**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 December 31, 2004****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 an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes ___ No  ü  .
 
 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 January 26, 2005****Common
      Stock $.001 Par Value**
    **6,267,321**
 
 
 
   
   **COLLECTORS
UNIVERSE, INC.**
 **QUARTERLY
REPORT**
 **ON
FORM 10-Q**
 **FOR
THE QUARTER ENDED DECEMBER 31, 2004**
 
 **TABLE
OF CONTENTS**
 
 **PART
      I**
    **Financial
      Information**
    **Page**Item
      1.
    Financial
      Statements:Condensed
      Consolidated Balance Sheets as of December 31, 2004and
      June 30, 2004 (unaudited)
    1Condensed
      Consolidated Statements of Operationsfor
      the Three and Six Months Ended December 31, 2004 and 2003
      (unaudited)
    2Condensed
      Consolidated Statements of Cash Flowsfor
      the Six Months Ended December 31, 2004 and 2003
      (unaudited)
    3Notes to Condensed Consolidated Financial Statements
      (unaudited)
    4Item
      2.
    Management's Discussion and Analysis of Financial Condition
      and Results of Operations
    11Forward Looking Statements
    11Our Business
    11Critical Accounting Policies and
      Estimates
    12Factors That Can Affect Our Financial Position and
      Operating Results
    14Results of Operations
    15Liquidity and Capital Resources
    18Risks and Uncertainties That Could Affect Our Future
      Financial Performance
    19Item
      3.
    Quantitative and Qualitative Disclosures About Market
      Risk
    20Item
      4.
    Controls and Procedures
    21**PART
      II**
    **Other
      Information**Item
      1
    Legal Proceedings
    22Item
      4
    Submission on Matters to a Vote of Security
      Holders
    22Item
      6.
    Exhibits
    23**SIGNATURES**
    
    S-1**INDEX TO EXHIBITS**
    E-1**EXHIBITS****Exhibit****10.99**
    2005
      Management Bonus Plan**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 of Periodic Report Under Section 906of
      the Sarbanes-Oxley Act of 2002**Exhibit
      32.2**
    Chief
      Financial Officer Certification of Periodic Report Under Section 906of
      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 December 31, 2004 and June 30, 2004**
 (in
thousands, except per share data)
 (unaudited)
 **December
      31,**
    
    **June
      30,****2004**
    
    **2004****ASSETS**Current
      assets:Cash
      and cash equivalents
    
    $
    21,739
    
    $
    21,454Short-term
      investments
    
    
    4,125
    
    
    -Accounts
      receivable, net of allowance for doubtful accounts of $35 (December) and
      $30 (June)
    
    
    803
    
    
    790Note
      receivable
    
    
    1,696
    
    
    -Inventories,
      net
    
    
    385
    
    
    452Prepaid
      expenses and other current assets
    
    
    1,016
    
    
    781Refundable
      income taxes
    
    
    -
    
    
    13Deferred
      income taxes
    
    
    1,174
    
    
    1,174Receivables
      from sale of net assets of discontinued operations
    
    
    542
    
    
    1,611Current
      assets of discontinued operations held for sale
    
    
    586
    
    
    1,267Total
      current assets
    
    
    32,066
    
    
    27,542Property
      and equipment, net
    
    
    904
    
    
    1,045Deferred
      income taxes
    
    
    4,034
    
    
    5,205Other
      assets
    
    
    182
    
    
    165Non-current
      assets of discontinued operations held for sale
    
    
    103
    
    
    117$
    37,289
    
    $
    34,074**LIABILITIES
      AND STOCKHOLDERS' EQUITY**Current
      liabilities:Accounts
      payable
    
    $
    412
    
    $
    455Accrued
      liabilities
    
    
    2,180
    
    
    1,351Accrued
      compensation and benefits
    
    
    775
    
    
    936Deferred
      revenue
    
    
    1,358
    
    
    1,225Current
      liabilities of discontinued operations held for sale
    
    
    64
    
    
    276Total
      current liabilities
    
    
    4,789
    
    
    4,243Deferred
      rent and other long-term liabilities
    
    
    514
    
    
    465Commitment
      and contingenciesStockholders'
      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 6,388 at December
      31, 2004and
      6,338 at June 30, 2004
    
    
    6
    
    
    6Additional
      paid-in capital
    
    
    42,672
    
    
    42,215Accumulated
      deficit
    
    
    (9,671
    )
    
    (11,834
    )Treasury
      stock, at cost (125 shares)
    
    
    (1,021
    )
    
    (1,021
    )Total
      stockholders' equity
    
    
    31,986
    
    
    29,366$
    37,289
    
    $
    34,074
  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**
    
    **Six
      Months Ended****December
      31,**
    
    **December
      31,**
    
    **December
      31,**
    
    **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Net
      revenues
    
    $
    7,982
    
    $
    5,753
    
    $
    16,177
    
    $
    11,765Cost
      of revenues
    
    
    2,998
    
    
    2,349
    
    
    5,824
    
    
    4,898Gross
      profit
    
    
    4,984
    
    
    3,404
    
    
    10,353
    
    
    6,867Selling
      and marketing expenses
    
    
    748
    
    
    690
    
    
    1,705
    
    
    1,528General
      and administrative expenses
    
    
    2,292
    
    
    2,235
    
    
    4,579
    
    
    4,163Settlement
      of lawsuit
    
    
    500
    
    
    -
    
    
    500
    
    
    -Total
      operating expenses
    
    
    3,540
    
    
    2,925
    
    
    6,784
    
    
    5,691Operating
      income
    
    
    1,444
    
    
    479
    
    
    3,569
    
    
    1,176Interest
      income, net
    
    
    110
    
    
    7
    
    
    174
    
    
    14Other
      income (expenses)
    
    
    2
    
    
    (12
    )
    
    2
    
    
    (19
    )Income
      before income taxes
    
    
    1,556
    
    
    474
    
    
    3,745
    
    
    1,171Provision
      for income taxes
    
    
    628
    
    
    170
    
    
    1,506
    
    
    483Income
      from continuing operations
    
    
    928
    
    
    304
    
    
    2,239
    
    
    688Loss
      from operations of discontinued operations, net of gains
      on
      sales of discontinued businesses (net of income taxes)
    
    
    (7
    )
    
    (782
    )
    
    (76
    )
    
    (735
    )Net
      income (loss)
    
    $
    921
    
    $
    (478
    )
    $
    2,163
    
    $
    (47
    )Net
      income (loss) per basic share:Income
      from continuing operations
    
    $
    0.15
    
    $
    0.05
    
    $
    0.36
    
    $
    0.11Loss
      from operations of discontinued operations, net of gains
      on
      sales of discontinued businesses (net of income taxes)
    
    
    -
    
    
    (0.13
    )
    
    (0.01
    )
    
    (0.12
    )Net
      income (loss)
    
    $
    0.15
    
    $
    (0.08
    )
    $
    0.35
    
    $
    (0.01
    )Net
      income (loss) per diluted share:Income
      from continuing operations
    
    $
    0.14
    
    $
    0.05
    
    $
    0.34
    
    $
    0.11Loss
      from operations of discontinued operations, net of gains
      on
      sales of discontinued businesses (net of income taxes)
    
    
    -
    
    
    (0.12
    )
    
    (0.01
    )
    
    (0.12
    )Net
      income (loss)
    
    $
    0.14
    
    $
    (0.07
    )
    $
    0.33
    
    $
    (0.01
    )Weighted
      average shares outstanding:Basic
    
    
    6,242
    
    
    6,167
    
    
    6,230
    
    
    6,164Diluted
    
    
    6,695
    
    
    6,391
    
    
    6,644
    
    
    6,343
 
 
 See
accompanying notes to condensed consolidated financial statements
 
  2
  **COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES**
 **CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (in
thousands)
 (unaudited)
 **Six
      Months Ended**
      **December
      31,**2004
    
    2003OPERATING
      ACTIVITIES:Net
      income from continuing operations
    
    $
    2,239
    
    $
    688Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
    
    
    253
    
    
    338Loss
      on disposal of fixed assets
    
    
    -
    
    
    23Provision
      for doubtful accounts
    
    
    5
    
    
    32Deferred
      income taxes
    
    
    1,431
    
    
    -Changes
      in operating assets and liabilities:Short-term
      investments
    
    
    (4,125
    )
    
    -Accounts
      receivable
    
    
    (18
    )
    
    27Inventories
    
    
    67
    
    
    (154
    )Prepaid
      expenses and other current assets
    
    
    (235
    )
    
    28Refundable
      income taxes
    
    
    13
    
    
    220Other
      assets
    
    
    (17
    )
    
    83Accounts
      payable
    
    
    (43
    )
    
    (240
    )Accrued
      liabilities
    
    
    829
    
    
    (273
    )Accrued
      compensation and benefits
    
    
    (161
    )
    
    157Other
      long-term liabilities
    
    
    49
    
    
    27Deferred
      revenue
    
    
    133
    
    
    146Net
      cash provided by operating activities
    
    
    420
    
    
    1,102INVESTING
      ACTIVITIES:Capital
      expenditures
    
    
    (112
    )
    
    (427
    )Collection
      of receivables from sales of discontinued operations
    
    
    1,069
    
    
    -Proceeds
      from sale of fixed assets
    
    
    -
    
    
    5Advances
      on notes receivable
    
    
    (2,307
    )
    
    -Proceeds
      from collection of notes receivable
    
    
    611
    
    
    -Net
      cash used in investing activities
    
    
    (739
    )
    
    (422
    )FINANCING
      ACTIVITIES:Proceeds
      from employee stock purchase plan
    
    
    -
    
    
    29Proceeds
      from exercise of stock options
    
    
    197
    
    
    348Net
      cash provided by financing activities
    
    
    197
    
    
    377Net
      cash provided by discontinued operations
    
    
    407
    
    
    3,420Net
      increase in cash and cash equivalents
    
    
    285
    
    
    4,477Cash
      and cash equivalents at beginning of period
    
    
    21,454
    
    
    4,482Cash
      and cash equivalents at end of period
    
    $
    21,739
    
    $
    8,959SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Interest
      paid
    
    $
    -
    
    $
    -Income
      taxes paid
    
    $
    10
    
    $
    11
 
 SUPPLEMENTAL
DISCLOSURE OF NON-CASH INFORMATION:
 
 During
the six months ended December 31, 2004, the Company recorded a tax benefit from
the exercise of stock options of $260,000, which is included as an increase to
Deferred Income Taxes and an increase to Additional Paid-In
Capital.
 
 
   3
   **COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)**
 
 1. SIGNIFICANT
ACCOUNTING POLICIES
  *Principles
of Consolidation*
  The
accompanying 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.
  *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 results of operations, 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 and six months ended December 31, 2004 are not necessarily indicative of
the results that may be expected for the year ending June 30, 2005 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/A for the fiscal year
ended June 30, 2004.
  *Reclassifications*
  Certain
prior period amounts have been reclassified to conform to the current period
presentation, including the reclassification from general and administrative
expenses to cost of revenues of occupancy, security and insurance costs which
directly relate to providing authentication and grading services.
  *Revenue
Recognition*
  Net
revenues consist primarily of fees generated from the authentication and grading
of coins, sportscards, autographs and stamps. Authentication and grading
revenues are recognized when those services have been performed by us and the
item is shipped back to the customer. Authentication and grading fees generally
are prepaid, although we offer open account privileges to larger dealers.
Advance payments received for grading services are deferred until the service is
performed and the graded item is shipped to the customer. In the case of dealers
to whom we have extended credit, we record revenues at the time the item is
shipped to the customer.
  *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 may be material to the condensed consolidated financial
statements.
  *Recent
Accounting Pronouncements*
  In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123R, *Share-Based
Payment.* SFAS No.
123R eliminates the ability to account for share-based compensation transactions
using Accounting Principles Board ("APB") Opinion No. 25, *Accounting
for Stock Issued to Employees,* and
instead requires that such transactions be accounted for using a
fair-value-based
   4
  method
with compensation costs related to share-based payments to be recognized in the
financial statements. SFAS No. 123R also requires the tax benefit associated
with these share-based payments to be classified as financing activities in the
statement of cash flows rather than operating activities as currently required.
SFAS No. 123R is effective as of the first interim or annual period beginning
after June 15, 2005. We will be required to apply SFAS No. 123R beginning July
1, 2005. SFAS No. 123R offers alternative methods of adopting this final rule.
At the present time, we have not yet determined which alternative method we will
use. Regardless of the method of adoption, the implementation of SFAS No. 123R
will result in increased compensation expenses in our reported consolidated
results of operations.
  *Concentrations*
  Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash , cash
equivalents and short-term investments, accounts receivable and notes
receivables.
  Financial
Instruments . Through
September 30, 2004, the Company invested its excess cash in a large uninsured
institutional money market fund. In September 2004, the Company adopted a policy
to invest its excess cash in a portfolio of high quality U.S. dollar-denominated
money market type securities, and appointed a new portfolio manager. In early
October 2004, the Company transferred $20 million of its excess cash balances to
such securities. At December 31, 2004, the Company’s excess funds of
approximately $24 million was primarily invested in high quality commercial
paper and a money market fund.
  Accounts
Receivable . A
substantial portion of accounts receivable is due from collectibles dealers. The
Company performs an analysis of the expected collectibility of accounts
receivable and makes an allowance for doubtful accounts, when necessary. The
allowance for doubtful accounts receivable was $35,000 and $30,000 at December
31, 2004 and June 30, 2004, respectively.
  Customers . The
authentication and grading of collectible coins accounted for approximately 69%
and 64% of our net revenues for the six months ended December 31, 2004 and 2003,
respectively. In the three and six months ended December 31, 2004, one customer
accounted for approximately 11% of the Company’s net revenues.
  *Stock
Option Plans*
  At
December 31, 2004, the Company had three stock-based compensation plans. The
following table illustrates the effect on net income and net income per share if
the Company had applied the fair value recognition provisions of SFAS No. 123 to
stock-based employee compensation:
  (in
      thousands,
      except
      per share data)
    
    (in
      thousands,
      except
      per share data)**Three
      Months Ended**
      **December
      31,**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Net
      income (loss), as reported
    
    $
    921
    
    $
    (478
    )
    $
    2,163
    
    $
    (47
    )Add:
      Stock-based employee compensation expense included inreported
      net loss,net
      of related tax effects
    
    
    -
    
    
    -
    
    
    -
    
    
    -Deduct:
      Total stock-based employee compensation expense determined
      under fair valuebased
      method for awards, net of related tax effects
    
    
    108
    
    
    19
    
    
    148
    
    
    56Pro
      forma net income (loss)
    
    $
    813
    
    $
    (497
    )
    $
    2,015
    
    $
    (103
    )Net
      income (loss) per common share - basic:As
      reported
    
    $
    0.15
    
    $
    (0.08
    )
    $
    0.35
    
    $
    (0.01
    )Pro
      forma
    
    $
    0.13
    
    $
    (0.08
    )
    $
    0.32
    
    $
    (0.02
    )Net
      income (loss) per common share - diluted:As
      reported
    
    $
    0.14
    
    $
    (0.07
    )
    $
    0.33
    
    $
    (0.01
    )Pro
      forma
    
    $
    0.12
    
    $
    (0.08
    )
    $
    0.30
    
    $
    (0.02
    )
 
 
 
 5
 
 The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model using the following weighted-average
assumptions:
  **Three
      Months Ended**
      **December
      31,**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Dividend
      yield
    
    
    -
    
    
    -
    
    
    -
    
    
    -Expected
      volatility
    
    
    75.00
    %
    
    80.00
    %
    
    74.00
    %
    
    80.00
    %Risk-free
      interest rate
    
    
    3.02
    %
    
    1.31
    %
    
    2.89
    %
    
    1.23
    %Expected
      lives
    
    
    2
      years
    
    
    11
      months
    
    
    2
      years
    
    
    10
      months
 
 2. CASH,
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
 
 At
December 31, 2004, cash, cash equivalents and short-term investments included
approximately $20 million of trading securities primarily comprising high
quality commercial paper issued by U.S. or foreign companies. The minimum credit
quality of the portfolio must be rated no less than single-A long term or A1/P1
short term and the portfolio must contain no more than 25% exposure to
securities of issuers whose principal business activities are in the same
industry. In addition, the weighted average maturity of the portfolio must not
exceed 90 days.
 
 3. NOTE
RECEIVABLE
  During
the second quarter, the Company made advances to its largest customer secured by
collectible coins that the customer submitted to us for authentication and
grading. The highest amount of the advances outstanding at any one time totaled
approximately $2,100,000 and the remaining principal balances at December 31,
2004 and February 3, 2005 were $1,696,000 and $1,311,000, respectively. To
ensure that the outstanding advances are fully collateralized at all times, the
customer is required to make principal reduction payments at the time the
Company returns authenticated and graded coins to the customer. The advances,
which bear interest at a rate based on the Prime Rate, are required to be repaid
by the customer by no later than March 22, 2005.
  4. INVENTORIES
  Inventories
      consist of the following:(in
      thousands)**December
      31,**
    
    **June
      30,****2004**
    
    **2004**Coins
    
    $
    242
    
    $
    253Other
      collectibles
    
    
    58
    
    
    58Grading
      raw materials consumable inventory
    
    
    137
    
    
    194437
    
    
    505Less
      inventory reserve
    
    
    (52
    )
    
    (53
    )Inventories,
      net
    
    $
    385
    
    $
    452
 
  6
  5. PROPERTY
AND EQUIPMENT
 
 
 Property
      and equipment consist of the following:(in
      thousands)**December
      31,**
    
    **June
      30,****2004**
    
    **2004**Grading
      reference sets
    
    $
    60
    
    $
    57Computer
      hardware and equipment
    
    
    1,004
    
    
    997Computer
      software
    
    
    900
    
    
    867Equipment
    
    
    1,333
    
    
    1,283Furniture
      and office equipment
    
    
    666
    
    
    659Leasehold
      improvements
    
    
    434
    
    
    422Trading
      card reference library
    
    
    52
    
    
    524,449
    
    
    4,337Less
      accumulated depreciation and amortization
    
    
    (3,545
    )
    
    (3,292
    )Property
      and equipment, net
    
    $
    904
    
    $
    1,045
 
 6. ACCRUED
LIABILITIES
 
  Accrued liabilities consist of the
      following:(in
      thousands)**December
      31,**
    
    **June
      30,****2004**
    
    **2004**Warranty
      Costs
    
    $
    686
    
    $
    492Professional
      fees
    
    
    436
    
    
    546Settlement
      of lawsuit
    
    
    600
    
    
    -Other
    
    
    458
    
    
    313$
    2,180
    
    $
    1,351
  The
following table presents the changes in the Company’s warranty reserve during
the six months ended December 31, 2004 and 2003:
  (in
      thousands)**Six
      Months Ended December 31,**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**Warranty
      reserve, beginning of period
    
    $
    492
    
    $
    304Charged
      to cost of revenue
    
    
    301
    
    
    334Payments
    
    
    (107
    )
    
    (263
    )Warranty
      reserve, end of period
    
    $
    686
    
    $
    375
 
 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 authentication and grading businesses and to divest 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, which were
comprised of Bowers and Merena, Superior Sports Auctions, Kingswood Coin
Auctions, Odyssey Publications, Lyn Knight Currency Auctions and DHRC, are
classified as held for sale and the related operating results are classified as
discontinued operations in the accompanying condensed consolidated balance
sheets at December 31, 2004 and June 30, 2004 and condensed consolidated
statements of operations for the three and six-month periods
 
 7
 ended
December 31, 2004 and 2003. By December 31, 2004, the Company had sold all of
its collectibles auctions and direct sales businesses, but elected to retain,
and has been
 liquidating, the remaining inventories, accounts receivable and liabilities of
those businesses.
  The
operating results of the discontinued collectible sales businesses included in
the accompanying condensed consolidated statements of operations, are as
follows:
  (in
      thousands)
      **Three
      Months Ended**
    
    (in
      thousands)
      **Six
      Months Ended****December
      31,**
      **2004**
    
    **December
      31,**
      **2003**
    
    **December
      31,**
      **2004**
    
    **December
      31,**
      **2003**Net
      revenues
    
    $
    15
    
    $
    7,577
    
    $
    270
    
    $
    18,751Loss
      before income taxes
    
    $
    (58
    )
    $
    (1,331
    )
    $
    (292
    )
    $
    (1,255
    )Gain
      on sale of discontinuedbusiness
    
    
    45
    
    
    -
    
    
    164
    
    
    -(13
    )
    
    (1,331
    )
    
    (128
    )
    
    (1,255
    )Income
      tax benefit
    
    
    6
    
    
    549
    
    
    52
    
    
    520Net
      loss from discontinuedoperations
    
    $
    (7
    )
    $
    (782
    )
    $
    (76
    )
    $
    (735
    )
  The gains
on sale of discontinued businesses realized in the three and six months ended
December 31, 2004 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)****December****31,**
      **2004**
    
    **June
      30,**
      **2004**Current
      assets:Accounts
      receivable
    
    $
    215
    
    $
    379Inventories
    
    
    177
    
    
    657Consignment
      advances
    
    
    30
    
    
    45Notes
      receivable
    
    
    164
    
    
    186$
    586
    
    $
    1,267Non-current
      assets:Notes
      receivable, net of current portion
    
    $
    103
    
    $
    117$
    103
    
    $
    117Current
      liabilities:Consignors
      payable
    
    $
    1
    
    $
    1Other
      current liabilities
    
    
    63
    
    
    275$
    64
    
    $
    276
 
 8. INCOME
TAXES
  Income
tax expense was provided for at a 40% rate for the three and six months ended
December 31, 2004. This rate reflects the expected federal and state statutory
rate of approximately 39%, adjusted for certain permanent tax differences. In
the three and six months ended December 31, 2003, income tax expense was
provided for at a 36% and 41%, respectively, which rate reflected the expected
federal and state statutory rate, adjusted for certain permanent
differences.
   8
  9. NET
INCOME PER SHARE
  (in
      thousands,
      except
      per share data)
    
    (in
      thousands,
      except
      per share data)**Three
      Months Ended**
      **December
      31,**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Income
      from continuing operations
    
    $
    928
    
    $
    304
    
    $
    2,239
    
    $
    688Loss
      from discontinued operations, net of gains on sales of
      discontinued
      businesses (net of income taxes)
    
    
    (7
    )
    
    (782
    )
    
    (76
    )
    
    (735
    )Net
      income (loss)
    
    $
    921
    
    $
    (478
    )
    $
    2,163
    
    $
    (47
    )Income
      (loss) per basic share:From
      continuing operations
    
    $
    0.15
    
    $
    0.05
    
    $
    0.36
    
    $
    0.11From
      discontinued operations, net of gainson
      sales of
      discontinued
      businesses (net of income taxes)
    
    
    -
    
    
    (0.13
    )
    
    (0.01
    )
    
    (0.12
    )Net
      income (loss)
    
    $
    0.15
    
    $
    (0.08
    )
    $
    0.35
    
    $
    (0.01
    )Net
      income (loss) per diluted share:From
      continuing operations
    
    $
    0.14
    
    $
    0.05
    
    $
    0.34
    
    $
    0.11From
      discontinued operations, net of gainson
      sales of
      discontinued
      businesses (net of income taxes)
    
    
    -
    
    
    (0.12
    )
    
    (0.01
    )
    
    (0.12
    )Net
      income (loss)
    
    $
    0.14
    
    $
    (0.07
    )
    $
    0.33
    
    $
    (0.01
    )Weighted
      average shares outstanding:Basic
    
    
    6,242
    
    
    6,167
    
    
    6,230
    
    
    6,164Effect
      of dilutive shares
    
    
    453
    
    
    224
    
    
    414
    
    
    179Diluted
    
    
    6,695
    
    
    6,391
    
    
    6,644
    
    
    6,343
 
 10. B USINESS
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 three reportable service
segments: coins, sportscards and other high-end collectibles. Services provided
by these segments include authentication, grading, publication and
advertising.
  We
allocate operating expenses to each service segment based upon activity levels.
We do not allocate specific assets to these service segments. All of our sales
and identifiable assets are located in the United States.
   9
   (in
      thousands)
    
    (in
      thousands)**Three
      Months Ended**
      **December
      31,**
    
    **Six
      Months Ended**
      **December
      31,**Net
      revenues from external customers
    
    **2004**
    
    **2003**
    
    **2004**
    
    **2003**Coins
    
    $
    5,493
    
    $
    3,692
    
    $
    11,101
    
    $
    7,582Sportscards
    
    
    1,976
    
    
    1,674
    
    
    4,023
    
    
    3,431Other
    
    
    513
    
    
    387
    
    
    1,053
    
    
    752Total
      revenue
    
    
    7,982
    
    
    5,753
    
    
    16,177
    
    
    11,765Operating
      income(loss)
      before unallocated expensesCoins
    
    $
    2,931
    
    $
    1,603
    
    $
    5,758
    
    $
    3,556Sportscards
    
    
    300
    
    
    334
    
    
    638
    
    
    489Other
    
    
    (149
    )
    
    (52
    )
    
    (240
    )
    
    (86
    )Total
    
    
    3,082
    
    
    1,885
    
    
    6,156
    
    
    3,959Legal
      settlement
    
    
    (500
    )
    
    -
    
    
    (500
    )
    
    -Unallocated
      operating expenses
    
    
    (1,138
    )
    
    (1,406
    )
    
    (2,087
    )
    
    (2,783
    )Consolidated
      operating income
    
    $
    1,444
    
    $
    479
    
    $
    3,569
    
    $
    1,176
 
  11. COMMITMENT
AND CONTINGENCIES
 
 The Company is named,
from time to time, as a defendant in lawsuits that arise in the ordinary course
of its business. Management of the Company believes
 that none of those
lawsuits currently pending against it is likely to have a material adverse
effect on the Company.
  12. SUBSEQUENT
EVENTS
 
 As
previously reported, the Company was named as a co-defendant in a lawsuit
brought by Real Legends, Inc. (Plaintiff), against When It Was a Game (“WIWAG”),
a sports card dealer. In that lawsuit Plaintiff was seeking alleged damages to
its business of $4 million, alleged to have arisen out of actions taken by
WIWAG, together with punitive damages. Plaintiff also alleged that the Company
was liable for those damages, because a Company employee had introduced WIWAG to
Plaintiff.
  On
January 26, 2005, the Company and Plaintiff settled that lawsuit. Pursuant to
the settlement, all claims against the Company will be released by Plaintiff and
the Company will pay Plaintiff the sum of $600,000 on or before February 23,
2005. The net cost of the settlement to the Company, which is $500,000 because
$100,000 of the settlement payment will be reimbursed by one of the Company’s
insurers, has been recorded as part of operating expenses in the Company’s
condensed consolidated statements of operations for the three and six months
ended December 31, 2004.
   On
January 19, 2005, the Company filed a registration statement for a firmly
underwritten public offering of a total of 3 million shares of its common stock,
of which 1,909,440 shares are being offered to the public by the Company and the
remaining shares are being offered by David G. Hall and Van D. Simmons. Messrs.
Hall and Simmons, who founded the Company in 1986, are directors of the Company
and Mr. Hall also is the Company’s President and Chief Operating Officer.
Assuming that the offering is successfully completed and that the shares are
sold in that offering at $18.50 per share, the Company expects that it would
receive net proceeds of approximately $32,700,000, after deducting the
anticipated underwriting discount and estimated offering expenses. The Company
will not receive any of the net proceeds from the sale of shares being offered
by Messrs. Hall and Simmons.
   
 10
   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 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 information about their expected future
financial performance so long as they provide meaningful, cautionary statements
identifying important factors that could cause actual results in the future to
differ from those set forth in its forward looking statements. 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 future financial condition or as to trends
in our business or 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 you are urged to read those sections of this Report in
their entirety. On January 19, 2005, we filed a Registration Statement on Form
S-3 (File No. 333-122129) with the SEC. You should also review the Section of
that Registration Statement entitled “Risk Factors” which contains additional
information regarding risks and uncertainties that could adversely affect our
future financial performance
  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.
  **Our Business**
  We
provide authentication and grading services
and other services to dealers and collectors of high value collectible coins,
sportscards, autographs and stamps, the market values of which can range from
$200 to over $1 million due principally to their rarity, age or association with
famous individuals or historical events and depending on their authenticity and
state of preservation, or quality. We believe that, because our authentication
and grading services provide independent confirmation to dealers and collectors
of the authenticity and quality of high value collectibles, we are able to
enhance their marketability and, thereby, provide increased liquidity to the
dealers and collectors that own, and buy and sell, these types of collectibles.
  We
principally generate revenues from the fees paid by dealers and collectors for
our authentication and grading services. To a much lesser extent, we generate
revenues from sales of (i) advertising on our websites; printed
publications and collectibles price guides and advertising in such publications;
(ii) historical data and information about the collectibles that we have
authenticated or graded, and (iii) memberships in our collectors clubs,
which entitle subscribers to receive authentication and grading services and
access to our collectibles publications and historical data.
  The
following table provides information regarding the respective numbers of coins,
sportscards, autographs and stamps that we authenticated or graded in the three
and three and six-month periods ended December 31, 2004 and 2003, and their
values as estimated by the dealers and collectors who submitted them to us for
authentication and grading.
  **Units
      Processed**
      **Three
      Months Ended December 31,**
    
    **Estimated
      Value (000)**
      **Three
      Months Ended December 31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Coins
    
    
    421,000
    
    
    61
    %
    
    285,000
    
    
    53
    %
    $
    275,066
    
    
    91
    %
    $
    183,805
    
    
    89
    %Sportcards
    
    
    253,000
    
    
    36
    %
    
    235,000
    
    
    44
    %
    
    14,954
    
    
    5
    %
    
    14,860
    
    
    7
    %Autographs
    
    
    17,000
    
    
    2
    %
    
    14,000
    
    
    2
    %
    
    7,191
    
    
    2
    %
    
    6,384
    
    
    3
    %Stamps
    
    
    7,000
    
    
    1
    %
    
    3,000
    
    
    1
    %
    
    5,797
    
    
    2
    %
    
    2,585
    
    
    1
    %Total
    
    
    698,000
    
    
    100
    %
    
    537,000
    
    
    100
    %
    $
    303,008
    
    
    100
    %
    $
    207,634
    
    
    100
    %
 
  11
  
 **Units
      Processed**
      **Six
      Months Ended December 31,**
    
    **Estimated
      Value (000)**
      **Six
      Months Ended December 31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Coins
    
    
    792,000
    
    
    58
    %
    
    567,000
    
    
    52
    %
    $
    576,221
    
    
    90
    %
    $
    397,126
    
    
    89
    %Sportcards
    
    
    518,000
    
    
    38
    %
    
    488,000
    
    
    45
    %
    
    31,879
    
    
    5
    %
    
    34,215
    
    
    8
    %Autographs
    
    
    39,000
    
    
    3
    %
    
    23,000
    
    
    2
    %
    
    16,958
    
    
    3
    %
    
    10,488
    
    
    2
    %Stamps
    
    
    12,000
    
    
    1
    %
    
    8,000
    
    
    1
    %
    
    10,528
    
    
    2
    %
    
    6,788
    
    
    1
    %Total
    
    
    1,361,000
    
    
    100
    %
    
    1,086,000
    
    
    100
    %
    $
    635,586
    
    
    100
    %
    $
    448,617
    
    
    100
    %
  During
the period from 1999 through the latter part of fiscal 2004, we also were
engaged in the business of marketing and selling collectible coins, sportscards
and sports entertainment and historical memorabilia. Most of those sales were
made at multi-venue auctions that were conducted by our collectibles sales
divisions. We also sold collectible coins, at retail, by direct sales
methods.
  At the
authorization of our Board of Directors, in December 2003 we adopted a plan to
focus our financial and managerial resources and collectibles expertise on the
operation and growth of our authentication and grading and other collectibles
service businesses, and to divest our collectibles auctions and direct sales
businesses.
  Pursuant
to that plan, during fiscal 2004 we sold our collectibles auction businesses and
terminated our direct sales collectible coins business. However, we retained the
collectibles inventories and the outstanding accounts receivables of those
businesses, substantially all of which had been liquidated by December 31,
2004.
  In
accordance with Statement of Financial Accounting Standard (“SFAS”) 144, the
assets and related liabilities of the collectible sales businesses have been
classified as held for sale, their related operating results have been
classified as discontinued operations.
  As a
result of our divestiture of our collectibles auctions and sales businesses, the
discussion that follows focuses almost entirely on our authentication and
grading businesses, which comprise our continuing operations.
  **Critical Accounting Policies and Estimates**
  *General* . In
accordance with accounting principles generally accepted in the United States of
America (“GAAP”), we record certain assets at the lower of cost or fair value.
In determining the fair value of certain of our assets, principally inventories,
we must make judgments, estimates and assumptions regarding circumstances or
trends that could affect the value of those assets, such as economic conditions
or trends in those conditions that could impact our ability to realize the
values of our inventories in future periods. Those judgments, estimates and
assumptions are made based on current information available to us at that time.
Many of those conditions, trends and circumstances, however, are outside of our
control and, if changes were to occur in the events, trends or circumstances on
which our judgments or estimates were based, or unanticipated events were to
occur, we may be required under GAAP to adjust our earlier estimates that are
affected by those changes. Changes in such estimates may require that we reduce
the carrying value of the affected assets on our balance sheet (which are
commonly referred to as “write-downs” of the assets involved).
  It is our
practice to establish reserves or allowances to record such downward adjustments
or “write-downs” in the carrying value of assets such as accounts receivable and
inventory. Such write-downs are recorded as charges to income or increases in
expense in our statement of operations in the periods when those reserves or
allowances are established or increased to take account of changed conditions or
events. As a result, our judgments, estimates and assumptions about future
events, and changes in the conditions, events or trends upon which those
estimates and judgments were based, can and will affect not only the amounts at
which we record those assets on our balance sheet, but also our results of
operations.
  The
decisions as to the timing of adjustments or write-downs of this nature also
require subjective evaluations or assessments about the effects and duration of
events or changes in circumstances. For example, it is difficult to predict
whether events, such as occurred on September 11, 2001, or increases in interest
rates or economic slowdowns, will have short or longer term consequences for our
business, and it is not uncommon for it to take some time after the occurrence
of an event or the onset of changes in economic circumstances for their full
effects to be measured. Therefore, management makes such estimates based upon
the information available at that time and reevaluates and adjusts its reserves
and allowances for potential write-downs on a quarterly basis.
   12
  Under
GAAP, businesses also must make estimates or judgments regarding the periods
during which, and also regarding the amounts at which, sales are recorded. Those
estimates and judgments will depend on a number of factors, including whether
customers are granted rights to return the products or reject or adjust the
payment for the services provided to them (return rights). As a general rule,
GAAP will require a business that grants its customers return rights to
establish a reserve or allowance for product returns by means of a reduction in
the amount at which its sales are recorded, based primarily on the nature,
extent and duration of those rights and its historical return
experience.
  In making
our estimates and assumptions, we follow GAAP in order to enable us to make fair
and consistent estimates of the fair value of assets and to establish adequate
reserves or allowances for possible write-downs in their carrying values. Set
forth below is a summary of the accounting policies that we believe are material
to an understanding of our financial condition and results of
operations.
  *Revenue
Recognition Policies* . We
record revenue at the time of shipment of the graded collectible to the
customer. Our authentication and grading customers generally prepay our
authentication and grading fees when they submit their collectibles to us for
authentication and grading. We record those prepayments as deferred revenue
until their graded collectibles are shipped back to them. At that time, we
record the revenue from the authentication and grading services we have
performed for the customer and deduct this amount from deferred
revenue.
  *Accounts
Receivable and the Allowance for Doubtful Accounts.* In the
normal course of business, we extend payment terms to many of the larger, more
creditworthy collectibles dealers who submit collectibles to us for
authentication and grading on a recurring basis. We regularly review their
accounts, estimate the amount of, and establish an allowance for, uncollectible
amounts in each quarterly period. The amount of that allowance is based on
several factors, including the age and extent of significant past due accounts,
and economic conditions or trends that may affect the ability of account debtors
to pay their accounts receivable balances. Estimates of uncollectible amounts
are reviewed each quarter and, based on that review, are revised to reflect
changed circumstances or conditions in the quarterly period they become known.
For example, if the financial condition of certain dealers or economic
conditions were to deteriorate, adversely affecting their ability to make
payments on their accounts, increases in the allowance may be required. Since
the allowance is created by recording a charge against income that is recorded
in general and administrative expenses, an increase in the allowance will cause
a decline in our operating results in the period when the increase is
recorded.
  *Inventory
Valuation Reserve* . Our
collectibles inventories are valued at the lower of cost or market and have been
reduced by an inventory valuation allowance to provide for declines in the value
of those inventories. The amount of the allowance is determined on the basis of
market knowledge, historical experience and estimates concerning future economic
conditions that may impact the sales values of our collectibles inventories.
Additionally, due to the relative uniqueness of some of the collectibles
included in our collectibles inventory, their valuation often involves judgments
that are more subjective than the judgments involved in valuing more
standardized products sold by other businesses. If events or circumstances, such
as changes in economic conditions, occur that we believe will make it more
difficult, or will cause us to reduce the prices at which we will be able, to
sell the collectibles, it may become necessary to increase the allowance.
Increases in this allowance will cause a decline in operating results, because
such increases are recorded by charges against income.
  *Grading
Warranty Costs* . We
offer a warranty covering the coins and sportscards we authenticate and grade.
Under the warranty, if any coin or sportscard that was previously graded by us
is later submitted to us for re-grading and either (i) receives a lower grade
upon that resubmittal or (ii) is determined not to have been authentic, we will
offer to purchase the coin or sportscard 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 coin or sportscard, upon resubmittal to us, is not in
the same tamper resistant clear plastic holder in which it was placed at the
time we last graded it or shows signs of tampering. We accrue for estimated
warranty costs based on historical trends and related experience. To date our
reserves have proved to be adequate. However, if warranty claims were to
increase in relation to historical trends and experience, we would be required
to increase our warranty reserves and incur additional charges that would
adversely affect our results of operations in those periods during which the
warranty reserve is increased.
   13
  **Factors That Can Affect our Financial Position and Operating
Results**
  *Factors
that Can Affect our Revenues and Cash Flows* . The
provision of authentication and grading services has provided relatively stable
and predictable cash flows for us, as the fees for most of the authentication
and grading submissions we receive are prepaid. In the six months ended December
31, 2004 and 2003, respectively, we generated cash of $420,000 (which is net of
investments of $4,125,000 in short-term investments, which had maturities
greater than 90 days when purchased) and $1,102,000, respectively, from our
continuing operations.
  Additionally,
during the six months ended December 31, 2004, we generated cash of $1,476,000
from the sales of our collectibles sales businesses and the liquidation of the
inventories and accounts receivable of those businesses. As a result, at
December 31, 2004, the remaining assets of those businesses, which we are in the
process of liquidating, totaled approximately $689,000, as compared to
$1,384,000 at June 30, 2004.
  *Factors
Affecting our Gross Profit Margins* . The
gross profit margins on authentication and grading submissions are primarily
affected by the mix of collectibles submitted for grading (i) between coins
and sportscards and (ii) between vintage or “classic” coins and
sportscards, on the one hand, and modern coins and sportscards, on the other
hand. Generally, the prices for authentication and grading of collectible coins
are higher than those charged for the grading of sportscards, autographs or
stamps. In addition, our fees for authentication and grading of coins and
sportscards vary depending on the “turn-around” time requested by our customers,
because we charge higher fees for faster service times. Since, as a general
rule, customers request faster turn-around times for vintage or classic coins
and sportscards than they do for modern submissions, the mix of submissions
between vintage and modern collectibles also affects our profit
margin.
  *Impact
of Economic Conditions on Financial Performance* . We
generate substantially all of our revenues from the collectibles market.
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 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. We believe that the recent
strengthening of the economy in the United States, together with the recent
weakening of the U.S. Dollar and an increased demand for gold and other precious
metals contributed to the increase in our authentication and grading revenues
during the six months ended December 31, 2004.
   14
  **Results of Operations**
  The
following table sets forth certain financial data, expressed as a percentage of
net revenues, derived from our statements of operations for the respective
periods indicated below:
  **Three
      Months Ended**
      **December
      31**
    
    **Six
      Months Ended December 31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Net
      revenues
    
    
    100.0
    %
    
    100.0
    %
    
    100.0
    %
    
    100.0
    %Cost
      of revenues
    
    
    37.6
    %
    
    40.8
    %
    
    36.0
    %
    
    41.6
    %Gross
      profit
    
    
    62.4
    %
    
    59.2
    %
    
    64.0
    %
    
    58.4
    %Operating
      expenses:Selling
      and marketing expenses
    
    
    9.4
    %
    
    12.0
    %
    
    10.5
    %
    
    13.0
    %General
      and administrative expenses
    
    
    28.7
    %
    
    38.9
    %
    
    28.3
    %
    
    35.4
    %Settlement
      of lawsuit
    
    
    6.2
    %
    
    -
    
    
    3.1
    %
    
    -Total
      operating expenses
    
    
    44.3
    %
    
    50.9
    %
    
    41.9
    %
    
    48.4
    %Operating
      income
    
    
    18.1
    %
    
    8.3
    %
    
    22.1
    %
    
    10.0
    %Interest
      income, net
    
    
    1.4
    %
    
    0.1
    %
    
    1.0
    %
    
    0.1
    %Other
      expenses
    
    
    -
    
    
    (0.2
    %)
    
    -
    
    
    (0.2
    %)Income
      before provision for income taxes
    
    
    19.5
    %
    
    8.2
    %
    
    23.1
    %
    
    9.9
    %Provision
      for income taxes
    
    
    (7.9
    %)
    
    (2.9
    %)
    
    (9.3
    %)
    
    (4.1
    %)Income
      from continuing operations after income taxes
    
    
    11.6
    %
    
    5.3
    %
    
    13.8
    %
    
    5.8
    %Loss
      from discontinued operations, net of gain on sales
      of
      discontinued businesses (net of income taxes)
    
    
    (0.1
    %)
    
    (13.6
    %)
    
    (0.5
    %)
    
    (6.2
    %)Net
      income (loss)
    
    
    11.5
    %
    
    (8.3
    %)
    
    13.3
    %
    
    (0.4
    %)
  *Net
Revenues*
  Net
revenues consist primarily of fees generated from the authentication and grading
of high value coins, sportscards, autographs and stamps and, to a much lesser
extent, revenues from the publication of collectibles magazines and the sale of
advertising for placement on our websites and in our magazines. Net revenues are
determined net of discounts and allowances.
  The
following table sets forth information regarding the net revenues attributable
to the authentication and grading of coins, sportscards and other collectibles
(principally autographs and stamps), respectively, in the three and six months
ended December 31, 2004 and 2003:
  **Three
      Months Ended December 31,**
    
    **Percentage**
      **Increase****2004**
    
    **2003**
    
    **2004
      over 2003****Amount**
    
    **%
      of Net Revenues**
    
    **Amount**
    
    **%
      of Net Revenues**Coins
    
    $
    5,493,000
    
    
    68.8
    %
    $
    3,692,000
    
    
    64.2
    %
    
    48.8
    %Sportscards
    
    
    1,976,000
    
    
    24.8
    %
    
    1,674,000
    
    
    29.1
    %
    
    18.0
    %Other
      collectibles
    
    
    513,000
    
    
    6.4
    %
    
    387,000
    
    
    6.7
    %
    
    32.6
    %Net
      revenues
    
    $
    7,982,000
    
    
    100.0
    %
    $
    5,753,000
    
    
    100.0
    %
    
    38.7
    %
 
 **Six
      Months Ended December 31,**
    
    **Percentage**
      **Increase****2004**
    
    **2003**
    
    **2004
      over 2003****Amount**
    
    **%
      of Net Revenues**
    
    **Amount**
    
    **%
      of Net Revenues**Coins
    
    $
    11,101,000
    
    
    68.6
    %
    $
    7,582,000
    
    
    64.4
    %
    
    46.4
    %Sportscards
    
    
    4,023,000
    
    
    24.9
    %
    
    3,431,000
    
    
    29.2
    %
    
    17.3
    %Other
      collectibles
    
    
    1,053,000
    
    
    6.5
    %
    
    752,000
    
    
    6.4
    %
    
    40.0
    %Net
      revenues
    
    $
    16,177,000
    
    
    100.0
    %
    $
    11,765,000
    
    
    100.0
    %
    
    37.5
    %
   15
 The
increase in net revenues in the second quarter of this year, as compared to the
second quarter of last year, was primarily attributable to a 30% increase in the
number of collectibles authenticated and graded in the second quarter of this
year, compared to the second quarter of last year. For the six months ended
December 31, 2004, the increase in net revenues was primarily attributable to a
25% increase in the number of collectibles authenticated and graded in the six
months ended December 31, 2004, compared to the same period of last year. Also
contributing to those increases in revenues were increases in the average
service fee paid for the authentication and grading of collectibles and in
revenues from sales of advertising and collectors club memberships, in both the
three and six months ended December 31, 2004, as compared to the same periods of
the prior year. The increase in average grading fees was attributable to
(i) the increase in coin authentication grading submissions, the fees for
which are higher than for the grading of sportscards and other collectibles,
(ii) an increase in the coin authentication and grading submissions for
which customers requested faster turn around times for which our fees are higher
than for other levels of service. As a result, while coins represented 61% of
the number of collectibles authenticated and graded in the second quarter this
year, coins authentication and grading accounted for 69% of our net revenues in
that quarter, as compared to 53% of the number of collectibles we authenticated
and graded, and 64% of the net revenues that we generated, in the three months
ended December 31, 2003. For the six months ended December 31, 2004, coins
represented 58% of the number of collectibles that we authenticated and graded,
and 69% of our net revenues, as compared to 52% of the number of collectibles
that we authenticated and graded and 64% of the net revenues that we generated
in the six months ended December 31, 2003.
  We
believe that the increase in the demand for our coin grading services was
largely attributable to two factors: (i) an increase in purchases and sales
of collectible and gold bullion coins by investors, which we believe was due in
large part to a shift by investors of some of their funds from marketable
securities to tangible assets in response to continuing economic uncertainties
and volatility in the stock markets, and (ii) new marketing programs that we
initiated in the second half of fiscal 2004.
  *Gross
Profit*
  Gross
profit is calculated by subtracting the cost of revenues from net revenues. Cost
of revenues primarily consist of labor to grade and authenticate coins and
sportscards, production and printing costs, credit cards fees, warranty expense
and occupancy, security and insurance costs that directly relate to providing
authentication and grading services. Gross profit margin is gross profit stated
as a percent of net revenues.
  Set forth
below is information regarding our gross profits in the quarters and six-month
periods ended December 31, 2004 and 2003.
  **Three
      Months Ended**
      **December
      31**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Gross
      profit
    
    $
    4,984,000
    
    $
    3,404,000
    
    $
    10,353,000
    
    $
    6,867,000Gross
      profit margin
    
    
    62.4
    %
    
    59.2
    %
    
    64.0
    %
    
    58.4
    %
  The
increases in the gross profit margin in the three and six months ended December
31, 2004, compared with the gross profit margins in same periods of the prior
year, were primarily attributable to: (i) the increase in coin authentication
and grading revenues, on which we realize higher margins than on submissions of
other collectibles for authentication and grading; (ii) an overall increase in
net revenues (described above), which caused the fixed elements of our costs of
revenues to represent a lower percentage of total revenues in the three and six
months ended December 31, 2004, as compared to the three and six months ended
December 31, 2003; and (iii) increased sales of website and magazine advertising
and collectors club memberships, than in the corresponding period of the prior
year.
   16
  *Selling
and Marketing Expenses*
  Selling
and marketing expenses primarily 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 and six-month periods ended December 31, 2004
and 2003.
  **Three
      Months Ended**
      **December
      31**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Selling
      and marketing expenses
    
    $
    748,000
    
    $
    690,000
    
    $
    1,705,000
    
    $
    1,528,000Percent
      of net revenue
    
    
    9.4
    %
    
    12.0
    %
    
    10.5
    %
    
    13.0
    %
  The
increases in the dollar amounts of selling and marketing expenses in the three
and six months ended December 31, 2004, compared to the same respective periods
of 2003, were primarily attributable to increases in general marketing and
trade-show activities. Notwithstanding those increases, however, as a percentage
of net revenues, selling and marketing expenses decreased from 12.0% of net
revenues in the quarter ended December 31, 2003 to 9.4% in the quarter ended
December 31, 2004, and from 13.0% of net revenues in the six months ended
December 31, 2003 to 10.5% in the six months ended December 31, 2004, which
indicates that we were able to increase authentication and grading submissions
and sales of advertising without significantly increasing our selling and
marketing expenses.
  *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**
      **December
      31**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**General
      and administrative expenses
    
    $
    2,292,000
    
    $
    2,235,000
    
    $
    4,579,000
    
    $
    4,163,000Percent
      of net revenues
    
    
    28.7
    %
    
    38.9
    %
    
    28.3
    %
    
    35.4
    %
  Although,
as indicated in the table above, G&A expenses increased by $57,000 in the
quarter ended December 31, 2004, as compared to the same quarter last year, and
$416,000 in the six months ended December 31, 2004, compared to the same period
of 2003, such expenses did not increase at the same rate as did net
revenues,  due to
improvements in operating efficiencies and staff reductions we were able to make
as a result of the disposition of our collectibles sales businesses. Therefore,
as a percentage of net revenues, G&A expenses declined to 28.7% in the three
months ended December 31, 2004 from 38.9% for the three months ended December
31, 2003 and to 28.3% for the six months ended December 31, 2004, compared with
35.4% for the same period in 2003.
  *Settlement
of Lawsuit*
  As
previously reported, we were named as a co-defendant in a legal action brought
in the Superior Court of California, County of San Diego, by Real Legends, Inc.,
a seller of sports cards (plaintiff) against When It Was a Game (“WIWAG”), a
sports card dealer that consigned sports cards to plaintiff. In the action,
plaintiff was seeking $4 million, together with punitive damages, alleged to
have been sustained by it as a result of certain actions of WIWAG. Plaintiff
also claimed that, although the Company was not involved in any of WIWAG’s
activities, the Company was nevertheless responsible for WIWAG’s actions
because, according to plaintiff’s allegations, WIWAG was introduced to plaintiff
by an employee of the Company who knew of prior incidents of questionable
behavior by WIWAG; allegations that the Company denied.
  In
January 2005, without any admission of wrongdoing, the Company entered into a
settlement with plaintiff. Pursuant to that settlement, all of the claims
asserted against the Company by plaintiff were settled and the litigation was
terminated, with prejudice, in exchange for which the Company has agreed to make
a settlement payment to plaintiff of $600,000, of which $100,000 will be paid,
or reimbursed to the Company, by one of its insurers. As a result, the net cost
to us of the settlement will be $500,000, which represents 6.2% and 3.1%,
respectively, of our net revenues in the quarter and six months ended December
31, 2004.
  17
 *Interest
Income, Net*
  **Three
      Months Ended**
      **December
      31**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Interest
      income, net
    
    $
    110,000
    
    $
    7,000
    
    $
    174,000
    
    $
    14,000Percent
      of net revenue
    
    
    1.4
    %
    
    0.1
    %
    
    1.0
    %
    
    0.1
    %
  The
increases in interest income, net in the three and six months ended December 31,
2004, as compared to the corresponding periods of the prior year, resulted
primarily from increases in our cash balances that were attributable to the cash
generated from the disposition of our collectibles sales businesses and the
increases in income generated by our authentication and grading businesses. Also
contributing to the increase in interest income in the quarter ended December
31, 2004, was an increase in the rates at which we earn interest on our cash
balances and the interest earned on the short term advances that we made to one
of our customers.
  *Income
Tax Expense*
  **Three
      Months Ended**
      **December
      31**
    
    **Six
      Months Ended**
      **December
      31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Income
      tax expense
    
    $
    628,000
    
    $
    170,000
    
    $
    1,506,000
    
    $
    483,000
  The
income tax expense recorded in the three and six
months ended December 31, 2004 was calculated based on our expected combined
federal and state effective income tax rate of approximately 40% for fiscal year
2004, compared to 36% and 41%, respectively, for the comparable periods of the
prior year.
  *Discontinued
Operations*
  **Three
      Months Ended**
      **December
      31**
    
    **Six
      Months Ended December 31,****2004**
    
    **2003**
    
    **2004**
    
    **2003**Loss
      from discontinued operations,net
      of gain on sales of
      discontinued businesses(net
      of income taxes)
    
    $
    7
    
    $
    782
    
    $
    76
    
    $
    735
  The net
loss from discontinued operations in the three and six months ended December 31,
2004 was primarily the result of (i) an increase in inventory reserves for the
remaining collectibles inventories that we had retained when we sold our
discontinued collectibles auctions and direct sales businesses, and (ii) costs
incurred in collecting their remaining accounts receivable. Those increased
costs were partially offset by gains realized in both
the three and six months ended December 31, 2004, attributable to contingent
consideration earned from the sale of one of those businesses.
  **Liquidity and Capital Resources**
  At December
31, 2004, we had cash and cash equivalents of $21,739,000 and short-term
investments of $4,125,000, as compared to cash and cash equivalents of
$21,454,000 at June 30, 2004. Contributing to that increase were (i) the
increases in operating income that were primarily attributable to the increases
in authentication and grading revenues, (ii) cash payments of contingent
consideration, received in the six months ended December 31, 2004, from the
sales of our collectibles sales businesses in fiscal 2004, and (iii) cash from
collections of their accounts receivables and sales of their collectibles
inventories, which we chose to retain and liquidate ourselves, rather than sell
to the buyers of those businesses.
  Historically,
we have relied on internally-generated funds, rather than borrowings, as our
primary source of funds to support our grading operations. We expect our
authentication and grading services to provide us with relatively stable and
predictable cash flows 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) we are able to closely monitor the
overall volume of authentication and grading submissions and make adjustments to
our operating expenses to the extent required to maintain positive cash flow
from operations.
  18
 During
the six months ended December 31, 2004, continuing operations provided net cash
of $420,000 (which is net of an investment of $4,125,000 in short-term
investments with maturities greater than 90 days at the date of purchase). This
compares to net cash provided by continuing operations of $1,102,000 in the six
months ended December 31, 2003.
  Net cash
used in investing activities was $739,000 for the six months ended December 31,
2004 and consisted primarily of cash received from the sale of our discontinued
businesses of $1,069,000, offset by capital expenditures of $112,000 and
advances, net of collections, on a note receivable of $1,696,000.
  In the
six months ended December 31, 2004, financing activities provided net cash of
$197,000, which consisted of proceeds from the exercise of employee stock
options.
  At June
30, 2004, we had the following outstanding obligations under operating leases,
net of sublease income for years ending June 30:
  2005
    
    $
    906,0002006
    
    
    908,0002007
    
    
    925,0002008
    
    
    908,0002009
    
    
    905,000Thereafter
    
    
    324,000$
    4,876,000
  With the
exception of those obligations, we do not have any material
financial obligations, such as long-term debt, capital lease, or purchase
obligations.
  However,
we are currently seeking a line of credit from a bank or other lending
institution primarily to enable us to fund a dealer financing program pursuant
to which we would provide short term loans and credit lines to coin and other
collectibles dealers as a means of generating additional interest income and
also providing an additional incentive for large collectibles dealers to do
business with us. We anticipate that any such loans that we might make generally
would be secured by collectibles submitted to us for authentication and grading.
There is no assurance that we will be successful in obtaining such a line of
credit.
  We also
may use cash resources to make acquisitions of or to commence other
authentication and grading businesses, if we identify opportunities to do so
that we believe are attractive.
  We
recently filed a registration statement with the SEC for an unwritten public
offering of a total of 3 million shares of our common stock, of which we propose
to offer a total of 1,909,440 shares. If that offering is successfully
completed, we expect that the net proceeds to us, after the underwriting
discount and offering expenses, will be approximately $33 million, assuming a
public offering price of $18.80 per share.
  We plan
to use our cash resources, including the net proceeds of the public offering,
assuming it is successfully completed, to (i) implement new and expand
existing marketing programs, (ii) introduce new services for our customers;
(iii) acquire or start other high value collectibles or high value asset
authentication and grading businesses and (iv) fund working capital
requirements, and for other corporate purposes.
  We
believe that our existing cash, cash equivalent and short-term investments and
internally generated funds, even without the proceeds of the public offering,
will be sufficient to fund our cash requirements for at least the next twelve
months.
  **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 markets in which we operate, such as a possible decline in
      the popularity of some high-value collectibles, either of which could
      reduce the volume of authentication and grading submissions and,
      therefore, the grading fees we generate;
  19
 ·
    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 conditions that could
      result in declines in collectibles submissions generally or, more
      particularly, in collectible coin submissions that would, in turn, result
      in reductions in our revenues and income;
  ·
    our
      dependence on certain key executives and collectibles 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;
  ·
    increased
      competition from other collectibles’ authentication and grading companies
      that could result in reductions in collectibles submissions 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 service offerings and business initiatives, such as
      autograph, stamp and paper currency grading services and a proposed new
      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
      risk that our strategy to exit the collectibles sales business and focus
      substantially all of our resources on our authentication and grading
      businesses will not be successful in enabling us to improve our
      profitability over the longer term or to grow our existing businesses or
      acquire or commence authentication and grading businesses outside our
      current markets;
  ·
    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 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, 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 the Section entitled “Risk Factors” in our Registration Statement on Form S-3
(File No. 333-122129), which we filed with the Securities and Exchange
Commission on January 19, 2005.
  **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 balances that we maintain, we are exposed to risk of changes in
short-term interest rates. At December 31, 2004, we had $25,864,000 in cash,
cash equivalents and short-term investments, primarily invested in a Money
Market Fund and high-grade commercial paper. Reductions in short-term interest
rates could result in reductions in the amount of that income. However, the
impact on our operating results of such changes is not expected to be
material.
  The
Company has no activities that would expose it to foreign currency exchange rate
risk or commodity price risks.
   20
  **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) are designed to provide
reasonable assurance that information required to be disclosed in our reports
filed under that Act (the Exchange Act), such as this 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 the Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures in effect as of December 31, 2004.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of December 31, 2004, 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 December 31, 2004, that has materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  
   21
  **PART
II - OTHER INFORMATION**
 
 **ITEM 1.**  **LEGAL
PROCEEDINGS**
  Real
Legends, Inc. v. When It Was a Game, et al . As was
previously reported in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2004, we were named as a co-defendant in this legal action, which was
brought in the Superior Court of California, County of San Diego, by Real
Legends, Inc., a seller of sports cards (Plaintiff) against When It Was a Game
(“WIWAG”), a sports card dealer that consigned sports cards to Plaintiff. In the
action, Plaintiff sought compensatory damages of $4 million, alleged to have
been sustained by it as a result of certain actions of WIWAG that, according to
Plaintiff, ruined its business, together with punitive damages. Plaintiff also
claimed that, although our Company was not involved in any of WIWAG’s
activities, our Company was nevertheless responsible for WIWAG’s actions
because, according to Plaintiff’s allegations, WIWAG was introduced to Plaintiff
by an employee of the Company who knew of, but failed to disclose, prior
incidents of questionable behavior by WIWAG; allegations that the Company
denied.
  In
January 2005, without any admission of wrongdoing, the Company entered into a
settlement with Plaintiff. Pursuant to that settlement, all of the claims
asserted against the Company by Plaintiff were settled and the litigation was
terminated, with prejudice, in exchange for which the Company has agreed to make
a settlement payment to Plaintiff of $600,000, of which $100,000 will be paid,
or reimbursed to the Company, by one of its insurers.
 ****
 **ITEM 4.**  **SUBMISSION
ON MATTERS TO A VOTE OF THE SECURITY HOLDERS**
  Our
Annual Meeting of Stockholders was held on December 6, 2004. The only matter
voted on by stockholders at that Meeting was the election of seven directors to
serve for a term of one year.
  The seven
candidates named below, all of whom were nominated by the Company’s Board of
Directors, were the only candidates nominated for election at the Meeting.
Therefore, the election was uncontested and all seven candidates were elected to
serve on the Company’s Board of Directors for a term that will end at the next
Annual Meeting of Stockholders and until their respective successors are
elected. Set forth below are the number of votes cast for the election of, and
the number of votes withheld from, each of those seven candidates. As the
election was uncontested, there were no broker non-votes.
  **Nominees**
    
    **Votes
      For**
    
    **Votes
      Withheld**A.
      Clinton Allen
    
    
    4,122,951
    
    
    2,337Deborah
      A. Farrington
    
    
    4,122,951
    
    
    2,337Ben
      A. Frydman
    
    
    3,666,231
    
    
    459,051David
      G. Hall
    
    
    3,665,606
    
    
    459,682Michael
      R. Haynes
    
    
    3,666,231
    
    
    459,053A.
      J. “Bert” Moyer
    
    
    4,122,701
    
    
    2,587Van
      D. Simmons
    
    
    3,666,106
    
    
    459,182
 
   22
 
  **ITEM
6.****EXHIBITS**
  **Exhibits**Exhibit
      10.99
    2005
      Management Bonus PlanExhibit
      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 of Periodic Report Pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002Exhibit
      32.2
    Chief
      Financial Officer Certification of Periodic Report Pursuant to Section 906of
      the Sarbanes-Oxley Act of 2002
 
   23
   
 **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:February
      14, 2005
    
    /s/
      MICHAEL R. HAYNESMichael
      R. HaynesChief
      Executive Officer
 
 
 
 **COLLECTORS
      UNIVERSE, INC.**Date:February
      14, 2005
    
    /s/
      MICHAELJ.
      LEWISMichaelJ.
      LewisChiefFinancial
      Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   S-1
 **INDEX TO EXHIBITS**
 
 
 
 **Number**
    **Description**Exhibit
      10.99
    2005
      Management Bonus PlanExhibit
      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 of Periodic Report Under Section 906of
      the Sarbanes-Oxley Act of 2002Exhibit
      32.2
    Chief
      Financial Officer Certification of Periodic Report Under Section 906
      of
      the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   E-1