UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
                          ----------------------

                               FORM 10-QSB/A
                              Amendment No. 1

    [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

    For the quarterly period ended March 31, 2007

                         OR

    [ ]  Transition Report Pursuant to Section 13 or 15(d) of the Exchange Act

    For the transition period from _______ to ________


    Commission File Number 0-4057

                              PORTSMOUTH SQUARE, INC.
                              -----------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

           California                               94-1674111
           ----------                               ----------
   (State or Other Jurisdiction of                 (IRS Employer
    Incorporation or Organization)                Identification No.)


           820 Moraga Drive
           Los Angeles, CA                               90049
---------------------------------------               ----------
(Address of Principal Executive Offices)              (Zip Code)

                                  (310) 889-2500
                                  --------------
                (Registrant's Telephone Number, Including Area Code)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days.  Yes (X)  No ( )

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes ( )  No (X)

     State the number of shares outstanding of each of the issuer's classes of
Common equity, as of the latest practicable date: 734,183 shares of issuer's No
Par Value Common Stock were outstanding as of May 10, 2007.

Transitional Small Business Disclosure Format (check one): Yes ( ) No (X)

<PAGE>


                             EXPLANATORY NOTE

This Amendment No. 1 on Form 10-QSB/A (the "Amendment") is filed by Portsmouth
Square, Inc. (the "Company") to amend the Company's Quarterly Report on Form
10-QSB for the period ended March 31, 2007 as filed on May 14, 2007. The
purpose of the Amendment is to restate our unaudited financial statements for
the period ended March 31, 2007, due to an error in those financial statements
related to the accounting for tax effects on the minority interest of a
consolidated limited partnership entity as described in Note 1 to the
Consolidated Financial Statements. The error does not affect the Company's
reported revenues, expenses, net income(loss) before income taxes or cash
flows, and does not impact the Company's operations.

No attempt has been made in this Form 10-QSB/A to modify or update other
disclosures presented in the original report on Form 10-QSB, except as required
to reflect the effects of the restatement. Information not affected by the
restatement is unchanged and reflects the disclosures made at the time of the
original filing of the Form 10-QSB on May 14, 2007. Accordingly, this Form 10-
QSB/A should be read in conjunction with our filings made with the Securities
and Exchange Commission subsequent to the filing of the original Form 10-QSB,
including any amendments to those filings. The following items have been
amended as a result of the restatement:

     *  Part I. Item 1. Financial Information

     *  Part I. Item 2. Management's Discussion and Analysis of Financial
                        Condition and Results of Operations

     *  Part I. Item 3. Controls and Procedures

In addition, this Amendment includes updated certifications from the Company's
Chief Executive Officer and Principal Financial Officer as Exhibits 31.1, 31.2,
32.1 and 32.1 as of the date of this filing.

                                    -2-
<PAGE>

                                     INDEX

                             PORTSMOUTH SQUARE, INC.


PART I. FINANCIAL INFORMATION                                            PAGE

Item 1. Consolidated Financial Statements

 Consolidated Balance Sheet - As of March 31, 2007 (Unaudited)             4

 Consolidated Statements of Operations (Unaudited)- For the Three
    Months ended March 31, 2007 and March 31, 2006                         5

 Consolidated Statements of Operations (Unaudited)- For the Nine
    Months ended March 31, 2007 and March 31, 2006                         6

 Consolidated Statements of Cash Flows (Unaudited)- For the Nine
    Months ended March 31, 2007 and March 31, 2006                         7

  Notes to Consolidated Financial Statements                               8

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                               17

Item 3. Controls and Procedures                                           25


PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Shareholders                   27

Item 6. Exhibits and Reports on Form 8-K                                  27

SIGNATURES                                                                28

                                    -3-
<PAGE>

                        PART 1 - FINANCIAL INFORMATION

Item 1 - Consolidated Financial Statements

                             PORTSMOUTH SQUARE, INC.
                            CONSOLIDATED BALANCE SHEET
                                  (Unaudited)
As of March 31,                                              2007
                                                        (As Restated)
                                                          ----------
Assets
  Investment in hotel, at cost:
    Land                                                $  1,124,000
    Furniture and equipment                               15,260,000
    Building and improvements                             42,961,000
    Accumulated depreciation                             (17,812,000)
                                                          ----------
                                                          41,533,000
                                                          ----------
  Cash and cash equivalents                                2,844,000
  Investment in marketable securities                      9,599,000
  Other investments                                        3,125,000
  Accounts receivable                                      1,834,000
  Other assets                                             2,732,000
                                                          ----------
                                                          61,667,000
  Minority interest                                        4,558,000
                                                          ----------
Total assets                                            $ 66,225,000
                                                          ==========
Liabilities and Shareholders' Equity

Liabilities
  Accounts payable and other liabilities                $  7,628,000
  Due to securities broker                                 4,984,000
  Obligations for securities sold                            530,000
  Mortgage notes payable                                  48,316,000
                                                          ----------
Total liabilities                                         61,458,000
                                                          ----------
Commitments and contingencies

Shareholders' equity:
  Common stock, no par value:
    Authorized shares - 750,000
    Issued and outstanding shares - 734,183                2,092,000
  Additional paid-in capital                                 916,000
  Retained earnings                                        1,759,000
                                                          ----------

Total shareholders' equity                                 4,767,000
                                                          ----------

Total liabilities and shareholders' equity              $ 66,225,000
                                                          ==========

The accompanying notes are an integral part of these consolidated financial
statements.

                                    -4-
<PAGE>

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

For the three months ended March 31,                 2007           2006
                                                 (As Restated)
                                                  ----------     ----------
Justice Investors operations:
 Hotel and garage revenue                        $ 7,654,000    $         -
 Operating expenses                               (7,297,000)             -
 Interest expense                                   (745,000)             -
 Real estate taxes                                  (176,000)             -
 Depreciation and amortization                    (1,042,000)             -
                                                  ----------     ----------
Loss from Justice Investors operations            (1,606,000)             -

Equity in net loss of Justice Investors                    -     (1,564,000)

General and administrative expense                  (208,000)      (112,000)
Other income                                           3,000          3,000

Investment transactions:
 Net gains on marketable securities                  591,000      1,354,000
 Dividend and interest                                29,000         49,000
 Margin interest and trading expense                (116,000)      (101,000)
 Other income                                              -        232,000
                                                  ----------     ----------
                                                     504,000      1,534,000
                                                  ----------     ----------

Loss before income taxes and minority interest    (1,307,000)      (139,000)

Minority interest - Justice Investors, pre-tax       879,000              -
                                                  ----------     ----------
Loss before income taxes                            (428,000)      (139,000)

Provision for income tax benefit                     177,000        104,000
                                                  ----------     ----------
Net loss                                         $  (251,000)   $   (35,000)
                                                  ==========     ==========

Basic loss per share                             $     (0.34)   $     (0.05)
                                                  ==========     ==========
Weighted average number of shares outstanding        734,183        734,183
                                                  ==========     ==========

The accompanying notes are an integral part of these consolidated financial
statements.

                                    -5-
<PAGE>

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

For the nine months ended March 31,                  2007           2006
                                                 (As Restated)
                                                  ----------     ----------
Justice Investors operations:
 Hotel and garage revenue                       $ 23,362,000    $         -
 Operating expenses                              (20,760,000)             -
 Interest expense                                 (2,180,000)             -
 Real estate taxes                                  (558,000)             -
 Depreciation and amortization                    (3,116,000)             -
                                                  ----------     ----------
Loss from Justice Investors operations            (3,252,000)             -

Equity in net loss of Justice Investors                    -     (3,303,000)

General and administrative expense                  (452,000)      (349,000)
Other income                                           9,000          9,000

Investment transactions:
 Net gains on marketable securities                  906,000      1,578,000
 Impairment loss on other investments                      -         (8,000)
 Dividend and interest                                95,000        171,000
 Margin interest and trading expense                (315,000)      (269,000)
 Other income                                              -        258,000
                                                  ----------     ----------
                                                     686,000      1,730,000
                                                  ----------     ----------

Loss before income taxes and minority interest    (3,009,000)    (1,913,000)

Minority interest - Justice Investors, pre-tax     1,714,000              -
                                                  ----------     ----------
Loss before income taxes                          (1,295,000)    (1,913,000)
Provision for income tax benefit                     534,000        797,000
                                                  ----------     ----------
Net loss                                        $   (761,000)   $(1,116,000)
                                                  ==========     ==========

Basic loss per share                            $      (1.04)   $     (1.52)
                                                  ==========     ==========
Weighted average number of shares outstanding        734,183        734,183
                                                  ==========     ==========

The accompanying notes are an integral part of these consolidated financial
statements.

                                    -6-
<PAGE>

                            PORTSMOUTH SQUARE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)

For the nine months ended March 31,                  2007           2006
                                                 (As Restated)
                                                  ----------     ----------
Cash flows from operating activities:
  Net loss                                      $   (761,000) $  (1,116,000)
  Adjustments to reconcile net loss
   to net cash provided by(used in) operating activities:
    Equity in net loss of Justice Investors                -      3,303,000
    Net unrealized gains on marketable securities   (132,000)    (1,817,000)
    Impairment loss on other investments                   -          8,000
    Depreciation and amortization                  3,116,000              -
    Minority interest                             (1,714,000)             -
    Changes in assets and liabilities:
      Investment in marketable securities          2,976,000     (3,871,000)
      Other investments and other assets          (3,158,000)      (522,000)
      Accounts payable and other liabilities         796,000        134,000
      Due to securities broker                      (554,000)     4,109,000
      Obligations for securities sold               (903,000)       (14,000)
                                                  ----------     ----------
  Net cash (used in) provided by operating
   activities                                       (334,000)       214,000
                                                  ----------     ----------
Cash flows from investing activities:
  Additions to furniture, equipment and
   building improvements                          (1,379,000)             -
                                                  ----------     ----------
  Net cash used in investing activities           (1,379,000)             -
                                                  ----------     ----------
Cash flows from financing activities:
Proceeds from new mortgage note payable           19,000,000
Pay-off of letter of credit                      (16,403,000)             -
Cash distributions to minority partners             (500,000)             -
                                                  ----------     ----------
  Net cash provided by financing activities        2,097,000              -
                                                  ----------     ----------
Net increase in cash and cash equivalents            384,000        214,000

Cash and cash equivalents at the beginning
  of the period                                    2,460,000         20,000
                                                  ----------     ----------
Cash and cash equivalents at the end of the
 period                                         $  2,844,000    $   234,000
                                                  ==========     ==========

Supplemental disclosure of non-cash activities:
 Consolidation of Justice Investors as of
  July 1, 2006
  Gross components:
   Assets (including cash of $2,352,000)        $(42,975,000)             -
   Liabilities                                    52,366,000              -
   Investment in Justice                          (7,321,000)             -
   Minority interest                              (2,343,000)             -


The accompanying notes are an integral part of these consolidated financial
statements.

                                    -7-
<PAGE>

                      PORTSMOUTH SQUARE, INC.
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                          (Unaudited)

1.  Basis of Presentation and Significant Accounting Policies
    ---------------------------------------------------------

The 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 consolidated financial statements prepared in accordance with generally
accepted accounting principles 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 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 flow and results of
operations as of and for the periods indicated.

The Company has a 50.0% interest in Justice Investors, a California limited
partnership ("Justice" or the "Partnership") in which Portsmouth serves as both
a general and limited partner. The other general partner, Evon Corporation
("Evon"), serves as the managing general partner of Justice. As discussed in
Note 2, the financial statements of Justice have been consolidated with those
of the Company, effective as of the first reporting period of its fiscal year
beginning July 1, 2006.

Portsmouth is a 68.8%-owned subsidiary of Santa Fe Financial Corporation
("Santa Fe"), which is also a public company.  Santa Fe is an approximately
74.1%-owned subsidiary of the InterGroup Corporation ("InterGroup"), a public
company.

Certain prior quarter balances have been reclassified to conform with the
current quarter presentation.

It is suggested that these financial statements be read in conjunction with the
audited financial statements and the notes therein included in the Company's
Form 10-KSB for the year ended June 30, 2006.

The results of operations for the three and nine months ended March 31, 2007
are not necessarily indicative of results to be expected for the full fiscal
year ending June 30, 2007.


RESTATEMENTS

As disclosed in Item 4.02(a) of the Company's Form 8-K dated February 13, 2008,
as filed with the Securities and Exchange Commission ("SEC") on February 19,
2008, the Company detected an error in the calculation and presentation of the
tax effects on the minority interest related to Justice Investors in the
comparative three and six month periods ended December 31, 2006 as presented in
the Company's previously issued Quarterly Report on Form 10-QSB for the period
ended December 31, 2006. Specifically, the minority interest line item in the

                                    -8-
<PAGE>

Consolidated Statement of Operations was mistakenly recorded and presented as
"net of tax" instead of pre-tax. The errors resulted in an overstatement of the
tax benefit related to the minority interest for the three and six months ended
December 31, 2006. After further review, the Company determined that similar
errors occurred in the quarterly periods ended September 30, 2006 and March 31,
2007.

The errors do not affect the Company's reported revenues, expenses, income
(loss) before income taxes or cash flows, and do not impact the Company's
operations. There were no such errors in the Company's audited financial
statements included in its Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2007, and as such that Annual Report will not be amended.

The Company will restate its unaudited financial information for the three and
six month periods ended December 31, 2006 in its Quarterly Report on Form 10-
QSB for the period ended December 31, 2007, which will be filed on February 19,
2008. Upon completion of this filing of the Company's Form 10-QSB/A for the
three months and nine months ended March 31, 2007, we will file an amended
Quarterly Report on Form 10-QSB/A for the three months ended September 30,
2007.

Within the current filing, we are restating the Consolidated Statement of
Operations for the three months and nine months ended March 31, 2007.

The table below presents the changes to the Consolidated Statement of
Operations for the three and nine months ended March 31, 2007 and the changes
to the Consolidated Balance Sheet as of March 31, 2007.

<TABLE>

For the three months ended March 31, 2007           As Reported      As Restated
                                                    -----------      -----------
<S>                                                 <C>              <C>
Income tax benefit                                  $  541,000       $ 177,000
Net income(loss)                                    $  113,000       $(251,000)
Basic income(loss) per share                        $     0.15       $   (0.34)

For the nine months ended March 31, 2007            As Reported      As Restated
                                                    -----------      -----------
Income tax benefit                                  $1,242,000       $ 534,000
Net loss                                            $  (53,000)      $(761,000)
Basic loss per share                                $    (0.07)      $   (1.04)

Balance Sheet Line Items as of March 31, 2007       As Reported      As Restated
                                                    -----------      -----------
Other assets                                        $ 3,440,000      $ 2,732,000
Retained earnings                                   $ 2,467,000      $ 1,759,000

</TABLE>

2.  Investment in Justice Investors
    -------------------------------

Justice Investors owns the land, improvements and leaseholds known as the
Hilton San Francisco Financial District, a 545-room hotel located at 750 Kearny
Street, San Francisco, California (the "Hotel").

All significant partnership decisions require the active participation and
approval of both general partners.  The Company and Evon jointly consult and
determine the amount of partnership reserves and the amount of cash to be

                                    -9-
<PAGE>

distributed to the limited partners.  Pursuant to the terms of the partnership
agreement, voting rights of the partners are determined according to the
partners' entitlement to share in the net profit and loss of the partnership.
The Company is not entitled to any additional voting rights by virtue of its
position as a general partner.  The partnership agreement also provides that no
portion of the partnership real property can be sold without the written
consent of the general and limited partners entitled to more than 72% of the
net profit.

On March 27, 2007, Justice entered into a second mortgage loan with The
Prudential Insurance Company of America (the "Second Prudential Loan") in a
principal amount of $19,000,000. The term of the Second Prudential Loan is for
approximately 100 months and matures on August 5, 2015, the same date as the
Partnership's first mortgage loan with Prudential. The Second Prudential Loan
is at a fixed interest rate of 6.42% per annum and calls for monthly
installments of principal and interest in the amount of approximately $119,000,
calculated on a 360 month amortization schedule. The Loan is collateralized by
a second deed of trust on the Partnership's Hotel property, including all
improvements and personal property thereon and an assignment of all present and
future leases and rents. The Loan is without recourse to the limited and
general partners of Justice.

As a condition of the Second Prudential Loan, Justice was required to obtain a
standby letter of credit in an amount of $1,500,000 to serve as security for
potential liabilities arising out of the litigation pending between the
Partnership and Allied Construction Management, Inc. and its subcontractors
(the "Allied Litigation") over disputed construction change orders. Justice
believes that it has good and meritorious defenses to the claims asserted in
the Allied Litigation and that the funds provided for by the letter of credit
will not have to be used.

From the proceeds of the Second Prudential Loan, Justice retired its existing
line of credit facility with United Commercial Bank ("UCB") paying off the
outstanding balance of principal and interest of approximately $16,403,000 on
March 27, 2007. The Partnership also obtained a new unsecured $3,000,000
revolving line of credit facility from UCB to be utilized by the Partnership to
meet any emergency or extraordinary cash flow needs arising from any disruption
of business due to labor issues, natural causes affecting tourism and other
unexpected events. The term of the new line of credit facility is for 60 months
at an annual interest rate, based on an index selected by Justice at the time
of advance, equal to the Wall Street Journal Prime Rate or the Libor Rate plus
two percent. As of March 31, 2007, there were no amounts borrowed by Justice
under the new line of credit; however, $1,500,000 of that line was utilized in
the form of a standby letter of credit related to the Allied Litigation. The
annual fee for the letter of credit is one and one half percent of $1,500,000,
which fee is to be paid in quarterly installments for the periods in which the
letter of credit is in effect.

On July 14, 2005, the Financial Accounting Standards Board directed Staff
Position (FSP) SOP 78-9-1, "Interaction of AICPA Statement of Position 78-9 and
EITF Issue No. 04-5" to amend the guidance in AICPA Statement of Position 78-9,
"Accounting for Investments in Real Estate Ventures" (SOP 78-9) to be
consistent with the consensus in Emerging Issues Task Force Issue No. 04-5
 "Determining Whether a General Partner, or General Partners as a Group,
Controls a Limited Partnership or Similar Entity When the Limited Partners Have

                                    -10-
<PAGE>

Certain Rights" (Issue 04-5). FSP SOP 78-9-1 eliminated the concept of
"important rights" in paragraph .09 of SOP 78-9 and replaces it with the
concepts of "kick out rights" and "substantive participating rights" as defined
in Issue 04-5.  In accordance with guidance set forth in FSP SOP 78-9-1,
Portsmouth has applied the principles of accounting applicable for investments
in subsidiaries due to its substantial limited partnership interest and general
partnership rights and has consolidated the financial statements of Justice
with those of the Company effective with the first reporting period of its
fiscal year beginning July 1, 2006.

For the three and nine months ended March 31, 2007, the results of operations
for Justice were consolidated with those of the Company.  However, for the
three and nine months ended March 31, 2006, the Company's investment in Justice
was accounted for under the equity method.  For comparative purposes, the
statement of operations for Justice for the three and nine months ended March
31, 2007 and March 31, 2006 are disclosed below.

Significant to note is the operations of the Hotel were temporarily closed down
effective May 31, 2005, to complete the substantial renovations of the Hotel
required by the Hilton Franchise Agreement. Thus, the Hotel did not generate
any room or food and beverage revenues during the first six and one-half months
of fiscal 2006. The below ground parking garage and Tru Spa located on the
lobby level of the Hotel, both of which are lessees of the Partnership,
remained open during the renovation work. As of January 12, 2006 the Hotel
renovation work was substantially completed, at which time Justice obtained
approval from Hilton to open the Hotel as the "Hilton San Francisco Financial
District". The Hotel opened with a limited number of rooms available to rent,
which increased as the Hotel transitioned into full operations by the end of
February 2006.

                                JUSTICE INVESTORS
                             STATEMENTS OF OPERATIONS

For the three months ended March 31,           2007            2006
                                            ----------      ----------
Revenues:
 Hotel rooms                              $  5,705,000     $ 2,461,000
 Food and beverage                           1,456,000         649,000
 Rent - hotel garage                           348,000         279,000
 Other                                         145,000         266,000
   Total revenues                           ----------      ----------
                                             7,654,000       3,655,000
Operating expenses:
 Hotel rooms                                (1,906,000)     (1,215,000)
 Food and beverage                          (1,494,000)     (1,095,000)
 Other operating expenses                   (2,420,000)     (2,209,000)
 Interest expense                             (745,000)       (490,000)
 Real estate taxes                            (176,000)       (163,000)
 Depreciation and amortization              (1,042,000)       (555,000)
 General and administrative                 (1,628,000)     (1,069,000)
                                            ----------      ----------
   Total expenses                           (9,411,000)     (6,796,000)
                                            ----------      ----------
                                            (1,757,000)     (3,141,000)
Intercompany eliminations                      151,000         232,000
                                            ----------      ----------
Net loss                                  $ (1,606,000)    $(2,909,000)
                                            ==========      ==========

                                    -11-
<PAGE>

                               JUSTICE INVESTORS
                             STATEMENTS OF OPERATIONS

For the nine months ended March 31,             2007            2006
                                            ----------      ----------
Revenues:
 Hotel rooms                              $ 17,773,000     $ 2,460,000
 Food and beverage                           3,781,000         649,000
 Rent - hotel garage                         1,159,000         604,000
 Other                                         649,000         301,000
   Total revenues                           ----------      ----------
                                            23,362,000       4,014,000
Operating expenses:
 Hotel rooms                                (5,623,000)     (1,400,000)
 Food and beverage                          (4,138,000)     (1,152,000)
 Other operating expenses                   (7,520,000)     (3,434,000)
 Interest expense                           (2,180,000)       (506,000)
 Real estate taxes                            (558,000)       (346,000)
 Depreciation and amortization              (3,116,000)       (839,000)
 General and administrative                 (3,656,000)     (2,969,000)
                                            ----------      ----------
   Total expenses                          (26,791,000)    (10,646,000)
                                            ----------      ----------
                                            (3,429,000)     (6,632,000)
Intercompany eliminations                      177,000         258,000
                                            ----------      ----------
Net loss                                  $ (3,252,000)    $(6,374,000)
                                            ==========      ==========

During the three and nine months ended March 31, 2007, Portsmouth received
monthly general partner management fees in the amount of $151,000 and $177,000,
respectively, from Justice Investors. These amounts were eliminated from the
Justice operating expenses during consolidation.

Below are the comparative standalone statements of operations for the Hotel for
the indicated periods.

For the three months ended March 31,               2007           2006
                                               -----------     ----------
Operating revenue:
 Room                                         $  5,705,000    $ 2,461,000
 Food and beverage                               1,456,000        649,000
 Other operating revenue                           110,000        232,000
                                               -----------     ----------
  Total operating revenue                        7,271,000      3,342,000
                                               -----------     ----------
Operating expenses:
 Rooms                                          (1,906,000)    (1,215,000)
 Food and beverage                              (1,494,000)    (1,095,000)
 Other operating expenses                       (3,371,000)    (2,804,000)
                                               -----------     ----------
  Total operating expenses                      (6,771,000)    (5,114,000)
                                               -----------     ----------
Net income(loss) from Hotel operations             500,000     (1,772,000)
Net expenses at Justice Investors               (2,106,000)    (1,137,000)
                                               -----------     ----------
Net loss from Justice Investors               $ (1,606,000)   $(2,909,000)
                                               ===========     ==========

                                    -12-
<PAGE>

For the nine months ended March 31,                 2007           2006
                                               -----------     ----------
Operating revenue:
 Room                                         $ 17,773,000    $ 2,460,000
 Food and beverage                               3,781,000        649,000
 Other operating revenue                           459,000        240,000
                                               -----------     ----------
  Total operating revenue                       22,013,000      3,349,000
                                               -----------     ----------
Operating expenses:
 Rooms                                          (5,623,000)    (1,400,000)
 Food and beverage                              (4,138,000)    (1,152,000)
 Other operating expenses                      (10,288,000)    (4,763,000)
                                               -----------     ----------
  Total operating expenses                     (20,049,000)    (7,315,000)
                                               -----------     ----------
Net income(loss) from Hotel operations           1,964,000     (3,966,000)
Net expenses at Justice Investors               (5,216,000)    (2,408,000)
                                               -----------     ----------
Net loss from Justice Investors               $ (3,252,000)   $(6,374,000)
                                               ===========     ==========

3.  Investment in Marketable Securities
    -----------------------------------

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

At March 31, 2007, all of the Company's marketable securities are classified as
trading securities.  In accordance with SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," the change in the
unrealized gains and losses on these investments are included in earnings.

Trading securities are summarized as follows:

<TABLE>

As of March 31, 2007:
                              Gross            Gross             Net            Market
Investment     Cost       Unrealized Gain  Unrealized Loss  Unrealized Gain     Value
----------  -----------   ---------------  ---------------  ---------------  ------------
<S>         <C>              <C>             <C>              <C>           <C>
Corporate
Equities    $ 7,078,000      $2,588,000      ($  67,000)      $2,521,000    $ 9,599,000

</TABLE>

As of March 31, 2007, the Company had $26,000 of unrealized losses related to
securities held for over one year.

As part of the investment strategies, the Company may assume short positions
against its long positions in marketable securities.  Short sales are used by
the Company to potentially offset normal market risks undertaken in the course
of its investing activities or to provide additional return opportunities.  The
Company has no naked short positions.  As of March 31, 2007, the Company had
obligations for securities sold (equities short) of $530,000.

                                    -13-
<PAGE>

Net gains on marketable securities on the statement of operations are comprised
of realized and unrealized gains (losses).  Below is the composition of the two
components for the three and nine months ended March 31, 2007 and March 31,
2006, respectively.

For the three months ended March 31,                  2007             2006
                                                  -----------      -----------
Realized gain on marketable securities            $   121,000      $    67,000
Unrealized gain on marketable securities              470,000        1,287,000
                                                  -----------      -----------
Net gains on marketable securities                $   591,000      $ 1,354,000
                                                  ===========      ===========

For the nine months ended March 31,                   2007             2006
                                                  -----------      -----------
Realized gain(loss) on marketable securities      $   774,000      $  (239,000)
Unrealized gain on marketable securities              132,000        1,817,000
                                                  -----------      -----------
Net gains on marketable securities                $   906,000      $ 1,578,000
                                                  ===========      ===========

4.  Segment Information
    --------------------

The Company operates in two reportable segments, the operation of Justice
Investors and the investment of its cash and securities assets. These two
operating segments, as presented in the financial statements, reflect how
management internally reviews each segment's performance.  Management also
makes operational and strategic decisions based on this same information.

Information below represents reporting segments for the three and nine months
ended March 31, 2007 and March 31, 2006, respectively.  Operating income from
Justice Investors consists of the operations of the hotel and garage.
Operating income (loss) for investment transactions consist of net investment
gains (losses) and dividend and interest income.

<TABLE>

Three months ended            Justice     Investment
March 31, 2007               Investors   Transactions      Other          Total
(As Restated)               -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>          <C>
Operating income            $ 7,654,000   $   620,000   $         -  $   8,274,000
Operating expenses           (9,260,000)     (116,000)            -     (9,376,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)   (1,606,000)      504,000             -     (1,102,000)

General and admin. expense                                 (208,000)      (208,000)
Other income                      3,000             -             -          3,000
Income tax benefit                    -             -       177,000        177,000
Minority interest               879,000             -             -        879,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $  (724,000)  $   504,000   $   (31,000)  $   (251,000)
                            ===========   ===========   ===========   ============
Total Assets                $46,679,000   $12,724,000   $ 6,822,000   $ 66,225,000
                            ===========   ===========   ===========   ============

</TABLE>
                                    -14-
<PAGE>
<TABLE>

Three months ended             Justice    Investment
March 31, 2006                Investors  Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>           <C>
Operating income(loss)      $(1,564,000)  $ 1,403,000   $         -   $   (161,000)
Operating expenses                    -      (101,000)            -       (101,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)   (1,564,000)    1,302,000             -       (262,000)

General and admin. exp.               -             -      (112,000)      (112,000)
Other income                      3,000             -       232,000        235,000
Income tax benefit                    -             -       104,000        104,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $(1,561,000)  $ 1,302,000   $   224,000   $    (35,000)
                            ===========   ===========   ===========   ============
Total Assets                $         -   $14,561,000   $ 1,314,000   $ 15,875,000
                            ===========   ===========   ===========   ============

</TABLE>
<TABLE>

Nine months ended             Justice     Investment
March 31, 2007               Investors   Transactions      Other          Total
(As Restated)               -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>           <C>
Operating income            $23,362,000   $ 1,001,000   $         -   $ 24,363,000
Operating expenses          (26,614,000)     (315,000)            -    (26,929,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)   (3,252,000)      686,000             -     (2,566,000)

General and admin. expense                                 (452,000)      (452,000)
Other income                      9,000             -             -          9,000
Income tax benefit                    -             -       534,000        534,000
Minority interest             1,714,000             -             -      1,714,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $(1,529,000)  $   686,000   $    82,000   $   (761,000)
                            ===========   ===========   ===========   ============
 Total Assets               $46,679,000   $12,724,000   $ 6,822,000   $ 66,225,000
                            ===========   ===========   ===========   ============

</TABLE>
<TABLE>

Nine months ended              Justice    Investment
March 31, 2006                Investors  Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>          <C>
Operating income(loss)      $(3,303,000)  $ 1,741,000   $         -  $  (1,562,000)
Operating expenses                    -      (269,000)            -       (269,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)   (3,333,000)    1,472,000             -     (1,831,000)

General and admin. exp.               -             -      (349,000)      (349,000)
Other income                      9,000             -       258,000        267,000
Income tax benefit                    -             -       797,000        797,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $(3,294,000)  $ 1,472,000   $   706,000  $  (1,116,000)
                            ===========   ===========   ===========   ============
Total Assets                $         -   $14,561,000   $ 1,314,000   $ 15,875,000
                            ===========   ===========   ===========   ============

</TABLE>
                                    -15-
<PAGE>

5.  Related Party Transactions
    --------------------------

Certain shared costs and expenses, primarily administrative expenses, rent and
insurance are allocated among the Company, the Company's parent, Santa Fe
Financial Corporation ("Santa Fe"), and The InterGroup Corporation
("InterGroup"), parent of Santa Fe, based on management's estimate of the pro
rata utilization of resources.  For the three months ended March 31, 2007 and
March 31, 2006, these expenses were approximately $18,000 and $20,000,
respectively.  For the nine months ended March 31, 2007 and March 31, 2006,
these expenses were approximately $54,000 and $60,000, respectively.

Four of the Company's Directors serve as directors of InterGroup and three of
the Company's Directors serve on the Board of Santa Fe.

John V. Winfield serves as Chief Executive Officer and Chairman of the Company,
Santa Fe, and InterGroup.  Depending on certain market conditions and various
risk factors, the Chief Executive Officer, his family, Santa Fe 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 his family members, and the resources of Santa Fe
and InterGroup, at risk in connection with investment decisions made on behalf
of the Company.

                                    -16-
<PAGE>



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.  These statements are subject to certain
risks and uncertainties, such as the impact of terrorism and war on the
national and international economies, including tourism and securities markets,
natural disasters, general economic conditions and competition in the hotel
industry in the San Francisco area, labor relations and labor disruptions,
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 Form 10-
KSB Report for the fiscal year ended June 30, 2006, that 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.

RESULTS OF OPERATIONS

The Company has a 50.0% ownership interest in the Justice Investors limited
partnership ("Justice" or the "Partnership"), in which Portsmouth serves as one
of the general partners. Justice owns the land, improvements and leaseholds at
750 Kearny Street, San Francisco, California, known as the Hilton San Francisco
Financial District hotel (the "Hotel"). The financial statements of Justice
have been consolidated with those of the Company, effective as of July 1, 2006.
See Note 2 to the Consolidated Financial Statements.

The Hotel is operated by the Partnership, with the assistance of a Management
Agreement with Prism Hospitality L.P. ("Prism Hospitality") to perform the day-
to-day management functions.

The Partnership also derives income from the lease of the garage portion of the
property to Evon Corporation ("Evon"), the managing general partner of Justice,
and from a lease with Tru Spa for a portion of the lobby level of the Hotel.
The Company also receives management fees as a general partner of Justice for
its services in overseeing and managing the Partnership's assets.

On December 10, 2004, Justice entered into a Franchise License Agreement for
the right to operate the Hotel property as a Hilton brand hotel. Prior to
operating the hotel as a Hilton, the Partnership was required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards. The term of the Agreement is for
a period of 15 years commencing on the opening date, with an option to extend
the license term for another five years, subject to certain conditions.

                                    -17-
<PAGE>

Effective May 31, 2005, the Partnership temporarily closed down its Hotel
operations to complete the renovations of the Hotel as required by the Hilton
Agreement.  The below ground parking garage and Tru Spa located on the lobby
remained open during the renovation work, although the operations of both were
impacted during that period of time.

As of January 12, 2006 the Hotel renovation work was substantially completed,
at which time the Partnership obtained approval from Hilton to open the Hotel
as the "Hilton San Francisco Financial District". The Hotel opened with a
limited number of rooms available to rent, which increased as the Hotel
transitioned into full operations by the end of February 2006.


Recent Developments

On February 9, 2007, Justice entered into an agreement with Dow Hotel Company,
to mutually terminate its management agreement and to transition the day-to-day
management responsibilities of the Hotel to another management company, Prism
Hospitality. Prism is an experienced Hilton approved operator of upscale and
luxury hotels throughout the Americas and the Caribbean. The management
agreement with Prism is on the same general terms and conditions as the
agreement with Dow, with the exception of certain provisions unique to
renovation and transition of the Hotel that are no longer applicable. Like the
Dow agreement, the management agreement with Prism can be terminated by the
Partnership upon ninety days written notice. The effective date of the
transition of the management agreement to Prism was February 10, 2007.  The
operations of the Hotel continued uninterrupted as if no termination had
occurred and Justice honored all bookings and contracts for the use of the
Hotel and retained all of the on-site employees with the exception of one
management position. Justice continues to work with Dow to finalize the
prorations and allocations of certain insurance costs and management fees.

On March 27, 2007, Justice entered into a second mortgage loan with The
Prudential Insurance Company of America (the "Second Prudential Loan") in a
principal amount of $19,000,000. The term of the Second Prudential Loan is for
approximately 100 months and matures on August 5, 2015, the same date as the
Partnership's first mortgage loan with Prudential. The Second Prudential Loan
is at a fixed interest rate of 6.42% per annum and calls for monthly
installments of principal and interest in the amount of approximately $119,000,
calculated on a 360 month amortization schedule. The Loan is collateralized by
a second deed of trust on the Partnership's Hotel property, including all
improvements and personal property thereon and an assignment of all present and
future leases and rents. The Loan is without recourse to the limited and
general partners of Justice.

As a condition of the Second Prudential Loan, Justice was required to obtain a
standby letter of credit to serve as security for potential liabilities arising
out of the litigation pending between the Partnership and Allied Construction
Management, Inc. and its subcontractors (the "Allied Litigation") over disputed
construction change orders. Justice believes that it has good and meritorious
defenses to the claims asserted in the Allied Litigation and that the funds
provided for by the letter of credit will not have to be used.

From the proceeds of the Second Prudential Loan, Justice retired its existing
line of credit facility with United Commercial Bank ("UCB") paying off the
outstanding balance of principal and interest of approximately $16,403,000 on

                                    -18-
<PAGE>

March 27, 2007. The Partnership also obtained a new unsecured $3,000,000
revolving line of credit facility from UCB to be utilized by the Partnership to
meet any emergency or extraordinary cash flow needs arising from any disruption
of business due to labor issues, natural causes affecting tourism and other
unexpected events. The term of the new line of credit facility is for 60 months
at an annual interest rate, based on an index selected by Justice at the time
of advance, equal to the Wall Street Journal Prime Rate or the Libor Rate plus
two percent. As of March 31, 2007, there were no amounts borrowed by Justice
under the new line of credit; however, $1,500,000 of that line was utilized in
the form of a standby letter of credit related to the Allied Litigation. The
annual fee for the letter of credit is one and one half percent of $1,500,000,
which fee is to be paid in quarterly installments for the periods in which the
letter of credit is in effect.

On March 28, 2007, Justice paid a special limited partnership distribution in a
total amount of $1,000,000, of which $500,000 is eliminated in consolidation.
The general partners believed that operations of the Hotel had stabilized under
the Hilton brand and new management, and that cash flows were sufficient to
warrant a special distribution, especially with the new financings in place to
meet any additional capital needs.  The general partners expect to conduct a
review each quarter to set the amount of any quarterly distribution that may be
appropriate based on the results of operations of the Hotel and other factors.


Three Months Ended March 31, 2007 Compared to Three Months
Ended March 31, 2006

The Company had a net loss of $251,000 for the three months ended March 31,
2007 compared to a net loss of $35,000 for the three months ended March 31,
2006.  As discussed below, the increase in the net loss was primarily due to
the decrease in the net gains from marketable securities partially offset by
the reduction in the net loss from the operations of Justice Investors.

The net loss from the operations of Justice Investors was $1,606,000 for the
three months ended March 31, 2007, compared to a net loss of $2,909,000 for the
three months ended March 31, 2006 (see Footnote 2 for more details). The
decrease was primarily attributable to net income generated from the operations
of the Hotel during the current quarter compared to the comparable quarter when
the Hotel did not reopen until January 12, 2006 after undergoing major
renovations, and from higher garage rental income in the current quarter.
Those results were partially offset by greater depreciation and amortization
expenses, interest costs, insurance costs and real estate taxes resulting from
the renovation of the Hotel and from higher general and administrative expenses
primarily due to increased legal and consulting fees related to the Allied
Litigation, the termination and transition of the Hotel management agreement
from Dow to Prism, and zoning issues.

For the three months ended March 31, 2007, the operations of the Hotel (on a
standalone basis (see Footnote 2) generated net income of $500,000 on total
operating revenues of approximately $7,271,000, compared to a loss from Hotel
operations of $1,772,000 on total operating revenues of $3,342,000 during the
three months ended March 31, 2006, when the Hotel first reopened on a limited
basis on January 12, 2006.  Garage rent increased to $348,000 from $279,000
primarily due to the Hotel being open for a longer period of time in the
current quarter.  The average daily room rate for the Hotel was approximately

                                    -19-
<PAGE>

$164 and the average occupancy rate was approximately 71% for the three months
ended March 31, 2007, compared to an average daily rate of approximately $147
and an average occupancy rate of approximately 37% during the three months
ended March 31, 2006 when the Hotel was opened on a limited basis.

Average daily room rates have continued to improve since the Hotel's reopening
in January 2006 and average occupancy rates have held steady this fiscal year
even in December, January and February, which are typically three of the slower
months in the San Francisco market.  We believe that many of the new programs
implemented to increase revenues and efficiencies at the Hotel, as well as
certain management personnel changes, have helped improve operations. While the
Hotel's food and beverage operations remain challenging, management was able to
further reduce losses in that department during the current quarter. Due to
brand requirements of maintaining a three-meal, full service restaurant, the
associated costs of union labor, and the intense competition in the San
Francisco market for restaurants, food and beverage operations will continue to
be challenging.  Management will continue to work to address those issues and
to explore all options to improve the operations of the Hotel.

General and administrative expenses increased to $208,000 for the three months
ended March 31, 2007 from $112,000 for the three months ended March 31, 2006
primarily as the result of $90,000 in Board authorized meeting fees paid to the
members of the Company's Special Hotel Committee for their active oversight and
involvement in the renovation and repositioning of the Hotel.

Net gains on marketable securities decreased to $591,000 for the three months
ended March 31, 2007 from $1,354,000 for the three months ended March 31, 2006.
For the three months ended March 31, 2007, the Company had net realized gains
of $121,000 and net unrealized gains of $470,000.  For the three months ended
March 31, 2006, the Company had net realized gains of $67,000 and net
unrealized gains of $1,287,000.  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 net income.  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 please see the Marketable Securities section below.

Dividend and interest income decreased to $29,000 for the three months ended
March 31, 2007 from $49,000 for the three months ended March 31, 2006 as a
result of the decreased investment in income yielding securities during the
quarter ended March 31, 2007.

During the three months ended March 31, 2007, the Company consolidated the
results of operations from Justice Investors and recorded a minority interest
benefit of $879,000 representing 50% of the net loss incurred at Justice
Investors during the quarter.  For the three months ended March 31, 2006, the
Company's investment in Justice Investors was recorded on an equity basis.

The provision for income tax benefit increased to $177,000 for the three months
ended March 31, 2007 from $104,000 for the three months ended March 31, 2006 as
the result of the higher pre-tax loss incurred by the Company during the
quarter ended March 31, 2007.

                                    -20-
<PAGE>

Nine Months Ended March 31, 2007 Compared to Nine Months
Ended March 31, 2006

The Company had a net loss of $761,000 for the nine months ended March 31, 2007
compared to a net loss of $1,116,000 for the nine months ended March 31, 2006.
As discussed below, the decrease in the net loss was primarily due to the
reduction in the net loss from the operations of Justice Investors partially
offset by the decrease in net gains from marketable securities.

The net loss from the operations of Justice Investors was $3,252,000 for the
nine months ended March 31, 2007, compared to a net loss of $6,374,000 for the
nine months ended March 31, 2006 (see Footnote 2 for more details). The
decrease was primarily attributable to net income generated from the operations
of the Hotel during the current period compared to the comparable nine months
when the Hotel was temporarily closed for major renovations for approximately
six and one-half months of that period and from higher garage rental income in
the current period. Those results were partially offset by higher greater
depreciation and amortization expenses, interest costs, insurance costs and
real estate taxes resulting from the renovation of the Hotel and from higher
general and administrative expenses primarily due to increased legal and
consultant fees related to the Allied Litigation, the termination and
transition of the Hotel management agreement from Dow to Prism, and zoning
issues.

For the nine months ended March 31, 2007, the operations of the Hotel (on a
standalone basis (see Footnote 2) generated net income of $1,964,000 on total
operating revenues of approximately $22,013,000 while revenues from the
operations of the Hotel during the nine months ended March 31, 2006 were
limited to approximately two and a half months after the Hotel reopened on a
limited basis on January 12, 2006. Garage rent increased to $1,159,000 from
$604,000 primarily due to the Hotel being open during the entire current
period.  The average daily room rate for the Hotel was approximately $158 and
the average occupancy rate was approximately 75% for the nine months ended
March 31, 2007, compared to an average daily rate of approximately $147 and an
average occupancy rate of approximately 37% during the two and one-half months
the Hotel was only open on a limited basis in the prior period.

Average daily room rates have continued to improve since the Hotel's reopening
in January 2006 and average occupancy rates have held steady this fiscal year
even in December, January and February, which are typically three of the slower
months in the San Francisco market.  We believe that many of the new programs
implemented to increase revenues and efficiencies at the Hotel, as well as
certain management personnel changes, have helped improve operations. While the
Hotel's food and beverage operations remain challenging, management was able to
further reduce losses in that department, particularly in the current quarter.
Due to brand requirements of maintaining a three-meal, full service restaurant,
the associated costs of union labor, and the intense competition in the San
Francisco market for restaurants, food and beverage operations will continue to
be challenging.  Management will continue to work to address those issues and
to explore all options to improve the operations of the Hotel.

Net gains on marketable securities decreased to $906,000 for the nine months
ended March 31, 2007 from $1,578,000 for the nine months ended March 31, 2006.
For the nine months ended March 31, 2007, the Company had net realized gains of
$774,000 and net unrealized gains of $132,000.  For the nine months ended March

                                    -21-
<PAGE>

31, 2006, the Company had net realized losses of $239,000 and net unrealized
gains of $1,817,000.  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 net income.  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 please see the Marketable Securities section below.

Dividend and interest income decreased to $95,000 for the nine months ended
March 31, 2007 from $171,000 for the nine months ended March 31, 2006 as a
result of the decreased investment in income yielding securities during the
nine months ended March 31, 2007.

During the nine months ended March 31, 2007, the Company consolidated the
results of operations from Justice Investors and recorded a minority interest
benefit of $1,714,000 representing 50% of the net loss incurred at Justice
Investors during the quarter.  For the nine months ended March 31, 2006, the
Company's investment in Justice Investors was recorded on an equity basis.

The provision for income tax benefit decreased to $534,000 for the nine months
ended March 31, 2007 from $797,000 for the nine months ended March 31, 2006 as
the result of the lower pre-tax loss incurred by the Company during the nine
months ended March 31, 2007.


MARKETABLE SECURITIES

As of March 31, 2007, the Company had investments in marketable equity
securities of $9,599,000.  The following table shows the composition of the
Company's marketable securities portfolio by selected industry groups as of
March 31, 2007.

                                                              % of Total
                                                              Investment
   Industry Group                      Market Value           Securities
   --------------                      ------------           ----------
   Insurance, banks and brokers        $ 2,042,000               21.3%
   Retail and consumer goods             1,451,000               15.1%
   Services                              1,390,000               14.5%
   Telecommunications and media          1,202,000               12.5%
   Dairy products                        1,039,000               10.8%
   REITs and building materials            989,000               10.3%
   Investment funds                        631,000                6.6%
   Pharmaceuticals and healthcare          338,000                3.5%
   Other                                   517,000                5.4%
                                       ------------           ----------
                                       $ 9,599,000              100.0%
                                       ============           ==========

The Company's investment portfolio is diversified with 22 different equity
positions.  The portfolio contains six individual equity securities that are
more than 5% of the equity value of the portfolio with the largest security
being 15.1% of the value of the portfolio.  The amount of the Company's
investment in any particular issuer may increase or decrease, and additions or

                                    -22-
<PAGE>

deletions to its securities portfolio may occur, at any time.  While it is the
internal policy of the Company to limit its initial investment in any single
equity to less than 5% of its total portfolio value, that investment could
eventually exceed 5% as a result of equity appreciation or reduction of other
positions.


LIQUIDITY AND SOURCES OF CAPITAL

The Company's cash flows are primarily generated from the operations of Justice
Investors. The Company also receives revenues generated from the investment of
its cash and securities assets.  Since the operations of the Hotel operations
of the Hotel were temporarily closed down on May 31, 2005, and significant
amounts of money were expended to renovate and reposition the Hotel as a
Hilton, Justice did not pay any partnership distributions until the end of
March 2007. As a result, the Company had to depend more on the revenues
generated from the investment of its cash and securities assets during that
transition period.

Prior to operating the hotel as a Hilton, the Partnership was required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards. The total cost of the
construction-renovation project of the Hotel was approximately $36.4 million,
which excludes approximately $630,000 in interest costs incurred during for the
construction phase that were capitalized.

To meet its substantial financial commitments for the renovation project and
transition of the Hotel to a Hilton, Justice had to rely on borrowings to meet
its obligations. On July 27, 2005, Justice entered into a first mortgage loan
(the "Prudential Loan") with The Prudential Insurance Company of America in a
principal amount of $30,000,000. The term of the Loan is for 120 months at a
fixed interest rate of 5.22% per annum. The Loan calls for monthly installments
of principal and interest in the amount of approximately $165,000, calculated
on a 360 month amortization schedule. The Loan is collateralized by a first
deed of trust on the Partnership's Hotel property, including all improvements
and personal property thereon and an assignment of all present and future
leases and rents. The Loan is without recourse to the limited and general
partners of Justice. As of March 31, 2007, the total amount outstanding of the
Prudential Loan was approximately $29,316,000.

On March 27, 2007, Justice entered into a second mortgage loan with The
Prudential Insurance Company of America (the "Second Prudential Loan") in a
principal amount of $19,000,000. The term of the Second Prudential Loan is for
approximately 100 months and matures on August 5, 2015, the same date as the
Partnership's first mortgage loan with Prudential. The Second Prudential Loan
is at a fixed interest rate of 6.42% per annum and calls for monthly
installments of principal and interest in the amount of approximately $119,000,
calculated on a 360 month amortization schedule. The Loan is collateralized by
a second deed of trust on the Partnership's Hotel property, including all
improvements and personal property thereon and an assignment of all present and
future leases and rents. The Loan is without recourse to the limited and
general partners of Justice.

                                    -23-
<PAGE>

From the proceeds of the Second Prudential Loan, Justice retired its existing
line of credit facility with United Commercial Bank ("UCB") paying off the
outstanding balance of principal and interest of approximately $16,403,000 on
March 27, 2007. The Partnership also obtained a new unsecured $3,000,000
revolving line of credit facility from UCB to be utilized by the Partnership to
meet any emergency or extraordinary cash flow needs arising from any disruption
of business due to labor issues, natural causes affecting tourism and other
unexpected events. The term of the new line of credit facility is for 60 months
at an annual interest rate, based on an index selected by Justice at the time
of advance, equal to the Wall Street Journal Prime Rate or the Libor Rate plus
two percent. As of March 31, 2007, there were no amounts borrowed by Justice
under the new line of credit; however, $1,500,000 of that line was utilized in
the form of a standby letter of credit related for the Allied Litigation. The
annual fee for the letter of credit is one and one half percent of $1,500,000,
which fee is to be paid in quarterly installments for the periods in which the
letter of credit is in effect.

The Hotel started to generate net operating income from its operations in June
2006, which have continued to improve during the first nine months of the
Company's current fiscal year.  As a result, Justice was able to pay a special
limited partnership distribution in a total amount of $1,000,000 on March 28,
2007, of which Portsmouth received $500,000. The general partners believed that
operations of the Hotel had stabilized under the Hilton brand and new
management, and that cash flows were sufficient to warrant a special
distribution, especially with the new financings in place to meet any
additional capital needs.  The general partners expect to conduct a review each
quarter to set the amount of any quarterly distribution that may be appropriate
based on the results of operations of the Hotel and other factors.

While the debt service requirements related to the two Prudential Loans, as
well as any utilization of the UCB line of credit, may create some additional
risk for the Company and its ability to generate cash flows in the future since
the partnership's assets had been virtually debt free for an number of years,
management believes that cash flows from the operations of the Hotel and the
garage lease will continue to be sufficient to meet all of the Partnership's
current and future obligations and financial requirements. Management also
believes that there is sufficient equity in the Hotel assets to support future
borrowings, if necessary, to fund any new capital improvements and other
requirements.

The Company has invested in short-term, income-producing instruments and in
equity and debt securities when deemed appropriate.  The Company's marketable
securities are classified as trading with unrealized gains and losses recorded
through the statement of operations.

Management believes that its cash, securities assets, and the cash flows
generated from those assets and from partnership distributions and management
fees, will be adequate to meet the Company's current and future obligations.


MATERIAL CONTRACTUAL OBLIGATIONS

The Company does not have any material contractual obligations or commercial
commitments other than Justice's mortgage loans with Prudential.


                                    -24-
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no 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.  To the extent that Prism is able to adjust room
rates, 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

The Company reviews its long-lived assets and other investments for impairment
when circumstances indicate that a potential loss in carrying value may have
occurred.  For the Company's investment in Justice, to the extent that
projected future undiscounted cash flows from the operation of the hotel
property are less than the carrying value of the asset, the investment would be
considered impaired and the carrying value of the asset would be reduced to its
fair value.  For other investments, the Company reviews the investment's
operating results, financial position and other relevant factors to determine
whether the estimated fair value of the asset is less than the carrying value
of the asset.

Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date.  Marketable
securities are classified as trading with net unrealized gains or losses
included in earnings.


Item 3. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

The Company's management, with the participation of the Company's Chief
Executive Officer and the 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
fiscal period covered by this Quarterly Report on Form 10-QSB/A.  In connection
with the restatement described in Note 1, to our Consolidated Financial
Statements, management determined that there were material weaknesses in our
internal control over financial reporting in the areas of accounting for
minority interest and tax provisions related to the consolidation of a
partnership entity in prior comparative periods. In light of these material
weaknesses, the Company performed additional analyses and other review
procedures to ensure the Company's Consolidated Financial Statements are
prepared in accordance with generally accepted accounting principles.
Accordingly, management believes that the financial statements included in this
report fairly represent in all material respects the Company's financial
condition, results of operations and cash flows for the periods presented.

                                    -25-
<PAGE>

Material Weakness in Internal Control Over Financial Reporting

A material weakness is a control deficiency, or combination of control
deficiencies, that result in a more than remote likelihood that a material
misstatement of the annual or interim financial statements will not be
prevented or detected. As of March 31, 2007, we did not maintain effective
controls over the accuracy for our accounting for the minority interest and tax
provisions related to our consolidated partnership entity. These control
deficiencies resulted in the restatement of our consolidated financial
statements for the quarterly period ended March 31, 2007. In addition, due to
these control deficiencies, restatements of our consolidated financial
statements for the three and six months ended December 31, 2006 and for the
three months ended September 31, 2006 will also be necessary.

(b) 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-QSB/A that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

Remediation of Material Weakness

As noted above, management determined that there were material weaknesses in
our internal controls over financial reporting in the areas of accounting for
the minority interest and tax provisions related to the consolidation of a
partnership entity. In connection with the material weaknesses in internal
controls over financial reporting the Company intends to take the following
steps to alleviate the material weaknesses in these areas:

       *  An additional layer of review of the Company's tax provisions and
          consolidation processes will be performed at the corporate level;

       *  The Company will engage tax consultants to review the Company's tax
          provisions on a quarterly and annual basis; and

       *  The Company will review staffing levels, job assignments, and
          processes to identify other process weaknesses, if any, in order
          to mitigate the risk of reporting errors within the tax process for
          future periods.

Management will continue to monitor internal control over financial reporting
and will modify or implement if necessary, any additional controls or
procedures that may be required to ensure the continued integrity of our
financial statements.

                                    -26-
<PAGE>

                               PART II.

                          OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Shareholders.

The Fiscal 2006 Annual Meeting of the Shareholders of the Company was held on
February 22, 2007 at the Hilton San Francisco Financial District, 750 Kearny
Street, San Francisco, California. At that meeting, all of management's
nominees: John V. Winfield, Jerold R. Babin, Josef A. Grunwald, John C. Love
and William J. Nance, were elected as Directors of the Company to serve until
the next Annual Meeting.  At the Annual Meeting, the shareholders also voted in
favor of the ratification of the Audit Committee's selection of
PricewaterhouseCoopers LLP as the Company's independent registered public
accounting firm for the fiscal year ending June 30, 2007.  A tabulation of the
vote follows:


Proposal (1) - Directors:              Votes For       Withheld
                                       ---------       --------
   John V. Winfield                     682,508         30,163
   Jerold R. Babin                      701,162         11,509
   Josef A. Grunwald                    682,761         29,915
   John C. Love                         682,761         29,915
   William J. Nance                     682,761         29,915

Proposal (2) - Accountants:            Votes For       Against    Abstained
                                       ---------       -------    ---------
   PricewaterhouseCoopers LLP           695,747          2,264      14,660


Item 6.  Exhibits and Reports on Form 8-K.

(a) Exhibits

    31.1   Certification of Chief 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 Chief 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.

(b) Registrant did not file any reports on Form 8-K during the quarter covered
by this Report.

                                    -27-
<PAGE>

                                SIGNATURES

Pursuant to the requirements 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 27, 2008                   by /s/ John V. Winfield
                                              ---------------------------
                                              John V. Winfield, President,
                                              Chairman of the Board and
                                              Chief Executive Officer


Date:  February 27, 2008                   by /s/ Michael G. Zybala
                                              ---------------------------
                                              Michael G. Zybala,
                                              Vice President and Secretary


Date:  February 27, 2008                   by /s/ David Nguyen
                                              --------------------------
                                              David Nguyen, Treasurer
                                             (Principal Accounting Officer)

                                    -28-