Cap caps Term SOFR at 4.50% and has a notional amount equal to or greater than the outstanding principal balance of the loan. The Company paid a premium of approximately $136,000 for the cap at inception. Changes in the fair value of the Interest Rate Cap are recorded in Other Income (Expense) within the consolidated statements of operations. At inception the cap was recorded at its fair value, which equaled the premium paid; subsequent changes in fair value are recognized in earnings in each reporting period.

The Interest Rate Cap is not designated as a hedging instrument under ASC 815 and is therefore accounted for at fair value, with changes in fair value recognized in earnings each reporting period. The cap is classified as a Level 2 financial instrument under the fair value hierarchy established by ASC 820, as its valuation is based on observable market inputs including interest rate curves and volatility assumptions obtained from a third-party pricing service. The Interest Rate Cap is associated with the Hotel senior mortgage and is held at the Portsmouth subsidiary level.

The following table summarizes the fair value of the derivative instrument as of June 30, 2025:

Derivative instruments measured at fair value on a recurring basis

There have been no material changes to the Company’s fair value measurement methodologies or classification of instruments during the periods presented.

NOTE 8 –OTHER ASSETS

Other assets consist of the following as of June 30:

There have been no material changes in the nature or classification of other assets during the periods presented. Income tax balances are presented gross by jurisdiction in accordance with ASC 740; amounts payable, if any, are classified within current liabilities.

NOTE 9 –OTHER FINANCING TRANSACTIONS

The following summarizes the balances of other notes payable as of June 30, 2025 and 2024, respectively.

Development incentive note to Hilton (Franchisor) is a self-exhausting, interest free note which is reduced by approximately $317,000 annually through 2030 by Hilton if the Hotel remains a franchisee under the Hilton brand. If the franchise is terminated prior to the end of the amortization period, amounts may become payable pursuant to the agreement.

Ambridge key money on February 1, 2017, Operating entered into a Hotel Management Agreement (“HMA”) with Aimbridge to manage the Hotel, with an effective takeover date of February 3, 2017. The term of the HMA is for an initial period of 10 years and automatically renews for up to five additional years in aggregate, subject to certain conditions. The HMA also provides Aimbridge to advance key money of $2,000,000 for capital improvements under a separate key money agreement. The key money is amortized in equal monthly amounts over eight (8) years commencing on the second anniversary of the takeover date and is recognized as a reduction of Hotel operating expenses. The unamortized portion of the key money, $396,000 and $646,000 as of June 30, 2025 and 2024, respectively, is included in other notes payable in the consolidated balance sheets due to potential repayment or claw back provisions upon early termination.

Future minimum principal payments for all other financing transactions are as follows:

On July 2, 2014, the Partnership secured an unsecured loan from InterGroup in the principal amount of $4,250,000, bearing a fixed annual interest rate of 12%, with no monthly principal or interest payments required prior to maturity. InterGroup also received a loan fee equal to 3% of the principal. The loan was prepayable at any time without penalty and was subsequently extended through July 31, 2023.

On December 16, 2020, the Partnership and InterGroup executed a loan modification agreement that increased the borrowing capacity, as needed, to a maximum of $10,000,000. Subsequently, on December 31, 2021, Portsmouth and InterGroup entered into a separate loan modification agreement, raising Portsmouth’s borrowing limit to $16,000,000. Following the dissolution of the Partnership in December 2021, Portsmouth assumed the outstanding loan obligation to InterGroup in the amount of $11,350,000.

In July 2023, the loan’s maturity date was extended to July 31, 2025, and the available borrowing capacity was increased to $20,000,000. In connection with this increase, the Company agreed to pay InterGroup a 0.5% loan modification fee on the additional $10,000,000.

In March 2024, another amendment raised the available borrowing limit to $30,000,000, subject to a 0.5% modification fee on the $10,000,000 increase.

In March 2025, another amendment was executed, increasing Portsmouth’s borrowing capacity to $40,000,000 and extendingthe maturity date to July 31, 2027. In May 2025, the parties agreed to reduce the loan’s interest rate from 12% to 9%.

Principal and accrued interest on the InterGroup loan are payable in full at maturity; no monthly principal or interest payments are required prior to that date. During the fiscal years ended June 30, 2025, and 2024, InterGroup advanced $11,615,000 and $10,793,000, respectively, to the Hotel to support its operations. As of June 30, 2025, and 2024, the amounts owed to InterGroup totaled $38,108,000 and $26,493,000, respectively. To date, the Company has not made any principal repayments on this note payable

The Company’s Audit Committee and Board of Directors reviewed and approved the related party loan agreements in accordance with its related party transaction policy. These transactions are disclosed pursuant to ASC 850 and Item 404 of Regulation S-K.

The Company may consider amending its by-laws to increase authorized shares and issue equity in public markets if needed, a measure that would be pursued as part of broader liquidity planning.

Four of the Portsmouth directors serve as directors of InterGroup. The Company’s Vice President Real Estate was elected President of Portsmouth in May 2021. The Company’s director and Chairman of the Audit Committee is William J. Nance.

As Chairman of the Executive Strategic Real Estate and Securities Investment Committee, the Company’s President and Chief Executive Officer (CEO), John V. Winfield, directs the investment activity of the Company in public and private markets pursuant to authority granted by the Board of Directors. Mr. Winfield also serves as Chief Executive Officer and Chairman of the Board of Portsmouth and oversees the investment activity of Portsmouth. Effective June 2016, Mr. Winfield became the Managing Director of Justice and served in that position until the dissolution of Justice in December 2021. Depending on certain market conditions and various risk factors, the Chief Executive Officer and Portsmouth may, at times, invest in the same companies in which the Company invests. Such investments align the interests of the Company with the interests of related parties because it places the personal resources of the Chief Executive Officer and the resources of Portsmouth, at risk in substantially the same manner as the Company in connection with investment decisions made on behalf of the Company.

NOTE 10 –MORTGAGE NOTES PAYABLE

Presentation and borrower entities unless otherwise noted, “the Company” refers to The InterGroup Corporation on a consolidated basis. The Hotel mortgage and mezzanine debt described in Sections A–E are obligations of Portsmouth Square, Inc. (“Portsmouth”) subsidiaries Justice Operating Company, LLC (“Operating”), and Justice Mezzanine Company, LLC (“Mezzanine”). These loans are secured at the Hotel-subsidiary level and are non-recourse to InterGroup except to the extent of limited guaranties described in Section D. InterGroup’s separate real estate mortgages (non-Hotel) are presented in Section F.

Obligor and recourse overview (as of and for the periods presented):

A. Mortgage and Mezzanine Loan History

In December 2013, Justice Investors Limited Partnership (“Justice”), then a consolidated subsidiary of Portsmouth, obtained a $97,000,000 mortgage loan and a $20,000,000 mezzanine loan to fund the redemption of limited partnership interests and repay a prior $42,940,000 mortgage loan. The mortgage loan was secured by Portsmouth’s principal asset, the Hilton San Francisco Financial District (the “Hotel”), and bore interest at 5.275% per annum. The loan required interest-only payments through January 2017 and began amortizing thereafter on a 30-year schedule, maturing on January 1, 2024. The mortgage loan was guaranteed in part by Portsmouth.

The mezzanine loan, originally bearing interest at 9.75% per annum and maturing concurrently with the senior loan, was secured by the membership interests of Justice Operating Company, LLC (“Operating”), held by Justice Mezzanine Company, LLC (“Mezzanine”), and was subordinated to the mortgage debt. The mezzanine loan was refinanced in July 2019 through a new agreement with CRED REIT Holdco LLC (“Mezzanine Lender”) in the amount of $20,000,000, at a reduced fixed interest rate of 7.25%, also maturing on January 1, 2024.

As of June 30, 2024, the outstanding senior mortgage loan balance was $76,962,000. As of December 31, 2024, the outstanding balance was $75,789,000.

B. Forbearance Agreements and Defaults

Due to the maturity of both loans on January 1, 2024, and the absence of full repayment by that date, Portsmouth (through Operating and Mezzanine) negotiated forbearance agreements with both lenders on April 29, 2024.

Mortgage Loan Forbearance Agreement (U.S. Bank and others, the “Mortgage Lender”):

Mezzanine Loan Forbearance Agreement (CRED REIT Holdco LLC):

Both agreements contained customary covenants, events of default, and representations and warranties. On January 3, 2025, Operating received a Notice of Termination from the Mortgage Lender, citing a termination event for failure to repay the debt by the forbearance expiration. On January 14, 2025, the Mezzanine Lender issued a Notice of Default, asserting its rights to pursue all remedies under the agreement.

These defaults were the primary contributors to Portsmouth’s substantial doubt assessment under ASC 205-40, as disclosed in Note 2 – Liquidity.

C. Debt Refinancing Completed on March 28, 2025

On January 21, 2025, Portsmouth executed a non-binding term sheet with Prime Finance (“Prime”) for a new senior loan. On March 28, 2025, Portsmouth’s subsidiaries closed on both a senior mortgage loan and modified mezzanine loan (collectively, the “Loan Agreements”), fully retiring the prior debt with U.S. Bank and CRED REIT Holdco LLC. In connection with the March 28, 2025 closing, all prior guaranties and credit documents related to the 2013/2017 facilities were terminated and replaced by the 2025 senior Loan Agreement and amended mezzanine documents.

Portsmouth continues to provide a limited guaranty in connection with both facilities. These borrower entities are also subject to customary covenants, including financial ratios and affirmative obligations. Copies of the senior Loan Agreement, the Mezzanine Loan Amendment, and the Cash Management Agreement are incorporated by reference to the Annual Report on Form 10-K of Portsmouth Square, Inc. for the fiscal year ended June 30, 2025 (see Item 15(a)(3)-Exhibits.

D. Guaranties

Under the March 28, 2025, refinancing, all guaranties associated with the prior 2013 senior mortgage and 2019 mezzanine facilities were terminated. The current senior mortgage and amended mezzanine facilities include customary limited non-recourse carve-out and performance undertakings provided at the Portsmouth/operating-entity level. InterGroup is not a guarantor of the March 28, 2025, senior mortgage loan or the amended mezzanine loan.

E. DSCR and Lockbox Arrangements

Operating has ongoing DSCR, cash-trap and other covenant requirements under the refinanced loans. Under the March 28, 2025 refinancing, a Cash Management Agreement with Prime Finance (“Lender”) and Wells Fargo Bank, N.A. (“Cash Management Bank”) requires that all Hotel cash receipts be deposited into a lender-controlled account. This lockbox arrangement remains in effect as provided in the loan documents and related intercreditor arrangements. Funds are disbursed for approved operating expenses, debt service (including senior interest-only), and required reserves (insurance, real estate taxes, and furniture, fixtures and equipment) in accordance with lender-approved budgets. Excess cash, if any, is applied in accordance with the senior waterfall and intercreditor agreement, which may limit current-pay to the mezzanine lender or upstream distributions. These cash-management provisions apply only to the Hotel’s financing at Portsmouth’s subsidiaries; they do not restrict InterGroup’s non-Hotel properties.

F. InterGroup Real Estate Mortgages (Non-Hotel)

During the fiscal year ending June 30, 2025, InterGroup refinanced the mortgage on its 157-unit apartment located in Florence, Kentucky in the amount of $9,800,000. The term of the loan is approximately 10 years with an interest rate at 5.40%. The loan matures in January 2035. In May 2025 InterGroup amended the agreement on our St. Louis, Missouri property to new loan maturity of June 5, 2028. In May 2025 InterGroup made a principal reduction payment of $344,000.

During the fiscal year ending June 30, 2024, InterGroup obtained a second mortgage on its 358-unit apartment located in Las Colinas, Texas in the amount of $4,573,000. The term of the loan is approximately 7 years with interest rate at 7.60%.

These non-Hotel property mortgages are obligations of InterGroup (parent-level real estate portfolio) and are separate from, and not cross-defaulted with, the Hotel-level financing of Portsmouth’s subsidiaries.

Each mortgage notes payable is secured by real estate or the Hotel. As of June 30, 2025 and 2024, the mortgage notes payables are summarized as follows:

Future minimum payments for all mortgage notes payable are as follows:

NOTE 11 –MANAGEMENT AGREEMENTS

Hotel Management

Operating entered into a hotel management agreement (“HMA”) with Aimbridge Hospitality (“Aimbridge”) to manage the Hotel, along with its five-level parking garage, with an effective date of February 3, 2017. The term of the management agreement is for an initial period of ten years commencing on February 3, 2017 and automatically renews for successive one (1) year periods, not to exceed five years in the aggregate, subject to certain conditions. Under the terms of the HMA, base management fee (“Basic Fee”) payable to Aimbridge equals one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge may earn an annual incentive fee for each fiscal year equal to ten percent (10%) of the amount by which Gross Operating Profit (“GOP”, as defined in the HMA) in the current fiscal year exceeds the previous fiscal year’s GOP.

For the fiscal years ended June 30, 2025 and 2024, hotel management fees were $783,000 and $706,000, respectively with incentive fees of $0, for both years, offset by key money amortization of $250,000 for both years that is included in Hotel operating expenses in the consolidated statements of operations. Following discussions with Aimbridge regarding the impact of the COVID-19 pandemic on incentive fee eligibility, the parties agreed that no incentive fees were payable for fiscal years 2019 through 2023. Specifically, Aimbridge agreed to waive $1,030,134 in previously recorded incentive fees, and both parties established a performance threshold for future incentive fee eligibility of $15,257,301 in earnings before interest, taxes, depreciation, and amortization (“EBITDA”) representing the EBITDA in 2017 when Aimbridge began managing the Hotel. As a result, Operating recorded a reduction in Hotel operating expenses of $1,030,134 for the year ended June 30, 2025. Future incentive fees, if any, will be recognized when earned in accordance with the HMA. See also Note 9 – Other Financing Transactions for information of the key money arrangement and related amortization. Under the HMA, Aimbridge, through Kearny Street Parking, LLC, an indirect wholly owned subsidiary, manages the parking garage operations.

InterGroup Real Estate Portfolio Management

In contrast to the Hotel’s third-party HMA, InterGroup’s multifamily and commercial real estate portfolio is managed in-house. Property-level operations, leasing, maintenance, and capital planning are overseen by the Company personnel rather than an external property manager. This structure provides direct owner oversight and avoids third-party property management and asset management fees that would otherwise be incurred; related payroll and benefits are recorded within real estate operating expenses. With this approach, management has experienced enhanced responsiveness and cost control which are reflected in the consolidated operating statements.

NOTE 12 –CONCENTRATION OF CREDIT RISK

As of June 30, 2025 and 2024, receivables related to Hotel customers were $396,000 and $519,000, respectively. Credit extended to tenants at the Company’s rental properties is generally limited because leases do not extend beyond one year; if tenants become delinquent, the Company pursues remedies available under applicable landlord-tenant laws. However, as of June 30, 2025 and 2024 accounts receivable from the Company’s rental properties were $906,000 and $788,000, respectively and allowance for doubtful accounts was $772,000 and $653,000, respectively.

These elevated gross receivable balances primarily reflect the effects of temporary eviction moratoria implemented by federal, state, and local authorities beginning in the COVID-19 pandemic. During applicable moratorium periods, landlords were restricted from evicting tenants for certain non-payments of rent. In Los Angeles County, the County’s COVID-19 Tenant Protections expired on March 31, 2023. In the City of Los Angeles, COVID-19 rental debt that accrued from March 1, 2020 through September 30, 2021 was due by August 1, 2023, and rental debt that accrued from October 1, 2021 through January 31, 2023 was due by February 1, 2024. The Company continues to fully pursue collections and other remedies permitted by applicable laws and regulations in the jurisdictions where it operates.

Hotel trade receivables are primarily from group accounts and credit card processors; credit card transactions typically settle within a few days, which reduces concentration risk in Hotel receivables.

The Company maintains its cash and cash equivalents and restricted cash with various financial institutions that are monitored regularly for credit quality. At times, such cash and cash equivalents holdings may exceed the Federal Deposit Insurance Corporation (“FDIC”) or other federally insured limits. Any loss incurred from, or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. Additionally, certain cash and securities are held in brokerage accounts and may exceed Securities Investor Protection Corporation (“SIPC”) protection limits; while the Company monitors counterparty creditworthiness, such balances are subject to counterparty risk.

NOTE 13 –INCOME TAXES

The provision for the Company’s income tax (expense) benefit is comprised of the following:

The provision for income taxes differs from the amount of income tax computed by applying the federal statutory income tax rate to income before taxes as a result of the following differences:

The components of the deferred tax asset and liabilities are as follows:

Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2025, it has been determined that it is more likely than not that the deferred tax asset will not be recognized. Thus, there is a valuation allowance of $39,314,000 as of June 30, 2025. This was an increase of $2,830,000 from June 30, 2024.

As of June 30, 2025, the Company had net operating loss carryforwards (“NOL”) available for carryforward of approximately $44,375,000 and $73,782,000 for federal and state purposes, respectively. Of the $43,375,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $28,668,000 of post-2017 NOLs can be carried forward indefinitely. Note that the post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $4,913,000 for federal and state purposes. The capital losses begin to expire in 2025 for both federal and state purposes. There are immaterial California state tax credits of $257,000 which expire in various years.

As of June 30, 2024, the Company had net operating loss carryforwards (“NOL”) available for carryforward of approximately $43,396,000 and $63,131,000 for federal and state purposes, respectively. Of the $43,396,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $28,689,000 of post-2017 NOLs can be carried forward indefinitely. Note that the post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $6,814,000 for federal and state purposes. The capital losses begin to expire in 2024 for both federal and state purposes. There are immaterial California state tax credits of $603,000 which expire in various years.

Below is the breakdown of the net operating losses for Intergroup and Portsmouth.

Utilization of certain tax attributes may be subject a substantial annual limitation if it should be determined that there has been a change in the ownership of more than 50 percent of the value of the Company’s stock, pursuant to Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examination by federal, state, and local jurisdictions, where applicable.

As of June 30, 2025, tax years beginning in fiscal 2021 and 2020 remain open to examination by the federal and state tax jurisdictions, respectively, and are subject to the statute of limitations.

Uncertain Tax Positions

The Company regularly evaluates the likelihood of realizing the benefit from income tax positions that it has taken in various federal, state, and foreign filings by considering all relevant facts, circumstances and information available. If the Company determines it is more likely than not that the position will be sustained, a benefit will be recognized at the largest amount that it believes is cumulatively greater than 50% likely to be realized. The following table summarizes changes in the amount of the Company’s unrecognized tax benefits for uncertain tax positions:

As of June 30, 2025 and June 30, 2024, the Company had unrecognized tax benefits, which would affect the effective tax rate if recognized. The unrecognized tax benefit are not expected to reverse within the next 12 months. Interest and penalties related to income tax matters are classified as a component of income tax expense. As of June 30, 2025 and June 30, 2024, no interest and penalties were recorded.

NOTE 14 –SEGMENT INFORMATION

The Company operates inthree reportable segments: (i) Hotel Operations (“the Hilton San Francisco District and its five-level parking garage), (ii) Real Estate Operations (the multifamily and commercial rental portfolio), and (iii) Investment Transactions (investment of cash in marketable securities and other investments). CODM is a group of senior executives who collectively use these segments to evaluate performance and allocates resources.

Segment results are evaluated using segment income (loss) from operations, which reflects revenues from external customers less segment operating expenses. This measure excludes interest expense, depreciation and amortization, gains/losses on extinguishment of debt, investment gains/losses, and income taxes, which are shown separately below. There are no intersegment revenues. “Other” consists primarily of unallocated corporate general and administrative costs and income taxes.

All long-lived assets and revenues are attributable to operations in the United States.

NOTE 15 –STOCK-BASED COMPENSATION PLANS

The Company currently has one equity compensation plan, which is the Intergroup 2010 Omnibus Employee Incentive Plan. The plan has been approved by the Company’s stockholders and is described below. Any outstanding options issued under the Key Employee Plan or the Non-Employee Director Plan remain effective in accordance with their terms.

As of June 30, 2025 and 2024, there wereno RSUs outstanding.

The InterGroup Corporation 2010 Omnibus Employee Incentive Plan

On February 24, 2010, the shareholders of the Company approved The Intergroup Corporation 2010 Omnibus Employee Incentive Plan (the “2010 Incentive Plan”), which was formally adopted by the Board of Directors following the annual meeting of shareholders. The Company believes that such awards help align the interests of its employees with those of its shareholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest based on five (5) years of continuous service. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the 2010 Incentive Plan. The 2010 Incentive Plan, as modified in December 2013, authorizes a total of up to 400,000 shares of common stock to be issued as equity compensation to officers and employees of the Company in an amount and in a manner to be determined by the Compensation Committee in accordance with the terms of the 2010 Incentive Plan. The 2010 Incentive Plan authorizes the awards of several types of equity compensation including stock options, stock appreciation rights, performance awards and other stock-based compensation. The 2010 Incentive Plan had an original expiration date of February 23, 2020, if not terminated sooner by the Board of Directors upon recommendation of the Compensation Committee. Any awards issued under the 2010 Incentive Plan will expire under the terms of the grant agreement. As of June 30, 2025 and 2024, approximately 14,000 shares remained available for future grant under the 2010 Incentive Plan.

The shares of common stock to be issued under the 2010 Incentive Plan have been registered under the Securities Act, pursuant to a registration statement filed on Form S-8 by the Company on June 16, 2010. Once received, shares of common stock issued under the Plan will be freely transferable subject to any requirements of Section 16 (b) of the Exchange Act.

On March 16, 2010, the Compensation Committee authorized the grant of 100,000 stock options to the Company’s Chairman, President and Chief Executive, John V. Winfield to purchase up to 100,000 shares of the Company’s common stock pursuant to the 2010 Incentive Plan. The exercise price of the options is $10.30, which is 100% of the fair market value of the Company’s Common Stock as determined by reference to the closing price of the Company’s Common Stock as reported on the NASDAQ Capital Market on March 16, 2010, the date of grant. The options had an original expiration dateten years from the date of grant, unless terminated earlier in accordance with the terms of the 2010 Incentive Plan. The options shall be subject to both time and market-based vesting requirements, each of which must be satisfied before options are fully vested and eligible to be exercised. Pursuant to the time vesting requirements, the options vest over a period offive years, with 20,000 options vesting upon each one-year anniversary of the date of grant. Pursuant to the market vesting requirements, the options vest in increments of 20,000 shares upon each increase of $2.00 or more in the market price of the Company’s common stock above the exercise price ($10.30) of the options. To satisfy this requirement, the common stock must trade at that increased level for a period of at least ten trading days during any one quarter. Consistent with stockholder-approved plan amendments in 2020 permitting extended terms, these options were extended to March 16, 2026. As of June 30, 2025, all market-vesting conditions had been satisfied.

On December 28, 2019, the Compensation Committee of the Board of Directors recommended, and the Board approved, amendments to the 2010 Incentive Plan which amend Section 1.3 to extend the term fromten years totwenty years, and Section 6.4 to change “tenth (10th) anniversary date” to “twentieth (20th) anniversary date”. This increased the term of the 2010 Incentive Plan to twenty years (expiring in February 2030 instead of February 2020) and also permits the existence of options with a term longer than ten years. The purpose of the amendment to the term is to extend its existence as our only incentive plan. The purpose of amendment of the allowable term of options is so that the Board may extend the term of the 100,000 options granted to John Winfield on March 16, 2010 from ten years to sixteen years so that these options will terminate on March 16, 2026 instead of on March 16, 2020, in recognition of Mr. Winfield’s contributions to and leadership of our Company. The recommended amendments were approved by shareholders on February 25, 2020.

In February 2012, the Compensation Committee awarded 90,000 stock options to the Company’s Chairman, President and Chief Executive, John V. Winfield to purchase up to 90,000 shares of common stock. The per share exercise price of the options is $19.77 which is the fair value of the Company’s Common Stock as reported on NASDAQ on February 28, 2012. The options expireten years from the date of grant. The options are subject to both time and market-based vesting requirements, each of which must be satisfied before the options are fully vested and eligible to be exercised. Pursuant to the time vesting requirements, the options vest over a period offive years, with 18,000 options vesting upon each one-year anniversary of the date of grant. Pursuant to the market vesting requirements, the options vest in increments of 18,000 shares upon each increase of $2.00 or more in the market price of the Company’s common stock above the exercise price ($19.77) of the options. To satisfy this requirement, the common stock must trade at that increased level for a period of at least ten trading days during any one quarter. On January 21, 2022, Mr. Winfield exercised 90,000 of his vested stock options by surrendering 35,094 shares of the Company’s common stock at fair value as payment of the exercise price, resulting in a net issuance to him of 54,906 shares. No additional compensation expense was recorded related to the issuance. This intrinsic value of the cashless exercise of 54,906 stock options was approximately $2,784,000 at January 21, 2022 when the Company’s common stock closing price was $50.70.

On December 26, 2013, the Compensation Committee authorized, subject to shareholder approval, a grant of non-qualified and incentive stock options for an aggregate of 160,000 shares (the “Option Grant”) to the Company’s President and Chief Executive Officer, John V. Winfield. The stock option grant was approved by shareholders on February 19, 2014. The grant of stock options was made pursuant to, and consistent with, the 2010 Incentive Plan, as proposed to be amended. The non-qualified stock options are for 133,195 shares and have a term often years, expiring on December 26, 2023, with an exercise price of $18.65 per share. The incentive stock options are for 26,805 shares and have a term offive years, expiring on December 26, 2018, with an exercise price of $20.52 per share. In accordance with the terms of the 2010 Incentive Plan, the exercise prices were based on 100% and 110%, respectively, of the fair market value of the Company’s common stock as determined by reference to the closing price of the Company’s common stock as reported on the NASDAQ Capital Market on the date of grant. The stock options are subject to time vesting requirements, with 20% of the options vesting annually commencing on the first anniversary of the grant date. In December 2018, Mr. Winfield exercised the 26,805 vested incentive stock options by surrendering 17,439 shares of the Company’s common stock at fair value as payment of the exercise price, resulting in a net issuance to him of 9,366 shares. No additional compensation expense was recorded related to the issuance.

In March 2017, the Compensation Committee awarded 18,000 stock options to the Company’s Chief Operating Officer, David C. Gonzalez, to purchase up to 18,000 shares of common stock. The per share exercise price of the options is $27.30 which is the fair value of the Company’s Common Stock as reported on the NASDAQ Capital Market on March 2, 2017. The options expireten years from the date of grant. Pursuant to the time vesting requirements, the options vest over a period offive years, with 3,600 options vesting upon each one-year anniversary of the date of grant. All 18,000 shares were vested as of June 30, 2025.

On October 13, 2023, the Compensation Committee awarded 18,000 stock options to the Company’s Chief Operating Officer David C. Gonzalez, to purchase up to 18,000 shares of common stock. The exercise price of the options is $28.90 which was the fair market value of the Company’s Common Stock as reported on the NASDAQ Capital Market at the close on October 12, 2023. The options expireten years from the date of grant. Pursuant to the time vesting requirements, the options vest over a period ofthree years, with 6,000 options vesting upon each on year anniversary of the date of grant.

On December 21, 2023, the Company extended the expiration date of the 133,195 stock options originally issued to John V. Winfield, CEO on December 26, 2013 with an exercise price of $18.65. The original expiration date was December 26, 2023 and is extended to December 26, 2029. As a result of extending Mr. Winfield’s options, the Company recorded stock option compensation cost of $1,175,000 in December 2023. The fair value of the modification was estimated using the Black Scholes pricing model, which takes into account immediately before and after the modification date the exercise price $18.65 per share and expected life of the stock option of 0.01 and 6 years, the market price of the underlying stock on modification date and its expected volatility 72% (pre-modification) and 50% (post-modification), expected dividends 0% on the stock and the risk free interest rate 0.9% (pre-modification) and 4.65% (post-modification) for the expected term of the stock option.

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. The Company has selected to use the simplified method for estimating the expected term. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. No dividend yield is included as the Company has not issued any dividends and does not anticipate issuing any dividends in the future.

During the years ended June 30, 2025 and 2024, the Company recorded stock option compensation expense of $105,000 and $1,309,000, respectively, related to stock option compensation cost.

The following tables summarize stock option activity for the year ended June 30, 2024 and 2025:

Aggregate Intrinsic Value represents the amount by which the market price of the Company’s common stock exceeded the exercise price of in-the-money options at period end.

Unrecognized compensation cost related to unvested stock options outstanding at June 30, 2025 was not material and is expected to be recognized over a weighted-average period of approximately 2.0 years. Cash received from options exercises was $0 for each of the fiscal years ended June 30, 205 and 2024. The total intrinsic value of options exercised was $0 for each of the fiscal years ended June 30, 2025 and 2024. Weighted-average grant-date fair value of options granted was not applicable for 2025 (no grants) andnot material for 2024. As of June 30, 2025 and 2024, approximately 14,000 shares remained available for future grant under the 2010 Incentive Plan.

NOTE 16 –RELATED PARTY TRANSACTIONS

As discussed in Note 9 – Other Financing Transactions, on July 2, 2014, InterGroup, as lender, established an unsecured revolving loan facility to its then-consolidated subsidiary, Justice Investors L.P. (the “Partnership”), with an initial principal capacity of $4,250,000, bearing a fixed annual interest rate of 12%, with no monthly principal or interest payments required prior to maturity. InterGroup also earned a loan fee equal to 3% of the original commitment. The facility was prepayable at any time without penalty and was subsequently extended through July 31, 2023.

On December 16, 2020, InterGroup and the Partnership executed a loan modification increasing the maximum borrowing capacity, as needed, to $10,000,000. Subsequently, on December 31, 2021, following the dissolution of the Partnership, Portsmouth Square, Inc. (“Portsmouth”), InterGroup’s majority-owned subsidiary and successor obligor, entered into a modification that (i) transferred the outstanding obligation to Portsmouth following the Partnership’s dissolution on December 23, 2021 (then $11,350,000) and (ii) increased Portsmouth’s borrowing limit to $16,000,000.

In July 2023, the loan’s maturity date was extended to July 31, 2025, and the available borrowing capacity was increased to $20,000,000. In connection with this increase, Portsmouth agreed to pay InterGroup 0.5% loan modification fee applicable to the additional $10,000,000.

In March 2024, InterGroup and Portsmouth raised the available borrowing limit to $30,000,000, subject to an additional 0.5% modification fee applicable to the $10,000,000 increase.

In March 2025, InterGroup further increased the commitment to $40,000,000 and extended the maturity to July 31, 2027. In May 2025, InterGroup reduced the facility’s fixed interest rate from 12% to 9%. The facility remains unsecured, interest-only, prepayable at any time without penalty, with principal and accrued interest due at maturity.

During the fiscal years ended June 30, 2025, and 2024, InterGroup advanced $11,615,000 and $10,793,000, respectively, to Portsmouth (principally to support Hotel refinancing). As of June 30, 2025, and 2024, amounts due to InterGroup from Portsmouth under the facility totaled $38,108,000 and $26,493,000, respectively. As of June 30, 2025, Portsmouth had not made any principal repayments.

InterGroup consolidates Portsmouth, the intercompany note receivable (InterGroup) and intercompany note payable (Portsmouth), together with related intercompany interest income/expense, are eliminated in consolidation. The terms are disclosed for transparency regarding related-party arrangements. InterGroup’s Audit Committee and Board of Directors reviewed and approved the related party loan agreements in accordance with its related party transaction policy.

Certain shared costs and expenses - primarily administrative expenses, rent and insurance - are allocated between InterGroup and Portsmouth based on management’s estimate of relative utilization. For the years ended June 30, 2025 and 2024, these expenses were approximately $144,000 for each year. Those fees are eliminated in consolidation.

As of June 30, 2025, InterGroup owns approximately 75.9% of the outstanding common shares of Portsmouth. As of June 30, 2024, the Company’s President, Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of Portsmouth. Mr. Winfield also serves as the Chairman of the Board and Chief Executive Officer of Portsmouth.

As Chairman of the Executive Strategic Real Estate and Securities Investment Committee, the Company’s President and Chief Executive Officer (CEO), John V. Winfield, directs the investment activity of the Company in public and private markets pursuant to authority granted by the Board of Directors. Mr. Winfield also serves as Chief Executive Officer and Chairman of the Board of Portsmouth and oversees the investment activity of Portsmouth. Depending on certain market conditions and various risk factors, the Chief Executive Officer and/or Portsmouth may, at times, invest in the same companies in which the Company invests. Such investments align the interests of the Company with the interests of related parties because it places the personal resources of the Chief Executive Officer and the resources of Portsmouth, at risk in substantially the same manner as the Company in connection with investment decisions made on behalf of the Company. Parallel investments are subject to InterGroup’s related-party policies and applicable SEC disclosure requirements.

NOTE 17 –COMMITMENTS AND CONTINGENCIES

Cash Management Agreement

In connection with the March 28, 2025 refinancing of the Hotel’s senior mortgage, Justice Operating Company, LLC (“Operating”) entered into a Cash Management Agreement with Prime Finance (lender) and Wells Fargo Bank, N.A. (cash management bank). Under this agreement, all Hotel receipts are deposited into a lender-controlled lockbox pursuant to a deposit account control agreement and swept to a cash management account maintained for the benefit of the lender. The cash management bank maintains subaccounts (including debt service, property tax, insurance, capital expenditure/FF&E, PIP, carry reserve, cash collateral, casualty/condemnation and security deposit subaccounts). On each monthly payment date, funds are applied in a set priority: (i) tax reserve, (ii) insurance reserve, (iii) bank fees, (iv) amounts due under the senior loan (interest and any other amounts due thereunder), (v) capital expenditure/FF&E reserve, (vi) approved operating expenses and custodial funds, and (vii) all remaining “available cash” to the carry reserve during the initial cash-management period or, thereafter, to the cash collateral subaccount, all in accordance with the loan documents. The account must maintain a minimum balance of $5,000. While no event of default exists, interest on balances (other than tax and insurance subaccounts) accrues to Operating; upon an event of default, the lender may direct application of all funds in any order to the debt. The agreement contains customary subordination of bank set-off rights, indemnities, New York governing-law and jury-trial-waiver provisions. See also Note 10—Mortgage Notes Payable. The Cash Management Agreement referenced above is incorporated by reference to the Annual Report of Form 10-K of Portsmouth Square, Inc. for the fiscal year ended June 30, 2025 (see Item 15(a)(3) – Exhibits).

Franchise Agreements

Justice Investors Limited Partnership (now dissolved) entered into a Franchise License Agreement with HLT Existing Franchise Holding LLC (“Hilton”) on December 10, 2004. The agreement provided an initial 15-year term from the Hotel’s conversion to the Hilton brand and included an option to extend, subject to conditions. On June 26, 2015, Operating and Hilton executed an amended franchise agreement that, among other things, extended the franchise term through January 31, 2030 and provided key-money incentives, subject to the applicable terms.

Since the opening of the Hotel as a full brand Hilton in January 2006, it has incurred monthly royalties, marketing/program fees, and information-technology charges equal to a percentage of the Hotel’s gross room revenue. Fees for such services during fiscal year 2025 and 2024 totaled approximately $3,529,000 and $2,967,000, respectively, and are included in Hotel operating expenses.

Employees

The Company’s corporate office and multifamily operations had 30 employees as of June 30, 2025 and the Hotel operations had 187 employees as of June 30, 2025. On February 3, 2017, Aimbridge assumed all labor union agreements as agent for the Hotel under the management agreement; Operating provides all funding for all payroll and related costs. As of June 30, 2025, approximately 90% of Hotel employees were represented by one of three labor unions, and their terms of employment were determined under various collective bargaining agreements (“CBAs”) to which Aimbridge is a party as agent for the Hotel. CBA for Local 2 (Hotel and Restaurant Employees) expires August 13, 2028. CBA for Local 856 (International Brotherhood of Teamsters) expires December 31, 2028. CBA for Local 39 (Stationary Engineers) expires July 2030.

Negotiation of collective bargaining agreements, which includes not just terms and conditions of employment, but scope and coverage of employees, is a regular and expected course of business operations for Portsmouth and Aimbridge. Portsmouth anticipates that CBA terms will affect wage and benefits, operating expenses, and certain Hotel operations over the life of each CBA and reflects there factors in operating and budgeting processes.

Legal Matters

Portsmouth, through Operating, owns the real property located at 750 Kearny Street, San Francisco, which is improved with the Hotel and five-level parking garage.. The Property was purchased and improved pursuant to the terms of a series of agreements with the City and County of San Francisco (the “City”) in the early 1970’s. The terms of the agreements and subsequent approvals and permits included a condition by which the owner was required to construct an ornamental overhead pedestrian bridge across Kearny Street, connecting the Property to a nearby City park and underground parking garage known as Portsmouth Square (the “Bridge”). Included in the approval process was the City’s issuance of a Major Encroachment Permit (“Permit”) allowing the Bridge to span over Kearny Street. As of May 24, 2022, the City purported to revoke the Permit and on June 13, 2022, directed Operating to submit a general bridge removal and restoration plan (the “Plan”) at owner’s expense. Portsmouth and Operating dispute the legality of the purported revocation of the Permit. They further dispute the existence of any legal or contractual obligation to remove the Bridge at owner’s expense. In particular, representatives from the owner participated in meetings with the City on and at various times after August 1, 2019, to discuss a collaborative process for the possible removal of the Bridge. Until the purported revocation of the Permit in 2022, the City representatives repeatedly and consistently promised and agreed that the City would pay for the associated costs of any Bridge removal and restoration of the front of the Hotel’s back to its current condition. Nevertheless, without waiving any rights, in an effort to understand all of the available options, and to provide a response to the City’s directives, Operating has engaged a Project Manager, a structural engineering firm and an architect to advise on the development of a Plan for the Bridge removal, as well as the reconstruction of the front of the Hilton Hotel. Operating has been working cooperatively with the City on the process of the removal of the Bridge and its related physical encroachments, including obtaining regulatory approvals and permits. Discussions are ongoing with the City regarding both the process and financial responsibility for the implementation of the Plan and reconstruction of the portions impacted of the Hotel. Those discussions are expected to continue at least through the third calendar quarter of 2025. A final Plan is currently expected to be completed and submitted for approval in late 2025; permits for demolition are unlikely to be obtained before early 2026, with demolition not anticipated before March 2026 at the earliest.

At this time, the Company cannot reasonably estimate the probability or amount of any loss, contribution, or recovery related to this matter; accordingly, no accrual has been recorded under ASC 450. From time to time, InterGroup and its subsidiaries may be involved in legal proceedings arising in the ordinary course of business. Management intends to defend such matters vigorously. Based on information currently available, management does not believe the ultimate resolution of such matters will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

NOTE 18—ASSETS HELD FOR SALE

On February 24, 2025, the Company executed a listing agreement to market for sale a 12-unit multifamily property located in Los Angeles County, California (10,600 square feet; acquired July 30, 1999). Active marketing commenced in April 2025. Management committed to a plan to sell the property, is available for immediate sale in its present condition, it is being actively marketed at a price commensurate with current market conditions, and a sale is considered probable within one year.

Accordingly, the Company concluded that the criteria in ASC 360-10-45-9 were met in the fourth quarter of fiscal 2025 and classified the asset as “Assets held for sale” as of June 30, 2025. Upon classification, the asset was measured at the carrying amount. No impairment charge was recognized in connection with the classification upon classification, as the carrying amount did not exceed its estimated fair value less costs to sell. Property taxes for the year ended June 30, 2025 were approximately $25,000.

The related mortgage (outstanding balance $1,863,000 at 3.59% fixed; maturity June 23, 2026) will be settled at closing and is not included in liabilities held for sale; it continues to be presented within mortgage notes payable.

Assets held for sale totaled $1,029,000 at June 30, 2025. (Amount reflects the carrying value of the Los Angeles 12-unit property at the date of classification April 2025.)

Management will continue to evaluate facts and circumstances each reporting period and will recognize any loss if the carrying value exceeds fair value less cost to sell.

NOTE 19 –SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date that the accompanying financial statements were issued, and has determined that no other material subsequent events that require adjustment to or disclosure in the financial statements exist through the date of this filing, except as disclosed below.

Regaining Nasdaq Listing Compliance

On September 17, 2025, the Company received confirmation from Nasdaq that the Company has regained compliance with Listing Rule 5550(b)(2). Nasdaq’s notice stated that, as of September 15, 2025, the Company had demonstrated 11 consecutive business days with a market value of listed securities above $35 million, thereby satisfying the requirement. As a result, the Panel granted the Company’s request for continued listing, and the matter is now closed.

One Big Beautiful Bill Act

****On July 4, 2025, the One Big Beautiful Bill was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal tax system. Significant components include restoration of 100% accelerated tax depreciation on qualifying property including expansion to cover qualified production property. Another major aspect incudes the return to immediate expensing of domestic research and experimental expenditures (“R&E”) which in some cases may include retroactive application back to 2021 for businesses with gross receipts of less than $31 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses. The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent. Less favorable business provisions include limitations on tax deductions for charitable contributions.

The Company is currently assessing the potential impact of this legislation on its future financial position, results of operations, and cash flows. In accordance with U.S. GAAP, the effects will be recognized in the period of enactment. Other than the matters described above, the Company did not identify any subsequent events requiring recognition or additional disclosure.