<PAGE>


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)
|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
    of 1934 for the fiscal year ended June 30, 2006
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

For the transition period from ______________ to ______________
Commission File No. 0-27121

                            SUPERIOR GALLERIES, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                                  35-2208007
      (State or Other Jurisdiction of                    (IRS Employer
       Incorporation or Organization                 Identification Number)

          9478 WEST OLYMPIC BLVD.                            90212
         BEVERLY HILLS, CALIFORNIA                         (Zip Code)
 (Address of Principal Executive Offices)

                                 (310) 203-9855
                         (Registrant's Telephone Number)

         SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
                                     (None)

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                         Common Stock, par value $0.001
                                (Title of Class)

         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
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 in response
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 Rule 12b-2 of the Act). Yes [ ] No |X|

         Based on the last sale price of its common stock on September 18, 2006
($1.01), the aggregate market value of the registrant's common stock held by
non-affiliates was approximately $2,348,393.(1) Unless otherwise specified
herein, all share, warrant and option amounts give effect to a 1-for-20 reverse
stock split effective as of June 30, 2003.

         The number of outstanding shares of the registrant's common stock as of
September 18, 2006, was 4,808,280.


-------------
(1) For purposes of this calculation, shares owned by executive officers,
   directors and 10% shareholders known to the registrant have been deemed to be
   owned by affiliates. This determination of affiliate status is not
   necessarily a conclusive determination for other purposes.




<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

         List hereunder the following documents if incorporated by reference and
the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to rule 424(b) or
(c) of the Securities Act of 1933 ("Securities Act"). The listed documents
should be clearly described for identification purposes.

         None


                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

PART I.........................................................................3
     ITEM 1.   BUSINESS........................................................3
     ITEM 1A.  RISK FACTORS...................................................11
     ITEM 1B.  UNRESOLVED STAFF COMMENTS......................................16
     ITEM 2.   PROPERTIES.....................................................16
     ITEM 3.   LEGAL PROCEEDINGS..............................................16
     ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............17

PART II.......................................................................18
     ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
               STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
               EQUITY SECURITIES..............................................18
     ITEM 6.   SELECTED FINANCIAL DATA........................................20
     ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS............................22
     ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK......37
     ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................38
     ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE............................38
     ITEM 9A.  CONTROLS AND PROCEDURES........................................38
     ITEM 9B.  OTHER INFORMATION..............................................39

PART III......................................................................40
     ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............40
     ITEM 11.  EXECUTIVE COMPENSATION.........................................43
     ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
               AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.................48
     ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................51
     ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.........................52

PART IV.......................................................................53
     ITEM 15.  EXHIBITS.......................................................53


                                      -2-





<PAGE>

                                     PART I

         This Annual Report on Form 10-K includes forward-looking statements
within the meaning of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. These statements are based on our beliefs and assumptions, and on
information currently available to us. Forward-looking statements include among
others, the information concerning possible or assumed future results of
operations of Superior Galleries, Inc. set forth under the heading "Financial
Information-Management's Discussion and Analysis of Financial Condition and
Results of Operations." Forward-looking statements also include statements in
which words such as "expect," "anticipate," "intend," "plan," "believe,"
"estimate," "consider" or similar expressions are used.

         Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions. Our future results and
shareholder values may differ materially from those expressed in these
forward-looking statements. We caution you not to put undue reliance on any
forward-looking statements contained in this document.

ITEM 1.  BUSINESS

COMPANY OVERVIEW

         Our principal line of business is the sale of rare coins on a retail,
wholesale, and auction basis. Our retail and wholesale operations are conducted
in virtually every state in the United States. We also provide auction services
for customers seeking to sell their own coins. We market our services nationwide
through broadcasting and print media and independent sales agents, as well as on
the Internet through third party websites such as eBay, Overstock.com and
Amazon.com and through our own website at SGBH.com. Our headquarters are in
Beverly Hills, California. Information regarding our revenues, profit or loss,
and total assets is contained in our financial statements included in this
Annual Report.

         We were originally organized as a Nevada corporation in 1995. On June
30, 2003, our stockholders approved and we completed a reincorporation of our
company in the State of Delaware and changed our corporate name from Tangible
Asset Galleries, Inc. ("Tangible") to Superior Galleries, Inc. ("Superior").
These changes were effective at the close of business on June 30, 2003. Unless
the context otherwise requires, all references in this Annual Report to "us,"
"we," "our" or "Superior" shall mean Superior Galleries, Inc. and Tangible, as
Superior's predecessor.

HISTORY OF THE COMPANY

         Tangible Investments of America, Inc. ("TIA") our predecessor, was
originally founded by our current chief executive officer ("CEO"), Silvano
DiGenova, in 1977 when Mr. DiGenova first exhibited his coins at a national coin
dealer's convention. That same year, Mr. DiGenova first became involved in other
collectibles such as fine arts and antiques. Mr. DiGenova has collected rare
coins since 1971 (when he was nine years old). While attending the Wharton
School of Business in the early 1980s, Mr. DiGenova continued to develop TIA,
and in May 1984, prior to graduating, Mr. DiGenova took a leave of absence from
Wharton and incorporated TIA in Pennsylvania.

         In 1991, Mr. DiGenova relocated TIA to Laguna Beach, California and
continued to develop its rare coin, fine art and collectibles retail and
wholesale business, continuing to expand on a national level. We acquired TIA on
April 28, 1999 through a reverse-merger acquisition.

                                      -3-



<PAGE>

         In December 1999, we acquired all of the outstanding common shares of
Gehringer and Kellar, Inc. d.b.a. Keystone Coin & Stamp Exchange, or Keystone.
Keystone is a wholesaler, retailer and auctioneer of rare coins located in
Allentown, Pennsylvania. We transferred the operations of this company to
certain members of its management in November 2001 and completed the sale of the
assets of this company in February 2002. In June 2001, we acquired all of the
outstanding common shares of HotelInteractive, Inc., or HI, an Internet-based
publisher of news and information. In February 2002, we sold this company to a
corporation controlled by Mr. Richard Viola, who was serving as a director on
our board at that time.

         In November 2002, we began to reduce our operations that were focused
on the fine art, jewelry and collectibles ("Art") segment of our business. By
March 2003, with exception of activities specifically related to the liquidation
of our remaining art inventory, all Art business segment operations had ceased.
We completed the liquidation of our art inventory in October 2003. We may, at
some future date and on a limited basis, re-enter some of the Art business
segment as a consignment auctioneer.

PENDING MERGER WITH DGSE COMPANIES, INC.

         On July 12, 2006, we entered into an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") with DGSE Companies, Inc., a Nevada
corporation ("DGSE"). The Merger Agreement provides that DGSE Merger Corp., a
newly-formed Delaware corporation and wholly-owned subsidiary of DGSE, will
merge with and into Superior Galleries, Inc., and that Superior Galleries will
survive the merger (the "Merger") as a wholly-owned subsidiary of DGSE. DGSE is
a publicly-held company trading on the NASDAQ Capital Market. In connection with
the Merger, our outstanding shares of common stock will convert into common
stock of DGSE, and certain of our options and warrants will be exchanged for
options and warrants of DGSE. In the Merger, each share of our common stock
outstanding immediately prior to the Merger would be converted into a number of
shares of DGSE common stock equal to a fraction, the numerator of which is equal
to the quotient of $14,000,000 divided by the lesser of (A) $3.25 and (B) the
greater of (1) the twenty day volume-weighted closing sale price on the
principal trading exchange for shares of DGSE common stock as of the closing
date and (2) $1.90, and the denominator of which equals the number of shares of
our common stock outstanding on the closing date. Accordingly, the maximum
number of shares of DGSE common stock to be issued in exchange for our
outstanding common stock is 7,368,421, and the minimum number of shares to be
issued is 4,307,692.

         Pursuant to the Merger Agreement, fifteen percent (15%) of the number
of shares of DGSE common stock to be issued at the closing of the Merger will be
deposited in an escrow account as security for the payment of indemnification
claims made under the Merger Agreement in the event our representations and
warranties concerning our capitalization are inaccurate. The escrow will expire
one year after the consummation of the Merger, and any shares not applied to
satisfy claims or related expenses will then be released to the persons who were
our stockholders at the closing date. The stockholder agent, which will
initially be Stanford International Bank, Ltd. ("Stanford" or "SIBL"), will have
the exclusive right to defend the escrow against claims made by DGSE or its
related parties on behalf of our stockholders.

         The Merger Agreement provides that at or prior to closing we will enter
into a Conversion and Exchange Agreement with Stanford, Stanford Financial Group
Company ("SFG") and our Chief Executive Officer, Silvano DiGenova. Pursuant to
the Conversion and Exchange Agreement, prior to the closing of the Merger SIBL
will convert all of the shares of our preferred stock that it holds, which
includes (i) 3,000,000 shares of the Series B $1.00 Convertible Preferred Stock;
(ii) 2,000,000 shares of the Series D $1.00 Convertible Preferred Stock; and
(iii) 2,500,000 shares of the Series E $1.00 Convertible Preferred Stock, into
an aggregate of 3,600,806 shares of our common stock. In addition, SFG will


                                      -4-



<PAGE>

convert $5,500,000 in debt that we owe SFG into our common stock at a conversion
ratio of $2.00 per share. If our stockholders equity, after giving pro forma
effect to the conversion of the preferred shares described above, is less than
$5,751,000, then SFG will convert additional debt, in the amount of such
deficit, into common stock at the same $2.00 per share conversion rate. Finally,
Silvano DiGenova will convert his 400,000 shares of Series B $1.00 Convertible
Preferred Stock into 202,330 shares of our common stock. All of the shares of
our common stock to be issued upon the conversion of preferred stock pursuant to
the Conversion and Exchange Agreement will be issued pursuant to current
conversion rights.

         Consummation of the Merger is subject to certain closing conditions,
including, among others, the approval of the Merger by our stockholders and
DGSE's stockholders; DGSE stockholder approval of an increase in the number of
authorized shares of common stock of DGSE; absence of governmental restraints;
effectiveness of a Form S-4 registration statement registering the shares of
DGSE common stock to be issued as merger consideration; entry into the
Conversion and Exchange Agreement; entry into new employment agreements with Dr.
L.S. Smith, the chairman and chief executive officer of DGSE, and William H.
Oyster, a director and the president and chief operating officer of DGSE; the
accuracy of representations and certifications; and the provision by a Stanford
affiliate of an amended secured credit facility of $11,500,000 to Superior and
DGSE. The Merger Agreement allows DGSE and Superior to terminate the Merger
Agreement upon the occurrence (or non-occurrence) of certain events. DGSE and
Superior currently expect the acquisition to close late in the Fall of 2006,
subject to the satisfaction or waiver of the various closing conditions in the
merger agreement.

         If the Merger is consummated as currently expected, DGSE's primary
shareholder, Dr. L. S. Smith, will beneficially own between approximately 18%
and 24% of the total common shares of DGSE, and our primary stockholder,
Stanford, will beneficially own between approximately 29% and 38% of the total
common shares of DGSE.

         The above description of the Merger does not purport to be complete and
is qualified in its entirety by reference to the Merger Agreement, which is
filed as an Exhibit to this Annual Report on Form 10-K.

BACKGROUND OF THE COIN AND COLLECTIBLES INDUSTRY

         Throughout history, coins have been highly prized and universally
regarded as a store of value, particularly those struck in precious metals. Over
the past 300 years, coin collecting for enjoyment and profit has gained
increasing prominence. The coin industry has been active in trading since the
17th century. Today, coins and collectibles are bought and sold throughout the
world in galleries, shops, stores, auctions and on the Internet at fixed prices.

         According to experts in the field, it is difficult to determine the
total annual sales volume of the coin and collectibles business. Sotheby's, one
of the two largest auctioneers in the world in the coin and collectibles market,
reported annual auction and related revenue from the sale of art and
collectibles of $502 million for the year ended December 31, 2005, which is an
increase of 13% over the prior year. With specific regard to coins, the U.S.
Mint, in its Report to Congress for the year ending September 30, 2005, reported
that Americans continue to collect the new quarter dollar coins from the 50
State Quarters(TM) program developed by the Mint. This program was designed to
increase coin collecting and the number of collectors by minting five new
designs annually of the quarter dollar with each design featuring one each of
the 50 states over a ten year period from 1998 through 2008. During the year,
the U.S. Mint also released the "Ocean in View" nickel, the "Return to
Monticello" nickel, the "Marine Corps 230" silver dollar, the "Chief Justice
John Marshall" silver dollar, the "Benjamin Franklin" silver dollar and the
"Jamestown Commemorative" five dollar gold coin. In addition, the U.S. Mint
reported non-bullion numismatic revenue of $360 million for 2005, which is an
increase of 3% over the prior year.

                                      -5-



<PAGE>

         Typically, the coins that we buy and sell were originally manufactured
in the late 1700's to the mid-20th century. Many of the items that we sell are
one-of-a-kind, or have very few examples on the market at any time. We believe
that coin buyers generally start with a modest purchase amount and increase the
size of their transactions and the rarity of the items that they purchase as
they gain experience as a buyer in the market.

COIN GRADING AND TRADING SYSTEMS

         Determining the market value of a given coin plays a vital role in
buying and selling rare coins. Rare coins are graded on a numerical scale from 0
to 70. Zero represents the basal state (or lowest condition or state of
preservation) and 70 represents an uncirculated (or mint state) specimen that is
perfect in condition or state of preservation in every aspect. As a result of
this numerical scale relating to condition or quality, there is a correlation to
value in that the higher its numerical grade, the more valuable a coin is to
collectors or dealers. A one point difference, not even discernible to a
layman's eye, can result in a difference in value of thousands of dollars.
Therefore, consistent grading according to a standard universally accepted by
the marketplace is very important. In 1986, the first uniform grading system was
implemented by the Professional Coin Grading Service, or the PCGS. Silvano
DiGenova, our chief executive officer, was a co-founder of the PCGS and assisted
in the development of the grading system used by the PCGS. Mr. DiGenova sold his
interest in the PCGS in 1987 and, since that time, has not been affiliated with
the PCGS, except as a customer of its services. A year after the PCGS was
founded, the Numismatic Guaranty Corporation, or the NGC, was formed. Mr.
DiGenova is not affiliated with NGC except as a customer of its services.

         These two firms established a uniform coin-grading standard, which has
gained almost universal acceptance throughout the world. Once a coin has been
graded and certified, both firms encapsulate the coin in tamper-proof acrylic
holders and register them by number, grade, date and mintmark. If applicable,
they identify variety and pedigree as well. Rare coins graded and certified by
either one of these services can then be traded with confidence. The advent of
certified grading has led to the formation of the Certified Coin Exchange, or
the CCE, which is a nationwide computerized trading network for rare coins. The
CCE is also the number one source of instantaneous price information. Coins can
be bought and sold sight unseen because of the certification and confidence
instilled in the market place by the CCE, the PCGS and the NGC. Mr. DiGenova was
a founder and board member of the CCE, and assisted in the organization of the
association. Mr. DiGenova sold his interests in the CCE in the late 1980s and
has not been affiliated with that entity since that time except as a user of its
services.

RETAIL AND WHOLESALE SALES

         We sell rare coins on a wholesale and retail basis. On a wholesale
basis, our contacts include approximately 5,000 rare coin dealers across the
country who we contact through telephone, email, fax, electronic exchanges and
in person at the approximately 30 shows or expositions annually. Wholesale
transactions are usually completed with recognized dealers in the trade and are
often for immediate payment or with approved credit relationships, by payment
within 30 days from the date of sale. Retail transactions typically do not
involve the extension of any credit terms and payment is made at the time of
sale.

                                      -6-



<PAGE>

         Our CEO in consultation with senior management team members approves
trade credit. In wholesale transactions, selling prices for rare coins are
determined by the marketplace and usually individually negotiated with the
buyer. There are several printed pricing guides, some published weekly, which
provide pricing indications as well as the CCE, a real-time exchange with bids
and asks on many of the coins in the market. Often, a wholesale customer is
buying rare coins from us because the wholesale customer has another customer,
whether wholesale or retail, already identified. Wholesale sales prices for rare
coins are determined primarily by the grade of the coins and are often
influenced by non-market factors such as the purchasing or selling dealer's
liquidity, the relative desire or need for the specific rare coin, the length of
time the selling dealer has held the rare coins and other factors.

         When selling rare coins on a retail basis, we utilize direct mail,
telephone, fax, email and Internet-based retail and auctions, both private and
public, as channels of distribution. We maintain a database of over 50,000
potential customers for rare coins who are solicited regularly through these
channels. We currently maintain our website, www.SGBH.com to offer rare coins
both at retail and at private auction. We also have ongoing campaigns on eBay
and Overstock.com, third party websites, to sell rare coins at their Internet
public auction and listing sites. At retail, we typically sell for immediate
payment, holding the rare coins until good funds are received. In a few
instances, on large purchases, we will consider financing a sale for a retail
buyer. In these situations, we will hold the rare coins as collateral. In retail
transactions, the market determines sale prices for rare coins and there are
several pricing guides available to the retail buyer including monthly and
weekly publications and auction prices realized. The price to be paid by a
retail buyer for a rare coin is primarily based on the coin's condition and
rarity as determined by its grade but is also influenced by the buyer's desire
for the particular rare coin, the time it has taken to find a suitable example
for the buyer's collection, the relative rarity of the coin to others held by
the buyer and other factors. In retail transactions, we principally sell rare
coins that have been certified for authenticity and quality by an independent
recognized authority.

ACQUISITION OF INVENTORY

         We acquire inventory of rare coins at wholesale through other dealers
in the trade, retail customers, trusts or estates desiring to sell their
holdings or by auction. We are not dependent on any major suppliers. During the
year ended June 30, 2006, one supplier provided approximately 10.5% of our
aggregate purchases of coins. All other suppliers provided less than 6% of our
inventory. When purchasing from other dealers in the trade, we are typically
offered 15 days to pay the net invoice amount. Purchases from retail customers,
trusts and estates or at auction by an independent auction company require
immediate payment upon taking title and possession of the property. On occasion,
we may trade items from our inventory to either a dealer or a retail customer in
exchange for property from the dealer or retail customer. When buying inventory
from a dealer, the majority of these purchases are completed at shows and
expositions around the country, although a significant volume is transacted over
the telephone. Purchasing at auction is another major source of inventory in
rare coins. Purchase prices are negotiated by our buyers with dealers in the
trade and with the retail customers, trusts and estates. When buying at auction,
our buyers compete with other buyers in determining the final bid for any given
lot of property.

AUCTION OPERATIONS

         On July 6, 2001, we acquired substantially all of the assets of
Superior Galleries, Inc., a California corporation, a company that was an
auctioneer of rare coins and collectibles located in Beverly Hills, California
("SGBH," which is not the same legal entity as Superior), for cash and a note.
Through June 30, 2003, we were operating this business as a subsidiary under the
name Superior Galleries Beverly Hills, Inc., although the seller retained
certain rights to the Superior Galleries name in the stamp and space memorabilia
markets for a period of two years from the date of the acquisition. As a result,
we were restricted until July 6, 2003 from doing business in either the rare
stamp or space memorabilia markets under this name for such period. Effective
July 1, 2003, the auction operations of SGBH were combined with the remainder of
our operations.

                                      -7-



<PAGE>

         Superior, as an auctioneer of rare coins and collectibles, has a
history dating back to 1929 with sales primarily in the rare coin and rare stamp
markets. With our long time location in Beverly Hills, our customers and clients
include many well-recognized names in the entertainment and sports fields.

         We solicit and accept consignments of rare coins from individuals,
dealers and trusts and estates and charge a seller's commission along with a
buyer's premium on each lot sold. The combination of the seller's commission and
the buyer's premium on each lot equals approximately 5%-30% but averages
approximately 11.8%.

         We market our services by advertising in trade journals, direct mail
and telemarketing and through attendance at major shows and exhibitions and by
personal visits. Each consignment of goods is evidenced by a contract signed by
both the consignor and Superior. In some instances, we may loan the consignor
funds in an amount up to approximately 70% of the expected prices realized from
the sale of the property in the consignment. The consignor loan amount maximums
are determined by a loan-to-value ratio based on our estimate of the wholesale
liquidation value in the event the consigned items do not sell at auction. In
this event, the consignor also executes a note and security agreement evidencing
the debt and providing a security interest to us in the consigned items. The
proceeds from the sale of the property are used to repay the loan amount and the
excess funds are paid to the consignor. Upon receipt of the consigned goods, we
record the receipt on our records and then catalog and photograph the items,
storing the information in digital format.

         Auction sale dates are established approximately one year in advance.
As deadlines for each auction date approaches, we organize all of the digitized
information into a catalog of goods with photographs and subcontract the
printing and mailing of the catalog to be sent to our mailing list of buyers. In
addition, we load the digitized catalog on our web-site and into software
managed by Internet seller eBay, so that bidders on the Internet worldwide may
also leave absentee bids to be executed by us at the live auction. eBay's
software also allows for Internet bidders to bid competitively with the live
auction in real time in competition with the bidders present at the auction
site.

         Generally, the purchase price from the sale of rare coins is due upon
the completion of the auction, although we maintain credit relationships with
certain dealers in the trade and offers payment terms of up to 60 days to those
selected dealers. A contract with a consignor requires payment to the consignor,
less any loan amounts, accrued interest and commissions, to be made within 45
days of the sale date.

COMPETITION

         The business of selling rare coins is highly competitive. Methods of
competition include pricing coins at levels that are lower than the published
prices of our competitors, charging reduced auction commissions to sellers,
increasing advertising and expanding Internet presence, and providing more
personalized service. We compete with a number of smaller, comparably sized, and
larger firms throughout the United States. These include: Heritage Auction
Galleries, a large scale coin dealer and auctioneer; Bowers and Merena Auctions;
and American Numismatic Rarities, a comparably-sized coin auction company. These
competitors are generally larger and better capitalized than we are. However, we
believe that we are able to compete with these competitors in part because of
the reputation of our Chief Executive Officer, Silvano DiGenova, who has
twenty-five years of experience in the rare coin industry. We cannot assure you,
though, that we can continue to compete successfully with other established
companies.

                                      -8-



<PAGE>

REGULATION

         The rare coin markets are not currently subject to direct federal,
state or local regulation. However, the Federal Trade Commission, or FTC, and
many state attorneys general have shown an interest in regulating the sales of
rare coins and other tangible assets as investments. The State of New York has
determined that under certain circumstances, rare coins may be treated as
securities under state law, thereby requiring rare coin dealers to register as
broker-dealers and permitting investors all legal and equitable remedies
otherwise available to buyers of securities. We rely upon a 1998 U.S. Federal
Court ruling that the ordinary retail sale of rare coins to investors does not
constitute the sale of a security under the federal securities laws, and we
believe that our operations are not subject to regulation as involving the sale
of securities. There is no assurance, however, that at some time in the future,
the sale of rare coins will not be subject to increased regulation, and that our
business will not be materially adversely affected by such regulation. Any
increased regulation of our business could increase our costs of operation or
require us to change our business practices, either of which could have a
material and adverse impact on our business.

         Over the past 15 years, the FTC has filed suits against numerous rare
coin dealers alleging that the dealers' representations about coins were false
or misleading or that the dealers' retail markups were so high that their
representations about investment risk and appreciation potential became
misleading or untrue. These cases have not, however, created any clear rules by
which dealers such as us can assure themselves of compliance. On January 1,
1996, the FTC's Telemarketing Sales Rule, authorized by the 1994 Telemarketing
and Consumer Fraud and Abuse Prevention Act, took effect. "Telemarketing" is
defined as any plan, program, or campaign that is conducted to induce payment
for goods and services by use of more than one interstate telephone call. This
rule applies to all sales of "investment opportunities," which are defined by
whether the seller's marketing materials generally promote items on the basis of
representations about "income, profit, or appreciation." We believe that all of
our retail sales are covered by this rule, even those to collectors.

         The Telemarketing Sales Rule requires us to inform customers of the
following before accepting payment: the number of items being sold, the purchase
price, and our refund/exchange/buyback policy. The rule also prohibits us from
misrepresenting the "risk, liquidity, earnings potential, and profitability" of
the items that we sell. This in itself did not materially change prior law.
However, during debates on the Telemarketing Sales Rule in 1995, FTC staff
attorneys tried to impose additional specific requirements that dealers in
"tangible assets" disclose to retail customers their actual cost for the items
they sell, and also disclose "all material facts" about their goods before
accepting any money from the customer. This would have required us to disclose
our actual margins to our retail customers, as well as impose on us the burden
of determining what facts were material to the purchase of coins or other
collectibles. Although the FTC ultimately removed these additional requirements
from the final version of the rule, the behavior of the FTC staff has
demonstrated its particular concern for telemarketing of coins as investments.
We cannot assure you that the FTC will not amend the rule in the future to
impose these or other additional regulations, or that individual states will not
impose such regulations. If the FTC or any state agency proposed additional
regulations relating to the telemarketing of coins, we could be required to
expend additional funds in order to hire staff and provide training. The expense
of complying with these requirements would likely reduce our profitability.

         In addition, many investors favor rare coins because they can be
bought, owned and sold privately, i.e., without registering with or notifying
any government agency. However, the Internal Revenue Service ("IRS") now
requires dealers such as us to report all sales of coins in which more than
$10,000 in cash or a cash-like instrument is used as payment. The private nature
of rare coin ownership has occasionally resulted in rare coins being purchased
by taxpayers for the purpose of concealing unreported income, or used to
"launder" income derived from unlawful activities. As a coin dealer, which falls
under the definition of a "dealer," the Company is subject to the Bank Secrecy


                                      -9-



<PAGE>

Act and the newly enacted Section 352 of the USA Patriot Act effective January
1, 2006. The Company must comply with requirements to collect certain
information about customer transactions and report it to the IRS on Form 8300 or
on a Suspicious Activity Report Form. As a second hand dealer of jewelry, the
Company must also collect and report customer information to the Beverly Hills
Police Department within 72 hours of the item purchase. We cannot assure you
that additional regulations will not be imposed upon us in the future, and that
our business will not be harmed as a result.

TAXATION OF MAIL ORDER SALES

         We do not collect California sales tax on mail order sales to
out-of-state customers, because interstate sales generally are tax-exempt. Nor
do we collect use tax on our interstate mail order sales. Most states impose a
use tax on "retailer(s) engaged in business in this state" on sales of "tangible
personal property for storage, use, or other consumption in this state." Use tax
is usually set at the same rate as sales tax, and its purpose is to equalize the
tax affects on local retailers who pay sales tax and out-of-state mail order
companies who do not. Some states exempt rare coin sales over $1,000 from sales
or use tax, but most do not. Although the United States Constitution restricts
the right of states to tax interstate commerce, states can assess use tax on any
transaction where the out-of-state mail order firm is deemed to be "engaged in
business" in the state. A retailer which has a "nexus" with the state, i.e., any
physical presence in the state, regardless of whether the sales themselves arise
from that local presence, is deemed to be "engaged in business" in the state.
"Nexus" includes attending conventions, although at least one state (California)
provides a seven-day "safe harbor" for out-of-state dealers attending
conventions and whose sales are less than a certain dollar threshold. It also
would include attending auctions or making buying or selling trips. On that
basis, we may be deemed to have "nexus" in many states.

         Payment of use tax is the buyer's obligation, but states require
retailers engaged in business in that state to collect the tax on sales to
customers in that state and remit it to the state along with a use tax return.
There is no statute of limitations for use tax if the dealer has filed no
returns. To date, we have not been assessed for use tax by the taxing authority
of any other state for sales to customers in that state claiming that we are
engaged in business in that state and therefore required to collect and remit
the tax, nor have we received any inquiry indicating that we were being audited
for the purposes of such an assessment. However, there is no assurance that we
will not be audited by state taxing authorities and be assessed for unpaid use
taxes (plus interest and penalties) for a period of many years.

         In addition to use tax, many states impose income and franchise taxes
on out-of-state companies that derive net income from business with their
residents. For example, California applies an income-based franchise tax to
out-of-state corporations operating in California for the privilege of using the
corporate form. The maximum California corporate tax rate is approximately 9%,
with a minimum tax of $800 per year. Income derived outside of California is not
taxed, and in-state income of taxpayers liable for tax in more than one state is
calculated using a formula contained in the Uniform Division of Income for
Taxation Purposes Act, a statute in effect in about one-half of the states. As
with use tax, nexus principles apply, and the U.S. Supreme Court requires "a
minimal connection between the interstate activities and the taxing state, and a
rational relationship between the income attributed to the State and the
intrastate values of the enterprise."

         Assuming the existence of nexus, we could be subject to income-based
taxes in each of the states in which we have had a physical presence at
conventions, auctions or otherwise. The only exceptions would be in states where
we are protected by a federal law, 15 U.S.C. ss. 381, which immunizes companies
from state income taxes if the company's only business activities in the taxing
state consists of "solicitation of orders for interstate sales." There is no


                                      -10-



<PAGE>

statute of limitations for income or franchise tax if the dealer has filed no
return. To date, we have not been assessed for income tax or franchise tax by
the taxing authority of any other state, nor have we received any inquiry
indicating that we were being audited for purposes of such an assessment.
However, we cannot assure you that we will not be audited by state taxing
authorities and be assessed for unpaid income or franchise taxes (plus interest
and penalties) for a period of many years.

CUSTOMERS/DEPENDENCE ON KEY CUSTOMERS

         We generally sell to a large variety of individual retail purchasers as
well as several wholesale purchasers throughout the nation and world. During the
fiscal year ended June 30, 2006, none of our customers accounted for more than
10% of our sales.

         On May 18, 2005, we entered into a Primary Supplier Agreement with
Stanford Coins & Bullion, Inc. ("Stanford C&B"), an affiliate of our principal
shareholder, Stanford, under which we have been provided with a preferential
right to source coins that Stanford C&B is seeking for its customers. When the
agreement expired in December 2005, the business relationship between the
parties continued under the same terms of the previous agreement. During the
fiscal year ended June 30, 2006, Stanford C&B purchased $2,277,000 of rare coins
from us.

NUMBER OF EMPLOYEES

         As of September 18, 2006, we co-employed or obtained contract services
from 32 persons, of which 31 were full-time co-employees. Our co-employment
relationship is with Administaff, as a professional employer organization. We
believe that our future success depends in part upon our ability to recruit and
retain qualified numismatists, marketing and other personnel. We consider our
relations with our employees to be good. None of our employees are represented
by a labor union.

ITEM 1A. RISK FACTORS

         The more prominent risks and uncertainties inherent in our business are
described below. However, additional risks and uncertainties may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations will likely suffer. Any of these or
other factors could harm our business and future results of operations and may
cause you to lose all or part of your investment in our company.

     WE HAVE A RECENT HISTORY OF LOSSES AND MAY INCUR FUTURE LOSSES.

         We may not be able to sustain profitability or significantly increase
our revenues. We recorded a net loss of $2,489,000 for the year ended June 30,
2006 and a net loss of $616,000 for the year ended June 30, 2005. We recorded
net income of $552,000 for the year ended June 30, 2004 and have incurred losses
in prior fiscal years since July 1999. We cannot assure you that we will be
profitable in the future.

     BECAUSE WE HAVE LIMITED WORKING CAPITAL, IT MAY BE DIFFICULT TO MAINTAIN OR
     EXPAND OUR OPERATIONS.

         At June 30, 2006, we had negative working capital of $909,000. There
can be no assurance that our revenue or results of operations will not decline
in the future, that we will not have losses in the future, or that we will be
able to continue funding such losses if they occur. Our limited capital could
adversely affect our ability to continue our operations.

                                      -11-



<PAGE>

     IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, OUR REVENUE AND PROFITABILITY
     WILL DECREASE.

         The business of selling coins and other collectibles is highly
competitive. We compete with a number of comparably sized and smaller firms, as
well as a number of larger firms throughout the United States. Our primary
competitors are Heritage Auction Galleries, a large scale coin dealer and
auctioneer; Bowers and Merena Auctions; and American Numismatic Rarities, a
comparably-sized coin auctioneer. Many of our competitors have the ability to
attract customers as a result of their reputation and the quality collectibles
they obtain through their industry connections. Additionally, other reputable
companies that sell or auction rare coins and other collectibles may decide to
enter our markets to compete with us. These companies have greater name
recognition and have greater financial and marketing resources than we do. If
these auction companies are successful in entering the specialized market for
premium collectibles in which we participate or if dealers and sellers
participate less in our auctions, we may attract fewer buyers and our revenue
could decrease.

     THE VOTING POWER OF SUPERIOR GALLERIES, INC. IS SUBSTANTIALLY CONTROLLED BY
     STANFORD INTERNATIONAL BANK LIMITED AND A GROUP OF AFFILIATED PERSONS. THIS
     CONCENTRATION OF VOTING POWER MAY, AMONG OTHER THINGS, DELAY OR FRUSTRATE
     THE REMOVAL OF INCUMBENT DIRECTORS OR A TAKEOVER ATTEMPT, EVEN IF SUCH
     EVENTS MAY BE BENEFICIAL TO OUR SHAREHOLDERS.

         Stanford and certain of its affiliates collectively hold approximately
51% of our voting securities. Consequently, Stanford and its affiliates have
sufficient voting power to control the outcome of virtually all corporate
matters submitted to the vote of our common shareholders. Those matters could
include the election of directors, changes in the size and composition of the
board of directors, and mergers and other business combinations involving
Superior. In addition, through this control of the board of directors and voting
power, Stanford is able to control certain decisions, including decisions
regarding the qualification and appointment of officers, dividend policy, access
to capital (including borrowing from third-party lenders and the issuance of
additional equity securities), and our acquisition or disposition of assets.
Also, the concentration of voting power in the hands of Stanford could have the
effect of delaying or preventing a change in control of our company, even if the
change in control would benefit our shareholders, and may adversely affect the
market price of our common stock.

     THE HIGH LEVEL OF OUR DEBT MAY LIMIT OUR ABILITY TO IMPLEMENT BUSINESS
     STRATEGIES TO GROW OUR REVENUE AND IMPROVE OUR PROFITABILITY.

         At June 30, 2006, we had total indebtedness of $12,000,000, of which
$11,700,000 was short-term debt. Our high level of debt limits the amount of
additional funds we can borrow, which in turn limits our ability to increase
inventory or make additional customer advances, thus restricting our ability to
grow our revenues. We do not have sufficient cash flow from operations to
rapidly repay this debt, and therefore if this debt was not renewed we would
have to seek new debt or equity financing to refinance our existing debt, or
liquidate inventory, possibly on unfavorable terms. In the past, we have
renegotiated or renewed the terms of our indebtedness on various occasions, but
we cannot assure you that we will be able to do so in the future or that new
debt or equity financing will be available for this purpose. This could result
in losses from operations, or could even require us to seek protection under the
bankruptcy laws.

     IF WE ARE UNABLE TO PAY OUR SECURED DEBT ON A TIMELY BASIS, THE LENDERS
     COULD REQUIRE THAT OUR ASSETS BE SOLD IN A FORECLOSURE SALE, WHICH COULD
     RESULT IN OUR BANKRUPTCY.

                                      -12-



<PAGE>

         We have borrowed funds from a Stanford affiliate and another private
party, each of which has been granted a security interest in substantially all
of our assets. If we default in the repayment of these debts, these lenders
could, among other things, foreclose on their security interests, which could
result in the sale of substantially all of our assets, the proceeds of which
would be applied to repay our debts to them. If this were to occur, we could be
forced to file a bankruptcy petition, or could go out of business.

     DECREASED DEMAND FOR RARE COINS COULD REDUCE OUR REVENUE AND PROFITABILITY.

         We derive substantially all of our revenues from commissions paid to us
on the sale of rare coins in our auctions and sales of rare coins from our own
inventory. Sales of rare coins depend on discretionary consumer spending and are
affected by general market conditions, including perceived scarcity, subjective
value, general consumer trends, changes in the prices of precious metals,
government regulation of rare coin transactions, interest rates and other
general economic conditions. Many factors affect discretionary consumer
spending, including the unemployment rate, business conditions, interest rates,
inflation and tax rates. Spending on the types of luxury items that we typically
sell and auction are impacted by these factors more than sales of consumer
products in general.

         Some of the market conditions that could cause the dollar volume spent
in our auctions to decrease include the following:

         o    fewer rare coins offered for sale;
         o    a decline in the prices buyers are willing to pay; and
         o    shifts in consumer trends.

         As buyers' tastes change and economic conditions fluctuate, the supply,
demand and dollar volume of rare coins sales could decrease, which could reduce
our revenues and profits, or cause us to incur losses.

     WE COULD BE SUBJECT TO SALES TAXES, INTEREST AND PENALTIES ON INTERSTATE
     SALES FOR WHICH WE HAVE NOT COLLECTED TAXES.

         We do not collect California sales tax on mail-order sales to
out-of-state customers, nor do we collect use tax on our interstate mail order
sales. We believe that our sales to interstate customers are generally
tax-exempt due to varying state exemptions relative to the definitions of being
engaged in business in particular states and the lack of current Internet
taxation. We do collect sales taxes on retail sales made, if any, while at
conventions and auctions held out of state and file related state tax returns.
While we have not been contacted by any state authorities seeking to enforce
sales or use tax regulations, we cannot assure you that we will not be contacted
by authorities in the future with inquiries concerning our compliance with
current statutes, nor can we assure you that future statutes will not be enacted
that affect the sales and use tax aspects of our business.

     THE LOSS OF THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER COULD SIGNIFICANTLY
     REDUCE OUR REVENUE AND PROFITABILITY.

         Our success and future performance depends on the continued services of
our Chief Executive Officer, Silvano DiGenova, on whom we rely heavily for his
expertise and reputation in the rare coin market. Specifically, Mr. DiGenova is
a substantial buyer, appraiser and seller of rare coins on our behalf as well as
a substantial draw to potential auction consigners. Mr. DiGenova's services
would be difficult to replace and the loss of these services could cause
significant harm to our business. While we previously had an employment
agreement with Mr. DiGenova that expired on March 31, 2005, this agreement has
not yet been renewed, and in any event such an employment agreement may not
provide us with meaningful assurance that we will continue to have his services
available to us in the future. His execution of an independent contractor
agreement with Superior is a condition to the planned Merger with DGSE.

                                      -13-



<PAGE>

     OUR QUARTERLY OPERATING RESULTS MAY VARY, WHICH MAY CAUSE VOLATILITY OR A
     DECLINE IN THE PRICE OF OUR COMMON STOCK.

         Our revenue, expenses and operating results may vary significantly from
quarter to quarter due to a number of factors, some of which are beyond our
control. These factors include the following:

         o    potential unfavorable supply of or demand for rare coins;
         o    quarter-to-quarter variations due to the timing of coin auctions;
         o    potential changes in consumer trends negatively affecting the
              popularity of rare coins that we auction and sell from time to
              time;
         o    unfavorable fluctuations in the prices of precious metals;
         o    costs associated with unanticipated personnel changes;
         o    our inability to maintain customer satisfaction;
         o    quarter-to-quarter variations due to the size and timing of
              capital expenditures and other costs associated with the expansion
              of our business and infrastructure;
         o    our inability to resell our inventory of rare coins in a timely
              manner;
         o    unexpected or severe price competition;
         o    our inability to maintain gross margins; and
         o    our inability to expand our sales and distribution channels.

         Additional factors that may negatively affect our quarterly operating
results generally include technical difficulties or network downtime and general
economic conditions and economic conditions specific to our industries.

     IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL, OUR ABILITY TO INCREASE
     REVENUE AND PROFITABILITY WILL BE LIMITED.

         Since our business involves the financing of inventory, receivables,
and auction and customer advances, we may require substantial amounts of capital
in order to achieve and accomplish our future business plans. However, to the
extent we are in need of any additional financing, we cannot assure you that any
such additional financing will be available to us on acceptable terms, or at
all. If we raise additional funds through the issuance of equity securities,
further dilution to our existing shareholders may result.

     THE COSTS ASSOCIATED WITH OUR GROWTH PLANS MAY RESULT IN REDUCED
     PROFITABILITY.

                                      -14-



<PAGE>

         We have experienced significant periods of growth and increased
personnel, marketing and other operational costs. This expansion has placed, and
we expect it will continue to place, a significant strain on our management and
our operational and financial resources. To manage this growth we must do the
following:

         o    establish and continue to develop operational, financial and
              management systems;
         o    train, manage and motivate our employee base;
         o    efficiently use technology and operations personnel; and
         o    replace contract rare coin specialists and appraisers with
              permanent staff.

         We expect to incur significant costs in connection with these efforts.
If we underestimate the costs of these efforts or overestimate our anticipated
growth in revenue, we will incur reduced profitability or even losses.

     WE MAY INCUR LOSSES AS A RESULT OF ACCUMULATING INVENTORY.

         In addition to auctioning rare coins on consignment, a substantial
portion of the rare coins that we sell are from our own inventory. We purchase
these rare coins from dealers and collectors and assume the inventory and price
risks of these items until they are sold. If we are unable to resell the rare
coins that we purchase when we want or need to, or at prices sufficient to
generate a profit from their resale, or if the market value of our inventory of
purchased rare coins were to decline, our revenue would likely decline.

     IF WE ARE UNABLE TO OBTAIN A SUFFICIENT SUPPLY OF RARE COINS FOR RESALE AND
     FOR SALE AT AUCTIONS, WE WILL BE UNABLE TO SUSTAIN OR INCREASE OUR
     REVENUES.

         Our business depends substantially on our ability to obtain rare coins
for appraisal, sale and auction. We depend on the availability of rare coins
through dealers and collectors, and we cannot assure you that rare coins will
continue to be available as before. Although we deal with numerous dealers and
collectors from whom we are able to obtain rare coins for resale and for our
auctions, only a limited number of dealers exist with the capacity to supply
rare coins for resale and auction on a regular basis. A change in our
relationships with suppliers or dealers could negatively affect our ability to
obtain, resell or auction rare coins in the quantities and at the times we
desire. A shortage in the supply of rare coins could impair our ability to
attract customers, which would harm our business, operating results and
financial condition.

     IF WE ARE UNABLE TO ATTRACT SUFFICIENT CONSIGNMENT MERCHANDISE FOR SALE AT
     OUR AUCTIONS, OUR AUCTION OPERATIONS MAY INCUR A LOSS.

         We incur certain fixed costs in connection with each auction. Our
auction operations generate commission revenue based on the successful sale of
consigned merchandise. If the volume of sales at our auctions does not generate
sufficient commission revenue to cover fixed costs, our auction operations will
generate a loss.

     IF WE EXPERIENCE AN INCREASE IN THE RESCISSION OF SALES, OUR REVENUE AND
     PROFITABILITY COULD DECREASE.

         Our operating results could suffer if we experience a significant
increase in the number of sales that are rescinded due to questions about title,
provenance or authenticity of an item. We warrant the title, provenance and
authenticity of each item that we sell, including items sold at auction. If a
buyer believes that any of these characteristics is in doubt, he or she must


                                      -15-



<PAGE>

notify us in writing within a certain number of days after the date of sale of
the property. If we cannot substantiate the questioned characteristics, the
buyer may rescind his or her purchase and we will refund the price paid at
auction to the buyer. When a purchase is rescinded, the seller is required to
refund the item's sale price less sellers' commissions and other sellers' fees.

     OUR PLANNED EXPANSION AND ENHANCEMENT OF OUR WEBSITE AND INTERNET
     OPERATIONS MAY NOT RESULT IN INCREASED PROFITABILITY.

         The satisfactory performance, reliability and availability of our
website and network infrastructure are and will be critical to our reputation
and our ability to attract and retain customers and technical personnel and to
maintain adequate customer service levels. Any system interruptions or reduced
performance of our website could materially adversely affect our reputation and
our ability to attract new customers and technical personnel. We are in the
process of development and/or enhancement of several portions of our website
that will offer content and auctions for rare coins that may have a lower
average selling price than many of the rare coins in the markets we currently
serve. Continued development of our website will require significant resources
and expense. If the planned expansion of our website does not result in
increased revenue, we may experience decreased profitability.

     OUR WEBSITE MAY BE VULNERABLE TO SECURITY BREACHES AND SIMILAR THREATS
     WHICH COULD RESULT IN OUR LIABILITY FOR DAMAGES AND HARM TO OUR REPUTATION.

         Despite the implementation of network security measures, our website is
vulnerable to computer viruses, break-ins and similar disruptive problems caused
by Internet users. These occurrences could result in our liability for damages,
and our reputation could suffer. The circumvention of our security measures may
result in the misappropriation of proprietary information. Any such security
breach could lead to interruptions and delays and the cessation of service to
our customers and could result in a decline in revenue and income.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

         Not applicable.

ITEM 2.  PROPERTIES

         Our corporate headquarters are located in an approximately 7,000 square
foot storefront facility located at 9478 West Olympic Boulevard, Beverly Hills,
California, which we lease from a company controlled by another rare coin
dealer. This facility includes administrative, customer support, auction,
gallery and retail space. One lease for the store front lease expires on
September 30, 2012; and one lease for the office space expires July 31, 2010.
The combined monthly rental rate is $21,147 plus parking fees and rent of
storage space, subject to annual increases based on increases in the consumer
price index. We believe that our facilities are adequate for our needs in the
near future.

ITEM 3.  LEGAL PROCEEDINGS

         We were sued by Heritage Capital Corporation ("Heritage"), a competitor
of ours, in connection with our employment of Larry Abbott, a former employee of
Heritage. The petition was filed on June 3, 2005 in the Dallas County District
Court in Texas. The parties to this case included Heritage, Superior Galleries,
Inc. and Mr. Abbott. In this case, Heritage sued Mr. Abbott for breach of his
employment agreement with that company, following his resignation in May 2005.
This lawsuit has been completely settled in accordance with a settlement
agreement dated March 27, 2006, at no cost to us, other than its own legal
costs, estimated to be $50,000.

                                      -16-



<PAGE>

         We are being sued by Elaine and Dean Sanders in connection with a loan
made to them against 32 coins placed on consignment on June 26, 2004. Fourteen
of the coins were sold, and the proceeds from this sale of approximately
$186,750 were insufficient to repay the loan of $359,471 that we made to the
Sanders. The plaintiffs subsequently paid an additional $155,000 in December
2005 with respect to the loan, but now allege that we violated the terms of our
agreement with them relating to the sale of the coins. We strongly deny that we
violated the agreement or acted improperly in any way. The complaint was filed
on June 6, 2006 in the U.S. District Court for Central California and seeks
undefined dollar amounts, accrued interest and reimbursement of plaintiffs'
legal costs.

         In April 2004 we sued our former Chief Financial Officer, Malingham
Shrinivas, in Los Angeles Superior Court for breach of contract, fraud and
conspiracy. In that lawsuit, we alleged that he fraudulently arranged to receive
more salary than he was entitled to, to pay personal expenses using Company
funds, and to pay third party vendors with Company funds for services which were
not rendered. In July 2004 Mr. Shrinivas filed a counterclaim in this
litigation, claiming that he was terminated without just cause and was therefore
entitled to $58,250 in severance pay.

         Although the case had been scheduled for trial in August 2006, prior to
that time the case was stayed by order of the Superior Court because the Court
had been advised that criminal charges against Mr. Shrinivas related to this
matter were imminent. Those criminal charges were subsequently filed, and
therefore further proceedings in connection with the civil case continue to be
stayed. We do not know how long the stay will be in effect. We believe that Mr.
Shrinivas was terminated with cause and that he is therefore not entitled to any
severance from us. If and when the stay of our civil case is terminated, we
intend to vigorously pursue our claims and defend Mr. Shrinivas' claims for
severance pay.

         From time to time, we may be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of our business. However,
except as discussed above, we are not currently involved in any litigation which
we believe could have a materially adverse effect on our financial condition or
results of operations.

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

         None.

                                      -17-



<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

         Our common stock is traded on the NASDAQ over-the-counter Bulletin
Board under the symbol "SPGR." Prior to July 1, 2003 our symbol was "TAGZ." The
following table shows the trading price data for our common stock as reported by
NASDAQ as the range of representative bid prices for our common stock for the
quarters indicated. Our common stock is quoted in the National Quotation
Bureau's Pink Sheets and listed on the NASD's Electronic Bulletin Board. The
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.

                                                        Fiscal 2006
                                                    -------------------
                  Fiscal Quarter Ended:             High           Low
                                                    -----         -----
                       June 30                      $1.25          $.81
                       March 31                      1.90           .82
                       December 31                   1.80           .92
                       September 30                  4.00          1.50

                                                        Fiscal 2005
                                                    -------------------
                  Fiscal Quarter Ended:             High           Low
                                                    -----         -----
                       June 30                      $4.75         $2.90
                       March 31                      4.20          1.50
                       December 31                   1.52          0.65
                       September 30                  2.00          1.25

HOLDERS

         We have one class of common stock outstanding as of September 18, 2006.
The number of holders of record of our common stock as of the close of business
on September 18, 2006 was 178. Within the holders of record of our common stock
are depositories such as Cede & Co. that hold shares of stock for brokerage
firms which, in turn, hold shares of stock for beneficial owners.

DIVIDENDS

         To date, we have declared no common stock dividends, and do not expect
to pay cash dividends on our common stock in the near future. We intend to
retain future earnings, if any, to provide funds for the operation of our
business. The terms of our Series B $1.00 Convertible Preferred Stock, or Series
B Preferred Stock, prohibit us from making any distributions on our common stock
without the vote or written consent of the holders of a majority of the
outstanding shares of the Series B Preferred Stock, voting as a separate class.
The holders of our outstanding Series D $1.00 Convertible Preferred Stock, or
Series D Preferred Stock and Series E $1.00 Convertible Preferred Stock, or
Series E Preferred Stock, each voting separately as a class, likewise must
approve the payment of any dividends other than dividends on our several
outstanding series of Preferred Stock. All of our shares of Series A Redeemable
8% Convertible Preferred Stock, or Series A Preferred Stock, were redeemed by
cash payments by the end of fiscal 2006, and therefore all restrictions on the
payment of dividends that were previously associated with these securities have
been terminated.

                                      -18-



<PAGE>

EQUITY COMPENSATION PLAN INFORMATION

         Information regarding outstanding options to purchase our common stock
under equity compensation plans, and concerning related matters, is set forth
below under "Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters--Equity Compensation Plan Information."

RECENT SALES OF UNREGISTERED SECURITIES

         None.

                                      -19-



<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The selected operating data for the fiscal years ended June 30, 2006,
2005 and 2004, and the selected balance sheet data at June 30, 2006 and 2005,
that are set forth below are derived from our audited financial statements
included elsewhere in this Report. The selected operating data for the fiscal
years ended June 30, 2003 and 2002 and the balance sheet data for June 30, 2004,
2003 and June 30, 2002 were derived from audited consolidated financial
statements that are not included in this Report. The following data should be
read in conjunction with our financial statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included below in this report.

<TABLE>
<CAPTION>
                                                                  YEAR ENDED JUNE 30,
                                                --------------------------------------------------------
STATEMENTS OF OPERATIONS DATA                     2006        2005        2004        2003        2002
                                                --------    --------    --------    --------    --------
                                                         (in thousands, except per share data)
<S>                                             <C>         <C>         <C>         <C>         <C>
Total revenue                                   $ 46,317    $ 39,535    $ 29,997    $ 20,355    $ 18,797
Cost of sales                                     38,393      32,027      23,382      15,952      16,092
                                                --------    --------    --------    --------    --------
Gross profit                                       7,924       7,508       6,615       4,403       2,705
Selling, general and administrative expenses       9,792       7,708       5,959       6,676       6,406
Impairment of goodwill                                --          --          --         591          --
                                                --------    --------    --------    --------    --------
Income (loss) from operations                     (1,868)       (200)        656      (2,864)     (3,701)
Other interest income (expense)                     (669)       (415)        (92)       (614)     (1,174)
Extraordinary gain from extinguished debt             50          --          --          --          --
                                                --------    --------    --------    --------    --------
Income (loss) before income tax provision         (2,487)       (615)        564      (3,478)     (4,875)
Income tax provision (benefit)                         2           1          12          13          (8)
                                                --------    --------    --------    --------    --------
Income (loss) from continuing operations          (2,489)       (616)        552      (3,491)     (4,867)
Income (loss) from discontinued operations            --          --          --          --      (3,038)
                                                --------    --------    --------    --------    --------
Net income (loss)                               $ (2,489)   $   (616)   $    552    $ (3,491)   $ (7,905)
                                                ========    ========    ========    ========    ========
Calculation of net income (loss) per share
Net income (loss)                               $ (2,489)   $   (616)   $    552    $ (3,491)   $ (7,905)
Preferred stock accretion                             --          --         (50)        (67)        (44)
Preferred stock dividends                             --          --         (37)       (429)        (62)
                                                --------    --------    --------    --------    --------
Net income (loss) applicable to common shares   $ (2,489)   $   (616)   $    465    $ (3,987)   $ (8,011)
                                                --------    --------    --------    --------    --------
Net income (loss) per common share: (1)
   from continuing operations                   $  (0.52)   $  (0.13)   $   0.11    $  (1.75)   $  (2.50)
   from discontinued operations                       --          --          --          --       (1.53)
                                                --------    --------    --------    --------    --------
   from net income (loss), basic                $  (0.52)   $  (0.13)   $   0.11    $  (1.75)   $  (4.03)
                                                ========    ========    ========    ========    ========
   from net income (loss), fully diluted        $  (0.52)   $  (0.13)   $   0.06    $  (1.75)   $  (4.03)
                                                ========    ========    ========    ========    ========
Weighted average shares outstanding: (1)
   Basic                                           4,817       4,627       4,370       2,278       1,988
   Fully diluted                                   4,817       4,627       8,098       2,278       1,988

--------------------------
(1)  Per share data and weighted average shares outstanding have been
     retroactively adjusted for a twenty-for-one reverse split, which was
     effectuated on June 30, 2003

                                      -20-



<PAGE>

                                                                              JUNE 30,
                                                       -------------------------------------------------------
BALANCE SHEET DATA                                       2006        2005       2004       2003         2002
                                                       --------    --------   --------    --------    --------
                                                                           (in thousands)
Cash and cash equivalents                              $  4,770    $    417   $    447    $    689    $     33
Current assets                                           19,410      19,395     16,719       9,597       5,918
Total assets                                           $ 19,794    $ 19,615   $ 16,865    $  9,827    $  7,221

Current liabilities                                    $ 20,319    $ 17,879   $ 17,004    $  9,955    $  5,528
Long-term liabilities                                       300         400        944         807       1,007
Total stockholders' equity (deficit)                       (825)      1,336     (1,083)     (1,572)       (585)
Total liabilities and stockholders' equity (deficit)   $ 19,794    $ 19,615   $ 16,865    $  9,827    $  7,221


         The following data present unaudited quarterly financial information
for each of the eight quarters beginning with September 30, 2004 and ending on
June 30, 2006. 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
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. The
following data should be read in conjunction with our financial statements and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included below in this report.

                                                                        FISCAL QUARTER ENDED
                                                YEAR ENDED   --------------------------------------------
                                                 JUNE 30,    JUNE 30,    MAR. 31,    DEC. 31,    SEPT. 30,
STATEMENTS OF OPERATIONS DATA                      2006        2006        2006        2005        2005
                                                 --------    --------    --------    --------    --------
                                                          (in thousands, except per share data)
Total revenue                                    $ 46,317    $  9,972    $ 15,067    $  9,626    $ 11,653
Cost of sales                                      38,393       8,527      12,085       8,440       9,342
                                                 --------    --------    --------    --------    --------
Gross profit                                        7,924       1,445       2,982       1,186       2,311
Selling, general and administrative expenses        9,792       2,921       2,404       2,166       2,301
                                                 --------    --------    --------    --------    --------
Income (loss) from operations                      (1,868)     (1,476)        578        (980)         10
Other income (expense)                               (669)       (240)       (177)       (137)       (114)
                                                 --------    --------    --------    --------    --------
Income (loss) from before income tax provision     (2,537)     (1,716)        401      (1,117)       (104)
Income tax provision (benefit)                          2           1          --          --           1
                                                 --------    --------    --------    --------    --------
Net income (loss) before extraordinary gain      $ (2,539)   $ (1,717)   $    401    $ (1,117)   $   (105)
                                                 ========    ========    ========    ========    ========

Extraordinary gain from extinguished debt              50          --          50          --          --
Net income (loss)                                $ (2,489)   $ (1,717)   $    451    $ (1,117)   $   (105)
                                                 ========    ========    ========    ========    ========

Net income (loss) per common share:
   from net income (loss), basic                 $  (0.52)   $  (0.36)   $   0.09    $  (0.23)   $  (0.02)
                                                 ========    ========    ========    ========    ========
   from net income (loss), fully diluted         $  (0.52)   $  (0.36)   $   0.05    $  (0.23)   $  (0.02)
                                                 ========    ========    ========    ========    ========

Weighted average shares outstanding:
   Basic                                            4,817       4,808       4,820       4,820       4,820
   Fully diluted                                    4,817       4,808       8,977       4,820       4,820

                                      -21-



<PAGE>

                                                                         FISCAL QUARTER ENDED
                                               YEAR ENDED    --------------------------------------------
STATEMENTS OF OPERATIONS DATA                    JUNE 30,    JUNE 30,    MAR. 31,    DEC. 31,    SEPT. 30,
                                                   2005        2005        2005        2004        2004
                                                 --------    --------    --------    --------    --------
                                                           (in thousands, except per share data)
Total revenue                                    $ 39,535    $ 10,205    $ 11,658    $  8,403    $  9,269
Cost of sales                                      32,027       8,364       9,661       6,787       7,215
                                                 --------    --------    --------    --------    --------
Gross profit                                        7,508       1,841       1,997       1,616       2,054
Selling, general and administrative expenses        7,708       2,114       2,098       1,642       1,854
                                                 --------    --------    --------    --------    --------
Income (loss) from operations                        (200)       (273)       (101)        (26)        200
Other income (expense)                               (415)       (135)       (102)       (104)        (74)
                                                 --------    --------    --------    --------    --------
Income (loss) from before income tax provision       (615)       (408)       (203)       (130)        126
Income tax provision (benefit)                          1          --          --          --           1
                                                 --------    --------    --------    --------    --------
Net income (loss)                                $   (616)   $   (408)   $   (203)   $   (130)   $    125
                                                 ========    ========    ========    ========    ========

Net income (loss) per common share:
   from net income (loss), basic                 $  (0.13)   $  (0.09)   $  (0.04)   $  (0.03)   $   0.03
                                                 ========    ========    ========    ========    ========
   from net income (loss), fully diluted         $  (0.13)   $  (0.09)   $  (0.04)   $  (0.03)   $   0.02
                                                 ========    ========    ========    ========    ========

Weighted average shares outstanding:
   Basic                                            4,627       4,743       4,685       4,510       4,497
   Fully diluted                                    4,627       4,743       4,685       4,510       8,170
</TABLE>


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

CAUTIONARY STATEMENTS

         This Annual Report on Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. We intend that such
forward-looking statements be subject to the safe harbors created by such
statutes. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Accordingly, to
the extent that this Annual Report contains forward-looking statements regarding
our financial condition, operating results, business prospects or any other
information or aspect of our company, you are advised that our actual financial
condition, operating results and business performance may differ materially from
that projected or estimated by us in forward-looking statements. The differences
may be caused by a variety of factors, including but not limited to:

         o    those identified under "Risk Factors" below,
         o    adverse economic conditions,
         o    unexpected costs and operating deficits,
         o    lower sales and revenues than had been forecast,
         o    loss of customers,
         o    litigation and administrative proceedings involving our company,
         o    the possible acquisition of new businesses that result in
              operating losses or that do not perform as anticipated, resulting
              in unanticipated losses,

                                      -22-



<PAGE>

         o    adverse publicity and news coverage,
         o    inability to carry out our marketing and sales plans,
         o    changes in interest rates and inflationary factors, and
         o    other specific risks that may be referred to in this Annual Report
              or in other reports that we have issued.

         In addition, our business and operations are subject to substantial
risks that increase the uncertainty inherent in the forward-looking statements.
The inclusion of forward-looking statements in this Annual Report should not be
regarded as a representation by us or any other person that we will achieve our
objectives or plans.

UNCERTAINTIES RESULTING FROM PLANNED MERGER WITH DGSE

         On July 12, 2006, we entered into the Merger Agreement with DGSE, as
described under "Item 1. Business - Pending Merger with DGSE Companies, Inc.,"
above. If the Merger is consummated, DGSE Merger Corp., a newly-formed Delaware
corporation and wholly-owned subsidiary of DGSE, will merge with and into
Superior Galleries, Inc. Superior Galleries, Inc. would survive the Merger as a
wholly-owned subsidiary of DGSE, and therefore would cease to be an independent
publicly traded company at that time. The closing of the Merger is subject to
certain conditions, however, and if these conditions are not satisfied the
Merger may not be consummated.

         We have incurred costs of approximately $162,000 in connection with the
Merger during the six months ended June 30, 2006. We expect to incur additional
costs related to the Merger during fiscal 2007, including substantial legal and
accounting costs. We expect these costs to be reflected in our operating results
for the quarters ending September 30, 2006 and December 31, 2006, but we are
presently unable to quantify these costs. In addition, we have entered into an
agreement with DGSE under which we will pay one-half of the total costs and
expenses incurred in connection with the Merger by both us and DGSE, if the
Merger is not consummated. These expenses would include, among others, legal
fees, accounting fees and investment banking fees. Under this arrangement, if
the Merger is not consummated our share of the total expenses may be
substantially more than the amount of expenses we have incurred ourselves.

TRENDS AND UNCERTAINTIES

         As a dealer and auctioneer of rare coins, our revenue and profitability
can be materially affected by economic factors such as interest rates,
inflation, stock market performance, the price of gold and other precious metals
and world political stability. The demand for and therefore the price of rare
coins tends to increase with the price of gold. During times of unstable stock
market performance and low interest rates rare coins may become more attractive
as an investment as compared to the stock market or interest bearing securities.
In times of strong stock market returns and high interest rates, rare coins may
be viewed as a less favorable investment. Political instability may also
increase the demand for rare coins as individuals may perceive the security and
portability of rare coins more favorably as compared to other financial assets
such as stocks, bonds or cash. While we are currently experiencing economic
conditions that have increased the demand for rare coins, resulting in higher
revenue for us, future changes in the economy such as rapid increases in
interest rates, a decrease in the price of gold or strong growth in the stock
market could materially reduce our revenue, margins and profitability and affect
our liquidity as inventory turns would diminish.

                                      -23-



<PAGE>

         Furthermore, certain types of rare coins, as is the case with other
collectibles, may become more or less popular based on market trends that we
cannot predict. Although we carry a diverse range of categories of rare coins, a
decrease in popularity in a particular category could result in diminished
liquidity as inventory turns decrease for the affected category.

         Within the rare coin industry many of our customers and suppliers are
other dealers. We may be materially affected by both external and internal
factors that could affect the financial stability and liquidity of other dealers
with whom we conduct business. Our revenues and profitability could
significantly decrease if several dealers faced financial difficulties that
curtailed their ability to sell or purchase rare coins either directly or at our
auctions.

         Over the past five years, except for the year ended June 30, 2004, we
incurred substantial losses that severely diminished our capital base and our
liquidity. As a result, we have negative shareholders' equity and working
capital. In addition, most of our debt is short-term and bears a variable
interest rate. Any significant unfavorable change in the economic environment or
in our industry could quickly result in declining revenue and operating losses.
Our challenge is to both raise additional permanent equity capital and
restructure our debt to include a larger long-term portion, which may be
accomplished through the intended Merger with DGSE. Although we cannot assure
you that we will be able to accomplish these objectives either with or without
the Merger, it is our hope that if we are able to restructure our debt and raise
additional equity, we will mitigate some of the impact of a future negative
economic environment and conversely will benefit more sharply from a positive
environment.

         The following discussion should be read in conjunction with, and is
qualified in its entirety by, our Financial Statements and related notes thereto
included elsewhere in this Annual Report. Historical results of operations,
percentage margin fluctuations and any trends that may be inferred from the
discussion below are not necessarily indicative of the operating results for any
future period.

CRITICAL ACCOUNTING POLICIES

         Our Financial Statements are based on the selection and application of
significant accounting policies, which require our management to make estimates
and assumptions that affect the amounts reported in the Balance Sheets and the
Statements of Operations. We believe that the following are the most critical
areas that may affect our financial condition and results of operations.

         ACCOUNTS RECEIVABLE. We are required to estimate the collectibility of
our accounts receivables. A considerable amount of judgment is required in
assessing the collectibility of these receivables, including judgments about the
current creditworthiness and financial condition of each client and related
aging of past due balances. We evaluate specific accounts receivable balances
when we become aware of a situation where a client may not be able to meets its
financial obligations to us. The amount of the required allowance is based on
the facts available to us and is reevaluated and adjusted as additional
information is available, including our right to offset debts with accounts
payable balances and the proceeds from consigned inventory sales. Allowances are
also established for probable loss inherent in the remainder of the accounts
receivable based on a factor of 0.1% of total gross sales. As a result of the
expansion of our rare coin auction business, we may attract new customers that
may adversely affect our estimates of accounts receivable collectibility, and,
the creditworthiness of our clients may deteriorate. These factors would require
the reassessment of our estimates and additional allowances resulting in a
reduction of our operating results.

                                      -24-



<PAGE>

         AUCTION AND CUSTOMER ADVANCES. We are required to estimate the
collectibility of our auction and customer advances. All of our advances are
secured by rare coins. Although we make our decision to advance funds based on
customers' creditworthiness, business history, and collateral valuation, the
collectibility of advances is primarily based on our estimate of sale of
customers' rare coin collateral on a wholesale liquidation basis. We evaluate
specific advance balances when we become aware of situations where a client may
not be able to meet its financial obligations to us or the value of collateral
securing the advance is impaired. Due to the availability of a line of credit
from Stanford Financial Group Company, which is an affiliate of our principal
shareholder, Stanford International Bank Limited, in fiscal 2005 we
significantly expanded our auction and customer advance activities, and in
fiscal 2006 we collected over $3 million of these advances. We have not had any
significant history of losses. It is difficult to assess future performance of
the rare coin market. A rapid adverse change in the rare coin market could
diminish the value of the collateral and the creditworthiness of our clients may
deteriorate. These factors would require the reassessment of our estimates and
additional allowances resulting in a reduction of our operating results.

         REVENUE RECOGNITION. We generate revenue from wholesale and retail
sales of rare coins, precious metals bullion and second-hand jewelry and
artifacts. The recognition of revenue varies for wholesale and retail
transactions and is, in large part, dependent on the type of payment
arrangements made between the parties.

         We sell rare coins to other wholesalers/dealers within our industry on
credit, generally for terms of 15 to 60 days, but in no event greater than one
year. We grant credit to new dealers based on extensive credit evaluations and
for existing dealers based on established business relationships and payment
histories. We generally do not obtain collateral with which to secure our
accounts receivable when the sale is made to a dealer. We maintain reserves for
potential credit losses based on an evaluation of specific receivables and a
general reserve based on total gross sales. We recognize revenue for monetary
transactions (i.e., cash and receivables) with dealers when the merchandise is
shipped to a dealer.

         We also sell rare coins to retail customers on credit, generally for
terms of 30 to 60 days, but in no event greater than one year. We grant credit
to retail customers based on credit evaluations and for existing retail
customers based on established business relationships and payment histories.
When a retail customer is granted credit, we generally collect a payment of 25%
of the sales price, establish a payment schedule for the remaining balance and
hold the merchandise as collateral as security against the customer's receivable
until all amounts due under the credit arrangement are paid in full. If the
customer defaults in the payment of any amount when due, we may declare the
customer's obligation in default, liquidate the collateral in a commercially
reasonable manner using such proceeds to extinguish the remaining balance and
disburse any amount in excess of the remaining balance to the customer.

         Under this retail arrangement, we recognize revenue when our customer
agrees to the terms of the credit and makes the initial payment. We have
limited-in-duration money back guaranty policies for our retail customers only,
as discussed below.

         In limited circumstances, we exchange merchandise for similar
merchandise and/or monetary consideration with both dealers and retail
customers, for which we recognize revenue in accordance with APB No. 29,
"Accounting for Non-monetary Transactions." When we exchange merchandise for
similar merchandise and there is no monetary component to the exchange, we do
not recognize any revenue. Instead, the basis of the merchandise relinquished
becomes the basis of the merchandise received, less any indicated impairment of
value of the merchandise relinquished. When we exchange merchandise for similar
merchandise and there is a monetary component to the exchange, we recognize
revenue to the extent of monetary assets received and determine the cost of sale
based on the ratio of monetary assets received to monetary and non-monetary
assets received multiplied by the cost of the assets surrendered.

                                      -25-



<PAGE>

         We have a return policy (money-back guarantee). The policy covers
retail transactions involving graded rare coins only. Our customers may return
graded rare coins purchased within 7 days of the receipt of the rare coins for a
full refund as long as the rare coins are returned in exactly the same condition
as they were delivered. In the case of rare coin sales on account, our customers
may cancel the sale within 7 days of making a commitment to purchase the rare
coins. The receipt of a deposit and a signed purchase order evidences the
commitment.

         Revenues from the sale of consigned goods are recognized as commission
income on such sale if we are acting as an agent for the consignor. If in the
process of selling consigned goods, we make an irrevocable payment to a
consignor for the full amount due on the consignment and the corresponding
receivable from the buyer(s) has not been collected by us at that payment date,
then we record that payment as a purchase and the sale of the consigned good(s)
to the buyer as revenue as we have assumed all collection risk.

         Our auction business generates revenue in the form of commissions
charged to buyers and sellers of auction lots. Auction commissions include
buyers' commissions, sellers' commissions, and buyback commissions, each of
which are calculated based on a percentage of the hammer price. Buyers' and
sellers' commissions are recognized upon the confirmation of the identification
of the winning bidders. Funds charged to winning bidders include the hammer
price plus the commission. Only the commission portion of the funds received by
winning bidders is recorded as revenue. Buyback commissions represent an agreed
upon rate charged by us for goods entered in the auction and not sold. Goods
remain unsold when an auction lot does not meet the consignor reserve, which is
the minimum sales price as determined prior to auction, and when items sold at
auction are returned subsequent to the winning bidder taking possession. Buyback
commission is recognized along with sellers' commission or at the time an item
is returned. Returns from winning bidders are very limited and primarily occur
when a rare coin sold auction has an error in its description which the winning
bidder relied upon to purchase the item.

         INVENTORY VALUATION. We value our inventory at the lower of cost or
market in accordance with generally accepted accounting principles related to
the fair market valuation of assets. On a periodic basis our numismatic staff
will review market data from recognized industry sources, published auction
results and offers made by customers on specific items to determine whether or
not the cost of our inventory is above or below market price. If the market
value of a coin is significantly less than its cost to us, we will establish a
reserve against inventory to reflect that the market value of our rare coin
inventory in the aggregate is below cost, which results in reflecting the value
of our inventory at the lower of cost or market.

                                      -26-



<PAGE>

RESULTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

         The following table sets forth the percentage of net revenue
represented by each item in our statements of operations for the periods
presented and the net changes and percentage of change for each item in our
statement of operations between the periods indicated:

<TABLE>
<CAPTION>
                                                     YEAR ENDED (DOLLARS IN THOUSANDS)
                                                  --------------------------------------
                                                  JUNE 30,            JUNE 30,                            %
                                                    2006        %       2005          %     CHANGE      CHANGE
                                                  --------    ----    --------      ----   ---------    ------
<S>                                               <C>          <C>    <C>            <C>   <C>             <C>
Net sales                                         $ 43,302     93%    $ 37,340       94%   $   5,962       16%
Commission Income                                    3,015      7%       2,195        6%         820       37%
                                                  --------    ----    --------      ----   ---------    ------
Total revenue                                       46,317    100%      39,535      100%       6,782       17%
Cost of sales                                       38,393     83%      32,027       81%       6,366       20%
                                                  --------    ----    --------      ----   ---------    ------
Gross profit                                         7,924     17%       7,508       19%         416        6%
Selling, general and administrative expenses         9,792     21%       7,708       19%       2,084       27%
                                                  --------    ----    --------      ----   ---------    ------
Income (loss) from operations                       (1,868)    -4%        (200)      -1%      (1,668)     834%
Other income (expense)                                (669)    -1%        (415)      -1%        (254)      61%
                                                  --------    ----    --------      ----   ---------    ------
Income (loss) before provision for taxes
  and extraordinary item                            (2,537)    -5%        (615)      -2%      (1,922)     313%
Income tax provision                                     2      0%           1        0%           1      100%
                                                  --------    ----    --------      ----   ---------    ------
Income (loss) before extraordinary item             (2,539)    -5%        (616)      -2%      (1,923)     312%
Extraordinary item                                      50      0%          --        0%          50      100%
                                                  --------    ----    --------      ----   ---------    ------
Net Income (loss)                                 $ (2,489)    -5%    $   (616)      -2%   $  (1,873)     304%
                                                  ========    ====    ========      ====   =========    ======

         Our net loss for the year ended June 30, 2006 was $2,489,000 or $0.52
per share on both a basic and fully diluted basis as compared to a net loss of
$616,000 or $0.13 per share on a basic and fully diluted basis for the year
ended June 30, 2005. The decline in our operating results was primarily due to
additional infrastructure costs to support current and anticipated future
growth, increased reserves against accounts receivable and inventory values,
higher net interest expenses, and costs incurred in connection with the proposed
Merger with DGSE.

     TOTAL REVENUE

         The table below sets forth our primary sources of revenue for the
periods indicated:

                                         YEAR ENDED (DOLLARS IN THOUSANDS)
                                    ------------------------------------------
                                     JUNE 30,               JUNE 30,                              %
                                       2006         %         2005          %      CHANGE      CHANGE
                                    ----------    ----     ----------     ----    ---------    ------
Net Sales
   Rare Coin-Wholesale              $   30,021      65%    $   24,533       62%   $   5,488        22%
   Rare Coin-Retail                     13,281      28%        12,807       32%         474         4%
   Art, Collectibles and Other               -       0%             -        0%           -         0%
                                    ----------    ----     ----------     ----    ---------    ------
Total Net Sales                         43,302      93%        37,340       94%       5,962        16%
Commission Income                        3,015       7%         2,195        6%         820        37%
                                    ----------    ----     ----------     ----    ---------    ------
Total Revenue                       $   46,317     100%    $   39,535      100%   $   6,782        17%
                                    ==========    ====     ==========     ====    =========    ======
</TABLE>

                                      -27-



<PAGE>

         We recorded total revenue of $46,317,000 for the year ended June 30,
2006, an increase of $6,782,000 or 17% over the total revenue of $39,535,000
recorded for the year ended June 30, 2005. The increase in revenue is primarily
due to increased wholesale coin sales. Wholesale rare coin sales increased
$5,488,000 or 22% over last year's sales to other coin dealers. This increase
was primarily due to continued strength in demand for rare coin inventory.
Retail rare coin sales increased marginally by $474,000 or 4% over last year.
This moderate increase was primarily due to the focus of our print advertising
campaign toward wholesalers and the slow ramp up of internet capabilities for
the retail market.

         Commission income for the year ended June 30, 2006 increased $820,000
or 37% over the last year ended June 30, 2005. This improvement was primarily
due to an increase in the volume of consignments and the average rate of
commission earned. Auction sales (hammer prices realized, which are the
aggregate amount of winning bids at our auctions excluding the buyer's
commission) were $28,665,000 for the year ended June 30, 2006 as compared to
$23,234,000 for the year ended June 30, 2005, which also contributed to the
increased commission income for the current year.

         Our revenue and profitability during the year is subject to
seasonality. Our first and third fiscal quarters have traditionally been our
strongest because two well-attended auctions are normally scheduled during each
of these quarters and during these quarters there are more frequent and
better-attended trade shows. Our second fiscal quarter has traditionally been
our weakest because we conduct only one auction event and there are fewer, less
popular trade shows.

         We believe that for our revenue to continue to grow in the future we
must continue to expand and diversify our distribution channels. We have
recently begun to consider, test and implement several growth strategies.

         To expand our wholesale sales efforts we began to supply a television
home shopping channel with rare coins on a test basis in October 2004. We
evaluated our arrangement with this supplier through February 2005, and we
decided to discontinue this arrangement and to examine other home shopping
opportunities at some future date. In January 2005, we began to supply internet
retailer Amazon.com with rare coins on a test basis. Our current relationship
with Amazon.com is simply to provide that company, on a nonexclusive basis, with
coins to be offered for sale on its website. We pay Amazon.com a commission,
which is presently 15%, on any sales it makes through this relationship. We have
yet to determine the length of the test period with Amazon.com. Over the medium
and long-term our growth strategy for wholesale type distribution channels
includes hiring of additional numismatic traders, acquiring small rare coin
dealers and supplying rare coins to gift and catalog retailers. We have yet to
determine the associated costs of our medium and long-term growth strategies in
the areas discussed above. We may extend or terminate any of these arrangements
at any time.

         To expand our retail distribution channels, we completed a significant
upgrade of our web-site last year. This upgrade included software tools to
improve the ease of use of our internet shopping cart, enhance the presentation
of items for sale, automate our listing capabilities with e-Bay.com, Amazon.com
and Overstock.com, increase traffic to our web-site where coins may also be
purchased and improve on-line bidding and customer want-list capabilities. The
costs incurred last year for this upgrade were approximately $80,000 and the
annual maintenance cost associated with this upgrade will be approximately
$42,000. We are considering further upgrades to our website in the coming year,
but we have yet to determine the costs associated with these potential upgrades.
In March 2005, we began listing rare coins with Overstock.com both in their
regular listing format and on their auction platform. Other growth plans include
the expansion of our direct mail advertising targeting high net worth collectors
who are currently buying rare coins or other fine collectibles.

         We plan to expand our auction operations to include bi-monthly
internet-only auctions through our strategic relationship with e-Bay.com. Under
this relationship, we have agreed that when we conduct internet-only auctions
through e-Bay.com, we will not simultaneously offer the auctioned items through
any other internet-based auction. We pay e-Bay.com a commission of 5% on sales
it makes, and when we auction coins in this manner we increase the charge to our


                                      -28-



<PAGE>

customer by 5%, to offset the commission paid to e-Bay.com. This arrangement
will complement the seven major live auctions that we currently hold during a
year. We anticipate ramping toward bi-monthly internet-only auctions by October
2006. Subsequent to the completion of the proposed Merger with DGSE, we plan to
expand our internet website (www.SGBH.com) significantly and to integrate the
website with DGSE's websites: www.DGSE.com, www.USBullionExchange.com,
www.FairchildWatches.com (Fairchild International), and www.CGDEInc.com
(Charleston Gold & Diamond Exchange).

         We would not hold an internet-only auction during the week that we held
a live auction as our live auctions are simultaneously broadcast over the
internet. We had seven live auction elite events in the fiscal year ending June
30, 2006 and are currently planning to hold two live auctions per quarter next
year.

         Our ability to expand our wholesale, retail and auction operations is
dependent in part upon the success of these strategies, which we have not yet
evaluated. The implementation of these strategies may not result in increased
revenues. We will seek to determine whether the expected benefits from these
strategies, measured principally in terms of increased revenue, justifies the
costs of implementing them. If we determine that any of these strategies is not
cost-effective, we will terminate or amend the strategy. We cannot assure you
that our growth plans will generate enough revenue to cover the additional
operating costs associated with these growth plans.

         Our ability to expand our revenue is significantly contingent on the
availability of additional permanent equity and debt financing. As indicated in
"Other Liquidity Plans" below we have plans to raise additional equity and debt,
but there is no assurance that we will be successful in doing so on terms and
conditions that are acceptable to us.

     COST OF SALES

         Cost of sales is primarily comprised of the acquisition price we pay
for coins, and is dependent on our skill in identifying coins that may be
offered for sale at advantageous prices, as well as supply and demand factors at
the time we are purchasing coins. Commission income on consigned coins has
minimal cost of sales associated with it. Cost of sales increased $6,366,000 or
20% to $38,393,000 for the year ended June 30, 2006, compared to $32,027,000 for
the year ended June 30, 2005. The cost of goods sold remained stable at
approximately 81% of total revenue for both years, excluding the effect of the
mark to market inventory reserve of $840,000 that was recorded for the year
ended June 30, 2006 as an inventory adjustment in cost of goods sold.
Management's inventory adjustment was focused on the fair market valuation of
the coins and other items in our inventory, on an item by item basis, and a
reserve was recorded if the fair market value was determined to be less than our
cost.

         The increase in the aggregate dollar cost of sales was primarily due to
the increased sale of wholesale rare coins as discussed in "Total Revenue"
above, rather than factors that might have influenced the cost of any particular
item of inventory. During our 2006 and 2005 fiscal years, we had comparable
success in purchasing coins at advantageous prices, which resulted in our cost
of sales as a percentage of revenue remaining similar. Although cost of sales as
a percentage of total revenue may be similar from year to year, this may result
from a coincidental combination of factors that are not always consistent. These
factors, which we cannot predict from year to year, include our success in
buying coins that generate substantial margin, the supply of coins that our
customers wish to purchase, and the level of auction sales and the percentage of
commission on these sales that we earn.

                                      -29-



<PAGE>

     GROSS PROFIT

         Gross profit for the year ended June 30, 2006 increased $416,000 or 6%
to $7,924,000 from $7,508,000 for the year ended June 30, 2005. Our gross profit
margin remained at approximately 19% of total revenue for both years excluding
the effect of the mark to market inventory reserve of $840,000 that was recorded
for the year ended June 30, 2006 as an inventory adjustment in cost of goods
sold. Due to recording the fair market reserve on inventory value, the gross
profit margin was 17% for the year ended June 30, 2006, compared to 19% for the
year ended June 30, 2005. The adjusted $1,256,000 increase in the total gross
profit figure in 2006 over 2005 was primarily due to the increase in our
wholesale rare coin sales and greater number of consigned coin sales. Gross
profit as a percentage of revenue will vary from period to period due to
variations in the factors discussed in "Cost of Sales," above.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses increased $2,084,000 or
27% to $9,792,000 for the year ended June 30, 2006, from $7,708,000 for the year
ended June 30, 2005. These expenses represented 21% of total revenue for the
year ended June 30, 2006, as compared to 19% of total revenue for the year ended
June 30, 2005. The dollar increase in these expenses was due principally to the
following factors: (i) additional employee compensation costs of $572,000, which
resulted from increased headcount and increased commissions that resulted from
our higher level of sales; (ii) $446,000 increase in other compensation
comprised of non-cash expenses associated with common stock grants of $36,000
and stock option awards of $410,000 realized according to FASB 123(R); (iii) an
additional $286,000 of marketing and operations expenses associated with the
logistics of attending trade shows, advertising and having coins graded by
professional associations; (iv) $232,000 increase in legal fees primarily
related to the proposed Merger with DGSE and (v) a net increase of $548,000
resulting from changes in all other selling, general and administrative expense
categories.

     OTHER INCOME AND EXPENSES

         Other expenses for the year ended June 30, 2006 increased $254,000 or
61% to $669,000 from $415,000 for the year ended June 30, 2005. This increase
was primarily due to: (i) a decrease in interest income of $15,000 that resulted
from the lower levels of lending to our customers; (ii) increases in interest
expenses of $241,000 that resulted from the combination of increased use of our
lines of credit to finance our own inventory and increases in rates charged to
us by our lenders for the year ended June 30, 2006, as compared to the year
ended June 30, 2005; and (iii) a decrease in the gain on the sales of fixed
assets of $3,000.

     PROVISION FOR INCOME TAXES

         We incurred a net loss of $2,489,000 for the year ended June 30, 2006
and a net loss of $616,000 for the year ended June 30, 2005. We recorded income
taxes expense of $2,000 for state and other minimum taxes for the year ended
June 30, 2006 and $1,000 for state and other minimum taxes for the year ended
June 30, 2005. The Company has net operating losses ("NOL") carried forward from
previous years. For federal income tax purposes, we have a NOL carry forward of
approximately $10,358,000 which is available to offset future federal taxable
income through 2025. For state income tax purposes, we also have a NOL carry
forward of approximately $5,097,000, which is available to offset state taxable
income through 2015. The use of these NOL carry forwards in future years will be
limited due to past changes in our ownership and will be further limited if the
Merger is consummated. The full effect of these limitations has yet to be
calculated. In addition, NOL carry forwards for the purposes of offsetting
California state taxable income have been limited to 50% for tax years 1998 and
2001, and limited to 60% for the tax years 2002 and 2003, only. All other tax
years can carry forward 100% of NOL.

                                      -30-



<PAGE>

EXTRAORDINARY GAIN

         On March 31, 2006, we repaid the balance of our line of credit from a
private lender of $1,900,000 by applying the accounts receivable from the sale
of $1,000,000 of rare coins to the lender, a payment of $850,000 in cash and the
application of a $50,000 discount for early payment. The $50,000 discount was
classified as an extraordinary gain on the Statement of Operations.

RESULTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 2005 AND 2004

         The following table sets forth the percentage of net revenue
represented by each item in our statements of operations for the periods
presented and the net changes and percentage of change for each item in our
statement of operations between the periods indicated:

<TABLE>
<CAPTION>
                                                    YEAR ENDED (DOLLARS IN THOUSANDS)
                                                  -------------------------------------
                                                  JUNE 30,            JUNE 30,                          %
                                                    2005      %         2004        %      CHANGE     CHANGE
                                                  --------   ----     --------    -----    --------   ------

<S>                                               <C>          <C>    <C>            <C>   <C>          <C>
Net sales                                         $ 37,340     94%    $ 26,916       90%   $ 10,424       39%
Commission Income                                    2,195      6%       3,081       10%       (886)     -29%
                                                  --------   ----     --------    -----    --------   ------
Total revenue                                       39,535    100%      29,997      100%      9,538       32%
Cost of sales                                       32,027     81%      23,382       78%      8,645       37%
                                                  --------   ----     --------    -----    --------   ------

Gross profit                                         7,508     19%       6,615       22%        893       13%
Selling, general and administrative expenses         7,708     19%       5,959       20%      1,749       29%
                                                  --------   ----     --------    -----    --------   ------

Income (loss) from operations                         (200)    -1%         656        2%       (856)    -130%
Other income (expense)                                (415)    -1%         (92)       0%       (323)     351%
                                                  --------   ----     --------    -----    --------   ------

Income (loss) before provision for taxes              (615)    -2%         564        2%     (1,179)    -209%
Income tax provision                                     1      0%          12        0%        (11)     -92%
                                                  --------   ----     --------    -----    --------   ------

Net Income (loss)                                 $   (616)    -2%    $    552        2%   $ (1,168)    -212%
                                                  ========   ====     ========    =====    ========   ======

         Our net loss for the year ended June 30, 2005 was $616,000 or $0.13 per
share on both a basic and fully diluted basis as compared to a net income of
$552,000 or $0.11 and $0.06 per share on a basic and fully diluted basis for the
year ended June 30, 2004. The year-to-year decline in our operating results was
primarily due to increased competition in our auction business, infrastructure
costs to support current and anticipated future growth and higher net interest
expenses.


     TOTAL REVENUE

         The table below sets forth our primary sources of revenue for the
periods indicated:

                                                    YEAR ENDED (DOLLARS IN THOUSANDS)
                                                  -------------------------------------
                                                  JUNE 30,            JUNE 30,                          %
                                                    2005      %         2004        %      CHANGE     CHANGE
                                                  --------   ----     --------    -----    --------   ------

Net Sales
   Rare Coin-Wholesale                           $ 24,533      62%    $ 19,195       64%   $  5,338       28%
   Rare Coin-Retail                                12,807      32%       7,345       24%      5,462       74%
   Art, Collectibles and Other                          -       0%         376        1%       (376)    -100%
                                                  --------   ----     --------    -----    --------   ------
Total Net Sales                                    37,340      94%      26,916       90%     10,424       39%
Commission Income                                   2,195       6%       3,081       10%       (886)     -29%
                                                  --------   ----     --------    -----    --------   ------
Total Revenue                                    $ 39,535     100%    $ 29,997      100%   $  9,538       32%
                                                  ========   ====     ========    =====    ========   ======
</TABLE>

                                      -31-



<PAGE>

         We recorded total revenue of $39,535,000 for the year ended June 30,
2005, an increase of $9,538,000 or 32% over the total revenue of $29,997,000
recorded for the year ended June 30, 2004. The increase in revenue is primarily
due to increased rare coin sales. Wholesale coin sales for fiscal 2005 increased
$5,338,000 or 28% over the prior year. This increase was primarily due to the
strong market demand which was caused, we believe, by an increase in the price
of gold, low interest rates and uncertainty in the stock market, and due to our
higher level of inventory available for sale, which resulted from the
availability to us of new financing to purchase that inventory. Retail coin
sales for fiscal 2005 increased $5,462,000 or 74% over the prior year. This
increase was primarily due to continued strength in demand for rare coins as
described above.

         We completed our exit of the Art business in October 2003 and as a
result we had no sales of art, collectibles and other for the years ended June
30, 2005 and 2004.

         Commission income for the year ended June 30, 2005 decreased $886,000
or 29% over the prior year. This decrease was primarily due to the entry of
additional auction houses into the rare coin market and aggressive pricing by
our competitors. Both of these factors served to reduce our market share and
resulted in a reduction in our average commission percentage. Auction sales
(hammer prices realized, which are the aggregate amount of winning bids at our
auctions excluding the buyer's commission) were $23,234,000 for the year ended
June 30, 2005 as compared to $30,033,000 for the year ended June 30, 2004, which
also contributed to the reduced commissions for the current year.

     COST OF SALES

         Cost of sales increased $8,645,000 or 37% to $32,027,000 for the year
ended June 30, 2005, representing 81% of total revenue, compared to $23,382,000,
for the year ended June 30, 2004, which represented 78% of total revenue. The
increase in the aggregate cost of sales was primarily due to the increased sale
of rare coins as discussed in "Total Revenue" above, rather than factors that
might have influenced the cost of any particular item of inventory. Our cost of
sales as a percentage of revenue increased over last year as a result of the
decrease in our commission income. During our 2005 and 2004 fiscal years, we had
comparable success in purchasing coins at advantageous prices, which resulted in
our cost of sales as a percentage of revenue remaining similar.

     GROSS PROFIT

         Gross profit for the year ended June 30, 2005 increased $893,000 or 13%
to $7,508,000 or 19% of total revenue, from $6,615,000 or 22% of total revenue
for the year ended June 30, 2004. The increase in the total gross profit in 2005
over 2004 was primarily due to the increase in our rare coin sales. Gross profit
as a percentage of revenue will vary from period to period due to variations in
the factors discussed in "Cost of Sales," above.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses increased $1,749,000 or
29% to $7,708,000 for the year ended June 30, 2005 from $5,959,000 for the year
ended June 30, 2004. These expenses represented 19% of total revenue for the
year ended June 30, 2005 as compared to 20% of total revenue for the year ended
June 30, 2004. The increase in these expenses was due to the following factors:
the hiring of new employees to enhance our operational infrastructure;
additional employee compensation costs of $711,000, which included commissions
that resulted from our higher level of sales; investor and public relations
efforts that began during the current year with a cost of $333,000; legal and
audit cost increases primarily associated with the preparation of registration
statements, in the amount of $164,000; increases in travel and entertainment
costs of $160,000 due to the larger number of trade shows we attended; and
auction operation costs increased by $262,000.

                                      -32-



<PAGE>

     OTHER INCOME AND EXPENSES

         Other expenses for the year ended June 30, 2005 increased $323,000 to
$415,000 from $92,000 for the year ended June 30, 2004. This increase was
primarily due to: (i) a decrease in interest income of $100,000 that resulted
from the decline in interest rates charged to our customers and lower levels of
lending; and (ii) increases in interest expenses of $253,000 that resulted from
the combination of increased use of our lines of credit to finance our own
inventory and increases in rates charged to us by our lenders for the year ended
June 30, 2005 as compared to the year ended June 30, 2004.

     PROVISION FOR INCOME TAXES

         Although we incurred a loss for the year ended June 30, 2005, we
recorded income taxes expense of $1,000 for state and other minimum taxes for
that year. Although we recorded income for the year ended June 30, 2004, we had
net operating losses ("NOL") carried forward from previous years and we had only
recorded income tax expenses of $12,000 for state and other minimum taxes for
the year ended June 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 2006, we had negative working capital of $909,000 and a
current ratio of 0.95:1.00. We recorded net losses of $2,489,000. Given our June
30, 2006 cash balance of $4,770,000 and our projected operating cash
requirements, we anticipate that our existing capital resources should be
adequate to satisfy our cash flow requirements through June 30, 2007. However,
we may require additional funding which will be affected by the anticipated
Merger with DGSE. Our cash flow estimates are based upon achieving certain
levels of sales and reductions in operating expenses. Should sales be less than
forecast or expenses become higher than forecast, then we may require additional
financing through debt and/or equity, and we may not have adequate resources to
fund operations. We expect future fixed obligations through June 30, 2007 to be
paid solely by cash generated from operating activities. However, if we are
unable to do so, we intend to satisfy fixed obligations from: (i) additional
debt/equity financings; (ii) extending vendor payments; and (iii) liquidation of
inventory. No assurance can be given that we will be able to pay or satisfy our
fixed obligations from these sources. If we are unable to satisfy our fixed
obligations as they become due, our creditors will be entitled to take legal
action against us. If they do, our business could be materially harmed.

     OPERATING ACTIVITIES

         Cash increased $4,353,000 during the year ended June 30, 2006 to
$4,770,000 from $417,000 at June 30, 2005.

         Net cash provided by our operating activities totaled $5,788,000. Cash
used in our operating activities totaled $2,507,000 resulting primarily from our
net loss of $2,489,000 and decreases in our accounts receivable of $18,000. Cash
provided by operations totaled $8,295,000 resulting from decreases in auction
advances of $3,121,000, increases in accounts payable of $3,348,000, decreases
in inventories of $1,122,000, decreases in prepaid expense of $114,000, non-cash
depreciation expense of $145,000, non-cash fair value of common stock grants of
$36,000 and stock option awards of $410,000.

         Common stock grant and stock option award expenses were recognized as
other compensation paid to employees and directors. On June 1, 2005 we issued
25,000 shares of Restricted Common Stock to Larry Abbott, Chief Operating
Officer, pursuant to the terms of his Employment Agreement. The $79,000 expense
of that grant is being amortized at $1,651 per month through June 1, 2009, with
a balance of $57,785 remaining as of June 30, 2006. On March 27, 2006, we issued
15,000 shares of Common Stock to Mr. Paul Biberkraut, the former Chief Financial


                                      -33-



<PAGE>

Officer and one of our directors, for services performed for the Company, which
was recognized as a period expense of $15,750. On March 31, 2006, we cancelled
26,662 shares of Common Stock that had been granted to American Capital Ventures
pursuant to the terms of a public relations service agreement that expired on
March 31, 2006 and reduced period expenses by $40,000. The amortization of all
other employee stock options issued under the 2003 stock option plan was
approximately $410,000.

         To generate cash to be used for operations, in fiscal 2006 we made
fewer advances against consigned coins and extended our payment terms to
vendors. Employees and non-employees were compensated with equity in the
company. We will continue to strive to gain operating efficiencies by turning
our inventory more quickly and monitoring the amount of inventory that we carry,
although there is no assurance we will achieve these efficiencies.

     INVESTING ACTIVITIES

         Cash used in investing activities during year ended June 30, 2006 was
$310,000 consisting of purchases of property and equipment.

     FINANCING ACTIVITIES

         Until the quarter ending March 31, 2004, we had incurred losses since
July 1999 and have financed these losses through short-term and long-term
borrowings, by issuing shares in various private placement transactions and by
liquidating assets. Losses in fiscal 2006 and 2005 have been financed primarily
through the restructuring of debt and conversion of revolving debt to equity by
SFG. During 2006, $850,000 out of $1,600,000 in cash borrowed from SFG was used
to partially repay an existing line of credit from a private lender. Cash
generated by operations was used to repay $1,300,000 of the remaining amount due
on that line of credit during the year, to repay $250,000 principal and interest
installments owed to our CEO and to redeem the last of our Series A Preferred
Stock at a cost of $275,000. Net cash used by financing activities totaled
$1,125,000 for the year ended June 30, 2006, resulting from the transactions
described below.

         FINANCING ACTIVITIES - DEBT

         On April 10, 2002 we executed a subordinated note payable to our CEO,
Silvano DiGenova, bearing interest at 9% per annum with quarterly installment
payments of $150,000 plus interest. No principal payments had been made through
February 2003. On February 10, 2003, the terms of the note were modified to
provide for repayment of principal in the amount of $50,000 per quarter
commencing on September 30, 2003 and for interest to be paid monthly. We were in
arrears of $150,000 of principal payments that were due on December 31, 2004,
March 31, 2005 and June 30, 2005 of $50,000 each. However, the CEO agreed to
delay these principal repayments to September 30, 2005. As of the year ending
June 30, 2005, the outstanding balance was $750,000 and all interest payments
were paid to date and continued to be paid current on a monthly basis. During
the year ended June 30, 2006, the note was reduced by $250,000 and the interest
rate was increased to 12%. At June 30, 2006, the balance due was $500,000 and
there was no accrued interest payable. As a part of the intended Merger with
DGSE, but conditioned on the closing of the Merger, we will restructure our
outstanding indebtedness to Mr. DiGenova. Under the terms of the revised
promissory note, the maturity date of the note will be extended to December 31,
2007 and the interest rate shall be set to the prime rate plus one percent.
Assuming the Merger closes before December 31, 2006, the note will be payable in
four equal quarterly installments of principal commencing December 31, 2006.

                                      -34-



<PAGE>

         On July 9, 2002 and July 26, 2002, we entered into temporary working
capital loan agreements with a private lender ("Lender") in the amounts of
$1,500,000 and $1,000,000, respectively. These loans bore interest at the prime
lending rate plus 7% per annum, were secured by our inventory and a personal
guarantee of our CEO and were due to be repaid in 60 days. On August 8, 2002, we
converted the two loans from the Lender into a line of credit with the Lender by
executing a Secured Revolving Line of Credit Agreement ("Private Line of
Credit"). The Private Line of Credit was modified and extended a number of times
between August 2002 and March 2006. On March 31, 2006, the Company repaid the
balance of the line of credit of $1,900,000 by applying the accounts receivable
from the sale of $1,000,000 of rare coins to the Lender, by making a payment of
$850,000 in cash and by receiving a $50,000 discount for early payment. The
$50,000 discount was classified as an extraordinary gain on the Statement of
Operations. As of June 30, 2006, the outstanding Private Line of Credit balance
was $0 and there was no accrued interest payable.

         On October 13, 2003, we executed a Commercial Loan and Security
Agreement ("Commercial LOC") with SFG, an affiliate of our principal
stockholder, SIBL, to provide us with a $7,500,000 line of credit for purposes
of financing our inventory, auction advances and inventory loans to other rare
coin dealers and collectors. A portion of this indebtedness was assigned to
SIBL, and on March 31, 2005, as described below, pursuant to SIBL's purchase of
$2,500,000 of our Series E Preferred Stock, SIBL assumed, converted and
cancelled $2,500,000 of this indebtedness under the Commercial LOC. In addition,
SFG further amended the Commercial LOC increasing the line of credit to
$10,000,000. Effective July 21, 2005, the Commercial LOC was renewed through
October 1, 2006. On May 2, 2006, SFG further amended the Commercial LOC
increasing the line of credit to $10,850,000 to reflect an additional advance
made March 30, 2006, to partially fund the repayment of the Private Line of
Credit. On September 5, 2006, the Commercial LOC was renewed through October 1,
2007. The Commercial LOC bears interest at the prime-lending rate (8.25% at June
30, 2006) and is secured by substantially all of our assets. As of June 30,
2006, the outstanding balance was $10,850,000 and there was no accrued interest
payable.

         Since the Commercial Line of Credit is secured by substantially all of
our assets, if we default in the performance of our obligations under this loan
the lender could foreclose its security interest, which could lead to a
termination of our business or require us to file a bankruptcy petition. We are
currently in compliance with all of the financial covenants contained in our
Commercial Line of Credit agreements or have waivers in place that cover
variances and the over-advance on collateral caused by the $850,000 advance that
was funded on May 2, 2006.

         As a condition to the closing of the expected Merger, SFG is required
to convert at least $5,500,000 in debt outstanding under its Commercial Line of
Credit into our common stock at a conversion ratio of $2.00. In addition, if our
stockholders equity, after giving pro forma effect to the conversion of our
outstanding preferred shares into common stock prior to the consummation of the
Merger, is less than $5,751,000, then SFG must convert additional debt, in the
amount of such deficit, into common stock. Further, at the closing of the Merger
a Stanford affiliate will provide a new secured credit facility of $11,500,000
million to Superior, which credit facility will be available to both Superior
and our post-Merger corporate parent, DGSE. These transactions are subject to
satisfaction of all of the other conditions to closing of the Merger, and if the
Merger is not consummated, these transactions will not occur.

         During October 2004 the Company executed three demand notes payable
with a private lender totaling $650,000 bearing interest at 10% per annum
secured by specific inventory. Interest is payable monthly. As of January 1,
2006, the interest rate increased to 12% per annum. As of June 30, 2006, the
outstanding balance was $650,000 and there was no accrued interest payable.
These notes were subsequently repaid in August 2006.

                                      -35-



<PAGE>

         On February 6, 2006 the Company executed a demand note payable with a
private lender in the amount of $500,000 bearing interest at 12% per annum
secured by specific inventory. Interest is payable monthly in advance. The note
was due on March 23, 2006. The private lender verbally agreed to extend the note
due date to June 30, 2006. As of June 30, 2006, the outstanding balance was $0
and there was no accrued interest payable.

         FINANCING ACTIVITIES - EQUITY

         In July 2001 we commenced a private placement of Series A $5.00
Redeemable 8% Convertible Preferred Stock ("Series A Preferred Stock"). The
Series A Preferred Stock carried an annual dividend of $0.40 per share payable
quarterly in cash or our common stock at our election, and provided for cash
redemption or conversion into our common stock based on elections by the holder
or by us with certain contingencies. The Series A Preferred Stock was redeemable
after March 31, 2004 for cash, at the option of the holder, in the amount of
$5.50 per share, with such aggregate amount for each holder payable in ten (10)
equal quarterly installments, the first such payment due the quarter immediately
following the redemption date. On March 31, 2004, all the holders of the Series
A Preferred Stock requested the redemption of their shares. However, at the
time, because our liabilities exceeded our assets, we were prohibited under
Delaware corporation law from commencing the redemption. As of March 31, 2005,
we were no longer prohibited from commencing the redemption. In April 2005, we
began to make payments on account of our obligations to redeem our Series A
Preferred Stock. When the redemption provisions were first exercised as of March
31, 2004, the total amount of the redemption payable was $688,000. Of this
amount, we paid $413,000 during the year ended June 30, 2005. During the
nine-month period ended March 31, 2006, we made redemption payments totaling
$275,000, which completed the redemption.

         ANTICIPATED EQUITY TRANSACTIONS

         As noted above, in connection with and as a condition to the closing of
the planned Merger, our Chief Executive Officer Silvano DiGenova will convert
his 400,000 shares of Series B $1.00 Convertible Preferred Stock into 202,330
shares of our common stock and SIBL will convert all of its shares of preferred
stock, which includes (i) 3,000,000 shares of the Series B $1.00 Convertible
Preferred Stock; (ii) 2,000,000 shares of the Series D $1.00 Convertible
Preferred Stock; and (iii) 2,500,000 shares of the Series E $1.00 Convertible
Preferred Stock, into an aggregate of 3,600,806 shares of our common stock. All
of the shares of our common stock to be issued pursuant to these conversions
will be issued pursuant to the current conversion rights of our outstanding
preferred shares. In addition, SFG will convert $5,500,000 in debt that we owe
SFG into our common stock at a conversion ratio of $2.00 per share. If our
stockholders equity, after giving pro forma effect to the conversion of the
preferred shares described above, is less than $5,751,000, then SFG will convert
additional debt, in the amount of such deficit, into common stock at the same
$2.00 per share conversion rate.

         Each share of our common stock outstanding immediately prior to the
Merger, including those issued in connection with the conversion of preferred
shares or debt as described above, would be exchanged in the Merger for a number
of shares of DGSE common stock equal to a fraction, the numerator of which is
equal to the quotient of $14,000,000 divided by the lesser of (A) $3.25 and (B)
the greater of (1) the twenty day volume-weighted closing sale price on the
principal trading exchange for shares of DGSE common stock as of the closing
date and (2) $1.90, and the denominator of which equals the number of shares of
our common stock outstanding on the closing date. Accordingly, the maximum
number of shares of DGSE common stock to be issued is 7,368,421, and the minimum
number of shares to be issued is 4,307,692.

                                      -36-



<PAGE>

         These transactions are subject to satisfaction of all of the other
conditions to closing of the Merger, and if the Merger is not consummated, these
transactions will not occur. If the Merger is consummated as planned, however,
DGSE's primary shareholder, Dr. L. S. Smith, will beneficially own between
approximately 18% and 24% of the total common shares of DGSE, and our primary
shareholder, Stanford International Bank, will beneficially own between
approximately 29% and 38% of the total common shares of DGSE.

         OTHER LIQUIDITY PLANS

         Although we will seek to secure additional financing and/or to raise
additional capital if the Merger is not closed as presently anticipated, we
cannot assure you that we will be successful in completing these critical tasks.
If we are unable to successfully obtain such financing, we may be forced to
significantly and materially reduce our operations and/or liquidate inventory at
amounts below current carrying value to generate the necessary working capital
to fund any ongoing operations.

CAPITAL EXPENDITURES

         We incurred approximately $310,000 of capital expenditures for property
and equipment during the year ended June 30, 2006, relating primarily to needed
leasehold improvements and development of our website. We do not have any plans
for material capital expenditures through the current fiscal year ending June
30, 2007.

         Pursuant to a lease agreement executed on August 6, 2002, we extended
two leases on our corporate headquarters and primary gallery located in Beverly
Hills, California. The monthly base rent including parking is $24,562 and will
increase by approximately 3% per year. The store front lease will expire on
September 30, 2012 and the office space lease will expire on July 31, 2010.

           The following table outlines payments due under our significant
contractual obligations over the periods shown, exclusive of interest:

<TABLE>
<CAPTION>
                                                       PAYMENTS DUE BY PERIOD
                                -------------------------------------------------------------------
    CONTRACT OBLIGATIONS                       LESS THAN                                 MORE THAN
      AT JUNE 30, 2006             TOTAL        1 YEAR       1-3 YEARS     3-5 YEARS      5 YEARS
-----------------------------   -----------   -----------   -----------   -----------   -----------
<S>                             <C>           <C>           <C>           <C>           <C>
Long Term Debt                  $   300,000   $        --   $   300,000   $        --   $        --
Operating Leases                  1,296,088       301,803       994,285       576,967            --
Short Term Debt                  11,700,000    11,700,000            --            --            --
                                -----------   -----------   -----------   -----------   -----------
Total Contractual Obligations   $13,296,088   $12,001,803   $ 1,294,285   $   576,967   $        --
                                ===========   ===========   ===========   ===========   ===========
</TABLE>

         The above table outlines our obligations as of June 30, 2006 and does
not reflect any changes in our obligations that have occurred after that date.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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
rare risk, commodity price risk and other relevant market rate or price risks.

         We are exposed to a degree of market risk through changes in short-term
interest rates. At June 30, 2006, we had a line of credit from a related party
with a balance payable of $10,850,000. This line of credit bears an interest
rate that is tied to the bank prime rate. We are exposed to the risk of
increasing short-term interest rates, but we do not consider this risk to be
material.

                                      -37-

<PAGE>

         We have no activities that would expose us to foreign currency exchange
rate risk or commodity price risks.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements and corresponding notes to the financial
statements called for by this item appear under the caption "Index to Financial
Statements" beginning on Page F-1 of this Annual Report on Form 10-K.

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

         None.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         Our Chief Executive Officer/Interim Chief Financial Officer carried out
an evaluation of the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
or 15d-15(e)) as of June 30, 2006, as required by paragraph (b) of Exchange Act
Rules 13a-15 or 15d-15. While we will continually seek to evaluate and improve
our disclosure controls, management does not expect that our disclosure controls
or its internal controls over financial reporting will prevent all possible
errors and fraud. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the control system's
objectives would be met.

         Our Chief Executive Officer/Interim Chief Financial Officer has
concluded, based on his evaluation as of June 30, 2006 ("Evaluation Date"), that
the design and operation of our "disclosure controls and procedures" (as defined
under the Exchange Act), are effective to ensure that information required to be
disclosed by us in reports filed or submitted by us under the Exchange Act is
accumulated, recorded, processed, summarized and reported to our management,
including our Board of Directors, as appropriate to allow timely decisions
regarding whether or not disclosure is required. There were no significant
changes in our internal controls or in other factors that could significantly
affect our internal controls subsequent to the Evaluation Date.

CHANGES IN INTERNAL CONTROLS

         During fiscal 2006, we implemented a new inventory tracking system,
segregated inventory handling duties and enhanced our video surveillance of
those locations in our facility where inventory may be processed, in order to
reduce the risk of loss. Other than these changes, there has been no change in
our internal controls over financial reporting during our most recent fiscal
year and quarter that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.

         In January 2006, Paul Biberkraut resigned from his position as chief
financial officer and the Board of Directors designated Silvano DiGenova as the
interim chief financial officer until a replacement was found. From January to
the present, functions of this office were performed by outside consultants to
the interim CFO. We plan to use consultants until the Merger with DGSE is
completed, and those functions will then become the responsibility of DGSE
personnel.

                                      -38-



<PAGE>

         In consideration of the pending Merger with DGSE, we have delayed the
start date for implementation of documentation and testing of internal controls
required under Section 404 of the Sarbanes Oxley Act ("SOX"). Assuming the
Merger is consummated as currently planned, the SOX project for the combined
companies will be conducted under the direction of DGSE. Since we are not an
"accelerated filer," as defined by SEC rules, we are not required to comply with
Section 404 of SOX until fiscal 2008.

ITEM 9B. OTHER INFORMATION

         None.


                                      -39-



<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

         Our directors and executive officers are as follows:

      NAME            AGE                     POSITION
----------------      ---    -----------------------------------------------
Silvano DiGenova       44    Chairman of the Board, Chief Executive Officer,
                             Chief Financial Officer and Director

Larry Abbott           43    Chief Sales Officer, Executive Vice President
                             and Secretary

Paul Biberkraut        45    Director

Anthony Friscia        58    Director (1)

Lee Ittner             44    Director

David Rector           59    Director (2)

Mitch Stoltz           52    Director (3)

--------------------
(1) Chairman of Audit Committee. Our Audit Committee consists of Messrs.
    Friscia, Ittner, Rector and Biberkraut.
(2) Chairman of Compensation Committee.
(3) Chairman of Nominating Committee

         SILVANO DIGENOVA is our chairman of the board, chief executive officer
and a director, and has served in these positions since the time our corporate
predecessor was formed in 1984. On January 25, 2006, our Board of Directors
appointed Mr. DiGenova as the acting chief financial officer of the Company
until the appointment of his replacement. Mr. DiGenova also served as our acting
chief financial officer from September 2002 through December 2002. Mr. DiGenova
founded TIA, which would later become our company, in 1977. Mr. DiGenova has
extensive experience in the numismatic and fine arts fields. In 1986, Mr.
DiGenova helped form the Professional Coin Grading Service, the first widely
accepted uniform grading system for rare coins. Mr. DiGenova attended the
Wharton School of Business at the University of Pennsylvania for four years.
However, Mr. DiGenova left Wharton in his fourth year to develop TIA, our
predecessor, and did not obtain a degree from Wharton.

         LARRY ABBOTT is our chief sales officer and executive vice president,
and has served as such since June 2005. On January 25, 2006, the Board of
Directors of the Company appointed Mr. Abbott as the acting secretary of the
Company until the appointment of his replacement. Mr. Abbott has over twenty
years of experience in management roles in numismatic sales and marketing, and
executive management. Prior to joining our company, Mr. Abbott held various
sales and management positions including, most recently, executive vice
president, at Heritage Rare Coin Galleries, a privately-held rare coin dealer
and auctioneer from May 1999 to May 2005.

                                      -40-



<PAGE>

         PAUL BIBERKRAUT is one of our directors. From December 2002 to January
15, 2006, he served as our chief financial officer, executive vice president and
secretary. Mr. Biberkraut had also served as our chief financial officer and
vice president of finance from October 1999 to December 2000. He has over
sixteen years of experience in management with varying levels of
responsibilities for finance, accounting, information technology, operations and
human resources. Prior to returning to our company Mr. Biberkraut was a senior
finance manager for information technology at PacifiCare Health Systems, Inc., a
publicly traded health care insurance company from December 2000 to November
2002 and was the corporate controller of Quality Systems, Inc., a publicly
traded medical software developer, from November 1997 to June 1999. Mr.
Biberkraut also served as the chairman of the audit committee for an Orange
County, California based credit union from 1997 to 1999 and had served as a
board member, treasurer and president of an Orange County, California based
not-for-profit social service agency from 1989 to 1998. Mr. Biberkraut is
currently the chief financial and administrative officer of Chartwell
International, Inc., a publicly traded railway logistics and natural resources
holding company.

         ANTHONY FRISCIA is one of our directors and the Chairman of our Audit
Committee. Mr. Friscia has served in this role since July 2005. Mr. Friscia is
currently an independent consultant to the entertainment industry, a position
that he has held since January 2005. From 1999 to 2005, Mr. Friscia was Vice
President, Free Television Contract Administration for Warner Brothers
International Television Distribution, Inc., a division of Time-Warner, Inc., a
public traded media and entertainment company. Mr. Friscia has over 25 years of
experience in financial, administrative and contract management within the
television and film industries.

         LEE ITTNER is one of our directors. Mr. Ittner has served in the role
since May 2003. Mr. Ittner is currently the Vice President for Latin America for
Kyocera Wireless Corp., a position he has held since 2001. Prior to that time,
Mr. Ittner was Senior Vice President of the Americas Region for Cellstar
Corporation, a provider of wireless phone services. Mr. Ittner has over 15 years
of experience in both domestic and international operational management, sales
and marketing, customer relations and strategic planning in the communications
industry.

         DAVID RECTOR is one of our directors and the Chairman of our
Compensation Committee. Mr. Rector has served in this role since May 2003. Mr.
Rector is currently the chief operating officer and a director of Nanoscience
Technologies, Inc., a publicly traded company, a position he has held since May
2004. From 1992 to 2004, Mr. Rector had been a principal management consultant
with The David Stephen Group, where he provided executive management services
for several companies, overseeing operations and strategic planning. Mr. Rector
has over twenty years of experience as a senior executive focusing on general
management with Fortune 100 and developmental companies. Mr. Rector is also a
member of the Board of Directors for Senesco Technologies, Inc. and CallKey
International, Inc.

         MITCH STOLTZ is one of our directors and Chairman of the Nominating
Committee of the Company. Mr. Stoltz has served in this position since December
2005. Mr. Stoltz is currently a member of the Board of Directors of NWS Illinois
d/b/a Union Beverage Company and Hamburg Distributing Company ("NWS"), a
position that he has held since 1998, and is also a Consultant to NWS. Mr.
Stoltz has been with NWS since 1992, serving at various times as President,
Executive Vice President of Sales & Marketing (Union Beverage) and Vice
President of Sales & Marketing (Hamburg Distributing). Mr. Stoltz has over 25
years of experience in marketing and distributing wine and spirits.

         All directors hold office until the next annual meeting of shareholders
or until their respective successors are elected or until their earlier death,
resignation or removal. Executive officers are appointed by and serve at the
discretion of the board of directors.

AUDIT COMMITTEE FINANCIAL EXPERT

         From October 25, 2004 and through July 7, 2005, James Gollihugh served
as a Director and chairman of our Audit Committee, and was the Audit Committee
financial expert as defined by Item 401(e) of Regulation S-K. On July 7, 2005,
Anthony Friscia succeeded Mr. Gollihugh as a Director and Chairman of our Audit
Committee and is our Audit Committee financial expert as defined by Item 401 (e)
of Regulation S-K.

                                      -41-



<PAGE>

CODE OF ETHICS

         We have adopted a code of ethics as defined by Item 406 of Regulation
S-K.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, requires our executive officers and directors, and persons who
beneficially own more than 10% of our common stock to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. These officers, directors and shareholders are required by
Commission regulations to furnish us with copies of all such reports that they
file.

         We have reviewed copies of such reports furnished to us during the
fiscal year ended June 30, 2006, and thereafter, and written representations
received by us from our directors and officers and the beneficial owners of more
than 10% of our common stock concerning their compliance with Section 16(a) of
the Exchange Act. Based on this review, we believe that during the 2006 fiscal
year, there was no failure by any such person to timely file a report under
Section 16(a) of the Exchange Act.

                                      -42-



<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

         The summary compensation table below shows certain compensation
information for the fiscal years ended June 30, 2006, 2005 and 2004 for services
rendered in all capacities to us by our chief executive officer and by each
other executive officer whose total annual salary and bonus exceeded $100,000
during the fiscal year ended June 30, 2006. Other than as set forth below, no
executive officer's total annual salary and bonus exceeded $100,000 during our
last fiscal year.

<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE

                                             ANNUAL COMPENSATION                  AWARDS                  PAYOUTS
                                    ------------------------------------   --------------------    ----------------------
                                                                                      SECURITIES
                                                               OTHER      RESTRICTED  UNDERLYING
                                                               ANNUAL       STOCK       OPTIONS/    LTIP       ALL OTHER
        NAME AND                      SALARY      BONUS     COMPENSATION    AWARDS       SARS      PAYOUTS   COMPENSATION
   PRINCIPAL POSITION       YEAR        ($)        ($)          ($)           ($)         (#)        ($)          ($)
------------------------    ----    ----------  ---------   ------------   -------       ------    -------   ------------
<S>                         <C>     <C>         <C>                  <C>         <C>     <C>           <C>   <C>
Silvano DiGenova,           2006    $  428,220  $      -0-          -0-         -0-      10,000       -0-    $   2,667(1)
   Chairman of the          2005    $  403,845  $      -0-          -0-         -0-      10,000       -0-    $   3,733(1)
   Board, Chief             2004    $  375,000  $  37,500           -0-         -0-      10,000       -0-           -0-
   Executive Officer,
   President and Chief
   Financial Officer
Paul Biberkraut,            2006    $   97,557  $      -0-          -0-         -0-      10,000       -0-    $  17,287(3)
   Chief Financial          2005    $  152,884  $  38,212           -0-         -0-      10,000       -0-    $   3,115(1)
   Officer, Executive       2004    $  127,500  $  30,000           -0-         -0-      60,000       -0-           -0-
   Vice President and
   Secretary(2)
Lawrence F. Abbott,         2006    $  208,404  $ 152,529           -0-         -0-       5,000       -0-          n/a
   Chief Sales Officer,     2005    $   16,667        n/a          n/a     $79,000(5)       n/a      n/a     $  25,000(6)
   Executive Vice           2004           n/a        n/a          n/a         n/a          n/a      n/a           n/a
   President and
   Secretary(4)

--------------------
(1) Consists of matching contributions to 401(k) plan administered by
    Administaff under our co-employment agreement.
(2) Mr. Biberkraut was an officer of the company from 1999 to 2000 and from 2002
    to 2006. He resigned as an officer of our company effective January
    15, 2006.
(3) Consists of $1,537 in matching contributions to 401 (k) plan administered
    by Administaff under our co-employment agreement plus $15,750 of
    unrestricted stock issued in consideration of services rendered.
(4) Mr. Abbott joined the company as an officer in June 2005.
(5) In June 2005, Mr. Abbott was awarded 25,000 shares of restricted stock,
    valued at $79,000. As of June 30, 2006, these shares had a value of
    $25,500 (without regard to the remaining vesting requirements). These
    shares vest in equal annual increments over four years, or, at Mr.
    Abbott's election, in equal quarterly increments over four years. During
    the first three years of the vesting period, an aggregate of 18,750 shares
    will vest. We do not anticipate paying any dividends with respect to our
    common stock during the vesting period, but if we do Mr. Abbott will be
    entitled to receive dividends on his stock at the same rate as paid to
    other stockholders.
(6) Consists of reimbursed moving expenses.

                                      -43-



<PAGE>

STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS DURING FISCAL 2006

         The following table summarizes options to purchase shares of our common
stock that we granted during the fiscal year ended June 30, 2006 to each of the
executive officers identified in the summary compensation table above. We have
never granted any stock appreciation rights.

                                    NUMBER OF           PERCENT OF
                                    SECURITIES         TOTAL OPTIONS
                                    UNDERLYING          GRANTED TO
                                     OPTIONS            EMPLOYEES IN            EXERCISE            EXPIRATION
            NAME                   GRANTED (#)         FISCAL YEAR (%)     PRICE(S) ($/SHARE)         DATE(S)
--------------------------         -----------         ---------------     ------------------       ----------
Silvano DiGenova                       10,000                40.00%               $3.02              June 2011
Paul Biberkraut                        10,000                40.00%               $2.75              June 2011
Larry Abbott                            5,000                20.00%               $1.20              May 2011
--------------------------

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

         The following table summarizes exercises of stock options during the
fiscal year ended June 30, 2006 by each of the executive officers named in the
summary compensation table above and the year-end value of unexercised options
for these executive officers.

                                                              NUMBER OF
                                                        UNEXERCISED SECURITIES         VALUE OF UNEXERCISED
                         SHARES           VALUE           UNDERLYING OPTIONS           IN-THE-MONEY OPTIONS
                        ACQUIRED        REALIZED          AT FISCAL YEAR END            AT FISCAL YEAR END
      NAME             ON EXERCISE         ($)        EXERCISABLE/UNEXERCISABLE     EXERCISABLE/UNEXERCISABLE
----------------       -----------      --------      -------------------------     -------------------------

Silvano DiGenova            0              N/A                 57,500/0                     $6,950/$0
Paul Biberkraut             0              N/A              51,250/18,750                 $13,625/$4,625
Larry Abbott                0              N/A              30,000/75,000                     $0/$0
</TABLE>


LONG-TERM INCENTIVE PLAN AWARDS

         In fiscal 2006, no awards were given to the executive officers named in
the summary compensation table under any long term incentive plan.

DIRECTORS' COMPENSATION

         Each of our non-employee directors currently receive cash compensation
in the amount of $12,000 per year for service on our board of directors and all
directors are reimbursed for certain expenses in connection with attendance at
board meetings. Committee chairpersons receive an additional $6,000 per year. At
the discretion of our board of directors, directors may be granted stock
options. On July 7, 2005, five of our directors were each granted options to
purchase 10,000 shares of our common stock at an exercise prices ranging from of
$2.75 to $3.02 per share. These options fully vested before June 30, 2006, and
are exercisable for a period of five years after vesting or for one month, if
vested, following the termination or resignation of the director from the board.
On December 15, 2005, one of our new directors was granted options to purchase
10,000 shares of our common stock at an exercise price of $1.60. These options
vest after December 15, 2006 and are exercisable for five years or one month
after resignation or termination.

                                      -44-



<PAGE>

REPRICING OF OPTIONS

         No adjustments to, or repricing of, stock options previously awarded to
the executive officers named in the summary compensation table above occurred in
fiscal 2006.

EMPLOYMENT AGREEMENTS

         On June 15, 2001, we entered into an employment agreement with Silvano
DiGenova under which we agreed to pay an annual salary of $375,000 and bonus
arrangements based on a sliding scale of 5% to 50% of base salary based on a
corresponding fiscal year pre-tax income (as defined) of our company from
$250,000 to $4,000,000. This agreement terminated on March 31, 2005. However,
the Board of Directors and Mr. DiGenova verbally agreed to continue to abide by
the agreement until a new agreement is effective in connection with the Merger.
At the time the Merger Agreement with DGSE was signed, Mr. DiGenova entered into
an agreement with DGSE that provides for an independent contractor relationship
between Mr. DiGenova and us, effective at the time that the Merger is completed.
This agreement will not become effective if the Merger is not completed. The
principal terms of this agreement are as follows:

         o    TITLE. Upon the closing of the Merger, Mr. DiGenova will have the
              title of Managing Director-Numismatics. However, the title will be
              purely nominal, and Mr. DiGenova will not be an officer or
              employee of DGSE, Superior or any of their respective
              subsidiaries.
         o    NET PROFITS ACCOUNT. Mr. DiGenova will be paid a minimum of
              $25,000 per month, payable bi-monthly from a net profits account,
              and will also have profit participation in a separate profit
              center which he will head, subject to our supervision and
              direction. The profit center will be allocated $2,500,000 in
              either inventory or capital to facilitate wholesale activities by
              Mr. DiGenova, which we will refer to as the allocated inventory.
              We will generate monthly profit and loss statements for the profit
              center. Revenues will include all wholesale and retail revenues
              generated by the profit center, exclusive of auction commissions
              but including commissions for retail sales of our inventory other
              than allocated inventory and gross profits realized on allocated
              inventory. Expenses will include all direct expenses of the profit
              center, including interest on the allocated inventory at the prime
              rate. Forty percent of the net profit or loss will be allocated
              each month to Mr. DiGenova's net profit account. At the end of
              each fiscal quarter, Mr. DiGenova will be entitled to receive any
              positive balance in the net profits account.
         o    OTHER SERVICES. Mr. DiGenova will be entitled to separate
              compensation for other services he performs for DGSE or us,
              including a commission, at the then standard salesman's rate, for
              retail auction consignments of inventory (other than allocated
              inventory), and earned commission, at the then standard salesman's
              rate, for any auctions.
         o    COMPETITIVE ACTIVITIES. Mr. DiGenova will not be obligated to
              devote any time, energy or skill to our business and will not be
              restricted from engaging in independent business activities for
              his own account, except that during the term of the arrangement,
              he may not engage in any activity involving rare coins, bullion
              products and jewelry (other than antique jewelry), solicit retail
              consignments, service retail clients or solicit auctions, except
              in each base on behalf of us.
         o    BENEFITS. As an independent contractor, Mr. DiGenova will not be
              entitled to participate in DGSE's employee benefits plans or
              programs.

                                      -45-



<PAGE>

         On December 27, 2002 we entered into an employment agreement with our
former Chief Financial Officer, Paul Biberkraut, under which we agreed to pay an
annual salary of $120,000 and bonus arrangements of up to 50% of base salary
based on personal and Company performance. Effective April 1, 2004, Mr.
Biberkraut's agreement was modified to increase his annual base salary to
$150,000 and reduce the maximum bonus as a percentage of base salary to 30%.
This agreement expired on December 27, 2005. Mr. Biberkraut resigned effective
January 15, 2006.

         On June 1, 2005 we entered into an employment agreement with our Chief
Sales Officer, Larry Abbott, under which we agreed to pay an annual salary of
$200,000 and bonus arrangements of up to 150% of base salary based on our
company's performance. This agreement expires on June 1, 2008.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         No director or executive officer of the Company is known by the Company
to serve as an officer, director or member of a compensation committee of any
other entity for which an executive officer or director thereof is also a member
of the Company's Board.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

         This report is provided by the compensation committee of our board of
directors to assist stockholders in understanding our objectives, policies and
procedures in establishing our executive compensation structure and system. The
compensation committee is responsible for reviewing and approving base salaries,
bonuses and incentive awards for all executive officers, and oversees our stock
incentive plan. The committee is comprised of three non-employee directors who
have no interlocking relationships as defined by the Securities and Exchange
Commission.

         Our compensation philosophy and policy is based on the following
objectives:

         o    To align executive compensation with our business strategy and
              performance.
         o    To provide an executive compensation structure and system that is
              competitive with other companies within our industry and of
              similar size.
         o    To attract, retain and motivate qualified executives critical to
              our success.
         o    To align our financial results and the compensation paid to our
              executive officers with the enhancement of stockholder value.

         Our compensation programs consist of base salary, an annual incentive
bonus, and the award of stock options and other equity-based incentives. Base
salary is targeted to recognize each executive officer's unique value and
historical contributions to our success in light of industry salary norms. The
compensation committee reviews the compensation of the chief executive officer,
and with the chief executive officer, the base compensation of all other
executive officers, on an annual basis to assure that a competitive position is
maintained.

         Any annual incentive or bonus is based upon a comparison of actual
performance against pre-established quantitative and qualitative performance
objectives derived from our business plan and operating budgets, which may
include company, operating division and individual components. Our CEO's annual
incentive bonus is based entirely on the achievement of specified profitability
goals. Since we were not profitable this year, our CEO will receive no incentive
bonus. The incentive bonuses for our other executive officers are based on a
combination of company profitability, sales levels, and/or qualitative factors.
Our policy is not to disclose target levels with respect to specific
quantitative or qualitative performance-related factors or factors considered to
involve confidential business information, because their disclosure would have
an adverse effect on our company.

                                      -46-



<PAGE>

         To further align the financial interests of our executive officers with
those of our company and its stockholders, our long-range executive incentive
programs are primarily equity-based and provide the opportunity for our
executive officers to earn stock options and consequently benefit, along with
all stockholders, from performance-driven increases in share value. The
compensation committee and/or the board of directors act as the manager of our
option plans and perform functions that include selecting option recipients,
determining the timing of option grant and whether options are incentive or
non-qualified, and assigning the number of shares subject to each option, fixing
the time and manner in which options are exercisable, setting option exercise
prices and vesting and expiration dates, and from time to time adopting rules
and regulations for carrying out the purposes of our plans.

         The compensation committee continues to monitor and evaluate our
executive compensation system and its application throughout our organization to
assure that it continues to reflect our compensation philosophy and objectives.

         Respectfully Submitted by:
         Compensation Committee, Superior Galleries, Inc.
         David Rector, Chairman
         Lee Ittner
         Anthony Friscia

PERFORMANCE GRAPH

         The following graph provides a comparison for our past five fiscal
years of cumulative total returns for our common stock, the Standard and Poor's
600 Small Cap Stock Index and the Russell 2000 Index. We operate in a specialty
market niche. There are no reasonably identifiable publicly held competitors
that have traded for a period of five years and that directly operate in all the
same markets as we do. Therefore, our comparison is limited to public issuers
with similar market capitalization in the Russell 2000 Index.

         The graph assumes an investment of $100 on July 1, 2001 in Superior,
the stocks comprising the Standard & Poor's 600 Small Cap Stock Index and the
stocks comprising the Russell 2000 Index, and also assumes reinvestment of all
dividends.

                                      -47-



<PAGE>


        COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN BETWEEN SUPERIOR
     GALLERIES, INC., THE S&P 600 SMALL CAP INDEX AND THE RUSSELL 2000 INDEX


<TABLE>
                  July 1, 2001   July 1, 2002   July 1,2003   July 1, 2004   July 1, 2005  July 1, 2006
                  ------------   ------------   -----------   ------------   ------------  ------------
<S>                    <C>           <C>            <C>            <C>           <C>           <C>
Superior Galleries     $100          $ 48           $ 30           $ 38          $ 61          $ 20
Russell 2000           $100          $ 90           $ 87           $115          $125          $141
S&P Small Cap 600      $100          $100           $ 95           $128          $144          $162
</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         The following table sets forth, as of September 18, 2006, certain
information with respect to the beneficial ownership of our stock by (i) each of
our executive officers named in the summary compensation table above, (ii) each
of our directors, (iii) each person known to us to be the beneficial owner of
more than 5% of each class of our outstanding voting securities, and (iv) all of
our directors and executive officers as a group.

                                      -48-



<PAGE>

<TABLE>
<CAPTION>
                                                                   AMOUNT AND NATURE
                                                                     OF BENEFICIAL
          NAME AND ADDRESS                                            OWNERSHIP OF        PERCENTAGE
         OF BENEFICIAL OWNER                 TITLE OF CLASS         COMMON STOCK(1)       OF CLASS(1)
------------------------------------    ------------------------   -----------------      -----------
<S>                                     <C>                             <C>                  <C>
Silvano DiGenova(2)                     Common(3)                       2,060,764            39.91%
                                        Series B Preferred Stock          400,000            11.76%

Larry Abbott(2)                         Common(4)                          55,000             1.14%

Paul Biberkraut(2)                      Common(5)                          66,250             1.36%

Anthony Friscia(2)                      Common                                  -             *

Lee Ittner(2)                           Common(6)                          30,000             *

David Rector(2)                         Common(7)                          20,000             *

Mitch Stoltz(2)                         Common                                  -             *

Stanford International Bank Limited     Common (8)                      4,350,806            51.74%
6075 Poplar Avenue                      Series B Preferred Stock        3,000,000            88.24%
Memphis, TN 38119                       Series D Preferred Stock        2,000,000           100.00%
                                        Series E Preferred Stock        2,500,000           100.00%

All Executive Officers and Directors    Common(9)                       2,232,014            42.24%
   as a Group (7 persons)               Series B Preferred Stock          400,000            11.76%
</TABLE>

* less than one percent
-------------------
(1)   Based upon information furnished to us by the directors and executive
      officers or obtained from our stock transfer books showing 4,808,280
      shares of common stock outstanding as of September 18, 2006. We are
      informed that these persons hold the sole voting and dispositive power
      with respect to the common stock except as noted herein. For purposes of
      computing "beneficial ownership" and the percentage of outstanding common
      stock held by each person or group of persons named above as of September
      18, 2006, any security which such person or group of persons has the right
      to acquire within 60 days after such date is deemed to be outstanding for
      the purpose of computing beneficial ownership and the percentage ownership
      of such person or persons, but is not deemed to be outstanding for the
      purpose of computing the percentage ownership of any other person.
(2)   The address for Messrs. DiGenova, Abbott, Biberkraut, Friscia, Ittner,
      Rector and Stoltz is 9478 West Olympic Blvd., Beverly Hills, California
      90212
(3)   Includes 152,500 shares of common stock issuable upon the exercise of
      options and warrants, 202,330 shares of common stock issuable upon the
      conversion of Series B Preferred Stock, all of which were convertible
      within 60 days of the date of this table, and 1,000 shares held by Mr.
      DiGenova's minor children, over which Mr. DiGenova exercises voting
      control.
(4)   Includes 30,000 shares of common stock issuable upon exercise of presently
      exercisable options that are exercisable within 60 days.
(5)   Includes 51,250 shares of common stock issuable upon exercise of presently
      exercisable options that are exercisable within 60 days.
(6)   Includes 20,000 shares of common stock issuable upon exercise of presently
      exercisable options that are exercisable within 60 days.
(7)   Includes 20,000 shares of common stock issuable upon exercise of presently
      exercisable options that are exercisable within 60 days.


                                      -49-



<PAGE>

(8)   Includes 1,517,472 shares of common stock issuable upon the conversion of
      Series B Preferred Stock, 1,666,667 shares of common stock issuable upon
      the conversion of Series D Preferred Stock, and 416,667 shares of common
      stock issuable upon the conversion of Series E Preferred Stock all of
      which are currently convertible within the next 60 days.
(9)   Includes 273,250 shares of common stock issuable upon exercise of options
      that are exercisable within 60 days, 202,330 shares of common stock
      issuable upon conversion of Series B Preferred Stock that are exercisable
      within 60 days, and 1,000 shares of common stock held by Mr. DiGenova's
      minor children, over which Mr. DiGenova exercises voting control.

EQUITY COMPENSATION PLAN INFORMATION

         The following table provides information about our common stock that
may be issued upon the exercise of options, warrants and rights that we have
granted under (a) our 2003 Omnibus Stock Option Plan and (b) individual
compensation arrangements in exchange for consideration in the form of goods or
services as of June 30, 2006.

<TABLE>
                                  EQUITY COMPENSATION PLAN INFORMATION

<CAPTION>
                                               NUMBER OF SECURITIES    WEIGHTED AVERAGE       NUMBER OF
                                                TO BE ISSUED UPON      EXERCISE PRICE OF     SECURITIES
                                             EXERCISE OF OUTSTANDING      OUTSTANDING         REMAINING
                                                OPTIONS, WARRANTS      OPTIONS, WARRANTS    AVAILABLE FOR
              PLAN CATEGORY                       AND RIGHTS(1)           AND RIGHTS       FUTURE ISSUANCE
-------------------------------------------  -----------------------   -----------------   ---------------
<S>                                                      <C>                 <C>                <C>
Equity compensation plans approved by
   security holders(2)                                   565,000             $ 2.38             580,000
Equity compensation plans not approved by
   security holders(3)                                     3,600             $20.00                 N/A
Total                                                    568,600             $ 2.49             576,400
----------------------------
</TABLE>

(1)   Number of shares is subject to adjustment in the future for changes in
      capitalization resulting from stock splits, stock dividends and similar
      events.
(2)   Consists of our 2003 Omnibus Stock Option Plan. This Plan authorizes us to
      grant options to purchase up to 1,200,000 shares of our common stock
      during the term of our Plan. Our Plan permits grants of both incentive
      stock options and non-qualified stock options. Options under all plans
      generally vest over 1 to 5 years, though the vesting periods may vary from
      person to person, and are exercisable subject to continued employment and
      other conditions. Options to purchase 55,000 shares have been exercised,
      leaving options to purchase 1,145,000 shares outstanding or available for
      issuance under the Plan.
(3)   Consists of remaining options to purchase our common stock granted to
      employees prior to the adoption of our 2000 Omnibus Stock Option Plan
      which was replaced by our 2003 Omnibus Stock Option Plan that came into
      effect on June 30, 2003.

         Our 2003 Omnibus Stock Option Plan was adopted by our board of
directors on May 1, 2003 and approved by our shareholders at our annual
shareholders' meeting on June 30, 2003. This plan permits us to grant both
incentive stock options and nonqualified stock options. Options under this plan
generally vest over one to five years, though the vesting periods may vary from
person to person, and are exercisable subject to continued employment and other
conditions.

                                      -50-



<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On January 31, 2003, we entered into a consulting agreement with
Stanford Group Company, an affiliate of our principal stockholder, Stanford, to
provide financial and advisory services to us for a three year period commencing
on April 1, 2003. The annual fee for such services was $60,000 and was payable
on a quarterly basis. These fees are comparable to or lower than those that
would be charged to us by an unrelated third party. The consulting agreement
expired on March 31, 2006 and was not renewed.

         On October 13, 2003, we executed a Commercial Loan and Security
Agreement ("Commercial LOC"`) with Stanford Financial Group Company, an
affiliate of our principal stockholder, Stanford, to provide us with a $7.5
million line of credit for purposes of financing our inventory, auction advances
and inventory loans to other rare coin dealers and collectors. On March 31,
2005, the lending limit on the Commercial LOC was increased to $10 million.
Effective July 21, 2005 the Commercial LOC was renewed through October 1, 2006.
On May 2, 2006 Stanford Financial further amended the Commercial LOC increasing
the line of credit to $10,850,000 to reflect an additional advance made March
30, 2006. On September 5, 2006, the Commercial LOC was renewed through October
1, 2007. The Commercial LOC bears interest at the prime-lending rate (8.25% at
June 30, 2006) and is secured by substantially all of Superior's assets. As of
June 30, 2006 the outstanding balance was $10,850,000 and there was no accrued
interest payable.

         On May 18, 2005 we entered into a Primary Supplier Agreement with
Stanford Coins & Bullion, Inc. ("Stanford C &B"), which is an affiliate of
Stanford. Under this arrangement, which had a term of six months commencing June
1, 2005, Stanford C&B was required to provide us with a preferential right to
source coins on a wholesale basis for that company. Stanford C&B paid a flat 7%
over our bid for all rare coins and 3.5% over our bid for all generic coins. We
provided marketing services for Stanford C&B, including providing information on
possible sales leads and making our inventory of coins available on Stanford
C&B's web site. For Stanford C&B's customers that sell coins through our
auctions, we paid Stanford C&B a fee of 6%, and paid their sales person a
commission of 2%. When the agreement expired in December 2005, the business
relationship between the parties continued under the same terms of the previous
agreement. During the fiscal year ended June 30, 2006, Stanford C&B purchased
$2,276,946 of rare coins from us.

         On July 5, 2006, we agreed to engage the former Chief Financial
Officer, Paul Biberkraut, as a consultant to the company in connection with the
DGSE Merger. His retainer is $4,000 per month.

         From time to time in fiscal years prior to 2006 we borrowed funds from
our CEO. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources; Financing Activities." In
July 2006, subject to the successful completion of the proposed Merger with
DGSE, our CEO agreed to restructure this debt, which currently has a principal
balance of $500,000 so that it bears interest at the rate of prime plus one
percent per annum and is payable in five quarterly installments of principal
commencing September 30, 2006.

                                      -51-



<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table shows the fees paid or accrued by us for the audit
and other services provided by Singer Lewak Greenbaum & Goldstein LLP ("SLGG")
and Haskell & White LLP ("H&W") for the fiscal years shown.

                                           2006                     2005
                                     -----------------       -----------------
                                       SLGG      H&W           SLGG      H&W
                                     --------  -------       --------  -------
  Audit Fees                         $108,000      --        $135,000  $31,000
  Audit - Related Fees               $ 23,000      --          18,000     --
  Tax Fees                              --         --           --        --
  All Other Fees                        --         --           --        --
                                     --------  -------       --------  -------
  Total                              $131,000      --        $153,000  $31,000
                                     ========  =======       ========  =======

         Audit fees consist of fees billed for professional services rendered
for the audit of our financial statements and review of the interim financial
statements included in quarterly reports and services that are normally provided
by the above auditors in connection with statutory and regulatory fillings or
engagements.

         The Audit - Related Fees shown above all related to the performance of
agreed upon procedures required to be performed in connection with our line of
credit from Stanford Financial Group Company.

         Our Audit Committee approved the Audit Fees for fiscal 2006 and 2005,
but none of the other fees for 2006 and 2005. Our Audit Committee policies
require it to approve the fees and scope of work for all annual audits and
quarterly financial statement review.

                                      -52-



<PAGE>

                                     PART IV

ITEM 15. EXHIBITS

         The following documents are filed as part of this Annual Report on Form
         10-K.

         (1)      FINANCIAL STATEMENTS. The following Financial Statements and
                  the Reports of Independent Registered Public Accounting Firms
                  are on page F-1 through F-42 hereof.

                  Reports of Independent Registered Public Accounting Firms

                  Balance Sheets

                  Statements of Operations

                  Statements of Stockholders' Equity

                  Statements of Cash Flows

                  Notes to Financial Statements

         (2)      FINANCIAL STATEMENT SCHEDULES. The following Financial
                  Statement Schedules are on page F-43.

                  Schedule II

         (3)      EXHIBITS.

   EXHIBIT
   NUMBER                              DESCRIPTION
   ------                              -----------
    3.1      Certificate of Incorporation of Superior Galleries, Inc. (including
             Certificates of Designation of Superior Galleries, Inc., relating
             to Series A $5.00 Redeemable 8% Convertible Preferred Stock, Series
             B $1.00 Convertible Preferred Stock and Series D $1.00 Convertible
             Preferred Stock) (incorporated herein by this reference to Exhibit
             D to the definitive Proxy Statement of Tangible Asset Galleries,
             Inc. filed under the Exchange Act on June 5, 2003).
    3.2      Certificate of Designation of Superior Galleries, Inc., relating to
             Series E $1.00 Convertible Preferred Stock (incorporated herein by
             this reference to Exhibit 3.1 to the Current Report on Form 8-K of
             Superior Galleries, Inc. filed under the Exchange Act on April 1,
             2005).
    3.3      Bylaws of Superior Galleries, Inc. (incorporated herein by this
             reference to Exhibit E to the definitive Proxy Statement of
             Tangible Asset Galleries, Inc. filed under the Exchange Act on June
             5, 2003).
    4.1      2003 Omnibus Stock Option Plan (incorporated herein by this
             reference to Exhibit A to the definitive Proxy Statement of
             Tangible Asset Galleries, Inc., filed under the Exchange Act on
             June 5, 2003).
    4.2      Form of Nonqualified Stock Option Agreement for 2003 Omnibus Stock
             Option Plan (incorporated herein by this reference to Exhibit 4.2
             to the Annual Report on Form 10-KSB of Superior Galleries, Inc.,
             filed under the Exchange Act, for the fiscal year ended June 30,
             2003) .

                                      -53-



<PAGE>

   EXHIBIT
   NUMBER                              DESCRIPTION
   ------                              -----------
    4.3      Form of Employee Incentive Stock Option Agreement for 2003 Omnibus
             Stock Option Plan (incorporated herein by this reference to Exhibit
             4.3 to the Annual Report on Form 10-KSB of Superior Galleries,
             Inc., filed under the Exchange Act, for the fiscal year ended June
             30, 2003).
    4.4      Lockup Agreement dated April 3, 2002 by and among Stanford Venture
             Capital Holdings, Inc. and certain stockholders of Tangible Asset
             Galleries, Inc. (incorporated herein by this reference to Exhibit G
             included in Exhibit 10.1 to the Current Report on Form 8-K of
             Tangible Asset Galleries, Inc., filed under the Exchange Act on
             April 24, 2002).
    4.5      Warrant to Purchase 1,000,000 Shares of Common Stock dated November
             27, 2001 Issued to NRLP (incorporated herein by this reference to
             Exhibit 4.11 of the Annual Report on Form 10-KSB of Tangible Asset
             Galleries, Inc., for the year ended June 30, 2002, filed under the
             Exchange Act on February 19, 2003).
    4.6      Liquidation Preferences Agreement between Tangible Asset Galleries,
             Inc., the holders of the outstanding Series B Preferred Stock of
             Tangible Asset Galleries, Inc. and Stanford Venture Capital
             Holdings, Inc. dated January 31, 2003 (incorporated herein by this
             reference to Exhibit 4.1 to the Current Report on Form 8-K of
             Superior Galleries, Inc. filed March 3, 2003).
    9.1      Shareholders' Agreement dated April 3, 2002 by and among Silvano
             DiGenova, Stanford Venture Capital Holdings, Inc. and Tangible
             Asset Galleries, Inc. (incorporated herein by this reference to
             exhibit E included in Exhibit 10.1 to the Current Report on Form
             8-K of Tangible Asset Galleries, Inc., filed under the Exchange Act
             on April 24, 2002).
    10.1     Series E Preferred Stock Purchase Agreement dated as of March 29,
             2005, between Superior Galleries, Inc. and Stanford Investment Bank
             Limited (incorporated herein by this reference to Exhibit 10.1 to
             the Current Report on Form 8-K of Superior Galleries, Inc. filed
             under the Exchange Act on April 1, 2005).
    10.2     Registration Rights Agreement dated as of March 29, 2005 and
             between Superior Galleries, Inc. and Stanford Investment Bank
             Limited (incorporated herein by this reference to Exhibit 10.4 to
             the Current Report on Form 8-K of Superior Galleries, Inc. filed
             under the Exchange Act on April 1, 2005).
    10.3     Standard Multi-Tenant Office Lease-Gross dated August 6, 2002 by
             and between DBKK, LLC and Tangible Asset Galleries, Inc.
             (incorporated herein by this reference to Exhibit 10.14 to the
             Annual Report on Form 10-KSB of Tangible Asset Galleries, Inc. for
             the year ended June 30, 2002, filed under the Exchange Act on
             February 19, 2003).
    10.4     Registration Rights Agreement dated January 31, 2003 by and among
             Tangible Asset Galleries, Inc. and holders of our Series B
             Preferred Stock, Series C Preferred Stock, Series D Stock and
             Certain Warrants (incorporated herein by this reference to Exhibit
             10.3 to the Current Report on Form 8-K of Tangible Asset Galleries,
             Inc., filed under the Exchange Act on March 3, 2003).
    10.5     Employment Agreement dated June 1, 2001 between Tangible Asset
             Galleries, Inc. and Silvano DiGenova. (incorporated herein by this
             reference to Exhibit 10.16 to the Annual Report on Form 10-KSB of
             Tangible Asset Galleries, Inc. for the year ended June 30, 2002,
             filed under the Exchange Act on February 19, 2003).
    10.6     Commercial Loan and Security Agreement dated October 13, 2003
             between Superior Galleries, Inc. and Stanford Financial Group
             Company (incorporated herein by this reference to Exhibit 10.1 to
             the Current Report on Form 8-K of Superior Galleries, Inc. filed
             under the Exchange Act, filed October 16, 2003).
    10.7     Commercial Note by Superior Galleries, Inc. to Stanford Financial
             Group Company dated October 1, 2003 (incorporated herein by this
             reference to Exhibit 10.2 to the Current Report on Form 8-K of
             Superior Galleries, Inc. filed October 16, 2003).

                                      -54-



<PAGE>

   EXHIBIT
   NUMBER                              DESCRIPTION
   ------                              -----------
    10.8     Promissory Note in the maximum amount of $1,000,000, dated February
             10, 2003, from Tangible Asset Galleries, Inc. to Silvano DiGenova
             (incorporated herein by reference to Exhibit 10.11 of the
             registrant's Amendment No. 1 to Registration Statement on Form
             SB-2, filed December 2, 2004)
    10.9     Series D Preferred Stock Purchase and Warrant Exercise Agreement
             dated January 31, 2003, between Tangible Asset Galleries, Inc.,
             Stanford Venture Capital Holdings, Inc., Silvano DiGenova and
             certain warrant holders (incorporated herein by this reference to
             Exhibit 10.1 to the Current Report on Form 8-K of Superior
             Galleries, Inc. filed March 3, 2003).
    10.10    First Amendment to Renewal and Modification Agreement dated
             December 15, 2004 between Superior Galleries, Inc. and the John
             Wesley English Living Trust (incorporated herein by reference to
             Exhibit 10.18 of the registrant's Registration Statement on Form
             SB-2, as amended, filed September 24, 2004)
    10.11    Waiver and Extension Agreement dated December 29, 2004 between
             Silvano DiGenova and Superior Galleries, Inc. (incorporated herein
             by reference to Exhibit 10.19 of the registrant's Registration
             Statement on Form SB-2, as amended, filed September 24, 2004)
    10.12    Investor Relations Agreement dated December 30, 2004 between
             American Capital Ventures, Inc. and Superior Galleries, Inc.
             (incorporated herein by reference to Exhibit 10.20 of the
             registrant's Registration Statement on Form SB-2, as amended, filed
             September 24, 2004)
    10.13    Promissory note dated October 1, 2004 by Superior Galleries, Inc.
             in favor of Stephen Gehringer (incorporated herein by reference to
             Exhibit 10.21 of the registrant's Registration Statement on Form
             SB-2, as amended, filed September 24, 2004)
    10.14    Promissory note dated October 14, 2004 by Superior Galleries, Inc.
             in favor of Stephen Gehringer ((incorporated herein by reference to
             Exhibit 10.22 of the registrant's Registration Statement on Form
             SB-2, as amended, filed September 24, 2004))
    10.15    Promissory note dated October 25, 2004 by Superior Galleries, Inc.
             in favor of Stephen Gehringer (incorporated herein by reference to
             Exhibit 10.23 of the registrant's Registration Statement on Form
             SB-2, as amended, filed September 24, 2004)
    10.16    Amendment Dated as of March 29, 2005 to Commercial Loan and
             Security Agreement between Superior Galleries, Inc. and Stanford
             Financial Group Company (incorporated herein by this reference to
             Exhibit 10.2 to the Current Report on Form 8-K of Superior
             Galleries, Inc. filed under the Exchange Act on April 1, 2005)
    10.17    Commercial Note dated as of March 29, 2005 by Superior Galleries,
             Inc. in favor of Stanford Financial Group Company (incorporated
             herein by this reference to Exhibit 10.3 to the Current Report on
             Form 8-K of Superior Galleries, Inc. filed under the Exchange Act
             on April 1, 2005)
    10.18    Primary Supplier Agreement dated May 18, 2005 between Superior
             Galleries, Inc. and Stanford Coins and Bullion (incorporated herein
             by this reference to Exhibit 10.1 to the Current Report on Form 8K
             of Superior Galleries, Inc., filed under the Exchange Act on May
             18, 2005).
    10.19    Second Extension to Commercial Loan and Security Agreement between
             Superior Galleries, Inc. and Stanford Financial Group, Incorporated
             dated as of July 21, 2005 (executed July 31, 2005) (incorporated
             herein by this reference to Exhibit 10.1 to the Current Report on
             Form 8K of Superior Galleries, Inc., filed under the Exchange Act
             on August 2, 2005).

                                      -55-



<PAGE>

   EXHIBIT
   NUMBER                              DESCRIPTION
   ------                              -----------
    10.20    Second Amendment to Renewal and Modification Agreement, dated as of
             July 31, 2005, by and between Superior Galleries, Inc. and the John
             Wesley English Living Trust (incorporated herein by this reference
             to Exhibit 10.2 to the Current Report on Form 8K of Superior
             Galleries, Inc., filed under the Exchange Act on August 2, 2005).
    10.21    Employment Agreement dated June 1, 2005 between Superior Galleries,
             Inc. and Larry Abbott (incorporated herein by this reference to
             Exhibit 10.1 to the Current Report on Form 8K of Superior
             Galleries, Inc., filed under the Exchange Act on June 7, 2005).
    10.22    Indemnification Agreement dated July 7, 2005 between Superior
             Galleries, Inc. and Anthony Friscia (incorporated herein by this
             reference to Exhibit 10.1 to the Current Report on Form 8K of
             Superior Galleries, Inc., filed under the Exchange Act on July 8,
             2005).
    10.23    Indemnification Agreement dated December 15, 2005 between Superior
             Galleries, Inc. and Mitch Stoltz (incorporated herein by this
             reference to Exhibit 10.1 to the Current Report on Form 10 Q of
             Superior Galleries, Inc., filed under the Exchange Act on January
             24, 2006).
    10.24    Promissory Note dated November 7, 2005 between Superior Galleries,
             Inc. and Kevin Lipton Rare Coins (incorporated herein by this
             reference to Exhibit 10.2 to the Current Report on Form 10K of
             Superior Galleries, Inc., filed under the Exchange Act on January
             24, 2006).
    10.25    Amendment to Commercial Loan and Security Agreement dated March 29,
             2006 between Superior Galleries, Inc. and Stanford Financial Group,
             Incorporated to increase the line to $10,850,000 (incorporated
             herein by this reference to Exhibit 10.1 to the Current Report on
             Form 8K of Superior Galleries, Inc., filed under the Exchange Act
             on May 4, 2006).
    10.26    Promissory Note dated February 21, 2006 between Superior Galleries,
             Inc. and Kevin Lipton Rare Coins (incorporated herein by this
             reference to Exhibit 10.1 to the Current Report on Form 10K of
             Superior Galleries, Inc., filed under the Exchange Act on May 15,
             2006).
    10.27    Coin Purchase and Debt Prepayment Agreement dated as of March 31,
             2006 between Superior Galleries, Inc. and the John Wesley English
             Living Trust (incorporated herein by this reference to Exhibit 10.1
             to the Current Report on Form 8K of Superior Galleries, Inc., filed
             under the Exchange Act on June 27, 2006)
    10.28    Agreement and Plan of Merger and Reorganization (the "Merger
             Agreement") dated July 14, 2006, between Superior Galleries, Inc.,
             a Delaware corporation, and DGSE Companies, Inc., a Nevada
             corporation (incorporated herein by this reference to Exhibit 2.1
             to the Current Report on Form 8-K of Superior Galleries, Inc.,
             filed under the Exchange Act on July 17, 2006).
    14.1     Superior Galleries, Inc. Code of Ethics (filed herewith).
    31.1     Certification of CEO pursuant to Securities Exchange Act Rules
             13a-14 and 15d-14 as adopted pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002 (filed herewith)
    31.2     Certification of CFO pursuant to Securities Exchange Act Rules
             13a-14 and 15d-14 as adopted pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002 (filed herewith)
    32.1     Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted
             pursuant to Section 906 of the Sarbanes-Oxley Act OF 2002 (filed
             herewith)
    32.2     Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted
             pursuant to Section 906 of the Sarbanes-Oxley Act OF 2002 (filed
             herewith)


                                      -56-



<PAGE>

                                   SIGNATURES

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

Dated: September 27, 2006                           SUPERIOR GALLERIES, INC.


                                                    By:  /s/ Silvano DiGenova
                                                         -----------------------
                                                         Silvano DiGenova,
                                                         Chief Executive Officer


Dated: September 27, 2006                           SUPERIOR GALLERIES, INC.


                                                    By:  /s/ Silvano DiGenova
                                                         -----------------------
                                                         Silvano DiGenova,
                                                         Chief Financial Officer


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

            SIGNATURE                      CAPACITY                 DATE
            ---------                      --------                 ----

/s/ Silvano DiGenova                       Director          September 27, 2006
---------------------------------
     Silvano DiGenova

/s/ Paul Biberkraut                        Director          September 27, 2006
---------------------------------
     Paul Biberkraut

                            Director          September 27, 2006
---------------------------------
     Anthony Friscia

/s/ Lee Ittner                             Director          September 27, 2006
---------------------------------
     Lee Ittner

/s/ David Rector                           Director          September 27, 2006
---------------------------------
     David Rector

                                           Director          September 27, 2006
---------------------------------
     Mitch Stoltz


                                      -57-



<PAGE>

                            SUPERIOR GALLERIES, INC.

                          INDEX TO FINANCIAL STATEMENTS



Independent Registered Public Accounting Firms' Reports .....................F-2

Financial Statements

     Balance Sheets..........................................................F-3

     Statements of Operations................................................F-5

     Statements of Stockholders' Equity (Deficit)............................F-7

     Statements of Cash Flows................................................F-8

     Notes to Financial Statements..........................................F-11


                                      F-1



<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Superior Galleries, Inc.
Beverly Hills, California

         We have audited the balance sheets of Superior Galleries, Inc. (the
"Company") as of June 30, 2006 and 2005, and the related statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended June 30, 2006. Our audits also included the financial
statement schedule of Superior Galleries, Inc. listed in Item 8. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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. 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
audits provided a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Superior Galleries,
Inc. as of June 30, 2006 and 2005, and the results of its operations and its
cash flows for each of the three years in the period ended June 30, 2006, in
conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.


Los Angeles, California
September 21, 2006


                                      F-2



<PAGE>

<TABLE>
<S>     <C>
                                              SUPERIOR GALLERIES, INC.
                                                   BALANCE SHEETS
                                                   (In thousands)


                                                                                 JUNE 30, 2006       JUNE 30, 2005
                                                                                ---------------     ---------------
CURRENT ASSETS

     Cash and cash equivalents (Note 1)                                         $         4,770     $           417
     Accounts receivable, net of allowance for doubtful
       accounts of $363 (2006) and $122 (2005) (Note 1)                                   4,987               4,969
     Auction and customer advances (Notes 1, 5 and 6)                                     1,829               4,950
     Inventories, net of reserve of $840 (2006) and $0 (2005)
       (Notes 1, 2, 6, 7, 8 and 9)                                                        7,592               8,713
     Prepaid expense                                                                        232                 346
                                                                                ---------------     ---------------
         Total current assets                                                            19,410              19,395

Property and equipment, net (Notes 1 and 3)                                                 384                 220

         TOTAL ASSETS                                                           $        19,794     $        19,615
                                                                                ===============     ===============

                                        LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

      Line of credit - related party (Note 6)                                   $        10,850     $         9,250
      Line of credit (Note 7)                                                                --               2,200
      Accounts payable and accrued expenses                                               8,619               5,154
      Notes payable to a related party (Note 8)                                             200                 350
      Series A stock redemption payable (Note 11)                                            --                 275
      Notes payable (Note 9)                                                                650                 650
                                                                                ---------------     ---------------

         Total current liabilities                                              $        20,319     $        17,879
                                                                                ===============     ===============


                                  (See accompanying Notes to Financial Statements)

                                                        F-3



<PAGE>

                                                 SUPERIOR GALLERIES, INC.
                                                BALANCE SHEETS (CONTINUED)
                                                      (In thousands)


                                                                                    JUNE 30, 2006         JUNE 30, 2005
                                                                                   ----------------      ----------------
LONG-TERM LIABILITIES

   Notes payable to a related party, net of current portion (Note 8)               $            300      $            400
                                                                                   ----------------      ----------------

       Total long-term liabilities                                                              300                   400
                                                                                   ----------------      ----------------

         TOTAL LIABILITIES                                                                   20,619                18,279
                                                                                   ----------------      ----------------

COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS (NOTES 5, 6, 7, 8, 9, 10, 11,
   12, 13, 14 AND 16)

STOCKHOLDERS' EQUITY (NOTE 11)
   Preferred Stock, 1,975 shares undesignated, none outstanding                                  --                    --
   Series B convertible preferred stock $1.00 par value, 3,400 shares
     designated 3,400 shares issued and outstanding with a liquidation
     preference of $3,400                                                                     2,967                 2,967
   Series D convertible preferred stock $1.00 par value, 2,000 shares
     designated 2,000 shares issued and outstanding with a liquidation
     preference of $2,000                                                                     1,931                 1,931
   Series E convertible preferred stock $1.00 par value, 2,500 shares
     designated 2,500 shares issued and outstanding with a liquidation
     preference of $2,500                                                                     2,488                 2,488
   Common stock, $.001 par value, 12,500 shares authorized, 4,808 (2006)
     and 4,820 (2005) issued and outstanding                                                      5                     5
   Additional paid in capital                                                                 8,788                 8,459
   Accumulated deficit                                                                      (17,004)              (14,514)
                                                                                   ----------------      ----------------

       Total stockholders' equity                                                              (825)                1,336

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $         19,794      $         19,615
                                                                                   ================      ================


                                     (See accompanying Notes to Financial Statements)

                                                           F-4



<PAGE>

                                           SUPERIOR GALLERIES, INC.
                                           STATEMENTS OF OPERATIONS
                                     (In thousand, except per share data)


                                                    YEAR ENDED            YEAR ENDED            YEAR ENDED
                                                 ----------------      ----------------      ----------------
                                                   JUNE 30, 2006        JUNE 30, 2005         JUNE 30, 2004
                                                 ----------------      ----------------      ----------------

Net sales                                        $         43,302      $         37,340      $         26,916
Commission income                                           3,015                 2,195                 3,081
                                                 ----------------      ----------------      ----------------
TOTAL REVENUE                                              46,317                39,535                29,997

COST OF SALES                                              38,393                32,027                23,382
                                                 ----------------      ----------------      ----------------

GROSS PROFIT                                                7,924                 7,508                 6,615
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                9,792                 7,708                 5,959
                                                 ----------------      ----------------      ----------------

Income (loss) from operations                              (1,868)                 (200)                  656
                                                 ----------------      ----------------      ----------------

OTHER INCOME (EXPENSE)
 Interest income                                              361                   376                   476
 Interest expense (Notes 6, 7, 8 and 9)                    (1,030)                 (788)                 (535)
 Other expense, net                                            --                    (3)                  (33)
                                                 ----------------      ----------------      ----------------

     Total other income (expense)                            (669)                 (415)                  (92)
                                                 ----------------      ----------------      ----------------

INCOME (LOSS) BEFORE PROVISION FOR INCOME
  TAXES AND EXTRAORDINARY ITEM                             (2,537)                 (615)                  564

INCOME TAX PROVISION (NOTE 10)                                  2                     1                    12
                                                 ----------------      ----------------      ----------------

Income (loss) before extraordinary item                    (2,539)                 (616)                  552

Extraordinary gain from extinguishment of
  debt, net of applicable taxes (Notes 7 and 16)               50                    --                    --
                                                 ----------------      ----------------      ----------------

NET INCOME (LOSS)                                $         (2,489)     $           (616)     $            552
                                                 ================      ================      ================


                               (See accompanying Notes to Financial Statements)

                                                     F-5



<PAGE>

                                              SUPERIOR GALLERIES, INC.
                                        STATEMENTS OF OPERATIONS (CONTINUED)
                                        (in thousand, except per share data)


                                                             YEAR ENDED           YEAR ENDED          YEAR ENDED
                                                          ----------------     ----------------     ---------------
                                                            JUNE 30, 2006        JUNE 30, 2005       JUNE 30, 2004
                                                          ----------------     ----------------     ---------------

Calculation of net income (loss) per share:
Net income (loss)                                         $         (2,489)    $           (616)    $           552
Preferred stock accretion                                               --                   --                 (50)
Preferred stock dividend                                                --                   --                 (37)
                                                          ----------------     ----------------     ---------------
Net income (loss) applicable to common shares             $         (2,489)    $           (616)    $           465
                                                          ================     ================     ===============

NET INCOME (LOSS) PER COMMON SHARE:
 Basic:
   Income (loss) before extraordinary item                           (0.53)               (0.13)               0.11
   Extraordinary item net of applicable taxes                         0.01                   --                  --
                                                          ----------------     ----------------     ---------------
   Net income (loss)                                                 (0.52)               (0.13)               0.11
                                                          ================     ================     ===============
 Fully Diluted
   Income (loss) before extraordinary item                           (0.53)               (0.13)               0.06
   Extraordinary item net of applicable taxes                         0.01                   --                  --
                                                          ----------------     ----------------     ---------------
   Net income (loss)                                                 (0.52)               (0.13)               0.06
                                                          ================     ================     ===============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
     Basic                                                           4,817                4,627               4,370
                                                          ================     ================     ===============
     Fully diluted                                                   4,817                4,627               8,098
                                                          ================     ================     ===============


                                 (See accompanying Notes to Financial Statements)

                                                        F-6

<PAGE>

                                                      SUPERIOR GALLERIES, INC.
                                            STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                          FOR THE YEARS ENDED JUNE 30, 2006, 2005 AND 2004
                                                           (In thousands)


                         SERIES B            SERIES D           SERIES E                                        RETAINED    TOTAL
                     PREFERRED STOCK     PREFERRED STOCK     PREFERRED STOCK           COMMON       ADDITIONAL  EARNINGS    STOCK-
                    ------------------  ------------------  ------------------  -------------------  PAID IN  (ACCUMULATED HOLDER'S
                     SHARES    AMOUNT    SHARES    AMOUNT    SHARES    AMOUNT    SHARES     AMOUNT   CAPITAL    DEFICIT)    EQUITY
                    --------  --------  --------  --------  --------  --------  --------   --------  --------   --------   --------

BALANCE,
  JUNE 30, 2003        3,400     2,967     2,000     1,931        --        --     2,641          3     7,940    (14,412)    (1,572)

 Issuance of
   common
   stock
   (Note 11)              --        --        --        --        --        --     1,845          1        --         --          2
 Fair value of
   options
   granted                --        --        --        --        --        --        --         --        22         --         22
 Accretion of
   redemption
   value of
   Series A
   Preferred
   Stock
   (Note 11)              --        --        --        --        --        --        --         --       (50)        --        (50)
 Dividends on
   preferred
   stock                  --        --        --        --        --        --        --         --        --        (38)       (38)
     Net income           --        --        --        --        --        --        --         --        --        552        552
                    --------  --------  --------  --------  --------  --------  --------   --------  --------   --------   --------
BALANCE,
  JUNE 30, 2004        3,400  $  2,967     2,000  $  1,931        --  $     --     4,486   $      4  $  7,912   $(13,898)  $ (1,084)

 Issuance of
   Series E
   Preferred
   stock, net
   of offering
   cost
   (Note 11)              --        --        --        --     2,500     2,488        --         --        --         --      2,488
 Issuance of
   common stock
   (Note 11)              --        --        --        --        --        --       105         --        77         --         77
 Fair value of
   options
   granted                --        --        --        --        --        --        --         --        92         --         92
 Fair value of
   common
   stock issued
   for services
   (Note 11)              --        --        --        --        --        --       229          1       378         --        379
         Net loss         --        --        --        --        --        --        --         --        --       (616)      (616)
                    --------  --------  --------  --------  --------  --------  --------   --------  --------   --------   --------
BALANCE,
  JUNE 30, 2005        3,400  $  2,967     2,000  $  1,931     2,500  $  2,488     4,820   $      5  $  8,459   $(14,514)  $  1,336

 Issuance/
   cancellation
   of common
   stock
   (Note 11)              --        --        --        --        --        --       (12)        --       (24)        --        (24)
 Fair value of
   options
   granted                --        --        --        --        --        --        --         --       410         --        410
 Fair value of
   common
   stock issued
   for services
   (Note 11)              --        --        --        --        --        --        --         --       (57)        --        (57)
         Net loss         --        --        --        --        --        --        --         --        --     (2,489)    (2,489)
                    --------  --------  --------  --------  --------  --------  --------   --------  --------   --------   --------
BALANCE,
  JUNE 30, 2006        3,400  $  2,967     2,000  $  1,931     2,500  $  2,488     4,808   $      5  $  8,788   $(17,004)  $   (825)
                    ========  ========  ========  ========  ========  ========  ========   ========  ========   ========   ========


                                        (See accompanying Notes to Financial Statements)

                                                                F-7



<PAGE>

                                                 SUPERIOR GALLERIES, INC.
                                                 STATEMENTS OF CASH FLOWS
                                                      (In thousands)


                                                              YEAR ENDED            YEAR ENDED           YEAR ENDED
                                                             JUNE 30, 2006         JUNE 30, 2005        JUNE 30, 2004
                                                            ---------------       ---------------      ---------------
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)                                           $        (2,489)      $          (616)     $           552
Adjustments to reconcile net income (loss) to net cash
  used in operating activities:
  Depreciation and amortization                                         145                    77                   94
  Loss on retirement of property and equipment                           --                     3                   33
Fair value of common stock options granted                              410                   379                   22
Fair value of common stock issued for services rendered                  36                    92                   --
Increase (decrease) in cash from changes in assets and
  liabilities
    Accounts receivable                                                 (18)               (1,256)                (887)
    Auction and customer advances, net                                3,121                 1,451               (2,907)
    Inventories                                                       1,122                (2,606)              (3,609)
    Prepaid expenses and other                                          114                  (296)                  39
    Other assets                                                         --                    11                    3
    Accounts payable and accrued expenses                             3,348                (2,107)                 423

Net cash provided by (used in) operating activities                   5,788                (4,868)              (6,237)
                                                            ---------------       ---------------      ---------------
CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment                                     310                  (164)                 (56)
Proceeds from sale of property and equipment                             --                    --                   10
Net cash provided by (used in) investing activities                     310                  (164)                 (46)
                                                            ===============       ===============      ===============


                                     (See accompanying Notes to Financial Statements)

                                                           F-8



<PAGE>

                                              SUPERIOR GALLERIES, INC.
                                        STATEMENTS OF CASH FLOWS (CONTINUED)
                                                   (In thousands)


                                                            YEAR ENDED            YEAR ENDED           YEAR ENDED
                                                          JUNE 30, 2006         JUNE 30, 2005        JUNE 30, 2004
                                                         ---------------       ---------------      ---------------
CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings under related party line of credit                     10,600                 8,400               11,000
Repayments under related party line of credit                     (9,000)               (5,750)              (4,400)
Borrowings under lines of credit                                      --                    --                3,300
Extraordinary gain on early payoff of line of credit                 (50)                   --                   --
Repayments under lines of credit                                  (2,150)                 (300)              (3,300)
Borrowings under notes payable                                        --                   650                   --
Repayments under notes payable                                        --                    --                  (64)
Borrowings under related party debt                                   --                    --                   --
Repayments under related party debt                                 (250)                 (150)                (460)
Payments under Series A preferred stock redemption                  (275)                 (413)                  --
Issuance of common shares                                             --                    77                    2
Issuance of Series E preferred shares, net of
  offering expenses                                                   --                 2,488                   --
Payment of dividends on preferred stock                               --                    --                  (37)
                                                         ---------------       ---------------      ---------------
Net cash provided by (used in) financing activities               (1,125)                5,002                6,041
                                                         ---------------       ---------------      ---------------

Net (decrease) increase in cash and equivalents                    4,353                   (30)                (242)

Cash and cash equivalents beginning of year                          417                   447                  689
                                                         ---------------       ---------------      ---------------
Cash and cash equivalents, end of year                   $         4,770       $           417      $           447
                                                         ===============       ===============      ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

Interest                                                 $         1,030       $           788      $           749
                                                         ===============       ===============      ===============
Income taxes                                             $             2       $             1      $             9
                                                         ===============       ===============      ===============


                                  (See accompanying Notes to Financial Statements)

                                                        F-9



<PAGE>

                                              SUPERIOR GALLERIES, INC.
                                        STATEMENTS OF CASH FLOWS (CONTINUED)
                                                   (In thousands)


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITY

During the years ended June 30, 2006, 2005 and 2004, the Company completed
non-cash transactions as follows:

                                                                   YEAR ENDED       YEAR ENDED       YEAR ENDED
                                                                 JUNE 30, 2006    JUNE 30, 2005    JUNE 30, 2004
                                                                 -------------    -------------    -------------
 NON-CASH INVESTING AND FINANCING ACTIVITIES

 Accretion of redemption value of Series A Preferred stock                   -                -               50
 Series A preferred stock redemption liability                               -                -              688
 Cancellation of treasury common stock                                     (40)               -                -


                                (See accompanying Notes to Financial Statements)

                                                      F-10
</TABLE>



<PAGE>

                            SUPERIOR GALLERIES, INC.
                          NOTES TO FINANCIAL STATEMENTS


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION AND BUSINESS

         Superior Galleries, Inc. ("Superior" or the "Company") is a wholesaler,
         retailer, and auctioneer of rare coins. The Company is based in Beverly
         Hills, California. On June 30, 2003 as part of a reincorporation in the
         State of Delaware the Company's name was changed to Superior Galleries,
         Inc. from Tangible Asset Galleries, Inc. Additionally, the Company's
         subsidiary Superior Galleries, Inc., a Nevada corporation, name was
         changed to Superior Galleries Beverly Hills, Inc. ("SGBH"). As of July
         1, 2003, all operations in SGBH ceased and were transferred to
         Superior.

         RECLASSIFICATIONS

         Certain amounts for the fiscal year ended June 30, 2005 have been
         reclassified to conform with the presentation of the June 30, 2006
         amounts. These reclassifications have no effect on reported net income
         (loss).

         CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid investments with original
         maturities of three months or less when purchased to be cash
         equivalents. The Company places its cash with high credit quality
         institutions. The Federal Deposit Insurance Corporation ("FDIC")
         insures cash accounts at each institution for up to $100,000. From time
         to time, the Company maintains cash in excess of the FDIC limit.

         ACCOUNTS RECEIVABLE.

         The Company evaluates specific accounts receivable balances when it
         becomes aware of a situation where a client may not be able to meet
         its financial obligations to the Company, as indicated by delinquent
         payments. The amount of the required allowance is based on the facts
         available to the Company and is reevaluated and adjusted as additional
         information is available, including its right to offset debts with
         accounts payable balances and the proceeds from consigned inventory
         sales. Allowances are also established for probable loss inherent in
         the remainder of the accounts receivable based on a factor of 0.1% of
         total gross sales.

         INVENTORIES

         Inventories consisting of rare coins and second-hand jewelry are stated
         (on a specific identification basis) at the lower of cost or fair
         market value. As of June 30, 2006, management of the company recorded a
         fair market reserve of $840,000 primarily against ungraded coins and
         coins held over one year.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost and are depreciated or
         amortized (as applicable) using the straight-line method over the
         estimated useful lives of the related assets, ranging from three to
         seven years. Maintenance and repairs are charged to expense as
         incurred. Significant renewals and betterments are capitalized. At the
         time of retirement or other disposition of property and equipment, the
         cost and accumulated depreciation and amortization are removed from the
         accounts and any resulting gain or loss is reflected in operations.

         The Company assesses the recoverability of property and equipment by
         determining whether the depreciation and amortization of property and
         equipment over its remaining life can be recovered through projected
         un-discounted future cash flows. The amount of property and equipment
         impairment, if any, is measured based on fair value and is charged to
         operations in the period in which property and equipment impairment is
         determined by management. At June 30, 2006 and 2005, management of the
         Company has not identified any impaired assets.


                                      F-11



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         GOODWILL

         Effective July 1, 2002, the Company adopted Statement of Financial
         Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
         Assets." SFAS 142 requires that goodwill be tested for impairment on an
         annual basis. As the Company recorded goodwill for its purchase of its
         SGBH subsidiary in July 2001, it tested the goodwill for impairment
         during the quarter ended December 31, 2002. Management estimated the
         fair value of the reporting unit (i.e. Company as a whole) using a
         present value model on estimated future cash flows. This value was then
         adjusted to calculate the implied fair value of goodwill based on the
         allocation of the reporting units assets and liabilities. The
         calculation identified that the implied fair value was less than the
         carrying amount of goodwill, indicating that the goodwill had been
         impaired. Based on this analysis, goodwill was determined to be fully
         impaired and the Company recorded an impairment of goodwill charge to
         operations of $591,000 during the quarter ended December 31, 2002,
         which removed the goodwill account from the balance sheet.

         USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America 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 date of the financial statements, and the
         reported amounts of revenues and expenses during the reported periods.
         Actual results could materially differ from those estimates. Areas
         where significant estimation is involved include, but are not limited
         to, the evaluation of the collectibility of accounts receivable, and,
         auction and customer advances, and the realizability and valuation of
         inventories.

         REVENUE RECOGNITION

         The Company generates revenue from wholesale and retail sales of rare
         coins, precious metals bullion and second-hand jewelry. The recognition
         of revenue varies for wholesale and retail transactions and is, in
         large part, dependent on the type of payment arrangements made between
         the parties. We recognize sales on an F.O.B. shipping point basis.

         The Company sells rare coins to other wholesalers/dealers within its
         industry on credit, generally for terms of 15 to 60 days, but in no
         event greater than one year. The Company grants credit to new dealers
         based on extensive credit evaluations and for existing dealers based on
         established business relationships and payment histories. The Company
         generally does not obtain collateral with which to secure its accounts
         receivable when the sale is made to a dealer. The Company maintains
         reserves for potential credit losses based on an evaluation of specific
         receivables, offset rights and the Company's historical experience
         related to credit losses. As of June 30, 2006 and 2005, management
         established an accounts receivable reserve of $363,000 and $122,000,
         respectively.


                                      F-12



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         REVENUE RECOGNITION (CONTINUED)

         The Company also sells rare coins to retail customers on credit,
         generally for terms of 30 to 60 days, but in no event greater than one
         year. The Company grants credit to retail customers based on extensive
         credit evaluations and for existing retail customers based on
         established business relationships and payment histories. When a retail
         customer is granted credit, the Company generally collects a payment of
         25% of the sales price, establishes a payment schedule for the
         remaining balance and holds the merchandise as collateral as security
         against the customer's receivable until all amounts due under the
         credit arrangement are paid in full. If the customer defaults in the
         payment of any amount when due, the Company may declare the customer's
         obligation in default, liquidate the collateral in a commercially
         reasonable manner using such proceeds to extinguish the remaining
         balance and disburse any amount in excess of the remaining balance to
         the customer.

         Under this retail arrangement, revenues are recognized when the
         customer agrees to the terms of the credit and makes the initial
         payment. The Company's has a limited-in-duration money back guaranty
         policies (as discussed below).

         In limited circumstances, the Company exchanges merchandise for similar
         merchandise and/or monetary consideration with both dealers and retail
         customers, for which the Company recognizes revenue in accordance with
         APB No. 29, "ACCOUNTING FOR NON-MONETARY TRANSACTIONS." When the
         Company exchanges merchandise for similar merchandise and there is no
         monetary component to the exchange, the Company does not recognize any
         revenue. Instead, the basis of the merchandise relinquished becomes the
         basis of the merchandise received, less any indicated impairment of
         value of the merchandise relinquished. When the Company exchanges
         merchandise for similar merchandise and there is a monetary component
         to the exchange, the Company recognizes revenue to the extent of
         monetary assets received and determines the cost of sale based on the
         ratio of monetary assets received to monetary and non-monetary assets
         received multiplied by the cost of the assets surrendered.

         The Company has a return policy (money-back guarantee). The policy
         covers retail transactions involving graded rare coins only. Customers
         may return graded rare coins purchased within 7 days of the receipt of
         the rare coins for a full refund as long as the rare coins are returned
         in exactly the same condition as they were delivered. In the case of
         rare coin sales on account, customers may cancel the sale within 7 days
         of making a commitment to purchase the rare coins. The receipt of a
         deposit and a signed purchase order evidences the commitment. Any
         customer may return a coin if they can demonstrate that the coin is not
         authentic, or there was an error in the description of a graded coin.

         Revenues from the sale of consigned goods are recognized as commission
         income on such sale if the Company is acting as an agent for the
         consignor. If in the process of selling consigned goods, the Company
         makes an irrevocable payment to a consignor for the full amount due on
         the consignment and the corresponding receivable from the buyer(s) has
         not been collected by the Company at that payment date, the Company
         records that payment as a purchase and the sale of the consigned
         good(s) to the buyer as revenue as the Company has assumed all
         collection risk.


                                      F-13



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         REVENUE RECOGNITION (CONTINUED)

         The Company's auction businesses generate revenue in the form of
         commissions charged to buyers and sellers of auction lots. Auction
         commissions include buyers' commissions, sellers' commissions, and
         buyback commissions, each of which are calculated based on a percentage
         of the hammer price.

         Buyers' and sellers' commissions are recognized upon the confirmation
         of the identification of the winning bidders. Funds charged to winning
         bidders include the hammer price plus the commission. Only the
         commission portion of the funds received by winning bidders is recorded
         as revenue.

         Buyback commissions represent an agreed upon rate charged by the
         Company for goods entered in the auction and not sold. Goods remain
         unsold when an auction lot does not meet the consignor reserve, which
         is the minimum sales price as determined prior to auction, and when
         items sold at auction are returned subsequent to the winning bidder
         taking possession. Returns from winning bidders are very limited and
         primarily occur when a rare coin sold auction has an error in its
         description in which the winner bidder relied upon to purchase the
         item. Buyback commission is recognized along with sellers' commission
         or at the time an item is returned.

         ADVERTISING

         Advertising costs are expensed as incurred. During the years ended June
         30, 2006, 2005 and 2004, advertising expenses were $762,000, $633,000
         and $578,000, respectively.

         INCOME TAXES

         The Company accounts for income taxes under Statement of Financial
         Accounting Standards No. 109, "ACCOUNTING FOR INCOME TAXES," ("SFAS
         109"). Under SFAS 109, deferred tax assets and liabilities are
         recognized for the future tax consequences attributable to differences
         between the financial statement carrying amounts of existing assets and
         liabilities and their respective tax bases. Deferred tax assets and
         liabilities are measured using enacted tax rates expected to apply to
         taxable income in the years in which those temporary differences are
         expected to be recovered or settled. A valuation allowance is provided
         for significant deferred tax assets when it is more likely than not
         that such assets will not be recovered.


                                      F-14



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         STOCK-BASED COMPENSATION

         In March 2004, the FASB issued SFAS No. 123(R), "SHARE-BASED PAYMENT."
         SFAS 123(R) amends SFAS No. 123, "ACCOUNTING FOR STOCK-BASED
         COMPENSATION," and APB Opinion 25, "ACCOUNTING FOR STOCK ISSUED TO
         EMPLOYEES." SFAS No.123(R) requires that the cost of share-based
         payment transactions (including those with employees and non-employees)
         be recognized in the financial statements. SFAS No. 123(R) applies to
         all share-based payment transactions in which an entity acquires goods
         or services by issuing (or offering to issue) its shares, share
         options, or other equity instruments (except for those held by an ESOP)
         or by incurring liabilities (1) in amounts based (even in part) on the
         price of the entity's shares or other equity instruments, or (2) that
         require (or may require) settlement by the issuance of an entity's
         shares or other equity instruments. This statement is effective (1) for
         public companies qualifying as SEC small business issuers, as of the
         first interim period or fiscal year beginning after March 15, 2005, or
         (2) for all other public companies, as of the first interim period or
         fiscal year beginning after June 15, 2005, or (3) for all nonpublic
         entities, as of the first fiscal year beginning after March 15, 2005.

         Currently the Company uses the Black-Scholes option pricing model to
         estimate the fair value of stock options granted to employees and is
         evaluating option valuation models including Black Scholes to determine
         which model the Company will use upon the adoption of SFAS No. 123(R).
         The Company adopted SFAS No. 123(R) effective with its fiscal year
         beginning July 1, 2005.

         EARNINGS (LOSS) PER SHARE

         Basic "Earnings Per Share ("EPS")," is computed as net income (loss)
         applicable to common shares divided by the weighted average number of
         common shares outstanding for the period. Net income (loss) applicable
         to common shares is calculated as net income (loss) less dividends and
         accretion on preferred stock. No dividends were paid nor were there any
         accretion on preferred stock for the years ended June 30, 2006 and
         2005. Dividends and accretion on preferred stock totaled $37,000 and
         $50,000, respectively, for the year ended June 30, 2004. Diluted EPS
         reflects the potential dilution that could occur from common shares
         issuable through stock options, warrants and other convertible
         securities. The total potential common shares that have not been
         included in the calculation of diluted net loss per common share
         totaled 4,250,000 on June 30, 2006 and 3,808,000 at June 30, 2005 as
         the effects of such are anti-dilutive for those years. All share and
         per share amounts have been retroactively adjusted for the effect of a
         one-for-twenty reverse stock split of the Company's common stock at
         June 30, 2003.

         CUSTOMER AND VENDOR CONCENTRATIONS

         During the years ended June 30, 2006, 2005 and 2004, the Company had no
         customer that accounted for 10% or more of the Company's net sales. As
         of June 30, 2006, the Company had one customer that represented 18.7%
         or more of accounts receivable as of such date; and all other customers
         represented less than 9.2% of accounts receivable. As of June 30, 2005,
         the Company had no customer that represented 10% or more of accounts
         receivable as of such date. As of June 30, 2004, the Company had one
         customer that represented 18% of accounts receivable as of such date.


                                      F-15



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         CUSTOMER AND VENDOR CONCENTRATIONS (CONTINUED)

         During the year ended June 30, 2006, the Company purchased 10.5% of its
         inventories from one vendor, and all other vendors represented less
         than 6.0% of inventory purchases. During the years ended June 30, 2005
         and 2004, the Company did not purchase 10% or more of its inventories
         from any single vendor. As of June 30, 2006, the Company had one vendor
         that represented 32% of accounts payable; two vendors that represented
         approximately 16% each, and all other venders represented less than 4%
         each as of such date. As of June 30, 2005, the Company had one vendor
         that represented 20% of accounts payable of such date; and as of June
         30, 2004 the Company had no vendor that represented 10% or more of
         accounts payable as of such date.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107, "DISCLOSURES ABOUT
         FAIR VALUE OF FINANCIAL INSTRUMENTS," issued in December 1991, requires
         the disclosure of the fair value, if reasonably obtainable, of the
         Company's financial instruments including assets and liabilities that
         both (a) impose on one entity a contractual obligation (1) to deliver
         cash or another financial instrument to a second entity or (2) to
         exchange other financial instruments on potentially unfavorable terms
         with the second entity; and (b) convey to that second entity a
         contractual right (1) to receive cash or another financial instrument
         from the first entity or (2) to exchange other financial instruments on
         potentially favorable terms with the first entity.

         The Company's financial instruments consist of its cash, accounts
         receivable, line of credit, accounts payable and accrued expense; note
         payable and notes payable to related parties. Management has determined
         that, except for the allowance for doubtful accounts receivable, the
         fair values of the Company's financial instruments approximate their
         carrying values at June 30, 2006 and 2005.

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         SFAS No. 151
         ------------
         In November 2004, the FASB issued SFAS No. 151, "INVENTORY COSTS." SFAS
         No. 151 amends the accounting for abnormal amounts of idle facility
         expense, freight, handling costs, and wasted material (spoilage) under
         the guidance in ARB No. 43, Chapter 4, "Inventory Pricing." Paragraph 5
         of ARB No. 43, Chapter 4, previously stated that ." . . under some
         circumstances, items such as idle facility expense, excessive spoilage,
         double freight, and rehandling costs may be so abnormal as to require
         treatment as current period charges. . . ." This Statement requires
         that those items be recognized as current-period charges regardless of
         whether they meet the criterion of "so abnormal." In addition, this
         Statement requires that allocation of fixed production overheads to the
         costs of conversion be based on the normal capacity of the production
         facilities. This statement is effective for inventory costs incurred
         during fiscal years beginning after June 15, 2005. Management does not
         expect adoption of SFAS No. 151 to have a material impact on the
         Company's financial statements.


                                      F-16



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

         SFAS No. 152
         ------------
         In March 2004, the FASB issued SFAS No. 152, "ACCOUNTING FOR REAL
         ESTATE TIME-SHARING TRANSACTIONS." The FASB issued this Statement as a
         result of the guidance provided in AICPA Statement of Position (SOP)
         04-2, "Accounting for Real Estate Time-Sharing Transactions." SOP 04-2
         applies to all real estate time-sharing transactions. Among other
         items, the SOP provides guidance on the recording of credit losses and
         the treatment of selling costs, but does not change the revenue
         recognition guidance in SFAS No. 66, "ACCOUNTING FOR SALES OF REAL
         ESTATE," for real estate time-sharing transactions. SFAS No. 152 amends
         Statement No. 66 to reference the guidance provided in SOP 04-2. SFAS
         No. 152 also amends SFAS No. 67, "Accounting for Costs and Initial
         Rental Operations of Real Estate Projects," to state that SOP 04-2
         provides the relevant guidance on accounting for incidental operations
         and costs related to the sale of real estate time-sharing transactions.
         SFAS No. 152 is effective for years beginning after June 15, 2005, with
         restatements of previously issued financial statements prohibited. This
         statement is not applicable to the Company.

         SFAS No. 153
         ------------
         In March 2004, the FASB issued SFAS No. 153, "EXCHANGES OF NONMONETARY
         ASSETS," an amendment to Opinion No. 29, "Accounting for Nonmonetary
         Transactions." Statement No. 153 eliminates certain differences in the
         guidance in Opinion No. 29 as compared to the guidance contained in
         standards issued by the International Accounting Standards Board. The
         amendment to Opinion No. 29 eliminates the fair value exception for
         nonmonetary exchanges of similar productive assets and replaces it with
         a general exception for exchanges of nonmonetary assets that do not
         have commercial substance. Such an exchange has commercial substance if
         the future cash flows of the entity are expected to change
         significantly as a result of the exchange. SFAS No. 153 is effective
         for nonmonetary asset exchanges occurring in periods beginning after
         June 15, 2005. Earlier application is permitted for nonmonetary asset
         exchanges occurring in periods beginning after March 16, 2004.
         Management does not expect adoption of SFAS No. 153 to have a material
         impact on the Company's financial statements.

         FAS No. 154
         -----------
         In May 2005, the FASB issued Statement of Accounting Standards (SFAS)
         No. 154, "ACCOUNTING CHANGES AND ERROR CORRECTIONS" an amendment to
         Accounting Principles Bulletin (APB) Opinion No. 20, "Accounting
         Changes," and SFAS No. 3, "REPORTING ACCOUNTING CHANGES IN INTERIM
         FINANCIAL STATEMENTS" though SFAS No. 154 carries forward the guidance
         in APB No. 20 and SFAS No. 3 with respect to accounting for changes in
         estimates, changes in reporting entity, and the correction of errors.
         SFAS No. 154 establishes new standards on accounting for changes in
         accounting principles, whereby all such changes must be accounted for
         by retrospective application to the financial statements of prior
         periods unless it is impracticable to do so. SFAS No. 154 is effective
         for accounting changes and error corrections made in fiscal years
         beginning after December 15, 2005, with early adoption permitted for
         changes and corrections made in years beginning after May 2005.


                                      F-17



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)

         FIN  No. 47
         -----------
         In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47,
         "Accounting for Conditional Asset Retirement Obligations." FIN No. 47
         clarifies the meaning of the term CONDITIONAL ASSET RETIREMENT
         OBLIGATION as used in FASB Statement No. 143, "Accounting for Asset
         Retirement Obligations" and clarifies when an entity would have
         sufficient information to reasonably estimate the fair value of an
         asset retirement obligation. This interpretation is effective no later
         than the end of fiscal years ending after December 15, 2005 (December
         31, 2005 for calendar-year companies). Retrospective application of
         interim financial information is permitted but is not required.
         Management does not expect adoption of FIN No. 47 to have a material
         impact on the Company's financial statements.

         FIN No. 48.
         -----------
         In June 2006, the FASB issued Interpretation No. 48, Accounting for
         Uncertainty in Income Taxes - An Interpretation of FASB Statement No.
         109, (FIN 48). FIN 48 clarifies the accounting for uncertainty in
         income taxes recognized in an enterprise's financial statements in
         accordance with FASB Statement No. 109, Accounting for Income Taxes.
         FIN 48 also prescribes a recognition threshold and measurement
         attribute for the financial statement recognition and measurement of a
         tax position taken or expected to be taken in a tax return that results
         in a tax benefit. Additionally, FIN 48 provides guidance on
         de-recognition, income statement classification of interest and
         penalties, accounting in interim periods, disclosure, and transition.
         This interpretation is effective for fiscal years beginning after
         December 15, 2006. The Company is currently evaluating the effect that
         the application of FIN 48 will have on its results of operations and
         financial condition.

2.       INVENTORIES

         Inventories are comprised of rare coins, bullion and second-hand
         jewelry.

         Inventory totaling $1,327,000 and $1,286,000 of owned coins was on
         consignment with third parties at June 30, 2006 and 2005, respectively.
         The balance of inventory was located in the Company's vault, at trade
         shows or with appraisal agencies. As of June 30, 2006, management
         reserved $840,000 against the gross inventory cost to reflect its
         analysis of the fair market of each inventory item as determined by
         third party industry sources such as the Certified Coin Exchange,
         offers received from customers on specific coins or publicly documented
         auction results for similar coins.

         The Company, from time to time, enters into informal partnerships with
         third parties who are either vendors or customers for the purchase and
         sale of specific rare coins. These arrangements include joint ownership
         of the rare coin and equal participation in profit or loss on specific
         transactions adjusted for agreed upon expenses and interest costs. When
         the rare coins are purchased the Company records its proportional
         ownership as inventory and upon the sale of the rare coins, the Company
         records its proportional sale and profit or loss. In most instances,
         the Company elects to buy-out the partnership interest in rare coins
         prior to its sale and the recording of a proportional sale and profit
         or loss are no longer applicable. At any given time, the Company may be
         involved in a few of these agreements.


                                      F-18



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


3.       PROPERTY AND EQUIPMENT

         Property and equipment consists of the following:

<TABLE>
                                                       JUNE 30, 2006      JUNE 30, 2005
                                                       -------------      -------------
                                                                (In thousands)
<S>                                                    <C>                <C>
          Furniture and equipment                      $         214      $         143
          Computer equipment and software                        528                351
          Leasehold improvements                                 182                121
                                                       -------------      -------------
                                                                 924                615

         Accumulated depreciation and amortization              (540)              (395)
                                                       -------------      -------------

                                                       $         384      $         220
                                                       =============      =============
</TABLE>

         Depreciation expense for the years ended June 30, 2006, 2005 and 2004
         were $145,000; $77,000 and $94,000, respectively.

4.       GOODWILL

         On July 6, 2001, the Company recorded goodwill for its purchase of its
         SGBH subsidiary in the amount of $591,000. The Company tested the
         goodwill for impairment during the quarter ended December 31, 2002.
         Management estimated the fair value of the reporting unit (i.e. Company
         as a whole) using a present value model on estimated future cash flows.
         This value was then adjusted to calculate the implied fair value of
         goodwill based on the allocation of the reporting unit's assets and
         liabilities. The calculation identified that the implied fair value was
         less than the carrying amount of goodwill, indicating that the goodwill
         had been impaired. Based on this analysis, goodwill was determined to
         be fully impaired and the Company recorded an impairment of goodwill
         charge to operations of $591,000 during the year ended June 30, 2003.


                                      F-19



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


5.       AUCTION AND CUSTOMER ADVANCES

         Superior has established two short-term lending programs consisting of
         (i) advancing consignment customers cash based on consigned inventory
         acquired for upcoming auctions, and, (ii) advancing customers cash
         based on the customer's assigning specific rare coins in their
         inventory to Superior as collateral. According to the terms of its
         Commercial Line of Credit, Superior can advance a customer up to 70% of
         consigned or assigned rare coin(s)' wholesale value. For auction
         advances, Superior will advance cash to a customer and take control of
         the inventory to be held on consignment for auction. The customer will
         sign a note receivable for the funds advanced to be secured by the
         consigned inventory. As consigned inventory is sold, the proceeds will
         be collected, repaying Superior for the auction advance and any auction
         fees, with the remaining amount due to the consignor. For customer
         inventory advances, Superior will advance cash to a customer and take
         control of the assigned inventory. The customer will sign a promissory
         note for the funds advanced to be secured by the assigned inventory.
         Auction and customer advances bear interest at rates between 10% and
         18% based primarily on the customer's creditworthiness and the loan
         size. The average term of the loan is approximately three months and no
         individual loan will exceed one year. Customers may require minimum
         prices for their consigned coins, and if the coin has not sold by the
         loan maturity date, the customer must choose to refinance the loan,
         repay the loan, or permit Superior to liquidate the coin. Superior will
         retain control of the assigned inventory until the customer repays the
         advance. Auction and customer advances consist of the follows:

                                               JUNE 30, 2006      JUNE 30, 2005
                                               --------------     --------------
                                                         (In thousands)

         Auction advances                      $        1,386     $        3,358
         Customer inventory advances                      443              1,592
                                               --------------     --------------
                                               $        1,829     $        4,950
                                               ==============     ==============


                                      F-20



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


6.       LINE-OF-CREDIT - RELATED PARTY

         On October 13, 2003, we executed a Commercial Loan and Security
         Agreement ("Commercial LOC") with Stanford Financial Group Company
         ("SFG"), an affiliate of our principal stockholder, Stanford
         International Bank Limited ("SIBL" or "Stanford"), to provide us with a
         $7,500,000 line of credit for purposes of financing our inventory,
         auction advances and inventory loans to other rare coin dealers and
         collectors. A portion of this indebtedness was assigned to SIBL, and on
         March 31, 2005, as described below, pursuant to SIBL's purchase of
         $2,500,000 of our Series E Preferred Stock, SIBL assumed, converted and
         cancelled $2,500,000 of this indebtedness under the Commercial LOC. In
         addition, SFG further amended the Commercial LOC increasing the line of
         credit to $10,000,000. Effective July 21, 2005 the Commercial LOC was
         renewed through October 1, 2006. On May 2, 2006, SFG further amended
         the Commercial LOC increasing the line of credit to $10,850,000 to
         reflect an additional advance made March 30, 2006, to partially fund
         the repayment of a private line of credit. On September 5, 2006, the
         Commercial LOC was renewed through October 1, 2007. The Commercial LOC
         bears interest at the prime-lending rate (8.25% at June 30, 2006) and
         is secured by substantially all of Superior's assets. As of June 30,
         2006, the outstanding balance was $10,850,000 and there was no accrued
         interest payable. During the years ended June 30, 2006, 2005 and 2004,
         Superior incurred interest expense on the line of credit - related
         party totaling $701,000; $394,000 and $104,000, respectively.

7.       LINES-OF-CREDIT

         On July 9, 2002 and July 26, 2002 the Company entered into temporary
         working capital loan agreements with a private Lender ("Lender") in the
         amounts of $1,500,000 and $1,000,000 respectively. These loans bore
         interest at the prime lending rate plus 7% per annum (11% at June 30,
         2003), were secured by the inventory of the Company and a personal
         guarantee of the Company's chief executive officer and a principal
         stockholder, and, were due to be repaid in 60 days. On August 8, 2002
         the Company converted the two loans from the Lender into a Line of
         Credit with the Lender by executing a Secured Revolving Line of Credit
         Agreement ("Private Line of Credit"). The Private Line of Credit was
         modified and extended a number of times between August 2002 and March
         2006. On March 31, 2006, the Company repaid the balance of the line of
         credit of $1,900,000 by applying the accounts receivable from the sale
         of $1,000,000 of rare coins to the Lender, by making a payment of
         $850,000 in cash and by receiving a $50,000 discount for early payment.
         The $50,000 discount was classified as an extraordinary gain on the
         Statement of Operations. As of June 30, 2005, the outstanding Private
         Line of Credit balance was $2,200,000 and there was no accrued interest
         payable. As of June 30, 2006, the outstanding Private Line of Credit
         balance was $0 and there was no accrued interest payable.


                                      F-21



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


8.       NOTES PAYABLE TO A RELATED PARTY

         On April 10, 2002 we executed a subordinated note payable for
         $1,000,000 to our CEO, Silvano DiGenova, bearing interest at 9% per
         annum with quarterly installment payments of $150,000 plus interest. No
         principal payments had been made through February 2003. On February 14,
         2003, the terms of the note were modified to provide for repayment of
         principal in the amount of $50,000 per quarter commencing on September
         30, 2003 and for interest to be paid monthly. The Company was in
         arrears of $150,000 of principal payments that were due on December 31,
         2004, March 31, 2005 and June 30, 2005 of $50,000 each. However, Mr.
         DiGenova agreed to delay these principal repayments to September 30,
         2005. As of the year ending June 30, 2005, the outstanding balance was
         $750,000 and all interest payments were paid to date and continued to
         be paid current on a monthly basis. During the year ended June 30,
         2006, the note was reduced by $250,000 and the interest rate was
         changed to 12%. At June 30, 2006, the balance due was $500,000 and
         there was no accrued interest payable. The remaining balance is due as
         follows:

                                              JUNE 30, 2006      JUNE 30, 2005
                                              --------------     --------------
                                                        (In thousands)

         Total                                 $         500     $          750
         Less current portion                           (200)              (350)
                                              --------------     --------------
         Long-term                            $          300     $          400
                                              ==============     ==============

         Interest expense incurred to notes payable to related parties during
         the year ended June 30, 2006, 2005 and 2004 totaled $66,000, $78,000
         and $101,000, respectively. Future minimum payments under notes payable
         to a related party are as follows:


                    YEAR ENDING           AMOUNT
                      JUNE 30,        (IN THOUSANDS)
                   --------------     --------------
                        2007               $200
                        2008               $300
                                           ----
                                           $500
                                           ====

9.       NOTES PAYABLE

         During October 2004 the Company executed three demand notes payable
         with a private lender totaling $650,000 bearing interest at 10% per
         annum secured by specific inventory. Interest is payable monthly. As of
         January 1, 2006 the interest rate increased to 12% per annum. As of
         June 30, 2006, the outstanding balance was $650,000 and there was no
         accrued interest payable.


                                      F-22



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


10.      INCOME TAXES

         The provision for income taxes consists of the following components:

                          YEAR ENDED          YEAR ENDED          YEAR ENDED
                        JUNE 30, 2006       JUNE 30, 2005       JUNE 30, 2004
                       ---------------     ---------------     ---------------
                                            (In thousands)
         Current:
           Federal     $            --     $            --     $            --
           State                     2                   1                  12
                       ---------------     ---------------     ---------------
                                     2                   1                  12
                       ---------------     ---------------     ---------------
         Deferred:
           Federal                  --                  --                  --
           State                    --                  --                  --
                       ---------------     ---------------     ---------------
                       $            --     $             1     $            12
                       ===============     ===============     ===============

         Deferred income taxes reflect the net tax effect of temporary
         differences between the carrying amount of assets and liabilities for
         financial reporting purposes and the amounts used for income tax
         purposes. The income tax effects of significant items comprising the
         Company's net deferred income tax assets and liabilities are as
         follows:

<TABLE>
                                                       JUNE 30, 2006        JUNE 30, 2005        JUNE 30, 2004
                                                      ---------------      ---------------      ---------------
                                                                            (IN THOUSANDS)
<S>                                                   <C>                  <C>                  <C>
         Deferred tax assets:
            Unearned income                           $            --      $             7      $             7
            Net operating loss carryforwards                    3,972                3,592                3,747
            Inventory reserve                                     360                   --                   --
            Goodwill                                              169                  186                  203
            Intangible asset                                       --                    8                    8
            Accrued vacation pay                                   35                   23                   29
            Allowance for doubtful accounts                       155                   52                  111
            Contributions                                           1                    1                    1
            Options and warrants not exercised                    287                   95                   54
            Depreciation                                            2                   26                   12
            Other                                                   8                    8                    8
                                                      ---------------      ---------------      ---------------
         Gross deferred tax assets                              4,989                3,998                4,180
         Valuation allowance                                   (4,740)              (3,836)              (3,988)
                                                      ---------------      ---------------      ---------------
              Deferred tax assets, net of reserve                 249                  162                  192
         Deferred tax liabilities:
            Repairs and maintenance                               (26)                  --                   --
            State tax benefit                                    (223)                (162)                (192)
                                                      ---------------      ---------------      ---------------
         Net deferred tax liabilities                 $            --      $            --      $            --
                                                      ===============      ===============      ===============
</TABLE>

                                                        F-23



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


10.      INCOME TAXES (CONTINUED)

         At June 30, 2006, 2005 and 2004, a 100% valuation allowance has been
         provided on the net deferred income tax assets since the Company cannot
         determine that it is "more likely than not" they will be realized.

         The income tax benefit differs from the amount of income tax determined
         by applying the expected U.S. Federal income tax rate to pretax loss
         for the fiscal periods as a result of:

<TABLE>
                                                         YEAR ENDED          YEAR ENDED         YEAR ENDED
                                                       JUNE 30, 2006       JUNE 30, 2005      JUNE 30, 2004
                                                       -------------       -------------      -------------
<S>                                                    <C>                 <C>                <C>
         Computed tax benefit                          $        (846)      $        (209)     $         192
         Decrease (increase) in income tax benefit
            resulting from:
           Nondeductible expenses                                 35                  21                 12
           State income tax expense                             (145)                (32)                46
           Change in valuation allowance                         958                 221               (238)
           Other                                                  --                  --                 --
                                                       -------------       -------------      -------------
                                                       $           2       $           1      $          12
                                                       =============       =============      =============
</TABLE>

         At June 30, 2006, the Company has a federal tax net operating loss
         ("NOL") carryforward of approximately $10,358,000 which expires at
         various dates though 2025, and a state net operating loss carryforward
         of approximately $5,097,000, which expires at various dates through
         2015.

         A portion of the NOLs described above are subject to provisions of the
         Internal Revenue Code ss.382 which limits the use of NOL carryforwards
         when changes of ownership of more than 50% occur during a three-year
         testing period. During the year ended June 30, 2003, the cumulative
         effects of SIBL's investment in the Company through the Sale of Series
         B and Series D preferred stock on April 3, 2002 and February 14, 2003,
         respectively, the Company ownership changed by more than 50%. The
         issues of common and preferred stock during the years-ended June 30,
         2002 and 2003 will limit the use of these NOLs. Further changes in
         common or preferred stock ownership in future years potentially limit
         the use of NOLs. The effect of such limitations has yet to be
         determined. In addition, NOL carry forwards for the purposes of
         offsetting California state taxable income have been limited to 50% for
         tax years 1998 and 2001, and limited to 60% for the tax years 2002 and
         2003, only. All other tax years can carry forward 100% of NOL.

11.      EQUITY

         COMMON STOCK TRANSACTIONS

         On June 30, 2003, the Company's stockholders at the Annual Meeting of
         the Shareholders approved both an amendment to the Company's articles
         of incorporation to effect a one-for-twenty reverse split of the
         Company's common shares and the Company's re-incorporation into the
         State of Delaware with authorized common stock of 12,500,000 and
         preferred stock of 10,000,000. The Series A, B and D preferred shares
         issued before this date retained the same rights and privileges as
         previously granted. All common share amounts presented have been
         retroactively adjusted to reflect a one-for-twenty reverse stock split.


                                      F-24



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


11.      EQUITY

         COMMON STOCK TRANSACTIONS

         On July 24, 2003, the Company issued 1,845,100 common shares pursuant
         to the exercise of 1,845,100 warrants to purchase the Company's common
         stock with an exercise price of $0.001 per common share (see additional
         discussion of warrants in Sale of Series D Convertible Preferred Stock
         below).

         On August 20, 2004, the Company issued 24,000 common shares to an
         investor and public relations firm in exchange for services. The
         services were valued at $30,000 and were based on the closing price of
         the Company's common stock as listed on NASDAQ's Over-the-counter
         Bulletin Board on the day the shares were issued.

         On January 4, 2005, the Company issued 180,000 common shares to an
         investor relations firm in exchange for services. The services were
         valued at $270,000 and were based on the closing price of the Company's
         common stock as listed on NASDAQ's Over-the-counter Bulletin Board on
         the day the shares were issued.

         Between March 17, 2005 and June 6, 2005, the Company issued 55,000
         common shares for cash of $27,000 pursuant to the exercise of stock
         options under our 2003 Omnibus Stock Option Plan

         On June 20, 2005, the Company issued 50,000 shares for cash of $50,000
         pursuant to the exercise of stock warrants.

         On June 20, 2005, the Company issued 25,000 restricted common shares in
         exchange for future services of an employee. The shares vest over a
         four year period on either a quarterly or annual basis at the option of
         the employee. The services were valued at $79,000 based on the closing
         price of the Company's common stock as listed on NASDAQ's
         Over-the-counter Bulletin Board on the day prior to the day the shares
         were issued. As of June 30, 2006, $57,785 remained unamortized.

         On March 27, 2006, the Company issued 15,000 shares of Common Stock to
         Mr. Paul Biberkraut, the former Chief Financial Officer and one of our
         directors, for services performed for the Company.

         On March 31, 2006, the Company cancelled 26,662 shares of Common Stock
         that had been granted to American Capital Ventures pursuant to the
         terms of a public relations service agreement that expired on March 31,
         2006.


                                      F-25



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


11.      EQUITY (CONTINUED)

         SALE AND REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK

         On July 3, 2001, the Board of Directors of the Company authorized the
         issuance of shares of $.001 par value preferred stock and
         simultaneously, the Company commenced a private placement of Series A
         $5.00 Redeemable 8% Convertible Preferred Stock ("Series A Preferred
         Stock"). The Series A Preferred Stock carried an annual dividend of
         $0.40 per share payable quarterly in cash or common stock of the
         Company at the Company's election, was convertible into 11 shares of
         the Company's common stock and provided for cash redemption or
         conversion into common stock of the Company based on elections by the
         holder or by the Company with certain contingencies.

         The Company originally issued 125,000 shares of Series A Preferred
         Stock. On March 31, 2004, in accordance with the redemption provisions
         of the Series A Preferred Stock, all the holders of the Series A
         Preferred Stock requested the redemption of their shares. However, at
         the time, because the Company's liabilities exceeded its assets, the
         Company was prohibited under Delaware corporation law from commencing
         the redemption. As of March 31, 2005, the Company was no longer
         prohibited from commencing the redemption and in April 2005, the
         Company began the redemption. As of June 30, 2005, the amount payable
         with respect to the Series A Preferred Stock redemption was shown as a
         liability of $275,000 on the balance sheet. All of our shares of Series
         A Redeemable 8% Convertible Preferred Stock, or Series A Preferred
         Stock, were redeemed by cash payments by the end of fiscal 2006. The
         125,000 shares of Series A Preferred Stock that were redeemed are no
         longer available for reissuance.

         SERIES B CONVERTIBLE PREFERRED STOCK

         The Company currently has 3,400,000 shares of Series B $1.00
         Convertible Preferred Stock, or Series B Preferred Stock, outstanding.
         These shares were issued on April 10, 2002. In connection with this
         transaction, the Company issued to the purchasers warrants to purchase
         an aggregate of 1,700,000 shares of its common stock, at exercise
         prices ranging from $2.00 to $4.00 per share. Management estimated the
         fair value of these warrants at $434,000, based on an appraisal of
         previously issued options with similar terms and the trading price of
         the Company's stock, and this amount was recorded as additional paid-in
         capital. The Series B Preferred Stock has voting rights with respect to
         all matters presented to our stockholders, and is entitled to the
         number of votes equal to the number of shares of Common Stock into
         which it is convertible. The Series B Preferred Stock is not entitled
         to dividends or preemptive rights.

         Each share of Series B Preferred Stock is convertible into 0.5 shares
         of Common Stock at the election of the holder subject to certain
         adjustments, and is adjustable upon our issuance of Common Stock or
         securities convertible into Common Stock at a price less than $1.00 per
         share.


                                      F-26



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


11.      EQUITY (CONTINUED)

         SALE OF SERIES D CONVERTIBLE PREFERRED STOCK

         On February 14, 2003, the Company issued 2,000,000 shares of newly
         created Series D $1.00 convertible preferred stock ("Series D stock")
         for a purchase price of $2,000,000 pursuant to a stock purchase and
         warrant agreement ("purchase agreement") with Stanford. On that date
         $1,500,000 of the purchase price was paid with $500,000 in cash and the
         conversion of $1,000,000 in bridge loans that Stanford granted to the
         Company in anticipation of the closing of the purchase agreement. The
         balance of the purchase price less interest due on the converted bridge
         loans and legal fees was paid on March 14, 2003. The Series D stock is
         convertible into common shares of the company at any time at the option
         of Stanford at the conversion rate 0.833333 common shares for each
         Series D share subject to certain anti-dilution adjustments. The Series
         D stockholders are entitled to vote on all matters requiring a vote of
         the shareholders and are entitled to the number of votes equal to the
         number of common shares into which the Series D stock is convertible.
         The purchase agreement also provided for the reduction to $0.001 per
         common share of the purchase price of 1,500,000 warrants that were
         issued to Stanford and their designated warrant holders as part of the
         Series B stock sale in April 2002. In connection with warrant price
         reduction the Company recorded a dividend of $300,000 on the Series B
         stock as its estimate of the fair value of the transaction. The reduced
         warrant price contemplated the reverse stock split that was provided
         for in the purchase agreement and that was subsequently approved by the
         Company's stockholders on June 30, 2003. The warrants were exercised on
         July 24, 2003. Concurrently with the closing of the purchase agreement,
         the Company, Stanford and the CEO entered into a share exchange and
         note modification agreement ("modification agreement"). Under the
         modification agreement the CEO exchanged 7,000 Series C shares of the
         Company for 583,333 common shares of the Company. The modification
         agreement provided for a reduction to $0.001 per common share of the
         exercise price of 345,100 warrants that were previously issued to the
         CEO. The previously issued warrants consist of 200,000 warrants issued
         in connection with the Series B stock in April 2002 and 145,100
         warrants issued in connection with personal loan guarantees by the CEO
         for the Company's debt. In connection with the warrant price reductions
         the Company recorded a dividend of $40,000 on the Series B stock and
         interest expense of $29,000 as its estimates of the fair value of the
         transactions. The reduced warrant price contemplated a reverse stock
         split that was provided for in the purchase agreement and that was
         subsequently approved by the Company's stockholders on June 30, 2003.
         The warrants were exercised on July 24, 2003. Additionally, the CEO
         agreed to amend his $1,000,000 promissory note due from the Company, to
         provide for quarterly principal payments of $50,000 that were to
         commence on September 30, 2003 (Note 8).

         The shareholders of preferred stock issued by the Company have a
         liquidation preference over the common shareholders. The Series A
         Preferred shareholders have primary preferential liquidation rights at
         $5.10 per share, followed by the Series B, Series D and Series E
         Preferred shareholders at $1.00 per share each.


                                      F-27



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


11.      EQUITY (CONTINUED)

         SALE OF SERIES E CONVERTIBLE PREFERRED STOCK

         On March 31, 2005, The Company issued 2,500,000 shares of newly created
         Series E $1.00 convertible preferred stock ("Series E stock") for a
         purchase price of $2,500,000 pursuant to a stock purchase agreement
         ("purchase agreement") with SIBL, a principal stockholder of the
         Company. On that date the purchase price of $2.5 million was paid by
         the conversion and cancellation of $2.5 million of indebtedness under
         the Company's Commercial LOC with Stanford Financial, an affiliate of
         Stanford (see Note 6). The Series E stock is convertible into common
         shares of the Company at any time at the option of Stanford at a
         conversion rate of six Series E shares into one common share subject to
         certain anti-dilution adjustments. The Series E stockholders are
         entitled to vote on all matters requiring a vote of the shareholders
         and are entitled to the number of votes equal to the number of common
         shares into which the Series E stock is convertible.

12.      SHARE-BASED STOCK OPTION PLANS

         STOCK OPTIONS

                  2003 OMNIBUS STOCK OPTION PLAN

         On May 1, 2003, the Company's Board of Directors approved, subject to
         shareholder approval which was obtained on June 30, 2003, a stock
         option plan (the "2003 Plan") to attract and retain competent personnel
         and to provide to participating officers, directors, employees and
         consultants long-term incentive for high levels of performance and for
         unusual efforts to improve the financial performance of the Company.
         The 2003 Plan provides for both incentive stock options specifically
         tailored to the provisions of the Internal Revenue Code and for options
         not qualifying as incentive stock options. Employees and consultants of
         the Company, including officers and directors, are eligible to receive
         options granted under the 2003 Plan. The shares subject to the options
         will generally be made available from authorized, but unissued shares.
         The Board of Directors ("Board") will administer the 2003 Plan. The
         Board has full authority to award options under the 2003 Plan, to
         establish the terms of the option agreements, and to take all other
         action deemed appropriate for administration of the 2003 Plan. The 2003
         Plan replaced the 2000 Omnibus Stock Option Plan.

                  2000 OMNIBUS STOCK OPTION PLAN

         On August 1, 2000, the Company's Board of Directors approved, subject
         to shareholder approval which was obtained, a stock option plan (the
         "2000 Plan") to attract and retain competent personnel and to provide
         to participating officers, directors, employees and consultants
         long-term incentive for high levels of performance and for unusual
         efforts to improve the financial performance of the Company. The 2000
         Plan provides for both incentive stock options specifically tailored to
         the provisions of the Internal Revenue Code and for options not
         qualifying as incentive stock options. Employees and consultants of the
         Company, including officers and directors, were eligible to receive
         options granted under the 2000 Plan. The shares subject to the options
         were made available from authorized, but unissued shares. The Board of
         Directors


                                      F-28



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


12.      SHARE-BASED STOCK OPTION PLANS (CONTINUED)

         STOCK OPTIONS (CONTINUED)

                  2000 OMNIBUS STOCK OPTION PLAN (CONTINUED)

         ("Board") administered the 2000 Plan. The Board had full authority to
         award options under the 2000 Plan, to establish the terms of the option
         agreements, and to take all other action deemed appropriate for
         administration of the 2000 Plan. The 2000 Plan was terminated on May 1,
         2003 and was replaced by the 2003 Omnibus Stock Option Plan.

         During the year ended June 30, 2006, the Company granted to certain
         employees and non-employees, 65,000 stock options to purchase common
         stock at an average exercise price of $2.50. The range of exercise
         prices of options issued during the year was $1.20 to $3.02. The stock
         options vest after one year and are exercisable over period of up to
         five years after vesting and expire at earlier of five years after the
         vesting date of each option or one month after the termination of
         employment or service agreement with the Company. The stock options
         were granted at strike prices, which were set at closing price of the
         Company's stock as listed on the NASDAQ Over-the-counter Bulletin Board
         and Pink Sheets as of the date of grant, except for one grant priced at
         the higher price of the prior week. During the year ended June 30,
         2006, the Company cancelled 35,733 stock options and 96,667 stock
         options were forfeited that expired or had not vested at the time of
         employees and non-employees discontinued service agreements with the
         Company. The stock option grants during the year ended June 30, 2006
         include 60,000 stock options to directors of the Company.

         During the year ended June 30, 2005, the Company granted to certain
         employees and non-employees, 360,000 stock options to purchase common
         stock at an average exercise price of $2.80. The range of exercise
         prices of options issued during the year was $1.01 to $4.25. The stock
         options vest over time of up to four years. All are exercisable over
         period of up to five years after vesting and expire at earlier of five
         years after the vesting date of each option or one month after the
         termination of employment or service agreement with the Company. The
         stock options were granted at strike prices, which were set at closing
         price of the Company's stock as listed on the NASDAQ Over-the-counter
         Bulletin Board and Pink Sheets as of the date of grant. During the year
         ended June 30, 2005, the Company cancelled 95,000 stock options that
         expired or had not vested at the time of employees and non-employees
         discontinued service with the Company and 55,000 stock options were
         exercised. The stock option grants during the year ended June 30, 2005
         include 60,000 stock options to directors of the Company.

         During the year ended June 30, 2004, the Company granted to certain
         employees and non-employees, 410,000 stock options to purchase common
         stock at an average exercise price of $0.77. The range of exercise
         prices of options issued during the year was $0.24 to $1.01. Certain
         stock options vest immediately and others vest over time. All are
         exercisable over period of up to five years after vesting and expire at
         earlier of five years after the vesting date of each option or one
         month after the termination of employment or service agreement with the
         Company. The stock options were granted at strike prices, which were
         set at closing price of the Company's stock as listed on the NASDAQ
         Over-the-counter Bulletin Board and Pink Sheets as of the date


                                      F-29



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


12.      SHARE-BASED STOCK OPTION PLANS (CONTINUED)

         STOCK OPTIONS (CONTINUED)

         of grant. During the year ended June 30, 2004, the Company cancelled
         97,750 stock options that expired or had not vested at the time of
         employees and non-employees discontinued service with the Company. The
         stock option grants during the year ended June 30, 2004 include 50,000
         stock options to directors of the Company.

         The following table summarizes information about stock option
         transactions for the years shown:

<TABLE>
                                                 YEAR ENDED                   YEAR ENDED                     YEAR ENDED
                                                JUNE 30, 2006                JUNE 30, 2005                  JUNE 30, 2004
                                          -------------------------     --------------------------    --------------------------
                                                           WEIGHTED                       WEIGHTED                      WEIGHTED
                                                           AVERAGE                        AVERAGE                       AVERAGE
                                            OPTION         EXERCISE        OPTION         EXERCISE       OPTION         EXERCISE
                                             SHARES         PRICE          SHARES          PRICE         SHARES          PRICE
                                          ------------     --------     ------------      --------    ------------      --------
<S>                                            <C>         <C>               <C>          <C>              <C>          <C>
         Outstanding at beginning of
            period                             636,000     $   2.41          426,000      $   1.50         113,750      $   6.05
         Options granted                        65,000         2.50          360,000          2.80         410,000          0.77
         Options canceled                      (35,733)        3.21          (95,000)         0.91         (97,750)         3.74
         Options forfeited                     (96,667)        1.72               --            --              --            --
         Options exercised                          --           --          (55,000)         0.49              --            --
                                          ------------     --------     ------------      --------    ------------      --------
         Outstanding at end of period          568,600     $   2.49          636,000      $   2.41         426,000      $   1.50
                                          ============     ========     ============      ========    ============      ========
         Exercisable at end of period          326,600     $   2.45          182,000      $   2.68         121,250      $   2.96
                                          ============     ========     ============      ========    ============      ========

         The weighted average remaining contractual life of the options
         outstanding at June 30, 2006, is 6.2 years.

         The following table provides information for the stock options granted
         during the year ended June 30, 2006:
                                                                                      WEIGHTED
                                                                                      AVERAGE           WEIGHTED
                                                                                      EXERCISE          AVERAGE
                                                                       NUMBER          PRICE           FAIR VALUE
                                                                  ---------------  ---------------  ----------------

        Options exercise price equal to stock price                    55,000        $    2.40         $    1.90
        Options exercise price exceeds the stock price                 10,000        $    3.02         $    2.15
</TABLE>

                                                       F-30



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


12.      SHARE-BASED STOCK OPTION PLANS (CONTINUED)

         STOCK OPTIONS (CONTINUED)

         The following table provides additional information for stock options
         outstanding at June 30, 2006:

<TABLE>
<S>     <C>
                                               OUTSTANDING                  EXERCISABLE           UNEXERCISABLE
                                  ----------------------------------   ---------------------   --------------------
                                             WEIGHTED     WEIGHTED                  WEIGHTED               WEIGHTED
                 RANGE                       AVERAGE      AVERAGE                   AVERAGE                AVERAGE
        -----------------------              EXERCISE    CONTRACTUAL                EXERCISE               EXERCISE
            FROM        TO        NUMBER      PRICE         LIFE        NUMBER       PRICE      NUMBER      PRICE
        ----------  -----------  --------   ---------    -----------   --------   ---------    --------   ---------
         $   0.30    $   0.33      35,000   $    0.31         5.5        28,750   $    0.31       6,250   $    0.30
         $   1.00    $   2.20     282,500   $    1.25         5.9       170,500   $    1.32     112,000   $    1.15
         $   2.75    $   5.00     240,000   $    3.81         6.8       116,250   $    3.68     123,750   $    3.93
         $   8.75    $  20.00      11,100   $   12.40         2.6        11,100   $   12.40               $    0.00
                                  -------                               -------                 -------
                                  568,600                               326,600                 242,000

         As of June 30, 2006, 2005 and 2004, the Company had reserved shares of
         common stock for the following purposes:

                                                              JUNE 30,            JUNE 30,          JUNE 30,
                                                                2006                2005              2004
                                                            -----------         ------------      -----------

         Options                                                568,600              636,000          426,000
         Warrants                                               120,000              132,500          189,063
         Series A Convertible Preferred Stock                         -                    -                -
         Series B Convertible Preferred Stock                 1,719,802            1,719,802        1,700,000
         Series D Convertible Preferred Stock                 1,666,667            1,666,667        1,666,667
         Series E Convertible Preferred Stock                   416,667              416,667                -
                                                            -----------         ------------      -----------

               Total                                          4,491,736            4,571,636        3,981,730
                                                            ===========         ============      ===========

         Pro forma information regarding net income (loss) and income (loss) per
         share is required by SFAS 123R, and is to be determined as if the
         Company had accounted for its employee stock options granted under the
         fair value method pursuant to SFAS 123R, rather than the intrinsic
         method pursuant to APB 25. The fair value of these options was
         estimated at the date of grant using a Black-Scholes option pricing
         model with the following range of assumptions for 2006, 2005 and 2004:


                                                    2006                  2005                2004
                                                 -----------          -----------         -----------
                  Risk free interest rate        3.8 - 5.1%           2.6 - 3.7%          1 - 2%
                  Dividends                      -                    -                   -
                  Volatility factor              246%                 250 - 275%          275%
                  Expected life                  1 - 4 years          1 - 4 years         1 - 3 years
</TABLE>

                                      F-31
<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


12.      SHARE-BASED STOCK OPTION PLANS (CONTINUED)

         STOCK OPTIONS (CONTINUED)

         For purpose of pro forma disclosures, the estimated fair value of the
         options is amortized to expense over the options' vesting period. The
         Company's pro-forma information for years ending June 30, 2006, 2005
         and 2004 as follows:

<TABLE>
                                                                        2006           2005            2004
                                                                    -----------     ----------      -----------
                                                                                    (in thousands)
<S>                                                                 <C>             <C>             <C>
         Net income (loss) applicable to common shares,
            as reported                                             $    (2,489)    $     (616)     $       465
         Add: Stock-based employee compensation included in
            reported net income (loss)                                        -              -                -
         Less: Total stock-based employee compensation expense
            determined under Black-Scholes option pricing model,
            net of tax effects                                                -            247               21
                                                                    -----------     ----------      -----------
         Pro forma net income (loss)                                $    (2,489)    $     (863)     $       444
                                                                    ===========     ==========      ===========
         Earnings (loss) per share - as reported:
            Basic                                                   $     (0.52)    $    (0.13)     $      0.11
            Diluted                                                 $     (0.52)    $    (0.13)     $      0.06

         Earnings (loss) per share - pro forma:
            Basic                                                   $     (0.52)    $    (0.19)     $      0.10
            Diluted                                                 $     (0.52)    $    (0.19)     $      0.05
</TABLE>

13.      COMMITMENTS AND CONTINGENCIES

         LEASES

         The Company leases office space in Beverly Hills under two operating
         lease agreements, one of which expiries in September 2012, the other in
         July 2010. Future minimum rental payments required under the above
         leases as of June 30, 2006 are as follows:

                     YEARS ENDING JUNE 30
                           2007                                   $     302,000
                           2008                                         324,000
                           2009                                         331,000
                           2010                                         339,000
                           2011 and beyond                              577,000
                                                                  -------------

                                                                  $   1,873,000
                                                                  =============

         Rent expense including parking fees and storage for all leases for the
         years ended June 30, 2006, 2005 and 2004 was $322,000; $274,000 and
         $386,000, respectively.

                                      F-32



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


13.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

         GUARANTEED LIQUIDITY AND BUY BACK

         The Company provides a Guaranteed Liquidity and Buy Back at Grade
         warranty (the "Guarantee") to its retail rare coin customers. Retail
         rare coin sales amounted to $13,281,000; $12,807,000 and $7,345,000 for
         years ended June 30, 2006, 2005 and 2004 respectively. The policy
         grants the customer the opportunity to sell their coins back to the
         Company at the prevailing market "bid" (below the current wholesale
         price). The Company determines the "bid" price based on the prevailing
         market price at which the Company believes it could readily liquidate
         the coin. The "bid" price may be substantially below what the customer
         originally paid for the coin.

         The values of the rare coins sold to retail customers continually
         fluctuate. Furthermore, retail customers continually resell or trade
         coins purchased from the Company with third parties. Once retail
         customers resell the rare coins to third parties, the Guarantee is
         void. Lastly, the Company has had minimal historical experience with
         customers exercising the Guarantee. As a result, it is not possible for
         the Company to determine the potential repurchase obligation pursuant
         to the Guarantee that it may be subject to as a result of previous
         sales of retail rare coins.

         PROFIT SHARING PLANS

         The Company had a 401(k) profit sharing plan covering all employees who
         have met certain service requirements. Through December 31, 2002,
         employees were allowed to make contributions to the plan of up to 15%
         of their salary. The Company was required to make nondiscretionary
         matching contributions of 3% of eligible employees' salaries. Effective
         January 1, 2003, no further contributions by employees were permitted
         as all of the Company's employees became co-employees of Administaff, a
         professional employer organization. The Company terminated the plan
         effective January 1, 2004. The Company had failed to make timely
         nondiscretionary matching contributions, caught up prior to the plan
         termination, but may be subject to penalties. The amount of the
         potential penalties, if any, is indeterminable at this time.

         LEGAL PROCEEDINGS

         Superior Galleries, Inc. was sued by Heritage Capital Corporation
         ("Heritage"), a competitor of ours, in connection with our employment
         of Larry Abbott, a former employee of Heritage. The petition was filed
         on June 3, 2005 in the Dallas County District Court in Texas. The
         parties to this case included Heritage, Superior Galleries, Inc. and
         Mr. Abbott. In this case, Heritage sued Mr. Abbott for breach of his
         employment agreement with that company, following his resignation in
         May 2005. This lawsuit has been completely settled in accordance with a
         settlement agreement dated March 27, 2006, at no cost to the Company,
         other than its own legal costs, estimated to be $50,000.


                                      F-33



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


13.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

         LEGAL PROCEEDINGS (CONTINUED)

         Superior Galleries, Inc. was being sued by Elaine and Dean Sanders in
         connection with a loan made to them against 32 coins placed on
         consignment on June 26, 2004. Fourteen of the coins were sold, and the
         proceeds from this sale of approximately $186,750 were insufficient to
         repay the loan of $359,471 that the Company made to the Sanders. The
         plaintiffs subsequently paid an additional $155,000 in December 2005
         with respect to the loan, but now allege that the Company violated its
         agreement with them relating to the sale of the coins. The Company
         strongly denies that it violated the agreement or that it acted
         improperly in any way. The complaint was filed on June 6, 2006 in the
         U.S. District Court for Central California and seeks undefined dollar
         amounts, accrued interest and reimbursement of plaintiffs' legal costs.

         In April 2004 the Company sued its former Chief Financial Officer,
         Malingham Shrinivas, in Los Angeles Superior Court for breach of
         contract, fraud and conspiracy. In that lawsuit, the Company alleged
         that he fraudulently arranged to receive more salary than he was
         entitled to, to pay personal expenses using Company funds, and to pay
         third party vendors with Company funds for services which were not
         rendered. In July 2004 Mr. Shrinivas filed a counterclaim in this
         litigation, claiming that he was terminated without just cause and was
         therefore entitled to $58,250 in severance pay. Although the case had
         been scheduled for trial in August 2006, prior to that time the case
         was stayed by order of the Superior Court because the Court had been
         advised that criminal charges against Mr. Shrinivas related to this
         matter were imminent. Those criminal charges were subsequently filed,
         and therefore further proceedings in connection with the civil case
         continue to be stayed. The Company believes that Mr. Shrinivas was
         terminated with cause and that he is therefore not entitled to any
         severance pay. If and when the stay of our civil case is terminated,
         the Company intends to vigorously pursue its claims and defend Mr.
         Shrinivas' claims for severance pay.

         The Company may from time to time be involved in various claims,
         lawsuits, disputes with third parties, actions involving allegations of
         discrimination, or breach of contract actions incidental to the
         operation of its business. Except as set forth above, the Company is
         not currently involved in any such litigation which it believes could
         have a material adverse effect on its financial condition or results of
         operations, liquidity or cash flows.

         STATE SALES AND USE TAXES

         The Company does not collect sales and use taxes for interstate sales.
         Management believes that the Company's sales to interstate customers
         are generally tax-exempt due to varying state exemptions relative to
         the definitions of being engaged in business in particular states and
         the lack of current internet taxation. While the Company has not been
         contacted by any state authorities seeking to enforce sales or use tax
         regulations, there is no assurance that the Company will not be
         contacted by authorities in the future with inquiries relative to
         compliance with current statutes, nor is there any assurance that
         future statutes will not be enacted that affect the sales and use
         aspects of the Company's business.


                                      F-34



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


14.      RELATED PARTY TRANSACTIONS

         On January 31, 2003, the Company entered into a consulting agreement
         with Stanford Group Company, and affiliate of SIBL, a principal
         stockholder of the Company to provide financial and advisory services
         for a three year period commencing on April 1, 2003. The annual fee for
         such services is $60,000 and is payable on a quarterly basis. The
         agreement was not extended beyond the April 1, 2006 expiration date.

         On October 23, 2003, the Company's Board of Directors approved the sale
         of Superior's remaining fine art inventory to the Company's chief
         operating officer and a principal stockholder ("CEO"), who is also an
         independent dealer of fine art, for $350,000. The Company solicited
         bids from third parties and the bid from the CEO was the highest. The
         Company realized a gross profit of $16,000 on sale of the art inventory
         to the CEO. The sale was paid in full by reductions of notes payable to
         the CEO.


                                      F-35



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


14.      RELATED PARTY TRANSACTIONS (CONTINUED)

         On May 28, 2004, the Company's Board of Directors approved a short-term
         sub-lease of a portion of Superior's vacant Newport Beach facility to
         the CEO. The lease term was from June 1, 2004 through September 30,
         2004 and provided for a monthly rental payment of $4,000. The sub-lease
         terminated concurrently with the Company's master lease of the Newport
         Beach facility on September 30, 2004.

         On May 18, 2005 the Company entered into a Primary Supplier Agreement
         with Stanford Coins & Bullion, Inc. ("Stanford C&B"), which is an
         affiliate of a principal shareholder, SIBL. Under this arrangement,
         which has a term of six months commencing June 1, 2005, Stanford C&B is
         required to provide Superior with a preferential right to source coins
         on a wholesale basis for that company. Stanford C&B will pay a flat 7%
         over Superior's bid for all rare coins and 3.5% for all generic coins.
         Superior will provide marketing services for Stanford C&B, including
         providing information on possible sales leads and making Superior's
         inventory of coins available on Stanford C&B's web site. For Stanford
         C&B's customers that sell coins through Superior's auctions, Superior
         will pay Stanford C&B a fee of 6%, and will pay their sales person a
         commission of 2%. Although the agreement was not extended on the
         December 1, 2005 expiration date, the two parties continue to operate
         under the terms of the prior agreement. During the year ended June 30,
         2006 Stanford C&B purchased $2,276,946 of rare coins from Superior.

         On July 5, 2006, the Company entered into a consulting arrangement with
         the former Chief Financial Officer, Paul Biberkraut, who is also a
         member of the Board of Directors. Under this arrangement, Mr.
         Biberkraut will assist management with the activities involved in the
         proposed Merger with DGSE. Superior is paying $4,000 per month under
         this arrangement until the Merger closes.

         See also notes 2, 6, 7, 8 and 11 for discussion of additional
         transactions with related parties.

15.      SELECTED QUARTERLY FINANCIAL DATA

         The following data present unaudited quarterly financial information
         for each of the eight quarters beginning with September 30, 2004 and
         ending on June 30, 2006. 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 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. The following
         data should be read in conjunction with "Management's Discussion and
         Analysis of Financial Condition and Results of Operations" included in
         this report.


                                      F-36



<PAGE>
<TABLE>
                                                      SUPERIOR GALLERIES, INC.
                                              NOTES TO FINANCIAL STATEMENTS (CONTINUED)


15.      SELECTED QUARTERLY FINANCIAL DATA (CONTINUED)


                                                                                       FISCAL QUARTER ENDED
                                                   YEAR ENDED       ---------------------------------------------------------------
                                                    JUNE 30,          JUNE 30,         MAR. 31,         DEC. 31,         SEPT. 30,
STATEMENTS OF OPERATIONS DATA                         2006              2006             2006             2005             2005
                                                   ------------     ------------     ------------     ------------      -----------
                                                                        (in thousands, except per share data)
<S>                                                <C>              <C>              <C>              <C>               <C>
Total revenue                                      $     46,317     $      9,972     $     15,067     $      9,626      $    11,653
Cost of sales                                            38,393            8,527           12,085            8,440            9,342
                                                   ------------     ------------     ------------     ------------      -----------
Gross profit                                              7,924            1,445            2,982            1,186            2,311
Selling, general and administrative expenses              9,792            2,921            2,404            2,166            2,301
                                                   ------------     ------------     ------------     ------------      -----------
Operating income (loss)                                  (1,868)          (1,476)             578             (980)              10
Other income (expense)                                     (669)            (240)            (177)            (137)            (114)
                                                   ------------     ------------     ------------     ------------      -----------
Income (loss) from before income tax provision           (2,537)          (1,716)             401           (1,117)            (104)
Income tax provision (benefit)                                2                1               --               --                1
                                                   ------------     ------------     ------------     ------------      -----------
Net income (loss) before extraordinary gain        $     (2,539)    $     (1,717)    $        401     $     (1,117)     $      (105)
                                                   ============     ============     ============     ============      ===========
Extraordinary Gain from extinguished debt                    50               --               50               --               --
Net income (loss)                                  $     (2,489)    $     (1,717)    $        451     $     (1,117)     $      (105)
                                                   ============     ============     ============     ============      ===========

Net income (loss) per common share:
   from net income (loss), basic                   $      (0.52)    $      (0.36)    $       0.09     $      (0.23)     $     (0.02)
                                                   ============     ============     ============     ============      ===========
   from net income (loss), fully diluted           $      (0.52)    $      (0.36)    $       0.05     $      (0.23)     $     (0.02)
                                                   ============     ============     ============     ============      ===========

Weighted average shares outstanding:
   Basic                                                  4,817            4,808            4,820            4,820            4,820
   Fully diluted                                          4,817            4,808            8,977            4,820            4,820


                                                                                       FISCAL QUARTER ENDED
                                                   YEAR ENDED       ---------------------------------------------------------------
                                                    JUNE 30,          JUNE 30,         MAR. 31,         DEC. 31,         SEPT. 30,
STATEMENTS OF OPERATIONS DATA                         2005              2005             2005             2004             2004
                                                   ------------     ------------     ------------     ------------      -----------
                                                                        (in thousands, except per share data)

Total revenue                                      $     39,535     $     10,205     $     11,658     $      8,403      $     9,269
Cost of sales                                            32,027            8,364            9,661            6,787            7,215
                                                   ------------     ------------     ------------     ------------      -----------
Gross profit                                              7,508            1,841            1,997            1,616            2,054
Selling, general and administrative expenses              7,708            2,114            2,098            1,642            1,854
                                                   ------------     ------------     ------------     ------------      -----------
Operating income (loss)                                    (200)            (273)            (101)             (26)             200
Other income (expense)                                     (415)            (135)            (102)            (104)             (74)
                                                   ------------     ------------     ------------     ------------      -----------
Income (loss) from before income tax provision             (615)            (408)            (203)            (130)             126
Income tax provision (benefit)                                1               --               --               --                1
                                                   ------------     ------------     ------------     ------------      -----------
Net income (loss)                                  $       (616)    $       (408)    $       (203)    $       (130)     $       125
                                                   ============     ============     ============     ============      ===========

Net income (loss) per common share:
   from net income (loss), basic                   $      (0.13)    $      (0.09)    $      (0.04)    $      (0.03)     $     0.03
                                                   ============     ============     ============     ============      ===========
   from net income (loss), fully diluted           $      (0.13)    $      (0.09)    $      (0.04)    $      (0.03)     $     0.02
                                                   ============     ============     ============     ============      ===========

Weighted average shares outstanding:
   Basic                                                  4,627            4,743            4,685            4,510            4,497
   Fully diluted                                          4,627            4,743            4,685            4,510            8,170


                                                                F-37
</TABLE>



<PAGE>

                            SUPERIOR GALLERIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)



16.      EXTRAORDINARY GAIN

         On March 31, 2006, the Company repaid the balance of its line of credit
         from a private lender of $1,900,000 by applying the accounts receivable
         from the sale of $1,000,000 of rare coins to the lender, a payment of
         $850,000 in cash and the application of a $50,000 discount for early
         payment. The $50,000 discount was classified as an extraordinary gain
         on the Statement of Operations.

17.      SUBSEQUENT EVENTS

         After the fiscal year ended June 30, 2006, on July 17, 2006, the
         Company announced a proposed Merger with DGSE Companies, Inc. As a
         condition to the Merger, the Company's lender, Stanford Financial
         Group, will convert $5,500,000 in debt outstanding under its Commercial
         LOC described in Note 6 into common stock of the Company. In addition,
         in connection with the Merger a Stanford affiliate will provide a new
         secured credit facility of $11,500,000 to the combined company. Also in
         connection with the proposed Merger, the Company will restructure the
         outstanding indebtedness to its Chief Executive Officer, Mr. DiGenova,
         as described in Note 8. Under the terms of the revised promissory note,
         the principal amount of the note shall be set to the current
         outstanding principal amount of $500,000, the maturity date of the note
         will be extended to December 31, 2007, payable in five equal quarterly
         installments commencing September 30, 2006, and the interest rate shall
         be set to the prime rate plus one percent.

         After the fiscal year ended June 30, 2006, on August 3, 2006, the
         Company paid off three demand notes payable to a private lender
         totaling $650,000 as described in Note 9, which bore interest at 12%
         per annum and were secured by specific inventory, as described in a
         Form 8-K filed by the Company August 9, 2006.


                                      F-38



<PAGE>

<TABLE>
<S>     <C>
                                          SUPERIOR GALLERIES, INC.
                                                SCHEDULE II
                           ALLOWANCE FOR DOUBTFUL ACCOUNTS AND INVENTORY RESERVES


                                                             Charged to
                                             Balance at       expenses/      Application
                                              Beginning        against         against         Balance at
               (In thousands)                  of Year         revenue         assets          End of Year
                                            -------------   -------------   -------------     -------------
  Allowance for doubtful accounts:
     Year ended June 30, 2004               $         271              20             (32)    $         259
     Year ended June 30, 2005               $         259               -            (137)    $         122
     Year ended June 30, 2006               $         122             241               -     $         363

  Inventory reserve:
     Year ended June 30, 2004               $         665               -            (665)    $           -
     Year ended June 30, 2005               $           -               -               -     $           -
     Year ended June 30, 2006               $           -             840               -     $         840


                                                    F-39
</TABLE>



<PAGE>

                                INDEX TO EXHIBITS

  EXHIBIT
   NUMBER                                DESCRIPTION
  -------                                -----------

    3.1           Certificate of Incorporation of Superior Galleries, Inc.
                  (including Certificates of Designation of Superior Galleries,
                  Inc., relating to Series A $5.00 Redeemable 8% Convertible
                  Preferred Stock, Series B $1.00 Convertible Preferred Stock
                  and Series D $1.00 Convertible Preferred Stock) (incorporated
                  herein by this reference to Exhibit D to the definitive Proxy
                  Statement of Tangible Asset Galleries, Inc. filed under the
                  Exchange Act on June 5, 2003).

    3.2           Certificate of Designation of Superior Galleries, Inc.,
                  relating to Series E $1.00 Convertible Preferred Stock
                  (incorporated herein by this reference to Exhibit 3.1 to the
                  Current Report on Form 8-K of Superior Galleries, Inc. filed
                  under the Exchange Act on April 1, 2005).

    3.3           Bylaws of Superior Galleries, Inc. (incorporated herein by
                  this reference to Exhibit E to the definitive Proxy Statement
                  of Tangible Asset Galleries, Inc. filed under the Exchange Act
                  on June 5, 2003).

    4.1           2003 Omnibus Stock Option Plan (incorporated herein by this
                  reference to Exhibit A to the definitive Proxy Statement of
                  Tangible Asset Galleries, Inc., filed under the Exchange Act
                  on June 5, 2003).

    4.2           Form of Nonqualified Stock Option Agreement for 2003 Omnibus
                  Stock Option Plan (incorporated herein by this reference to
                  Exhibit 4.2 to the Annual Report on Form 10-KSB of Superior
                  Galleries, Inc., filed under the Exchange Act, for the fiscal
                  year ended June 30, 2003) .

    4.3           Form of Employee Incentive Stock Option Agreement for 2003
                  Omnibus Stock Option Plan (incorporated herein by this
                  reference to Exhibit 4.3 to the Annual Report on Form 10-KSB
                  of Superior Galleries, Inc., filed under the Exchange Act, for
                  the fiscal year ended June 30, 2003).

    4.4           Lockup Agreement dated April 3, 2002 by and among Stanford
                  Venture Capital Holdings, Inc. and certain stockholders of
                  Tangible Asset Galleries, Inc. (incorporated herein by this
                  reference to Exhibit G included in Exhibit 10.1 to the Current
                  Report on Form 8-K of Tangible Asset Galleries, Inc., filed
                  under the Exchange Act on April 24, 2002).

    4.5           Warrant to Purchase 1,000,000 Shares of Common Stock dated
                  November 27, 2001 Issued to NRLP (incorporated herein by this
                  reference to Exhibit 4.11 of the Annual Report on Form 10-KSB
                  of Tangible Asset Galleries, Inc., for the year ended June 30,
                  2002, filed under the Exchange Act on February 19, 2003).

    4.6           Liquidation Preferences Agreement between Tangible Asset
                  Galleries, Inc., the holders of the outstanding Series B
                  Preferred Stock of Tangible Asset Galleries, Inc. and Stanford
                  Venture Capital Holdings, Inc. dated January 31, 2003
                  (incorporated herein by this reference to Exhibit 4.1 to the
                  Current Report on Form 8-K of Superior Galleries, Inc. filed
                  March 3, 2003).

    9.1           Shareholders' Agreement dated April 3, 2002 by and among
                  Silvano DiGenova, Stanford Venture Capital Holdings, Inc. and
                  Tangible Asset Galleries, Inc. (incorporated herein by this
                  reference to exhibit E included in Exhibit 10.1 to the Current
                  Report on Form 8-K of Tangible Asset Galleries, Inc., filed
                  under the Exchange Act on April 24, 2002).

    10.1          Series E Preferred Stock Purchase Agreement dated as of March
                  29, 2005, between Superior Galleries, Inc. and Stanford
                  Investment Bank Limited (incorporated herein by this reference
                  to Exhibit 10.1 to the Current Report on Form 8-K of Superior
                  Galleries, Inc. filed under the Exchange Act on April 1,
                  2005).




<PAGE>

  EXHIBIT
   NUMBER                                DESCRIPTION
  -------                                -----------

    10.2          Registration Rights Agreement dated as of March 29, 2005 and
                  between Superior Galleries, Inc. and Stanford Investment Bank
                  Limited (incorporated herein by this reference to Exhibit 10.4
                  to the Current Report on Form 8-K of Superior Galleries, Inc.
                  filed under the Exchange Act on April 1, 2005).

    10.3          Standard Multi-Tenant Office Lease-Gross dated August 6, 2002
                  by and between DBKK, LLC and Tangible Asset Galleries, Inc.
                  (incorporated herein by this reference to Exhibit 10.14 to the
                  Annual Report on Form 10-KSB of Tangible Asset Galleries, Inc.
                  for the year ended June 30, 2002, filed under the Exchange Act
                  on February 19, 2003).

    10.4          Registration Rights Agreement dated January 31, 2003 by and
                  among Tangible Asset Galleries, Inc. and holders of our Series
                  B Preferred Stock, Series C Preferred Stock, Series D Stock
                  and Certain Warrants (incorporated herein by this reference to
                  Exhibit 10.3 to the Current Report on Form 8-K of Tangible
                  Asset Galleries, Inc., filed under the Exchange Act on March
                  3, 2003).

    10.5          Employment Agreement dated June 1, 2001 between Tangible Asset
                  Galleries, Inc. and Silvano DiGenova. (incorporated herein by
                  this reference to Exhibit 10.16 to the Annual Report on Form
                  10-KSB of Tangible Asset Galleries, Inc. for the year ended
                  June 30, 2002, filed under the Exchange Act on February 19,
                  2003).

    10.6          Commercial Loan and Security Agreement dated October 13, 2003
                  between Superior Galleries, Inc. and Stanford Financial Group
                  Company (incorporated herein by this reference to Exhibit 10.1
                  to the Current Report on Form 8-K of Superior Galleries, Inc.
                  filed under the Exchange Act, filed October 16, 2003).

    10.7          Commercial Note by Superior Galleries, Inc. to Stanford
                  Financial Group Company dated October 1, 2003 (incorporated
                  herein by this reference to Exhibit 10.2 to the Current Report
                  on Form 8-K of Superior Galleries, Inc. filed October 16,
                  2003).

    10.8          Promissory Note in the maximum amount of $1,000,000, dated
                  February 10, 2003, from Tangible Asset Galleries, Inc. to
                  Silvano DiGenova (incorporated herein by reference to Exhibit
                  10.11 of the registrant's Amendment No. 1 to Registration
                  Statement on Form SB-2, filed December 2, 2004.

    10.9          Series D Preferred Stock Purchase and Warrant Exercise
                  Agreement dated January 31, 2003, between Tangible Asset
                  Galleries, Inc., Stanford Venture Capital Holdings, Inc.,
                  Silvano DiGenova and certain warrant holders (incorporated
                  herein by this reference to Exhibit 10.1 to the Current Report
                  on Form 8-K of Superior Galleries, Inc. filed March 3, 2003).

    10.10         First Amendment to Renewal and Modification Agreement dated
                  December 15, 2004 between Superior Galleries, Inc. and the
                  John Wesley English Living Trust (incorporated herein by
                  reference to Exhibit 10.18 of the registrant's Registration
                  Statement on Form SB-2, as amended, filed September 24, 2004)

    10.11         Waiver and Extension Agreement dated December 29, 2004 between
                  Silvano DiGenova and Superior Galleries, Inc. (incorporated
                  herein by reference to Exhibit 10.19 of the registrant's
                  Registration Statement on Form SB-2, as amended, filed
                  September 24, 2004)

    10.12         Investor Relations Agreement dated December 30, 2004 between
                  American Capital Ventures, Inc. and Superior Galleries, Inc.
                  (incorporated herein by reference to Exhibit 10.20 of the
                  registrant's Registration Statement on Form SB-2, as amended,
                  filed September 24, 2004)

    10.13         Promissory note dated October 1, 2004 by Superior Galleries,
                  Inc. in favor of Stephen Gehringer (incorporated herein by
                  reference to Exhibit 10.21 of the registrant's Registration
                  Statement on Form SB-2, as amended, filed September 24, 2004)




<PAGE>

  EXHIBIT
   NUMBER                                DESCRIPTION
  -------                                -----------

    10.14         Promissory note dated October 14, 2004 by Superior Galleries,
                  Inc. in favor of Stephen Gehringer ((incorporated herein by
                  reference to Exhibit 10.22 of the registrant's Registration
                  Statement on Form SB-2, as amended, filed September 24, 2004))

    10.15         Promissory note dated October 25, 2004 by Superior Galleries,
                  Inc. in favor of Stephen Gehringer (incorporated herein by
                  reference to Exhibit 10.23 of the registrant's Registration
                  Statement on Form SB-2, as amended, filed September 24, 2004)

    10.16         Amendment Dated as of March 29, 2005 to Commercial Loan and
                  Security Agreement between Superior Galleries, Inc. and
                  Stanford Financial Group Company (incorporated herein by this
                  reference to Exhibit 10.2 to the Current Report on Form 8-K of
                  Superior Galleries, Inc. filed under the Exchange Act on April
                  1, 2005)

    10.17         Commercial Note dated as of March 29, 2005 by Superior
                  Galleries, Inc. in favor of Stanford Financial Group Company
                  (incorporated herein by this reference to Exhibit 10.3 to the
                  Current Report on Form 8-K of Superior Galleries, Inc. filed
                  under the Exchange Act on April 1, 2005)

    10.18         Primary Supplier Agreement dated May 18, 2005 between Superior
                  Galleries, Inc. and Stanford Coins and Bullion (incorporated
                  herein by this reference to Exhibit 10.1 to the Current Report
                  on Form 8K of Superior Galleries, Inc., filed under the
                  Exchange Act on May 18, 2005).

    10.19         Second Extension to Commercial Loan and Security Agreement
                  between Superior Galleries, Inc. and Stanford Financial Group,
                  Incorporated dated as of July 21, 2005 (executed July 31,
                  2005) (incorporated herein by this reference to Exhibit 10.1
                  to the Current Report on Form 8K of Superior Galleries, Inc.,
                  filed under the Exchange Act on August 2, 2005).

    10.20         Second Amendment to Renewal and Modification Agreement, dated
                  as of July 31, 2005, by and between Superior Galleries, Inc.
                  and the John Wesley English Living Trust (incorporated herein
                  by this reference to Exhibit 10.2 to the Current Report on
                  Form 8K of Superior Galleries, Inc., filed under the Exchange
                  Act on August 2, 2005).

    10.21         Employment Agreement dated June 1, 2005 between Superior
                  Galleries, Inc. and Larry Abbott (incorporated herein by this
                  reference to Exhibit 10.1 to the Current Report on Form 8K of
                  Superior Galleries, Inc., filed under the Exchange Act on June
                  7, 2005).

    10.22         Indemnification Agreement dated July 7, 2005 between Superior
                  Galleries, Inc. and Anthony Friscia (incorporated herein by
                  this reference to Exhibit 10.1 to the Current Report on Form
                  8K of Superior Galleries, Inc., filed under the Exchange Act
                  on July 8, 2005).

    10.23         Indemnification Agreement dated December 15, 2005 between
                  Superior Galleries, Inc. and Mitch Stoltz (incorporated herein
                  by this reference to Exhibit 10.1 to the Current Report on
                  Form 10 Q of Superior Galleries, Inc., filed under the
                  Exchange Act on January 24, 2006).

    10.24         Promissory Note dated November 7, 2005 between Superior
                  Galleries, Inc. and Kevin Lipton Rare Coins (incorporated
                  herein by this reference to Exhibit 10.2 to the Current Report
                  on Form 10K of Superior Galleries, Inc., filed under the
                  Exchange Act on January 24, 2006).

    10.25         Amendment to Commercial Loan and Security Agreement dated
                  March 29, 2006 between Superior Galleries, Inc. and Stanford
                  Financial Group, Incorporated to increase the line to
                  $10,850,000 (incorporated herein by this reference to Exhibit
                  10.1 to the Current Report on Form 8K of Superior Galleries,
                  Inc., filed under the Exchange Act on May 4, 2006).

    10.26         Promissory Note dated February 21, 2006 between Superior
                  Galleries, Inc. and Kevin Lipton Rare Coins (incorporated
                  herein by this reference to Exhibit 10.1 to the Current Report
                  on Form 10K of Superior Galleries, Inc., filed under the
                  Exchange Act on May 15, 2006).




<PAGE>

  EXHIBIT
   NUMBER                                DESCRIPTION
  -------                                -----------

    10.27         Coin Purchase and Debt Prepayment Agreement dated as of March
                  31, 2006 between Superior Galleries, Inc. and the John Wesley
                  English Living Trust (incorporated herein by this reference to
                  Exhibit 10.1 to the Current Report on Form 8K of Superior
                  Galleries, Inc., filed under the Exchange Act on June 27,
                  2006)

    10.28         Agreement and Plan of Merger and Reorganization (the "Merger
                  Agreement") dated July 14, 2006, between Superior Galleries,
                  Inc., a Delaware corporation, and DGSE Companies, Inc., a
                  Nevada corporation (incorporated herein by this reference to
                  Exhibit 2.1 to the Current Report on Form 8-K of Superior
                  Galleries, Inc., filed under the Exchange Act on July 17,
                  2006).

    14.1          Superior Galleries, Inc. Code of Ethics (filed herewith).

    31.1          Certification of CEO pursuant to Securities Exchange Act Rules
                  13a-14 and 15d-14 as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (filed herewith)

    31.2          Certification of CFO pursuant to Securities Exchange Act Rules
                  13a-14 and 15d-14 as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (filed herewith)

    32.1          Certification of CEO pursuant to 18 U.S.C. Section 1350 as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act OF
                  2002 (filed herewith)

    32.2          Certification of CFO pursuant to 18 U.S.C. Section 1350 as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act OF
                  2002 (filed herewith)