UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

~~[X]~~

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

For the quarterly period ended ~~March~~December 31, 2021

~~[ ]~~☐

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

1516 S. Bundy Dr., Suite 200, Los Angeles, California90025

(Address of principal executive offices) (Zip Code)

(310)889-2500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

~~[X]~~ ☒ Yes ~~[ ]~~ ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

~~[X] Yes [ ] No~~

☒ Yes ☐ No

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

	Large accelerated filer ~~[ ]~~☐		Accelerated filer ~~[ ]~~☐

	Non-accelerated filer ~~[X]~~ ☒		Smaller reporting company ~~[X]~~☒

			Emerging growth company ~~[ ]~~☐

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

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

~~[ ]~~

☐ Yes ~~[X]~~ ☒ No

The number of shares outstanding of registrant’s Common Stock, as of ~~May 21, 2021~~February 14, 2022 was ~~734,187.~~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

TABLE OF CONTENTS

		Page

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of ~~March~~December 31, 2021 (Unaudited) and June 30, ~~2020 (Unaudited)~~2021	3
	Condensed Consolidated Statements of Operations for the Three Months ended ~~March~~December 31, 2021 and 2020 (Unaudited)	4
	Condensed Consolidated Statements of Operations for the ~~Nine~~Six Months ended ~~March~~December 31, 2021 and 2020 (Unaudited)	5
	Condensed Consolidated Statements of Shareholders’ Deficit for the ~~Nine~~Six Months ended ~~March~~December 31, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months ended ~~March~~December 31, 2021 and 2020 (Unaudited)	7
	Notes to the Condensed Consolidated Financial Statements	~~8-20~~8-18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~21-28~~19-26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

	PART II – OTHER INFORMATION

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	28

~~Item 4.~~	~~Controls and Procedures~~	28

	~~PART II – OTHER INFORMATION~~
Item 1.	Legal Proceedings	2927

Item 1A.	Risk Factors	2927

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2927

Item 3.	Defaults Upon Senior Securities	2927

Item 4.	Mine Safety Disclosures	2927

Item 5.	Other Information	2927

Item 6.	Exhibits	2927

Signatures	30
28

- 2 -

PART 1

FINANCIAL INFORMATION

Item 1 – Condensed Consolidated Financial Statements

PORTSMOUTH SQUARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

~~(Unaudited)~~

As of	December 31, 2021			June 30, 2021
	(unaudited)
ASSETS
Investment in hotel, net	$	31,734,000		$	31,513,000
Investment in marketable securities		1,443,000			3,536,000
Cash and cash equivalents		288,000			2,310,000
Restricted cash		6,534,000			6,222,000
Accounts receivable - hotel, net		218,000			194,000
Other assets, net		1,041,000			721,000
Deferred tax assets		9,208,000			8,055,000
Total assets	$	50,466,000		$	52,551,000

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Liabilities:
Accounts payable and other liabilities	$	8,408,000		$	8,294,000
Accounts payable to related party		3,748,000			3,193,000
Due to securities broker		654,000			1,715,000
Related party note payable - InterGroup		11,325,000			6,650,000
Related party notes payable		3,804,000			4,088,000
Other note payable - SBA Loan		-			2,000,000
Mortgage notes payable - hotel, net		109,329,000			110,134,000
Total liabilities		137,268,000			136,074,000

Shareholders’ deficit:
Common stock, 0 par value: Authorized shares - 750,000; 734,187 shares issued and outstanding shares as of December 31, 2021 and June 30, 2021		2,092,000			2,092,000
Accumulated deficit		(88,894,000	)		(84,960,000	)
Total Portsmouth shareholders’ deficit		(86,802,000	)		(82,868,000	)
Noncontrolling interest		-			(655,000	)
Total shareholders’ deficit		(86,802,000	)		(83,523,000	)
Total liabilities and shareholders’ deficit	$	50,466,000		$	52,551,000

As of March 31, 2021 June 30, 2020
ASSETS
Investment in hotel, net $ 31,435,000 $ 32,481,000
Investment in real estate - 980,000
Investment in marketable securities 1,603,000 565,000
Other investments, net 20,000 87,000
Cash and cash equivalents 3,298,000 4,710,000
Restricted cash 5,785,000 11,675,000
Accounts receivable - hotel, net 122,000 251,000
Other assets, net 873,000 831,000
Deferred tax assets 8,969,000 5,974,000

Total assets $ 52,105,000 $ 57,554,000

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Liabilities:
Accounts payable and other liabilities - Justice $ 6,476,000 $ 7,588,000
Accounts payable and other liabilities 269,000 255,000
Accounts payable to related party 2,991,000 2,385,000
Related party notes payable 10,145,000 7,604,000
Other note payable 6,719,000 4,719,000
Finance Leases 783,000 1,098,000
Mortgage notes payable - hotel, net 110,465,000 111,446,000

Total liabilities 137,848,000 135,095,000

Shareholders’ deficit:
Common stock, no par value: Authorized shares - 750,000; 734,183 shares issued and outstanding shares as of March 31, 2021 and June 30, 2020 2,092,000 2,092,000
Accumulated deficit (85,438,000 ) (73,809,000 )
Total Portsmouth shareholders’ deficit (83,346,000 ) (71,717,000 )
Noncontrolling interest (2,397,000 ) (5,824,000 )
Total shareholders’ deficit (85,743,000 ) (77,541,000 )

Total liabilities and shareholders’ deficit $ 52,105,000 $ 57,554,000

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

- 3 -

PORTSMOUTH SQUARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

For the three months ended March 31, 2021 2020

Revenue - Hotel $ 2,902,000 $ 11,259,000

Costs and operating expenses
Hotel operating expenses (3,990,000 ) (10,060,000 )
Hotel depreciation and amortization expense (503,000 ) (547,000 )
General and administrative expense (201,000 ) (167,000 )

Total costs and operating expenses (4,694,000 ) (10,774,000 )

(Loss) income from operations (1,792,000 ) 485,000

Other income (expense)
Interest expense - mortgage (1,675,000 ) (1,703,000 )
Interest expense - related party (158,000 ) (90,000 )
Net loss on marketable securities (15,000 ) (294,000 )
Net gain (loss) on marketable securities - Comstock 1,283,000 (13,000 )
Impairment loss on other investments (15,000 ) (38,000 )
Dividend and interest income 1,000 41,000
Trading and margin interest expense (35,000 ) (33,000 )

Total other expense, net (614,000 ) (2,130,000 )

Loss before income taxes (2,406,000 ) (1,645,000 )
Income tax benefit 669,000 440,000

Net loss (1,737,000 ) (1,205,000 )
Less:Net (gain) loss attributable to noncontrolling interest (223,000 ) 82,000

Net loss attributable to Portsmouth $ (1,960,000 ) $ (1,123,000 )

Basic and diluted net loss per share attributable to Portsmouth $ (2.67 ) $ (1.53 )

Weighted average number of common shares outstanding - basic and diluted 734,183 734,183

PORTSMOUTH SQUARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the three months ended December 31,	2021			2020

Revenue - Hotel	$	6,348,000		$	3,109,000

Costs and operating expenses
Hotel operating expenses		(6,479,000	)		(5,133,000	)
Hotel depreciation and amortization expense		(514,000	)		(533,000	)
General and administrative expense		(282,000	)		(184,000	)

Total costs and operating expenses		(7,275,000	)		(5,850,000	)

Loss from operations		(927,000	)		(2,741,000	)

Other income (expense)
Interest expense - mortgage		(1,654,000	)		(1,700,000	)
Interest expense - related party		(303,000	)		(91,000	)
Net gain on marketable securities		1,467,000			73,000
Net loss on marketable securities - Comstock		(1,879,000	)		(14,000	)
Gain on debt extinguishment		2,000,000			-
Impairment loss on other investments		(20,000	)		(1,000	)
Dividend and interest income		30,000			-
Trading and margin interest expense		(52,000	)		(25,000	)

Total other expense, net		(411,000	)		(1,758,000	)

Loss before income taxes		(1,338,000	)		(4,499,000	)
Income tax benefit		378,000			1,255,000

Net Loss		(960,000	)		(3,244,000	)
Less: Net loss attributable to noncontrolling interest		-			259,000

Net loss attributable to Portsmouth	$	(960,000	)	$	(2,985,000	)

Basic and diluted net loss per share attributable to Portsmouth	$	(1.31	)	$	(4.07	)

Weighted average number of common shares outstanding - basic and diluted		734,187			734,183

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

- 4 -

PORTSMOUTH SQUARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

For the nine months ended March 31, 2021 2020

Revenue - Hotel $ 9,436,000 $ 41,589,000

Costs and operating expenses
Hotel operating expenses (14,156,000 ) (33,138,000 )
Hotel depreciation and amortization expense (1,566,000 ) (1,653,000 )
General and administrative expense (561,000 ) (553,000 )

Total costs and operating expenses (16,283,000 ) (35,344,000 )

(Loss) income from operations (6,847,000 ) 6,245,000

Other income (expense)
Interest expense - mortgage (5,076,000 ) (5,270,000 )
Interest expense - related party (339,000 ) (271,000 )
Net gain (loss) on marketable securities 69,000 (327,000 )
Net gain (loss) on marketable securities - Comstock 1,315,000 (194,000 )
Impairment loss on other investments (38,000 ) (38,000 )
Dividend and interest income 16,000 129,000
Trading and margin interest expense (91,000 ) (103,000 )

Total other expense, net (4,144,000 ) (6,074,000 )

(Loss) income before income taxes (10,991,000 ) 171,000
Income tax benefit (expense) 2,995,000 (25,000 )

Net (loss) income (7,996,000 ) 146,000
Less:Net loss (income) attributable to the noncontrolling interest 300,000 (62,000 )

Net (loss) income attributable to Portsmouth $ (7,696,000 ) $ 84,000

Basic and diluted net (loss) income per share attributable to Portsmouth $ (10.48 ) $ 0.11

Weighted average number of common shares outstanding - basic and diluted 734,183 734,183

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

~~- 5 -~~

PORTSMOUTH SQUARE, ~~INC~~INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~SHAREHOLDERS’ DEFICIT~~OPERATIONS

(Unaudited)

Total
Portsmouth Total
Common Stock Accumulated Shareholders’ Noncontrolling Shareholders’
Shares Amount Deficit Deficit Interest Deficit

Balance at July 1, 2020 734,183 $ 2,092,000 $ (73,809,000 ) $ (71,717,000 ) $ (5,824,000 ) $ (77,541,000 )

Net loss - - (2,751,000 ) (2,751,000 ) (264,000 ) (3,015,000 )

Balance at September 30, 2020 734,183 2,092,000 (76,560,000 ) (74,468,000 ) (6,088,000 ) (80,556,000 )

Net loss - - (2,985,000 ) (2,985,000 ) (259,000 ) (3,244,000 )

Balance at December 31, 2020 734,183 2,092,000 (79,545,000 ) (77,453,000 ) (6,347,000 ) (83,800,000 )

Net (loss) gain - - (1,960,000 ) (1,960,000 ) 223,000 (1,737,000 )

Reclassify Justice NCI - - (3,933,000 ) (3,933,000 ) 3,933,000 -

Investment in Justice - - - - (206,000 ) (206,000 )

Shares Issued 4 - - - - -

Balance at March 31, 2021 734,187 $ 2,092,000 $ (85,438,000 ) $ (83,346,000 ) $ (2,397,000 ) $ (85,743,000 )

Total
Portsmouth Total
Common Stock Accumulated Shareholders’ Noncontrolling Shareholders’
Shares Amount Deficit Deficit Interest Deficit

Balance at July 1, 2019 734,183 $ 2,092,000 $ (70,876,000 ) $ (68,784,000 ) $ (5,534,000 ) $ (74,318,000 )

Net income - - 826,000 826,000 99,000 925,000

Balance at September 30, 2019 734,183 2,092,000 (70,050,000 ) (67,958,000 ) (5,435,000 ) (73,393,000 )

Net income - - 381,000 381,000 45,000 426,000

Balance at December 31, 2019 734,183 2,092,000 (69,669,000 ) (67,577,000 ) (5,390,000 ) (72,967,000 )

Net loss - - (1,123,000 ) (1,123,000 ) (82,000 ) (1,205,000 )

Balance at March 31, 2020 734,183 $ 2,092,000 $ (70,792,000 ) $ (68,700,000 ) $ (5,472,000 ) $ (74,172,000 )

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

~~- 6 -~~

~~PORTSMOUTH SQUARE, INC.~~

~~CONDENDSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

For the nine months ended March 31, 2021 2020
Cash flows from operating activities:
Net (loss) income $ (7,996,000 ) $ 146,000
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Net unrealized (gain) loss on marketable securities (1,644,000 ) 346,000
Deferred taxes (2,995,000 ) 26,000
Impairment loss on other investments 38,000 38,000
Depreciation and amortization 1,388,000 1,519,000
Changes in operating assets and liabilities:
Investment in marketable securities 606,000 748,000
Accounts receivable 129,000 665,000
Other assets (42,000 ) (222,000 )
Accounts payable and other liabilities - Justice (1,112,000 ) (3,182,000 )
Accounts payable and other liabilities 14,000 51,000
Accounts payable related party 606,000 121,000
Due to securities broker - (151,000 )
Obligations for securities sold - (325,000 )
Net cash used in operating activities (11,008,000 ) (220,000 )

Cash flows from investing activities:
Payments for hotel furniture, equipment and building improvements (490,000 ) (1,206,000 )
Proceeds from other investments 29,000 29,000
Proceeds from (payments for) real estate investments 980,000 (3,000 )
Investment in Justice (206,000 ) -
Net cash provided by (used in) investing activities 313,000 (1,180,000 )

Cash flows from financing activities:
Proceeds from other note payable - related party 2,950,000 -
Proceeds from other note payable - SBA Loan 2,000,000 -
Payments of mortgage and other notes payable (1,507,000 ) (1,399,000 )
Issuance cost from refinance of mortgage note payable - (480,000 )
Issuance cost from refinance of related party note payable (50,000 ) (80,000 )
Net cash provided by (used in) financing activities 3,393,000 (1,959,000 )

Net decrease in cash, cash equivalents, and restricted cash (7,302,000 ) (3,359,000 )
Cash, cash equivalents, and restricted cash at the beginning of the period 16,385,000 20,816,000
Cash, cash equivalents, and restricted cash at the end of the period $ 9,083,000 $ 17,457,000

Supplemental information:
Interest paid $ 5,415,000 $ 5,560,000
Taxes paid $ 22,000 $ 2,000

Non-cash transaction:
Additions to Hotel equipment through capital lease $ 30,000 $ 30,000

For the six months ended December 31,	2021			2020

Revenue - Hotel	$	13,153,000		$	6,534,000

Costs and operating expenses
Hotel operating expenses		(12,812,000	)		(10,166,000	)
Hotel depreciation and amortization expense		(1,043,000	)		(1,063,000	)
General and administrative expense		(610,000	)		(360,000	)

Total costs and operating expenses		(14,465,000	)		(11,589,000	)

Loss from operations		(1,312,000	)		(5,055,000	)

Other income (expense)
Interest expense - mortgage		(3,315,000	)		(3,401,000	)
Interest expense - related party		(540,000	)		(181,000	)
Net gain on marketable securities		1,199,000			84,000
Net (loss) gain on marketable securities - Comstock		(2,056,000	)		32,000
Gain on debt extinguishment		2,000,000			-
Impairment loss on other investments		(20,000	)		(23,000	)
Dividend and interest income		64,000			15,000
Trading and margin interest expense		(108,000	)		(56,000	)

Total other expense, net		(2,776,000	)		(3,530,000	)

Loss before income taxes		(4,088,000	)		(8,585,000	)
Income tax benefit		1,153,000			2,326,000

Net Loss		(2,935,000	)		(6,259,000	)
Less: Net loss attributable to noncontrolling interest		-			523,000

Net loss attributable to Portsmouth	$	(2,935,000	)	$	(5,736,000	)

Basic and diluted net loss per share attributable to Portsmouth	$	(4.00	)	$	(7.81	)

Weighted average number of common shares outstanding - basic and diluted		734,187			734,183

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

- 75 -

PORTSMOUTH SQUARE, INC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(Unaudited)

								Total
	Common Stock							Portsmouth						Total
					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		-		-		(1,975,000	)		(1,975,000	)		-			(1,975,000	)

Investment in Justice		-		-		-			-			(344,000	)		(344,000	)

Purchase of Remaining
Interest in Justice		-		-		(999,000	)		(999,000	)		999,000			-

Balance at September 30, 2021		734,187		2,092,000		(87,934,000	)		(85,842,000	)		-			(85,842,000	)

Net loss		-		-		(960,000	)		(960,000	)		-			(960,000	)

Balance at December 31, 2021		734,187	$	2,092,000	$	(88,894,000	)	$	(86,802,000	)	$	-		$	(86,802,000	)

								Total
	Common Stock							Portsmouth						Total
					Accumulated			Shareholders’			Noncontrolling			Shareholders’
	Shares		Amount		Deficit			Deficit			Interest			Deficit

Balance at July 1, 2020		734,183	$	2,092,000	$	(73,809,000	)	$	(71,717,000	)	$	(5,824,000	)	$	(77,541,000	)

Net loss		-		-		(2,751,000	)		(2,751,000	)		(264,000	)		(3,015,000	)

Balance at September 30, 2020		734,183		2,092,000		(76,560,000	)		(74,468,000	)		(6,088,000	)		(80,556,000	)

Net loss		-		-		(2,985,000	)		(2,985,000	)		(259,000	)		(3,244,000	)

Balance at December 31, 2020		734,183	$	2,092,000	$	(79,545,000	)	$	(77,453,000	)	$	(6,347,000	)	$	(83,800,000	)

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

- 6 -

PORTSMOUTH SQUARE, INC.

CONDENDSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the six months ended December 31,	2021			2020
Cash flows from operating activities:
Net loss	$	(2,935,000	)	$	(6,259,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Net unrealized gain on marketable securities		(1,283,000	)		(127,000	)
Gain on debt extinguishment		(2,000,000	)		-
Deferred taxes		(1,153,000	)		(2,325,000	)
Impairment loss on other investments		20,000			23,000
Depreciation and amortization		1,043,000			1,063,000
Amortization of loan costs		147,000			154,000
Amortization of related party notes payable		(284,000	)		(284,000	)
Changes in operating assets and liabilities:
Investment in marketable securities		3,376,000			(2,000	)
Accounts receivable		(24,000	)		211,000
Other assets		(340,000	)		(159,000	)
Accounts payable and other liabilities		356,000			(1,271,000	)
Accounts payable related party		555,000			416,000
Due to securities broker		(1,061,000	)		-
Net cash used in operating activities		(3,583,000	)		(8,560,000	)

Cash flows from investing activities:
Payments for hotel furniture, equipment and building improvements		(1,264,000	)		(333,000	)
Investment in Justice		(344,000	)		-
Proceeds from other investments		-			29,000
Net cash used in investing activities		(1,608,000	)		(304,000	)

Cash flows from financing activities:
Proceeds from related party note payable		4,700,000			700,000
Issuance cost from refinance of related party loan		(50,000	)		(50,000	)
Payments of mortgage and other notes payable		(1,169,000	)		(984,000	)
Net cash provided by (used in) financing activities		3,481,000			(334,000	)

Net decrease in cash, cash equivalents, and restricted cash		(1,710,000	)		(9,198,000	)
Cash, cash equivalents, and restricted cash at the beginning of the period		8,532,000			16,385,000
Cash, cash equivalents, and restricted cash at the end of the period	$	6,822,000		$	7,187,000

Supplemental information:
Interest paid	$	3,343,000		$	3,582,000
Taxes paid	$	-		$	1,000

Non-cash transaction:
Additions to Hotel equipment through finance lease	$	-		$	30,000

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

- 7 -

PORTSMOUTH SQUARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated financial statements included herein have been prepared by Portsmouth Square, Inc. (“Portsmouth” or the “Company”), without audit, according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the condensed consolidated financial statements prepared in accordance with generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures that are made are adequate to make the information presented not misleading. Further, the condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which included only normal recurring adjustments) necessary for a fair statement of the financial position, cash flows and results of operations as of and for the periods indicated. It is suggested that these financial statements be read in conjunction with the audited financial statements of Portsmouth and the notes therein included in the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2020.~~2021. The ~~March 31,~~June 30, 2021 condensed consolidated balance sheet was derived from the consolidated balance sheet as included in the Company’s Form 10-K for the year ended June 30, ~~2020.~~2021.

The results of operations for the ~~nine~~six months ended ~~March~~December 31, 2021 are not necessarily indicative of results to be expected for the full fiscal year ending June 30, ~~2021.~~2022.

Portsmouth’s primary business iswas conducted through its general and limited partnership interest in Justice Investors Limited Partnership, a California limited partnership (“Justice” or the “Partnership”). AsEffective July 15, 2021, Portsmouth completed the purchase of ~~March 31, 2021,~~ ~~Portsmouth has a 97.5%~~100% of the limited partnership interest ~~in Justice and is~~of Justice. Effective December 23, 2021, the ~~sole general partner.~~partnership was dissolved. The financial statements of Justice ~~are~~were consolidated with those of the Company.

~~Effective February 19, 2021, Santa Fe Financial Corporation (“Santa Fe”), a public company, was liquidated and all of its assets including its 68.8% interest in Portsmouth was distributed~~Prior to its ~~shareholders in exchange for their Santa Fe common stock. As a result, as of March 31,~~dissolution effective December 23, 2021, the InterGroup Corporation (“InterGroup”), a public company, owns approximately 71.3% of the outstanding common shares of Portsmouth. As of March 31, 2021, the Company’s President, Chairman of the BoardJustice owned and Chief Executive Officer, John 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.

~~Justice, through its subsidiaries Justice Operating Company, LLC (“Operating”) and Justice Mezzanine Company, LLC (“Mezzanine”) owns and operates~~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.~~garage through its subsidiaries Justice Operating Company, LLC (“Operating”) and Justice Mezzanine isCompany, 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 ~~operated by the partnership as~~ a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”) through January 31, 2030.

~~Justice~~Operating entered into a Hotel management agreement (“HMA”) with ~~Interstate Management Company, LLC~~Aimbridge Hospitality (“~~Interstate”~~Aimbridge”) to manage the Hotel, along with its five-level parking garage, with an effective ~~takeover~~ date of February 3, 2017. The term of the management agreement is for an initial period of ten years commencing on the ~~takeover~~February 3, 2017 date and automatically renews for successive one (1) year periods, to not exceed five years in the aggregate, subject to certain ~~conditions.~~conditions. Under the terms on the HMA, base management fee payable to ~~Interstate~~Aimbridge shall be one and seven-tenths percent ~~(1.70%~~(1.70%) of total Hotel revenue. ~~On October 25, 2019, Interstate merged with Aimbridge Hospitality, North America’s largest independent hotel management firm. With the completion~~

As of December 31, 2021, The InterGroup Corporation (“InterGroup”), a public company, owns approximately 75.0% of the ~~merger,~~outstanding common shares of Portsmouth. As of December 31, 2021, the ~~newly combined company will be positioned under~~Company’s Chairman of the ~~Aimbridge Hospitality (“Aimbridge”) name in~~Board and Chief Executive Officer, John V. Winfield, owns approximately 2.5% of the ~~Americas.~~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 68.1% of the outstanding common shares of InterGroup as of December 31, 2021.

There have been no material changes to the Company’s significant accounting policies during the six months ended December 31, 2021. Please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2021 for a summary of the significant accounting policies. Certain prior year amounts have been reclassified for consistency with the current period presentation on the condensed consolidated balance sheet. Other investment, net of $20,000 as of June 30, 2021 was reclassed to Other asset, net. Finance leases of $664,000 as of June 30, 2021 was reclassed to Accounts payable and other liabilities. Accounts payable and other liabilities – Justice of $7,440,000 as of June 30, 2021 was reclassed to Accounts payable and other liabilities. Related party notes payable of $10,738,000 as of June 30, 2021 is presented separately as $6,650,000 Related party note payable – InterGroup and $4,088,000 Related party notes payable. These reclassifications had no effect on the reported results of operations and financial position.

- 8 -

~~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.~~

~~Obligations for Securities Sold~~

Obligation for securities sold represents the fair market value of shares sold with the promise to deliver that security at some future date and the fair market value of shares underlying the written call options with the obligation to deliver that security when and if the option is exercised. The obligation may be satisfied with current holdings of the same security or by subsequent purchases of that security. Unrealized gains and losses from changes in the obligation are included in the condensed consolidated statements of operations.

~~Income Tax~~

The Company consolidates Justice (“Hotel”) for financial reporting purposes and is not taxed on its non-controlling interest in the Hotel. The income tax benefit (expense) during the nine months ended March 31, 2021 and 2020 represent the income tax effect on the Company’s pretax (loss) income which includes its share in the net (loss) income of the Hotel.

Recently Issued and Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities another option for transition, allowing entities to not apply the new standard in the comparative periods they present in their financial statements in the year of adoption. Effective July 1, 2019, we adopted ASU 2016-02 using the modified retrospective approach provided by ASU 2018-11. We elected certain practical expedients permitted under the transition guidance, including the election to carryforward historical lease classification. We also elected the short-term lease practical expedient, which allowed us to not recognize leases with a term of less than twelve months on our consolidated balance sheets. In addition, we elected the lease and non-lease components practical expedient, which allowed us to calculate the present value of the fixed payments without performing an allocation of lease and non-lease components. We did not record any operating lease right-of-use (“ROU”) assets and operating lease liabilities upon adoption of the new standard as the aggregate value of the ROU assets and operating lease liabilities are immaterial relative to our total assets and liabilities as of June 30, 2020 and 2019. The standard did not have an impact on our other finance leases, statements of operations or cash flows. See Note 4 and Note 11 for balances of finance lease ROU assets and liabilities, respectively.None.

~~In August 2018, the FASB issued Accounting Standard Update No. 2018-13,~~ ~~Changes to Disclosure Requirements for Fair Value Measurements (Topic 820)~~ (ASU 2018-13), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. The Company has adopted the new standard effective July 1, 2020 and the adoption of this guidance does not have a material impact on its condensed consolidated financial statements.

~~- 9 -~~

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 has had a material detrimental impact on our liquidity. For the ~~nine~~six months ended ~~March~~December 31, 2021 ~~our net cash flow used in operations was $11,008,000. For the nine months ended March 31,~~and 2020, our net cash flow used in operations was ~~$220,000.~~$3,583,000 and $8,560,000, respectively. 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, postponing major capital expenditures, renegotiating certain reoccurring expenses, and temporarily closing certain hotel services and outlets.

The Company had cash and cash equivalents of ~~$3,298,000~~$288,000 and ~~$4,710,000~~$2,310,000 as of ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, respectively. ~~In addition, the Hotel~~The Company had ~~$5,785,000~~marketable securities, net of margin due to securities brokers, of $789,000 and ~~$10,666,000 of restricted cash held by its senior lender Wells Fargo Bank, N.A. (“Lender”)~~$1,821,000 as of ~~March~~December 31, 2021 and June 30, 2021, respectively. These marketable securities are short-term investments and liquid in nature.

On December 16, 2020, ~~respectively. Of the $10,666,000 restricted cash held~~Justice and InterGroup entered into a loan modification agreement which increased Justice’s borrowing from InterGroup as of June 30, 2020, $2,432,000 was for a possible future property improvement plan (“PIP”) requested by our franchisor, Hilton. However, Hilton has confirmed that it will not require a PIP for our Hotel until relicensing which shall occur at the earlier of (i) January 2030, which is six years afterneeded up to $10,000,000 and extended the maturity date of ~~our current senior and mezzanine loans, or (ii) upon~~ the ~~sale~~loan to July 31, 2021. On July 7, 2021, the maturity date was extended to July 31, 2022. Upon the dissolution of ~~our Hotel. On August 19, 2020, Lender released PIP deposits~~Justice in December 2021, Portsmouth assumed Justice’s note payable to InterGroup in the amount of ~~$2,379,000~~$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 six months ending December 31, 2021, InterGroup advanced $4,700,000 to the ~~Hotel.~~Hotel, bringing the total amount due to InterGroup to $11,350,000 as of December 31, 2021. The ~~funds were utilized~~Company could amend its by-laws and increase the number of authorized shares to ~~fund operating expenses, including franchise and management fees and other expenses.~~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 ~~recently enacted~~ Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). Justice received proceeds of ~~$4,719,000~~$4,719,000 from the SBA Loan. In accordance with the requirements of the CARES Act, Justice ~~has~~ used the proceeds from the SBA Loan ~~primarily~~ for payroll ~~costs. As of March 31, 2021, Justice had used all proceeds of the SBA Loan in~~costs and other qualified expenses. The SBA Loan iswas scheduled to mature on April 9, 2022 with a ~~1.00%~~1.00% interest rate and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. If the SBA approves the forgiveness amount, all payments of principal and interest are deferred until the date the forgiveness amount is remitted by the SBA to CIBC. If the SBA does not forgive any amount of the loan, payments would start within 30 days. Repayment obligations under the loan may be forgiven if the funds are used for payroll and other qualified expenses. All unforgiven portion of the principal and accrued interest will be due at maturity. On ~~December 29, 2020, Justice submitted its application for full loan forgiveness. As of March 31,~~June 10, 2021, the SBA ~~has not~~Loan was forgiven ~~the SBA Loan.~~in full.

On February 3, 2021, Justice entered into a second loan agreement (“Second SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of ~~$2,000,000~~ $2,000,000 from the Second SBA Loan. As of June 30, 2021, Justice ~~will use~~had used all proceeds from the Second SBA Loan primarily for payroll costs. The Second SBA Loan iswas scheduled to mature on February 3, 2026 ~~and has~~, had a ~~1.00%~~1.00% interest rate, and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. All payments of principal and interest are deferred until either: (a) if the SBA approves the forgiveness amount, the date the forgiveness amount is remitted by the SBA to CIBC; or (b) if Justice does not apply for forgiveness within 10 months after the last day of the covered period specified in the loan agreement or if the forgiveness amount is not approved, the date that is 10 months after the last day of the covered period. The loan may be forgiven if the funds are used for payroll and other qualified expenses. All unforgiven portion of the principal and accrued interest will be due at maturity. As of March 31,On November 19, 2021, ~~unused portion of~~ the Second SBA Loan was ~~$350,000.~~

~~In order to increase its liquidity position~~forgiven in full and ~~to take advantage~~$2,000,000 was recorded as gain on debt extinguishment on the condensed consolidated statement of operations for the favorable interest rate environment, InterGroup refinanced its 151-unit apartment complex in Parsippany, New Jersey on April 30, 2020, generating net proceeds of $6,814,000. In June 2020, InterGroup refinanced one of its California properties and generated net proceeds of $1,144,000. During the ninesix months ended ~~March~~December 31, 2021, InterGroup completed refinancing on three of its California properties and generated net proceeds of $5,384,000. InterGroup is currently evaluating other refinancing opportunities and it could refinance additional multifamily properties should the need arise, or should management consider the interest rate environment favorable. InterGroup has an uncollateralized $8,000,000 revolving line of credit from CIBC Bank USA (“CIBC”) and the entire $8,000,000 is available to be drawn down as of March 31, 2021 should additional liquidity be necessary. On August 28, 2020, Santa Fe sold its 27-unit apartment complex located in Santa Monica, California for $15,650,000 and realized a gain on the sale of approximately $12,043,000. Santa Fe will manage its federal and state income tax liability, and anticipates the utilization of its available net operating losses and capital loss carryforwards. Santa Fe received net proceeds of $12,163,000 after selling costs and repayment of InterGroup’s RLOC of $2,985,000 as InterGroup had drawn on its RLOC in July 2018 to pay off the previous Fannie Mae mortgage on the property. Furthermore, pursuant to the Contribution Agreement between Santa Fe and InterGroup, Santa Fe paid InterGroup $662,000 from the sale.2021.

~~- 10 -~~

As the sole general partner of Justice that controls approximately 97.5% of the voting interest in the Partnership, Portsmouth has the ability to amend the partnership agreement to allow for capital calls to the limited partners of Justice if needed. The majority of any capital calls will be met by Portsmouth. Portsmouth will have financing availability, upon the authorization of the respective board of directors, to borrow from InterGroup to meet any capital calls and its other obligations during the next twelve months and beyond. On August 28, 2020, the Board of InterGroup passed resolution to provide funding to Portsmouth if necessary. 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. Since December 2020, InterGroup has advanced $2,950,000 to Justice per the aforementioned loan modification agreement. The Partnership is also allowed to seek additional loans and sell partnership interests. Upon the consent of the general partner and a super majority in interest, the Partnership may sell additional classes or series of units of the Partnership under certain conditions in order to raise additional capital.

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.

- 9 -

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. After considering our approach to liquidity and accessing our available sources of cash, we believe that our cash position, after giving effect to the transactions discussed above, will be adequate to meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and related benefits, taxes and compliance costs and other commitments, for at least twelve months from the date of issuance of these financial statements, even if current levels of ~~low~~ occupancy and ~~low~~ RevPAR were to persist. 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 aforementioned 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 for at least the next twelve months and beyond. However, there can be no guarantee that management will be successful with its plan.

The following table provides a summary as of ~~March~~December 31, 2021, the Company’s material financial obligations which also including interest payments:

3 Months Year Year Year Year
Total 2021 2022 2023 2024 2025 Thereafter
Mortgage notes payable $ 111,130,000 $ 385,000 $ 1,632,000 $ 1,721,000 $ 107,392,000 $ - $ -
SBA loans and other notes payable 7,502,000 119,000 5,200,000 183,000 - - 2,000,000
Related party notes payable 10,178,000 379,000 6,517,000 567,000 567,000 567,000 1,581,000
Interest 17,290,000 1,365,000 6,291,000 6,180,000 3,454,000 - -
Total $ 146,100,000 $ 2,248,000 $ 19,640,000 $ 8,651,000 $ 111,413,000 $ 567,000 $ 3,581,000

~~- 11 -~~

SCHEDULE OF FINANCIAL OBLIGATIONS INCLUDING INTEREST PAYMENTS

			6 Months		Year		Year		Year		Year
	Total		2022		2023		2024		2025		2026		Thereafter
Mortgage notes payable	$	109,818,000	$	850,000	$	1,729,000	$	107,239,000	$	-	$	-	$	-
Related party notes payable		15,155,000		283,000		11,917,000		567,000		567,000		567,000		1,254,000
Interest		13,013,000		3,779,000		6,167,000		3,067,000		-		-		-
Total	$	137,986,000	$	4,912,000	$	19,813,000	$	110,873,000	$	567,000	$	567,000	$	1,254,000

NOTE 3 – REVENUE

The following table present our revenues disaggregated by revenue streams.

For the three months ended March 31, 2021 2020
Hotel revenues:
Hotel rooms $ 2,368,000 $ 9,642,000
Food and beverage 17,000 874,000
Garage 479,000 650,000
Other operating departments 38,000 93,000
Total hotel revenue $ 2,902,000 $ 11,259,000

SCHEDULE OF REVENUE DISAGGREGATION BY REVENUE STREAMS

For the three months ended December 31,	2021		2020
Hotel revenues:
Hotel rooms	$	5,218,000	$	2,584,000
Food and beverage		296,000		76,000
Garage		768,000		424,000
Other operating departments		66,000		25,000
Total hotel revenue	$	6,348,000	$	3,109,000

For the six months ended December 31,	2021		2020
Hotel revenues:
Hotel rooms	$	10,780,000	$	5,474,000
Food and beverage		562,000		113,000
Garage		1,675,000		894,000
Other operating departments		136,000		53,000
Total hotel revenue	$	13,153,000	$	6,534,000

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.

- 10 -

	●
	●	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.

Contract assets and liabilities

We do not have any material contract assets as of ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, other than trade and other receivables, net on our condensed 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. Based on historical trends, the Hotel applies a 50% rate of default to receivables between 90 and 120 days and a 100% rate of default to receivables over 120 days.

~~- 12 -~~

We record 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 condensed consolidated balance sheets. Contract liabilities ~~decreased~~increased to ~~$173,000~~$445,000 as of ~~March~~December 31, 2021, from ~~$375,000~~$161,000 as of June 30, ~~2020.~~2021. The ~~decrease~~increase for the ~~nine~~six months ended ~~March~~December 31, 2021 was primarily driven by ~~$202,000~~$284,000 of ~~revenue recognized and refunds issued to guests as a result of the COVID-19 outbreak.~~advance deposits received for future reservations.

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.

- 11 -

NOTE 4 – INVESTMENT IN HOTEL, NET

Investment in hotel consisted of the following as of:

Accumulated Net Book
March 31, 2021 Cost Depreciation Value

Land $ 1,124,000 $ - $ 1,124,000
Finance lease ROU assets 1,805,000 (527,000 ) 1,278,000
Furniture and equipment 30,438,000 (27,857,000 ) 2,581,000
Building and improvements 56,194,000 (29,742,000 ) 26,452,000
Investment in Hotel, net $ 89,561,000 $ (58,126,000 ) $ 31,435,000

Accumulated Net Book
June 30, 2020 Cost Depreciation Value

Land $ 1,124,000 $ - $ 1,124,000
Finance lease ROU assets 1,775,000 (291,000 ) 1,484,000
Furniture and equipment 30,528,000 (27,498,000 ) 3,030,000
Building and improvements 55,614,000 (28,771,000 ) 26,843,000
Investment in Hotel, net $ 89,041,000 $ (56,560,000 ) $ 32,481,000

~~NOTE 5 –~~SCHEDULE OF INVESTMENT IN ~~REAL ESTATE~~HOTEL, NET

			Accumulated			Net Book
December 31, 2021	Cost		Depreciation			Value

Land	$	1,124,000	$	-		$	1,124,000
Finance lease ROU assets		1,805,000		(764,000	)		1,041,000
Furniture and equipment		32,276,000		(28,201,000	)		4,075,000
Building and improvements		56,196,000		(30,702,000	)		25,494,000
Investment in Hotel, net	$	91,401,000	$	(59,667,000	)	$	31,734,000

			Accumulated			Net Book
June 30, 2021	Cost		Depreciation			Value

Land	$	1,124,000	$	-		$	1,124,000
Finance lease ROU assets		1,805,000		(606,000	)		1,199,000
Furniture and equipment		31,014,000		(27,956,000	)		3,058,000
Building and improvements		56,194,000		(30,062,000	)		26,132,000
Investment in Hotel, net	$	90,137,000	$	(58,624,000	)	$	31,513,000

~~In August 2007, the Company agreed~~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 ~~acquire 50% interest in InterGroup Uluniu, Inc. (“Uluniu”),~~7 years. Building and improvements are stated at cost, depreciated on a ~~Hawaiian corporation and a 100% owned subsidiary of InterGroup, for $973,000, which represents an amount equal~~straight-line basis over their useful lives ranging from 15 to ~~the costs paid by InterGroup~~39 years. Depreciation expense for the ~~acquisition~~six months ended December 31, 2021 and carrying costs of approximately two acres of unimproved land held for development located in Maui, Hawaii. In March 2021, in an effort to make both companies more efficient, InterGroup purchased back the 50% interest of Uluniu from Portsmouth for $980,000, which represents Portsmouth’s carrying cost of the investment. No gains or losses were realized as a result of the transaction since it was a related-party transaction. As a related-party transaction, the fairness of the financial terms of the transactions were reviewedDecember 31, 2020 are $1,043,000 and ~~approved by the independent director of the Company.~~$1,063,000, respectively.

NOTE 65 - INVESTMENT IN MARKETABLE SECURITIES, NET

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

~~- 13 -~~

~~On March~~As of December 31, 2021, and June 30, ~~2020,~~2021, 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:

Gross Gross Net
Investment Cost Unrealized Gain Unrealized Loss Unrealized Loss
Fair
Value

As of March 31, 2021
Corporate
Equities $ 3,348,000 $ 206,000 $ (1,951,000 ) $ (1,745,000 ) $ 1,603,000

As of June 30, 2020
Corporate
Equities $ 3,955,000 $ 66,000 $ (3,456,000 ) $ (3,390,000 ) $ 565,000

SCHEDULE OF CHANGES IN UNREALIZED GAINS AND LOSSES ON INVESTMENTS

			Gross		Gross			Net			Fair
Investment	Cost		Unrealized Gain		Unrealized Loss			Unrealized Loss			Value

As of December 31, 2021
Corporate
Equities	$	1,610,000	$	165,000	$	(332,000	)	$	(167,000	)	$	1,443,000

As of June 30, 2021
Corporate
Equities	$	4,987,000	$	438,000	$	(1,889,000	)	$	(1,451,000	)	$	3,536,000

As of ~~March 31, 2021,~~ ~~and~~ June 30, ~~2020,~~2021, approximately ~~77% and 60%~~19% of the investment marketable securities balance above is comprised of the common stock of Comstock Mining, Inc. (“Comstock” - NYSE AMERICAN: LODE)~~, respectively.~~

. As of ~~March~~December 31, 2021, the Company does not have any investment in the common stock of Comstock. 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.

- 12 -

As of December 31, 2021, and June 30, ~~2020,~~2021, the Company had ~~$1,946,000~~$9,000 and ~~$3,448,000,~~$1,873,000, respectively, of unrealized losses related to securities held for over one year; of which ~~$1,845,000~~$0 and ~~$3,400,000~~$1,789,000 are related to its investment in Comstock, respectively.

Net gains (losses) on marketable securities on the statement of operations is comprised of realized and unrealized gains (losses). Below is the composition of net ~~gain (loss)~~gains (losses) on marketable securities for the three and ~~nine~~six months ended ~~March~~December 31, 2021 and 2020, respectively:

For the three months ended March 31, 2021 2020
Realized loss on marketable securities, net $ (11,000 ) $ (192,000 )
Realized loss on marketable securities related to LODE (250,000 ) -
Unrealized gain (loss) on marketable securities, net 80,000 (102,000 )
Unrealized gain (loss) on marketable securities related to LODE 1,565,000 (13,000 )
Net gain (loss) on marketable securities $ 1,384,000 $ (307,000 )

For the nine months ended March 31, 2021 2020
Realized loss on marketable securities, net $ - $ (175,000 )
Realized loss on marketable securities related to LODE (250,000 ) -
Unrealized loss on marketable securities, net (15,000 ) (152,000 )
Unrealized gain (loss) on marketable securities related to LODE 1,533,000 (194,000 )
Net gain (loss) on marketable securities $ 1,268,000 $ (346,000 )

~~NOTE 7 – OTHER INVESTMENTS,~~SCHEDULE OF NET LOSS ON MARKETABLE SECURITIES

For the three months ended December 31,	2021			2020
Realized loss on marketable securities, net	$	(79,000	)	$	-
Realized loss on marketable securities related to LODE		(2,016,000	)		-
Unrealized gain on marketable securities, net		1,546,000			73,000
Unrealized gain (loss) on marketable securities related to LODE		137,000			(14,000	)
Net (loss) gain on marketable securities	$	(412,000	)	$	59,000

The Company may also invest, with the approval of the Executive Strategic Real Estate and Securities Investment Committee and other Company guidelines, in private investment equity funds and other unlisted securities, such as convertible notes through private placements. Those investments in non-marketable securities are carried at cost on the Company’s consolidated balance sheet as part of other investments, net of other than temporary impairment losses.

~~- 14 -~~

~~Other investments, net consist of the following:~~

Type March 31, 2021 June 30, 2020

Private equity hedge fund, at cost $ 20,000 $ 57,000
Other preferred stock - 30,000
$ 20,000 $ 87,000

For the six months ended December 31,	2021			2020
Realized loss on marketable securities, net	$	(84,000	)	$	(11,000	)
Realized loss on marketable securities related to LODE		(2,056,000	)		-
Unrealized gain on marketable securities, net		1,283,000			95,000
Unrealized gain on marketable securities related to LODE		-			32,000
Net (loss) gain on marketable securities	$	(857,000	)	$	116,000

NOTE 86 - 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) 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

As of	December 31, 2021		June 30, 2021
	Total - Level 1		Total - Level 1
Assets:
Investment in marketable securities:
Communication services	$	995,000	$	1,334,000
REITs and real estate companies		302,000		438,000
Industrials		82,000		653,000
Basic materials		46,000		720,000
Utilities		9,000		-
Healthcare		5,000		141,000
Technology		4,000		-
Energy		-		250,000
	$	1,443,000	$	3,536,000

- 13 -

As of March 31, 2021 June 30, 2020
Total - Level 1 Total - Level 1
Assets:
Investment in marketable securities:
Basic materials $ 1,265,000 $ 377,000
REITs and real estate companies 276,000 162,000
Industrials 62,000 -
Energy - 26,000
$ 1,603,000 $ 565,000

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, net (non-marketable securities),” that were initially measured at cost and have been written down to fair value as a result of impairment. 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

					Net loss for the nine months							Net loss for the six months
Assets	Level 3		March 31, 2021		ended March 31, 2021			Level 3		December 31, 2021		ended December 31, 2021

Other non-marketable investments	$	20,000	$	20,000	$	(38,000	)	$	-	$	-	$	(20,000	)

					Net loss for the nine months							Net loss for the six months
Assets	Level 3		June 30, 2020		ended March 31, 2020			Level 3		June 30, 2021		ended December 31, 2020

Other non-marketable investments	$	87,000	$	87,000	$	(38,000	)	$	20,000	$	20,000	$	(23,000	)

For the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020, we received distribution from other non-marketable investments of ~~$29,000~~0 and ~~$29,000,~~$29,000, respectively.

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 and holds less than 20% ownership in each of the 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.

~~- 15 -~~

NOTE 97 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statement of cash flows:

As of March 31, 2021 June 30, 2020

Cash and cash equivalents $ 3,298,000 $ 4,710,000
Restricted cash 5,785,000 11,675,000
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows $ 9,083,000 $ 16,385,000

SCHEDULE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

As of	December 31, 2021		June 30, 2021

Cash and cash equivalents	$	288,000	$	2,310,000
Restricted cash		6,534,000		6,222,000
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows	$	6,822,000	$	8,532,000

Restricted cash is comprised of amounts held by lenders for payment of real estate taxes, insurance, replacement and capital addition reserves for the Hotel. As of June 30, 2020, restricted cash also includes key money received from Interstate that is restricted for capital improvements for the Hotel. As of March 31, 2021, the key money balance was zero as Hotel obtained approval from Interstate to use the funds for hotel operations during the first quarter of fiscal year 2021.

NOTE 108 - SEGMENT INFORMATION

The Company operates in ~~two~~2 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~~2 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.

- 14 -

Information below represents reporting segments for the three and ~~nine~~six months ended ~~March~~December 31, 2021 and 2020, respectively. Operating (loss) income from Hotel operations consists of the operation of the hotel and operation of the garage. Income (loss) from investment transactions consist of net investment gain (loss), impairment loss on other investments, net unrealized gain (loss) on other investments, dividend and interest income and trading and margin interest expense. The other segment consists of corporate general and administrative expenses and the income tax (expense) benefit for the entire Company.

SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT

As of and for the three months	Hotel			Investment
ended December 31, 2021	Operations			Transactions			Corporate			Total
Revenues	$	6,348,000		$	-		$	-		$	6,348,000
Segment operating expenses		(6,479,000	)		-			(282,000	)		(6,761,000	)
Segment loss		(131,000	)		-			(282,000	)		(413,000	)
Interest expense - mortgage		(1,654,000	)		-			-			(1,654,000	)
Interest expense - related party		(303,000	)								(303,000	)
Depreciation and amortization expense		(514,000	)		-			-			(514,000	)
Gain on extinguishment of debt		2,000,000									2,000,000
Loss from investments		-			(454,000	)		-			(454,000	)
Income tax benefit		-			-			378,000			378,000
Net (loss) income	$	(602,000	)	$	(454,000	)	$	96,000		$	(960,000	)
Total assets	$	39,653,000		$	1,443,000		$	9,370,000		$	50,466,000

For the three months	Hotel			Investment
ended December 31, 2020	Operations			Transactions		Corporate			Total
Revenues	$	3,109,000		$	-	$	-		$	3,109,000
Segment operating expenses		(5,133,000	)		-		(184,000	)		(5,317,000	)
Segment loss		(2,024,000	)		-		(184,000	)		(2,208,000	)
Interest expense - mortgage		(1,700,000	)		-		-			(1,700,000	)
Interest expense - related party		(91,000	)							(91,000	)
Depreciation and amortization expense		(533,000	)		-		-			(533,000	)
Income from investments		-			33,000		-			33,000
Income tax benefit		-			-		1,255,000			1,255,000
Net (loss) income	$	(4,348,000	)	$	33,000	$	1,071,000		$	(3,244,000	)

As of and for the six months	Hotel			Investment
ended December 31, 2021	Operations			Transactions			Corporate			Total
Revenues	$	13,153,000		$	-		$	-		$	13,153,000
Segment operating expenses		(12,812,000	)		-			(610,000	)		(13,422,000	)
Segment income (loss)		341,000			-			(610,000	)		(269,000	)
Interest expense - mortgage		(3,315,000	)		-			-			(3,315,000	)
Interest expense - related party		(540,000	)								(540,000	)
Depreciation and amortization expense		(1,043,000	)		-			-			(1,043,000	)
Gain on extinguishment of debt		2,000,000									2,000,000
Loss from investments		-			(921,000	)		-			(921,000	)
Income tax benefit		-			-			1,153,000			1,153,000
Net (loss) income	$	(2,557,000	)	$	(921,000	)	$	543,000		$	(2,935,000	)
Total assets	$	39,653,000		$	1,443,000		$	9,370,000		$	50,466,000

For the six months	Hotel			Investment
ended December 31, 2020	Operations			Transactions		Corporate			Total
Revenues	$	6,534,000		$	-	$	-		$	6,534,000
Segment operating expenses		(10,166,000	)		-		(360,000	)		(10,526,000	)
Segment loss		(3,632,000	)		-		(360,000	)		(3,992,000	)
Interest expense - mortgage		(3,401,000	)		-		-			(3,401,000	)
Interest expense - related party		(181,000	)							(181,000	)
Depreciation and amortization expense		(1,063,000	)		-		-			(1,063,000	)
Income from investments		-			52,000		-			52,000
Income (Loss) from investments		-			52,000		-			52,000
Income tax benefit		-			-		2,326,000			2,326,000
Net (loss) income	$	(8,277,000	)	$	52,000	$	1,966,000		$	(6,259,000	)

- 1615 -

As of and for the three months Hotel Investment
ended March 31, 2021 Operations Transactions Corporate Total
Revenues $ 2,902,000 $ - $ - $ 2,902,000
Segment operating expenses (3,990,000 ) - (201,000 ) (4,191,000 )
Segment loss (1,088,000 ) - (201,000 ) (1,289,000 )
Interest expense - mortgage and related party (1,833,000 ) - - (1,833,000 )
Depreciation and amortization expense (503,000 ) - - (503,000 )
Gain from investments - 1,219,000 - 1,219,000
Income tax benefit - - 669,000 669,000
Net income (loss) $ (3,424,000 ) $ 1,219,000 $ 468,000 $ (1,737,000 )
Total assets $ 40,152,000 $ 1,623,000 $ 10,330,000 $ 52,105,000

For the three months Hotel Investment
ended March 31, 2020 Operations Transactions Corporate Total
Revenues $ 11,259,000 $ - $ - $ 11,259,000
Segment operating expenses (10,060,000 ) - (167,000 ) (10,227,000 )
Segment income (loss) 1,199,000 - (167,000 ) 1,032,000
Interest expense - mortgage and related party (1,793,000 ) - - (1,793,000 )
Depreciation and amortization expense (547,000 ) - - (547,000 )
Loss from investments - (337,000 ) - (337,000 )
Income tax benefit - - 440,000 440,000
Net income (loss) $ (1,141,000 ) $ (337,000 ) $ 273,000 $ (1,205,000 )

As of and for the nine months Hotel Investment
ended March 31, 2021 Operations Transactions Corporate Total
Revenues $ 9,436,000 $ - $ - $ 9,436,000
Segment operating expenses (14,156,000 ) - (561,000 ) (14,717,000 )
Segment loss (4,720,000 ) - (561,000 ) (5,281,000 )
Interest expense - mortgage and related party (5,415,000 ) - - (5,415,000 )
Depreciation and amortization expense (1,566,000 ) - - (1,566,000 )
Gain from investments - 1,271,000 - 1,271,000
Income tax benefit - - 2,995,000 2,995,000
Net income (loss) $ (11,701,000 ) $ 1,271,000 $ 2,434,000 $ (7,996,000 )
Total assets $ 40,152,000 $ 1,623,000 $ 10,330,000 $ 52,105,000

For the nine months Hotel Investment
ended March 31, 2020 Operations Transactions Corporate Total
Revenues $ 41,589,000 $ - $ - $ 41,589,000
Segment operating expenses (33,138,000 ) - (553,000 ) (33,691,000 )
Segment income (loss) 8,451,000 - (553,000 ) 7,898,000
Interest expense - mortgage and related party (5,541,000 ) - - (5,541,000 )
Depreciation and amortization expense (1,653,000 ) - - (1,653,000 )
Loss from investments - (533,000 ) - (533,000 )
Income tax expense - - (25,000 ) (25,000 )
Net income (loss) $ 1,257,000 $ (533,000 ) $ (578,000 ) $ 146,000

~~- 17 -~~

NOTE 119 - RELATED PARTY AND OTHER FINANCING TRANSACTIONS

The following summarizes the balances of related party and other notes payable as of ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, respectively.

As of March 31, 2021 June 30, 2020

Note payable - InterGroup $ 5,950,000 $ 3,000,000
Note payable - Hilton 2,771,000 3,008,000
Note payable - Interstate 1,458,000 1,646,000
SBA Loans - Justice 6,719,000 4,719,000
Total related party and other notes payable $ 16,898,000 $ 12,373,000

SCHEDULE OF RELATED PARTY AND OTHER NOTES PAYABLE

As of	December 31, 2021		June 30, 2021
Related party note payable - InterGroup	$	11,325,000	$	6,650,000
Note Payable - Hilton		2,533,000		2,692,000
Related party note payable - Aimbridge		1,271,000		1,396,000
Other note payable - SBA Loan		-		2,000,000
Total related party and other notes payable	$	15,129,000	$	12,738,000

On July 2, 2014, the Partnership obtained from InterGroup an unsecured loan in the principal amount of ~~$4,250,000~~$4,250,000 at ~~12%~~12% per year fixed interest, with a term of 2 years, payable interest only each month. InterGroup received a 3%3% loan fee. The loan may be prepaid at any time without penalty. The loan was extended to July ~~1, 2021.~~31, 2022. 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. Since~~$10,000,000. Upon the dissolution of Justice in December ~~2020, InterGroup has advanced $2,950,000 to Justice per the aforementioned agreement. As of March 31,~~ 2021, ~~the Partnership has a loan due~~Portsmouth assumed Justice’s note payable to InterGroup in the ~~principal~~ amount of ~~$5,950,000.~~$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 December 31, 2021, and June 30, 2021, the balance of the loan was $11,350,000 and $6,650,000, net of loan amortization costs of $25,000 and 0, respectively.

Note payable to Hilton (Franchisor) is a self-exhausting, interest free development incentive note which is reduced by approximately ~~$316,000~~$316,000 annually through 2030 by Hilton if the Partnership is still a Franchisee with Hilton.

On February 1, 2017, ~~Justice~~Operating entered into an HMA with ~~Interstate~~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 yearscommencing 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 ~~Interstate~~Ambridge to advance a key money incentive fee to the Hotel for capital improvements in the amount of ~~$2,000,000~~ $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)~~(8) year period commencing on the second anniversary of the takeover date. ~~As of March 31, 2021, the key money balance was zero as Hotel obtained approval from Interstate to use the funds for hotel operations during~~During the first quarter of fiscal year ~~2021. As of June 30, 2020, balance of~~2021, the Hotel obtained approval from Ambridge to use the key money ~~plus accrued interest is $1,009,000~~for hotel operations and ~~is included in restricted cash in~~ the ~~condensed consolidated balance sheet.~~funds were exhausted by December 31, 2020. Unamortized portion of the key money is included in the related party notes payable in the condensed consolidated balance sheets.

On April 9, 2020, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration. Justice received proceeds of $4,719,000 from the SBA Loan. In accordance with the requirements of the CARES Act, the Company used proceeds from the SBA Loan primarily for payroll costs. As of March 31, 2021, Justice had used all proceeds of the SBA Loan in qualified expenses. The SBA Loan is scheduled to mature on April 9, 2022 with a 1.00% interest rate and is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act. If the SBA approves the forgiveness amount, all payments of principal and interest are deferred until the date the forgiveness amount is remitted by the SBA to CIBC. If the SBA does not forgive any amount of the loan, payments would start within 30 days. Repayment obligations under the loan may be forgiven if the funds are used for payroll and other qualified expenses. All unforgiven portion of the principal and accrued interest will be due at maturity. On December 29, 2020, Justice submitted its application for full loan forgiveness. As of March 31, 2021, the SBA has not forgiven the SBA Loan.

~~- 18 -~~

On February 3, 2021, Justice entered into a second loan agreement (“Second SBA Loan”) with CIBC Bank USA administered by the SBA. Justice received proceeds of ~~$2,000,000~~ $2,000,000 from the Second SBA Loan. As of June 30, 2021, Justice ~~will use~~had used all proceeds from the Second SBA Loan primarily for payroll costs. The Second SBA Loan iswas scheduled to mature on February 3, 2026 ~~and has~~, had a ~~1.00%~~1.00% interest rate, and iswas subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. All payments of principal and interest are deferred until either: (a) if the SBA approves the forgiveness amount, the date the forgiveness amount is remitted by the SBA to CIBC; or (b) if Justice does not apply for forgiveness within 10 months after the last day of the covered period specified in the loan agreement or if the forgiveness amount is not approved, the date that is 10 months after the last day of the covered period. The loan may be forgiven if the funds are used for payroll and other qualified expenses. All unforgiven portion of the principal and accrued interest will be due at maturity. As of March 31,On November 19, 2021, ~~unused portion of~~ the Second SBA Loan was ~~$350,000.~~forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the condensed consolidated statement of operations for the six months ended December 31, 2021.

As of March 31, 2021, the Company had finance lease obligations outstanding of $783,000. These finance leases expire in various years through 2023 at rates ranging from 4.62% to 6.25% per annum. Minimum future lease payments for assets under finance leases as of March 31, 2021 are as follows:

For the year ending June 30,
2021 $ 130,000
2022 508,000
2023 188,000
Total minimum lease payments 826,000
Less interest on finance lease (43,000 )
Present value of future minimum lease payments $ 783,000

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,
2022	$	283,000
2023		11,917,000
2024		567,000
2025		567,000
2026		567,000
Thereafter		1,254,000
Long term debt	$	15,155,000

- 16 -

For the year ending June 30,
2021 $ 498,000
2022 11,717,000
2023 750,000
2024 567,000
2025 567,000
Thereafter 3,581,000
$ 17,680,000

As of ~~March~~December 31, 2021, and June 30, ~~2020,~~2021, the Company had accounts payable to related party of ~~$2,991,000~~$3,748,000 and ~~$2,385,000,~~$3,193,000, respectively. These are amounts due to InterGroup and represent 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,~~$42,940,000, Justice obtained a ~~$97,000,000~~$97,000,000 mortgage loan and a ~~$20,000,000~~$20,000,000 mezzanine loan in December 2013. The mortgage loan is secured by the ~~Partnership’s~~Company’s principal asset, the Hotel. The mortgage loan bears an interest rate of ~~5.275%~~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 2024. Outstanding principal balance on the loan was ~~$91,130,000~~$89,818,000 and ~~$92,292,000~~$90,745,000 as of ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, 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%~~9.75% per annum and a maturity date of January 1, ~~2024.~~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.~~$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%~~7.25% and the loan matures on January 1, 2024. Interest only payments are due monthly.

~~- 19 -~~

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~~ $97,000,000 mortgage loan and the ~~$20,000,000~~ $20,000,000 mezzanine loan. Pursuant to the agreement, InterGroup is required to maintain certain net worth and liquidity. As of ~~March~~December 31, 2021, InterGroup is in compliance with both requirements. However, due to the Hotel’s current low occupancy and its negative impact on the Hotel’s cash flow, Justice Operating Company, LLC ~~may~~have not ~~meet~~been meeting certain of its loan covenants such as the Debt Service Coverage Ratio (“DSCR”) which would trigger the creation of a lock-box 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, Jerold R. Babin, and Steve Grunwald. All of the Company’s directors also serve as directors of InterGroup except for Mr. Grunwald. 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. 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.

- 17 -

NOTE 1210 – ACCOUNTS PAYABLE AND OTHER LIABILITIES ~~- JUSTICE~~

The following summarizes the balances of accounts payable and other liabilities ~~-Justice~~ as of ~~March~~December 31, 2021 and June 30, ~~2020,~~2021, respectively.

As of March 31, 2021 June 30, 2020

Trade payable $ 2,085,000 $ 3,032,000
Advance deposits 173,000 375,000
Property tax payable 14,000 523,000
Payroll and related accruals 2,484,000 1,969,000
Mortgage interest payable 414,000 527,000
Withholding and other taxes payable 581,000 370,000
Security deposit 52,000 52,000
Other payables 942,000 740,000
Total accounts payable and other liabilities - Justice $ 6,745,000 $ 7,588,000

SCHEDULE OF ACCOUNTS PAYABLE AND OTHER LIABILITIES - JUSTICE

As of	December 31, 2021		June 30, 2021

Trade payable	$	3,451,000	$	2,951,000
Payroll and related accruals		2,458,000		2,345,000
Withholding and other taxes payable		537,000		885,000
Advance deposits		484,000		161,000
Finance leases		422,000		664,000
Security deposit		52,000		52,000
Mortgage interest payable		-		582,000
Other payables		1,004,000		654,000
Total accounts payable and other liabilities	$	8,408,000	$	8,294,000

As of December 31, 2021, the Company had finance lease obligations outstanding of $422,000. These finance leases expire in various years through 2023 at rates ranging from 4.62% to 6.25% per annum. Minimum future lease payments for assets under finance leases as of December 31, 2021 are as follows:

SCHEDULE OF MINIMUM FUTURE LEASE PAYMENTS FOR ASSETS

For the year ending June 30,

2022	$	249,000
2023		188,000
Total minimum lease payments		437,000
Less interest on finance lease		(15,000	)
Present value of future minimum lease payments	$	422,000

NOTE 1311 – SUBSEQUENT EVENTS

None.

- 2018 -

Item 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

The Company may from time to time make forward-looking statements and projections concerning future expectations. When used in this discussion, the words “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “could,” “might” and similar expressions, are intended to identify forward-looking statements.

Such statements are subject to certain risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: national and worldwide economic conditions, including the impact of recessionary conditions on tourism, travel and the lodging industry; the impact of terrorism and war on the national and international economies, including tourism, securities markets, energy and fuel costs; natural disasters; general economic conditions and competition in the hotel industry in the San Francisco area; seasonality, labor relations and labor disruptions; actual and threatened pandemics such as swine flu or the outbreak of COVID-19 or similar outbreaks; partnership distributions; the ability to obtain financing at favorable interest rates and terms; securities markets, regulatory factors, litigation and other factors discussed below in this Report and in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2020.~~2021. These risks and uncertainties could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

NEGATIVE EFFECTS OF CIVIL AUTHORITY ACTIONS ON OUR BUSINESS

On February 25, 2020, the City of San Francisco issued the proclamation by the Mayor declaring the existence of a local emergency. The negative effects of the civil authority actions related to the novel strain of coronavirus (“COVID-19”) on our business have been significant. In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious virus, which has continued to spread, has adversely affected workforces, customers, economies and financial markets globally. It has also disrupted the normal operations of many businesses, including ours. To mitigate the harm from the pandemic, on March 16, 2020, the City and County of San Francisco, along with a group of five other Bay Area counties and the City of Berkeley, issued parallel health officer orders imposing shelter in place limitations across the Bay Area, requiring everyone to stay safe at home except for certain essential needs. Since February 2020, several unfavorable events and civil authority actions have unfolded causing demand for our hotel rooms to suffer including cancellations of all citywide conventions, reduction of flights in and out of the Bay Area and decline in both leisure and business travel.

In December 2020, due to the surge in COVID-19 cases and hospitalizations, the Health Officer of the City and County of San Francisco has suspended or restricted certain activities. Health Order C19-07q (the “Order”) incorporates suspensions, reductions in capacity limits, and other restrictions contained in the Regional Stay At Home Order issued by the California Department of Public Health on December 3, 2020. Effective December 17, 2020, the Bay Area Region, including San Francisco, is required to comply with the State’s December 3, 2020 Regional Stay-at-Home Order. The Order strongly discourages anyone in the County from travelling for leisure, recreation, business or other purposes that can be postponed until after the current surge. With limited exceptions, this Order imposed a mandatory quarantine on anyone traveling, moving, or returning to the County from anywhere outside the Bay Area. Effective January 20, 2021, Health Order ~~C19-07r~~C19- 07r revised and replaced the previous Order; it continues to temporarily prohibit certain businesses and activities from resuming but allows certain other businesses, activities, travel and governmental functions to occur subject to specified health and safety restrictions, limitations, and conditions to limit the transmission of COVID-19. Quarantine and isolation requirements and recommendations upon moving to, traveling to, or returning to the County have not changed from the previous Order.

On March 24, 2021, the City and County of San Francisco announced it moved into the orange tier which removed the suggested Shelter in Place for guests travelling to San Francisco. This was a very positive step for the hotel community. This tier opens up activities in the city including expanded restaurant capacities, museums and attractions. For the hotel it allows for guests to gather in public spaces and for outlets and amenities to open up at limited capacities including fitness centers. It does not change the very stringent cleaning and sanitation requirements set forth by the Health Officer of the City and County of San Francisco which proves to be a costly measure to maintain. Effective May 6, 2021, the City and County of San Francisco moved into the yellow tier guidelines. We continue to closely monitor the very fluid changes that the Center for Disease Control, San Francisco Department of Health and other authorities implement with regards to the COVID-19 pandemic.

- 19 -

On August 20, 2021, San Francisco announced vaccination requirements for indoor activities. This order requires restaurants, theaters, and entertainment venues where food or drink is served inside, as well as gyms, recreation facilities, yoga studios, dance studios and other fitness establishments, clubs involving elevated breathing to show proof of vaccination.

On January 11, 2022, a new Health Order has been issued. The primary change to the Order is to comply with changes the state made lowering the threshold for mega events to 500 attendees indoor and 5,000 attendees outdoor beginning January 15, 2022. This will have significant impact on the demand for major event drivers, primarily citywide events that many attendees will not be able to attend due to vaccination status along with the organizers cancelling events based on decreased anticipated attendance because of these regulations.

The San Francisco hospitality market has seen the two largest citywide events go virtual with DreamForce in September 2021 and JP Morgan Healthcare Conference in January 2022. RSA Conference originally scheduled for February 2022 was moved to June 2022 and Google Could Next was cancelled for 2022. We expect to continue to see cancellation of citywide events throughout the year.

In response to the decrease in demand, we have since furloughed all managers at the Hotel except for members of the executive team and continue to limit hourly staff to a minimum. By the end of March 2020, we had temporarily closed all of our food and beverage outlets, valet parking, concierge and bell services, fitness center, as well as the executive lounge facility. We continue to implement social distancing standards and cleaning processes designed by ~~Interstate~~Aimbridge and Hilton to keep employees and guests safe. The full impact and duration of the COVID-19 outbreak continues to evolve as of the date of this report. The pandemic effectively eliminated our ability to generate any profits, due to the drastic decline in both leisure and business travel. As a result, management believes the ongoing length and severity of the economic downturn caused by the pandemic will have a material adverse impact on our future business, financial condition, liquidity and financial results. We are also assessing the potential impact on the impairment analysis of our long-lived assets and the realization of our deferred tax assets. As of the date of this report, the effects of the pandemic continue to affect our economy, business and leisure travel, and our needs to continue to curtail certain revenue generating activities at the Hotel. We expect that the effects will have a material adverse effect on our business until the pandemic ends.

~~- 21 -~~

As a result of the ~~CARES~~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 April 9, 2020, Justice entered into a loan agreement (“SBA Loan”) with CIBC Bank USA under the CARES Act. Justice received proceeds of $4,719,000 from the SBA Loan. In accordance with the requirements of the CARES Act, Justice ~~has~~ used proceeds from the SBA Loan ~~primarily~~ for payroll ~~costs. As of March 31, 2021, Justice had used all proceeds of the SBA Loan in~~costs and other qualified expenses. The SBA Loan iswas scheduled to mature on April 9, 2022 with a 1.00% interest rate and is subject to the terms and conditions applicable to loans administered by the ~~SBA~~U.S. Small Business Administration under the CARES Act. If the SBA approves the forgiveness amount, all payments of principal and interest are deferred until the date the forgiveness amount is remitted by the SBA to CIBC. If the SBA does not forgive any amount of the loan, payments would start within 30 days. Repayment obligations under the loan may be forgiven if the funds are used for payroll and other qualified expenses. All unforgiven portion of the principal and accrued interest will be due at maturity. On ~~December 29, 2020, Justice submitted its application for full loan forgiveness. As of March 31,~~June 10, 2021, the SBA ~~has not~~Loan was forgiven ~~the SBA Loan.~~in full.

On February 3, 2021, Justice entered into a second loan agreement (“Second 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 ~~will use~~had used all proceeds from the Second SBA Loan primarily for payroll costs. The Second SBA Loan iswas scheduled to mature on February 3, 2026, ~~and has~~had a 1.00% interest rate, and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. All payments of principal and interest are deferred until either: (a) if the SBA approves the forgiveness amount, the date the forgiveness amount is remitted by the SBA to CIBC; or (b) if Justice does not apply for forgiveness within 10 months after the last day of the covered period specified in the loan agreement or if the forgiveness amount is not approved, the date that is 10 months after the last day of the covered period. The loan may be forgiven if the funds are used for payroll and other qualified expenses. All unforgiven portion of the principal and accrued interest will be due at maturity. As of March 31,On November 19, 2021, ~~unused portion of~~ the Second SBA Loan was ~~$350,000.~~forgiven in full and $2,000,000 was recorded as gain on debt extinguishment on the condensed consolidated statement of operations for the six months ended December 31, 2021.

- 20 -

RESULTS OF OPERATIONS

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

The Hotel is ~~operated by the Partnership as~~ a full-service Hilton brand hotel pursuant to a Franchise License Agreement (the “License Agreement”) with Hilton. The Partnership entered into the License Agreement on December 10, 2004. The term of the License Agreement was for an initial period of 15 years commencing on the opening date, with an option to extend the License Agreement for another five years, subject to certain conditions. On June 26, 2015, the Partnership and Hilton entered into an amended franchise agreement which extended the License Agreement through 2030, modified the monthly royalty rate, extended geographic protection to the Partnership and also provided the Partnership certain key money cash incentives to be earned through 2030. The key money cash incentives were received on July 1, 2015.

~~On February 1, 2017, Justice~~Operating entered into a Hotel management agreement (“HMA”) with ~~Interstate Management Company, LLC~~Aimbridge Hospitality (“~~Interstate”~~Aimbridge”) to manage the Hotel, ~~and related facilities~~along with its five-level parking garage, with an effective ~~takeover~~ date of February 3, 2017. The term of ~~HMA~~the management agreement is for an initial period of ten years commencing on the ~~takeover~~February 3, 2017 date and automatically renews for ~~an additional~~successive one (1) year periods, to not to exceed five years in the aggregate, subject to certain conditions. ~~The~~Under the terms on the HMA, ~~also provides for Interstate~~base management fee payable to ~~advance a key money incentive fee to the~~Aimbridge shall be one and seven-tenths percent (1.70%) of total Hotel ~~for capital improvements in the amount of $2,000,000 under certain terms and conditions described in a separate key money agreement.~~revenue.

~~- 22 -~~

Three Months Ended ~~March~~December 31, 2021 Compared to Three Months Ended ~~March~~December 31, 2020

The Company had net loss of ~~$1,737,000~~$960,000 for the three months ended ~~March~~December 31, 2021 compared to net loss of ~~$1,205,000~~$3,244,000 for the three months ended ~~March~~December 31, 2020. The change is primarily attributable to the ~~decrease~~increase in Hotel revenue.

Hotel Operations

The Company had net loss from Hotel operations of ~~$3,424,000~~$602,000 for the three months ended ~~March~~December 31, 2021 compared to net loss of ~~$1,141,000~~$4,348,000 for the three months ended ~~March~~December 31, 2020. The change is primarily attributable to ~~the decrease~~increase in Hotel ~~revenue.~~revenue and $2,000,000 one-time gain on debt extinguishment recorded as a result of the SBA Loan forgiven in November 2021.

The following table sets forth a more detailed presentation of Hotel operations for the three months ended ~~March~~December 31, 2021 and 2020.

For the three months ended March 31,	2021			2020
For the three months ended December 31,							2021			2020
Hotel revenues:
Hotel rooms	$	2,368,000		$	9,642,000		$	5,218,000		$	2,584,000
Food and beverage		17,000			874,000			296,000			76,000
Garage		479,000			650,000			768,000			424,000
Other operating departments		38,000			93,000			66,000			25,000
Total hotel revenues		2,902,000			11,259,000			6,348,000			3,109,000
Operating expenses excluding depreciation and amortization		(3,990,000	)		(10,060,000	)		(6,479,000	)		(5,133,000	)
Operating (loss) income before interest, depreciation and amortization		(1,088,000	)		1,199,000
Operating loss before interest, depreciation and amortization								(131,000	)		(2,024,000	)
Gain on extinguishment of debt								2,000,000			-
Interest expense - mortgage		(1,833,000	)		(1,793,000	)		(1,957,000	)		(1,791,000	)
Depreciation and amortization expense		(503,000	)		(547,000	)		(514,000	)		(533,000	)
Net loss from Hotel operations	$	(3,424,000	)	$	(1,141,000	)	$	(602,000	)	$	(4,348,000	)

For the three months ended ~~March~~December 31, 2021, the Hotel had operating loss of ~~$1,088,000~~$131,000 before interest expense, depreciation, and amortization on total operating revenues of ~~$2,902,000~~$6,348,000 compared to operating ~~income~~loss of ~~$1,199,000~~$2,024,000 before interest expense, depreciation, and amortization on total operating revenues of ~~$11,259,000~~$3,109,000 for the three months ended ~~March~~December 31, 2020. For the three months ended ~~March~~December 31, 2021, room revenues ~~decreased~~increased by ~~$7,274,000,~~$2,634,000, food and beverage revenue ~~decreased~~increased by ~~$857,000,~~$220,000, and garage revenue ~~decreased~~increased by ~~$171,000,~~$344,000, compared to the three months ended ~~March~~December 31, 2020. The year over year ~~decline~~increase in all ~~areas~~the revenue sources are result of the 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. Total operating expenses ~~decreased~~increased by ~~$6,070,000~~$1,346,000 due to ~~decrease~~increase in salaries and wages, rooms commission, credit card fees, management fees, and franchise fees.

- 21 -

The following table sets forth the average daily room rate, average occupancy percentage and RevPAR of the Hotel for the three months ended ~~March~~December 31, 2021 and 2020.

Three Months Ended March 31,	Average Daily Rate		Average Occupancy %			RevPAR
Three Months Ended December 31,								Average Daily Rate		Average Occupancy %			RevPAR

2021	$	103		47	%	$	48	$	138		75	%	$	104
2020	$	242		76	%	$	184	$	107		48	%	$	52

The Hotel’s revenues ~~decreased~~increased by ~~74%~~104% this quarter as compared to the previous comparable quarter. Average daily rate ~~decreased~~increased by ~~$139,~~$31, average occupancy ~~dropped 29%~~increased by 27%, and RevPAR ~~decreased~~increased by ~~$136~~$52 for the three months ended ~~March~~December 31, 2021 compared to the three months ended ~~March~~December 31, 2020.

~~- 23 -~~

Investment Transactions

The Company had a net loss on marketable securities of $412,000 for the three months ended December 31, 2021 compared to a net gain on marketable securities of ~~$1,268,000~~$59,000 for the three months ended ~~March 31, 2021 compared to a net loss on marketable securities of $307,000 for the three months ended March~~December 31, 2020. For the three months ended ~~March~~December 31, 2021, the Company had a net realized loss of ~~$250,000~~$2,095,000 and a net unrealized gain of ~~$1,518,000.~~$1,683,000. For the three months ended ~~March~~December 31, 2020, the Company had a net ~~realized loss~~unrealized gain of ~~$192,000 and a net unrealized loss of $115,000.~~$59,000. 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 ~~consolidates~~consolidated Justice ~~(Hotel)~~(“Hotel”) for financial reporting purposes and iswas not taxed on its non-controlling interest in the Hotel. Effective July 15, 2021, the Company become the owner of 100% of Justice and will include all of the Hotel’s income and expense accounts into its income taxes calculations. The income tax benefit during the three months ended ~~March~~December 31, 2021 and 2020 ~~represents~~represent the income tax effect on the Company’s pretax ~~income (loss)~~loss which includes its share in the net loss of the ~~Hotel.~~Hotel accordingly.

~~Nine~~Six Months Ended ~~March~~December 31, 2021 Compared to ~~Nine~~Six Months Ended ~~March~~December 31, 2020

The Company had net loss of ~~$7,996,000~~$2,935,000 for the ~~nine~~six months ended ~~March~~December 31, 2021 compared to net ~~income~~loss of ~~$146,000~~$6,259,000 for the ~~nine~~six months ended ~~March~~December 31, 2020. The change is primarily attributable to the ~~decrease~~increase in Hotel revenue.

Hotel Operations

The Company had net loss from Hotel operations of ~~$11,701,000~~$2,557,000 for the ~~nine~~six months ended ~~March~~December 31, 2021 compared to net ~~income~~loss of ~~$1,257,000~~$8,277,000 for the ~~nine~~six months ended ~~March~~December 31, 2020. The change is primarily attributable to ~~the decrease~~increase in Hotel ~~revenue.~~revenue and $2,000,000 one-time gain on debt extinguishment recorded as a result of the SBA Loan forgiven in November 2021.

The following table sets forth a more detailed presentation of Hotel operations for the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020.

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For the nine months ended March 31, 2021 2020
Hotel revenues:
Hotel rooms $ 7,842,000 $ 35,453,000
Food and beverage 130,000 3,521,000
Garage 1,373,000 2,162,000
Other operating departments 91,000 453,000
Total hotel revenues 9,436,000 41,589,000
Operating expenses excluding depreciation and amortization (14,156,000 ) (33,138,000 )
Operating (loss) income before interest, depreciation and amortization (4,720,000 ) 8,451,000
Interest expense - mortgage (5,415,000 ) (5,541,000 )
Depreciation and amortization expense (1,566,000 ) (1,653,000 )
Net (loss) income from Hotel operations $ (11,701,000 ) $ 1,257,000

For the six months ended December 31,	2021			2020
Hotel revenues:
Hotel rooms	$	10,780,000		$	5,474,000
Food and beverage		562,000			113,000
Garage		1,675,000			894,000
Other operating departments		136,000			53,000
Total hotel revenues		13,153,000			6,534,000
Operating expenses excluding depreciation and amortization		(12,812,000	)		(10,166,000	)
Operating income (loss) before interest, depreciation and amortization		341,000			(3,632,000	)
Gain on extinguishment of debt		2,000,000			-
Interest expense - mortgage		(3,855,000	)		(3,582,000	)
Depreciation and amortization expense		(1,043,000	)		(1,063,000	)
Net loss from Hotel operations	$	(2,557,000	)	$	(8,277,000	)

For the ~~nine~~six months ended ~~March~~December 31, 2021, the Hotel had operating ~~loss~~income of ~~$4,720,000~~$341,000 before interest expense, depreciation, and amortization on total operating revenues of ~~$9,436,000~~$13,153,000 compared to operating ~~income~~loss of ~~$8,451,000~~$3,632,000 before interest expense, depreciation, and amortization on total operating revenues of ~~$41,589,000~~$6,534,000 for the ~~nine~~six months ended ~~March~~December 31, 2020. For the ~~nine~~six months ended ~~March~~December 31, 2021, room revenues ~~decreased~~increased by ~~$27,611,000,~~$5,306,000, food and beverage revenue ~~decreased~~increased by ~~$3,391,000,~~$449,000, and garage revenue ~~decreased~~increased by ~~$789,000,~~$781,000, compared to the ~~nine~~six months ended ~~March~~December 31, 2020. The year over year ~~decline~~increase in all ~~areas~~the revenue sources are result of the 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. Total operating expenses ~~decreased~~increased by ~~$18,982,000~~$2,646,000 due to ~~decrease~~increase in salaries and wages, rooms commission, credit card fees, management fees, and franchise fees.

~~- 24 -~~

The following table sets forth the average daily room rate, average occupancy percentage and RevPAR of the Hotel for the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020.

Nine Months Ended March 31,	Average Daily Rate		Average Occupancy %			RevPAR
Six Months Ended December 31,								Average Daily Rate		Average Occupancy %			RevPAR

2021	$	106		49	%	$	52	$	139		77	%	$	107
2020	$	256		91	%	$	233	$	107		51	%	$	55

The Hotel’s revenues ~~decreased~~increased by ~~77%~~101% for the ~~nine~~six months ended ~~March~~December 31, 2021 as compared to the ~~nine~~six months ended ~~March~~December 31, 2020. Average daily rate ~~decreased~~increased by ~~$150,~~$32, average occupancy ~~decreased~~increased by ~~42%~~26%, and RevPAR ~~decreased~~increased by ~~$181~~$52 for the ~~nine~~six months ended ~~March~~December 31, 2021 compared to the ~~nine~~six months ended ~~March~~December 31, 2020.

Investment Transactions

The Company had a net loss on marketable securities of $857,000 for the six months ended December 31, 2021 compared to a net gain on marketable securities of ~~$1,384,000~~$116,000 for the ~~nine~~six months ended ~~March 31, 2021 compared to a net loss on marketable securities of $521,000 for the nine months ended March~~December 31, 2020. For the ~~nine~~six months ended ~~March~~December 31, 2021, the Company had a net realized loss of ~~$261,000~~$2,140,000 and a net unrealized gain of ~~$1,645,000.~~$1,283,000. For the ~~nine~~six months ended ~~March~~December, 31, 2021, Company had a net realized loss of $2,056,000 from its investment in Comstock. For the six months ended December 31, 2020, the Company had a net realized loss of ~~$175,000~~$11,000 and a net unrealized ~~loss~~gain of ~~$346,000.~~$127,000. 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 ~~consolidates~~consolidated Justice ~~(Hotel)~~(“Hotel”) for financial reporting purposes and iswas not taxed on its non-controlling interest in the Hotel. Effective July 15, 2021, the Company become the owner of 100% of Justice and will include all of the Hotel’s income and expense accounts into its income taxes calculations. The income tax benefit ~~(expense)~~ during the ~~nine~~six months ended ~~March~~December 31, 2021 and 2020 ~~represents~~represent the income tax effect on the Company’s pretax ~~income~~loss which includes its share in the net ~~(loss) income~~loss of the ~~Hotel.~~Hotel accordingly.

- 23 -

MARKETABLE SECURITIES

The following table shows the composition of the Company’s marketable securities portfolio as of ~~March~~December 31, 2021 and June 30, ~~2020~~2021 by selected industry groups.

			% of Total					% of Total
As of March 31, 2021			Investment
As of December 31, 2021								Investment
Industry Group	Fair Value		Securities			Fair Value		Securities

Communication services						$	995,000		69.0	%
REITs and real estate companies							302,000		20.9	%
Basic materials	$	1,265,000		78.9	%		46,000		3.2	%
REITs and real estate companies		276,000		17.2	%
Industrials		62,000		3.9	%		82,000		5.7	%
Utilities							9,000		0.6	%
Healthcare							5,000		0.3	%
Technologies							4,000		0.3	%
	$	1,603,000		100.0	%	$	1,443,000		100.0	%

			% of Total					% of Total
As of June 30, 2020			Investment
As of June 30, 2021								Investment
Industry Group	Fair Value		Securities			Fair Value		Securities

Communication services						$	1,334,000		37.7	%
Basic materials	$	377,000		66.7	%		720,000		20.3	%
Industrials							653,000		18.5	%
REITs and real estate companies		162,000		28.7	%		438,000		12.4	%
Energy		26,000		4.6	%		250,000		7.1	%
Healthcare							141,000		4.0	%
	$	565,000		100.0	%	$	3,536,000		100.0	%

As of ~~March~~December 31, 2021, the Company’s investment portfolio includes ~~six~~nine equity positions. The Company holds ~~one~~three equity securities that are more than 10% of the equity value of the portfolio. The largest security position represents ~~77%~~69% of the portfolio and consists of the common stock of ~~Comstock,~~ViacomCBS Inc. (NASDAQ: VIACP) which is included in the ~~basic materials~~communication services industry group.

~~- 25 -~~

As of June 30, ~~2020,~~2021, the Company held ~~four~~twelve different equity positions in its investment portfolio. The Company held ~~two~~three equity securities that comprised more than 10% of the equity value of the portfolio. The largest security position represents ~~60%~~38% of the portfolio and consists of the common stock of ~~Comstock~~ViacomCBS Inc. (NASDAQ: VIACP) which is included in the ~~basic materials~~communication services industry group.

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

For the three months ended December 31,	2021			2020
Net (loss) gain on marketable securities	$	(412,000	)	$	59,000
Impairment loss on other investments		(20,000	)		(1,000	)
Dividend and interest income		30,000			-
Margin interest expense		(12,000	)		-
Trading and management expenses		(40,000	)		(25,000	)
	$	(454,000	)	$	33,000

For the six months ended December 31,	2021			2020
Net (loss) gain on marketable securities	$	(857,000	)	$	116,000
Impairment loss on other investments		(20,000	)		(23,000	)
Dividend and interest income		64,000			15,000
Margin interest expense		(28,000	)		-
Trading and management expenses		(80,000	)		(56,000	)
	$	(921,000	)	$	52,000

- 24 -

For the three months ended March 31, 2021 2020
Net gain (loss) on marketable securities $ 1,268,000 $ (307,000 )
Impairment loss on other investments (15,000 ) (38,000 )
Dividend and interest income 1,000 41,000
Margin interest expense - (5,000 )
Trading and management expenses (35,000 ) (28,000 )
$ 1,219,000 $ (337,000 )

For the nine months ended March 31, 2021 2020
Net gain (loss) on marketable securities $ 1,384,000 $ (521,000 )
Impairment loss on other investments (38,000 ) (38,000 )
Dividend and interest income 16,000 129,000
Margin interest expense - (19,000 )
Trading and management expenses (91,000 ) (84,000 )
$ 1,271,000 $ (533,000 )

FINANCIAL CONDITION AND LIQUIDITY

On December 16, 2020, ~~respectively. Of~~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 ~~$10,666,000 restricted cash held as~~dissolution of June 30, 2020, $2,432,000 was for a possible future property improvement plan (“PIP”) requested by our franchisor, Hilton. However, Hilton has confirmed that it will not require a PIP for our Hotel until relicensing which shall occur at the earlier of (i) January 2030, which is six years after the maturity date of our current senior and mezzanine loans, or (ii) upon the sale of our Hotel. On August 19, 2020, Lender released PIP depositsJustice in December 2021, Portsmouth assumed Justice’s note payable to InterGroup in the amount of ~~$2,379,000~~$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 six months ending December 31, 2021, InterGroup advanced $4,700,000 to the ~~Hotel.~~Hotel, bringing the total amount due to InterGroup to $11,350,000 at December 31, 2021. The ~~funds were utilized~~Company could amend its by-laws and increase the number of authorized shares in order to ~~fund operating expenses, including franchise and management fees and other expenses.~~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 ~~recently enacted~~ Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business ~~Administration.~~Administration (the “SBA”). Justice received proceeds of $4,719,000 from the SBA Loan. In accordance with the requirements of the CARES Act, Justice ~~has~~ used the proceeds from the SBA Loan ~~primarily~~ for payroll ~~costs. As of March 31, 2021, Justice had used all proceeds of the SBA Loan in~~costs and other qualified expenses. The SBA Loan iswas scheduled to mature on April 9, 2022 with a 1.00% interest rate and is subject to the terms and conditions applicable to loans administered by the U.S. Small Business Administration under the CARES Act. If the SBA approves the forgiveness amount, all payments of principal and interest are deferred until the date the forgiveness amount is remitted by the SBA to CIBC. If the SBA does not forgive any amount of the loan, payments would start within 30 days. Repayment obligations under the loan may be forgiven if the funds are used for payroll and other qualified expenses. All unforgiven portion of the principal and accrued interest will be due at maturity. On ~~December 29, 2020, Justice submitted its application for full loan forgiveness. As of March 31,~~June 10, 2021, the SBA ~~has not~~Loan was forgiven ~~the SBA Loan.~~in full.

~~- 26 -~~

On November 19, 2021, ~~unused portion of~~ the Second SBA Loan was ~~$350,000.~~

As the sole general partner of Justice that controls approximately 97.5% of the voting interest in the Partnership, Portsmouth has the ability to amend the partnership agreement to allow for capital calls to the limited partners of Justice if needed. The majority of any capital calls will be met by Portsmouth. Portsmouth will have financing availability, upon the authorization of the respective board of directors, to borrow from InterGroup to meet any capital calls and its other obligations during the next twelve months and beyond. On August 28, 2020, the Board of InterGroup passed resolutions to provide funding to Portsmouth if necessary. 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. Since December 2020, InterGroup has advanced $2,950,000 to Justice per the aforementioned loan modification agreement. The Partnership is also allowed to seek additional loans and sell partnership interests. Upon the consent of the general partner and a super majority in interest, the Partnership may sell additional classes or series of units of the Partnership under certain conditions in order to raise additional capital.

- 2725 -

MATERIAL CONTRACTUAL OBLIGATIONS

The following table provides a summary as of ~~March~~December 31, 2021, the Company’s material financial obligations which also including interest payments:

			3 Months		Year		Year		Year		Year						6 Months		Year		Year		Year		Year
	Total		2021		2022		2023		2024		2025		Thereafter		Total		2022		2023		2024		2025		2026		Thereafter
Mortgage notes payable	$	111,130,000	$	385,000	$	1,632,000	$	1,721,000	$	107,392,000	$	-	$	-	$	109,818,000	$	850,000	$	1,729,000	$	107,239,000	$	-	$	-	$	-
SBA loans and other notes payable		7,502,000		119,000		5,200,000		183,000		-		-		2,000,000
Related party notes payable		10,178,000		379,000		6,517,000		567,000		567,000		567,000		1,581,000		15,155,000		283,000		11,917,000		567,000		567,000		567,000		1,254,000
Interest		17,290,000		1,365,000		6,291,000		6,180,000		3,454,000		-		-		13,013,000		3,779,000		6,167,000		3,067,000		-		-		-
Total	$	146,100,000	$	2,248,000	$	19,640,000	$	8,651,000	$	111,413,000	$	567,000	$	3,581,000	$	137,986,000	$	4,912,000	$	19,813,000	$	110,873,000	$	567,000	$	567,000	$	1,254,000

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 to adjust hotel room rates on an ongoing basis, there should be minimal impact on partnership revenues due to inflation. Partnership revenues are also subject to interest rate risks, which may be influenced by 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 USE OF ESTIMATES

Critical accounting policies are those that are most significant to the presentation of our financial position and results of operations and require judgments by management in order to make estimates about the effect of matters that are inherently uncertain. The preparation of these condensed 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 on-going 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. There have been no material changes to the Company’s critical accounting policies during the ~~nine~~six months ended ~~March~~December 31, 2021. Please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2020~~2021 for a summary of the critical accounting policies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-Q.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

~~- 28 -~~

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in the Company’s internal control over financial reporting during the last quarterly period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

- 26 -

PART II.

OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

During the period ending ~~March~~December 31, 2021, there were no pending or threatened legal actions.

Item 1A. RISK FACTORS

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There have been no events that are required to be reported under this Item.

Item 3. DEFAULTS UPON SENIOR SECURITIES

There have been no events that are required to be reported under this Item.

Item 4. MINE SAFETY DISCLOSURES

There have been no events that are required to be reported under this Item.

Item 5. OTHER INFORMATION

As disclosed in its Definitive Information Statement on Schedule 14C, filed with the SEC on January 25, 2021, personnel of the former Santa Fe Financial Corporation (“Santa Fe”) received shareholder approvalThere have been no events that are required to distribute its assets, as described and subsequently dissolve, all as set forth in the Information Statement. On April 12, 2021, Santa Fe received a filed stamped copy of its Articles of Dissolution from the State of Nevada, and Santa Fe is now fully dissolved and no longer in legal existence.be reported under this Item.

Item 6. EXHIBITS

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.~~1350

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

- 2927 -

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:	February 14, 2022
~~Date:~~by	~~May 21, 2021~~	by	/s/ John V. Winfield
				John V. Winfield
				~~President,~~ Chairman of the Board and
				Chief Executive Officer
				(Principal Executive Officer)

Date:	February 14, 2022		by	/s/ David C. Gonzalez
~~Date:~~		~~May 21, 2021~~	by	David C. Gonzalez
				President, Advisor of Executive Strategic Real Estate and Securities Investment Committee

Date:	February 14, 2022		by	/s/ Danfeng Xu
				Danfeng Xu
				Treasurer and Controller
				(Principal Financial Officer)

- 3028 -

For the nine months ended March 31,	2021			2020
Cash flows from operating activities:
Net (loss) income	$	(7,996,000	)	$	146,000
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Net unrealized (gain) loss on marketable securities		(1,644,000	)		346,000
Deferred taxes		(2,995,000	)		26,000
Impairment loss on other investments		38,000			38,000
Depreciation and amortization		1,388,000			1,519,000
Changes in operating assets and liabilities:
Investment in marketable securities		606,000			748,000
Accounts receivable		129,000			665,000
Other assets		(42,000	)		(222,000	)
Accounts payable and other liabilities - Justice		(1,112,000	)		(3,182,000	)
Accounts payable and other liabilities		14,000			51,000
Accounts payable related party		606,000			121,000
Due to securities broker		-			(151,000	)
Obligations for securities sold		-			(325,000	)
Net cash used in operating activities		(11,008,000	)		(220,000	)

Cash flows from investing activities:
Payments for hotel furniture, equipment and building improvements		(490,000	)		(1,206,000	)
Proceeds from other investments		29,000			29,000
Proceeds from (payments for) real estate investments		980,000			(3,000	)
Investment in Justice		(206,000	)		-
Net cash provided by (used in) investing activities		313,000			(1,180,000	)

Cash flows from financing activities:
Proceeds from other note payable - related party		2,950,000			-
Proceeds from other note payable - SBA Loan		2,000,000			-
Payments of mortgage and other notes payable		(1,507,000	)		(1,399,000	)
Issuance cost from refinance of mortgage note payable		-			(480,000	)
Issuance cost from refinance of related party note payable		(50,000	)		(80,000	)
Net cash provided by (used in) financing activities		3,393,000			(1,959,000	)

Net decrease in cash, cash equivalents, and restricted cash		(7,302,000	)		(3,359,000	)
Cash, cash equivalents, and restricted cash at the beginning of the period		16,385,000			20,816,000
Cash, cash equivalents, and restricted cash at the end of the period	$	9,083,000		$	17,457,000

Supplemental information:
Interest paid	$	5,415,000		$	5,560,000
Taxes paid	$	22,000		$	2,000

Non-cash transaction:
Additions to Hotel equipment through capital lease	$	30,000		$	30,000

Type	March 31, 2021		June 30, 2020

Private equity hedge fund, at cost	$	20,000	$	57,000
Other preferred stock		-		30,000
	$	20,000	$	87,000

As of and for the nine months	Hotel			Investment
ended March 31, 2021	Operations			Transactions		Corporate			Total
Revenues	$	9,436,000		$	-	$	-		$	9,436,000
Segment operating expenses		(14,156,000	)		-		(561,000	)		(14,717,000	)
Segment loss		(4,720,000	)		-		(561,000	)		(5,281,000	)
Interest expense - mortgage and related party		(5,415,000	)		-		-			(5,415,000	)
Depreciation and amortization expense		(1,566,000	)		-		-			(1,566,000	)
Gain from investments		-			1,271,000		-			1,271,000
Income tax benefit		-			-		2,995,000			2,995,000
Net income (loss)	$	(11,701,000	)	$	1,271,000	$	2,434,000		$	(7,996,000	)
Total assets	$	40,152,000		$	1,623,000	$	10,330,000		$	52,105,000

For the nine months	Hotel			Investment
ended March 31, 2020	Operations			Transactions			Corporate			Total
Revenues	$	41,589,000		$	-		$	-		$	41,589,000
Segment operating expenses		(33,138,000	)		-			(553,000	)		(33,691,000	)
Segment income (loss)		8,451,000			-			(553,000	)		7,898,000
Interest expense - mortgage and related party		(5,541,000	)		-			-			(5,541,000	)
Depreciation and amortization expense		(1,653,000	)		-			-			(1,653,000	)
Loss from investments		-			(533,000	)		-			(533,000	)
Income tax expense		-			-			(25,000	)		(25,000	)
Net income (loss)	$	1,257,000		$	(533,000	)	$	(578,000	)	$	146,000

For the year ending June 30,
2021	$	130,000
2022		508,000
2023		188,000
Total minimum lease payments		826,000
Less interest on finance lease		(43,000	)
Present value of future minimum lease payments	$	783,000

For the year ending June 30,
2021	$	498,000
2022		11,717,000
2023		750,000
2024		567,000
2025		567,000
Thereafter		3,581,000
	$	17,680,000