**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, 2005****OR**q
    **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 [NO FEE REQUIRED]****For
      the transition period from _______ to _____****Commission
      file number 0-27887******
      ****
      ****
      ****
      ****
      **COLLECTORS
      UNIVERSE, INC.**
      **(Exact
      name of Registrant as specified in its
charter)**
 
 **Delaware**
    **33-0846191****(State
      or other jurisdiction of**
    **(I.R.S.
      Employer Identification No.)****Incorporation
      or organization)****1921
      E. Alton Avenue, Santa Ana, California 92705****(address
      of principal executive offices and zip code****)****Registrant's
      telephone number, including area code: (949)
    567-1234**
 
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes   ü  No
___
 
 Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes ___ No  ü  .
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
 
 **Class**
    **Outstanding
      at April, 22, 2005****Common
      Stock $.001 Par Value**
    **8,601,112**
 
 
 
   
   **COLLECTORS
UNIVERSE, INC.**
 **QUARTERLY
REPORT**
 **ON
FORM 10-Q**
 **FOR
THE QUARTER ENDED** **MARCH
31, 2005**
 
 **TABLE
OF CONTENTS**
 
 **PART
      I**
    **Financial
      Information**
    **Page**Item
      1.
    Financial Statements:Condensed
      Consolidated Balance Sheets as of March 31, 2005 (unaudited)and
      June 30, 2004
    1Condensed
      Consolidated Statements of Operationsfor
      the Three and Nine Months Ended March 31, 2005 and 2004
      (unaudited)
    2Condensed
      Consolidated Statements of Cash Flowsfor
      the Nine Months Ended March 31, 2005 and 2004
    (unaudited)
    3Notes to Condensed Consolidated Financial Statements
      (unaudited)
    4Item
      2.
    Management's Discussion and Analysis of
      Financial Condition and Results of Operations
    11Forward Looking Information
    11Our Business
    11Critical Accounting Policies and
      Estimates
    12Factors That Can Affect Our Financial
      Position and Operating Results
    14Results of Operations
    15Liquidity and Capital
      Resources
    18Risks and Uncertainties That Could Affect
      Our Future Financial Performance
    20Item
      3.
    Quantitative
      and Qualitative Disclosures About Market Risk
    21Item
      4.
    Controls and Procedures
    21**PART
      II**
    **Other
      Information**Item
      6.
    Exhibits
    22**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 of Periodic Report Under Section 906of
      the Sarbanes-Oxley Act of 2002**Exhibit
      32.2**
    Chief
      Financial Officer Certification of Periodic Report Under Section 906of
      the Sarbanes-Oxley Act of 2002
 
 
 
   i
   **PART
I - FINANCIAL INFORMATION**
 
 **ITEM
1.** **FINANCIAL STATEMENTS**
 
 **COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES**
 **CONDENSED CONSOLIDATED BALANCE
SHEETS**
 (in
thousands, except per share data)
 
 **March
      31,**
    
    **June
      30,****2005**
      **(unaudited)**
    
    **2004****ASSETS**Current
      assets:Cash
      and cash equivalents
    
    $
    63,632
    
    $
    21,454Short-term
      investments
    
    
    2,294
    
    
    -Accounts
      receivable, net of allowance for doubtful accounts of $62 (March) and $30
      (June)
    
    
    918
    
    
    790Note
      receivable
    
    
    242
    
    
    -Inventories,
      net
    
    
    399
    
    
    452Prepaid
      expenses and other current assets
    
    
    789
    
    
    781Refundable
      income taxes
    
    
    -
    
    
    13Deferred
      income taxes
    
    
    1,174
    
    
    1,174Receivables
      from sale of net assets of discontinued operations
    
    
    68
    
    
    1,611Current
      assets of discontinued operations held for sale
    
    
    415
    
    
    1,267Total
      current assets
    
    
    69,931
    
    
    27,542Property
      and equipment, net
    
    
    876
    
    
    1,045Deferred
      income taxes
    
    
    3,256
    
    
    5,205Intangible
      and other assets
    
    
    275
    
    
    165Non-current
      assets of discontinued operations held for sale
    
    
    65
    
    
    117$
    74,403
    
    $
    34,074**LIABILITIES
      AND STOCKHOLDERS' EQUITY**Current
      liabilities:Accounts
      payable
    
    $
    823
    
    $
    455Accrued
      liabilities
    
    
    1,655
    
    
    1,351Accrued
      compensation and benefits
    
    
    807
    
    
    936Deferred
      revenue
    
    
    1,248
    
    
    1,225Current
      liabilities of discontinued operations held for sale
    
    
    54
    
    
    276Total
      current liabilities
    
    
    4,587
    
    
    4,243Deferred
      rent and other long-term liabilities
    
    
    537
    
    
    465Commitment
      and contingenciesStockholders'
      equity:Preferred
      stock, $.001 par value; 5,000 shares authorized; no shares issued or
      outstanding
    
    
    -
    
    
    -Common
      stock, $.001 par value; 45,000 shares authorized; issued 8,601 at March
      31, 2005and
      6,338 at June 30, 2004
    
    
    9
    
    
    6Additional
      paid-in capital
    
    
    78,493
    
    
    42,215Accumulated
      deficit
    
    
    (8,202
    )
    
    (11,834
    )Treasury
      stock, at cost (125 shares)
    
    
    (1,021
    )
    
    (1,021
    )Total
      stockholders' equity
    
    
    69,279
    
    
    29,366$
    74,403
    
    $
    34,074
  See
accompanying notes to condensed consolidated financial
statements.
  1
  **COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES**
 **CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS**
 (in
thousands, except per share data)
 (unaudited)
 
 
 
 **Three
      Months Ended**
    
    **Nine
      Months Ended****March
      31,**
    
    **March
      31,**
    
    **March
      31,**
    
    **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Net
      revenues
    
    $
    8,955
    
    $
    6,896
    
    $
    25,132
    
    $
    18,661Cost
      of revenues
    
    
    3,263
    
    
    2,597
    
    
    9,087
    
    
    7,495Gross
      profit
    
    
    5,692
    
    
    4,299
    
    
    16,045
    
    
    11,166Selling
      and marketing expenses
    
    
    876
    
    
    788
    
    
    2,581
    
    
    2,316General
      and administrative expenses
    
    
    2,588
    
    
    2,135
    
    
    7,167
    
    
    6,298Settlement
      of lawsuit
    
    
    -
    
    
    -
    
    
    500
    
    
    -Total
      operating expenses
    
    
    3,464
    
    
    2,923
    
    
    10,248
    
    
    8,614Operating
      income
    
    
    2,228
    
    
    1,376
    
    
    5,797
    
    
    2,552Interest
      income, net
    
    
    245
    
    
    11
    
    
    419
    
    
    25Other
      expenses
    
    
    (20
    )
    
    (4
    )
    
    (18
    )
    
    (23
    )Income
      before income taxes
    
    
    2,453
    
    
    1,383
    
    
    6,198
    
    
    2,554Provision
      for income taxes
    
    
    981
    
    
    592
    
    
    2,487
    
    
    1,075Income
      from continuing operations
    
    
    1,472
    
    
    791
    
    
    3,711
    
    
    1,479(Loss)
      income from operations of discontinued operations, net ofgains
      on
      sales
      of discontinued businesses (net of income taxes)
    
    
    (3
    )
    
    201
    
    
    (79
    )
    
    (534
    )Net
      income
    
    $
    1,469
    
    $
    992
    
    $
    3,632
    
    $
    945Net
      income per basic share:Income
      from continuing operations
    
    $
    0.21
    
    $
    0.13
    
    $
    0.57
    
    $
    0.24(Loss) income from operations of discontinued operations, net
      ofgains
      on
      sales of discontinued businesses (net of income taxes)
    
    
    -
    
    
    0.03
    
    
    (0.01
    )
    
    (0.09
    )Net
      income
    
    $
    0.21
    
    $
    0.16
    
    $
    0.56
    
    $
    0.15Net
      income per diluted share:Income
      from continuing operations
    
    $
    0.19
    
    $
    0.13
    
    $
    0.53
    
    $
    0.23(Loss) income from operations of discontinued operations, net
      ofgains
      on sales of
      discontinued businesses (net of income taxes)
    
    
    -
    
    
    0.03
    
    
    (0.01
    )
    
    (0.08
    )Net
      income
    
    $
    0.19
    
    $
    0.16
    
    $
    0.52
    
    $
    0.15Weighted
      average shares outstanding:Basic
    
    
    7,113
    
    
    6,135
    
    
    6,523
    
    
    6,160Diluted
    
    
    7,571
    
    
    6,319
    
    
    6,968
    
    
    6,306
 
 
 See
accompanying notes to condensed consolidated financial statements
 
  2
  **COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES**
 **CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS**
 (in
thousands)
 **Nine****Months
      Ended**
      **March****31,**2005
    
    2004CASH
      FLOWS FROM OPERATING ACTIVITIES:Income
      from continuing operations
    
    $
    3,711
    
    $
    1,479Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
    
    
    355
    
    
    500Loss
      on disposal of fixed assets
    
    
    -
    
    
    31Provision
      for doubtful accounts
    
    
    18
    
    
    25Provisions
      for inventory write down
    
    
    -
    
    
    38Stock-based
      compensation
    
    
    27
    
    
    -Provision
      for deferred income taxes
    
    
    2,264
    
    
    -Changes
      in operating assets and liabilities:Short-term
      investments
    
    
    (2,294
    )
    
    -Accounts
      receivable
    
    
    (146
    )
    
    (246
    )Inventories
    
    
    53
    
    
    (261
    )Prepaid
      expenses and other current assets
    
    
    (8
    )
    
    (125
    )Income
      taxes receivable/payable
    
    
    13
    
    
    1,931Other
      assets
    
    
    (18
    )
    
    87Accounts
      payable
    
    
    213
    
    
    (330
    )Accrued
      liabilities
    
    
    205
    
    
    (203
    )Accrued
      compensation and benefits
    
    
    (129
    )
    
    277Other
      long-term liabilities
    
    
    72
    
    
    50Deferred
      revenue
    
    
    23
    
    
    440Net
      cash provided by operating activities
    
    
    4,359
    
    
    3,693CASH
      FLOWS FROMINVESTING
      ACTIVITIES:Capital
      expenditures
    
    
    (178
    )
    
    (456
    )Collection
      of receivables from sales of discontinued operations
    
    
    1,543
    
    
    -Proceeds
      from sale of fixed assets
    
    
    -
    
    
    70Advances
      on notes receivable
    
    
    (2,575
    )
    
    -Proceeds
      from collection of notes receivable
    
    
    2,333
    
    
    -Purchase
      of intangible assets
    
    
    (100
    )
    
    -Net
      cash provided by (used in) investing activities
    
    
    1,023
    
    
    (386
    )CASH
      FLOWS FROMFINANCING
      ACTIVITIES:Proceeds
      from sale of common stock, net
    
    
    35,897
    
    
    -Proceeds
      from employee stock purchase plan
    
    
    34
    
    
    21Proceeds
      from exercise of stock options
    
    
    262
    
    
    748Net
      cash provided by financing activities
    
    
    36,193
    
    
    769Net
      cash provided by discontinued operations
    
    
    603
    
    
    7,181Net
      increase in cash and cash equivalents
    
    
    42,178
    
    
    11,257Cash
      and cash equivalents at beginning of period
    
    
    21,454
    
    
    4,482Cash
      and cash equivalents at end of period
    
    $
    63,632
    
    $
    15,739SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Interest
      paid
    
    $
    3
    
    $
    -Income
      taxes paid
    
    $
    156
    
    $
    14
 
 SUPPLEMENTAL
DISCLOSURE OF NON-CASH INFORMATION:
 
 During
the nine months ended March 31, 2005, the Company recorded a tax benefit from
the exercise of stock options of $315,000, which is included as an increase to
Deferred Income Taxes and an increase to Additional Paid-In
Capital.
 
 
   3
   **COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES**
 **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)**
 
 1. SIGNIFICANT
ACCOUNTING POLICIES
  *Principles
of Consolidation*
  The
accompanying interim condensed consolidated financial statements include the
accounts of Collectors Universe, Inc. and its subsidiaries (the “Company”). All
intercompany transactions and accounts have been eliminated.
  *Unaudited
Interim Financial Information*
  The
accompanying interim condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”) for interim financial reporting. These
interim condensed consolidated financial statements are unaudited and, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments and accruals) necessary to present fairly the condensed consolidated
balance sheets, consolidated results of operations, and consolidated cash flows
for the periods presented in accordance with accounting principles generally
accepted in the United States of America (“GAAP”). Operating results for the
three and nine months ended March 31, 2005 are not necessarily indicative of the
results that may be expected for the year ending June 30, 2005 or for any other
interim period during such year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have
been omitted in accordance with the rules and regulations of the SEC. These
interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
contained in the Company’s Annual Report on Form 10-K for the fiscal year ended
June 30, 2004, as amended by its Form 10-K/A filed with the SEC on January 19,
2005.
  *Reclassifications*
  Certain
prior period amounts have been reclassified to conform to the current period
presentation, including the reclassification from general and administrative
expenses to cost of revenues of occupancy, security and insurance costs which
directly relate to providing authentication and grading services.
  *Revenue
Recognition*
  Net
revenues consist primarily of fees generated from the authentication and grading
of coins, sportscards, autographs and stamps. Authentication and grading
revenues are recognized when those services have been performed by us and the
item is shipped back to the customer. Authentication and grading fees generally
are prepaid, although we offer open account privileges to larger dealers.
Advance payments received for grading services are deferred until the service is
performed and the graded item is shipped to the customer. In the case of dealers
to whom we have extended credit, we record revenues at the time the item is
shipped to the customer.
  *Use
of Estimates*
  The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates,
and such differences may be material to these condensed consolidated financial
statements.
  *Recent
Accounting Pronouncements*
  In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 123R, *Share-Based
Payment.* SFAS No.
123R will eliminate the ability to account for share-based compensation
transactions using Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
for Stock Issued to Employees,* and
instead will require that such transactions be accounted for using a
fair-value-based method with compensation costs related
 
 4
 
 
 to
share-based payments to be recognized in the financial statements. SFAS No. 123R
also requires the tax benefit associated with these share-based payments to be
classified as financing activities in the statement of cash flows rather than
operating activities as currently required. SFAS No. 123R is effective as of the
first annual period beginning after June 15, 2005. As a result, we will be
required to adopt SFAS No. 123R effective as of July 1, 2005. SFAS No. 123R
offers alternative methods of implementing this final rule. At the present time,
we have not yet determined which alternative method we will use. Regardless of
the method we choose to implement, SFAS No. 123R will result in increased
compensation expenses in our reported consolidated results of
operations.
 
 *Concentrations*
  Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash , cash
equivalents and short-term investments, accounts receivable and notes
receivables.
  Financial
Instruments and Cash Balances. Through
September 30, 2004, the Company invested its excess cash in a large uninsured
institutional money market fund. In September 2004, the Company adopted a policy
to invest its excess cash in a portfolio of high quality U.S. dollar-denominated
money market type or similar securities, and appointed a new portfolio manager.
At March 31, 2005, the Company’s excess funds of approximately $63 million were
primarily invested in high quality commercial paper and a money market fund. In
addition, at March 31 2005, the Company had approximately $3 million in a
non-interest bearing bank account for general day-to-day
operations.
  Accounts
Receivable . A
substantial portion of accounts receivable is due from collectibles dealers. 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 offset the ability
of the debtor to pay their account receivable balances. Based on such review,
the Company makes an allowance for doubtful accounts, when necessary. The
allowance for doubtful accounts receivable was $62,000 and $30,000 at March 31,
2005 and June 30, 2004, respectively.
  Customers . The
authentication and grading of collectible coins accounted for approximately 70%
and 66% of our net revenues for the nine months ended March 31, 2005 and 2004,
respectively. In the nine months ended March 31, 2005, one of our coin segment
customers accounted for approximately 10% of the Company’s net revenues.
  *Stock
Option Plans*
  At March
31, 2005, the Company had three stock-based compensation plans. The following
table illustrates the effect on net income and net income per share if the
Company had applied the fair value recognition provisions of SFAS No. 123, as
amended by SFAS No. 148, to stock-based employee compensation:
  (in
      thousands,
      except
      per share data)
      (unaudited)
    
    (in
      thousands,
      except
      per share data)
      (unaudited)**Three
      Months Ended**
      **March
      31,**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Net
      income, as reported
    
    $
    1,469
    
    $
    992
    
    $
    3,632
    
    $
    945Add:
      Stock-based employee compensation expense included inreportednet
      income, net of related tax effects
    
    
    16
    
    
    -
    
    
    16
    
    
    -Deduct:
      Total stock-based employee compensation expense
      determinedunder
      fair value based method for awards,
      net of
      related tax effects
    
    
    (125
    )
    
    30
    
    
    (273
    )
    
    (242
    )Pro
      forma net income
    
    $
    1,360
    
    $
    1,022
    
    $
    3,375
    
    $
    703Net
      income per common share - basic:As
      reported
    
    $
    0.21
    
    $
    0.16
    
    $
    0.56
    
    $
    0.15Pro
      forma
    
    $
    0.19
    
    $
    0.17
    
    $
    0.52
    
    $
    0.11Net
      income per common share - diluted:As
      reported
    
    $
    0.19
    
    $
    0.16
    
    $
    0.52
    
    $
    0.15Pro
      forma
    
    $
    0.18
    
    $
    0.16
    
    $
    0.48
    
    $
    0.11
 
   5
  The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model using the following weighted-average
assumptions:
  **Three
      Months Ended**
      **March
      31,**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Dividend
      yield
    
    
    -
    
    
    -
    
    
    -
    
    
    -Expected
      volatility
    
    
    75.00
    %
    
    -
    
    
    74.31
    %
    
    80.00
    %Risk-free
      interest rate
    
    
    3.66
    %
    
    -
    
    
    2.92
    %
    
    1.23
    %Expected
      lives
    
    
    2
      years
    
    
    -
    
    
    2
      years
    
    
    10
      months
 
 2. CASH,
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
 
 At March
31, 2005, cash, cash equivalents and short-term investments included
approximately $57 million of trading securities primarily comprising high
quality commercial paper issued by U.S. or foreign companies. The minimum credit
quality of the portfolio must be rated no less than single-A long term or A1/P1
short term and the portfolio must contain no more than 25% exposure to
securities of issuers whose principal business activities are in the same
industry. In addition, the weighted average maturity of the portfolio must not
exceed 90 days. Such trading securities are carried at market value in the
accompanying condensed consolidated balance sheet at March 31, 2005. Unrealized
gains on such trading securities were approximately $83,000 at March 31,
2005.
 
 3. NOTE
RECEIVABLE
  During
the second and third quarters of fiscal 2005, the Company made cash advances to
its largest customer, secured by certain collectible coins that the customer
submitted to us for authentication and grading. In addition, at March 31, 2005,
the Company had committed to make additional advances to this customer up to
approximately $865,000. The highest amount of the advances outstanding at any
one time, since the inception of this arrangement, totaled approximately
$2,100,000 and the outstanding principal balance at March 31, 2005 was $242,000.
Principal reduction payments are required at the time the Company returns the
authenticated and graded coins to the customer. Current advances bear interest
at a rate based on the Prime Rate and the outstanding borrowings, together with
accrued, but unpaid interest, are required to be repaid by the customer by no
later than June 30, 2005.
  4. INVENTORIES
  Inventories
      consist of the following:(in
      thousands)**March
      31,**
    
    **June
      30,****2005**
      **(unaudited)**
    
    **2004**
      ****Coins
    
    $
    182
    
    $
    253Other
      collectibles
    
    
    58
    
    
    58Grading
      raw materials consumable inventory
    
    
    167
    
    
    194407
    
    
    505Less
      inventory reserve
    
    
    (8
    )
    
    (53
    )Inventories,
      net
    
    $
    399
    
    $
    452
 
  6
  5. PROPERTY
AND EQUIPMENT
 
 Property
      and equipment consist of the following:(in
      thousands)**March
      31,**
    
    **June
      30,****2005**
      **(unaudited)**
    
    **2004**
      ****Grading
      reference sets
    
    $
    62
    
    $
    57Computer
      hardware and equipment
    
    
    1,034
    
    
    997Computer
      software
    
    
    900
    
    
    867Equipment
    
    
    1,356
    
    
    1,283Furniture
      and office equipment
    
    
    677
    
    
    659Leasehold
      improvements
    
    
    434
    
    
    422Trading
      card reference library
    
    
    52
    
    
    524,515
    
    
    4,337Less
      accumulated depreciation and amortization
    
    
    (3,639
    )
    
    (3,292
    )Property
      and equipment, net
    
    $
    876
    
    $
    1,045
 
 6. ACCRUED
LIABILITIES
  Accrued
      liabilities consist of the following:(in
      thousands)**March
      31,**
    
    **June
      30,****2005**
      **(unaudited)**
    
    **2004**
      ****Warranty
      Costs
    
    $
    720
    
    $
    492Professional
      fees
    
    
    339
    
    
    546Other
    
    
    596
    
    
    313$
    1,655
    
    $
    1,351
 
 The following table presents the changes in the Company’s warranty reserves
during the nine months ended March 31, 2005 and 2004:
  (in
      thousands)
      (unaudited)**Nine
      Months Ended**
      **March
      31,**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**Warranty
      reserve, beginning of period
    
    $
    492
    
    $
    304Charged
      to cost of revenue
    
    
    406
    
    
    498Payments
    
    
    (178
    )
    
    (381
    )Warranty
      reserve, end of period
    
    $
    720
    
    $
    421
 
 7. DISCONTINUED
OPERATIONS
  As
previously disclosed, on December 4, 2003, the Company’s Board of Directors
authorized management to implement a plan to focus the Company’s financial and
management resources, and collectibles expertise, on the operations and growth
of its authentication and grading businesses and to divest the Company’s
collectibles auctions and direct sales businesses.
  Therefore,
in accordance with SFAS No. 144, *Accounting
for the Impairment or Disposal of Long-Lived Assets* , the
assets and related liabilities of those collectibles sales businesses, which
were comprised of Bowers and Merena, Superior Sports Auctions, Kingswood Coin
Auctions, Odyssey Publications, Lyn Knight Currency Auctions and DHRC, were
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, 2005 and June 30, 2004 and
   7
  condensed
consolidated statements of operations for the three and nine-month periods ended
March 31, 2005 and 2004. The Company sold 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 included in
the accompanying condensed consolidated statements of operations, are as
follows:
  (in
      thousands)
      (unaudited)
      **Three
      Months Ended**
    
    (in
      thousands)
      (unaudited)
      **Nine
      Months Ended****March
      31,**
      **2005**
    
    **March
      31,**
      **2004**
    
    **March
      31,**
      **2005**
    
    **March
      31,**
      **2004**Net
      revenues
    
    $
    73
    
    $
    4,789
    
    $
    343
    
    $
    23,540Loss
      before income taxes
    
    $
    (2
    )
    $
    (1,578
    )
    $
    (294
    )
    $
    (2,833
    )Gain
      (loss) on sale ofdiscontinued
      business
    
    
    (2
    )
    
    1,872
    
    
    162
    
    
    1,872(4
    )
    
    294
    
    
    (132
    )
    
    (961
    )Income
      tax (benefit) expense
    
    
    (1
    )
    
    93
    
    
    (53
    )
    
    (427
    )Net
      income (loss) fromdiscontinued
      operations
    
    $
    (3
    )
    $
    201
    
    $
    (79
    )
    $
    (534
    )
  The
(loss) and gain realized on the sales of the discontinued businesses in,
respectively, the three-month and nine-month periods ended March 31, 2005
related to consideration that became determinable in those periods, partially
offset by adjustments to severance obligations directly related to the
disposition of certain of the discontinued businesses.
  The
following table contains summary balance sheet information with respect to the
net assets and liabilities of the collectibles sales businesses held for sale
that are included in the accompanying condensed consolidated balance sheets:
  **(in
      thousands)****March****31,**
      **2005**
      **(unaudited)**
    
    **June
      30,**
      **2004**
      ****Current
      assets:Accounts
      receivable
    
    $
    -
    
    $
    379Inventories
    
    
    294
    
    
    657Consignment
      advances
    
    
    30
    
    
    45Notes
      receivable
    
    
    91
    
    
    186$
    415
    
    $
    1,267Non-current
      assets:Notes
      receivable, net of current portion
    
    $
    65
    
    $
    117$
    65
    
    $
    117Current
      liabilities:Consignors
      payable
    
    $
    1
    
    $
    1Other
      current liabilities
    
    
    53
    
    
    275$
    54
    
    $
    276
 
 In
connection with an accounts receivable balance that existed for one of the
discontinued businesses and for which the Company had established a bad debt
reserve for a substantial portion of such receivable in prior periods, the
Company took ownership of certain customer-owned inventory in satisfaction of a
part of its receivable balance. Such inventory is classified as inventory of
discontinued businesses at March 31, 2005.
 
 
  8
  8. INCOME
TAXES
  Income
tax expense was provided for at a 40% rate for the three and nine months ended
March 31, 2005. This rate reflects the expected federal and state statutory rate
of approximately 39%, adjusted for certain permanent tax differences. In the
three and nine months ended March 31, 2004, income tax expense was provided for
at approximately 43% and 42%, respectively, which rate reflected the expected
federal and state statutory rate, adjusted for certain permanent differences in
those periods.
  9. NET
INCOME PER SHARE
  (in
      thousands,
      except
      per share data)
      (unaudited)
    
    (in
      thousands,
      except
      per share data)
      (unaudited)**Three
      Months Ended**
      **March
      31,**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Income
      from continuing operations
    
    $
    1,472
    
    $
    791
    
    $
    3,711
    
    $
    1.479Loss
      from discontinued operations, net of gains on sales ofdiscontinued
      businesses (net of income taxes)
    
    
    (3
    )
    
    201
    
    
    (79
    )
    
    (534
    )Net
      income
    
    $
    1,469
    
    $
    992
    
    $
    3,632
    
    $
    945Income
      (loss) per basic share:From
      continuing operations
    
    $
    0.21
    
    $
    0.13
    
    $
    0.57
    
    $
    0.24From
      discontinued operations, net of gains
      on
      sales of discontinued businesses (net of income taxes)
    
    
    -
    
    
    0.03
    
    
    (0.01
    )
    
    (0.09
    )Net
      income
    
    $
    0.21
    
    $
    0.16
    
    $
    0.56
    
    $
    0.15Income
      (loss) per diluted share:From
      continuing operations
    
    $
    0.19
    
    $
    0.13
    
    $
    0.53
    
    $
    0.23From
      discontinued operations, net of gains
      on
      sales of discontinued businesses (net of income taxes)
    
    
    -
    
    
    0.03
    
    
    (0.01
    )
    
    (0.08
    )Net
      income
    
    $
    0.19
    
    $
    0.16
    
    $
    0.52
    
    $
    0.15Weighted
      average shares outstanding:Basic
    
    
    7,113
    
    
    6,135
    
    
    6,523
    
    
    6,160Effect
      of dilutive shares
    
    
    458
    
    
    184
    
    
    445
    
    
    146Diluted
    
    
    7,571
    
    
    6,319
    
    
    6,968
    
    
    6,306
 
 Options and warrants to purchase approximately 414,000 shares of common stock
for the three and nine months ended March 31, 2005, respectively, and
approximately 368,000 and 460,000 for the three and nine months ended March 31,
2004 at exercise prices of up to $24 per share, were not included in the
computation of diluted earnings per share because the options’ and warrants’
exercise prices were greater than the average market price for the respective
period.
 
 10. B USINESS
SEGMENTS
  Operating
segments are defined as the components or “segments” of an enterprise for which
separate financial information is available that is evaluated regularly by the
Company’s chief operating decision maker, or decision-making group, in deciding
how to allocate resources to and in assessing performance of those components or
“segments.” The Company’s chief operating decision-maker is its Chief Executive
Officer. The operating segments of the Company are organized based on the
respective services that they offer to customers of the Company. Similar
operating segments have been aggregated to reportable operating segments based
on having similar services, types of customers, and other criteria that are set
forth in SFAS No. 131, *Disclosures
about Segments of an Enterprise and Related Information.*
  For our
continuing operations, we operate principally in three reportable service
segments: coins, sportscards and other high-value collectibles. Services
provided by these segments include authentication, grading, publication and
advertising. Effective, January 1, 2005, the Company introduced and commenced
the
   9
  operations
of a new currency grading service. Our new currency grading service did not
generate any revenues in the quarter; however, the costs of the operations of
that service have been included as part of the operating loss of the other
collectibles segment.
  We
allocate operating expenses to each service segment based upon activity levels.
We do not allocate specific assets to these service segments. All of our sales
and identifiable assets are located in the United States.
  (in
      thousands)
    
    (in
      thousands)**Three
      Months Ended**
      **March
      31,**
    
    **Nine
      Months Ended**
      **March
      31,**Net
      revenues from external customers
    
    
    **2005**
    
    
    **2004**
    
    
    **2005**
    
    
    **2004**Coins
    
    $
    6,386
    
    $
    4,659
    
    $
    17,487
    
    $
    12,241Sportscards
    
    
    2,070
    
    
    1,734
    
    
    6,093
    
    
    5,165Other
    
    
    499
    
    
    503
    
    
    1,552
    
    
    1,255Total
      revenue
    
    
    8,955
    
    
    6,896
    
    
    25,132
    
    
    18,661Operating
      income(loss)
      before unallocated expensesCoins
    
    $
    3,496
    
    $
    2,449
    
    $
    9,254
    
    $
    6,005Sportscards
    
    
    286
    
    
    194
    
    
    924
    
    
    683Other
    
    
    (333
    )
    
    9
    
    
    (573
    )
    
    (77
    )Total
    
    
    3,449
    
    
    2,652
    
    
    9,605
    
    
    6,611Legal
      settlement
    
    
    -
    
    
    -
    
    
    (500
    )
    
    -Unallocated
      operating expenses
    
    
    (1,221
    )
    
    (1,276
    )
    
    (3,308
    )
    
    (4,059
    )Consolidated
      operating income
    
    $
    2,228
    
    $
    1,376
    
    $
    5,797
    
    $
    2,552
 
  11. LEGAL
SETTLEMENT
  As
previously reported, the Company was named as a co-defendant in a lawsuit
brought by Real Legends, Inc. (Plaintiff), against When It Was a Game (“WIWAG”),
a sports card dealer. In that lawsuit Plaintiff was seeking alleged damages to
its business of $4 million, alleged to have arisen out of actions taken by
WIWAG, together with punitive damages. Plaintiff also alleged that the Company
was liable for those damages, because a Company employee had introduced WIWAG to
Plaintiff.
  On
January 26, 2005, the Company and Plaintiff settled that lawsuit. Pursuant to
the settlement, all claims against the Company were released by Plaintiff and
the Company paid Plaintiff the sum of $600,000 on or about February 23, 2005.
The cost of the settlement to the Company, net of a $100,000 insurance
reimbursement, was $500,000 which was recorded as part of operating expenses in
the Company’s condensed consolidated statements of operations for the nine
months ended March 31, 2005 and was accrued as a liability as of December 31,
2004, at which time it had been determined that a settlement of the suit was
probable and the estimated cost to the Company of the settlement had become
determinable.
  The
Company is named, from time to time, as a defendant in lawsuits that arise in
the ordinary course of its business. Management of the Company believes that
none of the lawsuits currently pending against it is likely to have a material
adverse effect on the Company.
  12. EQUITY
OFFERING
 
  During
the quarter ended March 31, 2005, the Company completed a firm commitment
underwritten public offering of a total of 3,450,000 million shares of its
common stock, of which a total of 2,195,856 shares were sold by the Company, and
the remaining shares were sold by David G. Hall and Van D. Simmons, at a public
offering price of $17.50 per share. Messrs. Hall and Simmons, who founded the
Company in 1986, are directors of the Company and Mr. Hall also is the Company’s
President and Chief Operating Officer. The proceeds (net of the underwriting
discount) to the Company were approximately $36,300,000. The estimated offering
expenses were approximately $675,000, of which approximately $420,000 had been
paid by March 31, 2005. The Company did not receive any of the net proceeds from
the sale of shares by Messrs. Hall and Simmons.
 
 10
 ITEM
2.  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND
RESULTS OF OPERATIONS
  **Forward-Looking Statements**
  The
discussion in this Item 2 and in Item 3 of this Quarterly Report on Form 10-Q
includes “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of the
Securities Exchange Act of 1934, as amended (the “1934 Act”). Those Sections of
the 1933 Act and 1934 Act provide a “safe harbor” for forward-looking statements
to encourage companies to provide information about their expected future
financial performance, so long as they provide meaningful, cautionary statements
identifying important factors that could cause actual results in the future to
differ from those set forth in its forward-looking statements. Other than
statements of historical fact, all statements in this Report and, in particular,
any projections of or statements as to our expectations or beliefs concerning
our future financial performance or future financial condition or as to trends
in our business or our markets, are forward-looking statements. Forward-looking
statements often include the words "believe," "expect," "anticipate," "intend,"
"plan," "estimate," "project," or words of similar meaning, or future or
conditional verbs such as "will," "would," "should," "could," or "may." Our
actual financial performance in future periods may differ, possibly
significantly, from our currently expected financial performance that is set
forth in the forward-looking statements contained in this Report. The sections
below entitled “Factors That Can Affect our Financial Position and Operating
Results” and “Risks and Uncertainties That Could Affect our Future Financial
Performance” describe some, but not all, of the factors and the risks and
uncertainties that could cause these differences, and you are urged to read
those sections of this Report in their entirety. On February 16, 2005, we filed
a Prospectus for our recently completed public offering with the SEC pursuant to
Rule 424(b) under the Securities Act of 1933, as amended. You should also review
the Section of that Prospectus entitled “Risk Factors” which contains additional
information regarding risks and uncertainties that could adversely affect our
future financial performance.
  Due to
these and other possible uncertainties and risks, readers are cautioned not to
place undue reliance on the forward-looking statements contained in this Report,
which speak only as of the date of this Report, or to make predictions about
future performance based solely on historical financial performance. We also
disclaim any obligation to update forward-looking statements contained in this
Report or in the Prospectus mentioned above.
  **Our Business**
  We
provide authentication and grading services and other services to dealers and
collectors of high value collectible coins, sportscards, autographs and stamps,
the market values of which can range from $40 to over $1 million, depending
principally on their rarity, age or association with famous individuals or
historical events, and their authenticity and state of preservation, or quality.
We believe that, because our authentication and grading services provide
independent confirmation to dealers and collectors of the authenticity and
quality of high value collectibles, we are able to enhance their marketability
and, thereby, provide increased liquidity to the dealers and collectors that
own, and buy and sell, these types of collectibles.
  We
principally generate revenues from the fees paid by dealers and collectors for
our authentication and grading services. To a much lesser extent, we generate
revenues from sales of (i) advertising on our websites and in printed
publications and collectibles price guides; (ii) historical data and
information about the collectibles that we have authenticated or graded; and
(iii) memberships in our collectors clubs, which entitle subscribers to
receive authentication and grading services and access to our collectibles
publications and historical data.
  The
following table provides information regarding the respective numbers of coins,
sportscards, autographs and stamps that we authenticated or graded in the three
and nine-month periods ended March 31, 2005 and 2004, and their values as
estimated by the dealers and collectors who submitted them to us for
authentication and grading.
  **Units
      Processed**
      **Three
      Months Ended March 31,**
    
    **Estimated
      Value (000)**
      **Three
      Months Ended March 31, 2005****2005**
    
    **2004**
    
    **2005**
    
    **2004**Coins
    
    
    449,000
    
    
    59
    %
    
    297,000
    
    
    52
    %
    $
    321,632
    
    
    92
    %
    $
    291,919
    
    
    90
    %Sportcards
    
    
    283,000
    
    
    38
    %
    
    242,000
    
    
    43
    %
    
    17,110
    
    
    5
    %
    
    17,074
    
    
    5
    %Autographs
    
    
    15,000
    
    
    2
    %
    
    25,000
    
    
    4
    %
    
    6,466
    
    
    2
    %
    
    11,400
    
    
    4
    %Stamps
    
    
    7,000
    
    
    1
    %
    
    4,000
    
    
    1
    %
    
    4,051
    
    
    1
    %
    
    3,016
    
    
    1
    %Total
    
    
    754,000
    
    
    100
    %
    
    568,000
    
    
    100
    %
    $
    349,259
    
    
    100
    %
    $
    323,409
    
    
    100
    %
 
  11
  
 **Units
      Processed**
      **Nine
      Months Ended March 31,**
    
    **Estimated
      Value (000)**
      **Nine
      Months Ended March 31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Coins
    
    
    1,241,000
    
    
    59
    %
    
    864,000
    
    
    52
    %
    $
    897,853
    
    
    91
    %
    $
    689,045
    
    
    89
    %Sportcards
    
    
    801,000
    
    
    38
    %
    
    730,000
    
    
    44
    %
    
    48,989
    
    
    5
    %
    
    51,289
    
    
    7
    %Autographs
    
    
    54,000
    
    
    2
    %
    
    48,000
    
    
    3
    %
    
    23,424
    
    
    2
    %
    
    21,888
    
    
    3
    %Stamps
    
    
    19,000
    
    
    1
    %
    
    12,000
    
    
    1
    %
    
    14,579
    
    
    2
    %
    
    9,805
    
    
    1
    %Total
    
    
    2,115,000
    
    
    100
    %
    
    1,654,000
    
    
    100
    %
    $
    984,845
    
    
    100
    %
    $
    772,027
    
    
    100
    %
  During
the period from 1999 through the latter part of fiscal 2004, we also were
engaged in the business of marketing and selling collectible coins, sportscards
and sports entertainment and historical memorabilia. Most of those sales were
made at multi-venue auctions that were conducted by our collectibles sales
divisions. We also sold collectible coins, at retail, by direct sales
methods.
  At the
authorization of our Board of Directors, in December 2003 we adopted a plan to
focus our financial and managerial resources and collectibles expertise on the
operation and growth of our authentication and grading and other collectibles
service businesses, and to divest our collectibles auctions and direct sales
businesses.
  Pursuant
to that plan, during fiscal 2004 we sold our collectibles auction businesses and
terminated our direct sales collectible coins business. However, we retained the
collectibles inventories and the outstanding accounts receivables of those
businesses, substantially all of which had been liquidated by March 31,
2005.
  In
accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144, the
assets and related liabilities of the collectible sales businesses have been
classified as held for sale and their related operating results have been
classified as discontinued operations.
  As a
result of our divestiture of our collectibles auctions and sales businesses, the
discussion that follows focuses almost entirely on our authentication and
grading businesses, which comprise our continuing operations.
  **Critical Accounting Policies and Estimates**
  *General* . In
accordance with accounting principles generally accepted in the United States of
America (“GAAP”), we record certain of our assets at the lower of cost or fair
value. In determining the fair value of those assets, principally inventories
and accounts receivable, we must make judgments, estimates and assumptions
regarding circumstances or trends that could affect the value of those assets,
such as economic conditions or trends that could impact our ability to realize
the amounts at which our inventories are recorded, or to fully collect the
accounts receivable shown, on our balance sheet. Those judgments, estimates and
assumptions are made based on current information available to us at that time.
Many of those conditions, trends and circumstances, however, are outside of our
control and, if changes were to occur in economic conditions or trends on which
our judgments or estimates were based, or unanticipated events were to occur, we
may be required under GAAP to adjust our earlier estimates that are affected by
those changes. Changes in such estimates may require that we reduce the carrying
value of the affected assets on our balance sheet (which are commonly referred
to as “write-downs” of the assets involved).
  It is our
practice to establish reserves or allowances to record such downward adjustments
or “write-downs” in the carrying value of assets such as accounts receivable and
inventory. Such write-downs are recorded as charges to income or increases in
expense in our statement of operations in the periods when those reserves or
allowances are established or increased to take account of changed conditions or
events. As a result, our judgments, estimates and assumptions about future
events, and changes in the conditions, events or trends upon which those
estimates and judgments were based, can and will affect not only the amounts at
which we record those assets on our balance sheet, but also our results of
operations.
  The
decisions as to the timing of adjustments or write-downs of this nature also
require subjective evaluations or assessments about the effects and duration of
events or changes in circumstances. For example, it is difficult to predict
whether events, such as occurred on September 11, 2001, or increases in interest
rates or economic slowdowns, will have short or longer term consequences for our
business, and it is not uncommon for it to take some time after the occurrence
of an event or the onset of changes in economic circumstances for their full
effects to be measured. Therefore, management makes such estimates based upon
the information available at that time and reevaluates and adjusts its reserves
and allowances for potential write-downs on a quarterly basis.
   12
  Under
GAAP, businesses also must make estimates or judgments regarding the periods
during which, and also regarding the amounts at which, sales are recorded. Those
estimates and judgments will depend on a number of factors, including whether
customers are granted rights to return the products or reject or adjust the
payment for the services provided to them (return rights). As a general rule,
GAAP will require a business that grants its customers return rights to
establish a reserve or allowance for product returns by means of a reduction in
the amount at which its sales are recorded, based primarily on the nature,
extent and duration of those rights and its historical return
experience.
  In making
our estimates and assumptions, we follow GAAP in order to enable us to make fair
and consistent estimates of the fair value of assets and to establish adequate
reserves or allowances for possible write-downs in their carrying values. Set
forth below is a summary of the accounting policies that we believe are material
to an understanding of our financial condition and results of
operations.
  *Revenue
Recognition Policies* . We
record revenue at the time of shipment of the graded collectible to the
customer. Our authentication and grading customers generally prepay our
authentication and grading fees when they submit their collectibles to us for
authentication and grading. We record those prepayments as deferred revenue
until their graded collectibles are shipped back to them. At that time, we
record the revenue from the authentication and grading services we have
performed for the customer and deduct this amount from deferred
revenue.
  *Accounts
Receivable and the Allowance for Doubtful Accounts.* In the
normal course of business, we extend payment terms to many of the larger, more
creditworthy collectibles dealers who submit collectibles to us for
authentication and grading on a recurring basis. We regularly review their
accounts, estimate the amount of, and establish an allowance for, uncollectible
amounts in each quarterly period. The amount of that allowance is based on
several factors, including the age and extent of significant past due accounts,
and economic conditions or trends that may affect the ability of account debtors
to pay their accounts receivable balances. Estimates of uncollectible amounts
are reviewed each quarter and, based on that review, are revised to reflect
changed circumstances or conditions in the quarterly period they become known.
For example, if the financial condition of certain dealers or economic
conditions were to deteriorate, adversely affecting their ability to make
payments on their accounts, increases in the allowance may be required. Since
the allowance is created by recording a charge against income that is recorded
in general and administrative expenses, an increase in the allowance will cause
a decline in our operating results in the period when the increase is
recorded.
  *Inventory
Valuation Reserve* . Our
collectibles inventories are valued at the lower of cost or market and have been
reduced by an inventory valuation allowance to provide for declines in the
estimated value of those inventories. The amount of the allowance is determined
on the basis of market knowledge, historical experience and estimates concerning
future economic conditions that may impact the sales values of our collectibles
inventories. Additionally, due to the relative uniqueness of some of the
collectibles included in our collectibles inventory, their valuation often
involves judgments that are more subjective than the judgments involved in
valuing more standardized products sold by other businesses. If events or
circumstances, such as changes in economic conditions, occur that we believe
will make it more difficult, or will cause us to reduce the prices at which we
will be able, to sell the collectibles, it may become necessary to increase the
allowance. Increases in this allowance will cause a decline in operating
results, because such increases are recorded by charges against income.
  *Grading
Warranty Costs* . We
offer a warranty covering the coins and sportscards we authenticate and grade.
Under the warranty, if any coin or sportscard that was previously graded by us
is later submitted to us for re-grading and either (i) receives a lower grade
upon that resubmittal or (ii) is determined not to have been authentic, we will
offer to purchase the coin or sportscard or pay the difference in value of the
item at its original grade as compared with its lower grade. However, this
warranty is voided if the coin or sportscard, upon resubmittal to us, is not in
the same tamper resistant clear plastic holder in which it was placed at the
time we last graded it or shows signs of tampering. We accrue for estimated
warranty costs based on historical trends and related experience. To date our
reserves have proved to be adequate. However, if warranty claims were to
increase in relation to historical trends and experience, we would be required
to increase our warranty reserves and incur additional charges that would have
the effect of reducing our income in those periods during which the warranty
reserve is increased.
   13
  **Factors That Can Affect our Financial Position and
Operating Results**
  *Factors
that Can Affect our Revenues and Cash Flows* . The
provision of authentication and grading services has provided relatively stable
and predictable cash flows for us, as the fees for most of the authentication
and grading submissions we receive are prepaid. In the nine months ended March
31, 2005 and 2004, respectively, we generated cash of $4,359,000 (which is net
of investments of $2,294,000 in short-term investments, which had maturities
greater than 90 days when purchased) and $3,693,000, respectively, from our
continuing operations.
  Additionally,
during the nine months ended March 31, 2005, we generated cash of $2,146,000
from the sales of our collectibles sales businesses and the liquidation of the
inventories and accounts receivable of those businesses. As a result, at March
31, 2005, the remaining assets of those businesses, which we are in the process
of liquidating, totaled approximately $480,000, as compared to $1,384,000 at
June 30, 2004.
  *Factors
Affecting our Gross Profit Margins* . The
gross profit margins on authentication and grading submissions are primarily
affected by the mix of collectibles submitted to us for grading (i) between
coins and sportscards and (ii) between vintage or “classic” coins and
sportscards, on the one hand, and modern coins and sportscards, on the other
hand. Generally, the prices for authentication and grading of collectible coins
are higher than those charged for the grading of sportscards, autographs or
stamps. In addition, our fees for authentication and grading of coins and
sportscards vary depending on the “turn-around” time requested by our customers,
because we charge higher fees for faster service times. Since, as a general
rule, customers request faster turn-around times for vintage or classic coins
and sportscards than they do for modern submissions, the mix of submissions
between vintage and modern collectibles also affects our profit
margin.
  *Impact
of Economic Conditions on Financial Performance* . We
generate substantially all of our revenues from the collectibles market.
Accordingly, our operating results are affected by that market’s financial
performance, which depends, to a great extent, on (i) discretionary
consumer spending and, hence, on the availability of disposable income, (ii) on
other economic conditions, including prevailing interest and inflation rates,
which affect consumer confidence, and (iii) the performance and volatility
of the precious metals and stock markets. These conditions primarily affect the
volume of purchases and sales of collectibles which, in turn, affects the volume
of authentication and grading submissions to us, because our services facilitate
commerce in collectibles. Accordingly, factors such as improving economic
conditions which usually result in increases in disposable income and consumer
confidence, and volatility in and declines in the prices of stocks and a
weakening in the value of the U.S. Dollar, which lead investors to increase
their purchases of precious metals, such as gold bullion and other coins, and
other collectibles, usually result in increases in submissions of collectibles
for our services. By contrast, the volume of collectibles sales and purchases
and, therefore, the volume of authentication and grading submissions, usually
decline during periods characterized by recessionary economic conditions and by
declines in disposable income and consumer confidence or by increasing stock
prices and relative stability in the stock markets. We believe that the recent
strengthening of the economy in the United States, together with the recent
weakening of the U.S. Dollar, resulted in an increased demand for gold and other
precious metals and, therefore, contributed to the increase in our
authentication and grading revenues during the nine months ended March 31,
2005.
   14
  **Results of Operations**
  The
following table sets forth certain financial data, expressed as a percentage of
net revenues, derived from our statements of operations for the respective
periods indicated below:
  **Three
      Months Ended**
      **March
      31**
    
    **Nine
      Months Ended March 31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Net
      revenues
    
    
    100.0
    %
    
    100.0
    %
    
    100.0
    %
    
    100.0
    %Cost
      of revenues
    
    
    36.4
    %
    
    37.7
    %
    
    36.2
    %
    
    40.2
    %Gross
      profit
    
    
    63.6
    %
    
    62.3
    %
    
    63.8
    %
    
    59.8
    %Operating
      expenses:Selling
      and marketing expenses
    
    
    9.8
    %
    
    11.4
    %
    
    10.3
    %
    
    12.4
    %General
      and administrative expenses
    
    
    28.9
    %
    
    31.0
    %
    
    28.5
    %
    
    33.7
    %Settlement
      of lawsuit
    
    
    -
    
    
    -
    
    
    2.0
    %
    
    -Total
      operating expenses
    
    
    38.7
    %
    
    42.4
    %
    
    40.8
    %
    
    46.1
    %Operating
      income
    
    
    24.9
    %
    
    19.9
    %
    
    23.0
    %
    
    13.7
    %Interest
      income, net
    
    
    2.7
    %
    
    0.2
    %
    
    1.7
    %
    
    0.1
    %Other
      expenses
    
    
    (0.2
    %)
    
    -
    
    
    (0.1
    %)
    
    (0.1
    %)Income
      before provision for income taxes
    
    
    27.4
    %
    
    20.1
    %
    
    24.6
    %
    
    13.7
    %Provision
      for income taxes
    
    
    (11.0
    %)
    
    (8.6
    %)
    
    (9.9
    %)
    
    (5.8
    %)Income
      from continuing operations after income taxes
    
    
    16.4
    %
    
    11.5
    %
    
    14.7
    %
    
    7.9
    %Income
      (loss) from discontinued operations, net of gain on salesof
      discontinued businesses (net of income taxes)
    
    
    -
    
    
    2.9
    %
    
    (0.3
    %)
    
    (2.9
    %)Net
      income
    
    
    16.4
    %
    
    14.4
    %
    
    14.4
    %
    
    5.0
    %
  *Net
Revenues*
  Net
revenues consist primarily of fees generated from the authentication and grading
of high-value coins, sportscards, autographs and stamps and, to a much lesser
extent, revenues from the publication of collectibles magazines and the sale of
advertising for placement on our websites and in our magazines and from the sale
of collectors club memberships. Net revenues are determined net of discounts and
allowances.
  The
following table sets forth information regarding the net revenues attributable
to the authentication and grading of coins, sportscards and other collectibles
(principally autographs and stamps), respectively, in the three and nine months
ended March 31, 2005 and 2004:
  **Three
      Months Ended March 31,**
    
    **Percentage**
      **Increase****2005**
    
    **2004**
    
    **2005
      over 2004****Amount**
    
    **%
      of Net Revenues**
    
    **Amount**
    
    **%
      of Net Revenues**Coins
    
    $
    6,386,000
    
    
    71.3
    %
    $
    4,659,000
    
    
    67.6
    %
    
    37.1
    %Sportscards
    
    
    2,070,000
    
    
    23.1
    %
    
    1,734,000
    
    
    25.1
    %
    
    19.4
    %Other
      collectibles
    
    
    499,000
    
    
    5.6
    %
    
    503,000
    
    
    7.3
    %
    
    (0.1
    %)Net
      revenues
    
    $
    8,955,000
    
    
    100.0
    %
    $
    6,896,000
    
    
    100.0
    %
    
    29.9
    %
 
 **Nine
      Months Ended March 31,**
    
    **Percentage**
      **Increase****2005**
    
    **2004**
    
    **2005
      over 2004****Amount**
    
    **%
      of Net Revenues**
    
    **Amount**
    
    **%
      of Net Revenues**Coins
    
    $
    17,487,000
    
    
    69.6
    %
    $
    12,241,000
    
    
    65.6
    %
    
    42.9
    %Sportscards
    
    
    6,093,000
    
    
    24.2
    %
    
    5,165,000
    
    
    27.7
    %
    
    18.0
    %Other
      collectibles
    
    
    1,552,000
    
    
    6.2
    %
    
    1,255,000
    
    
    6.7
    %
    
    23.7
    %Net
      revenues
    
    $
    25,132,000
    
    
    100.0
    %
    $
    18,661,000
    
    
    100.0
    %
    
    34.7
    %
  
 15
 The
increases in net revenues in the three and nine months ended March 31, 2005, as
compared to the same respective periods of 2004, were primarily attributable to
increases of 33% and 28%, respectively, in the numbers of collectibles
authenticated and graded in those three and nine-month periods this year, as
compared to those same periods last year. Also contributing to the increases in
net revenues were increases in sales of advertising and collectors club
memberships of approximately $200,000 and $850,000, in the three and nine months
ended March 31, 2005, as compared to the same periods of the prior year,
respectively, and an increase in the average of the service fees paid for the
authentication and grading of collectibles. That increase in the average of the
service fees paid for authentication and grading was attributable to
(i) the 44% increase in coin authentication grading submissions, the fees
for which are higher than for the grading of sportscards and other collectibles,
and (ii) an increase in the coin authentication and grading submissions for
which customers requested faster turn around times for which our fees are higher
than for other levels of service. As a result, although coins represented 59% of
the number of collectibles authenticated and graded by us in the third quarter
this year, coin submissions accounted for 71% of our net revenues in that
quarter, as compared to 52% of the number of collectibles we authenticated and
graded and 68% of the net revenues that we generated in the three months ended
March 31, 2004. For the nine months ended March 31, 2005, coins represented 59%
of the number of collectibles that we authenticated and graded, and 70% of our
net revenues, as compared to 52% of the number of collectibles that we
authenticated and graded and 66% of the net revenues that we generated in the
nine months ended March 31, 2004.
  We
believe that the increase in the demand for our coin grading services was
largely attributable to two factors: (i) an increase in purchases and sales
of collectible and gold bullion coins by investors, which we believe was due in
large part to a shift by investors of some of their funds from marketable
securities to tangible assets primarily in response to the decline in the value
of the U.S. Dollar, and uncertainties and volatility in the stock markets, and
(ii) new marketing programs that we initiated in the second half of fiscal
2004.
  *Gross
Profit*
  Gross
profit is calculated by subtracting the cost of revenues from net revenues. Cost
of revenues primarily consist of labor to grade and authenticate coins and
sportscards, production and printing costs, credit cards fees, warranty expense
and occupancy, security and insurance costs that directly relate to providing
authentication and grading services. Gross profit margin is gross profit stated
as a percent of net revenues.
  Set forth
below is information regarding our gross profits in the quarters and nine-month
periods ended March 31, 2005 and 2004.
  **Three
      Months Ended**
      **March
      31**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Gross
      profit
    
    $
    5,692,000
    
    $
    4,299,000
    
    $
    16,045,000
    
    $
    11,166,000Gross
      profit margin
    
    
    63.6
    %
    
    62.3
    %
    
    63.8
    %
    
    59.8
    %
  The
increases in the gross profit margin in the three and nine-month periods ended
March 31, 2005, as compared to the same three and nine-month periods of 2004,
were primarily attributable to:
  ·
    increases
      of 37% and 43%, respectively, in coin authentication and grading revenues,
      on which we realize higher margins than on authentication and grading
      submissions of sportscards and other collectibles;
  ·
    the
      increases in net revenues (described above), which caused the fixed
      elements of our costs of revenues to represent a lower percentage of total
      revenues than in the corresponding three and nine-month periods ended
      March 31, 2004; and
  *·*
    increases,
      as compared to the three and nine months ended March 31, 2004, in sales of
      website advertising, for which the costs of sales are relatively low.
  16
  *Selling
and Marketing Expenses*
  Selling
and marketing expenses are comprised primarily of advertising and promotions
costs, trade-show related expenses, customer service personnel costs and third
party consulting costs. Set forth below is information regarding our selling and
marketing expenses in the three and nine-month periods ended March 31, 2005 and
2004.
  **Three
      Months Ended**
      **March
      31**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Selling
      and marketing expenses
    
    $
    876,000
    
    $
    788,000
    
    $
    2,581,000
    
    $
    2,316,000Percent
      of net revenue
    
    
    9.8
    %
    
    11.4
    %
    
    10.3
    %
    
    12.4
    %
  The
increases in the dollar amounts of selling and marketing expenses in the three
and nine months ended March 31, 2005, compared to the same respective periods of
2004, were primarily attributable to increases in general marketing expenses and
trade show related cost increases of approximately $107,000 in the nine months
ended March 31, 2005. Notwithstanding those increases, however, as a percentage
of net revenues, selling and marketing expenses decreased from 11.4% of net
revenues in the quarter ended March 31, 2004 to 9.8% in the quarter ended March
31, 2005, and from 12.4% of net revenues in the nine months ended March 31, 2004
to 10.3% in the nine months ended March 31, 2005, indicating that we were able
to increase authentication and grading submissions and sales of advertising
without having to make commensurate increases in our selling and marketing
expenses.
  *General
and Administrative Expenses*
  General
and administrative (“G&A”) expenses are comprised primarily of compensation
paid to general and administrative personnel, including executive management,
finance and accounting and information technology personnel, and facilities
management costs and other miscellaneous expenses.
  **Three
      Months Ended**
      **March
      31**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**General
      and administrative expenses
    
    $
    2,588,000
    
    $
    2,135,000
    
    $
    7,167,000
    
    $
    6,298,000Percent
      of net revenues
    
    
    28.9
    %
    
    31.0
    %
    
    28.5
    %
    
    33.7
    %
  Although,
as indicated in the table above, G&A expenses increased by $453,000 in the
quarter ended March 31, 2005, as compared to the same quarter last year, and by
$869,000 in the nine months ended March 31, 2005, compared to the same period of
2004, such expenses did not increase at the same rate as did net
revenues,  due to
improvements in operating efficiencies and staff reductions we were able to make
as a result of the disposition of our collectibles sales businesses. Therefore,
as a percentage of net revenues, G&A expenses declined to 28.9% in the three
months ended March, 31, 2005 from 31.0% for the same period of 2004, and to
28.5% for the nine months ended March 31, 2005 from 33.7% in the same nine
months of 2004. In dollar terms, the main components of the increases in G&A
costs in the three-month period ended March 31, 2005, consisted primarily of
(i) increases of $70,000 in professional fees; (ii)  G&A
costs approximating $130,000 incurred in connection with the launch of our new
currency grading service during the quarter ended March 31, 2005,
(iii) consulting fees and costs of approximately $80,000 incurred in
connection with the documentation and preliminary testing of our internal
control over financial reporting, as required by the Sarbanes-Oxley Act 2002;
and iv) general expense incurred to support the increased volume of business
that we conducted during that period.
  *Settlement
of Lawsuit*
  As
previously reported, in January 2005, without any admission of wrongdoing, we
settled a legal action brought in the Superior Court of California for the
County of San Diego, by Real Legends, Inc., a seller of sports cards (plaintiff)
against When It Was a Game (“WIWAG”), a sports card dealer, and against us as a
co-defendant. Pursuant to the settlement terms, all of the claims asserted
against the Company by plaintiff were settled and plaintiff terminated the
litigation, with prejudice, and we paid plaintiff $600,000, of which $100,000
was reimbursed to us by one of our insurers. As a result, the net cost to us of
the settlement, which was recorded in our statement of operations for our second
quarter ended December 31, 2004, was $500,000, or 2.0% of our net revenues for
the nine months ended March 31, 2005.
   17
  *Interest
Income, Net*
  **Three
      Months Ended**
      **March
      31**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Interest
      income, net
    
    $
    245,000
    
    $
    11,000
    
    $
    419,000
    
    $
    25,000Percent
      of net revenue
    
    
    2.7
    %
    
    0.2
    %
    
    1.7
    %
    
    0.1
    %
  The
increases in interest income, net in the three and nine months ended March 31,
2005, as compared to the corresponding periods of the prior year, resulted
primarily from increases in our cash, cash equivalent and short-term investment
balances that were attributable to (i) the cash generated from the
disposition of our collectibles sales businesses, (ii) the increases in
income generated by our authentication and grading businesses, and (iii) the
completion, in the third quarter of 2005, of our common stock offering from
which we received net proceeds of $35,897,000. Also contributing to the increase
in interest income in the second and third quarters was an increase in the rates
at which we earned interest on our cash balances and the interest earned on the
short-term advances that we made to one of our customers.
  *Income
Tax Expense*
  **Three
      Months Ended**
      **March
      31**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Income
      tax expense
    
    $
    981,000
    
    $
    592,000
    
    $
    2,487,000
    
    $
    1,075,000
  The
income tax expense recorded in the three and nine
months ended March 31, 2005 was calculated based on our expected combined
federal and state effective income tax rate of approximately 40% for fiscal year
2005, compared to approximately 42%, respectively, for the comparable periods of
the prior year.
  *Discontinued
Operations*
  **Three
      Months Ended**
      **March
      31**
    
    **Nine
      Months Ended**
      **March
      31,****2005**
    
    **2004**
    
    **2005**
    
    **2004**Income
      (loss) from discontinued operations,net
      of gain on sales of
      discontinuedbusinesses(net
      of income taxes)
    
    $
    (3
    )
    $
    201
    
    $
    (79
    )
    $
    (534
    )
  The net
losses from discontinued operations in the three and nine months ended March 31,
2005 were primarily the result of (i) an increase in inventory reserves for the
remaining collectibles inventories that we had retained when we sold our
discontinued collectibles auctions and direct sales businesses, and (ii) costs
incurred in collecting their remaining accounts receivable. Those costs were
partially offset by gains realized in both the three and nine months ended March
31, 2005, attributable to consideration earned from the sale of one of those
businesses reduced by adjustments to severance obligations of a discontinued
business.
  **Liquidity and Capital
Resources**
  At March
31, 2005, we had cash and cash equivalents of $63,632,000 and short-term
investments of $2,294,000, as compared to cash and cash equivalents of
$21,454,000 at June 30, 2004. Contributing to that increase were (i) the
net proceeds of $35.9 million from our offering, consummated in the third
quarter of 2005, of additional shares of common stock to the public;
(ii) increases in operating income that were primarily attributable to the
increases in authentication and grading revenues, and (iii) the receipt, in
the nine months ended March 31, 2005, of contingent cash consideration
attributable to the sales of our collectibles sales businesses in fiscal 2004,
together with cash from collections of their accounts receivables and from sales
of their collectibles inventories, which we chose to retain and liquidate
ourselves, rather than sell to the buyers of those businesses.
   18
  Historically,
we have relied on internally-generated funds, rather than borrowings, as our
primary source of funds to support our grading operations. We expect our
authentication and grading services to provide us with relatively stable and
predictable cash flows, largely because (i) in many instances our customers
prepay for those services at the time they submit their collectibles to us for
authentication and grading, and (ii) in the event of a decline in
authentication and grading submissions, we can reduce some of our variable costs
to reduce the impact on our cash flows of such a decline.
  During
the nine months ended March 31, 2005, continuing operations provided net cash of
$4,359,000 (which is net of an investment of $2,294,000 in short-term
investments with maturities greater than 90 days at the date of purchase). This
compares to net cash provided by continuing operations of $3,693,000 in the nine
months ended March 31, 2004.
  Net cash
generated by investing activities was $1,023,000 for the nine months ended March
31, 2005 and consisted primarily of cash received from the sale of our
discontinued businesses of $1,543,000, offset by capital expenditures and the
purchase of intangible assets of $278,000 and advances, net of collections, on a
note receivable of $242,000.
  In the
nine months ended March 31, 2005, financing activities provided net cash of
$36,193,000, primarily from the sale of the shares in our public offering during
the quarter ended March 31, 2005. During the quarter ended March 31, 2005, we
also received cash of $262,000 from the exercise of employee stock options and
$34,000 from the sale of shares under our Employee Stock Purchase
Plan.
  At June
30, 2004, we had the following outstanding obligations under operating leases,
net of sublease income for years ending June 30:
  2005
    
    $
    906,0002006
    
    
    908,0002007
    
    
    925,0002008
    
    
    908,0002009
    
    
    905,000Thereafter
    
    
    324,000$
    4,876,000
  With the
exception of those obligations, we do not have any material
financial obligations, such as long-term debt, capital lease, or purchase
obligations.
  However,
we are currently seeking a line of credit from a bank or other lending
institution primarily to enable us to fund a dealer financing program pursuant
to which we would provide short term loans and credit lines to coin and other
collectibles dealers as a means of generating additional interest income and
also providing an additional incentive for large collectibles dealers to do
business with us. We anticipate that any such loans that we might make generally
would be secured by collectibles submitted to us for authentication and grading.
There is no assurance that we will be successful in obtaining such a line of
credit.
  We plan
to use our cash resources, including the net proceeds of the public offering, to
(i) expand 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, and (iv) fund working capital requirements, and for other
corporate purposes. We also may seek borrowings, and we may issue additional
shares of our stock, to finance acquisitions of additional authentication and
grading businesses.
  At this
time, we are not engaged in discussions with respect to any possible material
business acquisitions and we cannot predict if we will, or the terms on which we
might, obtain such borrowings or issue additional shares.
   19
  **Risks and Uncertainties That Could Affect Our Future
Financial Performance**
  There are
a number of risks and uncertainties that could affect our future operating
results and financial condition and
which could cause our future operating results to differ materially from those
expected at this time. Those risks and uncertainties include, but are not
limited to:
  ·
    changes
      in general economic conditions or changes in conditions in the
      collectibles markets in which we operate, such as a possible decline in
      the popularity of some high-value collectibles, either of which could
      reduce the volume of authentication and grading submissions and,
      therefore, the grading fees we generate;
  ·
    a
      lack of diversity in our sources of revenues and, more particularly, our
      dependence on collectible coin authentication and grading for a
      significant percentage of our total revenues, which makes us more
      vulnerable to adverse changes in economic conditions, including declines
      in the value of precious metals or recessionary conditions that could 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 collectibles experts, the loss of
      the services of any of which could adversely affect our ability to obtain
      authentication and grading submissions and, therefore, could harm our
      operating results;
  ·
    increased
      competition from other collectibles’ authentication and grading companies
      that could result in reductions in collectibles submissions 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 service offerings and business initiatives, such as
      autograph, stamp and paper currency grading services, and a proposed new
      dealer financing program, will not gain market acceptance or will be
      unsuccessful and will, as a result, increase our operating expenses and
      reduce our overall profitability or cause us to incur
    losses;
  ·
    the
      risk that our strategy to exit the collectibles sales business and focus
      substantially all of our resources on our authentication and grading
      businesses will not be successful in enabling us to improve our
      profitability over the longer term or to grow our existing businesses or
      acquire or commence authentication and grading businesses outside our
      current markets;
  ·
    the
      risks involved in acquiring existing or commencing new authentication and
      grading businesses, including the risks that we will be unable to
      successfully integrate new businesses into our operations, that our new
      businesses may not gain market acceptance; that business expansion may
      result in a costly diversion of management time and resources from our
      existing businesses and increase our operating expenses, and that we will
      not achieve adequate returns on the investments we may make in acquiring
      other or establishing new businesses, any of which would harm our
      profitability or cause us to incur losses;
  ·
    the
      risks that we will encounter problems with or failures of our computer
      systems that would interrupt our services or result in loss of data that
      we need for our business; and
  ·
    the
      potential of increased government regulation of our businesses that could
      cause operating costs to increase.
  Certain
of these risks and uncertainties, as well as other risks, are more fully
described above in this Section of this Report (entitled “Management's
Discussion and Analysis of Financial Condition and Results of Operations”) and
in the Section entitled “Risk Factors” in the Prospectus dated February 16, 2005
that we filed with the SEC under the Securities Act of 1933, as amended.
  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 the Prospectus
mentioned above.
   20
  **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, 2005, we had $65,926,000
in cash, cash equivalents and short-term investments, primarily invested in a
high-grade commercial paper and Money Market Fund. Reductions in short-term
interest rates could result in reductions in the amount of that income. However,
the impact on our operating results of such changes is not expected to be
material.
  The
Company has no activities that would expose it to foreign currency exchange rate
risk or commodity price risks.
  **ITEM
4.**  **CONTROLS AND PROCEDURES**
  Our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) are designed to provide
reasonable assurance that information required to be disclosed in our reports
filed under that Act (the Exchange Act), such as this Quarterly Report, is
recorded, processed, summarized and reported within the time periods specified
in the rules of the Securities and Exchange Commission. Our disclosure controls
and procedures also are designed to ensure that such information is accumulated
and communicated to our management, including our CEO and CFO, to allow timely
decisions regarding required disclosures.
  Our
management, under the supervision and with the participation of our Chief
Executive Officer and the Chief Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures in effect as of March 31, 2005. Based
on this evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of March 31, 2005, our disclosure controls and procedures
were effective to provide reasonable assurance that material information,
relating to the Company and its consolidated subsidiaries, required to be
included in our Exchange Act reports, including this 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, 2005, that has materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
   21
  
  **PART
II - OTHER INFORMATION**
 ****
 **ITEM
6.**  **EXHIBITS**
  **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 of Periodic Report Pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002Exhibit
      32.2
    Chief
      Financial Officer Certification of Periodic Report Pursuant to Section 906
      of
      the Sarbanes-Oxley Act of 2002
 
   22
   
 **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
      13, 2005
    
    /s/
      MICHAEL R. HAYNESMichael
      R. HaynesChief
      Executive Officer
 
 
 
 **COLLECTORS
      UNIVERSE, INC.**Date:May
      13, 2005
    
    /s/
      MICHAELJ.
      LEWISMichaelJ.
      LewisChiefFinancial
      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 of Periodic Report Under Section 906of
      the Sarbanes-Oxley Act of 2002Exhibit
      32.2
    Chief
      Financial Officer Certification of Periodic Report Under Section 906
      of
      the Sarbanes-Oxley Act of 2002
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   E-1