**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-Q**





(Mark
                One)ý
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the quarter ended December 31, 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**CU Logo
                
                **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  ü  No





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 January 22, 2006****Common
                Stock $.001 Par Value**
            **8,490,041**














**COLLECTORS
      UNIVERSE, INC.**


**QUARTERLY
      REPORT**


**ON
      FORM 10-Q**


**FOR
      THE QUARTER ENDED DECEMBER 31, 2005**





**TABLE
      OF CONTENTS**








**PART
                I**
            **Financial
                Information**
            **Page**Item
                1.
            Financial
                Statements:Condensed
                Consolidated Balance Sheets as of December 31, 2005and
                June 30, 2005 (unaudited)
            1Condensed
                Consolidated Statements of Operationsfor
                the Three and Six Months Ended December 31, 2005 and 2004
                (unaudited)
            2Condensed
                Consolidated Statements of Cash Flowsfor
                the Six Months Ended December 31, 2005 and 2004
                (unaudited)
            3Notes
                to Condensed Consolidated Financial Statements
                (unaudited)
            5Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            20Forward
                Looking Information
            20Our
                Business
            20Factors
                That Can Affect Our Financial Position and Operating Results
            21Critical
                Accounting Policies and Estimates
            23Results
                of Operations
            25Liquidity
                and Capital
                Resources
            32Recent
                Accounting Pronouncements
            33Risks
                and Uncertainties That Could Affect Our Future Financial
                Performance
            33Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            34Item
                4.
            Controls
                and Procedures
            35**PART
                II**
            **Other
                Information**Item
                1.
            Legal
                Proceedings
            36Item
                4.
            Submission
                on Matters to a Vote of the Security
                Holders
            36Item
                6.
            Exhibits
            37**SIGNATURES**
            
            S-1**INDEX
                TO EXHIBITS**
            E-1**EXHIBITS****Exhibit
                10.34**
            Gemprint
                Asset Purchase Agreement**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)


**December
                31,**
            
            **June
                30,****2005**
            
            **2005****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            53,694
            
            $
            65,439Short-term
                investments
            
            
            2,086
            
            
            -Accounts
                receivable, net of allowance for doubtful accounts of $30 (December)and
                $38 (June)
            
            
            1,359
            
            
            1,508Inventories,
                net
            
            
            429
            
            
            436Prepaid
                expenses and other current assets
            
            
            1,266
            
            
            1,102Customer
                notes receivable
            
            
            71
            
            
            1,560Deferred
                income taxes
            
            
            1,541
            
            
            2,854Receivables
                from sale of net assets of discontinued operations
            
            
            393
            
            
            63Current
                assets of discontinued operations held for sale
            
            
            209
            
            
            365Total
                current assets
            
            
            61,048
            
            
            73,327Property
                and equipment, net
            
            
            1,445
            
            
            857Goodwill
                and other intangibles
            
            
            14,096
            
            
            79Deferred
                income taxes
            
            
            679
            
            
            1,051Notes
                receivable from sale of net assets of discontinued
                operations
            
            
            365
            
            
            -Other
                assets
            
            
            110
            
            
            174Non-current
                assets of discontinued operations held for sale
            
            
            2
            
            
            46$
            77,745
            
            $
            75,534**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            1,054
            
            $
            753Accrued
                liabilities
            
            
            1,773
            
            
            1,563Accrued
                compensation and benefits
            
            
            695
            
            
            1,069Deferred
                revenue
            
            
            1,175
            
            
            1,001Current
                liabilities of discontinued operations held for sale
            
            
            26
            
            
            27Total
                current liabilities
            
            
            4,723
            
            
            4,413Deferred
                rent and other long-term liabilities
            
            
            438
            
            
            555Commitment**s**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; shares issued and
                outstanding
              of
                8,614 at December 31, 2005 and 8,610 at June 30, 2005
            
            
            9
            
            
            9Additional
                paid-in capital
            
            
            78,910
            
            
            78,594Accumulated
                deficit
            
            
            (5,314
            )
            
            (7,016
            )Treasury
                stock, at cost (125 shares)
            
            
            (1,021
            )
            
            (1,021
            )Total
                stockholders' equity
            
            
            72,584
            
            
            70,566$
            77,745
            
            $
            75,534


See
      accompanying notes to condensed consolidated financial
      statements.


1


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF
      OPERATIONS**


(in
      thousands, except per share data)


(unaudited)








**Three
                Months Ended**
            
            **Six
                Months Ended****December
                31,**
            
            **December
                31,**
            
            **December
                31,**
            
            **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                revenues
            
            $
            7,447
            
            $
            7,982
            
            $
            16,272
            
            $
            16,177Cost
                of revenues
            
            
            3,118
            
            
            2,998
            
            
            6,490
            
            
            5,824Gross
                profit
            
            
            4,329
            
            
            4,984
            
            
            9,782
            
            
            10,353Selling
                and marketing expenses
            
            
            918
            
            
            748
            
            
            2,008
            
            
            1,705General
                and administrative expenses
            
            
            3,026
            
            
            2,292
            
            
            6,246
            
            
            4,579Settlement
                of lawsuit
            
            
            -
            
            
            500
            
            
            -
            
            
            500Total
                operating expenses
            
            
            3,944
            
            
            3,540
            
            
            8,254
            
            
            6,784Operating
                income
            
            
            385
            
            
            1,444
            
            
            1,528
            
            
            3,569Interest
                income, net
            
            
            608
            
            
            110
            
            
            1,150
            
            
            174Other
                income
            
            
            8
            
            
            2
            
            
            16
            
            
            2Income
                before income taxes
            
            
            1,001
            
            
            1,556
            
            
            2,694
            
            
            3,745Provision
                for income taxes
            
            
            447
            
            
            628
            
            
            1,161
            
            
            1,506Income
                from continuing operations
            
            
            554
            
            
            928
            
            
            1,533
            
            
            2,239Income
                (loss) from operations of discontinued operations,
              net
                of gains on sales of discontinued businesses(net
                of income taxes)
            
            
            181
            
            
            (7
            )
            
            169
            
            
            (76
            )Net
                income
            
            $
            735
            
            $
            921
            
            $
            1,702
            
            $
            2,163Net
                income (loss) per basic share:Income
                from continuing operations
            
            $
            0.07
            
            $
            0.15
            
            $
            0.18
            
            $
            0.36Income
                (loss) from operations of discontinued operations,
              net
                of gains on sales of discontinued businesses(net
                of income taxes)
            
            
            0.02
            
            
            -
            
            
            0.02
            
            
            (0.01
            )Net
                income
            
            $
            0.09
            
            $
            0.15
            
            $
            0.20
            
            $
            0.35Net
                income (loss) per diluted share:Income
                from continuing operations
            
            $
            0.06
            
            $
            0.14
            
            $
            0.17
            
            $
            0.34Income
                (loss) from operations of discontinued operations,
              net
                of gains on sales of discontinued businesses(net
                of income taxes)
            
            
            0.02
            
            
            -
            
            
            0.02
            
            
            (0.01
            )Net
                income
            
            $
            0.08
            
            $
            0.14
            
            $
            0.19
            
            $
            0.33Weighted
                average shares outstanding:Basic
            
            
            8,488
            
            
            6,242
            
            
            8,487
            
            
            6,230Diluted
            
            
            8,803
            
            
            6,695
            
            
            8,806
            
            
            6,644








See
      accompanying notes to condensed consolidated financial
      statements.


2


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


(in
      thousands, except share data)


(unaudited)


**Six
                Months Ended**
              **December
                31,**2005
            
            2004OPERATING
                ACTIVITIES:Net
                income from continuing operations
            
            $
            1,533
            
            $
            2,239Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            261
            
            
            253Loss
                on disposal of fixed assets
            
            
            3
            
            
            -Provision
                for doubtful accounts
            
            
            32
            
            
            5Loss
                on termination of sublease
            
            
            83
            
            
            -Stock-based
                compensation
            
            
            265
            
            
            -Deferred
                income taxes
            
            
            1,306
            
            
            1,431Changes
                in operating assets and liabilities:Short-term
                investments
            
            
            (2,086
            )
            
            (4,125
            )Accounts
                receivable
            
            
            276
            
            
            (18
            )Inventories
            
            
            7
            
            
            67Prepaid
                expenses and other current assets
            
            
            (132
            )
            
            (235
            )Refundable
                income taxes
            
            
            -
            
            
            13Other
                assets
            
            
            -
            
            
            (17
            )Accounts
                payable
            
            
            (53
            )
            
            (43
            )Accrued
                liabilities
            
            
            (143
            )
            
            829Accrued
                compensation and benefits
            
            
            (543
            )
            
            (161
            )Deferred
                rent and other long-term benefits
            
            
            52
            
            
            49Deferred
                revenue
            
            
            101
            
            
            133Net
                cash provided by operating activities
            
            
            962
            
            
            420INVESTING
                ACTIVITIES:Capital
                expenditures
            
            
            (558
            )
            
            (112
            )Collections
                on receivables on sales of discontinued operations
            
            
            15
            
            
            1,069Purchase
                of businesses, net of cash acquired
            
            
            (13,962
            )
            
            -Cash
                received on sale of discontinued businesses
            
            
            128
            
            
            -Advances
                on notes receivable
            
            
            (78
            )
            
            (2,307
            )Collection
                on notes receivable
            
            
            1,567
            
            
            611Net
                cash used in investing activities
            
            
            (12,888
            )
            
            (739
            )FINANCING
                ACTIVITIES:Proceeds
                from exercise of stock options
            
            
            51
            
            
            197Net
                cash provided by financing activities
            
            
            51
            
            
            197Net
                cash provided by operating activities of discontinued
                operations
            
            
            130
            
            
            407Net
                increase (decrease) in cash and cash equivalents
            
            
            (11,745
            )
            
            285Cash
                and cash equivalents at beginning of period
            
            
            65,439
            
            
            21,454Cash
                and cash equivalents at end of period
            
            $
            53,694
            
            $
            21,739SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Interest
                paid
            
            $
            8
            
            $
            -Income
                taxes paid
            
            $
            78
            
            $
            10




See
      accompanying notes to condensed consolidated financial
      statements.


3


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


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


(in
      thousands, except share data)


(unaudited)





**Six
                Months Ended**
              **December
                31,**2005
            
            2004SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION (CONTINUED):Effective
                July 14, 2005, the Company acquired CoinFacts.com in a
                transaction
              summarized as follows:Goodwill
            
            $
            515
            
            
            -Purchase
                price
            
            
            (515
            )
            
            -Effective
                September 2, 2005, the Company acquired Certified Coin Exchange
                (CCE)
              in
                a transaction summarized as follows:Fair
                value of net liabilities assumed
            
            
            (19
            )
            
            -Deferred
                taxes recognized at acquisition
            
            
            (379
            )
            
            -Intangible
                assets
            
            
            947
            
            
            -Fair
                value of CTP, including net assets
            
            
            600
            
            
            -Goodwill
            
            
            1,201
            
            
            -Purchase
                price, net of cash acquired
            
            
            (2,350
            )
            
            -Effective
                November 8, 2005, the Company acquired Gem Certification and Appraisal
                Lab
                (GCAL)
              in
                a transaction summarized as follows:Fair
                value of net assets acquired
            
            
            150
            
            
            -Intangible
                assets
            
            
            53
            
            
            -Goodwill
            
            
            3,043
            
            
            -Purchase
                price, net of cash acquired
            
            
            (3,246
            )
            
            -Effective
                December 22, 2005, the Company acquired the business of Gemprint
                Corporation
              in
                a transaction summarized as follows:Fair
                value of net assets acquired
            
            
            85
            
            
            -Intangible
                assets
            
            
            3,444
            
            
            -Goodwill
            
            
            4,869
            
            
            -Purchase
                price, net of cash acquired
            
            
            (8,398
            )
            
            -SUPPLEMENTAL
                DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:In
                connection with the sale of CTP, the company received a note receivable
                of
                $458,000.  In addition, the
              Company
                realized a gain of $293,000 on the disposal of one of its collectible
                sales businesses, which proceeds were
              received
                subsequent to December 31, 2005 (see note 7).






See
        accompanying notes to condensed consolidated financial
        statements.




4


**COLLECTORS
      UNIVERSE, INC. AND SUBSIDIARIES**


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





1. SIGNIFICANT
      ACCOUNTING POLICIES





*Principles
      of Consolidation*





The
      accompanying 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. Since July 1,
      2005,
      the Company has made a number of acquisitions and disposed of a business related
      to one of such acquisitions (see note 2 below). These acquisitions have been
      consolidated from the respective dates of their acquisition and the business
      disposed of was deconsolidated as of the date of its sale.





*Unaudited
      Interim Financial Information*





The
      accompanying interim condensed consolidated financial statements have been
      prepared by the Company pursuant to the rules and regulations of the Securities
      and Exchange Commission (the “SEC”) for interim financial reporting. These
      interim condensed consolidated financial statements are unaudited and, in the
      opinion of management, include all adjustments (consisting of normal recurring
      adjustments and accruals) necessary to present fairly the condensed consolidated
      balance sheets, consolidated operating results, and consolidated cash flows
      for
      the periods presented in accordance with accounting principles generally
      accepted in the United States of America (“GAAP”). Operating results for the
      three and six months ended December 31, 2005 are not necessarily indicative
      of
      the results that may be expected for the year ending June 30, 2006 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, as permitted by 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, 2005. Amounts related to disclosure of June 30, 2005 balances within
      these interim condensed consolidated financial statements were derived from
      the
      aforementioned Form 10-K.





*Reclassifications*





Certain
      prior period amounts have been reclassified to conform to the current period
      presentation, including the classification of stock-based compensation expense
      which has been classified consistent with cash compensation paid to the same
      employee, in accordance with Staff Accounting Bulletin No. 107, issued by the
      Securities and Exchange Commission related to SFAS No. 123(R) (see “ *Stock-Based
      Compensation”* in this
      note 1 below).





*Revenue
      Recognition*





Net
      revenues consist primarily of fees generated from the authentication and grading
      of coins, sportscards, autographs, currency, stamps and diamonds. 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 authentication and 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


5


SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)





and
      expenses during the reporting periods. Actual results could differ from those
      estimates, and such differences could be material to the condensed consolidated
      financial statements.





*Long-Lived
      Assets*




Management
      regularly reviews property and equipment and other long-lived assets, including
      certain identifiable intangibles and goodwill, for possible impairment. This
      review occurs annually, or more frequently if events or changes in circumstances
      indicate the carrying amount of the asset may not be recoverable in full. If
      there is indication of impairment of property and equipment or amortizable
      intangible assets, then management prepares an estimate of future cash flows
      (undiscounted and without interest charges) expected to result from the use
      of
      that asset and its eventual disposition. If these cash flows are less than
      the
      carrying amount of the asset, an impairment loss is recognized to write down
      the
      asset to its estimated fair value. The fair value is estimated at the present
      value of the future cash flows discounted at a rate commensurate with
      management’s estimates of the business risks. As of December 31, 2005, the
      Company does not believe there have been any impairments of its long-lived
      assets. There can be no assurance, however, that there will be no impairment
      of
      the Company’s long-lived assets in the future.




*Stock-Based
      Compensation*





At
      December 31, 2005, 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* .
      No
      stock-based employee compensation cost was recognized in the statements of
      operations for the three and six months ended December 31, 2004, as all options
      granted under these plans had an exercise price equal to the market value of
      the
      underlying common stock on the date of grant.





Effective
      July 1, 2005, on the first day of the Company’s fiscal year 2006, the Company
      adopted the fair value recognition provisions of SFAS No. 123(R), *Share
      Based Payments* ,
      using
      the modified-prospective transition method. Under this transition method,
      compensation cost recognized in the three and six months ended December 31,
      2005
      includes: (a) compensation cost for all share-based payments granted and not
      yet
      vested prior to July 1, 2005, based on the grant date fair value estimated
      in
      accordance with the original provisions of SFAS No. 123, and (b) compensation
      cost for all share-based payments granted subsequent to June 30, 2005 based
      on
      the grant-date fair value estimated in accordance with the provisions of SFAS
      No. 123(R). Results for prior periods have not been restated. Since stock-based
      compensation expense recognized in the statements of operations for the three
      and six months ended December 31, 2005 is based on awards ultimately expected
      to
      vest, the compensation expense has been reduced for estimated forfeitures.
      SFAS
      No. 123(R) requires forfeitures to be estimated at the time of grant and
      revised, if necessary, in subsequent periods if actual forfeitures differ from
      those estimates. We estimated forfeitures to be 4% of the options
      issued.





The
      Company calculates stock-based compensation by estimating the fair value of
      each
      option using the Black-Scholes option pricing model. The Company’s determination
      of fair value of share-based payment awards are made as of their respective
      dates of grant using that option pricing model and is affected by the Company’s
      stock price as well as assumptions regarding a number of subjective variables.
      These variables include, but are not limited to the Company’s expected stock
      price volatility over the term of the awards, and actual and projected employee
      stock option exercise behavior. The Black-Scholes option pricing model was
      developed for use in estimating the value of traded options that have no vesting
      or hedging restrictions and


6


SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)





are
      fully
      transferable. Because the Company’s employee stock options have certain
      characteristics that are significantly different from traded options, the
      existing valuation models may not provide an accurate measure of the fair value
      of the Company’s employee stock options. Although the fair value of employee
      stock options is determined in accordance with SFAS No. 123(R) using an
      option-pricing model, that value may not be indicative of the fair value
      observed in a willing buyer/willing seller market transaction. The calculated
      compensation cost is recognized on a straight-line basis over the vesting period
      of the option.





The
      Company issues stock options to employees and outside directors whose only
      condition for vesting are continued employment or service during the related
      vesting period. Typically, the vesting period is four years for employee awards
      and six months for director awards, although awards are sometimes granted with
      immediate vesting.





The
      weighted-average grant date fair value of employee stock options granted during
      the three and six months ended December 31, 2005 was $5.69, using the
      Black-Scholes model with the following weighted-average
      assumptions:





**Three
                Months Ended**
              **December
                31,**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2005**Dividend
                yield
            
            
            0.0
            %
            
            0.00
            %Expected
                volatility
            
            
            78.00
            %
            
            78.00
            %Risk-free
                interest rate
            
            
            3.9
            %
            
            3.9
            %Expected
                lives
            
            
            2.0
                years
            
            
            2.0
                years





The
      Company granted no options in the three months ended December 31, 2005 and
      a
      total of 10,000 options during the six months ended December 31, 2005. At June
      30, 2005, the Company had 443,000 unvested options outstanding with a grant
      date
      weighted-average fair value of $4.67, and at December 31, 2005, there were
      397,000 unvested options outstanding with a weighted average fair value of
      $4.65.





As
      a
      result of adopting SFAS No. 123(R) on July 1, 2005, the Company’s income before
      income taxes and net income for the three and six months ended December 31,
      2005
      is $133,000 and $265,000 lower, respectively, than if it had continued to
      account for share-based compensation under APB Opinion No. 25. Basic and diluted
      net income per share for the three and six months ended December 31, 2005 would
      have been $0.10 and $0.10, and $0.23 and $0.22, respectively, if the Company
      had
      not adopted SFAS No. 123(R), compared to reported basic and diluted net income
      per share of $0.09 and $0.08, and $0.20 and $0.19, respectively.





The
      total
      amount of compensation expense related to non-vested awards not yet recognized
      at December 31, 2005 was $1,530,000 and, assuming the optionees continue to
      be
      employed by the Company, that amount will be recognized as compensation expense
      as follows:





FY
                2006
            
            $
            264,000FY
                2007
            
            
            516,000FY
                2008
            
            
            488,000FY
                2009
            
            
            259,000FY
                2010
            
            
            3,000Total
            
            $
            1,530,000





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


7


SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)





Prior
      to
      the adoption of SFAS No. 123(R), the Company presented all tax benefits of
      deductions resulting from the exercise of stock options as operating cash flows
      in the statements of cash flows. SFAS No. 123(R) requires the cash flows from
      the tax benefits resulting from tax deductions in excess of the compensation
      cost recognized for those options (excess tax benefits) to be classified as
      financing cash flows. There are no tax benefits resulting from the exercise
      of
      stock options for the three and six months ended December 31, 2005.





SFAS
      No.
      123(R) requires the Company to continue to provide the pro forma disclosures
      required by SFAS No. 123 for all periods presented in which share-based payments
      to employees are accounted for under APB Opinion No. 25. The following table
      illustrates the effect on net income and net income per share for the three
      and
      six months ended December 31, 2004 if the Company had applied the fair value
      recognition provisions of SFAS No. 123 to share-based employee
      compensation.





(in
                thousands,
              except
                per share data)
            
            (in
                thousands,
              except
                per share data)**Three
                Months Ended**
              **December
                31,**
            
            **Six
                Months**
              **Ended**
              **December
                31,****2004**
            
            **2004**Net
                income, as reported
            
            $
            921
            
            $
            2,163Add:
                Stock-based employee compensation expense included in reported net
                income,
                net of related tax effects
            
            
            -
            
            
            -Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value based method for awards,
              net of related tax effects
            
            
            108
            
            
            148Pro
                forma net income
            
            $
            813
            
            $
            2,015Net
                income per common share - basic:As
                reported
            
            $
            0.15
            
            $
            0.35Pro
                forma
            
            $
            0.13
            
            $
            0.32Net
                income per common share - diluted:As
                reported
            
            $
            0.14
            
            $
            0.33Pro
                forma
            
            $
            0.12
            
            $
            0.31





The
      weighted-average grant date fair value of stock options granted during the
      three
      and six months ended December 31, 2004 was $8.27 and $7.27, respectively, using
      the Black-Scholes model with the following weighted-average
      assumptions:





**Three
                Months Ended**
              **December
                31,**
            
            **Six
                Months Ended**
              **December
                31,****2004**
            
            **2004**Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %Expected
                volatility
            
            
            75.00
            %
            
            74.00
            %Risk-free
                interest rate
            
            
            3.02
            %
            
            2.89
            %Expected
                lives
            
            
            2.0
                years
            
            
            2.0
                years





8


SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)





The
      following is a summary of stock option activity during the periods indicated
      below:





**Number**
              **Of
                Shares**
            
            **Price
                Per Share**
            
            **Weighted
                Average Exercise Price Per Share**Options
                outstanding at June 30, 2004
            
            
            822
            
            $
            2.55
            
            
            -
            
            $
            30.52
            
            $
            10.56Granted
            
            
            295
            
            
            11.58
            
            
            -
            
            
            20.10
            
            
            17.09Cancelled
            
            
            (70
            )
            
            3.08
            
            
            -
            
            
            30.52
            
            
            17.70Exercised
            
            
            (71
            )
            
            2.55
            
            
            -
            
            
            12.00
            
            
            3.99Options
                outstanding at June 30, 2005
            
            
            976
            
            
            2.55
            
            
            -
            
            
            24.00
            
            
            12.49Granted
            
            
            10
            
            
            -
            
            $
            12.90
            
            
            
            
            
            12.90Cancelled
            
            
            (51
            )
            
            13.56
            
            
            -
            
            
            20.00
            
            
            13.99Exercised
            
            
            (4
            )
            
            3.08
            
            
            -
            
            
            13.73
            
            
            11.71Balance
                at December 31, 2005
            
            
            931
            
            $
            2.55
            
            
            -
            
            $
            24.00
            
            $
            12.42





The
      total
      pre-tax intrinsic value of options exercised during the three and six months
      ended December 31, 2005, was $10,000 and $12,000, respectively. The total
      pre-tax intrinsic value of options exercised during the three and six months
      ended December 31, 2004 was $576,000 and $589,000, respectively.





The
      following table summarizes significant ranges of outstanding and exercisable
      options as of December 31, 2005:




(in
                thousands, except per share data)Options
                Outstanding
            
            Options
                ExercisableRange
                of
              Exercise
                Prices
            
            Number
              of
                Shares Outstanding
            
            Weighted
              Average
              Remaining
              Contractual
              Life
                (years)
            
            Weighted-
              Average
              Exercise
              Price
            
            Aggregate
              Intrinsic
              Value
            
            Number
                of
              Shares
              Exercisable
            
            Weighted
              Average
              Exercise
              Price
            
            Aggregate
              Intrinsic
              Value$                  
                2.55
            
            $
            3.79
            
            
            183
            
            
            6.46
            
            $
            3.32
            
            $
            2,343
            
            
            144
            
            $
            3.34
            
            $
            1,843$                  
                5.28
            
            $
            7.60
            
            
            74
            
            
            7.21
            
            $
            7.22
            
            $
            657
            
            
            73
            
            $
            7.24
            
            $
            645$                  
                8.00
            
            $
            12.00
            
            
            182
            
            
            7.09
            
            $
            10.40
            
            $
            1,041
            
            
            91
            
            $
            9.97
            
            $
            561$                
                12.90
            
            $
            18.00
            
            
            239
            
            
            8.42
            
            $
            14.28
            
            $
            440
            
            
            76
            
            $
            15.22
            
            $
            69$                
                19.60
            
            $
            24.00
            
            
            253
            
            
            6.57
            
            $
            20.22
            
            $
            0
            
            
            185
            
            $
            20.42
            
            $
            0931
            
            
            
            
            $
            12.42
            
            $
            4,481
            
            
            569
            
            $
            11.97
            
            $
            3,118





The
      aggregate intrinsic values set forth in the above table represent the total
      pre-tax intrinsic values, based on the Company’s closing stock price of $16.12
      as of December 31, 2005, which would have been received by the optionees had
      all
      of them exercised their options as of that date. At December 31, 2005, options
      to purchase a total of 569,000 shares of our common stock were exercisable
      at a
      weighted-average exercise price of $11.97 per share, of which options to
      purchase 384,000 shares were in-the-money options. As of June 30, 2005,
      outstanding options to purchase a total of 527,000 shares of our common stock
      were exercisable at a weighted-average exercise price of $11.93.





9


SIGNIFICANT
      ACCOUNTING POLICIES (CONTINUED)





*Concentrations*




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




Financial
      Instruments, Cash, Cash Equivalents and Short-Term Investment
      Balances. At
      December 31, 2005, the Company had funds of approximately $54 million, (which
      was inclusive of a $2,086,000 short-term investment, which had an original
      maturity of greater than 90 days), which were primarily invested in high quality
      commercial paper, certificates of deposit and a money market fund. In addition,
      at December 31, 2005, the Company had approximately $2 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.
      At
      December 31, 2005 and June 30, 2005, one customer accounted for approximately
      29% and 46%, 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 and other conditions or trends that may adversely affect
      the ability of debtors to pay their account receivable balances. Based on such
      review, the Company establishes an allowance for doubtful accounts, when
      necessary. The allowance for doubtful accounts receivable was $30,000 at
      December 31, 2005.





Customers .
      The
      authentication and grading of collectible coins accounted for approximately
      63%
      and 69% of our net revenues for the six months ended December 31, 2005 and
      2004,
      respectively.





Customer
      Notes Receivables. At June
      30, 2005, the Company had short term customer notes receivable balances
      outstanding in an aggregate principal amount of $1,560,000 from two collectibles
      dealers who are long time customers. Those customer notes receivables have
      been
      fully repaid in accordance with their terms. At December 31, 2005 there was
      one
      note receivable outstanding in the principal amount of $71,000, which is
      repayable through January 2007. We perform an analysis of the expected
      collectibility of customer notes receivable based on several factors, including
      the age and extent of significant past due notes and economic conditions or
      trends that may adversely affect the ability of the debtor to pay their customer
      notes receivable.





**Recent
      Accounting Pronouncement**





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 154, *Accounting
      Changes and Error Corrections.* SFAS
      No.
      154 replaces APB Opinion No. 20, *Accounting
      Changes* and FASB
      Statement No 3, *Reporting
      Accounting Changes in Interim Financial Statements* which
      required that most voluntary changes in accounting principle be recognized
      by
      including in net income of the period of the change the cumulative effect of
      changing to the new accounting principle. SFAS No. 154 ** will
      require retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects or the cumulative effect of the change. This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. We will adopt SFAS No. 154
      for
      our fiscal year beginning July 1, 2006. We do not expect the adoption of SFAS
      No. 154 to have a material impact on the Company’s financial position or results
      of operation.





10


2. BUSINESS
      ACQUISITIONS





On
      July
      14, 2005, the Company acquired substantially all the assets of CoinFacts.com
      (“CoinFacts”) for $500,000 in cash. CoinFacts.com operates an internet website
      on which it publishes detailed proprietary information and history on U.S.
      Coins. The results of CoinFacts have been consolidated from the date of its
      acquisition.





On
      September 2, 2005, the Company acquired all of the common stock of Certified
      Coin Exchange (“CCE”) and all of the common stock of a related business (“CTP”)
      for an aggregate purchase price of $2,180,000, of which $1,680,000 was paid
      in
      cash at closing and the balance of $500,000 was paid within 60 days thereafter.
      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. CCE’s operating results have
      been consolidated into our operating results from the date of its
      acquisition.





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
      and, effective November 30, 2005, disposed of CTP. In accordance with SFAS
      No.
      144, the results of operations of CTP from the date of acquisition through
      November 30, 2005, which included revenue of approximately $120,000 and
      operating income of $38,000, were consolidated as part of the income from
      discontinued operations from the date of acquisition through November 30, 2005
      and the gain on the sale of CTP of $2,000 is included in the gain on the sale
      of
      discontinued operations for the three and six months ended December 31, 2005
      (see note 7 below).





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





On
      December 22, 2005, the Company completed its acquisition of the business and
      substantially all of the assets of Gemprint Corporation (“Gemprint”). These
      assets consist primarily of a patented technology for non-invasive diamond
      identification which Gemprint uses to digitally capture the unique refractive
      light pattern (or “gemprint”) of each diamond that is processed with that
      technology. The acquisition was consummated pursuant to an asset purchase
      agreement. Under that agreement, the Company paid a purchase price consisting
      of
      $7.5 million 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 next five years.





GCAL
      plans to incorporate the gemprint process into its business process, so that
      each GCAL authenticated and graded diamond will also carry a gemprint image
      stored in GCAL’s registered database; thereby enabling GCAL to provide an
      additional measure of protection against 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.





The
      Company has performed an initial and preliminary purchase price allocation
      with
      respect to each of these acquisitions **** in
      accordance with the purchase method of accounting for business combinations.
      The
      purchase method of accounting allocates the amount paid for an acquisition
      over
      the fair value of the assets and liabilities acquired, and measures the excess
      of the purchase price over the fair value as goodwill. Goodwill is evaluated
      at
      least annually for impairment, or more frequently, if the Company believes
      that
      the goodwill has been impaired due to changing facts and circumstances. 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.




11




BUSINESS
      ACQUISITIONS (CONTINUED)





The
      Company performed an initial and preliminary purchase price allocation as set
      forth in the following table:





**(in
                thousands)****CCE**
            
            **Coin**
              **Facts**
            
            **GCAL**
            
            **Gemprint**
            
            **Total**Cost
                of Investment:Purchase
                price
            
            $
            2,217
            
            $
            500
            
            $
            3,000
            
            $
            7,500
            
            $
            13,217Liabilities
                assumed
            
            
            -
            
            
            
            
            
            50
            
            
            114
            
            
            164Direct
                costs
            
            
            160
            
            
            15
            
            
            224
            
            
            279
            
            
            678Investment
                banking fees
            
            
            -
            
            
            -
            
            
            -
            
            
            417
            
            
            417Lease
                obligation assumed
            
            
            -
            
            
            -
            
            
            -
            
            
            88
            
            
            882,377
            
            
            515
            
            
            3,274
            
            
            8,398
            
            
            14,564Value
                Assigned to Assets and Liabilities:Current
                assets
            
            
            93
            
            
            -
            
            
            32
            
            
            113
            
            
            238Fixed
                assets
            
            
            -
            
            
            -
            
            
            158
            
            
            81
            
            
            239Current
                liabilities
            
            
            (39
            )
            
            -
            
            
            (12
            )
            
            (109
            )
            
            (160
            )Deferred
                revenue
            
            
            (73
            )
            
            -
            
            
            -
            
            
            -
            
            
            (73
            )Assets
                Sold: CTP
            
            
            600
            
            
            -
            
            
            -
            
            
            -
            
            
            600Deferred
                taxes
            
            
            (379
            )
            
            -
            
            
            -
            
            
            -
            
            
            (379
            )Transition
                services
            
            
            27
            
            
            -
            
            
            -
            
            
            -
            
            
            27Intangible
                Assets with Finite LivesCustomer
                list
            
            
            676
            
            
            -
            
            
            -
            
            
            -
            
            
            676Software/Technology
            
            
            207
            
            
            -
            
            
            -
            
            
            1,199
            
            
            1,406Covenants
                not to compete
            
            
            25
            
            
            -
            
            
            -
            
            
            -
            
            
            25Patents
            
            
            -
            
            
            -
            
            
            -
            
            
            1,865
            
            
            1,865Intangible
                Assets with Indefinite Lives:Trade
                name and marks
            
            
            39
            
            
            -
            
            
            53
            
            
            131
            
            
            223Database
            
            
            
            
            
            
            
            
            
            
            
            249
            
            
            249Excess
                of purchase price over fair value
              of
                net assets acquired (goodwill)
            
            $
            1,201
            
            $
            515
            
            $
            3,043
            
            $
            4,869
            
            $
            9,628





The
      intangible assets with finite lives will be amortized over their estimated
      useful lives, as follows:





**CCE**
            
            **Gemprint**Customer
                List
            
            
            15
                years
            
            
            -Software/Technology
            
            
            5
                years
            
            
            7
                yearsCovenant
                not to compete
            
            
            5
                years
            
            
            -Patent
            
            
            -
            
            
            20
                years





Based
      on
      these useful lives, annual amortization for each of the next five years will
      be
      approximately $91,000 and approximately $266,000 for CCE and Gemprint,
      respectively.





The
      following pro forma financial data presents the unaudited pro-forma consolidated
      statements of income for the Company for the three and six month periods ended
      December 31, 2005 and 2004 based on the assumption that the Coinfacts, CCE,
      GCAL
      and Gemprint acquisitions had been consummated on July 1, 2004, rather than
      on
      the actual dates of their acquisition. These pro forma unaudited statements
      of
      income do not purport to represent what the Company’s actual results of
      operations would have been had these acquisitions been consummated on July
      1,
      2004 and are not necessarily indicative of the Company’s results of operations
      for any subsequent interim period in the current fiscal year or in any
      subsequent year.


12


BUSINESS
      ACQUISITIONS (CONTINUED)




(in
                thousands, except per share data)
              Pro-Forma
                Financial Data**Three
                Months Ended**
              **December
                31,**
            
            **Three
                Months Ended**
              **December
                31,**
            
            **Six
                Months Ended**
              **December
                31,**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Revenue
            
            $
            7,565
            
            $
            8,451
            
            $
            16,666
            
            $
            17,082Operating
                income
            
            
            313
            
            
            1,461
            
            
            1,440
            
            
            3,617Interest
                income, net
            
            
            608
            
            
            110
            
            
            1,150
            
            
            174Other
                income (expense), net
            
            
            8
            
            
            2
            
            
            16
            
            
            2Income
                before provision for income taxes
            
            
            929
            
            
            1,573
            
            
            2,606
            
            
            3,793Provision
                for income taxes
            
            
            (415
            )
            
            (635
            )
            
            (1,121
            )
            
            (1,525
            )Income
                from continuing operations
            
            
            514
            
            
            938
            
            
            1,485
            
            
            2,268Income
                from discontinued operations
            
            
            181
            
            
            (4
            )
            
            182
            
            
            (37
            )Net
                income
            
            $
            695
            
            $
            934
            
            $
            1,667
            
            $
            2,231Net
                income per diluted share:Income
                from continuing operations
            
            $
            0.06
            
            $
            0.14
            
            $
            0.17
            
            $
            0.34Income
                (loss)****from
                discontinued operations
            
            $
            0.02
            
            $
            0.00
            
            $
            0.02
            
            $
            (0.01
            )Net
                income
            
            $
            0.08
            
            $
            0.14
            
            $
            0.19
            
            $
            0.34





3. CASH,
      CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS





At
      December 31, 2005, cash and cash equivalents and short-term investments was
      $56
      million of which securities primarily comprising high-quality commercial
      paper, and certificates of deposit issued by U.S. or foreign companies was
      $54
      million. The short-term investment of $2,086,000, included in the $54 million,
      relates to an investment that has an original maturity of greater than 90 days.
      The minimum credit quality of the commercial paper 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. 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 are carried at market
      value in the accompanying condensed consolidated balance sheet at December
      31,
      2005. Unrealized gains on such trading securities were approximately $136,000
      at
      December 31, 2005.





4.
            INVENTORIES




Inventories
                consist of the following:(in
                thousands)**December
                31,**
            
            **June
                30,****2005**
            
            **2005**Coins
            
            $
            291
            
            $
            276Other
                collectibles
            
            
            37
            
            
            37Grading
                raw materials consumable inventory
            
            
            164
            
            
            157492
            
            
            470Less
                inventory reserve
            
            
            (63
            )
            
            (34
            )Inventories,
                net
            
            $
            429
            
            $
            436





13


5. PROPERTY
      AND EQUIPMENT





Property
                and equipment consist of the following:(in
                thousands)**December
                31,**
            
            **June
                30,****2005**
            
            **2005**Coins
                and stamp grading reference sets
            
            $
            62
            
            $
            62Computer
                hardware and equipment
            
            
            1,196
            
            
            988Computer
                software
            
            
            954
            
            
            900Equipment
            
            
            1,806
            
            
            1,330Furniture
                and office equipment
            
            
            737
            
            
            689Leasehold
                improvements
            
            
            444
            
            
            438Trading
                card reference library
            
            
            52
            
            
            525,251
            
            
            4,459Less
                accumulated depreciation and amortization
            
            
            (3,806
            )
            
            (3,602
            )Property
                and equipment, net
            
            $
            1,445
            
            $
            857





6. ACCRUED
      LIABILITIES




Accrued
                liabilities consist of the following:(in
                thousands)**December
                31,**
            
            **June
                30,****2005**
            
            **2005**Warranty
                costs
            
            $
            622
            
            $
            609Professional
                fees
            
            
            426
            
            
            211Other
            
            
            725
            
            
            743$
            1,773
            
            $
            1,563





The
      following table presents the changes in the Company’s warranty reserve during
      the six months ended December 31, 2005 and 2004:





(in
                thousands)**Six
                Months Ended December 31,**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**Warranty
                reserve, beginning of period
            
            $
            609
            
            $
            492Charged
                to cost of revenue
            
            
            211
            
            
            301Payments
            
            
            (198
            )
            
            (107
            )Warranty
                reserve, end of period
            
            $
            622
            
            $
            686





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 business, by divesting the Company’s
      collectibles auctions and direct sales businesses. Therefore, in accordance
      with
      SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      the
      assets and related liabilities of those collectible sales businesses, are
      classified as held for sale and the related operating results are classified
      as
      discontinued operations in the accompanying condensed consolidated balance
      sheets at December 31, 2005 and June 30, 2005 and condensed consolidated
      statements of operations for the three and six-month periods ended December
      31,
      2005 and 2004. The Company sold or otherwise disposed of all of its


14


DISCONTINUED
      OPERATIONS (CONTINUED)





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.





In
      addition, as discussed in note 2 above, as part of the acquisition of CCE,
      in
      September 2005 the Company acquired the common stock of CTP. The Company’s
      intent at the date of acquisition was to dispose of CTP, and the Company
      disposed of CTP in November 2005. The operating results of CTP were classified
      as part of discontinued operations from the date of acquisition through the
      date
      of its disposal.





The
      operating results of the discontinued collectible sales businesses ,
      and those
      of
      CTP since the date of its acquisition, that are included
      in the accompanying consolidated condensed statements of operations, are as
      follows:




(in
                thousands)
              **Three
                Months Ended**
            
            (in
                thousands)
              **Six
                Months Ended****December
                31,**
              **2005**
            
            **December
                31,**
              **2004**
            
            **December
                31,**
              **2005**
            
            **December
                31,**
              **2004**Net
                revenues
            
            $
            252
            
            $
            15
            
            $
            313
            
            $
            270Income
                (loss) before income taxes
            
            $
            94
            
            $
            (58
            )
            $
            58
            
            $
            (292
            )Gain
                on sale of discontinuedbusinesses
            
            
            295
            
            
            45
            
            
            299
            
            
            164389
            
            
            (13
            )
            
            357
            
            
            (128
            )Income
                tax (expense) benefit
            
            
            (208
            )
            
            6
            
            
            (188
            )
            
            52Net
                income (loss) fromdiscontinued
                operations
            
            $
            181
            
            $
            (7
            )
            $
            169
            
            $
            (76
            )





As
      discussed in note 2, the income from discontinued operations in the three and
      six months ended December 31, 2005 includes the results of operations of CTP
      for
      the respective period that the Company owned such business, and the sale of
      a
      portion of the remaining inventory of the Company’s collectible auction and
      direct sales businesses, net of reserves previously established against such
      inventory, and includes bad debt expenses of $73,000 related to notes receivable
      that became uncollectible in the three months ended September 30,
      2005.





The
      gains
      realized on sales of discontinued businesses in the three and six-month periods
      ended December 31, 2005 and 2004, respectively, primarily relate to contingent
      consideration arising from the sale of one of the Company’s collectibles auction
      businesses that became determinable in those periods.





15


DISCONTINUED
      OPERATIONS (CONTINUED)





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





**(in
                thousands)****December
                31,**
              **2005**
            
            **June
                30,**
              **2005**Current
                assets:Accounts
                receivable
            
            $
            20
            
            $
            58Inventories
            
            
            123
            
            
            189Consignment
                advances
            
            
            30
            
            
            30Notes
                receivable
            
            
            36
            
            
            88$
            209
            
            $
            365Non-current
                assets:Notes
                receivable, net of current portion
            
            $
            2
            
            $
            46$
            2
            
            $
            46Current
                liabilities:Consignors
                payable
            
            $
            1
            
            $
            1Other
                current liabilities
            
            
            25
            
            
            26$
            26
            
            $
            27





In
      addition, at December 31, 2005, the Company had certain short-term receivables
      totaling $393,000 and a long term note in the amount of $365,000, comprised
      primarily of receivables that arose out of the sales of the collectibles auction
      businesses (including the amount that became determinable in the three months
      ended December 31, 2005), and a note receivable of $458,000 in connection with
      the sale of CTP.





Such
      note
      receivable of $458,000 is repayable over 5 years, bears interest at 10% per
      annum, and the Company has a security interest in the CTP business assets and
      certain personal assets of the purchaser. At December 31, 2005, $93,000 of
      such
      note was classified as part of short-term receivables, and the balance of
      $365,000 was classified as long-term notes receivable.





8.
            INCOME TAXES





Income
      tax expense was provided for at rates of 45% and 43% for the three and six-month
      periods ended December 31, 2005, compared with 40% for the three and six-month
      periods ended December 31, 2004. The increased rate in 2005 reflects the
      expected federal and state statutory rate of approximately 40% adjusted for
      certain permanent tax differences, primarily related to stock compensation
      expense for incentive stock options that are not allowable for income tax
      purposes.






16





9.
            NET INCOME PER SHARE





Net
      income per share is determined in accordance with SFAS No. 128, *Earnings
      Per Share* .
      Net
      income per share for the three and six-month periods ended December 31, 2005
      and
      2004, respectively, are computed as follows:





(in
                thousands,
              except
                per share data)
            
            (in
                thousands,
              except
                per share data)**Three
                Months Ended**
              **December
                31,**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Income
                from continuing operations
            
            $
            554
            
            $
            928
            
            $
            1,533
            
            $
            2,239Income
                (loss) from discontinued operations, net of gains
              on
                sales of discontinued businesses (net of income taxes)
            
            
            181
            
            
            (7
            )
            
            169
            
            
            (76
            )Net
                income
            
            $
            735
            
            $
            921
            
            $
            1,702
            
            $
            2,163Income
                per basic share:From
                continuing operations
            
            $
            0.07
            
            $
            0.15
            
            $
            0.18
            
            $
            0.36From
                discontinued operations, net of gains
              on
                sales of discontinued businesses (net of income taxes)
            
            
            0.02
            
            
            -
            
            
            0.02
            
            
            (0.01
            )Net
                income
            
            $
            0.09
            
            $
            0.15
            
            $
            0.20
            
            $
            0.35Net
                income per diluted share:From
                continuing operations
            
            $
            0.06
            
            $
            0.14
            
            $
            0.17
            
            $
            0.34From
                discontinued operations, net of gains
              on
                sales of discontinued businesses (net of income taxes)
            
            
            0.02
            
            
            -
            
            
            0.02
            
            
            (0.01
            )Net
                income
            
            $
            0.08
            
            $
            0.14
            
            $
            0.19
            
            $
            0.33Weighted
                average shares outstanding:Basic
            
            
            8,488
            
            
            6,242
            
            
            8,487
            
            
            6,230Effect
                of dilutive shares
            
            
            315
            
            
            453
            
            
            319
            
            
            414Diluted
            
            
            8,803
            
            
            6,695
            
            
            8,806
            
            
            6,644





Options
      and warrants to purchase approximately 692,000 and 691,000 shares of common
      stock for the three and six months ended December 31, 2005, respectively, and
      approximately 404,000 and 675,000 for the three and six months ended December
      31, 2004, respectively, 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 of the
      Company’s shares for those respective periods.





10.
            BUSINESS SEGMENTS





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





For
      our
      continuing operations, we operate principally in three reportable service
      segments: coins, sportscards and other high-end collectibles. Services provided
      by these segments include authentication, grading, publication advertising
      and
      subscription-based revenues.


17


BUSINESS
      SEGMENTS (CONTINUED)





We
      allocate operating expenses to each service segment. Stock-based compensation
      is
      recognized by segment for those employees of the reported segment. We do not
      allocate specific assets to these service segments. All of our sales and
      identifiable assets are located in the Unit ed
      States.





(in
                thousands)
            
            (in
                thousands)**Three
                Months Ended**
              **December
                31,**
            
            **Six
                Months Ended**
              **December
                31,**Net
                revenues from external customers
            
            **2005**
            
            **2004**
            
            **2005**
            
            **2004**Coins
            
            $
            4,551
            
            $
            5,493
            
            $
            10,302
            
            $
            11,101Sportscards
            
            
            1,964
            
            
            1,976
            
            
            4,070
            
            
            4,023Other
            
            
            932
            
            
            513
            
            
            1,900
            
            
            1,053Total
                revenue
            
            $
            7,447
            
            $
            7,982
            
            $
            16,272
            
            $
            16,177Operating
                income(loss)
                before unallocated expensesCoins
            
            $
            2,050
            
            $
            2,931
            
            $
            4,753
            
            $
            5,758Sportscards
            
            
            39
            
            
            300
            
            
            358
            
            
            638Other
            
            
            (112
            )
            
            (149
            )
            
            (81
            )
            
            (240
            )Total
            
            
            1,977
            
            
            3,082
            
            
            5,030
            
            
            6,156Legal
                settlement
            
            
            -
            
            
            (500
            )
            
            -
            
            
            (500
            )Unallocated
                operating expenses
            
            
            (1,592
            )
            
            (1,138
            )
            
            (3,502
            )
            
            (2,087
            )Consolidated
                operating income
            
            $
            385
            
            $
            1,444
            
            $
            1,528
            
            $
            3,569





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 customers owned loan collateral). At December 31, 2005,
      there was no balance outstanding under this line of credit.





Costs
      of
      approximately $340,000 (comprising a loan agreement fee, bank fees and legal
      fees) were incurred in connection with this line of credit. At December 31,
      2005, these costs were capitalized and are being amortized to net interest
      expense for CFC, which is included in net revenues in the condensed consolidated
      statements of operations for the three and six months ended December 31, 2005.
      The unamortized amount of such costs are included in prepaid expenses and other
      current assets in the accompanying condensed consolidated balance sheet at
      December 31, 2005. On a quarterly basis, CFC incurs an unused credit 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 December 31, 2005 and received the required
      consent from the lender for the purchase of the Gemprint business (see note
      2).






18





12.
            STOCK BUYBACK PROGRAM





On
      December 6, 2005,
      the Company announced that its Board of Directors had approved a $10 million
      Stock Buyback Program. The program authorizes the Company to make up to $10
      million of stock purchases in the open market or private transactions, in
      accordance with applicable SEC rules. The Company is under no obligation to
      repurchase any shares under this program, and the timing, actual number (if
      any)
      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. Through December 31, 2005, the Company had not
      repurchased any shares under this program.





13.
            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 was president of one of the Company’s
      collectibles sales businesses that was sold in 2004 and an expert in the
      authentication of autographs and memorabilia. Miller alleged that the Company
      had issued authentication certificates bearing his name without his consent,
      in
      violation of a California statute prohibiting unauthorized appropriation of
      a
      person’s name, signature or likeness. The statute provides that a person whose
      name, signature or likeness has been misappropriated, in violation of the
      statute, is entitled to recover the greater of $750 or the actual damages
      suffered as a result of the unauthorized use, and any profits from that are
      attributable to that unauthorized use that are not taken into account in
      computing the actual damages. The Company denied Miller’s allegations and
      asserted that he was not entitled to any recovery under the statute in excess
      of
      his actual damages and that he had not suffered any actual damages as a result
      of the issuance of the certificates.




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




As
      expected, Miller has 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. The Company has
      been
      informed by its trial counsel that, in California, it generally takes at least
      one year, and sometimes as long as two years, from the filing of an appeal
      of a
      damage award, before the appeal is actually heard by an appellate court.




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.


19


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





**Forward-Looking
      Statements**





The
      discussion in this Item 2 and in Item 3 of this Quarterly Report on Form 10-Q
      includes “forward-looking statements” within the meaning of Section 27A of the
      Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of the
      Securities Exchange Act of 1934, as amended (the “1934 Act”). Those Sections of
      the 1933 Act and 1934 Act provide a “safe harbor” for forward-looking statements
      to encourage companies to provide 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 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 risks and factors, described in our Annual Report on Form 10-K for
      the fiscal year ended June 30, 2005, that could affect our future financial
      performance as well.





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 any of our prior filings with the Securities and Exchange
      Commission.





**Our
      Business**





Collectors
      Universe Inc. (the “Company”) provides authentication and grading services to
      dealers and collectors of high-end collectible coins, sportscards, stamps,
      sports and entertainment memorabilia autographs and currency. Additionally,
      in
      the quarter ended December 31, 2005 we began offering diamond authentication
      and
      grading services to wholesale and retail dealers of diamonds. We believe that
      our authentication and grading services add value to these collectibles and
      to
      diamonds by enhancing their marketability and, thereby, providing increased
      liquidity to the dealers and collectors that own and buy and sell them.





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 the sale of advertising on our websites; the sale of printed
      publications and collectibles price guides and advertising in such publications;
      and the sale of historical data and information about the collectibles
      authenticated and graded by us that we believe facilitates commerce in those
      collectibles.





On
      July
      14, 2005, the Company purchased substantially all the assets of CoinFacts.com,
      which operates an internet website on which it publishes detailed proprietary
      information and history on U.S. Coins. On September 2, 2005, the Company
      acquired the common stock of Certified Coin Exchange (“CCE”), which operates a
      subscription-based dealer-to-dealer internet bid-ask market for third-party
      certified coins.





On
      November 8, 2005, the Company acquired Gem Certification & Appraisal Lab
      (“GCAL”), a forensic gemological certification and grading laboratory. As part
      of that transaction, the Company also acquired Diamond Profile Laboratory,
      Inc.
      (DPL), a scientific diamond light performance analysis laboratory, and all
      publishing and


20


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 million in
      cash for GCAL, DPL and the publishing and other rights to “Palmieri’s Market
      Monitor,” and assumed certain transaction-related costs of $50,000.





On
      December 22, 2005, the Company completed its acquisition of the business and
      substantially all of the assets of Gemprint Corporation (“Gemprint”), consisting
      primarily of a patented technology for non-invasive diamond identification
      which
      Gemprint uses 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 Gemprint’s business and assets of $7.5 million in
      cash, and assumed certain pre-acquisition liabilities and lease commitments,
      and
      agreed to pay additional contingent purchase price of $1 for each diamond that
      the Company registers using the gemprint process in excess of 100,000
      registrations per year during the next five years.





GCAL
      plans to incorporate the gemprint process into its diamond grading process,
      so
      that each GCAL authenticated and graded diamond will also carry a gemprint
      image
      stored in GCAL’s registered database, which will enable GCAL to provide an
      additional measure of protection against 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.





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





During
      the period from 1999 through the latter part of fiscal 2004, we also were
      engaged in the business of marketing and selling collectible coins, sportscards
      and sports entertainment and historical memorabilia. Most of those sales were
      made at multi-venue auctions that were conducted by our collectibles sales
      divisions. We also sold collectible coins, at retail, by direct sales
      methods.





At
      the
      authorization of our Board of Directors, in December 2003 we adopted a plan
      to
      focus our financial and managerial resources and collectibles expertise on
      the
      operation and growth of our authentication and grading and other collectibles
      service businesses, and to divest our collectibles auctions and direct sales
      businesses.





Pursuant
      to that plan, during fiscal 2004 we sold our collectibles auction businesses
      and
      terminated our direct sales collectible coins business. However, we retained
      the
      collectibles inventories and the outstanding accounts receivables of those
      businesses, substantially all of which had been liquidated by December 31,
      2005.





In
      connection with our acquisition of CCE, we also acquired an affiliated company
      (“CTP”) that was engaged in an unrelated business. In connection with that
      acquisition, which was made a condition to our purchase of CCE, we decided
      to
      dispose of that business and succeeded in doing so, in November 2005.
      Accordingly, CTP was classified as a discontinued business and its operating
      results for the period that we owned it were included in discontinued
      operations for the three and six months ended December 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
      and
      the disposition of CTP, the discussion that follows focuses almost entirely
      on
      our authentication and grading businesses, which comprise substantially all
      of
      our continuing operations.





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





*Factors
      that Can Affect our Revenues and Cash Flows* .
      The
      provision of authentication and grading and other value-added services provides
      relatively stable and predictable cash flows, as the fees for most of the
      grading submissions we receive are prepaid. In the six months ended December
      31,
      2005 and 2004, respectively, we


21


generated
      cash of $962,000 and $420,000, from the operating activities of our continuing
      businesses. The cash generated from operations for both the six months ended
      December 31, 2005 and 2004 are net of short-term investments of $2,086,000
      and
      $4,125,000, respectively.





During
      the six months ended December 31, 2005, we generated cash of $130,000, primarily
      from the sales of our 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 December 31, 2005, the remaining assets of those businesses, which
      we are in the process of liquidating, totaled approximately $211,000, as
      compared to $411,000 at June 30, 2005.





*Factors
      Affecting our Gross Profit Margins* .
      The
      gross profit margins on authentication and grading submissions are primarily
      affected by the mix and the total number of units of collectibles submitted
      to
      us for authentication and grading and the level of our non-grading revenues.
      The
      gross profit on our authentication and grading revenues is affected by mix
      of
      revenues (i) between coins, sportscards and other collectibles and
      (ii) between vintage or “classic” coins and sportscards, on the one hand,
      and modern coins and sportscards, on the other hand. 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. Furthermore, because a high
      proportion of our direct costs are fixed in nature, our gross profit is also
      affected, at least in the short-term, by the overall volume of collectibles
      authenticated and graded in any period.





*Impact
      of Economic Conditions on Financial Performance* .
      We
      generate substantially all of our revenues from the collectibles 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, other coins, and
      other
      collectibles, usually result in increases in submissions of collectibles for
      our
      services. By contrast, the volume of collectibles sales and purchases and,
      therefore, the volume of authentication and grading submissions, usually decline
      during periods characterized by recessionary economic conditions and by declines
      in disposable income and consumer confidence or by increasing stock prices
      and
      relative stability in the stock markets.





The
      following table provides information regarding the respective numbers of coins,
      sportscards, autographs, stamps, currency and diamonds that were authenticated
      and graded by us in the three and six months ended December 31, 2005 and 2004
      and their estimated values, which are the amounts at which those coins,
      sportscards, autographs, stamps, currency and diamonds were insured by the
      dealers and collectors who submitted them to us for authentication and
      grading.





**Units
                Processed**
              **Three
                Months Ended December 31,**
            
            **Declared
                Value (000)**
              **Three
                Months Ended December 31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Coins
            
            
            357,000
            
            
            53.0
            %
            
            421,000
            
            
            61.0
            %
            $
            278,216
            
            
            87.0
            %
            $
            275,066
            
            
            91.0
            %Sportscards
            
            
            275,000
            
            
            40.0
            %
            
            253,000
            
            
            36.0
            %
            
            17,823
            
            
            6.0
            %
            
            14,954
            
            
            5.0
            %Autographs
            
            
            34,000
            
            
            5.0
            %
            
            17,000
            
            
            2.0
            %
            
            4,308
            
            
            1.0
            %
            
            7,191
            
            
            2.0
            %Stamps
            
            
            7,000
            
            
            1.0
            %
            
            7,000
            
            
            1.0
            %
            
            3,153
            
            
            1.0
            %
            
            5,797
            
            
            2.0
            %Currency
            
            
            5,000
            
            
            1.0
            %
            
            -
            
            
            -
            
            
            7,216
            
            
            2.0
            %
            
            -
            
            
            -Diamonds
            
            
            1,000
            
            
            -
            
            
            -
            
            
            -
            
            
            9,963
            
            
            3.0
            %
            
            -
            
            
            -Total
            
            
            679,000
            
            
            100.0
            %
            
            698,000
            
            
            100.0
            %
            $
            320,679
            
            
            100.0
            %
            $
            303,008
            
            
            100.0
            %





22





**Units
                Processed**
              **Six
                Months Ended December 31,**
            
            **Declared
                Value (000)**
              **Six
                Months Ended December 31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Coins
            
            
            752,000
            
            
            53.0
            %
            
            792,000
            
            
            58.0
            %
            $
            630,922
            
            
            88.0
            %
            $
            576,221
            
            
            90.0
            %Sportscards
            
            
            558,000
            
            
            39.0
            %
            
            518,000
            
            
            38.0
            %
            
            35,070
            
            
            5.0
            %
            
            31,879
            
            
            5.0
            %Autographs
            
            
            89,000
            
            
            6.0
            %
            
            39,000
            
            
            3.0
            %
            
            7,496
            
            
            1.0
            %
            
            16,958
            
            
            3.0
            %Stamps
            
            
            16,000
            
            
            1.0
            %
            
            12,000
            
            
            1.0
            %
            
            8,322
            
            
            1.0
            %
            
            10,528
            
            
            2.0
            %Currency(1)
            
            
            14,000
            
            
            1.0
            %
            
            -
            
            
            -
            
            
            23,225
            
            
            3.0
            %
            
            -
            
            
            -Diamonds(1)
            
            
            1,000
            
            
            -
            
            
            -
            
            
            -
            
            
            9,963
            
            
            2.0
            %
            
            -
            
            
            -Total
            
            
            1,430,000
            
            
            100.0
            %
            
            1,361,000
            
            
            100.0
            %
            $
            714,998
            
            
            100.0
            %
            $
            635,586
            
            
            100.0
            %







(1)
            We
                began offering currency authentication and grading services and diamond
                grading services for the first time during the six months ended December
                31, 2005.





**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 inventories,
      we
      must make judgments, and estimates and assumptions, regarding circumstances
      or
      trends that could affect the value of those assets, such as economic conditions
      or trends in those conditions that could impact our ability to realize the
      value
      of our inventories in future periods. Those judgments, estimates, and
      assumptions are made based on current information available to us at that time.
      Many of those conditions, trends and circumstances, however, are outside of
      our
      control and, if changes were to occur in the events, trends or other or
      circumstances on which are judgments or estimates were based, or other
      unanticipated events were to happen that might affect our operations, we may
      be
      required under GAAP to adjust our earlier estimates that are affected by those
      changes or events. 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 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, such as occurred on September 11, 2001 or increases in interest
      rates or economic slowdowns, will have short or longer term consequences for
      our
      business, and it is not uncommon for it to take some time after the occurrence
      of an event or the onset of changes in economic circumstances for the full
      effects of such events or changes to be recognized. Therefore, management makes
      such estimates based upon the information available at that time and reevaluates
      and adjusts its reserves and allowances for potential write-downs on a quarterly
      basis.





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





23


During
      the six months ended December 31, 2005 we acquired certain businesses and,
      in
      accordance with GAAP, we accounted for those acquisitions using the purchase
      method of accounting. That accounting method required us to allocate the amount
      paid for those businesses over the fair value of the assets and liabilities
      acquired, and to classify the excess of the purchase price over the fair value
      as goodwill. In accordance with GAAP, we will be evaluating goodwill for
      impairments at least annually, or more frequently if we believe that goodwill
      has been impaired in the interim due to changing facts or events. 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.





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 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 authenticated and graded
      collectible to the customer. Our authentication and grading customers generally
      prepay our authentication and grading fees when they submit their collectible
      items to us for authentication and grading. We record those prepayments as
      deferred revenue until their graded collectibles are shipped back to them.
      At
      that time, we record the revenues from the authentication and grading services
      we have performed for the customer and deduct this amount from deferred revenue.
      For certain dealers to whom we extend open account privileges, we record revenue
      at the time of shipment of the authenticated and graded collectible to the
      dealer.





*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 collectibles dealers who submit
      collectibles to us for authentication and grading on a recurring basis. In
      addition, primarily in connection with our dealer financing programs, we make
      advances or extend credit under notes receivable arrangements. We regularly
      review 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 known conditions or trends that may affect the ability of account
      debtors to pay their accounts or notes 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
      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 market 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 on
      the
      basis of market knowledge, historical experience and estimates concerning future
      economic conditions 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 allowance. Increases
      in
      this allowance will cause a decline in operating results, as such increases
      are
      recorded by charges against income.





*Grading
      Warranty Costs* .
      We
      offer a warranty covering the coins, sportscards, stamps and currency 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


24


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 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 review 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. 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
      it
      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 were any impairment
      of
      its long-lived assets as of December 31, 2005. 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.* Effective
      July 1, 2005, the Company began recognizing share-based compensation costs
      based
      on the fair value recognition provision of SFAS No. 123(R), using the
      Black-Scholes option valuation method. Under that method, assumptions are made
      for the expected lives of the options granted, the expected volatility of the
      Company’s stock 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 net of option forfeitures we expect will occur, which we estimate
      on the basis of historical forfeiture experience. Once we determine the
      compensation cost of a stock option award, that cost is recognized over the
      vesting period of the option using the straight-line attribution
      method.





**Results
      of Operations**





The
      following table sets forth certain financial data, expressed as a percentage
      of
      net revenues, derived from our statements of operations for the respective
      periods indicated below:





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended December 31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                revenues
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of revenues
            
            
            41.9
            %
            
            37.6
            %
            
            39.9
            %
            
            36.0
            %Gross
                profit
            
            
            58.1
            %
            
            62.4
            %
            
            60.1
            %
            
            64.0
            %Operating
                expenses:Selling
                and marketing expenses
            
            
            12.3
            %
            
            9.4
            %
            
            12.3
            %
            
            10.5
            %General
                and administrative expenses
            
            
            40.6
            %
            
            28.7
            %
            
            38.4
            %
            
            28.3
            %Settlement
                of lawsuit
            
            
            -
            
            
            6.2
            %
            
            -
            
            
            3.1
            %Total
                operating expenses
            
            
            52.9
            %
            
            44.3
            %
            
            50.7
            %
            
            41.9
            %Operating
                income
            
            
            5.2
            %
            
            18.1
            %
            
            9.4
            %
            
            22.1
            %Interest
                income, net
            
            
            8.2
            %
            
            1.4
            %
            
            7.1
            %
            
            1.0
            %Other
                income
            
            
            -
            
            
            -
            
            
            0.1
            %
            
            -Income
                before provision for income taxes
            
            
            13.4
            %
            
            19.5
            %
            
            16.6
            %
            
            23.1
            %Provision
                for income taxes
            
            
            (6.0
            %)
            
            (7.9
            %)
            
            (7.1
            %)
            
            (9.3
            %)Income
                from continuing operations after income taxes
            
            
            7.4
            %
            
            11.6
            %
            
            9.5
            %
            
            13.8
            %Income
                (loss) from discontinued operations, net of gain on sales
              of
                discontinued businesses (net of income taxes)
            
            
            2.5
            %
            
            (0.1
            %)
            
            1.0
            %
            
            (0.5
            %)Net
                income
            
            
            9.9
            %
            
            11.5
            %
            
            10.5
            %
            
            13.3
            %





25


*Net
      Revenues*





Authentication
      and grading fees consist primarily of fees generated from the authentication
      and
      grading of high-value coins, sportscards, autographs, stamps, currency and
      diamonds and, to a much lesser extent, revenues from the publication of
      collectibles magazines, the sale of advertising for placement on our websites
      and in our magazines, and from subscription-based revenues. Net revenues are
      determined net of discounts and allowances.




The
      following tables set forth information regarding the net revenues attributable
      to the authentication and grading of coins, sportscards and other collectibles,
      respectively, in the three and six months ended December 31, 2005 and 2004:





**Three
                Months Ended December 31,****2005**
            
            **2004**
            
            **2005
                vs. 2004****Increase
                (Decrease)****Amount**
            
            **%
                of Net Revenues**
            
            **Amount**
            
            **%
                of Net Revenues**
            
            **Amount**
            
            **Percent**Coins
            
            $
            4,551,000
            
            
            61.1
            %
            $
            5,493,000
            
            
            68.8
            %
            
            (942,000
            )
            
            (17.1
            %)Sportscards
            
            
            1,964,000
            
            
            26.4
            %
            
            1,976,000
            
            
            24.8
            %
            
            (12,000
            )
            
            (0.6
            %)Other
                collectibles
            
            
            932,000
            
            
            12.5
            %
            
            513,000
            
            
            6.4
            %
            
            419,000
            
            
            81.7
            %Net
                revenues
            
            $
            7,447,000
            
            
            100.0
            %
            $
            7,982,000
            
            
            100.0
            %
            
            (535,000
            )
            
            (6.7
            %)








**Six
                Months Ended December 31,****2005**
            
            **2004**
            
            **2005
                vs. 2004****Increase
                (Decrease)****Amount**
            
            **%
                of Net Revenues**
            
            **Amount**
            
            **%
                of Net Revenues**
            
            **Amount**
            
            **Percent**Coins
            
            $
            10,302,000
            
            
            63.3
            %
            $
            11,101,000
            
            
            68.6
            %
            
            (799,000
            )
            
            (7.2
            %)Sportscards
            
            
            4,070,000
            
            
            25.0
            %
            
            4,023,000
            
            
            24.9
            %
            
            47,000
            
            
            1.2
            %Other
                collectibles
            
            
            1,900,000
            
            
            11.7
            %
            
            1,053,000
            
            
            6.5
            %
            
            847,000
            
            
            80.4
            %Net
                revenues
            
            $
            16,272,000
            
            
            100.0
            %
            $
            16,177,000
            
            
            100.0
            %
            
            95,000
            
            
            0.6
            %





The
      $535,000 (6.7%) decrease in net revenues in the quarter ended December 31,
      2005,
      compared to the corresponding quarter of the prior year, is primarily
      attributable to a 2.7% overall decrease in the total number of units
      authenticated and graded in this year’s second quarter, compared to the same
      quarter of the prior year. That decrease in units authenticated and graded
      was
      primarily due to a 15.2% decline in the number of coins authenticated and
      graded, compared to the same quarter of the prior year, which resulted in a
      17.1% decrease in coin revenues. That decrease in coin revenues, in turn, was
      attributable to a reduction in coin submissions from one of the Company’s larger
      customers, due to a serious illness sustained by its owner, whose submissions
      accounted for approximately 5% of coin submissions in this year’s second quarter
      as compared to 11% in the same quarter of 2004. Also contributing to the decline
      in coin revenues was a lower average service price earned on modern coin orders
      and a modest decrease in coin trading volumes which affects the number of coins
      submitted to us for authentication and grading.




The
      decline in coin revenues was partially offset by a $419,000, or 81.7%, increase
      in other collectible revenues in the three months ended December 31, 2005,
      compared to the corresponding period of the prior year. Other collectible
      revenues include approximately $320,000 of revenues from the Company’s currency
      division (that did not begin operations until the third quarter of fiscal year
      2005) and revenues generated by the businesses that we acquired during the
      six
      months ended December 31, 2005.





The
      $95,000, or 0.6%, increase in net revenues in the six months ended December
      31,
      2005, as compared to the same six months of 2004, was primarily due to a 5.1%
      increase in the number of collectibles authenticated and graded in the first
      half of this fiscal year, compared to the same period of the prior year. The
      decrease in coin revenues in the six months ended December 31, 2005 was
      primarily attributable to the same factors, described above, that caused the
      decline in coin revenues in the second quarter ended December 31, 2005. The


26


$847,000,
      or 80.4%, increase in other collectibles revenues for the six months ended
      December 31, 2005, compared to the same six months of 2004, is primarily
      attributable to approximately $510,000 of revenues generated by our currency
      division and revenues from the businesses that we acquired during the six months
      ended December 31, 2005.





Generally,
      second quarter revenues are lower than in other quarters because submissions
      decline due to the winter holidays. Additionally, we believe that the general
      economic conditions will continue to be favorable to our coin grading business.
      Accordingly, we expect that coin revenues in the third quarter of the current
      year will be higher than in this year’s second quarter.





*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. Cost
      of
      authentication and grading revenues, primarily consist of labor to authenticate
      and grade collectibles, production costs, credit cards fees, warranty expense
      and occupancy, security and insurance costs that directly relate to providing
      authentication and grading services and printing and other direct costs. In
      the
      three and six months ended December 31, 2005, our cost of revenues includes
      stock-based compensation required to be recognized in accordance with SFAS
      No.
      123(R).





Set
      forth
      below is information regarding our gross profits in the three and six months
      ended December 31, 2005 and 2004.





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Gross
                profit
            
            $
            4,329,000
            
            $
            4,984,000
            
            $
            9,782,000
            
            $
            10,353,000Gross
                profit margin
            
            
            58.1
            %
            
            62.4
            %
            
            60.1
            %
            
            64.0
            %





The
      decline in our gross profit margin in the three and six-month periods ended
      December 31, 2005, was primarily attributable to (i) the decline in net
      revenues and the relationship of the relatively fixed costs included in our
      costs of revenues to those net revenues, (ii) increased grader compensation
      costs of $124,000 and $282,000 in the three and six months ended December 31,
      2005, respectively; (iii)  a change in the mix of collectibles graded to a
      lower proportion of coins, on which we realize higher margins than on
      authentication and grading of other collectibles; and (iv) stock-based
      compensation expense of $56,000 recorded as a result of the adoption of SFAS
      No.
      123(R). Stock based compensation was not required to be recorded in 2004 or
      in
      prior years. Coin revenues represented approximately 61% and 63% of total
      net revenues in the three and six months ended December 31, 2005, as compared
      to
      approximately 69% of total net revenues in the same three and six months of
      the
      prior year.




Partially
      offsetting the impact of these factors on gross profit margin in both the three
      and six months ended December 31, 2005 was a $194,000 credit for the reversal
      of
      a long-term compensation accrual for a former employee due to the termination
      of
      his employment in the second quarter of 2006.





27


*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 six month periods ended December 31, 2005 and
      2004.





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Selling
                and marketing expenses
            
            $
            918,000
            
            $
            748,000
            
            $
            2,008,000
            
            $
            1,705,000Percent
                of net revenue
            
            
            12.3
            %
            
            9.4
            %
            
            12.3
            %
            
            10.5
            %





The
      increases, both in absolute dollars and as a percentage of net revenues, in
      selling and marketing expenses in the three and six months ended December 31,
      2005, respectively, compared to the same periods of 2004, were primarily
      attributable to (i) costs of $91,000 and $131,000, respectively, incurred
      in the three and six months ended December 31, 2005 in connection with the
      launch of the Company’s currency grading division and the commencement of
      marketing programs for the businesses that we acquired in the six months ended
      December 31, 2005, (ii) collectibles trade-show expenses of approximately
      $68,000 and $144,000 incurred in the three and six month periods ended December
      31, 2005, respectively, and (iii) increases in personnel costs in our
      marketing and customer service departments. Selling and marketing costs are
      generally higher in the first quarter of the fiscal year, because the number
      of
      large trade shows held in the first fiscal quarter of the year ordinarily
      exceeds the number held in any of the other fiscal quarters of the
      year.





*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. In the three and six months
      ended December 31, 2005, G&A expenses also included stock-based compensation
      required to be recognized in accordance with SFAS No. 123(R).





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**General
                and administrative expenses
            
            $
            3,026,000
            
            $
            2,292,000
            
            $
            6,246,000
            
            $
            4,579,000Percent
                of net revenues
            
            
            40.6
            %
            
            28.7
            %
            
            38.4
            %
            
            28.3
            %





The
      principal components of the increases in G&A expenses of $734,000 and
      $1,667,000, respectively, in the three and six months ended December 31, 2005,
      compared to the same periods of the prior year. Those expenses consisted
      primarily of:





·  expenditures
      of $341,000 and $774,000 incurred in the three and six months ended December
      31,
      2005, respectively, in connection with the launch of our new currency grading
      division and the acquisitions of new businesses during the first half of the
      current fiscal year, which included expenditures of $147,000 and $273,000,
      respectively, incurred to upgrade and expand our information systems and
      increases of $34,000 and $117,000, respectively, in our occupancy expense for
      additional office space at the Company’s corporate headquarters, in each case
      primarily to accommodate our new and expanded operations;





·  legal
      fees and related costs of $228,000 and $375,000 incurred in the three and six
      months ended December 31, 2005 primarily in connection with the previously
      reported Miller case,
      which went to trial in the quarter ended December 31, 2005; and





·  stock-based
      compensation of $76,000 and $151,000, respectively, due to the adoption of
      SFAS
      No. 123(R), effective July 1, 2005.


28


Also
      contributing to the increase in general and administrative expenses in the
      six
      months ended December 31, 2005 was approximately $310,000 of professional fees
      and related costs incurred in the first quarter of the current fiscal year
      in
      connection with the audit of the effectiveness of the Company’s internal control
      over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act
      of
      2002 and the annual financial statement audit for fiscal 2005.





*Settlement
      of Lawsuit*





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Settlement
                of lawsuit
            
            $
            -
            
            $
            500,000
            
            $
            -
            
            $
            500,000Percent
                of net revenues
            
            
            -
            
            
            6.2
            %
            
            -
            
            
            3.1
            %





As
      previously reported, during the quarter ended December 31, 2004, the Company
      paid $500,000 (net of a $100,00 insurance reimbursement) to settle the Real
      Legends lawsuit.





*Stock-Based
      Compensation.*





As
      discussed in note 1 to the Company’s condensed consolidated financial statements
      included in Part I of this report, effective July 1, 2005 the Company adopted
      SFAS No. 123(R) -- *Share
      Based Payments* , which
      resulted in our recognition of stock-based compensation of $133,000 and $265,000
      for the three and six months ended December 31, 2005. That stock-based
      compensation was attributable to the following:





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2005**Cost
                of revenues
            
            $
            56,000
            
            $
            112,000Selling
                and marketing expenses
            
            
            1,000
            
            
            2,000General
                and administrative expenses
            
            
            76,000
            
            
            151,000$
            133,000
            
            $
            265,000





Prior
      to
      the adoption of SFAS No 123(R), we accounted for our stock option plans in
      accordance with the Accounting Principle Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related interpretations. As such, compensation expense was recorded at the
      date
      of grant only if the quoted market price of the underlying stock on that date
      exceeded the exercise price of the options. However, we had provided pro forma
      net earnings and pro forma net earnings per share disclosures as if the fair
      value of all stock options as of their respective grant dates were recognized
      as
      expense over the vesting periods of those options in accordance with SFAS
      No. 123 *Accounting
      for* ****** *Stock-Based
      Compensation.*





We
      adopted SFAS No. 123(R) using the modified prospective method. Under this
      transition method, compensation costs recognized in the three and six months
      ended December 31, 2005 includes: (i) compensation cost for all share-based
      payments granted prior to, but not yet vested as of July 1, 2005, based on
      the
      grant date fair value estimated in accordance with the original provisions
      of
      SFAS No. 123, and (ii) compensation cost for all share-based payments
      granted subsequent to June 30, 2005 based on the grant-date fair value estimated
      in accordance with the provisions of SFAS No. 123(R). In accordance with the
      modified prospective method, results for the corresponding periods of the prior
      year have not been restated and the Company will continue to disclose the pro
      forma effect of option grants on net earnings and net earnings per share in
      its
      financial statement footnote disclosures.





We
      also
      will continue to account for equity instruments issued to persons other than
      Company employees and directors (“non-employees”) in accordance with the
      provisions of SFAS No. 123 and Emerging Issues Task Force (“EITF”) Issue
      No. 96-18, *Accounting
      for Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling Goods or Services* .
      All
      transactions in which goods or services are the consideration


29


received
      for equity instruments issued to non-employees are accounted for based on the
      fair value of the consideration received or the fair value of the equity
      instrument issued, whichever is more reliably measurable. The measurement date
      used to determine the fair value of any such equity instrument is the earliest
      to occur of (i) the date on which the third-party performance is complete,
      (ii) the date on which it is probable that performance will occur, or
      (iii) if different, the date on which the compensation has been earned by
      the non-employee. However, no equity instruments were issued to non-employees
      for goods or services during the three or six months ended December 31, 2005
      and
      2004.





The
      Company issues stock options to employees and outside directors whose only
      condition for vesting are continued employment or service during the related
      vesting period. Typically, the vesting period is four years for employee awards
      and six months for director awards, although awards are sometimes granted with
      immediate vesting.





For
      purposes of SFAS No. 123(R), the Company calculates stock-based
      compensation by estimating the fair value of each option granted using the
      Black-Scholes option valuation model and various assumptions that are described
      in note 1 to the condensed consolidated financial statements included in Part
      I
      of this Report. Once the compensation cost of an option is determined, that
      cost
      is recognized on a straight-line basis over the vesting period of the
      option.





For
      the
      three and six months ended December 31, 2005, stock-based compensation comprised
      compensation costs attributable to such period for those options that were
      not
      fully vested upon adoption of SFAS No. 123(R) and compensation costs for options
      that were granted during the period, prorated from the date of grant to December
      31, 2005, adjusted for estimated forfeitures in accordance with SFAS No. 123(R).
      Options to purchase a total of 10,000 shares of our common stock were granted
      to
      employees during the quarter ended September 30, 2005, but no options were
      granted in the subsequent quarter ended December 31, 2005.





The
      method we employ to calculate stock-based compensation is consistent with the
      method used to compute stock-based compensation under SFAS No. 123, except
      that
      under SFAS No. 123(R), we are required to estimate forfeitures, which we were
      not required to and did not estimate under SFAS No. 123. We have estimated
      forfeitures to be 4%, which reduced stock-based compensation cost by $5,000
      and
      $10,000 in the three and six months ended December 31, 2005.





The
      total
      amount of compensation cost related to non-vested awards not yet recognized
      at
      December 31, 2005, was $1,530,000, and that amount will be recognized as
      compensation expense (assuming the employees to whom the options were granted
      continue to be employed by the Company) as follows:





FY
                2006
            
            $
            264,000FY
                2007
            
            
            516,000FY
                2008
            
            
            488,000FY
                2009
            
            
            259,000FY
                2010
            
            
            3,000Total
            
            $
            1,530,000





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





There
      were no modifications made to outstanding share options prior to the adoption
      of
      SFAS No. 123(R).





30


*Interest
      Income, Net*





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Interest
                income, net
            
            $
            608,000
            
            $
            110,000
            
            $
            1,150,000
            
            $
            174,000Percent
                of net revenue
            
            
            8.2
            %
            
            1.4
            %
            
            7.1
            %
            
            1.0
            %





Interest
      income is generated on cash balances that we invest primarily in highly liquid
      money market accounts, short-term bank certificates of deposit and commercial
      paper instruments. Certain investments that have an original maturity of greater
      than 90 days are classified as short-term investments. Interest income, net
      totaled $608,000 and $1,150,000, respectively, in the three and six months
      ended
      December 31, 2005, compared with $110,000 and $174,000 in the three and six
      months ended December 31, 2004, respectively. These increases were primarily
      attributable to increases in our cash and cash equivalent balances that were
      attributable to (i) the sale by us of 2,195,856 shares of our common stock
      in a public offering that we completed in the third quarter of fiscal 2005,
      which generated net proceeds to us of $35,657,000; and (ii) cash generated
      from the disposition of our collectibles sales businesses. Also contributing
      to
      the increase in interest income was an increase in the rates at which we earned
      interest on our cash and cash equivalent balances due to increases in interest
      rates.





*Income
      Tax Expense*





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended**
              **December
                31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Income
                tax expense
            
            $
            447,000
            
            $
            628,000
            
            $
            1,161,000
            
            $
            1,506,000





The
      income tax expense recorded in the three and six months ended December 31,
      2005
      and 2004 was calculated based on our expected combined federal and state
      effective income tax rate of approximately 43% for the fiscal year ended June
      30, 2006 and 40% for the fiscal year ended June 30, 2005. The increase in the
      effective rate to 43% in the current fiscal year reflects increased permanent
      differences between the Company’s income for book purposes and for tax purposes
      due primarily to the non-deductibility of compensation costs on incentive stock
      options.





*Discontinued
      Operations*





**Three
                Months Ended**
              **December
                31**
            
            **Six
                Months Ended December 31,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Income
                (loss) from discontinued operations, net
                of gain on sales of
              discontinuedbusinesses(net
                of income taxes)
            
            $
            181,000
            
            $
            (7,000
            )
            $
            169,000
            
            $
            (76,000
            )





Income
      from discontinued operations in the three and six months ended December 31,
      2005
      includes the continued activities associated with the disposition of the assets
      (consisting primarily of inventories) of the collectibles sales businesses
      that
      we sold and the results of CTP from September 2, 2005 (the date of its
      acquisition) through November 30, 2005 (the date of its disposition). In the
      three and six months ended December 31, 2005, we recognized a pre-tax gain
      of
      $295,000 on the disposal of direct collectibles businesses, the amount of which
      became determinable in that period. In the six months ended December 31, 2005,
      the Company recognized a pre-tax bad debt expense of $73,000 in connection
      with
      a note receivable, attributable to the operations of one of our discontinued
      businesses, that became uncollectible in that period.





31


**Liquidity
      and Capital
      Resources**





At
      December 31, 2005, we had cash, cash equivalents and short-term investments
      of
      $55,780,000, as compared to cash and cash equivalents of $65,439,000 at June
      30,
      2005. That decrease was primarily attributable to the use of $13.4 million
      of
      cash to fund the purchase prices that we paid for the businesses that we
      acquired in the six months ended December 31, 2005.





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





During
      the six months ended December 31, 2005, our operating activities provided net
      cash of approximately $962,000, which had been reduced by a $2,086,000 increase
      in short-term investments that was attributable primarily to cash generated
      from
      our authentication and grading services and a reduction of $1,306,000 in
      deferred income taxes as a result of our use of our net operating losses in
      the
      period to reduce our taxes payable.





We
      used
      net cash of $12,888,000 in investing activities in the six months ended December
      31, 2005, primarily to fund the purchase prices paid for the businesses we
      acquired during that period.





We
      had
      the following outstanding obligations under operating leases, net of sublease
      income for years ending June 30:





2006
            
            $
            1,092,0002007
            
            
            1,164,0002008
            
            
            1,150,0002009
            
            
            1,157,0002010
            
            
            414,000$
            4,977,000





With
      the
      exception of those obligations, we do not have any material financial
      obligations, such as long-term debt, capital lease, or purchase obligations.
      We
      continue to have an obligation to repay any future borrowings under CFC’s $7
      million revolving line of credit; however, there were no borrowings outstanding
      under this line of credit at December 31, 2005.





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 private 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. The Company made no share
      repurchases during the quarter ended December 31, 2005.




We
      plan
      to use our cash resources 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, (iv) make private and open market share
      repurchases under our stock buyback program if there are opportunities to do
      so
      at prices that we believe are attractive, and (v) 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.


32


**Recent
      Accounting Pronouncement**





In
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 154, *Accounting
      Changes and Error Corrections.* SFAS
      No.
      154 replaces APB Opinion No. 20, *Accounting
      Changes* and FASB
      Statement No 3, *Reporting
      Accounting Changes in Interim Financial Statements* which
      required that most voluntary changes in accounting principle be recognized
      by
      including in net income of the period of the change the cumulative effect of
      changing to the new accounting principle. SFAS No. 154 ** will
      require retrospective application to prior periods’ financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects or the cumulative effect of the change. This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. We will adopt SFAS No. 154
      for
      our fiscal year beginning July 1, 2006.





**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 or assets, either
                of which
                could reduce the volume of authentication and grading submissions
                and,
                therefore, the authentication and 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;




·
            the
                concentration of revenues from a small number of customers, the loss
                of
                any of which could result in a decline in our revenues and
                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 service offerings and business initiatives, such as
                autograph, stamp, paper currency and diamond grading services, and
                our
                recently inaugurated 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;




33







·
            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
      “Factors That Could Affect Our Future Financial Performance” in our
      Annual Report on Form
      10-K for our
      fiscal year
      ended June 30, 2005,
      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 **** 2005 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 December 31, 2005, we had
      $55,780,000 in cash, cash equivalents and short term investments, primarily
      invested in high-grade commercial paper, money market funds and certificates
      of
      deposit. 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.





34


**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 the Chief Financial Officer, evaluated the effectiveness
      of our disclosure controls and procedures in effect as of December 31, 2005.
      Based on this evaluation, our Chief Executive Officer and Chief Financial
      Officer concluded that, as of December 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 December 31, 2005, that has materially affected, or
      are
      reasonably likely to materially affect, our internal control over financial
      reporting.


35


**PART
      II - OTHER INFORMATION**





**ITEM
      1.** **LEGAL
      PROCEEDINGS**





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 was president of one of the Company’s
      collectibles sales businesses that was sold in 2004 and an expert in the
      authentication of autographs and memorabilia. Miller alleged that the Company
      had issued authentication certificates bearing his name without his consent,
      in
      violation of a California statute prohibiting unauthorized appropriation of
      a
      person’s name, signature or likeness. The statute provides that a person whose
      name, signature or likeness has been misappropriated, in violation of the
      statute, is entitled to recover the greater of $750 or the actual damages
      suffered as a result of the unauthorized use, and any profits from that are
      attributable to that unauthorized use that are not taken into account in
      computing the actual damages. The Company denied Miller’s allegations and
      asserted that he was not entitled to any recovery under the statute in excess
      of
      his actual damages and that he had not suffered any actual damages as a result
      of the issuance of the certificates.





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





As
      expected, Miller has 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. The Company has
      been
      informed by its trial counsel that, in California, it generally takes at least
      one year, and sometimes as long as two years, from the filing of an appeal
      of a
      damage award, before the appeal is actually heard by an appellate court.





The
      Company continues to believe that it will not incur any material liability
      to
      plaintiff 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.





**ITEM
      4.****SUBMISSION
      ON MATTERS TO A VOTE OF THE SECURITY HOLDERS**





Our
      Annual Meeting of Stockholders was held on December 5, 2005. The only matters
      voted on by stockholders at that Meeting were (i) the election of seven
      directors to serve for a term of one year and until their successors are elected
      and (ii) a proposal to approve the adoption of the Company’s 2005 Stock
      Incentive Plan which authorizes the grant of stock options and restricted rights
      to purchase up to an aggregate of 230,000 shares of the Company’s common
      stock.





36


Election
      of Directors .
      The
      seven candidates named below, all of whom were nominated by the Company’s Board
      of Directors, were the only candidates nominated for election at the Meeting.
      Therefore, the election was uncontested and all seven candidates were elected
      to
      serve on the Company’s Board of Directors for a term that will end at the next
      Annual Meeting of Stockholders and until their respective successors are
      elected. Set forth below are the number of votes cast for the election of,
      and
      the number of votes withheld from, each of those seven candidates. As the
      election was uncontested, there were no broker non-votes.





**Nominees**
            
            **Votes
                For**
            
            **Votes
                Withheld**A.
                Clinton Allen
            
            
            7,295,067
            
            
            145,614Deborah
                A. Farrington
            
            
            7,315,102
            
            
            125,549Ben
                A. Frydman
            
            
            5,471,813
            
            
            1,968,838David
                G. Hall
            
            
            5,529,098
            
            
            1,911,553Michael
                R. Haynes
            
            
            5,508,348
            
            
            1,932,303A.
                J. “Bert” Moyer
            
            
            7,302,612
            
            
            138,039Van
                D. Simmons
            
            
            5,317,193
            
            
            2,123,458




Adoption
      of 2005 Stock Incentive Plan .
      Approval of the adoption of the 2005 Stock Incentive Plan required the
      affirmative vote of a majority of the shares that were present, in person or
      by
      proxy, and were voted at the Annual Meeting on this proposal. Abstentions on
      this proposal had the same effect as a vote against it. Broker non-votes, which
      has totaled 3,119,582 with respect to this proposal, were treated as if they
      had
      not been voted and, therefore, except for quorum purposes, were not be counted
      in determining whether this proposal was approved. The proposal to adopt the
      2005 Stock Incentive Plan was approved by the Company’s stockholders by the
      following vote:




**Number
                of Shares Voted**
            
            **Percent
                of Shares Voted**Votes
                For
            
            
            3,828,428
            
            
            89
            %Votes
                Against
            
            
            490,116
            
            
            11
            %Abstentions
            
            
            2,525
            
            
            0
            %







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





(a)
            ExhibitsExhibit
                10.34
            Gemprint
                Asset Purchase AgreementExhibit
                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











37


**SIGNATURES**








Pursuant
      to the requirement of the Securities Exchange Act of 1934, the registrant has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.











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











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








































































































**INDEX
      TO EXHIBITS**











**Number**
            **Description**Exhibit
                10.34
            Gemprint
                Asset Purchase AgreementExhibit
                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