<PAGE>
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                          ----------------------

                                FORM 10-QSB


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

    For the quarterly period ended June 30, 1998

                         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 Registrant as Specified in its Charter)

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

Mailing Address:  P.O. Box 80037
                  San Diego, CA 92138

Street Address:   2251 San Diego Avenue, Suite A-151
                  San Diego, CA 92110

                                  (619) 298-7201
                (Registrant's Telephone Number, Including Area Code)

   Check whether the issuer (1) has filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 
months, and (2) has been subject to such filing requirements for the past 90 
days. Yes [X]  No [ ]
     
   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 August 10, 1998.

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



                                                                    Page 1 of 13

<PAGE>


                                     INDEX

                             PORTSMOUTH SQUARE, INC.


<TABLE>
<S>                                                            <C>
PART I. FINANCIAL INFORMATION                                  PAGE NO.

Item 1. Financial Statements

    Balance Sheet--June 30, 1998 (Unaudited)                      3
   
    Statements of Income (Unaudited)--Three Months
    ended June 30, 1998 and 1997 and for the Six Months
    ended June 30, 1998 and 1997                                  4

    Statement of Cash Flows (Unaudited)--Six Months
    ended June 30, 1998 and 1997                                  5

    Notes to Financial Statements--June 30, 1998                  6

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                       8

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders      11

Item 6. Exhibits and Reports on Form 8-K                         11

SIGNATURES                                                       12
</TABLE>



                                                                    Page 2 of 13

<PAGE>

                         PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                             PORTSMOUTH SQUARE, INC.
                                  BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             JUNE 30,     
                                                               1998        
                                                           ------------
<S>                                                        <C>
Assets

  Cash and cash equivalents                                $   298,086
  Investment in marketable securities                          733,561
  Investment in Justice Investors                            1,951,583
  Other investments                                            187,500
  Note receivable                                                    -
  Other assets                                                 135,824       
                                                            ----------     
Total assets                                               $ 3,306,554
                                                            ==========


Liabilities and Shareholders' Equity

  Due to securities broker                                 $         -
  Accounts payable and accrued expenses                         32,257
  Due to Santa Fe Financial Corp.                               51,612
  Other liabilities                                            117,299
                                                            ----------  
Total liabilities                                              201,168
                                                            ----------  
Commitments and contingencies

Shareholders' equity
  Common stock, no par value:
    Authorized shares - 750,000
    Issued and outstanding shares - 734,183                  2,092,300  
   Additional paid-in capital                                  915,676
   Retained earnings                                            39,902
   Unrealized gain on investment securities,
    net of deferred taxes                                       57,508
                                                            ----------   
Total shareholders' equity                                   3,105,386
                                                            ----------  

Total liabilities and shareholders' equity                 $ 3,306,554
                                                            ==========  
</TABLE>

See accompanying notes.



                                                                    Page 3 of 13

<PAGE>

 

                                   PORTSMOUTH SQUARE, INC.
                                     STATEMENTS OF INCOME 
                                          (UNAUDITED)


<TABLE>
<CAPTION>
                                       Three Months ended June 30       Six Months ended June 30
                                          1998            1997             1998          1997
                                       ----------      ----------       ----------    ---------- 
<S>                                    <C>             <C>             <C>           <C>
Revenues:
  Equity in net income of Justice     
    Investors                          $  847,709      $  611,273      $ 1,454,109   $ 1,110,985
  Dividend and interest income              6,455          33,430           25,233        65,552
  Net investment gain (loss)             (164,021)        (60,535)         (87,481)      (78,772)
  Other income                             12,000           6,000           18,000        12,000
                                        ---------       ---------        ---------     ---------
                                          702,143         590,168        1,409,861     1,109,765
                                        ---------       ---------        ---------     ---------

Cost and expenses: 
  General and administrative               97,728          90,422          182,488       166,516
  Professional and outside services        45,476          27,397           96,028        81,466
  Margin interest expense                  14,866               -           29,153             -
                                        ---------       ---------        ---------     ---------
                                          158,070         117,819          307,669       247,982
                                        ---------       ---------        ---------     ---------
Income before income taxes                544,073         472,349        1,102,192       861,783

Income taxes                              284,215         189,591          477,511       345,903
                                        ---------       ---------        ---------     ---------
Net income                             $  259,858      $  282,758       $  624,681    $  515,880
                                        =========       =========        =========     =========


Basic earnings per share               $     0.35      $     0.38       $     0.85    $     0.69
                                        =========       =========        =========     =========
Dividends per share                    $        -      $        -       $     0.25    $     0.25
                                        =========       =========        =========     =========
Weighted average number of 
  shares outstanding                      734,183         748,328          734,183       748,328
                                        =========       =========        =========     =========

Comprehensive income:
  Net income                           $  259,858      $  282,758       $  624,681     $ 515,880
  Unrealized (losses) gains on 
   securities arising during
   period, net of taxes                   (73,852)         68,952          (38,968)       45,984
                                        ---------       ---------         --------      --------
                                       $  186,006      $  351,710        $ 585,713     $ 561,864
                                        =========       =========         ========      ========
</TABLE>

See accompanying notes.

 

                                                                    Page 4 of 13
<PAGE>


                            PORTSMOUTH SQUARE, INC.
                            STATEMENT OF CASH FLOWS
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                   Six Months ended June 30, 
                                                       1998           1997
                                                  ------------   ------------
<S>                                               <C>            <C>
Operating activities
  Net income                                       $   624,681    $   515,880
  Adjustments to reconcile net income to net
   cash used in operating activities:   
    Equity in net income of Justice Investors       (1,454,109)    (1,110,985)
    Changes in assets and liabilities:
     Other assets                                       20,020           (185)
     Deferred taxes and taxes payable                        -        (44,239)
     Due to Santa Fe Financial Corporation              34,109              -
     Accounts payable and other liabilities            (10,720)        25,322
                                                    ----------     ----------
Net cash used in operating activities                 (786,019)      (614,207)
                                                    ----------     ----------

Investing activities
  Cash distributions from Justice Investors            836,640        806,281
  Decrease in notes receivable                          60,000              -
  Purchases of investment securities                (2,937,547)    (1,120,576)
  Purchase of other investments                       (100,000)      (100,000)
  Proceeds from sales of investment securities       4,016,421      1,010,556
                                                    ----------     ----------
Net cash provided by investing activities            1,875,514        596,261
                                                    ----------     ----------

Financing activities
  Increase (decrease)in amounts due broker            (664,211)       479,135
  Purchase and retirement of common stock                    -       (102,645)
  Dividends paid                                      (183,546)      (187,500)
                                                    ----------     ----------
Net cash provided by (used in) financing
 activities                                           (847,757)       188,990
                                                    ----------     ----------
Net increase in cash and cash
 equivalents                                           241,738        171,044
Cash and cash equivalents at the beginning
 of the year                                            56,348         21,225
                                                    ----------     ----------
Cash and cash equivalents at the end of the
 period                                            $   298,086    $   192,269
                                                    ==========     ==========
</TABLE>

See accompanying notes.


                                                                    Page 5 of 13
<PAGE>


NOTES TO FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
     ---------------------------------------------------------
The financial statements included herein have been prepared by Portsmouth
Square, Inc. (the "Company"), without audit, according to the rules and
regulations of the Securities and Exchange Commission.  Certain information 
and footnote disclosures normally included in 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 financial statements 
reflect, in the opinion of management, all adjustments (which included only 
normal recurring adjustments) necessary to state fairly the financial 
position and results of operations as of and for the periods indicated.

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 December 31, 1997.

The results of operations for the six months ended June 30, 1998 are not
necessarily indicative of results to be expected for the full fiscal year 
ending December 31, 1998.

Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" ("SFAS No. 129") issued by the FASB is effective for
financial statements with fiscal years ending after December 15, 1997.  The new
standard reinstates various securities disclosure requirements previously in
effect under Accounting Principals Board Opinion No. 15, which has been
superseded by SFAS No. 128.  The Company does not expect the adoption of SFAS
No. 129 to have a material effect on its financial position or results of
operations.

Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") issued by the FASB is effective for financial
statements with fiscal years beginning after December 15, 1997.  Earlier
application is permitted.  SFAS 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of general-
purpose financial statements.  The Company has adopted SFAS No. 130.

Statement of Financial Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise and Related Information" ("SFAS No. 131") issued by the FASB is
effective for financial statements beginning after December 15, 1997.  The new
standard requires that public business enterprises report certain information
about operating segments in complete sets of financial statements of the
enterprise and in condensed financial statements of interim periods issued to
shareholders.  The Company does not expect the adoption of SFAS No. 131 to have
a material effect on its financial position or results of operations.


                                                                    Page 6 of 13

<PAGE>

2.  INVESTMENT IN JUSTICE INVESTORS
    -------------------------------

The Company's principal sources of revenue continue to be derived from its
49.8% interest in the Justice Investors limited partnership which owns and
leases a Holiday Inn in San Francisco, California. The Company also serves as
one of the two general partners of Justice Investors. Portsmouth records its
investment on the equity basis.

Condensed financial statements for Justice Investors are as follows:

       
         
                           JUSTICE INVESTORS
                        CONDENSED BALANCE SHEET


<TABLE>
<CAPTION>
                                                          JUNE 30, 1998
                                                          -------------
<S>                                                       <C>
Assets
Total current assets                                       $1,125,645
Property, plant and equipment, net of
  accumulated depreciation of $10,803,334                   5,772,348
Loan fees and deferred lease costs,
  net of accumulated amortization of $101,262                 209,151
                                                            ---------
                                                           $7,107,144      
                                                            =========

Liabilities and partners' capital 
Total current liabilities                                  $   79,372       
Long-term debt                                              2,011,634
Partners' capital                                           5,016,138
Total liabilities and                                       ---------
  partners' capital                                        $7,107,144
                                                            =========
</TABLE>


                        
                                JUSTICE INVESTORS
                        CONDENSED STATEMENTS OF OPERATIONS

       
<TABLE>
<CAPTION>
                                     SIX MONTHS ENDED          
                                         JUNE 30,
                                    1998           1997
                                 ---------      ----------
<S>                              <C>            <C>
Revenues                         $3,429,431     $2,762,573
Costs and expenses                  509,533        540,717
                                  ---------      ---------    
Net income                       $2,919,898     $2,221,856
                                  =========      =========
        
</TABLE>


                                                                    Page 7 of 13
<PAGE>

3. COMMITMENTS AND CONTINGENCIES
   -----------------------------
During 1996, the Company was served with a personal injury action in the San
Francisco Superior Court.  The suit named more than 60 defendants, including the
managing general partner of Justice Investors and alleges injuries suffered as a
result of exposure to asbestos-containing materials.  The complaint sought an
unspecified amount of damages.  Portsmouth was defended by an insurance carrier
under a reservation of rights.  During 1997, the trial court granted
Portsmouth's motion for summary judgment, which became final on April 13, 1998. 
No appeal from that judgment was taken.


4. RELATED PARTY TRANSACTIONS
   -------------------------- 

Certain costs and expenses, primarily salaries, rent and insurance, are
allocated between the Company and its parent company, Santa Fe Financial
Corporation ("Santa Fe") based on management's estimate of the utilization of
resources.  During the six months ended June 30, 1998, the Company also made
payments to The InterGroup Corporation ("InterGroup") in the amount of $25,588
for administrative costs and reimbursement of direct and indirect costs
associated with the management of the Company's investments, including its
partnership asset.  

The Company's President and Chief Executive Officer, 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 of Santa Fe and InterGroup and directs the investment activity
of those companies.  Effective April 1, 1998, an employee of InterGroup was
assigned to manage the portfolios of the Company and Santa Fe in consultation
with Mr. Winfield.  The Company and Santa Fe reimburse InterGroup for an
allocated portion of the compensation and benefits of such employee.  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.  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.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATION

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 "estimate," "project," "anticipate" and similar expressions, are
intended to identify forward-looking statements.  Such statements are subject
to certain risks and uncertainties, including partnership distributions, 
general economic conditions of the hotel industry in the San Francisco area,
securities markets, litigation and other factors, including natural disasters
those discussed below and in the Company's Form 10-KSB for the year ended
December 31, 1997, 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 


                                                                   Page 8 of 13
<PAGE>

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's principal sources of revenue continue to be derived from its 49.8%
interest in the Justice Investors limited partnership and income received from
the investment of its cash and securities assets.  The partnership derives most
of its income from a lease with Holiday Inns, Inc., which was assumed by Bristol
Hotel Company ("Bristol").  Effective July 31, 1998, Bristol merged into Felcor
Suite Hotels, Inc. ("Felcor") with Bristol Hotel Management Company continuing
as the manager of the hotel.


THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS 
ENDED JUNE 30, 1997

Comparison of operating results for the three months ended June 30, 1998 to 
the three months ended June 30, 1997, shows that total revenues increased 19%
from $590,168 to $702,143, primarily due to a 38.7% increase in partnership
income from $611,273 to $847,709, partially offset by a $164,021 net investment
loss.  That net investment loss, and higher taxes associated with the increase
in operating income, were the primary factors that resulted in a 8.1% decrease
in net income.

The increase in partnership income is primarily attributable to a 27% increase
in hotel rental income as a result of an increase in the average daily room rate
without a significant reduction in occupancy rates.  The net investment loss
reflects management's decision to prune the Company's investment portfolio of
certain of its underperforming securities in an effort to eliminate its margin
positions by the end of the quarter. Management believes that this more
conservative approach should reduce the Company's overall investment risk in
what has become a very challenging and difficult global economic environment and
should result in future savings in margin interest expenses.  As of June 30,
1998, the Company still showed a net unrealized gain on investments of $57,508,
after tax, which is included in shareholders' equity.

The increase in costs and expenses from $117,819 to $158,070 is primarily
attributable to margin interest and trading expenses in the amount of $14,866
associated with the Company's investing activities and an increase in
professional and outside service fees.  The increase in professional, and
outside service fees from $27,397 to $45,476 reflects the accrual of annual
audit and professional fees for the current fiscal year.  The modest increase in
general and administrative expenses from $90,422 to $97,728 primarily reflects
severance pay to certain staff employees.  Effective June 30, 1998, certain
accounting and administrative functions of the Company and its parent
corporation, Santa Fe, were transferred to the Los Angeles, California offices
of InterGroup.  InterGroup presently controls more than 50% of the voting power
of Santa Fe.  It is expected that the Company will continue to maintain a
corporate presence in San Diego, California, but on a reduced basis.


                                                                   Page 9 of 13
<PAGE>

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS 
ENDED JUNE 30, 1997

Comparison of operating results for the six months ended June 30, 1998 to 
the six months ended June 30, 1997, shows that net income increased 21%,
resulting from a 27.% increase in total revenues, partially offset by a 24.1%
increase in costs and expenses.

The 27% increase in total revenues from $1,109,765 to $1,409,861 was primarily
attributable to a 30.9% increase in partnership income, partially offset by a
$40,319 decrease in dividend and interest income and a $87,481 net investment
loss.  The increase in partnership income is primarily attributable to an
increase in the average daily room rate without a significant reduction in
occupancy rates.
 
The decline in dividend and interest income and the net investment loss reflects
management's decision to reduce the size of the Company's investment portfolio
and eliminate its margin positions in the second quarter. Management believes
that this more conservative approach should reduce the Company's overall
investment risk in what has become a very challenging and difficult global
economic environment and should result in future savings in margin interest
expenses.  As of June 30, 1998, the Company still showed a net unrealized gain
on investments of $57,508, after tax, which is included in shareholders' equity.

The increase in costs and expenses from $247,982 to $307,669 is primarily
attributable to margin interest and trading expenses in the amount of $29,153
associated with the Company's investing activities and modest increases in
professional and outside service fees and general and administrative expenses
which reflect adjustments in the Company's proportionate share of operating
expenses with its parent, Santa Fe, and higher administrative costs and direct
and indirect costs associated with the management of the Company's investments,
including its partnership asset.
 
LIQUIDITY AND SOURCES OF CAPITAL

The Company's cash flows are primarily generated by its investment in the
Justice Investors limited partnership, which derives the majority of its
income from its lease with Bristol and a lease with Evon Garage Corporation. 
In addition to its monthly limited partnership distributions from Justice
Investors, the Company also receives monthly management fees as a general
partner.  The Company also derives revenue from the investment of its cash and
securities assets.  

As a result of increases in the amount of rental income from the hotel lease,
the general partners of Justice Investors decided that there would be a special
one-third increase in the monthly distribution to limited partners effective
with the February 1997 distribution.  As a result, Portsmouth's monthly
distribution increased to $139,440 from $109,580.  In February 1998, the general
partners decided to continue monthly distributions at the higher monthly rate
for another year.  The increases in monthly distributions were clearly
identified as special distributions and, at any time, unforeseen circumstances
could dictate a change in the amount distributed.  The general partners will
continue to conduct an annual review and analysis to determine an appropriate
monthly distribution for the ensuing year.  At that time, the monthly
distribution could be increased or decreased, especially if the partnership was
to participate financially in the future upgrading of the public areas of the
hotel.


                                                                  Page 10 of 13
<PAGE>

The Company has diversified its investment of its cash and securities assets 
in an effort to obtain an overall higher yield while seeking to minimize the 
associated increased degree of risk.  The Company has invested in short-term, 
income-producing instruments and in equity and debt securities when deemed 
appropriate.  The Company's securities investments are classified as 
available-for-sale and unrealized gains and losses, net of deferred taxes, are 
included in shareholders' equity.  As of June 30, 1998, the Company was
successful in eliminating its margin positions and, as a result, has reduced its
current liabilities to $201,168 while increasing its cash position to $298,086. 
As of June 30, 1998, the Company also had a net unrealized gain on investments
of $57,508 after tax, which consists of pre-tax unrealized gains of $173,982 and
pre-tax unrealized losses of $77,915.

Realized investment gains and losses may fluctuate significantly from period
to period in the future and could have a meaningful effect on the Company's
net earnings.  However, the amount of realized investment gain or loss for any
given period may have no predictive value, and variations in amount from
period to period may have no practical analytical value.

At June 30, 1998, the Company's current assets were $1,354,971.  The 
Company remains liquid with a current ratio of approximately 6.7 to 1 at the
end of the second quarter of 1998.  Management believes that its capital 
resources are currently adequate to meet its short- and long-term obligations.


PART II.     OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Shareholders of the Company was held on May 5, 1998, 
at the Park Hyatt Hotel in Los Angeles, 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 Directors of Portsmouth to serve
until the next Annual Meeting.  The shareholders also voted to ratify the
appointment of Price Waterhouse LLP as the Company's independent accountants for
the year ending December 31, 1998.  A tabulation of the vote at that meeting was
previously reported on Registrant's Form 10-QSB for the quarterly period ended
March 31, 1998.

 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibit 27 - the Financial Data Schedule is filed 
             as an exhibit to this report.
          
         (b) Registrant did not file any reports on Form 8-K 
             during the period covered by this report.
                     


                                                                  Page 11 of 13
<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:    August 14, 1998

by /s/   John V. Winfield
-------------------------------------
         John V. Winfield, President,
         Chairman of the Board and
         Chief Executive Officer


Date:    August 14, 1998

by /s/   L. Scott Shields
-------------------------------------
         L. Scott Shields, Treasurer
         and Chief Financial Officer  



                                                                  Page 12 of 13