UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D. C. 20549

                                 FORM 10-Q

 [X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

 [ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

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.)


                     820 Moraga Drive Los Angeles, CA 90049
                     --------------------------------------
                    (Address of principal executive offices)


                                 (310) 889-2500
                          -----------------------------
                         (Registrant's telephone number)


Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.  [x] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.

   Large accelerated filer [ ]                 Accelerated filer [ ]

   Non-accelerated filer   [ ]                 Smaller reporting company [x]

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

<PAGE>

                                     INDEX

                             PORTSMOUTH SQUARE, INC.


PART I. FINANCIAL INFORMATION                                            PAGE

Item 1. Condensed Consolidated Financial Statements

 Condensed Consolidated Balance Sheets
   As of December 31, 2008(Unaudited) and June 30, 2008(Audited)           3

 Condensed Consolidated Statements of Operations (Unaudited)
   For the Three Months ended December 31, 2008 and 2007                   4

 Condensed Consolidated Statements of Operations (Unaudited)
   For the Six Months ended December 31, 2008 and 2007                     5

 Condensed Consolidated Statements of Cash Flows (Unaudited)
   For the Six Months ended December 31, 2008 and 2007                     6

  Notes to Condensed Consolidated Financial Statements (Unaudited)         7

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

Item 4T. Controls and Procedures                                          27


PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds       28

Item 6. Exhibits                                                          28


SIGNATURES                                                                29

                                    -2-
<PAGE>

<TABLE>

                        PART 1 - FINANCIAL INFORMATION

Item 1 - Condensed Consolidated Financial Statements

                             PORTSMOUTH SQUARE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                     December 31, 2008    June 30, 2008
                                                         (Unaudited)         (Audited)
                                                        ------------       ------------
<S>                                                     <C>                <C>
Assets
  Investment in hotel, net                              $ 38,128,000       $ 39,495,000
  Investment in real estate                                  973,000            973,000
  Investment in marketable securities                      2,809,000          2,958,000
  Other investments, net                                   2,566,000          2,489,000
  Cash and cash equivalents                                  115,000            485,000
  Accounts receivable, net                                 1,300,000          1,140,000
  Other assets, net                                        1,976,000          1,754,000
  Deferred tax asset                                       3,914,000          3,517,000
  Minority interest of Justice Investors                   7,122,000          6,793,000
                                                        ------------       ------------
Total assets                                            $ 58,903,000       $ 59,604,000
                                                        ============       ============
Liabilities and Shareholders' Equity

Liabilities
  Accounts payable and other liabilities                $  8,342,000       $  7,466,000
  Due to securities broker                                   761,000          1,032,000
  Line of Credit                                           1,756,000          1,513,000
  Mortgage notes payable                                  47,124,000         47,482,000
                                                        ------------       ------------
Total liabilities                                         57,983,000         57,493,000
                                                        ------------       ------------
Commitments and contingencies

Shareholders' equity:
  Common stock, no par value; 750,000 authorized shares;
   734,183 shares issued and outstanding                   2,092,000          2,092,000
  Additional paid-in capital                                 916,000            916,000
  Accumulated deficit                                     (2,088,000)          (897,000)
                                                        ------------       ------------
Total shareholders' equity                                   920,000          2,111,000
                                                        ------------       ------------
Total liabilities and shareholders' equity              $ 58,903,000       $ 59,604,000
                                                        ============       ============

</TABLE>

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

                                    -3-
<PAGE>

                             PORTSMOUTH SQUARE, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (UNAUDITED)

For the three months ended December 31,              2008           2007
                                                  ----------     ----------
Hotel operations:
 Hotel and garage revenue                       $  8,644,000    $ 9,619,000
 Operating expenses                               (7,101,000)    (8,176,000)
 Real estate taxes                                  (176,000)      (177,000)
 Interest expense                                   (724,000)      (703,000)
 Depreciation and amortization                    (1,120,000)    (1,118,000)
 Loss on termination of garage lease                (684,000)             -
                                                  ----------     ----------
Loss from hotel operations                        (1,161,000)      (555,000)
                                                  ----------     ----------
Investment transactions:
 Net gain on marketable securities                   336,000        597,000
 Dividend and interest income                         18,000         27,000
 Margin interest and trading expense                 (52,000)       (66,000)
                                                  ----------     ----------
Income from investment transactions                  302,000        558,000
                                                  ----------     ----------

General and administrative expense                  (162,000)      (147,000)
                                                  ----------     ----------

Loss before income taxes and minority interest    (1,021,000)      (144,000)

Minority interest - Justice Investors, pre-tax             -        257,000
                                                  ----------     ----------
Income(loss) before income taxes                  (1,021,000)       113,000

Provision for income tax benefit(expense)            170,000        (41,000)
                                                  ----------     ----------
Net income(loss)                                 $  (851,000)   $    72,000
                                                  ==========     ==========

Basic and diluted income(loss) per share         $     (1.16)   $      0.10
                                                  ==========     ==========
Weighted average number of common shares
 Outstanding                                         734,183        734,183
                                                  ==========     ==========

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

                                    -4-
<PAGE>

                             PORTSMOUTH SQUARE, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (UNAUDITED)

For the six months ended December 31,                2008           2007
                                                  ----------     ----------
Hotel operations:
 Hotel and garage revenue                       $ 17,943,000    $19,405,000
 Operating expenses                              (14,166,000)   (16,508,000)
 Real estate taxes                                  (353,000)      (354,000)
 Interest expense                                 (1,443,000)    (1,405,000)
 Depreciation and amortization                    (2,217,000)    (2,201,000)
 Loss on termination of garage lease                (684,000)             -
                                                  ----------     ----------
Loss from hotel operations                          (920,000)    (1,063,000)
                                                  ----------     ----------
Investment transactions:
 Net gain(loss) on marketable securities             120,000        (75,000)
 Impairment loss on other investments               (358,000)       (65,000)
 Dividend and interest income                         45,000         51,000
 Margin interest and trading expense                (107,000)      (159,000)
                                                  ----------     ----------
Loss from investment transactions                   (300,000)      (248,000)
                                                  ----------     ----------

General and administrative expense                  (272,000)      (297,000)
                                                  ----------     ----------

Loss before income taxes and minority interest    (1,492,000)    (1,608,000)

Minority interest - Justice Investors, pre-tax       (96,000)       535,000
                                                  ----------     ----------
Loss before income taxes                          (1,588,000)    (1,073,000)

Provision for income tax benefit                     397,000        437,000
                                                  ----------     ----------
Net loss                                         $(1,191,000)   $  (636,000)
                                                  ==========     ==========

Basic and diluted loss per share                 $     (1.62)   $     (0.87)
                                                  ==========     ==========
Weighted average number of common shares
 Outstanding                                         734,183        734,183
                                                  ==========     ==========

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

                                    -5-
<PAGE>

<TABLE>
                           PORTSMOUTH SQUARE, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)

For the six months ended December 31,                2008           2007
                                                  ----------     ----------
<S>                                              <C>            <C>
Cash flows from operating activities:
  Net loss                                       $(1,191,000)   $  (636,000)
  Adjustments to reconcile net loss
   to net cash provided by operating activities:
    Net unrealized (gain)loss on marketable
     securities                                     (481,000)        90,000
    Impairment loss on other investments             358,000         65,000
    Depreciation and amortization                  2,217,000      2,201,000
    Loss on termination of lease                     684,000              -
    Minority interest                                 96,000       (535,000)
    Changes in assets and liabilities:
      Investment in marketable securities            630,000      2,821,000
      Other investments                             (435,000)      (215,000)
      Accounts receivable                           (160,000)      (169,000)
      Other assets                                  (222,000)      (375,000)
      Accounts payable and other liabilities          (1,000)       932,000
      Due to securities broker                      (271,000)    (1,483,000)
      Obligations for securities sold                      -       (630,000)
      Deferred tax asset                            (397,000)      (437,000)
                                                  ----------     ----------
  Net cash provided by operating activities          827,000      1,629,000
                                                  ----------     ----------

Cash flows from investing activities:
  Capital expenditures for furniture, equipment
   and building improvements                        (657,000)    (1,958,000)
  Investment in real estate                                -       (973,000)
  Restricted cash                                          -      1,500,000
                                                  ----------     ----------
  Net cash used in investing activities             (657,000)    (1,431,000)
                                                  ----------     ----------
Cash flows from financing activities:

  Draw on line of credit                             243,000              -
  Principal payments on mortgage note payable       (358,000)      (338,000)
  Distributions to minority partner                 (425,000)      (500,000)
                                                  ----------     ----------
  Net cash used in financing activities             (540,000)      (838,000)
                                                  ----------     ----------
Net decrease in cash and cash equivalents           (370,000)      (640,000)

Cash and cash equivalents at the beginning
 of the period                                       485,000        796,000
                                                  ----------     ----------
Cash and cash equivalents at the end of the
 period                                          $   115,000    $   156,000
                                                  ==========     ==========
Supplemental information:

Interest paid                                    $ 1,452,000    $ 1,467,000
                                                  ==========     ==========

Non cash investing activities:
  Note payable on termination of garage lease    $  (727,000)   $         -
                                                  ==========     ==========
  Fixed assets acquired, net of liabilities, upon
   termination of garage lease                   $    43,000    $         -
                                                  ==========     ==========

</TABLE>

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

                                    -6-
<PAGE>

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

NOTE 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 flows and results of
operations as of and for the periods indicated.

As of December 31, 2008, Santa Fe Financial Corporation ("Santa Fe"), a public
company, owns approximately 68.8% of the outstanding common shares of
Portsmouth Square, Inc. ("Portsmouth" or the "Company"). Santa Fe is a 75.9%-
owned subsidiary of The InterGroup Corporation ("InterGroup"), a public
company. InterGroup also directly owns approximately 11.7% of the common stock
of Portsmouth.

Portsmouth's primary business is conducted through its general and limited
partnership interest in Justice Investors, a California limited partnership
("Justice" or the "Partnership"). Portsmouth has a 50.0% limited partnership
interest in Justice and serves as one of the two general partners. The other
general partner, Evon Corporation ("Evon") served as the managing general
partner until December 1, 2008. As further discussed in Note 2, the Limited
Partnership Agreement was amended, effective December 1, 2008, to provide for a
change in the respective roles of the general partners. Pursuant to that
amendment, Portsmouth became the Managing General Partner of Justice while Evon
assumed the role of Co-General Partner of Justice. The financial statements of
Justice are consolidated with those of the Company.

Justice owns a 544 room hotel property located at 750 Kearny Street, San
Francisco, California, known as the "Hilton San Francisco Financial District"
(the "Hotel") and related facilities, including a five level parking garage.
The Hotel was temporarily closed for major renovations from May 2005 to January
2006. The total construction costs related to the renovation project was
approximately $37 million.

The Hotel is operated by the Partnership as a full service Hilton brand hotel
pursuant to a Franchise License Agreement with Hilton Hotels Corporation.
Justice has a Management Agreement with Prism Hospitality L.P. ("Prism") to
perform the day-to-day management functions of the Hotel. Until September 30,
2008, the Partnership also derived income from the lease of the parking garage
to Evon. As further discussed in Note 7, effective October 1, 2008, Justice
entered into an installment sale agreement with Evon to purchase the remaining
term of the garage lease and related garage assets. Justice also leases a
portion of the lobby level of the Hotel to a day spa operator.  Portsmouth also
receives management fees as a general partner of Justice for its services in
overseeing and managing the Partnership's assets. Those fees are eliminated in
consolidation.

                                     -7-
<PAGE>

Minority interests in the net assets and earnings or losses of consolidated
subsidiaries are reflected in the caption "Minority interest" in the Company's
condensed consolidated balance sheet and condensed consolidated statements of
operations. Minority interest adjusts the Company's consolidated results of
operations to reflect only the Company's share of the earnings or losses of the
consolidated subsidiaries. As of December 31, 2008 and June 30, 2008, the
Company reported the minority interest of Justice Investors as an asset in the
condensed consolidated balance sheet as the result of the accumulated deficit
at Justice Investors. The accumulated deficit was primarily attributable to the
temporary closing of the Hotel to undergo major renovations from May 2005 to
January 2006 and subsequent net losses incurred by Justice due to substantial
depreciation and amortization costs resulting from the renovations and
operating losses as the Hotel ramped up operations after reopening.  The
Company expects the Hotel to be profitable in the future and the minority
interest asset to be recoverable. Additionally, management believes that there
is more than sufficient equity in the Hotel to support the carrying value of
this asset on the Company's consolidated financial statements.   However, due
to impact that the sharp deterioration of the U.S. economy has had on the
lodging sector since September 2008, and facing the prospect of a significant
recession for the immediate future, the Company believed that it would be most
appropriate not to add to the existing minority interest asset of $7,122,000
balance beginning in the quarterly period ended December 31, 2008.  As the
result, the Company did not record a minority interest benefit of $608,000
representing 50% of the loss from the hotel operations on its consolidated
statement of operations for the three ended December 31, 2008.

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

Basic loss per share is calculated based upon the weighted average number of
common shares outstanding during each fiscal year.  During the three and six
months ended December 31, 2008 and 2007, the Company did not have any
potentially dilutive securities outstanding.

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, 2008.

The results of operations for the three and six months ended December 31, 2008
are not necessarily indicative of results to be expected for the full fiscal
year ending June 30, 2009.

In May 2008, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 162(SFAS No. 162), The Hierarchy of
Generally Accepted Accounting Principles. This new standard is intended to
improve financial reporting by identifying a consistent framework, or
hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with GAAP for
nongovernmental entities. SFAS No. 162 is effective on November 15, 2008.  SFAS
No. 162 did not have a significant impact on the Company's financial
statements.

                                    -8-
<PAGE>

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, and amendment to Accounting Research
Bulletin (ARB) No. 51," (SFAS No. 160). This standard prescribes the accounting
by a parent company for minority interests held by other parties in a
subsidiary of the parent company. SFAS No. 160 is effective for the Company for
fiscal year ending June 30, 2010. The Company is currently assessing the impact
of SFAS No. 160 on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"), which replaces SFAS No. 141. SFAS 141R establishes
principles and requirements for how an acquirer in a business combination
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any controlling interest; recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase; and determines what information to disclose to enable users
of the financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141R is to be applied prospectively to business
combinations for which the acquisition date is on or after an entity's fiscal
year that begins after December 15, 2008.  The provisions of SFAS 141R are
effective for the Company for the fiscal year ending June 30, 2010.  The
Company is currently assessing the impact of SFAS 141R on its financial
statements.


NOTE 2 - JUSTICE INVESTORS PARTNERSHIP AMENDMENTS

On December 1, 2008, Portsmouth and Evon, as the two general partners of
Justice, entered into a 2008 Amendment to the Limited Partnership Agreement
(the "Amendment") that provides for a change in the respective roles of the
general partners. Pursuant to the Amendment, Portsmouth will assume the role of
Managing General Partner and Evon will continue on as the Co-General Partner of
Justice.  The Amendment was ratified by approximately 98% of the limited
partnership interests. The Amendment also provides that future amendments to
the Limited Partnership Agreement may be made only upon the consent of the
general partners and at least seventy five percent (75%) of the interests if
the limited partners. Consent of at least 75% of the interests of the limited
partners will also be required to remove a general partner pursuant to the
Amendment.

Concurrent with the Amendment to the Limited Partnership Agreement, a new
General Partner Compensation Agreement (the "Compensation Agreement") was
entered into on December 1, 2008, among Justice, Portsmouth and Evon to
terminate and supersede all prior compensation agreement for the general
partners. Pursuant to the Compensation Agreement, the general partners of
Justice will be entitled to receive an amount equal to 1.5% of the gross annual
revenues of the Partnership (as defined), less $75,000 to be used as a
contribution toward the cost of Justice engaging an asset manager. In no event
shall the annual compensation be less than a minimum base of approximately
$285,000, with eighty percent (80%) of that amount being allocated to
Portsmouth for its services as managing general partner and twenty percent
(20%) allocated to Evon as the co-general partner. Compensation earned by the
general partners in each calendar year in excess of the minimum base, will be
payable in equal fifty percent (50%) shares to Portsmouth and Evon.

                                    -9-
<PAGE>

NOTE 3 - INVESTMENT IN HOTEL, NET

Property and equipment consisted of the following:

                                             Accumulated        Net Book
As of December 31, 2008      Cost            Depreciation         Value
                          ------------       ------------     ------------
Land                      $  1,124,000       $          -     $  1,124,000
Furniture and equipment     15,852,000         (8,805,000)       7,047,000
Building and improvements   45,363,000        (15,406,000)      29,957,000
                          ------------       ------------     ------------
                          $ 62,339,000       $(24,211,000)    $ 38,128,000
                          ============       ============     ============

                                             Accumulated        Net Book
As of June 30, 2008           Cost           Depreciation         Value
                          ------------       ------------     ------------
Land                      $  1,124,000       $          -     $  1,124,000
Furniture and equipment     16,279,000         (8,005,000)       8,274,000
Building and improvements   45,123,000        (15,026,000)      30,097,000
                          ------------       ------------     ------------
                          $ 62,526,000       $(23,031,000)    $ 39,495,000
                          ============       ============     ============


NOTE 4 - 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 December 31, 2008, 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>
                              Gross            Gross             Net            Fair
Investment     Cost       Unrealized Gain  Unrealized Loss  Unrealized Gain     Value
----------  -----------   ---------------  ---------------  ---------------  ------------
<S>                        <C>             <C>                <C>            <C>
As of December 31, 2008

Corporate
Equities    $ 1,656,000    $  1,374,000    ($ 221,000)        $ 1,153,000    $ 2,809,000

As of June 30, 2008

Corporate
Equities    $ 2,286,000    $  877,000      ($ 205,000)        $ 672,000      $ 2,958,000

</TABLE>

As of December 31, 2008 and June 30, 2008, the Company had unrealized losses of
$38,000 and $58,000, respectively, related to securities held for over one
year.

                                    -10-
<PAGE>

Net gain(loss) on marketable securities on the statement of operations is
comprised of realized and unrealized gains(losses).  Below is the composition
of the net gain(loss) for the three and six months ended December 31, 2008 and
2007, respectively.

<TABLE>

For the three months ended December 31,                     2008             2007
                                                         -----------      -----------
<S>                                                      <C>              <C>
Realized (loss)gain on marketable securities             $   (78,000)     $   227,000
Unrealized gain on marketable securities                     414,000          370,000
                                                         -----------      -----------
Net gain on marketable securities                        $   336,000       $  597,000
                                                         ===========      ===========

For the six months ended December 31,                       2008             2007
                                                         -----------      -----------

Realized (loss)gain on marketable securities             $  (361,000)     $    15,000
Unrealized gain(loss) on marketable securities               481,000          (90,000)
                                                         -----------      -----------
Net gain(loss) on marketable securities                  $   120,000      $   (75,000)
                                                         ===========      ===========
</TABLE>

NOTE 5 - OTHER INVESTMENTS, NET

The Company may also invest, with the approval of the Securities Investment
Committee, in private investment equity funds and other unlisted securities,
such as convertible notes through private placements. Those investments in non-
marketable securities are carried at cost on the Company's balance sheet as
part of other investments net of other than temporary impairment losses.

As of December 31, 2008 and June 30, 2008, the Company had net other
investments of $2,566,000 and $2,489,000, respectively, which consist of the
following:


            Type                      December 31, 2008      June 30, 2008
   ---------------------------        ------------------  ----------------
   Private equity hedge fund           $       2,266,000  $      2,325,000
   Corporate debt instruments                    200,000            64,000
   Other                                         100,000           100,000
                                       -----------------  ----------------
                                       $       2,566,000  $      2,489,000
                                       =================  ================

In accordance with Emerging Issues Task Force No. 03-01, "The Meaning of Other-
Than-Temporary Impairment and Its Application to Certain Investments", during
the six months ended December 31, 2008 and 2007, the Company recorded
impairment losses of $358,000 and $65,000, respectively.  During the three
months ended December 31, 2008 and 2007, the Company did not record any
impairment losses.

NOTE 6 - FAIR VALUE MEASUREMENTS

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"), which defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements.
SFAS No. 157 is effective as of the beginning of the Company's 2009 fiscal

                                    -11-
<PAGE>

year.  In February 2008, the FASB deferred the effective date of SFAS No. 157
for non-financial assets and liabilities that are recognized or disclosed at
fair value on a nonrecurring basis until the beginning of fiscal year 2010. The
Company adopted SFAS No. 157 with respect to financial assets and liabilities
on July 1, 2008.  There was no material effect on the financial statements upon
adoption of this new accounting pronouncement. The impact on the financial
statements from adoption of SFAS No. 157 as it pertains to non-financial assets
and liabilities has not yet been determined.

SFAS No. 157 discusses valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income
or cash flow), and the cost approach (cost to replace the service capacity of
an asset or replacement cost). The statement utilizes a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value
into three broad levels:

Level 1:  Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.

Level 2: Inputs, other than quoted prices, that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for
similar assets or liabilities in active markets and quoted prices for identical
or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the reporting entity's own
assumptions

The assets measured at fair value on a recurring basis as of December 31, 2008
are as follows:

<TABLE>

Assets:                                 Level 1      Level 2         Level 3     December 31, 2008
-----------                            ---------    ---------      ---------     ------------------
<S>                                   <C>           <C>            <C>               <C>
Cash                                  $  115,000           -              -          $  115,000
Investment in marketable securities    2,809,000           -              -           2,809,000
                                       ---------    ---------      ---------          ---------
                                      $2,924,000           -              -          $2,924,000
                                       =========    =========      =========          =========
</TABLE>

The fair values of investments in marketable securities are determined by the
most recently traded price of each security at the balance sheet date.

Financial assets that are measured at fair value on a non-recurring basis and
are not included in the tables above include "Other investments in non-
marketable securities," that were initially measured at cost and have been
written down to fair value as a result of impairment. The following table shows
the fair value hierarchy for these assets measured at fair value on a non-
recurring basis as of December 31, 2008:
<TABLE>

                                                                                         Impairment loss for the
                                                                                           Six months ended
Assets:                           Level 1    Level 2      Level 3    December 31, 2008     December 31, 2008
-----------                      ---------  ---------    ---------   ------------------   ------------------
<S>                                     <C>        <C>  <C>            <C>                  <C>
Other non-marketable investments        -          -    $2,566,000     $2,566,000           $(358,000)

</TABLE>

Other investments in non-marketable securities are carried at cost net of any
impairment loss.  The Company has no significant influence or control over the
entities that issue these investments.  These investments are reviewed on a
periodic basis for other-than-temporary impairment. The Company reviews several

                                    -12-
<PAGE>

factors to determine whether a loss is other-than-temporary. These factors
include but are not limited to: (i) the length of time an investment is in an
unrealized loss position, (ii) the extent to which fair value is less than
cost, (iii) the financial condition and near term prospects of the issuer and
(iv) our ability to hold the investment for a period of time sufficient to
allow for any anticipated recovery in fair value.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities-Including an Amendment of FASB
Statement No. 115."  SFAS No. 159 provides entities with an irrevocable option
to report selected financial assets and financial liabilities at fair value. It
also establishes presentation and disclosure requirements that are designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities.  The Company adopted
SFAS No. 159 on July 1, 2008 and chose not to elect the fair value option for
its financial assets and liabilities that had not been previously carried at
fair value. Therefore, material financial assets and liabilities not carried at
fair value, such as other assets, accounts payable, line of credit, and
mortgage payables are reported at their carrying values.


NOTE 7 - TERMINATION OF GARAGE LEASE

Effective October 1, 2008, Justice and Evon entered into an Installment Sale
Agreement whereby Justice purchased all of Evon's right title and interest in
the remaining term of its lease of the parking garage, which was to expire on
November 30, 2010, and other related assets. Justice also agreed to assume
Evon's contract with Ace Parking for the management of the garage and any other
liabilities related to the operation of the garage commencing October 1, 2008.
The purchase price for the garage lease and related assets was approximately
$755,000, payable in one down payment of approximately $28,000 and 26 equal
monthly installments of approximately $29,000, which includes interest at the
rate of 2.4% per annum.  During the three and six months ended December 31,
2008, the Company recorded a loss on the termination of the garage lease of
$684,000 on the Company's condensed consolidated statements of operations.

Future installment payments are as follows:

       For the year ending June 30,

                  2009     $172,000
                  2010      345,000
                  2011      144,000
                           --------
                   Total   $661,000
                           ========

As of December 31, 2008, the total installment liability of $631,000 was
included in the accounts payable and other liabilities balance of $8,342,000 on
the Company's condensed consolidated balance sheet.


NOTE 8 - LINE OF CREDIT

On December 12, 2008, Justice obtained a modification and extension of its
unsecured revolving line of credit facility from United California Bank ("UCB")
which was to mature on February 2, 2009. The modification extends the term of
the credit facility to February 2, 2010, but reduced the limit of funds

                                    -13-
<PAGE>

available to the Partnership for short term capital for the Hotel's business
operations from $3,000,000 to $2,500,000. The annual interest rate is based on
an index selected by Justice at the time of advance, equal to the Wall Street
Journal Prime Rate plus 1.0%, or the LIBOR Rate plus 3.5%, with an interest
rate floor of 5% per annum.  As of December 31, 2008, there was a balance of
$1,756,000 drawn by Justice under the line of credit facility, with an annual
interest rate of 5% since the selected rate of Prime (3.25% as of December 31,
2008) plus 1% was less than the floor rate.

As of December 31, 2008, Justice was not in compliance with a financial
covenant pertaining to the line of credit.  The non-compliance resulted from
the one-time, non-recurring loss of $684,000 on the termination of the garage
lease and related professional fees.  The Company is working on obtaining a
waiver of non-compliance from the bank and does not believe it will have a
material impact on the financial statements.


NOTE 9 - SEGMENT INFORMATION

The Company operates in two reportable segments, the operation of the hotel and
the investment of its cash in marketable securities and other investments.
These two operating segments, as presented in the consolidated 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 six months
ended December 31, 2008 and 2007, respectively.  Operating income(loss) from
Hotel operations consists of the operation of the hotel and operation of the
garage.  Operating income(loss) for investment transactions consist of net
investment gain (loss) and dividend and interest income.

<TABLE>

As of and for the
Three months ended            Hotel       Investment
December 31, 2008           Operations   Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>           <C>
Operating income            $ 8,644,000   $   354,000   $         -   $  8,998,000
Operating expenses           (9,805,000)      (52,000)            -     (9,857,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)   (1,161,000)      302,000             -       (859,000)

General and administrative
 expense                                                   (162,000)      (162,000)
Income tax benefit                    -             -       170,000        170,000
Minority interest                     -             -             -              -
                            -----------   -----------   -----------   ------------
Net income(loss)            $(1,161,000)  $   302,000   $     8,000   $   (851,000)
                            ===========   ===========   ===========   ============
Total Assets                $41,349,000   $ 5,375,000   $12,179,000   $ 58,903,000
                            ===========   ===========   ===========   ============
</TABLE>

                                    -14-
<PAGE>

<TABLE>

As of and for the
Three months ended            Hotel       Investment
December 31, 2007           Operations   Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>           <C>
Operating income            $ 9,619,000   $   624,000   $         -   $ 10,243,000
Operating expenses          (10,174,000)      (66,000)            -    (10,240,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)     (555,000)      558,000             -          3,000

General and administrative
 expense                                                   (147,000)      (147,000)
Income tax expense                    -             -       (41,000)       (41,000)
Minority interest               257,000             -             -        257,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $  (298,000)  $   558,000   $  (188,000)  $     72,000
                            ===========   ===========   ===========   ============
Total Assets                $43,858,000   $ 9,378,000   $10,027,000   $ 63,263,000
                            ===========   ===========   ===========   ============
</TABLE>
<TABLE>

As of and for the
Six months ended              Hotel       Investment
December 31, 2008           Operations   Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>           <C>
Operating income(loss)      $17,943,000   $  (193,000)  $         -   $ 17,750,000
Operating expenses          (18,863,000)     (107,000)            -    (18,970,000)
                            -----------   -----------   -----------   ------------
Net operating loss             (920,000)     (300,000)            -     (1,220,000)

General and administrative
 expense                                                   (272,000)      (272,000)
Income tax benefit                    -             -       397,000        397,000
Minority interest               (96,000)            -             -        (96,000)
                            -----------   -----------   -----------   ------------
Net income(loss)            $(1,016,000)  $  (300,000)  $   125,000   $ (1,191,000)
                            ===========   ===========   ===========   ============
Total Assets                $41,349,000   $ 5,375,000   $12,179,000   $ 58,903,000
                            ===========   ===========   ===========   ============
</TABLE>
<TABLE>

As of and for the
Six months ended              Hotel       Investment
December 31, 2007           Operations   Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                        <C>            <C>           <C>          <C>
Operating income(loss)     $ 19,405,000   $   (89,000)  $         -  $  19,316,000
Operating expenses          (20,468,000)     (159,000)            -    (20,627,000)
                            -----------   -----------   -----------   ------------
Net operating loss           (1,063,000)     (248,000)            -     (1,311,000)

General and administrative
 expense                                                   (297,000)      (297,000)
Income tax benefit                    -             -       437,000        437,000
Minority interest               535,000             -             -        535,000
                            -----------   -----------   -----------   ------------
Net income (loss)          $   (528,000)  $  (248,000)  $   140,000   $   (636,000)
                            ===========   ===========   ===========   ============
Total Assets               $ 43,858,000   $ 9,378,000   $10,027,000   $ 63,263,000
                            ===========   ===========   ===========   ============
</TABLE>
                                    -15-
<PAGE>

NOTE 10 - 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 and
InterGroup, the parent of Santa Fe, based on management's estimate of the pro
rata utilization of resources.  For the three months ended December 31, 2008
and 2007, these expenses were approximately $18,000 for each respective period.
For the six months ended December 31, 2008 and 2007, these expenses were
approximately $36,000 for each respective period.

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

Evon, a general partner of Justice, was the lessee of the parking garage until
September 30, 2008. Under the terms of the lease agreement, Evon paid the
Partnership $319,000 and $415,000 for the six months ended December 31, 2008
and 2007, respectively. As discussed in Note 7, Justice and Evon entered into
an installment sale agreement whereby Justice purchased the remaining term of
the lease agreement and related assets for a total of approximately $755,000.

During the three months and six months ended December 31, 2008, the Company
received management fees from Justice Investors totaling $52,000 and $97,000,
respectively.  These amounts were eliminated in consolidation.

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 national and worldwide economic conditions,
including the impact of recessionary conditions on tourism, travel and the
lodging industry, the impact of terrorism and war on the national and
international economies, including tourism and securities markets, energy and
fuel costs, natural disasters, general economic conditions and competition in
the hotel industry in the San Francisco area, seasonality, labor relations and
labor disruptions, partnership distributions, the ability to obtain financing
at favorable interest rates and terms, securities markets, regulatory factors,
litigation and other factors discussed below in this Report and in the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 2008,
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's principal business is conducted through its general and limited
partnership interest in the Justice Investors limited partnership ("Justice" or
the "Partnership"). The Company has a 50.0% limited partnership interest in
Justice and 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 (the "Hotel"). The
financial statements of Justice have been consolidated with those of the
Company.

The Hotel is operated by the Partnership as a full service Hilton brand hotel
pursuant to a Franchise License Agreement with Hilton Hotels Corporation. The
term of the Agreement is for a period of 15 years commencing on January 12,
2006, with an option to extend the license term for another five years, subject
to certain conditions. Justice also has a Management Agreement with Prism
Hospitality L.P. ("Prism") to perform the day-to-day management functions of
the Hotel.

Until September 30, 2008, the Partnership also derived income from the lease of
the parking garage to Evon Corporation ("Evon") the other general partner of
Justice. As discussed below, effective October 1, 2008, Justice entered into an
installment sale agreement with Evon to purchase the remaining term of the
garage lease and related garage assets. Justice also leases a portion of the
lobby level of the Hotel to a day spa operator.  Portsmouth also receives
management fees as a general partner of Justice for its services in overseeing
and managing the Partnership's assets. Those fees are eliminated in
consolidation.

                                    -17-
<PAGE>

RECENT DEVELOPMENTS

Effective October 1, 2008, Justice and Evon entered into an Installment Sale
Agreement whereby the Partnership purchased all of Evon's right title and
interest in the remaining term of its lease of the parking garage, which was to
expire on November 30, 2010, and other related assets. The partnership also
agreed to assume Evon's contract with Ace Parking for the management of the
garage and any other liabilities related to the operation of the garage
commencing October 1, 2008. The purchase price for the garage lease and related
assets was approximately $755,000, payable in one down payment of approximately
$28,000 and 26 equal monthly installments of approximately $29,000, which
includes interest at the rate of 2.4% per annum.

On December 1, 2008, Portsmouth and Evon, as the two general partners of
Justice, entered into a 2008 Amendment to the Limited Partnership Agreement
(the "Amendment") that provides for a change in the respective roles of the
general partners. Pursuant to the Amendment, Portsmouth will assume the role of
Managing General Partner and Evon will continue on as the Co-General Partner of
Justice.  The Amendment was ratified by approximately 98% of the limited
partnership interests. The Amendment also provides that future amendments to
the Limited Partnership Agreement may be made only upon the consent of the
general partners and at least seventy five percent (75%) of the interests if
the limited partners. Consent of at least 75% of the interests of the limited
partners will also be required to remove a general partner pursuant to the
Amendment. A copy of the full text of the Amendment is filed as Exhibit 10.1 to
this Report.

Concurrent with the Amendment to the Limited Partnership Agreement, a new
General Partner Compensation Agreement (the "Compensation Agreement") was
entered into on December 1, 2008, among Justice, Portsmouth and Evon to
terminate and supersede all prior compensation agreement for the general
partners. Pursuant to the Compensation Agreement, the general partners of
Justice will be entitled to receive an amount equal to 1.5% of the gross annual
revenues of the Partnership (as defined), less $75,000 to be used as a
contribution toward the cost of Justice engaging an asset manager. In no event
shall the annual compensation be less than a minimum base of approximately
$285,000, with eighty percent (80%) of that amount being allocated to
Portsmouth for its services as managing general partner and twenty percent
(20%) allocated to Evon as the co-general partner. Compensation earned by the
general partners in each calendar year in excess of the minimum base, will be
payable in equal fifty percent (50%) shares to Portsmouth and Evon. A copy of
the full text of the Compensation Agreement is filed as Exhibit 10.2 to this
Report.

                                    -18-
<PAGE>


Three Months Ended December 31, 2008 Compared to Three Months
Ended December 31, 2007

The Company had a net loss of $851,000 for the three months ended December 31,
2008 compared to net income of $72,000 for the three months ended December 31,
2007.  As discussed in Note 1, the Company stopped recording a minority
interest benefit in Justice Investors beginning the quarter ended December 31,
2008 resulting in the recording of a additional $608,000 in the net loss.
During the three months ended December 31, 2008, the Company had a loss on
hotel operations of $1,161,000 compared to a loss of $555,000 primarily due to
one-time loss related to the termination of the hotel garage lease.  During the
same period, income from investment transactions decreased to $302,000 for the
three months ended December 31, 2008 from $558,000 for the three months ended
December 31, 2007.

The following table sets forth a more detailed presentation of Hotel operations
for the three months ended December 31, 2008 and 2007.

<TABLE>

For the three months ended December 31,                         2008            2007
                                                             ----------      ----------
<S>                                                         <C>            <C>
Hotel revenues:
 Hotel rooms                                                $ 6,612,000    $  7,309,000
 Food and beverage                                            1,268,000       1,659,000
 Garage                                                         571,000         421,000
 Other operating departments                                    193,000         230,000
                                                             ----------      ----------
  Total hotel revenues                                        8,644,000       9,619,000
                                                             ----------      ----------
Operating expenses excluding interest, depreciation
  and amortization                                           (7,277,000)     (8,353,000)
                                                             ----------      ----------
Operating income                                              1,367,000       1,266,000

Loss on termination of garage lease                            (684,000)              -
Interest expense                                               (724,000)       (703,000)
Depreciation and amortization expense                        (1,120,000)     (1,118,000)
                                                             ----------      ----------
Loss from hotel operations                                  $(1,161,000)    $  (555,000)
                                                             ==========      ==========
</TABLE>

For the three months ended December 31, 2008, the Hotel generated operating
income of approximately $1,367,000, before the loss on termination of garage
lease, interest, depreciation and amortization, on operating revenues of
approximately $8,644,000 compared to operating income of approximately
$1,266,000 before interest, depreciation and amortization, on operating
revenues of approximately $9,619,000 for the three months ended December 31,
2007. The increase in Hotel operating income is primarily attributable to lower
operating expenses and an increase in garage revenues partially offset by a
decrease in room and food and beverage revenues.  Management expects that the
termination of the garage lease will result in greater operating income in the
future and promote greater efficiencies with the garage operations now
integrated into those of the Hotel.

Room revenues decreased by $697,000 for the three months ended December 31,
2008 when compared to the three months ended December 31, 2007 and food and
beverage revenues decreased by $391,000 for the same periods. That decrease in
revenues was attributable to both a lower average daily rate and occupancy

                                    -19-
<PAGE>

percentage compared to the prior period.   The decrease in operating expenses
is primarily attributable to the decline in hotel occupancy during the current
quarter and management's efforts to reduce operating costs and to achieve
greater efficiencies.

The following table sets forth the average daily room rate, average occupancy
percentage and room revenue per available room ("RevPar") of the Hotel for the
three months ended December 31, 2008 and 2007.

Three Months Ended         Average           Average
  December 31,            Daily Rate        Occupancy%         RevPar
-----------------         ----------        ---------         --------
      2008                   $166              79%              $132
      2007                   $171              85%              $146

The operations of the Hotel were severely impacted by the dramatic downturn in
the domestic and international economies and markets during the three months
ended December 31, 2008.  Average daily rate, occupancy and RevPar all declined
compared to the three months ended December 31, 2007. That impact is expected
to continue through fiscal 2009. If that remains true, we expect Hotel
operating revenues to be less than fiscal 2008.

Facing an uncertain economy and the prospect of a lingering recession,
management has continued to focus on ways to improve efficiencies and reduce
operating costs and other expenses in its efforts to stabilize and maintain
operating income of the Hotel. As a result of those efforts, we have seen
further reductions in operating costs of the Hotel as a percentage of Hotel
revenues for the three months ended December 31, 2008. Management has also
increased its sales and marketing efforts in what has become an even more
competitive hotel market in San Francisco as hotels have slashed rates in an
effort to maintain occupancy levels.  Management will also continue to explore
new and innovative ways to improve operations and enhance the guest experience.
One significant step was to move lunch and dinner service from the restaurant
to the lounge to create a more intimate, yet lively, atmosphere and to
complement the new wine bar "Flyte" in the lobby of the Hotel.

The Company had a net gain on marketable securities of $336,000 for the three
months ended December 31, 2008 compared to net gain on marketable securities of
$597,000 for the three months ended December 31, 2007. For the three months
ended December 31, 2008, the Company had a net realized loss of $78,000 and a
net unrealized gain of $414,000.  For the three months ended December 31, 2007,
the Company had a net realized gain of $227,000 and a net unrealized gain of
$370,000.  Gains and losses on marketable securities may fluctuate
significantly from period to period in the future and could have a significant
impact on the Company's results of operations.  However, the amount of gain or
loss on marketable securities for any given period may have no predictive value
and variations in amount from period to period may have no analytical value.
For a more detailed description of the composition of the Company's marketable
securities see the Marketable Securities section below.

Margin interest and trading expenses decreased to $52,000 for the three months
ended December 31, 2008 from $66,000 for the three months ended December 31,
2007 primarily as the result of the decrease in margin interest expense related
to the decrease in the use of margin.

                                    -20-
<PAGE>

As discussed in Note 1, during the three months December 31, 2008, the Company
did not record a minority interest benefit of $608,000 related to the loss from
hotel operations.  In the comparable quarter ended December 31, 2007, the
Company recorded a minority interest benefit of $257,000.

The provision for income tax changed to a tax benefit of $170,000 for the three
months ended December 31, 2008 from an tax expense of $41,000 for the three
months end December 31, 2007 primarily as the result of the pre-tax loss
incurred during the three months ended December 31, 2008.  As noted above and
in Note 1, the Company did not record a pre-tax minority interest benefit for
the three months ended December 31, 2008.  As the result the effective tax rate
during the three months ended December 31, 2008 is lower compared to the three
months ended December 31, 2007.


Six Months Ended December 31, 2008 Compared to Six Months
Ended December 31, 2007

The Company had a net loss of $1,191,000 for the six months ended December 31,
2008 compared to net loss of $636,000 for the six months ended December 31,
2007.  As discussed in Note 1, the Company stopped recording a minority
interest benefit in Justice Investors beginning the quarter ended December 31,
2008 resulting in the recording of a additional $608,000 in the net loss.
During the six months ended December 31, 2008, the Company had a loss on hotel
operations of $920,000 compared to a loss of $1,063,000.  During the same
period, the loss from investment transactions increased to $300,000 for the six
months ended December 31, 2008 from $248,000 for the six months ended December
31, 2007.

The following table sets forth a more detailed presentation of Hotel operations
for the six months ended December 31, 2008 and 2007.

<TABLE>

For the six months ended December 31,                           2008            2007
                                                             ----------      ----------
<S>                                                         <C>            <C>
Hotel revenues:
 Hotel rooms                                                $14,200,000    $ 15,224,000
 Food and beverage                                            2,527,000       2,948,000
 Garage                                                         970,000         836,000
 Other operating departments                                    246,000         397,000
                                                             ----------      ----------
  Total hotel revenues                                       17,943,000      19,405,000
                                                             ----------      ----------
Operating expenses excluding interest, depreciation
  and amortization                                          (14,519,000)    (16,862,000)
                                                             ----------      ----------
Operating income                                              3,424,000       2,543,000

Loss on termination of garage lease                            (684,000)              -
Interest expense                                             (1,443,000)     (1,405,000)
Depreciation and amortization expense                        (2,217,000)     (2,201,000)
                                                             ----------      ----------
Loss from hotel operations                                  $  (920,000)    $(1,063,000)
                                                             ==========      ==========
</TABLE>

For the six months ended December 31, 2008, the Hotel generated operating
income of approximately $3,424,000, before the loss on termination of garage
lease, interest, depreciation and amortization, on operating revenues of
approximately $17,943,000 compared to operating income of approximately
$2,543,000 before interest, depreciation and amortization, on operating

                                    -21-
<PAGE>

revenues of approximately $19,405,000 for the six months ended December 31,
2007. The increase in Hotel operating income is primarily due to a significant
decrease in operating expenses of approximately $2,343,000, partially offset by
a decrease in operating revenues of approximately $1,462,000. The decrease in
operating expenses is primarily attributable to certain nonrecurring legal and
consulting fees incurred in the three months ended September 30, 2007 related
to construction litigation that was settled as of June 30, 2008 and for zoning
issues. Operating expenses also decreased due to a decline in hotel occupancy
during the current period and management's efforts to reduce costs and achieve
greater efficiencies. That decline in occupancy was also the primary reason for
the decrease in operating revenues compared to the prior period. Management
expects that the termination of the garage lease will result in greater
operating income in the future and promote greater efficiencies with the garage
operations now integrated into those of the Hotel.

The following table sets forth the average daily room rate, average occupancy
percentage and room revenue per available room ("RevPar") of the Hotel for the
six months ended December 31, 2008 and 2007.

 Six Months Ended          Average           Average
   December 31,           Daily Rate        Occupancy%         RevPar
-----------------         ----------        ---------         --------
      2008                   $177              80%              $142
      2007                   $173              87%              $152

While the Hotel was able to achieve a modest increase of approximately $4 in
its average daily room rates for the six months ended December 31, 2008
compared to the six months ended December 31, 2007, that increase was primarily
attributable to the three months ended September 30, 2008. The full impact of
the dramatic downturn in the domestic and international economies and markets
was not felt by the operations of the Hotel until September 2008 and is
expected to continue at least through fiscal 2009. As a result, average
occupancy percentage declined approximately 7% for the six months ended
December 31, 2008 and RevPar was down approximately $10 from the comparable
period.

Facing the prospect of a recession and a decline in business, group and leisure
travel, both domestic and international, management has continued to focus on
ways to improve efficiencies and reduce operating costs and other expenses in
its efforts to stabilize and maintain operating income of the Hotel. As a
result of those efforts, we have seen further reductions in operating costs of
the Hotel as a percentage of Hotel revenues for the three months ended December
31, 2008. Management will also increase its sales and marketing efforts in what
is expected to become an even more competitive hotel market in San Francisco.
Management will also continue to explore new and innovative ways to improve
operations and enhance the guest experience. One significant step was to move
lunch and dinner service from the restaurant to the lounge to create a more
intimate, yet lively, atmosphere and to complement the new wine bar "Flyte" in
the lobby of the Hotel.

The Company had a net gain on marketable securities of $120,000 for the six
months ended December 31, 2008 compared to net loss on marketable securities of
$75,000 for the six months ended December 31, 2007. For the six months ended
December 31, 2008, the Company had a net realized loss of $361,000 and a net

                                    -22-
<PAGE>

unrealized gain of $481,000.  For the six months ended December 31, 2007, the
Company had a net realized gain of $15,000 and a net unrealized loss of
$90,000.  Gains and losses on marketable securities may fluctuate significantly
from period to period in the future and could have a significant impact on the
Company's results of operations.  However, the amount of gain or loss on
marketable securities for any given period may have no predictive value and
variations in amount from period to period may have no analytical value. For a
more detailed description of the composition of the Company's marketable
securities see the Marketable Securities section below.

The Company may also invest, with the approval of the Securities Investment
Committee, in private investment equity funds and other unlisted securities,
such as convertible notes through private placements. Those investments in non-
marketable securities are carried at cost on the Company's balance sheet as
part of other investments, net of other than temporary impairment losses. As of
December 31, 2008, the Company had net other investments of $2,566,000. During
the six months ended December 31, 2008 and 2007, the Company performed an
impairment analysis of its other investments and determined that its
investments had other than temporary impairments and recorded impairment losses
of $358,000 and $65,000, respectively.

Margin interest and trading expenses decreased to $107,000 for the six months
ended December 31, 2008 from $159,000 for the six months ended December 31,
2007 primarily as the result of the decrease in margin interest expense related
to the decrease in the use of margin.

Minority interest related to Justice Investors changed to an expense of $96,000
for the six months ended December 31, 2008 from a benefit of $535,000 for the
six months ended December 31, 2007.  As discussed in Note 1, during the three
months December 31, 2008, the Company did not record a minority interest
benefit of $608,000 related to the loss from hotel operations.  The $96,000
minority interest expense was recorded during the three months ended September
30, 2008.  During the six months ended December 31, 2007, the Company recorded
a minority interest benefit of $535,000.

During the six months ended December 31, 2008, the provision for income tax
benefit decreased to $397,000 from $437,000 for the six months ended December
31, 2007.  As noted above and in Note 1, the Company did not record a pre-tax
minority interest benefit for the three months ended December 31, 2008.  As the
result the effective tax rate during the six months ended December 31, 2008 is
lower compared to the six months ended December 31, 2007.


MARKETABLE SECURITIES AND OTHER INVESTMENTS

As of December 31, 2008 and June 30, 2008, the Company had investments in
marketable equity securities of $2,809,000 and $2,958,000, respectively.  The
following table shows the composition of the Company's marketable securities
portfolio by selected industry groups as of December 31, 2008 and June 30,
2008.

                                    -23-
<PAGE>

   As of December 31, 2008:
                                                             % of Total
                                                              Investment
   Industry Group                      Fair Value             Securities
   --------------                      ------------           ----------

   Dairy products                       $ 1,166,000               41.5%
   Basic materials and energy               359,000               12.8%
   Consumer Cyclical                        303,000               10.8%
   Industrial                               274,000                9.8%
   Healthcare                               240,000                8.5%
   Financial services and REITs             120,000                4.3%
   Other                                    347,000               12.3%
                                       ------------           ----------
                                       $  2,809,000              100.0%
                                       ============           ==========


   As of June 30, 2008:
                                                             % of Total
                                                              Investment
   Industry Group                      Fair Value             Securities
   --------------                      ------------           ----------
   Diary products                      $    729,000               24.6%
   Communications                           494,000               16.7%
   Financial services                       459,000               15.5%
   Transportation                           285,000                9.6%
   Basic materials                          212,000                7.2%
   Other                                    779,000               26.4%
                                         ----------              ------
                                       $  2,958,000              100.0%
                                         ==========              ======

As of December 31, 2008, the Company's investment portfolio is diversified with
25 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 41.5% of the value of the portfolio. The amount of the
Company's investment in any particular issuer may increase or decrease, and
additions or 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.

The Company may also invest, with the approval of the Securities Investment
Committee, in private investment equity funds and other unlisted securities,
such as convertible notes through private placements. Those investments in non-
marketable securities are carried at cost on the Company's balance sheet as
part of other investments, net of other than temporary impairment losses.

As of December 31, 2008 and June 30, 2008, the Company had net other
investments of $2,566,000 and $2,489,000, respectively.  During the six months
ended December 31, 2008 and 2007, the Company made investments in corporate
debt instruments of a public company in the basic materials sector totaling
$500,000 and $225,000, respectively.

                                    -24-
<PAGE>

During the six months ended December 31, 2008 and 2007, the Company received
common stock issued upon conversion or as payment of interest and penalties on
convertible notes in this company.  During the six months ended December 31,
2008, the Company sold approximately $65,000 and $15,000, respectively, of this
company's stock.  As of December 31, 2008, Portsmouth had $227,000 of this
company's common stock included in its investment in marketable securities
balance of $2,809,000.


LIQUIDITY AND SOURCES OF CAPITAL

The Company's cash flows are primarily generated from its Hotel operations. The
Company also receives revenues generated from the investment of its cash and
marketable securities and other investments. Since the operations of the Hotel
were temporarily suspended 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 marketable securities during that transition period.

The Hotel started to generate cash flows from its operations in June 2006,
which have continued to improve since that time.  For the six months ended
December 31, 2008, Justice paid a total of $850,000 in limited partnership
distributions, of which the Company received $425,000. For the six months ended
December 31, 2007, Justice paid a total of $1,000,000 in limited partnership
distributions, of which the Company received $500,000.  The general partners
expect to conduct regular reviews to set the amount of any future distributions
that may be appropriate based on the results of operations of the Hotel and
other factors, including establishment of reasonable reserves for debt payments
and operating contingencies. The recent dramatic downturn in domestic and
international economies and markets, and the prospect of a prolonged recession,
are expected to have a negative impact on the operating results of the Hotel in
fiscal 2009, which will limit amounts available for limited partnership
distributions.

To meet its substantial financial commitments for the renovation 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
with The Prudential Insurance Company of America in a principal amount of
$30,000,000 (the "Prudential Loan"). The term of the Prudential Loan is for 120
months at a fixed interest rate of 5.22% per annum. The Prudential Loan calls
for monthly installments of principal and interest in the amount of
approximately $165,000, calculated on a 30-year amortization schedule. The
Prudential 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 Prudential Loan is
without recourse to the limited and general partners of Justice. As of December
31, 2008 the Prudential Loan balance was approximately $28,492,000.

On March 27, 2007, Justice entered into a second mortgage loan with Prudential
(the "Second Prudential Loan") in the 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 first Prudential Loan. 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 30-year amortization schedule. The Second Prudential

                                    -25-
<PAGE>

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 Second Prudential
Loan is without recourse to the limited and general partners of Justice. As of
December 31, 2008, the Second Prudential Loan balance was approximately
$18,632,000.

On December 12, 2008, Justice obtained a modification and extension of it
unsecured revolving line of credit facility from United California Bank ("UCB")
which was to mature on February 2, 2009. The modification extends the term of
the credit facility to February 2, 2010, but reduced the limit of funds
available to the Partnership for short term capital for the Hotel's business
operations from $3,000,000 to $2,500,000. The annual interest rate is based on
an index selected by Justice at the time of advance, equal to the Wall Street
Journal Prime Rate plus 1.0%, or the LIBOR Rate plus 3.5%, with an interest
rate floor of 5% per annum.  As of December 31, 2008, there was a balance of
$1,756,000 drawn by Justice under the line of credit facility, with an annual
interest rate of 5% since the selected rate of Prime (3.25% as of December 31,
2008) plus 1% was less than the floor rate.

While the debt service requirements related to the two Prudential loans, as
well as the 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 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 consolidated statements of operations.

Management believes that its cash, marketable securities, 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 and its
revolving line of credit facility with UCB.


OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off balance sheet arrangements.

                                    -26-
<PAGE>

IMPACT OF INFLATION

Hotel room rates are typically impacted by supply and demand factors, not
inflation, since rental of a hotel room is usually for a limited number of
nights.  Room rates can be, and usually are, adjusted to account for
inflationary cost increases.  Since Prism has the power and ability under the
terms of its management agreement to adjust hotel room rates on an ongoing
basis, there should be minimal impact on partnership revenues due to inflation.
Partnership revenues are also subject to interest rate risks, which may be
influenced by inflation.  For the two most recent fiscal years, the impact of
inflation on the Company's income is not viewed by management as material.


CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are most significant to the
portrayal of our financial position and results of operations and require
judgments by management in order to make estimates about the effect of matters
that are inherently uncertain. The preparation of these condensed financial
statements requires us to make estimates and judgments that affect the reported
amounts in our consolidated financial statements. We evaluate our estimates on
an on-going basis, including those related to the consolidation of our
subsidiaries, to our revenues, allowances for bad debts, accruals, asset
impairments, other investments, income taxes and commitments and contingencies.
We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities. The actual results may differ from these estimates or our
estimates may be affected by different assumptions or conditions.


Item 4T. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company's management, with the participation of the Company's Chief
Executive Officer and 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
quarterly period covered by this Quarterly Report on Form 10-Q.  Based upon
such evaluation, the Chief Executive Officer and Principal Financial Officer
have concluded that, as of the end of such period, the Company's disclosure
controls and procedures are effective in ensuring that information required to
be disclosed in this filing is accumulated and communicated to management and
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms.

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-Q that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

                                    -27-
<PAGE>

                               PART II.
                           OTHER INFORMATION


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) Not Applicable.

(c) Purchases of Equity Securities

Portsmouth did not repurchase any of its own securities during the second
quarter ended December 31, 2008 and does not have any publicly announced
repurchase program. The following table reflects purchases of Portsmouth's
common stock made by The InterGroup Corporation, for its own account, during
the second quarter of fiscal 2009. InterGroup can be considered an affiliated
purchaser.

<TABLE>

              SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

                                            (c)Total Number         (d)Maximum Number
             (a)Total         (b)           of Shares Purchased     of Shares that May
Fiscal       Number of      Average         as Part of Publicly     Yet Be Purchased
 2009         Shares        Price Paid       Announced Plans         Under the Plans
Period       Purchased      Per Share         or Programs             or Programs
--------------------------------------------------------------------------------------
<S>             <C>          <C>                    <C>                  <C>
Month #1
(October 1-     200          $32.75                 -                    N/A
October 31)
--------------------------------------------------------------------------------------
Month #2
(November 1-      -               -                 -                    N/A
November 30)
--------------------------------------------------------------------------------------
Month #3
(December 1-      -               -                 -                    N/A
December 31)
--------------------------------------------------------------------------------------
Total           200          $32.75                 -                    N/A
--------------------------------------------------------------------------------------
</TABLE>


Item 6.  Exhibits.

    10.1   2008 Amendment to the Limited Partnership Agreement, dated
            December 1, 2008.

    10.2   General Partner Compensation Agreement, dated December 1, 2008.

    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).

                                    -28-
<PAGE>

    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.


                                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 12, 2009                   by /s/ John V. Winfield
                                              ---------------------------
                                              John V. Winfield, President,
                                              Chairman of the Board and
                                              Chief Executive Officer


Date:  February 12, 2009                   by /s/ Michael G. Zybala
                                              ---------------------------
                                              Michael G. Zybala,
                                              Vice President and Secretary


Date:  February 12, 2009                   by /s/ David Nguyen
                                              --------------------------
                                              David Nguyen, Treasurer
                                             (Principal Financial Officer)

                                    -29-