NOTE 2 – LIQUIDITY

The Company’s principal sources of liquidity are cash on hand, cash flows generated from its real estate and Hotel operations, marketable securities and property-level financing. As of June 30, 2026, the Company had cash and cash equivalents of $6.356 million, restricted cash of $10.943 million and marketable securities with a fair value of $4.394 million. The Company also had $427,000 due to a securities broker and $272,000 of obligations for securities sold, which are presented separately as liabilities in the consolidated balance sheet. The Company generated $3.450 million of net cash from operating activities during fiscal 2026.

Restricted cash primarily consists of amounts maintained in lender-controlled accounts for operating expenses, debt service and required reserves and is not generally available for unrestricted corporate purposes.

Senior Mortgage and Mezzanine Financing

Portsmouth’s $67.0 million senior mortgage loan and $36.3 million mezzanine loan have an initial maturity date of April 9, 2027 and provide for three one-year extension options, subject to specified conditions. As of June 30, 2026, Portsmouth was in compliance with all applicable loan covenants.

For the first one-year extension through April 9, 2028, the senior mortgage loan requires, among other conditions, a Debt Service Coverage Ratio (“DSCR”) of at least 1.10:1.00, measured as provided in the loan agreement. Based on management’s application of the methodology set forth in the loan agreement, Portsmouth’s calculated DSCR was approximately 1.45:1.00 as of June 30, 2026, compared with the 1.10:1.00 requirement applicable to the first extension. Because DSCR is ultimately determined by the lender under the loan agreement, the lender’s calculation may differ from management’s calculation. If the required DSCR is not satisfied at the applicable measurement date, the loan agreement permits Portsmouth, subject to its terms, to deposit additional funds into the lender-controlled Carry Reserve in an amount sufficient to satisfy the DSCR condition.

No Debt Yield requirement applies to the first extension. The first extension also requires, among other conditions, the absence of specified defaults or events of default, extension or replacement of the required interest-rate protection and a corresponding extension of the mezzanine loan. Management currently expects to satisfy the applicable conditions and exercise the first one-year extension option through April 9, 2028.

The Company expects to fund its ordinary-course operating expenses, debt service, required reserves and capital expenditures through existing cash, operating cash flows and available financing arrangements. The Company’s liquidity remains subject to Hotel and real estate operating performance, interest rates, capital requirements, debt-extension conditions and the availability of refinancing.

Related Party Financing

The Company provides Portsmouth with an unsecured revolving credit facility with total borrowing capacity of $40.0 million. The facility bears interest at 9% per annum, is prepayable without penalty, and requires payment of principal and accrued interest at maturity. As of June 30, 2026, $38.108 million was outstanding, and Portsmouth had $1.892 million of remaining borrowing capacity. Portsmouth made no additional borrowings under the facility during fiscal 2026, following the March 28, 2025 refinancing.

In August 2026, the Company and Portsmouth amended the facility to extend its maturity date from July 31, 2027 to July 31, 2029. All other material terms remained unchanged. The related balances and transactions are eliminated in consolidation. Accordingly, the facility provides liquidity to Portsmouth within the consolidated group but does not constitute an external source of liquidity to the Company on a consolidated basis.

Cash Management and Distribution Restrictions (Hotel Subsidiary)

Under Portsmouth’s March 28, 2025 senior mortgage loan, Hotel cash receipts are deposited into lender-controlled accounts pursuant to a cash-management arrangement. The cash-management arrangement is separate from Portsmouth’s compliance with its loan covenants and from the conditions applicable to the first extension. Release from the cash-management arrangement requires, among other conditions, the lender to determine that the Hotel has achieved a Debt Yield of at least 11% and a DSCR of at least 1.10:1.00 for two consecutive applicable calculation dates.

Based on management’s application of the methodology set forth in the loan agreement, the Hotel’s calculated trailing-twelve-month DSCR and Debt Yield were approximately 1.45:1.00 and 13.9%, respectively, as of June 30, 2026. Although these calculations exceeded the applicable financial thresholds, satisfaction of the release conditions is determined by the lender, and the lender had not confirmed that the applicable release conditions had been satisfied as of June 30, 2026. Accordingly, the cash-management arrangement remained in effect. The continued operation of the cash-management arrangement does not constitute a default or noncompliance with Portsmouth’s loan covenants. Funds in the cash-management arrangement are applied to operating expenses, debt service, lender-required reserves and other amounts in accordance with the applicable loan documents.

Liquidity Outlook

Management expects to meet the Company’s liquidity requirements through cash on hand, operating cash flows and its existing financing arrangements. As of June 30, 2026, Portsmouth was in compliance with all applicable covenants under its senior mortgage and mezzanine loan agreements, management’s calculated DSCR of approximately 1.45:1.00 exceeded the 1.10:1.00 requirement applicable to the first extension, and management expects to exercise the first one-year extension option.

Management believes the Company’s existing liquidity sources and financing arrangements are sufficient to meet its obligations for at least twelve months following issuance of these consolidated financial statements.

The Hotel debt and cash-management/lockbox reside at Portsmouth’s subsidiaries; while these provisions may limit distributions upstream to InterGroup while in effect, they do not impose liens on InterGroup’s non-Hotel properties. Portsmouth and InterGroup have provided limited guaranties of specified obligations under the Hotel’s senior mortgage and mezzanine financing, including customary non-recourse carve-outs, specified performance obligations and certain springing-recourse events. See Note 10 – Mortgage and Mezzanine Loans.