PRSI Portsmouth Square (PK)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K/A

 

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2023

 

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 0-4057

 

PORTSMOUTH SQUARE, INC.

(Exact name of registrant as specified in its charter)

 

california		94-1674111
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)

 

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

(Address of principal executive offices) (Zip Code)

 

(310) 889-2500

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

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

 

Common Stock, No Par Value

(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.

 

☐ Yes ☒ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

 

☐ Yes ☒ No

 

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

☒ Yes ☐ No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.

 

☒ Yes ☐ No

 

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	☐
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. ☐

 

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). ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act):

☐ Yes ☒ No

 

The aggregate market value of the Common Stock, no par value, held by non-affiliates computed by reference to the closing price reported on December 31, 2022 was $7,081,000.

 

The number of shares outstanding of registrant’s Common Stock, as of October 13, 2023 was 734,187.

 

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

 

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 

 

Explanatory note

 

We are filing this Amendment No. 1 to our Form 10-K filed on October 16, 2023 to include all required IXBRL files.

 

 

TABLE OF CONTENTS

 

		Page
	PART I
Item 1.	Business.	4
Item 1A.	Risk Factors.	8
Item 1B.	Unresolved Staff Comments.	13
Item 2.	Properties.	13
Item 3.	Legal Proceedings.	14
Item 4.	Mine Safety Disclosures.	14
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	15
Item 6.	Selected Financial Data.	15
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	21
Item 8.	Financial Statements and Supplementary Data.	21
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	43
Item 9A.	Controls and Procedures.	43
Item 9B.	Other Information.	43
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	44
Item 11.	Executive Compensation.	46
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	48
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	49
Item 14.	Principal Accounting Fees and Services.	50
	PART IV
Item 15.	Exhibits, Financial Statement Schedules.	51
Signatures		52

 

 

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 the performance of our business, our financial results, our liquidity and capital resources, including anticipated repayment of certain of the Company’s indebtedness, the impact to our business and financial condition, the effects of competition and the effects of future legislation or regulations and other non-historical statements, the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts). Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as the words “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect our results of operations, financial condition, cash flows, performance or future achievements or events.

 

All such forward-looking statements are based on current expectations of management and therefore involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in these forward-looking statements. You should not place undue reliance on any forward-looking statements, and we urge investors to carefully review the disclosures we make concerning risks and uncertainties in Item 1A: “Risk Factors” in this Annual Report on Form 10-K. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 

The risk factors discussed in Item 1A: “Risk Factors” could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. Any such risks could cause our results to differ materially from those expressed in forward-looking statements.

 

Other factors that may cause actual results to differ materially from current expectations include, but are not limited to:

 

	●	risks associated with the lodging industry, including competition, increases in wages, labor relations, energy and fuel costs, actual and threatened pandemics, actual and threatened terrorist attacks, and downturns in domestic and international economic and market conditions, particularly in the San Francisco Bay area;
	●	risks associated with the real estate industry, including changes in real estate and zoning laws or regulations, increases in real property taxes, rising insurance premiums, costs of compliance with environmental laws and other governmental regulations;
	●	the availability and terms of financing and capital and the general volatility of securities markets;
	●	changes in the competitive environment in the hotel industry;
	●	economic volatility and potential recessive trends;
	●	risks related to natural disasters;
	●	hyperinflation;
	●	litigation; and
	●	other risk factors discussed below in this Report.

 

 

PART I

 

Item 1. Business.

 

GENERAL

 

Portsmouth Square, Inc. (referred to as “Portsmouth” or the “Company” and may also be referred to as “we” “us” or “our”) is a California corporation, incorporated on July 6, 1967, for the purpose of acquiring a hotel property in San Francisco, California through a California limited partnership, Justice Investors Limited Partnership (“Justice” or the “Partnership”). As of June 30, 2023, approximately 75.7% of the outstanding common stock of Portsmouth was owned by The InterGroup Corporation (“InterGroup”), a public company (NASDAQ: INTG). As of June 30, 2023, the Company’s Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of the Company. Mr. Winfield also serves as the President, Chairman of the Board and Chief Executive Officer of InterGroup and owns approximately 68.6% of the outstanding common shares of InterGroup as of June 30, 2023.

 

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 the Company.

 

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, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating. The Hotel is a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030.

 

The Company also derives income from the investment of its cash and investment securities assets. The Company has invested in income-producing instruments, equity and debt securities and may consider other investments in the future. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of the Company’s marketable securities and other investments.

 

 

HILTON HOTELS FRANCHISE LICENSE AGREEMENT

 

The Partnership entered into a Franchise License Agreement (the “License Agreement”) with the HLT Existing Franchise Holding LLC (“Hilton”) on December 10, 2004. The term of the License Agreement was for an initial period of fifteen years commencing on the date the Hotel began operating as a Hilton hotel, with an option to extend the License Agreement for another five years, subject to certain conditions. On June 26, 2015, Operating and Hilton entered into an amended franchise agreement that, among other things, extended the License Agreement through 2030, and provided the Justice with certain key money cash incentives to be earned through 2030.

 

HOTEL MANAGEMENT COMPANY AGREEMENT

 

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

 

For the fiscal years ended June 30, 2023 and 2022, hotel management fees were $711,000 and $530,000, and incentive fees of $505,000 and $525,000, respectively, offset by key money amortization of $250,000 for both years and are included in Hotel operating expenses in the consolidated statements of operations. As part of the Hotel management agreement, Aimbridge, through the Company’s wholly owned subsidiary, Kearny Street Parking LLC, manages the parking garage in-house.

 

CHINESE CULTURE FOUNDATION LEASE

 

On March 15, 2005, the Hotel entered an amended lease with the Chinese Culture Foundation of San Francisco (the “Foundation”) for the third-floor space of the Hotel commonly known as the Chinese Culture Center, which the Foundation had right to occupy pursuant to a 50-year nominal rent lease that began in 1967.

 

The amended lease, among other things, requires the Hotel to pay to the Foundation a monthly event space fee in the amount of $5,000, adjusted annually based on the local Consumer Price Index. As of June 30, 2023, monthly event space fee is $7,131. The term of the amended lease expires on October 17, 2023, with an automatic extension for another 10-year term if the property continues to be operated as a hotel. Subject to certain conditions as set forth in the amended lease, the Foundation is entitled to reserve for a maximum of 75 days per calendar year for use of the event space. If the Hotel needs the event space during one of the dates previously reserved by the Foundation, the Hotel shall pay the Foundation $4,000 per day for using the event space. During the fiscal years ended June 30, 2023 and 2022, the Hotel paid the Foundation $20,000 and $12,000 for such fees, respectively.

 

MARKETABLE SECURITIES INVESTMENT POLICIES

 

In addition to its Hotel operations, the Company also invests from time to time in income producing instruments, corporate debt and equity securities, publicly traded investment funds, mortgage-backed securities, securities issued by REITs and other companies which invest primarily in real estate.

 

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 currently has three members and is chaired by the Company’s Chairman of the Board and Chief Executive Officer, John V. Winfield. The Committee has delegated authority to manage the portfolio to the Company’s Chairman and Chief Executive Officer together with such assistants and management committees he may engage. The Committee generally follows certain established investment guidelines for the Company’s investments. These guidelines presently include: (i) corporate equity securities should be listed on the New York Stock Exchange (NYSE), NYSE MKT, NYSE Arca or the Nasdaq Stock Market (NASDAQ); (ii) the issuer of the listed securities should be in compliance with the listing standards of the applicable national securities exchange; and (iii) investment in a particular issuer should not exceed 10% of the market value of the total portfolio. The investment guidelines do not require the Company to divest itself of investments, which initially meet these guidelines but subsequently fail to meet one or more of the investment criteria. The Committee has in the past approved non-conforming investments and may in the future approve non-conforming investments. The Committee may modify these guidelines from time to time.

 

 

The Company may also invest, with the approval of the Committee, in unlisted securities, such as convertible notes, through private placements including private equity investment funds. Those investments in non-marketable securities are carried at cost on the Company’s consolidated balance sheets as part of other investments and reviewed for impairment on a periodic basis.

 

The Company may utilize margin for its marketable securities purchases using standard margin agreements with national brokerage firms. The margin used by the Company may fluctuate depending on market conditions. The use of leverage could be viewed as risky, and the market value of the portfolio may be subject to large fluctuations. Margin balances due on June 30, 2023 and 2022 were zero and $130,000 respectively.

 

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

 

Further information with respect to investment in marketable securities and other investments of the Company is set forth in Management Discussion and Analysis of Financial Condition and Results of Operations section and Notes 6 and 7 of the Notes to Consolidated Financial Statements.

 

SEASONALITY

 

Historically, the Hotel’s operation has been seasonal under normal circumstances. Like most hotels in the San Francisco area, the Hotel generally maintained high occupancy and room rates during the entire year except for the weeks starting from Thanksgiving to first week of January due to the holiday season. These seasonal patterns can be expected to cause fluctuations in the quarterly revenues of the Hotel. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding the effects on our results of operations.

 

COMPETITION

 

The Hotel has navigated this very competitive market nimbly and has consistently been ranked the number one hotel in its Competitive Set (“CompSet”) based on our ability to drive occupancy. During 2021 and first part of calendar 2022, we took advantage of the slow periods to make certain capital improvements including complete refinishing of all guest room furniture, resurfacing half of the hotel bathtubs that needed repair, refreshed meeting space and lobby paint and vinyl, replaced all bed frames and socks, and completed the carpet and wall covering corridor installation. In November 2022, we began our guestroom renovation and had completed approximately 200 guestrooms as of June 30, 2023. Hotel improvements are ongoing to remain competitive and we anticipate completing the guestroom renovations by the end March 2024.

 

As of the date of this report, the competition for business is very strong as there still hasn’t been a rebound close to 2019 for the overall San Francisco market. The fiscal year ending June 30, 2023, the Hotel’s Competitive Set (“CompSet”) was running 64% occupancy and average daily rate of $236 for a RevPAR of $152. The Hotel has fared drastically better than its CompSet by aggressively pursuing all segments and opening all channels on off peak days and limiting access over peak demand dates. At the end of fiscal year ending June 30, 2023, the Hotel was running occupancy of 83% including the vacancy of the “Out Of Order” rooms of about 13% at $195 average daily rate for a RevPAR of $161, giving the Hotel a RevPAR index of 106%.

 

 

The Hotel’s location in the San Francisco Financial District historically had provided greater opportunities over its competitors when it comes to developing relationships with the Financial District entities and the customers who regularly do business in the downtown area. With limited business travel to San Francisco for the time, we are competing with hotels in more tourist attracting locations and amenities for the leisure traveler. The ability to capitalize on the strong midweek demand of the individual business traveler to the Financial District has been the focus during the timeframe of strong growth in the market. The shift to attracting leisure travel has pushed the hotel to price aggressively to lure competition from the more tourist locations in San Francisco.

 

The Hotel is also subject to certain operating risks common to the hospitality industry, which could adversely impact performance.

 

These risks include, but are not limited to:

 

	●	Competition for guests and meetings from other hotels including competition and pricing pressure from internet wholesalers and distributors;
	●	increases in operating costs, including wages, benefits, insurance, property taxes and energy, due to inflation and other factors, which may not be offset in the future by increased room rates;
	●	labor strikes, disruptions or lock outs;
	●	dependence on demand from business and leisure travelers, which may fluctuate and is seasonal;
	●	increases in energy costs, cost of fuel, airline fares and other expenses related to travel, which may negatively affect traveling;
	●	terrorism, terrorism alerts and warnings, wars and other military actions, pandemics or other medical events or warnings which may result in decreases in business and leisure travel;
	●	natural disasters; and
	●	adverse effects of downturns and recessionary conditions in international, national and/or local economies and market conditions.

 

ENVIRONMENTAL MATTERS

 

In connection with the ownership of the Hotel, the Company is subject to various federal, state and local laws, ordinances and regulations relating to environmental protection. Under these laws, the current or previous owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on, under or in such property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances.

 

Environmental consultants retained by Justice and its lenders conducted updated Phase I environmental site assessments in fiscal year ended June 30, 2014 on the Hotel property. These Phase I assessments relied, in part, on Phase I environmental assessments prepared in connection with the Partnership’s first mortgage loan obtained in December 2013. Phase I assessments are designed to evaluate the potential for environmental contamination on properties based generally upon site inspections, facility personnel interviews, historical information, and certain publicly available databases; however, Phase I assessments will not necessarily reveal the existence or extent of all environmental conditions, liabilities or compliance concerns at the properties.

 

 

Although the Phase I assessments and other environmental reports we have reviewed disclose certain conditions on our property and the use of hazardous substances in operation and maintenance activities that could pose a risk of environmental contamination or liability, we are not aware of any environmental liability that we believe would have a material adverse effect on our business, financial position, results of operations or cash flows.

 

The Company believes that the Hotel is in compliance, in all material respects, with all federal, state, and local environmental ordinances and regulations regarding hazardous or toxic substances and other environmental matters, the violation of which could have a material adverse effect on the Company. The Company has not received written notice from any governmental authority of any material noncompliance, liability or claim relating to hazardous or toxic substances or other environmental matters in connection with any of its present properties.

 

EMPLOYEES

 

As of June 30, 2023, Portsmouth had two full-time employees. The employees of the Company are not part of any collective bargaining agreement, and the Company believes that its employee relations are satisfactory.

 

The hotel operations had 187 employees as of June 30, 2023. On February 3, 2017, Aimbridge assumed all labor union agreements and Justice provides all funding for all payroll and related costs. As of June 30, 2023, approximately 90% of those employees were represented by one of three labor unions, and their terms of employment were determined under various collective bargaining agreements (“CBAs”) to which Aimbridge was a party. CBA for Local 2 (Hotel and Restaurant Employees) expired on August 13, 2022 and a new MOU was signed June 26, 2023. CBA for Local 856 (International Brotherhood of Teamsters) expired on December 31, 2022 and a new agreement was signed on April 26, 2023. CBA for Local 39 (Stationary Engineers) will expire on July 31, 2024.

 

Negotiation of collective bargaining agreements, which includes not just terms and conditions of employment, but scope and coverage of employees, is a regular and expected course of business operations for the Company and Aimbridge. The Company expects and anticipates that the terms of conditions of CBAs will have an impact on wage and benefit costs, operating expenses, and certain hotel operations during the life of each CBA and incorporates these principles into its operating and budgetary practices.

 

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 public may read and copy any materials that we file with the Commission at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10:00 a.m. to 3:00 p.m. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. 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.

 

Item 1A. Risk Factors.

 

Adverse changes in the U.S. and global economies could negatively impact our financial performance.

 

Due to a number of factors affecting consumers, the outlook for the lodging industry remains uncertain. These factors have resulted at times in the past and could continue to result in the future in fewer customers visiting, or customers spending less, in San Francisco, as compared to prior periods. The macro-economic situation of a looming US/Global recession has seen business reducing or eliminating typical travel and group meetings in efforts to be conservative in uncertain financial times. Leisure travel and other leisure activities represent discretionary expenditures, and participation in such activities tends to decline during economic downturns, during which consumers generally have less disposable income. As a result, in those times customer demand for the luxury amenities and leisure activities that we offer may decline. Furthermore, during periods of economic contraction, revenues may decrease while some of our costs remain fixed or even increase, resulting in decreased earnings.

 

 

Weakened global economic conditions may adversely affect our industry, business and results of operations.

 

Our overall performance depends in part on worldwide economic conditions which could adversely affect the tourism industry. According to current economic news reports, the United States and other key international economies may be subject to a recession, characterized by falling demand for a variety of goods and services, restricted credit, going concern threats to financial institutions, major multinational companies and medium and small businesses, poor liquidity, declining asset values, reduced corporate profitability, and volatility in credit, equity and foreign exchange markets. These conditions affect discretionary and leisure spending and could adversely affect our customers’ ability or willingness to travel to destinations for leisure and cutback on discretionary business travel, which could adversely affect our operating results. In addition, in a weakened economy, companies that have competing properties may reduce room rates and other prices which could also reduce our average revenues and harm our operating results.

 

We operate a single property located in San Francisco and rely on the San Francisco market. Changes adversely impacting this market could have a material effect on our business, financial condition, results of operation, and fair market value of the Hotel.

 

Our business in San Francisco and the hospitality industry has a limited base of operations and substantially all of our revenues are currently generated by the Hotel in San Francisco, California. Accordingly, we are subject to greater risks than a more diversified hotel or resort operator and the profitability of our operations is linked to local economic conditions in San Francisco. The combination of a decline in the local economy of San Francisco, reliance on a single location and the significant investment associated with it may cause our operating results to fluctuate significantly and may adversely affect us and materially affect our total profitability.

 

We face intense local and increasingly national competition which could impact our operations and adversely affect our business and results of operations.

 

We operate in the highly competitive San Francisco hotel industry. The Hotel competes with other high-quality Northern California hotels and resorts. Many of these competitors seek to attract customers to their properties by providing, food and beverage outlets, retail stores and other related amenities, in addition to hotel accommodations. To the extent that we seek to enhance our revenue base by offering our own various amenities, we compete with the service offerings provided by these competitors.

 

Many of the competing properties have themes and attractions which draw a significant number of visitors and directly compete with our operations. Some of these properties are operated by subsidiaries or divisions of large public companies that may have greater name recognition and financial and marketing resources than we do and market to the same target demographic group as we do. Various competitors are expanding and renovating their existing facilities. We believe that competition in the San Francisco hotel and resort industry is based on certain property-specific factors, including overall atmosphere, range of amenities, price, location, technology infrastructure, entertainment attractions, theme and size. Any market perception that we do not excel with respect to such property-specific factors could adversely affect our ability to compete effectively. If we are unable to compete effectively, we could lose market share, which could adversely affect our business and results of operations.

 

The San Francisco hotel and resort industry are capital intensive; financing our renovations and future capital improvements could reduce our cash flow and adversely affect our financial performance.

 

The Hotel has an ongoing need for renovations and other capital improvements to remain competitive, including replacement, from time to time, of furniture, fixtures and equipment. We will also need to make capital expenditures to comply with applicable laws and regulations.

 

Renovations and other capital improvements of hotels require significant capital expenditures. In addition, renovations and capital improvements of hotels usually generate little or no cash flow until the project’s completion. We may not be able to fund such projects solely from cash provided from our operating activities. Consequently, we will rely upon the availability of debt or equity capital and reserve funds to fund renovations and capital improvements and our ability to carry them out will be limited if we cannot obtain satisfactory debt or equity financing, which will depend on, among other things, market conditions. No assurances can be made that we will be able to obtain additional equity or debt financing or that we will be able to obtain such financing on favorable terms.

 

Renovations and other capital improvements may give rise to the following additional risks, among others: construction cost overruns and delays; increased prices of materials due to tariffs; temporary closures of all or a portion of the Hotel to customers; disruption in service and room availability causing reduced demand, occupancy and rates; and possible environmental issues.

 

As a result, renovations and any other future capital improvement projects may increase our expenses, reduce our cash flows and our revenues. If capital expenditures exceed our expectations, this excess would have an adverse effect on our available cash.

 

 

We have substantial debt, and we may incur additional indebtedness, which may negatively affect our business and financial results.

 

We have substantial debt service obligations. Our substantial debt may negatively affect our business and operations in several ways, including: requiring us to use a substantial portion of our funds from operations to make required payments on principal and interest, which will reduce funds available for operations and capital expenditures, future business opportunities and other purposes; making us more vulnerable to economic and industry downturns and reducing our flexibility in responding to changing business and economic conditions; limiting our flexibility in planning for, or reacting to, changes in the business and the industry in which we operate; placing us at a competitive disadvantage compared to our competitors that have less debt; limiting our ability to borrow more money for operations, capital or to finance acquisitions in the future; and requiring us to dispose of assets, if needed, in order to make required payments of interest and principal.

 

The debt agreement that governs our outstanding indebtedness due January 2024 could result in our being required to repay these borrowings on their due date. If we are forced to refinance these borrowings on less favorable terms or are unable to refinance these borrowings, our financial condition and results of operations could be adversely affected.

 

Our business model involves high fixed costs, including property taxes and insurance costs, which we may be unable to adjust in a timely manner in response to a reduction in our revenues.

 

The costs associated with owning and operating the Hotel are significant. Some of these costs (such as property taxes and insurance costs) are fixed, meaning that such costs may not be altered in a timely manner in response to changes in demand for services. Failure to adjust our expenses may adversely affect our business and results of operations. Our real property taxes may increase as property tax rates change and as the values of properties are assessed and reassessed by tax authorities. Our real estate taxes do not depend on our revenues, and generally we could not reduce them other than by disposing of our real estate assets.

 

Insurance premiums have increased significantly in recent years, and continued escalation may result in our inability to obtain adequate insurance at acceptable premium rates. A continuation of this trend would appreciably increase the operating expenses of the Hotel. If we do not obtain adequate insurance, to the extent that any of the events not covered by an insurance policy materialize, our financial condition may be materially adversely affected.

 

In the future, our property may be subject to increases in real estate and other tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses, which could reduce our cash flow and adversely affect our financial performance. If our revenues decline and we are unable to reduce our expenses in a timely manner, our business and results of operations could be adversely affected.

 

Risk of declining market values in marketable securities.

 

The Company invests from time to time in marketable securities. As a result, the Company is exposed to market volatility in connection with these investments. The Company’s financial position and financial performance could be adversely affected by worsening market conditions or stagnant performance of such investments.

 

Illiquidity risk in nonmarketable securities.

 

Nonmarketable securities are, by definition, instruments that are not readily salable in the capital markets, and when sold are usually at a substantial discount. Thus, the holder is limited to return on investment from any income producing feature of the instrument, as any sale of such an instrument would be subject to a substantial discount. Thus, a holder may need to hold such instruments for long period of time and not be able to realize a return of their cash investment should there be a need to liquidate to obtain cash at any given time.

 

Litigation and legal proceedings could expose us to significant liabilities and thus negatively affect our financial results.

 

We are a party, from time to time, to various litigation claims and legal proceedings, government and regulatory inquiries and/or proceedings, including, but not limited to, intellectual property, premises liability and breach of contract claims. Material legal proceedings are described more fully in Note 15, Commitments and Contingencies, to our consolidated financial statements, included in Item 8 of this Annual Report on Form 10-K.

 

 

Litigation is inherently unpredictable and defending these proceedings can result in significant ongoing expenditures and the diversion of our management’s time and attention from the operation of our business, which could have a negative effect on our business operations. Our failure to successfully defend or settle any litigation or legal proceedings could result in liabilities that, to the extent not covered by our insurance, could have a material adverse effect on our financial condition, revenue and profitability.

 

The threat of terrorism could adversely affect the number of customer visits to the Hotel.

 

The threat of terrorism has caused, and may in the future cause, a significant decrease in customer visits to San Francisco due to disruptions in commercial and leisure travel patterns and concerns about travel safety. We cannot predict the extent to which disruptions in air or other forms of travel as a result of any further terrorist act, outbreak of hostilities or escalation of war would adversely affect our financial condition, results of operations or cash flows. The possibility of future attacks may hamper business and leisure travel patterns and, accordingly, the performance of our business and our operations.

 

We depend in part, on third party management companies for the future success of our business and the loss of one or more of their key personnel could have an adverse effect on our ability to manage our business and operate successfully and competitively or could be negatively perceived in the capital markets.

 

The Hotel is managed by Aimbridge. Their ability to manage the Hotel and to operate successfully and competitively is dependent, in part, upon the efforts and continued service of their managers. The departure of key personnel of current or future management companies could have an adverse effect on our business and our ability to operate successfully and competitively, and it could be difficult to find replacements for these key personnel, as competition for such personnel is intense.

 

Seasonality and other related factors such as weather can be expected to cause quarterly fluctuations in revenue at the Hotel.

 

The hotel and resort industry are seasonal in nature. This seasonality can tend to cause quarterly fluctuations in revenues at the Hotel. Our quarterly earnings may also be adversely affected by other related factors outside our control, including weather conditions and poor economic conditions. As a result, we may have to enter into short-term borrowings in certain quarters in order to offset these quarterly fluctuations in our revenues.

 

The hotel industry is heavily regulated and failure to comply with extensive regulatory requirements may result in an adverse effect on our business.

 

The hotel industry is subject to extensive regulation and the Hotel must maintain its licenses and pay taxes and fees to continue operations. Our property is subject to numerous laws, including those relating to the preparation and sale of food and beverages, including alcohol. We are also subject to laws governing our relationship with our employees in such areas as minimum wage and maximum working hours, overtime, working conditions, hiring and firing employees and work permits. Also, our ability to remodel, refurbish or add to our property may be dependent upon our obtaining necessary building permits from local authorities. The failure to obtain any of these permits could adversely affect our ability to increase revenues and net income through capital improvements of our property. In addition, we are subject to the numerous rules and regulations relating to state and federal taxation. Compliance with these rules and regulations requires significant management attention. Furthermore, compliance costs associated with such laws, regulations and licenses are significant. Any change in the laws, regulations or licenses applicable to our business or a violation of any current or future laws or regulations applicable to our business or gaming license could require us to make substantial expenditures or could otherwise negatively affect our gaming operations. Any failure to comply with all such rules and regulations could subject us to fines or audits by the applicable taxation authority.

 

Violations of laws could result in, among other things, disciplinary action. If we fail to comply with regulatory requirements, this may result in an adverse effect on our business.

 

 

Uninsured and underinsured losses could adversely affect our financial condition and results of operations.

 

There are certain types of losses, generally of a catastrophic nature, such as earthquakes and floods or terrorist acts, which may be uninsurable or not economically insurable, or may be subject to insurance coverage limitations, such as large deductibles or co-payments. We will use our discretion in determining amounts, coverage limits, deductibility provisions of insurance and the appropriateness of self-insuring, with a view to maintaining appropriate insurance coverage on our investments at a reasonable cost and on suitable terms. Uninsured and underinsured losses could harm our financial condition and results of operations. We could incur liabilities resulting from loss or injury to the Hotel or to persons at the Hotel. Claims, whether or not they have merit, could harm the reputation of the Hotel or cause us to incur expenses to the extent of insurance deductibles or losses in excess of policy limitations, which could harm our results of operations.

 

In the event of a catastrophic loss, our insurance coverage may not be sufficient to cover the full current market value or replacement cost of our lost investment. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in the Hotel, as well as the anticipated future revenue from the property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the Hotel. In the event of a significant loss, our deductible may be high, and we may be required to pay for all such repairs and, as a consequence, it could materially adversely affect our financial condition. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds to replace or renovate the Hotel after it has been damaged or destroyed. Under those circumstances, the insurance proceeds we receive might be inadequate to restore our economic position on the damaged or destroyed property.

 

It has generally become more difficult and expensive to obtain property and casualty insurance, including coverage for terrorism. When our current insurance policies expire, we may encounter difficulty in obtaining or renewing property or casualty insurance on our property at the same levels of coverage and under similar terms. Such insurance may be more limited and for some catastrophic risks (for example, earthquake, flood and terrorism) may not be generally available at current levels. Even if we are able to renew our policies or to obtain new policies at levels and with limitations consistent with our current policies, we cannot be sure that we will be able to obtain such insurance at premium rates that are commercially reasonable. If we were unable to obtain adequate insurance on the Hotel for certain risks, it could cause us to be in default under specific covenants on certain of our indebtedness or other contractual commitments that require us to maintain adequate insurance on the Hotel to protect against the risk of loss. If this were to occur, or if we were unable to obtain adequate insurance and the Hotel experienced damage which would otherwise have been covered by insurance, it could materially adversely affect our financial condition and the operations of the Hotel.

 

In addition, insurance coverage for the Hotel and for casualty losses does not customarily cover damages that are characterized as punitive or similar damages. As a result, any claims or legal proceedings, or settlement of any such claims or legal proceedings that result in damages that are characterized as punitive or similar damages may not be covered by our insurance. If these types of damages are substantial, our financial resources may be adversely affected.

 

You may lose all or part of your investment.

 

There is no assurance that the Company’s initiatives to improve its profitability or liquidity and financial position will be successful.

 

The price of the Company’s common stock may fluctuate significantly, which could negatively affect the Company and holders of its common stock.

 

The market price of the Company’s common stock may fluctuate significantly from time to time as a result of many factors, including: investors’ perceptions of the Company and its prospects; investors’ perceptions of the Company’s and/or the industry’s risk and return characteristics relative to other investment alternatives; difficulties between actual financial and operating results and those expected by investors and analysts; changes in our capital structure; trading volume fluctuations; actual or anticipated fluctuations in quarterly financial and operational results; volatility in the equity securities market; and sales, or anticipated sales, of large blocks of the Company’s common stock.

 

 

The concentrated beneficial ownership of our common stock and the ability it affords to control our business may limit or eliminate other shareholders’ ability to influence corporate affairs.

 

As of June 30, 2023, InterGroup owns 75.7% of the Company’s outstanding common stock. Because of this concentrated stock ownership, the Company’s largest shareholders will be able to significantly influence the election of the Company’s board of directors and all other decisions on all matters requiring shareholder approval. As a result, the ability of other shareholders to determine the management and policies of the Company is significantly limited. The interests of these shareholders may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of officers and directors and other business decisions. This level of control may also have an adverse impact on the market value of our shares because our largest shareholders may institute or undertake transactions, policies or programs that may result in losses, may not take any steps to increase our visibility in the financial community and/or may sell enough shares to significantly decrease our price per share.

 

Item 1B. Unresolved Staff Comments.

 

None.

 

Item 2. Properties.

 

SAN FRANCISCO HOTEL PROPERTY

 

The Hotel is owned by Portsmouth through its wholly owned subsidiary, Justice Operating Company, LLC. The Hotel is centrally located in the Financial District in San Francisco, one block from the Transamerica Pyramid. The Embarcadero Center is within walking distance and North Beach is two blocks away. Chinatown is directly across the bridge that runs from the Hotel to Portsmouth Square Park. The Hotel is a 31-story (including parking garage), steel and concrete, A-frame building, built in 1970. The Hotel has 544 well-appointed guest rooms and luxury suites situated on 22 floors. The Hotel has a restaurant, a lounge, and a private dining room on 3,700 square feet; additionally, there are two kitchens to service the restaurant and banquets and a fully equipped gym. 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 room space, including the grand ballroom. Other features of the Hotel include a 5-level underground parking garage and pedestrian bridge across Kearny Street connecting the Hotel and the CCC with Portsmouth Square Park in Chinatown.

 

As required by its senior lender, the Company will continue to make minimum payments into its furniture, fixtures, and equipment (“FF&E”) escrow account held by its senior lender of the greater of 4% of annual revenues or a minimum of $1,952,000 per annum. In the opinion of management, the Hotel is adequately covered by insurance.

 

HOTEL FINANCINGS

 

On December 18, 2013: (i) Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); and (ii) Justice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”). The Company is the sole member of Mezzanine, and Mezzanine is the sole member of Operating.

 

The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan. The proceeds of the Loan Agreements were used to fund the redemption of limited partnership interests and the pay-off of the prior mortgage.

 

The Mortgage Loan is secured by the Company’s principal asset, the Hotel. The Mortgage Loan bears an interest rate of 5.275% per annum and matures on January 1, 2024. The term of the loan is ten years with interest only due in the first three years and principal and interest payments to be made during the remaining seven years of the loan based on a thirty-year amortization schedule. The Mortgage Loan also requires payments for impounds related to property tax, insurance and FF&E reserves. As additional security for the Mortgage Loan, there is a limited guaranty (“Mortgage Guaranty”) executed by the Company in favor of the Mortgage Lender.

 

 

The Mezzanine Loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The Mezzanine Loan had an interest rate of 9.75% per annum and a maturity date of January 1, 2024. Interest only payments were due monthly. On July 31, 2019, Mezzanine refinanced the Mezzanine Loan by entering into a new mezzanine loan agreement (“New Mezzanine Loan Agreement”) with Cred Reit Holdco LLC in the amount of $20,000,000. The prior Mezzanine Loan was paid off. Interest rate on the new mezzanine loan is 7.25% and the loan matures on January 1, 2024. Interest only payments are due monthly. As additional security for the new mezzanine loan, there is a limited guaranty executed by the Company in favor of Cred Reit Holdco LLC (the “Mezzanine Guaranty” and, together with the Mortgage Guaranty, the “Guaranties”).

 

The Guaranties are limited to what are commonly referred to as “bad boy” acts, including: (i) fraud or intentional misrepresentations; (ii) gross negligence or willful misconduct; (iii) misapplication or misappropriation of rents, security deposits, insurance, or condemnation proceeds; and (iv) failure to pay taxes or insurance. The Guaranties are full recourse guaranties under identified circumstances, including failure to maintain “single purpose” status which is a factor in a consolidation of Operating or Mezzanine in a bankruptcy of another person, transfer, or encumbrance of the Property in violation of the applicable loan documents, Operating or Mezzanine incurring debts that are not permitted, and the Property becoming subject to a bankruptcy proceeding. Pursuant to the Guaranties, the Partnership was required to maintain a certain minimum net worth and liquidity. Effective as of May 12, 2017, InterGroup agreed to become an additional guarantor under the limited guaranty and an additional indemnitor under the environmental indemnity for the $97,000,000 mortgage loan and the $20,000,000 mezzanine loan. Pursuant to the agreement, InterGroup is required to maintain a certain net worth and liquidity. As of June 30, 2023 and 2022, InterGroup is in compliance with both requirements. Justice Operating Company, LLC is not meeting certain of its loan covenants such as the Debt Service Coverage Ratio (“DSCR”) which would trigger the creation of a lockbox and cash sweep by the Lender for all cash collected by the Hotel, and under certain terms, would allow the Lender to request Operating to replace its hotel management company. The DSCR for Operating had been below 1.00 from third quarter of fiscal year 2023 to fourth quarter of fiscal year 2023 while it is required to maintain a DSCR of at least 1.10 to 1.00 for two consecutive quarters. However, such lockbox has been created and utilized from the loan inception and will be in place up to loan maturity regardless of the DSCR. Justice has not missed any of its debt service payments and does not anticipate missing any debt obligations up to their maturity.

 

Each of the Loan Agreements contains customary representations and warranties, events of default, reporting requirements, affirmative covenants and negative covenants, which impose restrictions on, among other things, organizational changes of the respective borrower, operations of the Property, agreements with affiliates and third parties. Each of the Loan Agreements also provides for mandatory prepayments under certain circumstances (including casualty or condemnation events) and voluntary prepayments, subject to satisfaction of prescribed conditions set forth in the Loan Agreements. The Company is working with various potential lenders to refinance its current senior mortgage and mezzanine debt which will mature on January 1, 2024.

 

On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. The loan was extended to July 31, 2023. On December 16, 2020, the Partnership and InterGroup entered into a loan modification agreement which increased the Partnership’s borrowing from InterGroup as needed up to $10,000,000. Upon the dissolution of the Partnership in December 2021, Portsmouth assumed the Partnership’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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, net of loan amortization costs of zero, respectively. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to InterGroup.

 

As a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020, additional avenues of relief may be available to workers and families through enhanced unemployment insurance provisions and to small businesses through programs administered by the Small Business Administration (“SBA”). The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs.On February 3, 2021, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of $2,000,000 from the SBA Loan. As of June 30, 2021, Justice used all proceeds from the SBA Loan primarily for payroll costs. The SBA Loan was scheduled to mature on February 3, 2026, had a 1.00% interest rate, and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On November 19, 2021, the SBA Loan was forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the consolidated statement of operations for the fiscal year ending June 30, 2022.

 

Item 3. Legal Proceedings.

 

The Company may be subject to legal proceedings, claims, and litigation arising in the ordinary course of business. The Company will defend itself vigorously against any such claims. Management does not believe that the impact of such matters will have a material effect on the financial conditions or result of operations when resolved.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

 

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 traded on the OTC Market Inc.’s Pink tier under the symbol PRSI. As of June 30, 2023, the number of holders of record of the Company’s Common Stock was approximately 126. Such number of owners was determined from the Company’s shareholders records and does not include beneficial owners of the Company’s Common Stock whose shares are held in the names of various brokers, clearing agencies or other nominees.

 

DIVIDENDS

 

It is expected that the Company will not consider a return to a regular dividend policy until such time that the Hotel cash flows, distributions and other economic factors warrant such consideration. The Company will continue to review and modify its dividend policy as needed to meet such strategic and investment objectives as may be determined by the Board of Directors.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

Portsmouth has no securities authorized for issuance under equity compensation plans.

 

PURCHASES OF EQUITY SECURITIES

 

Portsmouth did not repurchase any of its own securities during the fourth quarter of its fiscal year ending June 30, 2023 and does not have any publicly announced repurchase program.

 

Item 6. Selected Financial Data.

 

Not required for smaller reporting companies.

 

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, related notes included thereto and Item 1A., “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K. For the discussion and analysis of our 2022 financial condition and results of operations compared to 2023, refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended June 30, 2023.

 

NEGATIVE EFFECTS OF CIVIL AUTHORITY ACTIONS ON OUR BUSINESS

 

There are several factors at play that are having a negative impact on our business and the entire hospitality community in San Francisco. The constant “doom loop” of negative headlines picked up in main stream media, particularly outlets like Fox News that have made San Francisco their punching back and find ways to amplify any negative story line in the city. The macro economic situation of a looming US/Global recession have seen business reducing or eliminating typical travel and group meetings in efforts to be conservative in uncertain financial times. The micro economic situation specific to San Francisco and Bay Area is many of the world’s largest tech companies have taken even more drastic cost cutting measures laying off hundreds of thousands of workers in the area and have reduced business travel, group meetings and even major citywides to cancel like Meta, Red Hat and VMWare. The ongoing conditions of the streets in regards to cleanliness, safety and homelessness problems have driven many other citywide customers to rethink hosting meetings in San Francisco and have relocated to other major markets like Las Vegas, Orlando and San Diego. Even factors like the recent culture wars that are dividing much of the country are impacting San Francisco harder than other areas as the city have long been known as the LGBTQ capital of the US, and made recent headlines after Mayor London Breed’s office named the first ever Drag Laureate to an 18 month term as ambassador.

 

As a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020, additional avenues of relief may be available to workers and families through enhanced unemployment insurance provisions and to small businesses through programs administered by the Small Business Administration (“SBA”). The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs.

 

On February 3, 2021, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of $2,000,000 from the Second SBA Loan. As of June 30, 2021, Justice used all proceeds from the SBA Loan primarily for payroll costs. The SBA Loan was scheduled to mature on February 3, 2026, had a 1.00% interest rate, and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On November 19, 2021, the SBA Loan was forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the consolidated statement of operations for the fiscal year ended June 30, 2022.

 

 

RESULTS OF OPERATIONS

 

The Company’s principal source of revenue continues to be derived from its ownership in Justice Operating Company, LLC (“Operating”) inclusive of hotel room revenue, food and beverage revenue, garage revenue, and revenue from other operating departments. Operating owns the Hotel and related facilities, including a five-level underground parking garage. The financial statements of Operating have been consolidated with those of the Company.

 

Fiscal Year Ended June 30, 2023 Compared to Fiscal Year Ended June 30, 2022

 

The Company had net loss of $13,203,000 for the year ended June 30, 2023 compared to net loss of $6,565,000 for the year ended June 30, 2022. Increase in Hotel revenue is offset by increased operating expenses, reduced gain from debt extinguishment, and loss on marketable securities.

 

The Company had net loss from Hotel operations of $3,337,000 for the year ended June 30, 2023 compared to net loss of $4,050,000 for the year ended June 30, 2022. The change was primarily attributable to the $10,493,000 increase in Hotel revenue, offset by $7,006,000 increase in operating expenses and the $2,000,000 gain on forgiveness of debt during period ended June 30, 2022.

 

The following table sets forth a more detailed presentation of Hotel operations for the years ended June 30, 2023 and 2022.

 

For the year ended June 30,		2023				2022
Hotel revenues:
Hotel rooms		$	35,684,000			$	26,599,000
Food and beverage			2,625,000				1,471,000
Garage			2,790,000				3,112,000
Other operating departments			928,000				352,000
Total hotel revenues			42,027,000				31,534,000
Operating expenses excluding depreciation and amortization			(34,457,000	)			(27,451,000	)
Operating income before interest, depreciation, and amortization and gain on forgiveness of debt			7,570,000				4,083,000
Gain on forgiveness of debt			-				2,000,000
Interest expense - mortgages			(6,467,000	)			(6,549,000	)
Interest expense – related party			(1,725,000	)			(1,375,000	)
Depreciation and amortization expense			(2,715,000	)			(2,209,000	)
Net loss from Hotel operations		$	(3,337,000	)		$	(4,050,000	)

 

For the year ended June 30, 2023, the Hotel had operating income of $7,570,000 before non-recurring charges, interest, depreciation, and amortization on total operating revenues of $42,027,000. The year over year increase in all areas, except garage revenues, are result of recovery from the business interruption attributable to a variety of responses by federal, state, and local civil authority to the COVID-19 outbreak since March 2020. The following table sets forth the monthly average occupancy percentage of the Hotel for the fiscal years ended June 30, 2023 and 2022.

 

Month			Jul				Aug				Sep				Oct				Nov				Dec				Jan				Feb				Mar				Apr				May				Jun				Fiscal Year
Year			2022				2022				2022				2022				2022				2022				2023				2023				2023				2023				2023				2023				2022 - 2023
Average Occupancy %				93	%			94	%			95	%			89	%			82	%			77	%			76	%			77	%			81	%			65	%			80	%			83	%			83	%

 

Year			2021				2021				2021				2021				2021				2021				2022				2022				2022				2022				2022				2022				2021 - 2022
Average Occupancy %				82	%			77	%			76	%			79	%			72	%			74	%			68	%			74	%			81	%			87	%			90	%			95	%			80	%

 

 

Beginning in November 2022, the occupancy of our hotel has been reduced by approximately 13% every month to reflect the “out-of-order” rooms that are being renovated at any given time. The guestroom renovation is scheduled to be completed by the end of March 31, 2024. Additionally, 14 guest rooms will be added to inventory as a result of renovating such rooms which had been repurposed for administrative offices in past years.

 

Total operating expenses increased by $7,006,000 due to increase in rooms, food and beverage, salaries and wages, utilities, credit card commissions, and franchise fees.

 

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, 2023 and 2022.

 

For the Year Ended June 30,			Average Daily Rate				Average Occupancy %				RevPAR
2023			$	217				83	%		$	180
2022			$	168				80	%		$	134

 

The Hotel’s revenues increased by 33% year over year. Average daily rate increased by $49, average occupancy increased 3%, and RevPAR increased by $46 for the twelve months ended June 30, 2023 compared to the twelve months ended June 30, 2022. As previously mentioned, our occupancy is lowered by approximately 13% beginning November 2022 when we began to take three levels out of service in order to complete our guestroom renovations. Had the Hotel been able to sell the additional 13% of rooms that were out of order, the RevPar would have been approximately $192.

 

After taking advantage of softer demand to refresh all public spaces and meeting rooms, the Hotel is now deep into a renovation of the guest rooms and suites.  The Hotel started it’s full renovation of all guest rooms and suites mid-November 2022 and is over half way complete as of fiscal year end 2023.  This includes new carpet, vinyl wall covering, headboards, end tables, wall sconces, art, soft seating and refinish of existing desks and doors.  The Hotel removed the existing armoire and has built a closet to replace it.  After this project is completed early calendar year 2024, the Hotel will add 14 additional guest rooms bringing back the old Justice offices, spa, and accounting offices to their original purpose.  This will all be funded from the Hotel’s cash from operations through the Hotel’s furniture, fixture, and equipment reserve account with our senior lender.

 

The Company had a net gain on marketable securities of $51,000 for the year ended June 30, 2023 compared to a net loss on marketable securities of $1,141,000 for the year ended June 30, 2022. For the year ended June 30, 2022, the Company had $2,056,000 net loss related to the Company’s investment in the common stock of Comstock Mining Inc. (“Comstock” - NYSE MKT: LODE). For the year ended June 30, 2023, the Company had a net realized loss of $137,000 and a net unrealized gain of $188,000. For the year ended June 30, 2022, the Company had a net realized loss of $2,489,000 and a net unrealized gain of $1,348,000. Gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company’s results of operations. However, the amount of gain or loss on marketable securities for any given period may have no predictive value and variations in amount from period to period may have no analytical value. For a more detailed description of the composition of the Company’s marketable securities see the Marketable Securities section below.

 

The Company had no other investments at June 30, 2023. During the year ended June 30, 2022 the Company performed an impairment analysis of its other investments and determined its investments had other than temporary impairments and recorded impairment losses of $20,000.

 

The Company consolidates Justice (Hotel) for financial reporting purposes and is taxed on its Hotel operations. The income tax benefit was recorded for the year ended June 30, 2022 for the pre-tax loss. However for the year ended June 30, 2023 an expense was booked on the pre-tax loss due to the set up of a valuation allowance on all the Companies deferred tax assets.

 

 

MARKETABLE SECURITIES AND OTHER INVESTMENTS

 

As of June 30, 2023 and 2022, the Company had investments in marketable equity securities of $359,000 and $541,000, respectively. The following table shows the composition of the Company’s marketable securities portfolio by selected industry groups:

 

						% of Total
As of June 30, 2023						Investment
Industry Group		Fair Value				Securities
REITs and real estate companies			350,000				97.5	%
Basic materials			9,000				2.5	%
		$	359,000				100.0	%

 

						% of Total
As of June 30, 2022						Investment
Industry Group		Fair Value				Securities
Communication services		$	355,000				65.6	%
REITs and real estate companies			162,000				29.9	%
Basic materials			18,000				3.3	%
Utilities			5,000				0.9	%
Technology			1,000				0.3	%
		$	541,000				100.0	%

 

The following table shows the net gain or loss on the Company’s marketable securities and the associated margin interest and trading expenses for the respective years.

 

For the years ended June 30,		2023				2022
Net gain (loss) on marketable securities		$	51,000			$	(1,141,000	)
Impairment loss on other investments			-				(20,000	)
Dividend and interest income			36,000				121,000
Margin interest expense			(1,000	)			(41,000	)
Trading expenses			(247,000	)			(162,000	)
Net loss from marketable securities		$	(161,000	)		$	(1,243,000	)

 

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL SOURCES

 

The Company had cash, cash equivalents and restricted cash of $5,206,000 and $8,888,000 as of June 30, 2023 and 2022, respectively. The Company had marketable securities, net of margin due to securities brokers, of $359,000 and $411,000 as of June 30, 2023 and 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, 2025. 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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. During the fiscal year ending June 30, 2023 and 2022, InterGroup advanced to the Hotel $1,500,000 and $7,550,000, respectively, bringing the total amount due to InterGroup to $15,700,000 and $14,200,000 as of June 30, 2023 and 2022, respectively. In July 2023, Portsmouth and InterGroup entered into a new loan modification agreement which increased Portsmouth’s borrowing from InterGroup up to $20,000,000. 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.

 

 

On April 9, 2020, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). On February 3, 2021, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of $2,000,000 from the SBA Loan. As of June 30, 2021, Justice used all proceeds from the SBA Loan primarily for payroll costs. The SBA Loan was scheduled to mature on February 3, 2026, had a 1.00% interest rate, and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On November 19, 2021, the SBA Loan was forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the consolidated statement of operations for the fiscal year ending June 30, 2022.

 

Our 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 of the Hotel.

 

Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities and capital improvements of the Hotel. We will continue to finance our business activities primarily with existing cash, including from the activities described above, and cash generated from our operations. The objectives of our cash management policy are to maintain existing leverage levels and the availability of liquidity, while minimizing operational costs. We believe that our cash on hand, along with other potential sources of liquidity that management may be able to obtain, will be sufficient to fund our working capital needs. As well as our capital lease and debt obligations, even if current levels of occupancy and revenue per occupied room (“RevPAR”, calculated by multiplying the hotel’s average daily room rate by its occupancy percentage) were to persist for at least the next twelve months and beyond. However, there can be no guarantee that management will be successful with its plan.

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As discussed in Note 9 – Mortgage Notes Payable, as of June 30, 2023, the outstanding balance consists of a senior mortgage loan and mezzanine loan totaling $107,117,000. Both loans mature on January 1, 2024, in addition, the Company has recurring losses and has an accumulated deficit of 105,727,000.

 

Due to these factors and the Company’s ability to successfully refinance the debt on favorable terms in the current lending environment gives rise to substantial doubt about the Company’s ability to continue as a going concern for one year after the financial statement issuance date.

 

The Company is exploring the possibility of refinancing its senior mortgage and mezzanine debt with potential lenders. Alternatively, the Company is also exploring the possibility of a loan modification or extension to the existing debt with the current lenders, however, the Company may be unable to access further financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. During 2021 and first part of calendar 2022, we took advantage of the slow periods to make certain capital improvements including complete refinishing of all guest room furniture, resurfacing half of the hotel bathtubs that needed repair, refreshed meeting space and lobby paint and vinyl, replaced all bed frames and socks, and completed the carpet and wall covering corridor installation. In November 2022, we began our guestroom renovation and had completed approximately 200 guestrooms as of June 30, 2023. Hotel improvements are ongoing to remain competitive and we anticipate completing the guestroom renovations by the end March 2024. Once the Company completes its full renovation, management anticipates its high occupancy to continue and its average daily rates to increase as it completes renovation up to the point of generating a positive cash flows.

 

The financial statements do not include any adjustments to the carrying amounts of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

 

MATERIAL CONTRACTUAL OBLIGATIONS

 

The following table provides a summary of the Company’s material financial obligations which also includes interest.

 

		Total				Year 2024				Year 2025				Year 2026				Year 2027				Year 2028				Thereafter
Mortgage notes payable		$	107,240,000			$	107,240,000			$	-			$	-			$	-			$	-			$	-
Related party notes payable			15,700,000				-				15,700,000
Other notes payable			2,954,000				567,000				567,000				567,000				463,000				317,000				473,000
Interest			3,243,000				3,243,000				-				-				-				-				-
Total		$	129,137,000			$	111,050,000			$	16,267,000			$	567,000			$	463,000			$	317,000			$	473,000

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company has no material off balance sheet arrangements.

 

 

IMPACT OF INFLATION

 

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

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Critical accounting policies are those that are most significant to the portrayal of our financial position and results of operations and require judgments by management in order to make estimates about the effect of matters that are inherently uncertain. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an ongoing basis, including those related to the consolidation of our subsidiaries, to our revenues, allowances for bad debts, accruals, asset impairments, other investments, income taxes and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.

 

INCOME TAXES

 

Judgment is required in addressing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns (e.g., realization of deferred tax assets, changes in tax laws, or interpretations thereof). In addition, we are subject to examination of our income tax returns by the IRS and other tax authorities. A change in the assessment of the outcomes of such matters could materially impact our consolidated financial statements. We evaluate tax positions taken or expected to be taken on a tax return to determine whether they are more likely than not of being sustained, assuming that the tax reporting positions will be examined by taxing authorities with full knowledge of all relevant information, prior to recording the related tax benefit in our consolidated financial statements. If a position does not meet the more likely than not standard, the benefit cannot be recognized. Assumptions, judgment, and the use of estimates are required in determining if the “more likely than not” standard has been met when developing the provision for income taxes. A change in the assessment of the “more likely than not” standard with respect to a position could materially impact our consolidated financial statements.

 

DEFERRED INCOME TAXES – VALUATION ALLOWANCE

 

We assess the realizability of our deferred tax assets quarterly and recognize a valuation allowance when it is more likely than not that some or all of our deferred tax assets are not realizable. This assessment is completed by tax jurisdiction and relies on the weight of both positive and negative evidence available, with significant weight placed on recent financial results. Cumulative pre-tax losses for the three-year period are considered significant objective negative evidence that some or all of our deferred tax assets may not be realizable. Cumulative reported pre-tax income is considered objectively verifiable positive evidence of our ability to generate positive pre-tax income in the future. In accordance with GAAP, when there is a recent history of pre-tax losses, there is little or no weight placed on forecasts for purposes of assessing the recoverability of our deferred tax assets. When necessary, we use systematic and logical methods to estimate when deferred tax liabilities will reverse and generate taxable income and when deferred tax assets will reverse and generate tax deductions. Assumptions, judgment, and the use of estimates are required when scheduling the reversal of deferred tax assets and liabilities, and the exercise is inherently complex and subjective. However, significant judgment will be required to determine the timing and amount of any reversal of the valuation allowance in future periods.

 

 

HOTEL ASSETS AND DEFINITE-LIVED INTANGIBLE ASSETS

 

We evaluate property and equipment, and definite-lived intangible assets for impairment quarterly, and when events or circumstances indicate the carrying value may not be recoverable, we evaluate the net book value of the assets by comparing to the projected undiscounted cash flows of the assets. We use judgment to determine whether indications of impairment exist and consider our knowledge of the hospitality industry, historical experience, location of the property, market conditions, and property-specific information available at the time of the assessment. The results of our analysis could vary from period to period depending on how our judgment is applied and the facts and circumstances available at the time of the analysis. When an indicator of impairment exists, judgment is also required in determining the assumptions and estimates to use within the recoverability analysis and when calculating the fair value of the asset or asset group, if applicable. Changes in economic and operating conditions impacting the judgments used could result in impairments to our long-lived assets in future periods. Historically, changes in estimates used in the property and equipment and definite-lived intangible assets impairment assessment process have not resulted in material impairment charges in subsequent periods as a result of changes made to those estimates. There were no indicators of impairment on its hotel investments or intangible assets and accordingly no impairment losses recorded for the years ended June 30, 2023 and 2022.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

 

Not required for smaller reporting companies.

 

Item 8. Financial Statements and Supplementary Data.

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		PAGE
Report of Independent Registered Public Accounting Firm		22
Consolidated Balance Sheets – As of June 30, 2023 and 2022		23
Consolidated Statements of Operations – For years ended June 30, 2023 and 2022		24
Consolidated Statements of Shareholders’ Deficit – For years ended June 30, 2023 and 2022		25
Consolidated Statements of Cash Flows – For years ended June 30, 2023 and 2022		26
Notes to the Consolidated Financial Statements		27

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders,

Portsmouth Square, Inc.:

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Portsmouth Square, Inc. and its subsidiaries (the “Company”) as of June 30, 2023 and 2022, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for the years 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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 1, the outstanding balance as of June 30, 2023 of the mortgage notes payable consists of a senior mortgage loan and mezzanine loan totaling $107,117,000. Both loans mature on January 1, 2024 In addition, the Company has recurring losses and has an accumulated deficit of $105,727,000. Due to these factors and the Company’s ability to successfully refinance the debt on favorable terms in the current lending environment gives rise to substantial doubt about the Company’s ability to continue as a going concern for one year after the financial statement issuance date. Management’s plans in regard to this matter are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

 

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 audits. 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 audits 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

 

Description of the Matters: Deferred Tax Asset Valuation Allowance

 

As discussed in Note 12 to the consolidated financial statements, it was determined that it is more likely than not that the deferred tax assets at June 30, 2023 will not be realized and thus a full valuation allowance of $33,784,000 has been recorded.

 

We identified the deferred tax asset valuation allowance as a critical audit matter due to the uncertainty, subjectivity, estimates and judgments required by management when forecasting future profitability and determining whether or not it is likely that the deferred tax assets will be realized.

 

How We Addressed the Matters in Our Audit

 

To test the Company’s conclusions about their deferred tax valuation allowance, we obtained an analysis about their plans and reviewed all the positive and negative conditions. In addition to considering the impact of any subsequent events, we received the Company’s five-year income projection. We examined the forecast for reasonableness in addition to reviewing management’s plans and considered whether it is likely that the Company’s projected future profitability will allow them to realize their current deferred tax assets.

 

/s/ WithumSmith+Brown, PC

 

We have served as the Company’s auditor since 2022.

 

East Brunswick, NJ

October 13, 2023

 

PCAOB ID Number 100

 

 

PORTSMOUTH SQUARE, INC.

CONSOLIDATED BALANCE SHEETS

 

As of		June 30, 2023				June 30, 2022
ASSETS
Investment in hotel, net		$	34,381,000			$	31,230,000
Investment in marketable securities			359,000				541,000
Cash and cash equivalents			2,295,000				2,662,000
Restricted cash			2,911,000				6,226,000
Accounts receivable - hotel, net			419,000				377,000
Other assets			735,000				852,000
Deferred tax assets, net			-				7,911,000
Total assets		$	41,100,000			$	49,799,000
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Liabilities:
Accounts payable and other liabilities - Hotel		$	11,615,000			$	8,307,000
Accounts payable and other liabilities			66,000				235,000
Accounts payable to related party			7,283,000				4,908,000
Due to securities broker			-				130,000
Related party notes payable			15,700,000				14,200,000
Other notes payable			2,954,000				3,521,000
Finance leases			-				183,000
Mortgage notes payable - Hotel, net			107,117,000				108,747,000
Total liabilities			144,735,000				140,231,000
Commitments and Contingencies - Note 15			-				-
Shareholders’ deficit:
Common stock, no par value: Authorized shares - 750,000; 734,187 shares issued and outstanding as of June 30, 2023 and 2022, respectively			2,092,000				2,092,000
Accumulated deficit			(105,727,000	)			(92,524,000	)
Total shareholders’ deficit			(103,635,000	)			(90,432,000	)
Total liabilities and shareholders’ deficit		$	41,100,000			$	49,799,000

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

PORTSMOUTH SQUARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

For the years ended June 30,		2023				2022
Revenue - Hotel		$	42,027,000			$	31,534,000
Costs and operating expenses
Hotel operating expenses			(34,457,000	)			(27,451,000	)
Hotel depreciation and amortization expense			(2,715,000	)			(2,209,000	)
General and administrative expense			(1,793,000	)			(1,130,000	)
Total costs and operating expenses			(38,965,000	)			(30,790,000	)
Income from operations			3,062,000				744,000
Other income (expense)
Interest expense - mortgage			(6,467,000	)			(6,549,000	)
Interest expense - related party			(1,725,000	)			(1,375,000	)
Gain on forgiveness of debt			-				2,000,000
Net realized loss on marketable securities			(137,000	)			(433,000	)
Net realized loss on marketable securities - Comstock			-				(2,056,000	)
Net unrealized gain on marketable securities			188,000				1,348,000
Impairment loss on other investments			-				(20,000	)
Dividend and interest income			36,000				121,000
Trading and margin interest expense			(248,000	)			(203,000	)
Total other expense, net			(8,353,000	)			(7,167,000	)
Loss before income taxes			(5,291,000	)			(6,423,000	)
Income tax expense (benefit)			(7,912,000	)			(142,000	)
Net loss		$	(13,203,000	)		$	(6,565,000	)
Basic and diluted net loss per share		$	(17.98	)		$	(8.94	)
Weighted average number of common shares outstanding - basic and diluted			734,187				734,187

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

PORTSMOUTH SQUARE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

 

		Shares				Amount				Deficit				Deficit				Interest				Deficit
														Total
														Portsmouth								Total
		Common Stock								Accumulated				Shareholders’				Noncontrolling				Shareholders’
		Shares				Amount				Deficit				Deficit				Interest				Deficit
Balance at July 1, 2021			734,187			$	2,092,000			$	(84,960,000	)		$	(82,868,000	)		$	(655,000	)		$	(83,523,000	)
Net loss			-				-				(6,565,000	)			(6,565,000	)			-				(6,565,000	)
Reclassify noncontrolling interest due to purchase of Partnership interest			-				-				(999,000	)			(999,000	)			999,000				-
Purchase of Partnership interest			-				-				-				-				(344,000	)			(344,000	)
Balance at June 30, 2022			734,187				2,092,000				(92,524,000	)			(90,432,000	)			-				(90,432,000	)
Balance			734,187				2,092,000				(92,524,000	)			(90,432,000	)			-				(90,432,000	)
Net loss			-				-				(13,203,000	)			(13,203,000	)			-				(13,203,000	)
Balance at June 30, 2023			734,187			$	2,092,000			$	(105,727,000	)		$	(103,635,000	)		$	-			$	(103,635,000	)
Balance			734,187			$	2,092,000			$	(105,727,000	)		$	(103,635,000	)		$	-			$	(103,635,000	)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

PORTSMOUTH SQUARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the year ended June 30,		2023				2022
Cash flows from operating activities:
Net loss		$	(13,203,000	)		$	(6,565,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net unrealized gain on marketable securities			(188,000	)			(1,348,000	)
Amortization of other notes payable			(567,000	)			(567,000	)
Gain on forgiveness of debt			-				(2,000,000	)
Deferred income taxes			7,911,000				144,000
Impairment loss on other investments			-				20,000
Depreciation and amortization			2,715,000				2,209,000
Amortization of loan cost			244,000				295,000
Changes in operating assets and liabilities:
Investment in marketable securities			370,000				4,343,000
Accounts receivable - Hotel, net			(42,000	)			(183,000	)
Other assets			117,000				(151,000	)
Accounts payable and other liabilities - Hotel			3,308,000				867,000
Accounts payable and other liabilities			(169,000	)			45,000
Accounts payable related party			2,375,000				1,715,000
Due to securities broker			(130,000	)			(1,585,000	)
Net cash provided by (used in) operating activities			2,741,000				(2,761,000	)
Cash flows from investing activities:
Payments for hotel furniture, equipment and building improvements			(5,866,000	)			(1,926,000	)
Investment in Justice			-				(344,000	)
Net cash used in investing activities			(5,866,000	)			(2,270,000	)
Cash flows from financing activities:
Proceeds from related party note payable			1,500,000				7,550,000
Payments of mortgage and finance leases			(2,057,000	)			(2,113,000	)
Issuance cost from refinance of related party loan			-				(50,000	)
Net cash (used in) provided by financing activities			(557,000	)			5,387,000
Net (decrease) increase in cash, cash equivalents, and restricted cash			(3,682,000	)			356,000
Cash, cash equivalents, and restricted cash at the beginning of the period			8,888,000				8,532,000
Cash, cash equivalents, and restricted cash at the end of the period		$	5,206,000			$	8,888,000
Supplemental information:
Interest paid		$	6,468,000			$	6,590,000
Taxes paid		$	23,000			$	27,000

 

The Company had cash and cash equivalents of $2,295,000 and $2,662,000 as of June 30, 2023 and 2022, respectively. The Company had restricted cash of $2,911,000 and $6,226,000 as of June 30, 2023 and 2022, respectively.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

PORTSMOUTH SQUARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

 

Description of Business

 

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 the Company.

 

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, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating. The Hotel is a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030.

 

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

 

As of June 30, 2023, The InterGroup Corporation (“InterGroup”), a public company, owns approximately 75.7% of the outstanding common shares of Portsmouth. As of June 30, 2023, the Company’s Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of the Company. Mr. Winfield also serves as the President, Chairman of the Board and Chief Executive Officer of InterGroup and owns approximately 68.6% of the outstanding common shares of InterGroup as of June 30, 2023.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and Justice up to its dissolution in December 2021 at which time all subsidiaries of Justice became subsidiaries of Portsmouth as the Company replaced Justice as the single member of Justice’s subsidiaries where appropriate. All significant inter-company transactions and balances have been eliminated.

 

Investment in Hotel, Net

 

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

 

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

 

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with generally accepted accounting principles (“GAAP”). If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between the assets’ carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset will be accounted for as its new cost. For a depreciable asset, the new cost will be depreciated over the asset’s remaining useful life. Generally, fair values are estimated using discounted cash flow, replacement cost or market comparison analyses. The process of evaluating for impairment requires estimates as to future events and conditions, which are subject to varying market and economic factors. Therefore, it is reasonably possible that a change in estimate resulting from judgments as to future events could occur which would affect the recorded amounts of the property. No impairment losses were recorded for the years ended June 30, 2023 and 2022.

 

27

 

 

Investment in Marketable Securities

 

Marketable securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date. Marketable securities are classified as trading securities with all unrealized gains and losses on the Company’s investment portfolio recorded through the consolidated statements of operations.

 

Cash and Cash Equivalents

 

Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased and are carried at cost, which approximates fair value. As of June 30, 2023 and 2022, the Company does not have any cash equivalents.

 

Restricted Cash

 

Restricted cash is comprised of amounts held by lenders for payment of real estate taxes, insurance, replacement and capital addition reserves for the Hotel.

 

Accounts Receivable - Hotel, Net

 

Accounts receivable from Hotel customers are carried at cost less an allowance for doubtful accounts that is based on management’s assessment of the collectability of accounts receivable. The net accounts receivable balance on July 1, 2021 was $211,000. As of June 30, 2023 and 2022, the Company has gross accounts receivable of $420,000 and $392,000 respectively, and allowance for doubtful accounts of $1,000 and $15,000, respectively. The Company extends unsecured credit to its customers but mitigates the associated credit risk by performing ongoing credit evaluations of its customers.

 

Other Assets

 

Other assets include prepaid insurance, estimated life insurance proceeds, prepaid expenses, other investments, net, and other miscellaneous assets. Other investments include non-marketable securities (carried at cost, net of any impairments loss). The Company has no significant influence or control over the entities that issue these investments. These investments are reviewed on a periodic basis for other-than-temporary impairment. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. For the years ended June 30, 2023 and 2022, the Company recorded impairment losses related to other investments of zero and $20,000, respectively.

 

Income Taxes

 

The Company consolidated Justice (“Hotel”) for financial reporting purposes up to its dissolution in December 2021 and was not taxed on its non-controlling interest in the Hotel. Effective July 15, 2021, the Company become the owner of 100% of Justice and began to include all the Hotel’s income and expense accounts into its income taxes calculations going forward. An income tax benefit was recorded during year ended June 30, 2022 for the pre-tax loss. However June 30, 2023 is an expense on the pre-tax loss due to the recording of a full valuation allowance on the Companies deferred tax assets.

 

28

 

 

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

 

The Company accounts for its uncertain tax positions pursuant to ASC 740, Income Taxes. This guidance prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities, a benefit will be recognized at the largest amount that it believes is cumulatively greater than 50% likely to be realized. A table summarizing the Company’s uncertain positions is presented in the income tax footnote section. Further, any interest or penalties associated with uncertain tax positions shall be recorded in the income tax provision. As of June 30, 2023 and 2022, no interest and penalties were recorded.

 

Due to Securities Broker

 

Various securities brokers have advanced funds to the Company for the purchase of marketable securities under standard margin agreements. These advanced funds are recorded as a liability.

 

Accounts Payable and Other Liabilities

 

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

 

Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

29

 

 

Revenue Recognition

 

Performance obligations

 

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

 

	●	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.
	●	Noncancelable 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.

 

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

 

Advertising Costs

 

Advertising costs are expensed as incurred and are included in Hotel operating expenses in the consolidated statements of operations. Advertising costs were $130,000 and $61,000 for the years ended June 30, 2023 and 2022, respectively.

 

Basic and Diluted Loss per Share

 

Basic loss per share is calculated based upon the weighted average number of common shares outstanding during each fiscal year. As of June 30, 2023 and 2022, the Company did not have any potentially dilutive securities outstanding.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Actual results may differ from those estimates. Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets and when appropriate, records tax valuation allowances based on that evidence and estimates. Such estimates primarily relate to the recording of allowance for doubtful accounts which are based on management’s assessment of the collectability of accounts receivable, as of the end of the fiscal year. As of June 30, 2023 based on taxable income that may be available under tax law the deferred taxed asset is not set more likely than not to be realized.

 

Reclassifications

 

Certain line items on the balance sheet as of June 30, 2023, for the years ended June 30, 2023 and 2022 have been reclassified to conform to the current period presentation. The related party relationship has been disclosed separately in the financial statements than the other debt obligations the Company has.

 

Debt Issuance Costs

 

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

 

30

 

 

Recently Issued and Adopted Accounting Pronouncements

 

As of June 30, 2023, there was no material impact from the recent adoption of new accounting pronouncements, nor expected material impact from recently issued accounting pronouncements yet to be adopted, on the Company’s consolidated financial statements.

 

Going Concern

 

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As discussed in Note 9 – Mortgage Notes Payable, as of June 30, 2023, the outstanding balance consists of a senior mortgage loan and mezzanine loan totaling $107,117,000. Both loans mature on January 1, 2024, in addition, the Company has recurring losses and has an accumulated deficit of 105,727,000.

 

Due to these factors and the Company’s ability to successfully refinance the debt on favorable terms in the current lending environment gives rise to substantial doubt about the Company’s ability to continue as a going concern for one year after the financial statement issuance date.

 

The Company is exploring the possibility of refinancing its senior mortgage and mezzanine debt with potential lenders. Alternatively, the Company is also exploring the possibility of a loan modification or extension to the existing debt with the current lenders, however, the Company may be unable to access further financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. During 2021 and first part of calendar 2022, we took advantage of the slow periods to make certain capital improvements including complete refinishing of all guest room furniture, resurfacing half of the hotel bathtubs that needed repair, refreshed meeting space and lobby paint and vinyl, replaced all bed frames and socks, and completed the carpet and wall covering corridor installation. In November 2022, we began our guestroom renovation and had completed approximately 200 guestrooms as of June 30, 2023. Hotel improvements are ongoing to remain competitive and we anticipate completing the guestroom renovations by the end March 2024. Once the Company completes its full renovation, management anticipates its high occupancy to continue and its average daily rates to increase as it completes renovation up to the point of generating a positive cash flows.

 

The financial statements do not include any adjustments to the carrying amounts of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

 

NOTE 2 - LIQUIDITY

 

Historically, our cash flows have been primarily generated from our Hotel operations. However, the responses by federal, state, and local civil authorities to the COVID-19 pandemic continues to have a material detrimental impact on our liquidity. For the fiscal years ended June 30, 2023 our net cash provided in operating activities was $2,741,000. We have taken several steps to preserve capital and increase liquidity at our 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 to recover, the Company will continue to evaluate what services the Company brings back. During the fiscal year ended June 30, 2023, the Company continued to make capital improvements to the hotel in the amount of $5,866,000 and anticipates continuing its guest room upgrade program during the fiscal year 2024.

 

The Company had cash and cash equivalents of $2,295,000 and $2,662,000 as of June 30, 2023 and 2022, respectively. The Company had restricted cash of $2,911,000 and $6,226,000 as of June 30, 2023 and 2022, respectively. The Company had marketable securities, net of margin due to securities brokers, of $359,000 and $411,000 as of June 30, 2023 and 2022, respectively. These marketable securities are short-term investments and liquid in nature.

 

On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. The loan was extended to July 31, 2023. On December 16, 2020, the Partnership and InterGroup entered into a loan modification agreement which increased the Partnership’s borrowing from InterGroup as needed up to $10,000,000. Upon the dissolution of the Partnership in December 2021, Portsmouth assumed the Partnership’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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, net of loan amortization costs of zero, respectively. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to InterGroup.

 

31

 

 

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 of the Hotel.

 

Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities and capital improvements of the Hotel. We will continue to finance our business activities primarily with existing cash, including from the activities described above, and cash generated from our operations. 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 June 30, 2023, the Company’s material financial obligations which also including interest payments:

 SCHEDULE OF FINANCIAL OBLIGATIONS INCLUDING INTEREST PAYMENTS

						Year				Year				Year				Year				Year
		Total				2024				2025				2026				2027				2028				Thereafter
Mortgage notes payable		$	107,240,000			$	107,240,000			$	-			$	-			$	-			$	-			$	-
Related party notes payable			15,700,000				-				15,700,000				-				-				-				-
Oher notes payable			2,954,000				567,000				567,000				567,000				463,000				317,000				473,000
Interest			3,243,000				3,243,000				-				-				-				-				-
Total		$	129,137,000			$	111,050,000			$	16,267,000			$	567,000			$	463,000			$	317,000			$	473,000

 

NOTE 3 - REVENUE

 

The following table present our revenue disaggregated by revenue streams.

 SCHEDULE OF REVENUE DISAGGREGATION BY REVENUE STREAMS

For the year ended June 30,		2023				2022
Hotel revenues:
Hotel rooms		$	35,684,000			$	26,599,000
Food and beverage			2,625,000				1,471,000
Garage			2,790,000				3,112,000
Other operating departments			928,000				352,000
Total Hotel revenue		$	42,027,000			$	31,534,000

 

Contract assets and liabilities

 

The Company does not have any material contract assets as of June 30, 2023 and 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 our hotel, which are presented within accounts payable and other liabilities on our consolidated balance sheets and had a balance of $493,000 at July 1, 2022. During the year ended June 30, 2023, the entire $493,000 was recognized as revenue. Contract liabilities decreased to $290,000 as of June 30, 2023. The decrease as of June 30, 2023, was primarily driven by a decrease in advance deposits received from customers for services to be performed after June 30, 2023.Contract liabilities increased to $493,000 as of June 30, 2022 from $161,000 as of June 30, 2021. The increase for the twelve months ended June 30, 2022 was primarily driven by advance deposits received from customers for services to be performed after June 30, 2022.

 

Contract costs

 

We consider sales commissions earned to be incremental costs of obtaining a contract with our customers. As a practical expedient, we expense these costs as incurred as our contracts with customers are less than one year.

 

32

 

 

NOTE 4 – INVESTMENT IN HOTEL, NET

 

Investment in Hotel consisted of the following as of:

 SCHEDULE OF INVESTMENT IN HOTEL, NET

						Accumulated				Net Book
June 30, 2023		Cost				Depreciation				Value
Land		$	1,124,000			$	-			$	1,124,000
Finance lease ROU assets			1,805,000				(1,239,000	)			566,000
Furniture and equipment			38,727,000				(29,682,000	)			9,045,000
Building and improvements			56,273,000				(32,627,000	)			23,646,000
Investment in Hotel, net		$	97,929,000			$	(63,548,000	)		$	34,381,000

 

						Accumulated				Net Book
June 30, 2022		Cost				Depreciation				Value
Land		$	1,124,000			$	-			$	1,124,000
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			56,274,000				(31,344,000	)			24,930,000
Investment in Hotel, net		$	92,063,000			$	(60,833,000	)		$	31,230,000

 

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 for the year ended June 30, 2023, and 2022 was $2,715,000 and $2,209,000, respectively.

 

NOTE 5 - INVESTMENT IN MARKETABLE SECURITIES

 

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

 

33

 

 

As of June 30, 2023 and 2022, all of the Company’s marketable securities are classified as trading securities. The change in the unrealized gains and losses on these investments are included in earnings. Trading securities are summarized as follows:

 SCHEDULE OF CHANGES IN UNREALIZED GAINS AND LOSSES ON INVESTMENTS

						Gross				Gross				Net
Investment		Cost				Unrealized Gain				Unrealized Loss				Unrealized (Loss)Gain				Fair Value
As of June 30, 2023
Corporate
Equities		$	274,000			$	133,000			$	(48,000	)		$	85,000			$	359,000
As of June 30, 2022
Corporate
Equities		$	643,000			$	42,000			$	(144,000	)		$	(102,000	)		$	541,000

 

As of June 30, 2023 and 2022, the Company had $73,000 of unrealized losses related to securities held for over one year.

 

Net (loss) gain on marketable securities on the statement of operations is comprised of realized and unrealized losses. Below is the breakdown of the two components for the years ended June 30, 2023 and 2022, respectively.

 SCHEDULE OF NET GAIN (LOSSES) ON MARKETABLE SECURITIES

For the year ended June 30,		2023				2022
Realized loss on marketable securities		$	(137,000	)		$	(433,000	)
Realized loss on marketable securities related to Comstock			-				(2,056,000	)
Unrealized gain on marketable securities			188,000				1,348,000
Net gain (loss) on marketable securities		$	51,000			$	(1,141,000	)

 

NOTE 6 - 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, due to securities broker and obligations for securities sold) or the nature and terms of the obligation (i.e., other notes payable and mortgage notes payable).

 

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

 SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON RECURRING BASIS

						% of Total
As of June 30, 2023						Investment
Industry Group		Fair Value				Securities
REITs and real estate companies			350,000				97.5	%
Basic materials			9,000				2.5	%
Investment in marketable securities		$	359,000				100.0	%

 

34

 

 

As of June 30, 2022		Level 1
Assets:
Investment in marketable securities:
Communication services		$	355,000
REITs and real estate companies			162,000
Basic materials			18,000
Utilities			5,000
Technology			1,000
Investment in marketable securities		$	541,000

 

The fair values of investments in marketable securities are determined by the most recently traded price of each security at the balance sheet date.

 

Financial assets that are measured at fair value on a non-recurring basis and are not included in the tables above include “Other investments in non-marketable securities,” that were initially measured at cost and have been written down to fair value as a result of impairment or adjusted to record the fair value of new instruments received (i.e., preferred shares) in exchange for old instruments (i.e., debt instruments). We had no other Investments in non-marketable securities at June 30, 2023. The following table shows the fair value hierarchy for these assets measured at fair value on a non-recurring basis as follows:

 SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON NONRECURRING BASIS

Assets		Level 3				June 30, 2022				Net loss for the year ended June 30, 2022
Other non-marketable investments		$	-			$	-			$	(20,000	)

 

 

Other investments in non-marketable securities are carried at cost net of any impairment loss. The Company has no significant influence or control over the entities that issue these investments. These investments are reviewed on a periodic basis for other-than-temporary impairment. When determining the fair value of these investments on a non-recurring basis, the Company uses valuation techniques such as the market approach and the unobservable inputs include factors such as conversion ratios and the stock price of the underlying convertible instruments. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

 

NOTE 7 – OTHER ASSETS

 

Other assets consist of the following as of June 30:

 SCHEDULE OF OTHER ASSETS

		2023				2022
Inventory - Hotel		$	27,000			$	27,000
Prepaid expenses			424,000				534,000
Miscellaneous assets			284,000				291,000
Total other assets		$	735,000			$	852,000

 

NOTE 8 – RELATED PARTY AND OTHER FINANCING TRANSACTIONS

 

The following summarizes the balances of related party and other notes payable as of June 30, 2023 and 2022, respectively.

 SCHEDULE OF RELATED PARTY AND OTHER NOTES PAYABLE

As of June 30,		2023				2022
Related party note payable - InterGroup		$	15,700,000			$	14,200,000
Other note payable - Hilton			2,058,000				2,375,000
Other note payable - Aimbridge			896,000				1,146,000
Total related party and other notes payable		$	18,654,000			$	17,721,000

 

35

 

 

On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. The loan was extended to July 31, 2023. On December 16, 2020, the Partnership and InterGroup entered into a loan modification agreement which increased the Partnership’s borrowing from InterGroup as needed up to $10,000,000. Upon the dissolution of the Partnership in December 2021, Portsmouth assumed the Partnership’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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, net of loan amortization costs of zero, respectively. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to InterGroup.

 

Note payable to Hilton (Franchisor) is a self-exhausting, interest free development incentive note which is reduced by approximately $317,000 annually through 2030 by Hilton if the Partnership is still a Franchisee with Hilton.

 

On February 1, 2017, Operating entered an HMA with Ambridge to manage the Hotel with an effective takeover date of February 3, 2017. The term of the management agreement is for an initial period of 10 years commencing on the takeover date and automatically renews for an additional year not to exceed five years in aggregate subject to certain conditions. The HMA also provides for Ambridge to advance a key money incentive fee to the Hotel for capital improvements in the amount of $2,000,000 under certain terms and conditions described in a separate key money agreement. The key money contribution shall be amortized in equal monthly amounts over an eight (8) year period commencing on the second anniversary of the takeover date. During the first quarter of fiscal year 2021, the Hotel obtained approval from Ambridge to use the key money for hotel operations and the funds were exhausted by December 31, 2020. The unamortized portion of the key money in the amount of $896,000 and $1,146,000 are included in other notes payable in the consolidated balance sheets at June 30, 2023 and 2022, respectively.

 

On April 9, 2020, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). On February 3, 2021, Justice entered into a loan agreement (“Second SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of $2,000,000 from the SBA Loan. As of June 30, 2021, Justice used all proceeds from the SBA Loan primarily for payroll costs. The SBA Loan was scheduled to mature on February 3, 2026, had a 1.00% interest rate, and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On November 19, 2021, the SBA Loan was forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the consolidated statement of operations for the fiscal year ended June 30, 2022.

 

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

 SCHEDULE OF FUTURE MINIMUM PRINCIPAL PAYMENTS

For the year ending June 30,
2024		$	111,050,000
2025			16,267,000
2026			567,000
2027			463,000
2028			317,000
Thereafter			473,000
Long term debt		$	129,137,000

 

As of June 30, 2023 and 2022, the Company had accounts payable to related party of $7,283,000 and $4,908,000, respectively. These are amounts due to InterGroup and represent accrued interests and certain shared costs and expenses, primarily general and administrative expenses, rent, insurance, and other expenses.

 

To fund the redemption of limited partnership interests and to repay the prior mortgage of $42,940,000, Justice obtained a $97,000,000 mortgage loan and a $20,000,000 mezzanine loan in December 2013. The mortgage loan is secured by the Company’s principal asset, the Hotel. The mortgage loan bears an interest rate of 5.275% per annum with interest only payments due through January 2017. Beginning in February 2017, the loan began to amortize over a thirty-year period through its maturity date of January 1, 2024. Outstanding principal balance on the loan was $87,240,000 and $89,114,000 as of June 30, 2023 and 2022, respectively. As additional security for the mortgage loan, there is a limited guaranty executed by Portsmouth in favor of the mortgage lender. The mezzanine loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The mezzanine interest only loan had an interest rate of 9.75% per annum and a maturity date of January 1, 2024. As additional security for the mezzanine loan, there is a limited guaranty executed by Portsmouth in favor of the mezzanine lender. On July 31, 2019, Mezzanine refinanced the mezzanine loan by entering into a new mezzanine loan agreement (“New Mezzanine Loan Agreement”) with Cred Reit Holdco LLC in the amount of $20,000,000. The prior Mezzanine Loan which had a 9.75% per annum interest rate was paid off. Interest rate on the new mezzanine loan is 7.25% and the loan matures on January 1, 2024. Interest only payments are due monthly.

 

Effective May 11, 2017, InterGroup agreed to become an additional guarantor under the limited guaranty and an additional indemnitor under the environmental indemnity for Justice Investors limited partnership’s $97,000,000 mortgage loan and the $20,000,000 mezzanine loan. Pursuant to the agreement, InterGroup is required to maintain certain net worth and liquidity. As of June 30, 2023, InterGroup is in compliance with both requirements. Justice Operating Company, LLC has not been meeting certain of its loan covenants such as the Debt Service Coverage Ratio (“DSCR”) which would trigger the creation of a lockbox by the Lender for all cash collected by the Hotel. However, such lockbox has been created and utilized from the loan inception and will be in place up to loan maturity regardless of the DSCR.

 

The Company’s Board of Directors is currently comprised of directors John V. Winfield, William J. Nance, John C. Love, Yvonne Murphy, and Steve Grunwald. All the Company’s directors also serve as directors of InterGroup. The Company’s director and Chairman of the Audit Committee, William J. Nance, serves as Comstock’s director and Chairman of the Audit and Finance, Compensation and Nominating and Governance Committees of Comstock.

 

36

 

 

John V. Winfield serves as Chief Executive Officer and Chairman of the Company and InterGroup. Effective June 2016, Mr. Winfield became the Managing Director of Justice till its dissolution in December 2021. Depending on certain market conditions and various risk factors, the Chief Executive Officer and InterGroup may, at times, invest in the same companies in which the Company invests. The Company encourages such investments because it places personal resources of the Chief Executive Officer and the resources of InterGroup, at risk in connection with investment decisions made on behalf of the Company.

 

On May 24, 2021, John V. Winfield resigned effective immediately as the Company’s President and the Company’s Board of Directors elected David C. Gonzalez as the Company’s new President, effective as of May 24, 2021. Mr. Gonzalez serves as Chief Operating Officer of InterGroup and is an advisor of the Executive Strategic Real Estate and Securities Investment Committee of InterGroup and Portsmouth.

 

NOTE 9 – MORTGAGE NOTES PAYABLE

 

On December 18, 2013: (i) Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); and (ii) Justice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”). The Partnership was the sole member of Mezzanine until its dissolution in December 2021 when Portsmouth replaced the Partnership as the sole member of Mezzanine. Mezzanine is the sole member of Operating.

 

The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan. The proceeds of the Loan Agreements were used to fund the redemption of limited partnership interests and the pay-off of the prior mortgage.

 

The Mortgage Loan is secured by Operating’s principal asset, the Hilton San Francisco-Financial District (the “Property”). The Mortgage Loan bears an interest rate of 5.275% per annum and matures on January 1, 2024. The term of the loan is ten years with interest only due in the first three years and principal and interest payments to be made during the remaining seven years of the loan based on a thirty-year amortization schedule. The Mortgage Loan also requires payments for impounds related to property tax, insurance and capital improvement reserves. As additional security for the Mortgage Loan, there is a limited guaranty (“Mortgage Guaranty”) executed by the Company in favor of the Mortgage Lender.

 

The Mezzanine Loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The Mezzanine Loan had an interest rate of 9.75% per annum and a maturity date of January 1, 2024. Interest only payments were due monthly. On July 31, 2019, Mezzanine refinanced the Mezzanine Loan by entering into a new mezzanine loan agreement (“New Mezzanine Loan Agreement”) with Cred Reit Holdco LLC in the amount of $20,000,000. The prior Mezzanine Loan was paid off. Interest rate on the new mezzanine loan is 7.25% and the loan matures on January 1, 2024. Interest only payments are due monthly. As additional security for the new mezzanine loan, there is a limited guaranty executed by the Company in favor of Cred Reit Holdco LLC (the “Mezzanine Guaranty” and, together with the Mortgage Guaranty, the “Guaranties”).

 

The Guaranties are limited to what are commonly referred to as “bad boy” acts, including: (i) fraud or intentional misrepresentations; (ii) gross negligence or willful misconduct; (iii) misapplication or misappropriation of rents, security deposits, insurance or condemnation proceeds; and (iv) failure to pay taxes or insurance. The Guaranties are full recourse guaranties under identified circumstances, including failure to maintain “single purpose” status which is a factor in a consolidation of Operating or Mezzanine in a bankruptcy of another person, transfer or encumbrance of the Property in violation of the applicable loan documents, Operating or Mezzanine incurring debts that are not permitted, and the Property becoming subject to a bankruptcy proceeding. Pursuant to the Guaranties, the Partnership was required to maintain a certain minimum net worth and liquidity. Effective as of May 12, 2017, InterGroup agreed to become an additional guarantor under the limited guaranty and an additional indemnitor under the environmental indemnity for the $97,000,000 mortgage loan and the $20,000,000 mezzanine loan. Pursuant to the agreement, InterGroup is required to maintain a certain net worth and liquidity. As of June 30, 2023 and 2022, InterGroup is in compliance with both requirements. Justice Operating Company, LLC is not meeting certain of its loan covenants such as the Debt Service Coverage Ratio (“DSCR”) which would trigger the creation of a lockbox and cash sweep by the Lender for all cash collected by the Hotel, and under certain terms, would allow the Lender to request Operating to replace its hotel management company. The DSCR for Operating had been below 1.00 from third quarter of fiscal year 2020 to third quarter of fiscal year 2022 while it is required to maintain a DSCR of at least 1.10 to 1.00 for two consecutive quarters. However, such lockbox has been created and utilized from the loan inception and will be in place up to loan maturity regardless of the DSCR. Justice has not missed any of its debt service payments and does not anticipate missing any debt obligations for at least the next twelve months and beyond. Additionally, Operating’s DSCR for the fourth quarter of fiscal year 2023 was 0.23 for the Mortgage Loan and 0.19 for the Mezzanine Loan.

 

37

 

 

Each of the Loan Agreements contains customary representations and warranties, events of default, reporting requirements, affirmative covenants and negative covenants, which impose restrictions on, among other things, organizational changes of the respective borrower, operations of the Property, agreements with affiliates and third parties. Each of the Loan Agreements also provides for mandatory prepayments under certain circumstances (including casualty or condemnation events) and voluntary prepayments, subject to satisfaction of prescribed conditions set forth in the Loan Agreements.

 

As of June 30, 2023 and 2022, the Company had the following mortgages:

 SCHEDULE OF MORTGAGES

June 30, 2023				June 30, 2022				Interest Rate		Origination Date		Maturity Date
$	87,240,000			$	89,114,000			Fixed 5.28%		December 18, 2013		January 1, 2024
	20,000,000				20,000,000			Fixed 7.25%		July 31, 2019		January 1, 2024
	107,240,000				109,114,000			Mortgage notes payable - hotel
	(123,000	)			(367,000	)		Net debt issuance costs
$	107,117,000			$	108,747,000			Total mortgage notes payable - hotel

 

The Company is working with several prospective lenders to refinance its senior mortgage as well as the mezzanine debt prior to its maturity date of January 1, 2024.

 

NOTE 10 – MANAGEMENT AGREEMENTS

 

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

 

For the fiscal years ended June 30, 2023 and 2022, hotel management fees were $711,000 and $530,000, and incentive fees of $505,000 and $525,000, respectively, offset by key money amortization of $250,000 for both years and are included in Hotel operating expenses in the consolidated statements of operations. As part of the Hotel management agreement, Aimbridge, through the Company’s wholly owned subsidiary, Kearny Street Parking LLC, manages the parking garage in-house.

 

38

 

 

NOTE 11 – CONCENTRATION OF CREDIT RISK

 

As of June 30, 2023 and 2022, all accounts receivables are related to Hotel customers. The Hotel had two customers that accounted for 103%, or $131,000 of accounts receivable at June 30, 2023, and two customers that accounted for 88%, or $183,000 of accounts receivable at June 30, 2022.

 

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 be in excess of the Federal Deposit Insurance Corporation (“FDIC”) or other federally insured limits. Any loss incurred 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.

 

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,		2023				2022
Federal
Current tax expense		$	-			$	-
Deferred tax expense			(5,513,000	)			(310,000	)
Federal income tax benefit			(5,513,000	)			(310,000	)
State
Current tax expense			(1,000	)			(1,000	)
Deferred tax (expense) benefit			(2,398,000	)			169,000
State and local income tax benefit			(2,399,000	)			168,000
Total income tax (expense) benefit		$	(7,912,000	)		$	(142,000	)

 

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,		2023				2022
Statutory federal tax rate			21.0	%			21.0	%
State income taxes, net of federal tax benefit			-8.9	%			2.0	%
Non-taxable PPP loan			-				21.7	%
Provision to return adjustment			11.8	%			8.3	%
Valuation allowance			-193.4	%			-236.7	%
Deferral True-Up – Justice Basis Diff in FA			-				180.9	%
Other			2.1	%			0.6	%
Effective income tax rate reconciliation percentage			-167.4	%			-2.2	%

 

The components of the Company’s deferred tax assets and (liabilities) as of June 30, 2023 and 2022 are as follows:

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

		2023				2022
Deferred tax assets
Net operating loss carryforward		$	13,073,000			$	10,925,000
Interest expense			3,185,000				2,231,000
Accruals and reserves			565,000				587,000
Depreciation			15,054,000				15,646,000
State tax credits			524,000				-
Capital loss carryforward			1,322,000				-
Other			61,000				1,800,000
Deferred tax assets before valuation allowance			33,784,000				31,189,000
Less Valuation allowance			(33,784,000	)			(22,775,000	)
Deferred tax assets after valuation allowance			-				8,414,000
Deferred tax liabilities
State taxes			-				(503,000	)
Deferred Tax Liabilities			-				(503,000	)
Net deferred tax assets		$	-			$	7,911,000

 

Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets to determine if it is more likely than not that the deferred tax asset will be realized. As of June 30, 2023, it has been determined that it is more likely than not that the deferred tax asset will not be recognized. Thus, there is a full valuation allowance of $33,784,000 as of June 30, 2023. This was an increase of $11,009,000 from June 30, 2022.

 

As of June 30, 2023, the Company had net operating loss (“NOL”) carryforwards of approximately $41,835,000 and $48,500,000 for federal and state purposes, respectively. Of the $41,835,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $27,128,000 of post-2017 NOLs can be carried forward indefinitely. Note that the post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $4,429,000 for federal and state purposes. The capital losses begin to expire in 2024 for both federal and state purposes. There are immaterial California state tax credits of $524,000 which expire in various years.

 

As of June 30, 2022, the Company had net operating loss (“NOL”) carryforwards of approximately $35,011,000 and $40,416,000 for federal and state purposes, respectively. Of the $35,011,000 federal NOL’s carryforwards , $14,697,000 expire in varying amount through 2037 and $20,314,000 of post 2017 NOL’s can be carried forward indefinitely. Note that the post 2017 NOL’s may only offset 80% of future taxable income.

 

39

 

 

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

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examination by federal, state, and local jurisdictions, where applicable. Note that partnership dissolved on July 15, 2021 when Portsmouth acquired 100% of Justice LLP.

 

As of June 30, 2023, tax years beginning in fiscal years 2019 and 2018 remain open to examination by the major tax jurisdictions 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

			2023
Unrecognized Tax Benefits at June 30, 2022		$	-
Increase in tax positions taken			1,665,000
Decrease in tax positions taken			-
Unrecognized Tax Benefits at June 30, 2023		$	1,665,000

 

$0 and $1,665,000 of unrecognized tax benefits as of June 30, 2022 and June 30, 2023, respectively, would impact the effective tax rate if recognized. The unrecognized tax benefit is not expected to reverse in 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, 2022 and June 30, 2023, no interest and penalties were recorded.

 

NOTE 13 - SEGMENT INFORMATION

 

The Company operates in two reportable segments, the operation of the Hotel (“Hotel Operations”) and the investment of its cash in marketable securities and other investments (“Investment Transactions”). These two operating segments, as presented in the consolidated financial statements, reflect how management internally reviews each segment’s performance. Management also makes operational and strategic decisions based on this same information.

 

Information below represents reporting segments for the years ended June 30, 2023 and 2022, respectively. Segment loss from Hotel operations consists of the operation of the Hotel and operation of the garage. Loss from investments consists of net investment gain (loss), dividend and interest income and investment related expenses.

 SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT

As of and for the year		Hotel				Investment
ended June 30, 2023		Operations				Transactions				Other				Total
Revenues		$	42,027,000			$	-			$	-			$	42,027,000
Segment operating expenses			(34,457,000	)			-				(1,793,000	)			(36,250,000	)
Segment income (loss)			7,570,000				-				(1,793,000	)			5,777,000
Interest expense - mortgage			(6,467,000	)			-				-				(6,467,000	)
Interest expense – related party			(1,725,000	)			-				-				(1,725,000	)
Depreciation and amortization expense			(2,715,000	)			-				-				(2,715,000	)
Loss from investments			-				(161,000	)			-				(161,000	)
Income tax expense			-				-				(7,912,000	)			(7,912,000	)
Net loss		$	(3,337,000	)		$	(161,000	)		$	(9,705,000	)		$	(13,203,000	)
Total assets		$	40,457,000			$	359,000			$	284,000			$	41,100,000

 

As of and for the year		Hotel				Investment
ended June 30, 2022		Operations				Transactions				Other				Total
Revenues		$	31,534,000			$	-			$	-			$	31,534,000
Segment operating expenses			(27,451,000	)			-				(1,130,000	)			(28,581,000	)
Segment income (loss)			4,083,000				-				(1,130,000	)			2,953,000
Interest expense – mortgage			(6,549,000	)			-				-				(6,549,000	)
Interest expense – related party			(1,375,000	)			-				-				(1,375,000	)
Gain on debt forgiveness			2,000,000				-				-				2,000,000
Depreciation and amortization expense			(2,209,000	)			-				-				(2,209,000	)
Loss from investments			-				(1,243,000	)			-				(1,243,000	)
Income tax expense			-				-				(142,000	)			(142,000	)
Net loss		$	(4,050,000	)		$	(1,243,000	)		$	(1,272,000	)		$	(6,565,000	)
Total assets		$	40,810,000			$	541,000			$	8,448,000			$	49,799,000

 

40

 

 

NOTE 14 – RELATED PARTY TRANSACTIONS

 

As discussed in Note 8 – Related Party and Other Financing Transactions, 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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, respectively, and are included in the related party notes payable in the consolidated balance sheets. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to 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 pro rata utilization of resources. For the years ended June 30, 2023 and 2022, these expenses were approximately $144,000 for each year.

 

All of the Company’s Directors serve as directors of InterGroup.

 

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

 

NOTE 15 – COMMITMENTS AND CONTINGENCIES

 

Cash Management Agreement

 

As part of the Hotel refinancing effective December 18, 2013, Operating entered into a Cash Management Agreement with Bank of America, N.A. (“Lender”) and Wells Fargo Bank, N.A. (“Cash Management Bank”) whereby all cash received by Operating is to be deposited into a business checking account controlled by the Cash Management Bank up to the loan maturity date. Additionally, other terms of the Cash Management Agreement provide that effective February 2019 or upon a Property Improvement Plan (“PIP”) requirement by Hilton (“Franchisor”) deemed the “Cash Sweep Period” during which all excess cash generated by Operating beyond the monthly budgeted expenses and debt services including principal and interest, insurance reserves, real estate taxes reserve, furniture fixtures and equipment (“FF&E”) reserves, for the senior and mezzanine loans, will be held by the Cash Management Bank for future hotel improvements as required by the date or a PIP. Currently, any and all funds are being controlled by the Cash Management Bank according to the Cash Management Agreement.

 

Franchise Agreements

 

The Partnership entered into a Franchise License Agreement (the “License Agreement”) with the HLT Existing Franchise Holding LLC (“Hilton”) on December 10, 2004. The term of the License agreement was for an initial period of 15 years commencing on the date the Hotel began operating as a Hilton hotel, with an option to extend the License Agreement for another five years, subject to certain conditions. On June 26, 2015, Operating and Hilton entered into an amended franchise agreement which amongst other things extended the License Agreement through 2030, and also provided the Partnership certain key money cash incentives to be earned through 2030.

 

Since the opening of the Hotel as a full brand Hilton in January 2006, it has incurred monthly royalties, program fees and information technology recapture charges equal to a percentage of the Hotel’s gross room revenue. Fees for such services during fiscal year 2023 and 2022 totaled approximately $3,029,000 and $2,107,000, respectively.

 

41

 

 

Hotel Employees

 

The hotel operations had 187 employees as of June 30, 2023. On February 3, 2017, Aimbridge assumed all labor union agreements and Justice provides all funding for all payroll and related costs. As of June 30, 2023, approximately 90% of those employees were represented by one of three labor unions, and their terms of employment were determined under various collective bargaining agreements (“CBAs”) to which Aimbridge was a party. CBA for Local 2 (Hotel and Restaurant Employees) expired on August 13, 2022 and a new Memorandum of Understanding (“MOU”) was signed June 26, 2023. CBA for Local 856 (International Brotherhood of Teamsters) expired on December 31, 2022 and a new agreement was signed on April 26, 2023. CBA for Local 39 (Stationary Engineers) will expire on July 31, 2024.

 

Negotiation of collective bargaining agreements, which includes not just terms and conditions of employment, but scope and coverage of employees, is a regular and expected course of business operations for the Company and Aimbridge. The Company expects and anticipates that the terms of conditions of CBAs will have an impact on wage and benefit costs, operating expenses, and certain hotel operations during the life of each CBA and incorporates these principles into its operating and budgetary practices.

 

Legal Matters

 

Portsmouth Square, Inc., through its operating company Justice Investors Operating Company, LLC, a Delaware limited liability company (the “Company”), is the owner of the real property located at 750 Kearny Street in San Francisco, currently improved with a 27 – story building which houses a Hilton Hotel (the “Property”). The Property was purchased and improved pursuant to the terms of a series of agreements with the City and County of San Francisco (the “City”) in the early 1970’s. The terms of the agreements and subsequent approvals and permits included a condition by which the Company was required to construct an ornamental overhead pedestrian bridge across Kearny Street, connecting the Property to a nearby City park and underground parking garage known as Portsmouth Square (the “Bridge”). Included in the approval process was the City’s issuance of a Major Encroachment Permit (“Permit”) allowing the Bridge to span over Kearney Street. As of May 24, 2022, the City has purported to revoke the Permit and on June 13, 2022, has directed the Company to submit a general bridge removal and restoration plan (the “Plan”) at the Company’s expense. The Company disputes the legality of the purported revocation of the Permit. The Company further disputes the existence of any legal or contractual obligation to remove the Bridge at its expense. In particular, representatives of the Company participated in meetings with the City on and at various times after August 1, 2019, to discuss a collaborative process for the possible removal of the Bridge. Until the purported revocation of the Permit in 2022, the City representatives repeatedly and consistently promised and agreed that the City will pay for the associated costs of any Bridge removal. Nevertheless, without waiving any rights, in an effort to understand all of the available options, and to provide a response to the City’s directives, the Company has engaged a Project Manager, a structural engineering firm and an architect to advise on the development of a Plan for the Bridge removal, as well as the reconstruction of the front of the Hilton Hotel. The Company has been working cooperatively with the City on the process for removal of the Bridge and its related physical encroachments, including obtaining regulatory approvals and permits. A final Plan is currently not expected to be completed until late calendar year of 2023, and permits are unlikely to be obtained until mid-2024 at the earliest. The Company is currently in discussion with the City regarding both the process and financial responsibility for the implementation of the Plan and reconstruction of the impacted portions of the Hotel. Those discussions are expected to continue through the Autumn of 2023.

 

The Company may be subject to legal proceedings, claims, and litigation arising in the ordinary course of business. The Company will defend itself vigorously against any such claims. Management does not believe that the impact of such matters will have a material effect on the financial conditions or result of operations when resolved.

 

NOTE 16 – SUBSEQUENT EVENTS

 

The Company evaluated subsequent events through the date that the accompanying financial statements were issued and has determined that no material subsequent events exist through the date of this filing.

 

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

There were no disagreements on any matter of accounting principles or practices, financial statement disclosure, nor auditing scope or procedure.

 

Item 9A. Controls and Procedures.

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

As of June 30, 2023, as required by Rules 13a-15 and 15d-15 under the Exchange Act, our principal executive officer and principal financial and accounting officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective because of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that our control around the interpretation and accounting for the deferred tax asset valuation allowance was not effectively designed or maintained. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

 

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

 

1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,

 

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

 

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on our assessments and those criteria, management determined that our internal controls over financial reporting were not effective as of June 30, 2023.

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

Other than the material weakness identified above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

None.

 

 

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, 2023:

 

Name		Position with the Company		Age		Term to Expire
John V. Winfield		Chairman of the Board and Chief Executive Officer (1)		76		Fiscal 2023 Annual Meeting
Yvonne Murphy		Director		66		Fiscal 2023 Annual Meeting
John C. Love		Director (2)(3)(4)		83		Fiscal 2023 Annual Meeting
William J. Nance		Director (2)(3)		79		Fiscal 2023 Annual Meeting
Steve Grunwald		Director (1)(3)(4)		41		Fiscal 2023 Annual Meeting
Other Executive Officers:
David C . Gonzalez		President (1)		56		N/A
Jolie Kahn		Secretary		58		N/A
Ann Marie Blair		Treasurer, Controller (Principal Financial Officer). Ms. Blair appointed effective July 6, 2023		36		N/A
Danfeng Xu		Treasurer, Controller (Principal Financial Officer), and Secretary. Ms. Xu resigned effective August 31, 2022		35		N/A

 

⁽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 was first elected to the Board in May of 1996 and currently serves as the Company’s Chairman of the Board and Chief Executive Officer. On May 24, 2021, Mr. Winfield resigned effective immediately from the position of the Company’s President. Mr. Winfield is also Chairman of the Board, President and Chief Executive Officer of InterGroup, Portsmouth’s parent company, and has held those positions since 1987. Effective June 2016, Mr. Winfield became the Managing Director of Justice. Mr. Winfield’s extensive experience as an entrepreneur and investor, as well as his managerial and leadership experience from serving as a chief executive officer and director of public companies, led to the Board’s conclusion that he should serve as a director of the Company.

 

 

David C. Gonzalez — Mr. Gonzalez was elected as the Company’s President in May 2021 upon the resignation of Mr. Winfield. Mr. Gonzalez was appointed Chief Operating Officer on May 31, 2023 and Vice President Real Estate of InterGroup, Portsmouth’s parent company, on January 31, 2001 through May 31, 2023. Since 1989, Mr. Gonzalez has served in numerous capacities with InterGroup, including Controller and Director of Real Estate. Mr. Gonzalez was appointed advisor of the Executive Strategic Real Estate and Securities Investment Committee of InterGroup and Portsmouth in February 2020.

 

Yvonne L. Murphy — Mrs. Murphy was elected to the Board of Portsmouth in October 2022 and served as a director at Portsmouth from March to December 2019. Mrs. Murphy took the place of Director Babin upon his passing in October 2022. Mrs. Murphy has impressive experiences in corporate management, legal research, and legislative lobbying for over 30 years. She was a member of Governor Kenny C. Guinn’s executive staff in Nevada and was employed for years by the prestigious Jones Vargas law firm in Reno, Nevada. She served in nine legislative sessions during the most challenging years in Nevada’s history. Before starting her lobbying firm, Ms. Murphy worked for RR Partners in its corporate office in Las Vegas, Nevada, and in the Government Affairs Division in Reno. She has a Doctorate and a Master’s in Business Administration from the California Pacific University. Within her community, she also serves as a volunteer board member for the Reno Philharmonic and Renown Health. Mrs. Murphy’s extensive government affairs and business experience led to the Board’s conclusion that she should serve as a director of the Company. Mrs. Murphy has been a Director of InterGroup since 2014.

 

John C. Love — Mr. Love was appointed a Director of the Company on March 5, 1998. Mr. Love is an international hospitality and tourism consultant. He is a retired partner in the national CPA and consulting firm of Pannell Kerr Forster and, for the last 30 years, a lecturer in hospitality industry management control systems and competition & strategy at Golden Gate University and San Francisco State University. He is Chairman Emeritus of the Board of Trustees of Golden Gate University and the Executive Secretary of the Hotel and Restaurant Foundation. Mr. Love is also a Director of InterGroup, having been appointed in January 1998. Mr. Love’s extensive experience as a CPA and in the hospitality industry, including teaching at the university level for the last 30 years in management control systems, and his knowledge and understanding of finance and financial reporting, led to the Board’s conclusion that he should serve as a director of the Company.

 

William J. Nance — Mr. Nance was first elected to the Board in May 1996. He is the President and CEO of Century Plaza Printers, Inc., a company he founded in 1979. He has also served as a consultant in the acquisition and disposition of multi-family and commercial real estate. Mr. Nance is a Certified Public Accountant and, from 1970 to 1976, was employed by Kenneth Leventhal & Company where he was a Senior Accountant specializing in the area of REITs and restructuring of real estate companies, mergers and acquisitions, and all phases of real estate development and financing. Mr. Nance is a Director of InterGroup and has held such position since 1984. Mr. Nance also serves as a director of Comstock Mining, Inc. Mr. Nance’s extensive experience as a CPA and in numerous phases of the real estate industry, his business and management experience gained in running his own businesses, his service as a director and audit committee member for other public companies and his knowledge and understanding of finance and financial reporting, led to the Board’s conclusion that he should serve as a director of the Company.

 

Steve Grunwald — Mr. Grunwald joined the Board in December 2019. Mr. Grunwald is a successful hospitality operator with over 15 years of experience. He worked at various positions at the five-star hotel Le Châtelain Brussels and later on became the General Manager of the property. In 2006, Mr. Grunwald actively participated in the construction and opening of a boutique hotel, The Progress Hotel. He became the General Manager of two more properties in 2009. In 2013, he oversaw the renovations and reopening of The Hotel Siru and took over the management of the property. Mr. Grunwald is currently managing four hotels of different styles and categories. Mr. Grunwald obtained his bachelor’s degree from Brussels Business Institute’s College of Hospitality and Tourism Management in 2004. Mr. Grunwald’s vast experience in the hospitality industry led to the Board’s conclusion that he should serve as a director of the Company.

 

Jerold R. Babin — Mr. Babin was first appointed as a director of the Company in February 1996. Mr. Babin is also a director of Portsmouth’s parent company, InterGroup. Mr. Babin was a retail securities broker. From 1974 to 1989, he worked at Drexel Burnham, and from 1989 to 2010, he worked for Prudential Securities (later Wachovia Securities and now Wells Fargo Advisors), where he held the title of First Vice President. Mr. Babin retired from his position at Wells Fargo advisors in June 2010. Mr. Babin had also served as an arbitrator for FINRA (formerly NASD) for over 20 years. Mr. Babin’s extensive experience in the securities and financial markets, as well as his involvement in the securities and public company regulatory industry, led to the Board’s conclusion that he should serve as a director of the Company. Mr. Babin served as a Board Member up to the time of his passing in October 2022.

 

Ann Marie Blair – Ms. Blair was appointed as Treasurer and Controller of the Company on July 6, 2023. Ms. Blair also serves as Treasurer and Controller of InterGroup, having been appointed to the position on July 6, 2023. Prior to joining the Company, she had served as Chief Financial Officer in the advertising technology industry. She obtained her Bachelor of Science degree in Accounting and her Master of Business Administration from Cumberland University.

 

Danfeng Xu – Ms. Xu was appointed as Treasurer and Controller of the Company on October 16, 2017. Ms. Xu also serves as Treasurer and Controller of InterGroup, having been appointed to the position on October 16, 2017. On June 1, 2018, she was appointed Secretary of the Company and InterGroup. Prior to joining the Company, she had served as Controller and worked in other positions at the Hotel from July 2010 to February 2017. She obtained her Bachelor of Science degree in Business Administration, Accounting and Finance from The Ohio State University and her Master of Professional Accounting, with a concentration in Audit and Assurance from University of Washington. Ms. Xu resigned effective August 31, 2022.

 

 

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: No director or executive officer, or person nominated or chosen to become a director or executive officer, was involved in any legal proceeding requiring disclosure.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and directors, and each beneficial owner of more than ten percent of the Common Stock of the Company, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten-percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely on its review of the copies of Forms 3 and 4 and amendments thereto furnished to the Company during its most recent fiscal year, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that during fiscal 2023 all filing requirements applicable to its officers, directors, and greater than ten-percent beneficial owners were complied with.

 

Code of Ethics.

 

The Company has adopted a Code of Ethics that applies to its executive officers, including its principal executive officer, principal financial officer, or persons performing similar functions as well as its Board of Directors. A copy of the Code of Ethics is filed as Exhibit 14 to this Report. A copy is also posted on the Portsmouth page of its parent company’s website at www.intgla.com. The Company will provide any person without charge, upon request, a copy of its Code of Ethics by sending such request to: Portsmouth Square, Inc., Attn: Treasurer, 1516 S Bundy Drive, Suite 200, Los Angeles, California 90025. The Company will promptly disclose any amendments or waivers to its Code of Ethics on Form 8-K.

 

BOARD AND COMMITTEE INFORMATION

 

Portsmouth is an unlisted company and a Smaller Reporting Company under the rules and regulations of the Securities and Exchange Commission (“SEC”). With the exception of the Company’s Chairman of the Board and CEO, John V. Winfield, all of Portsmouth’s Board of Directors consists of “independent” directors as independence is defined by the applicable rules of the SEC and NASDAQ.

 

Procedures for Recommendations of Nominees to Board of Directors

 

There have been no changes to the procedures previously disclosed by which security holders may recommend nominees to the Company’s Board of Directors.

 

Audit Committee and Audit Committee Financial Expert

 

Portsmouth is an unlisted company and a Smaller Reporting Company under SEC rules and regulations. The Company’s Audit Committee is currently comprised of Directors William J. Nance (Chairperson) and John C. Love, each of whom are independent directors as independence is defined by the applicable rules of the SEC and NASDAQ, and as may be modified or supplemented. William J. Nance and John C. Love also meets the audit committee financial expert requirement based on their qualifications and business experience discussed above in Item 10.

 

Item 11. Executive Compensation.

 

The following table provides certain summary information concerning compensation awarded to, earned by, or paid to the Company’s principal executive officer and other named executive officers of the Company whose total compensation exceeded $100,000 for all services rendered to the Company for each of the Company’s last two completed fiscal years ended June 30, 2023 and 2022. No stock awards, long-term compensation, options or stock appreciation rights were granted to any of the named executive officers during the last two fiscal years.

 

 

SUMMARY COMPENSATION TABLE

 

Annual Compensation
Name and		Fiscal										All Other
Principal Position		Year		Salary				Bonus				Compensation				Total
John V. Winfield		2023		$	433,000	(1)		$	318,000			$	-			$	751,000
Chairman and Chief Executive Officer		2022		$	433,000	(1)		$	-			$	-			$	433,000
David C. Gonzalez		2023		$	173,000			$	211,000			$	-			$	384,000
President		2022		$	173,000			$	-			$	-			$	173,000

 

⁽¹⁾ Amounts shown include $6,000 per year in regular Directors fees.

 

Portsmouth has no stock option plan or stock appreciation rights for its executive officers. The Company has no pension or long-term incentive plans. There are no employment contracts between Portsmouth and any executive officer, and there are no termination-of-employment or change-in-control arrangements.

 

Internal Revenue Code Limitations

 

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), provides that, in the case of a publicly held corporation, the corporation is not generally allowed to deduct remuneration paid to its chief executive officer and certain other highly compensated officers to the extent that such remuneration exceeds $1,000,000 for the taxable year. Certain remuneration, however, is not subject to disallowance, including compensation paid on a commission basis and, if certain requirements prescribed by the Code are satisfied, other performance-based compensation. Since InterGroup and Portsmouth are each a public company, the $1,000,000 limitation applies separately to the compensation paid by each entity. Stock option expenses are also amortized over several years. For fiscal years 2023 and 2022, no compensation paid by the Company to its CEO or other executive officers was subject the deduction disallowance prescribed by Section 162(m) of the Code.

 

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, 2022.

 

DIRECTOR COMPENSATION TABLE

 

Name		Fees Earned or Paid in Cash				All Other Compensation				Total
Yvonne Murphy		$	6,000				-			$	6,000
John C. Love		$	8,000	(1)			-			$	8,000
William J. Nance		$	8,000	(1)			-			$	8,000
Steve Grunwald		$	6,000				-			$	6,000
John V. Winfield (2)			-				-				-

 

⁽¹⁾ Amounts shown include regular Board fees and Audit Committee fees.

 

⁽²⁾ As an executive officer, Mr. Winfield’s director fees are reported in the Summary Compensation Table.

 

Each director of the Company is paid a Board retainer fee of $1,500 per quarter for a total annual compensation of $6,000. This policy has been in effect since July 1, 1985. Members of the Company’s Audit Committee also receive a fee of $500 per quarter. Directors and Committee members are also reimbursed for their out-of-pocket travel costs to attend meetings.

 

 

Change in Control or Other Arrangements

 

Except for the foregoing, there are no other arrangements for compensation of directors and there are no employment contracts between the Company and its directors or any change in control arrangements.

 

Outstanding Equity Awards at Fiscal Year End

 

The Company did not have any outstanding equity awards at the end of its fiscal year ended June 30, 2023 and has no equity compensation plans in effect.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth, as of October 13, 2023, certain information with respect to the beneficial ownership of Common Stock owned by (i) those persons or groups known by the Company to own more than five percent of the outstanding shares of Common Stock, (ii) each Director and Executive Officer, and (iii) all Directors and Executive Officers as a group.

 

Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership (1)				Percent of Class (2)
John V. Winfield			18,641				2.5	%
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
Yvonne Murphy			-				-
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
John C. Love			-				-
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
William J. Nance			-				-
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
Steve Grunwald			-				-
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
David C. Gonzalez			-				-
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
Ann Marie Blair (6)			-				-
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
Danfeng Xu (5)			-				-
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
The InterGroup Corporation			555,518	(4)			75.7	%
1516 S. Bundy Drive, Suite 200
Los Angeles, CA 90025
All of the above as a group			574,159				78.2	%

 

⁽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 of 734,187 shares of Common Stock issued and outstanding as of October 13, 2023.

 

⁽⁴⁾ As directors of InterGroup, Messrs. Winfield, Murphy, Love and Nance have the power to direct the vote of the shares of Portsmouth owned by InterGroup.

 

⁽⁵⁾Ms. Xu resigned effective August 31, 2022.

 

⁽⁶⁾Ms. Blair appointed effective July 6, 2023.

 

 

Security Ownership of Management in Parent Corporation.

 

As Chairman of the Board and a 68.6% beneficial shareholder of InterGroup, Mr. Winfield has voting and dispositive power over the shares owned of record and beneficially by InterGroup.

 

Changes in Control Arrangements.

 

There are no arrangements that may result in a change in control of Portsmouth.

 

Securities Authorized for Issuance Under Equity Compensation Plans.

 

Portsmouth has no securities authorized for issuance under any equity compensation plans.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

As of October 13, 2023, InterGroup and John V. Winfield owned 75.7% and 2.5% of the common stock of Portsmouth, respectively.

 

As discussed in Note 8 – Related Party and Other Financing Transactions, on July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. 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. 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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000.

 

Under the terms of the Justice Partnership Agreement, its general partner, Portsmouth, received compensation of one percent of hotel revenue up until the dissolution of Justice in December 2021. During each of the fiscal years ended June 30, 2023 and 2022, total compensation earned by Portsmouth under the agreement was zero and $130,000, respectively, and are eliminated in consolidation. Effective with the dissolution of the Partnership, the compensation to Portsmouth from the hotel was terminated.

 

Certain shared costs and expenses, primarily administrative expenses, rent and insurance are allocated among the Company and InterGroup based on management’s estimate of the pro rata utilization of resources. For the years ended June 30, 2023 and 2022, these expenses were approximately $144,000 and $144,000, respectively.

 

 

All of the Company’s Directors serve as directors of InterGroup. The Company’s President serves as Chief Operating Officer of InterGroup. Director William Nance is a director and Chairman of the Audit Committee of Comstock Mining, Inc., since 2005.

 

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

 

There are no other relationships or related transactions between the Company and any of its officers, directors, five-percent security holders or their families that require disclosure.

 

Director Independence

 

Portsmouth is an unlisted company and a Smaller Reporting Company under the rules and regulations of the SEC. With the exception of the Company’s CEO, John V. Winfield, all of Portsmouth’s Board of Directors consists of “independent” directors as independence is defined by the applicable rules and regulations of the SEC and NASDAQ.

 

Item 14. Principal Accounting Fees and Services.

 

On January 31, 2022, the Audit Committee retained WithumSmith+Brown, PC, PCAOB ID: 100 (“Withum”) as the Company’s new independent registered public accounting firm. upon the resignation of Moss Adams LLP , Irvine CA, PCAOB ID: 659 (“Moss Adams”) in December 2021. The aggregate fees billed for each of the last two fiscal years ended June 30, 2023 and 2022 for professional services rendered by Withum. These fees were billed for audit of the Company’s annual financial statements, review of financial statements included in the Company’s Form 10-Q reports, and services provided in connection with statutory and regulatory filings and engagements for those fiscal years.

 

		Fiscal Year
		2023				2022
Audit fees – Withum		$	101,000			$	24,000
Tax fees – Withum			48,000				3,000
Audit Fees – Moss Adams			-				103,000
Tax fees – Moss Adams			-				10,000
Total		$	149,000			$	140,000

 

Audit Committee Pre-Approval Policies

 

The Audit Committee shall pre-approve all auditing 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 any de minimis exceptions that may be set for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Committee prior to the completion of the audit. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting. All of the services described herein were approved by the Audit Committee pursuant to its pre-approval policies.

 

None of the hours expended on the independent registered public accounting firms’ engagement to audit the Company’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the independent registered public accounting firm’s full-time permanent employees.

 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

(a)(1) Financial Statements

 

The following financial statements of the Company are included in Part II, Item 8 of this Report at pages 23 through 43:

 

	Report of Independent Registered Public Accounting Firm
	Consolidated Balance Sheets - June 30, 2023 and 2022
	Consolidated Statements of Operations for years ended June 30, 2023 and 2022
	Consolidated Statements of Shareholders’ Deficit for years ended June 30, 2023 and 2022
	Consolidated Statements of Cash Flows for years ended June 30, 2023 and 2022
	Notes to the Consolidated Financial Statements

 

(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 or are not applicable or the required information is shown in the consolidated financial statements or notes to the consolidated financial statements.

 

(a)(3) Exhibits

 

Set forth below is an index of applicable exhibits filed with this report according to exhibit table number.

 

Exhibit Number		Description
3.(i)		Bylaws (amended February 16, 2000) *
3.(ii)		Articles of Incorporation*
4.		Instruments defining the rights of security holders including indentures (See Articles of Incorporation and Bylaws) *
10.		Material Contracts:
10.3		Franchise License Agreement, dated December 10, 2004, between Justice Investors Limited Partnership and Hilton Hotels (incorporated by reference to Exhibit 10.3 of the Company’s amended report on Form 10-K/A for the fiscal year ended June 30, 2011, as filed with the Commission on August 24, 2012). *
10.5		Management Agreement, dated February 1, 2017, between Justice Operating Company, LLC and Aimbridge Management Company, LLC. (incorporated by reference to Exhibit 10.5 of the Company’s Form 10-K Report for the fiscal year ended June 30, 2017, as filed with the Commission on October 13, 2017). *
14.		Code of Ethics (filed herewith).
31.1		Certification of Principal Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
31.2		Certification of Principal Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) and Rule 15d-14(a).
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* All exhibits marked by an asterisk have been previously filed with other documents, including Registrant’s Form 10 filed on October 27, 1967, and subsequent filings on Forms 8-K, 10-K, 10-KSB, 10-Q and 10-QSB, which are incorporated herein by reference

 

 

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:	October 13, 2023		by	/s/ John V. Winfield
				John V. Winfield,
				Chairman of the Board and
				Chief Executive Officer
Date:	October 13, 2023		by	/s/ Ann Marie Blair
				Ann Marie Blair, 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		October 13, 2023
John V. Winfield		of the Board (Principal Executive Officer)
/s/ David C. Gonzalez		President, Advisor of Executive Strategic		October 13, 2023
David C. Gonzalez		Real Estate and Securities Investment Committee
/s/ Yvonne Murphy		Director		October 13, 2023
Jerold R. Babin
/s/ John C. Love		Director		October 13, 2023
John C. Love
/s/ William J. Nance		Director		October 13, 2023
William J. Nance
/s/ Steve Grunwald		Director		October 13, 2023
Steve Grunwald

 

 

 

EXHIBIT 14

 

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, Vice President, 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 and 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 the rules and regulations of self-regulatory organizations of which Portsmouth is a member;

 

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; and

 

7. Promptly report any possible violation of this Code of Ethics to the Audit Committee and the Company’s counsel.

 

All Senior Financial Officers are prohibited from directly or indirectly taking any action to coerce, manipulate, mislead or fraudulently influence Portsmouth’s independent public accountant engaged in the performance of an audit or review of the financial statements of the Company for the purpose of rendering the financial statements of Portsmouth misleading.

 

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.

 

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.

 

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. An individual may choose to remain anonymous in reporting any possible violation of this Code of Ethics.

 

 

 

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 disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-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: October 13, 2023

 

/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 disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-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: October 13, 2023

 

/s/ Ann Marie Blair
Ann Marie Blair
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, 2023, 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 5(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: October 13, 2023

 

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, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ann Marie Blair, Corporate Controller of the Company, and serving as its 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 5(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
Principal Financial Officer

 

Date: October 13, 2023

 

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.

 

 

v3.23.3

Cover - USD ($)	12 Months Ended
	Jun. 30, 2023	Oct. 13, 2023	Dec. 31, 2022
Cover [Abstract]
Document Type	10-K/A
Amendment Flag	true
Amendment Description	We are filing this Amendment No. 1 to our Form 10-K filed on October 16, 2023 to include all required IXBRL files.
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2023
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--06-30
Entity File Number	0-4057
Entity Registrant Name	PORTSMOUTH SQUARE, INC
Entity Central Index Key	0000079661
Entity Tax Identification Number	94-1674111
Entity Incorporation, State or Country Code	CA
Entity Address, Address Line One	1516 S. Bundy Drive
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	Los Angeles
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90025
City Area Code	(310)
Local Phone Number	889-2500
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 7,081,000
Entity Common Stock, Shares Outstanding		734,187
Document Financial Statement Error Correction [Flag]	false
Auditor Name	WithumSmith+Brown, PC
Auditor Location	East Brunswick, NJ
Auditor Firm ID	100

v3.23.3

Consolidated Balance Sheets - USD ($)	Jun. 30, 2023	Jun. 30, 2022
ASSETS
Investment in hotel, net	$ 34,381,000	$ 31,230,000
Investment in marketable securities	359,000	541,000
Cash and cash equivalents	2,295,000	2,662,000
Restricted cash	2,911,000	6,226,000
Accounts receivable - hotel, net	419,000	377,000
Other assets	735,000	852,000
Deferred tax assets, net		7,911,000
Total assets	41,100,000	49,799,000
Liabilities:
Due to securities broker		130,000
Other notes payable	2,954,000	3,521,000
Finance leases		183,000
Mortgage notes payable - Hotel, net	107,117,000	108,747,000
Total liabilities	144,735,000	140,231,000
Commitments and Contingencies - Note 15
Shareholders’ deficit:
Common stock, no par value: Authorized shares - 750,000; 734,187 shares issued and outstanding as of June 30, 2023 and 2022, respectively	2,092,000	2,092,000
Accumulated deficit	(105,727,000)	(92,524,000)
Total shareholders’ deficit	(103,635,000)	(90,432,000)
Total liabilities and shareholders’ deficit	41,100,000	49,799,000
Hotel [Member]
Liabilities:
Accounts payable and other liabilities	11,615,000	8,307,000
Nonrelated Party [Member]
Liabilities:
Accounts payable and other liabilities	66,000	235,000
Related Party [Member]
Liabilities:
Accounts payable to related party	7,283,000	4,908,000
Related party notes payable	$ 15,700,000	$ 14,200,000

v3.23.3

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2023	Jun. 30, 2022
Statement of Financial Position [Abstract]
Common stock, par value	$ 0	$ 0
Common stock, shares authorized	750,000	750,000
Common stock, shares issued	734,187	734,187
Common stock, shares outstanding	734,187	734,187

v3.23.3

Consolidated Statements of Operations - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Defined Benefit Plan Disclosure [Line Items]
Revenue - Hotel	$ 42,027,000	$ 31,534,000
Costs and operating expenses
Hotel operating expenses	(34,457,000)	(27,451,000)
Hotel depreciation and amortization expense	(2,715,000)	(2,209,000)
General and administrative expense	(1,793,000)	(1,130,000)
Total costs and operating expenses	(38,965,000)	(30,790,000)
Income from operations	3,062,000	744,000
Other income (expense)
Interest expense - mortgage	(6,467,000)	(6,549,000)
Gain on forgiveness of debt		2,000,000
Net realized loss on marketable securities	(137,000)	(433,000)
Net realized loss on marketable securities - Comstock		(2,056,000)
Net unrealized gain on marketable securities	188,000	1,348,000
Impairment loss on other investments		(20,000)
Dividend and interest income	36,000	121,000
Trading and margin interest expense	(248,000)	(203,000)
Total other expense, net	(8,353,000)	(7,167,000)
Loss before income taxes	(5,291,000)	(6,423,000)
Income tax expense (benefit)	(7,912,000)	(142,000)
Net loss	$ (13,203,000)	$ (6,565,000)
Basic net loss per share	$ (17.98)	$ (8.94)
Diluted net loss per share	$ (17.98)	$ (8.94)
Weighted average shares outstanding - Basic	734,187	734,187
Weighted average shares outstanding - Diluted	734,187	734,187
Related Party [Member]
Other income (expense)
Interest expense - related party	$ (1,725,000)	$ (1,375,000)

v3.23.3

Consolidated Statements of Shareholders' Deficit - USD ($)	Common Stock [Member]	Retained Earnings [Member]	Total Portsmouth Shareholders Deficit [Member]	Noncontrolling Interest [Member]	Total
Balance at Jun. 30, 2021	$ 2,092,000	$ (84,960,000)	$ (82,868,000)	$ (655,000)	$ (83,523,000)
Balance, shares at Jun. 30, 2021	734,187
Net loss		(6,565,000)	(6,565,000)		(6,565,000)
Reclassify noncontrolling interest due to purchase of Partnership interest		(999,000)	(999,000)	999,000
Purchase of Partnership interest				(344,000)	(344,000)
Balance at Jun. 30, 2022	$ 2,092,000	(92,524,000)	(90,432,000)		(90,432,000)
Balance, shares at Jun. 30, 2022	734,187
Net loss		(13,203,000)	(13,203,000)		(13,203,000)
Balance at Jun. 30, 2023	$ 2,092,000	$ (105,727,000)	$ (103,635,000)		$ (103,635,000)
Balance, shares at Jun. 30, 2023	734,187

v3.23.3

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net loss	$ (13,203,000)	$ (6,565,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net unrealized gain on marketable securities	(188,000)	(1,348,000)
Amortization of other notes payable	(567,000)	(567,000)
Gain on forgiveness of debt		(2,000,000)
Deferred income taxes	7,911,000	144,000
Impairment loss on other investments		20,000
Depreciation and amortization	2,715,000	2,209,000
Amortization of loan cost	244,000	295,000
Changes in operating assets and liabilities:
Investment in marketable securities	370,000	4,343,000
Accounts receivable - Hotel, net	(42,000)	(183,000)
Other assets	117,000	(151,000)
Accounts payable and other liabilities - Hotel	3,308,000	867,000
Accounts payable and other liabilities	(169,000)	45,000
Accounts payable related party	2,375,000	1,715,000
Due to securities broker	(130,000)	(1,585,000)
Net cash provided by (used in) operating activities	2,741,000	(2,761,000)
Cash flows from investing activities:
Payments for hotel furniture, equipment and building improvements	(5,866,000)	(1,926,000)
Investment in Justice		(344,000)
Net cash used in investing activities	(5,866,000)	(2,270,000)
Cash flows from financing activities:
Proceeds from related party note payable	1,500,000	7,550,000
Payments of mortgage and finance leases	(2,057,000)	(2,113,000)
Issuance cost from refinance of related party loan		(50,000)
Net cash (used in) provided by financing activities	(557,000)	5,387,000
Net (decrease) increase in cash, cash equivalents, and restricted cash	(3,682,000)	356,000
Cash, cash equivalents, and restricted cash at the beginning of the period	8,888,000	8,532,000
Cash, cash equivalents, and restricted cash at the end of the period	5,206,000	8,888,000
Supplemental information:
Interest paid	6,468,000	6,590,000
Taxes paid	$ 23,000	$ 27,000

v3.23.3

Consolidated Statements of Cash Flows (Parenthetical) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Statement of Cash Flows [Abstract]
Cah and cash equivalents at carrying value	$ 2,295,000	$ 2,662,000
Restricted cash	$ 2,911,000	$ 6,226,000

v3.23.3

BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES	12 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES	NOTE 1 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES   Description of Business   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 the Company.   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, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating. The Hotel is a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030.   Operating entered into a hotel management agreement (“HMA”) with Aimbridge Hospitality (“Aimbridge”) to manage the Hotel, along with its five-level parking garage, with an effective date of February 3, 2017. The term of the management agreement is for an initial period of ten years commencing on the February 3, 2017 date and automatically renews for successive one (1) year periods, not to exceed five years in the aggregate, subject to certain conditions. Under the terms on the HMA, base management fee (“Basic Fee”) payable to Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge shall be entitled to an annual incentive fee for each fiscal year equal to ten percent (10%) of the amount by which Gross Operating Profit in the current fiscal year exceeds the previous fiscal year’s Gross Operating Profit.   As of June 30, 2023, The InterGroup Corporation (“InterGroup”), a public company, owns approximately 75.7% of the outstanding common shares of Portsmouth. As of June 30, 2023, the Company’s Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of the Company. Mr. Winfield also serves as the President, Chairman of the Board and Chief Executive Officer of InterGroup and owns approximately 68.6% of the outstanding common shares of InterGroup as of June 30, 2023.   Principles of Consolidation   The consolidated financial statements include the accounts of the Company and Justice up to its dissolution in December 2021 at which time all subsidiaries of Justice became subsidiaries of Portsmouth as the Company replaced Justice as the single member of Justice’s subsidiaries where appropriate. All significant inter-company transactions and balances have been eliminated.   Investment in Hotel, Net   Property and equipment are stated at cost. Building improvements are depreciated on a straight-line basis over their useful lives ranging from 3 to 39 years. Furniture, fixtures, and equipment are depreciated on a straight-line basis over their useful lives ranging from 3 to 7 years.   Repairs and maintenance are charged to expense as incurred. Costs of significant renewals and improvements are capitalized and depreciated over the shorter of its remaining estimated useful life or life of the asset. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts; any resulting gain or loss is included in other income (expenses).   The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with generally accepted accounting principles (“GAAP”). If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between the assets’ carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset will be accounted for as its new cost. For a depreciable asset, the new cost will be depreciated over the asset’s remaining useful life. Generally, fair values are estimated using discounted cash flow, replacement cost or market comparison analyses. The process of evaluating for impairment requires estimates as to future events and conditions, which are subject to varying market and economic factors. Therefore, it is reasonably possible that a change in estimate resulting from judgments as to future events could occur which would affect the recorded amounts of the property. No impairment losses were recorded for the years ended June 30, 2023 and 2022.     Investment in Marketable Securities   Marketable securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date. Marketable securities are classified as trading securities with all unrealized gains and losses on the Company’s investment portfolio recorded through the consolidated statements of operations.   Cash and Cash Equivalents   Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased and are carried at cost, which approximates fair value. As of June 30, 2023 and 2022, the Company does not have any cash equivalents.   Restricted Cash   Restricted cash is comprised of amounts held by lenders for payment of real estate taxes, insurance, replacement and capital addition reserves for the Hotel.   Accounts Receivable - Hotel, Net   Accounts receivable from Hotel customers are carried at cost less an allowance for doubtful accounts that is based on management’s assessment of the collectability of accounts receivable. The net accounts receivable balance on July 1, 2021 was $211,000. As of June 30, 2023 and 2022, the Company has gross accounts receivable of $420,000 and $392,000 respectively, and allowance for doubtful accounts of $1,000 and $15,000, respectively. The Company extends unsecured credit to its customers but mitigates the associated credit risk by performing ongoing credit evaluations of its customers.   Other Assets   Other assets include prepaid insurance, estimated life insurance proceeds, prepaid expenses, other investments, net, and other miscellaneous assets. Other investments include non-marketable securities (carried at cost, net of any impairments loss). The Company has no significant influence or control over the entities that issue these investments. These investments are reviewed on a periodic basis for other-than-temporary impairment. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. For the years ended June 30, 2023 and 2022, the Company recorded impairment losses related to other investments of zero and $20,000, respectively.   Income Taxes   The Company consolidated Justice (“Hotel”) for financial reporting purposes up to its dissolution in December 2021 and was not taxed on its non-controlling interest in the Hotel. Effective July 15, 2021, the Company become the owner of 100% of Justice and began to include all the Hotel’s income and expense accounts into its income taxes calculations going forward. An income tax benefit was recorded during year ended June 30, 2022 for the pre-tax loss. However June 30, 2023 is an expense on the pre-tax loss due to the recording of a full valuation allowance on the Companies deferred tax assets.     Deferred income taxes are calculated under the liability method. Deferred income tax assets and liabilities are based on differences between the financial statement and tax basis of assets and liabilities at the current enacted tax rates. Changes in deferred income tax assets and liabilities are included as a component of income tax expense. Changes in deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets where realization is not likely.   The Company accounts for its uncertain tax positions pursuant to ASC 740, Income Taxes. This guidance prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities, a benefit will be recognized at the largest amount that it believes is cumulatively greater than 50% likely to be realized. A table summarizing the Company’s uncertain positions is presented in the income tax footnote section. Further, any interest or penalties associated with uncertain tax positions shall be recorded in the income tax provision. As of June 30, 2023 and 2022, no interest and penalties were recorded.   Due to Securities Broker   Various securities brokers have advanced funds to the Company for the purchase of marketable securities under standard margin agreements. These advanced funds are recorded as a liability.   Accounts Payable and Other Liabilities   Accounts payable and other liabilities include trade payables, advance customer deposits, accrued wages, accrued real estate taxes, and other liabilities.   Fair Value of Financial Instruments   Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Accounting standards for fair value measurement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:   Level 1–inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.   Level 2–inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.   Level 3–inputs to the valuation methodology are unobservable and significant to the fair value.     Revenue Recognition   Performance obligations   We identified the following performance obligations for which revenue is recognized as the respective performance obligations are satisfied, which results in recognizing the amount we expect to be entitled to for providing the goods or services:     ● 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.         ● Noncancelable 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.   We do not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less. Due to the nature of our business, our revenue is not significantly impacted by refunds. Cash payments received in advance of guests staying at our hotel are refunded to hotel guests if the guest cancels within the specified time period, before any services are rendered. Refunds related to service are generally recognized as an adjustment to the transaction price at the time the hotel stay occurs or services are rendered. See Note 3 – Revenue.   Advertising Costs   Advertising costs are expensed as incurred and are included in Hotel operating expenses in the consolidated statements of operations. Advertising costs were $130,000 and $61,000 for the years ended June 30, 2023 and 2022, respectively.   Basic and Diluted Loss per Share   Basic loss per share is calculated based upon the weighted average number of common shares outstanding during each fiscal year. As of June 30, 2023 and 2022, the Company did not have any potentially dilutive securities outstanding.   Use of Estimates   The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Actual results may differ from those estimates. Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets and when appropriate, records tax valuation allowances based on that evidence and estimates. Such estimates primarily relate to the recording of allowance for doubtful accounts which are based on management’s assessment of the collectability of accounts receivable, as of the end of the fiscal year. As of June 30, 2023 based on taxable income that may be available under tax law the deferred taxed asset is not set more likely than not to be realized.   Reclassifications   Certain line items on the balance sheet as of June 30, 2023, for the years ended June 30, 2023 and 2022 have been reclassified to conform to the current period presentation. The related party relationship has been disclosed separately in the financial statements than the other debt obligations the Company has.   Debt Issuance Costs   Debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the debt liability and are amortized over the life of the debt. Loan amortization costs are included in interest expense in the consolidated statement of operations.     Recently Issued and Adopted Accounting Pronouncements   As of June 30, 2023, there was no material impact from the recent adoption of new accounting pronouncements, nor expected material impact from recently issued accounting pronouncements yet to be adopted, on the Company’s consolidated financial statements.   Going Concern   The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As discussed in Note 9 – Mortgage Notes Payable, as of June 30, 2023, the outstanding balance consists of a senior mortgage loan and mezzanine loan totaling $107,117,000. Both loans mature on January 1, 2024, in addition, the Company has recurring losses and has an accumulated deficit of 105,727,000.   Due to these factors and the Company’s ability to successfully refinance the debt on favorable terms in the current lending environment gives rise to substantial doubt about the Company’s ability to continue as a going concern for one year after the financial statement issuance date.   The Company is exploring the possibility of refinancing its senior mortgage and mezzanine debt with potential lenders. Alternatively, the Company is also exploring the possibility of a loan modification or extension to the existing debt with the current lenders, however, the Company may be unable to access further financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. During 2021 and first part of calendar 2022, we took advantage of the slow periods to make certain capital improvements including complete refinishing of all guest room furniture, resurfacing half of the hotel bathtubs that needed repair, refreshed meeting space and lobby paint and vinyl, replaced all bed frames and socks, and completed the carpet and wall covering corridor installation. In November 2022, we began our guestroom renovation and had completed approximately 200 guestrooms as of June 30, 2023. Hotel improvements are ongoing to remain competitive and we anticipate completing the guestroom renovations by the end March 2024. Once the Company completes its full renovation, management anticipates its high occupancy to continue and its average daily rates to increase as it completes renovation up to the point of generating a positive cash flows.   The financial statements do not include any adjustments to the carrying amounts of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

v3.23.3

LIQUIDITY	12 Months Ended
	Jun. 30, 2023
Liquidity
LIQUIDITY	NOTE 2 - LIQUIDITY   Historically, our cash flows have been primarily generated from our Hotel operations. However, the responses by federal, state, and local civil authorities to the COVID-19 pandemic continues to have a material detrimental impact on our liquidity. For the fiscal years ended June 30, 2023 our net cash provided in operating activities was $2,741,000. We have taken several steps to preserve capital and increase liquidity at our 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 to recover, the Company will continue to evaluate what services the Company brings back. During the fiscal year ended June 30, 2023, the Company continued to make capital improvements to the hotel in the amount of $5,866,000 and anticipates continuing its guest room upgrade program during the fiscal year 2024.   The Company had cash and cash equivalents of $2,295,000 and $2,662,000 as of June 30, 2023 and 2022, respectively. The Company had restricted cash of $2,911,000 and $6,226,000 as of June 30, 2023 and 2022, respectively. The Company had marketable securities, net of margin due to securities brokers, of $359,000 and $411,000 as of June 30, 2023 and 2022, respectively. These marketable securities are short-term investments and liquid in nature.   On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. The loan was extended to July 31, 2023. On December 16, 2020, the Partnership and InterGroup entered into a loan modification agreement which increased the Partnership’s borrowing from InterGroup as needed up to $10,000,000. Upon the dissolution of the Partnership in December 2021, Portsmouth assumed the Partnership’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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, net of loan amortization costs of zero, respectively. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to InterGroup.     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 of the Hotel.   Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities and capital improvements of the Hotel. We will continue to finance our business activities primarily with existing cash, including from the activities described above, and cash generated from our operations. 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 June 30, 2023, the Company’s material financial obligations which also including interest payments:  SCHEDULE OF FINANCIAL OBLIGATIONS INCLUDING INTEREST PAYMENTS           Year     Year     Year     Year     Year             Total     2024     2025     2026     2027     2028     Thereafter   Mortgage notes payable   $ 107,240,000     $ 107,240,000     $ -     $ -     $ -     $ -     $ -   Related party notes payable     15,700,000       -       15,700,000       -       -       -       -   Oher notes payable     2,954,000       567,000       567,000       567,000       463,000       317,000       473,000   Interest     3,243,000       3,243,000       -       -       -       -       -   Total   $ 129,137,000     $ 111,050,000     $ 16,267,000     $ 567,000     $ 463,000     $ 317,000     $ 473,000

v3.23.3

REVENUE	12 Months Ended
	Jun. 30, 2023
Revenue from Contract with Customer [Abstract]
REVENUE	NOTE 3 - REVENUE   The following table present our revenue disaggregated by revenue streams.  SCHEDULE OF REVENUE DISAGGREGATION BY REVENUE STREAMS For the year ended June 30,   2023     2022   Hotel revenues:                 Hotel rooms   $ 35,684,000     $ 26,599,000   Food and beverage     2,625,000       1,471,000   Garage     2,790,000       3,112,000   Other operating departments     928,000       352,000   Total Hotel revenue   $ 42,027,000     $ 31,534,000     Contract assets and liabilities   The Company does not have any material contract assets as of June 30, 2023 and 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 our hotel, which are presented within accounts payable and other liabilities on our consolidated balance sheets and had a balance of $493,000 at July 1, 2022. During the year ended June 30, 2023, the entire $493,000 was recognized as revenue. Contract liabilities decreased to $290,000 as of June 30, 2023. The decrease as of June 30, 2023, was primarily driven by a decrease in advance deposits received from customers for services to be performed after June 30, 2023.Contract liabilities increased to $493,000 as of June 30, 2022 from $161,000 as of June 30, 2021. The increase for the twelve months ended June 30, 2022 was primarily driven by advance deposits received from customers for services to be performed after June 30, 2022.   Contract costs   We consider sales commissions earned to be incremental costs of obtaining a contract with our customers. As a practical expedient, we expense these costs as incurred as our contracts with customers are less than one year.

v3.23.3

INVESTMENT IN HOTEL, NET	12 Months Ended
	Jun. 30, 2023
Real Estate [Abstract]
INVESTMENT IN HOTEL, NET	NOTE 4 – INVESTMENT IN HOTEL, NET   Investment in Hotel consisted of the following as of:  SCHEDULE OF INVESTMENT IN HOTEL, NET           Accumulated     Net Book   June 30, 2023   Cost     Depreciation     Value                       Land   $ 1,124,000     $ -     $ 1,124,000   Finance lease ROU assets     1,805,000       (1,239,000 )     566,000   Furniture and equipment     38,727,000       (29,682,000 )     9,045,000   Building and improvements     56,273,000       (32,627,000 )     23,646,000   Investment in Hotel, net   $ 97,929,000     $ (63,548,000 )   $ 34,381,000               Accumulated     Net Book   June 30, 2022   Cost     Depreciation     Value                       Land   $ 1,124,000     $ -     $ 1,124,000   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     56,274,000       (31,344,000 )     24,930,000   Investment in Hotel, net   $ 92,063,000     $ (60,833,000 )   $ 31,230,000     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 for the year ended June 30, 2023, and 2022 was $2,715,000 and $2,209,000, respectively.

v3.23.3

INVESTMENT IN MARKETABLE SECURITIES	12 Months Ended
	Jun. 30, 2023
Investments, Debt and Equity Securities [Abstract]
INVESTMENT IN MARKETABLE SECURITIES	NOTE 5 - INVESTMENT IN MARKETABLE SECURITIES   The Company’s investment in marketable securities consists primarily of corporate equities. The Company has also invested in income producing securities, which may include interests in real estate-based companies and REITs, where financial benefit to its shareholders through income and/or capital gain.     As of June 30, 2023 and 2022, all of the Company’s marketable securities are classified as trading securities. The change in the unrealized gains and losses on these investments are included in earnings. Trading securities are summarized as follows:  SCHEDULE OF CHANGES IN UNREALIZED GAINS AND LOSSES ON INVESTMENTS           Gross     Gross     Net         Investment   Cost     Unrealized Gain     Unrealized Loss     Unrealized (Loss)Gain     Fair Value                                   As of June 30, 2023                                         Corporate                                         Equities   $ 274,000     $ 133,000     $ (48,000 )   $ 85,000     $ 359,000                                             As of June 30, 2022                                         Corporate                                         Equities   $ 643,000     $ 42,000     $ (144,000 )   $ (102,000 )   $ 541,000     As of June 30, 2023 and 2022, the Company had $73,000 of unrealized losses related to securities held for over one year.   Net (loss) gain on marketable securities on the statement of operations is comprised of realized and unrealized losses. Below is the breakdown of the two components for the years ended June 30, 2023 and 2022, respectively.  SCHEDULE OF NET GAIN (LOSSES) ON MARKETABLE SECURITIES For the year ended June 30,   2023     2022   Realized loss on marketable securities   $ (137,000 )   $ (433,000 ) Realized loss on marketable securities related to Comstock     -       (2,056,000 ) Unrealized gain on marketable securities     188,000       1,348,000   Net gain (loss) on marketable securities   $ 51,000     $ (1,141,000 )

v3.23.3

FAIR VALUE MEASUREMENTS	12 Months Ended
	Jun. 30, 2023
Fair Value Disclosures [Abstract]
FAIR VALUE MEASUREMENTS	NOTE 6 - 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, due to securities broker and obligations for securities sold) or the nature and terms of the obligation (i.e., other notes payable and mortgage notes payable).   The assets measured at fair value on a recurring basis are as follows:  SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON RECURRING BASIS                         % of Total   As of June 30, 2023         Investment   Industry Group   Fair Value     Securities                 REITs and real estate companies     350,000       97.5 % Basic materials     9,000       2.5 % Investment in marketable securities    $ 359,000       100.0 %     As of June 30, 2022   Level 1   Assets:         Investment in marketable securities:         Communication services   $ 355,000   REITs and real estate companies     162,000   Basic materials     18,000   Utilities     5,000   Technology     1,000   Investment in marketable securities    $ 541,000     The fair values of investments in marketable securities are determined by the most recently traded price of each security at the balance sheet date.   Financial assets that are measured at fair value on a non-recurring basis and are not included in the tables above include “Other investments in non-marketable securities,” that were initially measured at cost and have been written down to fair value as a result of impairment or adjusted to record the fair value of new instruments received (i.e., preferred shares) in exchange for old instruments (i.e., debt instruments). We had no other Investments in non-marketable securities at June 30, 2023. The following table shows the fair value hierarchy for these assets measured at fair value on a non-recurring basis as follows:  SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON NONRECURRING BASIS Assets   Level 3     June 30, 2022     Net loss for the year ended June 30, 2022                       Other non-marketable investments   $ -     $ -     $ (20,000 )     Other investments in non-marketable securities are carried at cost net of any impairment loss. The Company has no significant influence or control over the entities that issue these investments. These investments are reviewed on a periodic basis for other-than-temporary impairment. When determining the fair value of these investments on a non-recurring basis, the Company uses valuation techniques such as the market approach and the unobservable inputs include factors such as conversion ratios and the stock price of the underlying convertible instruments. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

v3.23.3

OTHER ASSETS	12 Months Ended
	Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
OTHER ASSETS	NOTE 7 – OTHER ASSETS   Other assets consist of the following as of June 30:  SCHEDULE OF OTHER ASSETS     2023     2022   Inventory - Hotel   $ 27,000     $ 27,000   Prepaid expenses     424,000       534,000   Miscellaneous assets     284,000       291,000   Total other assets   $ 735,000     $ 852,000

v3.23.3

RELATED PARTY AND OTHER FINANCING TRANSACTIONS	12 Months Ended
	Jun. 30, 2023
Related Party And Other Financing Transactions
RELATED PARTY AND OTHER FINANCING TRANSACTIONS	NOTE 8 – RELATED PARTY AND OTHER FINANCING TRANSACTIONS   The following summarizes the balances of related party and other notes payable as of June 30, 2023 and 2022, respectively.  SCHEDULE OF RELATED PARTY AND OTHER NOTES PAYABLE As of June 30,   2023     2022   Related party note payable - InterGroup   $ 15,700,000     $ 14,200,000   Other note payable - Hilton     2,058,000       2,375,000   Other note payable - Aimbridge     896,000       1,146,000   Total related party and other notes payable   $ 18,654,000     $ 17,721,000       On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of $4,250,000 at 12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3% loan fee. The loan may be prepaid at any time without penalty. The loan was extended to July 31, 2023. On December 16, 2020, the Partnership and InterGroup entered into a loan modification agreement which increased the Partnership’s borrowing from InterGroup as needed up to $10,000,000. Upon the dissolution of the Partnership in December 2021, Portsmouth assumed the Partnership’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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, net of loan amortization costs of zero, respectively. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to InterGroup.   Note payable to Hilton (Franchisor) is a self-exhausting, interest free development incentive note which is reduced by approximately $317,000 annually through 2030 by Hilton if the Partnership is still a Franchisee with Hilton.   On February 1, 2017, Operating entered an HMA with Ambridge to manage the Hotel with an effective takeover date of February 3, 2017. The term of the management agreement is for an initial period of 10 years commencing on the takeover date and automatically renews for an additional year not to exceed five years in aggregate subject to certain conditions. The HMA also provides for Ambridge to advance a key money incentive fee to the Hotel for capital improvements in the amount of $2,000,000 under certain terms and conditions described in a separate key money agreement. The key money contribution shall be amortized in equal monthly amounts over an eight (8) year period commencing on the second anniversary of the takeover date. During the first quarter of fiscal year 2021, the Hotel obtained approval from Ambridge to use the key money for hotel operations and the funds were exhausted by December 31, 2020. The unamortized portion of the key money in the amount of $896,000 and $1,146,000 are included in other notes payable in the consolidated balance sheets at June 30, 2023 and 2022, respectively.   On April 9, 2020, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). On February 3, 2021, Justice entered into a loan agreement (“Second SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of $2,000,000 from the SBA Loan. As of June 30, 2021, Justice used all proceeds from the SBA Loan primarily for payroll costs. The SBA Loan was scheduled to mature on February 3, 2026, had a 1.00% interest rate, and was subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. On November 19, 2021, the SBA Loan was forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the consolidated statement of operations for the fiscal year ended June 30, 2022.   Future minimum principal payments for all related party and other financing transactions are as follows:  SCHEDULE OF FUTURE MINIMUM PRINCIPAL PAYMENTS For the year ending June 30,               2024   $ 111,050,000   2025     16,267,000   2026     567,000   2027     463,000   2028     317,000   Thereafter     473,000   Long term debt    $ 129,137,000     As of June 30, 2023 and 2022, the Company had accounts payable to related party of $7,283,000 and $4,908,000, respectively. These are amounts due to InterGroup and represent accrued interests and certain shared costs and expenses, primarily general and administrative expenses, rent, insurance, and other expenses.   To fund the redemption of limited partnership interests and to repay the prior mortgage of $42,940,000, Justice obtained a $97,000,000 mortgage loan and a $20,000,000 mezzanine loan in December 2013. The mortgage loan is secured by the Company’s principal asset, the Hotel. The mortgage loan bears an interest rate of 5.275% per annum with interest only payments due through January 2017. Beginning in February 2017, the loan began to amortize over a thirty-year period through its maturity date of January 1, 2024. Outstanding principal balance on the loan was $87,240,000 and $89,114,000 as of June 30, 2023 and 2022, respectively. As additional security for the mortgage loan, there is a limited guaranty executed by Portsmouth in favor of the mortgage lender. The mezzanine loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The mezzanine interest only loan had an interest rate of 9.75% per annum and a maturity date of January 1, 2024. As additional security for the mezzanine loan, there is a limited guaranty executed by Portsmouth in favor of the mezzanine lender. On July 31, 2019, Mezzanine refinanced the mezzanine loan by entering into a new mezzanine loan agreement (“New Mezzanine Loan Agreement”) with Cred Reit Holdco LLC in the amount of $20,000,000. The prior Mezzanine Loan which had a 9.75% per annum interest rate was paid off. Interest rate on the new mezzanine loan is 7.25% and the loan matures on January 1, 2024. Interest only payments are due monthly.   Effective May 11, 2017, InterGroup agreed to become an additional guarantor under the limited guaranty and an additional indemnitor under the environmental indemnity for Justice Investors limited partnership’s $97,000,000 mortgage loan and the $20,000,000 mezzanine loan. Pursuant to the agreement, InterGroup is required to maintain certain net worth and liquidity. As of June 30, 2023, InterGroup is in compliance with both requirements. Justice Operating Company, LLC has not been meeting certain of its loan covenants such as the Debt Service Coverage Ratio (“DSCR”) which would trigger the creation of a lockbox by the Lender for all cash collected by the Hotel. However, such lockbox has been created and utilized from the loan inception and will be in place up to loan maturity regardless of the DSCR.   The Company’s Board of Directors is currently comprised of directors John V. Winfield, William J. Nance, John C. Love, Yvonne Murphy, and Steve Grunwald. All the Company’s directors also serve as directors of InterGroup. The Company’s director and Chairman of the Audit Committee, William J. Nance, serves as Comstock’s director and Chairman of the Audit and Finance, Compensation and Nominating and Governance Committees of Comstock.     John V. Winfield serves as Chief Executive Officer and Chairman of the Company and InterGroup. Effective June 2016, Mr. Winfield became the Managing Director of Justice till its dissolution in December 2021. Depending on certain market conditions and various risk factors, the Chief Executive Officer and InterGroup may, at times, invest in the same companies in which the Company invests. The Company encourages such investments because it places personal resources of the Chief Executive Officer and the resources of InterGroup, at risk in connection with investment decisions made on behalf of the Company.   On May 24, 2021, John V. Winfield resigned effective immediately as the Company’s President and the Company’s Board of Directors elected David C. Gonzalez as the Company’s new President, effective as of May 24, 2021. Mr. Gonzalez serves as Chief Operating Officer of InterGroup and is an advisor of the Executive Strategic Real Estate and Securities Investment Committee of InterGroup and Portsmouth.

v3.23.3

MORTGAGE NOTES PAYABLE	12 Months Ended
	Jun. 30, 2023
Debt Disclosure [Abstract]
MORTGAGE NOTES PAYABLE	NOTE 9 – MORTGAGE NOTES PAYABLE   On December 18, 2013: (i) Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); and (ii) Justice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”). The Partnership was the sole member of Mezzanine until its dissolution in December 2021 when Portsmouth replaced the Partnership as the sole member of Mezzanine. Mezzanine is the sole member of Operating.   The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan. The proceeds of the Loan Agreements were used to fund the redemption of limited partnership interests and the pay-off of the prior mortgage.   The Mortgage Loan is secured by Operating’s principal asset, the Hilton San Francisco-Financial District (the “Property”). The Mortgage Loan bears an interest rate of 5.275% per annum and matures on January 1, 2024. The term of the loan is ten years with interest only due in the first three years and principal and interest payments to be made during the remaining seven years of the loan based on a thirty-year amortization schedule. The Mortgage Loan also requires payments for impounds related to property tax, insurance and capital improvement reserves. As additional security for the Mortgage Loan, there is a limited guaranty (“Mortgage Guaranty”) executed by the Company in favor of the Mortgage Lender.   The Mezzanine Loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The Mezzanine Loan had an interest rate of 9.75% per annum and a maturity date of January 1, 2024. Interest only payments were due monthly. On July 31, 2019, Mezzanine refinanced the Mezzanine Loan by entering into a new mezzanine loan agreement (“New Mezzanine Loan Agreement”) with Cred Reit Holdco LLC in the amount of $20,000,000. The prior Mezzanine Loan was paid off. Interest rate on the new mezzanine loan is 7.25% and the loan matures on January 1, 2024. Interest only payments are due monthly. As additional security for the new mezzanine loan, there is a limited guaranty executed by the Company in favor of Cred Reit Holdco LLC (the “Mezzanine Guaranty” and, together with the Mortgage Guaranty, the “Guaranties”).   The Guaranties are limited to what are commonly referred to as “bad boy” acts, including: (i) fraud or intentional misrepresentations; (ii) gross negligence or willful misconduct; (iii) misapplication or misappropriation of rents, security deposits, insurance or condemnation proceeds; and (iv) failure to pay taxes or insurance. The Guaranties are full recourse guaranties under identified circumstances, including failure to maintain “single purpose” status which is a factor in a consolidation of Operating or Mezzanine in a bankruptcy of another person, transfer or encumbrance of the Property in violation of the applicable loan documents, Operating or Mezzanine incurring debts that are not permitted, and the Property becoming subject to a bankruptcy proceeding. Pursuant to the Guaranties, the Partnership was required to maintain a certain minimum net worth and liquidity. Effective as of May 12, 2017, InterGroup agreed to become an additional guarantor under the limited guaranty and an additional indemnitor under the environmental indemnity for the $97,000,000 mortgage loan and the $20,000,000 mezzanine loan. Pursuant to the agreement, InterGroup is required to maintain a certain net worth and liquidity. As of June 30, 2023 and 2022, InterGroup is in compliance with both requirements. Justice Operating Company, LLC is not meeting certain of its loan covenants such as the Debt Service Coverage Ratio (“DSCR”) which would trigger the creation of a lockbox and cash sweep by the Lender for all cash collected by the Hotel, and under certain terms, would allow the Lender to request Operating to replace its hotel management company. The DSCR for Operating had been below 1.00 from third quarter of fiscal year 2020 to third quarter of fiscal year 2022 while it is required to maintain a DSCR of at least 1.10 to 1.00 for two consecutive quarters. However, such lockbox has been created and utilized from the loan inception and will be in place up to loan maturity regardless of the DSCR. Justice has not missed any of its debt service payments and does not anticipate missing any debt obligations for at least the next twelve months and beyond. Additionally, Operating’s DSCR for the fourth quarter of fiscal year 2023 was 0.23 for the Mortgage Loan and 0.19 for the Mezzanine Loan.     Each of the Loan Agreements contains customary representations and warranties, events of default, reporting requirements, affirmative covenants and negative covenants, which impose restrictions on, among other things, organizational changes of the respective borrower, operations of the Property, agreements with affiliates and third parties. Each of the Loan Agreements also provides for mandatory prepayments under certain circumstances (including casualty or condemnation events) and voluntary prepayments, subject to satisfaction of prescribed conditions set forth in the Loan Agreements.   As of June 30, 2023 and 2022, the Company had the following mortgages:  SCHEDULE OF MORTGAGES June 30, 2023     June 30, 2022     Interest Rate   Origination Date   Maturity Date $ 87,240,000     $ 89,114,000     Fixed 5.28%   December 18, 2013   January 1, 2024   20,000,000       20,000,000     Fixed 7.25%   July 31, 2019   January 1, 2024   107,240,000       109,114,000     Mortgage notes payable - hotel           (123,000 )     (367,000 )   Net debt issuance costs         $ 107,117,000     $ 108,747,000     Total mortgage notes payable - hotel           The Company is working with several prospective lenders to refinance its senior mortgage as well as the mezzanine debt prior to its maturity date of January 1, 2024.

v3.23.3

MANAGEMENT AGREEMENTS	12 Months Ended
	Jun. 30, 2023
Management Agreements
MANAGEMENT AGREEMENTS	NOTE 10 – MANAGEMENT AGREEMENTS   Operating entered into a HMA with Aimbridge Hospitality to manage the Hotel, along with its five-level parking garage, with an effective date of February 3, 2017. The term of the management agreement is for an initial period of ten years commencing on the February 3, 2017 date and automatically renews for successive one (1) year periods, not to exceed five years in the aggregate, subject to certain conditions. Under the terms on the HMA, base management fee (“Basic Fee”) payable to Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge shall be entitled to an annual incentive fee for each fiscal year equal to ten percent (10%) of the amount by which Gross Operating Profit in the current fiscal year exceeds the previous fiscal year’s Gross Operating Profit.   For the fiscal years ended June 30, 2023 and 2022, hotel management fees were $711,000 and $530,000, and incentive fees of $505,000 and $525,000, respectively, offset by key money amortization of $250,000 for both years and are included in Hotel operating expenses in the consolidated statements of operations. As part of the Hotel management agreement, Aimbridge, through the Company’s wholly owned subsidiary, Kearny Street Parking LLC, manages the parking garage in-house.

v3.23.3

CONCENTRATION OF CREDIT RISK	12 Months Ended
	Jun. 30, 2023
Risks and Uncertainties [Abstract]
CONCENTRATION OF CREDIT RISK	NOTE 11 – CONCENTRATION OF CREDIT RISK   As of June 30, 2023 and 2022, all accounts receivables are related to Hotel customers. The Hotel had two customers that accounted for 103%, or $131,000 of accounts receivable at June 30, 2023, and two customers that accounted for 88%, or $183,000 of accounts receivable at June 30, 2022.   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 be in excess of the Federal Deposit Insurance Corporation (“FDIC”) or other federally insured limits. Any loss incurred 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.

v3.23.3

INCOME TAXES	12 Months Ended
	Jun. 30, 2023
Income Tax Disclosure [Abstract]
INCOME TAXES	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,   2023     2022   Federal                 Current tax expense   $ -     $ -   Deferred tax expense     (5,513,000 )     (310,000 ) Federal income tax benefit     (5,513,000 )     (310,000 ) State                 Current tax expense     (1,000 )     (1,000 ) Deferred tax (expense) benefit     (2,398,000 )     169,000   State and local income tax benefit     (2,399,000 )     168,000   Total income tax (expense) benefit   $ (7,912,000 )   $ (142,000 )   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,   2023     2022                 Statutory federal tax rate     21.0 %     21.0 % State income taxes, net of federal tax benefit     -8.9 %     2.0 % Non-taxable PPP loan     -       21.7 % Provision to return adjustment     11.8 %     8.3 % Valuation allowance     -193.4 %     -236.7 % Deferral True-Up – Justice Basis Diff in FA     -       180.9 % Other     2.1 %     0.6 % Effective income tax rate reconciliation percentage     -167.4 %     -2.2 %   The components of the Company’s deferred tax assets and (liabilities) as of June 30, 2023 and 2022 are as follows:  SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES     2023     2022   Deferred tax assets                 Net operating loss carryforward   $ 13,073,000     $ 10,925,000   Interest expense     3,185,000       2,231,000   Accruals and reserves     565,000       587,000   Depreciation     15,054,000       15,646,000   State tax credits     524,000       -   Capital loss carryforward     1,322,000       -   Other     61,000       1,800,000   Deferred tax assets before valuation allowance     33,784,000       31,189,000   Less Valuation allowance     (33,784,000 )     (22,775,000 ) Deferred tax assets after valuation allowance     -       8,414,000                     Deferred tax liabilities                 State taxes     -       (503,000 ) Deferred Tax Liabilities     -       (503,000 ) Net deferred tax assets   $ -     $ 7,911,000     Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets to determine if it is more likely than not that the deferred tax asset will be realized. As of June 30, 2023, it has been determined that it is more likely than not that the deferred tax asset will not be recognized. Thus, there is a full valuation allowance of $33,784,000 as of June 30, 2023. This was an increase of $11,009,000 from June 30, 2022.   As of June 30, 2023, the Company had net operating loss (“NOL”) carryforwards of approximately $41,835,000 and $48,500,000 for federal and state purposes, respectively. Of the $41,835,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $27,128,000 of post-2017 NOLs can be carried forward indefinitely. Note that the post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $4,429,000 for federal and state purposes. The capital losses begin to expire in 2024 for both federal and state purposes. There are immaterial California state tax credits of $524,000 which expire in various years.   As of June 30, 2022, the Company had net operating loss (“NOL”) carryforwards of approximately $35,011,000 and $40,416,000 for federal and state purposes, respectively. Of the $35,011,000 federal NOL’s carryforwards , $14,697,000 expire in varying amount through 2037 and $20,314,000 of post 2017 NOL’s can be carried forward indefinitely. Note that the post 2017 NOL’s may only offset 80% of future taxable income.     Utilization of the certain tax attributes may be subject to a substantial annual limitation if it should be determined that there has been a change in the ownership of more than 50 percent of the value of the Company’s stock, pursuant to Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.   The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examination by federal, state, and local jurisdictions, where applicable. Note that partnership dissolved on July 15, 2021 when Portsmouth acquired 100% of Justice LLP.   As of June 30, 2023, tax years beginning in fiscal years 2019 and 2018 remain open to examination by the major tax jurisdictions 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       2023   Unrecognized Tax Benefits at June 30, 2022   $ -   Increase in tax positions taken     1,665,000   Decrease in tax positions taken     -   Unrecognized Tax Benefits at June 30, 2023   $ 1,665,000     $0 and $1,665,000 of unrecognized tax benefits as of June 30, 2022 and June 30, 2023, respectively, would impact the effective tax rate if recognized. The unrecognized tax benefit is not expected to reverse in 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, 2022 and June 30, 2023, no interest and penalties were recorded.

v3.23.3

SEGMENT INFORMATION	12 Months Ended
	Jun. 30, 2023
Segment Reporting [Abstract]
SEGMENT INFORMATION	NOTE 13 - SEGMENT INFORMATION   The Company operates in two reportable segments, the operation of the Hotel (“Hotel Operations”) and the investment of its cash in marketable securities and other investments (“Investment Transactions”). These two operating segments, as presented in the consolidated financial statements, reflect how management internally reviews each segment’s performance. Management also makes operational and strategic decisions based on this same information.   Information below represents reporting segments for the years ended June 30, 2023 and 2022, respectively. Segment loss from Hotel operations consists of the operation of the Hotel and operation of the garage. Loss from investments consists of net investment gain (loss), dividend and interest income and investment related expenses.  SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT As of and for the year   Hotel     Investment               ended June 30, 2023   Operations     Transactions     Other     Total   Revenues   $ 42,027,000     $ -     $ -     $ 42,027,000   Segment operating expenses     (34,457,000 )     -       (1,793,000 )     (36,250,000 ) Segment income (loss)     7,570,000       -       (1,793,000 )     5,777,000   Interest expense - mortgage     (6,467,000 )     -       -       (6,467,000 ) Interest expense – related party     (1,725,000 )     -       -       (1,725,000 ) Depreciation and amortization expense     (2,715,000 )     -       -       (2,715,000 ) Loss from investments     -       (161,000 )     -       (161,000 ) Income tax expense     -       -       (7,912,000 )     (7,912,000 ) Net loss   $ (3,337,000 )   $ (161,000 )   $ (9,705,000 )   $ (13,203,000 ) Total assets   $ 40,457,000     $ 359,000     $ 284,000     $ 41,100,000     As of and for the year   Hotel     Investment               ended June 30, 2022   Operations     Transactions     Other     Total   Revenues   $ 31,534,000     $ -     $ -     $ 31,534,000   Segment operating expenses     (27,451,000 )     -       (1,130,000 )     (28,581,000 ) Segment income (loss)     4,083,000       -       (1,130,000 )     2,953,000   Interest expense – mortgage     (6,549,000 )     -       -       (6,549,000 ) Interest expense – related party     (1,375,000 )     -       -       (1,375,000 ) Gain on debt forgiveness     2,000,000       -       -       2,000,000   Depreciation and amortization expense     (2,209,000 )     -       -       (2,209,000 ) Loss from investments     -       (1,243,000 )     -       (1,243,000 ) Income tax expense     -       -       (142,000 )     (142,000 ) Net loss   $ (4,050,000 )   $ (1,243,000 )   $ (1,272,000 )   $ (6,565,000 ) Total assets   $ 40,810,000     $ 541,000     $ 8,448,000     $ 49,799,000

v3.23.3

RELATED PARTY TRANSACTIONS	12 Months Ended
	Jun. 30, 2023
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	NOTE 14 – RELATED PARTY TRANSACTIONS   As discussed in Note 8 – Related Party and Other Financing Transactions, 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 increased Portsmouth’s borrowing from InterGroup as needed up to $16,000,000. As of June 30, 2023 and 2022, the balance of the loan was $15,700,000 and $14,200,000, respectively, and are included in the related party notes payable in the consolidated balance sheets. In July 2023, the note maturity date was extended to July 31, 2025 and the borrowing amount available was increased to $20,000,000. The Company agreed to a 0.5% loan extension and modification fee payable to 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 pro rata utilization of resources. For the years ended June 30, 2023 and 2022, these expenses were approximately $144,000 for each year.   All of the Company’s Directors serve as directors of InterGroup.   As Chairman of the Executive Strategic Real Estate and Securities Investment Committee and Chief Executive Officer (CEO), John V. Winfield, directs the investment activity of the Company in public and private markets pursuant to authority granted by the Board of Directors. Mr. Winfield also serves as President, Chief Executive Officer, and Chairman of InterGroup and oversees the investment activity of InterGroup. Effective June 2016, Mr. Winfield became the Managing Director of Justice. Depending on certain market conditions and various risk factors, the Chief Executive Officer and InterGroup may, at times, invest in the same companies in which the Company invests. Such investments align the interests of the Company with the interests of these related parties because it places the personal resources of the Chief Executive Officer and the resources of InterGroup at risk in substantially the same manner as the Company in connection with investment decisions made on behalf of the Company.

v3.23.3

COMMITMENTS AND CONTINGENCIES	12 Months Ended
	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	NOTE 15 – COMMITMENTS AND CONTINGENCIES   Cash Management Agreement   As part of the Hotel refinancing effective December 18, 2013, Operating entered into a Cash Management Agreement with Bank of America, N.A. (“Lender”) and Wells Fargo Bank, N.A. (“Cash Management Bank”) whereby all cash received by Operating is to be deposited into a business checking account controlled by the Cash Management Bank up to the loan maturity date. Additionally, other terms of the Cash Management Agreement provide that effective February 2019 or upon a Property Improvement Plan (“PIP”) requirement by Hilton (“Franchisor”) deemed the “Cash Sweep Period” during which all excess cash generated by Operating beyond the monthly budgeted expenses and debt services including principal and interest, insurance reserves, real estate taxes reserve, furniture fixtures and equipment (“FF&E”) reserves, for the senior and mezzanine loans, will be held by the Cash Management Bank for future hotel improvements as required by the date or a PIP. Currently, any and all funds are being controlled by the Cash Management Bank according to the Cash Management Agreement.   Franchise Agreements   The Partnership entered into a Franchise License Agreement (the “License Agreement”) with the HLT Existing Franchise Holding LLC (“Hilton”) on December 10, 2004. The term of the License agreement was for an initial period of 15 years commencing on the date the Hotel began operating as a Hilton hotel, with an option to extend the License Agreement for another five years, subject to certain conditions. On June 26, 2015, Operating and Hilton entered into an amended franchise agreement which amongst other things extended the License Agreement through 2030, and also provided the Partnership certain key money cash incentives to be earned through 2030.   Since the opening of the Hotel as a full brand Hilton in January 2006, it has incurred monthly royalties, program fees and information technology recapture charges equal to a percentage of the Hotel’s gross room revenue. Fees for such services during fiscal year 2023 and 2022 totaled approximately $3,029,000 and $2,107,000, respectively.     Hotel Employees   The hotel operations had 187 employees as of June 30, 2023. On February 3, 2017, Aimbridge assumed all labor union agreements and Justice provides all funding for all payroll and related costs. As of June 30, 2023, approximately 90% of those employees were represented by one of three labor unions, and their terms of employment were determined under various collective bargaining agreements (“CBAs”) to which Aimbridge was a party. CBA for Local 2 (Hotel and Restaurant Employees) expired on August 13, 2022 and a new Memorandum of Understanding (“MOU”) was signed June 26, 2023. CBA for Local 856 (International Brotherhood of Teamsters) expired on December 31, 2022 and a new agreement was signed on April 26, 2023. CBA for Local 39 (Stationary Engineers) will expire on July 31, 2024.   Negotiation of collective bargaining agreements, which includes not just terms and conditions of employment, but scope and coverage of employees, is a regular and expected course of business operations for the Company and Aimbridge. The Company expects and anticipates that the terms of conditions of CBAs will have an impact on wage and benefit costs, operating expenses, and certain hotel operations during the life of each CBA and incorporates these principles into its operating and budgetary practices.   Legal Matters   Portsmouth Square, Inc., through its operating company Justice Investors Operating Company, LLC, a Delaware limited liability company (the “Company”), is the owner of the real property located at 750 Kearny Street in San Francisco, currently improved with a 27 – story building which houses a Hilton Hotel (the “Property”). The Property was purchased and improved pursuant to the terms of a series of agreements with the City and County of San Francisco (the “City”) in the early 1970’s. The terms of the agreements and subsequent approvals and permits included a condition by which the Company was required to construct an ornamental overhead pedestrian bridge across Kearny Street, connecting the Property to a nearby City park and underground parking garage known as Portsmouth Square (the “Bridge”). Included in the approval process was the City’s issuance of a Major Encroachment Permit (“Permit”) allowing the Bridge to span over Kearney Street. As of May 24, 2022, the City has purported to revoke the Permit and on June 13, 2022, has directed the Company to submit a general bridge removal and restoration plan (the “Plan”) at the Company’s expense. The Company disputes the legality of the purported revocation of the Permit. The Company further disputes the existence of any legal or contractual obligation to remove the Bridge at its expense. In particular, representatives of the Company participated in meetings with the City on and at various times after August 1, 2019, to discuss a collaborative process for the possible removal of the Bridge. Until the purported revocation of the Permit in 2022, the City representatives repeatedly and consistently promised and agreed that the City will pay for the associated costs of any Bridge removal. Nevertheless, without waiving any rights, in an effort to understand all of the available options, and to provide a response to the City’s directives, the Company has engaged a Project Manager, a structural engineering firm and an architect to advise on the development of a Plan for the Bridge removal, as well as the reconstruction of the front of the Hilton Hotel. The Company has been working cooperatively with the City on the process for removal of the Bridge and its related physical encroachments, including obtaining regulatory approvals and permits. A final Plan is currently not expected to be completed until late calendar year of 2023, and permits are unlikely to be obtained until mid-2024 at the earliest. The Company is currently in discussion with the City regarding both the process and financial responsibility for the implementation of the Plan and reconstruction of the impacted portions of the Hotel. Those discussions are expected to continue through the Autumn of 2023.   The Company may be subject to legal proceedings, claims, and litigation arising in the ordinary course of business. The Company will defend itself vigorously against any such claims. Management does not believe that the impact of such matters will have a material effect on the financial conditions or result of operations when resolved.

v3.23.3

SUBSEQUENT EVENTS	12 Months Ended
	Jun. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE 16 – SUBSEQUENT EVENTS   The Company evaluated subsequent events through the date that the accompanying financial statements were issued and has determined that no material subsequent events exist through the date of this filing.

v3.23.3

BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Policies)	12 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Description of Business	Description of Business   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 the Company.   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, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating. The Hotel is a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030.   Operating entered into a hotel management agreement (“HMA”) with Aimbridge Hospitality (“Aimbridge”) to manage the Hotel, along with its five-level parking garage, with an effective date of February 3, 2017. The term of the management agreement is for an initial period of ten years commencing on the February 3, 2017 date and automatically renews for successive one (1) year periods, not to exceed five years in the aggregate, subject to certain conditions. Under the terms on the HMA, base management fee (“Basic Fee”) payable to Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge shall be entitled to an annual incentive fee for each fiscal year equal to ten percent (10%) of the amount by which Gross Operating Profit in the current fiscal year exceeds the previous fiscal year’s Gross Operating Profit.   As of June 30, 2023, The InterGroup Corporation (“InterGroup”), a public company, owns approximately 75.7% of the outstanding common shares of Portsmouth. As of June 30, 2023, the Company’s Chairman of the Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the outstanding common shares of the Company. Mr. Winfield also serves as the President, Chairman of the Board and Chief Executive Officer of InterGroup and owns approximately 68.6% of the outstanding common shares of InterGroup as of June 30, 2023.
Principles of Consolidation	Principles of Consolidation   The consolidated financial statements include the accounts of the Company and Justice up to its dissolution in December 2021 at which time all subsidiaries of Justice became subsidiaries of Portsmouth as the Company replaced Justice as the single member of Justice’s subsidiaries where appropriate. All significant inter-company transactions and balances have been eliminated.
Investment in Hotel, Net	Investment in Hotel, Net   Property and equipment are stated at cost. Building improvements are depreciated on a straight-line basis over their useful lives ranging from 3 to 39 years. Furniture, fixtures, and equipment are depreciated on a straight-line basis over their useful lives ranging from 3 to 7 years.   Repairs and maintenance are charged to expense as incurred. Costs of significant renewals and improvements are capitalized and depreciated over the shorter of its remaining estimated useful life or life of the asset. The cost of assets sold or retired and the related accumulated depreciation are removed from the accounts; any resulting gain or loss is included in other income (expenses).   The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with generally accepted accounting principles (“GAAP”). If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between the assets’ carrying amount and its estimated fair value. If impairment is recognized, the reduced carrying amount of the asset will be accounted for as its new cost. For a depreciable asset, the new cost will be depreciated over the asset’s remaining useful life. Generally, fair values are estimated using discounted cash flow, replacement cost or market comparison analyses. The process of evaluating for impairment requires estimates as to future events and conditions, which are subject to varying market and economic factors. Therefore, it is reasonably possible that a change in estimate resulting from judgments as to future events could occur which would affect the recorded amounts of the property. No impairment losses were recorded for the years ended June 30, 2023 and 2022.
Investment in Marketable Securities	Investment in Marketable Securities   Marketable securities are stated at fair value as determined by the most recently traded price of each security at the balance sheet date. Marketable securities are classified as trading securities with all unrealized gains and losses on the Company’s investment portfolio recorded through the consolidated statements of operations.
Cash and Cash Equivalents	Cash and Cash Equivalents   Cash equivalents consist of highly liquid investments with an original maturity of three months or less when purchased and are carried at cost, which approximates fair value. As of June 30, 2023 and 2022, the Company does not have any cash equivalents.
Restricted Cash	Restricted Cash   Restricted cash is comprised of amounts held by lenders for payment of real estate taxes, insurance, replacement and capital addition reserves for the Hotel.
Accounts Receivable - Hotel, Net	Accounts Receivable - Hotel, Net   Accounts receivable from Hotel customers are carried at cost less an allowance for doubtful accounts that is based on management’s assessment of the collectability of accounts receivable. The net accounts receivable balance on July 1, 2021 was $211,000. As of June 30, 2023 and 2022, the Company has gross accounts receivable of $420,000 and $392,000 respectively, and allowance for doubtful accounts of $1,000 and $15,000, respectively. The Company extends unsecured credit to its customers but mitigates the associated credit risk by performing ongoing credit evaluations of its customers.
Other Assets	Other Assets   Other assets include prepaid insurance, estimated life insurance proceeds, prepaid expenses, other investments, net, and other miscellaneous assets. Other investments include non-marketable securities (carried at cost, net of any impairments loss). The Company has no significant influence or control over the entities that issue these investments. These investments are reviewed on a periodic basis for other-than-temporary impairment. The Company reviews several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to: (i) the length of time an investment is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer and (iv) our ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. For the years ended June 30, 2023 and 2022, the Company recorded impairment losses related to other investments of zero and $20,000, respectively.
Income Taxes	Income Taxes   The Company consolidated Justice (“Hotel”) for financial reporting purposes up to its dissolution in December 2021 and was not taxed on its non-controlling interest in the Hotel. Effective July 15, 2021, the Company become the owner of 100% of Justice and began to include all the Hotel’s income and expense accounts into its income taxes calculations going forward. An income tax benefit was recorded during year ended June 30, 2022 for the pre-tax loss. However June 30, 2023 is an expense on the pre-tax loss due to the recording of a full valuation allowance on the Companies deferred tax assets.     Deferred income taxes are calculated under the liability method. Deferred income tax assets and liabilities are based on differences between the financial statement and tax basis of assets and liabilities at the current enacted tax rates. Changes in deferred income tax assets and liabilities are included as a component of income tax expense. Changes in deferred income tax assets and liabilities attributable to changes in enacted tax rates are charged or credited to income tax expense in the period of enactment. Valuation allowances are established for certain deferred tax assets where realization is not likely.   The Company accounts for its uncertain tax positions pursuant to ASC 740, Income Taxes. This guidance prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities, a benefit will be recognized at the largest amount that it believes is cumulatively greater than 50% likely to be realized. A table summarizing the Company’s uncertain positions is presented in the income tax footnote section. Further, any interest or penalties associated with uncertain tax positions shall be recorded in the income tax provision. As of June 30, 2023 and 2022, no interest and penalties were recorded.
Due to Securities Broker	Due to Securities Broker   Various securities brokers have advanced funds to the Company for the purchase of marketable securities under standard margin agreements. These advanced funds are recorded as a liability.
Accounts Payable and Other Liabilities	Accounts Payable and Other Liabilities   Accounts payable and other liabilities include trade payables, advance customer deposits, accrued wages, accrued real estate taxes, and other liabilities.
Fair Value of Financial Instruments	Fair Value of Financial Instruments   Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Accounting standards for fair value measurement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:   Level 1–inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.   Level 2–inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.   Level 3–inputs to the valuation methodology are unobservable and significant to the fair value.
Revenue Recognition	Revenue Recognition   Performance obligations   We identified the following performance obligations for which revenue is recognized as the respective performance obligations are satisfied, which results in recognizing the amount we expect to be entitled to for providing the goods or services:     ● 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.         ● Noncancelable 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.   We do not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less. Due to the nature of our business, our revenue is not significantly impacted by refunds. Cash payments received in advance of guests staying at our hotel are refunded to hotel guests if the guest cancels within the specified time period, before any services are rendered. Refunds related to service are generally recognized as an adjustment to the transaction price at the time the hotel stay occurs or services are rendered. See Note 3 – Revenue.
Advertising Costs	Advertising Costs   Advertising costs are expensed as incurred and are included in Hotel operating expenses in the consolidated statements of operations. Advertising costs were $130,000 and $61,000 for the years ended June 30, 2023 and 2022, respectively.
Basic and Diluted Loss per Share	Basic and Diluted Loss per Share   Basic loss per share is calculated based upon the weighted average number of common shares outstanding during each fiscal year. As of June 30, 2023 and 2022, the Company did not have any potentially dilutive securities outstanding.
Use of Estimates	Use of Estimates   The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Actual results may differ from those estimates. Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets and when appropriate, records tax valuation allowances based on that evidence and estimates. Such estimates primarily relate to the recording of allowance for doubtful accounts which are based on management’s assessment of the collectability of accounts receivable, as of the end of the fiscal year. As of June 30, 2023 based on taxable income that may be available under tax law the deferred taxed asset is not set more likely than not to be realized.
Reclassifications	Reclassifications   Certain line items on the balance sheet as of June 30, 2023, for the years ended June 30, 2023 and 2022 have been reclassified to conform to the current period presentation. The related party relationship has been disclosed separately in the financial statements than the other debt obligations the Company has.
Debt Issuance Costs	Debt Issuance Costs   Debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the debt liability and are amortized over the life of the debt. Loan amortization costs are included in interest expense in the consolidated statement of operations.
Recently Issued and Adopted Accounting Pronouncements	Recently Issued and Adopted Accounting Pronouncements   As of June 30, 2023, there was no material impact from the recent adoption of new accounting pronouncements, nor expected material impact from recently issued accounting pronouncements yet to be adopted, on the Company’s consolidated financial statements.
Going Concern	Going Concern   The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As discussed in Note 9 – Mortgage Notes Payable, as of June 30, 2023, the outstanding balance consists of a senior mortgage loan and mezzanine loan totaling $107,117,000. Both loans mature on January 1, 2024, in addition, the Company has recurring losses and has an accumulated deficit of 105,727,000.   Due to these factors and the Company’s ability to successfully refinance the debt on favorable terms in the current lending environment gives rise to substantial doubt about the Company’s ability to continue as a going concern for one year after the financial statement issuance date.   The Company is exploring the possibility of refinancing its senior mortgage and mezzanine debt with potential lenders. Alternatively, the Company is also exploring the possibility of a loan modification or extension to the existing debt with the current lenders, however, the Company may be unable to access further financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. During 2021 and first part of calendar 2022, we took advantage of the slow periods to make certain capital improvements including complete refinishing of all guest room furniture, resurfacing half of the hotel bathtubs that needed repair, refreshed meeting space and lobby paint and vinyl, replaced all bed frames and socks, and completed the carpet and wall covering corridor installation. In November 2022, we began our guestroom renovation and had completed approximately 200 guestrooms as of June 30, 2023. Hotel improvements are ongoing to remain competitive and we anticipate completing the guestroom renovations by the end March 2024. Once the Company completes its full renovation, management anticipates its high occupancy to continue and its average daily rates to increase as it completes renovation up to the point of generating a positive cash flows.   The financial statements do not include any adjustments to the carrying amounts of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

v3.23.3

LIQUIDITY (Tables)	12 Months Ended
	Jun. 30, 2023
Liquidity
SCHEDULE OF FINANCIAL OBLIGATIONS INCLUDING INTEREST PAYMENTS	The following table provides a summary as of June 30, 2023, the Company’s material financial obligations which also including interest payments:  SCHEDULE OF FINANCIAL OBLIGATIONS INCLUDING INTEREST PAYMENTS           Year     Year     Year     Year     Year             Total     2024     2025     2026     2027     2028     Thereafter   Mortgage notes payable   $ 107,240,000     $ 107,240,000     $ -     $ -     $ -     $ -     $ -   Related party notes payable     15,700,000       -       15,700,000       -       -       -       -   Oher notes payable     2,954,000       567,000       567,000       567,000       463,000       317,000       473,000   Interest     3,243,000       3,243,000       -       -       -       -       -   Total   $ 129,137,000     $ 111,050,000     $ 16,267,000     $ 567,000     $ 463,000     $ 317,000     $ 473,000

v3.23.3

REVENUE (Tables)	12 Months Ended
	Jun. 30, 2023
Revenue from Contract with Customer [Abstract]
SCHEDULE OF REVENUE DISAGGREGATION BY REVENUE STREAMS	The following table present our revenue disaggregated by revenue streams.  SCHEDULE OF REVENUE DISAGGREGATION BY REVENUE STREAMS For the year ended June 30,   2023     2022   Hotel revenues:                 Hotel rooms   $ 35,684,000     $ 26,599,000   Food and beverage     2,625,000       1,471,000   Garage     2,790,000       3,112,000   Other operating departments     928,000       352,000   Total Hotel revenue   $ 42,027,000     $ 31,534,000

v3.23.3

INVESTMENT IN HOTEL, NET (Tables)	12 Months Ended
	Jun. 30, 2023
Real Estate [Abstract]
SCHEDULE OF INVESTMENT IN HOTEL, NET	Investment in Hotel consisted of the following as of:  SCHEDULE OF INVESTMENT IN HOTEL, NET           Accumulated     Net Book   June 30, 2023   Cost     Depreciation     Value                       Land   $ 1,124,000     $ -     $ 1,124,000   Finance lease ROU assets     1,805,000       (1,239,000 )     566,000   Furniture and equipment     38,727,000       (29,682,000 )     9,045,000   Building and improvements     56,273,000       (32,627,000 )     23,646,000   Investment in Hotel, net   $ 97,929,000     $ (63,548,000 )   $ 34,381,000               Accumulated     Net Book   June 30, 2022   Cost     Depreciation     Value                       Land   $ 1,124,000     $ -     $ 1,124,000   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     56,274,000       (31,344,000 )     24,930,000   Investment in Hotel, net   $ 92,063,000     $ (60,833,000 )   $ 31,230,000

v3.23.3

INVESTMENT IN MARKETABLE SECURITIES (Tables)	12 Months Ended
	Jun. 30, 2023
Investments, Debt and Equity Securities [Abstract]
SCHEDULE OF CHANGES IN UNREALIZED GAINS AND LOSSES ON INVESTMENTS	SCHEDULE OF CHANGES IN UNREALIZED GAINS AND LOSSES ON INVESTMENTS           Gross     Gross     Net         Investment   Cost     Unrealized Gain     Unrealized Loss     Unrealized (Loss)Gain     Fair Value                                   As of June 30, 2023                                         Corporate                                         Equities   $ 274,000     $ 133,000     $ (48,000 )   $ 85,000     $ 359,000                                             As of June 30, 2022                                         Corporate                                         Equities   $ 643,000     $ 42,000     $ (144,000 )   $ (102,000 )   $ 541,000
SCHEDULE OF NET GAIN (LOSSES) ON MARKETABLE SECURITIES	Net (loss) gain on marketable securities on the statement of operations is comprised of realized and unrealized losses. Below is the breakdown of the two components for the years ended June 30, 2023 and 2022, respectively.  SCHEDULE OF NET GAIN (LOSSES) ON MARKETABLE SECURITIES For the year ended June 30,   2023     2022   Realized loss on marketable securities   $ (137,000 )   $ (433,000 ) Realized loss on marketable securities related to Comstock     -       (2,056,000 ) Unrealized gain on marketable securities     188,000       1,348,000   Net gain (loss) on marketable securities   $ 51,000     $ (1,141,000 )

v3.23.3

FAIR VALUE MEASUREMENTS (Tables)	12 Months Ended
	Jun. 30, 2023
Fair Value Disclosures [Abstract]
SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON RECURRING BASIS	The assets measured at fair value on a recurring basis are as follows:  SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON RECURRING BASIS                         % of Total   As of June 30, 2023         Investment   Industry Group   Fair Value     Securities                 REITs and real estate companies     350,000       97.5 % Basic materials     9,000       2.5 % Investment in marketable securities    $ 359,000       100.0 %     As of June 30, 2022   Level 1   Assets:         Investment in marketable securities:         Communication services   $ 355,000   REITs and real estate companies     162,000   Basic materials     18,000   Utilities     5,000   Technology     1,000   Investment in marketable securities    $ 541,000
SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON NONRECURRING BASIS	SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON NONRECURRING BASIS Assets   Level 3     June 30, 2022     Net loss for the year ended June 30, 2022                       Other non-marketable investments   $ -     $ -     $ (20,000 )

v3.23.3

OTHER ASSETS (Tables)	12 Months Ended
	Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
SCHEDULE OF OTHER ASSETS	Other assets consist of the following as of June 30:  SCHEDULE OF OTHER ASSETS     2023     2022   Inventory - Hotel   $ 27,000     $ 27,000   Prepaid expenses     424,000       534,000   Miscellaneous assets     284,000       291,000   Total other assets   $ 735,000     $ 852,000

v3.23.3

RELATED PARTY AND OTHER FINANCING TRANSACTIONS (Tables)	12 Months Ended
	Jun. 30, 2023
Related Party And Other Financing Transactions
SCHEDULE OF RELATED PARTY AND OTHER NOTES PAYABLE	The following summarizes the balances of related party and other notes payable as of June 30, 2023 and 2022, respectively.  SCHEDULE OF RELATED PARTY AND OTHER NOTES PAYABLE As of June 30,   2023     2022   Related party note payable - InterGroup   $ 15,700,000     $ 14,200,000   Other note payable - Hilton     2,058,000       2,375,000   Other note payable - Aimbridge     896,000       1,146,000   Total related party and other notes payable   $ 18,654,000     $ 17,721,000
SCHEDULE OF FUTURE MINIMUM PRINCIPAL PAYMENTS	Future minimum principal payments for all related party and other financing transactions are as follows:  SCHEDULE OF FUTURE MINIMUM PRINCIPAL PAYMENTS For the year ending June 30,               2024   $ 111,050,000   2025     16,267,000   2026     567,000   2027     463,000   2028     317,000   Thereafter     473,000   Long term debt    $ 129,137,000

v3.23.3

MORTGAGE NOTES PAYABLE (Tables)	12 Months Ended
	Jun. 30, 2023
Debt Disclosure [Abstract]
SCHEDULE OF MORTGAGES	As of June 30, 2023 and 2022, the Company had the following mortgages:  SCHEDULE OF MORTGAGES June 30, 2023     June 30, 2022     Interest Rate   Origination Date   Maturity Date $ 87,240,000     $ 89,114,000     Fixed 5.28%   December 18, 2013   January 1, 2024   20,000,000       20,000,000     Fixed 7.25%   July 31, 2019   January 1, 2024   107,240,000       109,114,000     Mortgage notes payable - hotel           (123,000 )     (367,000 )   Net debt issuance costs         $ 107,117,000     $ 108,747,000     Total mortgage notes payable - hotel

v3.23.3

INCOME TAXES (Tables)	12 Months Ended
	Jun. 30, 2023
Income Tax Disclosure [Abstract]
SCHEDULE OF PROVISION FOR INCOME TAX (EXPENSE) BENEFIT	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,   2023     2022   Federal                 Current tax expense   $ -     $ -   Deferred tax expense     (5,513,000 )     (310,000 ) Federal income tax benefit     (5,513,000 )     (310,000 ) State                 Current tax expense     (1,000 )     (1,000 ) Deferred tax (expense) benefit     (2,398,000 )     169,000   State and local income tax benefit     (2,399,000 )     168,000   Total income tax (expense) benefit   $ (7,912,000 )   $ (142,000 )
SCHEDULE OF STATUTORY FEDERAL INCOME TAX RATE	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,   2023     2022                 Statutory federal tax rate     21.0 %     21.0 % State income taxes, net of federal tax benefit     -8.9 %     2.0 % Non-taxable PPP loan     -       21.7 % Provision to return adjustment     11.8 %     8.3 % Valuation allowance     -193.4 %     -236.7 % Deferral True-Up – Justice Basis Diff in FA     -       180.9 % Other     2.1 %     0.6 % Effective income tax rate reconciliation percentage     -167.4 %     -2.2 %
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES	The components of the Company’s deferred tax assets and (liabilities) as of June 30, 2023 and 2022 are as follows:  SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES     2023     2022   Deferred tax assets                 Net operating loss carryforward   $ 13,073,000     $ 10,925,000   Interest expense     3,185,000       2,231,000   Accruals and reserves     565,000       587,000   Depreciation     15,054,000       15,646,000   State tax credits     524,000       -   Capital loss carryforward     1,322,000       -   Other     61,000       1,800,000   Deferred tax assets before valuation allowance     33,784,000       31,189,000   Less Valuation allowance     (33,784,000 )     (22,775,000 ) Deferred tax assets after valuation allowance     -       8,414,000                     Deferred tax liabilities                 State taxes     -       (503,000 ) Deferred Tax Liabilities     -       (503,000 ) Net deferred tax assets   $ -     $ 7,911,000
SCHEDULE OF UNRECOGNIZED TAX BENEFIT	SCHEDULE OF UNRECOGNIZED TAX BENEFIT       2023   Unrecognized Tax Benefits at June 30, 2022   $ -   Increase in tax positions taken     1,665,000   Decrease in tax positions taken     -   Unrecognized Tax Benefits at June 30, 2023   $ 1,665,000

v3.23.3

SEGMENT INFORMATION (Tables)	12 Months Ended
	Jun. 30, 2023
Segment Reporting [Abstract]
SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT	Information below represents reporting segments for the years ended June 30, 2023 and 2022, respectively. Segment loss from Hotel operations consists of the operation of the Hotel and operation of the garage. Loss from investments consists of net investment gain (loss), dividend and interest income and investment related expenses.  SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT As of and for the year   Hotel     Investment               ended June 30, 2023   Operations     Transactions     Other     Total   Revenues   $ 42,027,000     $ -     $ -     $ 42,027,000   Segment operating expenses     (34,457,000 )     -       (1,793,000 )     (36,250,000 ) Segment income (loss)     7,570,000       -       (1,793,000 )     5,777,000   Interest expense - mortgage     (6,467,000 )     -       -       (6,467,000 ) Interest expense – related party     (1,725,000 )     -       -       (1,725,000 ) Depreciation and amortization expense     (2,715,000 )     -       -       (2,715,000 ) Loss from investments     -       (161,000 )     -       (161,000 ) Income tax expense     -       -       (7,912,000 )     (7,912,000 ) Net loss   $ (3,337,000 )   $ (161,000 )   $ (9,705,000 )   $ (13,203,000 ) Total assets   $ 40,457,000     $ 359,000     $ 284,000     $ 41,100,000     As of and for the year   Hotel     Investment               ended June 30, 2022   Operations     Transactions     Other     Total   Revenues   $ 31,534,000     $ -     $ -     $ 31,534,000   Segment operating expenses     (27,451,000 )     -       (1,130,000 )     (28,581,000 ) Segment income (loss)     4,083,000       -       (1,130,000 )     2,953,000   Interest expense – mortgage     (6,549,000 )     -       -       (6,549,000 ) Interest expense – related party     (1,375,000 )     -       -       (1,375,000 ) Gain on debt forgiveness     2,000,000       -       -       2,000,000   Depreciation and amortization expense     (2,209,000 )     -       -       (2,209,000 ) Loss from investments     -       (1,243,000 )     -       (1,243,000 ) Income tax expense     -       -       (142,000 )     (142,000 ) Net loss   $ (4,050,000 )   $ (1,243,000 )   $ (1,272,000 )   $ (6,565,000 ) Total assets   $ 40,810,000     $ 541,000     $ 8,448,000     $ 49,799,000

v3.23.3

BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Details Narrative) - USD ($)			12 Months Ended
	Jul. 15, 2021	Feb. 03, 2017	Jun. 30, 2023	Jun. 30, 2022	Jul. 01, 2021
Property, Plant and Equipment [Line Items]
Managment agreement term		10 years
Option to extend		automatically renews for successive one (1) year periods, not to exceed five years in the aggregate, subject to certain conditions
Percentage of management fee payable		1.70%
Percentage of incentive fee payable		10.00%
Cash and cash equivalents			$ 0	$ 0
Accounts receivable			420,000	392,000	$ 211,000
Allowance for doubtful accounts			1,000	15,000
Impairment losses on other investments			0	20,000
Advertising expense			130,000	61,000
Mortgage loan			107,117,000	108,747,000
Accumulated deficit			$ 105,727,000	92,524,000
Minimum [Member] | Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			15 years
Minimum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			3 years
Maximum [Member] | Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			39 years
Maximum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			7 years
Hotel [Member]
Property, Plant and Equipment [Line Items]
Impairment losses			$ 0	$ 0
Hotel [Member] | Minimum [Member] | Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			3 years
Hotel [Member] | Minimum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			3 years
Hotel [Member] | Maximum [Member] | Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			39 years
Hotel [Member] | Maximum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life			7 years
Santa Fe Financial Corporation [Member] | John V. Winfield [Member]
Property, Plant and Equipment [Line Items]
Ownership percentage			2.50%
Santa Fe Financial Corporation [Member] | John V. Winfield [Member] | Inter Group Corporation [Member]
Property, Plant and Equipment [Line Items]
Ownership percentage			68.60%
Parent Company [Member] | Inter Group Corporation [Member]
Property, Plant and Equipment [Line Items]
Ownership percentage			75.70%
Justice Investors Limited Partnership [Member]
Property, Plant and Equipment [Line Items]
Subsidiary of limited liability company or limited partnership, ownership interest	100.00%
Remaining non-controlling interest	0.70%

v3.23.3

SCHEDULE OF FINANCIAL OBLIGATIONS INCLUDING INTEREST PAYMENTS (Details) - Obligations [Member]	Jun. 30, 2023 USD ($)
Debt Instrument [Line Items]
Long-term Debt	$ 129,137,000
2024	111,050,000
2025	16,267,000
2026	567,000
2027	463,000
2028	317,000
Thereafter	473,000
Mortgage Notes Payable [Member]
Debt Instrument [Line Items]
Long-term Debt	107,240,000
2024	107,240,000
2025
2026
2027
2028
Thereafter
Related Party Notes Payable [Member]
Debt Instrument [Line Items]
Long-term Debt	15,700,000
2024
2025	15,700,000
2026
2027
2028
Thereafter
Other Notes Payable [Member]
Debt Instrument [Line Items]
Long-term Debt	2,954,000
2024	567,000
2025	567,000
2026	567,000
2027	463,000
2028	317,000
Thereafter	473,000
Interest [Member]
Debt Instrument [Line Items]
Long-term Debt	3,243,000
2024	3,243,000
2025
2026
2027
2028
Thereafter

v3.23.3

LIQUIDITY (Details Narrative) - USD ($)					1 Months Ended	12 Months Ended
	Jul. 01, 2023	Feb. 03, 2017	Feb. 01, 2017	Jul. 02, 2014	Feb. 28, 2017	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2021	Dec. 16, 2020	Jan. 31, 2017
Net cash used in operating activities						$ 2,741,000	$ (2,761,000)
Cash and cash equivalents						2,295,000	2,662,000
Restricted cash						2,911,000	6,226,000
Marketable securities, net						$ 359,000	411,000
Debt instrument interest rate stated percentage										5.275%
Debt instrument terms		10 years	10 years
Debt instrument, maturity date, description					Beginning in February 2017, the loan began to amortize over a thirty-year period through its maturity date of January 1, 2024	The mezzanine loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The mezzanine interest only loan had an interest rate of 9.75% per annum and a maturity date of January 1, 2024
Current loan balance						$ 18,654,000	17,721,000
Line of credit						20,000,000
Loan Modification Agreement [Member] | InterGroup Corp [Member]
Working capital								$ 16,000,000
Justice Investors Limited Partnership and Intergroup [Member] | Loan Modification Agreement [Member]
Debt instrument, face amount						$ 11,350,000			$ 10,000,000
Debt instrument interest rate stated percentage						0.50%
Current loan balance						$ 15,700,000	14,200,000
Amortization of financing costs						0	$ 0
Justice Investors Limited Partnership and Intergroup [Member] | Loan Modification Agreement [Member] | Subsequent Event [Member]
Debt instrument interest rate stated percentage	0.50%
Debt instrument, maturity date	Jul. 31, 2025
Line of credit	$ 20,000,000
Unsecured Debt [Member]
Debt instrument, face amount				$ 4,250,000
Debt instrument interest rate stated percentage				12.00%
Debt instrument terms				2 years
Percentage of loan fee received				3.00%
Debt instrument, maturity date, description				The loan was extended to July 31, 2023
Guest Room [Member]
Capital improvements						$ 5,866,000

v3.23.3

SCHEDULE OF REVENUE DISAGGREGATION BY REVENUE STREAMS (Details) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue [Line Items]
Total Hotel revenue	$ 42,027,000	$ 31,534,000
Hotel Rooms [Member]
Disaggregation of Revenue [Line Items]
Total Hotel revenue	35,684,000	26,599,000
Food and Beverage [Member]
Disaggregation of Revenue [Line Items]
Total Hotel revenue	2,625,000	1,471,000
Garage [Member]
Disaggregation of Revenue [Line Items]
Total Hotel revenue	2,790,000	3,112,000
Other Operating Departments [Member]
Disaggregation of Revenue [Line Items]
Total Hotel revenue	$ 928,000	$ 352,000

v3.23.3

REVENUE (Details Narrative) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jul. 01, 2022	Jun. 30, 2022	Jun. 30, 2021
Revenue from Contract with Customer [Abstract]
Contract with customer, liability	$ 290,000	$ 493,000	$ 493,000	$ 161,000
Contract with customer, liability, revenue recognized	$ 493,000

v3.23.3

SCHEDULE OF INVESTMENT IN HOTEL, NET (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Property, Plant and Equipment [Line Items]
Cost	$ 97,929,000	$ 92,063,000
Accumulated Depreciation	(63,548,000)	(60,833,000)
Net Book Value	34,381,000	31,230,000
Land [Member]
Property, Plant and Equipment [Line Items]
Cost	1,124,000	1,124,000
Accumulated Depreciation
Net Book Value	1,124,000	1,124,000
Finance Lease ROU Assets [Member]
Property, Plant and Equipment [Line Items]
Cost	1,805,000	1,805,000
Accumulated Depreciation	(1,239,000)	(922,000)
Net Book Value	566,000	883,000
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Cost	38,727,000	32,860,000
Accumulated Depreciation	(29,682,000)	(28,567,000)
Net Book Value	9,045,000	4,293,000
Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Cost	56,273,000	56,274,000
Accumulated Depreciation	(32,627,000)	(31,344,000)
Net Book Value	$ 23,646,000	$ 24,930,000

v3.23.3

INVESTMENT IN HOTEL, NET (Details Narrative) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Real Estate [Line Items]
Depreciation and amortization	$ 2,715,000	$ 2,209,000
Furniture and Fixtures [Member] | Minimum [Member]
Real Estate [Line Items]
Property, plant and equipment, useful lives	3 years
Furniture and Fixtures [Member] | Maximum [Member]
Real Estate [Line Items]
Property, plant and equipment, useful lives	7 years
Building Improvements [Member] | Minimum [Member]
Real Estate [Line Items]
Property, plant and equipment, useful lives	15 years
Building Improvements [Member] | Maximum [Member]
Real Estate [Line Items]
Property, plant and equipment, useful lives	39 years

v3.23.3

SCHEDULE OF CHANGES IN UNREALIZED GAINS AND LOSSES ON INVESTMENTS (Details) - Equity Securities [Member] - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Marketable Securities [Line Items]
Cost	$ 274,000	$ 643,000
Gross Unrealized Gain	133,000	42,000
Gross Unrealized Loss	(48,000)	(144,000)
Net Unrealized Loss	85,000	(102,000)
Fair Value	$ 359,000	$ 541,000

v3.23.3

SCHEDULE OF NET GAIN (LOSSES) ON MARKETABLE SECURITIES (Details) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Investments, Debt and Equity Securities [Abstract]
Realized loss on marketable securities	$ (137,000)	$ (433,000)
Realized loss on marketable securities related to Comstock		(2,056,000)
Unrealized gain on marketable securities	188,000	1,348,000
Net gain (loss) on marketable securities	$ 51,000	$ (1,141,000)

v3.23.3

INVESTMENT IN MARKETABLE SECURITIES (Details Narrative) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Securities Held for Over One Year [Member]
Marketable Securities [Line Items]
Unrealized losses related to securities	$ 73,000	$ 73,000

v3.23.3

SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON RECURRING BASIS (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities	$ 359,000
Investment interest rate	100.00%
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities		$ 541,000
REITs and Real Estate Companies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities	$ 350,000
Investment interest rate	97.50%
REITs and Real Estate Companies [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities		162,000
Basic Materials [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities	$ 9,000
Investment interest rate	2.50%
Basic Materials [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities		18,000
Communication Services [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities		355,000
Utilities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities		5,000
Technology [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment in marketable securities		$ 1,000

v3.23.3

SCHEDULE OF FAIR VALUE, ASSETS MEASURED ON NONRECURRING BASIS (Details)	12 Months Ended
	Jun. 30, 2022 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other non-marketable investments
Net loss for the period	(20,000)
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other non-marketable investments

v3.23.3

SCHEDULE OF OTHER ASSETS (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Inventory - Hotel	$ 27,000	$ 27,000
Prepaid expenses	424,000	534,000
Miscellaneous assets	284,000	291,000
Total other assets	$ 735,000	$ 852,000

v3.23.3

SCHEDULE OF RELATED PARTY AND OTHER NOTES PAYABLE (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Defined Benefit Plan Disclosure [Line Items]
Total related party and other notes payable	$ 18,654,000	$ 17,721,000
Note Payable Inter Group [Member]
Defined Benefit Plan Disclosure [Line Items]
Total related party and other notes payable	15,700,000	14,200,000
Note Payable Hilton [Member]
Defined Benefit Plan Disclosure [Line Items]
Total related party and other notes payable	2,058,000	2,375,000
Note Payable Aimbridge [Member]
Defined Benefit Plan Disclosure [Line Items]
Total related party and other notes payable	$ 896,000	$ 1,146,000

v3.23.3

SCHEDULE OF FUTURE MINIMUM PRINCIPAL PAYMENTS (Details) - Related Party and Other Financing Transaction [Member]	Jun. 30, 2023 USD ($)
Defined Benefit Plan Disclosure [Line Items]
2024	$ 111,050,000
2025	16,267,000
2026	567,000
2027	463,000
2028	317,000
Thereafter	473,000
Long term debt	$ 129,137,000

v3.23.3

RELATED PARTY AND OTHER FINANCING TRANSACTIONS (Details Narrative) - USD ($)							1 Months Ended	12 Months Ended
	Jul. 01, 2023	Apr. 09, 2020	Jul. 31, 2019	Feb. 03, 2017	Feb. 01, 2017	Jul. 02, 2014	Feb. 28, 2017	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2021	Dec. 16, 2020	May 11, 2017	Jan. 31, 2017	Dec. 31, 2013
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage													5.275%
Debt instrument terms				10 years	10 years
Debt instrument, maturity date, description							Beginning in February 2017, the loan began to amortize over a thirty-year period through its maturity date of January 1, 2024	The mezzanine loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The mezzanine interest only loan had an interest rate of 9.75% per annum and a maturity date of January 1, 2024
Current loan balance								$ 18,654,000	$ 17,721,000
Line of credit								20,000,000
Key money incentive advance to related party					$ 2,000,000			505,000	525,000
Debt Instrument amortization period					8 years
Gain on debt extinguishment									2,000,000
Outstanding loan principal amount								87,240,000	89,114,000
New Mezzanine Loan [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage			7.25%
Debt instrument maturity date			Jan. 01, 2024
Note Payable Hilton [Member]
Debt Instrument [Line Items]
Current loan balance								2,058,000	2,375,000
Notes reduction								$ 317,000
Debt instrument, payment terms								through 2030
Note Payable Aimbridge [Member]
Debt Instrument [Line Items]
Current loan balance								$ 896,000	1,146,000
Unamortized portion of key money payment								896,000	1,146,000
Related Party [Member]
Debt Instrument [Line Items]
Accounts payable to related party								7,283,000	4,908,000
Related Party [Member] | Prior Mortgage [Member]
Debt Instrument [Line Items]
Accounts payable to related party														$ 42,940,000
Related Party [Member] | Mortgage Loan [Member]
Debt Instrument [Line Items]
Accounts payable to related party												$ 97,000,000		97,000,000
Related Party [Member] | Mezzanine Loan [Member]
Debt Instrument [Line Items]
Accounts payable to related party												$ 20,000,000		$ 20,000,000
Loan Modification Agreement [Member] | InterGroup Corp [Member]
Debt Instrument [Line Items]
Working capital										$ 16,000,000
Unamortized portion of key money payment								15,700,000	14,200,000
Justice Investors Limited Partnership and Intergroup [Member] | Loan Modification Agreement [Member]
Debt Instrument [Line Items]
Debt instrument, face amount								$ 11,350,000			$ 10,000,000
Debt instrument, interest rate, stated percentage								0.50%
Current loan balance								$ 15,700,000	14,200,000
Amortization of financing costs								$ 0	$ 0
Justice Investors Limited Partnership and Intergroup [Member] | Loan Modification Agreement [Member] | Subsequent Event [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	0.50%
Debt instrument maturity date	Jul. 31, 2025
Line of credit	$ 20,000,000
CIBC Bank USA [Member] | Cares Act [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage		1.00%
Debt instrument maturity date		Feb. 03, 2026
Proceeds from loans		$ 2,000,000
Cred Reit Holdco LLC [Member] | New Mezzanine Loan [Member]
Debt Instrument [Line Items]
Debt instrument, face amount			$ 20,000,000
Debt instrument, interest rate, stated percentage			9.75%
Unsecured Debt [Member]
Debt Instrument [Line Items]
Debt instrument, face amount						$ 4,250,000
Debt instrument, interest rate, stated percentage						12.00%
Debt instrument terms						2 years
Percentage of loan fee received						3.00%
Debt instrument, maturity date, description						The loan was extended to July 31, 2023

v3.23.3

SCHEDULE OF MORTGAGES (Details) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jan. 31, 2017
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage			5.275%
Mortgage notes payable - hotel	$ 107,240,000	$ 109,114,000
Net debt issuance costs	(123,000)	(367,000)
Total mortgage notes payable - hotel	107,117,000	108,747,000
Fixed Mortgage Notes Payable Hotel 5.28% [Member]
Debt Instrument [Line Items]
Mortgage notes payable hotel	$ 87,240,000	89,114,000
Debt instrument, interest rate, stated percentage	5.28%
Debt instrument, maturity date range, start	Dec. 18, 2013
Debt instrument, maturity date	Jan. 01, 2024
Fixed Mortgage Notes Payable Hotel 7.25% [Member]
Debt Instrument [Line Items]
Mortgage notes payable hotel	$ 20,000,000	$ 20,000,000
Debt instrument, interest rate, stated percentage	7.25%
Debt instrument, maturity date range, start	Jul. 31, 2019
Debt instrument, maturity date	Jan. 01, 2024

v3.23.3

MORTGAGE NOTES PAYABLE (Details Narrative)	1 Months Ended	3 Months Ended	12 Months Ended
	Jul. 31, 2019 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($)	May 12, 2017 USD ($)
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Investment in mortgage loans on real estate, interest rate			5.275%
Investment in mortgage loans on real estate, final maturity date, description			matures on January 1, 2024
Mortgage loan on real estate final maturity period			10 years
Debt service coverage ratio description			The DSCR for Operating had been below 1.00 from third quarter of fiscal year 2020 to third quarter of fiscal year 2022 while it is required to maintain a DSCR of at least 1.10 to 1.00 for two consecutive quarters
Mortgage Loans [Member]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Investment in mortgage loans		$ 97,000,000	$ 97,000,000
Guarantor obligations, current carrying value				$ 97,000,000
Debt service coverage ratio		0.23
Mezzanine Loan [Member]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Investment in mortgage loans		$ 20,000,000	$ 20,000,000
Investment in mortgage loans on real estate, interest rate			9.75%
Investment in mortgage loans on real estate, final maturity date			Jan. 01, 2024
Guarantor obligations, current carrying value				$ 20,000,000
Debt service coverage ratio		0.19
New Mezzanine Loan [Member]
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Investment in mortgage loans	$ 20,000,000
Investment in mortgage loans on real estate, interest rate	7.25%
Investment in mortgage loans on real estate, final maturity date	Jan. 01, 2024

v3.23.3

MANAGEMENT AGREEMENTS (Details Narrative) - USD ($)			12 Months Ended
	Feb. 03, 2017	Feb. 01, 2017	Jun. 30, 2023	Jun. 30, 2022
Management Agreements
Debt instrument terms	10 years	10 years
Management fee description			Under the terms on the HMA, base management fee (“Basic Fee”) payable to Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel revenue. In addition to the Basic Fee, Aimbridge shall be entitled to an annual incentive fee for each fiscal year equal to ten percent (10%)
Hotel management fees			$ 711,000	$ 530,000
Key money incentive advance to related party		$ 2,000,000	505,000	525,000
Amortization expense			$ 250,000	$ 250,000

v3.23.3

CONCENTRATION OF CREDIT RISK (Details Narrative) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Concentration Risk [Line Items]
Accounts receivable, net	$ 419,000	$ 377,000
Two Customers [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | Hotel [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	103.00%	88.00%
Accounts receivable, net	$ 131,000	$ 183,000

v3.23.3

SCHEDULE OF PROVISION FOR INCOME TAX (EXPENSE) BENEFIT (Details) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Income Tax Disclosure [Abstract]
Current tax expense
Deferred tax expense	(5,513,000)	(310,000)
Federal income tax benefit	(5,513,000)	(310,000)
Current tax expense	(1,000)	(1,000)
Deferred tax (expense) benefit	(2,398,000)	169,000
State and local income tax benefit	(2,399,000)	168,000
Total income tax (expense) benefit	$ (7,912,000)	$ (142,000)

v3.23.3

SCHEDULE OF STATUTORY FEDERAL INCOME TAX RATE (Details)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Income Tax Disclosure [Abstract]
Statutory federal tax rate	21.00%	21.00%
State income taxes, net of federal tax benefit	(8.90%)	2.00%
Non-taxable PPP loan		21.70%
Provision to return adjustment	11.80%	8.30%
Valuation allowance	(193.40%)	(236.70%)
Deferral True-Up – Justice Basis Diff in FA		180.90%
Other	2.10%	0.60%
Effective income tax rate reconciliation percentage	(167.40%)	(2.20%)

v3.23.3

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($)	Jun. 30, 2023	Jun. 30, 2022
Income Tax Disclosure [Abstract]
Net operating loss carryforward	$ 13,073,000	$ 10,925,000
Interest expense	3,185,000	2,231,000
Accruals and reserves	565,000	587,000
Depreciation	15,054,000	15,646,000
State tax credits	524,000
Capital loss carryforward	1,322,000
Other	61,000	1,800,000
Deferred tax assets before valuation allowance	33,784,000	31,189,000
Less Valuation allowance	(33,784,000)	(22,775,000)
Deferred tax assets after valuation allowance		8,414,000
State taxes		(503,000)
Deferred Tax Liabilities		(503,000)
Net deferred tax assets		$ 7,911,000

v3.23.3

SCHEDULE OF UNRECOGNIZED TAX BENEFIT (Details)	12 Months Ended
	Jun. 30, 2023 USD ($)
Income Tax Disclosure [Abstract]
Unrecognized Tax Benefits at June 30, 2022
Increase in tax positions taken	1,665,000
Decrease in tax positions taken
Unrecognized Tax Benefits at June 30, 2023	$ 1,665,000

v3.23.3

INCOME TAXES (Details Narrative) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Operating Loss Carryforwards [Line Items]
Valuation allowance	$ 33,784,000	$ 22,775,000
Increase in valuation allowance		11,009,000
Net operating loss carryforwards, federal	41,835,000	35,011,000
Operating loss carryforwards	$ 13,073,000	$ 10,925,000
Future taxable income percentage	80.00%	80.00%
Capital loss carry forward	$ 4,429,000
Deferred tax credit	524,000
Unrecognized tax beneifit	1,665,000
Interest and penalities	0	0
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforwards, state	48,500,000	40,416,000
2037 [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	14,707,000	14,697,000
2017 NOLs [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	$ 27,128,000	$ 20,314,000

v3.23.3

SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT (Details) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Segment Reporting Information [Line Items]
Revenues	$ 42,027,000	$ 31,534,000
Segment operating expenses	36,250,000	(28,581,000)
Segment income (loss)	5,777,000	2,953,000
Interest expense – mortgage	(6,467,000)	(6,549,000)
Interest expense – related party	(1,725,000)	(1,375,000)
Depreciation and amortization expense	(2,715,000)	(2,209,000)
Loss from investments	(161,000)	(1,243,000)
Income tax expense	(7,912,000)	(142,000)
Net loss	(13,203,000)	(6,565,000)
Total assets	41,100,000	49,799,000
Gain on debt forgiveness		2,000,000
Hotel Operations [Member]
Segment Reporting Information [Line Items]
Revenues	42,027,000	31,534,000
Segment operating expenses	34,457,000	(27,451,000)
Segment income (loss)	7,570,000	4,083,000
Interest expense – mortgage	(6,467,000)	(6,549,000)
Interest expense – related party	(1,725,000)	(1,375,000)
Depreciation and amortization expense	(2,715,000)	(2,209,000)
Loss from investments
Income tax expense
Net loss	(3,337,000)	(4,050,000)
Total assets	40,457,000	40,810,000
Gain on debt forgiveness		2,000,000
Investment Transactions [Member]
Segment Reporting Information [Line Items]
Revenues
Segment operating expenses
Segment income (loss)
Interest expense – mortgage
Interest expense – related party
Depreciation and amortization expense
Loss from investments	(161,000)	(1,243,000)
Income tax expense
Net loss	(161,000)	(1,243,000)
Total assets	359,000	541,000
Gain on debt forgiveness
Other [Member]
Segment Reporting Information [Line Items]
Revenues
Segment operating expenses	1,793,000	(1,130,000)
Segment income (loss)	(1,793,000)	(1,130,000)
Interest expense – mortgage
Interest expense – related party
Depreciation and amortization expense
Loss from investments
Income tax expense	(7,912,000)	(142,000)
Net loss	(9,705,000)	(1,272,000)
Total assets	$ 284,000	8,448,000
Gain on debt forgiveness

v3.23.3

SEGMENT INFORMATION (Details Narrative)	12 Months Ended
	Jun. 30, 2023 Segments
Segment Reporting [Abstract]
Number of reportable segments	2

v3.23.3

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2021	Jan. 31, 2017
Related Party Transaction [Line Items]
Borrowing amount	$ 20,000,000
Debt instrument interest rate stated percentage				5.275%
InterGroup Corp [Member]
Related Party Transaction [Line Items]
Costs and expenses, related party	144,000	$ 144,000
Loan Modification Agreement [Member] | InterGroup Corp [Member]
Related Party Transaction [Line Items]
Line of credit facility maximum borrowing capacity			$ 16,000,000
Balance of loans	$ 15,700,000	$ 14,200,000
Line of credit facility, expiration date	Jul. 31, 2025
Justice Investors Limited Partnership and Intergroup [Member] | Loan Modification Agreement [Member]
Related Party Transaction [Line Items]
Debt instrument, face amount			$ 11,350,000
Debt instrument interest rate stated percentage	0.50%

v3.23.3

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Service fees	$ 3,029,000	$ 2,107,000
Franchise License Agreement [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License agreement period	15 years

---