Portsmouth Square Inc 10-K for FY2026
Portsmouth Square Inc (PRSI)
About this 10-K
Portsmouth Square Inc filed this 10-K on September 28, 2026, covering the fiscal year ended June 30, 2026 (FY2026).
Headline figures
Fiscal year ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $55.8M
- up 20.3% from $46.36M a year earlier
- Net loss
- $5.41M
- compared with a net loss of $9.11M a year earlier
- Diluted EPS
- -$7.37
- compared with -$12.41 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to_________
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| Incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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Yes ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):
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Yes
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
The
aggregate market value of the Common Stock, no par value, held by non-affiliates computed by reference to the price at which the Company
Stock was last sold, or the average bid and asked price, as of the last business day of the registrant’s most recently completed
second quarter, December 31, 2025, was $
The number of shares outstanding of registrant’s Common Stock, as of September 28, 2026 was .
DOCUMENTS
INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements include, but are not limited to, statements related to our expectations regarding our liquidity and capital resources, including our indebtedness and ability to satisfy extension or refinancing conditions, future operating performance, capital expenditures, market conditions and other future events or circumstances.
Forward-looking statements include statements that are not historical facts and may be identified by words such as “believes,” “expects,” “may,” “will,” “should,” “could,” “intends,” “plans,” “estimates,” and “anticipates” and similar expressions, although not all forward-looking statements contain these words.
Forward-looking statements are based on management’s current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties include, among others, our dependence on a single Hotel in San Francisco; economic, business travel, convention and tourism conditions in San Francisco; our substantial indebtedness and ability to satisfy conditions for extensions or refinancing; our dependence on Hilton and Aimbridge; labor and operating costs; capital expenditure requirements; competition; cybersecurity risks; and the other risks described in Item 1A – Risk Factors and elsewhere in this Annual Report on Form 10-K.
Readers should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise.
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PART I
Item 1. Business.
GENERAL
Portsmouth Square, Inc. (“Portsmouth,” the “Company,” “we,” “us,” or “our”) is a California corporation incorporated on July 6, 1967. As of June 30, 2026, approximately 75.9% of the Company’s outstanding common stock was owned by The InterGroup Corporation (“InterGroup”), a publicly traded company listed on the Nasdaq Capital Market under the symbol “INTG.” InterGroup is the Company’s controlling shareholder. See Item 1A – Risk Factors and Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The Company’s principal business is the ownership and operation of the Hilton San Francisco Financial District, a full-service hotel located at 750 Kearny Street in San Francisco, California (the “Hotel”). Effective September 30, 2025, the Hotel’s available room inventory increased from 544 to 558 rooms following the conversion of 14 former administrative office spaces into guestrooms.
The Hotel generates revenues principally from guest rooms, food and beverage operations, parking and other Hotel operations and serves business, convention, group and leisure travelers.
The Hotel is operated through the Company’s wholly owned subsidiary structure. Justice Operating Company, LLC (“Operating”) owns the Hotel, Justice Pledgor, LLC (“Pledgor”) is the sole member of Operating, and Justice Mezzanine Company, LLC (“Mezzanine”) is the sole member of Pledgor.
HILTON FRANCHISE AGREEMENT
Operating is party to a franchise agreement with HLT Franchise Holding, LLC (“Hilton”) under which the Hotel operates as the Hilton San Francisco Financial District. The franchise agreement extends through January 31, 2030.
The License Agreement requires the Hotel to comply with applicable Hilton brand standards and capital improvement requirements. Failure to comply with applicable requirements could result in penalties or termination of the franchise, as discussed in Item 1A – Risk Factors.
HOTEL MANAGEMENT AGREEMENT
Operating entered into a hotel management agreement (“HMA”) with Aimbridge Hospitality (“Aimbridge”) to manage the Hotel, along with its five-level parking garage, effective February 3, 2017. The HMA has an initial ten-year term ending in February 2027 and provides for up to five successive one-year renewal periods, subject to the terms of the agreement.
Under the HMA, Aimbridge receives a base management fee equal to 1.70% of total Hotel revenue and may earn an incentive fee based on Hotel operating performance, subject to the terms of the HMA. See Note 10 – Management Agreement to the Consolidated Financial Statements and Item 1A – Risk Factors.
CHINESE CULTURE FOUNDATION LEASE
The Hotel is subject to a long-term lease with the Chinese Culture Foundation of San Francisco (the “Foundation”) covering the third-floor Chinese Culture Center. The lease automatically extended for an additional 10-year term in October 2023 while the property continues to operate as a hotel. Under the lease, the Foundation has the right to reserve the event space for up to 75 days per calendar year, subject to specified conditions, and the Hotel may use reserved dates upon payment of a contractual fee.
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MARKETABLE SECURITIES INVESTMENT POLICIES
In addition to its Hotel operations, the Company from time to time invests in marketable securities and other investment instruments.
The Company’s securities investments are made under the supervision of an Executive Strategic Real Estate and Securities Investment Committee of the Board of Directors (the “Committee”). The Committee has delegated authority to manage the portfolio to the Company’s Chairman and Chief Executive Officer subject to investment guidelines established by the Committee.
See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 5, 6 and 13 to the Consolidated Financial Statements for additional information regarding the Company’s investment activities.
SEASONALITY
Historically, the Hotel’s operation has been seasonal under normal circumstances. The Hotel generally experiences lower demand during the holiday period from approximately Thanksgiving through early January. These seasonal patterns may cause fluctuations in the Hotel’s quarterly revenues.
COMPETITION
The Hotel operates in a highly competitive San Francisco lodging market and competes with full-service and other lodging properties for business, convention, group and leisure travelers. Competition is based on factors including location, brand affiliation, room rates, property condition, amenities, service levels and access to corporate, convention and leisure demand. The Hotel’s Financial District location, Hilton affiliation and recently renovated guestrooms and public areas are important competitive factors.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The Hotel is subject to federal, state and local laws and regulations applicable to its operations, including laws and regulations relating to employment and labor, food and beverage service, accessibility, health and safety, privacy, taxation and environmental matters. Changes in applicable laws or regulations could increase the Company’s operating or capital costs.
The Company’s operations are subject to various federal, state, and local environmental laws and regulations. Management is not aware of any pending environmental matters or remediation obligations that are expected to have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows. Compliance with existing environmental laws has not had, and is not currently expected to have, a material effect on the Company’s capital expenditures, earnings or competitive position.
EMPLOYEES
As of June 30, 2026, the Company and the Hotel had a total of 191 employees, of whom 152 were full-time. Of the 191 employees, four were full-time corporate employees of Portsmouth and the remainder were Hotel employees.
As of June 30, 2026, approximately 90% of the Hotel employees were represented by one of three labor unions and were covered by collective bargaining agreements (“CBAs”). Aimbridge, as agent for Justice Operating Company, LLC (“Operating”), administers the applicable CBAs, and Operating funds the related payroll, employee benefits and other labor costs.
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The CBA covering employees represented by Local 2 (Hotel and Restaurant Employees) expires on August 13, 2028. The CBA covering employees represented by Local 856 (International Brotherhood of Teamsters) expires on December 31, 2028. The CBA covering employees represented by Local 39 (Stationary Engineers) expires in July 2030.
The terms of the CBAs affect the Hotel’s wages, employee benefits and other labor-related operating costs. See Item 1A – Risk Factors.
ADDITIONAL INFORMATION
The Company files required annual and quarterly reports on Forms 10-K and 10-Q, current reports on Form 8-K and other information with the Securities and Exchange Commission (“SEC” or the “Commission”). The SEC no longer operates a public reference room. The Commission also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.
Other information about the Company can be found on our parent company’s website www.intgla.com. Reference in this document to that website address does not constitute incorporation by reference of the information contained on the website. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports available free of charge on our website as soon as reasonably practicable after such materials are filed with or furnished to the SEC.
Item 1A. Risk Factors.
RISKS RELATED TO OUR HOTEL OPERATIONS
Our results depend on a single hotel property in San Francisco and are highly sensitive to local demand and competitive conditions.
Substantially all of our revenues are generated by the Hilton San Francisco Financial District. Because our operations are concentrated in a single property and a single geographic market, our financial performance is particularly sensitive to economic, business, travel, and tourism, convention and competitive conditions in the San Francisco area. Demand for Hotel accommodations depends on business, convention, group and leisure travel, corporate spending, consumer confidence and general economic conditions. Economic downturns, reduced travel demand, changing customer preferences or increased competition could reduce occupancy, average daily room rates, revenues and operating margins. Because we do not operate other hotel properties or in other geographic markets, adverse conditions affecting the Hotel or the San Francisco lodging market could have a material adverse effect on our results of operations and cash flows.
The Hotel requires significant ongoing capital expenditures and compliance costs.
Hotels require substantial expenditures for renovations, maintenance, furniture, fixtures, equipment, technology, and compliance with brand standards and governmental requirements. The Hotel is also subject to federal, state and local requirements relating to matters such as accessibility, employment, food and beverage operations, health and safety and environmental matters.
We may not generate sufficient cash flow to fund these expenditures and may need additional debt or equity financing. Delays, cost overruns, labor shortages, supply chain disruptions, inflation, or an inability to obtain financing could adversely affect our competitiveness and financial performance.
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We depend on third parties to operate and franchise the Hotel.
The Hotel is managed by Aimbridge Hospitality and operates under the Hilton brand pursuant to a franchise agreement. Our success depends in part upon the continued performance of these third parties and our ability to maintain these contractual relationships.
The initial term of the Aimbridge management agreement ends in February 2027, subject to a renewal provisions, and the Hilton franchise agreement extends through January 31, 2030. Failure to satisfy franchise standards, termination or nonrenewal of management or franchise agreement, or poor operational performance could materially adversely affect our operations and financial results.
Our heavily unionized Hotel workforce exposes us to increased labor costs and potential operating disruptions.
As of June 30, 2026, approximately 90% of the Hotel’s 187 employees were represented by one of three labor unions under collective bargaining agreements. These agreements affect wages, employee benefits and other labor-related operating costs. Future increases in labor costs, changes in applicable labor laws, collective bargaining negotiations, labor disputes or work stoppages could increase operating expenses or disrupt Hotel operations and adversely affect our results.
Restoration work following removal of the pedestrian bridge and construction of permanent improvements to the Hotel entrance could result in additional costs or operational disruption.
The pedestrian bridge connecting the Hotel to Portsmouth Square was physically removed on August 9, 2026, and the Hotel resumed guest operations on August 10, 2026, following a temporary closure. The City and its contractor continue to perform restoration work affecting portions of the Hotel façade and surrounding areas, and the Company is separately responsible for the design and construction of permanent improvements to the Hotel’s Kearny Street entrance. Delays in design, governmental approvals, permitting or construction, unexpected conditions, increased project costs or disruption of guest access could adversely affect Hotel operations, revenues or cash flows.
Our business is exposed to catastrophic events and insurance risks.
Natural disasters, including earthquakes, severe weather, terrorism, public health emergencies, and other catastrophic events could disrupt operations or reduce travel demand. Our concentration in a single San Francisco property increases our exposure to events affecting the Hotel or the surrounding area.
Although we maintain insurance coverage, such coverage may not be available for all risks or may be subject to significant deductibles, exclusions, or coverage limitations. Rising insurance costs or reduced availability of coverage could adversely affect our financial condition.
Cybersecurity incidents could adversely affect our operations.
We rely on information technology systems, including systems operated by third parties, to conduct our business. Cybersecurity incidents, including ransomware attacks, unauthorized access, or other disruptions, could impair operations, compromise confidential information, expose us to litigation or regulatory actions, and harm our reputation. We also depend on systems and technology maintained by third parties, including our Hotel manager and franchisor, which may expose us to cybersecurity risks outside our direct control. See Item 1C – Cybersecurity.
RISKS RELATED TO FINANCING AND LIQUIDITY
Our substantial indebtedness could adversely affect our financial condition.
We have significant debt obligations that require substantial principal and interest payments and subject us to financial covenants. Our indebtedness reduces financial flexibility, limits our ability to pursue strategic opportunities, and increases our vulnerability to adverse economic conditions and rising interest rates. Our inability to comply with debt covenants, refinance indebtedness, or satisfy extension conditions could materially adversely affect our business and financial condition.
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RISKS RELATED TO OUR OWNERSHIP AND COMMON STOCK
Our common stock is quoted on the OTC Pink Open Market and may have limited liquidity and significant price volatility.
Our common stock is quoted on the OTC Markets Group Pink Open Market and is not listed on a national securities exchange. The market for our common stock may have limited trading volume and liquidity. As a result, shareholders may have difficulty selling shares at desired prices, and relatively small transactions may result in significant fluctuations in the market price of our common stock.
InterGroup controls the Company and is also a significant creditor of the Company
As of June 30, 2026, InterGroup owned approximately 75.9% of our outstanding common stock. As a result, InterGroup is able to control or significantly influence matters submitted to shareholders, including the election of directors, corporate transactions, and other significant corporate actions. The Company also has substantial financing and other related-party transactions with InterGroup, including $38.108 million outstanding under an unsecured revolving credit facility as of June 30, 2026. The interests of InterGroup may differ from those of our minority shareholders.
Item 1B. Unresolved Staff Comments.
None.
The
Company maintains processes designed to assess, identify and manage material risks from cybersecurity threats. Because the Company’s
Hotel and corporate operations depend substantially on information technology systems operated or supported by
Risk Management and Strategy
The Company’s technology environment generally consists of three principal areas. First, the Hotel utilizes systems and technology provided and maintained by Hilton in connection with reservations, booking, marketing and other franchise-related functions. Second, Aimbridge Hospitality (“Aimbridge”), as manager of the Hotel, provides and maintains systems used for Hotel-level accounting, operations and administrative support. Third, the Company’s corporate office relies on a third-party information technology and cybersecurity provider and third-party software platforms, including Yardi, for accounting and administrative functions. A substantial portion of the Company’s corporate operations and communications are conducted through internet-based systems and third-party technology platforms.
Because of the Company’s size, it does not maintain a dedicated internal cybersecurity department and instead relies on its third-party information technology and cybersecurity provider for technical cybersecurity expertise and services relating to its corporate technology environment.
The Company’s cybersecurity risk and vulnerability assessments:
| ● | use of third-party information technology and cybersecurity professionals to assist in monitoring, investigating, containing and remediating identified threats and vulnerabilities; |
| ● | cybersecurity awareness and compliance training; |
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| ● | maintenance and periodic testing of cybersecurity incident-response procedures; and monthly cybersecurity awareness training to our staff; and |
| ● | consideration of cybersecurity risks associated with material third-party technology and service providers. |
The Company uses its third-party information technology and cybersecurity provider and related cybersecurity tools and services to assist in monitoring its corporate technology environment, evaluating vulnerabilities and addressing identified cybersecurity risks. Hotel personnel also complete annual Payment Card Industry (“PCI”) compliance certification and training requirements through both Hilton and Aimbridge.
Third-Party Service Providers
The Company depends substantially on third-party technology and service providers for systems used in its operations. Hilton provides and maintains systems used for reservations, booking, marketing and other franchise-related functions, while Aimbridge provides and maintains systems used for Hotel-level accounting, operations and administrative support. Hilton and Aimbridge maintain their own cybersecurity programs and controls, and Hotel personnel complete annual PCI compliance certification and training requirements through both organizations.
The Company also relies on its third-party information technology and cybersecurity provider for its corporate technology environment and on third-party software platforms, including Yardi, for certain accounting and administrative functions.
The Company does not directly control the cybersecurity systems, practices or infrastructure of Hilton, Aimbridge, Yardi or its other third-party service providers. Accordingly, a cybersecurity incident affecting one of these providers could adversely affect the Company even if the Company’s corporate systems were not directly compromised.
Management and Board Oversight
The Company’s Controller and Principal Financial Officer is responsible for coordinating the Company’s cybersecurity risk management activities with its third-party information technology and cybersecurity provider. The Controller and Principal Financial Officer receive information regarding identified cybersecurity risks, vulnerabilities and incidents and is responsible for escalating material cybersecurity matters to senior management and, when appropriate, the Board of Directors. The Controller and Principal Financial Officer is not a dedicated cybersecurity professional; the Company relies on its third-party information technology and cybersecurity provider for technical cybersecurity expertise and services.
Management monitors cybersecurity risks through communications with the Company’s third-party information technology and cybersecurity provider, assessments of identified risks and vulnerabilities, and information received from material third-party service providers.
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Effect of Cybersecurity Risks
Risks
from cybersecurity threats, including risks associated with third-party systems used by the Company, have not materially affected the
Company, including its business strategy, results of operations or financial condition.
The Company nevertheless remains subject to cybersecurity risks arising from its own technology environment and from systems maintained by Hilton, Aimbridge, Yardi and other third-party service providers. A material cybersecurity incident affecting any of these systems could disrupt Hotel or corporate operations, compromise confidential or proprietary information, result in legal or regulatory exposure, or otherwise materially adversely affect the Company’s business, results of operations or financial condition. See Item 1A – Risk Factors.
Item 2. Properties.
SAN FRANCISCO HOTEL PROPERTY
The Hotel is owned by Portsmouth through its wholly owned subsidiary, Justice Operating Company, LLC (“Operating”). The Hotel is located at 750 Kearny Street in the Financial District of San Francisco, California, one block from the Transamerica Pyramid. The Embarcadero Center is within walking distance and North Beach is two blocks away, and is used by the Company’s Hotel Operations reportable segment.
The Hotel is a 31-story (including parking garage), steel and concrete, A-frame building, built in 1970. The Hotel has 558 guest rooms and suites situated on 22 floors. During fiscal 2026, 14 former administrative office spaces were converted to guestrooms, which were added to the Hotel’s room inventory effective September 30, 2025.
The Hotel has a restaurant, lounge and private dining room totaling approximately 3,700 square feet, two kitchens servicing restaurant and banquet operations, a fitness center and a rooftop swimming pool that is not currently in operation. The third floor houses the Chinese Culture Center (the “CCC”), its administrative office, and a grand ballroom. The Hotel has approximately 22,000 square feet of meeting space, including the grand ballroom, and a five-level underground parking garage.
The pedestrian bridge formerly spanning Kearny Street between the Hotel and Portsmouth Square Park was removed on August 9, 2026. In connection with the removal, the Hotel was closed from July 31, 2026 through August 9, 2026 and resumed guest operations on August 10, 2026. See Note 15 – Subsequent Events to the Consolidated Financial Statements for additional information regarding the bridge removal and related post-removal repair work.
The Hotel is subject to a mortgage securing the Company’s $67.0 million senior mortgage loan. See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 9 – Mortgage and Mezzanine Loans to the Consolidated Financial Statements for additional information regarding the Company’s financing arrangements.
Item 3. Legal Proceedings.
The Company is not a party to any material pending legal proceedings required to be disclosed under Item 103 of Regulation S-K. See Note 14 – Commitments and Contingencies and Note 15 – Subsequent Events to the Consolidated Financial Statements for information regarding the Company’s dispute and arrangements with the City and County of San Francisco relating to the pedestrian bridge formerly connecting the Hotel to Portsmouth Square Park.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
MARKET INFORMATION
Portsmouth’s common stock is quoted on the OTC Markets Group Inc. Pink Open Market under the symbol “PRSI.” Quotations on the OTC market reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. As of June 30, 2026, the number of holders of record of the Company’s Common Stock was approximately 129. The number of holders of record is based on the Company’s shareholder records and does not include beneficial owners whose shares are held in the names of brokers, clearing agencies or other nominees.
DIVIDENDS
The Company does not currently anticipate paying regular cash dividends. The declaration and payment of any future dividends will be determined by the Board of Directors based on the Company’s financial condition, results of operations, cash requirements, contractual restrictions and other factors the Board considers relevant.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The Company had no equity compensation plans and no securities authorized for issuance under any equity compensation plan as of June 30, 2026.
UNRESGISTERED SALES OF EQUITY SECURITIES
The Company did not sell any equity securities during the fiscal year ended June 30, 2026 that were not registered under the Securities Act of 1933.
PURCHASES OF EQUITY SECURITIES
The Company did not repurchase any shares of its common stock during the fourth quarter of the fiscal year ended June 30, 2026, and had no publicly announced share repurchase program during that period.
Item 6. Reserved.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes, and Item 1A - “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K.
SAN FRANCISCO MARKET CONDITIONS
The Hotel’s operating results are significantly affected by economic, business travel, convention and tourism conditions in San Francisco. During fiscal 2026, the Hotel experienced improved business travel and convention demand, which contributed to higher occupancy, average daily rate and room revenue compared with fiscal 2025. San Francisco lodging demand remains subject to changes in local economic conditions, convention activity, business and leisure travel and public perceptions of the city. Because the Company’s Hotel operations are concentrated in a single property in San Francisco, changes in these conditions may have a significant effect on the Company’s future operating results. See Item 1A – Risk Factors.
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RESULTS OF OPERATIONS
The Company reported a net loss of $5.414 million for fiscal 2026 compared with a net loss of $9.110 million for fiscal 2025.
Fiscal Year Ended June 30, 2026, Compared to Fiscal Year Ended June 30, 2025
The decrease in net loss for fiscal 2026 compared with fiscal 2025 primarily reflected improved Hotel operating results and lower mortgage interest expense. The year-over-year improvement was partially offset by certain benefits recognized in fiscal 2025 that did not recur in fiscal 2026, including a $1.416 million gain on extinguishment of debt and a $1.030 million reduction in Hotel operating expenses resulting from Aimbridge’s waiver of previously accrued incentive management fees.
Hotel Operations
The Company’s principal source of revenue is the Hotel, including room, food and beverage, parking and other operating revenue.
Hotel Operations segment income increased to $12.524 million in fiscal 2026 from $8.732 million in fiscal 2025. The improvement primarily reflected higher room revenue resulting from increased average daily rate, higher occupancy, improved business travel and convention demand, and the addition of 14 guestrooms to available inventory effective September 30, 2025. The increase was partially offset by higher Hotel operating expenses and by the absence of the $1.030 million management incentive fee waiver recognized as a reduction of Hotel operating expenses in fiscal 2025.
Hotel Operating Table
| For the year ended June 30, | 2026 | 2025 | ||||||
| Hotel rooms | $ | 48,396,000 | $ | 39,648,000 | ||||
| Food and beverage | 3,164,000 | 2,862,000 | ||||||
| Garage | 3,307,000 | 3,214,000 | ||||||
| Other operating departments | 930,000 | 639,000 | ||||||
| Total Hotel revenue | 55,797,000 | 46,363,000 | ||||||
| Hotel operating expenses | (43,273,000 | ) | (37,631,000 | ) | ||||
| Hotel operations segment income | $ | 12,524,000 | $ | 8,732,000 | ||||
The following table sets forth the monthly average occupancy percentage of the Hotel for the fiscal years ended June 30, 2026 and 2025.
| Month | Jul | Aug | Sep | Oct | Nov | Dec | Jan | Feb | Mar | Apr | May | Jun | Fiscal Year | |||||||||||||||||||||||||||||||||||||||
| Year | 2025 | 2025 | 2025 | 2025 | 2025 | 2025 | 2026 | 2026 | 2026 | 2026 | 2026 | 2026 | 2025 - 2026 | |||||||||||||||||||||||||||||||||||||||
| Average Occupancy % | 93 | % | 95 | % | 96 | % | 96 | % | 92 | % | 88 | % | 91 | % | 96 | % | 97 | % | 95 | % | 97 | % | 97 | % | 95 | % | ||||||||||||||||||||||||||
| Year | 2024 | 2024 | 2024 | 2024 | 2024 | 2024 | 2025 | 2025 | 2025 | 2025 | 2025 | 2025 | 2024 – 2025 | |||||||||||||||||||||||||||||||||||||||
| Average Occupancy % | 96 | % | 96 | % | 96 | % | 94 | % | 83 | % | 87 | % | 90 | % | 86 | % | 91 | % | 91 | % | 93 | % | 93 | % | 92 | % | ||||||||||||||||||||||||||
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Hotel Operating Expenses
Hotel operating expenses increased by $5.642 million, to $43.273 million in fiscal 2026 from $37.631 million in fiscal 2025. The increase primarily reflected higher salaries, wages and employee-related costs, higher Hilton marketing and guest loyalty program fees, increased credit card processing costs, and higher travel agent and group commissions associated with increased business volume. Fiscal 2025 Hotel operating expenses also benefited from the $1.030 million Aimbridge incentive management fee waiver discussed above.
The following table sets forth the average daily room rate, average occupancy percentage and room revenue per available room (“RevPAR”) of the Hotel for the years ended June 30, 2026 and 2025.
For the Year Ended June 30, | Average Daily Rate | Average Occupancy % | RevPAR | |||||||||
| 2026 | $ | 253 | 95 | % | $ | 239 | ||||||
| 2025 | $ | 218 | 92 | % | $ | 200 | ||||||
Total Hotel revenue increased approximately 20% to $55.797 million in fiscal 2026 from $46.363 million in fiscal 2025. Average daily rate increased $35, or approximately 16%, to $253 from $218; average occupancy increased three percentage points to 95% from 92%; and RevPAR increased $39, or approximately 20%, to $239 from $200. The increases reflected improved business travel and convention demand, the benefit of the completed guestrooms renovation, which included the addition of 14 guestrooms to available inventory during fiscal 2026.
Corporate and Financing Expenses
Corporate general and administrative expense decreased to $1.095 million in fiscal 2026 from $1.327 million in fiscal 2025. Mortgage and mezzanine interest expense decreased to $9.686 million from $10.680 million, primarily reflecting the March 2025 refinancing and the resulting financing terms applicable throughout fiscal 2026. Related-party interest expense decreased to $3.437 million from $3.570 million. Depreciation and amortization expense increased slightly to $3.640 million from $3.534 million.
Fiscal 2025 included a $1.416 million gain on extinguishment of debt associated with the March 2025 refinancing; no comparable gain was recognized in fiscal 2026.
Investment Transactions
The Company’s Investment Transactions segment generated a loss of $79,000 in fiscal 2026 compared with a loss of $146,000 in fiscal 2025. Fiscal 2026 included an unrealized gain on marketable securities of $73,000 and trading and margin interest expense of $152,000. Fiscal 2025 included a net gain on marketable securities of $3,000, dividend and interest income of $10,000 and trading and margin interest expense of $159,000.
The following table summarizes the results of the Company’s marketable securities activities:
| For the year ended June 30, | 2026 | 2025 | ||||||
| Net gain on marketable securities | $ | 73,000 | $ | 3,000 | ||||
| Dividend and interest income | - | 10,000 | ||||||
| Trading expenses | (152,000 | ) | (159,000 | ) | ||||
| Net loss from investment activities | $ | (79,000 | ) | $ | (146,000 | ) | ||
| 13 |
At June 30, 2026 and 2025, the Company held marketable equity securities with fair values of $200,000 and $127,000, respectively. The portfolio consisted of securities of REITs and other real estate companies. The Company had no other investments at either date. See Notes 5 and 13 to the Consolidated Financial Statements.
Income Taxes
The Company recorded income tax expense of $1,000 in each of fiscal 2026 and 2025. The Company maintained a full valuation allowance against its net deferred tax assets as of June 30, 2026 and 2025 because management concluded that realization of those deferred tax assets was not more likely than not. See Note 12 – Income Taxes to the Consolidated Financial Statements.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary sources of liquidity are cash on hand and cash flows generated from Hotel operations. Net cash provided by operating activities was $3.899 million in fiscal 2026, compared with net cash used in operating activities of $2.148 million in fiscal 2025.
As of June 30, 2026, the Company had cash and cash equivalents of $4.982 million, restricted cash of $8.440 million and marketable securities of $200,000, compared with $4.470 million, $7.252 million and $127,000, respectively, as of June 30, 2025. Restricted cash primarily consists of amounts maintained in lender-controlled accounts and is subject to the cash-management and reserve provisions of the Hotel’s financing arrangements. Accordingly, restricted cash is not generally available for unrestricted corporate purposes.
Material Cash Requirements
The Company’s material cash requirements include Hotel operating expenses, corporate overhead, interest expense, lender-required reserves, capital expenditures and scheduled debt maturities. During fiscal 2026, the Company incurred approximately $2.199 million of capital expenditures at the Hotel. Future capital expenditures are expected to include routine maintenance and improvements necessary to maintain the Hotel and comply with applicable Hilton brand standards.
Following the removal of the pedestrian bridge in August 2026, the Company is responsible for the design and construction of permanent improvements to the Hotel’s Kearny Street entrance. The Company is currently developing the design and has not yet established a reliable estimate of the total project cost. The Company’s preliminary design concept contemplates utilizing existing structural elements where practicable and limiting the need for new structural construction, which management believes may reduce the overall cost and complexity of the project. The ultimate cost and timing of the improvements will depend on the final design, governmental and other approvals, permitting requirements, construction requirements and other factors.
Senior Mortgage and Mezzanine Financing
The Company’s $67.0 million senior mortgage loan and $36.3 million mezzanine loan have an initial maturity date of April 9, 2027 and provide for three one-year extension options, subject to specified conditions. As of June 30, 2026, the Company was in compliance with all applicable covenants under the loan agreements.
For the first one-year extension through April 9, 2028, the senior mortgage loan requires, among other conditions, a Debt Service Coverage Ratio (“DSCR”) of at least 1.10:1.00, measured as provided in the loan agreement. Based on management’s application of the methodology set forth in the loan agreement, the Company’s calculated DSCR was approximately 1.45:1.00 as of June 30, 2026. Because DSCR is ultimately determined by the lender under the loan agreement, the lender’s calculation may differ from management’s calculation. If the required DSCR is not satisfied at the applicable measurement date, the loan agreement permits the Company, subject to its terms, to deposit additional funds into a lender-controlled reserve in an amount sufficient to satisfy the DSCR condition.
| 14 |
No Debt Yield requirement applies to the first extension. The first extension also requires, among other conditions, the absence of specified defaults or events of default, extension or replacement of the required interest-rate protection and a corresponding extension of the mezzanine loan. Management currently expects to satisfy the applicable conditions and exercise the first one-year extension option. There can be no assurance, however, that all extension conditions will be satisfied or waived when required. If the Company is unable to exercise an extension, it would be required to repay or refinance the senior mortgage and mezzanine loans at maturity.
Cash Management Arrangement
Under the senior mortgage loan, Hotel cash receipts are deposited into lender-controlled accounts and applied in accordance with the cash-management provisions of the loan documents. Release from the cash-management arrangement requires, among other conditions, the lender to determine that the Hotel has achieved a Debt Yield of at least 11% and a DSCR of at least 1.10:1.00 for two consecutive applicable calculation dates.
Based on management’s application of the loan-agreement methodology, the Hotel’s calculated trailing-twelve-month DSCR and Debt Yield were approximately 1.45:1.00 and 13.9%, respectively, as of June 30, 2026. Although these calculations exceeded the applicable financial thresholds, satisfaction of the release conditions is determined by the lender, and the lender had not confirmed that the applicable release conditions had been satisfied as of June 30, 2026. Accordingly, the cash-management arrangement remained in effect. The continued operation of the cash-management arrangement does not constitute a default or noncompliance with the Company’s loan covenants.
Related Party Credit Facility
The Company has an unsecured revolving credit facility with its majority shareholder, The InterGroup Corporation (“InterGroup”), with total borrowing capacity of $40.0 million. The facility bears interest at 9% per annum. As of June 30, 2026, $38.108 million was outstanding, leaving $1.892 million of available borrowing capacity. No additional borrowings were made during fiscal 2026. Principal and accrued interest are due at maturity, and no monthly principal or interest payments are required prior to maturity. In August 2026, the Company and InterGroup amended the facility to extend its maturity date from July 31, 2027 to July 31, 2029. All other material terms remained unchanged. See Note 8 – Related Party and Other Financing Transactions.
Liquidity Outlook
Management expects to meet the Company’s ordinary-course liquidity requirements through cash on hand, cash flows generated from Hotel operations and existing financing arrangements. Net cash provided by operating activities improved to $3.899 million in fiscal 2026 from net cash used in operating activities of $2.148 million in fiscal 2025, and Hotel operating performance improved significantly during fiscal 2026.
As of June 30, 2026, the Company was in compliance with all applicable covenants under its senior mortgage and mezzanine loan agreements. Management’s calculated DSCR of approximately 1.45:1.00 exceeded the 1.10:1.00 requirement applicable to the first extension, and management currently expects to exercise the first one-year extension option.
Following the August 2026 extension of the InterGroup facility through July 31, 2029, management believes that the Company’s available liquidity and financing arrangements are sufficient to meet its obligations for at least twelve months following issuance of the consolidated financial statements.
The Company’s liquidity remains dependent on Hotel operating performance, satisfaction or waiver of the conditions applicable to extensions of its senior mortgage and mezzanine loans, and its ability to obtain additional financing if required. See Item 1A – Risk Factors and Notes 2, 8 and 9 to the Consolidated Financial Statements.
| 15 |
IMPACT OF INFLATION
Inflation may affect the Company’s operating results through increases in labor and employee benefit costs, utilities, food and beverage costs, insurance, repairs and maintenance, supplies and other Hotel operating expenses. Because Hotel room rates are generally established for relatively short periods, room rates can be adjusted in response to changes in market conditions and operating costs; however, the Company’s ability to increase rates is subject to demand, competition and other market conditions.
During fiscal 2026, Hotel operating expenses increased to $43.273 million from $37.631 million in fiscal 2025. The increase reflected, among other factors, higher salaries, wages and employee-related costs and other expenses associated with increased business volume. The Company cannot separately quantify the portion of the increase attributable to inflation. Continued inflationary pressure could increase the Company’s operating and capital costs and, to the extent those increases cannot be offset by higher room rates, increased occupancy or other revenue growth, could adversely affect operating margins and cash flows.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company’s consolidated financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. Critical accounting estimates involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the Company’s financial condition or results of operations. Management believes the estimates discussed below involve the most significant judgments and estimation uncertainty affecting the consolidated financial statements.
DEFERRED INCOME TAXES – VALUATION ALLOWANCE
We assess the realizability of our deferred tax assets quarterly and recognize a valuation allowance when, based on all available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. This assessment requires significant judgment, including consideration of our recent operating results and cumulative pre-tax income or losses, expected future taxable income, the timing of reversals of temporary differences and other available evidence. Objective evidence, including recent cumulative pre-tax losses, is generally given greater weight than subjective forecasts of future taxable income.
As of June 30, 2026, the Company had deferred tax assets of approximately $39.2 million and maintained a full valuation allowance against those deferred tax assets because management concluded that their realization was not more likely than not. Changes in our operating results, objectively verifiable evidence of sustained future profitability, the timing of reversals of temporary differences, changes in tax laws or other relevant evidence could cause us to change our assessment in future periods. A reduction in the valuation allowance could result in a material income tax benefit in the period in which such determination is made.
IMPAIRMENT OF HOTEL ASSETS
We review our Hotel property and equipment for impairment whenever events or circumstances indicate the carrying amount of an asset or asset group may not be recoverable. When such indicators are present, we evaluate recoverability by comparing the carrying amount of the applicable asset or asset group to the estimated undiscounted future cash flows expected to result from its use and eventual disposition. If the carrying amount is not recoverable, an impairment loss is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset or asset group.
We use significant judgment to determine whether indicators of impairment exist and consider the Hotel’s operating performance and prospects, hospitality industry and San Francisco market conditions, the Hotel’s location, and property-specific information available at the time of the assessment. When an impairment indicator exists, significant judgment is also required in developing the assumptions and estimates used in the recoverability analysis and, if necessary, in estimating fair value. These assumptions may include, as applicable, projected occupancy, average daily room rates, Hotel revenues and operating expenses, capital expenditures, market conditions and other factors affecting expected future cash flows. Fair value may be estimated using discounted cash flow, replacement cost or market comparison analyses, as appropriate.
| 16 |
As of June 30, 2026, the carrying amount of the Hotel property and equipment was approximately $32.3 million. Changes in economic or operating conditions or in the assumptions and estimates used in our analysis could result in impairments charge in future periods. Because these estimates are based on assumptions about future operating performance and market conditions, actual results could differ materially from those assumptions. There were no indicators of impairment of the Hotel property and equipment, and no impairment losses were recorded for the years ended June 30, 2026 and 2025.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As a smaller reporting company, the Company is not required to provide the information required by this Item pursuant to Item 305(e) of Regulation S-K.
Item 8. Financial Statements and Supplementary Data.
| 17 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Portsmouth Square, Inc.:
Opinion on the Financial Statements
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
We have served as the Company’s auditor since 2026.
September 28, 2026
PCAOB
ID Number
| 18 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Portsmouth Square, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Portsmouth Square, Inc. and its subsidiaries (the “Company”) as of June 30, 2025, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025, and the results of its operations and its cash flows for the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
We served as the Company’s auditor from 2022 through March 2026.
September 29, 2025
PCAOB
ID Number
| 19 |
PORTSMOUTH SQUARE, INC.
CONSOLIDATED BALANCE SHEETS
| As of | June 30, 2026 | June 30, 2025 | ||||||
| ASSETS | ||||||||
| Investment in Hotel, net | $ | $ | ||||||
| Investment in marketable securities | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Accounts receivable - Hotel, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Liabilities: | ||||||||
| Accounts payable and other liabilities - Hotel | $ | $ | ||||||
| Accounts payable and other liabilities | ||||||||
| Accounts payable to related party | ||||||||
| Related party notes payable | ||||||||
| Other notes payable | ||||||||
| Mortgage and mezzanine notes payable - Hotel, net | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies - Note 14 | ||||||||
| Shareholders’ deficit: | ||||||||
| Common stock, | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 20 |
PORTSMOUTH SQUARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the years ended June 30, | 2026 | 2025 | ||||||
| Hotel revenue | $ | $ | ||||||
| Costs and operating expenses | ||||||||
| Hotel operating expenses | ( | ) | ( | ) | ||||
| Hotel depreciation and amortization expense | ( | ) | ( | ) | ||||
| General and administrative expense | ( | ) | ( | ) | ||||
| Total costs and operating expenses | ( | ) | ( | ) | ||||
| Income from operations | ||||||||
| Other income (expense) | ||||||||
| Interest expense – mortgage and mezzanine | ( | ) | ( | ) | ||||
| Interest expense - related party | ( | ) | ( | ) | ||||
| Net realized loss on marketable securities | ( | ) | ||||||
| Net unrealized gain on marketable securities | ||||||||
| Gain on extinguishment of debt | ||||||||
| Dividend and interest income | ||||||||
| Trading and margin interest expense | ( | ) | ( | ) | ||||
| Total other expense, net | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share | $ | ) | $ | ) | ||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 21 |
PORTSMOUTH SQUARE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
| Total | ||||||||||||||||
| Common Stock | Accumulated | Shareholders’ | ||||||||||||||
| Shares | Amount | Deficit | Deficit | |||||||||||||
| Balance at July 1, 2024 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balance at June 30, 2025 | ( | ) | ( | ) | ||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balance at June 30, 2026 | $ | $ | ( | ) | $ | ( | ) | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 22 |
PORTSMOUTH SQUARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended June 30, | 2026 | 2025 | ||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Net unrealized gain on marketable securities | ( | ) | ( | ) | ||||
| Amortization of other notes payable | ( | ) | ( | ) | ||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Amortization of debt issuance costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Investment in marketable securities | ||||||||
| Accounts receivable - Hotel, net | ||||||||
| Other assets | ( | ) | ||||||
| Accounts payable and other liabilities - Hotel | ||||||||
| Accounts payable and other liabilities | ( | ) | ( | ) | ||||
| Accounts payable to related party | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Payments for hotel furniture, equipment and building improvements | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance costs from refinance | ( | ) | ||||||
| Proceeds from mortgage and mezzanine notes payable | ||||||||
| Proceeds from related party note payable | ||||||||
| Payments of mortgage and finance leases | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash, cash equivalents, and restricted cash | ||||||||
| Cash, cash equivalents, and restricted cash at the beginning of the period | ||||||||
| Cash, cash equivalents, and restricted cash at the end of the period | $ | $ | ||||||
| Supplemental information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Cash, cash equivalents, and restricted cash presented in the consolidated statements of cash flows consist of the following: | ||||||||
| As of June 30, | 2026 | 2025 | ||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 23 |
PORTSMOUTH SQUARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026
NOTE 1 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Description of Business
Portsmouth Square, Inc. (“Portsmouth” or the “Company”), through its wholly owned subsidiaries, owns the Hilton San Francisco Financial District, a 558-room full-service hotel located at 750 Kearny Street in San Francisco, California, together with a five-level underground parking garage (collectively, the “Hotel”).
Justice Operating Company, LLC (“Operating”) an indirectly wholly owned subsidiary of the Company, owns the Hotel. The Hotel operates under a franchise agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030 and is managed by Aimbridge Hospitality (“Aimbridge”) pursuant to a hotel management agreement.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Investment in Hotel, Net
Property
and equipment are stated at cost. Building and improvements are depreciated on a straight-line basis over their useful lives ranging
from
Repairs and maintenance are charged to expense as incurred. Costs of significant renewals and improvements are capitalized and depreciated over their estimated useful lives. 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 long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset or asset group may not be recoverable. Recoverability is evaluated by comparing the carrying amount of the asset or asset group
with the estimated undiscounted future cash flows expected to result from its use and eventual disposition. If the carrying amount is
not recoverable, an impairment loss is recognized for the amount by which the carrying amount exceeds fair value.
| 24 |
Investment in Marketable Securities
Marketable equity securities are measured at fair value based on quoted market prices, with changes in fair value recognized in earnings.
Cash and Cash Equivalents
The Company considers highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash consist of amounts held in lender-controlled accounts for real estate taxes, insurance, capital expenditures and other reserves required under the Hotel’s financing arrangements.
Accounts Receivable - Hotel, Net
Accounts
receivable are stated at amounts expected to be collected, net of an allowance for credit losses. The allowance is estimated based on
historical credit loss experience, current conditions and reasonable and supportable forecasts. Receivables deemed uncollectible are
written off against the allowance. The net accounts receivable balance on July 1, 2024 was $
Other Assets
Other assets primarily consist of Hotel inventory, prepaid expenses and other miscellaneous assets.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities and for tax carryforwards, using enacted tax rates expected to apply when the differences reverse. A valuation allowance is recognized when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Company recognizes the tax benefit of an uncertain tax position only when it is more likely than not, based on its technical merits, that the position will be sustained upon examination. The recognized tax benefit is measured as the largest amount that is greater than 50% likely to be realized upon settlement. Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.
Interest Rate Cap
The Company accounts for interest rate cap agreements as derivative instruments that are recognized in the balance sheet at fair value and remeasured at each reporting date.
The interest rate caps are not designated as hedging instruments, and changes in fair value are recognized in earnings within other income (expense).
| 25 |
Revenue Recognition
Hotel revenue consists primarily of room, food and beverage, parking and other ancillary revenue. Room revenue is recognized over the period rooms are occupied, and food and beverage, parking and other ancillary revenue is recognized when the related goods or services are provided. For arrangements containing multiple performance obligations, the transaction price is allocated to each performance obligation based on relative standalone selling prices.
Amounts received in advance are recorded as contract liabilities and recognized as revenue as the related performance obligations are satisfied. The Company does not disclose remaining performance obligations for contracts with an original expected duration of one year or less. See Note 3 – Revenue.
Advertising Costs
Advertising
costs are expensed as incurred and are included in Hotel operating expenses in the consolidated statements of operations. Advertising
expense was $
Basic loss per share is computed using the weighted average number of common shares outstanding during each period. Diluted loss per share is the same as basic loss per share because the Company had no potentially dilutive securities outstanding during the years ended June 30, 2026 and 2025.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures. Actual results may differ from those estimates.
Debt Issuance Costs
Debt issuance costs related to a debt obligation are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the related debt and are amortized over the life of the debt. Amortization of debt issuance costs is included in interest expense in the consolidated statements of operations.
Recently Issued and Adopted Accounting Pronouncements
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, effective July 1, 2025. The adoption did not affect the Company’s consolidated financial position, results of operations or cash flows and resulted in expanded income tax disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, as subsequently clarified by ASU 2025-01. The amendments require additional disaggregation of certain expense captions and are effective for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact on its disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient for estimating expected credit losses on certain current accounts receivable and contract assets and are effective for annual reporting periods beginning after December 15, 2025. The Company is evaluating the impact of the guidance.
Other recently issued accounting pronouncements are not expected to have a material effect on the Company’s consolidated financial statements.
| 26 |
NOTE 2 – LIQUIDITY
The
Company’s primary sources of liquidity are cash on hand and cash flows generated from operations at the Hilton San Francisco Financial
District (the “Hotel”). Net cash provided by operating activities was $
As
of June 30, 2026, the Company had cash and cash equivalents of $
The Company’s material liquidity requirements include Hotel operating expenses, corporate overhead, debt service, lender-required reserves, capital expenditures and scheduled debt maturities.
Senior Mortgage and Mezzanine Financing
The
Company’s $
For the first one-year extension of the senior mortgage loan through April 9, 2028, the loan agreement requires, among other conditions, a Debt Service Coverage Ratio (“DSCR”) of at least 1.10:1.00, measured as of the last day of the calendar month immediately preceding the initial maturity date. The loan agreement defines DSCR based on Underwritten Net Cash Flow (“UNCF”) and projected debt service for the succeeding twelve-month period. Based on management’s application of the methodology set forth in the loan agreement, the Company’s calculated DSCR was approximately 1.45:1.00 as of June 30, 2026, compared with the 1.10:1.00 requirement applicable to the first extension. Because UNCF and DSCR are ultimately determined by the lender under the loan agreement, the lender’s calculation may differ from management’s calculation. If the required 1.10:1.00 DSCR is not satisfied at the applicable measurement date, the loan agreement permits the Company to satisfy that condition by depositing additional funds into the lender-controlled Carry Reserve in an amount sufficient to achieve the required DSCR.
The
loan agreement further provides that no Debt Yield requirement applies to the first extension. Debt Yield requirements of
Cash Management Arrangement
The
lender-controlled cash-management arrangement is separate from the Company’s compliance with its loan covenants and from the conditions
applicable to the first extension. Under the senior mortgage loan, release from the cash-management arrangement requires the lender to
determine that the Hotel has achieved, for two consecutive quarter-end calculation dates, a Debt Yield of at least
Based
on management’s application of the methodology set forth in the loan agreement, the Hotel’s calculated trailing-twelve-month
DSCR was approximately 1.45:1.00 and its calculated Debt Yield was approximately
| 27 |
Related Party Financing
The
Company has an unsecured revolving credit facility with its majority shareholder, The InterGroup Corporation (“InterGroup”),
with borrowing capacity of up to $
Liquidity Outlook
Management expects to meet the Company’s liquidity requirements through cash on hand, operating cash flows and its existing financing arrangements. As of June 30, 2026, the Company was in compliance with all applicable covenants under its senior mortgage and mezzanine loan agreements, management’s calculated DSCR of approximately 1.45:1.00 exceeded the 1.10:1.00 requirement applicable to the first extension, and management expects to exercise the first one-year extension option.
Following the August 2026 extension of the InterGroup facility through July 31, 2029, management believes that the Company’s available liquidity and financing arrangements are sufficient to meet its obligations for at least twelve months following issuance of these consolidated financial statements.
NOTE 3 - REVENUE
The following table presents the Company’s revenue disaggregated by major revenue streams:
SCHEDULE OF REVENUE DISAGGREGATION BY REVENUE STREAMS
| For the years ended June 30, | 2026 | 2025 | ||||||
| Hotel revenues: | ||||||||
| Hotel rooms | $ | $ | ||||||
| Food and beverage | ||||||||
| Parking | ||||||||
| Other operating departments | ||||||||
| Total Hotel revenue | $ | $ | ||||||
Contract Assets and Liabilities
The Company does not have any material contract assets as of June 30, 2026 and 2025, 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.
The
Company 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 and had a balance of $
Contract
liabilities were $
| 28 |
Contract Costs
The Company applies the practical expedient that permits incremental costs of obtaining a contract, including sales commissions, to be expensed as incurred when the amortization period that otherwise would have applied is one year or less.
NOTE 4 – INVESTMENT IN HOTEL, NET
Investment in Hotel, net, consisted of the following:
SCHEDULE OF INVESTMENT, NET
| Accumulated | Net Book | |||||||||||
| June 30, 2026 | Cost | Depreciation | Value | |||||||||
| Land | $ | $ | $ | |||||||||
| Finance lease right-of-use assets | ( | ) | ||||||||||
| Furniture and equipment | ( | ) | ||||||||||
| Building and improvements | ( | ) | ||||||||||
| Investment in Hotel, net | $ | $ | ( | ) | $ | |||||||
| Accumulated | Net Book | |||||||||||
| June 30, 2025 | Cost | Depreciation | Value | |||||||||
| Land | $ | $ | $ | |||||||||
| Finance lease right-of-use assets | ( | ) | ||||||||||
| Furniture and equipment | ( | ) | ||||||||||
| Building and improvements | ( | ) | ||||||||||
| Investment in Hotel, net | $ | $ | ( | ) | $ | |||||||
Furniture
and equipment are depreciated on a straight-line basis over estimated useful lives ranging from
Depreciation
and amortization expense related to the Hotel was $
| 29 |
NOTE 5 - INVESTMENT IN MARKETABLE SECURITIES
The Company’s marketable equity securities are measured at fair value recognized in earnings.
Marketable securities consisted of the following:
SCHEDULE OF MARKETABLE SECURITIES
| Investment | Cost | Cumulative Unrealized Gain | Fair Value | |||||||||
| As of June 30, 2026 | ||||||||||||
| Corporate equities | $ | $ | $ | |||||||||
| As of June 30, 2025 | ||||||||||||
| Corporate equities | $ | $ | $ | |||||||||
Net gain on marketable securities recognized in earnings consisted of the following:
SCHEDULE OF NET GAIN ON MARKETABLE SECURITIES COMPRISING OF REALIZED AND UNREALIZED GAIN LOSSES
| For the years ended June 30, | 2026 | 2025 | ||||||
| Realized loss on marketable securities | $ | $ | ( | ) | ||||
| Unrealized gain on marketable securities | ||||||||
| Net gain on marketable securities | $ | $ | ||||||
NOTE 6 - FAIR VALUE MEASUREMENTS
Fair value measurements are classified within a three-level hierarchy based on the observability of the inputs used. Level 1 inputs are quoted prices in active markets for identical assets or liabilities; Level 2 inputs are observable inputs other than Level 1 quoted prices; and Level 3 inputs are significant unobservable inputs.
Assets measured at fair value on a recurring consisted of the following:
SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON RECURRING BASIS
| June 30, 2026 | Total Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
| Interest rate cap | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| June 30, 2025 | Total Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Marketable equity securities | $ | $ | $ | $ | ||||||||||||
| Interest rate cap | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Marketable equity securities are classified within Level 1 because their fair values are based on quoted prices in active markets for identical securities. See Note 5 – Investment in Marketable Securities.
The
Interest Rate Cap is classified within Level 2 because its fair value is determined using observable market inputs, including forward
Term SOFR curves and implied volatility assumptions obtained from a third-party pricing service. The Interest Rate Cap is not designated
as a hedging instrument, and changes in its fair value are recognized in earnings. The Interest Rate Cap had a notional amount of $
There have been no material changes to the Company’s fair value measurement methodologies or classification of instruments during the periods presented.
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NOTE 7 – OTHER ASSETS
Other assets consist of the following as of June 30:
SCHEDULE OF OTHER ASSETS
| 2026 | 2025 | |||||||
| Hotel inventory | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Miscellaneous assets | ||||||||
| Total other assets | $ | $ | ||||||
NOTE 8 – RELATED PARTY AND OTHER FINANCING TRANSACTIONS
Related party and other notes payable consisted of the following:
SCHEDULE OF RELATED PARTY AND OTHER NOTES PAYABLE
| As of June 30, | 2026 | 2025 | ||||||
| Related party note payable - InterGroup | $ | $ | ||||||
| Other note payable - Hilton | ||||||||
| Other note payable - Aimbridge | ||||||||
| Total related party and other notes payable | $ | $ | ||||||
InterGroup Credit Facility
The
Company has an unsecured revolving credit facility with its majority shareholder, The InterGroup Corporation (“InterGroup”),
with borrowing capacity of up to $
Hilton Development Incentive Note
The
note payable to Hilton represents an interest-free development incentive note that is reduced by approximately $
Aimbridge Key Money
Operating
received a $
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Contractual Maturities and Scheduled Reductions
Contractual maturities and scheduled reductions of related party and other notes payable as of June 30, 2026 were as follows:
SCHEDULE OF CONTRACTUAL MATURITIES AND SCHEDULED REDUCTIONS OF RELATED PARTY AND OTHER NOTES PAYABLE
| For the years ending June 30, | ||||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| Thereafter | ||||
| Related party and other notes payable | $ | |||
The table above reflects contractual terms in effect as of June 30, 2026 and therefore does not give effect to the subsequent extension of the InterGroup facility described above.
Other Amounts Due to InterGroup
Accounts
payable to InterGroup were $
Certain directors and executive officers of the Company also serve as directors or executive officers of InterGroup.
NOTE 9 – MORTGAGE AND MEZZANINE LOANS
Current Senior Mortgage and Mezzanine Loans
On
March 28, 2025, Justice Operating Company, LLC (“Operating”) entered into a $
The
senior mortgage loan bears interest at a floating rate equal to the greater of
The
mezzanine loan bears interest at a fixed rate of
Extension Options
The senior mortgage and mezzanine loan agreements provide for three one-year extension options through April 9, 2028, April 9, 2029 and April 9, 2030, subject to satisfaction of specified conditions. Notice of an extension must generally be provided not less than 30 days and not more than 90 days before the then-scheduled maturity date.
For the first extension through April 9, 2028, the senior mortgage loan requires, among other conditions, a Debt Service Coverage Ratio (“DSCR”) of at least 1.10:1.00, calculated as of the last day of the calendar month immediately preceding the initial maturity date. The loan agreement expressly provides that no Debt Yield requirement applies to the first extension.
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If DSCR is below 1.10:1.00 at the applicable first-extension measurement date, Operating may satisfy the DSCR condition by depositing additional funds into the lender-controlled Carry Reserve in an amount sufficient to achieve a pro forma DSCR of at least 1.10:1.00, provided the other extension conditions are satisfied or waived.
The second and third senior-loan extensions are subject to Debt Yield requirements of 13% and 14% and DSCR requirements of 1.40:1.00 and 1.50:1.00, respectively, together with the other conditions specified in the loan agreement. The mezzanine loan contains corresponding extension provisions, including the requirement that the senior mortgage loan be extended.
As of June 30, 2026, the Company was in compliance with all applicable covenants under the senior mortgage and mezzanine loan agreements. Based on management’s application of the methodology set forth in the senior loan agreement, the Company’s calculated DSCR was approximately 1.45:1.00 as of June 30, 2026, compared with the 1.10:1.00 requirement applicable to the first extension. Management currently expects to exercise the first extension option. See Note 2 – Liquidity.
Cash Management Arrangement
Under the March 28, 2025, senior mortgage loan, Hotel cash receipts are deposited into lender-controlled accounts pursuant to a cash-management arrangement.
Release from the cash-management arrangement requires, among other conditions, Prime’s determination that the Hotel has achieved a Debt Yield of at least 11% and a DSCR of at least 1.10:1.00 for two consecutive applicable calculation dates.
Based on management’s application of the loan-agreement methodology, the Hotel’s calculated trailing-twelve-month DSCR and Debt Yield were approximately 1.45:1.00 and 13.9%, respectively, as of June 30, 2026. However, satisfaction of the cash-management release conditions is determined by Prime, and Prime had not confirmed that the applicable release conditions had been satisfied. Accordingly, the cash-management arrangement remained in effect as of June 30, 2026. The continued operation of the cash-management arrangement does not constitute a default or noncompliance with the Company’s loan covenants.
Funds in the cash-management arrangement are applied to operating expenses, debt service, lender-required reserves and other amounts in accordance with the applicable loan documents.
2025 Debt Extinguishment
The
March 2025 amendment and restatement of the mezzanine loan was accounted for as a debt extinguishment under ASC 470-50 Debt Modifications
and Extinguishments. In connection with the transaction, CRED REIT Holdco LLC waived a $
Limited Guaranties
Portsmouth and InterGroup each provide limited guaranties of specified recourse obligations under the senior mortgage and mezzanine loan documents.
Loan Balances
SCHEDULE OF LOAN BALANCES
| June 30, 2026 | June 30, 2025 | Interest Rate | Initial Maturity | |||||||||
| Senior mortgage loan | $ | $ | Greater of
| |||||||||
| Mezzanine loan | ||||||||||||
| Gross loans | ||||||||||||
| Less: unamortized debt issuance costs | ( | ) | ( | ) | ||||||||
| Mortgage and mezzanine loans, net | $ | $ | ||||||||||
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Contractual Maturities
Contractual maturities as of June 30, 2026 were as follows:
SCHEDULE OF CONTRACTUAL MATURITIES
| For the years ending June 30, | ||||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| Thereafter | ||||
| Contractual debt | $ | |||
NOTE 10 – MANAGEMENT AGREEMENTS
Justice
Operating Company, LLC (“Operating”) has a hotel management agreement (“HMA”) with Aimbridge Hospitality (“Aimbridge”)
to manage the Hotel, including its parking garage. The HMA commenced on February 3, 2017 and has an initial
The
HMA originally provided for an annual incentive fee based on increases in Gross Operating Profit. In connection with a subsequent amendment
to the incentive-fee provisions, the parties established $
Base
management fees were $
During
fiscal 2025, Aimbridge waived $
See Note 8 – Related Party and Other Financing Transactions for information regarding the Aimbridge key-money arrangement and Note 15 – Commitments and Contingencies for additional obligations under the HMA.
NOTE 11 – CONCENTRATION OF CREDIT RISK
As
of June 30, 2026 and 2025, all accounts receivables were related to Hotel customers. The Hotel had two customers that accounted for approximately
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 significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
| 34 |
NOTE 12 - INCOME TAXES
The provision for income tax (expense) benefit consists of the following:
SCHEDULE OF PROVISION FOR INCOME TAX (EXPENSE) BENEFIT
| For the years ended June 30, | 2026 | 2025 | ||||||
| Federal | ||||||||
| Current tax expense | $ | $ | ||||||
| Deferred tax expense | ||||||||
| Federal income tax benefit | ||||||||
| State | ||||||||
| Current tax expense | ( | ) | ( | ) | ||||
| Deferred tax expense | ||||||||
| State and local income tax benefit | ( | ) | ( | ) | ||||
| Income tax expense | $ | ( | ) | $ | ( | ) | ||
A reconciliation of the statutory federal income tax rate to the effective tax rate is as follows:
SCHEDULE OF STATUTORY FEDERAL INCOME TAX RATE
| For the years ended June 30, | 2026 | 2025 | ||||||
| Statutory federal tax rate | % | % | ||||||
| State income taxes, net of federal tax benefit | % | % | ||||||
| Provision to return adjustment | % | % | ||||||
| Valuation allowance | - | % | - | % | ||||
| Other | - | % | - | % | ||||
| Effective income tax rate reconciliation percentage | % | % | ||||||
The components of the Company’s deferred tax assets and (liabilities) as of June 30, 2026 and 2025 are as follows:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
| 2026 | 2025 | |||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforward | $ | $ | ||||||
| Interest expense | ||||||||
| Accruals and reserves | ||||||||
| Depreciation | ||||||||
| Related party interest | ||||||||
| State tax credits | ||||||||
| Capital loss carryforward | ||||||||
| Other | ||||||||
| Deferred tax assets before valuation allowance | ||||||||
| Less Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets after valuation allowance | ||||||||
| Deferred tax liabilities | ||||||||
| Unrealized loss | ( | ) | ||||||
| Deferred tax liabilities | ( | ) | ||||||
| Net deferred tax assets | $ | $ | ||||||
| 35 |
As
of June 30, 2026, the Company had net operating loss (“NOL”) carryforwards of approximately $
As
of June 30, 2025, the Company had net operating loss (“NOL”) carryforwards of approximately $
Assets
and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns where such
positions are judged to not meet the “more-likely-than-not” threshold based on the technical merits of the positions. As
of June 30, 2026, it has been determined that the company had $
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, 2026, tax years beginning in fiscal year 2023 and 2022 remain open to examination by 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:
SCHEDULE OF UNRECOGNIZED TAX BENEFIT
| Unrecognized Tax Benefits at June 30, 2025 | $ | |||
| Increase in tax positions taken | ||||
| Decrease in tax positions taken | ||||
| Unrecognized Tax Benefits at June 30, 2026 | $ |
As
of June 30, 2026 and June 30, 2025, the Company had unrecognized tax benefits, which would affect the effective tax rate if recognized.
The unrecognized tax benefits 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, 2026 and June 30, 2025,
| 36 |
NOTE 13 - SEGMENT INFORMATION
The
Company operates in
The Company’s chief operating decision maker (“CODM”) is a group of senior executives. The CODM uses segment income (loss) as the primary measure for assessing segment performance and making resource-allocation decisions. For Hotel Operations, segment income represents Hotel revenue less Hotel operating expenses before depreciation and amortization and financing-related interest expense. For Investment Transactions, segment loss includes gains and losses on marketable securities, dividend and interest income, and trading and margin interest expense.
The significant expense categories regularly provided to the CODM and included in Hotel Operations segment income utilities, real estate taxes, insurance and Hotel general and administrative expenses. Significant expenses regularly provided to the CODM for Investment Transactions include trading and margin interest expense.
Hotel Operations includes the operations of the Hotel and its five-level parking garage. The following tables present the Company’s reportable segment information for the years ended June 30, 2026 and 2025.
SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT
| As of and for the year | Hotel | Investment | ||||||||||||||
| ended June 30, 2026 | Operations | Transactions | Other | Total | ||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ( | ) | ( | ) | ||||||||||||
| Utilities | ( | ) | ( | ) | ||||||||||||
| Real estate taxes | ( | ) | ( | ) | ||||||||||||
| Insurance | ( | ) | ( | ) | ||||||||||||
| General and administrative | ( | ) | ( | ) | ||||||||||||
| Segment income (loss) | ( | ) | ||||||||||||||
| Interest expense - mortgage | ( | ) | ( | ) | ||||||||||||
| Interest expense – related party | ( | ) | ( | ) | ||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||
| Depreciation and amortization expense | ( | ) | ( | ) | ||||||||||||
| Loss from investments | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| As of and for the year | Hotel | Investment | ||||||||||||||
| ended June 30, 2025 | Operations | Transactions | Other | Total | ||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ( | ) | ( | ) | ||||||||||||
| Utilities | ( | ) | ( | ) | ||||||||||||
| Real estate taxes | ( | ) | ( | ) | ||||||||||||
| Insurance | ( | ) | ( | ) | ||||||||||||
| General and administrative | ( | ) | ( | ) | ||||||||||||
| Segment income (loss) | ( | ) | ||||||||||||||
| Interest expense - mortgage | ( | ) | ( | ) | ||||||||||||
| Interest expense – related party | ( | ) | ( | ) | ||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||
| Depreciation and amortization expense | ( | ) | ( | ) | ||||||||||||
| Loss from investments | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| 37 |
NOTE 14 – 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 the senior mortgage lender and Wells Fargo Bank, N.A., as cash management bank. Under the agreement, Hotel receipts are deposited into lender-controlled accounts and applied in accordance with the priority and reserve requirements specified in the senior loan documents. The cash management arrangement remained in effect as of June 30, 2026. See Note 9 – Mortgage and Mezzanine Loans for additional information regarding the senior mortgage loan and the cash management release conditions.
Franchise Agreements
Operating is party to a franchise agreement with HLT Franchise Holding, LLC (“Hilton”) under which the Hotel operates as the Hilton San Francisco Financial District. The franchise agreement extends through January 31, 2030 and requires the Hotel to pay royalties, program fees and certain other charges based primarily on Hotel revenues and to comply with applicable Hilton brand standards.
Franchise-related
fees were approximately $
Hotel Employees and Collective Bargaining Agreements
As
of June 30, 2026, the Hotel had 187 employees, approximately
The CBA covering Local 2 (Hotel and Restaurant Employees) expires on August 13, 2028; the CBA covering Local 856 (International Brotherhood of Teamsters) expires on December 31, 2028; and the CBA covering Local 39 (Stationary Engineers) expires in July 2030. The terms of the CBAs affect the Hotel’s wages, employee benefits and other labor-related operating costs.
| 38 |
Legal Matters
Portsmouth Square, Inc., through Justice Investors Operating Company, LLC (the “Company”), owns the real property at 750 Kearny Street in San Francisco, which is improved with a 27-story building that houses a Hilton-branded hotel (the “Property”). In connection with City approvals in the early 1970s, the Company constructed an ornamental overhead pedestrian bridge spanning Kearny Street to the City’s Portsmouth Square park and underground garage (the “Bridge”), pursuant in part to a Major Encroachment Permit (the “Permit”).
On May 24, 2022, the City purported to revoke the Permit and, on June 13, 2022, directed the Company to submit a general bridge removal and site restoration plan (the “Plan”) at the Company’s expense. The Company disputes the legality of the purported revocation and the existence of any obligation to fund removal. Company representatives participated in meetings with the City on and after August 1, 2019, regarding a potential collaborative removal process; until the 2022 purported revocation, City representatives repeatedly indicated that the City would bear the costs of any removal.
Without waiving any rights, and to evaluate available options and respond to the City’s directives, the Company engaged a project manager, structural engineer, and architect to advise on the Plan for Bridge removal and reconstruction of the Property’s Kearny Street frontage. The Company has worked with the City on approvals and permits and discussed both process and financial responsibility. Those discussions resulted in a term sheet agreement in July whereby a plan was agreed-upon for the removal of the Bridge, and the Bridge removal was completed as of August 10, 2026.
The Parties are now negotiating a final settlement agreement to reflect the term sheet agreement. The City has agreed to make certain payments to the Company to address certain anticipated costs to rebuild portions of the front of the hotel due to the absence of the Bridge, subject to the Company’s repayment obligations which will commence in 2029.
At this time, the Company cannot reasonably estimate a loss or range of loss related to this matter, and no liability has been recorded in the accompanying financial statements.
NOTE 15 – SUBSEQUENT EVENTS
Portsmouth Square Pedestrian Bridge Removal
On August 9, 2026, the physical removal of the pedestrian bridge connecting the Hotel to Portsmouth Square was completed. The Hotel had temporarily suspended guest operations from July 31, 2026 through August 9, 2026 to facilitate the bridge demolition and resumed guest operations on August 10, 2026. Following removal of the bridge, the City and its contractor continued work associated with the project, including restoration of portions of the Hotel façade and surrounding areas affected by the demolition. The Company is separately responsible for the design and construction of permanent improvements to the Hotel’s Kearny Street entrance.
Extension of Related Party Credit Facility
In
August 2026, the Company and its majority shareholder, The InterGroup Corporation (“InterGroup”), amended the Company’s
unsecured revolving credit facility to extend its maturity date from July 31, 2027 to July 31, 2029. All other material terms of the
facility remained unchanged. As of June 30, 2026, $
| 39 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
As previously disclosed, on March 19, 2026, the Company dismissed WithumSmith+Brown, PC (“Withum”) as its independent registered public accounting firm, and the Audit Committee approved the engagement of Whitley Penn LLP (“Whitley”) as the Company’s new independent registered public accounting firm, subject to completion of Whitley’s standard client acceptance and independence procedures and execution of an engagement letter. Whitley completed those procedures and accepted the engagement on March 26, 2026.
Withum’s report on the Company’s consolidated financial statements for the fiscal year ended June 30, 2025 did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. Withum’s report on the Company’s consolidated financial statements for the fiscal year ended June 30, 2024 included an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern; however, Withum stated that its opinion was not modified with respect to that matter.
During the fiscal years ended June 30, 2025 and 2024 and the subsequent interim period through March 19, 2026, there were no disagreements with Withum on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, and there were no “reportable events,” as defined in Item 304(a)(1)(v) of Regulation S-K. During those periods, neither the Company nor anyone on its behalf consulted with Whitley regarding any matter required to be disclosed under Item 304(a)(2) of Regulation S-K.
Item 9A. Controls and Procedures.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2026. Based upon such evaluation, the Company’s Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2026 using the criteria established in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of June 30, 2026.
Because the Company is a non-accelerated filer, this Annual Report on Form 10-K is not required to include, and does not include, an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
During
fiscal quarter ended June 30, 2026, no director or officer, of the Company (as defined in rule 16a-1(f) under the Exchange Act)
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
| 40 |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth certain information with respect to the Directors and Executive Officers of the Company as of June 30, 2026:
| Name | Position with the Company | Age | Term to Expire | |||
| John V. Winfield | Chairman of the Board and Chief Executive Officer (1) | 79 | Next Annual Meeting | |||
| Yvonne L. Murphy | Director | 69 | Next Annual Meeting | |||
| William J. Nance | Director (2)(3) | 82 | Next Annual Meeting | |||
| Steve H. Grunwald | Director (1)(3)(4) | 44 | Next Annual Meeting | |||
| Andrew J. Kaplan | Director (2)(3)(4 | 59 | Next Annual Meeting | |||
| David C. Gonzalez | President (1) | 59 | N/A | |||
| Ann Marie Blair | Treasurer, Controller, Assistant Secretary (Principal Financial Officer) |
39 | N/A |
Each director serves until the next annual meeting of shareholders and until his or her successor is duly elected and qualified.
| (1) | Member of Executive Strategic Real Estate and Securities Investment Committee |
| (2) | Member of Audit Committee |
| (3) | Member of Compensation Committee |
| (4) | Member of Nominating Committee |
Business Experience:
The principal occupation and business experience during the last five years for each of the Directors and Executive Officers of the Company are as follows:
John V. Winfield — Mr. Winfield has served as Chairman of the Board and Chief Executive Officer of the Company since May 1996. He also serves as Chairman, President and Chief Executive Officer of The InterGroup Corporation (“InterGroup”), the Company’s parent company. Mr. Winfield’s extensive experience in public company leadership, investment management and real estate supports his service as a director of the Company.
| 41 |
David C. Gonzalez — Mr. Gonzalez has served as President of the Company since May 2021. He has served as Chief Operating Officer of InterGroup since May 31, 2023, and previously served as its Vice President of Real Estate from January 2001 to May 2023. Mr. Gonzalez has been employed by InterGroup since 1989 in various capacities, including Controller and Director of Real Estate, and has served as an advisor to the Executive Strategic Real Estate and Securities Investment Committee of InterGroup and the Company since February 2020.
Yvonne L. Murphy — Mrs. Murphy has served as a Director of InterGroup since 2014 and was elected to the Board of Portsmouth in October 2022, having previously served as a Portsmouth director from March to December 2019. Since 2022, she has served as a Development Officer at Renown Health. Since 2012, she has also served as Chief Executive Officer and Senior Legislative Lobbyist of Yvonne Murphy Group, an executive consulting practice focused on public policy and legislative strategy. Mrs. Murphy holds a Doctorate and MBA from California Pacific University. Her extensive corporate management and government affairs experience supports her service as a director of the Company.
William J. Nance — Mr. Nance has served as a director since May 1996. A Certified Public Accountant, he previously served as a Senior Accountant at Kenneth Leventhal & Company, specializing in REITs, restructuring, mergers and acquisitions, and real estate development and financing, and has also acted as a consultant on multi-family and commercial real estate transactions. He is a Director of InterGroup and Comstock Inc. His accounting, financial reporting, real estate and public company experience supports his service as a director and as Chairman of the Audit Committee.
Steve H. Grunwald — Mr. Grunwald joined the Board in December 2019 and has extensive experience in hospitality operations and management. From 2021 through 2022, he managed and oversaw the renovation of several hotel properties. In 2023, he managed the sale of several properties and businesses. During 2024 and 2025, he oversaw the management and operations of a five-star boutique hotel in Brussels and other real estate assets. Since 2025, he has also provided international hospitality consulting services to hotel owners, operators and investors. His experience in hospitality operations, asset management and strategic transactions supports his service as a director of the Company.
Andrew J. Kaplan – Mr. Kaplan appointed to the Board on January 12, 2026, following Mr. Love’s resignation. Mr. Kaplan has over 30 years of experience in financial public relations and capital markets. He has served as Vice President of Barry Kaplan Associates, a leading financial public relations firm supporting public and private companies in the United States, Canada, and the United Kingdom. During his career, Mr. Kaplan has sourced over $500 million in capital for both public and private companies. He currently serves as a capital markets consultant to Avino Silver & Gold Mines Ltd. and Energy Fuels Inc., advising on institutional and analyst outreach, financings, mergers and acquisitions and corporate governance. Mr. Kaplan also serves as a director of InterGroup. His capital markets, financing, corporate governance and public company board experience supports his service as a director of the Company.
Ann Marie Blair – Ms. Blair was appointed Treasurer and Controller on July 6, 2023, and also serves in those roles for The InterGroup Corporation. She previously served as Chief Financial Officer in the advertising technology industry and began her career in public accounting in 2010, specializing in the audit of financial institutions. Ms. Blair holds a Bachelor of Science degree in Accounting and a Master of Business Administration from Cumberland University.
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Family Relationships: There are no family relationships among directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.
Involvement in Certain Legal Proceedings: During the past ten years, no director or executive officer of the Company has been involved in any legal proceeding required to be disclosed pursuant to Item 401(f) of Regulation S-K.
Code of Ethics.
The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. A copy of the Code of Ethics is filed as Exhibit 14 to this Annual Report on Form 10-K and is available on the Portsmouth page of InterGroup’s website at www.intgla.com, and available without charge upon request to: Portsmouth Square, Inc., Attn: Treasurer, 1516 S. Bundy Drive, Suite 200, Los Angeles, California 90025. The Company will promptly disclose any amendment to, or waivers from, the Code of Ethics applicable to the officers specified in Item 406 of Regulation S-K as required by applicable SEC rules.
For the information required by Item 408(b) of Regulation S-K regarding the Company’s insider trading policy, see Item 9B – Other Information.
Procedures for Recommendations of Nominees to Board of Directors
There have been no material changes during fiscal 2026 to the procedures by which security holders may recommend nominees to the Board.
Audit Committee and Audit Committee Financial Expert
The Audit Committee is comprised of William J. Nance (Chairperson) and Andrew J. Kaplan, both independent directors under SEC and NASDAQ rules. Both qualify as audit committee financial experts based on their qualifications and business experience. The Board of Directors has determined that Mr. Nance qualifies as an “audit committee financial expert,” as defined in Item 407(d)(5) of Regulation S-K, and that Mr. Nance is independent in accordance with the independence standards applicable to Audit Committee members.
Item 11. Executive Compensation.
The following table provides summary information concerning compensation awarded to, earned by, or paid to the Company’s principal executive officer and other named executive officers whose total compensation exceeded $100,000 for all services rendered to the Company and its subsidiaries for each of the Company’s last two completed fiscal years ended June 30, 2026 and 2025. No stock awards, option awards or non-equity incentive plan compensation were awarded to, earned by, or paid to any of the named executive officers during fiscal years 2026 or 2025.
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Fiscal Year | Salary | All Other Compensation | Total | ||||||||||||
| John V. Winfield | 2026 | $ | 427,000 | $ | 6,000 | (1) | $ | 433,000 | ||||||||
| Chairman and Chief Executive Officer | 2025 | $ | 427,000 | $ | 6,000 | (1) | $ | 433,000 | ||||||||
| David C. Gonzalez | 2026 | $ | 173,000 | $ | - | $ | 173,000 | |||||||||
| President | 2025 | $ | 173,000 | $ | - | $ | 173,000 | |||||||||
(1) Represents $6,000 of cash fees earned by Mr. Winfield for services as a director of the Company.
The Company has no equity compensation, pension or long-term incentive plans. The named executive officers are compensated through fixed annual salaries. Neither Mr. Winfield nor Mr. Gonzalez is party to a written employment agreement with the Company, and the Company has no arrangements providing for payments to either named executive officer in connection with termination of employment or a change in control of the Company.
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DIRECTOR COMPENSATION
The following table provides information concerning compensation awarded to, earned by, or paid to the Company’s directors for the fiscal year ended June 30, 2026.
DIRECTOR COMPENSATION TABLE
| Name | Fees Earned or Paid in Cash | Total | ||||||
| Yvonne L. Murphy | $ | 6,000 | $ | 6,000 | ||||
| John C. Love(1) | $ | 4,000 | $ | 4,000 | ||||
| William J. Nance(2) | $ | 8,000 | $ | 8,000 | ||||
| Steve H. Grunwald | $ | 6,000 | $ | 6,000 | ||||
| Andrew J. Kaplan(3) | $ | 4,000 | $ | 4,000 | ||||
(1) Mr. Love resigned from the Board of Directors effective January 12, 2026. The amount shown represents director and Audit Committee fees earned through the date of his resignation.
(2) Amounts shown include regular Board fees and Audit Committee fees.
(3) Mr. Kaplan was appointed to the Board of Directors effective January 12, 2026. The amount shown represents director and Audit Committee fees earned from the date of his appointment through June 30, 2026.
Mr. Winfield is not included in the Director Compensation Table because he is a named executive officer and his compensation for service as a director is fully reflected in the Summary Compensation Table above.
Each director is paid a Board retainer fee of $1,500 per quarter for a total annual compensation of $6,000. Members of the Company’s Audit Committee also receive a fee of $500 per quarter.
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Outstanding Equity Awards at Fiscal Year End
The Company did not have any outstanding equity awards as of June 30, 2026 and had no equity compensation plans in effect.
Policies and Practices Regarding Option Awards
The Company does not currently grant stock options, stock appreciation rights or similar option-like instruments and does not have a policy or practice regarding the timing of such awards in relation to the disclosure of material nonpublic information. The Company did not grant any such awards to its named executive officers during fiscal 2026. The Company does not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of September 28, 2026, certain information regarding the beneficial ownership of Common Stock held by (i) persons or groups known by the Company to own more than five percent of the outstanding shares, (ii) each Director and named executive officer, and (iii) all Directors and Executive Officers as a group. Unless otherwise indicated, the business address of each person listed below is 1516 S. Bundy Drive, Suite 200, Los Angeles, California 90025.
| Name of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | ||||||
| John V. Winfield | 575,585 | (3) | 78.4 | % | ||||
| Yvonne L. Murphy | - | - | ||||||
| William J. Nance | - | - | ||||||
| Steve H. Grunwald | - | - | ||||||
| Andrew J. Kaplan | - | - | ||||||
| David C. Gonzalez | - | - | ||||||
| The InterGroup Corporation | 556,944 | (4) | 75.9 | % | ||||
| All Directors and Executive Officers of the above as a group (6 persons) | 575,585 | 78.4 | % | |||||
(1) Unless otherwise indicated, and subject to applicable community property laws, each person has sole voting and investment power with respect to the shares beneficially owned.
(2) Percentages are calculated based on 734,187 shares of Common Stock issued and outstanding as of September 28, 2026.
(3) Includes 18,641 shares owned directly by Mr. Winfield and 556,944 shares owned by InterGroup. Mr. Winfield serves as President, Chairman of the Board and Chief Executive Officer of InterGroup and beneficially owns approximately 68.8% of InterGroup’s outstanding common stock. As a result of his voting and dispositive power over the Portsmouth shares owned by InterGroup, Mr. Winfield is deemed to beneficially own those shares for purposes of Rule 13d-3 under the Exchange Act.
(4) Represents shares owned directly by InterGroup.
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Security Ownership in Parent Corporation.
Because InterGroup is the Company’s parent corporation, the following table sets forth the beneficial ownership of InterGroup common stock by the Company’s directors and named executive officers as of September 28, 2026.
| Portsmouth person | InterGroup shares then reported | Percent then reported | ||||||
| John V. Winfield | 1,590,074 | 68.8 | % | |||||
| William J. Nance | 47,946 | 2.1 | % | |||||
| David C. Gonzalez | 65,529 | 2.8 | % | |||||
| Yvonne L. Murphy | 2,282 | 0.1 | % | |||||
| Andrew J. Kaplan | 1,002 | 0.0 | % | |||||
Changes in Control Arrangements.
The Company is not aware of any arrangement, including any pledge of securities of the Company or its parent, the operation of which may at a subsequent date result in a change in control of the Company.
Securities Authorized for Issuance Under Equity Compensation Plans.
The Company had no equity compensation plans and no securities authorized for issuance under any equity compensation plan as of June 30, 2026.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
As of September 28, 2026, The InterGroup Corporation (“InterGroup”) owned 556,944 shares, or approximately 75.9%, of the Company’s outstanding common stock and is the Company’s parent and controlling shareholder. John V. Winfield owned 18,641 shares, or approximately 2.5%, of the Company’s outstanding common stock directly and beneficially owned approximately 68.8% of InterGroup’s outstanding common stock. Accordingly, Mr. Winfield controls InterGroup and indirectly controls the Company. See Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Related Party Credit Facility – InterGroup
The Company maintains an unsecured revolving credit facility with InterGroup with borrowing capacity of up to $40,000,000. During fiscal 2025, the facility was amended to increase the borrowing capacity from $30,000,000 to $40,000,000, extend the maturity date to July 31, 2027 and reduce the interest rate from 12% to 9%. InterGroup advanced $11,615,000 to the Company during fiscal 2025. No additional borrowings were made during fiscal 2026. As of June 30, 2026 and 2025, $38,108,000 was outstanding under the facility.
In August 2026, the Company and InterGroup amended the facility to extend its maturity date from July 31, 2027 to July 31, 2029. All other material terms remained unchanged. The facility bears interest at 9%, does not require monthly principal or interest payments and may be prepaid without penalty. Principal and accrued interest are payable at maturity.
Interest expense related to the InterGroup facility was approximately $3,437,000 and $3,570,000 for the years ended June 30, 2026 and 2025, respectively.
Other Transactions with InterGroup
Certain shared costs and expenses, primarily administrative expenses, rent and insurance are allocated between the Company and InterGroup based on management’s estimate of the relative use of resources. For the years ended June 30, 2026 and 2025, amounts allocated to the Company were $0 and $144,000, respectively.
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As of June 30, 2026 and 2025, the Company had accounts payable to InterGroup of approximately $21,300,000 and $16,634,000, respectively, consisting primarily of accrued interest and certain shared costs and expenses.
All of the Company’s Directors serve as directors of InterGroup. The Company’s President serves as Chief Operating Officer of InterGroup. Mr. Winfield serves as Chairman and Chief Executive Officer of the Company and as Chairman, President and Chief Executive Officer of InterGroup.
Except as disclosed above, the Company had no other transactions requiring disclosure pursuant to Item 404(d) of Regulation S-K during the periods presented.
See Note 8 – Related Party and Other Financing Transactions to the consolidated financial statements for additional information regarding transactions with InterGroup.
Director Independence
The Company’s common stock is quoted on the OTC Markets Group Pink Open Market and is not listed on a national securities exchange. For purposes of determining director independence, the Board of Directors applies the definition of “independent director” set forth in Nasdaq Listing Rule 5605(a)(2). The Board has determined that Yvonne L. Murphy, William J. Nance, Steve H. Grunwald and Andrew J. Kaplan are independent under that standard. John V. Winfield is not independent because he serves as the Company’s Chief Executive Officer. In making its independence determinations, the Board considered, among other things, each director’s relationships with the Company and InterGroup, including the service of each of the Company’s directors on the board of directors of InterGroup.
Item 14. Principal Accounting Fees and Services.
WithumSmith+Brown, PC (“Withum”) served as the Company’s independent registered public accounting firm through March 19, 2026. Whitley Penn LLP (“Whitley”) accepted its engagement as the Company’s independent registered public accounting firm on March 26, 2026. See Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
The following table sets forth the aggregate fees billed or expected to be billed by Withum and Whitley for professional services rendered during the fiscal years ended June 30, 2026 and 2025. Withum was the Company’s independent registered public accounting firm during fiscal 2025. Fees for fiscal 2026 include services provided by both Withum and Whitley.
| Fiscal Year | ||||||||
| 2026 | 2025 | |||||||
| Whitley Penn LLP | ||||||||
| Audit Fees (1) | $ | 16,000 | $ | - | ||||
| Audit-Related Fees (2) | - | - | ||||||
| Tax Fees (3) | - | - | ||||||
| All Other Fees (4) | - | - | ||||||
| TOTAL: | $ | 16,000 | $ | - | ||||
| Fiscal Year | ||||||||
| 2026 | 2025 | |||||||
| WithumSmith+Brown, PC | ||||||||
| Audit Fees (1) | $ | 132,000 | $ | 145,000 | ||||
| Audit-Related Fees (2) | - | - | ||||||
| Tax Fees (3) | 16,000 | 31,000 | ||||||
| All Other Fees (4) | - | - | ||||||
| TOTAL: | $ | 148,000 | $ | 176,000 | ||||
(1) Audit Fees consist of fees for the audit of the annual consolidated financial statements, reviews of the interim financial statements included in Quarterly Reports on Form 10-Q, and services normally provided in connection with statutory and regulatory filings.
(2) Audit-Related Fees include assurance and related services reasonably related to the performance of the audit or review of the financial statements and not reported under “Audit Fees.” The Company did not incur any audit-related fees during fiscal 2026 or 2025.
(3) Tax Fees consist primarily of federal and state tax compliance, tax planning, and tax advisory services.
(4) All Other Fees include permitted services not captured in the categories above. There were no such fees in the periods presented.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy requiring the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent registered public accounting firm, subject to the de minimis exception described in Section 10A(i)(1)(B) of the Exchange Act. The Audit Committee may delegate pre-approval authority to one or more of its members, provided that any such pre-approval is presented to the full Audit Committee at its next scheduled meeting. All services described above were pre-approved by the Audit Committee. No services were approved pursuant to the de minimis exception contained in Rule 2-01(c)(7)(i)(C) of Regulation S-X.
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PART IV
Item 15. Exhibits and, Financial Statement Schedules.
(a)(1) Financial Statements
The following consolidated financial statements of the Company are included in Part II, Item 8 of this Report at pages 17 through 39:
(a)(2) Financial Statement Schedules
All other schedules for which provision is made in Regulation S-X have been omitted because they are not required, not applicable, or the required information is included in the consolidated financial statements or notes to the consolidated financial statements.
(a)(3) Exhibits
The following exhibits are filed with or incorporated by reference into this Annual Report on Form 10-K:
| 48 |
Item 16. Form 10-K Summary
None.
| 49 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PORTSMOUTH SQUARE, INC. | ||||
| (Registrant) | ||||
| Date: | September 28, 2026 | by | /s/ John V. Winfield | |
| John V. Winfield, | ||||
| Chairman of the Board and | ||||
| Chief Executive Officer | ||||
| Date: | September 28, 2026 | by | /s/ Ann Marie Blair | |
Ann Marie Blair, | ||||
| Controller and Principal Financial Officer | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signatures | Title and Position | Date | ||
| /s/ John V Winfield | Chief Executive Officer and Chairman | September 28, 2026 | ||
| John V. Winfield | of the Board (Principal Executive Officer) | |||
| /s/ Yvonne L. Murphy | Director | September 28, 2026 | ||
| Yvonne L. Murphy | ||||
| /s/ William J. Nance | Director | September 28, 2026 | ||
| William J. Nance | ||||
| /s/ Steve H. Grunwald | Director | September 28, 2026 | ||
| Steve H. Grunwald |
|
|||
| /s/ Andrew J. Kaplan | Director | September 28, 2026 | ||
| Andrew J. Kaplan |
| 50 |
Exhibit 10.4
Exhibit 10.9
Exhibit 10.10
EXHIBIT 14.1
PORTSMOUTH SQUARE, INC.
CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS
This Code of Ethics applies to Portsmouth Square, Inc. (“Portsmouth” or the “Company”) Senior Financial Officers. “Senior Financial Officers” shall include the principal executive officer, the principal accounting officer or controller, or persons performing similar functions, including Portsmouth’s President and Chief Executive Officer, Chief Financial Officer, Treasurer, Controller, and such other individuals as determined from time to time by the Audit Committee of the Company for purposes of this Code of Ethics. The Company expects all employees, in carrying out their job responsibilities, to act in accordance with the highest standards of personal and professional integrity, to comply with all applicable laws, and to abide by Portsmouth’s other corporate policies and procedures adopted from time to time by the Company. This Code of Ethics supplements the foregoing with respect to all Senior Financial Officers.
Portsmouth’s Senior Financial Officers will:
1. Engage in and promote honest and ethical conduct, acting with integrity and exercising at all times their best independent judgment;
2. Avoid actual or apparent conflicts of interest between personal and professional relationships and disclose to the Company’s Audit Committee or the Company’s counsel any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
3. Produce full, fair, accurate, timely and understandable disclosure in reports and documents that Portsmouth files with, or submits to, the Securities and Exchange Commission and in other public communications made by Portsmouth;
4. Comply with applicable governmental laws, rules and regulations, as well as applicable SEC rules and regulations;
5. Maintain the confidentiality of Company information, except when authorized or otherwise required to make any disclosure, and avoid the use of any Company information for personal advantage;
6. Promote ethical and honest behavior among employees under your supervision; including by setting appropriate “tone at the top” and supporting internal control compliance, and
7. Promptly report any possible violation of this Code of Ethics to the Audit Committee or the Company’s counsel or through the Company’s whistleblower reporting channel, if available. Retaliation against good-faith reports is prohibited.
All Senior Financial Officers are prohibited from directly or indirectly taking any action to coerce, manipulate, mislead or fraudulently influence Portsmouth’s independent registered public accounting firm engaged in the performance of an audit or review of the consolidated financial statements of the Company for the purpose of causing the issuance of materially misleading financial statements or audit reports.
The Audit Committee of the Board of Directors shall approve any waiver or amendment of this Code of Ethics, and any such waiver or amendment shall be disclosed promptly as required by law and SEC regulations.
Waivers for the Chief Executive Officer, Principal Financial Officer, or Controller will be disclosed on Form 8-K or the Company’s website, as applicable.
All Senior Financial Officers will be held accountable for their adherence to this Code of Ethics. Failure to observe the terms of this Code of Ethics may result in disciplinary action, up to and including termination of employment. Violations of this Code of Ethics may also constitute violations of law, and may result in civil and criminal penalties for the individual, his or her supervisor and/or Portsmouth. No retaliation will be tolerated against anyone who makes a good-faith report or participates in an investigation.
If a Senior Financial Officer has any questions regarding the best course of action in a particular situation, he or she should promptly contact the Chairman of the Audit Committee or the Company’s counsel or use the Company’s anonymous reporting hotline if available. An individual may choose to remain anonymous in reporting any possible violation of this Code of Ethics.
Exhibit 19.1
EXHIBIT 21.1
SUBSIDIARIES OF PORTSMOUTH SQUARE, INC.
| Name | Jurisdiction of Organization | |
| Justice Mezzanine Company, LLC | Delaware | |
| Justice Senior Pledgor, LLC | Delaware | |
| Justice Operating Company, LLC | Delaware | |
| Kearny Street Beverage Company, LLC | California |
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the inclusion of our report dated September 29, 2025, relating to the consolidated financial statements of Portsmouth Square, Inc. and its subsidiaries as of and for the year ended June 30, 2025, which is contained in this Form 10-K.
/s/ WithumSmith+Brown, PC
Princeton, NJ
September 28, 2026
PCAOB ID Number 100
EXHIBIT 31.1
CERTIFICATION
I, John V. Winfield, certify that:
1. I have reviewed this Annual Report on Form 10-K of Portsmouth Square, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining: (a) disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)); and (b) internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: September 28, 2026
| /s/ John V. Winfield | |
| John V. Winfield | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
I, Ann Marie Blair, certify that:
1. I have reviewed this Annual Report on Form 10-K of Portsmouth Square, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining: (a) disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)); and (b) internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):
(a) All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: September 28, 2026
| /s/ Ann Marie Blair | |
| Ann Marie Blair | |
| Controller and Principal Financial Officer |
EXHIBIT 32.1
Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act Of 2002
In connection with the Annual Report of Portsmouth Square, Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John V. Winfield, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
| ● | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| ● | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ John V. Winfield | |
| John V. Winfield | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Date: September 28, 2026
A signed original of this written statement required by Section 906 has been provided to Portsmouth Square, Inc. and will be retained by Portsmouth Square, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
Certification of Principal Financial Officer Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act Of 2002
In connection with the Annual Report of Portsmouth Square, Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ann Marie Blair, Principal Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
| ● | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| ● | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Ann Marie Blair | |
| Ann Marie Blair | |
| Controller and Principal Financial Officer |
Date: September 28, 2026
A signed original of this written statement required by Section 906 has been provided to Portsmouth Square, Inc. and will be retained by Portsmouth Square, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.