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, 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 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.



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.



-22-






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 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 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 Annual 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.




As a result of the Coronavirus Aid, Relief, and Economic Security Act (the
"CARES Act") signed into law on March 27, 2020, additional avenues of relief may
be available to workers and families through enhanced unemployment insurance
provisions and to small businesses through programs administered by the Small
Business Administration ("SBA"). The CARES Act includes, among other things,
provisions relating to payroll tax credits and deferrals, net operating loss
carryback periods, alternative minimum tax credits and technical corrections to
tax depreciation methods for qualified improvement property. The CARES Act also
established a Paycheck Protection Program ("PPP"), whereby certain small
businesses are eligible for a loan to fund payroll expenses, rent, and related
costs. On April 9, 2020, Justice entered into a loan agreement ("SBA Loan -
Justice") with CIBC Bank USA under the CARES Act. Justice received proceeds of
$4,719,000 from the SBA Loan - Justice. In accordance with the requirements of
the CARES Act, Justice has used all proceeds from the SBA Loan for payroll costs
and other qualified expenses. The SBA Loan - Justice was scheduled to mature on
April 9, 2022 and had a 1.00% interest rate and was subject to the terms and
conditions applicable to loans administered by the U.S. Small Business
Administration under the CARES Act. On April 27, 2020, InterGroup entered into a
loan agreement ("SBA Loan - InterGroup") with CIBC Bank USA under the CARES Act
and received loan proceeds in the amount of $453,000. As of June 30, 2021,
InterGroup had used all the $453,000 loan proceeds in qualified payroll
expenses. The SBA Loan - InterGroup was scheduled to mature on April 27, 2022
and had a 1.00% interest rate. Both the SBA Loan - Justice and SBA Loan -
InterGroup (collectively the "SBA Loans") were forgiven in full by the SBA

as of
June 30, 2021.




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 had used all
proceeds from the Second SBA Loan primarily for payroll costs. The Second SBA
Loan was scheduled to mature on February 3, 2026, 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. On November 19, 2021,
the Second SBA Loan was 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.



RESULTS OF OPERATIONS



As of December 31, 2021, the Company owns approximately 75% of the common shares
of Portsmouth Square, Inc. Historically, the Company's principal source of
revenue is derived from the investment of its subsidiary, Portsmouth, in the
Justice Investors Limited Partnership ("Justice" or the "Partnership") inclusive
of hotel room revenue, food and beverage revenue, garage revenue, and revenue
from other operating departments. Justice owned the Hotel and related
facilities, including a five-level underground parking garage up to its
dissolution on December 23, 2021 when Portsmouth replaced Justice as the owner
of the Hotel. The financial statements of Justice had been consolidated with
those of the Company. However, the impact of the COVID-19 pandemic is highly
uncertain and management expects that the ongoing length and severity of the
economic downturn will have a material adverse impact on our business, financial
condition, liquidity and financial results.



The Hotel is 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.




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



-23-






In addition to the operations of the Hotel, the Company also generates income
from the ownership, management and, when appropriate, sale of real estate.
Properties include sixteen apartment complexes, one commercial real estate
property, and three single-family houses as strategic investments. The
properties are located throughout the United States, but are concentrated in
Texas and Southern California. The Company also has an investment in unimproved
real property. All of the Company's residential and commercial rental operating
properties are managed in-house.



The Company acquires its investments in real estate and other investments
utilizing cash, securities, or debt, subject to approval or guidelines of the
Board of Directors. The Company also invests in income-producing instruments,
equity, and debt securities from time to time and will consider other
investments if such investments offer growth or profit potential.

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





The Company had a net loss of $2,243,000 for the three months ended December 31,
2021 compared to a net loss of $1,063,000 for the three months ended December
31, 2020. The change is primarily attributable to $2,351,000 loss on marketable
securities in the three months ended December 31, 2021.



Hotel Operations



The Company had net loss from Hotel operations of $324,000 for the three months
ended December 31, 2021 compared to net loss of $4,274,000 for the three months
ended December 31, 2020. The change is primarily attributable to the increase in
Hotel revenue.

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


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 revenues                                    6,348,000          3,109,000
Operating expenses excluding depreciation and
amortization                                           (6,479,000 )       (5,133,000 )
Operating loss before interest, depreciation and
amortization                                             (131,000 )       (2,024,000 )
Gain on extinguishment of debt                          2,000,000

-


Interest expense - mortgage                            (1,654,000 )       (1,668,000 )
Depreciation and amortization expense                    (539,000 )         (582,000 )
Net loss from Hotel operations                     $     (324,000 )   $   (4,274,000 )
For the three months ended December 31, 2021, the Hotel had operating loss of
$131,000 before interest expense, depreciation, and amortization on total
operating revenues of $6,348,000 compared to operating loss of $2,024,000 before
interest expense, depreciation, and amortization on total operating revenues of
$3,109,000 for the three months ended December 31, 2020. For the three months
ended December 31, 2021, room revenues increased by $2,634,000, food and
beverage revenue increased by $220,000, and garage revenue increased by
$344,000, compared to the three months ended December 31, 2020. The year over
year increase in all 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 increased by $1,346,000 due to 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 three months ended December 31,

2021
and 2020.



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

       2021          $        138                75 %   $    104
       2020          $        107                48 %   $     52

The Hotel's revenues increased by 104% this quarter as compared to the previous comparable quarter. Average daily rate increased by $31, average occupancy increased by 27%, and RevPAR increased by $52 for the three months ended December 31, 2021 compared to the three months ended December 31, 2020.





Real Estate Operations




Net income from real estate operations for the three months ended December 31,
2021 increased by $85,000 compared to the three months ended December 31, 2020
due to increase in revenue. Revenue from real estate operations increased by
$312,000 year over year due to increase in market rent and reduction in bad
debt. All the Company's properties are managed in-house. Management continues to
review and analyze the Company's real estate operations to improve occupancy and
rental rates and to reduce expenses and improve efficiencies.



Investment Transactions



The Company had a net loss on marketable securities of $2,351,000 for the three
months ended December 31, 2021 compared to a net gain on marketable securities
of $3,457,000 for the three months ended December 31, 2020. For the three months
ended December 31, 2021, the Company had a net realized loss of $3,254,000 and a
net unrealized gain of $903,000. For the three months ended December, 31, 2021,
Company had a net realized loss of $2,441,000 from its investment in Comstock.
For the three months ended December 31, 2020, the Company had a net realized
loss of $672,000 and a net unrealized gain of $4,129,000. 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 and its subsidiary Portsmouth compute and file income tax returns
and prepare discrete income tax provisions for financial reporting. The income
tax benefit during the three months ended December 31, 2021 and 2020 represent
primarily the income tax effect of the pretax (loss) income at InterGroup and
Portsmouth, which includes its share in net loss of the Hotel.

Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020





The Company had net loss of $5,149,000 for the six months ended December 31,
2021 compared to net income of $3,756,000 for the six months ended December 31,
2020. The change is primarily attributable to the $12,043,000 gain from sale of
real estate in August 2020 and $4,519,000 loss on marketable securities in the
six months ended December 31, 2021.



Hotel Operations



The Company had net loss from Hotel operations of $2,067,000 for the six months
ended December 31, 2021 compared to net loss of $8,161,000 for the six months
ended December 31, 2020. The change is primarily attributable to the increase in
Hotel revenue.



-25-

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


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                            (3,315,000 )       (3,368,000 )
Depreciation and amortization expense                  (1,093,000 )       (1,161,000 )
Net loss from Hotel operations                     $   (2,067,000 )   $   (8,161,000 )
For the six months ended December 31, 2021, the Hotel had operating income of
$341,000 before interest expense, depreciation, and amortization on total
operating revenues of $13,153,000 compared to operating loss of $3,632,000
before interest expense, depreciation, and amortization on total operating
revenues of $6,534,000 for the six months ended December 31, 2020. For the six
months ended December 31, 2021, room revenues increased by $5,306,000, food and
beverage revenue increased by $449,000, and garage revenue increased by
$781,000, compared to the six months ended December 31, 2020. The year over year
increase in all 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 increased by $2,646,000 due to increase in salaries and wages, rooms
commission, credit card fees, management fees, and franchise fees.



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



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

       2021          $        139                77 %   $    107
       2020          $        107                51 %   $     55




The Hotel's revenues increased by 101% for the six months ended December 31,
2021 as compared to the six months ended December 31, 2020. Average daily rate
increased by $32, average occupancy increased by 26%, and RevPAR increased by
$52 for the six months ended December 31, 2021 compared to the six months ended
December 31, 2020.



Real Estate Operations



Net income from real estate operations for the six months ended December 31,
2021 decreased by $11,796,000 compared to the six months ended December 31, 2020
due to the $12,043,000 gain from sale of real estate in August 2020. Revenue
from real estate operations increased by $944,000 year over year due to
reduction in vacancy and bad debt. All the Company's properties are managed
in-house. Management continues to review and analyze the Company's real estate
operations to improve occupancy and rental rates and to reduce expenses and

improve efficiencies.



Investment Transactions



The Company had a net loss on marketable securities of $4,519,000 for the six
months ended December 31, 2021 compared to a net gain on marketable securities
of $3,299,000 for the six months ended December 31, 2020. For the six months
ended December 31, 2021, the Company had a net realized loss of $1,001,000 and a
net unrealized loss of $3,518,000. For the six months ended December, 31, 2021,
Company had a net realized loss of $2,581,000 from its investment in Comstock.
For the six months ended December 31, 2020, the Company had a net realized loss
of $934,000 and a net unrealized gain of $4,233,000. 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.



-26-






MARKETABLE SECURITIES



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



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

REITs and real estate companies   $  7,014,000             33.2 %
Communication services               4,732,000             22.4 %
Financial services                   2,951,000             14.0 %
Technology                           1,930,000              9.1 %
Industrials                          1,487,000              7.0 %
Energy                               1,427,000              6.7 %
Consumer cyclical                      745,000              3.5 %
Basic material                         357,000              1.7 %
Utilities                              268,000              1.3 %
Healthcare                             237,000              1.1 %
                                  $ 21,148,000            100.0 %




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

REITs and real estate companies   $ 11,624,000             32.5 %
Energy                               6,374,000             17.8 %
Communication services               4,872,000             13.6 %
Financial services                   3,873,000             10.8 %
Industrials                          3,746,000             10.5 %
Basic material                       1,797,000              5.0 %
Consumer cyclical                    1,702,000              4.8 %
Healthcare                             981,000              2.7 %
Technology                             442,000              1.2 %
Other                                  381,000              1.1 %
                                  $ 35,792,000            100.0 %





As of December 31, 2021, the Company's investment portfolio is diversified with
69 different equity positions. The Company held one equity security that is more
than 10% of the equity value of the portfolio. The largest security position
represents 21% of the portfolio and consists of the common stock of Viacom CBS,
Inc. (NASDAQ: VIACP) which is included in the communication services industry
group.




As of June 30, 2021, the Company's investment portfolio is diversified with 83
different equity positions. The Company holds two equity securities that
comprised more than 10% of the equity value of the portfolio. The two largest
security positions represent 12% and 11% of the portfolio and consists of the
common stock of DigitalBridge Group, Inc. (NASDAQ: DBRG) and Viacom CBS, Inc.
(NASDAQ: VIACP), which are included in the REITs and real estate companies and
communication services industry group, respectively.

The following table shows the net (loss) gain 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         $   (120,000 )   $ 3,501,000
Net (loss) on marketable securities - Comstock     (2,231,000 )       (44,000 )
Impairment loss on other investments                  (41,000 )       (27,000 )
Dividend and interest income                          462,000          81,000
Margin interest expense                              (204,000 )      (161,000 )
Trading and management expenses                      (156,000 )

(126,000 ) Net (loss) gain from investment transactions $ (2,290,000 ) $ 3,224,000






-27-






For the six months ended December 31,                     2021

2020



Net (loss) gain on marketable securities              $ (1,938,000 )   $

3,248,000

Net (loss) gain on marketable securities - Comstock (2,581,000 ) 51,000 Impairment loss on other investments

                       (41,000 )       (89,000 )
Dividend and interest income                               649,000         205,000
Margin interest expense                                   (426,000 )      (281,000 )
Trading and management expenses                           (288,000 )

(275,000 ) Net (loss) gain from investment transactions $ (4,625,000 ) $ 2,859,000

FINANCIAL CONDITION AND LIQUIDITY


The Company had cash and cash equivalents of $12,168,000 and $6,808,000 as of
December 31, 2021 and June 30, 2021, respectively. The Company had marketable
securities, net of margin due to securities brokers, of $18,184,000 and
$21,456,000 as of December 31, 2021 and June 30, 2020, respectively. These
marketable securities are short-term investments and liquid in nature.



On December 16, 2020, Justice and InterGroup entered into a loan modification
agreement which increased Justice's borrowing from InterGroup as needed up to
$10,000,000. Upon the dissolution of Justice in December 2021, Portsmouth
assumed Justice's note payable to InterGroup in the amount of $11,350,000. On
December 31, 2021, Portsmouth and InterGroup entered into a loan modification
agreement which increased Portsmouth's borrowing from InterGroup as needed up to
$16,000,000. During the six months ending December 31, 2021, InterGroup advanced
$4,700,000 to the Hotel, bringing the total amount due to InterGroup to
$11,350,000 at December 31, 2021. Portsmouth could amend its by-laws and
increase the number of authorized shares in order to issue additional shares to
raise capital in the public markets if needed.



In order to increase our liquidity position and to take advantage of the
favorable interest rate environment, we refinanced our 151-unit apartment
complex in Parsippany, New Jersey on April 30, 2020, generating net proceeds of
$6,814,000. In June 2020, we refinanced one of our California properties and
generated net proceeds of $1,144,000. During the fiscal year ended June 30,
2021, we completed refinancing on six of our California properties and generated
net proceeds of $6,762,000. During the six months ending December 31, 2021, we
refinanced five of our properties' existing mortgages and obtained a mortgage
note payable on one of our California properties, generating net proceeds
totaling $16,099,000 as a result. We are currently evaluating other refinancing
opportunities and we could refinance additional multifamily properties should
the need arise, or should management consider the interest rate environment
favorable. The Company has an uncollateralized $5,000,000 revolving line of
credit from CIBC Bank USA ("CIBC") and the entire $5,000,000 is available to be
drawn down as of December 31, 2021 should additional liquidity be necessary.



On April 9, 2020, Justice entered into a loan agreement ("SBA Loan") with CIBC
Bank USA under the Coronavirus Aid, Relief, and Economic Security Act ("CARES
Act") administered by the U.S. Small Business Administration (the "SBA").
Justice received proceeds of $4,719,000 from the SBA Loan. In accordance with
the requirements of the CARES Act, Justice used the proceeds from the SBA Loan
for payroll costs and other qualified expenses. The SBA Loan was 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. On June 10, 2021, the SBA Loan was forgiven
in full.



On April 27, 2020, InterGroup entered into a loan agreement ("SBA Loan -
InterGroup") with CIBC Bank USA under the CARES Act and received loan proceeds
in the amount of $453,000. InterGroup had used all of the $453,000 loan proceeds
in qualified payroll expenses. The SBA Loan - InterGroup was scheduled to mature
on April 27, 2022 and had a 1.00% interest rate. On March 17, 2021, SBA Loan -
InterGroup was forgiven 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 had used all
proceeds from the Second SBA Loan primarily for payroll costs. The Second SBA
Loan was scheduled to mature on February 3, 2026, 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. On November 19, 2021,
the Second SBA Loan was 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.



-28-






Our known short-term liquidity requirements primarily consist of funds necessary
to pay for operating and other expenditures, including management and franchise
fees, corporate expenses, payroll and related costs, taxes, interest and
principal payments on our outstanding indebtedness, and repairs and maintenance
of the Hotel.



Our long-term liquidity requirements primarily consist of funds necessary to pay
for scheduled debt maturities and capital improvements of the Hotel and our real
estate properties. We will continue to finance our business activities primarily
with existing cash, including from the activities described above, and cash
generated from our operations. After considering our approach to liquidity and
accessing our available sources of cash, we believe that our cash position,
after giving effect to the transactions discussed above, will be adequate to
meet anticipated requirements for operating and other expenditures, including
corporate expenses, payroll and related benefits, taxes and compliance costs and
other commitments, for at least twelve months from the date of issuance of these
financial statements, even if current levels of low occupancy 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.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

MATERIAL CONTRACTUAL OBLIGATIONS

The following table provides a summary as of December 31, 2021, the Company's material financial obligations which also includes interest payments.





                                                               6 Months            Year              Year              Year             Year
                                               Total             2022              2023              2024              2025             2026           Thereafter

Mortgage and subordinated notes payable $ 196,118,000 $ 1,431,000

$ 12,960,000 $ 108,321,000 $ 3,866,000 $ 1,066,000 $ 68,474,000 Related party notes payable

                    3,804,000          283,000           567,000            567,000          567,000          567,000         1,253,000
Interest                                      34,564,000        4,533,000         8,723,000          5,376,000        2,241,000        2,126,000        11,565,000
Total                                      $ 234,486,000      $ 6,247,000      $ 22,250,000      $ 114,264,000      $ 6,674,000      $ 3,759,000      $ 81,292,000




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.

The Company's residential rental properties provide income from short-term operating leases and no lease extends beyond one year. Rental increases are expected to offset anticipated increased property operating expenses.





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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 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 critical
accounting policies.

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