OTC: PRSI

Prior
to its dissolution effective December 23, 2021, Justice owned and operated a 544-room hotel property located at 750 Kearny Street, San
Francisco California, known as the Hilton San Francisco Financial District (the “Hotel”) and related facilities including
a five-level underground parking garage through its subsidiaries Justice Operating Company, LLC (“Operating”) and Justice
Mezzanine Company, LLC (“Mezzanine”). Mezzanine was a wholly owned subsidiary of the Partnership; Operating is a wholly owned
subsidiary of Mezzanine. Effective December 23, 2021, Portsmouth replaced Justice as the single member of Mezzanine. Mezzanine is the
borrower under certain mezzanine indebtedness of Justice, and in December 2013, the Partnership conveyed ownership of the Hotel to Operating.
The Hotel is a full-service Hilton brand hotel pursuant to a Franchise License Agreement with HLT Franchise Holding LLC (“Hilton”)
through January 31, 2030. The franchise agreement requires the hotel to meet certain brand standards and capital improvement requirements,
noncompliance with which could have an adverse impact on operations, as discussed in Item 1A – Risk Factors.

In
connection with the refinancing of the Hotel on March 28, 2025, the Company formed Justice Pledgor, LLC, a Delaware limited liability
company (“Pledgor”), which became the sole member of Operating. Mezzanine is the sole member of Pledgor. The refinancing
transaction resulted in an increase in our leverage of approximately $1 million and subjects us to additional covenants and payment obligations,
which are described in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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HILTON
HOTELS FRANCHISE LICENSE AGREEMENT

The
Partnership entered into a Franchise License Agreement (the “License Agreement”) with the HLT Existing Franchise Holding
LLC (“Hilton”) on December 10, 2004. The term of the License Agreement was for an initial period of fifteen years commencing
on the date the Hotel began operating as a Hilton hotel, with an option to extend it for another five years, subject to certain conditions.
On June 26, 2015, Operating and Hilton entered into an amended franchise agreement that, among other things, extended the License Agreement
through 2030, and provided Justice with certain key money cash incentives to be earned through 2030. The License Agreement requires the
hotel to maintain specific brand standards and periodic renovations, noncompliance with which could result in penalties, termination
of the agreement, or loss of the Hilton brand, as discussed in Item 1A – Risk Factors.

HOTEL
MANAGEMENT COMPANY AGREEMENT

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

For
the fiscal years ended June 30, 2025 and 2024, hotel management fees were $783,000 and $706,000, and incentive fees of $0, respectively,
offset by key money amortization of $250,000 for both years and are included in Hotel operating expenses in the consolidated statements
of operations. However, following discussions with Aimbridge regarding the impact of the COVID-19 pandemic on incentive fee eligibility,
the parties agreed that no incentive fees were payable for fiscal years 2019 through 2023. Specifically, Aimbridge agreed to waive $1,030,134
in previously recorded incentive fees, and both parties established a performance threshold for future incentive fee eligibility of $15,257,301
in earnings before interest, taxes, depreciation, and amortization (“EBITDA”) which was the EBITDA in 2017 when Aimbridge
began managing the Hotel. As a result, the Company recorded a reduction in Hotel operating expenses of $1,030,134 for the year ended
June 30, 2025. The loss or replacement of the hotel management company, or a failure by Aimbridge to meet performance benchmarks, could
have a material adverse impact on hotel operations, as discussed in Item 1A – Risk Factors.

CHINESE
CULTURE FOUNDATION LEASE

In
November 1967, Justice entered into a 50-year nominal rent lease (the “Lease”) with the Chinese Culture Foundation of San
Francisco (the “Foundation”) for the third-floor space of the Hotel commonly known as the Chinese Culture Center, which the
Foundation had the right to occupy pursuant to the Lease. Among other requirements, the Lease was a condition imposed by the City of
San Francisco upon Justice, to convey the real estate where the Hotel would be built.

On
March 15, 2005, the Hotel and the Foundation entered an amended lease. The amended lease, among other things, requires the Hotel to pay
to the Foundation a monthly event space fee in the amount of $5,000, adjusted annually based on the local Consumer Price Index. As of
June 30, 2025, the monthly event space fee was $7,000. The term of the amended lease expired on October 17, 2023, with an automatic extension
for another 10-year term if the property continues to be operated as a hotel. Subject to certain conditions as set forth in the amended
lease, the Foundation is entitled to reserve for a maximum of 75 days per calendar year for use of the event space. If the Hotel needs
the event space during one of the dates previously reserved by the Foundation, the Hotel shall pay the Foundation $4,000 per day for
using the event space. During the fiscal years ended June 30, 2025 and 2024, the Hotel paid the Foundation $15,000 and $8,000 for such
fees, respectively. The terms of this lease, including the reserved use provisions, could limit flexibility for certain hotel functions
or events.

MARKETABLE
SECURITIES INVESTMENT POLICIES

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

The
Company’s securities investments are made under the supervision of an Executive Strategic Real Estate and Securities Investment
Committee of the Board of Directors (the “Committee”). The Committee currently has three members and is chaired by the Company’s
Chairman of the Board and Chief Executive Officer, John V. Winfield. The Committee has delegated authority to manage the portfolio to
the Company’s Chairman and Chief Executive Officer together with such assistants and management committees he may engage. The Committee
generally follows certain established investment guidelines for the Company’s investments. These guidelines presently include:
(i) corporate equity securities should be listed on the New York Stock Exchange (NYSE), NYSE MKT, NYSE Arca or the Nasdaq Stock Market
(NASDAQ); (ii) the issuer of the listed securities should be in compliance with the listing standards of the applicable national securities
exchange; and (iii) investment in a particular issuer should not exceed 10% of the market value of the total portfolio. The investment
guidelines do not require the Company to divest itself of investments, which initially meet these guidelines but subsequently fail to
meet one or more of the investment criteria. The Committee has in the past approved non-conforming investments and may in the future
approve non-conforming investments. The Committee may modify these guidelines from time to time. Changes in market conditions, interest
rates, or liquidity could negatively impact the value or performance of these investments, as discussed in Item 1A – Risk Factors.

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

The
Company may utilize margin for its marketable securities purchases using standard margin agreements with national brokerage firms. The
margin used by the Company may fluctuate depending on market conditions. The use of leverage could be viewed as risky, and the market
value of the portfolio may be subject to large fluctuations. Margin balances due on June 30, 2025 and 2024 were $0. The use of margin
or other forms of leverage increases exposure to market volatility and could magnify losses.

As
Chairman of the Committee and of the Company, John V. Winfield, directs the investment activity of the Company in public and private
markets pursuant to authority granted by the Board of Directors. Mr. Winfield also serves as Chief Executive Officer and Chairman of
the Board of InterGroup and oversees the investment activity of InterGroup. Depending on certain market conditions and various risk factors,
the Chief Executive Officer and InterGroup may, at times, invest in the same companies in which the Company invests. Such investments
align the interests of the Company with the interests of these related parties because it places the personal resources of the Chief
Executive Officer and the resources of InterGroup, at risk in substantially the same manner as the Company in connection with investment
decisions made on behalf of the Company. Transactions or investments involving related parties are subject to the Company’s related-party
transaction policies and applicable Securities and Exchange Commission disclosure requirements.

Further
information with respect to investment in marketable securities and other investments of the Company is set forth in Management Discussion
and Analysis of Financial Condition and Results of Operations section and Notes 5 and 6 of the Notes to Consolidated Financial Statements.

SEASONALITY

Historically,
the Hotel’s operation has been seasonal under normal circumstances. Like most hotels in the San Francisco area, the Hotel generally
maintained high occupancy and room rates during the entire year except for the weeks starting from Thanksgiving to first week of January
due to the holiday season. These seasonal patterns can be expected to cause fluctuations in the quarterly revenues of the Hotel. See
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information regarding the
effects on our results of operations. Climate variability or extreme weather events could alter historical seasonal trends and impact
occupancy and room rates, as discussed in Item 1A – Risk Factors.

COMPETITION

Our
Hotel has successfully completed its full guest-rooms renovation over the last 2 years along with public space, fitness center, corridors,
and meeting space. The renovations position the hotel to continue to drive rate and grow RevPAR over the market and its CompSet. The
hotel recently received its annual Quality Assurance inspection from Hilton and received the highest score at least in the hotel’s
last decade at 96.7% which is an “Outstanding” ranking by Hilton.

During
the fiscal year ending June 30, 2025, the Hotel’s CompSet achieved a RevPAR of $172.84 while the Hotel had a RevPAR of $214.66.
Since the completion of the renovation in June 2024, the Hotel has increased its lead in RevPAR on the CompSet dramatically, growing
RevPAR 23% while the comp set lost 8.3% over the same time.

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The
Hotel’s location in the San Francisco Financial District historically has provided greater opportunities over its competitors when
it comes to developing relationships with the Financial District entities and the customers who regularly do business in the downtown
area. With business travel slowly returning to San Francisco post-pandemic, we are competing with hotels in more tourist attracting locations
and amenities for the leisure traveler. The ability to capitalize on the strong midweek demand of the individual business traveler to
the Financial District has been the focus during this period of strong growth in the market. The city is seeing the return of a stronger
convention calendar along with business travel trending positively.

The
Hotel is also subject to certain operating risks common to the hospitality industry, which could adversely impact performance, including
those set forth in Item 1A- Risk Factors.

These
risks include, but are not limited to:

●
Competition
for guests and meetings from other hotels including competition and pricing pressure from internet wholesalers and distributors;

●
increases
in operating costs, including wages, benefits, insurance, property taxes and energy, due to inflation and other factors, which may
not be offset in the future by increased room rates;

●
labor
strikes, disruptions or lockouts;

●
dependence
on demand from business and leisure travelers, which may fluctuate and is seasonal;

●
increases
in energy costs, cost of fuel, airline fares and other expenses related to travel, which may negatively affect traveling;

●
terrorism,
terrorism alerts and warnings, wars and other military actions, pandemics or other medical events or warnings which may result in
decreases in business and leisure travel;

●
natural
disasters; and

●
adverse
effects of downturns and recessionary conditions in international, national and/or local economies and market conditions. Other factors
such as cybersecurity incidents impacting travel infrastructure, extreme weather events linked to climate changes, or public health
crisis could also disrupt travel patterns and negatively affect hotel performance, as discussed in Item 1A- Risk Factors.

ENVIRONMENTAL
MATTERS

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

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

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

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

EMPLOYEES

As
of June 30, 2025, Portsmouth had four full-time employees. The employees of the Company are not part of any collective bargaining agreement,
and the Company believes that its employee relations are satisfactory.

The
hotel operations had 187 employees as of June 30, 2025. On February 3, 2017, Aimbridge assumed all labor union agreements as agent for
Hotel and Justice, and Justice provides all funding for all payroll and related costs. As of June 30, 2025, approximately 90% of those
employees were represented by one of three labor unions, and their terms of employment were determined under various collective bargaining
agreements (“CBAs”) to which Aimbridge was a party as agent for Hotel and Justice. CBA for Local 2 (Hotel and Restaurant
Employees) will expire on August 13, 2028. CBA for Local 856 (International Brotherhood of Teamsters) will expire on December 31, 2028.
CBA for Local 39 (Stationary Engineers) will expire in July 2030.

Negotiation
of collective bargaining agreements, which includes not just terms and conditions of employment, but scope and coverage of employees,
is a regular and expected course of business operations for the Company and Aimbridge. The Company expects and anticipates that the terms
and conditions of CBAs will have an impact on wage and benefit costs, operating expenses, and certain hotel operations during the life
of each CBA and incorporates these principles into its operating and budgetary practices. Changes in labor laws, union negotiations,
or work stoppages could materially impact hotel operations and cost structures, as discussed in Item 1A – Risk Factors.

ADDITIONAL
INFORMATION

The
Company files required annual and quarterly reports on Forms 10-K and 10-Q, current reports on Form 8-K and other information with the
Securities and Exchange Commission (“SEC” or the “Commission”).. The SEC no longer operates a public reference
room. The Commission also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the Commission.

Other
information about the Company can be found on our parent company’s website www.intgla.com. Reference in this document to that website
address does not constitute incorporation by reference of the information contained on the website. We make our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports available free of charge on our website
as soon as reasonably practicable after such materials are filed with or furnished to the SEC.