UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934 For the quarterly period ended March 31, 2023

☐ 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: 1-10324

THE INTERGROUP CORPORATION

(Exact name of registrant as specified in its charter)

delaware

13-3293645

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

1516 S. Bundy Dr., Suite 200, Los Angeles, California 90025

(Address of principal executive offices, including Zip Code)

(310) 889-2500

(Registrant’s Telephone Number, including Area Code)

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. Yes ☒ No ☐

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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock, as of May 10, 2023, was 2,206,489.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock		INTG		NASDAQ CAPITAL MARKET

TABLE OF CONTENTS
		Page
PART 1 - FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and June 30, 2022	1
	Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2023 and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Operations for the Nine Months ended March 31, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Shareholders’ Deficit for the Three and Nine Months ended March 31, 2023 and 2022 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months ended March 31, 2023 and 2022 (Unaudited)	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27

Item 4.	Controls and Procedures	27

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

Item 5.	Other Information	28

Item 6.	Exhibits	29

Signatures		30

PART I

FINANCIAL INFORMATION

Item 1 - Condensed Consolidated Financial Statements

THE INTERGROUP CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2023			June 30, 2022
	(unaudited)
Assets
Investment in hotel, net	$	39,369,000		$	37,267,000
Investment in real estate, net		48,349,000			48,025,000
Investment in marketable securities		16,967,000			11,049,000
Cash and cash equivalents		6,670,000			14,367,000
Restricted cash		6,429,000			8,982,000
Other assets, net		3,482,000			2,744,000
Accounts receivable, net		11,000			—
Deferred tax assets, net		3,612,000			3,612,000
Total assets	$	124,889,000		$	126,046,000

Liabilities and Shareholders’ Deficit
Liabilities
Accounts payable and other liabilities - Hotel		11,759,000			7,691,000
Accounts payable and other liabilities		923,000			2,715,000
Due to securities broker		176,000			490,000
Obligations for securities sold		657,000			449,000
Related party and other notes payable		3,096,000			3,521,000
Mortgage notes payable - Hotel, net		107,500,000			108,747,000
Mortgage notes payable - real estate, net		84,637,000			85,437,000
Total liabilities		208,748,000			209,050,000

Shareholders’ deficit
Preferred stock, $.01 par value, 100,000 shares authorized, none issued		—			—
Common stock, $.01 par value; 4,000,000 shares authorized; 3,459,888 and 3,459,888 issued; 2,207,466 and 2,236,180 outstanding, respectively		33,000			33,000
Additional paid-in capital		2,551,000			3,277,000
Accumulated deficit		(44,781,000	)		(46,116,000	)
Treasury stock, at cost, 1,252,944 and 1,223,708 shares as of March 31, 2023 and June 30, 2022, respectively		(20,756,000	)		(19,324,000	)
Total InterGroup shareholders’ deficit		(62,953,000	)		(62,130,000	)
Noncontrolling interest		(20,906,000	)		(20,874,000	)
Total shareholders’ deficit		(83,859,000	)		(83,004,000	)
Total liabilities and shareholders’ deficit	$	124,889,000		$	126,046,000

The accompanying notes are an integral part of these (unaudited) condensed consolidated financial statements.

THE INTERGROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the three months ended March 31,	2023			2022
Revenues:
Hotel	$	10,430,000		$	6,632,000
Rental income		3,932,000			3,826,000
Total revenues		14,362,000			10,458,000

Costs and operating expenses
Hotel operating expenses		(8,413,000	)		(6,544,000	)
Rental real estate operating expenses		(2,770,000	)		(2,270,000	)
Depreciation and amortization expense		(1,380,000	)		(1,185,000	)
General and administrative expenses		(836,000	)		(580,000	)
Total costs and operating expenses		(13,399,000	)		(10,579,000	)

Income (loss) from operations		963,000			(121,000	)

Other income (expense)
Interest expense - mortgage		(2,101,000	)		(2,188,000	)
Net gain on marketable securities		866,000			906,000
Net loss on marketable securities - Comstock
Gain on debt extinguishment
Gain on insurance recovery
Impairment loss on other investments
Dividend and interest income		72,000			158,000
Trading and margin interest expense		(473,000	)		(339,000	)
Total other expense, net		(1,636,000	)		(1,463,000	)

Loss before income taxes		(673,000	)		(1,584,000	)
Income tax benefit		59,000			711,000
Net loss		(614,000	)		(873,000	)
Less: Net loss attributable to the noncontrolling interest		258,000			407,000
Net loss attributable to InterGroup Corporation	$	(356,000	)	$	(466,000	)

Net loss per share attributable to InterGroup Corporation
Basic	$	(0.16	)	$	(0.21	)
Diluted		-			-

Weighted average number of basic common shares outstanding		2,211,066			2,230,872
Weighted average number of diluted common shares outstanding		-			-

The accompanying notes are an integral part of these (unaudited) condensed consolidated financial statements.

THE INTERGROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the nine months ended March 31,	2023			2022
Revenues:
Hotel	$	32,632,000		$	19,785,000
Rental income		11,991,000			11,808,000
Total revenues		44,623,000			31,593,000

Costs and operating expenses
Hotel operating expenses		(26,445,000	)		(19,356,000	)
Rental real estate operating expenses		(7,695,000	)		(6,620,000	)
Depreciation and amortization expense		(4,012,000	)		(3,468,000	)
General and administrative expenses		(2,448,000	)		(1,966,000	)
Total costs and operating expenses		(40,600,000	)		(31,410,000	)

Income from operations		4,023,000			183,000

Other income (expense)
Interest expense - mortgage		(6,483,000	)		(6,712,000	)
Net gain (loss) on marketable securities		1,440,000			(1,032,000	)
Net loss on marketable securities - Comstock		—			(2,581,000	)
Gain on debt extinguishment		—			1,665,000
Gain on insurance recovery		2,692,000			—
Impairment loss on other investments		—			(41,000	)
Dividend and interest income		369,000			807,000
Trading and margin interest expense		(1,182,000	)		(1,053,000	)
Total other expense, net		(3,164,000	)		(8,947,000	)

Income (loss) before income taxes		859,000			(8,764,000	)
Income tax (expense) benefit		(107,000	)		2,742,000
Net income (loss)		752,000			(6,022,000	)
Less: Net loss attributable to the noncontrolling interest		583,000			1,392,000
Net income (loss) attributable to InterGroup Corporation	$	1,335,000		$	(4,630,000	)

Net income (loss) per share attributable to InterGroup Corporation
Basic	$	0.60		$	(2.09	)
Diluted	$	0.54			-

Weighted average number of basic common shares outstanding		2,222,801			2,219,220
Weighted average number of diluted common shares outstanding		2,473,996			-

The accompanying notes are an integral part of these (unaudited) condensed consolidated financial statements.

THE INTERGROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (UNAUDITED)

	Shares		Amount		Capital			Deficit			Stock			Deficit			Interest			Deficit
For the three and nine months ended	Common Stock				Additional Paid- in			Accumulated			Treasury			Total InterGroup Shareholders’			Non-Controlling			Total Shareholders’
March 31, 2023	Shares		Amount		Capital			Deficit			Stock			Deficit			Interest			Deficit
Balance at July 1, 2022		3,459,888	$	33,000	$	3,277,000		$	(46,116,000	)	$	(19,324,000	)	$	(62,130,000	)	$	(20,874,000	)	$	(83,004,000	)
Net loss		—		—		—			(199,000	)		—			(199,000	)		(2,000	)		(201,000	)
Investment in Portsmouth		—		—		(19,000	)		—			—			(19,000	)		14,000			(5,000	)
Purchase of treasury stock		—		—		—			—			(872,000	)		(872,000	)		—			(872,000	)
Balance, September 30, 2022		3,459,888		33,000		3,258,000			(46,315,000	)		(20,196,000	)		(63,220,000	)		(20,862,000	)		(84,082,000	)
Net income (loss)		—		—		—			1,890,000			—			1,890,000			(323,000	)		1,567,000
Investment in Portsmouth		—		—		(670,000	)		—			—			(670,000	)		509,000			(161,000	)
Purchase of treasury stock		—		—		—			—			(370,000	)		(370,000	)		—			(370,000	)
Balance, December 31, 2022		3,459,888		33,000		2,588,000			(44,425,000	)		(20,566,000	)		(62,370,000	)		(20,676,000	)		(83,046,000	)
Net loss		—		—		—			(356,000	)		—			(356,000	)		(258,000	)		(614,000	)
Investment in Portsmouth		—		—		(37,000	)		—			—			(37,000	)		28,000			(9,000	)
Purchase of treasury stock		—		—		—						(190,000	)		(190,000	)		—			(190,000	)
Balance, March 31, 2023		3,459,888	$	33,000	$	2,551,000		$	(44,781,000	)	$	(20,756,000	)	$	(62,953,000	)	$	(20,906,000	)	$	(83,859,000	)

The accompanying notes are an integral part of these (unaudited) condensed consolidated financial statements.

THE INTERGROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT (UNAUDITED)

For the three and nine months ended	Common Stock				Additional Paid- in			Accumulated			Treasury			InterGroup Shareholders’			Non-Controlling			Total Shareholders’
March 31, 2023	Shares		Amount		Capital			Deficit			Stock			Deficit			Interest			Deficit
Balance at July 1, 2021		3,404,982	$	33,000		2,172,000		$	(36,394,000	)	$	(17,370,000	)	$	(51,559,000	)	$	(19,677,000	)	$	(71,236,000	)
Net loss		—		—		—			(2,161,000	)		—			(2,161,000	)		(745,000	)		(2,906,000	)
Stock options expense		—		—		2,000			—			—			2,000			—			2,000
Investment in Portsmouth		—		—		(25,000	)		—			—			(25,000	)		17,000			(8,000	)
Purchase of remaining interest in Justice		—		—		—			(999,000	)		—			(999,000	)		999,000			—
Investment in Justice		—		—		—			—			—			—			(344,000	)		(344,000	)
Purchase of treasury stock		—		—		—			—			(74,000	)		(74,000	)		—			(74,000	)
Balance, September 30, 2021		3,404,982		33,000		2,149,000			(39,554,000	)		(17,444,000	)		(54,816,000	)		(19,750,000	)		(74,566,000	)
Net loss		—		—		—			(2,003,000	)		—			(2,003,000	)		(240,000	)		(2,243,000	)
Stock options expense		—		—		2,000			—			—			2,000			—			2,000
Investment in Portsmouth		—		—		(33,000	)		—			—			(33,000	)		24,000			(9,000	)
Purchase of treasury stock		—		—		—			—			(1,513,000	)		(1,513,000	)		—			(1,513,000	)
Balance, December 31, 2021		3,404,982		33,000		2,118,000			(41,557,000	)		(18,957,000	)		(58,363,000	)		(19,966,000	)		(78,329,000	)
Balance		3,404,982		33,000		2,118,000			(41,557,000	)		(18,957,000	)		(58,363,000	)		(19,966,000	)		(78,329,000	)
Issuance of stock		54,906		—		—			—			—			—			—			—
Net loss		—		—		—			(466,000	)		—			(466,000	)		(407,000	)		(873,000	)
Net income (loss)		—		—		—			(466,000	)		—			(466,000	)	$	(407,000	)		(873,000	)
Purchase of Treasury Stock		—		—		—			—			(38,000	)		(38,000	)		—			(38,000	)
Balance, March 31, 2022		3,459,888	$	33,000	$	2,118,000		$	(42,023,000	)	$	(18,995,000	)	$	(58,867,000	)	$	(20,373,000	)	$	(79,240,000	)
Balance		3,459,888	$	33,000	$	2,118,000		$	(42,023,000	)	$	(18,995,000	)	$	(58,867,000	)	$	(20,373,000	)	$	(79,240,000	)

The accompanying notes are an integral part of these (unaudited) condensed consolidated financial statements.

THE INTERGROUP CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For the nine months ended March 31,	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	752,000		$	(6,022,000	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		4,012,000			3,468,000
Amortization of loan cost		265,000			341,000
Amortization of related party note payable		(425,000	)		(426,000	)
Gain on insurance recovery		(2,692,000	)		—
Gain from debt extinguishment		—			(2,000,000	)
Deferred taxes		—			(2,740,000	)
Net unrealized loss (gain) on marketable securities		(2,459,000	)		2,739,000
Impairment loss on other investments		—			41,000
Stock compensation expense		—			4,000
Change in operating assets and liabilities:
Investment in marketable securities		(3,459,000	)		7,512,000
Accounts receivable		(11,000	)		—
Other assets		(738,000	)		(1,433,000	)
Accounts payable and other liabilities - Hotel		9,019,000			321,000
Accounts payable and other liabilities		(6,585,000	)		(317,000	)
Due to securities broker		(314,000	)		(5,197,000	)
Obligations for securities sold		208,000			(5,162,000	)
Net cash used in operating activities		(2,427,000	)		(8,871,000	)

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for hotel investments		(4,131,000	)		(1,694,000	)
Payments for real estate investments		(1,940,000	)		(1,716,000	)
Insurance proceeds for property damage claims		2,325,000			—
Payments for investment in Justice		—			(344,000	)
Payments for investment in Portsmouth		(175,000	)		(17,000	)
Net cash used in investing activities		(3,921,000	)		(3,771,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of mortgage and other notes payable		(2,312,000	)		(2,857,000	)
Proceeds from refinance of mortgage notes payable		—			16,099,000
Issuance costs of refinancing mortgage and other notes payable		—			(91,000	)
Purchase of treasury stock		(1,432,000	)		(1,625,000	)
Payments of finance leases		(158,000	)		—
Net cash provided by (used in) financing activities		(3,902,000	)		11,526,000

Net change in cash, cash equivalents, and restricted cash		(10,250,000	)		(1,116,000	)
Cash, cash equivalents, and restricted cash at the beginning of the period		23,349,000			15,392,000
Cash, cash equivalents, and restricted cash at the end of the period	$	13,099,000		$	14,276,000

Supplemental information:
Interest paid	$	5,862,000		$	5,921,000
Taxes paid	$	—		$	679,000

The accompanying notes are an integral part of these (unaudited) condensed consolidated financial statements.

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation and Significant Accounting Policies

The condensed consolidated financial statements included herein have been prepared by The InterGroup Corporation (“InterGroup” or the “Company”), according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the unaudited condensed consolidated financial statements prepared in accordance with generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures that are made are adequate to make the information presented not misleading. Further, the unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which included only normal recurring adjustments) necessary for a fair statement of the financial position, cash flows and results of operations as of and for the periods indicated. It is suggested that these financial statements be read in conjunction with the audited consolidated financial statements of InterGroup and the notes therein included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022. The consolidated balance sheet as of June 30, 2022, was derived from audited financial statements as included in the Company’s Form 10-K for the year ended June 30, 2022.

The unaudited condensed consolidated financial statements include the accounts of our wholly owned and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended March 31, 2023, are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2023.

Effective February 19, 2021, the Company’s 83.7% owned subsidiary, Santa Fe Financial Corporation (“Santa Fe”), a public company (OTCBB: SFEF), was liquidated and all of its assets including its 68.8% interest in Portsmouth Square, Inc. (“Portsmouth”), a public company (OTCBB: PRSI) were distributed to its shareholders in exchange for their Santa Fe common stock. As of March 31, 2023, InterGroup owns approximately 75.6% of the outstanding common shares of Portsmouth and the Company’s President, Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of Portsmouth. Mr. Winfield also serves as the Chairman of the Board and Chief Executive Officer of Portsmouth.

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

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

Aimbridge Hospitality (“Aimbridge”) manages the Hotel, along with its five-level parking garage, under a certain Hotel management agreement (“HMA”) with Operating. The term of the management agreement is for an initial period of ten years commencing on February 3, 2017 and automatically renews for successive one (1) year periods, to not exceed five years in the aggregate, subject to certain conditions. Under the terms on the HMA, the base management fee payable to Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel revenue.

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

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

There have been no material changes to the Company’s significant accounting policies during the nine months ended March 31, 2023. Please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2022 for a summary of the significant accounting policies. Certain prior year amounts have been reclassified for consistency with the current period presentation on the condensed consolidated balance sheets. Finance leases of $183,000 as of June 30, 2022, were reclassified to Accounts Payable and Other Liabilities - Hotel. These reclassifications had no effect on the reported results of operations and financial position.

Recently Issued and Adopted Accounting Pronouncements

As of March 31, 2023, management does not expect a material impact from recently issued accounting pronouncements yet to be adopted, on the Company’s condensed consolidated financial statements.

Note 2. Liquidity

Historically, the Company’s cash flows have been primarily generated from our Hotel and real estate operations. However, the responses by federal, state, and local civil authorities to the COVID-19 pandemic continue to have a material detrimental impact on the Company’s liquidity. For the nine months ended March 31, 2023, the Company’s net cash flows used in operations was $2,427,000. The Company has cautiously re-established certain services at our Hotel but have continued to take steps to preserve capital and increase liquidity at the Hotel, including implementing strict cost management measures to eliminate non-essential expenses, renegotiating certain reoccurring expenses, and temporarily closing certain hotel services and outlets. As the hospitality and travel environment continues its recovery, Portsmouth will continue to evaluate what services it brings back. During the nine months ended March 31, 2023, Portsmouth continued to make capital improvements to the hotel in the amount of $4,131,000 and anticipates continuing its guest room upgrade program during the remainder of fiscal year 2023. During the nine months ended March 31, 2023, the Company made capital improvements in the amount of $1,940,000 to its multi-family and commercial real estate.

The Company had cash, and cash equivalents, of $6,670,000 and $14,367,000 as of March 31, 2023 and June 30, 2022, respectively. The Company had marketable securities, net of margin due to securities brokers, of $16,134,000 and $10,110,000 as of March 31, 2023 and June 30, 2022, respectively. These marketable securities are short-term investments and liquid in nature.

On December 16, 2020, Justice and InterGroup entered into a loan modification agreement which increased Justice’s borrowing from InterGroup as needed up to $10,000,000 and extended the maturity date of the loan to July 31, 2021. As of the date of this report, the maturity date was extended to July 31, 2023. On September 7, 2021, the Board of InterGroup passed a resolution to provide funding to Portsmouth for the working capital of the Hotel up to $16,000,000 if necessary. Upon the dissolution of Justice in December 2021, Portsmouth assumed Justice’s note payable to InterGroup in the amount of $11,350,000. On December 31, 2021, Portsmouth and InterGroup entered into a loan modification agreement which memorialized the increase to $16,000,000 and the substitution of Portsmouth for Justice. During the fiscal year ending June 30, 2022, InterGroup advanced $7,550,000 to the Hotel, bringing the total amount due to InterGroup to $14,200,000 as of June 30, 2022 and March 31, 2023. Currently, the Company does not anticipate any need for additional funding from InterGroup. As of March 31, 2023, the Company has not made any pay-downs to its note payable to InterGroup. The Company could amend its by-laws and increase the number of authorized shares to issue additional shares to raise capital in the public markets if needed. The loan to InterGroup is eliminated in consolidation of the Company’s condensed consolidated financial statements.

During the fiscal year ended June 30, 2022, the Company refinanced five of our properties’ existing mortgages and obtained a mortgage note payable on one of our California properties, generating net proceeds totaling $16,683,000. The Company will continue to evaluate other refinancing opportunities and could refinance additional multifamily properties should the need arise, or should management consider the interest rate environment favorable. In July 2022, the Company renewed its uncollateralized revolving line of credit from CIBC Bank USA (“CIBC”) at a reduced amount of $2,000,000 from $5,000,000. The entire $2,000,000 is available to draw down as of March 31, 2023.

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company’s known short-term liquidity requirements primarily consist of funds necessary to pay for operating and other expenditures, including management and franchise fees, corporate expenses, payroll and related costs, taxes, interest and principal payments on our outstanding indebtedness, and repairs and maintenance at all our properties. The Company has been and will continue its efforts to secure a new loan to replace its current first mortgage and mezzanine debt which matures on January 1, 2024. Management anticipates the successful completion of the hotel’s debt refinancing.

The Company’s long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities and capital improvements of the Hotel and our real estate properties. We will continue to finance our business activities primarily with existing cash, including from the activities described above, and cash generated from our operations. After considering our approach to liquidity and accessing our available sources of cash, we believe that our cash position, after giving effect to the transactions discussed above, will be adequate to meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and related benefits, taxes and compliance costs and other commitments, for at least twelve months from the date of issuance of these financial statements, even if the economic recovery takes longer than anticipated. The objectives of our cash management policy are to maintain existing leverage levels and the availability of liquidity, while minimizing operational costs. However, there can be no guarantee that management will be successful with its plan.

The following table provides a summary as of March 31, 2023, the Company’s material financial obligations which also includes interest payments.

	Total		3 Months 2023		Year 2024		Year 2025		Year 2026		Year 2027		Thereafter
Mortgage notes payable	$	193,087,000	$	5,578,000	$	108,417,000	$	3,966,000	$	1,171,000	$	3,301,000	$	70,654,000
Related party notes payable		3,096,000		142,000		567,000		567,000		567,000		463,000		790,000
Interest		29,043,000		2,176,000		5,640,000		2,501,000		2,381,000		2,274,000		14,071,000
Total	$	225,226,000	$	7,896,000	$	114,624,000	$	7,034,000	$	4,119,000	$	6,038,000	$	85,515,000

Note 3. Revenue

Our revenue from real estate is primarily rental income from residential and commercial property leases which is recorded when due from residents and is recognized monthly as earned. The revenue recognition rules under ASC 606 specifically exclude rental revenue from the accounting standard. The following table present our Hotel revenue disaggregated by revenue streams:

Schedule of Disaggregation of Revenue

For the three months ended March 31,	2023		2022
Hotel revenues:
Hotel rooms	$	8,968,000	$	5,505,000
Food and beverage		744,000		372,000
Garage		609,000		677,000
Other operating departments		109,000		78,000
Total hotel revenues	$	10,430,000	$	6,632,000

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the nine months ended March 31,	2023		2022
Hotel revenues:
Hotel rooms	$	28,020,000	$	16,285,000
Food and beverage		1,905,000		934,000
Garage		2,148,000		2,352,000
Other operating departments		559,000		214,000
Total hotel revenues	$	32,632,000	$	19,785,000

Performance obligations

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

● Cancelable room reservations or ancillary services are typically satisfied as the good or service is transferred to the hotel guest, which is generally when the room stay occurs.

● Non-cancelable room reservations and banquet or conference reservations represent a series of distinct goods or services provided over time and satisfied as each distinct good or service is provided, which is reflected by the duration of the room reservation.

● Other ancillary goods and services are purchased independently of the room reservation at standalone selling prices and are considered separate performance obligations, which are satisfied when the related good or service is provided to the hotel guest.

● Components of package reservations for which each component could be sold separately to other hotel guests are considered separate performance obligations and are satisfied as set forth above.

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

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

Contract assets and liabilities

The Company does not have any material contract assets as of March 31, 2023 and June 30, 2022, 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 the hotel, which are presented within accounts payable and other liabilities on our unaudited consolidated balance sheets and had a balance of $493,000 at July 1, 2022. During the nine months ended March 31, 2023, the entire $493,000 was recognized as revenue. Contract liabilities decreased to $364,000 as of March 31, 2023. The decrease at December 31, 2022 was primarily driven by advance deposits received from customers for services to be performed after March 31, 2023.

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Contract costs

The Company considers sales commissions earned to be incremental costs of obtaining a contract with our customers. As a practical expedient, the Company expenses these costs as incurred as our contracts with customers are less than one year.

Note 4. Investment in Hotel, Net

Investment in hotel consisted of the following as of:

Schedule of Investment in Hotel, Net

March 31, 2023	Cost		Accumulated Depreciation			Net Book Value
Land	$	2,739,000	$	—		$	2,739,000
Finance Lease ROU assets		1,805,000		(1,160,000	)		645,000
Furniture and Equipment		36,991,000		(29,322,000	)		7,669,000
Building and improvements		64,664,000		(36,348,000	)		28,316,000
Investment in Hotel, net	$	106,199,000	$	(66,830,000	)	$	39,369,000

June 30, 2022	Cost		Accumulated Depreciation			Net Book Value
Land	$	2,738,000	$	—		$	2,738,000
Finance Lease ROU assets		1,805,000		(922,000	)		883,000
Furniture and Equipment		32,860,000		(28,567,000	)		4,293,000
Building and improvements		64,665,000		(35,312,000	)		29,353,000
Investment in Hotel, net	$	102,068,000	$	(64,801,000	)	$	37,267,000

Finance lease ROU assets, furniture and equipment are stated at cost, depreciated on a straight-line basis over their useful lives ranging from 3 to 7 years and amortized over the life of the lease. Building and improvements are stated at cost, depreciated on a straight-line basis over their useful lives ranging from 15 to 39 years. Depreciation and amortization expense related to the Hotel for the three months ended March 31, 2023 and March 31, 2022 was $767,000 and $626,000, respectively. Depreciation and amortization related to the Hotel for the nine months ended March 31, 2023 and 2022 are $2,029,000 and $1,669,000, respectively.

Note 5. Investment in Real Estate, Net

The Company’s investment in real estate includes sixteen apartment complexes, one commercial real estate property and three single-family houses. The properties are located throughout the United States, but are concentrated in Dallas, Texas and Southern California. The Company also has an investment in unimproved land located in Maui, Hawaii.

Investment in real estate consisted of the following:

Schedule of Investment in Real Estate

	March 31, 2023			June 30, 2022
Land	$	22,998,000		$	22,998,000
Building, improvements and equipment		73,239,000			70,933,000
Accumulated depreciation		(49,356,000	)		(47,374,000	)
Investment in real estate, gross		46,881,000			46,557,000
Land held for development		1,468,000			1,468,000
Investment in real estate, net	$	48,349,000		$	48,025,000

Building, improvements, and equipment are stated at cost, depreciated on a straight-line basis over their useful lives ranging from 5 to 40 years. Depreciation expense related to the Company’s investment in real estate for the three months ended March 31, 2023 and March 31, 2022 was $663,000 and $609,000, respectively. Depreciation expense related to the Company’s investment in real estate for the nine months ended March 31, 2023 and 2022 are $1,983,000 and $1,799,000, respectively.

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 6. Investment in Marketable Securities

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

At March 31, 2023 and June 30, 2022, all of the Company’s marketable securities are classified as trading securities. The change in the unrealized gains and losses on these investments, along with the changes in amounts due to broker are included in earnings. Trading securities are summarized as follows:

Schedule of Trading Securities

Investment	Cost		Gross Unrealized Gain		Gross Unrealized Loss			Net Unrealized Gain (Loss)			Fair Value
As of March 31, 2023
Corporate equities	$	14,582,000	$	3,547,000	$	(1,162,000	)	$	2,385,000		$	16,967,000

As of June 30, 2022
Corporate equities	$	11,150,000	$	1,474,000	$	(1,575,000	)	$	(101,000	)	$	11,049,000

Net gains (losses) on marketable securities on the statement of operations are comprised of realized and unrealized gains (losses). Below is the composition of net gains (losses) on marketable securities for the three and nine months ended March 31, 2023, respectively:

For the three months ended March 31,	2023		2022
Realized gain on marketable securities, net	$	503,000	$	127,000
Realized loss on marketable securities related to Comstock
Unrealized gain on marketable securities, net		363,000		779,000
Net gain on marketable securities	$	866,000	$	906,000

For the nine months ended March 31,		2023			2022
Realized (loss) gain on marketable securities, net	$	(1,019,000	)	$	1,707,000
Realized loss on marketable securities related to Comstock		—			(2,581,000	)
Unrealized gain (loss) on marketable securities, net		2,459,000			(2,739,000	)
Net gain (loss) on marketable securities	$	1,440,000		$	(3,613,000	)

Note 7. Fair Value Measurements

The carrying values of the Company’s financial instruments not required to be carried at fair value on a recurring basis approximate fair value due to their short maturities (i.e., accounts receivable, other assets, accounts payable and other liabilities and obligations for securities sold) or the nature and terms of the obligation (i.e., other notes payable and mortgage notes payable).

THE INTERGROUP CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

As of	March 31, 2023 Total - Level 1		June 30, 2022 Total - Level 1
Assets:
Investment in marketable securities:
REITs and real estate companies	$	6,443,000	$	3,289,000
Financial Services		1,065,000		1,755,000
Technology		1,139,000		815,000

SEC Form 10-Q filed by Intergroup Corporation