**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 March 31, 2007****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 April 25, 2007****Common
                Stock $.001 Par Value**
            **8,463,711**











**COLLECTORS
      UNIVERSE, INC.**


**QUARTERLY
      REPORT ON FORM 10-Q**


**FOR
      THE QUARTER ENDED MARCH 31, 2007**





**TABLE
      OF CONTENTS**








**PART
                I**
            **Financial
                Information**
            **Page**Item
                1.
            Financial
                Statements:Condensed
                Consolidated Balance Sheets as of March 31, 2007and
                June 30, 2006 (unaudited)
            1Condensed
                Consolidated Statements of Operationsfor
                the Three and Nine Months Ended March 31, 2007 and 2006
                (unaudited)
            2Condensed
                Consolidated Statements of Stockholders’ Equity for the Years Ended June
                30, 2005and
                2006
              and
                for the Nine Months
                Ended March 31, 2007 (unaudited)
            3Condensed
                Consolidated Statements of Cash Flowsfor
                the Nine Months Ended March 31, 2007 and 2006
                (unaudited)
            4Notes
                to Condensed Consolidated Financial Statements
                (unaudited)
            6Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            25Forward
                Looking Statements
            25Our
                Business
            25Overview
                of Results of Operation for the Three and Nine Months Ended March 31,
                2007
            26Factors
                That Can Affect Our Financial Position and Operating Results
            27Critical
                Accounting Policies and Estimates
            28Results
                of Operations-Three and Nine Months Ended March
                31, 2007 versusThree
                and Nine Months Ended March 31, 2006
            31Liquidity
                and Capital Resources
            36Recent
                Accounting Pronouncements
            38Risks
                and Uncertainties That Could Affect Our Future Financial
                Performance
            39Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            40Item
                4.
            Controls
                and Procedures
            41**PART
                II**
            **Other
                Information**Item
                1A.
            Risk
                Factors
            42Item
                2.
            Unregistered
                Sales of Securities and Use of
                Proceeds
            42Item
                6.
            Exhibits
            42**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**


(in
      thousands, except per share data)


(unaudited)


**March
                31,**
            
            **June
                30,****2007**
            
            **2006****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            43,075
            
            $
            52,110Accounts
                receivable, net of allowance for doubtful accounts of $67 (March)
                and $37
                (June)
            
            
            1,609
            
            
            1,753Inventories,
                net
            
            
            467
            
            
            437Prepaid
                expenses and other current assets
            
            
            1,397
            
            
            1,010Customer
                notes receivable, net of allowance of $22 (March) and $16
                (June)
            
            
            2,180
            
            
            3,797Deferred
                tax assets
            
            
            1,010
            
            
            1,414Receivables
                from sale of net assets of discontinued operations
            
            
            92
            
            
            196Current
                assets of discontinued operations held for sale
            
            
            54
            
            
            83Total
                current assets
            
            
            49,884
            
            
            60,800Property
                and equipment, net
            
            
            3,920
            
            
            1,897Goodwill
            
            
            15,104
            
            
            9,799Intangible
                assets, net
            
            
            7,249
            
            
            4,674Note
                receivable from sale of discontinued operations
            
            
            252
            
            
            321Deferred
                tax assets
            
            
            810
            
            
            342Other
                assets
            
            
            519
            
            
            388$
            77,738
            
            $
            78,221**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            1,351
            
            $
            907Accrued
                liabilities
            
            
            2,045
            
            
            2,043Accrued
                compensation and benefits
            
            
            1,208
            
            
            1,075Income
                taxes payable
            
            
            5
            
            
            496Deferred
                revenue
            
            
            2,144
            
            
            1,384Current
                liabilities of discontinued operations held for sale
            
            
            7
            
            
            8Total
                current liabilities
            
            
            6,760
            
            
            5,913Deferred
                rent
            
            
            475
            
            
            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; 8,464****issued
                and outstanding at March 31, 2007 and 8,350 (net of treasury shares)
                at
                June 30, 2006
            
            
            9
            
            
            8Additional
                paid-in capital
            
            
            76,451
            
            
            76,909Accumulated
                deficit
            
            
            (5,997
            )
            
            (3,990
            )Treasury
                stock, at cost (125 shares)
            
            
            -
            
            
            (1,021
            )Total
                stockholders' equity
            
            
            70,463
            
            
            71,906$
            77,738
            
            $
            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**
            
            **Nine
                Months Ended****March
                31,**
            
            **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Net
                revenues
            
            $
            11,081
            
            $
            10,022
            
            $
            29,772
            
            $
            26,294Cost
                of revenues
            
            
            5,138
            
            
            4,088
            
            
            13,861
            
            
            10,578Gross
                profit
            
            
            5,943
            
            
            5,934
            
            
            15,911
            
            
            15,716Operating
                expenses:Selling
                and marketing expenses
            
            
            2,411
            
            
            1,378
            
            
            5,106
            
            
            3,386General
                and administrative expenses
            
            
            3,729
            
            
            3,152
            
            
            11,389
            
            
            9,343Amortization
                of intangible assets
            
            
            219
            
            
            102
            
            
            577
            
            
            157Total
                operating expenses
            
            
            6,359
            
            
            4,632
            
            
            17,072
            
            
            12,886Operating
                income (loss)
            
            
            (416
            )
            
            1,302
            
            
            (1,161
            )
            
            2,830Interest
                income, net
            
            
            511
            
            
            588
            
            
            1,624
            
            
            1,738Other
                income
            
            
            2
            
            
            8
            
            
            8
            
            
            24Income
                before income taxes
            
            
            97
            
            
            1,898
            
            
            471
            
            
            4,592Provision
                for income taxes
            
            
            165
            
            
            804
            
            
            336
            
            
            1,965Income
                (loss) from continuing operations
            
            
            (68
            )
            
            1,094
            
            
            135
            
            
            2,627Income
                from discontinued operations, net of gains on sales of
              discontinued
                businesses (net of income taxes)
            
            
            99
            
            
            -
            
            
            190
            
            
            169Net
                income
            
            $
            31
            
            $
            1,094
            
            $
            325
            
            $
            2,796Net
                income per basic share:Income
                (loss) from continuing operations
            
            $
            (0.01
            )
            $
            0.13
            
            $
            0.02
            
            $
            0.31Income
                from discontinued operations, net of gainson
                sales
              of discontinued businesses (net of income taxes)
            
            
            0.01
            
            
            -
            
            
            0.02
            
            
            0.02Net
                income
            
            $
            -
            
            $
            0.13
            
            $
            0.04
            
            $
            0.33Net
                income per diluted share:Income
                (loss) from continuing operations
            
            $
            (0.01
            )
            $
            0.12
            
            $
            0.02
            
            $
            0.30Income
                from discontinued operations, net of gainson
                sales of
              discontinued
                businesses (net of income taxes)
            
            
            0.01
            
            
            -
            
            
            0.02
            
            
            0.02Net
                income
            
            $
            -
            
            $
            0.12
            
            $
            0.04
            
            $
            0.32Weighted
                average shares outstanding:Basic
            
            
            8,381
            
            
            8,485
            
            
            8,346
            
            
            8,486Diluted
            
            
            8,587
            
            
            8,822
            
            
            8,612
            
            
            8,807Dividends
              declared per common share
            
            $
            -
            
            $
            -
            
            $
            0.28
            
            $
            -








See
      accompanying notes to condensed consolidated financial statements.




2


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
      EQUITY**


(in
      thousands)


unaudited


**Common
                Stock**
            
            **Additional**
              **Paid-in**
            
            **Retained
                Earnings**
              **(Accumulated**
            
            **Treasury
                Stock****Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit)**
            
            **Shares**
            
            **Amount**
            
            **Total**Balance
                at June 30, 2004
            
            
            6,338
            
            $
            6
            
            $
            42,215
            
            $
            (11,834
            )
            
            (125
            )
            $
            (1,021
            )
            $
            29,366Issuance
                of common stock inpublic
                offering (net of expenses)
            
            
            2,196
            
            
            2
            
            
            35,655
            
            
            -
            
            
            -
            
            
            -
            
            
            35,657Exercise
                of stock options
            
            
            71
            
            
            1
            
            
            283
            
            
            -
            
            
            -
            
            
            -
            
            
            284Tax
                benefit on exerciseof
                stock options
            
            
            -
            
            
            -
            
            
            338
            
            
            -
            
            
            -
            
            
            -
            
            
            338Issuances
                of stock under stock purchase plan and related compensation
                expense
            
            
            5
            
            
            -
            
            
            103
            
            
            -
            
            
            -
            
            
            -
            
            
            103Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            4,818
            
            
            -
            
            
            -
            
            
            4,818Balance
                at June 30, 2005
            
            
            8,610
            
            
            9
            
            
            78,594
            
            
            (7,016
            )
            
            (125
            )
            
            (1,021
            )
            
            70,566Exercise
                of stock options
            
            
            47
            
            
            -
            
            
            243
            
            
            -
            
            
            -
            
            
            -
            
            
            243Stock-based
                compensation expense
            
            
            -
            
            
            -
            
            
            670
            
            
            -
            
            
            -
            
            
            -
            
            
            670Tax
                benefit on exercise of stock options
            
            
            -
            
            
            -
            
            
            29
            
            
            -
            
            
            -
            
            
            -
            
            
            29Shares
                repurchased and cancelled underthe
                Stock Repurchase Plan
            
            
            (182
            )
            
            (1
            )
            
            (2,627
            )
            
            -
            
            
            -
            
            
            -
            
            
            (2,628
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            3,700
            
            
            -
            
            
            -
            
            
            3,700Dividends
                paid to common stockholders
            
            
            -
            
            
            -
            
            
            -
            
            
            (674
            )
            
            -
            
            
            -
            
            
            (674
            )Balance
                at June 30, 2006
            
            
            8,475
            
            
            8
            
            
            76,909
            
            
            (3,990
            )
            
            (125
            )
            
            (1,021
            )
            
            71,906Exercise
                of stock options
            
            
            147
            
            
            1
            
            
            228
            
            
            -
            
            
            -
            
            
            -
            
            
            229Tax
                benefit on exercise of stock options
            
            
            -
            
            
            -
            
            
            623
            
            
            -
            
            
            -
            
            
            -
            
            
            623Issuances
                of restricted stock and relatedstock-based
                compensation expense
            
            
            39
            
            
            -
            
            
            104
            
            
            -
            
            
            -
            
            
            -
            
            
            104Repurchase
                of common stock
            
            
            (72
            )
            
            -
            
            
            (949
            )
            
            -
            
            
            -
            
            
            -
            
            
            (949
            )Stock-based
                compensation expense-options
            
            
            -
            
            
            -
            
            
            557
            
            
            -
            
            
            -
            
            
            -
            
            
            557Dividends
                paid to common stockholders
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,332
            )
            
            -
            
            
            -
            
            
            (2,332
            )Retirement
                of treasury shares
            
            
            (125
            )
            
            -
            
            
            (1,021
            )
            
            -
            
            
            125
            
            
            1,021
            
            
            -Net
                income for nine monthsended
                March 31, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            325
            
            
            -
            
            
            -
            
            
            325Balance
                at March 31, 2007
            
            
            8,464
            
            $
            9
            
            $
            76,451
            
            $
            (5,997
            )
            
            -
            
            $
            -
            
            $
            70,463








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


3


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


(in
      thousands)


(unaudited)


**Nine
                Months Ended**
              **March
                31,**2007
            
            2006OPERATING
                ACTIVITIES:Net
                income
            
            $
            325
            
            $
            2,796Adjustments
                to reconcile net income to net cash provided by (used in) operating
                activities:Depreciation
                and amortization
            
            
            1,332
            
            
            621Loss
                on disposal of fixed assets
            
            
            -
            
            
            3Loss
                on termination of sublease
            
            
            -
            
            
            83Stock-based
                compensation expense
            
            
            661
            
            
            398Tax
                benefit from exercising of stock options
            
            
            623
            
            
            -Provision
                for bad debts and credits
            
            
            33
            
            
            49Provision
                for inventory write down
            
            
            1
            
            
            47Discontinued
                operations
            
            
            (190
            )
            
            (169
            )Deferred
                income taxes
            
            
            (201
            )
            
            1,485Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            213
            
            
            (32
            )Inventories
            
            
            (21
            )
            
            (46
            )Prepaid
                expenses and other current assets
            
            
            (602
            )
            
            (302
            )Income
                taxes payable
            
            
            (579
            )
            
            610Other
                assets
            
            
            (80
            )
            
            (36
            )Accounts
                payable
            
            
            365
            
            
            (174
            )Accrued
                liabilities
            
            
            (44
            )
            
            -Deferred
                rent and other long-term liabilities
            
            
            74
            
            
            (50
            )Accrued
                compensation and benefits
            
            
            133
            
            
            (343
            )Deferred
                revenue
            
            
            295
            
            
            487Short-term
                investments
            
            
            -
            
            
            (7,602
            )Net
                cash provided by (used in) operating activities
            
            
            2,338
            
            
            (2,175
            )Net
                cash provided by operating activities of discontinued
                businesses
            
            
            65
            
            
            200CASH
                FLOWS FROM INVESTING ACTIVITIES:Capital
                expenditures
            
            
            (2,590
            )
            
            (1,090
            )Purchase
                of businesses, net of cash acquired
            
            
            (6,316
            )
            
            (14,554
            )Advances
                on customer notes receivable
            
            
            (3,052
            )
            
            (3,524
            )Proceeds
                from collection of customer notes receivable
            
            
            4,784
            
            
            1,604Purchase
                of patents and other intangible assets
            
            
            (352
            )
            
            -Capitalized
                software
            
            
            (1,184
            )
            
            (121
            )Cash
                received on sale of discontinued businesses
            
            
            324
            
            
            358Net
                cash used in investing activities
            
            
            (8,386
            )
            
            (17,327
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from exercise of stock options
            
            
            229
            
            
            132Payments
                for retirement of common stock
            
            
            (949
            )
            
            (703
            )Dividends
                paid to common stockholders
            
            
            (2,332
            )
            
            -Net
                cash used in financing activities
            
            
            (3,052
            )
            
            (571
            )Net
                decrease in cash and cash equivalents
            
            
            (9,035
            )
            
            (19,873
            )Cash
                and cash equivalents at beginning of period
            
            
            52,110
            
            
            65,439Cash
                and cash equivalents at end of period
            
            $
            43,075
            
            $
            45,566SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Interest
                paid
            
            $
            15
            
            $
            12Income
                taxes paid
            
            $
            868
            
            $
            93





See
      accompanying notes to condensed consolidated financial
      statements.


4


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


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


(in
      thousands)


(unaudited)








**Nine
                Months Ended**
              **March
                31,**2007
            
            2006SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION (CONTINUED):Effective
                July 14, 2005, the Company acquired CoinFacts.com in a transactionsummarized
                as follows:Goodwill
            
            $
            -
            
            $
            515Purchase
                price
            
            $
            -
            
            $
            515Effective
                September 2, 2005, the Company acquired Certified Coin Exchange
                (CCE)in
                a transaction summarized as follows:Fair
                value of net liabilities assumed
            
            $
            -
            
            $
            (18
            )Deferred
                taxes recognized at acquisition
            
            
            -
            
            
            (379
            )Intangible
                assets
            
            
            -
            
            
            947Fair
                value of CTP, including net assets
            
            
            -
            
            
            600Goodwill
            
            
            -
            
            
            1,200Purchase
                price, net of cash acquired
            
            $
            -
            
            $
            2,350Effective
                November 8, 2005, the Company acquired Gem Certification & Appraisal
                Lab (GCAL)in
                a transaction
              summarized as follows:Fair
                value of net assets acquired
            
            $
            -
            
            $
            119Intangible
                assets
            
            
            -
            
            
            53Goodwill
            
            
            -
            
            
            3,067Purchase
                price, net of cash acquired
            
            $
            -
            
            $
            3,239Effective
                December 22, 2005, the Company acquired the business of Gemprint
                Corporationin
                a transaction
              summarized
                as follows:Fair
                value of net assets acquired
            
            $
            -
            
            $
            96Intangible
                assets
            
            
            -
            
            
            3,444Goodwill
            
            
            1
            
            
            5,021Purchase
                price, net of cash acquired
            
            $
            1
            
            $
            8,561Effective
                July 1, 2006, the Company acquired Expos Unlimited, LLC (Expos) in
                a
                transactionsummarized
                as follows:Fair
                value of net liabilities assumed
            
            $
            (470
            )
            $
            -Intangible
                assets
            
            
            988
            
            
            -Goodwill
            
            
            1,907
            
            
            -Purchase
                price, net of cash acquired
            
            $
            2,425
            
            $
            -Effective
                August 18, 2006, the Company acquired American Gemological Laboratories,
                Inc.(AGL)
                in a transaction
              summarized as follows:Fair
                value of net liabilities assumed
            
            $
            (16
            )
            $
            -Deferred
                tax liability recognized at acquisition
            
            
            (137
            )
            
            -Intangible
                assets
            
            
            646
            
            
            -Goodwill
            
            
            3,397
            
            
            -Purchase
                price, net of cash acquired
            
            $
            3,890
            
            $
            -








See
      accompanying notes to condensed consolidated financial
      statements.


5


**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” or “we” or “us”). All intercompany transactions and accounts have been
      eliminated. In fiscal 2006, we acquired the following businesses, the results
      of
      operations of which have been consolidated into our financial statements from
      their respective dates of acquisition:




Business
            Acquisition
                Date
            Purchase
                PriceCoinFacts.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, we acquired the following businesses, the results
      of operations of which have been consolidated into our financial statements
      from
      their respective dates of acquisition:




Business
            Acquisition
                Date
            Purchase
                PriceExpos
                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, Statements of Operations, Stockholders’ Equity and 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 nine months ended March 31, 2007 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.


6


*Revenue
      Recognition*




Net
      revenues consist primarily of fees generated from the authentication and grading
      of coins, sports cards, autographs, currency, diamonds, colored gemstones and
      stamps. With the acquisition of Expos, we recognize revenues earned from the
      promotion, management and operation of collectibles trade shows and conventions
      in the respective periods that such shows and conventions are conducted.
      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. The Company does not believe there
      has been any impairment of its long-lived assets as of March 31, 2007.




*Stock-Based
      Compensation*




At
      June
      30, 2006, the Company had three 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* .
      During
      the second quarter of fiscal 2007, the three plans in effect at June 30, 2006
      were consolidated into a single plan, the 2006 Equity Incentive Plan (“2006
      Plan”). Pursuant to the 2006 Plan, up to 1,355,000 shares of the Company’s
      common stock may be issued as a result of grants of stock options, restricted
      stock purchase rights, stock appreciation rights and restricted stock, of which
      a total of approximately 423,000 are remaining for future grants.


7


Effective
      July 1, 2005, the Company adopted the provisions of 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 maximum
      contractual life of our stock options is 10 years from the date of grant. The
      following table shows total stock-based compensation expense included in the
      Condensed Consolidated Statements of Operations:




**Three
                Months Ended**
              **March
                31,**
              **(in
                thousands)**
            
            **Nine
                Months Ended**
              **March
                31,**
              **(in
                thousands)****2007**
            
            **2006**
            
            **2007**
            
            **2006**Included
                in:Cost of revenues
            
            $
            77
            
            $
            56
            
            $
            229
            
            $
            168Selling
                and marketing expenses
            
            
            3
            
            
            1
            
            
            6
            
            
            3General
                and administrative expenses(1)
            
            
            161
            
            
            76
            
            
            426
            
            
            227Pre-tax
                stock-based compensation expense
            
            $
            241
            
            $
            133
            
            $
            661
            
            $
            398






(1)
            Includes
                $66,000 and $104,000 in the three and nine months ended March 31,
                2007,
                respectively, and $0 for the three and nine months ended March 31,
                2006
                for amortization of deferred compensation expense related to issuance
                of
                restricted stock (see below).




For
      the
      nine months ended March 31, 2006 and 2007, 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 fiscal year 2006, the Company reviewed its assumptions,
      both current and historical, used in connection with the determination of
      stock-based compensation in accordance with the Black-Scholes option pricing
      model. The expected option term and the resultant volatility percentage and
      the
      risk-free rate assumptions were modified, which resulted in a correcting
      adjustment requiring additional compensation expense in the fourth quarter
      of
      fiscal 2006 of approximately $105,000. The estimated forfeiture rate was
      increased from 4% to 10.5%, and the expected term of options was increased
      to a
      weighted average of 5.0 years from a previous weighted average estimate of
      2.0
      years, both of which we believe were erroneously determined by us. 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.





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 SFAS No. 154, *Accounting
      Changes and Error Corrections* ,
      a
      replacement of APB Opinion No. 20, and SFAS No. 3, we determined that the
      prorata portion of such $105,000 (which was $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.




We
      granted options to purchase 10,000 shares of common stock during the three
      month
      period ended March 31, 2007; whereas, we granted no options during the
      corresponding three months of the prior year. We used the Black-Scholes option
      pricing model to determine the fair value of those option grants using the
      assumptions set forth in the following table (which reflect the adjustments
      described above):




**Three
                Months Ended**
              **March
                31**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Dividend
                yield
            
            
            3.4
            %
            
            -
            
            
            2.5
            %
            
            -Expected
                volatility
            
            
            49.0
            %
            
            -
            
            
            51.1
            %
            
            61.0
            %Risk-free
                interest rate
            
            
            4.7
            %
            
            -
            
            
            4.6
            %
            
            3.9
            %Expected
                lives
            
            
            5.1
                yrs.
            
            
            -
            
            
            5.1
                yrs.
            
            
            5.1
                yrs.







8


Because
      the Company paid its first quarterly dividend of $0.08 per common share in
      the
      fourth quarter of fiscal 2006 and increased the dividend to $0.12 per quarter
      beginning with the third quarter of fiscal year 2007, the Company assumed a
      dividend yield of approximately 2.3% for stock option grants issued in the
      fourth quarter of fiscal year 2006 and assumed 3.4% and 2.5% for the three
      and
      nine months ended March 31, 2007, respectively, based on the current annualized
      dividend of $0.48 per share of common stock.




The
      following table presents information relative to the stock options outstanding
      under all equity option plans as of and for the nine months ended March 31,
      2007. The closing price of our common stock as of March 31, 2007 was
      $14.01.




**Shares**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Remaining Contractual Term**
            
            **Aggregate
                Intrinsic**
              **Value****Options:**Outstanding
                at June 30, 2006
            
            
            889,000
            
            $
            12.65Granted
            
            
            60,000
            
            
            13.66Exercised
            
            
            (14,000
            )
            
            3.87Forfeited
                or cancelled
            
            
            (13,000
            )
            
            15.08Outstanding
                at March 31, 2007
            
            
            922,000
            
            $
            12.82
            
            
            6.64
                yrs.
            
            $
            2,642,000Exercisable
                at March 31, 2007
            
            
            607,000
            
            $
            12.41
            
            
            5.98
                yrs.
            
            $
            2,328,000Unvested
                at March 31, 2007
            
            
            315,000
            
            $
            13.62
            
            
            7.91
                yrs.
            
            $
            314,000Expect
                to vest at March 31, 2007
            
            
            247,000
            
            $
            13.53
            
            
            8.28
                yrs.
            
            $
            275,000





The
      weighted average grant-date fair value of options, determined by using the
      Black-Scholes option pricing model, granted during the nine months ended March
      31, 2006 and 2007 were $7.20 and $5.58, respectively. The total intrinsic value
      of options exercised during the nine months ended March 31, 2006 and 2007 were
      $106,000 and $132,000, respectively.





The
      247,000 options that are expected to vest at March 31, 2007 are based on the
      current forfeiture rate of 10.5% and the remaining vesting terms of the 315,000
      unvested options at March 31, 2007.




During
      the nine months ended March 31, 2007, approximately 56,000 options were vested
      with an aggregate fair value of approximately $378,000. During the nine months
      ended March 31, 2006, approximately 59,000 options were vested with an aggregate
      fair value of approximately $418,000.





In
      July
      1997, we granted options to an individual to purchase 132,900 shares of our
      common stock at an exercise price of $1.32 as consideration for a five-year
      consulting agreement that commenced on July 1, 1997. These options became fully
      vested on December 31, 2001 and were fully exercised in January 2007. The
      activity relative to these options is not presented in the above table, as
      such
      options were previously issued to a consultant and the table above presents
      option activity relative to employees and non-employee directors.




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 our stock 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 Sheets at March 31, 2007. 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. On December 29, 2006, the Compensation Committee
      of the Board of Directors authorized the issuance of restricted shares of common
      stock to its five outside directors such that each director received 2,612
      shares of common stock in compensation for continuous service on the Board
      for a
      period of one year following December 5, 2006, at an aggregate deferred
      compensation expense of $175,000. In accordance with the 2006 Plan, 13,060
      restricted shares were issued on December 29, 2006 at a market value equal
      to
      the closing price of $13.40 on that day and a deferred compensation expense
      of
      $175,000 was recorded as part of additional paid-in capital and is subject
      to
      amortization expense over the service period of one year. During the three
      and
      nine months ended March 31,


9


2007,
      approximately $44,000 and $56,000 were recognized as compensation expense,
      respectively, for directors’ restricted stock. As of March 31, 2007, none of the
      restricted shares have been forfeited, and 3,265 shares have been
      vested.





The
      following table presents the non-vested status of the restricted shares for
      the
      nine months ended March 31, 2007 and the weighted average grant-date fair
      values.





**Non-Vested
                Shares:**
            
            **Shares**
            
            **Weighted**
              **Average**
              **Grant-Date**
              **Fair
                Value**Non-vested
                at June 30, 2006
            
            
            -
            
            $
            -Granted
            
            
            39,260
            
            
            13.63Vested
            
            
            (3,265
            )
            
            13.40Forfeited
                or Cancelled
            
            
            -
            
            
            -Non-vested
                at March 31, 2007
            
            
            35,995
            
            $
            13.65





As
      of
      March 31, 2007, $1,798,000 of total unrecognized compensation costs related
      to
      non-vested stock-based awards is expected to be recognized over a weighted
      average remaining period of approximately 2.5 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 March
      31, 2007, total cash and cash equivalents, were approximately $43.1 million
      and
      were comprised of money market funds of $41.8 million and approximately $1.3
      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.
      Approximately $155,000, representing a federal income tax refund, was classified
      as part of accounts receivable on the Condensed Consolidated Balance Sheets
      at
      March 31, 2007. At March 31, 2007 and June 30, 2006, two and two customers
      accounted for approximately 33% 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 $67,000 at March 31, 2007 and $37,000 at June 30,
      2006.





Sources
      of Revenues .
      The
      authentication and grading of collectible coins accounted for approximately
      57%
      and 54% of our net revenues in the three and nine months ended March 31, 2007,
      respectively, and 61% and 60% of our net revenues for the three and nine months
      ended March 31, 2006, respectively.





Customer
      Notes Receivables. At March
      31, 2007, the outstanding principal amount of customer notes receivable, which
      evidenced short term advances made to customers by CFC, totaled $2,058,000,
      net
      of a $22,000 allowance for uncollectible amounts, and two of those notes
      receivable represented 82% of the total principal amounts outstanding. During
      the nine months ended March 31, 2007, the Company made short-term advances
      to
      and recorded cash collections from these two customers in the aggregate amounts
      of $1,799,000 and $1,203,000, respectively. In total, for CFC, the Company
      made
      short-term advances of $3,052,000 and recorded cash collections of $4,784,000
      during the nine months ended March 31, 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 June 30, 2006 and March 31, 2007 allowances of $16,000
      and $22,000, respectively, reflected a deficiency in collateral value securing
      the notes of one customer. In addition to the principal




10




amount
      of
      $2,058,000 for CFC, the Company recorded a note receivable from a customer
      in
      September 2006 that matures in December 2007 in the principal amount of
      $132,000.


The
      stated interest rate on the note was 0%; as a result, the Company discounted
      the
      note to a carrying value of approximately $114,000 at September 30, 2006 using
      an


imputed
      interest rate, per annum, of 11.25%, which is the interest rate per annum that
      applied to similar note receivables held by CFC. During the nine months ended
      March 31,


2007,
      $8,000 was recorded as interest income, and, accordingly, the carrying value
      of
      the note receivable was increased to $122,000.




*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 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. During
      the six month period ended December 31, 2006, the Company completed its annual
      review of the carrying value of goodwill acquired with the acquisitions of
      CoinFacts, Inc. and Certified Coin Exchange (“CCE”), which were acquired in the
      first quarter of fiscal year 2006, and Gem Certification & Appraisal Lab,
      LLC (“GCAL”) and Gemprint Corporation (“Gemprint”), which were consummated in
      the second quarter of fiscal 2006, and determined that no impairment has
      occurred. Intangible assets acquired through acquisition, which have definite
      lives, are subject to amortization over their remaining useful lives.




During
      the nine months ended March 31, 2007, the Company completed the acquisition
      of
      two businesses and the purchase of an asset which resulted in the acquisition
      of
      goodwill and intangible assets with indefinite lives, totaling approximately
      $5,304,000 and $656,000, respectively. The Company also acquired through
      business acquisitions during the same nine month period, approximately
      $1,312,000 of intangible assets with definite lives. Separately, the Company
      capitalized $1,184,000 of certain internally-developed software costs during
      the
      nine months ended March 31, 2007. Of the $1,184,000 capitalized, approximately
      $407,000 was capitalized during the three months ended March 31, 2007. Both
      the
      acquired intangible assets and the internally-developed software are subject
      to
      amortization over their remaining useful lives (see also related discussion
      in
      note 2).




11


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, 2006 and March 31, 2007 in thousands of dollars:





**Coins**
            
            **CGAL**
              **&
                Gemprint**
            
            **AGL**
            
            **Expos**
            
            **CCE**
              **and
                Other**
            
            **Total**Goodwill:Balance
                at June 30, 2006
            
            $
            515
            
            $
            8,168
            
            $
            -
            
            $
            -
            
            $
            1,116
            
            $
            9,799Acquired
                during FY2007:AGL
            
            
            -
            
            
            -
            
            
            3,397
            
            
            -
            
            
            -
            
            
            3,397Expos
                Unlimited
            
            
            -
            
            
            -
            
            
            -
            
            
            1,907
            
            
            -
            
            
            1,907Purchase
                price adjustment since June 30, 2006:Gemprint
            
            
            -
            
            
            1
            
            
            -
            
            
            -
            
            
            -
            
            
            1Balance
                at March 31, 2007
            
            $
            515
            
            $
            8,169
            
            $
            3,397
            
            $
            1,907
            
            $
            1,116
            
            $
            15,104Intangible
                Assets, Net:Balance
                at June 30, 2006
            
            $
            29
            
            $
            3,365
            
            $
            -
            
            $
            -
            
            $
            1,280
            
            $
            4,674Acquired
                during FY2007 with indefinite lives:AGL
                Acquisition
            
            
            -
            
            
            -
            
            
            522
            
            
            -
            
            
            -
            
            
            522Expos
                Unlimited
            
            
            -
            
            
            -
            
            
            -
            
            
            134
            
            
            -
            
            
            134Acquired
                during FY2007 with definite lives:AGL
            
            
            -
            
            
            -
            
            
            124
            
            
            -
            
            
            -
            
            
            124Expos
                Unlimited
            
            
            -
            
            
            -
            
            
            -
            
            
            854
            
            
            -
            
            
            854Diamond
                I.D.
            
            
            -
            
            
            332
            
            
            -
            
            
            -
            
            
            -
            
            
            332CCE
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2
            
            
            2Capitalized
                software costs during FY2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,184
            
            
            1,184Less:
                amortization for FY2007
            
            
            (29
            )
            
            (220
            )
            
            (14
            )
            
            (66
            )
            
            (248
            )
            
            (577
            )Balance
                at March 31, 2007
            
            $
            -
            
            $
            3,477
            
            $
            632
            
            $
            922
            
            $
            2,218
            
            $
            7,249




Amortization
      expense for each of the five succeeding years relating to intangible assets
      with
      definite lives currently recorded in the Condensed Consolidated Balance Sheets
      is estimated to be as follows at March 31, 2007:




2007
                (for Q4)
            
            $
            275,0002008
            
            $
            991,0002009
            
            $
            966,0002010
            
            $
            794,0002011
            
            $
            429,000




Approximately
      $11.0 million of the $15.1 million classified as goodwill on the Condensed
      Consolidated Balance Sheets at March 31, 2007 is amortizable and deductible
      for
      tax purposes over a period of 15 years.




*Stock
      Buyback*




During
      the nine months ended March 31, 2007, the Company repurchased a total of 72,517
      shares of its common stock in the open market and, as a result, recorded
      reductions of additional paid-in capital of approximately $949,000. There were
      no share repurchases in the three months ended March 31, 2007. In the third
      quarter of fiscal year 2006, we purchased 50,000 shares in the open market
      and,
      as a result, recorded reductions of additional paid-in capital of
      $700,000.




*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 June
      30, 2006 in the amount of $1,021,000. The transaction was finalized in October
      2006 and the Company retired those shares during the second quarter of fiscal
      year 2007.





12


*Dividends*




On
      May
      31, 2006, the Company announced that its Board of Directors adopted a dividend
      policy that called 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, dividend payments of $0.08 per
      share were paid on September 12, 2006 in the aggregate amount of approximately
      $668,000, and on December 13, 2006, in the aggregate amount of approximately
      $665,000. On December 5, 2006, the Board of Directors authorized an increase
      in
      the quarterly dividend from $0.08 per share of common stock to $0.12 per share
      and declared a dividend in that amount to be paid for the third quarter of
      fiscal year 2007. Accordingly, a dividend in the amount of approximately
      $999,000 was paid on January 17, 2007.





*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. For the three and
      nine
      months ended March 31, 2007, the Company capitalized software development costs
      of $407,000 and $1,184,000, respectively. During the three and nine months
      ended
      March 31, 2006, approximately $121,000 was capitalized as internally-developed
      software. During the three and nine month periods ended March 31, 2007,
      approximately $54,000 and $81,000 were recorded as amortization expense related
      to completed software projects, respectively. During the same periods in fiscal
      year 2006, no amortization expense was recorded. 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. As of March 31, 2007, management
      believes that no such impairments have occurred.




*Advertising
      Costs*




We
      expense advertising costs as part of selling and marketing expenses on the
      Condensed Consolidated Statements of Operations as incurred. During the three
      and nine months ended March 31, 2007, we incurred approximately $380,000 and
      $710,000, respectively, for media and co-op advertising. During the
      corresponding periods of fiscal year 2006, we incurred approximately $216,000
      and $416,000, respectively, for media and co-op advertising.




*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. We will evaluate the impact of Interpretation 48 prior to
      the
      filing of our Form 10-K for fiscal year 2007.





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 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.




13


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 statement misstatements. 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 SAB 108 to have a
      material impact on the Company’s financial position or results of
      operation.





In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      amendment of FASB Statement No. 115,* which ** permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. The objective is to improve financial reporting by providing
      entities with the opportunity to mitigate volatility in reported earnings caused
      by measuring related assets and liabilities differently without having to apply
      complex hedge accounting provisions. This Statement is expected to expand the
      use of fair value measurement, which is consistent with the FASB’s long-term
      measurement objectives for accounting for financial instruments. This Statement
      is effective as of the beginning of an entity’s first fiscal year that begins
      after November 15, 2007. Early adoption is permitted as of the beginning of
      a
      fiscal year that begins on or before November 15, 2007, provided the entity
      also
      elects to apply the provisions of FASB Statement No. 157, *Fair
      Value Measurements* .
      As
      described above, we do not expect that the adoption of SFAS No. 157 or No.
      159
      will have a material impact on our financial position or results of
      operations.





2.
            BUSINESS
                ACQUISITIONS





On
      July
      14, 2005, we 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, we acquired all of the common stock of Certified Coin
      Exchange and all of the common stock of an affiliated business,
      computertradingpost.com, Inc. (“CTP”), for an aggregate purchase price of
      $2,180,000 in cash. 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.




14


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, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      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 nine months ended March 31,
      2006, and a loss on the sale of CTP was included in the gain on the sale of
      discontinued operations for the nine months ended March 31, 2006 (see note
      7
      below).




On
      November 8, 2005, the Company acquired Gem Certification & Appraisal Lab,
      LLC, 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. These assets consisted 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. The purchase
      price for this business was $2,400,000 in cash. 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 $75,000. A third
      party valuation firm has assisted management with performing the valuation
      analysis of the intangible assets acquired, and a preliminary fair value of
      $988,000 has been assigned to identifiable intangible assets, and $193,000
      and
      $613,000 has been allocated to net assets acquired 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 totals $1,907,000, was recorded as goodwill during
      the nine months ended March 31, 2007. During the fourth quarter of fiscal year
      2007, the Company expects to finalize the purchase price allocation for this
      acquisition, which may result in a cumulative adjustment to amortization expense
      for identifiable intangible assets with definite lives and adjustments to the
      carrying values of goodwill and intangible assets. 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 Expos collectibles trade show businesses.




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 AGL’s future revenues, 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




15


purchase
      price allocation based on the AGL acquisition price of $3,500,000, plus
      approximately $231,000 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 has
      assisted management with performing the valuation analysis of the intangible
      assets


acquired
      and a preliminary fair value of $646,000 has been assigned to identifiable
      intangible assets. Approximately $108,000 and $206,000 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 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 Sheets. The
      Company expects to complete the purchase price allocation within the current
      fiscal


year,
      which may result in adjustments to the carrying values of acquired intangible
      assets and goodwill, and may result in a cumulative adjustment to amortization
      expense that


has
      been
      recorded since the first quarter of the current fiscal year. The amount of
      $3,397,000 recorded as goodwill related to AGL as of March 31, 2007 is based
      on
      the


Company’s
      expectations that future growth and profit opportunities exist in this
      underdeveloped market segment.




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 $332,000, which includes other direct
      costs of approximately $37,000, and presented these assets as part of intangible
      assets, net, on the Condensed Consolidated Balance Sheets at March 31, 2007.
      The
      acquisition of those assets did not constitute a business combination. In the
      three and nine months ended March 31, 2007, approximately $11,000 and $22,000,
      respectively, were recorded as amortization expense with respect to the assets
      acquired.




The
      Company has performed an initial and preliminary purchase price allocation
      with
      respect to Expos and AGL as set forth in the following table.




**Expos**
            
            **AGL**
            
            **DID**
            
            **Total**Cost
                of Investment:Purchase
                Price
            
            $
            2,400
            
            $
            3,500
            
            $
            295
            
            $
            6,195Other
                direct costs
            
            
            75
            
            
            181
            
            
            37
            
            
            293Investment
                banking fees
            
            
            -
            
            
            50
            
            
            -
            
            
            50Liability
                assumed
            
            
            -
            
            
            214
            
            
            -
            
            
            2142,475
            
            
            3,945
            
            
            332
            
            
            6,752Value
                Assigned to Assets and Liabilities:Current
                assets
            
            
            135
            
            
            108
            
            
            -
            
            
            243Current
                liabilities
            
            
            (147
            )
            
            (69
            )
            
            -
            
            
            (216
            )Customer
                deposits
            
            
            (466
            )
            
            -
            
            
            -
            
            
            (466
            )Property,
                plant and equipment
            
            
            57
            
            
            -
            
            
            -
            
            
            57Other
                assets
            
            
            1
            
            
            -
            
            
            -
            
            
            1Deferred
                tax liabilities
            
            
            -
            
            
            (137
            )
            
            -
            
            
            (137
            )Intangible
                Assets with Finite Lives:Exhibitor
                list
            
            
            681
            
            
            -
            
            
            -
            
            
            681Website
            
            
            25
            
            
            25
            
            
            -
            
            
            50Contract
            
            
            49
            
            
            -
            
            
            -
            
            
            49Covenant
                not to compete
            
            
            -
            
            
            81
            
            
            32
            
            
            113Patent
            
            
            -
            
            
            -
            
            
            300
            
            
            300Trade
                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)
            
            $
            1,907
            
            $
            3,397
            
            $
            -
            
            $
            5,304







16


The
      following table is intended to show, on a pro forma basis, the effect that
      the
      operations of Expos, and AGL would have had on our consolidated results of
      operations for the three and nine month periods ended March 31, 2007 and 2006
      had those businesses been acquired by us as of July 1, 2005, instead of their
      actual dates of acquisition in the first quarter of fiscal year 2007. In
      addition, the fiscal year 2006 acquisitions of GCAL, Gemprint and CCE are
      included, on a pro forma basis, for the entire three and nine month periods
      ended March 31, 2006.




**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Revenue
            
            $
            11,081
            
            $
            10,705
            
            $
            29,849
            
            $
            28,175Operating
                income (loss)
            
            
            (416
            )
            
            1,354
            
            
            (1,161
            )
            
            2,751Interest
                income, net
            
            
            511
            
            
            520
            
            
            1,603
            
            
            1,418Other
                income
            
            
            2
            
            
            10
            
            
            8
            
            
            26Income
                before provision for income taxes
            
            
            97
            
            
            1,884
            
            
            450
            
            
            4,195Provision
                for income taxes
            
            
            165
            
            
            798
            
            
            328
            
            
            1,799Income
                (loss) from continuing operations
            
            
            (68
            )
            
            1,086
            
            
            122
            
            
            2,396Income
                from discontinued operations
            
            
            99
            
            
            -
            
            
            190
            
            
            182Net
                income
            
            $
            31
            
            $
            1,086
            
            $
            312
            
            $
            2,578Net
                income per basic share:Income
                (loss) from continuing operations
            
            $
            (0.01
            )
            $
            0.13
            
            $
            0.01
            
            $
            0.28Income
                from discontinued operations
            
            $
            0.01
            
            $
            -
            
            $
            0.03
            
            $
            0.02Net
                income
            
            $
            -
            
            $
            0.13
            
            $
            0.04
            
            $
            0.30Net
                income per diluted share:Income
                (loss) from continuing operations
            
            $
            (0.01
            )
            $
            0.12
            
            $
            0.01
            
            $
            0.27Income
                from discontinued operations
            
            $
            0.01
            
            $
            -
            
            $
            0.03
            
            $
            0.02Net
                income
            
            $
            -
            
            $
            0.12
            
            $
            0.04
            
            $
            0.29




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
      March
      31, 2007, we had approximately $41.8 million of our cash and cash equivalents
      invested primarily in money market funds. At June 30, 2006, the Company’s cash,
      cash equivalent and short-term investment balances were primarily invested
      in
      high-quality commercial paper and certificates of deposit issued by U.S. or
      foreign companies, auction rate securities, money market funds, a municipal
      bond
      and bank certificates of deposit. Under the Company’s investment policy, 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 sheets at March 31, 2007 and June 30, 2006. Unrealized
      gains on such trading securities were approximately $130,000 and $0 as of March
      31, 2006 and 2007, respectively.






17





4.
            INVENTORIES




Inventories
                consist of the following:(in
                thousands)**March
                31,**
            
            **June
                30,****2007**
            
            **2006**Coins
            
            $
            325
            
            $
            346Other
                collectibles
            
            
            31
            
            
            37Grading
                raw materials consumable inventory
            
            
            207
            
            
            160563
            
            
            543Less
                inventory reserve
            
            
            (96
            )
            
            (106
            )Inventories,
                net
            
            $
            467
            
            $
            437





5. PROPERTY
      AND EQUIPMENT





Property
                and equipment consist of the following:(in
                thousands)**March
                31,**
            
            **June
                30,****2007**
            
            **2006**Coins,
                stamp and diamond grading reference sets
            
            $
            218
            
            $
            62Computer
                hardware and equipment
            
            
            1,563
            
            
            1,271Computer
                software
            
            
            1,022
            
            
            972Equipment
            
            
            3,051
            
            
            2,020Furniture
                and office equipment
            
            
            1,016
            
            
            793Leasehold
                improvements
            
            
            1,497
            
            
            607Trading
                card reference library
            
            
            52
            
            
            528,419
            
            
            5,777Less
                accumulated depreciation and amortization
            
            
            (4,499
            )
            
            (3,880
            )Property and equipment, net
            
            $
            3,920
            
            $
            1,897








6 ACCRUED
      LIABILITIES





Accrued
                liabilities consist of the following:
            
            (in
                thousands)**March
                31,**
            
            **June
                30,****2007**
            
            **2006**Warranty
                costs
            
            $
            730
            
            $
            710Professional
                fees
            
            
            172
            
            
            189Other
            
            
            1,143
            
            
            1,144$
            2,045
            
            $
            2,043





The
      following table presents the changes in the Company’s warranty reserve during
      the nine months ended March 31, 2007 and 2006 (in thousands):





(in
                thousands)**Nine
                Months**
              **Ended**
              **March
                31,**
            
            **Nine
                Months**
              **Ended**
              **March
                31,****2007**
            
            **2006**Warranty
                reserve, beginning of period
            
            $
            710
            
            $
            609Charged
                to cost of revenue
            
            
            288
            
            
            329Payments
            
            
            (268
            )
            
            (300
            )Warranty
                reserve, end of period
            
            $
            730
            
            $
            638






18





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, 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 March 31, 2007 and June 30, 2006 and Condensed
      Consolidated Statements of Operations for the three and nine month periods
      ended
      March 31, 2007 and 2006. 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.





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)
            
            (in
                thousands)**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Net
                revenues
            
            $
            5
            
            $
            6
            
            $
            54
            
            $
            319Income
                (loss) before income taxes
            
            
            22
            
            
            (14
            )
            
            63
            
            
            44Gain
                on sale of discontinued businesses
            
            
            101
            
            
            14
            
            
            252
            
            
            313123
            
            
            -
            
            
            315
            
            
            357Income
                tax expense
            
            
            (24
            )
            
            -
            
            
            (125
            )
            
            (188
            )Income
                from discontinued operations
            
            $
            99
            
            $
            -
            
            $
            190
            
            $
            169





The
      gains
      realized on sales of discontinued businesses in the three and nine month periods
      ended March 31, 2007 and 2006 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)****March
                31,**
              **2007**
            
            **June
                30,**
              **2006**Current
                assets:Accounts
                receivable
            
            $
            -
            
            $
            10Inventories
            
            
            16
            
            
            37Notes
                receivable
            
            
            38
            
            
            36$
            54
            
            $
            83Current
                liabilities:Consignors
                payable
            
            $
            1
            
            $
            1Other
                current liabilities
            
            
            6
            
            
            7$
            7
            
            $
            8





19


8. INCOME
      TAXES





The
      income tax expense was provided for at a rate of 71% for the three and nine
      month periods ended March 31, 2007, respectively, and at 43% for the
      corresponding periods ending March 31, 2006. The increased rate for the nine
      months ended March 31, 2007, as compared to the same nine month period in 2006,
      is primarily related to a higher estimate for non-deductible stock-based
      compensation expense for the full fiscal year 2007 as compared to the same
      estimate for fiscal year 2006 and lower pre-tax income in the three and nine
      months ended March 31, 2007, compared to the same periods of the prior
      year.




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 and nine months ended March 31, 2007 and 2006,
      respectively, are presented as follows:




(in
                thousands)
            
            (in
                thousands)**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Income
                (loss) from continuing operations
            
            $
            (68
            )
            $
            1,094
            
            $
            135
            
            $
            2,627Income
                from discontinued operations, net of gainon
                sales
              of discontinued businesses(net
                of income taxes)
            
            
            99
            
            
            -
            
            
            190
            
            
            169Net
                income
            
            $
            31
            
            $
            1,094
            
            $
            325
            
            $
            2,796NET
                INCOME PER SHARE-BASIC:Income
                (loss) from continuing operations
            
            $
            (0.01
            )
            $
            0.13
            
            $
            0.02
            
            $
            0.31Income
                from discontinued operations, net of gainon
                sales
              of discontinued businesses(net
                of income taxes)
            
            $
            0.01
            
            $
            -
            
            $
            0.02
            
            $
            0.02Total
            
            $
            -
            
            $
            0.13
            
            $
            0.04
            
            $
            0.33NET
                INCOME PER SHARE-DILUTED:Income
                (loss) from continuing operations
            
            $
            (0.01
            )
            $
            0.12
            
            $
            0.02
            
            $
            0.30Income
                from discontinued operations, net of gainon
                sales
              of discontinued businesses(net
                of income taxes)
            
            $
            0.01
            
            $
            -
            
            $
            0.02
            
            
            0.02Total
            
            $
            -
            
            $
            0.12
            
            $
            0.04
            
            $
            0.32WEIGHTED
                AVERAGE SHARES OUTSTANDING:Basic
            
            
            8,381
            
            
            8,485
            
            
            8,346
            
            
            8,486Effect
                of dilutive shares
            
            
            206
            
            
            337
            
            
            266
            
            
            321Diluted
            
            
            8,587
            
            
            8,822
            
            
            8,612
            
            
            8,807








Options
      and warrants to purchase approximately 736,000 and 631,000 shares of common
      stock for the three months ended March 31, 2007 and 2006, 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 and were anti-dilutive. For
      the
      nine months ended March 31, 2007 and 2006, 736,000 and 726,000 options and
      warrants were not included in the computation of diluted earnings per share,
      respectively, as they were anti-dilutive.




20






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.





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 and nine month periods ended March 31, 2007
      and
      2006. Net identifiable assets and goodwill are provided by business segment
      as
      of March 31, 2007 and June 30, 2006. For the three and nine month periods ended
      March 31, 2007, approximately $429,000 and $2,141,000, respectively, was spent
      to expand and equip the operating facilities for GCAL and AGL, which comprise
      the Jewelry segment. All of our sales and identifiable assets are located in
      the
      United States.


21








**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,**Net
                revenues from external customers:
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**Coins
            
            $
            6,793
            
            $
            6,511
            
            $
            17,279
            
            $
            16,814Sportscards
            
            
            2,156
            
            
            2,177
            
            
            6,507
            
            
            6,247Jewelry
            
            
            270
            
            
            172
            
            
            936
            
            
            255Other
            
            
            1,862
            
            
            1,162
            
            
            5,050
            
            
            2,978Total
                revenue
            
            $
            11,081
            
            $
            10,022
            
            $
            29,772
            
            $
            26,294Amortization
                and depreciation:Coins
            
            $
            72
            
            $
            27
            
            $
            148
            
            $
            76Sportscards
            
            
            22
            
            
            15
            
            
            64
            
            
            52Jewelry
            
            
            190
            
            
            87
            
            
            477
            
            
            92Other
            
            
            121
            
            
            157
            
            
            408
            
            
            198Total
            
            
            405
            
            
            286
            
            
            1,097
            
            
            418Unallocated
                amortization and depreciation
            
            
            75
            
            
            74
            
            
            235
            
            
            203Consolidated
                amortization and depreciation
            
            $
            480
            
            $
            360
            
            $
            1,332
            
            $
            621Stock-based
                compensation:Coins
            
            $
            55
            
            $
            29
            
            $
            168
            
            $
            88Sportscards
            
            
            3
            
            
            2
            
            
            23
            
            
            7Jewelry
            
            
            2
            
            
            -
            
            
            4
            
            
            -Other
            
            
            25
            
            
            32
            
            
            76
            
            
            94Total
            
            
            85
            
            
            63
            
            
            271
            
            
            189Unallocated
                stock-based compensation
            
            
            156
            
            
            70
            
            
            390
            
            
            209Consolidated
                stock-based compensation
            
            $
            241
            
            $
            133
            
            $
            661
            
            $
            398Operating
                income (loss) before unallocated expenses:Coins
            
            $
            2,976
            
            $
            3,192
            
            $
            7,098
            
            $
            7,945Sportscards
            
            
            292
            
            
            328
            
            
            1,044
            
            
            686Jewelry
            
            
            (1,845
            )
            
            (541
            )
            
            (3,387
            )
            
            (589
            )Other
            
            
            186
            
            
            3
            
            
            333
            
            
            (29
            )Total
            
            
            1,609
            
            
            2,982
            
            
            5,088
            
            
            8,013Unallocated
                operating expenses
            
            
            (2,025
            )
            
            (1,680
            )
            
            (6,249
            )
            
            (5,183
            )Consolidated
                operating income (loss)
            
            $
            (416
            )
            $
            1,302
            
            $
            (1,161
            )
            $
            2,830








**At
                March 31,**
            
            **At
                June 30,**Identifiable
                Assets:
            
            **2007**
            
            **2006**Coins
            
            $
            2,385
            
            $
            2,647Sportscards
            
            
            646
            
            
            541Jewelry
            
            
            19,035
            
            
            12,611Other
            
            
            7,923
            
            
            6,284Total
            
            
            29,989
            
            
            22,083Unallocated
                assets
            
            
            47,749
            
            
            56,138Consolidated
                assets
            
            $
            77,738
            
            $
            78,221





**At
                March 31,**
            
            **At
                June 30,**Goodwill:
            
            **2007**
            
            **2006**Coins
            
            $
            515
            
            $
            515Jewelry
            
            
            11,566
            
            
            8,168Other
            
            
            3,023
            
            
            1,116Consolidated
                goodwill
            
            $
            15,104
            
            $
            9,799








22





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
      March 31, 2007, 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 revenue over a
      two-year period in the Condensed Consolidated Statements of Operations for
      the
      three and nine months ended March 31, 2007 and 2006. The unamortized amount
      of
      such costs is included in prepaid expenses and other current assets in the
      accompanying Condensed Consolidated Balance Sheets at March 31, 2007 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 March 31, 2007 and received the required
      consents form the lender for the purchases of Expos Unlimited and American
      Gemological Laboratory, repurchase of the Company’s common stock and the payment
      of dividends beginning with the fourth quarter of fiscal year 2006 to the third
      quarter of 2007.





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
      attributable to that unauthorized use. 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 various
      responsive briefs were filed through April 2007. Our current expectation is
      that
      the Court will schedule a hearing for the appeal between the third and fourth
      calendar quarters of 2007.




23




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.




13.
            SUBSEQUENT EVENT




On
      May 10, 2007, the Board of Directors declared a quarterly cash dividend in
      the
      amount of $0.12 per share of common stock; or in the aggregate amount
      of


$1,016,000, to
      be
      paid on June 7, 2007 to stockholders of record as of May 24,
      2007.


24


**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, collectors and consumers that own, 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; fees from the sale of
      collectors’ club memberships, subscription revenues related to our CCE
      dealer-to-dealer Internet bid-ask market for certified coins and revenues from
      the collectibles trade shows and conventions that we conduct.





*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 and
      conventions, for a purchase price of $2,400,000 in cash and incurred
      approximately $75,000 for directly-related acquisition costs. 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.




25


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 $231,000 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 nine months ended March 31, 2007,
      we
      generated cash of $389,000 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 March
      31, 2007, the remaining assets of those businesses, which we are in the process
      of liquidating, totaled approximately $54,000, as compared to $83,000 at June
      30, 2006.




**Overview
      of Results of Operation for the Three and Nine
      Months Ended March 31, 2007**




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


**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Net
                revenues
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of revenues
            
            
            46.4
            %
            
            40.8
            %
            
            46.6
            %
            
            40.2
            %Gross
                profit
            
            
            53.6
            %
            
            59.2
            %
            
            53.4
            %
            
            59.8
            %Operating
                expenses:Selling
                and marketing expenses
            
            
            21.8
            %
            
            13.7
            %
            
            17.1
            %
            
            12.9
            %General
                and administrative expenses
            
            
            33.6
            %
            
            31.5
            %
            
            38.3
            %
            
            35.5
            %Amortization
                of intangible assets
            
            
            2.0
            %
            
            1.0
            %
            
            1.9
            %
            
            0.6
            %Total
                operating expenses
            
            
            57.4
            %
            
            46.2
            %
            
            57.3
            %
            
            49.0
            %Operating
                income (loss)
            
            
            (3.8
            %)
            
            13.0
            %
            
            (3.9
            %)
            
            10.8
            %Interest
                income, net
            
            
            4.6
            %
            
            5.9
            %
            
            5.5
            %
            
            6.6
            %Other
                income
            
            
            0.1
            %
            
            0.1
            %
            
            -
            
            
            0.1
            %Income
                before provision for income taxes
            
            
            0.9
            %
            
            19.0
            %
            
            1.6
            %
            
            17.5
            %Provision
                for income taxes
            
            
            1.5
            %
            
            8.0
            %
            
            1.1
            %
            
            7.5
            %Income
                from continuing operations after income taxes
            
            
            (0.6
            %)
            
            11.0
            %
            
            0.5
            %
            
            10.0
            %Income
                from discontinued operations, net of gain on sales
              of
                discontinued businesses (net of income taxes)
            
            
            0.9
            %
            
            -
            
            
            0.6
            %
            
            0.6
            %Net
                income
            
            
            0.3
            %
            
            11.0
            %
            
            1.1
            %
            
            10.6
            %




Net
      revenues in the three and nine months ended March 31, 2007 increased by 10.6%
      and 13.2%, respectively, as compared to the same respective periods of the
      prior
      fiscal year, due to increased grading and authentication fees of 6.1% and 7.0%
      in the three and nine months ended March 31, 2007, respectively, earned by
      our
      existing grading businesses and our newer diamond and color gemstone businesses,
      as well as increases of 49.4% and 68.5% in our other related services in the
      three and nine months ended March 31, 2007, respectively. Such increases in
      other related services include revenues earned from the Company’s collectibles
      convention business, which we acquired effective July 1, 2006. However,
      notwithstanding the increases in net revenues, we incurred operating losses
      of
      $416,000 and $1,161,000, respectively, for the three and nine months ended
      March
      31, 2007, as compared to operating income of $1,302,000 and $2,830,000 in the




26


three
      and
      nine months ended March 31, 2006. These declines were attributable to a number
      of different factors, including the following: (i) increased operating
      losses of $648,000 and $2,025,000 for the three and nine months ended
      March 31, 2007 incurred by our diamond authentication and grading business,
      which we acquired in November 2005, and losses incurred of $654,000 and $769,000
      for the three and nine months ended March 31, 2007 for our colored gemstone
      business, which we acquired in August, 2006, as we invest in and develop those
      businesses by, among other things, promoting our service offerings and
      increasing its authentication and grading capacity in anticipation of the growth
      of diamond and gemstone submissions in the future; (ii) decreases of
      $216,000 and $847,000, respectively, in the operating income of our coin grading
      business in the three and nine months ended March 31, 2007, due primarily to
      an
      increase in costs resulting from the addition of coin grading capacity in
      anticipation of increased volumes of submissions and to reduce turnaround times,
      and the fact that our operating results in the nine months ended March 31,
      2006
      benefited from the reversal of a compensation accrual in the amount of $194,000
      due to the termination, during that period, of a long-term employment contract;
      and (iii) increased infrastructure-related costs of $182,000 and $469,000
      in the three and nine months ended March 31, 2007, as we continued to upgrade
      and expand our internal systems to support increased business and entry into
      new
      markets. These, as well as other factors affecting our operating results in
      the
      three and nine months ended March 31, 2007, are described in more detail
      below.




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




*Factors
      that Can Affect our Revenues* .
      Our
      revenues are comprised of (i) fees generated by the authentication and
      grading of high-value collectibles and high-value assets, and (ii) to a
      lesser extent, revenues from sales of collectibles club memberships; 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 the
      management, operation and promotion of collectibles trade shows and conventions.




Our
      authentication and grading revenues, which accounted for approximately 85%
      of
      our total net revenues in the three and nine month periods ended March 31,
      2007,
      are primarily affected by (i) the level of submission revenues among coins,
      sportscards and other collectibles and high-value assets; (ii) the mix of
      submission revenues between vintage or “classic” coins and sports cards, on the
      one hand, and modern coins and sportscards, on the other hand and (iii) in
      the case of coins and sports cards, 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 sports cards than they do for modern submissions, the mix of
      submissions between vintage and modern collectibles also affects our net
      revenues.




Five
      of
      our coin authentication and grading customers accounted for approximately 22%
      and 15% of our total net revenues in the fiscal year ended June 30, 2006 and
      in
      the nine months ended March 31, 2007, 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 nine months ended March 31,
      2007,
      revenue earned from our trade show related activities decreased by approximately
      $700,000 as a result of lower submissions at trade shows by, primarily, these
      customers in the Company’s first fiscal quarter ended September 30, 2006. 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.




*Factors
      Affecting our Gross Profit Margins* .
      The
      gross profit margins on authentication and grading submissions are primarily
      affected by (i) the mix of submission revenues among coins, sports cards
      and other collectibles and high-value assets, because we generally realize
      higher margins on coin submissions than on submissions of other collectibles
      and
      high-value assets; and (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 and (iv) the stage of development
      and the seasonality of new businesses. 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.




27


*Impact
      of Economic Conditions on Financial Performance* .
      We
      generate substantially all of our revenues from the collectibles and the diamond
      and colored gemstone markets. Accordingly, our operating results are affected
      by
      those 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 number of coins,
      sportscards, autographs, currency, diamonds and colored gemstones that were
      graded or authenticated by us in the three and nine months ended March 31,
      2007
      and 2006 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 March 31,**
            
            **Declared
                Value (000)**
              **Three
                Months Ended March 31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Coins
            
            
            400,000
            
            
            50.0
            %
            
            474,000
            
            
            56.0
            %
            $
            365,597
            
            
            84.0
            %
            $
            577,693
            
            
            93.0
            %Sportscards
            
            
            321,600
            
            
            41.0
            %
            
            315,000
            
            
            37.0
            %
            
            22,503
            
            
            5.0
            %
            
            18,288
            
            
            3.0
            %Autographs
            
            
            39,800
            
            
            5.0
            %
            
            45,000
            
            
            5.0
            %
            
            5,488
            
            
            1.0
            %
            
            3,845
            
            
            1.0
            %Stamps
            
            
            16,900
            
            
            2.0
            %
            
            10,000
            
            
            1.0
            %
            
            3,077
            
            
            1.0
            %
            
            5,430
            
            
            1.0
            %Currency
            
            
            9,000
            
            
            1.0
            %
            
            9,000
            
            
            1.0
            %
            
            8,201
            
            
            2.0
            %
            
            8,208
            
            
            1.0
            %Diamonds*
            
            
            5,100
            
            
            1.0
            %
            
            1,000
            
            
            -
            
            
            17,661
            
            
            4.0
            %
            
            9,740
            
            
            1.0
            %Colored
                Gemstones*
            
            
            800
            
            
            -
            
            
            -
            
            
            -
            
            
            13,924
            
            
            3.0
            %
            
            -
            
            
            -Total
            
            
            793,200
            
            
            100.0
            %
            
            854,000
            
            
            100.0
            %
            $
            436,451
            
            
            100.0
            %
            $
            623,204
            
            
            100.0
            %





**Units
                Processed**
              **Nine
                Months Ended March 31,**
            
            **Declared
                Value (000)**
              **Nine
                Months Ended March 31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Coins
            
            
            1,162,700
            
            
            50.0
            %
            
            1,226,000
            
            
            54.0
            %
            $
            1,153,192
            
            
            83.0
            %
            $
            1,208,616
            
            
            91.0
            %Sportscards
            
            
            938,700
            
            
            41.0
            %
            
            873,000
            
            
            38.0
            %
            
            66,666
            
            
            5.0
            %
            
            53,358
            
            
            4.0
            %Autographs
            
            
            117,800
            
            
            5.0
            %
            
            134,000
            
            
            6.0
            %
            
            20,114
            
            
            1.0
            %
            
            11,341
            
            
            1.0
            %Stamps
            
            
            47,200
            
            
            2.0
            %
            
            26,200
            
            
            1.0
            %
            
            8,433
            
            
            1.0
            %
            
            13,752
            
            
            1.0
            %Currency
            
            
            25,200
            
            
            1.0
            %
            
            23,300
            
            
            1.0
            %
            
            24,096
            
            
            2.0
            %
            
            31,433
            
            
            2.0
            %Diamonds*
            
            
            20,000
            
            
            1.0
            %
            
            2,000
            
            
            -
            
            
            74,795
            
            
            5.0
            %
            
            19,703
            
            
            1.0
            %Colored
                Gemstones*
            
            
            1,000
            
            
            -
            
            
            -
            
            
            -
            
            
            44,111
            
            
            3.0
            %
            
            -
            
            
            -Total
            
            
            2,312,600
            
            
            100.0
            %
            
            2,284,500
            
            
            100.0
            %
            $
            1,391,407
            
            
            100.0
            %
            $
            1,338,203
            
            
            100.0
            %






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




**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 and
      notes receivable and 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 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 circumstances on which
      our judgments or estimates were based, or other unanticipated events




28


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.




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 or conditions, such as 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.




During
      fiscal year 2006 and in the first quarter of fiscal year 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 assumed, and to classify the excess
      of the purchase price over that fair value as goodwill. In accordance with
      GAAP,
      we evaluate goodwill for impairment 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 high-value assets to the customer. Many of 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, management
      and operation of collectibles conventions and trade shows 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 or distributors who
      submit collectibles or high-value assets to us for authentication and grading
      on
      a recurring basis. In




29


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.




*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 two years’ 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 March 31, 2007. 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




30


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 operations over
      the
      vesting period of the option using the straight-line attribution method.




*Capitalized
      Software* .
      In the
      first three quarters of fiscal year 2007, we capitalized approximately
      $1,184,000 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 nine months ended March 31, 2007, approximately $81,000 was
      recorded as amortization expense related to such capitalized software projects.
      We evaluate 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.




**Results
      of Operations - Three and Nine Months Ended March 31,
      2007 versus the Three and Nine Months Ended March 31,
      2006**




*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 generate other-related
      service 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 promoting, managing and operating collectibles conventions. Net revenues
      are determined net of discounts and allowances.




The
      following table sets forth our total net revenues for the three and nine months
      ended March 31, 2007 and 2006, broken out between grading and authentication
      services and other related services:




**Three
                Months Ended March 31,****2007**
            
            **2006**
            
            **Increase****Amount**
            
            **%
                of Net**
              **Revenues**
            
            **Amount**
            
            **%
                of Net**
              **Revenues**
            
            **Amount**
            
            **%
                of Net**
              **Revenues**(Dollars
                in thousands)Grading
                and authentication fees
            
            $
            9,526
            
            
            86.0
            %
            $
            8,981
            
            
            89.6
            %
            $
            545
            
            
            6.1
            %Other
                related services
            
            
            1,555
            
            
            14.0
            %
            
            1,041
            
            
            10.4
            %
            
            514
            
            
            49.4
            %Total
                net revenues
            
            $
            11,081
            
            
            100.0
            %
            $
            10,022
            
            
            100.0
            %
            $
            1,059
            
            
            10.6
            %





**Nine
                Months Ended March 31,****2007**
            
            **2006**
            
            **Increase****Amount**
            
            **%
                of Net**
              **Revenues**
            
            **Amount**
            
            **%
                of Net**
              **Revenues**
            
            **Amount**
            
            **%
                of Net**
              **Revenues**(Dollars
                in thousands)Grading
                and authentication fees
            
            $
            25,296
            
            
            85.0
            %
            $
            23,637
            
            
            89.9
            %
            $
            1,659
            
            
            7.0
            %Other
                related services
            
            
            4,476
            
            
            15.0
            %
            
            2,657
            
            
            10.1
            %
            
            1,819
            
            
            68.5
            %Total
                net revenues
            
            $
            29,772
            
            
            100.0
            %
            $
            26,294
            
            
            100.0
            %
            $
            3,478
            
            
            13.2
            %









31


The
      following tables set
      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 numbers of collectibles and diamonds and colored gemstones that we
      authenticated and graded in the three and nine months ended March 31, 2007
      and
      2006:




**Three
                Months Ended March 31,****2007**
            
            **2006**
            
            **2007
                vs. 2006****Increase
                (Decrease)****%
                of Net**
            
            
            
            **%
                of Net**
            
            **Revenues**
            
            **Units
                Processed****Amount**
            
            **Revenues**
            
            **Amount**
            
            **Revenues**
            
            **Amounts**
            
            **Percent**
            
            **Number**
            
            **Percent**(Dollars
                in thousands)Coins
            
            $
            6,793
            
            
            61.3
            %
            $
            6,511
            
            
            65.0
            %
            $
            282
            
            
            4.3
            %
            
            (74,000
            )
            
            (15.6
            %)Sportscards
            
            
            2,156
            
            
            19.5
            %
            
            2,177
            
            
            21.7
            %
            
            (21
            )
            
            (1.0
            %)
            
            6,600
            
            
            2.1
            %Other(1)
            
            
            2,132
            
            
            19.2
            %
            
            1,334
            
            
            13.3
            %
            
            798
            
            
            59.8
            %
            
            6,600
            
            
            10.2
            %Net
                Revenues
            
            $
            11,081
            
            
            100.0
            %
            $
            10,022
            
            
            100.0
            %
            $
            1,059
            
            
            10.6
            %
            
            (60,800
            )
            
            (7.1
            %)







**Nine
                Months Ended March 31,****2007**
            
            **2006**
            
            **2007
                vs. 2006****Increase
                (Decrease)****%
                of Net**
            
            
            
            **%
                of Net**
            
            **Revenues**
            
            **Units
                Processed****Amount**
            
            **Revenues**
            
            **Amount**
            
            **Revenues**
            
            **Amounts**
            
            **Percent**
            
            **Number**
            
            **Percent**(Dollars
                in thousands)Coins
            
            $
            17,279
            
            
            58.0
            %
            $
            16,814
            
            
            63.9
            %
            $
            465
            
            
            2.8
            %
            
            (63,300
            )
            
            (5.2
            %)Sportscards
            
            
            6,507
            
            
            21.9
            %
            
            6,247
            
            
            23.8
            %
            
            260
            
            
            4.2
            %
            
            65,700
            
            
            7.5
            %Other(1)
            
            
            5,986
            
            
            20.1
            %
            
            3,233
            
            
            12.3
            %
            
            2,753
            
            
            85.1
            %
            
            25,700
            
            
            14.0
            %Net
                Revenues
            
            $
            29,772
            
            
            100.0
            %
            $
            26,294
            
            
            100.0
            %
            $
            3,478
            
            
            13.2
            %
            
            28,100
            
            
            1.2
            %






(1)
            Consists
                of revenues from the authentication and grading of autographs, stamps,
                currency businesses and our CFC dealer financing business during
                all
                periods presented. Also includes revenues from (i) the CCE
                subscription business from September 2, 2005, (ii) the authentication
                and
                grading of diamonds from November 2005, when we completed our acquisition
                of GCAL, (iii) the collectibles convention business from July 2006,
                when we completed our acquisition of Expos, and (iv) the
                authentication and grading of colored gemstones from August 2006,
                when we
                completed our acquisition of AGL.




The
      $545,000 (6.1%) and $1,659,000 (7.0%) increase in grading and authentication
      fees earned in the three and nine months ended March 31, 2007 included an
      increase in coins and sportscards grading revenues as well as increases in
      revenues earned from the Company’s newer diamond and colored gemstone
      businesses. Coin grading and authentication revenues in the quarter and in
      the
      nine months of the current year increased 3.7% and 1.3% despite decreases of
      15.6% and 5.2% in the number of coins graded in those periods compared to the
      same periods of the prior year, due to a change in the mix to higher average
      value services in the quarter and nine month periods. In the third quarter
      there
      was a lower level of First Strike submissions than the same period of the prior
      year. We believe, the reduction in the First Strike submissions was due to
      a
      number of factors, including a dispute relating to PCGS’s trademarked First
      Strike designation, which has been since resolved. The increase in sportcards
      grading revenues of 1.7% and 7.7% in the three and nine months ended March
      31,
      2007, respectively, was attributable to an increase in the number of units
      graded, primarily in the first six months of the year.





The
      increases in other related services of 49.4% and 68.5%, respectively, in the
      three and nine months ended March 31, 2007 were due primarily to
      (i) increased sales of club memberships and CCE subscriptions, (ii) an
      increase in interest earned as a result of an increase in the average amount
      of
      loans outstanding to dealers under our dealer finance program, and
      (iii) revenues generated by our collectibles convention business that was
      acquired effective July 1, 2006.




Our
      current expectation is that the First Strike program will recover as the dispute
      related to the First Strike designation has now been resolved; however, it
      is
      uncertain if revenues from such program will be concentrated in the Company’s
      third and fourth fiscal quarters in future periods, as in previous years, and
      if
      the level of revenues earned from such program will achieve the same levels
      of
      revenues earned in previous years.




32


*Gross
      Profit*




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




Set
      forth
      below is information regarding our gross profits in the three and nine months
      ended March 31, 2007 and 2006.





**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Gross
                profit
            
            $
            5,943,000
            
            $
            5,934,000
            
            $
            15,911,000
            
            $
            15,716,000Gross
                profit margin
            
            
            53.6
            %
            
            59.2
            %
            
            53.4
            %
            
            59.8
            %




The
      declines in the gross profit margin in the three and nine months ended March
      31,
      2007, as compared to the same three and nine months of last year, were
      attributable to a number of different factors, including the following:
      (i) a decline in the gross margin on coin authentication and grading in
      both those periods due primarily to an increase in costs resulting from the
      addition of new coin grading capacity in anticipation of increased volumes
      of
      submissions and to reduce the turnaround times within which coins are
      authenticated and graded, and the fact that last year’s nine month period ended
      March 31, 2006 benefited from a reversal of a long-term compensation accrual
      for
      an employee that terminated his employment in that period; (ii) a decline
      in the gross margin realized on sportscard authentication and grading business,
      due primarily to a decrease in sportscard related advertising revenues and
      a
      lower average service fees earned due to the mix of services in the period;
      (iii) a change in the mix of our revenues to a lower proportion of coin
      authentication and grading revenues, on which we have historically realized
      higher margins than on the authentication and grading of other collectibles,
      as
      coin revenues represented approximately 61% and 58% of total net revenues in
      the
      three and nine months ended March 31, 2007, respectively, compared to
      approximately 65% and 64% of total net revenues in the three and nine months
      ended March 31, 2006, respectively; (iv) the early stage of our diamond and
      colored gemstone grading businesses as we build our diamond grading capacity
      in
      anticipation of increased revenues in future periods; and (v) stock-based
      compensation costs of $77,000 and $229,000 that were recognized as part of
      cost
      of revenues in the three and nine months ended March 31, 2007, respectively,
      compared with $56,000 and $168,000 in the three and nine months ended March
      31,
      2006.




*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 and nine month periods ended March 31, 2007 and
      2006.




**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Selling
                and marketing expenses
            
            $
            2,411,000
            
            $
            1,378,000
            
            $
            5,106,000
            
            $
            3,386,000Percent
                of net revenue
            
            
            21.8
            %
            
            13.7
            %
            
            17.1
            %
            
            12.9
            %





The
      increases of $1,033,000 and $1,720,000 in the dollar amounts of selling and
      marketing expenses in the three and nine months ended March 31, 2007,
      respectively, compared to the same periods of the prior fiscal year, were
      primarily attributable to (i) increased sales and marketing costs of
      $747,000 and $1,224,000 for the three and nine months, respectively,
      attributable to our new businesses, including our diamond grading business
      (which we acquired in November 2005), our colored gemstone business (which
      we
      acquired in August 2006), and our CCE subscription business
      (which we acquired in September 2005), (ii) increased sales and marketing
      costs of $94,000 and $256,000 for the three and nine months, respectively,
      for
      coins and sportscards for promotional activities as we focused more


33


resources
      on our trade show programs, and (iii) general marketing cost increases,
      including increases in compensation costs resulting from the hiring of a chief
      marketing officer in November 2006.





*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**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**General
                and administrative expenses
            
            $
            3,729,000
            
            $
            3,152,000
            
            $
            11,389,000
            
            $
            9,343,000Percent
                of net revenues
            
            
            33.6
            %
            
            31.5
            %
            
            38.3
            %
            
            35.5
            %




The
      increases in G&A expenses of $577,000 and $2,046,000 in the three and nine
      months ended March 31, 2007, compared to the same three and nine months of
      last
      year, were primarily attributable to (i) expenses, totaling approximately
      $300,000 and $1,700,000, respectively, incurred in connection with initiatives
      to grow our recently acquired diamond, colored gemstone, and trade show
      businesses; (ii) increased costs of approximately $180,000 and $470,000,
      respectively, to upgrade and expand our internal systems to support an increased
      volume of business and entry into new markets; and (iii) increased business
      development costs of approximately $80,000 and $225,000, respectively, incurred
      in connection with our coin authentication and grading business. Such cost
      increases were partially offset by a reduction in litigation-related costs
      in
      the first and second quarters of fiscal 2007, compared to the same periods
      of
      fiscal 2006, during which we incurred legal fees and expenses in connection
      with
      the Miller trial. Stock-based compensation costs included in general and
      administrative expenses for the three and nine months ended March 31, 2007
      were
      $161,000 and $426,000, respectively, compared with $76,000 and $227,000 for
      the
      three and nine months ended March 31, 2006, respectively.




*Amortization
      of Intangible Assets*


**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Amortization
                expense
            
            $
            219,000
            
            $
            102,000
            
            $
            577,000
            
            $
            157,000Percent
                of net revenues
            
            
            2.0
            %
            
            1.0
            %
            
            1.9
            %
            
            0.6
            %




The
      increases in the amortization expense are due to primarily to an increase in
      intangible assets that resulted from the business acquisitions that we
      consummated in fiscal year 2006 and in the first quarter of fiscal year 2007
      and
      for the amortization of capitalized software. 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 and in addition, recognized compensation
      expense related to the issuance of restricted stock, as follows:




**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,**Included
                in:
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**Cost
                of revenues
            
            $
            77,000
            
            $
            56,000
            
            $
            229,000
            
            $
            168,000Selling
                and marketing expenses
            
            
            3,000
            
            
            1,000
            
            
            6,000
            
            
            3,000General
                and administrative expenses
            
            
            161,000
            
            
            76,000
            
            
            426,000
            
            
            227,000$
            241,000
            
            $
            133,000
            
            $
            661,000
            
            $
            398,000






34




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, relating principally to the expected
      remaining terms of and the forfeiture rate for outstanding options, during
      the
      first three quarters of fiscal 2006, were incorrect. We determined that, as
      a
      result, the stock-based compensation expense recognized in each of the first
      three quarters of fiscal 2006 was understated by approximately $35,000, but
      that
      the understatement of that expense in each of the interim periods was immaterial
      to the operating results of those periods. The correction of those erroneous
      assumptions accounted for $35,000 and $105,000 of the increases in stock based
      compensation recognized in the quarter and nine months ended March 31, 2007,
      respectively, as compared to the same corresponding periods of the prior fiscal
      year.




The
      total
      amount of compensation cost related to non-vested stock based awards not yet
      recognized at March 31, 2007, was $1,798,000. That amount will be recognized
      as
      compensation expense over a weighted average remaining period of 2.5 years,
      assuming the recipients of such stock based awards continue to remain in the
      service of the Company, as follows:




FY
                2007 (Q4)
            
            $
            245,000FY
                2008
            
            
            854,000FY
                2009
            
            
            486,000FY
                2010
            
            
            175,000FY
                2011
            
            
            38,000Total
            
            $
            1,798,000




However,
      such amounts do not include the cost of any additional stock based awards 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**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Interest
                income, net
            
            $
            511,000
            
            $
            588,000
            
            $
            1,624,000
            
            $
            1,738,000Percent
                of net revenue
            
            
            4.6
            %
            
            5.9
            %
            
            5.5
            %
            
            6.6
            %




Interest
      income is generated on cash and cash equivalent balances that we invest
      primarily in highly liquid money market accounts and commercial paper
      instruments. Such interest income does not include the interest that we generate
      on loans we make pursuant to our dealer finance programs, which are included
      in
      net revenues.




The
      declines in net interest income were primarily due to decreases in our cash
      average and cash equivalent balances during the three and nine month periods
      ended March 31, 2007, as compared to the same respective periods of the prior
      fiscal year, that were attributable to the uses we made of cash to fund
      (i) business acquisitions, (ii) the payment of quarterly dividends to
      stockholders, and repurchases of shares of our common stock under our stock
      buyback program, partially offset by the effect of increased interest rates
      applicable to our average cash balances in the three and nine months ended
      March
      31, 2007, compared to the same periods in the prior year.




*Income
      Tax Expense*


**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Income
                tax expense
            
            $
            165,000
            
            $
            804,000
            
            $
            336,000
            
            $
            1,965,000Percent
                of net revenues
            
            
            1.5
            %
            
            8.0
            %
            
            1.1
            %
            
            7.5
            %




The
      income tax expense recorded for the three and nine months ended March 31, 2007
      was calculated based on our expected combined federal and state effective income
      tax rate of approximately 71% for fiscal 2007, compared with 43% for the three
      and nine months ended March 31, 2006. That increase in the effective rate
      primarily reflects the effect of increased permanent differences between the
      Company’s income for book purposes and for tax purposes, due




35




primarily
      to the non-deductibility of stock-based compensation expense attributable to
      stock-based awards in the three and nine months ended March 31, 2007 and lower
      pre-tax income in the three and nine month period of fiscal 2007, compared
      with
      the same period of fiscal 2006.




*Discontinued
      Operations*


**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Income
                from discontinued operations, net of gain on sales of discontinued
                businesses (net of income taxes).
            
            $
            99,000
            
            $
            -
            
            $
            190,000
            
            $
            169,000Percent
                of net revenues
            
            
            0.9
            %
            
            0.0
            %
            
            0.6
            %
            
            0.6
            %




Income
      from discontinued operations for the three and nine months ended March 31,
      2007,
      respectively, was primarily related to gains realized on the sale of one of
      our
      discontinued businesses, the amount of which became determinable in fiscal
      2007.
      Such gains will not arise after the third fiscal quarter of 2007.




The
      income from discontinued operations in the three and nine months ended March
      31,
      2006 included the results of CTP from September 2, 2005 (which was the date
      of
      its acquisition) through November 30, 2005 (the date of disposition) and gains
      realized on the sale of one of our discontinued businesses, which became
      determinable in those periods.




**Liquidity
      and Capital
      Resources**




At
      March
      31, 2007, we had cash and cash equivalents of $43,075,000, 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 positive 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) we expect that, in the event of an on-going decline in
      authentication and grading submissions, we will be able to reduce certain of
      our
      costs and thereby reduce the impact on our cash flows of such a
      decline.




During
      the nine months ended March 31, 2007, our operating activities generated net
      cash of $2,338,000.




Net
      cash
      used in investing activities was $8,386,000 for the nine months ended March
      31,
      2007, which consisted primarily of cash used for business acquisitions of
      $6,316,000, capital expenditures (primarily related to expanding our diamond
      and
      colored gemstone grading facilities and capacity) of $2,590,000 and $1,184,000
      used for capitalized software development projects as the Company continues
      to
      upgrade its infrastructure to enable it to support the expansion of its
      businesses. In addition, the Company had net repayments of notes receivable
      from
      dealers of $1,732,000 under its CFC Dealer Financing Program.




In
      the
      nine months ended March 31, 2007, financing activities used net cash of
      $3,052,000, primarily for the payment of $2,332,000 of cash dividends to
      stockholders and $949,000 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




36


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 or
      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 and
      nine months ended or at March 31, 2007.




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 March 31,
      2007 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.




*Outstanding
      Financial Obligations*




We
      had
      the following outstanding obligations under operating leases, net of sublease
      income, at March 31:




Fiscal
                Year2007(remaining
                3 months)
            
            $
            443,0002008
            
            
            1,693,0002009
            
            
            1,710,0002010
            
            
            804,0002011
            
            
            364,000Thereafter
            
            
            1,756,000$
            6,770,000




With
      the
      exception of those obligations, we do not have any material financial
      obligations, such as long-term debt or 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 March 31, 2007.




*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 million
      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
      March 31, 2007, the Company had repurchased a total of 254,368 shares of its
      common stock for an aggregate purchase price of approximately $3,575,000 (which
      includes transaction costs of approximately $13,000), of which a total of 72,517
      shares were repurchased, at a cost of $949,000 in the first nine months of
      fiscal 2007.




37


*Dividends* .
      In the
      fourth quarter of fiscal 2006, the Board of Directors adopted a dividend policy
      that called 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. In
      December 2006, the Board of Directors authorized an increase in the dividend
      rate to $0.12 per quarter, or $0.48 per annum, effective beginning with the
      dividend paid on January 17, 2007.  To date, the Board of Directors has
      declared the following quarterly cash dividends:




**Dividend**
            
            **Amounts****Declaration
                Date**
            
            **Record
                Date**
            
            **Payment
                Date**
            
            **Per
                Share**
            
            **Total**May
                31, 2006
            
            
            June
                14, 2006
            
            
            June
                28, 2006
            
            $
            0.08
            
            $
            674,000August
                15, 2006
            
            
            August
                29, 2006
            
            
            September
                12, 2006
            
            $
            0.08
            
            $
            668,000November
                15, 2006
            
            
            November
                29, 2006
            
            
            December
                13, 2006
            
            $
            0.08
            
            $
            665,000December
                4, 2006
            
            
            January
                3, 2007
            
            
            January
                17, 2007
            
            $
            0.12
            
            $
            999,000May
                10, 2007
            
            
            May
                24, 2007
            
            
            June
                7, 2007
            
            $
            0.12
            
            $
            1,016,000




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) continue paying dividends to
      our stockholders, as determined by the Board of Directors, (v) 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, 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.




**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 filing of our Form 10-K for of this fiscal
      year,
      we will evaluate the impact of Interpretation 48 on our financial position
      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.




38


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 a material
      impact on the Company’s financial position or results of operation.




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      amendment of FASB Statement No. 115,* which ** permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. The objective is to improve financial reporting by providing
      entities with the opportunity to mitigate volatility in reported earnings caused
      by measuring related assets and liabilities differently without having to apply
      complex hedge accounting provisions. This Statement is expected to expand the
      use of fair value measurement, which is consistent with the FASB’s long-term
      measurement objectives for accounting for financial instruments. This Statement
      is effective as of the beginning of an entity’s first fiscal year that begins
      after November 15, 2007. Early adoption is permitted as of the beginning of
      a
      fiscal year that begins on or before November 15, 2007, provided the entity
      also
      elects to apply the provisions of FASB Statement No. 157, *Fair
      Value Measurements* .
      As
      described above, we do not expect that the adoption of SFAS No. 157 or No.
      159
      will have a material impact on our financial position or results of
      operations.





**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;




·
            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;






39




·
            the
                fact that for the year ended June 30, 2006 and the three and nine
                months
                ended March 31, 2007 our top 5 customers accounted for approximately
                22%
                and 15%, 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 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 gemstone 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.




**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 March 31, 2007, we had approximately
      $41,800,000 of our cash and cash equivalents 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 due to the liquidity and short-term nature of these
      investments.





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


40


**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 March 31, 2007. Based
      on
      this evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that, as of March 31, 2007, 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 March 31, 2007, that has materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




41


**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.****UNREGISTERED
      SALES 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.




There
      were no share repurchases during the three months ended March 31, 2007.




**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











42





**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:May
                10, 2007
            
            /s/
                MICHAEL R. HAYNESMichael
                R. HaynesChief
                Executive Officer











**COLLECTORS
                UNIVERSE, INC.**Date:May
                10, 2007
            
            /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