UNITED STATES
                    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 December 31, 2005

                         OR

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

    For the transition period from _______ to ________


    Commission File Number 0-4057

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

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


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

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

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

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

State the number of shares outstanding of each of the issuer's classes of
Common equity, as of the latest practicable date: 734,183 shares of issuer's No
Par Value Common Stock were outstanding as of February 8, 2006.

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

<PAGE>


                                     INDEX

                             PORTSMOUTH SQUARE, INC.


PART I. FINANCIAL INFORMATION                                         PAGE
                                                                      ----
Item 1. Financial Statements

 Balance Sheet - December 31, 2005 (Unaudited)                          3

 Statements of Operations (Unaudited)- Three Months ended               4
    December 31, 2005 and December 31, 2004

 Statements of Operations (Unaudited)- Six Months ended                 5
    December 31, 2005 and December 31, 2004

 Statements of Cash Flows (Unaudited)- Six Months ended
    December 31, 2005 and December 31, 2004                             6

  Notes to Financial Statements                                         7

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                            13

Item 3. Controls and Procedures                                        21


PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K                               21

SIGNATURES                                                             22


                                    -2-
<PAGE>



                         PART 1 - FINANCIAL INFORMATION

Item 1 - Financial Statements

                             PORTSMOUTH SQUARE, INC.
                                 BALANCE SHEET
                                  (Unaudited)

As of December 31,                                           2005
                                                          ----------
Assets

  Cash and cash equivalents                             $     71,000
  Investment in marketable securities                     11,505,000
  Other investments                                        1,050,000
  Other assets                                               835,000
                                                          ----------
Total assets                                            $ 13,461,000
                                                          ==========

Liabilities and Shareholders' Equity

Liabilities
  Due to securities broker                                 4,889,000
  Obligations for securities sold                          1,652,000
  Accounts payable and other liabilities                     154,000
  Deferred income taxes                                      446,000
  Equity investment in Justice Investors                     271,000
                                                          ----------
Total liabilities                                          7,412,000
                                                          ----------
Commitments and contingencies

Shareholders' equity:
  Common stock, no par value:
    Authorized shares - 750,000
    Issued and outstanding shares - 734,183                2,092,000
  Additional paid-in capital                                 916,000
  Retained earnings                                        3,041,000
                                                          ----------

Total shareholders' equity                                 6,049,000
                                                          ----------

Total liabilities and shareholders' equity              $ 13,461,000
                                                          ==========


See accompanying notes to financial statements.


                                    -3-
<PAGE>


                            PORTSMOUTH SQUARE, INC.
                           STATEMENTS OF OPERATIONS
                                  (Unaudited)

For the three months December 31,                    2005           2004
                                                  ----------     ----------
  Equity in net income loss of Justice
   Investors                                     $(1,009,000)    $ (313,000)

  General and administrative expenses               (127,000)      (115,000)
                                                  ----------     ----------
                                                  (1,136,000)      (428,000)
Non-operating income (expenses):
  Net gains on marketable securities                 422,000      1,883,000
  Impairment loss on other investments                (8,000)       (42,000)
  Dividend and interest income                        26,000         67,000
  Margin interest and trading expenses               (85,000)       (68,000)
  Other income, net                                   13,000          8,000
                                                  ----------     ----------
                                                     368,000      1,848,000
                                                  ----------     ----------
Income(loss) before income taxes                    (768,000)     1,420,000

Provision for income tax benefit(expense)            298,000       (568,000)
                                                  ----------     ----------
Net income(loss)                                $   (470,000)   $   852,000
                                                  ==========     ==========

Basic income(loss) per share                    $      (0.64)   $      1.16
                                                  ==========     ==========

Weighted average number of
  shares outstanding                                 734,183        734,183
                                                  ==========     ==========


See accompanying notes to financial statements.


                                    -4-
<PAGE>


                            PORTSMOUTH SQUARE, INC.
                           STATEMENTS OF OPERATIONS
                                  (Unaudited)

For the six months December 31,                       2005           2004
                                                  ----------     ----------
  Equity in net loss of Justice Investors        $(1,733,000)    $ (176,000)

  General and administrative expenses               (237,000)      (240,000)
                                                  ----------     ----------
                                                  (1,970,000)      (416,000)
Non-operating income (expenses):
  Net losses on marketable securities                224,000        191,000
  Impairment loss on other investments                (8,000)       (42,000)
  Dividend and interest income                       122,000        136,000
  Margin interest and trading expenses              (168,000)      (125,000)
  Other income, net                                   26,000         94,000
                                                  ----------     ----------
                                                     196,000        254,000
                                                  ----------     ----------
Loss before income taxes                          (1,774,000)      (162,000)

Provision for income tax benefit                     693,000         65,000
                                                  ----------     ----------
Net loss                                        $ (1,081,000)   $   (97,000)
                                                  ==========     ==========

Basic loss per share                            $      (1.47)   $     (0.13)
                                                  ==========     ==========

Weighted average number of
  shares outstanding                                 734,183        734,183
                                                  ==========     ==========


See accompanying notes to financial statements.


                                    -5-
<PAGE>


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

For the six months ended December 31,                2005           2004
                                                  ----------     ----------
Cash flows from operating activities:
  Net loss                                       $(1,081,000) $     (97,000)
  Adjustments to reconcile net loss
   to net cash provided by operating activities:
    Equity in net loss of Justice Investors        1,733,000        176,000
    Net unrealized gains on marketable
     securities                                     (531,000)      (787,000)
    Impairment loss on other investments               8,000         42,000
    Changes in assets and liabilities:
      Investment in marketable securities         (3,142,000)      (280,000)
      Deferred income taxes and other assets        (277,000)        80,000
      Accounts payable and other liabilities          85,000       (143,000)
      Due to securities broker                     2,839,000       (900,000)
      Obligations for securities sold                417,000      1,986,000
                                                  ----------     ----------
  Net cash provided by operating activities           51,000         77,000
                                                  ----------     ----------
Cash flows from investing activities:
  Cash distributions from Justice Investors                -              -
                                                  ----------     ----------
  Net cash provided by investing activities                -              -
                                                  ----------     ----------

Cash flows from financing activities:
  Dividends paid                                           -              -
                                                  ----------     ----------
  Net cash provided from financing activities              -              -
                                                  ----------     ----------
Net increase in cash and cash equivalents             51,000         77,000

Cash and cash equivalents at the beginning
  of the period                                       20,000        112,000
                                                  ----------     ----------
Cash and cash equivalents at the end of the
 period                                          $    71,000    $   189,000
                                                  ==========     ==========


See accompanying notes to financial statements.


                                    -6-
<PAGE>

                      PORTSMOUTH SQUARE, INC.

                   NOTES TO FINANCIAL STATEMENTS

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

The 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 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 for a fair statement of the financial
position, cash flow and results of operations as of and for the periods
indicated.

Portsmouth is a 68.8%-owned subsidiary of Santa Fe Financial Corporation
("Santa Fe"), which is also a public company.  Santa Fe is an approximately
74%-owned subsidiary of the InterGroup Corporation ("InterGroup"), a public
company.

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, 2005.

The results of operations for the three and six months ended December 31, 2005
are not necessarily indicative of results to be expected for the full fiscal
year ending June 30, 2006.


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

The Company has a 49.8% interest in Justice Investors, a California limited
partnership ("Justice" or the "Partnership") in which Portsmouth serves as both
a general and limited partner. The other general partner, Evon Corporation
("Evon"), serves as the managing general partner of Justice.  Justice owns the
land, improvements and leaseholds now known as the Hilton San Francisco
Financial District, a 549-room hotel in San Francisco, California (the
"Hotel").  The Company's investment in Justice is recorded on the equity basis.
Due to continuing losses incurred by the Partnership during the renovation and
repositioning of the Hotel discussed below, the Company's equity in its
investment in Justice is currently carried as a liability on the Balance Sheet
as of December 31, 2005.

As a general and limited partner, Portsmouth has significant control over the
management and operation of the assets of Justice.  All significant partnership
decisions require the active participation and approval of both general
partners.  The Company and Evon jointly consult and determine the amount of
partnership reserves and the amount of cash to be distributed to the limited
partners.

                                    -7-
<PAGE>

Pursuant to the terms of the partnership agreement, voting rights of the
partners are determined according to the partners' entitlement to share in the
net profit and loss of the partnership.  The Company is not entitled to any
additional voting rights by virtue of its position as a general partner.

The partnership agreement also provides that no portion of the partnership real
property can be sold without the written consent of the general and limited
partners entitled to more than 72% of the net profit.

Historically, Justice's most significant income source was a lease between the
Partnership and Felcor Lodging Trust, Inc. ("Felcor") for the Hotel portion of
the property.  Pursuant to a Settlement Agreement entered into on May 3, 2004,
Felcor agreed to terminate its lease and surrender possession of the Hotel to
Justice, on June 30, 2004.  Effective July 1, 2004, Justice became the owner-
operator of the Hotel, with the assistance of a Management Agreement with Dow
Hotel Company, LLC. ("Dow") to perform the day-to day management functions of
the Hotel. The Partnership also derives income from the lease of the garage
portion of the property to Evon and from a lease on the lobby level of the
Hotel to Tru Spa.  The Company also derives revenue from management fees from
Justice for actively managing the hotel as a general partner.

On December 10, 2004, Justice entered into a Franchise License Agreement for
the right to operate the Hotel property as a Hilton brand hotel. Prior to
operating the hotel as a Hilton, the Partnership was required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards.  The Agreement requires that
those renovations be complete and the Hotel commence operations as a Hilton
hotel no later than June 1, 2006. The term of the Agreement is for a period of
15 years commencing on the opening date, with an option to extend the license
term for another five years, subject to certain conditions.

The Partnership currently estimates that the total cost of the renovation
project will be approximately $41 million.  That amount includes approximately
$35 million for the actual cost of the renovations and approximately $6 million
for construction interest and estimated carrying costs of operations during the
renovation period and for the first couple of months of operations after the
hotel opens.  As of December 31, 2005, the Partnership has incurred
approximately $31,578,000 in construction costs related to the renovation. Of
that amount, approximately $636,000 is related to capitalized interest.
Additionally, for the six months ended December 31, 2005, the Partnership had
an operating loss of approximately $3,491,000.

On March 15, 2005, the Partnership announced its decision to close down its
Hotel operations on or about June 1, 2005 to complete renovations of the Hotel
as required by the Hilton Agreement.  The below ground parking garage and Tru
Spa located on the lobby level of the Hotel, both of which are lessees of the
Partnership, remained open during the renovation work. The Hotel renovation
work was substantially completed on January 12, 2006 at which time the
Partnership obtained approval from Hilton to open the Hotel as the "Hilton San
Francisco Financial District". The Hotel opened with a limited number of rooms
available to rent, which number has increased as the Hotel transitions into
full operations and all of the guest rooms, suites and amenities are completed.
It is expected that project will be totally finished in February 2006.

                                    -8-
<PAGE>

Condensed financial statements for Justice Investors are as follows:


                            JUSTICE INVESTORS
                         CONDENSED BALANCE SHEET
                              (Unaudited)

As of December 31,                                             2005
                                                            ----------
Assets
Cash                                                      $  7,474,000
Other assets                                                 2,518,000
Property, plant and equipment, net of
  accumulated depreciation of $13,494,000                    3,981,000
Construction in progress                                    31,578,000
Land                                                         1,124,000
                                                            ----------
    Total assets                                          $ 46,675,000
                                                            ==========

Liabilities and partners' capital
Total current liabilities                                 $  9,473,000
Long-term debt                                              36,779,000
Partners' capital                                              423,000
                                                            ----------
    Total liabilities and partners' capital               $ 46,675,000
                                                            ==========


                                JUSTICE INVESTORS
                        CONDENSED STATEMENTS OF OPERATIONS

For the three months ended December 31,       2005            2004
                                            ----------      ----------
Hotel revenue                            $           -     $ 3,452,000
Hotel rent                                           -               -
Garage rent                                    168,000         244,000
Other income(loss)                            (488,000)         69,000
Operating expenses                          (1,711,000)     (4,406,000)
                                            ----------      ----------
Net loss                                  $ (2,031,000)    $  (641,000)
                                            ==========      ==========


                                 JUSTICE INVESTORS
                        CONDENSED STATEMENTS OF OPERATIONS

For the six months ended December 31,          2005            2004
                                            ----------      ----------
Hotel revenue                            $           -     $ 7,806,000
Hotel rent                                           -               -
Garage rent                                    325,000         549,000
Other income(loss)                            (465,000)        129,000
Operating expenses                          (3,351,000)     (8,849,000)
                                            ----------      ----------
Net loss                                  $ (3,491,000)    $  (365,000)
                                            ==========      ==========

                                      -9-
<PAGE>

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

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

At December 31, 2005, all of the Company's marketable securities are classified
as trading securities.  In accordance with SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," the change in the
unrealized gains and losses on these investments are included in earnings.
Trading securities are summarized as follows:

<TABLE>

As of December 31, 2005:

                              Gross            Gross             Net            Market
Investment     Cost       Unrealized Gain  Unrealized Loss  Unrealized Gain     Value
----------  -----------   ---------------  ---------------  ---------------  ------------
<S>         <C>             <C>             <C>               <C>            <C>
Corporate
Equities    $9,946,000      $2,051,000      ($  492,000)      $1,559,000     $ 11,505,000

</TABLE>

As of December 31, 2005, the Company did not have any unrealized losses related
to securities held for over one year.

As part of the investment strategies, the Company may assume short positions
against its long positions in marketable securities.  Short sales are used by
the Company to potentially offset normal market risks undertaken in the course
of its investing activities and/or to provide additional return opportunities.
The Company has no naked short positions.  As of December 31, 2005, the Company
had obligations for securities sold (equities short) of $1,652,000.

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

Net gains on marketable securities on the statement of operations are comprised
of realized and unrealized gains.  Below is the composition of the two
components for the three and six months ended December 31, 2005 and 2004,
respectively.

For the three months ended December 31,               2005             2004
                                                  -----------      -----------
Realized loss on marketable securities            $  (312,000)     $  (249,000)
Unrealized gain on marketable securities              734,000        2,132,000
                                                  -----------      -----------
Net gains on marketable securities                    422,000      $ 1,883,000
                                                  ===========      ===========

For the six months ended December 31,                 2005             2004
                                                  -----------      -----------
Realized loss on marketable securities            $  (306,000)     $  (596,000)
Unrealized gain on marketable securities              530,000          787,000
                                                  -----------      -----------
Net gains on marketable securities                    224,000      $   191,000
                                                  ===========      ===========

                                    -10-
<PAGE>

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

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

Information below represents reporting segments for the three and six months
ended December 31, 2005 and 2004.  Operating income from Justice Investors
consists of the operations of the hotel and garage, which are included in the
equity in net income(loss) of Justice Investors.  Operating income (loss) for
investment transactions consist of net investment gains (losses) and dividend
and interest income.

<TABLE>

Three months ended            Justice    Investment
December 31, 2005            Investors  Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>          <C>
Operating income(loss)      $(1,009,000)  $   440,000             -  $    (569,000)
Operating expenses                    -       (85,000)            -        (85,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)   (1,009,000)      355,000             -       (654,000)

General and admin. exp.               -             -      (127,000)      (127,000)
Other income                          -             -        13,000         13,000
Income tax benefit                    -             -       298,000        298,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $(1,009,000)  $   355,000   $   184,000  $    (470,000)
                            ===========   ===========   ===========   ============
Total Assets                $         -   $12,555,000   $   906,000   $ 13,461,000
                            ===========   ===========   ===========   ============
</TABLE>
<TABLE>

Three months ended            Justice     Investment
December 31, 2004            Investors   Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>          <C>
Operating income(loss)      $  (313,000)  $ 1,950,000             -  $   1,637,000
Operating expenses                    -      (110,000)            -       (110,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)     (313,000)    1,840,000             -      1,527,000

General and admin. exp.               -             -      (115,000)      (115,000)
Other income                          -             -         8,000          8,000
Income tax expense                    -             -      (568,000)      (568,000)
                            -----------   -----------   -----------   ------------
Net income (loss)           $  (313,000)  $ 1,840,000   $  (675,000) $     852,000
                            ===========   ===========   ===========   ============
Total Assets                $ 3,377,000   $20,477,000   $   307,000   $ 24,161,000
                            ===========   ===========   ===========   ============
</TABLE>
                                    -11-
<PAGE>

<TABLE>
Six months ended              Justice    Investment
December 31, 2005            Investors  Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>          <C>
Operating income(loss)      $(1,733,000)  $   338,000             -  $  (1,395,000)
Operating expenses                    -      (168,000)            -       (168,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)   (1,733,000)      170,000             -     (1,563,000)

General and admin. exp.               -             -      (237,000)      (237,000)
Other income                          -             -        26,000         26,000
Income tax benefit                    -             -       693,000        693,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $(1,733,000)  $   170,000   $   482,000  $  (1,081,000)
                            ===========   ===========   ===========   ============
Total Assets                $         -   $12,555,000   $   906,000   $ 13,461,000
                            ===========   ===========   ===========   ============
</TABLE>
<TABLE>

Six months ended              Justice     Investment
December 31, 2004            Investors   Transactions      Other          Total
                            -----------  ------------   -----------   ------------
<S>                         <C>           <C>           <C>          <C>
Operating income(loss)      $  (176,000)  $   327,000             -  $     151,000
Operating expenses                    -      (167,000)            -       (167,000)
                            -----------   -----------   -----------   ------------
Net operating income(loss)     (176,000)      160,000             -        (16,000)

General and admin. exp.               -             -      (240,000)      (240,000)
Other income                          -             -        94,000         94,000
Income tax benefit                    -             -        65,000         65,000
                            -----------   -----------   -----------   ------------
Net income (loss)           $  (176,000)  $   160,000   $   (81,000)  $    (97,000)
                            ===========   ===========   ===========   ============
 Total Assets               $ 3,377,000   $20,477,000   $   307,000   $ 24,161,000
                            ===========   ===========   ===========   ============
</TABLE>


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

Certain shared costs and expenses, primarily administrative salaries, rent and
insurance are allocated among the Company, the Company's parent, Santa Fe
Financial Corporation ("Santa Fe"), and The InterGroup Corporation
("InterGroup"), parent of Santa Fe, based on management's estimate of the pro
rata utilization of resources.  For the three months ended December 31, 2005
and 2004, these expenses were approximately $20,000 and $21,000, respectively.
For the six months ended December 31, 2005 and 2004, these expenses were
approximately $40,000 and $42,000, respectively. Four of the Company's
Directors serve as directors of InterGroup and three of the Company's Directors
serve on the Board of Santa Fe.

John V. Winfield serves as Chief Executive Officer and Chairman of the Company,
Santa Fe, and InterGroup.  Depending on certain market conditions and various
risk factors, the Chief Executive Officer, his family, Santa Fe and InterGroup
may, at times, invest in the same companies in which the Company invests.  The
Company encourages such investments because it places personal resources of the
Chief Executive Officer and his family members, and the resources of Santa Fe
and InterGroup, at risk in connection with investment decisions made on behalf
of the Company.

                                    -12-
<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 "estimate," "project," "anticipate" and similar expressions, are intended
to identify forward-looking statements.  Such statements are subject to certain
risks and uncertainties, such as the impact of terrorism and war on the
national and international economies, including tourism and securities markets,
general economic conditions and increased competition in the hotel industry in
the San Francisco area, labor relations and labor disruptions, partnership
distributions, the ability of the Partnership to obtain hotel financing for
renovations at favorable interest rates and terms, securities markets and
concentration of risk, litigation and other factors, including natural
disasters, and those discussed below in this section and in the Company's Form
10-KSB for the fiscal year ended June 30, 2005, that could cause actual results
to differ materially from those projected.  Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as to the
date hereof.  The Company undertakes no obligation to publicly release the
results of any revisions to those forward-looking statements, which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.


RESULTS OF OPERATIONS

The Company has a 49.8% ownership interest in the Justice Investors limited
partnership ("Justice" or the "Partnership"), in which Portsmouth serves as one
of the general partners. Justice owns the land, improvements and leaseholds at
750 Kearny Street, San Francisco, California, formerly known as the Holiday Inn
Select Downtown & Spa (the "Hotel"). Historically, Justice's most significant
income source was derived from a lease between the Partnership and Felcor
Lodging Trust, Inc. ("Felcor") for the Hotel portion of the property.  Pursuant
to a Settlement Agreement entered into on May 3, 2004, Felcor agreed to
terminate its lease and surrender possession of the Hotel to Justice, effective
June 30, 2004. Effective July 1, 2004, Justice became the owner-operator of the
Hotel, with the assistance of a Management Agreement with Dow Hotel Company,
LLC. ("Dow") to perform the day-to-day management functions of the Hotel. The
Partnership also derives income from the lease of the garage portion of the
property to Evon Corporation ("Evon") and from a lease with Tru Spa for a
portion of the lobby level of the Hotel.  The Company also receives management
fees from Justice for actively managing the hotel as a general partner.

On December 10, 2004, Justice entered into a Franchise License Agreement for
the right to operate the Hotel property as a Hilton brand hotel. Prior to
operating the hotel as a Hilton, the Partnership was required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards.  The Agreement requires that
those renovations be complete and the Hotel commence operations as a Hilton
                                    -13-
<PAGE>

hotel no later than June 1, 2006. The term of the Agreement is for a period of
15 years commencing on the opening date, with an option to extend the license
term for another five years, subject to certain conditions.

The Partnership currently estimates that the total cost of the renovation
project will be approximately $41 million.  That amount includes approximately
$35 million for the actual cost of the renovations and approximately $6 million
for construction interest and estimated carrying costs of operations during the
renovation period and for the first couple of months of operations after the
hotel opens.  As of December 31, 2005, the Partnership has incurred
approximately $31,578,000 in construction costs related to the renovation. Of
that amount, approximately $636,000 is related to capitalized interest.
Additionally, for the six months ended December 31, 2005, the Partnership had
an operating of loss of approximately $3,491,000.

On March 15, 2005, the Partnership announced its decision to close down its
Hotel operations on or about June 1, 2005 to complete renovations of the Hotel
as required by the Hilton Agreement.  The below ground parking garage and Tru
Spa located on the lobby level of the Hotel, both of which are lessees of the
Partnership, remained open during the renovation work.


RECENT DEVELOPMENTS

As of January 12, 2006 the Hotel renovation work was substantially completed,
at which time the Partnership obtained approval from Hilton to open the Hotel
as the "Hilton San Francisco Financial District". The Hotel opened with a
limited number of rooms available to rent, which number has increased as the
Hotel transitions into full operations and all of the guest rooms, suites and
amenities are completed. It is expected that project will be totally finished
in February 2006.

The newly opened Hilton hotel will have 549 well appointed guestrooms and
luxury suites with bay or city views, featuring large working desks, ergonomic
chairs, wired and wireless high-speed Internet access, and "The Suite Dreams"
beds by Hilton, complete with duvet, down comforter and jumbo size pillows. The
newly redesigned meeting rooms and ballroom will accommodate meetings and
events for up to 500 people with video conferencing and premium audio/visual
equipment. A new business center and fitness center are additional amenities.
The new Hilton hotel also has the only hotel day spa (Tru Spa) in the Financial
District. A redesigned entryway is integrated into the lobby and management
expects the new restaurant "Seven Fifty" and lounge, with a dramatic fireplace
treatment, will bring a new level of excitement and service to the guests of
the hotel. Management believes that the new Hilton hotel will now be able to
directly compete with all hotels in the Financial District.

On January 20, 2006, the Partnership obtained a $4,500,000 increase in its
existing line of credit capacity with United Commercial Bank, raising the total
amount available to the Partnership pursuant to that line of credit to
$14,500,000. The increase in the credit line is on the same terms as the
existing line of credit with additional loan and documentation fees of $4,000.

                                    -14-
<PAGE>



Three Months Ended December 31, 2005 Compared to Three Months
Ended December 31, 2004

The Company had a net loss of $470,000 for the three months ended December 31,
2005 compared to net income of $852,000 for the three months ended December 31,
2004.  As discussed below, the change was primarily due to the significantly
higher loss related to the Company's equity investment in Justice Investors and
the significantly lower net gains generated from the Company's marketable
securities portfolio.

The loss from the Company's equity investment in Justice Investors increased to
$1,009,000 for the three months ended December 31, 2005 from $313,000 for the
three months ended December 31, 2004. Effective, May 31, 2005, the Partnership
elected to close down its Hotel operations to complete the renovations of the
Hotel as required by the Hilton Franchise Agreement. Thus, the Partnership net
loss for the three months ended December 31, 2005 did not include any operating
results from the Hotel, while the three months ended December 31, 2004 included
the direct operating results of the Hotel. The net operating loss from the
Hotel for the three months ended December 31, 2004, was approximately $490,000.
The overall increase in Partnership's net loss was attributable to a decrease
in garage rent to approximately $168,000 from approximately $244,000 related to
the closing of the Hotel, and increased costs in the current quarter related to
higher interest expenses, property taxes, insurance costs, professional fees,
security personnel and other costs for the repositioning of the Hotel,
including additional costs to meet governmental code and permitting
requirements.

Management believed that the hotel could not continue to be competitive under
the conditions it operated as a Holiday Inn Select brand hotel. Average daily
room rates for the hotel had decreased to approximately $90 in fiscal 2005 from
approximately $92 in fiscal 2004, while average monthly occupancy rates had
decreased to approximately 65% in fiscal 2005 from approximately 71% in fiscal
2004.  While the hotel had traditionally enjoyed a favorable year-round
occupancy rate, both occupancy and average daily room rates have suffered since
fiscal year ended June 30, 2001 and the hotel has lagged far behind its
competitors. Newer and more upscale properties opened in or near the Financial
District, which provided greater amenities to their guests, making it difficult
for the Partnership's hotel to compete.  Those competitors were much better
positioned to attract both the business traveler and tourists and to achieve
higher occupancy and room rates. The Partnership believes that the major
renovations to the Hotel, coupled with the strength of the Hilton brand and
reservation system, along with the hotel management expertise of Dow, will
allow the Hotel to directly compete with all hotels in the Financial District.

Net gains on marketable securities decreased to $422,000 for the three months
ended December 31, 2005 from $1,883,000 for the three months ended December 31,
2004.  For the three months ended December 31, 2005, the Company had net
unrealized gains of $734,000 and net realized losses of $312,000.  For the
three months ended December 31, 2004, the Company had net unrealized gains of
$2,132,000 and net realized losses of $249,000.  Gains and losses on marketable
securities may fluctuate significantly from period to period in the future and
could have a significant impact on the Company's net income.  However, the
amount of gain or loss on marketable securities for any given period may have
no predictive value and variations in amount from period to period may have no
analytical value. For a more detailed description of the composition of the
Company's marketable securities please see the Marketable Securities section
below.

                                    -15-
<PAGE>

Dividend and interest income decreased to $26,000 from $67,000 as a result of
the decreased investment in dividend yielding securities.

The provision for income tax benefit (expense) changed to a tax benefit of
$298,000 for the three months ended December 31, 2005 from a tax expense of
$568,000 for the three months ended December 31, 2004 as the result of the loss
incurred in the current quarter compared to income generated in the comparable
quarter.

Six Months Ended December 31, 2005 Compared to Six Months
Ended December 31, 2004

The Company had a net loss of $1,081,000 for the six months ended December 31,
2005 compared to a net loss of $97,000 for the six months ended December 31,
2004.  As discussed below, the increase in the net loss was primarily due the
the significantly higher loss related to the Company's equity investment in
Justice Investors.

The loss from the Company's equity investment in Justice Investors increased to
$1,733,000 for the six months ended December 31, 2005 from $176,000 for the six
months ended December 31, 2004. Effective, May 31, 2005, the Partnership
elected to close down its Hotel operations to complete the renovations of the
Hotel as required by the Hilton Franchise Agreement. Thus, the Partnership net
loss for the six months ended December 31, 2005 did not include any operating
results from the Hotel, while the six months ended December 31, 2004 included
the direct operating results of the Hotel. The net operating loss from the
Hotel for the six months ended December 31, 2004, was approximately $185,000.
The overall increase in Partnership's net loss was attributable to a decrease
in garage rent to approximately $325,000 from approximately $549,000 related to
the closing of the Hotel, and increased costs in the current quarter related to
higher interest expenses, property taxes, insurance costs, professional fees,
security personnel and other costs for the repositioning of the Hotel,
including additional costs to meet governmental code and permitting
requirements.

Management believed that the hotel could not continue to be competitive under
the conditions it operated as a Holiday Inn Select brand hotel. Average daily
room rates for the hotel had decreased to approximately $90 in fiscal 2005 from
approximately $92 in fiscal 2004, while average monthly occupancy rates had
decreased to approximately 65% in fiscal 2005 from approximately 71% in fiscal
2004.  While the hotel had traditionally enjoyed a favorable year-round
occupancy rate, both occupancy and average daily room rates have suffered since
fiscal year ended June 30, 2001 and the hotel has lagged far behind its
competitors. Newer and more upscale properties opened in or near the Financial
District, which provided greater amenities to their guests, making it difficult
for the Partnership's hotel to compete.  Those competitors were much better
positioned to attract both the business traveler and tourists and to achieve
higher occupancy and room rates. The Partnership believes that the major
renovations to the Hotel, coupled with the strength of the Hilton brand and
reservation system, along with the hotel management expertise of Dow, will
allow the Hotel to directly compete with all hotels in the Financial District.

Net gains on marketable securities increased to $224,000 for the six months
ended December 31, 2005 from $191,000 for the six months ended December 31,
2004.  For the six months ended December 31, 2005, the Company had net
unrealized gains of $530,000 and net realized losses of $306,000.  For the six
months ended December 31, 2004, the Company had net unrealized gains of

                                    -16-
<PAGE>

$787,000 and net realized losses of $596,000.  Gains and losses on marketable
securities may fluctuate significantly from period to period in the future and
could have a significant impact on the Company's net income.  However, the
amount of gain or loss on marketable securities for any given period may have
no predictive value and variations in amount from period to period may have no
analytical value. For a more detailed description of the composition of the
Company's marketable securities please see the Marketable Securities section
below.

Margin interest and trading expenses increased to $168,000 from $125,000
primarily due to the increase in administrative, staff and trading research
related expenses.  Margin interest expense was consistent with the prior
comparable quarter.

Other income decreased to $26,000 from $94,000 due to the receipt of $69,000 in
additional fees from Justice Investors for management's work in the positioning
of the hotel during the six months ended December 31, 2004.

The provision for income tax benefit increased to $693,000 for the six months
ended December 31, 2005 from $65,000 for the six months ended December 31, 2004
due to the higher pre-tax loss incurred during the six months ended December
31, 2005 as compared to the pre-tax loss incurred during the six months ended
December 31, 2004.


MARKETABLE SECURITIES

As of December 31, 2005, the Company had investments in marketable equity
securities of $11,505,000.  The following table shows the composition of the
Company's marketable securities portfolio by selected industry groups as of
December 31, 2005.

                                                              % of Total
                                                              Investment
   Industry Group                      Market Value           Securities
   --------------                      ------------           ----------
   Telecommunications and media        $ 2,120,000               18.4%
   Internet and technology               1,764,000               15.3%
   Insurance, banks and brokers          1,295,000               11.3%
   Real estate invest trusts(REITs)      1,227,000               10.7%
   Gold, paper mills and chemicals       1,128,000                9.8%
   Services                              1,088,000                9.5%
   Consumer goods                          750,000                6.5%
   Automobiles and motor vehicle parts     715,000                6.2%
   Pharmaceuticals and healthcare          655,000                5.7%
   Other                                   763,000                6.6%
                                       ------------           ----------
                                       $11,505,000              100.0%
                                       ============           ==========

The Company's investment portfolio is diversified with 56 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 9.8% of the value of the portfolio.  The amount of the Company's
investment in any particular issuer may increase or decrease, and additions or

                                    -17-
<PAGE>

deletions to its securities portfolio may occur, at any time.  While it is the
internal policy of the Company to limit its initial investment in any single
equity to less than 5% of its total portfolio value, that investment could
eventually exceed 5% as a result of equity appreciation or reduction of other
positions.  As of December 31, 2005, the Company had approximately 18.4% of its
marketable securities portfolio invested in the telecommunications and media
industry group.  While such concentration could be considered a risk factor,
that industry grouping includes telecom and media companies that operate in
different sectors of telecommunications and media industry, which the Company
believes is consistent with its diversification policies.  Marketable
securities are stated at market value as determined by the most recently traded
price of each security at the balance sheet date.


FINANCIAL CONDITION AND LIQUIDITY

Historically, the Company's cash flows were primarily generated through its
general and limited partnership interest in the Justice Investors limited
partnership, which derived its income from its lease with Felcor and a lease
with Evon.  The Company also received monthly limited partnership distributions
from Justice Investors as well as monthly management fees as a general partner.
The Company also receives revenues generated from the investment of its cash
and securities assets.  As discussed below, since the Partnership closed down
the operations of the Hotel on May 31, 2005 and is expending significant
amounts of money to renovate and reposition the Hotel as a Hilton, it will not
be paying any monthly limited partnership distributions until some time after
operations commence under the Hilton brand.  As a result, the Company may have
to depend more on the revenues generated from the investment of its cash and
securities assets during that transition period.

Prior to operating the hotel as a Hilton, the Partnership was required to make
substantial renovations to the hotel to meet Hilton standards in accordance
with a product improvement plan agreed upon by Hilton and the Partnership, as
well as complying with other brand standards.  The Partnership currently
estimates that the total cost of the renovation project will be approximately
$41 million.  That amount includes approximately $35 million for the actual
cost of the renovations and approximately $6 million for construction interest
and estimated carrying costs of operations during the renovation period and for
the first couple of months of operations after the hotel opens. That amount
reflects an increase in the Partnership's prior estimates primarily due to
increased renovation and design costs related to additional governmental code
and permitting requirements.

Effective, May 31, 2005, the Partnership elected to close down its Hotel
operations to complete the renovations of the Hotel as required by the Hilton
Franchise Agreement.  The below ground parking garage and Tru Spa located on
the lobby level of the Hotel, both of which are lessees of the Partnership,
remained open during the renovation work.

To meet its substantial financial commitments for the renovation project,
Justice has relied on additional borrowings to meet its obligations. On July
27, 2005, Justice entered into a first mortgage loan (the "Prudential Loan")
with The Prudential Insurance Company of America in a principal amount of
$30,000,000. The term of the Loan is for 120 months at a fixed interest rate of

                                    -18-
<PAGE>

5.22% per annum. The Loan calls for monthly installments of principal and
interest in the amount of approximately $165,100, calculated on a 360 month
amortization schedule. The Loan is collateralized by a first deed of trust on
the Partnership's Hotel property, including all improvements and personal
property thereon and an assignment of all present and future leases and rents.
The Loan is without recourse to the limited and general partners of Justice.

On July 27, 2005, Justice also obtained a $10,000,000 Revolving Line of Credit
("LOC") from United Commercial Bank. The term of the LOC is for 60 months at an
annual interest rate based on the index selected by Justice at the time of the
request for each advance. The interest rate will either be a variable rate
equal to The Wall Street Journal Prime Rate or the Libor Rate plus 2%, fixed
for the period selected by the Partnership. The LOC is collateralized by a
second deed of trust on the Hotel property. Interest only is payable monthly
with principal and accrued interest due at maturity. As of December 31, 2005,
$6,778,000 of the LOC was utilized by the Partnership.

On January 20, 2006, the Partnership obtained a $4,500,000 increase in its
existing line of credit capacity with United Commercial Bank, raising the total
amount available to the Partnership pursuant to that line of credit to
$14,500,000. The increase in the credit line is on the same terms as the
existing line of credit with additional loan and documentation fees of $4,000.

Justice believes that the Prudential Loan and the LOC will provide sufficient
financial resources for the Partnership to complete the substantial renovations
to the Hotel required by its Franchise License Agreement with Hilton and to
meet its debt service requirements and operating capital needs through the
reopening of the Hotel and to sustain its operating cash needs until the Hotel
begins generating net income which the Partnership expects to be in the Spring
of 2006.  The Partnership believes that the revenues expected to be generated
from the Hotel operations will be sufficient to meet all of its current and
future obligations and financial requirements.

That additional amount of leverage related to the Prudential Loan and the
utilization of the LOC and the associated debt service will create additional
risk for the Partnership and its ability to generate cash flows in the future
since the Hotel asset has been virtually debt free for many years. The
Partnership does not anticipate paying any partnership distributions until some
time after operations commence under the Hilton brand and net income and
capital requirements warrant such distributions.  As a result, the Company may
have to depend more on the revenues generated from the investment of its cash
and securities assets during that transition period.

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

Although the Company has suffered a significant decline in hotel revenues and
may be facing a significant period of time without partnership distributions,
management believes that its cash, securities assets, and the cash flows
generated from those assets, will be adequate to meet the Company's current and
future obligations.

                                    -19-
<PAGE>

MATERIAL CONTRACTUAL OBLIGATIONS

The Company also does not have any material contractual obligations or
commercial commitments.


OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off balance sheet arrangements.


IMPACT OF INFLATION

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


CRITICAL ACCOUNTING POLICIES

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

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

                                    -20-
<PAGE>

Item 3. Controls and Procedures

(a) Disclosure Controls and Procedures.

The Company's management, with the participation of the Company's Chief
Executive Officer and the Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
fiscal period covered by this Quarterly Report on Form 10-QSB.  Based upon such
evaluation, the Chief Executive Officer and Chief 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 in a timely manner and in
accordance with Securities and Exchange Commission rules and regulations.

 (b) Internal Control Over Financial Reporting.

There have been no changes in the Company's internal control over financial
reporting during the last quarterly period covered by this Quarterly Report on
Form 10-QSB that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.


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

(a) Exhibits

    31.1   Certification of Chief Executive Officer of Periodic Report
            Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

    31.2   Certification of Chief Financial Officer of Periodic Report
            Pursuant to Rule 13a-14(a) and Rule 15d-14(a).

    32.1   Certification of Chief Executive Officer Pursuant to 18
            U.S.C. Section 1350.

    32.2   Certification of Chief Financial Officer Pursuant to 18
            U.S.C. Section 1350.

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

                                    -21-
<PAGE>



                                SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                               PORTSMOUTH SQUARE, INC.
                                                     (Registrant)


Date: February 13, 2006                    by /s/ John V. Winfield
                                              ---------------------------
                                              John V. Winfield, President,
                                              Chairman of the Board and
                                              Chief Executive Officer


Date: February 13, 2006                    by /s/ Michael G. Zybala
                                              ---------------------------
                                              Michael G. Zybala,
                                              Vice President and Secretary


Date: February 13, 2006                    by /s/ David T. Nguyen
                                              --------------------------
                                              David T. Nguyen, Treasurer
                                             (Principal Accounting Officer)


                                    -22-