The InterGroup(US:INTG)2025-05-15 18:20PART I – FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls assessment for the nine months ended March 31, 2025 Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements and notes, detailing financial position, performance, cash flows, and the company's liquidity and going concern assessment Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $103.2 million, total liabilities $215.3 million, and shareholders' deficit $112.1 million, reflecting a decline in assets and increased deficit Condensed Consolidated Balance Sheet Highlights | Account | March 31, 2025 (Unaudited) Value ($ million) | June 30, 2024 Value ($ million) | | :--- | :--- | :--- | | Total Assets | $103.2 | $107.8 | | Investment in Hotel, net | $39.1 | $40.9 | | Investment in real estate, net | $46.6 | $47.5 | | Investment in marketable securities | $0.75 | $7.45 | | Cash and cash equivalents | $4.0 | $4.3 | | Restricted cash | $9.4 | $4.4 | | Total Liabilities | $215.3 | $214.3 | | Mortgage notes payable - Hotel, net | $101.2 | $100.8 | | Mortgage notes payable - real estate, net | $94.2 | $88.2 | | Total Shareholders' Deficit | ($112.1) | ($106.5) | Condensed Consolidated Statements of Operations The company reported a net loss of $0.75 million for Q3 2025 and $5.3 million for the nine-month period, showing significant improvement year-over-year due to higher revenue and a gain on debt extinguishment Three Months Ended March 31 (Unaudited) | Metric | 2025 Value ($ million) | 2024 Value ($ million) | | :--- | :--- | :--- | | Total Revenues | $16.8 | $14.9 | | Income from Operations | $2.4 | $0.7 | | Gain (loss) on extinguishment of debt | $1.4 | ($0.45) | | Net Loss | ($0.75) | ($3.9) | | Net Loss Attributable to InterGroup | ($0.58) | ($3.2) | | Basic & Diluted EPS ($) | ($0.27) | ($1.44) | Nine Months Ended March 31 (Unaudited) | Metric | 2025 Value ($ million) | 2024 Value ($ million) | | :--- | :--- | :--- | | Total Revenues | $48.2 | $44.7 | | Income from Operations | $6.3 | $1.0 | | Net Loss | ($5.3) | ($7.6) | | Net Loss Attributable to InterGroup | ($3.7) | ($5.9) | | Basic & Diluted EPS ($) | ($1.71) | ($2.70) | Condensed Consolidated Statements of Shareholders' Deficit Total shareholders' deficit increased from $106.5 million to $112.1 million due to the cumulative net loss and treasury stock purchases, partially offset by stock options expense - The total shareholders' deficit grew from ($106.5 million) at the beginning of the fiscal year to ($112.1 million) at March 31, 202519 Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $1.7 million, investing activities used $2.2 million, and financing activities provided $5.2 million, resulting in a $4.7 million increase in cash and equivalents Cash Flow Summary for Nine Months Ended March 31 (Unaudited) | Cash Flow Activity | 2025 Value ($ million) | 2024 Value ($ million) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $1.7 | $1.8 | | Net Cash Used in Investing Activities | ($2.2) | ($4.6) | | Net Cash from Financing Activities | $5.2 | $1.9 | | Net Increase (Decrease) in Cash | $4.7 | ($0.9) | Notes to the Condensed Consolidated Financial Statements These notes detail the successful debt refinancing, ongoing substantial doubt about going concern due to market challenges, reliance on a related-party credit facility, and segment performance including losses from hotel and investment operations - On March 28, 2025, Portsmouth successfully refinanced its maturing debt, securing a new $67.0 million senior mortgage loan and a modified $36.3 million mezzanine loan, addressing prior default notices3894101 - Despite the refinancing, management concluded that substantial doubt exists about Portsmouth's ability to continue as a going concern due to challenging market conditions, high interest rates, and future refinancing risks4150 - The company relies on a related-party loan facility from its parent, InterGroup, with capacity increased to $40 million and maturity extended to July 2027, with $38.1 million outstanding as of March 31, 20258345 Segment Results for Nine Months Ended March 31, 2025 | Segment | Revenues ($ million) | Net (Loss) Income ($ million) | | :--- | :--- | :--- | | Hotel Operations | $34.0 | ($3.0) | | Real Estate Operations | $14.2 | $2.8 | | Investment Transactions | - | ($2.4) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, including reduced net loss, segment results, significant liquidity challenges, reliance on related-party financing, and substantial doubt about going concern, alongside critical accounting estimates Results of Operations The net loss decreased to $5.3 million for the nine-month period, driven by a gain on debt extinguishment and increased hotel revenues, with improved hotel occupancy offsetting a slight ADR decline Hotel Performance Metrics vs. Prior Year | Period | Metric | 2025 Value ($) | 2024 Value ($) | Change | | :--- | :--- | :--- | :--- | :--- | | 3 Months | RevPAR | $215 | $182 | +$33 | | | ADR | $241 | $232 | +$9 | | | Occupancy (%) | 89% | 78% | +11% | | 9 Months | RevPAR | $194 | $180 | +$14 | | | ADR | $213 | $219 | -$6 | | | Occupancy (%) | 91% | 82% | +9% | - The decrease in the company's net loss for the nine-month period was primarily attributable to a gain on debt extinguishment related to the hotel's refinancing and increased room revenues115 Marketable Securities The marketable securities portfolio dramatically decreased from $7.45 million to $0.75 million, becoming highly concentrated in one stock and resulting in a $2.4 million net loss from investment transactions - The fair value of the investment portfolio decreased from $7.45 million at June 30, 2024, to $0.75 million at March 31, 2025125 - As of March 31, 2025, the portfolio was highly concentrated, with one investment in American Realty Investors, Inc. accounting for approximately 99% of the total equity value125 Financial Condition, Liquidity, and Going Concern Liquidity is supported by cash and a $40 million related-party credit facility, but substantial doubt about going concern remains for Portsmouth due to adverse market conditions and future refinancing risks despite recent debt refinancing - Portsmouth relies on a related-party revolving credit facility from InterGroup, with capacity increased to $40 million and maturity extended to July 31, 2027, to support hotel operations130132 - Management concluded that substantial doubt exists about Portsmouth's ability to continue as a going concern for the next twelve months, citing adverse macroeconomic conditions, suppressed business travel in San Francisco, and future refinancing risks141143 Critical Accounting Policies and Use of Estimates Critical accounting policies involve significant judgment for deferred tax assets, hotel asset impairment, and stock-based compensation, with no material changes or impairment losses recorded during the nine-month period - Critical accounting policies involve significant judgment regarding deferred tax asset valuation, impairment of hotel assets, and stock-based compensation149 - No impairment losses were recorded on hotel investments or intangible assets during the nine months ended March 31, 2025 and 2024153 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the registrant is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is exempt from providing disclosures about market risk155 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to stock-based compensation accounting - Management concluded that disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to the accounting for stock-based compensation156 PART II – OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, unregistered equity sales, defaults, mine safety, other information, and required exhibits Item 1. Legal Proceedings The company is in a dispute with the City of San Francisco regarding the required removal of a pedestrian bridge connected to its hotel, disputing the obligation and financial responsibility - The company is in a dispute with the City of San Francisco, which has directed the company to remove a pedestrian bridge connected to its hotel at the company's own expense159 The company disputes this obligation and is in ongoing discussions159 Item 1A. Risk Factors The company faces significant delisting risk from Nasdaq due to failing to maintain minimum market value and negative stockholders' equity, potentially impacting liquidity and financing - The company received a deficiency letter from Nasdaq for failing to maintain the minimum Market Value of Listed Securities and faces a likely delisting, which could lead to decreased stock liquidity and difficulty in obtaining financing161 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No events were required to be reported under this item regarding unregistered sales of equity securities and use of proceeds - No events were required to be reported under this item162 Item 3. Defaults Upon Senior Securities No events were required to be reported under this item regarding defaults upon senior securities - No events were required to be reported under this item163 Item 4. Mine Safety Disclosures No events were required to be reported under this item regarding mine safety disclosures - No events were required to be reported under this item164 Item 5. Other Information No events were required to be reported under this item regarding other information - No events were required to be reported under this item165 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including required CEO and CFO certifications and Inline XBRL data files - The exhibits include required CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL interactive data files168