PORTSMOUTH SQUARE INC 10-K

MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and related notes, and Item 1A - “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K. SAN FRANCISCO MARKET CONDITIONS The Hotel’s operating results are significantly affected by economic, business travel, convention and tourism conditions in San Francisco. During fiscal 2026, the Hotel experienced improved business travel and convention demand, which contributed to higher occupancy, average daily rate and room revenue compared with fiscal 2025. San Francisco lodging demand remains subject to changes in local economic conditions, convention activity, business and leisure travel and public perceptions of the city. Because the Company’s Hotel operations are concentrated in a single property in San Francisco, changes in these conditions may have a significant effect on the Company’s future operating results. See Item 1A – Risk Factors. Field: Page; Sequence: 11; Value: 2 Field: Sequence; Type: Arabic; Name: PageNo 11 Field: /Sequence Field: /Page RESULTS OF OPERATIONS The Company reported a net loss of $5.414 million for fiscal 2026 compared with a net loss of $9.110 million for fiscal 2025. Fiscal Year Ended June 30, 2026, Compared to Fiscal Year Ended June 30, 2025 The decrease in net loss for fiscal 2026 compared with fiscal 2025 primarily reflected improved Hotel operating results and lower mortgage interest expense. The year-over-year improvement was partially offset by certain benefits recognized in fiscal 2025 that did not recur in fiscal 2026, including a $1.416 million gain on extinguishment of debt and a $1.030 million reduction in Hotel operating expenses resulting from Aimbridge’s waiver of previously accrued incentive management fees. Hotel Operations The Company’s principal source of revenue is the Hotel, including room, food and beverage, parking and other operating revenue. Hotel Operations segment income increased to $12.524 million in fiscal 2026 from $8.732 million in fiscal 2025. The improvement primarily reflected higher room revenue resulting from increased average daily rate, higher occupancy, improved business travel and convention demand, and the addit