INTERGROUP CORP

Previous wording

This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding our business strategy, operating performance, financial condition and results, liquidity and capital resources(including anticipated refinancing or repayment of indebtedness), capital expenditures, market conditions, and other plans and objectives. These statements are not historical facts and can be identified by words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “seeks,” “may,” “will,” “should,” “could,” and similar expressions.

Current wording

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, statements regarding our business strategy; operating performance; financial condition and results of operations, liquidity and capital resources (including anticipated refinancing or repayment of indebtedness); capital expenditures; market conditions; and other plans and objectives. These statements are not historical facts and can be identified by words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “seeks,” “may,” “will,” “should,” “could,” and similar expressions.

Previous wording

Forward-looking statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Important factors include, among others: general economic conditions; interest-rate and inflation trends; availability and terms of financing and refinancing; operating performance of the Hilton San Francisco Financial District and conditions in the San Francisco hospitality market; competitive dynamics in our hotel and real estate markets; labor availability and costs; regulatory and legal developments; property-level operating risks (including maintenance, tax and insurance costs); capital market conditions; and other risks described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, and in other reports we file with the SEC.

Current wording

Forward-looking statements are based on our current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Important factors include, among others: general economic conditions; interest-rate and inflation trends; availability and terms of financing and refinancing; operating performance of the Hilton San Francisco Financial District and conditions in the San Francisco hospitality market; competitive dynamics in our hotel and real estate markets; labor availability and costs; regulatory and legal developments; property-level operating risks (including maintenance, tax and insurance costs); capital market conditions; and other risks described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, and in other reports we file with the SEC. These risks and uncertainties are not exhaustive.

Previous wording

As of September 30, 2025, the Company owned approximately 75.9% of the common shares of Portsmouth Square, Inc. The Company’s principal sources of revenue are (i) revenues from the Hotel owned by Portsmouth, (ii) rental income from multifamily and commercial real estate, and (iii) income from investment of cash and securities. Portsmouth’s primary asset is the 558-room Hilton San Francisco Financial District and related facilities (including a five-level underground garage). In addition to the Hotel operations, the Company generates income from owned and managed real estate, concentrated in Texas and Southern California.

Current wording

As of December 31, 2025, the Company owned approximately 75.9% of the common shares of Portsmouth Square, Inc. (“Portsmouth”). The Company’s principal sources of revenue are (i) revenues from the hotel operations conducted through Portsmouth, (ii) rental income from multifamily and commercial real estate, and (iii) income from the investment of cash and marketable securities and other investments. Portsmouth’s primary asset is the 558-room Hilton San Francisco Financial District and related facilities (including a five-level underground garage). The Company also generates income from its owned and in-house managed real estate, concentrated in Texas and Southern California.

Previous wording

The following table sets forth the average daily room rate, average occupancy percentage and RevPAR of the Hotel for the three months ended September 30, 2025 and 2024.

Current wording

The following table sets forth ADR, occupancy and RevPAR of the Hotel for the three months ended December 31, 2025 and 2024.

Previous wording

The Company had a net gain on marketable securities of $136,000 for the three months ended September 30, 2025 compared to a net gain of $129,000 for the three months ended September 30, 2024. For the quarter ended September 30, 2025, the Company recorded a net realized gain of $20,000 and a net unrealized gain of $116,000. Given the Company’s relatively modest marketable securities balances ($966,000 at September 30, 2025), period-to-period gains/losses are not expected to be material to consolidated results. See “Marketable Securities” below. For the three months ended September 30, 2024, the Company had a net realized loss of $659,000 and a net unrealized gain of $788,000.

Current wording

The Company had a net loss on marketable securities of $39,000 for the three months ended December 31, 2025 compared to a net loss of $598,000 for the three months ended December 31, 2024. For the three months ended December 31, 2025, the Company recorded a net unrealized loss of $39,000. Given the Company’s relatively modest marketable securities balances ($926,000 at December 31, 2025), period-to-period gains and losses are not expected to be material to consolidated results of operations or liquidity. See Note 6 – Investment in Marketable Securities. For the three months ended December 31, 2024, the Company had a net realized gain of $404,000 and a net unrealized loss of $1,002,000.

Previous wording

For the three months ended September 30, 2025, the Hotel had operating income of $1,937,000 before interest expense, depreciation, and amortization on total operating revenues of $12,418,000. For the three months ended September 30, 2024, the Hotel had operating income of $3,028,000 before interest expense, depreciation, and amortization on total operating revenues of $11,820,000.

Current wording

For the six months ended December 31, 2025, the Hotel had operating income of $4,171,000 before interest expense and depreciation and amortization expense on total operating revenues of $25,079,000 compared to operating income of $3,938,000 before interest expense and depreciation and amortization expense on total operating revenues of $21,785,000 for the six months ended December 31, 2024. Hotel revenues increased $3,294,000, driven primarily by higher room revenue. Operating expenses (excluding depreciation and amortization expenses) increased $3,061,000 due to the absence of a management incentive fee waiver in the prior-year period (approximately $1.030 million), partially offset by cost-control efforts and other operating variances. Mortgage interest expense decreased by $791,000 primarily reflecting changes in debt terms following the March 2025 refinancing. Depreciation and amortization expense was relatively consistent period over period.

Previous wording

Revenue from real estate operations increased to $5,495,000 for the three months ended September 30, 2025 from $5,086,000 for the three months ended September 30, 2024, driven by stronger multifamily occupancy. Operating expenses decreased to $2,338,000 from $2,457,000, reflecting reduced operating costs and improved property-level efficiency.

Current wording

Revenue from real estate operations increased to $10,135,000 for the six months ended December 31, 2025 from $9,562,000 for the six months ended December 31, 2024, primarily driven by stronger multifamily occupancy and rental rate trends across the portfolio. Operating expenses increased to $4,757,000 from $4,665,000, reflecting higher labor-related costs and property-level operating and maintenance costs.

Previous wording

The Company and its subsidiary, Portsmouth, compute and file income tax returns separately and prepare discrete income tax provisions for financial reporting purposes. Income tax expense for the three months ended September 30, 2025 and September 30, 2024 primarily reflects the combined income tax effect of Portsmouth’s pretax loss(which includes Hotel operations) and InterGroup’s standalone pretax income. Both entities file their respective federal and state income tax returns on a calendar-year basis.

Current wording

The Company and Portsmouth compute and file income tax returns separately and, for financial reporting purposes, each entity records a discrete income tax provision. Income tax expense for the six months ended December 31, 2025 and December 31, 2024 primarily reflects the combined income tax effect of Portsmouth’s pretax loss (including Hotel operations) and InterGroup’s standalone pretax income.

Previous wording

The following table shows the net loss on the Company’s marketable securities and the associated margin interest and trading expenses for the respective periods:

Current wording

The following table shows the net gains and losses on the Company’s marketable securities and the associated margin interest and trading expenses for the respective periods:

Previous wording

InterGroup’s liquidity is driven primarily by: (i) cash generated by its multifamily and commercial real estate portfolio; (ii) cash and cash equivalents held at the parent; (iii) proceeds from refinancings at InterGroup-owned properties; and (iv) limited amounts of marketable securities. InterGroup does not rely on Portsmouth for parent-level liquidity. Key expected uses of cash at the parent include corporate G&A, parent-level income taxes, debt service on InterGroup property-level mortgages, and capital expenditures for its multifamily and other real estate assets.

Current wording

InterGroup’s parent-level liquidity is generated primarily from cash flows from its multifamily and commercial real estate operations and cash on hand, and is for corporate overhead, income taxes, debt service on non-hotel mortgages, and capital expenditures across its real estate portfolio. InterGroup does not rely on Portsmouth for parent-level liquidity.

Previous wording

Related Party Credit Facility – (with InterGroup as lender)

Current wording

Related-Party Credit Facility (InterGroup as lender; Portsmouth as borrower)

Previous wording

As of September 30, 2025, the Company has no material off balance sheet arrangements.

Current wording

As of December 31, 2025, the Company had no material off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K.

Previous wording

Of the amounts shown, Hotel-related mortgage and mezzanine balances are obligations of Portsmouth’s subsidiaries; InterGroup’s parent-level mortgages relate to its non-Hotel real estate portfolio.

Current wording

Of the amounts shown, Hotel-related mortgage and mezzanine obligations are obligations of Portsmouth’s subsidiaries; InterGroup’s parent-level mortgages relate to its non-Hotel real estate portfolio.

Previous wording

Hotel room rates are typically impacted by supply and demand factors, not inflation, since rental of a hotel room is usually for a limited number of nights. Room rates can be, and usually are, adjusted to account for inflationary cost increases. Since Aimbridge has the power and ability under the terms of its management agreement to adjust Hotel room rates on an ongoing basis, there should be minimal impact on the Company’s revenues due to inflation. For the two most recent fiscal years, the impact of inflation on the Company’s income is not viewed by management as material.

Current wording

Hotel room rates are typically impacted by supply and demand factors, not inflation, since rental of a hotel room is usually for a limited number of nights. Since Aimbridge has the power and ability under the terms of its management agreement to adjust hotel room rates on an ongoing basis, management believes there has not been a material adverse impact on the Hotel’s revenues due to inflation. For the two most recent fiscal years, the impact of inflation on the Company’s income is not viewed by management as material. However, inflationary pressures on wages, utilities, food and beverage costs, and other operating expenses could adversely affect operating margins to the extent such increases cannot be offset through pricing actions or operating efficiencies.

Previous wording

The Company’s residential rental properties provide income from short-term operating leases, and no lease extends beyond one year. Rental increases are expected to offset anticipated increased property operating expenses.

Current wording

The Company’s residential rental properties provide income from short-term operating leases and no lease extends beyond one year. Accordingly, management believes the Company generally has the ability to adjust rental rates over time to reflect changes in operating costs, although there can be no assurance that rental-rate increases will fully offset inflationary costs pressures.

Previous wording

Critical accounting policies are those that are most significant to the portrayal of our financial position and results of operations and require judgments by management in order to make estimates about the effect of matters that are inherently uncertain. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an ongoing basis, including those related to the consolidation of our subsidiaries, recognition of our revenues, allowances for bad debts, accruals, asset impairments, other investments, income taxes and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions. There have been no material changes to the Company’s critical accounting policies during the three months ended September 30, 2025.

Current wording

Critical accounting policies are those that are most significant to the portrayal of our financial position and results of operations and require judgments by management to make estimates about the effect of matters that are inherently uncertain. The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, including those related consolidation, revenue recognition, allowance for credit losses, accrued liabilities, impairment assessments, investments, income taxes, and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, and use the results of those assumptions to form judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates. There have been no material changes to the Company’s critical accounting policies during the six months ended December 31, 2025. For a discussion of the Company’s critical accounting policies and estimates, see the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

Previous wording

We apply ASC 740 to account for income taxes. Significant judgment is required to estimate the future tax consequences of events recognized in our condensed consolidated financial statements and tax returns, including the realizability of deferred tax assets and the effects of changes in tax laws or their interpretation. Our income tax returns are subject to examination by the IRS and other taxing authorities; changes in our assessment of these matters could materially affect our consolidated financial statements. We evaluate tax positions taken or expected to be taken on a tax return and recognize benefits only when it is more-likely-than-not that the position will be sustained upon examination, based on the technical merits and assuming full knowledge by the taxing authority. For positions that meet this threshold, the recognized benefit is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. Positions that do not meet the recognition threshold are not recognized. Estimates, assumptions, and judgments are inherent in these evaluations, and changes in our assessments could materially affect our consolidated financial statements. We recognize interest and penalties related to uncertain tax positions in income tax expense.

Current wording

We apply ASC 740 in accounting for income taxes. Significant judgment is required to estimate the future tax consequences of events recognized in our condensed consolidated financial statements and tax returns, including the realizability of deferred tax assets and the effects of changes in tax laws or their interpretation. Our income tax returns are subject to examination by the IRS and other taxing authorities; changes in our assessment of these matters could materially affect our consolidated financial statements. We evaluate tax positions taken or expected to be taken on a tax return and recognize benefits only when it is more-likely-than-not that the position will be sustained upon examination, based on the technical merits and assuming full knowledge by the taxing authority. For positions that meet this threshold, the recognized benefit is measured as the largest amount of tax benefit that is greater than 50% likely to be realized upon settlement. Positions that do not meet the recognition threshold are not recognized. Changes in these estimates and judgments could materially affect our condensed consolidated financial statements. We recognize interest and penalties related to uncertain tax positions in income tax expense.

Previous wording

Cumulative pre-tax losses over the preceding three years constitute significant negative evidence that DTAs may not be realizable, while cumulative pre-tax income provides objective positive evidence of our ability to generate taxable income. Consistent with GAAP, when there is a recent history of pre-tax losses, limited or no weight is placed on forecasts in assessing DTA realizability. When relevant, we use systematic and logical scheduling to estimate the timing of reversal of temporary differences (i.e., when deferred tax liabilities will generate taxable income and when DTAs will generate deductions). These assessments require assumptions and judgements and are inherently complex and subjective. Significant judgment will also be required to determine the timing and amount of any future release of the valuation allowance should our evidence change.

Current wording

Cumulative pre-tax losses over the preceding three years constitute significant negative evidence that DTAs may not be realizable, while cumulative pre-tax income provides objective positive evidence of our ability to generate taxable income. Consistent with GAAP, when there is a recent history of pre-tax losses, limited or no weight is placed on forecasts in assessing DTA realizability. When relevant, we use systematic and logical scheduling to estimate the timing of reversal of temporary differences (i.e., when deferred tax liabilities will generate taxable income and when DTAs will generate deductions). These assessments require assumptions and judgments and are inherently complex and subjective. Significant judgment is also required to determine the timing and amount of any future release of the valuation allowance should our evidence change.

Previous wording

When indicators of impairment exist, we compare the carrying amount to the sum of the asset group’s undiscounted cash flows expected from use and eventual disposition. If not recoverable we measure an impairment loss as the excess of carrying amount over fair value. Fair value is estimated using market and/or income approaches, which require significant judgment, including assumptions about occupancy, ADR/RevPAR, operating margins, required capital expenditures, terminal values, and market discount and capitalization rates. Our indicators of impairment assessment considers industry conditions, property location, market dynamics, historical performance, and property-specific facts available at the time; conclusions may vary period to period as facts change.

Current wording

When indicators of impairment exist, we compare the carrying amount to the sum of the asset group’s undiscounted cash flows expected from use and eventual disposition. If the carrying amount is not recoverable, an impairment loss is measured as the excess of the carrying amount over fair value. Fair value is estimated using market and/or income approaches, which require significant judgment, including assumptions about occupancy, ADR/RevPAR, operating margins, required capital expenditures, terminal values, and market discount and capitalization rates. Our indicators of impairment assessment consider industry conditions, property location, market dynamics, historical performance, and property-specific facts available at the time; conclusions may vary from period to period as facts change.

Previous wording

Changes in economic or operating conditions could result in future impairment charges. Historically, changes in estimates used in our process have not resulted in material subsequent-period impairment charges.

Current wording

Changes in economic or operating conditions, or in the estimates and assumptions used in our analysis, could result in future impairment charges.

Previous wording

There were no indicators of impairment for our hotel investments or definite-lived intangible assets, and no impairment losses were recorded for the three months ended September 30, 2025 and 2024, respectively.

Current wording

No impairment losses were recorded for the six months ended December 31, 2025 and 2024, respectively.

Previous wording

We account for stock-based compensation by measuring and recognizing as compensation expense the fair value of all share-based payment awards made to employees, including employee stock options, restricted stock awards and employee stock purchases related to the Employee Stock Purchase Plan, or ESPP, based on estimated grant date fair values. The determination of fair value involves a number of significant estimates. We use the Black Scholes option pricing model to estimate the value of employee stock options which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based on historical data as well as expectations of future developments over the term of the options.

Current wording

We account for stock-based compensation by measuring and recognizing as compensation cost the fair value of all share-based payment awards made to employees, including employee stock options, restricted stock awards and purchases under our Employee Stock Purchase Plan (“ESPP”), based on estimated grant-date fair values. The determination of fair value involves significant judgment. We use the Black-Scholes option pricing model to estimate the value of employee stock options which requires assumptions, including the expected volatility of our stock and employee exercise behavior, which are based on historical data as well as expectations of future developments over the term of the options.