**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-K**





(Mark
              One)ý
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the fiscal year ended June 30, 2005****OR**q
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 [NO FEE REQUIRED]****For
                the transition period from _______ to _____**


**Commission
      file number 0-27887**









**COLLECTORS
      UNIVERSE, INC.**




**(Exact
      name of Registrant as specified in its charter)**





**Delaware**
            
            **33-0846191****(State
                or other jurisdiction of**
            
            **(I.R.S.
                Employer Identification No.)****Incorporation
                or organization)****1921
                E. Alton Avenue, Santa Ana, California**
            
            **92705****(Address
                of principal executive offices)**
            
            **(Zip
                Code)**




**(949)
      567-1234**


**(Registrant's
      telephone number, including area code)**




Securities
      registered pursuant to Section 12(b) of the Act: None




Securities
      registered pursuant to Section 12(g) of the Act: Common Stock, par value $.001
      per share




Indicate,
      by check mark, whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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. YES [X] NO [ ]




Indicate,
      by check mark, if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of Registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. x




Indicate
      by check mark whether the Registrant is an accelerated filer (as defined in
      Securities Exchange Act Rule 12b-2).


YES x NO [
      ]




Indicate by check mark
      whether the Registrant is a shell company (as defined in Securities Exchange
      Act
      Rule 12b-2).


YES
      [ ]
      NO x




As
      of
      December 31, 2004, the aggregate market value of the Common Stock held by
      non-affiliates was approximately $84,462,000, based on the per share closing
      price of $20.43 of Registrant’s Common Stock as of such date as reported by the
      Nasdaq Stock Market.




As
      of
      September 9, 2005, a total of 8,611,000 shares of Registrant's Common Stock
      were
      outstanding.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




Except
      as
      otherwise stated therein, Items 10, 11, 12, 13 and 14 in Part III of the Form
      10-K are incorporated by reference from Registrant's Definitive Proxy Statement,
      for its


Annual
      Meeting which is expected to be filed with the Securities and Exchange
      Commission on or before October 26, 2005, for its Annual Meeting of Stockholders
      to be


held on
      December 5, 2005.











**COLLECTORS
      UNIVERSE, INC.**


**FORM
      10-K**


**FOR
      THE FISCAL YEAR ENDED JUNE 30, 2005**




**TABLE
      OF CONTENTS**











PART
                I
            
            
            **Page**Item
                1.
            Business
            1Item
                2.
            Properties
            26Item
                3.
            Legal
                Proceedings
            26Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            26Executive
                Officers of Registrant
            27PART
                IIItem
                5.
            Market
                for Common Stock and Related Stockholder
                Matters
            28Item
                6.
            Selected
                Consolidated Financial Data
            28Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            30Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            41Item
                8.
            Financial
                Statements and Supplementary Data
            42Report
                of Independent Registered Public Accounting
                Firm (Grant Thornton LLP)
            43Report
                of Independent Registered Public Accounting Firm
                (Deloitte & Touche LLP)
            44Consolidated
                Balance Sheets at June 30, 2005 and
                2004
            45Consolidated
                Statements of Operations for
                the Years ended June 30, 2005, 2004 and 2003
            46Consolidated
                Statements of Stockholders' Equity for the Years Ended June 30, 2005,2004
                and 2003
            47Consolidated
                Statements of Cash Flows for the Years
                Ended June 30, 2005, 2004 and 2003
            48Notes
                to Consolidated Financial Statements for the Years
                Ended June 30, 2005, 2004 and 2003
            50Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting
                and Financial Disclosure
            69Item
                9A
            Controls
                and Procedures
            69Item
                9B
            Other
                Information
            72PART
                IIIItem
                10.
            Directors
                and Executive Officers
            72Item
                11.
            Executive
                Compensation
            72Item
                12.
            Security
                Ownership of Certain Beneficial Owners and
                Management
            72Item
                13.
            Certain
                Relationships and Related
                Transactions
            72Item
                14.
            Principal
                Accountant Fees And Services
            72PART
                IV
            Item
                15.
            Exhibits
                and Financial Statement Schedules
            73SIGNATURES
            S-1INDEX
                TO EXHIBITS
            E-1











(1)


**FORWARD-LOOKING
      STATEMENTS**




Statements
      contained in this Report that are not historical facts or that discuss our
      expectations or beliefs regarding our future operations or future financial
      performance, or financial or other trends in our business, constitute
“forward-looking statements” as defined in the Private Securities Reform Act of
      1995. Forward-looking statements can be identified by the fact that they do
      not
      relate strictly to historical or current facts. Often, such statements include
      the words “believe,”“expect,”“anticipate,”“intend,”“plan,”“estimate,”“project,”
      or words of similar meaning, or future or conditional verbs such as
“will,”“would,”“should,”“could,” or “may”. Forward looking statements are
      estimates or predictions about the future that are based on current information
      and are subject to a number of risks and uncertainties that could cause our
      financial condition or operating results in the future to differ significantly
      from those expected at the current time, as described in the forward-looking
      statements that are contained in this Report. Those risks and uncertainties
      are
      described in Part I below under the caption “Factors that Could Affect Our
      Future Financial Performance” and in Part II under the caption “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations.”
      Accordingly, readers of this Report are urged to read the cautionary statements
      contained in those Sections of this Report.





Due
      to
      these uncertainties and risks, readers are cautioned not to place undue reliance
      on forward-looking statements contained in this Report, which speak only as
      of
      the date of this Annual Report and which are based on current information or
      factual assumptions that are subject to change for a number of reasons,
      including those set forth in the Section of this Report entitled “Certain
      Factors that Could Affect Our Future Financial Performance” and in “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations.” We
      undertake no obligation to update or revise any forward-looking statements,
      whether as a result of new information, future events or otherwise.









**PART
      I**


**ITEM
      1.**  **BUSINESS**




**Overview**




We
      are a
      leading provider of value-added authentication, grading and information services
      to dealers and collectors of high-value coins, sportscards, autographs and
      stamps and vintage U.S. currency notes. These collectibles have market values
      generally ranging from $200 to over $1 million, due principally to their rarity,
      age or association with famous individuals or historical events. The
      authenticity and the state of preservation, or quality, of these collectibles
      are also important determinants of their value in the collectibles markets.
      For
      that reason, dealers and collectors submit their high-value collectibles to
      us
      for:




•
            a
                certification by our independent experts of their authenticity; that
                is,
                confirmation that the collectibles are real and are what they have
                been
                represented to be; and




•
            an
                evaluation of their physical condition and appearance and the assignment
                of a grade by our independent experts on the basis of uniform quality
                standards.




Once
      we
      have authenticated and assigned a grade to a collectible, we encapsulate it
      in a
      tamper-evident, clear plastic holder, or issue a certificate of authenticity,
      that (i) identifies the specific collectible, (ii) sets forth
      the
      quality grade we have assigned to it and (iii) bears one of our brand
      names
      and logos: “PCGS” for coins, “PSA” for sportscards, “PSA/DNA” for autographs,
“PSE” for stamps and “PCGS Currency” for U.S. vintage currency notes 1  .
      Additionally, we warrant our certification of authenticity and the grade that
      we
      assign to the coins and sportscards that we authenticate and grade, and we
      have
      recently begun offering warranties with respect to our determinations of
      authenticity and our assignment of quality grades to stamps.




We
      believe that our authentication and grading services increase the liquidity
      and
      marketability and, therefore, add to the value, of these collectibles. Our
      services provide dealers and collectors with (i) the confidence of knowing
      that the collectibles they are buying or selling are authentic, and
      (ii) information, in the form of objective




1 *Collectors
        Universe, PCGS Professional Sports Authenticator and PSA/DNA, Set Registry,
        CU3000 and First Strike, and each of the logos associated with those names,
        are
        registered service or trade marks of the Company* .


1


and
      uniform measures of quality, that enable dealers and collectors to assess the
      value of those collectibles. Armed with this information, a prospective buyer
      who might otherwise be reluctant to purchase a high priced collectible is more
      confident and more willing to make the purchase, particularly “sight-unseen,” on
      internet auction sites such as those operated by eBay. We also believe that
      collectibles dealers who sell collectibles that have been authenticated and
      graded by us are more readily able to sell, and are more likely to obtain higher
      prices for those collectibles, than if the collectibles had not been
      authenticated and graded by us.




We
      originated the standards and methodologies we use for authenticating and grading
      coins, sportscards, autographs, stamps and currency. Those standards and
      methodologies have become generally accepted in the collectible coin,
      sportscards and autograph markets. Since we are the only company to have
      launched an independent third party stamp grading service, and the concept
      of
      stamp grading is relatively novel, our stamp grading standards have not yet
      become generally accepted; however, we believe that these standards have been
      gaining wider acceptance in that market.




We
      also
      have developed some of the leading brands in the collectibles markets in which
      we conduct our business:




•  “PCGS”
      (Professional Coin Grading Service), which is the brand name for our independent
      coin authentication and grading service;




•  “PSA”
      (Professional Sports Authenticator), which is the brand name for our independent
      sportscard authentication and grading service;




•  “PSA/DNA”
      (PSA/DNA Authentication Services), which is the brand name for our independent
      authentication and grading service for vintage autographs;




•  “PSE”
      (Professional Stamp Experts), which is the brand name for our independent stamp
      authentication and grading service; and




•  “PCGS
      Currency” the brand name for our recently inaugurated currency authentication
      and grading service.




PCGS
      and
      PSA are among the leading independent authentication and grading services in
      the
      collectible coin and sportscard markets in the United States. PSA/DNA and PSE
      also are among the leading independent authentication services and, to our
      knowledge, provide the only independent grading services, in their respective
      markets. Currency authentication and grading are new to the currency market
      and
      PCGS Currency began offering its authentication and grading services in the
      third quarter of fiscal 2005 and began receiving authentication and grading
      submissions in the fourth quarter of fiscal 2005.




We
      began
      offering our PCGS coin authentication and grading services in 1986 and, from
      inception through the fiscal year ended June 30, 2005, we had authenticated
      and
      graded more than 11 million coins. In 1991, we launched our PSA sportscard
      authentication and grading service and, through June 30, 2005, had authenticated
      and graded over 8 million sportscards. In 1999, we launched our PSA/DNA vintage
      autograph authentication business and in June 2004 we extended that business
      by
      introducing vintage autograph grading services to dealers and collectors of
      autographed sports memorabilia. We started our PSE stamp authentication and
      grading service in 2000.




2


The
      following table provides information regarding the respective numbers of coins,
      sportscards, autographs and stamps that we authenticated or graded from 2003
      to
      2005 and the number of currency notes that we graded since the inception of
      our
      currency authentication and grading service in the third quarter of fiscal
      2005.




**Units
                Authenticated or Graded****Fiscal
                Year Ended June 30,****2005**
            
            **2004**
            
            **2003**Coins
            
            
            1,670,000
            
            
            58
            %
            
            1,241,000
            
            
            53
            %
            
            917,000
            
            
            46
            %Sportscards
            
            
            1,084,000
            
            
            38
            %
            
            998,000
            
            
            43
            %
            
            1,058,000
            
            
            53
            %Autographs
            
            
            77,000
            
            
            3
            %
            
            68,000
            
            
            3
            %
            
            15,000
            
            
            1
            %Stamps
            
            
            26,000
            
            
            1
            %
            
            16,000
            
            
            1
            %
            
            12,000
            
            
            0
            %Currency
            
            
            3,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            
            2,860,000
            
            
            100
            %
            
            2,323,000
            
            
            100
            %
            
            2,002,000
            
            
            100
            %





**Declared
                Values (000)****Fiscal
                Year Ended June 30,****2005**
            
            **2004**
            
            **2003**Coins
            
            $
            1,191,000
            
            
            91
            %
            $
            993,000
            
            
            90
            %
            $
            769,000
            
            
            90
            %Sportscards
            
            
            66,000
            
            
            5
            %
            
            67,000
            
            
            6
            %
            
            72,000
            
            
            8
            %Autographs
            
            
            26,000
            
            
            2
            %
            
            31,000
            
            
            3
            %
            
            7,000
            
            
            1
            %Stamps
            
            
            17,000
            
            
            1
            %
            
            10,000
            
            
            1
            %
            
            8,000
            
            
            1
            %Currency
            
            
            8,000
            
            
            1
            %
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            1,308,000
            
            
            100
            %
            $
            1,101,000
            
            
            100
            %
            $
            856,000
            
            
            100
            %




We
      generate revenues principally from our authentication and grading service fees.
      Those fees range from $6 to as much as $200 per collectible authenticated and
      graded, based primarily on the type of collectible authenticated or graded
      and
      the turn-around times selected by our customers, which range from 1 to
      approximately 60 days. In fiscal 2005, our authentication and grading fees
      averaged $11. As a general rule, collectibles dealers and, to a lesser extent,
      individual collectors, request faster turn-around times and, therefore,
      generally pay higher fees for more valuable, older or “vintage” collectibles,
      than they do for modern collectibles.




We
      also
      generate revenues, to a lesser extent, from sales of (i) advertising on our
      websites; (ii) our printed publications and price guides and advertising placed
      in such publications; and (iii) our rarity or “population” reports that contain
      data regarding the total number of coins and sportscards we have graded since
      our inception, categorized by item type and grade determination. We believe
      that
      our printed publications, price guides and reports make collectors better
      informed consumers and make collecting more interesting and exciting for
      them.




**Industry
      Background**




The
      primary determinants of the prices of, and the willingness of dealers and
      collectors to purchase, high-value or high priced collectibles or other
      high-value assets are their authenticity and quality. The authenticity of a
      collectible relates not only to the genuineness of the collectible, but also
      to
      the absence of any alterations or repairs that may have been made to hide damage
      or to restore the item. The quality of a collectible relates to its state of
      preservation relative to its original state of manufacture or creation. With
      regard to value, confirmation of authenticity generally is required before
      a
      buyer is willing to proceed with a purchase of a high priced collectible.
      Quality directly affects value and price, usually on an exponential basis,
      with
      higher quality collectibles generally attracting dramatically higher prices
      than
      lower quality collectibles. Even a relatively modest difference in quality
      can
      translate into a significant difference in perceived value and, therefore,
      in
      price. For example, a 1952 Mickey Mantle baseball card that received a PSA
      grade
      from us of 10 on our PSA grading scale of 1-to-10 was sold in 2001 for $275,000.
      By comparison, a similar 1952 Mickey Mantle baseball card that received a PSA
      grade of 8 was sold in 2004 for $62,338.




Until
      the
      advent of independent third party authentication and grading, most prospective
      buyers, including experienced collectibles dealers, insisted on physically
      examining high priced collectibles before consummating transactions. However,
      unlike professional dealers, most collectors lacked the experience and knowledge
      needed to determine, with confidence, the authenticity or the quality, and
      hence
      the value, of high priced collectibles, even when they had the opportunity
      to
      examine them physically. As a result, collectors had to rely on representations




3


made
      by
      sellers regarding authenticity and quality. For these reasons, “buyer beware”
      characterized the high-value collectibles markets, and “sight-unseen” markets
      for rare coins and other high-value collectibles were practically
      non-existent.




Dealers
      and collectors traditionally marketed high-value collectibles by means of direct
      mail, catalogues, price lists and advertisements in trade publications, and
      sold
      and purchased them at collectibles shows, auction houses and local dealer shops.
      These markets were highly inefficient because:




•
            they
                were fragmented and localized, which limited both the variety of
                available
                collectibles and the number of potential
                buyers;




•
            transaction
                costs were often relatively high due to the number of intermediaries
                involved;




•
            buyers
                usually lacked the information needed to determine the authenticity
                and
                quality and, hence the value, of the collectibles being sold;
                and




•
            buyers
                and sellers were vulnerable to fraudulent practices because they
                had to
                rely on the dealers of high-value collectibles for opinions or
                representations as to authenticity and
                quality.




*Coin
      Market* .
      In an
      effort to overcome some of these inefficiencies, approximately 30 years ago,
      professional coin dealers began using a numerical grading scale for grading
      coins. That scale ranged from 1 to 70, with higher numbers denoting a higher
      quality. Previously, professional dealers used descriptive terms, such as
“Fair,”“Fine” and “Uncirculated,” to characterize the quality of the coins they
      sold, a practice that continued after the development of the numeric grading
      system. However, whether using a numeric or a descriptive system, grading
      standards varied significantly from dealer to dealer, depending on a dealer’s
      subjective criteria of quality. Moreover, dealers were hardly disinterested
      or
      independent since, as the sellers or buyers of the coins they were grading,
      they
      stood to benefit financially from the assignment of a particular
      grade.




*Sportscard
      Market* .
      Misrepresentations of authenticity and quality also operated as a barrier to
      the
      liquidity and growth of the collectibles market for sportscards. Even
      experienced and knowledgeable dealers insisted on physically examining
      purportedly rare and higher priced sportscards. Most collectors lacked the
      knowledge needed to purchase collectible sportscards with confidence, even
      when
      they had physically examined them. Sportscard dealers eventually developed
      a
      rudimentary adjectival system to provide measures of quality, using descriptive
      terms such as “Poor,”“Very Good,”“Mint” and “Gem Mint.” These measures of
      quality were assigned on the basis of such characteristics as the centering
      of
      the image on the card and the presence or absence of bent or damaged corners,
      scratches and color imperfections. However, as was the case with coins, grading
      standards varied significantly from dealer to dealer, depending on a dealer’s
      subjective criteria of quality. Additionally, since the dealers who bought
      and
      sold sportscards were the ones that assigned these grades, collectors remained
      vulnerable to fraudulent practices.




*Autographed
      Memorabilia Market* .
      The
      market for autographed sports, entertainment and historical memorabilia has
      been
      plagued by a high incidence of forgeries and misrepresentations of authenticity.
      For example, Operation Bullpen, initiated by the FBI and other law enforcement
      agencies beginning in 1997, has uncovered a high volume of outright forgeries
      of
      signatures and widespread misrepresentations as to the genuineness of sports
      memorabilia. We believe that the high incidence of such fraudulent activities
      was due, in large part, to a dearth of independent third party memorabilia
      authentication services and an absence of systematic methodologies and specimen
      data needed for verification of authenticity.




*Stamp
      Market* .
      Stamp
      dealers developed an adjectival system, similar to the one developed for
      sportscards, by which they valued and priced stamps based primarily on the
      centering of the stamp image on the stamp paper background, ignoring other
      faults in the stamp. As a result, experienced and knowledgeable dealers insisted
      on physically examining purportedly rare and higher priced stamps before
      purchasing them. Additionally, most collectors lacked the knowledge and
      experience needed to purchase higher priced stamps with confidence.
      Consequently, as was the case with coins and sportscards, collectors were forced
      to depend on representations of authenticity and quality from the very dealers
      from whom they purchased or to whom they sold stamps.




*Currency
      Market* .
      While
      the market for third-party currency grading is not new, none of the entrants
      in
      the past have been particularly successful, and the currency market has not
      developed substantial demand for these services. The only established grading
      services with market presence prior to the beginning of 2005 were not




4


independent
      third-party grading services, as they are operated and owned by currency dealers
      who also buy and sell the currency that they grade, thereby creating potential
      conflicts of interest, much as we have seen in some of our other
      markets.




These
      conditions in our collectibles markets created a need and the demand for
      independent authentication and grading services from which dealers and
      collectors could obtain:




•  determinations,
      from independent, third party experts, of the authenticity of the high-value
      collectibles that dealers and collectors purchased, particularly “


sight-unseen”;




•  representations
      of quality based on uniform standards applied by independent, third party
      experts; and




•  authoritative
      information, compiled by a credible third party, to help collectors understand
      the factors that affect a collectible’s perceived value and price,
      including:




—  its
      rarity;




—  its
      quality or grade; and




—  its
      historical and recent selling prices.




*The
      Impact of eBay on the Collectibles Markets* .
      The
      advent of the internet and, in particular, eBay’s development of an internet or
“virtual” marketplace, have overcome many of the inefficiencies that had
      characterized the traditional collectibles markets. eBay’s online marketplace
      (i) offers enhanced interaction between and greater convenience for
      sellers
      and buyers of high-value collectibles; (ii) eliminates the involvement
      of
      dealers and other “middlemen;” (iii) reduces transaction costs;
      (iv) allows trading at all hours; and (v) provides continually
      updated
      information. However, internet commerce still raises, and has even heightened,
      concerns about the authenticity and quality of the collectibles that are listed
      for sale on the internet. Buyers have no ability to physically examine those
      collectibles and no means to confirm the identity or the credibility of the
      dealers or sellers who sell purportedly high-value collectibles on the internet.
      As a result, we believe that the growth of internet collectibles markets, such
      as eBay’s, has increased awareness of the importance of, and the demand for,
      independent third party authentication and grading services of the type we
      provide. Our services enable collectors to use the internet to purchase
      collectibles “sight-unseen,” with the confidence of knowing that those
      collectibles are authentic and are of the quality represented by sellers. The
      importance and value of our services to collectors, we believe, are demonstrated
      by eBay’s inclusion, on its collectibles websites, of information that
      identifies, and encourages visitors to use, our independent third party
      authentication and grading services, as well as similar services offered by
      some
      of our competitors.




**Our
      Services**




*PCGS
      Coin Authentication and Grading Services* .
      Recognizing the need for third party authentication and grading services, we
      launched Professional Coin Grading Service in 1986. PCGS employs expert coin
      graders, who are independent of coin buyers and sellers, to provide impartial
      authentication and grading services. Currently, we employ 16 experts who have
      an
      average of 27 years of experience in the collectible coin market, in most cases
      initially as dealers and later as authenticators and graders. We also
      established uniform standards of quality measured against an actual “benchmark”
      set of coins kept at our offices. We place each coin that we authenticate and
      grade in a tamper-evident, clear plastic holder that bears our logo, so that
      any
      prospective buyer will know that it is a PCGS authenticated and graded coin.
      We
      also provide a warranty as to the accuracy of our coin authentication and
      grading.




By
      providing an independent assessment by coin experts of the authenticity and
      quality of coins, we believe that PCGS has increased the liquidity of the
      trading market for collectible coins. Following the introduction of our
      independent, third party authentication and grading service, buyer confidence,
      even between dealers, increased to such a degree that coins authenticated and
      graded by PCGS were able to be traded “sight-unseen.” As a result, PCGS
      facilitated the development, in 1990, of a dealer market, known as the
“Certified Coin Exchange,” on which coin dealers traded rare coins
“sight-unseen,” over a private satellite network, which now operates on the
      internet. In addition, we began to provide a range of authoritative content
      on
      coin collecting to inform and communicate with the collector community,
      including guides and reports that track the trading prices and the rarity of
      PCGS-graded coins.




5


More
      recently, our coin authentication and grading services have facilitated the
      development of a growing internet or “virtual” marketplace for collectible
      coins. A prospective buyer, who might otherwise be reluctant to purchase a
      high
      priced coin listed on the internet, is able to rely on a PCGS certification
      in
      deciding whether or not to bid and in determining the amount to offer for the
      coin. As a result, to enhance the marketability of higher priced coins, many
      sellers submit their coins to PCGS for authentication and grading. That enables
      the sellers to include, in their internet sales listings, digital images of
      the
      coins in their tamper-evident, clear plastic holders, which identify the coins
      as having been authenticated and graded by PCGS as well as their PCGS-assigned
      grades.




*PSA
      Sportscard Authentication and Grading Services* .
      Leveraging the credibility and using the methodologies that we had established
      with PCGS in the coin market, in 1991 we launched Professional Sports
      Authenticator (PSA), which instituted a similar authentication and grading
      system for sportscards. Our independent sportscard experts certify the
      authenticity of and assign a grade to sportscards using a numeric system with
      a
      scale from 1-to-10 that we developed, together with an adjectival system to
      describe their condition. Currently, we employ 13 experts who have an average
      of
      21 years of experience in the collectible sportscard market. We believe that
      our
      authentication and grading services have removed barriers that were created
      by
      the historical seller-biased grading process and, thereby, have improved the
      overall marketability of and facilitated commerce in sportscards, including
      over
      the internet and at telephonic sports memorabilia auctions.




*PSA/DNA
      Autograph Authentication and Grading Services* .
      In
      1999, we launched our vintage autograph authentication business, initially
      offering authentication services for “vintage” sports autographs and memorabilia
      that were autographed or signed prior to the time they were presented to us
      for
      authentication. The vintage autograph authentication business is distinctly
      different from the “signed-in-the-presence” authentication of autographs where
      the “authenticator” is present and witnesses the actual signing. Vintage
      autograph authentication involves the rendering of an opinion of authenticity
      by
      a handwriting expert based on (i) an analysis of the signed object,
      such as
      the signed document or autographed item of memorabilia, to confirm that its
      age
      and material composition are consistent with similar materials or items that
      existed during the signer’s lifetime; (ii) a comparison of the signature
      submitted for authentication with exemplars; and (iii) a handwriting
      analysis. We currently employ 2 autograph experts with an average of 19 years
      of
      experience in the autograph memorabilia market.




In
      June
      2004, we also began offering grading services for vintage sports autographs
      and
      vintage signed sports memorabilia, beginning with baseballs containing a single
      signature or autograph. We use uniform grading standards that we have developed
      and a numeric scale of 1-to-10, with the highest number representing “Mint”
      condition or perfect quality. We assign two grades to the collectible: one
      based
      on the physical condition or state of preservation and legibility of the
      autograph and the other based on the physical condition of the autographed
      item
      of memorabilia. Autograph grading is in its infancy and we cannot predict
      whether it will gain market acceptance. However, if we find that there is a
      demand for such services, we intend to extend our grading services to include
      autographed historical and entertainment memorabilia.




*PSE
      Stamp Authentication and Grading Services* .
      In
      January 2000, we launched our Professional Stamp Experts (PSE) as an
      independent, third party stamp authentication and grading service. We use both
      an adjectival system and a numeric scale from 1-to-100 to grade stamps. We
      assign grades based on the centering of the stamp image on the stamp paper
      background and the absence or presence of other faults on the stamp. There
      have
      been viable third party stamp authentication services in operation for several
      decades, and stamp dealers and collectors had been using a subjective grading
      system based primarily on the centering of the stamp image on the stamp paper
      background, ignoring other faults. However, prior to our entry into the stamp
      market, independent third party stamp grading was non-existent. As a result,
      we
      have encountered some resistance to this concept in the stamp collectibles
      market, which is steeped in tradition and slow to change, as we did from coin
      dealers when we launched PCGS and from sportscard dealers when we launched
      PSA.
      We believe, however, that the grading of stamps can potentially gain, albeit
      gradually, increased market acceptance. Currently, we employ four stamp graders
      who have an average of 36 years of experience in the collectible stamp
      market.




*Vintage
      U.S. Paper Currency Authentication and Grading* .
      In the
      third quarter of fiscal 2005, we began marketing a U.S. paper currency
      authentication and grading service, which we decided to brand as “PCGS Currency”
      because many of the dealers of currency notes are familiar with and have used
      PCGS’ coin authentication and grading service. We have employed one currency
      expert and engaged the services of other currency grading experts for this
      business and began generating revenues in the fourth quarter of fiscal
      2005.




6


*Publications
      and Advertising* .
      We
      publish authoritative price guides, rarity reports and other collectibles data
      to provide collectors with information that makes them better informed consumers
      and makes collecting more interesting and exciting. Our publications also enable
      us to market our services, create increased brand awareness and to generate
      advertising revenues. Our publications include the *Sports
      Market Report,* which
      we
      publish on a monthly basis primarily for distribution to approximately 6,500
      PSA
      Collectors Club members, and the *Stamp
      Market Quarterly* ,
      which
      we publish for distribution to approximately 2,500 stamp dealers and collectors.
      We sell advertising to dealers and vendors for placement in our publications.
      In
      addition, we manage a Collectors Universe website and individual websites for
      four of our authentication and grading services. On those websites, we offer
      collectible content, some of which is available for a fee and some of which
      is
      available without charge. On a combined basis, our PCGS, PSA, PSA/DNA and PSE
      websites attracted, on average, approximately 167,000 and 154,000 unique
      visitors per week during the fiscal years ended June 30, 2005 and 2004,
      respectively. As a result of the increasing number of collectors visiting our
      websites, during the year ended June 30, 2005, we began selling advertising
      on
      our websites to dealers and other vendors that serve the collectibles markets.
      Such on-line advertising generated approximately $400,000 in revenues in
      2005.




**Our
      Mission**




Our
      mission is to provide the finest available authentication and grading services
      to sellers and buyers of high-value collectibles and other high-value assets
      in
      order to:




•  increase
      the values and liquidity of the high-value collectibles and other high-value
      assets;




•  enable
      and facilitate transactions in high-value collectibles and other high-value
      assets;




•  generally
      enhance interest, activity and trading in high-value collectibles and other
      high-value assets; and




•  achieve
      profitable growth, build long-term value for our stockholders and provide
      rewarding opportunities for our employees.




**Our
      Growth Strategy**




Our
      growth strategies include:


• Leveraging
        the strong brand awareness that we have achieved in our existing
        markets:
  —
              to
                  increase the demand for and use of our services not only by dealers,
                  but
                  also by collectors, only a relatively small percentage of whom
                  use
                  independent authentication or grading services;
                  and
  —
              to
                  introduce new value-added services to customers in our existing
                  collectibles markets.
  •
              Identifying
                  and entering other high-value collectibles or high-value asset
                  markets
                  where we believe we can succeed in building and meeting the demand
                  among
                  dealers, sellers and buyers for independent, third party authentication
                  and grading services.


We
      are
      pursuing the following strategic initiatives in order to achieve these growth
      objectives:




*Increasing
      the Demand for our Services* .
      We have
      established leading brands in our existing collectibles markets, including
      PCGS,
      PSA, PSA/DNA and PSE. We intend to use those brands, as well as our new PCGS
      Currency brand, to promote Collectors Universe as the premier provider of
      authentication and grading services in the high-value collectibles markets
      in
      order (i) to increase our market share among existing users of authentication
      and grading services and (ii) to increase the use of our services by the
      numerous collectors that do not currently use any independent third party
      authentication or grading services.




Although
      we have authenticated and graded over 11 million coins since the inception
      of
      PCGS and over 8 million sportscards since the inception of PSA, we estimate
      that
      less than 10% of the vintage United States coins and vintage sportscards have
      been authenticated and graded. According to recent data available on eBay’s
      websites, the number of coins being sold at any one time on eBay generally
      ranges from approximately 150,000 to 180,000, of which only approximately 15%
      are authenticated and graded by a third party authentication and grading
      service, such as ours. Similarly, the number of sportscards being sold at any
      one time on eBay generally ranges from




7


approximately
      250,000 to 300,000, of which only about 10% are independently authenticated
      and
      graded. Additionally, we are not aware of any other companies that offer grading
      services for autographs or stamps and we estimate that we have authenticated
      and
      graded less than 1% of the potential market of autographs and stamps in the
      United States. Also, new collectibles are introduced each year into the markets
      in which we operate, some of which are authenticated and graded in the year
      of
      manufacture. Over time, these collectibles will increase the supply of vintage
      items that are sold by dealers and collectors and, therefore, that will be
      submitted for independent third party authentication and grading.




To
      take
      advantage of these market opportunities, we have:




- enhanced
          our marketing programs to promote our brands and services directly to internet
          and other auction-related businesses. These programs emphasize the benefits
          of
          using our services, including increased marketability and the prospect
          of
          higher bids for collectibles.
- initiated
          joint marketing programs with collectibles dealers that are designed to
          make
          their customers aware of the availability and benefits of our authentication
          and grading services.
- established
          authorized PCGS and PSA dealer networks to increase the visibility of our
          brands and the use of our services by those dealers and their
          customers.
- developed
          and expanded our Set RegistrySMprograms to increase demand for our collectible coin, sportscard and stamp
          authentication and grading services among collectors and to increase traffic
          on our websites.
- increased
          the promotion of our Collectors Clubs to attract and to provide incentives
          for
          collectors to use our services.

*Introducing New Services in our Existing Markets* .
      Using
      the brand recognition we have established in the markets we serve, we intend
      to
      create and promote new services and expand recently introduced services in
      our
      existing markets. These services include:




•
            *Collectors
                Universe Invitationals*.
                Since 2001, we have been holding special “invitation-only” events for our
                authorized PCGS and PSA dealers. At those events, dealers have the
                opportunity to meet and engage in collectibles trading with other
                invited
                dealers. To facilitate collectibles trading at these events, we offer
                same
                day, on-site authentication and grading services, enabling the dealers
                to
                complete their transactions while at the invitationals. In fiscal
                2005, we
                held nine dealer invitationals.




•
            *Sales
                of Website Advertising*.
                During the quarter ended September 30, 2004, we began selling advertising
                on our websites to collectibles dealers and auctioneers in the markets
                in
                which we offer our branded authentication and grading services. Due
                to the
                increasing number of visitors to our websites, we are able to offer
                those
                dealers and auctioneers the opportunity to market their products
                and
                services to an increased number of prospective customers. In July
                2005,
                the Company acquired substantially all the assets of Coinfacts.com,
                Inc.,
                which operates an internet website on which it publishes detailed
                proprietary information and history on rare U.S. Coins. Integration
                of the
                Coinfacts website onto the Company’s PCGS website will add significantly
                to the number of advertising pages that will be contributing revenues
                in
                the very near term.




•
            *Dealer
                Financing Program*.
                We initiated a dealer finance program beginning in the fourth quarter
                of
                2005. Under that program, we offer short-term loans to established
                collectibles dealers that use our authentication and grading services.
                The
                loans, which are collateralized by collectibles that dealers submit
                to us
                for authentication and grading, are intended to provide those dealers
                with
                working capital during the authentication and grading process. We
                believe
                these loans will provide an incentive to dealers to submit additional
                collectibles to us for authentication and grading, and will generate
                interest income for us.




8


•
            *Autograph
                Grading Services*.
                In June 2004, we launched autograph grading services, beginning with
                single signed baseballs (patent pending). Our autograph grading service
                is
                intended to meet existing and create additional demand for differentiation
                in the quality, and thus in the value, of autographed memorabilia.
                Our
                grading is based primarily on sharpness, intensity, readability and
                clarity of autographs. It is our intention to expand this grading
                service
                to other autographed sports memorabilia and then to historical and
                entertainment autographs, if we find that there is a demand for our
                signed
                baseball grading services.




•
            *Expansion
                of Website Information Services*.
                We have been expanding the information available on our websites,
                including the addition of: (i) historical coin auction prices; (ii)
                reproductions of historical reference books; and (iii) the contents
                of
                famous coin, sportscard and stamp collections. These services are
                designed
                to attract new collectors, increase the number of visitors to our
                websites
                and increase advertising revenues. During the year ended June 30,
                2005, on
                a combined basis our five websites attracted, on average, over 167,000
                visitors per week, as compared to 154,000 in the same period of the
                prior
                fiscal year.




•
            *Photography
                Services*.
                We now offer digital photography for collectibles that are submitted
                to us
                for authentication and grading. The digital images can be used by
                dealers
                for recordkeeping purposes and by both dealers and collectors when
                listing
                collectibles on internet auction sites, such as eBay. We believe
                that we
                are able to offer digital photography services more efficiently than
                other
                service providers, because we will be able to easily incorporate
                this
                service as part of our authentication and grading
                processes.




•
            *eBay
                Promotional Programs*.
                Leveraging our expertise and reputation as a leading independent
                third
                party authenticator and grader of high-value collectibles, we work
                with
                eBay to create programs designed to increase the marketability of
                collectibles on its auction websites and, at the same time, promote
                our
                authentication and grading services. We now offer a fee-based “Quick
                Opinion” autograph authentication service to visitors on eBay’s sports
                memorabilia auction website. Our autograph experts render an authenticity
                opinion based on an examination of the digital image of the autograph
                posted on eBay. We also have included, at eBay’s request, information
                about the benefits of our authentication and grading services on
                our
                websites, to which eBay has placed links on its collectibles websites
                in
                order to make that information readily accessible to its
                users.




•
            *First
                StrikesTM Program.*Every
                calendar year, the U.S. Mint produces new dies with the new year
                engraved
                on the die for minting the coins of that year, including the gold
                and
                silver bullion coins. In the third quarter of fiscal 2005, PCGS introduced
                a new program designed to generate submissions of these coins to
                us for
                authentication and grading with a special “*First
                Strike”*designation. This program was launched based on our belief that the
                marketplace would prefer coins struck early in the life of the die
                so that
                the details of the coin would be very sharp, provided that there
                was
                independent evidence of an early strike. To provide assurance to
                the
                marketplace of these early strikes, we required that coins for*First
                Strike*designation be submitted in January of the year as struck on the
                coin or
                otherwise be provided to us in their original, date-stamped, Mint-sealed
                containers. With such evidence, we would then encapsulate the coins
                in our
                tamper-evident, clear plastic holders with an imprint on the descriptive
                label designating the coins as*First
                Strike*coins. We inaugurated our*First
                Strike*program in January 2005 for U.S. Gold and Silver Eagle bullion coins.


•
              *Set
                  Registry Kiosk**SM**Program.*The kiosk program places an attractive graphic and Internet link
                  on a
                  participating commercial dealer or auctioneer website that connects
                  the
                  customers to our popular and free Set Registry program. The Set
                  Registry
                  program provides for customers to register their partial or complete
                  collection and compete on a worldwide basis for top ranking of
                  the type of
                  collection, while requiring that all items registered be certified
                  for
                  authenticity and quality by the appropriate division of our Company.
                  (See
                  Marketing- Pull Strategy- Set Registry Programs). Until the launch
                  of the
                  kiosk program, Set Registry participants must have registered on
                  the PCGS
                  website directly. We believe that by obtaining the participation,
                  promotion and support of the commercial dealers and auctioneers
                  through
                  their respective websites, we will increase the exposure of Set
                  Registry
                  to the collecting community.




9


•
              *Certified
                  Coin Exchange.*In
                  September 2005, the company acquired Certified Coin Exchange (CCE)
                  www.certifiedcoinexchange.com,
                  a
                  dealer-to-dealer Internet-based, bid-ask system for certified coins.
                  This
                  system and its predecessors have been in continuous operation since
                  the
                  1960’s. The CCE has approximately 400 dealer-members paying a fixed
                  monthly fee with two access levels, the full access level supporting
                  approximately 125 dealer-members paying $295 per month and allowed
                  to post
                  bid and ask prices for certified coins, including PCGS coins, and
                  an
                  associate access level supporting approximately 275 dealer-members
                  paying
                  $139 per month and allowed to view the pricing information. The
                  CCE now
                  supports approximately 100,000 bid-ask prices. In addition, there
                  is an
                  open segment of the website called “Collectors Corner” where
                  dealer-members can post offerings at retail prices, with approximately
                  11,000 items now being listed. We believe that the CCE system will
                  allow
                  us to better take advantage of and monetize our data base of supply-demand
                  information and to provide a platform for extending the CCE concept
                  into
                  other markets served by the
                  Company.




*Entering
      Other Collectibles and High-Value Asset Markets* .
      There
      are additional high-value collectibles and high-value assets with respect to
      which marketability and value depend primarily on their authenticity and state
      of preservation or quality. We believe that the growth of some of these markets
      has been hampered by the absence or limited availability of independent
      authentication and grading services. It is our intention to expand our business
      into one or more of those markets. Markets that we are considering for possible
      expansion include:




Antique
                silver
            Estate
                jewelryColored
                gemstones
            Musical
                instrumentsComic
                books
            Political
                memorabiliaDiamonds
            PostcardsEntertainment
                memorabilia
            Rare
                books




We
      intend to
      consider the following criteria in selecting markets for future
      expansion:




- *Market
          Size*.
          The
          size of the target market, measured both in terms of the volume and the
          value
          of the collectibles or high-value assets that trade in the
          market.
- *Trading
          Prices*.
          The
          prices at which collectibles or other high-value assets trade in the target
          market, because we have found that the more valuable the collectible or
          asset,
          the greater is the demand for authentication and grading
          services.
- *Competitive
          Environment*.
          The
          presence or absence of existing independent authentication and grading
          services in the target market, its capacity for new entrants and the
          satisfaction of dealers and collectors with the services offered by existing
          providers.
- *Availability
          of Experts*.
          The
          availability of experts needed to succeed in entering a target
          market.
- *Means
          of Entry*.
          The
          benefits and costs of entry by means of an opportunistic acquisition, if
          possible, as opposed to starting a new authentication and grading service
          that
          would require the development of a new brand. Most of the markets we are
          targeting have no existing authentication and grading services, and in
          those
          cases, as opposed to starting a new business, we may acquire a business
          with
          experts who trade the products in the market, then convert the acquired
          business to authentication and grading services while ceasing the trading
          operations.

The
        largest of these currently targeted markets are the diamond and colored gemstone
        markets. According to the Rapaport Group, an independent research firm to
        the
        diamond, gem and jewelry industry, in 2003 approximately 18 million
        carats
        of polished diamonds, valued in excess of $10 billion, were imported into
        the
        United States. Currently there are four companies of significant size that
        provide third party authentication and grading services in the diamond market,
        and two in the colored gemstone market, as well as a few smaller, mostly
        more
        recently established, companies that provide various authentication and grading
        services in those markets. Other large markets include estate and pre-owned
        jewelry and entertainment memorabilia, such as Hollywood props, scripts and
        wardrobes. According to data available from eBay, at any one time there are
        approximately 800,000 to 1,000,000 items of pre-owned jewelry, including
        watches, and from 300,000 to 500,000 items of entertainment memorabilia,
        listed
        on eBay. We are not aware of any significant third party authentication or
        grading services in either of these markets. Although the other targeted
        markets
        are much smaller than the diamond, pre-owned jewelry and entertainment
        memorabilia markets, we are not aware of any significant third party
        authentication or grading companies that operate in any of those
        markets.


10


There
      is
      no assurance that we will succeed in expanding our business into any of these
      new markets or, even if we do succeed in doing so, that the authentication
      or
      grading services we will offer in those markets will gain market acceptance
      or
      become profitable.




**Operations**




We
      offer
      authentication and grading services for coins, sportscards, autographs and
      autographed memorabilia, stamps and currency. Our trained and experienced
      authentication and grading experts determine the authenticity of and, using
      uniform quality standards, assign a quality grade to these
      collectibles.




*PCGS* .
      Since
      our inception in 1986, we have graded approximately 11 million coins. We now
      authenticate and grade approximately 1,700,000 coins per year. We typically
      charge authentication and grading fees that range between $8 and $200 per coin,
      depending primarily on the turn-around time requested by the customer, which
      varies from one day for the highest level of service to approximately 60 days
      for the lowest level of service. In the fiscal year ended June 30, 2005, our
      fee
      per coin averaged approximately $13. We authenticate and grade coins in
      accordance with standards that we developed and which have become generally
      accepted in the industry. We use both an adjectival and numeric system, with
      a
      scale of 1-to-70, to rate the quality of the coins, with the highest number
      representing “gem” or perfect quality. We have authenticated and graded, either
      before or after sale, two of the three highest priced U.S. coins ever sold
      at
      public auction, including an 1804 Draped Bust Silver Dollar, that was sold
      by
      the owner at an auction in 1999 for approximately $4.1 million, and a U.S.
      1913
      Liberty Head Nickel, that was recently sold for $4.15 million, the second
      highest price paid for any coin.




Our
      grading of coins involves an exacting and standardized process. We receive
      coins
      from dealers and collectors and remove all packaging that identifies the
      submitter in any way. We then enter information regarding the coins into our
      proprietary computerized inventory system, which tracks the coins at every
      stage
      of our authentication and grading process. Generally, our process requires
      that
      two of our experts evaluate each coin independently, and no authenticity opinion
      is issued and no quality grade is assigned unless their opinions of authenticity
      and the grades independently assigned by each of them are the same. In some
      cases, depending on the type of coin being authenticated and graded or on the
      results of the initial review process, a third expert is involved to make the
      final determinations of authenticity and grade. The coin, the determination
      of
      authenticity and its grade are then verified by one of our senior experts,
      who
      has the authority to resubmit the coin for further review if deemed to be
      necessary. Only after this process is complete is the coin reunited with its
      invoice, thus keeping the authentication and grading process independent of
      the
      identity of the owner and the history of the coin. The coin is then sonically
      sealed in our specially-designed, tamper-evident, clear plastic holder, which
      also encases a label describing the coin, the quality grade that we have
      assigned to it, a unique certificate number and bar code, and the PCGS hologram
      and brand name.




*PSA* .
      We
      launched our PSA sportscard authentication and grading service in 1991 and,
      through June 30, 2005, had authenticated and graded over 8 million sportscards.
      Our sportscard grading system uses both an adjectival and a numeric system
      with
      a scale from 1-to-10, with the highest number representing “mint” condition or
      perfect quality. We employ sportscard authentication and grading procedures
      that
      are similar to our coin authentication and grading procedures. On receipt of
      sportscards from dealers and collectors, we remove all packaging that identifies
      the submitter in any way and enter information regarding the sportscards into
      our proprietary computerized inventory system that enables us to track the
      sportscards throughout our authentication and grading process. Only after the
      authentication and grading process is complete is the sportscard reunited with
      its invoice, thus keeping the authentication and grading process independent
      of
      the identity of the owner and the history of the sportscard. The sportscard
      is
      then sonically sealed in our specially-designed, tamper-evident, clear plastic
      holder, which also encases a label that identifies the sportscard, the quality
      grade that we have assigned to it and a unique certificate number and bar code,
      and the PSA hologram and brand name.




We
      primarily authenticate and grade baseball sportscards and, to a lesser extent,
      football, basketball and hockey sportscards, as well as entertainment and other
      collectible cards. We typically charge fees ranging between $6 and $100 per
      card, with an average fee of $6 per card in 2005. As is the case with coin
      authentication and grading, sportscard authentication and grading fees are
      based
      on the particular turn-around time requested by the submitter, ranging from
      one
      day’s turn-around for the highest level of service to approximately 60 days for
      the lowest level of service.




11


The
      sportscards submitted to us for authentication and grading include primarily
      (i)
      older or vintage sportscards, particularly of memorable or historically famous
      players, such as Honus Wagner, Joe DiMaggio, Ted Williams and Mickey Mantle,
      and
      (ii) modern or newly produced sportscards of current or new athletes who have
      become popular with sports fans or have achieved new records or milestones,
      such
      as Nolan Ryan and Mark McGwire. These sportscards have, or are perceived to
      have, sufficient collectible value and are sold more frequently than are
      sportscards of less notable athletes, leading dealers and collectors to submit
      them for grading to enhance their marketability. Also, the production and sale
      of each new series of sportscards, which take place at the beginning and during
      the course of each new sports season, create new collectibles that provide
      a
      source of future additional authentication and grading submissions to us. Among
      the sportscards that we have authenticated and graded is a 1909 Honus Wagner
      baseball card, which received a PSA grade of 8 and was sold by the owner in
      2000
      for approximately $1.3 million.




*PSA/DNA* .
      In
      1999, we began offering authentication services for vintage sports autographs.
      Because of the variability in the size of autographed memorabilia, the
      procedures we use necessarily differ from those used in authenticating and
      grading coins and sportscards. Customers may ship the memorabilia to us for
      authentication at our offices or, in the case of dealers or collectors that
      desire to have a large number of items authenticated, we will sometimes send
      an
      expert to the customer’s location for “on-site” examination and authentication.
      Generally, our procedures require at least two of our autograph experts to
      agree
      on either a positive or a negative opinion on authenticity for most items that
      are submitted for authentication. Our experts reference what we believe is
      one
      of the largest databases of known genuine examples of signatures for comparison
      to a submitted specimen and draw upon their training and experience in
      handwriting analysis. In most cases, we take a digital photograph of the
      autographs that we authenticate and store those photographs in a master
      database. Before shipping the item back to the customer, a tamper-evident
      holographic label is affixed to the collectible. The label contains our PSA/DNA
      name and logo and a unique certificate number. For additional security, in
      most
      cases we tag the items with synthetic DNA-laced ink, which is odorless,
      colorless and tasteless and visible only when exposed to a narrow band
      wavelength of laser light using a hand-held, battery-powered lamp. As a result,
      if the label is removed from the item, it is still possible to verify that
      the
      item was authenticated by us.




Memorabilia
      that have been authenticated by our vintage autograph service include Mark
      McGwire’s 70th home run baseball, which was sold at auction in 1999 for more
      than $3 million, a baseball bat autographed by Babe Ruth, which he used to
      hit
      the first home run ever hit in Yankee Stadium in 1923 that was sold by Sotheby’s
      for more than $1.2 million and a 1919 contract trading Babe Ruth from the Boston
      Red Sox to the New York Yankees, which was recently sold at auction for
      $996,000.




In
      June
      2004, we also began offering grading services for vintage sports autographs,
      beginning with single signed baseballs. We use uniform grading standards that
      we
      have developed to assign two grades to the collectible, one based on the
      physical condition or state of preservation and legibility of the autograph,
      and
      the other based on the physical condition of the collectible, using a numeric
      scale of 1-to-10, the highest number representing “mint” condition or perfect
      quality. However, the grading standards that we apply for “game-used” baseballs,
      which by their very nature are not in “pristine” condition, are different than
      the grading standards for unused or souvenir autographed baseballs. Autograph
      grading is in its infancy and we cannot predict whether it will gain market
      acceptance. However, if we find that there is a demand for such services, it
      is
      our intention to offer grading services for autographed historical and
      entertainment memorabilia as well.




*PSE* .
      We
      commenced our PSE stamp authentication and grading service in January 2000.
      In
      rating the quality of stamps, we assign a numeric grade to each stamp that
      ranges from 1-to-100. The grade assigned to a stamp is based on several
      characteristics, including the centering of the image on the stamp and the
      absence or presence of various faults, such as creases, perforation problems
      and
      other imperfections that, if present, will reduce the value of the stamp. For
      a
      stamp to receive a grade of 100, which means that it is in “gem” condition, the
      image on the stamp must be perfectly centered and the stamp must be faultless.
      Stamps submitted to us for grading are independently examined and graded by
      two
      of our stamp experts, who must have independently arrived at the same grade
      before a final grade is assigned. After a stamp has been authenticated and
      graded, we generally issue a certificate of authentication that briefly
      describes the stamp and the grade assigned to it and has a digital image of
      the
      stamp attached. The certificate bears the PSE name and logo and a unique
      certification number that we assign to the stamp for record keeping purposes.
      We
      also offer our customers the option of having the stamp encapsulated in a
      tamper-evident, clear plastic holder with an encased label that, like the
      certificate, identifies the stamp and sets forth the grade assigned to it,
      its
      unique certification number and the PSE name and logo.




12


Stamps
      that have been authenticated and graded by us include an 1868 1¢“Z” Grill U.S.
      postage stamp, which received a PSE grade of Extremely Fine (XF) 90 and was
      last
      sold at auction in 1989 for more than $900,000. The owner submitted the stamp
      to
      us shortly after we initiated our stamp authentication and grading service
      in
      2000.




The
      volume of stamp authentication and grading submissions through fiscal 2005,
      relative to the number of coin and sportscard submissions, has not been
      material. Since stamp grading services are new to the market, we cannot predict
      when or even whether our services will gain the level of market acceptance
      needed for stamp grading to become a material contributor to our operating
      results.




*Vintage
      U.S. Paper Currency* .
      PCGS
      began marketing a vintage U.S. paper currency grading service, under the brand
      name “PCGS Currency” in the third fiscal quarter ended March 31, 2005. We have
      engaged a number of paper currency experts to grow this business and to
      authenticate and grade vintage paper currency. We use an adjectival and numeric
      grading system, with a scale of 1-to-70, which is similar to the system that
      we
      use for grading coins, largely because most vintage currency dealers are already
      familiar with that system. Currently, there are two relatively small vintage
      paper currency authentication and grading companies. Additionally, Numismatic
      Guaranty Corporation of America, our principal coin authentication and grading
      competitor, started a separate vintage paper currency authentication and grading
      service in the first calendar quarter of 2005. The rare currency market is
      smaller than our other collectibles markets and, although we began generating
      currency and authentication and grading revenues in the fourth quarter of fiscal
      2005, there is no assurance that our currency authentication and grading service
      will gain market acceptance or that our entry into that market will generate
      material revenues for us or become profitable.




*Publications
      and Content* .
      We
      publish authoritative price guides and rarity reports for coins, sportscards,
      sports autographs and memorabilia and stamps. This information is available
      on
      our website and in our publications. These publications include:




- *Price
          Guides*.
          We
          provide a wide variety of authoritative price guides for a number of
          collectible markets. For example, we track the prices at which the 3,000
          most
          actively-traded U.S. coins are sold, dating back to 1970, and compile and
          publish this information in a generally recognized collectible coin index,
          known as the*PCGS3000.*TM
- *Rarity
          Reports*.
          We
          compile and publish reports that list the total number of coins and
          sportscards we have graded since our inception, categorized by item type
          and
          grade determination. We can publish, for example, the exact number of Mint
          State (MS) 67-grade 1881-S Morgan silver dollars that we have graded. We
          believe that collectors use this information to make more informed decisions
          regarding the purchase of particular coins.
- *Articles*.
          Collecting is a passion for many and has nuances and anecdotes that are
          well
          suited to a library of articles for each category of collectibles. We write
          informative articles and publish them on our websites. A sense of community
          is
          also important to collectors. We therefore encourage our customers to
          communicate and to write articles which we sometimes publish on our websites
          or include in our publications.
- *Historical
          Content*.
          Collecting is often about history, and, in many instances, historical events
          associated with a collectible enhance its value. In our publications, we
          provide short histories about unusual and rare collectibles. We believe
          that
          these historical accounts add to the attractiveness and excitement of
          purchasing such items. During 2004, House of Collectibles, a division of
          Random House, published the second edition of the*Official
          Guide to Coin Grading and Counterfeit Detection*,
          which
          was authored by our collectible coin experts. To enhance the historical
          content that we are able to provide dealers and collectors, in the first
          quarter of the current fiscal year we acquired CoinFacts.com, which operates
          a
          website at www.coinfacts.com, at which we are now able to offer coin dealers
          and collectors proprietary information about the date and mintmark
          combinations of U.S. Colonial Coins, early U.S. coins, such as the Liberty
          Cap
          Half Cent of 1794, to the most recent U.S. minted coins, such as the Fifty
          State QuartersTM and the One Ounce American Eagle Gold and Silver Bullion Coins
          currently being produced by the U.S. Mint.



13


- *News*.
          We
          provide market news and information that are accessible to collectors and
          dealers on our websites. The news and information most often relate to
          recent
          events, such as sales of collectibles at record prices, the introduction
          of
          new collectibles and trends and developments in the collectibles markets
          we
          serve.

Marketing




We
        employ
        both “pull” and “push” strategies in marketing our services to dealers and
        collectors of high-value collectibles. Our “pull” strategies are designed to
        promote our brands and increase the preference among collectors for our
        authentication and grading services and to encourage collectors to communicate
        that preference to their collectibles dealers, because most authentication
        and
        grading submissions are made by dealers. In our experience, if a customer
        requests a particular service, the dealer ordinarily will comply with that
        request. On the other hand, if the customer expresses no preference, the
        dealer
        will make its own choice of authentication and grading service or may even
        decide not to submit the collectible to an independent service for
        authentication and grading. Therefore, our “pull” oriented marketing programs
        emphasize (i) the protections that collectors will have if they purchase
        collectibles that we have authenticated and graded, and (ii) the improved
        marketability and higher prices that they can realize if they use our
        independent third party authentication and grading services. Our “push”
        strategy, on the other hand, is designed to market our services directly
        to
        collectibles dealers and to encourage them to use and promote our
        services.


*Our
      “Pull” Strategy* .
      We have
      developed and implemented a number of marketing programs and initiatives
      designed to create consumer preference for collectibles that have been
      authenticated and graded by us. Those programs and initiatives
      include:




•
            *Direct
                Advertising*.
                We directly address collectors by advertising our services in trade
                journals and periodicals in each of our markets. Those journals include*Coin
                World*,*Linn’s
                Stamp News*,*Sports
                Collectors Digest*and*Autograph
                Collector Magazine*.
                We make personal appearances at major, national-market trade shows
                around
                the United States that are attended by collectors, as well as dealers.
                We
                also participate in and support programs conducted by non-profit
                associations whose members are primarily collectors, such as the
                American
                Numismatic Association and the American Stamp Dealers
                Association.




•
            *Set
                Registry Programs*.
                We provide collectors with the opportunity to participate in free
                internet
                “Set RegistrySMprograms
                that we host on our collectibles websites. These programs encourage
                collectors to assemble full sets of related collectibles that have
                been
                authenticated and graded by us. Generally, each registered set is
                comprised of between 50 and 200 separate, but related, collectibles.
                Examples include particular issues of coins, such as Twenty Dollar
                Gold
                Double Eagles or Morgan Silver Dollars; particular sets of sportscards,
                such as all Hall of Fame pitchers or a particular team, like the
                1961
                Yankees; or sets of collectible stamps, such as Columbian Commemoratives
                or Graf Zeppelin Airmail stamps. Our Set Registry programs enable
                collectors:




—
            to
                register their sets on our websites, which provides them with an
                off-site
                reference source for insurance and informational
                purposes;




—
            to
                display on our websites, and compare the completeness and quality
                grades
                of, the collectibles making up their sets to those of other collectors
                who
                have registered similar sets on our websites, thereby creating a
                competitive aspect to collecting that adds to its excitement;
                and




—
            to
                enter our annual company-sponsored Set Registry competitions and
                awards
                programs in which collectors can win awards for having collected
                the most
                complete and highest graded sets of particular series or issues of
                coins,
                sportscards or stamps.




The
      collectibles that may be registered on our Set Registries and included in our
      Set Registry competitions are limited to collectibles that have been
      authenticated and graded by us. To register the collectibles to be included
      in a
      particular set, a collector is required to enter the unique certificate number
      that we had assigned to each of the collectibles when last authenticated and
      graded by us. We use the certificate number to compare the information being
      submitted by the collector with our database of information to verify that
      the
      collectibles being registered by a participant for inclusion in a particular
      set
      qualify to be included in that set.




14


We
      have
      found that our Set Registry competitions (i) create a preference and
      increase demand among collectors for our brands, and (ii) promote the
      trading of collectibles authenticated and graded by us by set registrants
      seeking to improve the completeness and overall quality of their sets, which
      generally results in additional authentication and grading submissions to us.
      Annual awards for set completeness and quality have been issued by PCGS and
      PSA
      each year since 2002 and by PSE beginning in 2004. As an indication of the
      popularity of our Set Registry programs, more than 30,000 sets were registered
      on our Set Registries as of June 30, 2005, which represents a 41% increase
      over
      the number registered as of June 30, 2004.






*Collectors
            Clubs Subscription Program*. We also have established “Collectors Clubs”
            for coin and sportscard collectors. For an annual membership fee, ranging
            from
            $100 to $200, collectors receive a number of benefits, including (i)
            the right
            to have, without any further charge, a specified number of collectibles
            authenticated and graded by us, a privilege that non-member collectors
            do not
            have; and (ii) access to certain proprietary data that we make
            available
            on our websites or in print. As of June 30, 2005, there were approximately
            15,000 members in our Collectors Clubs. *Our
“Push”
        Strategy* .
        We also
        market our services directly to collectibles dealers and auctioneers to promote
        their use of our authentication and grading services. Our marketing message
        is
        focused on the potential increase in marketability of the collectibles due
        to
        the increase in consumer confidence that is attributable to our authentication
        and grading of those collectibles. These marketing programs
        include:


•
            *Trade
                Publication Advertising and Direct Communications*.
                We communicate to dealers and auctioneers by direct contact and through
                advertising in trade journals and publications in the respective
                markets.
                Those journals include*Coin
                World*,*Linn’s
                Stamp News*,*Sports
                Collectors Digest*and*Autograph
                Collector Magazine*.
                We also communicate with our dealers and with auctioneers by direct
                mail,
                email, and telephone.




•
            *Trade
                Shows and Conventions*.
                There are numerous collectibles trade shows and conventions held
                annually
                in the United States, of which approximately 30 generally are considered
                to be the largest and most significant in the collectible coin,
                sportscard, autograph and stamp markets. At these shows and conventions,
                collectibles dealers gather on a trading floor or “bourse” to buy and sell
                collectibles. We offer same day, on-site authentication and grading
                services, which facilitate the trading and sales of collectibles
                at these
                shows and conventions. At the same time, we obtain additional brand
                exposure and generate increased revenues, because dealers and collectors
                generally are willing to pay higher fees for same day, on-site
                services.




•
            *Our
                Dealer Invitationals*.
                We sponsor and host 8-to-10 “invitation-only” events per year for our
                larger dealers that provide them with forums for buying and selling
                their
                collectibles. We also offer same day, on-site authentication and
                grading
                services at these invitationals. Like the other trade shows and
                conventions we attend, these invitationals enable us to generate
                additional authentication and grading revenues. At the same time,
                because
                we host the invitationals, they provide additional brand exposure
                and
                build goodwill for us among the collectibles
                dealers.




•
            *Authorized
                Dealer Network*.
                We have implemented authorized dealer programs for coin and sportscard
                collectibles dealers and auction companies. Authorized dealers are
                able to
                use our marketing materials which are designed to promote our services
                and
                those of our authorized dealers to collectors. Those materials include
                “point of sale” and “point of purchase” displays and brochures and direct
                mail pieces for insertion in customer mailings. In addition, authorized
                dealers may use our brand logotypes on their websites to attract
                buyers
                for coins and sportscards that have been authenticated and graded
                by us.
                We also conduct joint marketing programs with our authorized dealers
                in
                which we provide financial support for dealer marketing programs,
                approved
                by us, that promote both the dealer’s products and services and our
                authentication and grading
                services.






15




*eBay
        Promotional Programs* .
        Since
        1999, we have worked with eBay on programs to increase the volume of
        collectibles traded on eBay and, at the same time, to provide greater exposure
        for our authentication and grading services. Current programs
        include:


•
            *Informative
                and Educational Web Pages*.
                We have created web pages for eBay specifically designed to inform
                and
                educate eBay buyers and sellers about the benefits of our authentication
                and grading services. eBay includes, on its collectibles web pages,
                links
                to our web pages and encourages its collectibles customers to use
                our
                services. eBay has similar programs with other collectibles authentication
                and grading services.




•
            *Quick
                Opinion Autograph Authentication Service*.
                We have developed, for eBay’s customers that visit its sports memorabilia
                auction website, a fee-based “Quick Opinion” autograph authentication
                service. For a prescribed fee, currently approximately $7 per autograph,
                an eBay visitor that is interested in selling or buying an autographed
                item of memorabilia on the eBay auction website can obtain, from
                one of
                our autograph experts, a “quick” opinion as to the authenticity of the
                autograph, generally provided within a day of submission. The opinion
                is
                based on an examination of a digital image of the autograph posted
                on eBay
                and, due to the limitations inherent in this process, we do not warrant
                the accuracy of these opinions. The fees generated by this service
                are
                shared between us and eBay.




•
            *Other
                Initiatives*.
                We have maintained an ongoing dialogue with eBay regarding other
                programs
                that will attract collectibles sellers and buyers and make it easier
                for
                them to complete collectibles transactions on eBay’s collectibles auction
                websites. For example, we recently authenticated and graded, for
                exclusive
                sale on eBay’s sports memorabilia auction website, a special issue of
                Boston Red Sox Poker Chips that commemorate the team’s World Series
                victory and we also graded promotional cards for the Star Wars Return
                of
                the Sith movie that were auctioned on
                eBay.




**Patents
      and Intellectual Property**




Our
      intellectual property consists primarily of trademarks, copyrights, proprietary
      software and trade secrets. As part of our confidentiality procedures, we
      generally enter into agreements with our employees and consultants and limit
      access to, and distribution of, our software, documentation and other
      proprietary information. The following table sets forth a list of our
      trademarks, both registered and unregistered, that are currently being used
      in
      the conduct of our business:




**Registered
                Marks**
            
            **Unregistered
                Marks**Collectors
                Universe
            
            Cert
                & Sell
            
            PSEPCGS
            
            World
                Series of Grading
            
            Coin
                UniverseProfessional
                Sports Authenticator
            
            PCGS3000TM
            
            Collectors.comPSA/DNA
            
            History
                in Your Hands
            
            Record
                UniverseSet
                Registry
            
            First
                Strike
            
            PCGS
                Currency




We
      have
      not conducted an exhaustive search of possible prior users of the unregistered
      trademarks listed above and, therefore, it is possible that our use of some
      of
      these trademarks may conflict with others.




In
      addition, the Company or its subsidiaries have been awarded two patents, one
      patent application is pending, and we have filed a provisional patent
      application in connection with grading and authentication of
      collectibles.




**Collectibles
      Experts**




As
      of
      June 30, 2005, we employed 36 collectibles experts in our authentication and
      grading operations, who have from 1 to 49 years, and an overall average of
      25
      years, of collectibles marketplace experience. Our experts include individuals
      that either (i) had previously been collectibles dealers or were recognized
      as experts in the markets we serve, or (ii) who we have trained in our
      authentication and grading methodologies and procedures. However, talented
      authentication and grading experts are in short supply and there is considerable
      competition among collectibles authentication and grading companies for their
      services. As a result, we have recently increased our focus on training young
      authenticators and graders who we believe have the skills or knowledge base
      to
      become collectibles experts. Such full-time graders and authenticators are
      prohibited from submitting items to us for grading or authentication. We also
      sometimes contract with outside experts on a consulting basis, who are usually
      collectibles dealers, to help grade and/or authenticate significant and/or
      very
      specialized items. These consultants can, and do, use our services. However,
      they are prohibited from grading and/or authenticating any item in which




16


they
      have
      a financial interest. In addition, we may use outside consultants to enable
      us
      to address short-term increases in authentication and grading
      orders.




**Service
      Warranties**




We
      issue
      an authenticity or grading warranty with every coin and sportscard authenticated
      or graded by us. Under the terms of the warranty, if a coin or sportscard that
      was graded by us later receives a lower grade upon resubmission to us for
      grading, we are obligated either to purchase the coin or sportscard at the
      price
      paid by the then-owner of the coin or sportscard or, instead, if we so choose,
      to pay the difference in value of the item at its original grade as compared
      with its lower grade. Similarly, if a coin or sportscard that has been
      authenticated by us is later determined not to have been authentic, we are
      obligated under our warranty to purchase the coin or sportscard at the price
      that the then-owner paid for that collectible. We accrue for estimated warranty
      costs based on historical claims experience.




Before
      returning an authenticated or graded coin or sportscard to our customer, we
      place the coin or sportscard in a tamper-evident, clear plastic holder that
      encapsulates a label identifying the collectible as having been authenticated
      and graded by us. The warranty is voided in the event the plastic holder has
      been broken or damaged or shows signs of tampering.




We
      recently began offering a similar warranty for stamps and currency that we
      authenticate and grade. To obtain such a warranty, the customer must elect
      to
      have his or her stamp encapsulated in a tamper-evident, clear plastic holder
      that includes a label identifying the collectible as having been authenticated
      or graded by us. We do not offer such a warranty in those cases where the
      customer chooses, instead, to have us issue a certificate of authenticity and
      grade.




We
      do not
      provide a warranty with respect to our opinions regarding the authenticity
      or
      quality of autographs.




**Customer
      Service and Support**




We
      devote
      significant resources, including a 24 person staff, to providing personalized
      customer service and support in a timely manner. On our websites, customers
      are
      able to check the status of their collectibles submissions throughout the
      authentication and grading process and to confirm the authenticity of the over
      15 million collectibles that we have graded. When customers need services or
      have any questions, they can telephone or e-mail our support staff, Monday
      through Friday between the hours of 7:00 A.M. and 6:00 P.M., Pacific Time.
      We
      also involve our collectibles experts in providing support services when
      necessary to address special issues.




**Supplies**




In
      order
      to obtain volume discounts, we have chosen to purchase most of the
      injection-molded plastic parts for our clear plastic holders principally from
      a
      single supplier. There are numerous suppliers for these items, however, and
      we
      believe that, if necessary, we could obtain those items from any of those other
      suppliers without significant cost to us. However, if it were to become
      necessary for us to obtain another supplier, we might have to arrange for the
      fabrication of a die for the new supplier. Fabrication of high precision dies
      can be a lengthy process. Therefore, it is our practice to maintain at least
      a
      one month supply of these molded plastic parts in inventory.




**Competition**




*Coin
      Authentication and Grading* .
      We have
      three primary competitors in the coin authentication and grading market:
      Numismatic Guaranty Corporation of America, Independent Coin Grading and
      ANACS.




*Sportscard
      Authentication and Grading* .
      We have
      two primary competitors in sportscard authentication and grading: Beckett
      Sportscard Grading Corporation and Global Authentication, Inc.




*Autograph
      Authentication and Grading* .
      In the
      vintage autograph authentication market, we compete with Global Authentication,
      Inc. and a few smaller competitors. By contrast, there are a number of
      competitors for “signed-in-the-presence” grading, including Tri-Star, Steiner
      Sports and Upper Deck Authentication. We have not encountered any competitors
      that offer autograph grading services.




17


*Stamp
      Authentication and Grading* .
      In
      stamp authentication, our principal competitors are the Philatelic Foundation
      and the American Philatelic Society, both of which are non-profit organizations.
      On the other hand, we are not aware of any companies or other organizations
      that
      provide stamp grading services.




*Currency
      Authentication and Grading.* In the
      paper currency authentication and grading market, we compete against Numismatic
      Guaranty Corporation of America and two smaller competitors.




The
      principal competitive factors in our collectibles authentication and grading
      markets are (i) brand recognition and awareness, (ii) an established
      reputation for integrity, independence and consistency in the application of
      grading standards, and (iii) responsiveness of service. Price is much
      less
      of a factor in the case of vintage collectibles, but is a more important
      consideration with respect to modern coins and sportscards because of their
      significantly lower values. We believe that our PCGS, PSA, PSA/DNA, PSE and
      PCGS
      Currency brands compete favorably with respect to all of these factors and
      are
      among the leaders in each of their respective markets. Barriers to entry into
      the authentication and grading market are relatively low, especially in the
      sportscard authentication and grading market. However, brand name recognition
      and a reputation for integrity, independence and consistency in the application
      of grading standards can take several years to develop. The limited supply
      of
      collectibles experts also operates as a barrier to entry or
      expansion.




**Information
      Technology**




We
      have
      developed proprietary software systems that we use in our authentication and
      grading operations, principally for order tracking, processing and
      recordkeeping, and the operation and maintenance of our internet websites.
      These
      software systems include Grading Management and Production Systems, Set
      Registry, Population Reports, Price Guides, Market Indexes, Article Libraries
      QuickOpinion Systems and Featured Dealer Systems. These systems operate on
      software platforms in Microsoft Visual Basic.NET, Microsoft ASP.NET and
      Microsoft SQL Server. We also have legacy systems, which we are in process
      of
      replacing, in Cold Fusion and Visual Basic 6. We also maintain an integrated
      local area network that assists in and provides certain controls on production,
      product physical movement, accounting and financial functions, data warehousing
      and other tasks. During the fiscal year ended June 30, 2005, these systems
      tracked the authentication and grading process and generated records and data
      for over 2.9 million collectibles submitted to us for authentication and
      grading, without significant disruption or loss of service.




Although
      we do not primarily conduct our business on the internet, we do use the internet
      for information exchange and delivery of market-oriented content and for our
      Set
      Registry and certain of our other marketing programs. As a result, we have
      25
      Dell PowerEdge Servers with RAID, along with a fully redundant SQL Server 2000
      with high-availability cluster supporting over two terabytes of clustered
      storage. The hardware resides at our headquarters in a server room that has
      24/7
      environmental monitoring and alerting through hardware sensors, 24/7 network
      availability and performance monitoring and alerting through network management
      software and 24/7 internet availability and performance monitoring and alerting
      through third party providers. The internet connectivity flows through multiple
      internet providers supporting up to approximately 47 megabit internet bandwidth
      with multiple layers of internet firewall protection, including three Cisco
      PIX
      firewalls and Microsoft ISA Server protection. We maintain a multi-tiered
      antivirus and anti-spam SMTP infrastructure scanning all incoming mail through
      four different AV engines. The system is backed up nightly with 1.6 terabyte
      capacity, expandable to over 3 terabytes under current configuration, and is
      managed by administrators certified by Microsoft, Cisco and Linux.




However,
      we do not have redundant computer systems at a location that is remote from
      Southern California, where our computer systems currently are located. As a
      result, any damage to or failure of our computer systems due to a catastrophic
      event in Southern California, such as an earthquake, could cause an interruption
      in our services.





**Government
      Regulation**





With
      the
      exception of laws in some states that require memorabilia authenticators to
      certify to the accuracy of their authentication opinions, there are no material
      government regulations specifically relating to the authentication and grading
      businesses that we conduct, other than regulations that apply generally to
      businesses operating in the markets where we maintain operations or conduct
      business. However, our dealer finance program is subject to numerous laws and
      regulations in those states in which we may make loans to
      dealers.


18


**Disposition
      of Collectibles Sales Businesses**




During
      the period from 1999 through the latter part of fiscal 2004, we also were
      engaged in the business of marketing and selling collectible coins, sportscards,
      currency and sports entertainment and historical memorabilia. Most of those
      sales were made at multi-venue auctions that were conducted by our collectibles
      sales businesses, which were comprised of Bowers and Merena Galleries and
      Kingswood Coin Auctions for rare coins, Superior Sports Auctions for vintage
      sportscards and sports memorabilia, Lyn Knight Currency Auctions for currency
      and Odyssey Publications for entertainment and historical memorabilia. We also
      sold collectible coins by direct sales methods.




In
      December 2003, our Board of Directors authorized management to implement a
      plan
      to focus our financial and management resources, and collectibles expertise,
      on
      the operations and growth of our authentication and grading businesses, and
      to
      divest the collectibles auctions and direct sales businesses. This decision
      was
      based on a number of factors and considerations that included, among others,
      (i)
      the historical operating results of the collectibles auction and direct sales
      businesses, which had proven to be disappointing as compared to the operating
      results of our authentication and grading businesses; (ii) a lack of synergies
      between the collectibles sales businesses and our grading authentication
      businesses, which made it difficult to achieve a meaningful reduction in our
      operating expenses; and (iii) the additional capital that we believed would
      be
      required to grow our collectibles auction and direct sales businesses in
      comparison to the lower capital requirements of our authentication and grading
      businesses.




As
      a
      result of this decision, we sold our collectibles sales businesses during fiscal
      2004, but retained the collectibles inventory and accounts receivable of those
      businesses, which we have substantially liquidated. We also terminated the
      licenses under which we operated our David Hall Rare Coins Division, which
      had
      been engaged in the business of selling collectible coins at retail. We
      generated cash of $10,435,000 in fiscal year ended June 30, 2004 and $2,332,000
      in the year ended June 30, 2005, from the disposition of those businesses and
      the liquidation of their inventories and accounts receivable.




We
      believe that the divestiture of the collectibles sales businesses enables us
      to
      focus our financial and managerial resources on growing our existing
      authentication and grading revenues and to reduce our operating expenses, and,
      thereby, increase our overall profitability. Additionally, we intend to use
      the
      cash generated from the sales of the discontinued businesses, along with our
      other cash resources, to develop and implement new marketing programs, expand
      the value-added services that we are able to offer our existing customers and
      acquire or start new businesses that will enable us to offer authentication
      and
      grading services in other high-value collectibles or high-value asset
      markets.




**Employees**




As
      of
      June 30, 2005, we had 167 full-time employees and 19 part-time employees, of
      which 139 were employed in authentication and grading, including our 36
      collectibles experts and 24 customer service and support personnel. The other
      employees included 8 in information services, 3 in marketing, and 36 in other
      business and administrative services. We have never had a work stoppage, and
      no
      employees are represented under collective bargaining agreements. We consider
      relations with our employees to be good.




**Factors
      That Could Affect Our Future Financial Performance**




Our
      business is subject to a number of risks and uncertainties that could prevent
      us
      from achieving our business objectives and that could hurt our future financial
      performance and the price performance of our common stock, and cause our future
      financial condition and future financial performance to differ significantly
      from our current expectations described in the forward-looking statements
      contained in this Report. Those risks and uncertainties, many of which are
      outside of our control, include the following:




**A
      decline in the popularity of high-value collectibles and a resulting decrease
      in
      submissions for our services could adversely impact our business.**




The
      volume of collectibles submitted to us for authentication and grading is
      affected by the demand for and market value of those collectibles. As the demand
      for and value of collectibles increase, authentication and grading submissions,
      as well as requests by submitters for higher price, faster turn-around times,
      also increase. However,




19


that
      also
      means that a decline in popularity and, therefore in the value, of the
      collectibles that we authenticate and grade would cause decreases in
      authentication and grading submissions and in requests for faster turn-around
      times and, therefore, also in our revenues and profitability. We have found,
      over the years, that the popularity of collectibles can vary due to a number
      of
      factors, most of which are outside of our control, including perceived scarcity
      of collectibles, general consumer confidence and trends and their impact on
      disposable income, precious metals prices, interest rates and other general
      economic conditions. For example, declines in gold prices or further increases
      in interest rates could lead to reductions in authentication and grading
      submissions and, therefore, could adversely affect our profitability and
      financial condition.




**Declines
      in general economic conditions could result in decreased demand for our
      services, which could adversely affect our operating results.**




The
      availability of discretionary or disposable income is an important factor in
      the
      willingness and ability of collectors to purchase, and the prices that they
      are
      willing to pay for, high-value collectibles. Declines in purchases and sales,
      and in the value, of collectibles usually result in declines in the use of
      authentication and grading services, as such services are most often used by
      sellers and purchasers of collectibles in conjunction with and to facilitate
      collectibles sale and purchase transactions. As a result, economic
      uncertainties, downturns and recessions can and do adversely affect our
      operating results by (i) reducing the frequency with which collectors submit
      their coins, sportscards and other collectibles for authentication and grading;
      (ii) causing customers to request longer authentication and grading turn-around
      times, which would reduce our revenues and profitability, and (iii) reducing
      the
      ability of customers to pay outstanding accounts receivable.




**Temporary
      popularity of some collectibles may result in short-term increases, followed
      by
      decreases, in the volume of submissions for our services, which could cause
      our
      revenues to fluctuate.**




Temporary
      consumer popularity or “fads” among collectors may lead to short-term or
      temporary increases, followed by decreases, in the volume of collectibles that
      we authenticate and grade. These trends may result in significant
      period-to-period fluctuations in our operating results and could result in
      declines in our net revenues and profitability, not only because of a resulting
      decline in the volume of authenticating and grading submissions, but also
      because such trends could lead to increased price competition, which could
      require us to reduce our authentication and grading fees in order to maintain
      market share. In the last few years, for example, the popularity of sportscards
      has declined and, at the same time, we have experienced a decline in sportscard
      authentication and grading submissions.




**Our
      revenues and income depend significantly on revenues generated by our coin
      authentication and grading services. A decrease in the level of submissions
      for
      these services, which historically has been impacted by changes in economic
      conditions, could adversely affect our revenues and results of operations.**




Coin
      authentication and grading accounted for approximately 69%, 66% and 60% of
      our
      net revenues in fiscal 2005, 2004 and 2003, respectively. Furthermore, in fiscal
      2005, coin grading was the segment of our authentication and grading business
      that experienced the most significant increase in net revenues. We believe
      that
      this growth in coin grading submissions has been due, at least in part, to
      the
      volatility of and uncertainties regarding the performance of the stock markets,
      coupled with the decline in interest rates and in the value of the U.S. Dollar,
      which have led investors to shift some of their investments from stocks and
      bonds to precious metals. The lack of diversity in our sources of revenues
      and
      our dependence on coin grading submissions for a majority of our net revenues
      make us more vulnerable to adverse changes in economic conditions. These adverse
      changes include declines in the value of precious metals or recessionary
      conditions that could result in declines in collectibles authentication and
      grading submissions generally or, more particularly, in collectible coin
      submissions that would, in turn, result in reductions in our total net revenues
      and income.




**Our
      top 5 customers, account for approximately 27% of our total net revenues.**




During
      the year ended June 30, 2005, five of our coin authentication and grading
      customers accounted for approximately 27% of our total net revenues. As a
      result, the loss of any of those customers, or a lower level of activity by
      any
      of those customers, would cause our net revenues to decline and, therefore,
      could harm our profitability. During the fourth quarter of fiscal 2005, the
      owner of the largest of these customers encountered an unexpected and serious
      medical problem, which led to a 45% decrease in revenues from that customer
      in
      the fourth




20


quarter,
      compared to the third quarter of fiscal 2005. This reduction in revenues from
      that customer is expected to continue in fiscal 2006.




**Our
      autograph grading, stamp and currency authentication and grading businesses
      are
      in their start-up phase. There can be no assurance that these businesses will
      prove to be successful.**




We
      only
      commenced our autograph grading and currency authentication and grading
      businesses in fiscal 2005 and our stamp authentication and grading business,
      which we commenced in 2000, has yet to make a material contribution to our
      net
      revenues. There is no assurance that these services will gain market acceptance.
      To date, our stamp and currency grading businesses have incurred operating
      losses and our autograph grading business has been in operation for a short
      period of time. As a result, there is no assurance that any of these businesses
      will ever make a material contribution to our net revenues or achieve
      profitability. In that event, we may have to discontinue, and write off our
      investments in, those businesses.




**There
      are risks associated with our decision to exit our collectibles auctions and
      direct sales businesses.**




In
      December 2003, we adopted a new strategic plan that focuses our financial and
      management resources, and collectibles expertise, on the operations and growth
      of our authentication and grading businesses and that led us to dispose of
      our
      collectibles auctions and direct sales businesses. We adopted this strategic
      plan because we believed it would enable us to improve our profitability and
      the
      consistency and predictability of our operating results and cash flows. Although
      our operating results have improved since we initiated this strategy, there
      is
      no assurance that this strategy will prove to be successful over the longer
      term. Among other things, one consequence of our strategy is that there has
      been
      a significant reduction in our net revenues, because our discontinued auction
      and direct sale businesses had accounted for, on average, more than 60% of
      our
      net revenues from continuing operations in each of the fiscal years ended June
      30, 2003, 2002 and 2001. Therefore, our future success will depend to a great
      extent on our ability to continue to increase our revenues by introducing and
      offering additional revenue generating services in our existing markets and
      entering into collectibles or high value asset markets in which we do not
      presently operate, either by acquisition of existing businesses or the
      commencement of new authentication and grading businesses.




There
      is
      no assurance that we will be successful in doing so, and if we are unable to
      achieve internal growth or acquire new authentication or grading businesses,
      this strategy could have a negative impact on our future financial performance.




**Future
      acquisitions and the commencement of new businesses present risks, and we may
      be
      unable to achieve the financial and strategic goals of any acquisition or
      commencement of any new business.**




One
      component of our growth strategy is to acquire existing or to start new
      businesses that serve other markets for other collectibles or high-value assets.
      Even if we succeed in acquiring or starting any such businesses, those new
      businesses will face a number of risks and uncertainties, including:




•
            difficulties
                in integrating newly acquired or newly started businesses into existing
                operations, as a result of which we may incur increased operating
                costs
                that would adversely affect our operating
                results;




•
            the
                risk that our current and planned facilities, computer systems and
                personnel and controls will not be adequate to support our future
                operations;




•
            diversion
                of management time and capital resources from our existing businesses,
                which could adversely affect their performance and our operating
                results;




•
            dependence
                on key management personnel of acquired or newly started businesses
                and
                the risk that we will be unable to integrate or retain such
                personnel;




•
            the
                risk that new services we may introduce or begin offering, whether
                as a
                result of internal expansion or business acquisitions, will not gain
                acceptance among dealers or
                collectors;




21


•
            the
                risk that we will face competition from established or larger competitors
                in the new markets we may enter, which could adversely affect the
                financial performance of any businesses we might acquire or start;
                and




•
            the
                risk that the anticipated benefits of any acquisition or of the
                commencement of any new business may not be realized, in which event
                we
                will not be able to achieve an attractive return on our
                investment.




**There
      are risks associated with new service offerings, including our dealer financing
      program, with which we have little experience.**




We
      are
      exploring new services that we might introduce and offer to our existing
      authentication and grading customers as a means of increasing our net revenues
      and profitability. Those new services, however, may be unprofitable and harm
      our
      operating results.




One
      of
      those new services is a dealer financing program that involves our making
      short-term loans to collectibles dealers that would be collateralized by the
      collectibles they submit to us for authentication and grading. There is no
      assurance that we will succeed in achieving the objectives of our dealer finance
      program. Additionally the lending business is subject to a number of risks
      and
      uncertainties and we do not have loan underwriting or collection experience.
      In
      addition, the failure or inability of borrowers to repay their loans is an
      inherent risk in a lending business. Our ability to minimize loan losses will
      depend on several factors, including:




·
            The
                loan underwriting policies and controls we adopt and implement, which
                could prove to be inadequate to prevent loan losses from
                occurring;




·
            Our
                ability to sell collateral, when a borrower defaults in the payment
                of a
                loan, for amounts sufficient to offset loan losses, which can be
                affected
                by a number of factors outside of our control, including (i) changes
                in economic conditions, (ii) increases in market rates of
                interest
                and (iii) changes in the condition or value of the collateral
                that
                will secure the loans we make; and




·
            The
                reserves we will need to establish for potential loan losses, which
                may
                prove to be inadequate, in which case we would have to incur additional
                charges, which would have the effect of reducing our income and could
                hurt
                our financial condition.




Additionally,
      the business of lending is subject to numerous state and certain federal laws
      and regulations, which may impose significant costs or limitations on the way
      we
      conduct or expand such a business.




We
      also
      have obtained a $7 million bank credit line that we will use to fund some of
      the
      dealer loans we make. We cannot assure that our cash flow from the operations
      of
      our dealer finance program will be sufficient to enable us to repay those
      borrowings. Also, the loan agreements establishing the line of credit impose
      certain restrictive covenants on the Company which could operate to restrict
      our
      plans to grow our business.




**We
      are dependent on our key management personnel.**




Our
      performance is greatly dependent on the performance of our senior management
      and
      certain other key employees. As a result, the loss of the services of any of
      our
      executive officers or other key employees could harm our business. Some of
      our
      executive officers and key employees are experts in the collectibles markets
      and
      have industry-wide reputations for authentication and grading of collectibles.
      In particular, the loss of Michael R. Haynes, our Chief Executive Officer,
      or
      David G. Hall, our President, could have a negative effect on our reputation
      for
      expertise in the collectibles markets in which we operate and could lead to
      a
      reduction in authentication and grading submissions to us.




**We
      are dependent on our collectibles experts.**




There
      are
      a limited number of individuals who have the expertise to authenticate and
      grade
      collectibles, and compete for available collectibles experts is intense.
      Accordingly, our business and our growth initiatives are heavily dependent
      on
      our ability (i) to retain our existing collectibles experts, who have developed
      relatively unique skills and enjoy a reputation for being experts within the
      collectibles markets, and (ii) to implement personnel recruiting,




22


succession
      and training programs that will enable us to add collectibles experts, as
      necessary, to grow our business and offset employee turnover that can occur
      from
      time to time. If we are not successful in retaining our existing collectibles
      experts or in hiring and training new collectibles experts, this could adversely
      affect our growth initiatives and harm our business, operating results and
      financial condition. Moreover, some of our experts could leave our company
      to
      join a competitor or start a competing business.




**We
      could suffer losses on authentication and grading warranties.**




We
      offer
      a warranty covering the coin, sportscard and stamps authentication and grading
      services that we provide. Under the terms of our warranty:




•
            if
                any coin, sportscard or stamp that we have authenticated and sealed
                in our
                tamper-evident plastic cases is later determined not to have been
                genuine,
                we would have to purchase the coin or sportscard at the price paid
                for it
                by its then owner; and




•
            if
                any coin, sportscard or stamp that was graded by us and sealed in
                our
                tamper-evident plastic cases later receives a lower grade upon
                resubmission to us for grading, we would be obligated either to purchase
                the coin, sportscard or stamp at the price paid by its then owner
                or to
                pay the difference in its value at its original grade as compared
                to its
                value at the lower grade.




We
      have
      no insurance coverage for claims made under these warranties and, therefore,
      we
      maintain reserves to satisfy such warranty claims based on historical
      experience, which in the past have proven to be adequate. If warranty claims
      were to exceed these reserves, we would incur additional charges that would
      adversely affect our operating results and financial condition.




**Increased
      competition could adversely affect our financial performance.**




Although
      there are few major competitors in the collectibles authentication and grading
      markets in which we currently operate, competition in these markets is,
      nevertheless, intense. Increased competition could adversely affect our pricing
      and profit margins and our ability to achieve further growth. We cannot assure
      that we will continue to be successful in competing against existing or future
      competitors. Additionally, if we succeed in expanding our business into new
      collectibles markets in which there are companies that already provide
      authentication and grading services, we are likely to encounter intense
      competition from those companies. Also, our entry into new collectibles or
      high-value asset markets could lead other potential competitors to enter those
      markets as well. Such competition could adversely affect our ability to generate
      profits and could cause us to incur losses and damage our financial condition.




**We
      depend on our ability to protect and enforce our intellectual property rights.**




We
      believe that our trademarks and other proprietary rights are important to our
      success and competitive position. We rely on a combination of trademark,
      copyright and trade secret laws to establish and protect our proprietary rights.
      However, the actions we take to establish and protect our trademarks and other
      proprietary rights may prove to be inadequate to prevent imitation of our
      services or products or to prevent others from claiming violations of their
      trademarks and proprietary rights by us. In addition, others may develop similar
      trade secrets or other intellectual property independently or assert rights
      in
      our trademarks and other proprietary rights that could lead them to seek to
      block sales of our services based on allegations that use of some of our marks
      or other intellectual property constitutes a violation of their intellectual
      property rights.




**Our
      unregistered trademarks could conflict with trademarks of others.**




We
      have
      not conducted an exhaustive search of possible prior users of our unregistered
      trademarks, including Coin Universe, Collectors.com and PSE. Therefore, it
      is
      possible that our use of some of these trademarks may conflict with others.
      As a
      result, we could face litigation or lose the use of some of these trademarks,
      which could have an adverse effect on our name recognition and result in a
      decrease in revenues and an increase in expenses.




23


**The
      imposition of government regulations could increase our costs of doing business.**




With
      the
      exception of state laws applicable to autograph authentication, the collectible
      coin and other high-value collectibles markets are not currently subject to
      direct federal, state or local regulation. However, from time to time government
      authorities discuss additional regulations which could impose restrictions
      on
      the collectibles industry, such as regulating collectibles as securities or
      requiring collectibles dealers to meet registration or reporting requirements,
      or regulating the conduct of auction businesses. Adoption of laws or regulations
      of this nature could lead to a decline in sales and purchases of collectibles
      and, therefore, also to a decline in the volume of coins, sportscards and other
      collectibles that are submitted to us for authentication and grading.




**Our
      reliance on a single source for principally all of our “tamper-evident,” clear
      plastic coin and sportscard holders exposes us to potential supply problems.**




We
      place
      all of the coins and sportscards and currency notes, and sometimes also the
      stamps, that we authenticate and grade in tamper-evident, clear plastic holders.
      In order to take advantage of volume pricing discounts, we have chosen to
      purchase substantially all of those holders, on a purchase order basis, from
      one
      principal supplier. Our reliance on a single supplier for a substantial portion
      of those plastic holders exposes us to potential for delay in our ability to
      deliver timely authentication and grading services in the event that supplier
      were to terminate its services to us or to encounter financial or production
      problems. If, in such an event, we were unable to obtain replacements of
      comparable quality in a relatively short period of time, we could lose customer
      orders or incur additional costs, which could cause a decline in our net
      revenues and have a material adverse effect on our results of operations.




**Our
      computer and network systems may be vulnerable to unforeseen problems and
      security risks, and we are vulnerable to system failure due to a lack of
      redundant systems at another location.**




Our
      operations are dependent on our ability to protect our computer systems that
      we
      use in our authentication and grading operations and to maintain our websites
      against damage from fire, power loss, telecommunications failure, earthquakes
      and similar catastrophic events. In this regard, Southern California, where
      we
      are located, is particularly vulnerable to earthquakes and fires that could
      result in damage to our computer systems; however, we do not have redundant
      computer systems at a location that is remote from Southern California. Any
      damage to or failure of our computer systems could cause an interruption in
      our
      services that could harm our business, operating results and financial
      condition.




In
      addition, our operations are dependent on our ability to protect our computer
      systems and network infrastructure from damage that could occur from physical
      break-ins, security breaches and other disruptive problems caused by the
      technology that we employ in our operations. Computer break-ins and security
      breaches also could jeopardize the security of information stored in and
      transmitted through our computer systems and network infrastructure, which
      could
      cause us to incur significant liability and possibly also damage our reputation.
      Other disruptions due to problems on the internet or actions of internet users
      could make it difficult for our customers to access our websites. In either
      case, problems of this nature could adversely affect our business and operating
      results, and security breaches that would adversely affect the privacy of
      customer information could lead existing customers to terminate their business
      relationships with us. Although we intend to continue to implement sophisticated
      technology to prevent such disruptions and damage, there is no assurance that
      our security measures will prove to be successful.




**We
      rely on third parties for various internet and processing services.**




Our
      operations depend on a number of third parties for internet access and delivery
      services. We have limited control over these third parties and no long-term
      relationships with any of them. For example, we do not own a gateway onto the
      internet, but, instead, rely on internet service providers to connect our
      website to the internet. Should the third parties that we rely on for internet
      access or delivery services be unable to serve our needs for a sustained time
      period as a result of a strike, natural disaster or other reason, our revenues
      and business could be harmed.




24


**We
      are exposed to potential risks and we will continued to incur increased costs
      as
      a result of the internal control testing and evaluation process mandated by
      Section 404 of the Sarbanes-Oxley Act of 2002.**




Although
      we have now completed the documentation and testing of the effectiveness of
      our
      internal control over financial reporting, as required by Section 404 of the
      Sarbanes-Oxley Act of 2002, we expect we will have to incur continuing costs,
      including increased accounting fees, in order to maintain compliance with that
      Section of the Sarbanes-Oxley Act. Also, if our efforts to comply with new
      or
      changed laws, regulations and standards differ from the activities intended
      by
      regulatory or governing bodies due to ambiguities related to our practices,
      our
      reputation may be harmed or we may be subject to litigation.




**If
      our quarterly results are below the expectations of securities market analysts
      and investors, the price of our common stock may decline.**




Many
      factors, including those described in this “Risk Factors” section, can affect
      our business, financial condition and results of operations, which makes the
      prediction of our financial results difficult. These factors include:




•
            increases
                or decreases in number of collectibles graded from period to
                period,




•
            changes
                in market conditions that can affect the demand for our authentication
                and
                grading services, such as a decline in the popularity of certain
                collectibles,




•
            general
                economic conditions that affect the availability of disposable income
                among collectors, and




•
            the
                actions of our competitors.




If
      our
      quarterly operating results fall below the expectations of securities market
      analysts and investors due to these or other risks, securities analysts may
      downgrade our common stock and some of our stockholders may sell their shares,
      which could adversely affect the trading prices of our common stock.
      Additionally, in the past, companies that have experienced declines in the
      trading price of their shares due to events of this nature have been the subject
      of securities class action litigation. If we become involved in a securities
      class action litigation in the future, it could result in substantial costs
      and
      diversion of our management’s attention and resources, thus harming our
      business.




**Provisions
      in our charter documents or in Delaware law may make an acquisition of us more
      difficult or delay a change in control, which may adversely affect the market
      price of our common stock.**




Our
      Amended and Restated Certificate of Incorporation and Bylaws contain
      anti-takeover provisions, including those listed below, that could make it
      more
      difficult for a third party to acquire control of us, even if that change of
      control would be beneficial to our stockholders:




•
            our
                board of directors has the authority to issue common stock and preferred
                stock and to determine the price, rights and preferences of any new
                series
                of preferred stock without stockholder
                approval;




•
            there
                are limitations on who can call special meetings of our stockholders;
                and




•
            stockholders
                may not take action by written
                consent.




In
      addition, provisions of Delaware law and our stock option plans may also
      discourage, delay or prevent a change in control of our company or unsolicited
      acquisition proposals.




**Ownership
      of shares by our directors and executive officers.**




As
      of
      June 30, 2005, our officers and directors and their affiliates owned
      approximately 12% of the outstanding shares of our common stock. By reason
      of
      that ownership and their positions with our Company, those stockholders continue
      to have the ability to exercise influence over our business. The interests
      of
      these stockholders may differ from the interests of other stockholders and
      their
      concentration of ownership also could discourage or prevent attempts to effect
      a
      change in control of our Company.




25


**We
      do not intend to pay dividends.   As a result, stockholders will
      benefit from an investment in our common stock only if it appreciates in value.**




We
      have
      not declared or paid any cash dividends on our common stock since our initial
      public offering in 1999. Moreover, we currently intend to retain any future
      earnings to finance our operations and for the further expansion and growth
      of
      our business and, for that reason, do not expect to pay any cash dividends
      in
      the foreseeable future. As a result, the success of an investment in our common
      stock will depend upon any future appreciation in its value. We cannot guarantee
      that our common stock will appreciate in value or even maintain the price at
      which stockholders have purchased their shares.




**ITEM
      2.**  **PROPERTIES**




We
      lease
      approximately 59,000 square feet for our California-based headquarters under
      a
      nine-year lease that commenced in November 2000. We currently sublease 2,184
      square feet of this office space to a sub-tenant with an expiration date that
      coincides with the expiration of the Company's nine-year lease. We believe
      that
      our leased offices are sufficient for our business requirements.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**




Bill
      Miller v. Collectors Universe, Inc .
      The
      Company has been named as a defendant in this action, which has been brought
      in
      the Superior Court of California, County of Orange, by Bill Miller, a former
      employee of the Company, who was president of one of the Company’s collectibles
      sales businesses that was sold in 2004 and an expert in the authentication
      of
      autographs and memorabilia. The complaint alleges that the Company had issued
      certificates of authentication bearing his name without his consent, in
      violation of a California statute prohibiting unauthorized appropriation of
      a
      person’s name, signature or likeness. The statute entitles the person whose
      name, signature or likeness has been misappropriated, in violation of the
      statute, to recover the greater of $750 or the actual damages suffered as a
      result of the unauthorized use, and any profits from the unauthorized use that
      are attributable to the use and are not taken into account in computing the
      actual damages. Although Plaintiff’s complaint does not state the amount of
      damages he is seeking, during the discovery phase of the action, plaintiff’s
      counsel has asserted that he is entitled to recover damages in excess of $10
      million based on the assertion that the statue entitles plaintiff to $750 per
      issued certificate of authenticity. The Company has denied plaintiff’s
      allegations, including a denial that the use of the certificates was
      unauthorized and a denial that he has suffered damages, and the Company is
      vigorously defending against the lawsuit. The Company believes, moreover, that
      it has meritorious defenses to plaintiff’s claims and that it will not incur any
      material liability to plaintiff in this action. However, there is little
      interpretive history with respect to the statute, creating a number of
      relatively novel factual and legal issues, and for that reason, it is not
      possible to predict with certainty the ultimate outcome of the trial, which
      is
      scheduled to take place in October 2005.




The
      Company also is named, from time to time, as a defendant in lawsuits that arise
      in the ordinary course of its business. Management of the Company believes
      that
      none of such lawsuits that are currently pending against it is likely to have
      a
      material adverse effect on the Company.




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




None.




26


**EXECUTIVE
      OFFICERS OF REGISTRANT**




**Name**
            
            **Age**
            
            **Positions**Michael
                R. Haynes
            
            54
            
            Chief
                Executive OfficerDavid
                G. Hall
            
            58
            
            PresidentMichael
                J. Lewis
            
            61
            
            Senior
                Vice President - Finance and Chief Financial Officer(1)Joseph
                J. Wallace
            
            45
            
            Vice
                President Finance and Chief Financial Officer(1)




(1)
            Effective
                as of September 15, 2005, Mr. Lewis will become Senior Vice President
                of
                Finance and Mr. Wallace, who has been the Company’s Vice President of
                Finance since November 2004 and Controller since June 2004,
                will
                assume the position of Chief Financial
                Officer.




**MICHAEL
      R. HAYNES** has
      served as Chief Executive Officer and Director since January 1, 2003. He served
      as Chief Operating Officer, Chief Financial Officer and Director of Tangible
      Asset Galleries, Inc, a distributor of fine art, from 2000 to 2002. He has
      been
      President, Chief Operating Officer and/or Chief Financial Officer of eight
      collectibles, precious metals, specialty retail, distribution, e-commerce and
      manufacturing businesses. Overall, Mr. Haynes has more than 25 years
      of
      experience in managing the growth and development of growth companies, which
      includes over 19 years experience in managing both public and private companies
      engaged in the business of selling collectibles at auction, retail and
      wholesale. He was also one of the co-founding board members of the Industry
      Council for Tangible Assets, a Washington, D.C. trade association for dealers
      and auctioneers of tangible and collectible assets, where he served for nine
      years. Mr. Haynes holds a Master's degree in Business and a Bachelor of Science
      degree in mechanical engineering, both from Southern Methodist University.
      He is
      a Certified Public Accountant and a Certified Financial Planner.





**DAVID
      G. HALL** has
      served as President of Collectors Universe, Inc. since September 2001. From
      April 2000 to September 2001, Mr. Hall served as our Chairman of the Board
      and
      Chief Executive Officer. Mr. Hall also has served as Chairman of the Board
      and a
      Director of Professional Coin Grading Services, Inc., the Company’s predecessor,
      since it was founded in February 1986 and also served as its President and
      Chief
      Executive Officer until January 1999. Mr. Hall was honored in 1999 by *COINage
      Magazine* as
      Numismatist of the Century, along with 14 others. In 1990, Mr. Hall was named
      an
      Orange County Entrepreneur of the Year by *INC.
      magazine.* In
      addition, he has written *A
      Mercenary’s Guide to the Rare Coin Market* ,
      a book
      dedicated to coin collecting. Mr. Hall is also a member of the Professional
      Numismatists Guild.





**MICHAEL
      J. LEWIS** has
      served as Chief Financial Officer of Collectors Universe, Inc. since October
      2001. Effective September 15, 2005, Mr. Lewis will become Senior Vice President
      - Finance of the Company. At that time, his duties as Chief Financial Officer
      will be assumed by Joseph J. Wallace, the Company’s Vice President of Finance
      and Controller. From January 2000 to October 2001, Mr. Lewis was a private
      investor. In 1998, Mr. Lewis was Chief Financial Officer of the Young
      Presidents’ Organization. During 1999, Mr. Lewis was an associate with Eureka
      Financial Markets, a venture capital firm. From 1994 to 1997, Mr. Lewis served
      as Chief Executive Officer of National Case Management. Prior to that time,
      Mr.
      Lewis served as a Financial Consultant or as Chief Financial Officer in several
      companies, including Chief Financial Officer of Western Digital Corporation
      and
      Emulex Corporation.





**JOSEPH
      J. WALLACE** will
      become the Company’s Chief Financial Officer effective as of September 15, 2005.
      He has been the Company’s Vice President of Finance since November 2004 and its
      Controller since June 2004. From 1997 to 2003, Mr. Wallace was Vice President
      of
      Finance, Chief Financial Officer and Secretary of STM Wireless, Inc., a public
      traded company engaged in the business of developing, manufacturing and
      marketing satellite communications products and services, which filed for
      Chapter 11 protection under the Bankruptcy Code in February 2003. Mr. Wallace
      is
      a Fellow of the Institute of Chartered Accountants, a member of the Institute
      of
      Certified Public Accountants, in Ireland, and a CPA in the State of
      California.














27


**PART
      II**




**ITEM
      5.** **MARKET
      FOR COMMON STOCK AND RELATED STOCKHOLDER
      MATTERS**




Our
      common stock is listed on the Nasdaq National Market, trading under the symbol
      CLCT. The following table sets forth the high and low closing prices of our
      common stock, as reported by NASDAQ for each of the fiscal quarters in the
      fiscal years ended June 30, 2005 and 2004:




**Fiscal
                2005**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            14.87
            
            $
            10.53Second
                Quarter
            
            
            20.43
            
            
            14.50Third
                Quarter
            
            
            21.60
            
            
            17.78Fourth
                Quarter
            
            
            19.34
            
            
            14.82





**Fiscal
                2004**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            3.80
            
            $
            3.35Second
                Quarter
            
            
            10.60
            
            
            3.45Third
                Quarter
            
            
            12.44
            
            
            7.45Fourth
                Quarter
            
            
            14.09
            
            
            9.33




The
      Company had 111 **** holders
      of record of its common stock and approximately 2,184 beneficial owners on
      June
      30, 2005.




**Dividends
      and Share Repurchases**




We
      do not
      intend to declare or pay cash dividends for the foreseeable future, as it is
      our
      current policy to retain all earnings to support future growth and expansion.
      In
      addition, there are restrictions on the payment of dividends arising from the
      Company’s new line of credit (see note 9 to the consolidated financial
      statements).




Pursuant
      to a program approved by the Board of Directors in 2000, the Company purchased
      125,000 of its shares at an average price of $8.16 per share during the period
      from September 25, 2000 to December 28, 2000. Although we do not currently
      have
      plans to do so, depending on market conditions and the alternatives for the
      use
      of the Company’s cash that may be in excess of our current requirements, the
      Board of Directors may consider adopting additional stock repurchase programs
      in
      the future.




**ITEM
      6.**  **SELECTED
      CONSOLIDATED FINANCIAL DATA**




The
      selected operating data for the fiscal years ended June 30, 2005, 2004 and
      2003,
      and the selected balance sheet data at June 30, 2005 and 2004, that are set
      forth below are derived from the Company’s audited consolidated financial
      statements included elsewhere in this Report. The selected operating data for
      the fiscal years ended June 30, 2002 and 2001 and the related balance sheet
      data
      at June 30, 2003, 2002 and 2001 were derived from audited consolidated financial
      statements that are not included in this Report. The following data should
      be
      read in conjunction with our consolidated financial statements and the related
      notes thereto and “Management’s Discussion and Analysis of Financial Condition
      and Results of Operations” included below in this Report.




As
      previously disclosed, in December 2003 the Company approved, and during the
      balance of fiscal 2004 implemented, a plan to dispose of its collectibles sales
      businesses. As a result, the consolidated selected financial data set out below
      for the five years ended June 30, 2005 have been restated to classify the assets
      and related liabilities of those businesses as held for sale and the related
      operating results as discontinued operations. Therefore, for fiscal years 2001
      through 2003, the loss from discontinued operations reflects the after-tax
      results of operations of these businesses in those years. In fiscal 2004, the
      loss from discontinued operations reflects the after-tax results of operations
      for these businesses through the respective dates of their disposal, plus any
      gain or loss recognized on the disposal of those businesses. In fiscal 2005,
      the
      loss from discontinued operations reflects the after tax net loss incurred
      on
      the disposal of the remaining assets of those businesses, plus additional
      consideration recognized on the sale of the discontinued businesses that became
      determinable in the period.


28


In
      the
      third quarter of fiscal 2005, we completed a public offering in which we sold
      a
      total of 3,450,000 shares of our common stock at a public offering price of
      $17.50 per share, of which 2,195,856 shares were sold by the Company. The net
      proceeds to us, after payment of underwriting commissions and offering expenses,
      were approximately $35,657,000.




**Years
                Ended June 30,**(1)(in
                thousands, except per share data)**2005**
            
            **2004**
            
            **2003**
            
            **2002**
            
            **2001****Consolidated
                Statement of Operations Data:**Net
                revenues
            
            $
            33,607
            
            $
            26,420
            
            $
            20,337
            
            $
            18,635
            
            $
            21,373Cost
                of revenues
            
            
            12,239
            
            
            10,322
            
            
            8,754
            
            
            7,935
            
            
            8,929Gross
                profit
            
            
            21,368
            
            
            16,098
            
            
            11,583
            
            
            10,700
            
            
            12,444Selling,
                general and administrative expenses
            
            
            13,901
            
            
            11,829
            
            
            11,486
            
            
            11,884
            
            
            11,044Settlement
                of lawsuit
            
            
            500
            
            
            -
            
            
            -
            
            
            -
            
            
            -Amortization
                of goodwill
            
            
            -
            
            
            -
            
            
            -
            
            
            90
            
            
            60Impairment
                of goodwill
            
            
            -
            
            
            -
            
            
            6
            
            
            51
            
            
            -Operating
                income (loss)
            
            
            6,967
            
            
            4,269
            
            
            91
            
            
            (1,325
            )
            
            1,340Interest
                income, net
            
            
            906
            
            
            135
            
            
            94
            
            
            191
            
            
            855Other
                income (expense), net
            
            
            26
            
            
            (25
            )
            
            (6
            )
            
            (20
            )
            
            (34
            )Income
                (loss) before provision (benefit) for income taxes
            
            
            7,899
            
            
            4,379
            
            
            179
            
            
            (1,154
            )
            
            2,161Provision
                (benefit) for income taxes
            
            
            3,141
            
            
            1,581
            
            
            (557
            )
            
            (502
            )
            
            949Income
                (loss) from continuing operations
            
            
            4,758
            
            
            2,798
            
            
            736
            
            
            (652
            )
            
            1,212Income
                (loss) from discontinued operations, net of gain
              on
                sales of discontinued businesses (net of incometaxes)
            
            
            60
            
            
            (1,068
            )
            
            (2,202
            )
            
            (1,858
            )
            
            (1,861
            )Cumulative
                effect of accounting change(net
                of income taxes)
            
            
            -
            
            
            -
            
            
            (8,973
            )
            
            -
            
            
            -Net
                income (loss)
            
            
            4,818
            
            $
            1,730
            
            $
            (10,439
            )
            $
            (2,510
            )
            $
            (649
            )Net
                income (loss) per basic share:(2)Income
                (loss) from continuing operations
            
            $
            0.68
            
            $
            0.45
            
            $
            0.12
            
            $
            (0.10
            )
            $
            0.19Income
                (loss) from discontinued operations, net of gainon
                sales of
              discontinued
                businesses (net of incometaxes)
            
            
            0.01
            
            
            (0.17
            )
            
            (0.35
            )
            
            (0.30
            )
            
            (0.29
            )Cumulative
                effect of accounting change(net
                of income taxes)
            
            
            -
            
            
            -
            
            
            (1.45
            )
            
            -
            
            
            -Net
                income (loss)
            
            $
            0.69
            
            $
            0.28
            
            $
            (1.68
            )
            $
            (0.40
            )
            $
            (0.10
            )Net
                income (loss) per diluted share:(2)Income
                (loss) from continuing operations
            
            $
            0.64
            
            $
            0.44
            
            $
            0.12
            
            $
            (0.10
            )
            $
            0.19Income
                (loss) from discontinued operations, net of gainon
                sales of discontinued businesses (net of incometaxes)
            
            
            0.01
            
            
            (0.17
            )
            
            (0.35
            )
            
            (0.30
            )
            
            (0.29
            )Cumulative
                effect of accounting change(net
                of income taxes)
            
            
            -
            
            
            -
            
            
            (1.43
            )
            
            -
            
            
            -Net
                income (loss)
            
            $
            0.65
            
            $
            0.27
            
            $
            (1.66
            )
            $
            (0.40
            )
            $
            (0.10
            )Weighted
                average shares outstanding:(2)Basic
            
            
            7,013
            
            
            6,170
            
            
            6,205
            
            
            6,347
            
            
            6,279Diluted
            
            
            7,452
            
            
            6,463
            
            
            6,294
            
            
            6,347
            
            
            6,408**Balance
                Sheet Data:**Cash
                and cash equivalents
            
            $
            65,439
            
            $
            21,454
            
            $
            4,482
            
            $
            4,947
            
            $
            5,874Working
                capital - continuing operations
            
            
            68,576
            
            
            22,308
            
            
            4,566
            
            
            5,621
            
            
            7,943Working
                capital - discontinued operations
            
            
            338
            
            
            991
            
            
            13,803
            
            
            13,732
            
            
            12,682Total
                assets - continuing operations
            
            
            75,123
            
            
            32,690
            
            
            15,926
            
            
            11,503
            
            
            13,588Total
                assets - discontinued operations
            
            
            411
            
            
            1,384
            
            
            16,365
            
            
            34,006
            
            
            33,281Stockholders'
                equity
            
            
            70,566
            
            
            29,366
            
            
            26,319
            
            
            37,128
            
            
            39,550




(1)
            Prior
                to fiscal 2003 the Company’s fiscal year ended on the Saturday closest to
                June 30 and, as a result, fiscal 2002 ended on June 29, 2002. Beginning
                with fiscal 2003 the Company changed its fiscal year end to June
                30. For
                clarity of presentation, fiscal 2002 is reported as having ended
                on June
                30.




(2)
            Per
                share data and weighted average shares outstanding in fiscal 2002
                and 2001
                have been retroactively adjusted for a 1-for-4 reverse stock
                split of
                our outstanding shares, which was effectuated on December 9,
                2002.











29


**ITEM
      7.** **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION****AND
      RESULTS OF OPERATIONS**




*The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with the “Selected Consolidated
      Financial Data” and our Consolidated Financial Statements and related notes,
      included elsewhere in Part II of this Report. This discussion also should be
      read in conjunction with the Section of this Report, entitled “Factors That
      Could Affect Our Future Financial Performance,” included in Part I of this
      Report, which contains information about certain risks and uncertainties that
      can affect our business and our financial performance in the future.*




**Introduction
      and Overview**




*Our
      Business*




We
      provide authentication and grading and other services to dealers and collectors
      of high-value collectible coins, sportscards, autographs and stamps that we
      believe add value to those collectibles by enhancing their marketability and,
      thereby, providing increased liquidity to the dealers and collectors that buy
      and sell these types of collectibles.




We
      principally generate revenues from the fees paid by dealers and collectors
      for
      our authentication and grading services. To a much lesser extent, we also
      generate revenues from the sale of advertising on our websites; the sale of
      printed publications and collectibles price guides and advertising in such
      publications; and the sale of historical data and information about the
      collectibles authenticated and graded by us.




*Discontinued
      Operations*




During
      the period from 1999 through the latter part of fiscal 2004, we also were
      engaged in the business of marketing and selling collectible coins, sportscards
      and sports entertainment and historical memorabilia. For the most part, those
      sales were made at multi-venue auctions that were conducted by our collectibles
      sales divisions, including Bowers and Merena Galleries and Kingswood Coin
      Auctions for rare coins, Superior Sports Auctions for vintage sportscards and
      sports memorabilia, Odyssey Publications for entertainment and historical
      memorabilia and Lynn Knight Currency Auctions for currency. We also sold
      collectible coins, at retail, by direct sales methods.




At
      the
      authorization of our Board of Directors, in December 2003, we adopted a plan
      to
      focus our financial and managerial resources, and collectibles expertise, on
      the
      operation and growth of our authentication and grading and other collectibles
      service businesses, and to divest our collectibles auctions and direct sales
      businesses. The decision to implement this plan was based on a number of factors
      and considerations that included, among others, the historical operating results
      of the collectibles sales and auction businesses, which had proved to be
      disappointing as compared to the operating results of our authentication and
      grading businesses; a lack of synergies between the collectibles sales and
      auction businesses and our authentication and grading businesses, which made
      it
      difficult to achieve operational efficiencies and cost savings; and the
      additional capital that we believed would be required to grow our auction and
      retail sales businesses in comparison to the lower capital requirements of
      our
      authentication and grading businesses.




Pursuant
      to that plan, during fiscal 2004 we sold our collectibles sales businesses.
      We
      also terminated the licenses under which we operated our David Hall Rare Coins
      Division, which had been engaged in the business of selling collectible coins
      at
      retail. However, we chose to retain and separately sell the collectibles
      inventories and collect the outstanding accounts receivables of those
      businesses. By June 30, 2005 we had substantially liquidated those retained
      assets.




In
      accordance with Statement of Financial Accounting Standard (SFAS) No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      the
      assets and related liabilities of the collectible sales businesses have been
      classified as held for sale, their related operating results have been
      classified as discontinued operations and prior period financial statements
      have
      been restated on that same basis. See “Selected Consolidated Financial Data”
      included in this Annual Report and our consolidated financial statements
      contained in Part II of this Report.




As
      a
      result of our divestiture of our collectibles sales businesses, the discussion
      that follows focuses almost entirely on our authentication and grading
      businesses, which comprise our continuing operations.




30


**Factors
      That Can Affect our Financial Position and Operating Results**




*Factors
      that Can Affect our Revenues and Cash Flows* .
      The
      provision of authentication and grading services has provided relatively stable
      and predictable cash flows for us, as the fees for a significant proportion
      of
      the authentication and grading submissions we receive are prepaid. In the years
      ended June 30, 2005, 2004 and 2003, respectively, we generated cash of
      $7,447,000, $6,068,000 and $838,000, respectively, from the operations of our
      continuing businesses.




During
      the year ended June 30, 2005 and 2004, we generated cash of $2,332,000 and
      $10,435,000 from the sales of our collectibles sales businesses and the
      liquidation of the retained inventories and accounts receivable of those
      businesses. As a result, at June 30, 2005, the remaining assets of those
      businesses, which we are in the process of liquidating, totaled $411,000, as
      compared to $1,384,000 at June 30, 2004. Therefore, it is not expected that
      the
      Company will generate any substantial cash flows from the sale of the remaining
      assets of the discontinued businesses in the future.




During
      the year ended June 30, 2005, five of our coin authentication and grading
      customers accounted for approximately 27% of our total net revenues. As a
      result, the loss of any of those customers, or a lower level of activity by
      any
      of those customers, would cause our net revenues to decline and, therefore,
      could harm our profitability. During the fourth quarter of fiscal 2005, the
      owner of the largest of these customers encountered an unexpected and serious
      medical problem, which led to a 45% decrease in revenues from that customer
      in
      the fourth quarter, compared to the third quarter of fiscal 2005. This reduction
      in revenues from that customer is expected to continue in fiscal
      2006.




In
      addition, the Company’s cash flows from investing activities can be impacted by
      the extent to which the Company makes advances or receives repayments under
      the
      Dealer Financing Program that was initiated in fiscal 2005. Borrowings or
      repayments under the Company’s new line of credit, which will be classified as
      cash flows from financing activities, may offset the impact of such advances
      or
      repayment.




At
      June
      30, 2005, we had cash and cash equivalents totaling $65,439,000, of which
      $35,657,000 represented the net proceeds from our sale, in a public offering,
      of
      2,195,856 shares of our common stock in the third quarter of 2005.




We
      intend
      to use our cash resources to fund the growth of our authentication and grading
      businesses, including (i) the introduction of new services that we can offer
      our
      customers in our existing markets and (ii) the acquisition or start up of
      businesses that authenticate or grade other high-value collectibles or other
      high-value assets. A description of the new services we plan to introduce and
      the acquisition opportunities we are exploring is contained in the Section
      of
      this Report entitled “BUSINESS -- Our Growth Strategy” in Part I of this
      Report.




*Factors
      Affecting our Gross Profit Margins* .
      The
      gross profit margins on authentication and grading submissions are primarily
      affected by the mix of collectibles submitted to us for grading (i) between
      coins and sportscards and (ii) between vintage or “classic” coins and
      sportscards, on the one hand, and modern coins and sportscards, on the other
      hand. Generally, the prices for authentication and grading of collectible coins
      are higher than those charged for the grading of sportscards, autographs or
      stamps. In addition, our fees for authentication and grading of coins and
      sportscards vary depending on the “turn-around” time requested by our customers,
      because we charge higher fees for faster service times. Since, as a general
      rule, customers request faster turn-around times for vintage or classic coins
      and sportscards than they do for modern submissions, the mix of submissions
      between vintage and modern collectibles also affects our profit
      margin.




*Impact
      of Economic Conditions on Financial Performance* .
      We
      generate substantially all of our revenues from the high-value collectibles
      markets. Accordingly, our operating results are affected by the financial
      performance of those markets, which depends to a great extent on
      (i) discretionary consumer spending and, hence, on the availability
      of
      disposable income, (ii) other economic conditions, including prevailing
      interest and inflation rates, which can affect consumer confidence and the
      performance of the stock market and the precious metals markets, and
      (iii) the performance and volatility of the precious metals and stock
      markets. These conditions primarily affect the volume of purchases and sales
      of
      collectibles which, in turn, affects the volume of authentication and grading
      submissions to us, because our services facilitate commerce in collectibles.
      Accordingly, factors such as improving economic conditions which usually result
      in increases in disposable income and consumer confidence, and volatility in
      and
      declines in the prices of stocks and a weakening in the value of the U.S.
      Dollar, which lead




31


investors
      to increase their purchases of precious metals, such as gold bullion and other
      coins, and other collectibles, usually result in increases in submissions of
      collectibles for our services. By contrast, the volume of collectibles sales
      and
      purchases and, therefore, the volume of authentication and grading submissions,
      usually decline during periods characterized by recessionary economic conditions
      and by declines in disposable income and consumer confidence, and during periods
      characterized by increasing stock prices and relative stability in the stock
      markets. We believe that the strengthening of the economy in the United States,
      together with the weakening of the U.S. Dollar, coupled with some continuing
      uncertainties over the longer term direction of the stock markets, and the
      prospect of increased inflation and higher interest rates, have contributed
      to
      an increase in the demand for gold and other precious metals and, therefore,
      also to the increases in our authentication and grading revenues during the
      years ended June 30, 2005 and 2004, in each case as compared to the immediately
      preceding fiscal year.




The
      following table provides information regarding the respective numbers of coins,
      sportscards, autographs, stamps and currency that we graded or authenticated
      in
      the fiscal years ended June 30, 2005, 2004, and 2003 and their estimated values,
      which are the amounts at which those coins, sportscards, stamps and currency
      were insured by the dealers and collectors who submitted them to us for grading
      and authentication.




**Units
                Processed****2005**
            
            **2004**
            
            **2003**Coins
            
            
            1,670,000
            
            
            58
            %
            
            1,241,000
            
            
            53
            %
            
            917,000
            
            
            46
            %Sportscards
            
            
            1,084,000
            
            
            38
            %
            
            998,000
            
            
            43
            %
            
            1,058,000
            
            
            53
            %Autographs
            
            
            77,000
            
            
            3
            %
            
            68,000
            
            
            3
            %
            
            15,000
            
            
            1
            %Stamps
            
            
            26,000
            
            
            1
            %
            
            16,000
            
            
            1
            %
            
            12,000
            
            
            -Currency
            
            
            3,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            
            2,860,000
            
            
            100
            %
            
            2,323,000
            
            
            100
            %
            
            2,002,000
            
            
            100
            %





**Declared
                Values (000)****2005**
            
            **2004**
            
            **2003**Coins
            
            $
            1,191,000
            
            
            91
            %
            $
            993,000
            
            
            90
            %
            $
            769,000
            
            
            90
            %Sportscards
            
            
            66,000
            
            
            5
            %
            
            67,000
            
            
            6
            %
            
            72,000
            
            
            8
            %Autographs
            
            
            26,000
            
            
            2
            %
            
            31,000
            
            
            3
            %
            
            7,000
            
            
            1
            %Stamps
            
            
            17,000
            
            
            1
            %
            
            10,000
            
            
            1
            %
            
            8,000
            
            
            1
            %Currency
            
            
            8,000
            
            
            1
            %
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            1,308,000
            
            
            100
            %
            $
            1,101,000
            
            
            100
            %
            $
            856,000
            
            
            100
            %




**Critical
      Accounting Policies and Estimates**




*General* .
      In
      accordance with accounting principles generally accepted in the United States
      of
      America (“GAAP”), we record certain of our assets at the lower of cost or fair
      value. In determining the fair value of those assets, principally inventories
      and accounts receivable, we must make judgments, estimates and assumptions
      regarding circumstances or trends that could affect the value of those assets,
      such as economic conditions or trends that could impact our ability to realize
      the amounts at which our inventories are recorded, or to fully collect the
      accounts receivable shown, on our balance sheet. Those judgments, estimates
      and
      assumptions are made based on current information available to us at that time.
      Many of those conditions, trends and circumstances, however, are outside of
      our
      control and, if changes were to occur in economic conditions or trends on which
      our judgments or estimates were based, or unanticipated events were to occur,
      we
      may be required under GAAP to adjust our earlier estimates that are affected
      by
      those changes. Changes in such estimates may require that we reduce the carrying
      value of the affected assets on our balance sheet (which are commonly referred
      to as “write-downs” of the assets involved).




It
      is our
      practice to establish reserves or allowances to record such downward adjustments
      or “write-downs” in the carrying value of assets such as accounts receivable and
      inventory. Such write-downs are recorded as charges to income or increases
      in
      expense in our statement of operations in the periods when those reserves or
      allowances are established or increased to take account of changed conditions
      or
      events. As a result, our judgments, estimates and assumptions about future
      events, and changes in the conditions, events or trends upon which those




32


estimates
      and judgments were based, can and will affect not only the amounts at which
      we
      record those assets on our balance sheet, but also our results of
      operations.




The
      decisions as to the timing of adjustments or write-downs of this nature also
      require subjective evaluations or assessments about the effects and duration
      of
      events or changes in circumstances. For example, it is difficult to predict
      whether events, such as occurred on September 11, 2001, or increases in interest
      rates or economic slowdowns, will have short or longer term consequences for
      our
      business, and it is not uncommon for it to take some time after the occurrence
      of an event or the onset of changes in economic circumstances for their full
      effects to be measured. Therefore, management makes such estimates based upon
      the information available at that time and reevaluates and adjusts its reserves
      and allowances for potential write-downs on a quarterly basis.




Under
      GAAP, businesses also must make estimates or judgments regarding the periods
      during which, and also regarding the amounts at which, sales are recorded.
      Those
      estimates and judgments will depend on a number of factors, including whether
      customers are granted rights to return the products or reject or adjust the
      payment for the services provided to them (return rights).




In
      making
      our estimates and assumptions, we follow GAAP in order to enable us to make
      fair
      and consistent estimates of the fair value of assets and to establish adequate
      reserves or allowances for possible write-downs in their carrying values.




Set
      forth
      below is a summary of the accounting policies that we believe are material
      to an
      understanding of our financial condition and results of operations.




*Revenue
      Recognition Policies* .
      We
      record revenue at the time of shipment of the graded collectible to the
      customer. Our authentication and grading customers generally prepay our
      authentication and grading fees when they submit their collectibles to us for
      authentication and grading. We record those prepayments as deferred revenue
      until their graded collectibles are shipped back to them. At that time, we
      record the revenue from the authentication and grading services we have
      performed for the customer and deduct this amount from deferred
      revenue.




*Accounts
      Receivable and the Allowance for Doubtful Accounts.* In
      the
      normal course of business, we extend payment terms, usually of 30 days duration,
      to many of the larger, more creditworthy collectibles dealers who submit
      collectibles to us for authentication and grading on a recurring basis. We
      regularly review their accounts, estimate the amount of, and establish an
      allowance for, uncollectible amounts on a quarterly basis. The amount of that
      allowance is based on several factors, including the age and extent of
      significant past due accounts, and known conditions or trends that may affect
      the ability of account debtors to pay their accounts receivable balances.
      Estimates of uncollectible amounts are reviewed each quarter and, based on
      that
      review, are revised to reflect changed circumstances or conditions in the
      quarterly period they become known. For example, if the financial condition
      of
      certain dealers or economic conditions were to deteriorate, adversely affecting
      their ability to make payments on their accounts, increases in the allowance
      may
      be required. Since the allowance is created by a charge against income that
      is
      recorded in general and administrative expenses, an increase in the allowance
      will cause a decline in our operating results in the period when the increase
      is
      recorded.




*Grading
      Warranty Costs* .
      We
      offer a warranty covering the coins, sportscards and currency we authenticate
      and grade. We have recently begun offering a warranty covering the stamps that
      we authenticate and grade, if the dealer or collector requests that the stamp
      be
      returned to them in our tamper-evident clear plastic holders. Under the
      warranty, if any coin, sportscard, currency or stamp that was previously graded
      by us is later submitted to us for re-grading and either (i) receives a lower
      grade upon that resubmittal or (ii) is determined not to have been authentic,
      we
      will offer to purchase the coin, sportscard or stamp or, at our election, to
      pay
      the difference in value of the item at its original grade as compared with
      its
      lower grade. However, this warranty is voided if the coin, sportscard, currency
      or stamp, upon resubmittal to us, is not in the same tamper evident clear
      plastic holder in which it was placed at the time we last graded it, or shows
      signs of tampering. We accrue for estimated warranty costs based on historical
      trends and related experience. To date our reserves have proved to be adequate.
      However, if warranty claims were to increase in relation to historical trends
      and experience, we would be required to increase our warranty reserves and
      incur
      additional charges that would have the effect of reducing our income in those
      periods during which the warranty reserve is increased.




33


*Inventory
      Valuation Reserve* .
      Our
      remaining collectibles sales inventories, which totaled approximately $189,000
      at June 30, 2005 and our coin and other collectibles inventories used in our
      continuing operations, are valued at the lower of cost or market and have been
      reduced by an inventory valuation allowance to provide for declines in the
      estimated value of those inventories. The amount of the allowance is determined
      on the basis of market knowledge, historical experience and estimates concerning
      future economic conditions that may impact the sales values of our collectibles
      inventories. Additionally, due to the relative uniqueness of some of the
      collectibles included in our collectibles inventory, their valuation often
      involves judgments that are more subjective than the judgments involved in
      valuing more standardized products sold by other businesses. If events or
      circumstances, such as changes in economic conditions, occur that we believe
      will make it more difficult, or will cause us to reduce the prices at which
      we
      will be able, to sell the collectibles, it may become necessary to increase
      the
      allowance. Increases in this allowance will cause a decline in operating
      results, because such increases are recorded by charges against
      income.





***Results
      of Operations***





The
      following table sets forth certain financial data, expressed as a percentage
      of
      net revenues, derived from our statements of operations for the respective
      periods indicated below:


**Fiscal
                Years Ended June 30,****2005**
            
            **2004**
            
            **2003**Net
                revenues
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of revenues
            
            
            36.4
            %
            
            39.1
            %
            
            43.0
            %Gross
                profit
            
            
            63.6
            %
            
            60.9
            %
            
            57.0
            %Operating
                expenses:Selling
                and marketing expenses
            
            
            10.5
            %
            
            12.0
            %
            
            13.0
            %General
                & administrative expenses
            
            
            30.8
            %
            
            32.7
            %
            
            43.6
            %Settlement
                of lawsuit
            
            
            1.5
            %
            
            -
            
            
            -Total
                operating expenses
            
            
            42.8
            %
            
            44.7
            %
            
            56.6
            %Operating
                income
            
            
            20.8
            %
            
            16.2
            %
            
            0.4
            %Interest
                income, net
            
            
            2.7
            %
            
            0.5
            %
            
            0.5
            %Other,
                net
            
            
            0.1
            %
            
            (0.1
            %)
            
            -Income
                before provision (benefit) for income taxes
            
            
            23.6
            %
            
            16.6
            %
            
            0.9
            %Provision
                (benefit) for income taxes
            
            
            9.4
            %
            
            6.0
            %
            
            (2.7
            %)Income
                from continuing operations
            
            
            14.2
            %
            
            10.6
            %
            
            3.6
            %Income
                (loss) from discontinued operations, net of gain on sales of
              discontinued
                businesses (net of income taxes)
            
            
            0.1
            %
            
            (4.1
            %)
            
            (10.8
            %)Cumulative
                effect of accounting change (net of income taxes)
            
            
            -
            
            
            -
            
            
            (44.1
            %)Net
                income (loss)
            
            
            14.3
            %
            
            6.5
            %
            
            (51.3
            %)




*Net
      Revenues* .
      Net
      revenues consist primarily of fees generated from the grading and authentication
      of sportscards, coins and stamps and, to a much lesser extent, revenues from
      the
      sale of advertising and the publication of collectibles magazines. Net revenues
      are determined net of discounts and allowances.




34


The
      following tables sets forth certain information regarding the increases in
      net
      revenues and in the number of collectibles authenticated and graded in fiscal
      2005, fiscal 2004 and fiscal 2003:




**2005**
            
            **2004**
            
            **2005
                vs. 2004****Increase
                (Decrease)****%
                of Net**
            
            
            
            **%
                of Net**
            
            **Revenues**
            
            **Units
                Processed****Amount**
            
            **Revenues**
            
            **Amount**
            
            **Revenues**
            
            **Amounts
                ($)**
            
            **Percent**
            
            **Number**
            
            **Percent**(Dollars
                in thousands)Coins
            
            $
            23,203
            
            
            69.0
            %
            $
            17,474
            
            
            66.1
            %
            $
            5,729
            
            
            32.8
            %
            
            429,000
            
            
            34.6
            %Sportscards
            
            
            8,143
            
            
            24.2
            %
            
            7,126
            
            
            27.0
            %
            
            1,017
            
            
            14.3
            %
            
            86,000
            
            
            8.6
            %Other
                collectibles(1)
            
            
            2,261
            
            
            6.8
            %
            
            1,820
            
            
            6.9
            %
            
            441
            
            
            24.2
            %
            
            22,000
            
            
            26.2
            %$
            33,607
            
            
            100.0
            %
            $
            26,420
            
            
            100.0
            %
            $
            7,187
            
            
            27.2
            %
            
            537,000
            
            
            23.1
            %





**2004**
            
            **2003**
            
            **2004
                vs. 2003****Increase
                (Decrease)****%
                of Net**
            
            
            
            **%
                of Net**
            
            **Revenues**
            
            **Units
                Processed****Amount**
            
            **Revenues**
            
            **Amount**
            
            **Revenues**
            
            **Amounts
                ($)**
            
            **Percent**
            
            **Number**
            
            **Percent**(Dollars
                in thousands)Coins
            
            $
            17,474
            
            
            66.1
            %
            $
            12,171
            
            
            59.8
            %
            $
            5,303
            
            
            43.6
            %
            
            324,000
            
            
            35.3
            %Sportscards
            
            
            7,126
            
            
            27.0
            %
            
            6,946
            
            
            34.2
            %
            
            180
            
            
            2.6
            %
            
            (60,000
            )
            
            (5.7
            )%Other
                collectibles(1)
            
            
            1,820
            
            
            6.9
            %
            
            1,220
            
            
            6.0
            %
            
            600
            
            
            49.2
            %
            
            57,000
            
            
            211.1
            %$
            26,420
            
            
            100.0
            %
            $
            20,337
            
            
            100.0
            %
            $
            6,083
            
            
            29.9
            %
            
            321,000
            
            
            16.0
            %




(1)
            Other
                collectibles consisted of autographs, stamps and currency in fiscal
                2005
                and autographs and stamps in 2004 and
                2003.




*Fiscal
      2005 vs. 2004* .
      The
      number of coins, sportcards and other collectibles (consisting of autographs,
      stamps and currency) authenticated or graded in 2005 increased by 34.6%, 8.6%
      and 26.2%, respectively, in 2005, as compared to 2004, resulting in a 23.1%
      increase in the number of units authenticated and graded and a 27.2% increase
      in
      net revenues. Also contributing to the increase in net revenues in 2005 were
      increases in sales of advertising and collectors club memberships totaling
      approximately $920,000 (which includes an approximate $319,000 increase in
      on-line advertising) in 2005, as compared to 2004. The average of the service
      fees earned for all collectibles was approximately the same in 2005 and 2004.
      However, modern coin revenues, for which the Company earns a lower average
      service fee than for vintage coin submissions, accounted for a higher proportion
      of the coins authenticated and graded in 2005, than in 2004. As a result, in
      2005, the increase in the number of coins authenticated and graded was greater
      than the increase in the net revenues.




*Fiscal
      2004 vs. 2003* .
      The 30%
      increase in net revenues in 2004, compared to 2003, was attributable to an
      overall increase of 16% in the number of collectibles authenticated and graded,
      including a 35.3% increase in the number of coins authenticated and graded,
      in
      2004 as compared to 2003. The average fees paid for the grading of coins was
      higher in 2004 than in 2003, due primarily to customers requesting faster
      turnaround times in 2004, compared to 2003. Coins accounted for 53% of the
      total
      collectibles graded in fiscal 2004 as compared to 46% in fiscal 2003.
      Additionally, while the number of sportscards graded declined by 5.7% in fiscal
      2004, as compared to 2003, sportscard grading revenues increased to $7,126,000
      in fiscal 2004 from $6,946,000 in fiscal 2003, because 2003 included a large
      bulk order for the grading of newly manufactured sportscards, for which the
      average selling price was lower than for the grading of sportscards submitted
      by
      dealers and collectors.




We
      believe that the increases in the demand for our coin grading services, both
      in
      2005 and in 2004, in each case as compared to the prior year, were largely
      attributable to two factors: (i) an increase in purchases and sales
      of
      collectible and gold bullion coins by investors, which we believe was due in
      large part to a shift by investors of some of their funds from marketable
      securities to tangible assets, primarily in response to the decline in the
      value
      of the U.S. dollar and uncertainties and volatility in the stock markets, and
      (ii) new marketing programs that we initiated in the second half of
      fiscal
      2004. We believe that the increase in the number of other collectibles graded
      in
      2005 versus 2004 was due largely to greater acceptance of and, therefore greater
      demand for, our grading services particularly among stamp dealers and
      collectors.




35


*Gross
      Profit* .
      Gross
      profit is calculated by subtracting the cost of revenues from net revenues.
      Cost
      of revenues consist primarily of labor to grade and authenticate coins,
      sportscards, autographs and stamps, production and printing costs, credit cards
      fees, warranty expense, and occupancy, security and insurance costs which
      directly relate to providing grading and authentication services. Gross profit
      margin is gross profit stated as a percent of net revenues.




**Fiscal
                Year Ended June 30,**
              (Dollars
                in thousands)**2005**
            
            **2004**
            
            **2003**Gross
                profit
            
            $
            21,368
            
            $
            16,098
            
            $
            11,583Gross
                profit margin
            
            
            63.6
            %
            
            60.9
            %
            
            57.0
            %




The
      increase in the gross profit margin in 2005, as compared to 2004, was primarily
      attributable to (i) increases of 30% in coin authentication and grading
      revenues, on which we realize higher margins than on authentication and grading
      submissions of sportscards and other collectibles; (ii) the increases
      in
      net revenues (described above), which caused the fixed elements of our costs
      of
      revenues to represent a lower percentage of total revenues than in 2004; and
      (iii) increases, as compared to 2004, in sales of website advertising,
      for
      which the cost of sales are minimal.




The
      increase in our gross profit margin in 2004, as compared to 2003, was due to
      a
      combination of factors, the most important of which consisted of (i) the
      increase in grading submissions of coins, on which we realize higher margins
      than on submissions of other collectibles for grading, and (ii) an overall
      increase in net revenues, which caused the fixed elements of our cost of
      revenues to represent a lower percentage of total revenues in 2004 as compared
      to 2003.




*Selling
      and Marketing Expenses*




Selling
      and marketing expenses are comprised primarily of advertising and promotions
      costs, trade-show related expenses, customer service personnel costs and third
      party consulting costs.




**Fiscal
                Year Ended June 30,**
              (Dollars
                in thousands)**2005**
            
            **2004**
            
            **2003**Selling
                and marketing expenses
            
            $
            3,534
            
            $
            3,165
            
            $
            2,615As
                a percentage of net revenues
            
            
            10.5
            %
            
            12.0
            %
            
            12.9
            %




The
      increase of $369,000 in selling and marketing expenses in 2005, compared to
      2004, was primarily attributable to increases in general marketing expenses
      (customer service personnel, advertising and trade-show related costs) in 2005.
      Notwithstanding those increases, however, as a percentage of net revenues,
      selling and marketing expenses decreased from 12.0% of net revenues in 2004
      to
      10.5% in 2005, indicating that we were able to increase authentication and
      grading revenues and sales of advertising without having to make commensurate
      increases in our selling and marketing expenses. The increase in selling and
      marketing expenses of $550,000 in 2004, compared to 2003, was due primarily
      to
      an increase of $370,000 in trade-show related costs and other selling expenses
      in 2004, compared to 2003. However, notwithstanding that increase, as a
      percentage of net revenues, sales and marketing expenses decreased from 12.9%
      in
      2003 to 12.0% in 2004.




*General
      and Administrative.* General
      and administrative (“G&A”) expenses primarily include wages and
      payroll-related expenses, advertising and promotional expenses, facility and
      security expenses, outside professional fees and service charges, travel-related
      expenses and other general administrative expenses.




**Fiscal
                Year Ended June 30,**
              (Dollars
                in thousands)**2005**
            
            **2004**
            
            **2003**General
                & administrative expenses
            
            $
            10,367
            
            $
            8,664
            
            $
            8,871As
                a percentage of net revenues
            
            
            30.8
            %
            
            32.7.
            %
            
            43.6
            %




Although,
      as indicated in the table above, G&A expenses increased by $1,703,000 in
      2005, as compared to 2004, such expenses did not increase at the same rate
      as
      did net revenues, due primarily to improvements in




36




operating
      efficiencies and staff reductions we were able to make as a result of the
      disposition of our collectibles sales businesses. Therefore, as a percentage
      of
      net revenues, G&A expenses declined to 30.8% in 2005 from 32.7% for
      2004.
       In dollar terms, the larger value components of the increases in G&A
      expenses in 2005, compared to 2004, consisted primarily of (i) increases
      of
      approximately $320,000 in legal fees, including fees incurred on litigation
      matters, such as the Real Legends lawsuit (discussed below);
      (ii) approximately $185,000 of costs incurred in connection with the
      launch
      of our new currency grading service during 2005; (iii) consulting fees
      and
      audit costs of approximately $400,000 incurred in connection with the
      documentation and testing of our internal control over financial reporting,
      as
      required by Section 404 of the Sarbanes-Oxley Act 2002; (iv) new business
      development personnel and outside consulting costs of $263,000 incurred to
      develop and maintain our knowledge base in coins and to identify and analyze
      acquisition opportunities, and (v) general expenses and infrastructure
      costs incurred to support the increased volume of business that we conducted
      in
      2005, as compared with 2004.




In
      2004,
      G&A expenses decreased both in absolute dollars, by $207,000, and as a
      percentage of net revenues to 32.7% from 43.6%, as compared to 2003. The
      percentage decrease was primarily attributable to the 30% increase in our net
      revenues in 2004. The dollar decrease in 2004, as compared to 2003, was the
      result primarily of (i) a reduction in administrative personnel made
      possible by the disposition of the collectibles sales businesses and (ii) a
      reduction in consulting fees incurred for services rendered to us in connection
      with securing State Enterprise Zone Tax Credits in 2004, as compared to 2003,
      which more than offset increases in G&A expenses that were attributable to
      the increases in grading submissions in fiscal 2004, as compared to fiscal
      2003.




*Settlement
      of Lawsuit* . ** In
      January 2005, without any admission of wrongdoing, we settled a legal action
      brought in the Superior Court of California for the County of San Diego, by
      Real
      Legends, Inc., a seller of sports cards (plaintiff) against When It Was a Game
      (“WIWAG”), a sports card dealer, and against us as a co-defendant. Pursuant to
      the settlement terms, all of the claims asserted against the Company by
      plaintiff were settled and plaintiff terminated the litigation, with prejudice,
      and we paid plaintiff $600,000, of which $100,000 was reimbursed to us by one
      of
      our insurers. As a result, the net cost to us of the settlement in 2005 was
      $500,000, or 1.5% of our net revenues.




*Goodwill
      Impairment.* In 2003,
      we recorded, as part of operating expenses, a non-cash goodwill impairment
      charge of $6,000 related to continuing operations.




*Interest
      Income, Net.* Interest
      income is generated on cash balances that we invest primarily in highly liquid
      money market accounts, short-term bank certificates of deposit and commercial
      paper instruments. Interest income, net was $906,000 in 2005, $135,000 in fiscal
      2004, and $94,000 in fiscal 2003. The increase in interest income in 2005
      compared to 2004 resulted primarily from increases in our cash, cash equivalent
      and short-term investment balances that were attributable to (i) the
      cash
      generated from the disposition of our collectibles sales businesses,
      (ii) the increases in income generated by our authentication and grading
      businesses, and (iii) the sale by us of 2,195,856 shares of our common
      stock in a public offering that we completed in the third quarter of 2005,
      which
      generated net proceeds to us of $35,657,000. Also contributing to the increase
      in interest income was an increase in the rates at which we earned interest
      on
      our cash and cash equivalent balances and the interest earned on the short-term
      advances that we made to one of our customers. The increase in interest income
      in 2004 as compared to 2003 was primarily attributable to interest earned on
      tax
      refunds that we received in fiscal 2004.




*Provision
      (Benefit) for Income Taxes* .
      The
      provision made for income taxes in fiscal 2005 and 2004 and the income tax
      benefits recorded in fiscal 2003 were calculated on the basis of our expected
      federal and state effective income tax rates for those years. Contributing
      to
      the income tax benefit in fiscal 2003 were $671,000 of California Enterprise
      Zone Hiring Tax Credits covering eligibility periods from 1999 to 2002, for
      which required governmental approvals were obtained in the second quarter of
      fiscal 2003.




*Income
      (loss) from Discontinued Operations* .
      As a
      result of our decision in fiscal 2004 to dispose of our collectibles sales
      businesses, in accordance with SFAS 144 the assets and related liabilities
      of
      those businesses have been classified as held for sale and their related
      operating results for fiscal years 2005, 2004 and 2003 have been classified
      as
      discontinued operations in the consolidated financial statements included in
      this Report. Therefore, in fiscal years 2003, the loss from discontinued
      operations (net of income taxes) related to the operations of those discontinued
      businesses for the entire fiscal year and included a goodwill impairment charge
      of $1,471,000. In fiscal 2005 and 2004, the income (loss) from discontinued
      operations includes (i) the losses from the operations of our discontinued
      collectibles sales businesses through the respective dates on which they were
      disposed of and




37


(ii) the
      losses or gains recognized on the sales of those businesses and the disposition
      of those assets (consisting primarily of inventories and accounts receivable)
      that we retained.




*Cumulative
      Effect of Change in Accounting Principle,* SFAS
      No.
      142 required us to perform a transitional goodwill impairment test as of the
      beginning of fiscal 2003, the year of adoption of that new standard. Based
      on
      that test, it was determined that a substantial portion of our goodwill was
      impaired, and we recorded a non-cash after-tax charge of $8,973,000 or $1.43
      per
      diluted share, as a cumulative effect of an accounting change, in fiscal
      2003.




**Quarterly
      Results of Operations and Seasonality**




The
      following tables present unaudited quarterly financial information for each
      of
      the eight quarters beginning September 30, 2003 and ending on June 30, 2005.
      The
      information has been derived from our unaudited quarterly financial statements,
      which have been prepared by us on a basis consistent with our audited financial
      statements appearing elsewhere in this Form 10-K. The consolidated financial
      information set forth below includes all necessary adjustments, consisting
      only
      of normal recurring adjustments, that management considers necessary for a
      fair
      presentation of the unaudited quarterly results when read in conjunction with
      the consolidated financial statements and the notes thereto appearing elsewhere
      in this Form 10-K. These operating results, which reflect the reclassification
      of our results of operations between continuing operations and discontinued
      operations as a result of the disposition of our collectibles sales businesses,
      are not necessarily indicative of results that may be expected for any
      subsequent periods.




Generally,
      net revenues are lower during our second fiscal quarter that ends on December
      31
      than in other quarterly periods, which we believe is related primarily to the
      holidays that take place during that quarter. Additionally, while net revenues
      increased by 9% in the fourth quarter of fiscal 2005, compared to the fourth
      quarter of fiscal 2004, they declined by 5% compared to the third quarter of
      fiscal 2005, due primarily to the introduction of First StrikeTM (see Introducing
      New Services in our existing markets) in the third quarter of fiscal 2005 that
      provided approximately $700,000 in revenue on approximately 75,000 graded units,
      which activity, by its nature, occurs only in the third fiscal quarter. Although
      there is no assurance as to the level of future activity, we anticipate that
      the
      third quarter of fiscal 2006 will also recognize First Strike revenue that,
      like
      fiscal 2005, will not continue into the fourth quarter of fiscal 2006.




In
      addition, although net revenues increased by 9% in the fourth quarter of fiscal
      2005, as compared to the fourth quarter of fiscal 2005, that percentage increase
      was lower than the percentage increased in net revenues in each of the first
      three quarters of fiscal 2005, as compared to the respective corresponding
      quarters of fiscal 2004. We believe this slowing in the growth of net revenues
      was largely due to two unrelated factors. During the fourth quarter, we saw
      a
      slowing, which we believe is temporary, in the volume of gold trading, which
      impacts the volume of coins submitted to us for grading. Additionally, during
      the fourth quarter of fiscal 2005, the owner of our largest customer encountered
      an unexpected and serious medical problem, which led to a 45% decrease in
      revenues from that customer in the fourth quarter, compared with the third
      quarter of fiscal 2005. This reduction in revenues is expected to continue
      in
      fiscal 2006.




Our
      operating results also may fluctuate in the future due to a number of factors
      which are outside of our control. See “BUSINESS -- Factors That Could Affect Our
      Future Financial Performance” in Part I of this Report and “Factors That Can
      Affect our Financial Position and Operating Results” earlier in this Section of
      this Report for a discussion of those factors.




38







**Quarters
                Ended**
              **(In
                thousands, except per share data)**Sept.
                30,
              2003
            
            Dec.
                31,
              2003
            
            Mar.
                31,
              2004
            
            June
                30,
              2004
            
            Sept.
                30,
              2004
            
            Dec.
                31,
              2004
            
            Mar.
                31
              2005
            
            June
                30,
              2005Statement
                of Operations Data:Net
                revenues
            
            $
            6,012
            
            $
            5,753
            
            $
            6,896
            
            $
            7,759
            
            $
            8,195
            
            $
            7,982
            
            $
            8,955
            
            $
            8,475Cost
                of revenues
            
            
            2,549
            
            
            2,349
            
            
            2,597
            
            
            2,827
            
            
            2,826
            
            
            2,998
            
            
            3,263
            
            
            3,152Gross
                profit
            
            
            3,463
            
            
            3,404
            
            
            4,299
            
            
            4,932
            
            
            5,369
            
            
            4,984
            
            
            5,692
            
            
            5,323SG&A
                expenses
            
            
            2,766
            
            
            2,925
            
            
            2,923
            
            
            3,215
            
            
            3,244
            
            
            3,040
            
            
            3,464
            
            
            4,153Settlement
                of lawsuit
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            500
            
            
            -
            
            
            -Operating
                income
            
            
            697
            
            
            479
            
            
            1,376
            
            
            1,717
            
            
            2,125
            
            
            1,444
            
            
            2,228
            
            
            1,170Interest
                and other income (expense), net
            
            
            -
            
            
            (5
            )
            
            7
            
            
            108
            
            
            64
            
            
            112
            
            
            225
            
            
            531Income
                before income taxes
            
            
            697
            
            
            474
            
            
            1,383
            
            
            1,825
            
            
            2,189
            
            
            1,556
            
            
            2,453
            
            
            1,701Provision
                for income taxes
            
            
            313
            
            
            170
            
            
            592
            
            
            506
            
            
            878
            
            
            628
            
            
            981
            
            
            654Income
                from continuing operations
            
            
            384
            
            
            304
            
            
            791
            
            
            1,319
            
            
            1,311
            
            
            928
            
            
            1,472
            
            
            1,047Income
                (loss) from discontinuedoperations,
                net of gain
              on salesof
                discontinued businesses(net
                of income taxes)
            
            
            47
            
            
            (782
            )
            
            201
            
            
            (534
            )
            
            (69
            )
            
            (7
            )
            
            (3
            )
            
            139Net
                income (loss)
            
            $
            431
            
            $
            (478
            )
            $
            992
            
            $
            785
            
            $
            1,242
            
            $
            921
            
            $
            1,469
            
            $
            1,186Net
                income (loss) per basic shareIncome
                from continuing operations
            
            $
            0.06
            
            $
            0.05
            
            $
            0.13
            
            $
            0.21
            
            $
            0.21
            
            $
            0.15
            
            $
            0.21
            
            $
            0.12Income
                (loss) from discontinuedoperations,
                net of
              gain on salesof
                discontinued businesses
              (net of income taxes)
            
            
            0.01
            
            
            (0.13
            )
            
            0.03
            
            
            (0.08
            )
            
            (0.01
            )
            
            -
            
            
            -
            
            
            0.02Net
                income (loss)
            
            $
            0.07
            
            $
            (0.08
            )
            $
            0.16
            
            $
            0.13
            
            $
            0.20
            
            $
            0.15
            
            $
            0.21
            
            $
            0.14Net
                income (loss) per diluted share:Income from continuing operations
            
            $
            0.06
            
            $
            0.05
            
            $
            0.13
            
            $
            0.20
            
            $
            0.20
            
            $
            0.14
            
            $
            0.19
            
            $
            0.12Income (loss) from discontinuedoperations,
                net of
              gainon
                sales ofdiscontinued
                businesses
              (net
                of income taxes)
            
            
            0.01
            
            
            (0.12
            )
            
            0.03
            
            
            (0.08
            )
            
            (0.01
            )
            
            -
            
            
            -
            
            
            0.01Net
                income (loss)
            
            $
            0.07
            
            $
            (0.07
            )
            $
            0.16
            
            $
            0.12
            
            $
            0.19
            
            $
            0.14
            
            $
            0.19
            
            $
            0.13Weighted
                average shares outstandingBasic
            
            
            6,172
            
            
            6,167
            
            
            6,135
            
            
            6,201
            
            
            6,214
            
            
            6,242
            
            
            7,113
            
            
            8,479Diluted
            
            
            6,288
            
            
            6,391
            
            
            6,319
            
            
            6,557
            
            
            6,569
            
            
            6,695
            
            
            7,571
            
            
            8,902





**Quarters
                Ended**
              **(In
                thousands)**Sept
                30,
              2003
            
            Dec.
                31,
              2003
            
            Mar.
                31,
              2004
            
            June
                30,
              2004
            
            Sept.
                30,
              2004
            
            Dec.
                31,
              2004
            
            Mar.
                31,
              2005
            
            June
                30,
              2005**Selected
                Operating Data:**Units
                authenticated or gradedCoins
            
            
            282
            
            
            285
            
            
            297
            
            
            377
            
            
            371
            
            
            421
            
            
            449
            
            
            429Sportscards
            
            
            253
            
            
            235
            
            
            242
            
            
            268
            
            
            265
            
            
            253
            
            
            283
            
            
            283Autographs
            
            
            9
            
            
            14
            
            
            25
            
            
            20
            
            
            22
            
            
            17
            
            
            15
            
            
            23Stamps
            
            
            5
            
            
            3
            
            
            4
            
            
            4
            
            
            5
            
            
            7
            
            
            7
            
            
            7Currency
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3Total
            
            
            549
            
            
            537
            
            
            568
            
            
            669
            
            
            663
            
            
            698
            
            
            754
            
            
            745








**Liquidity
      and Capital Resources**




At
      June
      30, 2005 , we had cash and cash equivalents of $65,439,000, as compared to
      $21,454,000 at June 30, 2004. Contributing to that increase were (i) net
      proceeds of $35,657,000 from our sale of 2,195,856 shares of common stock in
      a
      public offering that we completed in the third quarter of 2005; (ii) the
      receipt, in the year ended June 30, 2005, of cash consideration that became
      determinable in 2005, attributable to the sales of our collectibles sales
      businesses in fiscal 2004, together with cash from collections of accounts
      receivables and from sales of




39


collectibles
      inventories, which we chose to retain and liquidate ourselves, rather than
      sell
      to the buyers of those businesses; and (iii) increases in operating income
      that
      were primarily attributable to the increases in authentication and grading
      revenues.




Historically,
      we have relied on internally-generated funds, rather than borrowings, as our
      primary source of funds to support our grading operations. We expect our
      authentication and grading services to provide us with relatively stable and
      predictable cash flows, largely because (i) in many instances our customers
      prepay for those services at the time they submit their collectibles to us
      for
      authentication and grading, and (ii) in the event of a decline in
      authentication and grading submissions, we believe we would be able to reduce
      our variable operating costs to offset, at least partially, the impact on our
      cash flows of such a decline.




During
      the year ended June 30, 2005, operating activities of our continuing operations
      provided net cash of $7,447,000, which represented an increase of $1,379,000,
      from the $6,068,000 of net cash generated in fiscal 2004, that resulted
      primarily from an increase in income from continuing operations in fiscal
      2005;




Investing
      activities used net cash of $257,000 during the year ended June 30, 2005,
      primarily to fund net short term advances to two of our established customers
      of
      $1,560,000 and capital expenditures of $256,000 substantially offset by
      $1,548,000 in cash received from the sales of our discontinued businesses;
      and




In
      the
      year ended June 30, 2005, financing activities provided net cash of $36 million,
      primarily from the sale of the shares in our public offering during the third
      quarter ended March 31, 2005 and, to a much lesser extent, exercises of employee
      stock options and sales of shares under our Employee Stock Purchase Plan.




Currently,
      we have the following outstanding obligations under operating leases, net of
      sublease income for years ending June 30:




2006
            
            $
            1,092,0002007
            
            
            1,164,0002008
            
            
            1,150,0002009
            
            
            1,157,0002010
            
            
            414,000$
            4,977,000




In
      fiscal
      2005 we organized Collectors Finance Corporation (“CFC”), as a wholly-owned
      subsidiary, to engage in the business of making short term loans primarily
      to
      coin dealers. All such loans are required to be collateralized by the delivery
      to us of collectibles coins for authentication and grading that have a fair
      market value of at least the amount of the loans. The loans are required to
      be
      repaid to us when those collectibles are returned to the dealers. To provide
      a
      source of funding for those short term loans, in June 2005 CFC obtained a
      revolving bank line of credit pursuant to a loan and security agreement that
      permits CFC to borrow, at any one time, up to the lesser of (i) $7,000,000
      or (ii) an amount equal to 85% of the aggregate principal amount of those of
      its
      loan receivables that meet the bank’s eligibility criteria. Borrowings under
      that credit line, which has a term of two years, are secured by the loan
      receivables due CFC and a guarantee by the Company.




Other
      than (i) the obligation to repay any future borrowings under CFC’s
      revolving credit line, which we expect will be paid with the proceeds of
      repayments of the loans made by CFC to its borrowers or the sale of the items
      collateralizing those loans, and (ii) the cash requirements of our on-going
      operations, including the payment of rent obligations under operating leases,
      which we expect to be able to fund with internally generated funds, we do not
      have any material outstanding obligations.




We
      plan
      to use our cash resources, including the net proceeds from the sale of our
      shares in the public offering completed during the third quarter of 2005, to
      (i) expand existing and implement new marketing programs,
      (ii) introduce new services for our customers in our existing markets;
      (iii) acquire or start-up other high-value collectibles or high-value
      asset
      authentication and grading businesses, and (iv) fund working capital
      requirements, and for other general corporate purposes.




40


**Recent
      Accounting Pronouncements**




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 123R, *Share-Based
      Payment.* SFAS
      No.
      123R will eliminate the ability to account for share-based compensation
      transactions using Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      instead will require that such transactions be accounted for using a
      fair-value-based method with compensation costs related to share-based payments
      to be recognized in the financial statements. SFAS No. 123R also requires the
      tax benefit associated with these share-based payments to be classified as
      financing activities in the statement of cash flows rather than operating
      activities as currently required. SFAS No. 123R is effective as of the first
      annual period beginning after June 15, 2005. As a result, we have adopted SFAS
      No. 123R effective as of July 1, 2005. SFAS No. 123R offers alternative methods
      for determining the fair value of share based compensation. At the present
      time,
      we have not yet determined which alternative method we will use. Regardless
      of
      the method we choose to implement, SFAS No. 123R will result in increased
      compensation expenses in our reported consolidated results of operations.
      However, we are not able at this time to predict whether the increased
      compensation expense will be material as that will depend on, among other
      things, the number or amount of the share-based compensation we award and the
      prices of our common stock in the future.




In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 154, *Accounting
      Changes and Error Corrections.* SFAS
      No.
      154 replaces APB Opinion No. 20, *Accounting
      Changes* and FASB
      Statement No 3, *Reporting
      Accounting Changes in Interim Financial Statements* which
      required that most voluntary changes in accounting principle be recognized
      by
      including in net income of the period of the change the cumulative effect of
      changing to the new accounting principle. SFAS No. 154 ** will
      require retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects or the cumulative effect of the change. This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. We will adopt SFAS No. 154
      for
      our fiscal year beginning July 1, 2005.




**ITEM
      7A.** **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




Market
      risk represents the risk of loss that may impact our financial position, results
      of operations or cash flows due to adverse changes in financial market prices,
      including interest rate risk, foreign currency exchange rate risk, commodity
      price risk and other relevant market rate or price risks.




Due
      to
      the cash and cash equivalent balances that we maintain, we are exposed to risk
      of changes in short-term interest rates. At June 30, 2005, we had $65,439,000
      in
      cash and cash equivalents, primarily invested in a bank certificates of deposit,
      a money market fund and high grade commercial paper. Reductions in short-term
      interest rates could result in reductions in the amount of that income. However,
      the impact on our operating results of such changes is not expected to be
      material.




The
      Company has no activities that would expose it to foreign currency exchange
      rate
      risk or commodity price risks.







41


**ITEM
      8.** **FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**





Index
      to Consolidated Financial Statements





**Page**Report
                of Grant Thornton LLP, Independent Registered Public Accounting
                Firm
            43Report
                of Deloitte & Touche LLP, Independent Registered Public Accounting
                Firm
            44Consolidated
                Balance Sheets at June 30, 2005 and 2004
            45Consolidated
                Statements of Operations for the Years Ended June 30, 2005, 2004
                and
                2003
            46Consolidated
                Statements of Stockholders’ Equity For the Years Ended June 30, 2005, 2004
                and 2003
            47Consolidated
                Statements of Cash Flows for the Years Ended June 30, 2005, 2004
                and
                2003
            48Notes
                to Consolidated Financial Statements For the Years Ended June 30,
                2005,
                2004 and 2003
            50











42


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**








Board
      of
      Directors and Stockholders


Collectors
      Universe, Inc. and Subsidiaries








We
      have
      audited the accompanying consolidated balance sheet of Collectors Universe,
      Inc.
      and subsidiaries (the Company) as of June 30, 2005, and the related consolidated
      statements of operations, stockholders’ equity and cash flows for the year ended
      June 30, 2005. These financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      financial statements based on our audit.




We
      conducted our audit in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above, present
      fairly, in all material respects, the consolidated financial position of
      Collectors Universe, Inc. and subsidiaries as of June 30, 2005, and the results
      of their consolidated operations and their consolidated cash flows for the
      year
      ended June 30, 2005, in conformity with accounting principles generally accepted
      in the United States of America.




We
      have
      also audited Schedule II of Collectors Universe, Inc. and subsidiairies for
      the
      year ended June 30, 2005. In our opinion, this schedule, when considered in
      relation to the basic consolidated financial statements taken as a whole,
      presents fairly, in all material respects, the information set forth
      therein.




We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Collectors Universe,
      Inc.
      and subsidiaries’ internal control over financial reporting as of June 30, 2005,
      based on criteria established in Internal Control - Integrated Framework issued
      by the Committee of Sponsoring Organizations of the Treadway Commission and
      our
      report dated September 2, 2005, expressed an unqualified opinion
      thereon.





/s/
      GRANT
      THORNTON LLP





Irvine,
      California


September
      2, 2005








43


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM**








To
      the
      Stockholders and Board of Directors of


Collectors
      Universe, Inc.








We
      have
      audited the accompanying consolidated balance sheet of Collectors Universe,
      Inc.
      and subsidiaries (the Company) as of June 30, 2004 and the related consolidated
      statements of operations, stockholders’ equity and cash flows for each of the
      two years in the period ended June 30, 2004. Our audits also included the
      financial statement schedule listed in the index in Part IV, Item 15(A) (2)
      for
      the two years in the period ended June 30, 2004. These financial statements
      and
      the financial statement schedule are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these financial
      statements and the financial statement schedule based on our
      audits.




We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audits included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provides a
        reasonable basis for our opinion.


In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Collectors
      Universe, Inc. and subsidiaries as of June 30, 2004 and the results of their
      operations and their cash flows for each of the two years in the period ended
      June 30, 2004, in conformity with accounting principles generally accepted
      in
      the United States of America. Also, in our opinion, such financial statement
      schedule for each of the two years in the period ended June 30, 2004, when
      considered in relation to the basic consolidated financial statements taken
      as a
      whole, presents fairly in all material respects the information set forth
      therein.




As
      described in Note 2 to the consolidated financial statements, the Company
      changed its method of accounting for goodwill and other intangible assets as
      a
      result of adopting Statement of Financial Accounting Standards No. 142, *Goodwill
      and Other Intangible Assets* ,
      effective July 1, 2002.







DELOITTE
      & TOUCHE LLP





Costa
      Mesa, California


September
      23, 2004


44


**COLLECTORS
      UNIVERSE, INC. AND
      SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


(in
      thousands, except per share data)





**June
                30,****ASSETS**
            
            **2005**
            
            **2004**Current
                assets:Cash
                and cash equivalents
            
            $
            65,439
            
            $
            21,454Accounts
                receivable, net of allowance of $38in
                2005 and $30 in 2004
            
            
            1,508
            
            
            790Inventories,
                net
            
            
            436
            
            
            452Prepaid
                expenses and other current assets
            
            
            1,102
            
            
            781Customer
                notes receivable
            
            
            1,560
            
            
            -Refundable
                income taxes
            
            
            -
            
            
            13Deferred
                income taxes
            
            
            2,854
            
            
            1,174Receivables
                from sale of net assets of discontinued operations
            
            
            63
            
            
            1,611Current
                assets of discontinued operations held for sale
            
            
            365
            
            
            1,267Total
                current assets
            
            
            73,327
            
            
            27,542Property
                and equipment, net
            
            
            857
            
            
            1,045Deferred
                income taxes
            
            
            1,051
            
            
            5,205Other
                assets
            
            
            253
            
            
            165Non-current
                assets of discontinued operations held for sale
            
            
            46
            
            
            117$
            75,534
            
            $
            34,074**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            753
            
            $
            455Accrued
                liabilities
            
            
            1,563
            
            
            1,351Accrued
                compensation and benefits
            
            
            1,069
            
            
            936Deferred
                revenue
            
            
            1,001
            
            
            1,225Current
                liabilities of discontinued operations held for sale
            
            
            27
            
            
            276Total
                current liabilities
            
            
            4,413
            
            
            4,243Deferred
                rent
            
            
            386
            
            
            401Other
                long-term liabilities
            
            
            169
            
            
            64Commitments
                and contingencies (note 14)Stockholders’
                equity:Preferred
                stock, $.001 par value; 5,000 shares authorized;no
                shares issued or outstanding
            
            
            -
            
            
            -Common
                stock, $.001 par value; 45,000 shares authorized;shares
                issued: 8,610 in 2005 and 6,338 in 2004;shares
                outstanding (net of treasury stock): 8,485 in 2005 and 6,213 in
                2004
            
            
            9
            
            
            6Additional
                paid-in capital
            
            
            78,594
            
            
            42,215Accumulated
                deficit
            
            
            (7,016
            )
            
            (11,834
            )Treasury
                stock, at cost (125 shares)
            
            
            (1,021
            )
            
            (1,021
            )Total
                stockholders’ equity
            
            
            70,566
            
            
            29,366$
            75,534
            
            $
            34,074





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


45


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF
      OPERATIONS**


(in
      thousands, except per share data)


**Year
                Ended June 30,****2005**
            
            **2004**
            
            **2003**Net
                revenues:Grading,
                authentication and related services
            
            $
            33,607
            
            $
            26,420
            
            $
            20,337Cost
                of revenues:Cost
                of grading, authentication and related services
            
            
            12,239
            
            
            10,322
            
            
            8,754Gross
                profit
            
            
            21,368
            
            
            16,098
            
            
            11,583Operating
                expenses:Selling
                and marketing expenses
            
            
            3,534
            
            
            3,165
            
            
            2,615General
                and administrative expenses
            
            
            10,367
            
            
            8,664
            
            
            8,871Settlement
                of lawsuit
            
            
            500
            
            
            -
            
            
            -Impairment
                of goodwill
            
            
            -
            
            
            -
            
            
            6Total
                operating expenses
            
            
            14,401
            
            
            11,829
            
            
            11,492Operating
                income
            
            
            6,967
            
            
            4,269
            
            
            91Interest
                income, net
            
            
            906
            
            
            135
            
            
            94Other
                income (expense), net
            
            
            26
            
            
            (25
            )
            
            (6
            )Income
                before provision (benefit) for income taxes
            
            
            7,899
            
            
            4,379
            
            
            179Provision
                (benefit) for income taxes
            
            
            3,141
            
            
            1,581
            
            
            (557
            )Income
                from continuing operations
            
            
            4,758
            
            
            2,798
            
            
            736Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses
              (net of income taxes) (see note 3)
            
            
            60
            
            
            (1,068
            )
            
            (2,202
            )Cumulative
                effect of accounting change (net of income tax benefit of
                $4,511)
            
            
            -
            
            
            -
            
            
            (8,973
            )Net
                income (loss)
            
            $
            4,818
            
            $
            1,730
            
            $
            (10,439
            )Net
                income (loss) per basic share:Income
                from continuing operations
            
            $
            0.68
            
            $
            0.45
            
            $
            0.12Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses
              (net of income taxes)
            
            
            0.01
            
            
            (0.17
            )
            
            (0.35
            )Cumulative
                effect of accounting change (net of income taxes)
            
            
            
            
            
            -
            
            
            (1.45
            )Net
                income (loss)
            
            $
            0.69
            
            $
            0.28
            
            $
            (1.68
            )Net
                income (loss) per diluted share:Income
                from continuing operations
            
            $
            0.64
            
            $
            0.44
            
            $
            0.12Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses
              (net of income taxes)
            
            
            0.01
            
            
            (0.17
            )
            
            (0.35
            )Cumulative
                effect of accounting change (net of income taxes)
            
            
            -
            
            
            -
            
            
            (1.43
            )Net
                income (loss)
            
            $
            0.65
            
            $
            0.27
            
            $
            (1.66
            )Weighted
                average shares outstanding:Basic
            
            
            7,013
            
            
            6,170
            
            
            6,205Diluted
            
            
            7,452
            
            
            6,463
            
            
            6,294








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


46


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS'
      EQUITY**


(in
      thousands)





**Common
                Stock**
            
            **Additional**
              **Paid-in**
            
            **Retained
                Earnings**
              **(Accumulated**
            
            **Treasury
                Stock****Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit)**
            
            **Shares**
            
            **Amount**
            
            **Total**Balance
                at June 30, 2002
            
            
            6,381
            
            $
            6
            
            $
            41,268
            
            $
            (3,125
            )
            
            (125
            )
            $
            (1,021
            )
            $
            37,128Redemption
                of common stock in satisfaction of note receivable from
              related party
            
            
            (130
            )
            
            -
            
            
            (386
            )
            
            -
            
            
            -
            
            
            -
            
            
            (386
            )Employee
                stock purchase plan
            
            
            3
            
            
            -
            
            
            14
            
            
            -
            
            
            -
            
            
            -
            
            
            14Exercise
                of stock options
            
            
            1
            
            
            -
            
            
            2
            
            
            -
            
            
            -
            
            
            -
            
            
            2Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (10,439
            )
            
            -
            
            
            -
            
            
            (10,439
            )Balance
                at June 30, 2003
            
            
            6,255
            
            $
            6
            
            $
            40,898
            
            $
            (13,564
            )
            
            (125
            )
            $
            (1,021
            )
            $
            26,319Exercise
                of stock options
            
            
            204
            
            
            -
            
            
            883
            
            
            -
            
            
            -
            
            
            -
            
            
            883Tax
                benefit on exercise
              of
                stock options
            
            
            -
            
            
            -
            
            
            342
            
            
            -
            
            
            -
            
            
            -
            
            
            342Issuances
                of stock under stock purchase plan and related
              compensation expense
            
            
            12
            
            
            -
            
            
            92
            
            
            -
            
            
            -
            
            
            -
            
            
            92Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            1,730
            
            
            -
            
            
            -
            
            
            1,730Cancellation
                of stock issued toa
                former officer
            
            
            (133
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Balance
                at June 30, 2004
            
            
            6,338
            
            $
            6
            
            $
            42,215
            
            $
            (11,834
            )
            
            (125
            )
            $
            (1,021
            )
            $
            29,366Issuance
                of common stock inpublic
                offering (net of expenses)
            
            
            2,196
            
            
            2
            
            
            35,655
            
            
            -
            
            
            -
            
            
            -
            
            
            35,657Exercise
                of stock options
            
            
            71
            
            
            1
            
            
            283
            
            
            -
            
            
            -
            
            
            -
            
            
            284Tax
                benefit on exerciseof
                stock options
            
            
            -
            
            
            -
            
            
            338
            
            
            -
            
            
            -
            
            
            -
            
            
            338Issuances
                of stock under stock purchase plan and related
              compensation expense
            
            
            5
            
            
            -
            
            
            103
            
            
            -
            
            
            -
            
            
            -
            
            
            103Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            4,818
            
            
            -
            
            
            -
            
            
            4,818Balance
                at June 30, 2005
            
            
            8,610
            
            $
            9
            
            $
            78,594
            
            $
            (7,016
            )
            
            (125
            )
            $
            (1,021
            )
            $
            70,566








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


47




**COLLECTORS
      UNIVERSE, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(in
      thousands)




**Year
                ended June 30,****2005**
            
            **2004**
            
            **2003****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Income
                from continuing operations
            
            $
            4,758
            
            $
            2,798
            
            $
            736Adjustments
                to reconcile income from continuing operations to netcash
                provided by operating activities:Depreciation
                and amortization
            
            
            443
            
            
            647
            
            
            650Impairment
                of goodwill
            
            
            -
            
            
            -
            
            
            6Stock-based
                compensation expense
            
            
            33
            
            
            50
            
            
            -Interest
                on note receivable from a related party
            
            
            -
            
            
            -
            
            
            (9
            )Provision
                for bad debts
            
            
            38
            
            
            31
            
            
            **-**Provision
                for inventory write-down
            
            
            -
            
            
            53
            
            
            -(Gain)
                loss on sale of property and equipment
            
            
            (10
            )
            
            25
            
            
            5Deferred
                income taxes
            
            
            2,812
            
            
            1,496
            
            
            (1,300
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (756
            )
            
            (367
            )
            
            264Inventories
            
            
            16
            
            
            (325
            )
            
            4Prepaid
                expenses and other
            
            
            (321
            )
            
            (143
            )
            
            (216
            )Notes
                receivable
            
            
            -
            
            
            -
            
            
            22Refundable
                income taxes
            
            
            13
            
            
            1,170
            
            
            8Other
                assets
            
            
            (88
            )
            
            29
            
            
            13Accounts
                payable and accrued liabilities
            
            
            510
            
            
            (364
            )
            
            639Accrued
                compensation and benefits
            
            
            133
            
            
            446
            
            
            (192
            )Deferred
                revenue
            
            
            (224
            )
            
            448
            
            
            98Deferred
                rent
            
            
            (15
            )
            
            10
            
            
            110Other
                long-term liabilities
            
            
            105
            
            
            64
            
            
            -Net
                cash provided by operating activities
            
            
            7,447
            
            
            6,068
            
            
            838**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Proceeds
                from sale of property and equipment
            
            
            11
            
            
            83
            
            
            -Capital
                expenditures
            
            
            (256
            )
            
            (538
            )
            
            (297
            )Advances
                on customer notes receivable
            
            
            (6,078
            )
            
            -
            
            
            -Proceeds
                from collection of customer notes receivable
            
            
            4,518
            
            
            -
            
            
            -Collections
                on notes receivable from related parties
            
            
            -
            
            
            -
            
            
            3Cash
                received from sale of net assets of discontinued
                operations
            
            
            1,548
            
            
            2,307
            
            
            -Net
                cash provided by (used in) investing activities
            
            
            (257
            )
            
            1,852
            
            
            (294
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from employee stock purchase plan
            
            
            70
            
            
            60
            
            
            14Proceeds
                from sale of common stock, net
            
            
            35,657
            
            
            -
            
            
            -Proceeds
                from exercise of stock options
            
            
            284
            
            
            864
            
            
            2Net
                cash provided by financing activities
            
            
            36,011
            
            
            924
            
            
            16Discontinued
                operations:Net
                cash provided by (used in) discontinued operations
            
            
            784
            
            
            8,128
            
            
            (1,025
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            43,985
            
            
            16,972
            
            
            (465
            )Cash
                and cash equivalents at beginning of year
            
            
            21,454
            
            
            4,482
            
            
            4,947Cash
                and cash equivalents at end of year
            
            $
            65,439
            
            $
            21,454
            
            $
            4,482





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


48


**COLLECTORS
      UNIVERSE, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (continued)**


(in
      thousands)








**Year
                ended June 30****2005**
            
            **2004**
            
            **2003****SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION****:**Income
                taxes paid
            
            $
            213
            
            $
            14
            
            $
            -Interest
                paid
            
            $
            3
            
            $
            2
            
            $
            3**SUPPLEMENTAL
                SCHEDULE OF NONCASH TRANSACTIONS:**See
                note 2, Supplemental Schedule of Non-Cash Transactions





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








49


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**1.** **Company
      Organization and Nature Of Business**





***Organization***




Collectors
      Universe, Inc. (“We,”“us,” the “Company” or “Collectors Universe”) is a Delaware
      corporation that was organized on February 5, 1999 for the purpose of enabling
      Professional Coin Grading Service, Inc. (“PCGS”) to acquire other businesses
      that, like PCGS, would provide services to the collectibles markets. On February
      5, 1999, Collectors Universe issued 4,327,000 shares of common stock in exchange
      for all of the outstanding shares of PCGS. As a result of that exchange, the
      former stockholders of PCGS became stockholders of Collectors Universe, with
      each of them receiving a number of our shares based on his or her percentage
      ownership of the shares of PCGS. Prior to this exchange, Collectors Universe
      had
      no operating assets or liabilities and had not yet conducted any operations.
      The
      assets and liabilities acquired were recorded at the PCGS’ basis as the
      transaction represented a transfer of assets and liabilities between entities
      under common control.




Concurrently,
      with the exchange transaction with PCGS, Collectors Universe acquired the assets
      of the auction businesses of Lyn F. Knight Rare Coins, Inc. (“Lyn Knight”) and
      Kingswood Coin Auctions, LLC (“Kingswood”) and the minority ownership interests
      in Superior Sportscard Auctions, LLC (“Superior”) and Internet Universe, LLC
      (“IU”), both of which were majority-owned subsidiaries of PCGS at the time these
      acquisitions were consummated. See note 3, Discontinued Operations.




In
      fiscal
      2005, Collectors Finance Corporation (“CFC”) began operations as a 100%
      subsidiary of the Company to engage in the business of making short-term loans
      to collectibles dealers pursuant to a Dealer Financing Program. Under that
      program, CFC offers short-term loans to established collectibles dealers. The
      loans are secured by the delivery of coins or other collectibles to us. In
      March
      2005, CFC received a California Finance Lenders License.




***Nature
      of the Business***




We
      are a
      collectibles company engaged in the provision of authentication, grading and
      related services for high-end collectibles. We provide authentication and
      grading services for rare coins, vintage U.S. paper currency, sportscards,
      stamps and for sports memorabilia and autographs. We also publish magazines
      that
      provide market prices and information for certain collectibles and sell
      advertising on our websites and in those magazines.




During
      the period from 1999 through the latter part of fiscal 2004, we also were
      engaged in the business of marketing and selling high-end collectible coins,
      sportscards and sports entertainment and historical memorabilia. Most of those
      sales were made at multi-venue auctions that were conducted by our collectibles
      sales divisions, which were comprised of Bowers and Merena Galleries and
      Kingswood Coin Auctions for rare coins, Superior Sportscard Auctions for vintage
      sportscards and sports memorabilia and Odyssey for entertainment and historical
      memorabilia. We also sold collectible coins by direct sales
      methods.




On
      December 4, 2003, our Board of Directors adopted a plan to focus the Company’s
      financial and management resources and collectibles expertise, on the operations
      and growth of its authentication and grading businesses, by divesting the
      collectibles auctions and direct sales businesses comprising its collectibles
      sales segment. As a result, in the accompanying consolidated financial
      statements, the assets and related liabilities of the collectibles sales segment
      have been classified as held for sale and the related operating results have
      been classified as discontinued operations in accordance with SFAS 144 (see
      note
      3).




**2.** **Summary
      of Significant Accounting Policies**




***Basis
      of Presentation***




The
      accompanying consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of
      America.




50


***Principles
      of Consolidation***




The
      accompanying consolidated financial statements include the accounts of
      Collectors Universe, Inc. and its subsidiaries. In 2004, the Company disposed
      of
      the businesses comprising its collectibles sales segment and, accordingly,
      the
      assets and liabilities of those businesses have been classified as held for
      sale
      and their related operating results (including the gains or losses recognized
      on
      the sales of those businesses) have been classified as discontinued operations.
      See note 3.




***Use
      of Estimates***




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the dates of the financial statements
      and
      the reported amounts of revenues and expenses during the reporting periods.
      Actual results may differ from those estimates, and such differences may be
      material to the consolidated financial statements.




***Cash
      and Cash Equivalents***




We
      consider all highly liquid investments with original maturities of three months
      or less at the date of purchase to be cash equivalents. At June 30, 2005, cash
      and cash equivalents included approximately $60 million of trading securities,
      primarily comprising high quality commercial paper and certificates of deposit
      issued by U.S. or foreign companies. The minimum credit quality of the portfolio
      must be rated no less than single-A long term or A1/P1 short term, and the
      portfolio must contain no more than 25% exposure to securities of issuers whose
      principal business activities are in the same industry. However, the 25%
      limitation does not apply to securities guaranteed by the U.S. government or
      to
      bank obligations, subject to U.S. banking regulations. In addition, the weighted
      average maturity of the portfolio must not exceed 90 days. Such trading
      securities are carried at market value in the accompanying consolidated balance
      sheet at June 30, 2005. Unrealized gains on such trading securities were
      approximately $106,000 at June 30, 2005.




***Concentrations***




Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist primarily of cash, cash equivalents and short-term
      investments, accounts receivable and notes receivables.




*Financial
      Instruments and Cash Balances.* Through
      September 30, 2004, the Company had invested its excess cash in a large
      uninsured institutional money market fund. In September 2004, the Company
      adopted a policy to invest its excess cash in a portfolio of high quality U.S.
      dollar-denominated money market type or similar securities, and appointed a
      new
      portfolio manager. At June 30, 2005, the Company’s excess funds of approximately
      $63 million were primarily invested in certificates of deposit, in a money
      market fund, and in high quality commercial paper. In addition, at June 30,
      2005, the Company had approximately $2 million in a non-interest bearing bank
      account for general day-to-day operations.




*Accounts
      Receivable.* A
      substantial portion of accounts receivable is due from collectibles dealers.
      At
      June 30, 2005 and 2004, accounts receivable from one customer represented 46%
      and 24% of the Company’s total accounts receivable balances. We perform an
      analysis of the expected collectibility of accounts receivable based on several
      factors, including the age and extent of significant past due accounts and
      economic conditions or trends that may offset the ability of the debtor to
      pay
      their account receivable balances. Based on such review, we make an allowance
      for doubtful accounts, when necessary. The allowance for doubtful accounts
      receivable was $38,000 and $30,000 at June 30, 2005 and June 30, 2004,
      respectively.




*Customers.* The
      authentication and grading of collectible coins accounted for approximately
      69%,
      66% and 60% of our net revenues for the years ended June 30, 2005, 2004 and
      2003, respectively.




*Customer
      Notes Receivable.* During
      the year ended June 30, 2005, we made short term advances, in an aggregate
      principal amount of $6,078,000 (of which $4,518,000 had been repaid by June
      30,
      2005) to two collectibles dealers who have been long time customers. We perform
      an analysis of the expected collectibility of customer notes receivable based
      on
      several factors, including the age and extent of significant past due notes
      and
      economic conditions or trends that may offset the ability of the debtor to
      pay
      their customer notes receivable balances.




51


*Suppliers* .
      We
      purchase injection-molded parts, holograms and printed labels for our grading
      services. There are numerous suppliers for these items and, as a result, it
      is
      possible to change suppliers without significant delay or cost to the Company.
      However, while there are numerous sources for injection-molded parts, these
      parts require a die to fabricate the part. The manufacture of high precision
      dies can be a lengthy process and requires considerable expertise in their
      fabrication. Although, we do not have back-up dies for some of our high volume
      injection-molded parts and we rely on one supplier for these requirements,
      we
      believe that this supplier maintains a large enough inventory of the
      injection-molded parts to allow time for us to have new molds manufactured
      for
      use by other suppliers.




***Fair
      Value of Financial Instruments***




The
      carrying value of cash and cash equivalents, accounts receivable, customer
      notes
      receivable, accounts payable and accrued liabilities approximate their
      respective fair values due to the short-term nature of such instruments. The
      carrying value of trading securities included in cash and cash equivalents
      approximate fair value based on quoted market prices for these
      investments.




***Inventories***




Our
      inventories consist primarily of (i) our coin and stamp collectibles
      inventories, and (ii) consumable supplies that we use in our continuing
      authentication and grading businesses. We account for those collectibles
      inventories under the specific identification method. Inventories are valued
      at
      the lower of cost or market. Inventories are periodically reviewed to identify
      slow moving items, and the allowance for inventory loss is recognized, as
      necessary. The allowance for inventory loss was $34,000 and $53,000 at June
      30,
      2005 and 2004, respectively. It is possible that our estimates of market value
      could change in the near term due to market conditions in the various
      collectibles markets served by the Company.




***Property
      and Equipment***




Property
      and equipment are stated at cost. Depreciation and amortization are provided
      using the straight-line method over the estimated useful lives ranging from
      three to seven years. Leasehold improvements are amortized over the shorter
      of
      the estimated useful lives of the improvements or the term of the related lease.
      Repair and maintenance costs are expensed as incurred.




***Long-Lived
      Assets***




Management
      regularly reviews property and equipment and other long-lived assets, including
      certain identifiable intangibles, for possible impairment. This review occurs
      annually, or more frequently if events or changes in circumstances indicate
      the
      carrying amount of the asset may not be recoverable in full. If there is
      indication of impairment of property and equipment or amortizable intangible
      assets, then management prepares an estimate of future cash flows (undiscounted
      and without interest charges) expected to result from the use of that asset
      and
      its eventual disposition. If these cash flows are less than the carrying amount
      of the asset, an impairment loss is recognized to write down the asset to its
      estimated fair value. The fair value is estimated at the present value of the
      future cash flows discounted at a rate commensurate with management’s estimates
      of the business risks. During the year ended June 30, 2003, the Company
      determined that a covenant not-to-compete obtained in connection with an
      acquisition of a collectibles sales business was impaired. Accordingly, the
      Company wrote-off the unamortized balance of $18,000. Such amount is included
      in
      the loss from discontinued operations in the accompanying consolidated
      statements of operations for the year ended June 30, 2003 (note 3). In the
      fiscal year ended June 30, 2003 the Company also recorded impairment charges
      for
      goodwill, as discussed further in this Note 2. No long-lived asset impairments
      were identified at June 30, 2005 or 2004.




***Revenue
      Recognition***




Net
      revenues consist primarily of fees generated from the authentication and grading
      of coins, sportscards, autographs, currency and stamps. Authentication and
      grading revenues are recognized when those services have been performed by
      us
      and the item is shipped back to the customer. Authentication and grading fees
      generally are prepaid, although we offer open account privileges to larger
      dealers. Advance payments received for grading services are deferred until
      the
      service is performed and the graded item is shipped to the customer. In the
      case
      of dealers to whom we have extended credit, we record revenues at the time
      the
      item is shipped to the customer.




52


***Shipping
      and Handling Costs***




Shipping
      and handling costs incurred to return to our customers their collectibles
      property are recorded as costs of revenues, net of amounts received from such
      customers.





***Warranty
      Costs***




We
      offer
      a warranty covering the coins and sportscards we authenticate and grade and,
      beginning in the fourth quarter of 2005, we began offering a similar warranty
      on
      the stamps and currency that we authenticate and grade. Under the warranty,
      if
      any coin, sportscard, stamp or currency that was previously graded by us is
      later submitted to us for re-grading and either (i) receives a lower grade
      upon
      that resubmittal or (ii) is determined not to have been authentic, we will
      offer
      to purchase the coin, sportscard, stamp or currency or, in the alternative,
      at
      our option, pay the difference in value of the item at its original grade as
      compared with its lower grade. However, this warranty is voided if the coin,
      sportscard, stamp or currency, upon resubmittal to us, is not in the same
      tamper-evident clear plastic holder in which it was placed at the time we last
      graded it or shows signs of tampering. We accrue for estimated warranty costs
      based on historical trends and related experience.




***Advertising
      Costs***




Advertising
      costs are expensed as incurred and amounted to approximately $260,000, $149,000
      and $123,000 in the fiscal years ended June 30, 2005, 2004 and 2003,
      respectively.




***Income
      Taxes***




We
      account for income taxes in accordance with Statement of Financial Accounting
      Standards (“SFAS”) No. 109 *,
      Accounting for Income Taxes* .
      This
      statement requires the recognition of deferred tax assets and liabilities for
      the future consequences of events that have been recognized in the Company’s
      financial statements or tax returns. Measurement of the deferred items is based
      on enacted tax laws. In the event the future consequences of differences between
      financial reporting bases and tax bases of the Company’s assets or liabilities
      result in a deferred tax asset, SFAS No. 109 requires an evaluation
      of the
      probability of being able to realize the future benefits indicated by such
      asset. A valuation allowance related to a deferred tax asset is recorded when
      it
      is more likely than not that some portion or all of the deferred tax asset
      will
      not be realized.




***Stock-Based
      Compensation***




During
      the three year period ended June 30, 2005, we accounted for our stock option
      plans in accordance with Accounting Principles Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related interpretations. As such, compensation expense was recorded on the
      date
      of grant only if the quoted market price of the underlying stock on that date
      exceeded the exercise price of the options. However, we have provided pro forma
      net earnings and pro forma net earnings per share disclosures as if the fair
      value of all stock options as of the grant date were recognized as expense
      over
      the vesting period in accordance with SFAS No. 123, *Stock
      Based Compensation* .




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 123R, *Share-Based
      Payment.* SFAS
      No. 123R will eliminate the ability to account for share-based compensation
      transactions using Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      instead will require that such transactions be accounted for using a
      fair-value-based method and that the compensation costs related to share-based
      payments be recognized in the financial statements. SFAS No. 123R also
      requires the tax benefit associated with these share-based payments to be
      classified as financing activities in the statement of cash flows rather than
      operating activities as currently required. SFAS No. 123R is effective
      as
      of the first annual period beginning after June 15, 2005. As a result, we have
      adopted SFAS No. 123R effective as of July 1, 2005. SFAS No. 123R
      offers alternative methods for determining the fair value of share based
      compensation grants. At the present time, we have not yet determined which
      alternative method we will use. Regardless of the method we choose to implement,
      SFAS No. 123R will result in increased compensation expenses in our reported
      consolidated results of operations.




53


The
      following table illustrates the pro forma effect on net income (loss) and net
      income (loss) per share if the Company had applied the fair value recognition
      provisions of SFAS No. 123 to stock-based employee compensation:





(in
                thousands, except per share data)**June
                30****2005**
            
            **2004**
            
            **2003**Net
                income (loss), as reported
            
            $
            4,818
            
            $
            1,730
            
            $
            (10,439
            )Add:
                stock-based employee compensation expense included in reported net
                income,
              net
                of related tax effects
            
            
            20
            
            
            50
            
            
            --Deduct:
                total stock-based employee compensation expense determined under
                fair
                value
              based method for awards,net
                of related tax effects
            
            
            (791
            )
            
            (402
            )
            
            (262
            )Pro
                forma net income (loss)
            
            $
            4,047
            
            $
            1,378
            
            $
            (10,701
            )Net
                income (loss) per common share - basicAs
                reported
            
            $
            0.69
            
            $
            0.28
            
            $
            (1.68
            )Pro
                forma
            
            $
            0.58
            
            $
            0.22
            
            $
            (1.72
            )Net
                income (loss) per common share - dilutedAs
                reported
            
            $
            0.65
            
            $
            0.27
            
            $
            (1.66
            )Pro
                forma
            
            $
            0.54
            
            $
            0.21
            
            $
            (1.70
            )




The
      fair
      value of each option grant was estimated on the date of grant using the
      Black-Scholes option-pricing model with the following weighted-average
      assumptions used:




**June
                30****2005**
            
            **2004**
            
            **2003**Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Expected
                volatility
            
            
            75.0
            %
            
            75.0
            %
            
            73.0
            %Risk-free
                interest rate
            
            
            3.6
            %
            
            1.7
            %
            
            2.0
            %Expected
                lives
            
            
            2.0
                years
            
            
            2.0
                years
            
            
            2.0
                years




We
      account for equity instruments issued to persons other than Company employees
      and directors (“non-employees”) in accordance with the provisions of SFAS
      No. 123 and Emerging Issues Task Force (“EITF”) Issue No. 96-18, *Accounting
      for Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services.* All
      transactions in which goods or services are the consideration received for
      the
      issuance of equity instruments issued to non-employees are accounted for based
      on the fair value of the consideration received or the fair value of the equity
      instrument issued, whichever is more reliably measurable. The measurement date
      used to determine the fair value of any such equity instrument is the earliest
      to occur of (i) the date on which the third-party performance is complete,
      or (ii) the date on which it is probable that performance will occur,
      or
      (iii), if different, the date on which the compensation has been earned by
      the
      non-employee. No equity instruments have been issued to non employees for goods
      or services during fiscal 2003, 2004 or 2005.




***Net
      Income (Loss) Per Share***




We
      compute net income (loss) per share in accordance with SFAS No. 128, *Earnings
      Per Share.* SFAS
      No. 128 requires the presentation of basic and diluted earnings per
      share.
      Basic net income (loss) per share is computed by dividing net income (loss)
      attributable to common stockholders by the weighted-average number of common
      shares outstanding during the periods presented. Diluted net income (loss)
      per
      share is computed by dividing net income (loss) attributable to common
      stockholders by the weighted-average number of common and common equivalent
      shares outstanding during the periods presented assuming the exercise of all
      outstanding stock options and other dilutive securities. However, options with
      exercise prices that exceed the average market price of the Company’s shares for
      the period for which the calculation of diluted net income (loss) per share
      is
      made are disregarded, because they are non-dilutive in their effect.




54


The
      following table sets forth the computation of basic and diluted net income
      (loss) per common share (in thousands except per share data):




**2005**
            
            **2004**
            
            **2003**Income
                from continuing operations
            
            $
            4,758
            
            $
            2,798
            
            $
            736Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses
              (net of income taxes)
            
            
            60
            
            
            (1,068
            )
            
            (2,202
            )Cumulative
                effect of accounting change (net of income taxes)
            
            
            -
            
            
            -
            
            
            (8,973
            )Net
                income (loss)
            
            $
            4,818
            
            $
            1,730
            
            $
            (10,439
            )Net
                income (loss) per basic share:From
                continuing operations
            
            $
            0.68
            
            $
            0.45
            
            $
            0.12Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses
              (net of income taxes)
            
            
            0.01
            
            
            (0.17
            )
            
            (0.35
            )Cumulative
                effect of accounting change (net of income taxes)
            
            
            -
            
            
            -
            
            
            (1.45
            )Net
                income (loss)
            
            $
            0.69
            
            $
            0.28
            
            $
            (1.68
            )Net
                income (loss) per diluted share:From
                continuing operations
            
            $
            0.64
            
            $
            0.44
            
            $
            0.12Income
                (loss) from discontinued operations, net of gain on sales
                ofdiscontinued
                businesses
              (net of income taxes)
            
            
            0.01
            
            
            (0.17
            )
            
            (0.35
            )Cumulative
                effect of accounting change (net of income taxes)
            
            
            -
            
            
            -
            
            
            (1.43
            )Net
                income (loss)
            
            $
            0.65
            
            $
            0.27
            
            $
            (1.66
            )Weighted-average
                shares outstanding:Basic
            
            
            7,013
            
            
            6,170
            
            
            6,205Diluted
            
            
            7,452
            
            
            6,463
            
            
            6,294




Options
      and warrants to purchase approximately 406,000, 624,000 and 646,000 shares
      of
      common stock for the years ended June 30, 2005, 2004 and 2003, respectively
      at
      exercise prices up to $30.52 per share, were not included in the computation
      of
      diluted earnings per share because the respective exercise prices of those
      options and warrants were greater than the average market price for the
      respective period.




***Comprehensive
      Income***




The
      Company does not have any items of other comprehensive income requiring separate
      disclosure.




***Computer
      Software Development Costs***




In
      accordance with Statement of Position No. 98-1, *Accounting
      for the Costs of Computer Software Developed or Obtained for Internal Use,* the
      Company has capitalized certain costs to obtain or develop software used for
      internal purposes. For fiscal years 2005, 2004 and 2003, the Company capitalized
      $0, $119,000 and $0, respectively. During the years ended June 30, 2005, 2004
      and 2003, amortization of software development costs was $35,000, $67,000 and
      $115,000, respectively, based upon a two-year amortization period.




***Change
      in Accounting for Goodwill and Other Intangible
      Assets***




Effective
      July 1, 2002, we adopted the provisions of SFAS No. 142, *Goodwill
      and Other Intangible Assets* .
      SFAS
      No. 142 required us, in the year of its adoption, to perform a transitional
      goodwill impairment test to be measured as of the beginning of that fiscal
      year.
      As required by SFAS No. 142, the test was conducted at a “reporting unit”
      level and involved a comparison of each reporting unit’s fair value to its
      carrying value. We determined that our reporting units were our operating
      segments that were aggregated into reporting segments. The measurement of value
      for each reporting unit was based on a weighting of a combination of valuation
      approaches, including discounted cash flows and multiples of earnings before
      interest, taxes, depreciation and amortization. Upon adoption of SFAS
      No. 142, we completed a transitional impairment test and concluded that
      certain of our goodwill was impaired, resulting in a non-cash, after-tax charge
      of $8,973,000. The charge has been recorded as a cumulative effect of an
      accounting change in the accompanying consolidated statement of operations
      for
      the year ended June 30, 2003.




55


The
      following is a summary of the transitional impairment charge by segment and
      reporting unit, net of a related $4,511,000 tax benefit (in
      thousands):




**Reportable
                Segments**
            
            **Reporting
                Unit**
            
            **Charge**Discontinued
                operations - collectible sales
            
            
            Bowers
                and Merena
            
            $
            7,230Lyn
                Knight
            
            
            1,262Odyssey
            
            
            323Superior
                Sports Auctions
            
            
            102Continuing
                operations - authentication and grading
            
            
            Professional
                Stamp Experts
            
            
            56$
            8,973




Market
      and economic conditions resulted in impairment to the goodwill allocated to
      these reporting units.




On
      June
      30, 2003, we tested goodwill and other intangible assets in accordance with
      the
      provisions of SFAS No. 142, and concluded that the remaining unamortized
      goodwill was impaired. The operating profits and cash flows of each of the
      reporting units were lower than had been expected for fiscal 2003. Based on
      that
      trend and a reforecast of the future earnings of those units, the expected
      present value of future cash flows of each of those reporting units was
      re-determined, resulting in a pre-tax impairment of $1,477,000. This impairment
      was recorded as a goodwill impairment charge of $6,000, with the balance of
      $1,471,000 recorded as part of the loss from discontinued operations in the
      accompanying consolidated statement of operations for 2003.




***Supplemental
      Schedule of Noncash Transactions***




During
      the year ended June 30, 2003, an officer of the Company transferred to the
      Company 130,207 shares of the Company’s common stock owned by him, with a fair
      value of $386,000, in full satisfaction of the then outstanding balance and
      accrued interest on a note receivable due by the officer to the
      Company.




In
      connection with the adoption of SFAS No. 142, *Goodwill
      and Other Intangible Assets* ,
      the
      Company completed the initial impairment test and concluded that certain of
      its
      goodwill was impaired, resulting in a non-cash impairment charge in the first
      quarter of fiscal 2003, of $8,973,000, net of a tax benefit of $4,511,000.
      Such
      $8,973,000 is classified as a cumulative effect of accounting change in
      2003.




As
      described above, effective June 30, 2003, pursuant to SFAS No. 142,
      the
      Company recorded another non-cash goodwill impairment charge of $1,477,000.
      This
      charge is classified as $6,000 for goodwill impairment for continuing operations
      and the balance of $1,471,000 is classified as part of the loss from
      discontinued operations in the accompanying consolidated statement of operations
      for 2003.




Effective
      June 30, 2003, the Company determined that the unamortized balance of a
      covenant-not-to compete was impaired, resulting in a non-cash impairment charge
      of $18,000, which is classified as part of the loss from discontinued operations
      in the accompanying statement of operations for 2003.




During
      2004, in connection with the divestiture of the Company’s collectibles auctions
      and direct sales businesses, the Company sold such businesses for gross proceeds
      of approximately $2,874,000, of which $2,307,000 and $544,000 were received
      in
      2004 and 2005, respectively. The balances of $567,000 and $23,000 are included
      as part of the receivables from the sale of discontinued operations in the
      accompanying balance sheet at June 30, 2004 and June 30, 2005,
      respectively.




During
      2005 and 2004, the Company recorded a tax benefit from the exercise of stock
      options of $338,000, and $342,000, respectively, which is included as an
      increase to deferred income taxes, and an increase to additional paid-in
      capital.




***Recent
      Accounting Pronouncements***




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 123R, *Share-Based
      Payment.* SFAS
      No.
      123R will eliminate the ability to account for share-based compensation
      transactions using Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees,* and
      instead will require that such transactions be accounted for using a
      fair-value-based method with compensation costs related to share-based payments
      to be recognized in the financial




56


statements.
      SFAS No. 123R also requires the tax benefit associated with these share-based
      payments to be classified as financing activities in the statement of cash
      flows
      rather than operating activities as currently required. SFAS No. 123R is
      effective as of the first annual period beginning after June 15, 2005. As a
      result, we have adopted SFAS No. 123R effective as of July 1, 2005. SFAS No.
      123R offers alternative methods of determining the fair value of share-based
      compensation awards. At the present time, we have not yet determined which
      alternative method we will use. Regardless of the method we choose to implement,
      SFAS No. 123R will result in increased compensation expenses in our reported
      consolidated results of operations.




In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 154, *Accounting
      Changes and Error Corrections.* SFAS
      No.
      154 replaces APB Opinion No. 20, *Accounting
      Changes* and FASB
      Statement No 3, *Reporting
      Accounting Changes in Interim Financial Statements* which
      required that most voluntary changes in accounting principle be recognized
      by
      including in net income of the period of the change the cumulative effect of
      changing to the new accounting principle. SFAS No. 154 ** will
      require retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects or the cumulative effect of the change. This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. We will adopt SFAS No. 154
      for
      our fiscal year beginning July 1, 2005.




***Reclassifications***




Certain
      reclassifications have been made to the fiscal 2003 and 2004 financial
      statements to conform to the fiscal 2005 presentation.




**3.** **Discontinued
      Operations**




On
      December 4, 2003, the Company’s Board of Directors authorized management to
      implement a plan to focus the Company’s financial and management resources, and
      collectibles expertise, on the operations and growth of its grading and
      authentication businesses, and to divest the Company’s collectibles auctions and
      direct sales businesses.




Accordingly,
      in accordance with SFAS No. 144, the assets and related liabilities
      of the
      collectibles sales businesses, which included the Bowers and Merena, Superior
      Sports Auctions, Kingswood Coin Auctions, Odyssey Publications, Lyn Knight
      Currency Auctions and DHRC, have been classified as held for sale in the
      accompanying consolidated balance sheets at June 30, 2005 and 2004; and the
      related operating results have been classified as discontinued operations in
      the
      accompanying consolidated statements of operations for the fiscal years ended
      June 30, 2005, 2004 and 2003.




On
      February 19, 2004 we sold the businesses and certain assets of our Bowers &
      Merena Auction, Kingswood Coin Auction and Superior Sports Auction divisions
      (collectively the “BK&S Divisions”) to Spectrum Numismatics International,
      Inc. (“Spectrum”), a subsidiary of Greg Manning Auctions, Inc. We retained
      ownership of the collectibles inventories and the then outstanding accounts
      receivables of the BK&S Divisions and Spectrum assumed certain outstanding
      contractual obligations of those businesses.




The
      consideration for the sale of those businesses was $2,500,000 in cash. We are
      entitled to receive an additional consideration in an amount that will be
      determined on the basis of the future sales revenues of the BK&S Divisions
      over the two-year period following February 19, 2004. We recorded a pre-tax
      gain
      of $1,872,000 on the sale of the BK&S Divisions in the year ended June 30,
      2004. We will recognize any additional consideration in future periods as and
      to
      the extent the amounts become determinable. However, there was no additional
      amount received in fiscal 2005.




In
      furtherance of our strategy to focus our business on the provision of value
      added collectibles services and to dispose of the collectibles sales businesses,
      in March 2003 we discontinued the business of selling coins, at retail, under
      the name “David Hall Rare Coins” (or “DHRC”). In connection with the operation
      of that business, we had utilized certain intangible assets and trade secrets
      obtained under a license agreement from an affiliate of David Hall and Van
      Simmons, two of the Company’s largest stockholders and also two of its
      directors. In connection with the discontinuance of the DHRC business, and
      with
      the approval of the disinterested members of our Board of Directors, we
      terminated that license agreement. We retained the operating inventory,
      receivables and liabilities of DHRC at the time of the termination of the
      license and discontinuance of that business.




57


In
      the
      fourth quarter of 2004, we disposed of our Odyssey related auction and
      publications businesses for $190,000 cash, of which $130,000 was paid at the
      time of sale and the remaining $60,000 is payable in eight (8) equal quarterly
      installments. The aggregate payments received through June 30, 2005, inclusive
      of the cash received at the time of sale, totaled $167,500. We also accrued
      for
      Odyssey’s share of the commissions it generated in a fourth quarter 2004
      auction. In addition, we retained certain assets and liabilities of these
      businesses and we are in the process of liquidating these assets and paying
      down
      those liabilities.




On
      September 17, 2003, we sold certain assets of our currency auction business,
      operated by a wholly-owned subsidiary, Lyn Knight Currency Auctions, Inc.,
      to
      Collectible Properties, Inc., a private company owned by Lyn F. Knight who,
      until that sale, had been president of that subsidiary and had managed that
      business for the Company. We retained ownership of the inventory of collectible
      currencies and the then outstanding accounts receivable, and Collectible
      Properties, Inc. assumed certain outstanding contractual obligations, of this
      business. The consideration received from that sale was equal to the net book
      value of the assets sold plus an additional amount which will be determined
      on
      the basis of the future sales revenue of Collectible Properties, Inc. Through
      June 30, 2005, we recognized approximately $127,000 in fiscal 2004 and $248,000
      in fiscal 2005 of additional consideration based on the revenues of Collectible
      Properties, Inc. If we receive any additional consideration, it will be recorded
      at the time the amount of that additional consideration becomes determinable.




The
      operating results of the discontinued collectible sales businesses included
      in
      the accompanying consolidated statements of operations, are as follows (in
      thousands):




**Years
                Ended June 30,****2005**
            
            **2004**
            
            **2003**Net
                revenues
            
            $
            472
            
            $
            27,101
            
            $
            31,928Loss
                from operations
            
            
            (277
            )
            
            (3,468
            )
            
            (3,806
            )Gain
                on sale of discontinued businesses
            
            
            202
            
            
            2,245
            
            
            -(75
            )
            
            (1,223
            )
            
            (3,806
            )Income
                tax benefit
            
            
            (135
            )
            
            (155
            )
            
            (1,604
            )Income
                (loss) from discontinued operations
            
            $
            60
            
            $
            (1,068
            )
            $
            (2,202
            )




The
      following table contains summary balance sheet information (in thousands) with
      respect to the net assets and liabilities of the collectible sales businesses
      held for sale that are included in the accompanying consolidated balance sheets:




**June
                30,****2005**
            
            **2004**Current
                assets:Accounts
                receivable
            
            $
            58
            
            $
            379Inventories
            
            
            189
            
            
            657Consignment
                advances
            
            
            30
            
            
            45Notes
                receivable
            
            
            88
            
            
            186$
            365
            
            $
            1,267Non-current
                assets:Notes
                receivable, net of current portion
            
            
            46
            
            
            117$
            46
            
            $
            117Current
                liabilities:Consignors
                payable
            
            $
            1
            
            $
            1Other
                current liabilities
            
            
            26
            
            
            275$
            27
            
            $
            276






58




**4.**
              **Inventories**


Inventories
      consist of the following at June 30:


(in
                thousands)**2005**
            
            **2004**Coins
            
            $
            276
            
            $
            253Other
                collectibles
            
            
            37
            
            
            58Grading
                raw materials consumable inventory
            
            
            157
            
            
            194470
            
            
            505Less
                inventory reserve
            
            
            (34
            )
            
            (53
            )$
            436
            
            $
            452




Inventory
      reserve represents valuation allowance on certain items held in
      inventory.






**5.**
            **Customer
                Notes Receivable**




During
      2005, we made short-term cash advances to two of our largest customers, secured
      by certain collectible coins that the customers had submitted to us for
      authentication and grading. Principal reduction payments are required at the
      time the Company returns the authenticated and graded coins to the customer.
      Current advances bear interest at a rate based on the Prime Rate. During the
      fourth quarter of 2005, our wholly-owned subsidiary, Collectors Finance
      Corporation, implemented a Dealer Financing Program, pursuant to which it offers
      short term loans to collectibles dealers with established credit histories
      that
      are willing to collateralize the loans with coins or other collectibles
      delivered to us for authentication and grading. The customers are required
      to
      repay the loan at maturity or, if sooner, on return of the coins to them. The
      total principal amount of advances and short term loans made to customers in
      2005 were $6,078,000, of which $4,518,000 had been repaid by June 30, 2005,
      leaving a remaining unpaid balance as of that date of $1,560,000. See note
      9,
      Line of Credit.






**6.**
            **Property
                and Equipment**




Property
      and equipment consist of the following at June 30:




(in
                thousands)**2005**
            
            **2004**Coins
                and stamp grading reference sets
            
            $
            62
            
            $
            57Computer
                hardware and equipment
            
            
            988
            
            
            997Computer
                software
            
            
            900
            
            
            867Equipment
            
            
            1,330
            
            
            1,283Furniture
                and office equipment
            
            
            689
            
            
            659Leasehold
                improvements
            
            
            438
            
            
            422Trading
                card reference library
            
            
            52
            
            
            524,459
            
            
            4,337Less
                accumulated depreciation and amortization
            
            
            (3,602
            )
            
            (3,292
            )Property
                and equipment, net
            
            $
            857
            
            $
            1,045




Depreciation
      and amortization expense relating to property and equipment for fiscal 2005,
      2004 and 2003 was $443,000, $647,000 and $650,000, respectively.




59






**7.**
            **Accrued
                Liabilities**




Accrued
      liabilities consisted of the following at June 30:


(in
                thousands)**2005**
            
            **2004**Warranty
                costs
            
            $
            609
            
            $
            492Professional
                fees
            
            
            211
            
            
            546Other
            
            
            743
            
            
            313$
            1,563
            
            $
            1,351




Warranty
      reserve activity and balances related to fiscal years 2005, 2004 and 2003,
      were
      as follows (in
      thousands):




Warranty
                reserve, June 30, 2002
            
            $
            302Charged
                to cost of revenues
            
            
            317Cash
                payments
            
            
            (315
            )Warranty
                reserve, June 30, 2003
            
            
            304Charged
                to cost of revenues
            
            
            646Payments
            
            
            (458
            )Warranty
                reserve June 30, 2004
            
            
            492Charged
                to cost of revenues
            
            
            530Payments
            
            
            (413
            )Warranty
                reserve at June 30, 2005
            
            $
            609




**8.**
            **Income
                Taxes**




Set
      forth
      below are the provision (benefit) for income taxes for the years ended June
      30:




(in
                thousands)**2005**
            
            **2004**
            
            **2003**Current:Federal
            
            $
            2,738
            
            $
            1,595
            
            $
            278State
            
            
            63
            
            
            62
            
            
            (448
            )2,801
            
            
            1,657
            
            
            (170
            )Deferred:Federal
            
            
            (117
            )
            
            (216
            )
            
            146State
            
            
            457
            
            
            140
            
            
            (533
            )340
            
            
            (76
            )
            
            (387
            )Total
                provision (benefit) for income taxes
            
            $
            3,141
            
            $
            1,581
            
            $
            (557
            )




The
      reconciliation of the provision (benefit) for income taxes computed at federal
      statutory rates to the provision (benefit) for income taxes for the years ended
      June 30, was as follows:




(in
                thousands)**2005**
            
            **2004**
            
            **2003**Provision
                at federal statutory rates
            
            $
            2,685
            
            $
            1,542
            
            $
            63State
                income taxes (benefit), net
            
            
            340
            
            
            132
            
            
            (644
            )Other,
                net
            
            
            116
            
            
            (93
            )
            
            24$
            3,141
            
            $
            1,581
            
            $
            (557
            )









60




Deferred
      income taxes reflect the net tax effect of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. Significant components of deferred
      taxes as of June 30, 2005 and 2004, were as follows:




(in
                thousands)**2005**
            
            **2004**Deferred
                tax assets:Supplier
                compensation costs
            
            $
            553
            
            $
            546Reserves
            
            
            816
            
            
            1,295Goodwill
                and intangibles
            
            
            136
            
            
            156Net
                operating loss carryforward
            
            
            1,504
            
            
            4,110State
                credits
            
            
            919
            
            
            944Other
            
            
            63
            
            
            19Total
                deferred tax assets
            
            
            3,991
            
            
            7,070Deferred
                tax liabilities:State
                taxes
            
            
            -
            
            
            (637
            )Property
                and equipment
            
            
            (34
            )
            
            -Other
            
            
            (52
            )
            
            (54
            )Total
                deferred tax liabilities
            
            
            (86
            )
            
            (691
            )Net
                deferred tax assets
            
            
            3,905
            
            
            6,379Less:
                Current portion
            
            
            (2,854
            )
            
            (1,174
            )$
            1,051
            
            $
            5,205




At
      June
      30, 2005, the Company had federal tax net operating losses of $3,800,000, which
      can be carried forward through June 30, 2024 and state tax net operating losses
      of $3,600,000, which will begin to expire in the tax year ending June 30, 2019.
      In addition, the Company has federal and state Alternative Minimum Tax (AMT)
      credit carry forwards of $130,000 and $44,000, respectively, and a state tax
      credit carryforward of approximately $1,060,000 related to California Enterprise
      Zone Credits. These credits have no expiration dates.






**9.**
            **Line
                of Credit**




To
      provide a source of funds for its Dealer Financing Program, in June 2005 CFC
      entered into a two-year revolving bank line of credit agreement, that permits
      CFC to borrow, at any one time, up to the lesser of (i) $7,000,000 or (ii)
      an
      amount equal to 85% of the aggregate principal amount of customer receivables
      that meet the bank’s eligibility criteria. Borrowings under this credit line
      bear interest at rates based on the bank’s Prime Rate or LIBOR, as applicable,
      and are secured by substantially all the assets of CFC (including customer
      receivables and CFC’s security interests in customer owned loan collateral).




Costs
      of
      approximately $330,000 (comprising a loan agreement fee, bank fees and legal
      fees) were incurred in connection with this line of credit. At June 30, 2005,
      these costs have been capitalized and are included in prepaid expenses and
      other
      current assets in the accompanying consolidated balance sheet at June 30, 2005.
      These debt issue costs will be amortized to interest expense over the term
      of
      the revolving bank line of credit agreement, which is two years. On a quarterly
      basis, CFC will incur an unused line fee of 0.25% per annum, based on the
      average daily unused portion of the total facility during the
      quarter.




CFC’s
      obligations under this line of credit have been guaranteed by the Company
      pursuant to a Continuing Guaranty Agreement with the bank lender. The terms
      of
      that Agreement require the Company to be in compliance with certain financial
      and other restrictive covenants, and require the consent of the lender (i)
      for
      the Company to pay cash dividends or repurchase shares of its common stock
      in
      amounts exceeding its annual net income in any year, and (ii) to consummate
      more than $5 million of business acquisitions in any year. The Company was
      in
      compliance with all covenants at June 30, 2005.




61




**10.**
            **Employee
                Benefit Plans**




We
      established an employee benefit plan, effective July 1992, that featured a
      401(k) salary reduction provision covering all employees who met the eligibility
      requirements of the plan. Eligible employees are able to defer up to the lesser
      of 15% of their base compensation or the statutorily prescribed annual limit.




On
      July
      5, 2000, the Company implemented the 2000 Employee Stock Purchase Plan (the
      “Plan”) covering all employees who meet certain eligibility requirements. The
      Plan, which was approved by our stockholders, permitted employees to elect,
      at
      the beginning of each six-month period (each, a “purchase period”), to authorize
      withholdings from payroll of up to 15% of their compensation that would be
      used
      to purchase shares of the Company’s common stock at the end of the six-month
      period. The Plan provided that the purchase price would be 85% of the closing
      price of the Company’s shares on NASDAQ on (i) the first day of the
      six-month period, or (ii) the last day of the six-month period, whichever
      price was lower. Participating employees were entitled to revoke their elections
      to participate in the purchase of shares at any time prior to the end of a
      purchase period, in which event the amounts withheld to the date of such
      revocation were paid to the employee, without interest. This Plan was terminated
      effective as of July 1, 2005.




During
      fiscal 2005, 2004 and 2003, we issued 5,000, 12,000 and 3,000 shares of common
      stock, respectively, under the Plan at an average purchase price of $12.80,
      $7.94 and $3.22, respectively.




**11.**
            **Stockholders’
                Equity**




***Equity
      Offering***




In
      March
      2005, the Company completed a public offering of a total of 3,450,000 shares
      of
      its common stock, of which a total of 2,195,856 shares were sold by the Company,
      and the remaining shares were sold by David G. Hall and Van D. Simmons, at
      a
      public offering price of $17.50 per share. Messrs. Hall and Simmons, who founded
      the Company in 1986, are directors of the Company, and Mr. Hall also is the
      Company’s President and Chief Operating Officer. The proceeds to the Company net
      of the underwriting discount and offering expenses of approximately $650,000,
      were approximately $35,657,000. The Company did not receive any of the net
      proceeds (representing the public offering price net of underwriting discount)
      from the sale of shares by Messrs. Hall and Simmons.




***Treasury
      Stock***




During
      fiscal 2001, we repurchased 125,000 shares of our common stock at an aggregate
      cost of $1,021,000.




***Consulting
      Agreement*** ****




In
      July
      1997, we granted options to an individual to purchase 133,000 shares of our
      common stock at an exercise price of $1.32 per share as consideration for a
      five-year consulting agreement that commenced on July 1, 1997. The options
      vested in five annual installments of 20% of the shares beginning on December
      31, 1997 and continuing through December 31, 2001. The options will terminate
      if
      not exercised by December 31, 2005. No amount was recognized for the value
      of
      the options, as the amount was not material.




***Supplier
      Compensation Cost***




During
      fiscal 1999, the Company granted warrants to purchase up to an aggregate of
      150,000 shares of common stock, at an exercise price of $20.00 per share, to
      collectible experts providing content for our websites. These warrants vested
      immediately and are exercisable over a ten-year term. The fair value of these
      options was expensed in fiscal 1999, and all of these options are outstanding
      at
      June 30, 2005.




**12.**
            **Stock
                Option Plans**




In
      January 1999, we adopted the PCGS 1999 Stock Incentive Plan (the “PCGS Plan”).
      The PCGS Plan, which was assumed by the Company at the time of its acquisition
      of PCGS, covers an aggregate of 269,250 shares of our common stock. In February
      1999, we adopted the 1999 Stock Incentive Plan (the “1999 Plan”), which




62


provides
      for grants of incentive stock options, nonstatutory stock options, and
      restricted stock grants to directors, officers, employees and consultants of
      Collectors Universe who provide valuable services to Collectors Universe,
      entitling them to purchase up to 437,250 shares of our common stock. On December
      5, 2000, the stockholders, at the Company’s Annual Meeting, approved an
      amendment to the 1999 Plan to increase the authorized number of shares of our
      common stock that are issuable under this Plan from 437,250 to 749,750 shares.




On
      December 5, 2003, the stockholders, at the Company’s Annual Meeting, approved
      the 2003 Incentive Plan (the “2003 Plan”), which authorizes the grant of
      options, and the issuance of restricted rights, to purchase up to an aggregate
      of 500,000 shares of the Company’s common stock to officers and other employees,
      non-employee directors and service providers of the Company and its
      subsidiaries.




The
      PCGS
      Plan and the 1999 Plan provide that the option exercise price per share may
      not
      be less than 100% of the fair market value of a share of common stock on the
      grant date, as determined by the Board of Directors, for incentive stock options
      and 85% of fair market value for nonstatutory stock options. The 2003 Plan
      provides that the exercise price of all options (whether incentive or
      non-statutory), and the purchase price of shares issued pursuant to restricted
      stock purchase rights, may not be less than 100% of the fair market value of
      the
      shares subject to such options or rights (as the case may be) on the date of
      grant. However, the exercise price of incentive stock options granted under
      any
      of the Plans to any individual possessing 10% or more of the voting power of
      all
      classes of our stock may not be less than 110% of the fair market value of
      a
      share of common stock on the grant date. The timing of exercise for individual
      option grants is at the discretion of the Board of Directors, and the options
      expire no later than ten years after the grant date (five years in the case
      of
      incentive stock options granted to individuals possessing 10% or more of the
      voting power of all classes of our stock). In the event of a change in control
      of the Company, an option or award of shares under these Plans will become
      fully
      exercisable if an agreement is not reached that provides for the surviving
      corporation to assume such options or awards or to substitute comparable options
      or awards for the options and awards granted under these Plans.




The
      following is a summary of stock option activity for fiscal 2005, 2004 and 2003
      under the PCGS Plan, the 1999 Plan and the 2003 Plan. No rights to purchase
      restricted shares have been granted to date.




**(in
                thousands, except per share data)****Number**
              **of
                Shares**
            
            **Exercise**
              **Price
                Per Share**
            
            **Weighted-Average**
              **Exercise
                Price Per Share**Options
                outstanding at June 30, 2002
            
            
            690
            
            $
            3.08
            
            
            -
            
            $
            30.52
            
            $
            10.96Granted
            
            
            254
            
            
            2.55
            
            
            -
            
            
            4.80
            
            
            3.40Cancelled
            
            
            (241
            )
            
            3.08
            
            
            -
            
            
            30.52
            
            
            10.83Exercised
            
            
            (1
            )
            
            
            
            $
            3.08
            
            
            
            
            
            3.08Options
                outstanding at June 30, 2003
            
            
            702
            
            
            2.55
            
            
            -
            
            
            30.52
            
            $
            8.27Granted
            
            
            405
            
            
            3.79
            
            
            -
            
            
            13.73
            
            
            11.14Cancelled
            
            
            (81
            )
            
            2.79
            
            
            -
            
            
            30.52
            
            
            8.16Exercised
            
            
            (204
            )
            
            2.55
            
            
            -
            
            
            8.00
            
            
            4.25Options
                outstanding at June 30, 2004
            
            
            822
            
            
            2.55
            
            
            -
            
            
            30.52
            
            $
            10.56Granted
            
            
            295
            
            
            11.58
            
            
            -
            
            
            20.10
            
            
            17.09Cancelled
            
            
            (70
            )
            
            3.08
            
            
            -
            
            
            30.52
            
            
            17.70Exercised
            
            
            (71
            )
            
            2.55
            
            
            -
            
            
            12.00
            
            
            3.99Options
                outstanding as June 30, 2005
            
            
            976
            
            
            2.55
            
            
            -
            
            
            24.00
            
            $
            12.49





63


The
      following table summarizes information about stock options outstanding at June
      30, 2005:





(In
                thousands, except per share data)**Outstanding
                Options**
            
            **Exercisable
                Options**Range
                of Exercise Prices
            
            Number
                of
              Shares
                Outstanding
            
            Weighted
                Average Remaining Contractual
              Life
                (Years)
            
            Weighted
                Average Exercise Price
            
            Number
                of
              Shares
                Outstanding
            
            Weighted
                Average Exercise Price$2.55
            
            
            -
            
            $
            3.80
            
            
            184
            
            
            7.47
            
            $
            3.32
            
            
            134
            
            $
            3.32$5.28
            
            
            -
            
            $
            7.60
            
            
            74
            
            
            8.22
            
            $
            7.22
            
            
            72
            
            $
            7.27$8.00
            
            
            -
            
            $
            12.00
            
            
            182
            
            
            8.10
            
            $
            10.40
            
            
            73
            
            $
            9.66$        
                13.24
            
            
            -
            
            $
            19.60
            
            
            432
            
            
            9.40
            
            $
            16.10
            
            
            154
            
            $
            17.33$
            20.00
            
            
            
            
            
            65
            
            
            3.83
            
            $
            20.00
            
            
            65
            
            $
            20.00$20.10
            
            
            -
            
            $
            24.00
            
            
            39
            
            
            5.76
            
            $
            22.99
            
            
            29
            
            $
            24.00976
            
            
            
            
            
            
            
            
            527




At
      June
      30, 2005 options to purchase a total of 527,000 shares of our common stock
      were
      exercisable at a weighted-average exercise price of $11.93 per share. By
      comparison, at June 30, 2004, exercisable options to purchase a total of 385,000
      shares were outstanding at a weighted-average exercise price of $10.17 per
      share; and at June 30, 2003, exercisable options to purchase a total of 358,000
      shares were outstanding at a weighted average exercise price of $9.94 per
      share.




The
      weighted-average fair values of stock options granted during fiscal 2005, 2004
      and 2003 were $7.20, $4.66 and $1.01 per option share,
      respectively.





**13.**
            **Related-Party
                Transactions**




A
      member
      of the Board of Directors is also a partner in a professional services firm
      providing service to the Company. For each of the years ended June 30, 2005,
      2004 and 2003, the member was paid $31,250, $35,000 and $35,000, respectively,
      as Board fees; and the professional services firm was paid $588,000, $390,000,
      and $237,000, respectively, for services rendered.




In
      May
      2003, the Company entered into a license agreement with DHRCC, Inc., which
      is
      wholly owned by David Hall and Van Simmons who are two of the Company’s
      stockholders and two of the directors of the Company. Pursuant to that
      Agreement, the Company obtained (i) an exclusive license to use, for up to
      a
      four year period ending May 31, 2007, a customer list owned and compiled by
      DHRCC, and certain other intangible assets owned by DHRCC, and (ii) a
      non-exclusive license to use, in perpetuity, a coin inventory control software
      program owned by DHRCC, both for use by the Company’s David Hall Rare Coins
      (“DHRC”) Division, which was engaged in the business of selling collectible
      coins at retail. Under that agreement, the Company agreed to pay DHRCC, for
      the
      use of the DHRCC customer list, a royalty equal to one and one half percent
      (1.5%) of the net revenues of the Company’s David Hall Rare Coins (“DHRC”)
      Division, on a quarterly basis, but in no event to exceed (i) twenty percent
      (20%) of the quarterly pre-tax profits of that division, or (ii) an aggregate
      of
      $500,000 per year, whichever was less. The Company also paid DHRCC a one-time
      fee of $5,000 for use of the other intangible assets licensed by the Company,
      including the coin inventory software program. The license agreement was
      terminable by either party at any time, without cause, on 30 days prior written
      notice to the other. Amounts paid to DHRCC by the Company pursuant to the
      license agreement totaled $36,000 in fiscal 2003. The license agreement was
      terminated by the Company as a result of its decision, made in fiscal 2004,
      to
      discontinue its collectibles sales businesses. See note 3.




DHRCC
      had
      been engaged in the business of selling collectible coins at retail until June
      2000. As a result of the Company’s decision to discontinue that business, DHRCC
      elected to resume selling collectible coins at retail and in connection
      therewith DHRCC purchased certain fixed assets, that had been used by the
      Company’s DHRC division, for a purchase price of $13,000, which was equal to the
      net book value of those assets on the Company’s books at March 31, 2003. DHRCC
      also has subleased from the Company, through November 6, 2009, approximately
      2,200 square feet of office space, located at the Company’s offices in Santa
      Ana, California, at a rent equal to between $1.50 and $1.75 per square foot
      per
      month. That rent, per square foot, is equal to the rent being paid to the
      Company by an unaffiliated subtenant for comparable space in the same building
      under a sublease




64


entered
      into by the Company in March 2004. Rent received under the DHRCC sublease,
      which
      commenced on March 1, 2004, totaled $40,000 in fiscal 2005 and $13,000 in fiscal
      2004.




In
      connection with its discontinuance of its retail coin sales business, effective
      March 1, 2004 the Company engaged DHRCC to sell the Company’s remaining
      inventory of collectible coins that had been held for sale at retail by the
      Company’s DHRC division. Sales of collectible coins by DHRCC pursuant to this
      engagement totaled $11,000 and $840,000 for the periods ended June 30, 2005
      and
      2004, respectively, and the Company paid DHRCC commissions of $1,000 and $84,000
      in connection with those sales. At June 30, 2005, and June 30, 2004, accounts
      receivable balances arising from those sales totaled $0 and $376,000,
      respectively.




All
      of
      the above-described transactions with DHRCC were approved by the disinterested
      members of the Company’s Board of Directors.




During
      2005, the Company charged DHRCC approximately $29,000 for advertising fees,
      and
      approximately $26,000 for grading and authentication fees, which were comparable
      to the fees charged by the Company in the ordinary course of its business to
      unaffiliated customers for similar services. During 2005, the Company also
      reimbursed DHRCC for warranty claims of approximately $11,000 in accordance
      with
      its standard authentication and grading warranty, and paid DHRCC approximately
      $9,000 for the purchase of certain coin inventory.




**14.      
              ****
            **Commitments
                and Contingencies**




*Leases*




The
      Company has various operating lease commitments for facilities and equipment
      that expire through November 2009. During fiscal 2005, the Company subleased
      office space that was in excess of its current requirements to an unaffiliated
      third party and also to a related party (see note 13). Such lease for office
      space contains escalations over the term of the lease. In accordance with SFAS
      No. 13, rent expense is recognized on a straight-line basis over the lease
      period. Total rent expense, net of sublease income, was approximately
      $1,349,000, $1,462,000 and $1,523,000, respectively, for the years ended June
      30, 2005, 2004 and 2003. At June 30, 2005, deferred rent (representing the
      cumulative difference between rent paid and the rent expense recognized) was
      $386,000. Effective October 1, 2005, the sublease to the unaffiliated third
      party will be cancelled. Future minimum lease payments under these agreements
      are as follows:




(In
                thousands)Company’s
              Gross
              Payment
            
            Sublease
              Income
            
            Net2006
            
            $
            1,181
            
            $
            89
            
            $
            1,0922007
            
            
            1,206
            
            
            42
            
            
            1,1642008
            
            
            1,194
            
            
            44
            
            
            1,1502009
            
            
            1,202
            
            
            45
            
            
            1,1572010
            
            
            430
            
            
            16
            
            
            414$
            5,213
            
            $
            236
            
            $
            4,977




***Employment
      Agreements***




The
      Company has entered into employment agreements with certain executive officers
      and other key employees. The employment agreements provide for minimum salary
      levels, incentive compensation and severance benefits, among other
      items.




***Guarantees***




As
      discussed in note 9, the Company has guaranteed the obligations of CFC under
      its
      line of credit. However, since CFC is a wholly-owned, consolidated subsidiary
      of
      the Company, its line of credit borrowings, which the Company has guaranteed,
      are required to be set forth on our consolidated balance sheet. There were
      no
      such borrowings outstanding at June 30, 2005.




65


***Indemnification
      Obligations***




The
      Company from time to time enters into certain types of contracts that
      contingently require the Company to indemnify parties against third-party
      claims. These contracts primarily relate to (i) agreements pursuant to which
      the
      Company has sold its discontinued collectibles sales businesses and which
      require the Company to indemnify the purchasers from certain contingent
      liabilities that might arise from the operation of those businesses prior to
      their sale by the Company, which is customary in business sale transactions
      such
      as these; (ii) certain real estate leases under which the Company may
      be
      required to indemnify property owners for environmental or other liabilities
      and
      other claims arising from the Company’s use of the applicable premises; and
      (iii) certain agreements with the Company’s officers and directors, under
      which the Company may be required to indemnify such persons for liabilities
      arising out of their relationships as officers or directors of the Company.
      The
      terms of such obligations vary by contract and in most instances a specific
      or
      maximum dollar amount is not explicitly stated therein. Historically, the
      Company has not been obligated to make significant payments under, and no
      liabilities have been recorded in the accompanying consolidated balance sheets
      for these indemnification obligations.




***Legal
      Settlement***




As
      previously reported, the Company was named as a co-defendant in a lawsuit
      brought by Real Legends Inc, (Plaintiff), against When It Was a Game (“WIWAG”),
      a sports card dealer. In the lawsuit, Plaintiff was seeking alleged damages
      to
      its business of $4 million, alleged to have arisen out of actions taken by
      WIWAG, together with punitive damages. Plaintiff also alleged that the Company
      was liable for those damages, because a Company employee had introduced WIWAG
      to
      Plaintiff.




On
      January 26, 2005, the Company and Plaintiff settled that lawsuit. Pursuant
      to
      the settlement, all claims against the Company were released by Plaintiff and
      the Company paid Plaintiff the sum of $600,000 on or about February 23, 2005.
      The cost of the settlement to the Company, net of $100,000 insurance
      reimbursement, was $500,000, which was recorded as part of operating expenses
      in
      the Company’s consolidated statements of operations for the year ended June 30,
      2005.




***Other
      Legal Matters***




Bill
      Miller v. Collectors Universe, Inc .
      The
      Company has been named as a defendant in this action, which has been brought
      in
      the Superior Court of California, County of Orange, by Bill Miller, a former
      employee of the Company, who was president of one of the Company’s collectibles
      sales businesses that was sold in 2004 and an expert in the authentication
      of
      autographs and memorabilia. The complaint alleges that the Company had issued
      certificates of authentication bearing his name without his consent, in
      violation of a California statute prohibiting unauthorized appropriation of
      a
      person’s name, signature or likeness. The statute entitles the person whose
      name, signature or likeness has been misappropriated, in violation of the
      statute, to recover the greater of $750 or the actual damages suffered as a
      result of the unauthorized use, and any profits from the unauthorized use that
      are attributable to the use and are not taken into account in computing the
      actual damages. Although Plaintiff’s complaint does not state the amount of
      damages he is seeking, during the discovery phase of the action, plaintiff’s
      counsel has asserted that he is entitled to recover damages in excess of $10
      million based on the assertion that the statue entitles plaintiff to $750 per
      issued certificate of authenticity. The Company has denied plaintiff’s
      allegations, including a denial that the use of the certificates was
      unauthorized and a denial that he has suffered damages, and the Company is
      vigorously defending against the lawsuit. The Company believes, moreover, that
      it has meritorious defenses to plaintiff’s claims and that it will not incur any
      material liability to plaintiff in this action. However, there is little
      interpretive history with respect to the statute, creating a number of
      relatively novel factual and legal issues, and for that reason, it is not
      possible to predict with certainty the ultimate outcome of the trial, which
      is
      scheduled to take place in October 2005.




The
      Company also is named, from time to time, as a defendant in lawsuits that arise
      in the ordinary course of its business. Management of the Company believes
      that
      none of such lawsuits that are currently pending against it is likely to have
      a
      material adverse effect on the Company.




66




**15.**
            **Segment,
                Geographic and Major Customer
                Information**




Operating
      segments are defined as components of an enterprise about which separate
      financial information is available that is evaluated regularly by the Company’s
      chief operating decision maker, or decision making group, in deciding how to
      allocate resources and in assessing performance. The Company’s chief operating
      decision maker is its Chief Executive Officer. The operating segments of the
      Company are organized based on the services it offers. Similar operating
      segments have been aggregated to reportable operating segments based on having
      similar products or services, types of customers, and other criteria under
      SFAS
      No. 131, *Disclosures
      About Segments of an Enterprise and Related Information.*




For
      our
      continuing operations, we operate principally in three service segments: coins,
      sportscards and other high-value collectibles. Services provided by these
      segments include authentication, grading, publication and
      advertising.




We
      allocate operating expenses to each service segment based upon activity levels.
      We do not allocate specific assets to these service segments. All of our sales
      and identifiable assets are located in the United States. No individual customer
      accounted for 10% or more of revenue in any of the years ended June 30, 2005,
      2004 and 2003.




**Year
                Ended June 30**
              (in
                thousands)**2005**
            
            **2004**
            
            **2003**Net
                revenues from external customersCoins
            
            $
            23,203
            
            $
            17,474
            
            $
            12,171Sportscards
            
            
            8,143
            
            
            7,126
            
            
            6,946Other
            
            
            2,261
            
            
            1,820
            
            
            1,220Total
                revenue
            
            
            33,607
            
            
            26,420
            
            
            20,337Operating
                income before unallocated expensesCoins
            
            
            12,183
            
            
            8,837
            
            
            6,010Sportscards
            
            
            1,344
            
            
            968
            
            
            1,000Other
            
            
            (704
            )
            
            (117
            )
            
            (452
            )Total
            
            
            12,823
            
            
            9,688
            
            
            6,558Unallocated
                operating expenses
            
            
            (5,356
            )
            
            (5,419
            )
            
            (6,461
            )Settlement
                of lawsuit
            
            
            (500
            )
            
            -
            
            
            -Goodwill
                impairment
            
            
            -
            
            
            -
            
            
            (6
            )Consolidated
                operating income
            
            $
            6,967
            
            $
            4,269
            
            $
            91






67





**16.**
            **Quarterly
                Reports of Operations
                (unaudited)**





**Quarters
                Ended**
              **(In
                thousands, except per share data)**Sept.
                30,
              2003
            
            Dec.
                31,
              2003
            
            Mar.
                31,
              2004
            
            June
                30,
              2004
            
            Sept.
                30,
              2004
            
            Dec.
                31,
              2004
            
            Mar.
                31
              2005
            
            June
                30,
              2005Statement
                of Operations Data:Net
                revenues
            
            $
            6,012
            
            $
            5,753
            
            $
            6,896
            
            $
            7,759
            
            $
            8,195
            
            $
            7,982
            
            $
            8,955
            
            $
            8,475Cost
                of revenues
            
            
            2,549
            
            
            2,349
            
            
            2,597
            
            
            2,827
            
            
            2,826
            
            
            2,998
            
            
            3,263
            
            
            3,152Gross
                profit
            
            
            3,463
            
            
            3,404
            
            
            4,299
            
            
            4,932
            
            
            5,369
            
            
            4,984
            
            
            5,692
            
            
            5,323SG&A
                expenses
            
            
            2,766
            
            
            2,925
            
            
            2,923
            
            
            3,215
            
            
            3,244
            
            
            3,040
            
            
            3,464
            
            
            4,153Settlement
                of lawsuit
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            500
            
            
            -
            
            
            -Operating
                income
            
            
            697
            
            
            479
            
            
            1,376
            
            
            1,717
            
            
            2,125
            
            
            1,444
            
            
            2,228
            
            
            1,170Interest
                and other income (expense), net
            
            
            -
            
            
            (5
            )
            
            7
            
            
            108
            
            
            64
            
            
            112
            
            
            225
            
            
            531Income
                before income taxes
            
            
            697
            
            
            474
            
            
            1,383
            
            
            1,825
            
            
            2,189
            
            
            1,556
            
            
            2,453
            
            
            1,701Provision
                for income taxes
            
            
            313
            
            
            170
            
            
            592
            
            
            506
            
            
            878
            
            
            628
            
            
            981
            
            
            654Income
                from continuing operations
            
            
            384
            
            
            304
            
            
            791
            
            
            1,319
            
            
            1,311
            
            
            928
            
            
            1,472
            
            
            1,047Income
                (loss) from discontinuedoperations,
              net of gain on salesof
                discontinued businesses
              (net
                of income taxes)
            
            
            47
            
            
            (782
            )
            
            201
            
            
            (534
            )
            
            (69
            )
            
            (7
            )
            
            (3
            )
            
            139Net
                income (loss)
            
            $
            431
            
            $
            (478
            )
            $
            992
            
            $
            785
            
            $
            1,242
            
            $
            921
            
            $
            1,469
            
            $
            1,186Net
                income (loss) per basic share:Income
                from continuing operations
            
            $
            0.06
            
            $
            0.05
            
            $
            0.13
            
            $
            0.21
            
            $
            0.21
            
            $
            0.15
            
            $
            0.21
            
            $
            0.12Income
                (loss) from discontinuedoperations,
              net of gain on salesof
                discontinued businesses
              (net
                of income taxes)
            
            
            0.01
            
            
            (0.13
            )
            
            0.03
            
            
            (0.08
            )
            
            (0.01
            )
            
            -
            
            
            -
            
            
            0.02Net
                income (loss)
            
            $
            0.07
            
            $
            (0.08
            )
            $
            0.16
            
            $
            0.13
            
            $
            0.20
            
            $
            0.15
            
            $
            0.21
            
            $
            0.14Net
                income (loss) per diluted share:Income
                from continuing operations
            
            $
            0.06
            
            $
            0.05
            
            $
            0.13
            
            $
            0.20
            
            $
            0.20
            
            $
            0.14
            
            $
            0.19
            
            $
            0.12Income (loss) from discontinuedoperations,
              net of gain on sales ofdiscontinued
                businesses
              (net
                of income taxes)
            
            
            0.01
            
            
            (0.12
            )
            
            0.03
            
            
            (0.08
            )
            
            (0.01
            )
            
            -
            
            
            -
            
            
            0.01Net
                income (loss)
            
            $
            0.07
            
            $
            (0.07
            )
            $
            0.16
            
            $
            0.12
            
            $
            0.19
            
            $
            0.14
            
            $
            0.19
            
            $
            0.13Weighted
                average shares outstandingBasic
            
            
            6,172
            
            
            6,167
            
            
            6,135
            
            
            6,201
            
            
            6,214
            
            
            6,242
            
            
            7,113
            
            
            8,479Diluted
            
            
            6,288
            
            
            6,391
            
            
            6,319
            
            
            6,557
            
            
            6,569
            
            
            6,695
            
            
            7,571
            
            
            8,902







**17.**
            **Subsequent
                Events**





In
      July
      2005, the Company acquired a substantial portion of the assets of CoinFacts.com
      for $500,000. CoinFacts.com operates an Internet website on which it publishes
      detailed proprietary information and history on rare U.S. coins.





On
      September 2, 2005, the Company acquired the common stock of Certified Coin
      Exchange (“CCE”) and a related business for $2,180,000 in cash, of which
      $1,680,000 was paid at closing, and the balance of $500,000 is payable no later
      than 60 days from closing. CCE is a subscription-based dealer-to-dealer Internet
      electronic exchange for third party certified coins.








68


**ITEM
                9.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE**




As **** previously
      reported in a Current Report on Form 8-K dated January 26, 2005, on
      that
      date we were informed by Deloitte & Touche LLP (“D&T”) that it had
      decided to resign as the Company’s independent registered public accounting firm
      upon the completion of D&T’s review of the Company’s interim financial
      information to be included in its Quarterly Report on Form 10-Q for our second
      quarter that ended on December 31, 2004. We were informed by D&T that its
      decision to resign was not the result of any disagreements between us and
      D&T on matters of accounting principles or practices, financial statement
      disclosure or auditing scope or procedures.




The
      audit
      reports of D&T on our financial statements for fiscal years ended June 30,
      2004 and 2003 contained no adverse opinion or disclaimer of opinion, and were
      not qualified or modified as to uncertainty, audit scope or accounting
      principles.




During
      the period from July 1, 2002, the beginning of fiscal 2003, to January 26,
      2005,
      there were no disagreements between us and D&T on any matter of accounting
      principles or practices, financial statement disclosure or auditing scope or
      procedures which, if not resolved to D&T’s satisfaction, would have caused
      it to make reference to the subject matter of the disagreement in connection
      with its reports.




During
      the period from July 1, 2002 to January 26, 2005 there were no reportable events
      as defined in Item 304(a)(1)(v) of Regulation S-K.




We
      provided D&T with a copy of the disclosure we included in our Current Report
      on Form 8-K reporting its resignation and, at our request D&T furnished us
      with a letter addressed to the Securities and Exchange Commission stating
      whether D&T agreed us with the statements that we have made in that
      Current Report. A copy of D&T’s letter was attached to that Report as
      Exhibit 16.1.




As
      also
      previously reported, in a Current Report on Form 8-K dated February 8, 2005,
      that we had filed with the Securities and Exchange Commission, the Audit
      Committee of the Company’s Board of Directors approved the appointment and
      engagement of Grant Thornton LLP (“Grant Thornton”) as the Company’s independent
      registered public accounting firm.




During
      the period from July 1, 2002 to February 8, 2005 (the date Grant Thornton was
      engaged), neither the Company, nor anyone acting on its behalf, consulted with
      Grant Thornton regarding (i) the application of accounting principles to any
      specified transaction, either completed or proposed, or the type of audit
      opinion that might be rendered on the Company's financial statements, or (ii)
      any of the matters or events set forth in Item 304(a)(2)(ii) of Regulation
      S−K.




**ITEM
      9A.** **CONTROLS
      AND PROCEDURES**




*Disclosure
      Controls and Procedures*




Our
      disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
      under the Securities Exchange Act of 1934, as amended) are designed to provide
      reasonable assurance that information required to be disclosed in our reports
      filed under that Act (the Exchange Act), such as this Annual Report on Form
      10-K, is recorded, processed, summarized and reported within the time periods
      specified in the rules of the Securities and Exchange Commission. Our disclosure
      controls and procedures also are designed to ensure that such information is
      accumulated and communicated to our management, including our Chief Executive
      Officer and Chief Financial Officer, to allow timely decisions regarding
      required disclosures.




Our
      management, under the supervision and with the participation of our Chief
      Executive Officer and the Chief Financial Officer, evaluated the effectiveness
      of our disclosure controls and procedures in effect as of June 30, 2005. Based
      on that evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that, as of June 30, 2005, our disclosure controls and procedures
      were
      effective to provide reasonable assurance that material information, relating
      to
      the Company and its consolidated subsidiaries, required to be included in our
      Exchange Act reports, including this Annual Report on Form 10-K, is made known
      to management, including the Chief Executive Officer and Chief Financial
      Officer, on a timely basis.




69


*Changes
      in Internal Control Over Financial Reporting*




There
      have
      been no changes in our internal control over financial reporting that occurred
      during our fourth fiscal quarter ended June 30, 2005 that have materially
      affected, or are reasonably likely to materially affect, our internal control
      over financial reporting.




*Management’s
      Report on Internal Control Over Financial Reporting*




Management
      of
      Collectors Universe, Inc. is responsible for establishing and maintaining
      adequate internal control over financial reporting as defined in Rules 13a-15(f)
      and 15d-15(f) under the Exchange Act. Our internal control over financial
      reporting is a process designed to provide reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with accounting principles generally
      accepted in the United States of America. Internal control over financial
      reporting includes those written policies and procedures that:




•
            pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of our assets;




•
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with accounting
                principles generally accepted in the United States of America;




•
            provide
                reasonable assurance that our receipts and expenditures are being
                made
                only in accordance with authorization of our management and directors;
                and




•
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of assets that could
                have a
                material effect on our consolidated financial statements.




Internal
      control over financial reporting includes the controls themselves, monitoring
      and internal auditing practices and actions taken to correct deficiencies as
      identified.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risks that controls may
      become inadequate because of changes in conditions or because the degree of
      compliance with the policies or procedures may deteriorate.




*Management’s
      Assessment and Determination*




Our
      management assessed the effectiveness of Collectors Universe’s internal control
      over financial reporting as of June 30, 2005, based on criteria for effective
      internal control over financial reporting described in “Internal Control -
      Integrated Framework” issued by the Committee of Sponsoring Organizations of the
      Treadway Commission. Management’s assessment included an evaluation of the
      design and the testing of the operational effectiveness of Collectors Universe’s
      internal control over financial reporting. Management reviewed the results
      of
      its assessment with the Audit Committee of our Board of Directors.




Based
      on
      that assessment, management determined that, as of June 30, 2005, Collectors
      Universe, Inc. maintained effective internal control over financial reporting.




Grant
      Thornton LLP, independent registered public accounting firm, which audited
      and
      reported on our consolidated financial statements for the fiscal year ended
      June
      30, 2005 which are included in this Annual Report on Form 10-K, has issued
      an
      attestation report on management’s assessment of internal control over financial
      reporting, which is set forth below.




70


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**


**ON
      INTERNAL CONTROL OVER FINANCIAL REPORTING**




Board
      of
      Directors and Stockholders


Collectors
      Universe, Inc. and Subsidiaries




We
      have
      audited management’s assessment, included in the accompanying Collectors
      Universe, Inc. and subsidiaries Management’s Report on Internal Control Over
      Financial Reporting, that Collectors Universe, Inc. and subsidiaries maintained
      effective internal control over financial reporting as of June 30, 2005, based
      on criteria established in Internal Control—Integrated Framework issued by the
      Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      Collectors Universe, Inc. and subsidiaries’ management is responsible for
      maintaining effective internal control over financial reporting and for its
      assessment of the effectiveness of internal control over financial reporting.
      Our responsibility is to express an opinion on management’s assessment and an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting based on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management’s assessment, testing and evaluating
      the design of the operating effectiveness of internal control, and performing
      such other procedures as we considered necessary in the circumstances. We
      believe that our audit provides a reasonable basis for our opinion.




A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




In
      our
      opinion, management’s assessment that Collectors Universe, Inc. and subsidiaries
      maintained effective internal control over financial reporting as of June 30,
      2005, is fairly stated, in all material respects, based on criteria established
      in Internal Control—Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission. Also in our opinion, Collectors
      Universe, Inc. and subsidiaries maintained, in all material respects, effective
      internal control over financial reporting as of June 30, 2005, based on criteria
      established in Internal Control—Integrated Framework issued by the Committee of
      Sponsoring Organizations of the Treadway Commission.




We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheet of Collectors
      Universe, Inc. and subsidiaries as of June 30, 2005, and the related
      consolidated statements of operations, stockholders’ equity, and cash flows for
      the year then ended and our report dated September 2, 2005 expressed an
      unqualified opinion thereon.




/s/
      GRANT
      THORNTON LLP




Irvine,
      California


September
      2, 2005




71


**ITEM
      9B.** **OTHER
      INFORMATION**





None








**PART
      III**








**ITEM
      10.** **DIRECTORS
      AND EXECUTIVE OFFICERS**




Except
      for information concerning the Company's executive officers, which is included
      in Part I of this Report, the information required by Item 10 is incorporated
      by
      reference from the Company's definitive proxy statement, expected to be filed
      with the Commission on or before October 28,
      2005,
      for the Company’s 2005 annual stockholders' meeting.




**ITEM
      11.** **EXECUTIVE
      COMPENSATION**




The
      information required by Item 11 is incorporated herein by reference from the
      Company's definitive proxy statement, expected to be filed with the Commission
      on or before October 28, 2005 for the Company’s 2005 annual stockholders'
      meeting.




**ITEM
      12.** **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT**




Except
      for the information below regarding our equity compensation plans, the
      information required by Item 12 is incorporated herein by reference
      from
      the Company's definitive proxy statement, expected to be filed with the
      Commission on or before October 28, 2005, for the Company’s 2005 annual
      stockholders' meeting.




The
      following table provides information relating to our equity compensation plans
      as of June 30, 2005




**Column
                A**
            
            **Column
                B**
            
            **Column
                C**Number
                of Securities to be Issued Upon Exercise of Outstanding Options and
                Warrants
            
            Weighted-Average
                Exercise Price of Outstanding Options and Warrants
            
            Number
                of Securities Remaining Available for Future Issuance under Equity
                Compensation Plans(Excluding
                Securities Reflected in Column A)Equity
                compensation plansapproved
                by shareholders
            
            
            976,000
            
            $
            12.49
            
            
            190,000Equity
                compensation not approvedby
                shareholders(1)
            
            
            282,000
            
            
            11.21
            
            
            -Total
            
            
            1,258,000
            
            $
            12.20
            
            
            190,000




(1)
            Warrants
                to purchase common stock granted to non-employee service providers
                in the
                fiscal years ended June 30, 1997 and 1999.




**ITEM
      13.** **CERTAIN
      RELATIONSHIPS AND RELATED
      TRANSACTIONS**




The
      information required by Item 13 is incorporated herein by reference from the
      Company's definitive proxy statement, expected to be filed with the Commission
      on or before October 28, 2005, for the Company’s 2005 annual stockholders’
      meeting.




**ITEM
      14.** **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**




The
      information required by Item 14 is incorporated herein by reference from the
      Company's definitive proxy statement, expected to be filed with the Commission
      on or before October 28, 2005, for the Company’s 2005 annual stockholders’
      meeting.




72


**PART
      IV**





**ITEM
      15.** **EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES**




(a)(1)
            Financial
                Statements




The
      following financial statements are included in Item 8 of Form 10-K:




Report
                of Grant Thornton LLP, Independent Registered Public Accounting
                FirmReport
                of Deloitte & Touche, LLP, Independent Registered Public Accounting
                FirmConsolidated
                Balance Sheets as of June 30, 2005 and 2004Consolidated
                Statements of Operations for the years ended June 30, 2005, 2004
                and
                2003Consolidated
                Statements of Stockholders’ Equity for the years ended June 30, 2005, 2004
                and 2003Consolidated
                Statements of Cash Flows for the years ended June 30, 2005, 2004
                and
                2003Notes
                to the Consolidated Financial
                Statements




(a)(2)
            Financial
                Statement Schedule




Schedule
                II Valuation and Qualifying Accounts


The
      other
      schedules are omitted because the required information is either inapplicable
      or
      has been disclosed in the consolidated financial statements and notes
      thereto.




(a)(3) Exhibits




See
      Index
      to Exhibits immediately following the Signature Page of this Report for a list
      of the Exhibits required, pursuant to Item 601 of Regulation S-K, to be filed
      with this Report.




**Schedule
                II**
              **Valuation
                and Qualifying Accounts for Continuing Operations**
              **For
                the Years Ended June 30, 2003, 2004 and 2005****Description**
            
            **Balance
                at Beginning**
              **of
                Period**
            
            **Charged
                to Operating Expenses**
            
            **Charged
                to Cost of Revenues**
            
            **Deductions**
            
            **Balance**
              **at
                End**
              **of
                Period**Allowance
                for doubtful accounts
            
            $
            45,000
            
            $
            210,000
            
            $
            -
            
            $
            (226,000
            )
            $
            29,000Inventory
                reserve
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                at June 30, 2003
            
            $
            45,000
            
            $
            210,000
            
            $
            -
            
            $
            (226,000
            )
            $
            29,000Allowance
                for doubtful accounts
            
            $
            29,000
            
            $
            31,000
            
            $
            -
            
            $
            (30,000
            )
            $
            30,000Inventory
                reserve
            
            
            -
            
            
            -
            
            
            53,000
            
            
            -
            
            
            53,000Total
                at June 30, 2004
            
            $
            29,000
            
            $
            31,000
            
            $
            53,000
            
            $
            (30,000
            )
            $
            83,000Allowance
                for doubtful accounts
            
            $
            30,000
            
            $
            17,000
            
            $
            -
            
            $
            (9,000
            )
            $
            38,000Inventory
                reserve
            
            
            53,000
            
            
            -
            
            
            26,000
            
            
            (45,000
            )
            
            34,000Total
                at June 30, 2005
            
            $
            83,000
            
            $
            17,000
            
            $
            26,000
            
            $
            (54,000
            )
            $
            72,000











73


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.





**COLLECTORS
                  UNIVERSE, INC**Date:September
                  13, 2005
              By:/s/
                  MICHAEL J. LEWISMichael
                  J. Lewis, Chief Financial Officer





**POWER
      OF ATTORNEY**





Each
      person whose signature to this report appears below hereby appoints Michael
      R.
      Haynes and Michael J. Lewis, and either of them, individually, to act severally
      as attorneys-in-fact and agents, with power of substitution and resubstitution,
      for each of them, to sign on his behalf, individually and in the capacities
      stated below, and to file, any and all amendments to this Annual Report, which
      amendment or amendments may make changes and additions as such attorneys-in-fact
      may deem necessary or appropriate.





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.





**Signature**
            
            **Title**
            
            **Date**/s/
                A. CLINTON ALLEN
              A.
                Clinton Allen
            
            Chairman/Director
            
            September
                13, 2005/s/
                MICHAEL R. HAYNES
              Michael
                R. Haynes
            
            Chief
                Executive Officer
            
            September
                13, 2005/s/
                DAVID HALL
              David
                G. Hall
            
            President
                and Director
            
            September
                13, 2005/s/
                MICHAEL J. LEWIS
              Michael
                J. Lewis
            
            Chief
                Financial Officer (Principal Financial and Primary Accounting
                Officer)
            
            September
                13, 2005/s/
                BEN A. FRYDMAN
              Ben
                A. Frydman
            
            Director
            
            September
                13, 2005/s/
                VAN D. SIMMONS
              Van
                D. Simmons
            
            Director
            
            September
                13, 2005/s/
                A.J. BERT MOYER
              A.J.
                Bert Moyer
            
            Director
            
            September
                13, 2005/s/
                DEBORAH A. FARRINGTON
              Deborah
                A. Farrington
            
            Director
            
            September
                13, 2005











S-1


**INDEX
      TO EXHIBITS**




**Exhibit
                  No**
              
              **Description**1.1
              
              Form
                  of Underwriting Agreement.*1.2
              
              Form
                  of Underwriting Agreement between Collectors Universe and Thomas
                  Weisel
                  Partners LLC, Needham & Company, Inc. and Roth Capital Partners LLC.
                  Incorporated by reference to Exhibit 1.1 to Amendment No. 1 to
                  the
                  Company’s Registration Statement on Form S-3 (File No. 333-122129), filed
                  on February 14, 2005.3.2
              
              Amended
                  and Restated Certificate of Incorporation of Collectors Universe.
                  Incorporated by reference to Exhibit 3.2 to the Company’s Registration
                  Statement on Form S-3 (File No. 333-122129), filed on January 19,
                  2005.3.2.1
              
              Certificate
                  of Amendment to Amended and Restated Certificate of Incorporation
                  of
                  Collectors Universe. Incorporated by reference to Exhibit 3.2.1
                  to the
                  Company’s Registration Statement on Form S-3 (File No. 333-122129), filed
                  on January 19, 2005.3.3
              
              Amended
                  and Restated Bylaws of Collectors Universe, as adopted September
                  1,
                  1999.*4.1
              
              Registration
                  Rights Agreement.*4.2
              
              Form
                  of Registration Rights Agreement for Stockholders pursuant to private
                  placement.*5.1
              
              Opinion
                  of Stradling Yocca Carlson & Rauth, a Professional
                  Corporation.*10.1
              
              Collectors
                  Universe 1999 Stock Incentive Plan.*10.2
              
              Form
                  of Stock Option Agreement for the Collectors Universe 1999
                  Plan.*10.4
              
              PCGS
                  1999 Stock Incentive Plan.*10.5
              
              Form
                  of Stock Option Agreement for the PCGS 1999 Plan.*10.6
              
              Employee
                  Stock Purchase Plan.*10.7
              
              Form
                  of indemnification Agreement.*10.8
              
              Asset
                  Acquisition Agreement dated January 25, 1999 between Professional
                  Coin
                  Grading Service, Inc.,
                Info
                  Exchange, Inc. and Brent Gutekunst.*10.9
              
              Collectors
                  Universe/eBay Mutual Services Term Sheet dated February 10, 1999,
                  between
                  the Company and eBay, Inc.*10.10
              
              Net
                  Lease between Orix Searls Santa Ana Venture and Collectors Universe,
                  dated
                  June, 1999.*10.11
              
              Agreement
                  for the Sale of Goods and Services dated March 31,1999, between
                  the
                  Company and DNA Technologies, *10.12
              
              Contribution
                  and Acquisition Agreement dated February 3, 1999, between the Company
                  and
                  Hugh Sconyers.*10.13
              
              Contribution
                  and Acquisition Agreement dated February 3, 1999, between the Company
                  and
                  BJ Searls.*10.14
              
              Contribution
                  and Acquisition Agreement dated February 3, 1999, between the Company
                  and
                  Greg Bussineau.*10.15
              
              Contribution
                  and Acquisition Agreement dated February 3, 1999, between the Company
                  and
                  Lyn F. Knight Rare Coins*10.16
              
              Contribution
                  and Acquisition Agreement dated February 3, 1999, between the Company,
                Kingswood
                  Coin Auction, LLC and the Members of Kingswood.*10.17
              
              Contribution
                  and Acquisition Agreement dated February 3, 1999, between the Company
                and
                  Professional Coin Grading Service, Inc.*10.18
              
              Employment
                  Agreement dated March 1999, between Superior Sportscard Auctions,
                  LLC and
                  Greg Bussineau.*10.19
              
              Employment
                  Agreement dated March 5, 1999, between Lyn F. Knight, Lyn Knight
                  Currency
                  Auctions, Inc.
                and
                  Collectors Universe.*10.24
              
              Asset
                  Purchase Agreements between Collectors Universe, Inc. and Auctions
                  by
                  Bowers and Merena, Inc., Bowers and Merena Galleries, Inc. and
                  Bowers and
                  Merena Research, Inc. (Incorporated by reference to Exhibit 10.1
                  to
                  Registrant’s Current Report on Form 8-K, dated March 21, 2000).*10.25
              
              Asset
                  Purchase Agreements dated February 19, 2004 between Collectors
                  Universe,
                  Inc. and Spectrum Numismatics, Inc. (Incorporated by reference
                  to Exhibit
                  10.1 to Registrant’s Current Report on Form 8-K, dated February 19,
                  2004).





E-1


**INDEX
      TO EXHIBITS**


(Continued)






**Exhibit
                  No.**
              
              **Description**10.26
              
              Non-Competition
                  Agreement dated February 19, 2004 between Collectors Universe,
                  Inc. and
                  Spectrum Numismatics, Inc. (Incorporated by reference to Exhibit
                  10.2 to
                  Registrant’s Current Report on Form 8-K, dated February 19,
                  2004).10.27
              
              Collectors
                  Universe 2003 Stock Incentive Plan. Incorporated by reference to
                  Exhibit
                  10.1 to the Company’s Registration Statement on Form S-8 (File No.
                  333-121035), filed on December 6, 2004.10.28
              
              Form
                  of Stock Option Agreement for 2003 Stock Incentive Plan. Incorporated
                  by
                  reference to Exhibit 10.2 to the Company’s Registration Statement on Form
                  S-8 (File No. 333-121035), filed on December 6, 2004.10.29
              
              Form
                  of Restricted Stock Purchase Agreement for 2003 Stock Incentive
                  Plan.
                  Incorporated by reference to Exhibit 10.3 to the Company’s Registration
                  Statement on Form S-8 (File No. 333-121035), filed on December
                  6,
                  2004.10.30
              
              Employment
                  Agreement, dated January 1, 2003, between the Company and Michael
                  Haynes.
                  Incorporated by reference to Exhibit 10.30 to the Company’s Registration
                  Statement on Form S-3 (File No. 333-122129), filed on January 19,
                  2005.10.30.1
              
              First
                  Amendment to Employment Agreement, dated October 1, 2003, between
                  the
                  Company and Michael Haynes. Incorporated by reference to Exhibit
                  10.30.1
                  to the Company’s Registration Statement on Form S-3 (File No. 333-122129),
                  filed on January 19, 2005.10.30.2
              
              Second
                  Amendment to Employment Agreement, dated November 1, 2004, between
                  the
                  Company and Michael Haynes. Incorporated by reference to Exhibit
                  10.30.2
                  to the Company’s Registration Statement on Form S-3 (File No. 333-122129),
                  filed on January 19, 2005.10.31
              
              2005
                  Management Bonus Plan. Incorporated by reference to Exhibit 10.99
                  to the
                  Company’s Quarterly Report on
                Form
                  10-Qfor the quarter ended December 31, 2004, filed with the Commission
                  on
                  February 14, 200510.32
              
              Loan
                  and Security Agreement between Collectors Finance Corporation and
                  California Bank & Trust
                dated
                  as of June 30, 2005.10.33
              
              Continuing
                  Guaranty issued as of June 30, 2005 by Collectors Universe, Inc.
                  to
                  California Bank & Trust.21.1
              
              Subsidiaries
                  of the Registrant.23.1
              
              Consent
                  of Grant Thornton LLP, Independent Registered Public Accounting
                  Firm23.2
              
              Consent
                  of Deloitte & Touche LLP, Independent Registered Public Accounting
                  Firm31.1
              
              Certifications
                  of CEO Under Section 302 Of The Sarbanes-Oxley Act.31.2
              
              Certifications
                  of CFO Under Section 302 Of The Sarbanes-Oxley Act.32.1
              
              CEO
                  Certification of Periodic Report Under Section 906 of the Sarbanes-Oxley
                  Act.32.2
              
              CFO
                  Certification of Periodic Report Under Section 906 of the Sarbanes-Oxley
                  Act.






*  Incorporated
      by reference to the same numbered exhibit to the Company’s Registration
      Statement (No. 333-86449) on Form S-1 filed with the Commission on September
      2,
      1999.























E-2