**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-Q**





(Mark
                One)ý
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the quarter ended September 30, 2006****OR**q
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 [NO FEE REQUIRED]****For
                the transition period from _______ to _____****Commission
                file number 0-27887****COLLECTORS
                UNIVERSE, INC.**
              **(Exact
                name of Registrant as specified in its
                charter)**





**Delaware**
            **33-0846191****(State
                or other jurisdiction of**
            **(I.R.S.
                Employer Identification No.)****Incorporation
                or organization)****1921
                E. Alton Avenue, Santa Ana, California 92705****(address
                of principal executive offices and zip code****)****Registrant's
                telephone number, including area code: (949)
                567-1234**




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes   ü  No
      ___




Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act, (Check
      one):




Large
      accelerated filer o   Accelerated
      filer ý  Non-accelerated
      filer o




Indicate
      by check mark whether the Registrant is a shell company (as defined in
      Securities Exchange Act Rule 12b-2). YES
      [ ]
      NO x




Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date.




**Class**
            **Outstanding
                at October 29, 2006****Common
                Stock $.001 Par Value**
            **8,352,902**











**COLLECTORS
      UNIVERSE, INC.**


**QUARTERLY
      REPORT ON FORM 10-Q**


**FOR
      THE QUARTER ENDED SEPTEMBER 30, 2006**





**TABLE
      OF CONTENTS**








**PART
                I**
            **Financial
                Information**
            **Page**Item
                1.
            Financial
                Statements:Condensed
                Consolidated Balance Sheets as of September 30, 2006and
                June 30, 2006 (unaudited)
            1Condensed
                Consolidated Statements of Operationsfor
                the Three-Months Ended September 30, 2006 and 2005
                (unaudited)
            2Condensed
                Consolidated Statements of Cash Flowsfor
                the Three Months Ended September 30, 2006 and 2005
                (unaudited)
            3Notes
                to Condensed Consolidated Financial Statements
                (unaudited)
            5Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            21Forward
                Looking Information
            21Our
                Business
            21Factors
                That Can Affect Our Financial Position and Operating Results
            22Overview
                of Results of Operation for the Quarter Ended September 30,
                2006
            24Critical
                Accounting Policies and Estimates
            24Results
                of Operations-Quarter Ended September 30,2006 Versus Quarter Ended
                September 30, 2005
            27Liquidity
                and Capital Resources
            31Recent
                Accounting Pronouncements
            33Risks
                and Uncertainties That Could Affect Our Future Financial
                Performance
            33Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            35Item
                4.
            Controls
                and Procedures
            35**PART
                II**
            **Other
                Information**Item
                1A.
            Risk
                Factors
            36Item
                2.
            Unregistered
                Sales of Securities and Use of
                Proceeds
            36Item
                6.
            Exhibits
            36**SIGNATURES**
            
            S-1**INDEX
                TO EXHIBITS**
            E-1**EXHIBITS****Exhibit
                31.1**
            Certifications
                of Chief Executive Officer Under Section 302 of the Sarbanes-Oxley
                Act of
                2002**Exhibit
                31.2**
            Certifications
                of Chief Financial Officer Under Section 302 of the Sarbanes-Oxley
                Act of
                2002**Exhibit
                32.1**
            Chief
                Executive Officer Certification Under Section 906 of the Sarbanes-Oxley
                Act of 2002**Exhibit
                32.2**
            Chief
                Financial Officer Certification Under Section 906 of the Sarbanes-Oxley
                Act of 2002








i


**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1.****FINANCIAL
      STATEMENTS**


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**as
      of September 30, 2006 and June 30, 2006**


(in
      thousands, except per share data)


(unaudited)


**September
                30,**
            
            **June
                30,****2006**
            
            **2006****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            41,602
            
            $
            52,110Accounts
                receivable, net of allowance for doubtful accounts of $61 (September)
                and
                $37 (June)
            
            
            1,815
            
            
            1,753Inventories,
                net
            
            
            452
            
            
            437Prepaid
                expenses and other current assets
            
            
            875
            
            
            1,010Customer
                notes receivable, net of allowance of $16
            
            
            5,587
            
            
            3,797Deferred
                tax assets
            
            
            1,414
            
            
            1,414Receivables
                from sale of net assets of discontinued operations
            
            
            92
            
            
            196Current
                assets of discontinued operations held for sale
            
            
            73
            
            
            83Total
                current assets
            
            
            51,910
            
            
            60,800Property
                and equipment, net
            
            
            3,180
            
            
            1,897Note
                receivable
            
            
            115
            
            
            -Goodwill
            
            
            15,074
            
            
            9,799Intangible
                assets, net
            
            
            6,843
            
            
            4,674Note
                receivable from sale of discontinued operations
            
            
            298
            
            
            321Deferred
                tax assets
            
            
            216
            
            
            342Other
                assets
            
            
            512
            
            
            388$
            78,148
            
            $
            78,221**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            880
            
            $
            907Accrued
                liabilities
            
            
            2,178
            
            
            2,043Accrued
                compensation and benefits
            
            
            1,200
            
            
            1,075Income
                taxes payable
            
            
            351
            
            
            496Deferred
                revenue
            
            
            1,547
            
            
            1,384Current
                liabilities of discontinued operations held for sale
            
            
            2
            
            
            8Total
                current liabilities
            
            
            6,158
            
            
            5,913Deferred
                rent
            
            
            468
            
            
            402Other
                long-term liabilities
            
            
            40
            
            
            -Commitment**s**and contingencies
            
            
            **-**
            
            
            **-**Stockholders'
                equity:Preferred
                stock, $.001 par value; 5,000 shares authorized; no shares issued
                or
                outstanding
            
            
            -
            
            
            -Common
                stock, $.001 par value; 45,000 shares authorized; issued 8,478 at
                September 30, 2006 and 8,475 at June 30, 2006
            
            
            8
            
            
            8Additional
                paid-in capital
            
            
            76,759
            
            
            76,909Accumulated
                deficit
            
            
            (4,264
            )
            
            (3,990
            )Treasury
                stock, at cost (125 shares)
            
            
            (1,021
            )
            
            (1,021
            )Total
                stockholders' equity
            
            
            71,482
            
            
            71,906$
            78,148
            
            $
            78,221





See
      accompanying notes to condensed consolidated financial statements.







1


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF
      OPERATIONS**


(in
      thousands, except per share data)


(unaudited)








**Three
                Months Ended****September
                30,****2006**
            
            **2005**Net
                revenues
            
            $
            9,898
            
            $
            8,825Cost
                of revenues
            
            
            4,356
            
            
            3,372Gross
                profit
            
            
            5,542
            
            
            5,453Selling
                and marketing expenses
            
            
            1,262
            
            
            1,090General
                and administrative expenses
            
            
            3,979
            
            
            3,200Amortization
                of intangible assets
            
            
            171
            
            
            20Total
                operating expenses
            
            
            5,412
            
            
            4,310Operating
                income
            
            
            130
            
            
            1,143Interest
                income, net
            
            
            567
            
            
            542Other
                income
            
            
            4
            
            
            8Income
                before income taxes
            
            
            701
            
            
            1,693Provision
                for income taxes
            
            
            (318
            )
            
            (714
            )Income
                from continuing operations
            
            
            383
            
            
            979Income
                (loss) from discontinued operations, net of gain on sales of discontinued
                businesses
                (net of income taxes)
            
            
            11
            
            
            (12
            )Net
                income
            
            $
            394
            
            $
            967Net
                income per basic share:Income
                from continuing operations
            
            $
            0.05
            
            $
            0.11Income
                (loss) from discontinued operations, net of gain on sales of discontinuedbusinesses
                (net of income taxes)
            
            
            -
            
            
            -Net
                income
            
            $
            0.05
            
            $
            0.11Net
                income per diluted share:Income
                from continuing operations
            
            $
            0.04
            
            $
            0.11Income
                (loss) from discontinued operations, net of gain on sales of discontinuedbusinesses
                (net of income taxes)
            
            
            -
            
            
            -Net
                income
            
            $
            0.04
            
            $
            0.11Weighted
                average shares outstanding:Basic
            
            
            8,351
            
            
            8,486Diluted
            
            
            8,628
            
            
            8,806





See
      accompanying notes to condensed consolidated financial
      statements.


2


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


(in
      thousands)


(unaudited)


**Three
                Months Ended**
              **September
                30,**2006
            
            2005CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            394
            
            $
            967Adjustments
                to reconcile net income to net cash (used in) providedby
                operating activities:Depreciation
                and amortization
            
            
            390
            
            
            121Loss
                on disposal of fixed assets
            
            
            -
            
            
            3Loss
                on termination of sublease
            
            
            -
            
            
            83Stock-based
                compensation expense
            
            
            195
            
            
            127Tax
                benefit from exercising of stock options
            
            
            7
            
            
            -Provision
                for bad debts and credits
            
            
            -
            
            
            25Provision
                for inventory write down
            
            
            (12
            )
            
            -Discontinued
                operations
            
            
            (10
            )
            
            12Deferred
                income taxes
            
            
            (12
            )
            
            698Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (121
            )
            
            296Inventories
            
            
            7
            
            
            (1
            )Prepaid
                expenses and other current assets
            
            
            158
            
            
            39Customer
                notes receivable (CFC)
            
            
            (1,790
            )
            
            1,483Income
                taxes payable
            
            
            (228
            )
            
            -Other
                assets
            
            
            (66
            )
            
            -Accounts
                payable
            
            
            (106
            )
            
            (361
            )Accrued
                liabilities
            
            
            66
            
            
            (67
            )Deferred
                rent and other long-term liabilities
            
            
            66
            
            
            17Accrued
                compensation and benefits
            
            
            48
            
            
            (200
            )Deferred
                revenue
            
            
            (316
            )
            
            176Net
                cash (used in) provided by operating activities
            
            
            (1,330
            )
            
            3,418Net
                cash provided by operating activities of discontinued
                businesses
            
            
            14
            
            
            173CASH
                FLOWS FROM INVESTING ACTIVITIES:Capital
                expenditures
            
            
            (1,387
            )
            
            (99
            )Collection
                of receivables from sales of discontinued businesses
            
            
            128
            
            
            48Purchase
                of businesses, net of cash acquired
            
            
            (6,182
            )
            
            (2,279
            )Purchase
                of patents and other intangible assets
            
            
            (343
            )
            
            -Capitalized
                software
            
            
            (383
            )
            
            -Net
                cash used in investing activities
            
            
            (8,167
            )
            
            (2,330
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from exercise of stock options
            
            
            21
            
            
            14Payments
                for retirement of common stock
            
            
            (378
            )
            
            -Dividends
                paid to common stockholders
            
            
            (668
            )
            
            -Net
                cash (used in) provided by financing activities
            
            
            (1,025
            )
            
            14Net
                (decrease) increase in cash and cash equivalents
            
            
            (10,508
            )
            
            1,275Cash
                and cash equivalents at beginning of period
            
            
            52,110
            
            
            65,439Cash
                and cash equivalents at end of period
            
            $
            41,602
            
            $
            66,714SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Interest
                paid
            
            $
            7
            
            $
            3Income
                taxes paid
            
            $
            507
            
            $
            16





See
      accompanying notes to condensed consolidated financial
      statements.


3


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


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


(in
      thousands)


(unaudited)








**Three
                Months Ended**
              **September
                30,**2006
            
            2005SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION (CONTINUED):Effective
                July 14, 2005, the Company acquired CoinFacts.com in a transaction
                summarized asfollows:Goodwill
            
            $
            -
            
            $
            515Cash
                paid
            
            
            -
            
            
            515Effective
                September 2, 2005, the Company acquired CCE in a transaction summarized
                as
                follows:Fair
                value of net liabilities assumed
            
            
            -
            
            
            (70
            )Deferred
                taxes recognized at acquisition
            
            
            -
            
            
            (423
            )Transition
                costs
            
            
            -
            
            
            27Intangible
                assets
            
            
            -
            
            
            947Fair
                value of CTP, including net assets
            
            
            -
            
            
            501Goodwill
            
            
            -
            
            
            1,282Purchase
                price, net of cash acquired
            
            
            -
            
            
            2,264
            *Effective
                July 1, 2006, the Company acquired Expos Unlimited, LLC in a transactionsummarized
                as follows:Fair
                value of net liabilities assumed
            
            $
            (471
            )
            $
            -Intangible
                assets
            
            
            988
            
            
            -Goodwill
            
            
            1,894
            
            
            -Purchase
                price, net of cash acquired
            
            
            2,411
            **
            
            -Effective
                August 18, 2006, the Company acquired American Gemological Laboratories,
                Inc.
              in a transaction summarized as follows:Fair
                value of net assets acquired
            
            $
            7
            
            $
            -Deferred
                taxes recognized at acquisition
            
            
            (137
            )
            
            -Intangible
                assets
            
            
            646
            
            
            -Goodwill
            
            
            3,360
            
            
            -Purchase
                price, net of cash acquired
            
            
            3,876
            ***
            
            -*$500,000
                of the purchase price was payable subsequent to September 30, 2005
                and wasincluded
                in accrued
              liabilities at September 30,
                2005.**Includes
                $30,000 unpaid as of September 30, 2006, pending settlement of the
                workingcapital
                provisions,
              of the purchase agreement.***
                Includes $75,000 of direct costs accrued at September 30,
                2006.






See
      accompanying notes to condensed consolidated
      financial statements.





4


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)**





1. SIGNIFICANT
      ACCOUNTING POLICIES





*Principles
      of Consolidation*





The
      accompanying unaudited interim condensed consolidated financial statements
      include the accounts of Collectors Universe, Inc. and its subsidiaries (the
      “Company”). All intercompany transactions and accounts have been eliminated. In
      fiscal
      2006, the Company acquired the following businesses, the results of operations
      of which have been consolidated into the financial statements of the Company
      from their respective dates of acquisition:




**Business**
            **Acquisition
                Date**
            **Purchase
                Price**CoinFacts.com
            July
                14, 2005
            $0.5
                millionCertified
                Coin Exchange
            September
                2, 2005
            $2.4
                millionGem
                Certification & Appraisal Lab, LLC
            November
                8, 2005
            $3.3
                millionGemprint
                Corporation
            December
                22, 2005
            $8.6
                million




In
      the
      first quarter of fiscal 2007, the Company acquired the following businesses,
      the
      results of operations of which have been consolidated into the financial
      statements of the Company from their respective dates of
      acquisition:




**Business**
            **Acquisition
                Date**
            **Purchase
                Price**Expos
                Unlimited, LLC
            July
                1, 2006
            $2.5
                millionAmerican
                Gemological Laboratories, Inc.
            August
                18, 2006
            $3.9
                million




*Unaudited
      Interim Financial Information*




The
      accompanying interim condensed consolidated financial statements have been
      prepared by the Company pursuant to the rules and regulations of the Securities
      and Exchange Commission (the “SEC”) for interim financial reporting. These
      interim condensed consolidated financial statements are unaudited and, in the
      opinion of management, include all adjustments (consisting of normal recurring
      adjustments and accruals) necessary to present fairly the condensed consolidated
      balance sheets, consolidated operating results, and consolidated cash flows
      for
      the periods presented in accordance with accounting principles generally
      accepted in the United States of America (“GAAP”). Operating results for the
      three months ended September 30, 2006 are not necessarily indicative of the
      results that may be expected for the year ending June 30, 2007 or for any other
      interim period during such year. Certain information and footnote disclosures
      normally included in financial statements prepared in accordance with GAAP
      have
      been omitted in accordance with the rules and regulations of the SEC. These
      interim condensed consolidated financial statements should be read in
      conjunction with the audited consolidated financial statements and notes thereto
      contained in the Company’s Annual Report on Form 10-K for the fiscal year ended
      June 30, 2006. Amounts related to disclosure of June 30, 2006 balances within
      these interim condensed consolidated financial statements were derived from
      the
      aforementioned audited consolidated financial statements and notes thereto
      included in that Form 10-K.




*Reclassifications*




Certain
      prior
      period amounts have been reclassified to conform to the current period
      presentation. On the Condensed Consolidated Statements of Cash Flows for the
      three month period ended September 30, 2005, net cash inflows of $1,483,000
      from
      advances to and cash collections from customer notes receivable has been
      reclassified from cash flows from investing activities to cash flows from
      operating activities.







5


*Revenue
      Recognition*




Net
      revenues consist primarily of fees generated from the authentication and grading
      of coins, sportscards, autographs, currency, diamonds, colored gemstones and
      stamps. With the acquisition of Expos, the Company recognizes revenues earned
      from the promotion, managing and operation of collectibles conventions in the
      period that the event occurs. Authentication and grading revenues are recognized
      when those services have been performed by us and the item is shipped back
      to
      the customer. Authentication and grading fees generally are prepaid, although
      we
      offer open account privileges to larger dealers. Advance payments received
      for
      grading services are deferred until the service is performed and the graded
      item
      is shipped to the customer. In the case of dealers to whom we have extended
      credit, we record revenues at the time the item is shipped to the
      customer.





*Use
      of Estimates*




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





*Long-Lived
      Assets*




Management
      regularly reviews property and equipment and other long-lived assets, including
      certain identifiable intangibles and goodwill, for possible impairment. This
      review occurs annually, or more frequently if events or changes in circumstances
      indicate the carrying amount of the asset may not be recoverable in full. If
      there is indication of impairment of property and equipment or amortizable
      intangible assets, then management prepares an estimate of future cash flows
      (undiscounted and without interest charges) expected to result from the use of
      that asset and its eventual disposition. If these cash flows are less than
      the
      carrying amount of the asset, an impairment loss is recognized to write down
      the
      asset to its estimated fair value. The fair value is estimated at the present
      value of the future cash flows discounted at a rate commensurate with
      management’s estimates of the business risks. As of September 30, 2006, the
      Company does not believe there has been any impairment of its long-lived assets.
      There can be no assurance, however, that there will be no impairment of the
      Company’s long-lived assets in the future.




*Stock-Based
      Compensation*




At
      September 30, 2006, the Company had four stock-based compensation plans. Prior
      to July 1, 2005, the Company accounted for these plans under the recognition
      and
      measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related interpretations, as permitted by Statement of Financial Accounting
      Standards (“SFAS”) No. 123, *Accounting
      for Stock-Based Compensation* .


6


Effective
      July 1, 2005, the Company adopted the provisions of Standards (SFAS) No.
      123(R), *Share-Based
      Payment* . 
      Accordingly, stock-based compensation cost is measured at the grant date, based
      on the fair value of the award, and is recognized as expense over the employee
      requisite service period, which is generally the vesting period. The following
      table shows total stock-based compensation expense included in the Condensed
      Consolidated Statements of Operations:









(Dollars
                in thousands)**Three
                Months Ended**
              **September
                30,****2006**
            
            **2005**Included
                in:Cost
                of revenues
            
            $
            76
            
            $
            56Selling
                and marketing expenses
            
            
            1
            
            
            1General
                and administrative expenses(1)
            
            
            123
            
            
            75Pre-tax
                stock-based compensation expense
            
            
            200
            
            
            132Income
                tax benefits
            
            
            (5
            )
            
            (5
            )Stock-based
                compensation expense
            
            $
            195
            
            $
            127







(1)
            Includes
                $3,000 and $0 in the three months ended September 30, 2006 and 2005,
                respectively, for amortization of deferred compensation expense related
                to
                issuance of restricted stock (see
                below).




For
      the
      three months ended September 30, 2005 and 2006, the Company estimated the rates
      of forfeiture of outstanding non-vested stock-based compensation awards to
      be 4%
      and 10.5%, respectively.




During
      the fourth quarter of 2006, the Company reviewed its assumptions, both current
      and historical, regarding the assumptions that are input into the Black-Scholes
      option model. The expected option term and the resultant volatility percentage
      and the resultant risk-free rate assumptions were modified, which resulted
      in a
      correcting adjustment of compensation expense in the fourth quarter of fiscal
      2006 of approximately $105,000, including the effect of the increase in the
      estimated forfeiture rate from 4% to 10.5%, which we believe was erroneously
      determined by us. The Company increased the expected term of options to a
      weighted average of approximately 5.0 years from a previous weighted average
      estimate of 2.0 years, which we believe was erroneously determined by us. After
      carefully assessing the effect of the $105,000 on each of the quarters in the
      nine months ended March 31, 2006, under the provisions of Statement of Financial
      Accounting Standards No. 154, *Accounting
      Changes and Error Corrections* ,
      a
      replacement of APB Opinion No. 20, and FASB Statement No.3, we determined that
      the prorata portion of such $105,000 (or $35,000 per quarter) was not material
      to those quarters and, accordingly, recorded the amount of $105,000 in the
      fourth quarter of fiscal 2006. The annual volatility percentage was reduced
      from
      approximately 75% to a range of 58% to 68%, depending on the estimated expected
      term of the option.





During
      the three month periods ended September 30, 2005 and 2006, 10,000 and 28,000
      stock options were granted, respectively. The Company uses the Black-Scholes
      option pricing model to determine the fair value of option grants issued and
      used the assumptions set forth in the following table (which reflect the
      adjustments described above) to determine the fair values of the options granted
      in those respective three month periods:




**2006**
            
            **2005**Dividend yield
            
            
            2.3%
            
            
            -Expected
                volatility
            
            
            52.0%
            
            
            61.0%Risk-free
                interest rate
            
            
            4.69%
            
            
            3.99%Expected
                lives
            
            
            5.1
                years
            
            
            5.1
                years




Because
      the Company paid its first quarterly dividend of $0.08 per common share in
      the
      fourth quarter of 2006, the Company assumed a dividend yield of 2.3% for stock
      option grants issued in or after the fourth quarter of fiscal 2006, based on
      an
      annualized dividend of $0.32 per share of common stock.




7




At
      September 30, 2006, stock options to purchase a total of 911,000 shares of
      our
      common stock were outstanding at a weighted average exercise price of $12.72,
      of
      which options to purchase 580,000 shares were exercisable at a weighted average
      price of $12.37. Based on the Company’s closing stock price of $13.95 as of
      Friday, September 29, 2006, and assuming all the optionees had exercised their
      options as of that date, the aggregate intrinsic value (i) of the total number
      of stock options then outstanding was $2,705,000 and (ii) of those options
      that
      were then exercisable was $2,197,000. Also, based on that same closing price
      as
      of September 29, 2006, approximately 335,000 of the 580,000 exercisable options
      were “in-the-money-options”. The weighted average remaining contractual lives,
      as of September 30, 2006, of the total number of stock options outstanding
      and
      of those options that were exercisable on September 30, 2006 were 7.28 years
      and
      6.68 years, respectively.




At
      September 30, 2006, unvested stock options to purchase a total of approximately
      331,000 shares had a weighted average contractual remaining life of 8.34 years
      and a weighted average exercise price of $13.32. As of the same date, the
      aggregate intrinsic value of those unvested options was approximately $508,000.
      We estimate, based on an estimated forfeiture rate of 10.5% per annum and the
      remaining vesting terms of those options as of September 30, 2006, that
      approximately 257,000 of those options will vest over their remaining vesting
      terms at a weighted average exercise price of $13.08 and that those options
      have
      an aggregate intrinsic value of $457,000 and a remaining contractual life of
      7.97 years.




On
      September 19, 2006, the Compensation Committee of the Board of Directors granted
      the Chief Executive Officer a restricted stock award of 26,200 shares that,
      subject to his continued employment with the Company, will vest over four equal
      annual installments commencing on September 19, 2007. Based on the closing
      price
      of $13.75 on that date of grant, the Company recorded the estimated aggregate
      intrinsic value of that award, in the amount of approximately $360,000, as
      deferred compensation in additional paid-in capital on the Condensed
      Consolidated Balance Sheet at September 30, 2006. That amount will be subject
      to
      amortization and, therefore, the Company expects to record compensation expense
      of approximately $90,000 per year over the four-year vesting period of that
      award.




As
      of
      September 30, 2006, $1,976,000 of total unrecognized compensation costs related
      to non-vested stock-based awards is expected to be recognized over a weighted
      average period of approximately 2.7 years.




*Concentrations*




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




Financial
      Instruments and Cash Balances. At
      September 30, 2006, cash and cash equivalents, totaling approximately $41.6
      million, were comprised primarily of money market funds. At September 30, 2006,
      the Company had in excess of $0.6 million in a non-interest bearing bank account
      for general day-to-day operations.




Accounts
      Receivable .
      A
      substantial portion of accounts receivable are due from collectibles dealers.
      At
      September 30, 2006 and June 30, 2006, two customers accounted for approximately
      42% and 31%, respectively, of total accounts receivable balances. The Company
      performs an analysis of the expected collectibility of accounts receivable
      based
      on several factors, including the age and extent of significant past due
      accounts and economic conditions or trends that may adversely affect the ability
      of account debtors to pay their account receivable balances. Based on that
      review, the Company establishes an allowance for doubtful accounts, when
      necessary. The allowance for doubtful accounts receivable was $61,000 at
      September 30, 2006.




Sources
      of Revenues .
      The
      authentication and grading of collectible coins accounted for approximately
      56%
      and 65% of our net revenues for the three months ended September 30, 2006 and
      2005, respectively.




Customer
      Notes Receivables. At
      September 30, 2006, the outstanding principal amount of customer notes
      receivable, which evidenced short term advances made to customers, totaled
      $5,587,000, net of a $16,000 allowance for uncollectible amounts, and three
      of
      those notes receivable represented 96% of the total principal amounts
      outstanding. During the quarter ended September 30, 2006, the Company made
      short-term advances to and recorded cash collections from these three customers
      in the aggregate amounts of $2,406,000 and $614,000, respectively. In total,
      the
      Company made short-term advances of $2,421,000 and recorded cash collections
      of
      $631,000 during the first quarter of fiscal year 2007. The Company performs
      an
      analysis of the expected collectibility of customer notes receivables based
      on
      several factors, including the age and extent of significant past due amounts,
      economic conditions or trends that may adversely affect the ability of customers
      to pay those notes and the value of collateral securing the repayment of the
      outstanding balances. At September 30, 2006 the allowance of $16,000 reflected
      a
      deficiency in collateral value securing the notes of one customer. Subsequent
      to
      September 30, 2006, a customer repaid $3,400,000 of customer note receivables
      due to the Company.






8


*Comprehensive
      Income*




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




*Goodwill
      and Other Intangible Assets* . **




In
      accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company
      is required to evaluate the carrying value of its goodwill and certain
      indefinite-lived intangible assets at least annually for impairment, or more
      frequently if facts and circumstances indicate that impairment has occurred.
      Management intends to formally evaluate the carrying value of its goodwill
      and
      other indefinite-lived intangible assets for impairment on the anniversary
      date
      of each of the acquisitions that gave rise to the recording of such assets.
      During the three month period ended September 30, 2006, the Company completed
      its annual review of the carrying value of goodwill acquired with the
      acquisitions of CoinFacts.com and Certified Coin Exchange, which were
      consummated in the first quarter fiscal 2006, and determined that no impairment
      had occurred. Intangible assets acquired through acquisition, which have
      definite lives, are subject to amortization over their remaining useful lives.




During
      the first quarter 2007, the Company completed two business acquisitions and
      one
      asset purchase which resulted in the acquisition of goodwill and intangible
      assets with indefinite lives, totaling $5,254,000 and $656,000, respectively.
      The Company also acquired $1,301,000 of intangible assets through business
      acquisitions with definite lives and capitalized $383,000 of certain software
      development costs, both of which are subject to amortization over their
      remaining useful lives (see also related discussion in note 2).




The
      following table sets forth, by “reporting unit” as defined by SFAS No. 142, the
      amounts classified as goodwill and intangible assets, net, on the balance sheets
      as of June 30 and September 30, 2006 in thousands of dollars:




**Coins**
            
            **CGAL**
              **&
                Gemprint**
            
            **AGL**
            
            **Expos**
            
            **CCE**
              **and
                Other**
            
            **Total**Goodwill:Balance
                at June 30, 2006
            
            $
            515
            
            $
            8,167
            
            $
            -
            
            $
            -
            
            $
            1,117
            
            $
            9,799Acquired
                during FY2007:AGL
                Acquisition
            
            
            -
            
            
            -
            
            
            3,360
            
            
            -
            
            
            -
            
            
            3,360Expos
                Unlimited
            
            
            -
            
            
            -
            
            
            -
            
            
            1,894
            
            
            -
            
            
            1,894Purchase
                price adjustment since June 30, 2006:
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Gemprint
            
            
            -
            
            
            21
            
            
            -
            
            
            -
            
            
            -
            
            
            21Balance
                at September 30, 2006
            
            $
            515
            
            $
            8,188
            
            $
            3,360
            
            $
            1,894
            
            $
            1,117
            
            $
            15,074Intangible
                Assets, NetBalance
                at June 30, 2006
            
            $
            29
            
            $
            3,365
            
            $
            -
            
            $
            -
            
            $
            1,280
            
            $
            4,674Acquired
                during FY2007 with indefinite lives:AGL
                Acquisition
            
            
            -
            
            
            -
            
            
            522
            
            
            -
            
            
            -
            
            
            522Expos
                Unlimited
            
            
            -
            
            
            -
            
            
            -
            
            
            134
            
            
            -
            
            
            134Acquired
                during FY2006 with definite lives:AGL
                Acquisition
            
            
            -
            
            
            -
            
            
            124
            
            
            -
            
            
            -
            
            
            124Expos
                Unlimited
            
            
            -
            
            
            -
            
            
            -
            
            
            854
            
            
            -
            
            
            854Diamond
                I.D.
            
            
            -
            
            
            323
            
            
            -
            
            
            -
            
            
            -
            
            
            323Capitalized
                software costs
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            383
            
            
            383Less:
                amortization for FY2007
            
            
            (12
            )
            
            (66
            )
            
            (2
            )
            
            (22
            )
            
            (69
            )
            
            (171
            )Balance
                at September 30, 2006
            
            $
            17
            
            $
            3,622
            
            $
            644
            
            $
            966
            
            $
            1,594
            
            $
            6,843








9




Amortization
      expense for each of the five succeeding years relating to intangible assets
      with
      definite lives currently recorded in the Condensed Consolidated Balance Sheet
      is
      estimated to be as follows at September 30, 2006:




2007
                (for Q2-Q4)
            
            $
            664,0002008
            
            $
            627,0002009
            
            $
            600,0002010
            
            $
            610,0002011
            
            $
            576,000




Approximately
      $11.0 million of the $15.1 million classified as goodwill on the Condensed
      Consolidated Balance Sheet at September 30, 2006 is amortizable and deductible
      for tax purposes over a period of 15 years.




*Stock
      Buyback*




During
      the first quarter of fiscal year 2007, the Company repurchased a total of 27,117
      shares of its common stock in the open market and, as a result, recorded a
      reduction of additional paid-in capital in the amount of approximately $378,000
      on the Condensed Consolidated Balance Sheet as of September 30, 2006. As this
      program was authorized by the Board of Directors on December 6, 2005, there
      were
      no share repurchases in the three month period ended September 30,
      2005.




*Retirement
      of Treasury Shares*




On
      September 19, 2006, the Board of Directors approved the retirement of 125,000
      treasury shares presented on the Condensed Consolidated Balance Sheets at
      September 30, 2006 and June 30, 2006 in the amount of $1,021,000. The
      transaction was finalized in October 2006 and the Company will retire these
      shares during the second quarter of fiscal 2007.





*Dividends*




On
      May
      31, 2006, the Company announced that its Board of Directors had adopted a
      dividend policy that calls for the payment of an expected total annual cash
      dividend of $0.32 per common share, payable in the amount of $0.08 per share
      per
      quarter. At the same time, the Board of Directors declared the first of the
      quarterly cash dividends under this policy of $0.08 per share, which was paid
      on
      June 28, 2006 in the aggregate amount of $674,000 to stockholders of record
      on
      June 14, 2006. Similarly, pursuant to that dividend policy, in the first quarter
      of fiscal 2007, a dividend of $0.08 per share was declared and subsequently
      paid
      on September 11, 2006 in the aggregate amount of approximately
      $668,000.




*Capitalized
      Software*




Statement
      of Position (“SOP”) 98-1, *Accounting
      for the Costs of Computer Software Developed or Obtained for Internal
      Use* requires
      that certain costs incurred, either from internal or external sources, be
      capitalized as part of intangible assets and amortized to expense on a
      straight-line basis over the useful life of the software. Through September
      30,
      2006, the Company capitalized software development costs in the total amount
      of
      $804,000. Approximately $383,000 of such costs were capitalized during the
      three
      month period ended September 30, 2006. During the first quarter of fiscal 2007,
      approximately $13,000 of such costs was recognized as amortization expense.
      Planning, training, support and maintenance costs incurred either prior to
      or
      following the implementation phase are recognized as expense in the period
      in
      which they occur. The Company evaluates the carrying values of capitalized
      software to determine if the carrying values are impaired, and, if necessary,
      an
      impairment loss is recorded in the period in which the impairment occurs.
      Management believes that no such impairments have occurred.




In
      July
      2006, the FASB issued FASB Interpretation 48, *Accounting
      for Uncertainty in Income Taxes: an Interpretation of FASB Statement No.
      109.* Interpretation 48 clarifies Statement 109, *Accounting
      for Income Taxes* ,
      to
      indicate a criterion that an individual tax position would have to meet for
      some
      or all of the benefit of that position to be recognized in an entity’s financial
      statements. Interpretation 48 is effective for fiscal years beginning after
      December 15, 2006. We will evaluate the impact of Interpretation 48 prior to
      the
      end of this fiscal year.




10




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements.* SFAS
      No.
      157 defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (GAAP) and expands disclosure about
      fair value measurements. The statement emphasizes that fair value is a
      market-based measurement, not an entity-specific measurement. SFAS No. 157
      is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. We do not
      expect the adoption of SFAS No. 157 to have a material impact on our financial
      position or results of operation.




In
      September 2006, the FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Post Retirement Plans* (an
      amendment of FASB Statement No. 87, 88, 106 and 132R). SFAS No. 158 requires
      an
      employer to recognize the over funded or under funded status of a defined
      benefit postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income. As the Company currently does not sponsor one or more single-employer
      defined benefit plans, we do not expect the adoption of SFAS No. 158 to have
      a
      material impact on our financial position or results of operation.





In
      September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements.* SAB 108
      was issued to provide consistency in the manner in which registrants quantify
      financial statements. Historically, there have been two widely-used methods
      for
      quantifying the effects of financial statement misstatements. These methods
      are
      referred to as the “roll-over” method and the “iron curtain” method,
      respectively. The roll-over method quantifies the amount by which the current
      year income statement is misstated. Exclusive reliance on this income statement
      approach can result in the accumulation of errors on the balance sheet that
      may
      not have been material to any individual income statement, but which may
      misstate one or more balance sheet accounts. The iron curtain method quantifies
      the error as the cumulative amount by which the current year balance sheet
      is
      misstated. Exclusive reliance on this balance sheet approach can result in
      disregarding the effects of errors in the current year income statement that
      result from the correction of an error existing in previously issued financial
      statements. SAB 108 established an approach that requires quantification of
      financial statement misstatements based on the effects of the misstatement
      on
      each of the Company’s financial statements and the related financial statement
      disclosures. This approach is commonly referred to as the “dual approach”
because it requires quantification of errors under both the roll-over and iron
      curtain methods. SAB 108 allows registrants to initially apply the dual approach
      either by (1) retroactively adjusting prior financial statements as if the
      dual
      approach had always been used or by (2) recording the cumulative effect of
      initially applying the dual approach as adjustments to the carrying values
      of
      assets and liabilities as of July 1, 2006 with an offsetting adjustment recorded
      to the opening balance of retained earnings (accumulated deficit). Use of this
      “cumulative effect” transition method requires detailed disclosure of the nature
      and amount of each individual error being corrected through the cumulative
      adjustment and how and when it arose. We do not expect the initial application
      of SAB 108 to have any impact on the Company’s financial position or results of
      operation.





2.
            BUSINESS
                ACQUISITIONS





On
      July
      14, 2005, the Company acquired substantially all the assets of CoinFacts.com
      (“CoinFacts”) for $500,000 in cash. CoinFacts.com operates an Internet website
      on which it publishes detailed proprietary historical information on U.S.
      coins.




On
      September 2, 2005, the Company acquired all of the common stock of Certified
      Coin Exchange (“CCE”) and all of the common stock of an affiliated business,
      computertradingpost.com, Inc. (“CTP”), for an aggregate purchase price of
      $2,180,000. In addition, there was a provision for a working capital adjustment
      that was determined to be $37,000. CCE is a subscription-based dealer-to-dealer
      Internet bid-ask market for third-party certified coins.




The
      Company was required to purchase CTP as a condition to its acquisition of CCE.
      At the time it consummated the CCE acquisition, the Company intended to dispose
      of CTP, and, effective November 30, 2005, disposed of CTP. In accordance with
      SFAS No. 144, the results of operations of CTP from the date of its acquisition
      through November 30, 2005, which included revenue of approximately $120,000
      and
      operating income of $38,000, were consolidated as part of income from
      discontinued operations in the consolidated statement of operations for the
      fiscal year ended June 30, 2006, and a loss on the sale of CTP was included
      in
      the gain on the sale of discontinued operations for the fiscal year ended June
      30, 2006 (see note 7 below).






11


On
      November 8, 2005, the Company acquired Gem Certification & Appraisal Lab
      (“GCAL”), a forensic gemological certification and grading laboratory. As part
      of that transaction, the Company also acquired all of the common stock of
      Diamond Profile Laboratory, Inc. (“DPL”), a scientific diamond light performance
      analysis laboratory, and all publishing and other rights to “Palmieri’s Market
      Monitor,” an educational and informative industry publication currently
      published by the Gemological Appraisal Association, Inc. (“GAA”). The Company
      paid an aggregate acquisition price of $3,000,000 in cash for GCAL, DPL and
      the
      publishing and other rights to “Palmieri’s Market Monitor,” plus the assumption
      of $50,000 of certain transaction-related costs.




On
      December 22, 2005, the Company acquired the business and substantially all
      of
      the assets of Gemprint Corporation (“Gemprint”). These assets consist primarily
      of a patented technology for non-invasive diamond identification which Gemprint
      used to digitally capture the unique refractive light pattern (or “Gemprint”) of
      each diamond that is processed with that technology. The Company paid a purchase
      price for that business and those assets consisting of $7,500,000 in cash,
      and
      assumed certain pre-acquisition liabilities and a lease commitment at closing,
      and agreed to pay $1 for each diamond that the Company registers using the
      Gemprint process in excess of 100,000 registrations during any year in the
      five-year period ending December 22, 2010.




GCAL
      has
      incorporated the Gemprint process into its GCAL business process, so that each
      GCAL authenticated and graded diamond can also carry a Gemprint image stored
      in
      GCAL’s registered database. The Gemprint process enables GCAL to provide an
      additional measure of protection by enabling it to detect misrepresentations
      of
      diamond quality that can occur by, for example, switching a diamond grading
      certificate issued for a higher quality diamond to a lower quality
      diamond.




Effective
      July 1, 2006, the Company acquired the business of Expos Unlimited LLC (Expos),
      a trade show management company that operates the Long Beach and the Santa
      Clara, California coin, stamp and collectibles expositions, for $2,370,000
      in
      cash and $30,000 (which currently is being withheld until working capital
      adjustments are settled). Based on the future revenues of Expos, the Company
      may
      be obligated to make contingent payments up to an aggregate of $750,000 after
      five years, or July 2011. The Company completed an initial and preliminary
      purchase price allocation based upon an acquisition price of $2,400,000 and
      other direct costs of approximately $60,000. As a result of a valuation of
      the
      intangible assets provided by a third party, the Company allocated $988,000
      to
      identifiable intangible assets and allocated $204,000 and $626,000 to net assets
      and assumed liabilities, respectively. Under the purchase method of accounting
      for business combinations, the excess of the purchase price over the fair values
      of net assets acquired and liabilities assumed, which totaled $1,894,000, was
      recorded as goodwill during the three months ended September 30, 2006. The
      Company, which authenticates and grades collectibles at trade shows as part
      of
      its collectibles authentication and grading business, believes that there exists
      synergistic benefits between the Company’s core collectibles authentication and
      grading businesses and the collectibles trade show business acquired from
      Expos.




On
      August
      18, 2006, the Company acquired American Gemological Laboratories (AGL), an
      international forensic colored gemstone certification and grading laboratory.
      AGL is a third party authentication and grading services for colored gemstones,
      including colored gemstones that are sold at auctions and by jewelry retailers.
      The Company paid an acquisition price of $3,500,000 in cash for AGL, and,
      depending on the future revenue performance of AGL, may become obligated to
      make
      contingent payments of up to an aggregate of $3,500,000 over the next five
      years. The Company also completed an initial and preliminary purchase price
      allocation based on the AGL acquisition price of $3,500,000, plus approximately
      $217,000 of other directly-related costs and $214,000 representing a payment
      to
      settle a loan obligation of AGL to the seller of AGL. A third party valuation
      firm performed the valuation analysis of the intangible assets acquired and
      assigned a fair value of $646,000 to identifiable intangible assets.
      Approximately $101,000 and $176,000 were allocated to net assets acquired and
      liabilities assumed, respectively. Included within the $646,000 allocated to
      intangible assets is an estimated amount of $500,000 in connection with a
      colored gemstone reference set with an indefinite remaining life. The Company
      expects to complete an appraisal of the reference set within fiscal year 2007,
      which may result in an adjustment to the fair value of this asset. The excess
      of
      the purchase price over the fair value of the net assets acquired, including
      intangible assets and liabilities assumed, is recorded as goodwill on the
      Condensed Consolidated Balance Sheet. The amount of $3,360,000 recorded as
      goodwill related to AGL as of September 30, 2006 is based on the Company’s
      expectations that future growth and profit opportunities exist in this
      underdeveloped market segment.






12


The
      operating results of each of these acquired businesses were consolidated into
      the Company's financial statements from the respective dates of their
      acquisition.




On
      September 21, 2006, the Company acquired an existing patent and other intangible
      assets from Diamond I.D., Inc. (DID) for $295,000 and presented these assets
      as
      part of intangible assets, net, on the Condensed Consolidated Balance Sheet
      at
      September 30, 2006. Such acquisition of assets did not constitute a business
      combination.




The
      Company has performed an initial and preliminary purchase price allocation
      with
      respect to each of these acquisitions, as set forth in the following table.
      The
      Company expects to complete its accounting for these acquisitions during this
      fiscal year and expects that some of the amount reported as goodwill in the
      accompanying consolidated balance sheet will be allocated to acquired assets
      and
      assumed liabilities, including identifiable intangible assets, which will be
      depreciated or amortized to expense over their estimated useful
      lives.




**Expos**
            
            **AGL**
            
            **DID**
            
            **Total**Cost
                of Investment:Purchase
                Price
            
            $
            2,400
            
            $
            3,500
            
            $
            295
            
            $
            6,195Other
                direct costs
            
            
            60
            
            
            167
            
            
            28
            
            
            255Investment
                banking fees
            
            
            -
            
            
            50
            
            
            -
            
            
            50Liability
                assumed
            
            
            -
            
            
            214
            
            
            -
            
            
            2142,460
            
            
            3,931
            
            
            323
            
            
            6,714Value
                Assigned to Assets and Liabilities:Current
                assets
            
            
            133
            
            
            101
            
            
            -
            
            
            234Current
                liabilities
            
            
            (147
            )
            
            (39
            )
            
            -
            
            
            (186
            )Customer
                deposits
            
            
            (479
            )
            
            -
            
            
            -
            
            
            (479
            )Property,
                plant and equipment
            
            
            70
            
            
            -
            
            
            -
            
            
            70Other
                assets
            
            
            1
            
            
            -
            
            
            -
            
            
            1Deferred
                tax liabilities
            
            
            -
            
            
            (137
            )
            
            -
            
            
            (137
            )Intangible
                Assets with Finite LivesExhibitor
                list
            
            
            681
            
            
            -
            
            
            -
            
            
            681Website
            
            
            25
            
            
            25
            
            
            -
            
            
            50Contract
            
            
            49
            
            
            -
            
            
            -
            
            
            49Covenant
                not to compete
            
            
            -
            
            
            81
            
            
            32
            
            
            113Patent
            
            
            -
            
            
            -
            
            
            291
            
            
            291Trade
                name
            
            
            99
            
            
            18
            
            
            -
            
            
            117Intangible
                Assets with Indefinite Lives:Database
            
            
            134
            
            
            -
            
            
            -
            
            
            134Reference
                set
            
            
            -
            
            
            500
            
            
            -
            
            
            500Customer
                list
            
            
            -
            
            
            22
            
            
            -
            
            
            22Excess
                of purchase price over fair value of net assets acquired
                (goodwill)
            
            $
            1,894
            
            $
            3,360
            
            $
            0
            
            $
            5,254









13




The
      proforma statements of operations that are set forth in the following table
      are
      prepared assuming that the AGL and Expos acquisitions had occurred on July
      1,
      2005, instead of July 1, 2006 for Expos and August 18, 2006 for AGL. Proforma
      adjustments for GCAL, Gemprint and CCE, which were acquired in fiscal 2006,
      are
      included for the three months ended September 30, 2005 from an assumed date
      of
      acquisition of July 1, 2005.




**Three
                Months Ended**
              **September
                30,****2006**
            
            **2005**Revenue
            
            $
            9,975
            
            $
            9,723Operating
                income
            
            
            130
            
            
            1,134Interest
                income, net
            
            
            567
            
            
            545Other
                income
            
            
            4
            
            
            8Income
                before provision for income taxes
            
            
            701
            
            
            1,687Provision
                for income taxes
            
            
            318
            
            
            711Income
                from continuing operations
            
            
            383
            
            
            976Income
                (loss) from discontinued operations
            
            
            11
            
            
            (28
            )Net
                income
            
            $
            394
            
            $
            948Net
                income per diluted share:Income
                from continuing operations
            
            $
            0.04
            
            $
            0.11Income
                (loss) from discontinued operations
            
            $
            -
            
            $
            -Net
                income
            
            $
            0.04
            
            $
            0.11




In
      connection with the Company's acquisition of the business and assets of Expos,
      the Company assumed a lease for the offices at which Expos conducts its
      operations. The landlord under that lease is a trust of which the trustee is
      the
      former president of Expos, who has been retained to provide services to the
      Company under a five year consulting agreement for consulting fees of $250,000
      per year. The lease provides for lease payments by the Company of $3,000 per
      month for a term of three years. The lease is renewable for successive periods
      of one year each, subject to the right of either party to terminate the lease
      prior to commencement of any such one year renewal period.




3. CASH
      AND
      CASH EQUIVALENTS




At
      September 30, 2006, cash and cash equivalents included approximately $41.6
      million, invested primarily in money market funds. At September 30, 2005, the
      Company’s cash and cash equivalent balances were primarily invested in
      high-quality commerce paper and certificates of deposit issued by U.S. or
      foreign companies. The minimum credit quality of the commercial paper portfolio
      funds in a money market account must be rated no less than single-A long term
      or
      A1/P1 short term, and the portfolio must contain no more than 25% exposure
      to
      securities of issuers whose principal business activities are in the same
      industry. However, the 25% limitation does not apply to securities guaranteed
      by
      the U.S. government or to bank obligations, subject to U.S. banking regulations.
      In addition, the weighted average maturity of the portfolio must not exceed
      90
      days. Such trading securities were carried at market value in the accompanying
      condensed consolidated balance sheet at September 30, 2006 and June 30, 2006.
      Unrealized gains on such trading securities were approximately $110,000 and
      $0
      for the three months ended September 30, 2005 and 2006,
      respectively.





4.
            INVENTORIES




Inventories
                consist of the following:(in
                thousands)**September
                30,**
            
            **June
                30,****2006**
            
            **2006**Coins
            
            $
            330
            
            $
            346Other
                collectibles
            
            
            35
            
            
            37Grading
                raw materials consumable inventory
            
            
            185
            
            
            160550
            
            
            543Less
                inventory reserve
            
            
            (98
            )
            
            (106
            )Inventories,
                net
            
            $
            452
            
            $
            437







14




5. PROPERTY
      AND EQUIPMENT





Property
                and equipment consist of the following:(in
                thousands)**September
                30,**
            
            **June
                30,****2006**
            
            **2006**Coins
                and stamp grading reference sets
            
            $
            90
            
            $
            62Computer
                hardware and equipment
            
            
            1,366
            
            
            1,271Computer
                software
            
            
            975
            
            
            972Equipment
            
            
            2,459
            
            
            2,020Furniture
                and office equipment
            
            
            1,023
            
            
            793Leasehold
                improvements
            
            
            1,265
            
            
            607Trading
                card reference library
            
            
            52
            
            
            527,230
            
            
            5,777Less
                accumulated depreciation and amortization
            
            
            (4,050
            )
            
            (3,880
            )Property
                and equipment, net
            
            $
            3,180
            
            $
            1,897





6. ACCRUED
      LIABILITIES




Accrued
                  liabilities consist of the following:
              
              (in
                  thousands)**September
                  30,**
              
              **June
                  30,****2006**
              
              **2006**Warranty
                  costs
              
              $
              748
              
              $
              710Professional
                  fees
              
              
              323
              
              
              189Amount
                  withheld for Expos’ acquisition (note 2)
              
              
              30
              
              
              -Other
              
              
              1,077
              
              
              1,144$
              2,178
              
              $
              2,043
 The
        following
        table presents the changes in the Company’s warranty reserve during the three
        months ended September 30, 2006 and 2005 (in thousands):





(in
                thousands)**Three
                Months Ended September 30,**
            
            **Three
                Months Ended**
              **September
                30,****2006**
            
            **2005**Warranty
                reserve, beginning of period
            
            $
            710
            
            $
            609Charged
                to cost of revenue
            
            
            121
            
            
            116Payments
            
            
            (83
            )
            
            (142
            )Warranty
                reserve, end of period
            
            $
            748
            
            $
            583





7.
            DISCONTINUED
                OPERATIONS





As
      previously disclosed, on December 4, 2003, the Company’s Board of Directors
      authorized management to implement a plan to focus the Company’s financial and
      management resources, and collectibles expertise, on the operations and growth
      of its grading and authentication businesses, by divesting the Company’s
      collectibles auctions and direct sales businesses. Therefore, in accordance
      with
      SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      the
      assets and related liabilities of those collectible sales businesses, are
      classified as held for sale and the related operating results are classified
      as
      discontinued operations in the accompanying condensed consolidated balance
      sheets at September 30, 2006 and June 30, 2006 and condensed consolidated
      statements of operations for the three-month periods ended September 30, 2006
      and 2005. The Company sold or otherwise disposed of all of its collectibles
      auctions and direct sales businesses prior to the beginning of the quarter
      ended
      March 31, 2005, but elected to retain, and has been liquidating, the remaining
      inventories, accounts receivable and liabilities of those businesses.







15


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





**(in
                thousands)****Three
                Months Ended**
              **September
                30,****2006**
            
            **2005**Net
                revenues
            
            $
            3
            
            $
            61Income
                (loss)
            
            
            11
            
            
            (36
            )Gain
                on sale of discontinued businesses
            
            
            6
            
            
            417
            
            
            (32
            )Income
                tax (expense) benefit
            
            
            (6
            )
            
            20Net
                loss from discontinued operations
            
            $
            11
            
            $
            (12
            )





The
      gains
      realized on sales of discontinued businesses in the three-month periods ended
      September 30, 2006 and 2005 related to contingent consideration that became
      determinable in those periods.





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




**(in
                thousands)****September
                30,**
              **2006**
            
            **June
                30,**
              **2006**Current
                assets:Accounts
                receivable
            
            $
            -
            
            $
            10Inventories
            
            
            37
            
            
            37Notes
                receivable
            
            
            36
            
            
            36$
            73
            
            $
            83Current
                liabilities:Consignors
                payable
            
            $
            1
            
            $
            1Other
                current liabilities
            
            
            1
            
            
            7$
            2
            
            $
            8





8.
            INCOME
                TAXES





Income
      tax expense was
      provided for at rates of 45% and 42% for the three-month periods ended September
      30, 2006 and September 30, 2005, respectively. The increased rate for the three
      months ended September 30, 2006, as compared to the same three month period
      in
      2005, reflects a higher estimate for generally non-deductible stock-based
      compensation expense for the full fiscal year 2007 as compared to the same
      estimate for fiscal year 2006. During the fourth quarter of fiscal year 2006,
      the Company made corrections to its assumptions that determined the fair values
      associated with stock-based compensation expense that resulted in increased
      estimated expense for fiscal years 2006 and 2007. These estimates where higher
      than the estimates that were anticipated during the first quarter of fiscal
      year
      2006 (see note 1).






16




9.
            NET
                INCOME PER SHARE





Net
      income per share is determined in accordance with SFAS No. 128, *Earnings
      Per Share* .
      Net
      income per share for the three-month periods ended September 30, 2006 and 2005,
      respectively, are computed as follows:





(In
                thousands,
              except
                share data)**Three
                Months Ended**
              **September
                30,****2006**
            
            **2005**Income
                from continuing operations
            
            $
            383
            
            $
            979Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses (net of income taxes)
            
            
            11
            
            
            (12
            )Net
                income
            
            $
            394
            
            $
            967NET
                INCOME (LOSS) PER SHARE - BASIC:Income
                from continuing operations
            
            $
            0.05
            
            $
            0.11Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses (net of income taxes)
            
            
            -
            
            
            -Total
            
            $
            0.05
            
            $
            0.11NET
                INCOME (LOSS) PER SHARE - DILUTED:Income
                from continuing operations
            
            $
            0.04
            
            $
            0.11Income
                (loss) from discontinued operations, net of gain on sales ofdiscontinued
                businesses (net of income taxes)
            
            
            -
            
            
            -Total
            
            $
            0.04
            
            $
            0.11WEIGHTED
                AVERAGE SHARES OUTSTANDING:Basic
            
            
            8,351
            
            
            8,486Effect
                of dilutive shares
            
            
            277
            
            
            320Diluted
            
            
            8,628
            
            
            8,806





Options
      and warrants to purchase approximately 716,000 and 745,000 shares of common
      stock for the three months ended September 30, 2006 and 2005, respectively,
      at
      exercise prices of up to $24 per share, were not included in the computation
      of
      diluted earnings per share because their exercise prices were greater than
      the
      average market price for the respective periods.





10.
            BUSINESS
                SEGMENTS





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





For
      our
      continuing operations, we operate principally in four reportable service
      segments: coins, sportscards, jewelry and other high-end collectibles. Services
      provided by these segments include authentication, grading, publication
      advertising and subscription-based revenues. The other collectibles segment
      includes autographs, stamps, currency, the CCE subscription business and our
      collectibles conventions business.





17


We
      allocate operating expenses to each service segment based upon activity levels.
      The following tables set forth on a business segment basis, including a
      reconciliation with the condensed consolidated financial statements, (i)
      external revenues, (ii) amortization and depreciation, (iii) stock-based
      compensation expense as a significant other non-cash transaction, and (iv)
      operating income for the three month periods ended September 30, 2006 and 2005.
      Net identifiable assets are provided by business segment as of September 30,
      2006 and June 30, 2006. During the three month period since the end of the
      last
      fiscal year, approximately $383,000 was spent to acquire patents and other
      intangible assets for the Jewelry segment, and approximately $949,000 was spent
      to expand the operating facilities for GCAL, which is included as part of the
      Jewelry segment. All of our sales and identifiable assets are located in the
      United States.





**Three
                Months Ended September 30,****2006**
            
            **2005**Net
                revenues from external customersCoins
            
            $
            5,590
            
            $
            5,753Sportscards
            
            
            2,251
            
            
            2,106Jewelry
            
            
            241
            
            
            -Other
            
            
            1,816
            
            
            966Total
                revenue
            
            $
            9,898
            
            $
            8,825Amortization
                and depreciationCoins
            
            $
            40
            
            $
            23Sportscards
            
            
            21
            
            
            21Jewelry
            
            
            108
            
            
            -Other
            
            
            140
            
            
            12Total
            
            
            309
            
            
            56Unallocated
                amortization and depreciation
            
            
            81
            
            
            65Consolidated
                amortization and depreciation
            
            $
            390
            
            $
            121Stock-based
                compensationCoins
            
            $
            49
            
            $
            30Sportscards
            
            
            16
            
            
            3Jewelry
            
            
            -
            
            
            -Other
            
            
            37
            
            
            30Total
            
            
            102
            
            
            63Unallocated
                stock-based compensation
            
            
            98
            
            
            69Consolidated
                stock-based compensation
            
            $
            200
            
            $
            132Operating
                income before unallocated expensesCoins
            
            $
            2,384
            
            $
            2,733Sportscards
            
            
            439
            
            
            321Jewelry
            
            
            (641
            )
            
            -Other
            
            
            271
            
            
            60Total
            
            
            2,453
            
            
            3,114Unallocated
                operating expenses
            
            
            (2,323
            )
            
            (1,971
            )Consolidated
                operating income
            
            $
            130
            
            $
            1,143





**At
                September 30,**
            
            **At
                June 30,**Identifiable
                Assets
            
            **2006**
            
            **2006**Coins
            
            $
            2,845
            
            $
            2,647Sportscards
            
            
            571
            
            
            541Jewelry
            
            
            18,285
            
            
            12,611Other
            
            
            10,859
            
            
            6,284Total
            
            
            32,560
            
            
            22,083Unallocated
                assets
            
            
            45,588
            
            
            56,138Consolidated
                assets
            
            $
            78,148
            
            $
            78,221






18




11.
            LINE
                OF CREDIT





To
      provide a source of funds for its Dealer Financing Program, in June 2005 our
      wholly-owned subsidiary, Collectors Finance Corp. (“CFC”), entered
      into a two-year revolving bank line of credit agreement, that permits CFC to
      borrow, at any one time, up to the lesser of (i) $7,000,000 or (ii) an amount
      equal to 85% of the aggregate principal amount of customer receivables that
      meet
      the bank’s eligibility criteria. Borrowings under this credit line bear interest
      at rates based on the bank’s Prime Rate or LIBOR, as applicable, and are secured
      by substantially all the assets of CFC (including customer receivables and
      CFC’s
      security interests in customer-owned loan collateral). At June 30, 2006 and
      September 30, 2006, the amount outstanding under this line of credit was
      $0.





Costs
      of
      approximately $340,000 (comprising a loan agreement fee, bank fees and legal
      fees) were incurred in connection with the establishment of this line of credit.
      These costs were capitalized and are being amortized to net interest expense
      over a two-year period and are included in net revenues in the condensed
      consolidated statements of operations for the three months ended September
      30,
      2006 and 2005. The unamortized amount of such costs is included in prepaid
      expenses and other current assets in the accompanying Condensed Consolidated
      Balance Sheets at September 30, 2006 and June 30, 2006. On a quarterly basis,
      CFC incurs an unused line fee of 0.25% per annum, based on the average daily
      unused portion of the total facility during the quarter.





CFC’s
      obligations under this line of credit have been guaranteed by the Company
      pursuant to a Continuing Guaranty Agreement with the bank lender. The terms
      of
      that Agreement require the Company to be in compliance with certain financial
      and other restrictive covenants, and require the consent of the lender (i)
      for
      the Company to pay cash dividends or repurchase shares of its common stock
      in
      amounts exceeding its annual net income in any year, and (ii) to consummate
      more
      than $5 million of business acquisitions in any year. The Company was in
      compliance with all covenants at September 30, 2006.





12.
            LEGAL
                MATTERS





Bill
      Miller v. Collectors Universe, Inc .
      As
      previously reported, the Company was a defendant in this legal action, which
      was
      brought in the Superior Court of California, County of Orange, by Bill Miller,
      a
      former employee of the Company, who had been the president of one of the
      Company’s collectibles sales businesses that was sold in 2004 and an expert in
      the authentication of autographs and memorabilia. Miller alleged that the
      Company had issued authentication certificates bearing his name without his
      consent, in violation of a California statute prohibiting unauthorized
      appropriation of a person’s name, signature or likeness. The statute provides
      that a person whose name, signature or likeness has been misappropriated, in
      violation of the statute, is entitled to recover the greater of $750 or the
      actual damages suffered as a result of the unauthorized use, and any profits
      from that were attributable to that unauthorized use that are not taken into
      account in computing the actual damages. The Company denied Miller’s allegations
      and asserted that he was not entitled to any recovery under the statute in
      excess of his actual damages and that he had not suffered any actual damages
      as
      a result of the issuance of the certificates.




As
      also
      previously reported, at the conclusion of the trial, which took place in October
      2005, (i) the jury found that the Company had used Miller’s name without
      his consent on 14,060 authentication certificates, but that Miller had sustained
      actual damages from that use totaling $14,060; and (ii) the parties entered
      into a stipulated judgment in the case, which, among other things, provides
      that
      Miller’s statutory damages arising from the actions of the Company were zero.
      The court left unresolved and for future determination the issue of which party,
      if any, was the prevailing party in the lawsuit, which would determine which
      party, if any, is entitled to recover its attorney’s fees from the other
      party.




In
      December 2005, Miller filed a Notice of Appeal seeking an appellate court
      review, a reversal of the judgment entered by the trial court and a finding,
      that as a matter of law, he is entitled to statutory damages equal to $750
      for
      each use of his name by the Company, or more than $10 million in total. Miller
      filed an opening brief with the appellate court in August 2006, and we expect
      that various responsive briefs will be filed through February 2007. The Company
      has been informed by its trial counsel that, in California, it sometimes takes
      as long as two years, from the filing of an appeal of a damage award, before
      the
      appeal is actually heard by an appellate court.






19


The
      Company continues to believe that it will not incur any material liability
      to
      Miller in this case. However, there is little interpretive history with respect
      to the measure of damages in a case such as the Miller case, creating a number
      of relatively novel legal issues. As a result, it is not possible to predict,
      with certainty, how an appellate court will ultimately rule on the issue of
      damages.





Other
      Legal Actions





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





20






**ITEM
                2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**




**Forward-Looking
      Statements**





The
      discussion in this Item 2 and in Item 3 of this Quarterly Report (“Report”) on
      Form 10-Q includes “forward-looking statements” within the meaning of Section
      27A of the Securities Act of 1933, as amended (the “1933 Act”) and Section 21E
      of the Securities Exchange Act of 1934, as amended (the “1934 Act”). Those
      Sections of the 1933 Act and 1934 Act provide a “safe harbor” for
      forward-looking statements to encourage companies to provide prospective
      information about their financial performance so long as they provide
      meaningful, cautionary statements identifying important factors that could
      cause
      actual results to differ from projected results. Other than statements of
      historical fact, all statements in this Report and, in particular, any
      projections of or statements as to our expectations or beliefs concerning our
      future financial performance or financial condition or as to trends in our
      business or in our markets, are forward-looking statements. Forward-looking
      statements often include the words "believe," "expect," "anticipate," "intend,"
      "plan," "estimate," "project," or words of similar meaning, or future or
      conditional verbs such as "will," "would," "should," "could," or "may." Our
      actual financial performance in future periods may differ significantly from
      the
      currently expected financial performance set forth in the forward-looking
      statements contained in this Report. The sections below entitled “Factors That
      Can Affect our Financial Position and Operating Results” and “Risks and
      Uncertainties That Could Affect our Future Financial Performance” describe some,
      but not all, of the factors and the risks and uncertainties that could cause
      these differences, and readers of this Report are urged to read those sections
      of this Report in their entirety and to review certain additional risk factors
      that are described in our Annual Report on Form 10-K for the fiscal year ended
      June 30, 2006.





Due
      to
      these and other possible uncertainties and risks, readers are cautioned not
      to
      place undue reliance on the forward-looking statements contained in this Report,
      which speak only as of the date of this Report, or to make predictions about
      future performance based solely on historical financial performance. We also
      disclaim any obligation to update forward-looking statements contained in this
      Report or in our Annual Report on Form 10-K or any other prior filings with
      the
      Securities and Exchange Commission.





**Our
      Business**





Collectors
      Universe Inc. (the “Company”) provides grading and authentication services to
      dealers and collectors of high-value coins, sportscards, autographs, stamps,
      and
      vintage U.S. currency notes and to sellers and purchasers of diamonds, colored
      gemstones and other high-value assets. We believe that our authentication and
      grading services add value to these collectibles and to diamonds and colored
      gemstones by enhancing their marketability and, thereby, providing increased
      liquidity to the dealers and collectors and consumers that own and buy and
      sell
      them.




We
      principally generate revenues from the fees paid for our authentication and
      grading services. To a much lesser extent, we generate revenues from the sale
      of
      advertising on our websites; the sale of printed publications and collectibles
      price guides and advertising in such publications; and fees from the sale of
      collectors’ club memberships, and subscription revenues related to our CCE
      dealer-to-dealer Internet bid-ask market for certified coins.





*Recent
      Business Acquisitions* .
      Effective July 1, 2006, we acquired all of the outstanding ownership interests
      of Expos Unlimited LLC (“Expos”), a California limited liability company engaged
      in the business of owning and conducting collectibles trade shows, for a
      purchase price that consisted of $2,400,000 in cash, of which $2,370,000 was
      paid to the former owners of Expos. Approximately $60,000 was incurred for
      directly-related costs of the acquisition. Depending on the future revenue
      performance of Expos, the Company may become obligated to make contingent
      payments to those former owners of up to an aggregate of $750,000 in July 2011.
      Expos owns and operates the Long Beach Coin, Stamp & Collectibles Expo
      (“Long Beach”) and the Santa Clara Coin, Stamp & Collectibles Expo (“Santa
      Clara”), which comprise, in total, five trade shows that are held annually. At
      both the Long Beach and Santa Clara Expos, leading numismatic, philatelic and
      collectibles dealers offer rare and valuable collectibles to the public, while
      auctions of coins and currency are conducted by third party auction companies
      alongside exhibitions of major numismatic and collectible interest. We offer
      on-site authentication and grading services for the collectibles exhibited
      and
      bought and sold at those shows, with same day turnaround.




21


On
      August
      18, 2006, we acquired American Gemological Laboratories (AGL), an international
      forensic colored gemstone certification and grading laboratory. AGL is one
      of
      the leading third party authentication and grading services for colored
      gemstones, including colored gemstones that are sold at auction through
      Sotheby’s and Christies and by jewelry retailers such as Cartier and Fred
      Leighton. The Company paid an aggregate acquisition price of $3,500,000 in
      cash
      for AGL, and, depending on the future revenue performance of AGL, the Company
      may become obligated to make payments of up to an aggregate of an additional
      $3,500,000 over the next five years. We also incurred direct costs of
      approximately $217,000 and paid a loan on behalf of AGL made between the seller
      of AGL and AGL in the amount of $214,000.





The
      operating results of these acquired businesses have been consolidated into
      our
      operating results from the respective dates of their acquisition.





*Discontinued
      Operations* .
      As
      previously disclosed, the remaining activities resulting from our divestiture
      of
      our collectibles auctions and sales businesses have been classified as
      discontinued operations and the discussion that follows focuses almost entirely
      on our authentication and grading businesses, which comprise substantially
      all
      of our continuing operations. During the three months ended September 30, 2006,
      we generated cash of $142,000 from the sales of our discontinued collectibles
      sales businesses and the liquidation of the inventories and accounts receivable
      of those businesses that were not included in those sales. As a result, at
      September 30, 2006, the remaining assets of those businesses, which we are
      in
      the process of liquidating, totaled approximately $73,000, as compared to
      $83,000 at June 30, 2006.




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





*Factors
      that Can Affect our Revenues and Cash Flows* .
      The
      provision of authentication and grading and other value-added services provides
      relatively stable and predictable cash flows, as the fees for most of the
      grading submissions we receive are prepaid. In the three months ended September
      30, 2006 and 2005, respectively, we used cash of $1,330,000 and generated cash
      of $3,418,000, respectively, from the operating activities of our continuing
      businesses. Net cash advances under notes receivable by CFC were $1,790,000
      in
      the three months ended September 30, 2006, compared with net proceeds from
      repayments of notes receivable of $1,483,000 in the three months ended September
      30, 2005.




Five
      of
      our coin authentication and grading customers accounted for approximately 22%
      and 14% of our total net revenues in the fiscal year ended June 30, 2006 and
      in
      the three months ended September 30, 2006, respectively. As a result, the loss
      of any of those customers, or a decrease in the volume of grading submissions
      from any of them to us, would cause our net revenues to decline and, therefore,
      could adversely affect our profitability. During the three months ended
      September 30, 2006, revenue earned from the Company’s trade-show related
      activities decreased as a result of lower submissions at trade shows by,
      primarily, these customers. We believe that this decline was primarily the
      result of lower gold prices in the three months ended September 30, 2006,
      compared with the three months ended June 30, 2006, which reduced the volume
      of
      coin transactions and, therefore, the demand for our services at those shows.




The
      Company’s cash flows from investing activities can be impacted by the extent to
      which the Company purchases new businesses and invests in capital expenditures
      Cash used in investing activities in the three months ended September 30, 2006
      was $8,167 000.




Cash
      flows from financing activities reflects dividends paid to common stockholders,
      payments for the retirement of the Company’s common stock authorized under the
      Company’s buyback program, and proceeds from the exercise of stock options. Cash
      used in financing activities in the three months ended September 30, 2006 was
      $1,025,000.




At
      September 30, 2006, we had cash and cash equivalents totaling $41,602,000,
      compared with $52,110,000 at June 30, 2006.




22


*Factors
      Affecting our Gross Profit Margins* .
      The
      gross profit margins on authentication and grading submissions are primarily
      affected by (i) the mix of collectibles submission revenues among coins,
      sportscards and other collectibles, because we generally realize higher margins
      on coin submissions than on submissions of other collectibles; (ii) the mix
      of submission revenues between vintage or “classic” coins and sportscards, on
      the one hand, and modern coins and sportscards, on the other hand; and
      (iii) in the case of coins and sportscards, the “turn-around” times
      requested by our customers, because we charge higher fees for faster service
      times. Since, as a general rule, customers request faster turn-around times
      for
      vintage or classic coins and sportscards than they do for modern submissions,
      the mix of submissions between vintage and modern collectibles also affects
      our
      profit margin. Furthermore, because a significant proportion of our direct
      costs
      are fixed in nature, our gross profit is also affected by the overall volume
      of
      collectibles authenticated and graded in any period.




*Impact
      of Economic Conditions on Financial Performance* .
      We
      generate substantially all of our revenues from the collectibles markets.
      Accordingly, our operating results are affected by that market’s financial
      performance, which depends, to a great extent, on (i) discretionary
      consumer spending and, hence, on the availability of disposable income, (ii)
      on
      other economic conditions, including prevailing interest and inflation rates,
      which affect consumer confidence, and (iii) the performance and volatility
      of the precious metals, primarily gold, and stock markets. These conditions
      primarily affect the volume of purchases and sales of collectibles which, in
      turn, affects the volume of authentication and grading submissions to us,
      because our services facilitate commerce in collectibles. Accordingly, factors
      such as improving economic conditions which usually result in increases in
      disposable income and consumer confidence, and volatility in and declines in
      the
      prices of stocks and a weakening in the value of the U.S. Dollar, which lead
      investors to increase their purchases of precious metals, such as gold bullion
      and other coins, and other collectibles, usually result in increases in
      submissions of collectibles for our services. By contrast, the volume of
      collectibles sales and purchases and, therefore, the volume of authentication
      and grading submissions, usually decline during periods characterized by
      recessionary economic conditions and by declines in disposable income and
      consumer confidence or by increasing stock prices and relative stability in
      the
      stock markets.




The
      following table provides information regarding the respective numbers of coins,
      sportscards, autographs, currency, diamonds and colored gemstones that were
      graded or authenticated by us in the quarters ended September 30, 2006 and
      2005
      and their estimated values, which are the amounts at which those coins,
      sportscards and stamps and other high value assets were insured by the dealers
      and collectors who submitted them to us for grading and
      authentication.




**Units
                Processed**
              **Three
                Months Ended September 30,**
            
            
            **Declared
                Value (000)**
              **Three
                Months Ended September 30,****2006**
            
            **2005**
            
            
            **2006**
            
            **2005**Coins
            
            
            481,300
            
            
            56
            %
            
            395,000
            
            
            53
            %
            
            $
            464,922
            
            
            85
            %
            $
            352,707
            
            
            89
            %Sportscards
            
            
            321,500
            
            
            37
            %
            
            283,000
            
            
            38
            %
            
            
            22,595
            
            
            4
            %
            
            17,246
            
            
            5
            %Autographs
            
            
            34,200
            
            
            4
            %
            
            55,000
            
            
            7
            %
            
            
            10,475
            
            
            2
            %
            
            3,188
            
            
            1
            %Stamps
            
            
            12,300
            
            
            1
            %
            
            9,200
            
            
            1
            %
            
            
            3,059
            
            
            1
            %
            
            5,169
            
            
            1
            %Currency
            
            
            9,100
            
            
            1
            %
            
            9,300
            
            
            1
            %
            
            
            8,442
            
            
            2
            %
            
            16,009
            
            
            4
            %Diamonds*
            
            
            6,000
            
            
            1
            %
            
            -
            
            
            -
            
            
            
            23,209
            
            
            4
            %
            
            -
            
            
            -Colored
                Gemstones*
            
            
            100
            
            
            -
            
            
            -
            
            
            -
            
            
            
            13,145
            
            
            2
            %
            
            -
            
            
            -Total
            
            
            864,500
            
            
            100
            %
            
            751,500
            
            
            100
            %
            
            $
            545,847
            
            
            100
            %
            $
            394,319
            
            
            100
            %






*  We
      began
      offering diamond grading services for the first time in November 2005 and
      colored gemstones beginning in late August 2006.







23




**Overview
      of Results of Operation for the
      Quarter Ended September 30, 2006**




Despite
      a
      12.2% increase in revenues in the three months ended September 30, 2006,
      compared to the same period of the prior fiscal year, operating income declined
      to $130,000, or 1.3% of net revenues, in the three months ended September 30,
      2006 from $1.1 million, or 13% of net revenues in the three months ended
      September 30, 2005. This decline was attributable to a number of different
      factors, including the following: (i) a $900,00 reduction in coin
      authentication and grading revenues generated from the Company’s trade show
      activities, which also adversely affected our gross margin because customers
      generally require and are willing to pay higher fees for faster turnaround
      times
      at trade shows; (ii) an operating loss of $630,00 incurred by the Company’s
      diamond operations, as we continued to invest in and to develop this business;
      and (iii) increased infrastructure-related costs, as we continue to upgrade
      and expand our internal systems to support the Company’s increased volume of
      business and entry into new markets. These, as well as other factors affecting
      our operating results in the first quarter of 2007, are described in more detail
      below.




The
      following table sets forth certain financial data, expressed as a percentage
      of
      net revenues, derived from our interim condensed consolidated statements of
      income (included earlier in this report) for the respective periods indicated
      below:





**Three
                Months Ended September 30,****2006**
            
            **2005**Net
                revenues
            
            
            100.0
            %
            
            100.0
            %Cost
                of revenues
            
            
            44.0
            %
            
            38.2
            %Gross
                profit
            
            
            56.0
            %
            
            61.8
            %Operating
                expenses:Selling
                and marketing expenses
            
            
            12.8
            %
            
            12.3
            %General
                and administrative expenses
            
            
            40.2
            %
            
            36.3
            %Amortization
                of intangibles
            
            
            1.7
            %
            
            0.2
            %Total
                operating expenses
            
            
            54.7
            %
            
            48.8
            %Operating
                income
            
            
            1.3
            %
            
            13.0
            %Interest
                income, net
            
            
            5.7
            %
            
            6.1
            %Other
                income
            
            
            0.1
            %
            
            0.1
            %Income
                before provision for income taxes
            
            
            7.1
            %
            
            19.2
            %Provision
                for income taxes
            
            
            (3.2
            %)
            
            (8.1
            %)Income
                from continuing operations after income taxes
            
            
            3.9
            %
            
            11.1
            %Income
                (loss) from discontinued operations, net of gain onsales
                of discontinued businesses (net of income taxes)
            
            
            0.1
            %
            
            (0.1
            %)Net
                income
            
            
            4.0
            %
            
            11.0
            %





**Critical
      Accounting Policies and
      Estimates**





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




It
      is our
      practice to establish reserves or allowances to record such downward adjustments
      or “write-downs” in the carrying value of assets such as accounts and notes
      receivable and inventory. Such write-downs are recorded as charges to income
      or
      increases in expense in our statement of operations in the periods when those
      reserves or allowances are established or increased to take account of changed
      conditions or events. As a result, our judgments, estimates and assumptions
      about future events and changes in the conditions, events or trends upon which
      those estimates and judgments were made, can and will affect not only the
      amounts at which we record such assets on our balance sheet, but also our
      results of operations.




24




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




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




As
      is
      described above, in the first quarter of fiscal 2007, we acquired certain
      businesses and, in accordance with GAAP, we accounted for those acquisitions
      using the purchase method of accounting. That accounting method required us
      to
      allocate the amount paid for those businesses over the fair value of the assets
      and liabilities acquired, and to classify the excess of the purchase price
      over
      that fair value as goodwill. In accordance with GAAP, we evaluate goodwill
      for
      impairments at least annually, or more frequently if we believe that goodwill
      has been impaired in the interim due to changing facts or events (see
“ *Long-Lived
      Assets* ”
below).
      Other intangible assets that are separable from goodwill and have definite
      lives
      are subject to amortization over their remaining useful lives. Indefinite-lived
      intangible assets are subject to on-going evaluation for impairment. Management
      formally evaluates the carrying value of its goodwill and other indefinite-lived
      intangible assets for impairment on the anniversary date of each of the
      acquisitions that gave rise to the recording of such assets.




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




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




*Revenue
      Recognition Policies* .
      We
      generally record revenue at the time of shipment of the authenticated and graded
      collectible or diamond to the customer. Our authentication and grading customers
      generally prepay our authentication and grading fees when they submit their
      collectible items to us for authentication and grading. We record those
      prepayments as deferred revenue until their graded collectibles are shipped
      back
      to them. At that time, we record the revenues from the authentication and
      grading services we have performed for the customer and deduct this amount
      from
      deferred revenue. For certain dealers to whom we extend open account privileges,
      we record revenue at the time of shipment of the authenticated and graded
      collectible to the dealer. With respect to our acquisition of Expos, we
      recognize revenue earned from the promotion, managing and operation of
      collectibles conventions in the period in which the event occurs.




*Accounts
      Receivable, Notes Receivable and the Allowance for Doubtful Accounts.* In
      the
      normal course of our authentication and grading business, we extend payment
      terms to many of the larger, more creditworthy dealers who submit collectibles
      or diamonds to us for authentication and grading on a recurring basis. In
      addition, primarily in connection with our coin dealer financing programs,
      we
      make advances or extend credit under notes receivable arrangements. We regularly
      review our accounts and notes receivable, estimate the amount of, and establish
      an allowance for, uncollectible amounts in each quarterly period. The amount
      of
      that allowance is based on several factors, including the age and extent of
      significant past due amounts, and, in the case of notes receivable, the current
      value of the collateral we hold as security for the payment obligations under
      the notes receivable, and known conditions or trends that may affect the ability
      of account debtors or note obligors to pay their accounts or notes receivable
      balances. Each quarter we review estimates of uncollectible amounts and such
      economic or other conditions or trends in order to enable us to determine
      whether or not to adjust the amount of the allowance. For example, if the
      financial condition of certain dealers or economic conditions were to
      deteriorate, adversely affecting their ability to make payments on their
      accounts or notes, increases in the allowance may be required. Since the
      allowance is created by recording a charge against income that is reflected
      in
      general and administrative expenses, an increase in the allowance will cause
      a
      decline in our operating results in the period when the increase is
      recorded.






25




*Inventory
      Valuation Reserve* .
      Our
      collectibles inventories are valued at the lower of cost or fair value and
      have
      been reduced by an inventory valuation allowance to provide for potential
      declines in the value of those inventories. The amount of the allowance is
      determined and is periodically adjusted on the basis of market knowledge,
      historical experience and estimates concerning future economic conditions or
      trends that may impact the sale value of the collectibles inventories.
      Additionally, due to the relative uniqueness of some of the collectibles
      included in our collectibles inventory, valuation of such collectibles often
      involves judgments that are more subjective than those that are required when
      determining the market values of more standardized products.




If
      there
      were to be **** an
      economic downturn or there were to occur **** other
      events or circumstances that are likely to make it more difficult to sell,
      or
      that would lead us to reduce the sales **** prices
      of **** those
      collectibles, it may become necessary to increase the reserve. Increases in
      this
      reserve will cause a decline in operating results, because such increases are
      recorded by charges against income.




*Grading
      Warranty Costs* .
      We
      offer a limited warranty covering the coins, sportscards, stamps and currency
      that we authenticate and grade. Under the warranty, if any collectible that
      was
      previously authenticated and graded by us is later submitted to us for
      re-grading and either (i) receives a lower grade upon that resubmittal or
      (ii) is determined not to have been authentic, we will offer to purchase
      the collectible or pay the difference in value of the item at its original
      grade
      as compared with its lower grade. However, this warranty is voided if the
      collectible, upon resubmittal to us, is not in the same tamper resistant holder
      in which it was placed at the time we last graded it. We offer a similar limited
      warranty, of one year’s duration, on the diamonds we grade. We accrue for
      estimated warranty costs based on historical trends and related experience.
      To
      date our reserves have proved to be adequate. However, if warranty claims were
      to increase in relation to historical trends and experience, we would be
      required to increase our warranty reserves and incur additional charges that
      would adversely affect our results of operations in those periods during which
      the warranty reserve is increased.




*Long-Lived
      Assets.* We
      regularly conduct reviews of property and equipment and other long-lived assets,
      including certain identifiable intangibles and goodwill, for possible
      impairment. Such reviews occur annually, or more frequently if events or changes
      in circumstances indicate the carrying amount of the asset may not be
      recoverable in full. In order to determine if the value of an asset is impaired,
      we make an estimate of the future cash flows (undiscounted and without interest
      charges) expected to result from the use of that asset and its eventual
      disposition and determine its fair value by discounting those cash flows to
      present value using a discount rate commensurate with management’s estimates of
      the business risks associated with the asset. If that estimated fair value
      is
      less than the carrying amount of the asset, an impairment loss is recognized
      to
      write down the asset to its estimated fair value. The Company does not believe
      there was any impairment of its long-lived assets as of September 30, 2006.
      There can be no assurance, however, that there will be no impairments of the
      Company’s long-lived assets in the future.




*Stock-Based
      Compensation.* We
      recognize share-based compensation expense based on the fair value recognition
      provision of SFAS No. 123(R), *Share-Based
      Payment* ,
      using
      the Black-Scholes option valuation method. Under that method, assumptions are
      made with respect to the expected lives of the options granted, the expected
      volatility of the Company’s stock, dividend yield percentage and the risk-free
      interest rate at the date of grant. In addition, under SFAS No. 123(R), we
      recognize and report share-based compensation expense net of option forfeitures
      that we expect will occur over the vesting period, which we estimate on the
      basis of historical forfeiture experience or other factors that could affect
      future forfeitures. Once we determine the compensation expense of a stock option
      award, that expense is recognized in our consolidated statements of income
      over
      the vesting period of the option using the straight-line attribution
      method.




*Capitalized
      Software* .
      In the
      period January 1, 2006 through June 30, 2006, we capitalized approximately
      $804,000 of software development costs related to a number of in-house software
      development projects, in accordance with Statement of Position (SOP) 98-1, *Accounting
      for the Costs of Computer Software Developed or Obtained for Internal
      Use* .
      SOP
      98-1 requires that certain costs incurred, either from internal or external
      sources, be capitalized as part of intangible assets and amortized on a
      straight-line basis over the useful life of the software. Planning, training,
      support and maintenance costs incurred either prior to or following the
      implementation phase are recognized as expense in the period in which they
      occur. During the first quarter of fiscal 2007, approximately $13,000 was
      recorded as amortization expense related to such capitalized software projects.
      The Company evaluates the carrying values of capitalized software to determine
      if the carrying values are impaired, and, if necessary, an impairment loss
      is
      recorded in the period in which the impairment occurs.






26


**Results
      of Operations - Quarter Ended September 30,
      2006 V** **ersus
      Quarter Ended September 30, 2005**




*Net
      Revenues*




Grading
      and authentication fees consist primarily of fees generated from the
      authentication and grading of high-value collectibles and high-value assets.
      Fees generated from the authentication and grading of collectibles include
      coins, sportscards, autographs, stamps and currency and for high-value assets
      diamonds and colored gemstones. To a lesser extent, we also generate revenues
      from sales of collectibles club memberships; the sale of advertising on our
      websites and in printed publications and collectibles price guides;
      subscription-based revenues primarily related to our CCE dealer-to-dealer
      Internet bid-ask market for certified coins; and fees earned from promotion
      and
      managing and operating collectibles conventions. Net revenues are determined
      net
      of discounts and allowances.




The
      following table sets forth the breakout of total net revenues for the three
      months ended September 30, 2006 and 2005 between grading and authentication
      services and other related services:




**Three
                Months Ended September 30,****2006**
            
            **2005**
            
            **Increase****Amount**
            
            **%
                of Net**
              **Revenues**
            
            **Amount**
            
            **%
                of Net**
              **Revenues**
            
            **Amount**
            
            **%
                of Net**
              **Revenues**(Dollars
                in thousands)Grading
                and authentication fees
            
            $
            8,315
            
            
            84.0
            %
            $
            8,062
            
            
            91.4
            %
            $
            253
            
            
            3.1
            %Other
                related services
            
            
            1,583
            
            
            16.0
            %
            
            763
            
            
            8.6
            %
            
            820
            
            
            107.5
            %Total
                net revenues
            
            $
            9,898
            
            
            100.0
            %
            $
            8,825
            
            
            100.0
            %
            $
            1,073
            
            
            12.2
            %




The
      following table sets forth certain information regarding the increases in net
      revenues in our larger markets (which are inclusive of revenues from our other
      related services) and in the number of units authenticated and graded in the
      three months ended September 30, 2006 and 2005:




**Three
                Months Ended September 30,****2006**
            
            **2005**
            
            **2006
                vs. 2005****Increase
                (Decrease)****%
                of Net**
            
            
            
            **%
                of Net**
            
            **Revenues**
            
            **Units
                Processed****Amount**
            
            **Revenues**
            
            **Amount**
            
            **Revenues**
            
            **Amounts**
            
            **Percent**
            
            **Number**
            
            **Percent**(Dollars
                in thousands)Coins
            
            $
            5,590
            
            
            56.5
            %
            $
            5,753
            
            
            65.2
            %
            $
            (163
            )
            
            (2.8
            %)
            
            86,300
            
            
            21.8
            %Sportscards
            
            
            2,251
            
            
            22.7
            %
            
            2,106
            
            
            23.9
            %
            
            145
            
            
            6.9
            %
            
            38,500
            
            
            13.6
            %Other(1)
            
            
            2,057
            
            
            20.8
            %
            
            966
            
            
            10.9
            %
            
            1,091
            
            
            112.9
            %
            
            (11,800
            )
            
            (16.1
            %)$
            9,898
            
            
            100.0
            %
            $
            8,825
            
            
            100.0
            %
            $
            1,073
            
            
            12.2
            %
            
            113,000
            
            
            15.0
            %







(1)
            Consists
                of autographs, stamps, currency, diamonds and colored gemstones,
                CCE
                subscription business and our collectibles convention business in
                fiscal
                2006; and autographs, stamps, currency and one month of our CCE revenues
                in fiscal 2005.




The
      $1,073,000 (12.2%) increase in net revenues in the three months ended September
      30, 2006, compared to the same three months of the prior year, was attributable
      to an overall increase in authentication and grading service fees of $253,000
      (3.1%) and increases in other related services revenues of $820,000 (107.5%).
      The increases in the other related services primarily related to revenues
      generated by our collectibles trade show business (which we acquired in July
      2006) and increased revenues from the Company’s CCE subscription business (which
      we acquired in September 2005 and, therefore, generated less than a month of
      revenues in last year’s first quarter as compared to a full quarter of revenues
      in the three months ended September 30, 2006).




The
      3.1%
      increase in authentication and grading fees, despite an increase of 15% in
      the
      number of units graded and authenticated, in the first quarter this year,
      primarily reflects a lower average service fee for coins authenticated and
      graded in the three months ended September 30, 2006 due to a decline in the
      number of coins authenticated and graded at trade shows in the quarter (where
      customers typically request faster turnaround times that result in higher
      service fees), as compared to the same quarter last year. Such decline in the
      number of coins authenticated and graded at trade shows resulted in a reduction
      of $900,000 in revenues from trade shows, primarily related to our main coin
      customers, compared to the three months ended September 30, 2005.  In
      addition, that decline substantially, but not entirely, offset increases in
      revenues due to increases in submissions of sportscards and other collectibles
      for authentication and grading, as well as the contribution of diamond grading
      revenues in this year’s first quarter (as we acquired our diamond grading
      business subsequent to last year’s first quarter). We believe that the decline
      in coin authentication and grading submissions at trade shows reflects lower
      gold prices in the three months ended September 30, 2006, compared to the three
      months ended June 30, 2006, which led to a reduction in coin transactions and,
      therefore, in grading submissions at trade shows during this year’s first
      quarter.






27


Our
      current expectation is that our coin business and, in particular, our trade
      show
      activity, will rebound over time back up to prior quarter levels, as gold prices
      stabilize. However, there is a seasonality to our trade show activity in that
      there are fewer trade shows held in the second fiscal quarter than in other
      quarters due to the winter holidays.




*Gross
      Profit*




Gross
      profit is calculated by subtracting the cost of revenues from net revenues.
      Cost
      of revenues for grading and authentication revenues, primarily consist of labor
      to grade and authenticate collectibles, production costs, credit cards fees,
      warranty expense and occupancy, security and insurance costs that directly
      relate to providing authentication and grading services. Cost of revenues also
      include printing and other direct costs of our related revenues. In addition,
      cost of revenues include stock-based compensation earned by employees whose
      compensation is classified as part of cost of revenues. Gross profit margin
      is
      gross profit stated as a percent of net revenues.




Set
      forth
      below is information regarding our gross profits in the quarter ended September
      30, 2006 and 2005.




**Three
                Months Ended September 30,****2006**
            
            **2005****Amount**
            
            **%
                of Revenues**
            
            **Amount**
            
            **%
                of Revenues**Gross
                profit
            
            $
            5,542,000
            
            
            56.0
            %
            $
            5,453,000
            
            
            61.8
            %




The
      decline in the gross profit margin in the three months ended September 30,
      2006,
      as compared to the same three months of last year, reflects (i) a decline
      in the average service fees for coins due to the mix of services provided in
      the
      periods as a result of a lower level of customers requesting higher margin
      faster turnaround times at trade shows, as described above, (ii) a lower
      gross margin earned on our sportscards business as a result of a lower level
      of
      advertising revenues in the quarter and increased production costs, and
      (iii) a change in our revenue mix to a lower proportion of coins, on which
      we realize higher margins than on the authentication and grading of other
      collectibles and high-value assets, as coin revenues represented approximately
      56% of total net revenues in the first quarter of fiscal 2007, compared to
      approximately 65% of total net revenues in the first quarter of fiscal 2006.
      Stock-based compensation costs of $76,000 and $56,000 were recognized as part
      of
      cost of revenues in the three months ended September 30, 2006 and 2005,
      respectively.




*Selling
      and Marketing Expenses*




Selling
      and marketing expenses include advertising and promotions costs, trade-show
      related expenses, customer service personnel costs and third party consulting
      costs. Set forth below is information regarding our selling and marketing
      expenses in the three-month period ended September 30, 2006 and
      2005.




**Three
                Months Ended September 30,****2006**
            
            **2005**Selling
                and marketing expenses
            
            $
            1,262,000
            
            $
            1,090,000Percent
                of net revenues
            
            
            12.8
            %
            
            12.3
            %





The
      increase of $172,000 in the dollar amount of selling and marketing expenses
      in
      the three months ended September 30, 2006, compared to the same period of the
      prior fiscal year, was primarily related to increased sales and marketing costs
      primarily attributable to our diamond grading business (which we acquired in
      November 2005) and our CCE subscription business (which we acquired in September
      2005).




28


*General
      and Administrative Expenses*




General
      and administrative (“G&A”) expenses are comprised primarily of compensation
      paid to general and administrative personnel, including executive management,
      finance and accounting and information technology personnel, and facilities
      management costs and other miscellaneous expenses.





**Three
                Months Ended September 30,****2006**
            
            **2005**General
                and administrative expense
            
            $
            3,979,000
            
            $
            3,200,000Percent
                of net revenues
            
            
            40.2
            %
            
            36.3
            %





In
      dollar
      terms, the main components of the $779,000 increase in G&A expenses in the
      three months ended September 30, 2006, compared to the same three months last
      year, consisted primarily of (i) approximately $610,000 of expenses for
      businesses that were acquired subsequent to September 30, 2005 and increases
      associated with our CCE business that we had not operated for the full first
      quarter of the prior year; (ii) increased costs of $140,000 for upgrading
      and expansion of the Company’s internal systems to support the Company’s
      increased volume of business and entry into new markets; and
      (iii) increased business development costs of approximately $65,000
      incurred in connection with our coin business. Such cost increases were
      partially offset by a reduction in litigation-related costs in the first quarter
      of fiscal 2007, compared to the first quarter of fiscal 2006, as last year’s
      first quarter included legal fees and expenses incurred in preparation for
      the Miller trial.
      Stock-based compensation costs included in general and administrative expenses
      for the three months ended September 30, 2006 and 2005 were $123,000 and
      $75,000, respectively.





*Amortization
      of Intangible Assets*




**Three
                Months Ended September 30,****2006**
            
            **2005**Amortization
                expense
            
            $
            171,000
            
            $
            20,000Percent
                of net revenues
            
            
            1.7
            %
            
            0.2
            %





The
      increase in the amortization expense relating to intangible assets was primarily
      related to the amortization of assets that were acquired through business
      acquisitions that were consummated in fiscal 2006 and in the first quarter
      of
      fiscal 2007. Such assets are being amortized over their estimated useful lives
      as described in note 1 to the Condensed Consolidated Financial
      Statements.





*Stock-Based
      Compensation*





As
      discussed in note 1 to the Company’s condensed consolidated financial
      statements, in accordance with SFAS 123(R) for share-based payments, the Company
      recognized stock-based compensation as follows:





**Three
                Months Ended September 30,****2006**
            
            **2005**Included
                in:Cost of revenues
            
            $
            76,000
            
            $
            56,000Selling
                and marketing expenses
            
            
            1,000
            
            
            1,000General
                and administrative expenses
            
            
            123,000
            
            
            75,000$
            200,000
            
            $
            132,000




As
      discussed in the Company’s Form 10-K for the year ended June 30, 2006, during
      the fourth quarter of 2006, the Company determined that assumptions used in
      the
      Black-Scholes option pricing model related principally to the expected term
      of
      an option and the forfeiture rate used in the determination of stock-based
      compensation expense during the first three quarters of fiscal 2006 were
      erroneously determined by us. We determined that the stock-based compensation
      expense recognized during the interim periods of 2006, including the first
      quarter of fiscal 2006, was understated by approximately $35,000 in each of
      the
      first three quarters, but that the understatement of expense in each of the
      interim periods of 2006 was immaterial to each quarter. Therefore, $35,000
      of
      the increase of $68,000 in stock-based compensation expense in the three months
      ended September 30, 2006, compared to the same three month period of the prior
      year related to such change in assumptions that were implemented in the fourth
      quarter of fiscal 2006 and carried over into fiscal 2007.






29




The
      total
      amount of compensation cost related to non-vested awards not yet recognized
      at
      September 30, 2006, was $1,976,000, and such amount will be recognized as
      compensation expense assuming the employees to whom the options and restricted
      stock awards were granted continue to be employed by the Company, as
      follows:




FY
                2007 (for Q-2 - Q-4)
            
            $
            594,000FY
                2008
            
            
            751,000FY
                2009
            
            
            458,000FY
                2010
            
            
            147,000FY
                2011
            
            
            26,000Total
            
            $
            1,976,000





However,
      such amounts do not include the cost of any additional options that may be
      granted in future periods nor any changes that may occur in the Company’s
      forfeiture percentage.





*Interest
      Income, Net*





**Three
                Months Ended September 30,****2006**
            
            **2005**Interest
                income, net
            
            $
            567,000
            
            $
            542,000Percent
                of net revenues
            
            
            5.7
            %
            
            6.1
            %





Interest
      income is generated on cash and cash equivalent balances that we invest
      primarily in highly liquid money market accounts, and commercial paper
      instruments. Interest income, net was $567,000 in the three months ended
      September 30, 2006, compared with $542,000 in the three months ended September
      30, 2005. The increase in interest income in the three months ended September
      30, 2006, compared to 2005, related to higher interest earned on the Company’s
      cash balances in the three months ended September 30, 2006, compared to the
      three months ended September 30, 2005 as a result of higher market rates of
      interest in that period. The Company’s average cash balances declined in the
      three months ended September 30, 2006, compared with the same period of the
      prior year due primarily to the use of cash to fund business acquisitions in
      fiscal 2006 and the first quarter of fiscal 2007.





*Income
      Tax Expense*





**Three
                Months Ended September 30,****2006**
            
            **2005**Income
                tax
                expense
            
            $
            318,000
            
            $
            714,000





The
      income tax expense recorded in the three months ended September 30, 2006 and
      2005 was calculated based on our expected combined federal and state effective
      income tax rate of approximately 45% for the three months ended September 30,
      2006 and 42% for the three months ended September 30, 2005. The increase in
      the
      effective rate to 45% in this year’s first quarter primarily reflects a higher
      effect of increased permanent differences between the Company’s income for book
      purposes and for tax purposes, due to the non-deductibility of compensation
      costs recognized on incentive stock options in the three months ended September
      30, 2006.





*Discontinued
      Operations*





**Three
                Months Ended September 30,****2006**
            
            **2005**Income
                (loss) from discontinued operations,net
                of gain on sales of discontinuedbusinesses
                (net of income taxes).
            
            $
            11,000
            
            $
            (12,000
            )





The
      income of $11,000 from discontinued operations for the three months ended
      September 30, 2006, primarily related to a bad debt recovery in the
      period.


30


The
      loss
      from discontinued operations in the three months ended September 30, 2005
      included the results of CTP from September 2, 2005 (which was the date of its
      acquisition) through September 30, 2005 and the continued activities associated
      with the disposition of the assets (consisting primarily of inventories and
      accounts receivables) of the collectibles sales businesses that we sold. In
      the
      three months ended September 30, 2005, the Company recognized a pre-tax bad
      debt
      expense of $73,000 in connection with a note receivable of one of our
      discontinued businesses, that became uncollectible.





**Liquidity
      and Capital
      Resources**





At
      September 30, 2006, we had cash and cash equivalents of $41,602,000, as compared
      to cash and cash equivalents of $52,110,000 at June 30, 2006.




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




During
      the three months ended September 30, 2006, our operating activities used net
      cash of $1,330,000, which included net advances under notes receivable by CFC
      of
      $1,790,000.




Net
      cash
      used in investing activities was $8,167,000 for the three months ended September
      30, 2006 and consisted primarily of cash used for business acquisitions of
      $6,182,000, and capital expenditures (primarily related to expanding our
      diamond grading facilities and capacity) of $1,387,000.




In
      the
      three months ended September 30, 2006, financing activities used net cash of
      $1,025,000, primarily related to the payment of $668,000 of cash dividends
      to
      stockholders and $378,000 of repurchases of Company shares under our stock
      buyback program.




*Bank
      Line of Credit* .
      As
      previously reported, in fiscal 2005, we organized Collectors Finance Corporation
      (“CFC”), as a wholly-owned subsidiary, to engage in the business of making loans
      primarily to coin or sportscards dealers. All such loans are required to be
      collateralized by the delivery to us of collectibles that have a fair market
      value of at least the amount of the loans. The loans are required to be repaid
      to us when those collectibles are returned to the dealers. To provide a source
      of funding for those loans, in June 2005, CFC obtained a revolving bank line
      of
      credit pursuant to a loan and security agreement that permits CFC to borrow,
      at
      any one time, up to the lesser of (i) $7,000,000 or (ii) an amount equal to
      85%
      of the aggregate principal amount of those of its loan receivables that meet
      the
      bank’s eligibility criteria. Borrowings under that credit line, which has a term
      of two years ending in June 2007, bear interest at rates based on the bank’s
      prime rate of LIBOR, as applicable, and are secured by the loan receivables
      due
      CFC. There were no borrowings outstanding under that line of credit during
      the
      three months ended or at September 30, 2006.




CFC’s
      obligations under this line of credit have been guaranteed by the Company
      pursuant to a Continuing Guaranty Agreement with the bank lender. The terms
      of
      that Agreement require the Company to be in compliance with certain financial
      and other restrictive covenants, and require the consent of the lender
      (i) for the payment of cash dividends or repurchases of our common stock in
      an aggregate amount exceeding its annual net income in any year, and
      (ii) to consummate more than $5,000,000 of business acquisitions in any
      year. The Company was in compliance with all of these covenants at September
      30,
      2006 and received the required consents from the lender for the purchases of
      Expos Unlimited and American Gemological Laboratories businesses, the repurchase
      of the Company’s common stock, and the payment of dividends during fiscal 2006
      and 2007.




31


*Outstanding
      Financial Obligations*





We
      had
      the following outstanding obligations under operating leases, net of sublease
      income, at September 30:




Fiscal
                Year2007(remaining
                9 months)
            
            $
            1,058,0002008
            
            
            1,594,0002009
            
            
            1,585,0002010
            
            
            840,0002011
            
            
            393,000Thereafter
            
            
            1,756,000$
            7,226,000





With
      the
      exception of those obligations, we do not have any material financial
      obligations, such as long-term debt, capital lease, or purchase obligations.
      In
      the event CFC incurs any borrowings under its line of credit, we will have
      an
      obligation to repay such borrowings; however, there were no borrowings
      outstanding under this line of credit at September 30, 2006.





*Stock
      Buyback Program.* In
      December 2005, the Company’s Board of Directors approved a $10 million stock
      buyback program. The program authorizes the Company to make up to $10,000,000
      of
      stock repurchases in open market or privately negotiated transactions, in
      accordance with applicable Securities Exchange Commission rules, when
      opportunities to make such repurchases, at attractive prices, become available.
      The Company is under no obligation to repurchase any shares under the stock
      buyback program and the timing, actual number and value of shares that may
      be
      repurchased under that program will depend on a number of factors, including
      the
      Company's future financial performance, the Company's available cash resources
      and competing uses for the cash that may arise in the future, prevailing market
      prices of the Company's common stock and the number of shares that become
      available for sale at prices that the Company believes are attractive. Through
      September 30, 2006, the Company had repurchased a total of 208,968 shares of
      its
      common stock for an aggregate purchase price of approximately $3,005,000 (which
      includes transaction costs of approximately $10,000) of which a total of 27,117
      shares were repurchased, at a cost of $378,000, in the first quarter of fiscal
      2007.




*Dividends* .
      In
      fiscal, 2006, the Board of Directors adopted a dividend policy that calls for
      the payment of an expected total annual cash dividend of $0.32 per common share,
      payable in the amount of $0.08 per share per quarter. To date, the Board of
      Directors has declared the following quarterly cash dividends under this
      policy.




**Declaration
                Date**
            
            **Record
                Date**
            
            **Dividend
                Payment Date**
            
            **Amount**May
                31, 2006
            
            
            June
                14, 2006
            
            
            June
                28, 2006
            
            $
            674,000August
                15, 2006
            
            
            August
                29, 2006
            
            
            September
                12, 2006
            
            $
            668,000




The
      declaration of cash dividends in the future, pursuant to the Company’s dividend
      policy, is subject to final determination each quarter by the Board of Directors
      based on a number of factors, including the Company’s financial performance and
      its available cash resources, its cash requirements and alternative uses of
      cash
      that the Board may conclude would represent an opportunity to generate a greater
      return on investment for the Company. For these reasons, as well as others,
      there can be no assurance that the amount of the quarterly cash dividend will
      not be reduced, or that the Board of Directors will not decide to suspend or
      discontinue the payment of cash dividends, in the future.




We
      plan
      to use our cash resources to (i) expand our existing and implement new
      marketing programs, (ii) introduce new services for our customers,
      (iii) acquire or start-up other high-value collectibles or high-value asset
      authentication and grading businesses, (iv) make private and open market
      share repurchases under our stock buyback program if there are opportunities
      to
      do so at prices that we believe are attractive, (v) continue paying
      dividends to our stockholders, as determined by the Board of Directors, and
      (vi) fund working capital requirements, and for other corporate purposes.
      Although we have no current plans to do so, we also may seek borrowings, and
      we
      may issue additional shares of our stock, to finance acquisitions of additional
      authentication and grading businesses.






32


**Recent
      Accounting
      Pronouncements**




In
      July
      2006, the FASB issued FASB Interpretation 48, *Accounting
      for Uncertainty in Income Taxes: an Interpretation of FASB Statement No.
      109.* Interpretation 48 clarifies Statement 109, *Accounting
      for Income Taxes* ,
      to
      indicate a criterion that an individual tax position would have to meet for
      some
      or all of the benefit of that position to be recognized in an entity’s financial
      statements. Interpretation 48 is effective for fiscal years beginning after
      December 15, 2006. Prior to the end of this fiscal year, we will evaluate the
      impact of Interpretation 48 on our financial statements and results of
      operations.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* ,
      which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (GAAP) and expands disclosure about
      fair value measurements. The statement emphasizes that fair value is a
      market-based measurement, not an entity-specific measurement. SFAS No. 157
      is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. We do not
      expect the adoption of SFAS No. 157 to have a material impact on our financial
      position or results of operation.




In
      September 2006, the FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Post Retirement Plans* (an
      amendment of FASB Statement No. 87, 88, 106 and 132R). SFAS No. 158 requires
      an
      employer to recognize the over funded or under funded status of a defined
      benefit postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income. As the Company currently does not sponsor one or more single-employer
      defined benefit plans, we do not expect the adoption of SFAS No. 158 to have
      a
      material impact on our financial position or results of operation.




In
      September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 108, *“Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements.”* SAB 108
      was issued to provide consistency between how registrants quantify financial
      statements. Historically, there have been two widely-used methods for
      quantifying the effects of financial statement misstatements. These methods
      are
      referred to as the “roll-over” and “iron curtain” method. The roll-over method
      quantifies the amount by which the current year income statement is misstated.
      Exclusive reliance on an income statement approach can result in the
      accumulation of errors on the balance sheet that may not have been material
      to
      any individual income statement, but which may misstate one or more balance
      sheet accounts. The iron curtain method quantifies the error as the cumulative
      amount by which the current year balance sheet is misstated. Exclusive reliance
      on a balance sheet approach can result in disregarding the effects of errors
      in
      the current year income statement that results from the correction of an error
      existing in previously issued financial statements. SAB 108 established an
      approach that requires quantification of financial statement misstatements
      based
      on the effects of the misstatement on each of the Company’s financial statements
      and the related financial statement disclosures. This approach is commonly
      referred to as the “dual approach” because it requires quantification of errors
      under both the roll-over and iron curtain methods. SAB 108 allows registrants
      to
      initially apply the dual approach either by (1) retroactively adjusting prior
      financial statements as if the dual approach had always been used or by (2)
      recording the cumulative effect of initially applying the dual approach as
      adjustments to the carrying values of assets and liabilities as of July 1,
      2006
      with an offsetting adjustment recorded to the opening balance of retained
      earnings (accumulated deficit). Use of this “cumulative effect” transition
      method requires detailed disclosure of the nature and amount of each individual
      error being corrected through the cumulative adjustment and how and when it
      arose. We do not expect the initial application of SAB 108 to have any impact
      on
      the Company’s financial position or results of operation.




**Risks
      and Uncertainties That Could Affect Our
      Future Financial Performance**




There
      are
      a number of risks and uncertainties that could affect our future operating
      results and financial condition and which could cause our future operating
      results to differ materially from those expected at this time. Those risks
      and
      uncertainties include, but are not limited to:




·
            changes
                in general economic conditions or changes in conditions in the
                collectibles or high-value assets markets in which we operate, such
                as a
                possible decline in the popularity of some high-value collectibles
                or
                assets, either of which could reduce the volume of authentication
                and
                grading submissions and, therefore, the grading fees we generate;






33


·
            a
                lack of diversity in our sources of revenues and, more particularly,
                our
                dependence on collectible coin authentication and grading for a
                significant percentage of our total revenues, which makes us more
                vulnerable to adverse changes in economic conditions, including declines
                in the value of precious metals or recessionary or other conditions
                that
                could lead to reduced coin and other collectibles submissions that
                would,
                in turn, result in reductions in our revenues and income;




·
            our
                dependence on certain key executives and experts, the loss of the
                services
                of any of which could adversely affect our ability to obtain
                authentication and grading submissions and, therefore, could harm
                our
                operating results;




·
            the
                fact that for the year ended June 30, 2006 and the three months ended
                September 30, 2006, our top 5 customers accounted for approximately
                22%
                and 14%, respectively, of our net revenues, which means that the
                loss of
                any of those customers, or a reduction in their grading submissions
                to us,
                would result in a decline in our revenues and a reduction in our
                operating
                income;




·
            increased
                competition from other collectibles’ authentication and grading companies
                that could result in reductions in collectibles submissions to us
                or could
                require us to reduce the prices we charge for our services, either
                of
                which could result in reductions in our revenue and income;




·
            the
                risk that we will incur unanticipated liabilities under our authentication
                and grading warranties that would increase our operating expenses;




·
            the
                risk that new collectibles service offerings and business initiatives,
                such as autograph, stamp and paper currency grading services, diamonds
                and
                colored gemstones, and our dealer financing program, will not gain
                market
                acceptance or will be unsuccessful and will, as a result, increase
                our
                operating expenses and reduce our overall profitability or cause
                us to
                incur losses;




·
            the
                risks involved in acquiring existing or commencing new authentication
                and
                grading businesses, including the risks that we will be unable to
                successfully integrate new businesses into our operations; that our
                new
                businesses (in particular our diamond and colored gemstones businesses)
                may not gain market acceptance; that business expansion may result
                in a
                costly diversion of management time and resources from our existing
                businesses and increase our operating expenses; that acquisition-related
                goodwill and intangible assets may become impaired, which could adversely
                impact our financial statements and results of operations; and that
                we
                will not achieve adequate returns on the investments we may make
                in
                acquiring other or establishing new businesses, any of which would
                harm
                our profitability or cause us to incur losses;




·
            the
                risks that we will encounter problems with or failures of our computer
                systems that would interrupt our services or result in loss of data
                that
                we need for our business; and




·
            the
                potential of increased government regulation of our businesses that
                could
                cause operating costs to increase.




Certain
      of these risks and uncertainties, as well as other risks, are more fully
      described above in this Section of this Report (entitled
      “Management's Discussion and Analysis of Financial Condition and Results of
      Operations”), and in Part I: Item 1A, entitled “Risk Factors” in  our
      Annual Report on Form
      10-K for our
      fiscal year
      ended June 30, 2006,
      as
      filed with the SEC under the Securities Exchange Act of 1934.




Due
      to
      these and other possible uncertainties and risks, you are cautioned not to
      place
      undue reliance on the forward-looking statements contained in this Report,
      which
      speak only as of the date of this Report. We also disclaim any obligation to
      update forward-looking statements contained in this Report or
      in
      our **** 2006 Annual
      Report on Form
      10-K.




34


**ITEM
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





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





Due
      to
      the cash and cash equivalent balances that we maintain, we are exposed to risk
      of changes in short-term interest rates. At September 30, 2006, we had
      $41,602,000 in cash and cash equivalents, primarily invested in money market
      funds. Reductions in short-term interest rates could result in reductions in
      the
      amount of that income. However, the impact on our operating results of such
      changes is not expected to be material.





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





**ITEM
      4.**  **CONTROLS
      AND PROCEDURES**





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




Our
      management, under the supervision and with the participation of our Chief
      Executive Officer and Chief Financial Officer, evaluated the effectiveness
      of
      our disclosure controls and procedures in effect as of September 30, 2006.
      Based
      on this evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that, as of September 30, 2006, our disclosure controls and procedures
      were effective to provide reasonable assurance that material information,
      relating to the Company and its consolidated subsidiaries, required to be
      included in our Exchange Act reports, including this Quarterly Report on Form
      10−Q, is made known to management, including the CEO and CFO, on a timely basis.




There
      were no changes in our internal control over financial reporting that occurred
      during the quarter ended September 30, 2006, that has materially affected,
      or
      are reasonably likely to materially affect, our internal control over financial
      reporting.




35


**PART
      II - OTHER INFORMATION**




**ITEM
      1A.**  **RISK
      FACTORS**




There
      were no material changes in the risk factors that were disclosed under the
      caption “Risk Factors” in Part IA of our Annual Report on Form 10-K for our
      fiscal year ended June 30, 2006, except as may otherwise be set forth above
      under the caption “Risks and Uncertainties That Could Affect Our Future
      Financial Performance” in Item 2 of Part I of this Report.




**ITEM
      2.** **UNREGISTEREDSALES
      OF SECURITIES AND USE OF
      PROCEEDS**




Share
      Repurchases .




On
      December 6, 2005, Collectors Universe, Inc. reported that its Board of Directors
      had authorized a stock buyback program, pursuant to which the Company may,
      from
      time to time, in accordance with the applicable Securities and Exchange
      Commission rules, purchase up to an aggregate of $10 million of its shares
      of
      common stock in open market and private transactions, when opportunities to
      makes such purchases become available at attractive prices. The Company is
      under
      no obligation to repurchase any shares under the stock buyback program and
      the
      timing, actual number and value of shares that may be repurchased under this
      program will depend on a number of factors, including the Company’s future
      financial performance; the Company’s available cash resources and competing uses
      for the cash that may arise in the future; prevailing market prices of the
      Company’s common stock; and the number of shares that become available for sale
      at prices that the Company believes are attractive. In addition the Company
      may
      suspend or terminate this program at any time, without notice.




The
      following table sets forth information regarding our share repurchases in each
      of the months during the quarter ended September 30, 2006. These purchases
      are
      the share repurchases made by the Company under this program since
      inception.




**(a)**
            
            **(b)**
            
            **(c)**
            
            **(d)****Monthly
                Periods**
              **Through
                September 30, 2006**
            
            **Total
                Number**
              **of
                Shares Purchased**
            
            **Average
                Price Paid per Share**
            
            **Total
                Number**
              **of
                Shares Purchased**
              **as**
              **Part
                of Publicly Announced**
              **Programs**
            
            **Approximate
                Dollar Value**
              **of
                Shares that**
              **May
                Yet Be**
              **Purchased
                Under**
              **the
                Programs**July
                1 to July 31, 2006
            
            
            0
            
            $
            0
            
            
            0
            
            $
            7,381,584August
                1 to August 31, 2006
            
            
            0
            
            $
            0
            
            
            0
            
            $
            7,381,584September
                1 to September 30, 2006
            
            
            27,117
            
            $
            13.86
            
            
            27,117
            
            $
            7,005,780Total
            
            
            27,117
            
            $
            13.86
            
            
            27,117





**ITEM
      6.**  **EXHIBITS**





(a)
            Exhibits:Exhibit
                31.1
            Certification
                of Chief Executive Officer Under Section 302 of the Sarbanes-Oxley
                Act of
                2002Exhibit
                31.2
            Certification
                of Chief Financial Officer Under Section 302 of the Sarbanes-Oxley
                Act of
                2002Exhibit
                32.1
            Chief
                Executive Officer Certification Under Section 906 of the Sarbanes-Oxley
                Act of 2002Exhibit
                32.2
            Chief
                Financial Officer Certification Under Section 906 of the Sarbanes-Oxley
                Act of 2002











36





**SIGNATURES**








Pursuant
      to the requirement 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.











**COLLECTORS
                UNIVERSE, INC.**Date:November
                9, 2006
            
            /s/
                MICHAEL R. HAYNESMichael
                R. HaynesChief
                Executive Officer











**COLLECTORS
                UNIVERSE, INC.**Date:November
                9, 2006
            
            /s/
                JOSEPH J. WALLACEJoseph
                J. WallaceChief
                Financial Officer

































































S-1


**INDEX
      TO EXHIBITS**











**Number**
            **Description**Exhibit
                31.1
            Certification
                of Chief Executive Officer Under Section 302 of the Sarbanes-Oxley
                Act of
                2002Exhibit
                31.2
            Certification
                of Chief Financial Officer Under Section 302 of the Sarbanes-Oxley
                Act of
                2002Exhibit
                32.1
            Chief
                Executive Officer Certification Under Section 906 of the Sarbanes-Oxley
                Act of 2002Exhibit
                32.2
            Chief
                Financial Officer Certification Under Section 906 of the Sarbanes-Oxley
                Act of 2002







































































E-1