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
      1934For
      the quarter ended December 31, 2008ORq
            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 0-27887COLLECTORS
      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. YesýNoo




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




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





Indicate
by check mark whether the Registrant is a shell company (as defined in
Securities Exchange Act Rule 12b-2).




YES  [  ]   NO  x




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




Class
            Outstanding at  January 29,
      2009Common
      Stock $.001 Par Value
            9,187,191








COLLECTORS
UNIVERSE, INC.


QUARTERLY
REPORT ON FORM 10-Q


FOR
THE QUARTER ENDED DECEMBER 31, 2008





TABLE
OF CONTENTS





PART
      I
              Financial
      Information
              PageItem 1.
              Financial Statements:Condensed
      Consolidated Balance Sheets as of  December 31, 2008and
      June 30, 2008 (unaudited)
              1Condensed
      Consolidated Statements of Operationsfor
      the Three and Six Months Ended December 31, 2008 and 2007
      (unaudited)
              2Condensed
      Consolidated Statements of Cash Flowsfor
      the Six Months Ended December 31, 2008 and 2007
      (unaudited)
              3Notes to Condensed Consolidated Financial Statements
      (unaudited)
              4Item 2.
              Management's Discussion and Analysis of Financial Condition
      and Results of Operations
              17Forward Looking Information
              17Our Business
              17Overview of Results of Operations for the Three and Six
      Months Ended December 31, 2008
              18Factors That Can Affect Our Financial Position and
      Operating Results
              19Critical Accounting Policies and
      Estimates
              20Results
      of Operations–For the Three and Six Months Ended December 31, 2008 Versus
      the Threeand
      Six Months
                Ended December 31, 2007
              22Liquidity and Capital Resources
              28Risks and Uncertainties That Could Affect
      Our Future Financial Performance
              30Item 2A.
              Quantitative and Qualitative Disclosures About Market
      Risk
              31Item 3
              Controls and Procedures
              31PART
      II
              Other
      InformationItem 1A.
              Risk Factors
              32Item 2.
              Unregistered Sales of Securities and Use of
      Proceeds
              32Item 3.
              Submission on Matters to a Vote of the Security
      Holders
              32Item 6.
              Exhibits
              33SIGNATURES
              
              S-1INDEX TO
      EXHIBITS
              E-1EXHIBITSExhibit 31.1
              Certifications
      of Chief Executive Officer Under Section 302 of the Sarbanes-Oxley Act of
      2002Exhibit 31.2
              Certifications
      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








PART
1 – 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
      30,2008
                      
                      
                      2008ASSETSCurrent
      assets:Cash and cash
      equivalents
                      
                      $
                      19,607
                      
                      
                      $
                      23,345Accounts receivable, net of
      allowance of$95 at
      December 31, 2008and $79 at June 30,
      2008
                      
                      
                      1,399
                      
                      
                      
                      1,389Refundable income
      taxes
                      
                      
                      575
                      
                      
                      
                      575Inventories, net
                      
                      
                      791
                      
                      
                      
                      961Prepaid expenses and other current
      assets
                      
                      
                      1,221
                      
                      
                      
                      959Customer notes receivable, net of allowance of $31 at
      December 31, 2008 and at June 30, 2008
                      
                      
                      2,390
                      
                      
                      
                      2,062Net deferred income tax
      asset
                      
                      
                      496
                      
                      
                      
                      486Customer notes receivables held
      for sale
                      
                      
                      -
                      
                      
                      
                      3,579Receivables from sale of net
      assets of discontinued operation
                      
                      
                      92
                      
                      
                      
                      92Current assets of discontinued
      operation held for sale
                      
                      
                      233
                      
                      
                      
                      117Total current
    assets
                      
                      
                      26,804
                      
                      
                      
                      33,565Property and equipment,
      net
                      
                      
                      2,974
                      
                      
                      
                      4,473Goodwill
                      
                      
                      2,626
                      
                      
                      
                      3,974Intangible assets,
    net
                      
                      
                      3,929
                      
                      
                      
                      8,386Net deferred income tax
      assets
                      
                      
                      -
                      
                      
                      
                      909Customer note receivable, net of
      current portion
                      
                      
                      975
                      
                      
                      
                      -Note receivable from sale of
      discontinued operation
                      
                      
                      92
                      
                      
                      
                      138Other assets
                      
                      
                      392
                      
                      
                      
                      396Non-current assets of discontinued
      operation held for sale
                      
                      
                      127
                      
                      
                      
                      177$
                      37,919
                      
                      
                      $
                      52,018LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts payable
                      
                      $
                      1,488
                      
                      
                      $
                      1,817Accrued
liabilities
                      
                      
                      1,636
                      
                      
                      
                      1,724Accrued compensation and
      benefits
                      
                      
                      1,319
                      
                      
                      
                      1,423Income taxes
    payable
                      
                      
                      351
                      
                      
                      
                      368Deferred revenue
                      
                      
                      2,066
                      
                      
                      
                      2,038Current liabilities of
      discontinued operation held for sale
                      
                      
                      244
                      
                      
                      
                      198Total current
      liabilities
                      
                      
                      7,104
                      
                      
                      
                      7,568Deferred
      rent and other long-term liabilities
                      
                      
                      770
                      
                      
                      
                      620Net
      deferred income tax liability
                      
                      
                      305
                      
                      
                      
                      -Commitments
      and contingencies
                      
                      
                      -
                      
                      
                      
                      -Preferred
      stock, $.001 par value; 3,000 shares authorized at December 31,
      2008;
                        5,000 at June 30, 2008; no
      shares issued or outstanding
                      
                      
                      -
                      
                      
                      
                      -Common
      stock, $.001 par value; 20,000 shares authorized at December 31, 2008 and
      45,000at
      June 30, 2008; outstanding 9,187
                        at December 31, 2008 and 8,361 at June 30, 2008
                      
                      
                      9
                      
                      
                      
                      8Additional
      paid-in capital
                      
                      
                      76,217
                      
                      
                      
                      75,996Accumulated
      deficit
                      
                      
                      (46,486
                      )
                      
                      
                      (32,174
                      )Total stockholders'
      equity
                      
                      
                      29,740
                      
                      
                      
                      43,830$
                      37,919
                      
                      
                      $
                      52,018





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
                          December
      31,
                        
                        
                        Six
      Months Ended
                          December
      31,2008
                        
                        
                        2007
                        
                        
                        2008
                        
                        
                        2007Net
      revenues:Grading, authentication and
      related services
                        
                        $
                        8,103
                        
                        
                        $
                        8,981
                        
                        
                        $
                        17,580
                        
                        
                        $
                        19,544Product sales
                        
                        
                        102
                        
                        
                        
                        811
                        
                        
                        
                        103
                        
                        
                        
                        8928,205
                        
                        
                        
                        9,792
                        
                        
                        
                        17,683
                        
                        
                        
                        20,436Cost
      of revenues:Grading, authentication and
      related services
                        
                        
                        4,501
                        
                        
                        
                        5,851
                        
                        
                        
                        9,432
                        
                        
                        
                        10,856Product sales
                        
                        
                        295
                        
                        
                        
                        788
                        
                        
                        
                        306
                        
                        
                        
                        8074,796
                        
                        
                        
                        6,639
                        
                        
                        
                        9,738
                        
                        
                        
                        11,663Gross
      profit
                        
                        
                        3,409
                        
                        
                        
                        3,153
                        
                        
                        
                        7,945
                        
                        
                        
                        8,773Operating
      expenses:Selling and marketing
      expenses
                        
                        
                        1,298
                        
                        
                        
                        1,780
                        
                        
                        
                        2,953
                        
                        
                        
                        3,708General and administrative
      expenses
                        
                        
                        3,775
                        
                        
                        
                        3,717
                        
                        
                        
                        7,657
                        
                        
                        
                        7,645Impairment
loss
                        
                        
                        7,695
                        
                        
                        
                        -
                        
                        
                        
                        7,695
                        
                        
                        
                        1Amortization of intangible
      assets
                        
                        
                        334
                        
                        
                        
                        274
                        
                        
                        
                        630
                        
                        
                        
                        533Total
      operating expenses
                        
                        
                        13,102
                        
                        
                        
                        5,771
                        
                        
                        
                        18,935
                        
                        
                        
                        11,887Operating
      loss
                        
                        
                        (9,693
                        )
                        
                        
                        (2,618
                        )
                        
                        
                        (10,990
                        )
                        
                        
                        (3,114
                        )Interest
      income, net
                        
                        
                        75
                        
                        
                        
                        296
                        
                        
                        
                        199
                        
                        
                        
                        740Other
      income (expense)
                        
                        
                        (1
                        )
                        
                        
                        2
                        
                        
                        
                        9
                        
                        
                        
                        3Loss
      before income taxes
                        
                        
                        (9,619
                        )
                        
                        
                        (2,320
                        )
                        
                        
                        (10,782
                        )
                        
                        
                        (2,371
                        )Provision
      (benefit) for income taxes
                        
                        
                        1,210
                        
                        
                        
                        (925
                        )
                        
                        
                        1,210
                        
                        
                        
                        (945
                        )Loss
      from continuing operations
                        
                        
                        (10,829
                        )
                        
                        
                        (1,395
                        )
                        
                        
                        (11,992
                        )
                        
                        
                        (1,426
                        )Loss
      from discontinued operations, net of income tax benefit
                        
                        
                        (95
                        )
                        
                        
                        (48
                        )
                        
                        
                        (229
                        )
                        
                        
                        (127
                        )Net
      loss
                        
                        $
                        (10,924
                        )
                        
                        $
                        (1,443
                        )
                        
                        $
                        (12,221
                        )
                        
                        $
                        (1,553
                        )Net
      loss per basic share:Loss from continuing
      operations
                        
                        $
                        (1.19
                        )
                        
                        $
                        (0.15
                        )
                        
                        $
                        (1.32
                        )
                        
                        $
                        (0.15
                        )Loss from discontinued
      operations, net of income tax benefit
                        
                        
                        (0.01
                        )
                        
                        
                        -
                        
                        
                        
                        (0.02
                        )
                        
                        
                        (0.02
                        )Net
      loss
                        
                        $
                        (1.20
                        )
                        
                        $
                        (0.15
                        )
                        
                        $
                        (1.34
                        )
                        
                        $
                        (0.17
                        )Net
      loss per diluted share:Loss from continuing
      operations
                        
                        $
                        (1.19
                        )
                        
                        $
                        (0.15
                        )
                        
                        $
                        (1.32
                        )
                        
                        $
                        (0.15
                        )Loss from discontinued
      operations, net of income tax benefit
                        
                        
                        (0.01
                        )
                        
                        
                        -
                        
                        
                        
                        (0.02
                        )
                        
                        
                        (0.02
                        )Net  loss
                        
                        $
                        (1.20
                        )
                        
                        $
                        (0.15
                        )
                        
                        $
                        (1.34
                        )
                        
                        $
                        (0.17
                        )Weighted
      average shares outstanding:Basic
                        
                        
                        9,083
                        
                        
                        
                        9,340
                        
                        
                        
                        9,116
                        
                        
                        
                        9,325Diluted
                        
                        
                        9,083
                        
                        
                        
                        9,340
                        
                        
                        
                        9,116
                        
                        
                        
                        9,325Cash
      dividends declared per common share
                        
                        $
                        -
                        
                        
                        $
                        0.25
                        
                        
                        $
                        0.25
                        
                        
                        $
                        0.50





See
accompanying notes to condensed consolidated financial
statements.


2





COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)


Six
      Months Ended
                    December
      31,2008
                  
                  
                  2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (12,221
                  )
                  
                  $
                  (1,553
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation and
      amortization
                  
                  
                  1,294
                  
                  
                  
                  1,138Stock-based compensation
      expense
                  
                  
                  532
                  
                  
                  
                  500Impairment loss
                  
                  
                  7,695
                  
                  
                  
                  1Provision for bad
      debts
                  
                  
                  7
                  
                  
                  
                  18(Gain) loss on sale of property
      and equipment
                  
                  
                  1
                  
                  
                  
                  (2
                  )Gain on sale of customer
      notes
                  
                  
                  (10
                  )
                  
                  
                  -Provision for inventory write
      down
                  
                  
                  169
                  
                  
                  
                  10Interest on notes
      receivable
                  
                  
                  -
                  
                  
                  
                  (7
                  )Discontinued
      operations
                  
                  
                  229
                  
                  
                  
                  127Deferred income
      taxes
                  
                  
                  1,205
                  
                  
                  
                  (963
                  )Changes
      in operating assets and liabilities:Accounts
    receivable
                  
                  
                  (17
                  )
                  
                  
                  (1,056
                  )Inventories
                  
                  
                  1
                  
                  
                  
                  (75
                  )Prepaid expenses and other
      current assets
                  
                  
                  (262
                  )
                  
                  
                  (413
                  )Other assets
                  
                  
                  (13
                  )
                  
                  
                  (6
                  )Income taxes
      payable
                  
                  
                  (18
                  )
                  
                  
                  5Accounts
payable
                  
                  
                  (329
                  )
                  
                  
                  (778
                  )Accrued
    liabilities
                  
                  
                  (65
                  )
                  
                  
                  371Deferred rent and other
      long-term liabilities
                  
                  
                  150
                  
                  
                  
                  (26
                  )Accrued compensation and
      benefits
                  
                  
                  (104
                  )
                  
                  
                  (601
                  )Deferred
revenue
                  
                  
                  28
                  
                  
                  
                  (191
                  )Net cash used in operating
      activities
                  
                  
                  (1,728
                  )
                  
                  
                  (3,501
                  )Net
      cash used in operating activities of discontinued
    businesses
                  
                  
                  (233
                  )
                  
                  
                  (33
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Capital
      expenditures
                  
                  
                  (1,385
                  )
                  
                  
                  (969
                  )Proceeds
      from sale of property and equipment
                  
                  
                  -
                  
                  
                  
                  63Advances
      on customer notes receivable
                  
                  
                  (2,446
                  )
                  
                  
                  (3,501
                  )Proceeds
      from collection of customer notes receivable
                  
                  
                  4,707
                  
                  
                  
                  2,578Purchase
      of patents and other intangible assets
                  
                  
                  -
                  
                  
                  
                  (20
                  )Capitalized
      software
                  
                  
                  (286
                  )
                  
                  
                  (618
                  )Cash
      received on sale of discontinued businesses
                  
                  
                  46
                  
                  
                  
                  46Net cash provided by (used in)
      investing activities
                  
                  
                  636
                  
                  
                  
                  (2,421
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from sale of common stock
                  
                  
                  161
                  
                  
                  
                  -Proceeds
      from exercise of stock options
                  
                  
                  1
                  
                  
                  
                  111Repurchase
      of common stock
                  
                  
                  (484
                  )
                  
                  
                  -Dividends
      paid to common stockholders
                  
                  
                  (2,091
                  )
                  
                  
                  (4,263
                  )Net cash used in financing
      activities
                  
                  
                  (2,413
                  )
                  
                  
                  (4,152
                  )Net
      decrease in cash and cash equivalents
                  
                  
                  (3,738
                  )
                  
                  
                  (10,107
                  )Cash
      and cash equivalents at beginning of period
                  
                  
                  23,345
                  
                  
                  
                  42,386Cash
      and cash equivalents at end of period
                  
                  $
                  19,607
                  
                  
                  $
                  32,279SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Interest
      paid
                  
                  $
                  2
                  
                  
                  $
                  9Income
      taxes paid
                  
                  $
                  8
                  
                  
                  $
                  -





See
accompanying notes to condensed consolidated financial
statements.


3





COLLECTORS
UNIVERSE, INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)





1.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Principles
of Consolidation




The
accompanying unaudited interim condensed consolidated financial statements
include the accounts of Collectors Universe, Inc. and its subsidiaries (the
“Company” “we”, “us”, “our”).  At December 31, 2008, such operating
subsidiaries were Collectors Finance Corporation (“CFC”),  Certified
Asset Exchange, Inc. (“CAE”), Gem Certification and Assurance Lab, Inc.
(“GCAL”), Expos Unlimited, Inc. (“Expos”), and American Gemological
Laboratories, Inc. (“AGL”), all of which are 100% owned by Collectors Universe,
Inc.  All intercompany transactions and accounts have been
eliminated.






Unaudited
Interim Financial Information




The
accompanying interim condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”) for interim financial
reporting.   These interim condensed consolidated financial
statements are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring adjustments and accruals) necessary
to present fairly the Condensed Consolidated Balance Sheets, Condensed
Consolidated Statements of Operations, and Condensed Consolidated Statements of
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, 2008 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2009 or for any other interim period
during such year.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP have
been omitted in accordance with the rules and regulations of the
SEC.  These interim condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial statements and
notes thereto contained in the Company’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2008, as filed with the SEC.  Amounts
related to disclosure of June 30, 2008 balances within these interim condensed
consolidated financial statements were derived from the aforementioned audited
consolidated financial statements and notes thereto included in that Annual
Report on Form 10-K.




Reclassifications




Certain
prior period amounts have been reclassified to conform to the current period
presentation.  At December 31, 2008, we classified our paper currency
business as a discontinued operation held for sale, and, accordingly, all
periods presented in the Condensed Consolidated Financial Statements have been
restated to reflect the results of operations, loss per share, cash flows and
financial position of the paper currency business as a discontinued operation
(see note 7). During the second fiscal quarter of 2009, we distributed a 10%
stock dividend to our common stockholders, and, as such, we restated the number
of shares outstanding and the loss per share for continuing and discontinued
operations to give retroactive effect of the stock dividend for those shares
shown in the Consolidated Statements of Operations prior to the stock dividend
date of November 3, 2008.





Revenue
Recognition




Net
revenues consist primarily of fees generated from the authentication and grading
of coins, sportscards, autographs, stamps, diamonds and colored
gemstones.  Authentication and grading revenues are recognized when
those services have been performed by us and the item is shipped back to the
customer.  Authentication and grading fees generally are prepaid,
although we offer open account privileges to larger dealers.  Advance
payments received for grading services are deferred until the service is
performed and the graded item is shipped to the customer.  In the case
of dealers to whom we have extended credit, we record revenues at the time the
item is shipped to the customer.  With respect to our Expos trade show
business, we recognize revenue generated by the promotion, management and
operation of collectibles conventions and trade shows in the periods in which
the shows take place.






4




A portion
of our net revenues are comprised of subscription fees paid by customers for a
membership in our Collectors Club.  Those memberships entitle members
access to our on-line and printed publications, and sometimes also to vouchers
for free grading services.  We record revenue for this multi-element
service arrangement in accordance with EITF00-21, Accounting for Revenue
Arrangements With Multiple Deliverables,by recognizing approximately 60%
of the subscription fee in the month following the membership purchase, on the
basis that Collectors Club members typically utilize their vouchers for free
grading services within 30 days of subscribing for memberships.  The
balance of the membership fee is recognized as revenue over the life of the
membership, which can range from one to two years.  We evaluate, at
least semi-annually, the relative fair values of the deliverables and the
percentage factors used to allocate the membership fee between the grading and
the publication services provided under this membership service.




We recognize product sales when items
are shipped and the requirements of Staff Accounting Bulletin No. 104, Revenue Recognition,issued
by the Securities and Exchange Commission (“SEC”), have been
satisfied.  Product sales consist primarily of collectible coins that
we purchased pursuant to our coin authentication and grading warranty program
and are not considered an integral part of the Company’s on-going revenue
generating activities.





Use
of Estimates





The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.  Actual results could differ from those
estimates, and such differences could be material to the condensed consolidated
financial statements.  Examples of such estimates that could be
material to the Condensed Consolidated Financial Statements include capitalized
software, the valuation of stock-based compensation awards, the amount of
goodwill and the existence or non-existence of goodwill and other long-lived
assets impairments, warranty reserves and income tax provisions.  Each
of these estimates, and the material impairment adjustment we made to our
goodwill and certain long-lived assets of our jewelry reporting units as of June
30, 2008 and in the three months ended December 31, 2008, is discussed in more
detail in the Annual Report on Form 10-K for the fiscal year ended June 30, 2008
and included herein in the Interim Report on Form 10-Q for the three and six
months ended December 31, 2008, respectively.





Long-Lived
Assets




Management
regularly reviews property and equipment and other long-lived assets, including
certain definite-lived intangibles assets, 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 undiscounted cash flows 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 or based upon the
replacement cost or market approach, as applicable.  During the second
quarter of fiscal 2009, the Company recorded aggregate impairment losses of
$7,695,000 with respect to our jewelry businesses, of which $4,963,000 was
associated with property and equipment and other definite-lived intangible
assets following the determination that the carrying values of these assets were
not recoverable (see Impairment Losses below in
this note 1).





Goodwill and Other Intangible
Assets.




In
accordance with SFAS No. 142, Goodwill and Other Intangible
Assets, the Company is required to evaluate the carrying value of its
goodwill and certain indefinite-lived intangible assets at least annually for
impairment, or more frequently if facts and circumstances indicate that an
impairment has occurred.  Management evaluates the carrying value of
its goodwill and other indefinite-lived intangible assets for impairment on the
anniversary date of each of the acquisitions that gave rise to the recording of
such assets. During the three months ended December 31, 2008, the Company
completed its annual review of the carrying values of the goodwill and trade
name indefinite-lived intangible assets acquired in the acquisitions of GCAL and
Gemprint and concluded that the acquired goodwill and the trade names were fully
impaired as of December 31, 2008.  Accordingly, we recorded impairment
losses in the Condensed Consolidated Statements of Operations for the three
months ended December 31, 2008 of $899,000 for goodwill and $184,000 for trade
name intangible assets.  We also evaluated the recoverability of the
goodwill and the trade name assets acquired in the AGL acquisition on an interim
basis and concluded that the goodwill of $449,000 and trade name intangible
assets of $1,200,000 were fully impaired and recorded an impairment loss in the
Condensed Consolidated Statements of Operations for the three months ended
December 31, 2008, accordingly (see Impairment Losses below in
this note 1).






5




Stock-Based
Compensation Expense




In
accordance with Statement of Financial Accounting Standard (“SFAS”) No. 123(R),
Share-Based Payment,stock-based compensation cost is measured at the grant date of an award,
based on its fair value, and is recognized as expense over the employee’s
requisite service period, which is generally the vesting period.  The
following table shows total stock-based compensation expense included as part of
continuing operations in the Condensed Consolidated Statements of Operations for
the three and six months ended December 31, 2008 and 2007:









Three
      Months Ended
                    December
      31,
                    (in
      thousands)
                  
                  
                  Six
      Months Ended
                    December
      31,
                    (in
      thousands)Included in:
                  
                  2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Cost
      of revenues
                  
                  $
                  86
                  
                  
                  $
                  55
                  
                  
                  $
                  158
                  
                  
                  $
                  110Selling
      and marketing expenses
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (7
                  )General
      and administrative expenses(1)
                  
                  
                  178
                  
                  
                  
                  205
                  
                  
                  
                  374
                  
                  
                  
                  397Pre-tax
      stock-based compensation expense
                  
                  $
                  264
                  
                  
                  $
                  260
                  
                  
                  $
                  532
                  
                  
                  $
                  500





(1)
            Includes
      $93,000 and $185,000 in the three and six months ended December 31, 2008,
      respectively, and $85,000 and $167,000 in the three and six months ended
      December 31, 2007, respectively, for amortization of compensation expense
      related to issuances of restricted
stock.




For the
three months ended December 31, 2008 and 2007, the Company estimated the rates
of forfeiture of outstanding non-vested stock-based compensation awards to be 5%
and 9%, respectively.




No
options were granted during the three and six months ended December 31,
2008.  The following table presents information relative to the stock
options outstanding under all equity incentive plans as of December 31, 2008 and
stock option activity during the six months ended December 31, 2008, as adjusted
to give retroactive effect to the 10% stock dividend that was declared on
September 26, 2008 and distributed on November 3, 2008 to all stockholders of
record as of October 21, 2008.  The closing per share prices of our
common stock as of June 30, 2008 and December 31, 2008 were $7.37 and $2.93,
respectively.







Shares
                  
                  
                  Weighted
      Average Exercise Price
                  
                  Weighted
      Average Remaining Contractual Term
                  
                  Aggregate
      Intrinsic
                    ValueOptions:Outstanding
      at June 30, 2008
                  
                  
                  927,200
                  
                  
                  $
                  12.54
                  
                  5.5
      yrs.
                  
                  $
                  314,000Granted
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  (100
                  )
                  
                  
                  2.80Forfeited
      or cancelled
                  
                  
                  (41,500
                  )
                  
                  
                  11.75Outstanding
      at December 31, 2008
                  
                  
                  885,600
                  
                  
                  $
                  12.57
                  
                  5.0
      yrs.
                  
                  $
                  2,677Exercisable
      at December 31, 2008
                  
                  
                  737,100
                  
                  
                  $
                  12.55
                  
                  4.7
      yrs.
                  
                  $
                  2,677Unvested
      at December 31, 2008
                  
                  
                  148,500
                  
                  
                  $
                  12.70
                  
                  6.6
      yrs.
                  
                  $
                  -Expect
      to vest at December 31, 2008
                  
                  
                  141,700
                  
                  
                  $
                  12.69
                  
                  6.6
      yrs.
                  
                  $
                  -








6




The
aggregate intrinsic values of the options exercised during the six months ended
December 31, 2008 and 2007 were $465 and $381,000, respectively.




The 141,700 options that were expected
to vest at December 31, 2008 are based on the current forfeiture rate of 5% and
the remaining vesting terms of the 148,500 unvested options at December 31,
2008.




During the six months ended December
31, 2008, approximately 50,900 options were vested with an aggregate fair value
of approximately $352,000.  During the six months ended December 31,
2007, approximately 49,500 options were vested with an aggregate fair value of
$364,000.





The
following table presents information regarding the numbers of non-vested
restricted shares that were granted or became vested during the six months ended
December 31, 2008 and their weighted average grant-date fair
values.





Non-Vested Shares:
                
                Shares
                
                
                Weighted
                  Average
                  Grant-Date
                  Fair
      ValueNon-vested
      at June 30, 2008
                
                
                50,359
                
                
                $
                12.60Granted
                
                
                77,778
                
                
                
                2.70Vested
                
                
                (16,974
                )
                
                
                12.66Forfeited or
      Cancelled
                
                
                -
                
                
                
                -Non-vested
      at December 31, 2008
                
                
                111,163
                
                
                $
                5.67




The
following table sets forth total unrecognized compensation cost in the amount of
$799,000 related to non-vested stock-based awards expected to be recognized
through fiscal year 2012.  That amount and time periods do not include
the cost or effect of the possible grant of any additional stock-based
compensation awards in the future or any change that may occur in the Company’s
forfeiture percentage.




Fiscal
      Year Ending June 30,
                                
                                Amount2009
                                
                                $
                                311,0002010
                                
                                
                                347,0002011
                                
                                
                                125,0002012
                                
                                
                                16,000$
                                799,000





Concentrations




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




Financial Instruments and
Cash Balances.  At December 31, 2008, we had cash and cash
equivalents, totaling approximately $19,607,000, of which approximately
$17,674,000 were invested in U.S. government-secured money market
funds.  At December 31, 2008, the Company had approximately $1,933,000
in non-interest bearing bank accounts for general day-to-day
operations.




Accounts
Receivable.  A substantial portion of accounts receivable are
due from collectibles dealers.  At December 31, 2008, no individual
customer represented a significant concentration, i.e., individual accounts
receivable balance comprising of at least 10% of the total net outstanding
balance of $1,399,000 on that date; whereas, at June 30, 2008, three customers
accounted for approximately 37% of total net accounts receivable balances of
$1,389,000 outstanding on that date.  The Company performs an analysis
of the expected collectibility of accounts receivable based on several factors,
including the age and extent of significant past due accounts and economic
conditions or trends that may adversely affect the ability of account debtors to
pay their account receivable balances.  Based on that review, the
Company establishes an allowance for doubtful accounts, when
necessary.  The allowance for doubtful accounts receivable was $95,000
at December 31, 2008 and $79,000 at June 30, 2008.








7




Customer Notes
Receivables.  At December 31, 2008, the outstanding principal
amount of customer notes receivable, which evidenced advances made to customers,
totaled $3,365,000, net of a $31,000 allowance for uncollectible amounts, of
which $975,000 was classified as non-current customer notes receivable and
$2,390,000 was classified as current customer notes receivable.  At
December 31, 2008, the unpaid principal balance of one of those notes receivable
was greater than 10% of the aggregate of the unpaid principal balances of all of
the notes receivable that were outstanding at December 31, 2008 and represented
88% of the total principal amounts outstanding.  At June 30, 2008,
three customers’ loan balances, each greater than 10% of the total notes
receivable balances, represented 49% of the total principal balances
outstanding.




During
the six months ended December 31, 2008, the Company sold, without recourse,
$3,554,000 of the aggregate principal amount of $3,579,000 classified as loans
held for sale at June 30, 2008 for an amount that was about 0.7% over the
aggregate principal amount of the loans. The proceeds from the sales are
included in the Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 2008 as part of proceeds from collection of customer
notes receivable. As of December 31, 2008, approximately $25,000 of the
$3,579,000 held for sale at June 30, 2008 was no longer held for
sale.




Sources of
Revenues.  The authentication, grading and sales of collectible
coins accounted for approximately 53% of our net revenues for the three and six
months ended December 31, 2008.  For the three and six months ended
December 31, 2007, collectible coin revenues accounted for approximately 56% and
57% of our net revenues, respectively.




Capitalized
Software




Through
December 31, 2008, the Company had capitalized an aggregate of approximately
$2,310,000 of software development costs, net of accumulated amortization of
approximately $1,152,000, in accordance with Statement of Position (“SOP”) 98-1,
Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use,and
EITF 00-02, Accounting
for Website Development Costs.In the three and six months ended December
31, 2008, approximately $54,000 and $286,000 of such costs were capitalized and
approximately $223,000 and $408,000 were recognized as amortization expense,
respectively.  During the three and six months ended December 31,
2007, approximately $254,000 and $618,000 of such costs were capitalized, and
$135,000 and $260,000 were recorded as amortization expense,
respectively.  Planning, training, support and maintenance costs
incurred either prior to or following the implementation phase of a software
project are recognized as expense in the period in which they are
incurred.  The Company evaluates the carrying values of capitalized
software to determine if those values are impaired, and, if necessary, an
impairment loss is recorded in the period in which an impairment
occurs.  At December 31, 2008, management evaluated the capitalized
software that was in use by the jewelry businesses and concluded that the
carrying value of that asset was impaired and, accordingly, in the three months
ended December 31, 2008, an impairment loss of $490,000 was recorded as part of
impairment losses in the carrying values of the goodwill and other long-lived
assets of those businesses that total $7,695,000, which was recorded in the
Condensed Consolidated Statements of Operations for the six months ended
December 31, 2008.  See Impairment Losses below in
this note 1.




Warranty
Costs




We offer
a limited warranty covering the coins, sportscards, stamps and currency that we
authenticate and grade.  Under the warranty, if any collectible that
was previously authenticated and graded by us is later submitted to us for
re-grading at any time and either (i) receives a lower grade upon that
re-submittal or (ii) is determined not to have been authentic, we will
offer to purchase the collectible or, at our option, 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
re-submittal to us, is not in the same tamper resistant holder in which it was
placed at the time we last graded it.  To the extent that we purchase
an item under a warranty claim, we recognize as a reduction in our warranty
reserve the difference in value of the item at its original grade and its
re-graded estimated value.  We include in our inventory the re-graded
estimated value of the item.  We offer a similar limited warranty of
two years duration on the diamonds we grade.  We accrue for estimated
warranty costs based on historical trends and related
experience.  Increased future claims experience under our warranty
program could increase to levels higher than in the past which could result in
additional warranty accruals in anticipation of these claims, and our ongoing
warranty accrual rate could increase to cover potential higher claims in the
future, both of which could have a material adverse impact on our future results
of operations.


8


Dividends





On
September 26, 2008, the Board of Directors determined that, due to market and
economic conditions, including the liquidity crisis in the United States, the
prudent course of action would be to suspend the payment of cash dividends in
order to preserve the Company's cash resources.  At the same time, the
Board of Directors declared a 10% stock dividend on the Company's outstanding
shares distributed on November 3, 2008 to all stockholders of record as of
October 20, 2008.  The 10% stock dividend was recorded in the
accompanying Condensed Consolidated Balance Sheet as of the declaration date of
September 26, 2008 and all shares outstanding, stock option grants outstanding
and the weighted average number of shares used in the computation of the loss
per share for the six months ended December 31, 2008 and for the three and six
months ended December 31, 2007 were retroactively adjusted for the stock
dividend as of the record date of October 20, 2008.





Stock Buyback Program





On
October 8, 2008, the Company acquired from its CEO approximately 120,000 shares
of the Company’s common stock, and the Company paid approximately $484,000 in
cash for these shares, or approximately $4.03 per share.  The selling
price of $4.03 was determined based on a 10% discount from the volume weighted
average price of the Company’s common stock on October 8, 2008 of
$4.48.  On October 8, 2008, two directors purchased an aggregate of
40,000 shares from the Company for a selling price of $4.03, or approximately
$161,000.





Impairment
Losses





During
the fourth quarter of fiscal year 2008, we completed an interim review of the
carrying values of goodwill and other long-lived assets including identifiable
intangible assets acquired with the acquisitions of GCAL and Gemprint, which
were both consummated during fiscal year 2006 and have been evaluated together
as the “GCAL Reporting Unit”, and AGL, which was acquired in fiscal year 2007.
On the basis of those reviews, we determined that impairment losses had occurred
with respect to goodwill and other long-lived assets on the basis of continued
significant losses by these reporting units, the inability of these reporting
units to meet or exceed projections prepared prior to June 30, 2008 and used in
the evaluation for goodwill impairment as of that date and the uncertainty of
future revenues, income and related cash flows. During the fourth quarter of
fiscal 2008, approximately $2,169,000 was recorded as an impairment loss related
to long-lived assets other than goodwill, of which approximately $1,817,000 was
related to the GCAL Reporting Unit and $352,000 was related to AGL. We also
recorded impairment losses of goodwill for the GCAL Reporting Unit and AGL in
the fourth quarter of 2008 of $7,267,000 and $1,797,000,
respectively.




During
the first quarter of fiscal year 2009, we reported on Form 10-Q for the three
months ended September 30, 2008 that no impairments of long-lived assets
including goodwill had occurred in any of our reporting units, as we completed
the annual impairment reviews for several of our reporting units including
AGL.




During
the second quarter of fiscal 2009, we evaluated the AGL reporting unit on an
interim basis and the GCAL Reporting Unit on its annual basis and determined
that impairments of goodwill and other long-lived assets had occurred in both
reporting units on the basis that both these reporting units had missed
projections for revenues and cash flows set forth in the revised projections
prepared by management in the fourth quarter of fiscal 2008. We also considered
other factors, such as the current economic climate and outlook in the United
States, and concluded that the weight of negative evidence outweighed the
positive evidence that future discounted or undiscounted cash flows would be
adequate to recover the carrying values of the GCAL Reporting Unit or AGL as of
December 31, 2008. As a result, we estimated the fair values of both of these
reporting units to be equal to their salvage values, and, accordingly we
recorded an impairment loss in the second quarter of fiscal 2009 in the
aggregate of $7,695,000, of which $3,791,000 was associated with the GCAL
Reporting Unit and $3,904,000 was associated with AGL.




9


The
following table provides additional detail of the impairment losses associated
with GCAL and AGL reporting units recorded in the Condensed Consolidated
Statements of  Operations for the three months ended December 31, 2008
in thousands of dollars:




AGL
                  
                  
                  GCAL
                  
                  
                  TotalGoodwill
                  
                  $
                  449
                  
                  
                  $
                  899
                  
                  
                  $
                  1,348Trade
      names (indefinite-lived)
                  
                  
                  1,200
                  
                  
                  
                  184
                  
                  
                  
                  1,384Acquired
      intangible assets (definite-lived)
                  
                  
                  718
                  
                  
                  
                  1,307
                  
                  
                  
                  2,025Capitalized
      software
                  
                  
                  35
                  
                  
                  
                  455
                  
                  
                  
                  490Property
      and equipment
                  
                  
                  239
                  
                  
                  
                  347
                  
                  
                  
                  586Leasehold
      improvements
                  
                  
                  1,263
                  
                  
                  
                  588
                  
                  
                  
                  1,851Other
      assets
                  
                  
                  -
                  
                  
                  
                  11
                  
                  
                  
                  11$
                  3,904
                  
                  
                  $
                  3,791
                  
                  
                  $
                  7,695





The
following table sets forth, by reporting unit, the amounts classified as
goodwill and intangible assets, net, on our balance sheets as of June 30, 2008
and December 31, 2008 in thousands of dollars:





Coins
                  
                  
                  GCAL
                  
                  
                  AGL
                  
                  
                  Expos
                  
                  
                  CCE
                    and
      Other
                  
                  
                  TotalGoodwill:Balance at June 30, 2008,
      net
                  
                  $
                  515
                  
                  
                  $
                  899
                  
                  
                  $
                  449
                  
                  
                  $
                  1,001
                  
                  
                  $
                  1,110
                  
                  
                  $
                  3,974Impairment loss in second
      quarter FY2009
                  
                  
                  -
                  
                  
                  
                  (899
                  )
                  
                  
                  (449
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,348
                  )Balance at December 31,
      2008
                  
                  $
                  515
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,001
                  
                  
                  $
                  1,110
                  
                  
                  $
                  2,626Intangible
      assets, net:Balance at June 30,
      2008
                  
                  $
                  294
                  
                  
                  $
                  2,127
                  
                  
                  $
                  2,177
                  
                  
                  $
                  1,590
                  
                  
                  $
                  2,198
                  
                  
                  $
                  8,386Capitalized software additions
      for FY09 (6 months)
                  
                  
                  126
                  
                  
                  
                  35
                  
                  
                  
                  36
                  
                  
                  
                  -
                  
                  
                  
                  89
                  
                  
                  
                  286Less: Cap SW amortization for
      FY09 (6 months)
                  
                  
                  (106
                  )
                  
                  
                  (122
                  )
                  
                  
                  (1
                  )
                  
                  
                  -
                  
                  
                  
                  (179
                  )
                  
                  
                  (408
                  )Less: Cap SW impairment at
      12/31/08
                  
                  
                  
                  
                  
                  
                  (455
                  )
                  
                  
                  (35
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (490
                  )Less: Cap SW reclass to
      discontinued operationsfor
      FY09 (6 months)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4
                  )
                  
                  
                  (4
                  )Less: amortization for 6
      months FY09 for definite-livedintangible
      assets
                  
                  
                  -
                  
                  
                  
                  (94
                  )
                  
                  
                  (49
                  )
                  
                  
                  (55
                  )
                  
                  
                  (24
                  )
                  
                  
                  (222
                  )Less: impairment loss at
      12/31/08 for definite-livedintangible
      assets
                  
                  
                  -
                  
                  
                  
                  (1,307
                  )
                  
                  
                  (718
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,025
                  )Less: impairment loss at
      12/31/08 for indefinite-livedintangible
      assets
                  
                  
                  -
                  
                  
                  
                  (184
                  )
                  
                  
                  (1,200
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,384
                  )Less: reclass of AGL reference
      sets to non-depreciableproperty
      and equipment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (210
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (210
                  )Balance at December 31, 2008
                  
                  $
                  314
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,535
                  
                  
                  $
                  2,080
                  
                  
                  $
                  3,929




2.  CASH
AND CASH EQUIVALENTS





At
December 31, 2008 and June 30, 2008, cash and cash equivalents consisted of
approximately $19,607,000 and $23,345,000, respectively, which was invested
primarily in money-market funds, which comprised of investments in
government-guaranteed securities.





3.
            FAIR
      VALUE MEASUREMENTS





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value
      Measurements.  SFAS 157 defines fair value, establishes a
      framework for measuring fair value in accordance with U.S. GAAP, and
      expands disclosures about fair value measurements, SFAS 157 is effective
      for financial statements issued for fiscal years beginning after November
      15, 2007, and interim periods within those fiscal years.  In
      February 2008, the FASB issued SFAS No. 157-2, Effective Date of FASB
      Statement No. 157, which delays the effective date of SFAS 157 to
      fiscal years beginning after November 15, 2008 for all nonfinancial assets
      and nonfinancial liabilities, except for those that are recognized or
      disclosed at fair value in the financial statements on a recurring
      basis.  The Company has adopted the provisions of SFAS 157 as of
      July 1, 2008 for financial assets, including cash and cash equivalents,
      and SFAS 157-2 will be adopted as of July 1, 2009 for nonfinancial assets
      and nonfinancial liabilities.








10





SFAS
      157 establishes a three-tier fair value hierarchy, which prioritizes the
      inputs used in measuring fair value.  These tiers
      include:





Level
1-defined as observable inputs such as quoted prices in active
markets;





Level
2-defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and





Level
3-defined as unobservable inputs in which little or no market data exists,
therefore requiring an entity to develop its own assumptions.





As of
December 31, 2008, the Company held certain assets that are required to be
measured at fair value on a recurring basis.  The Company measures the
following financial assets at fair value on a recurring basis.  The
fair value of these financial assets was determined using the following inputs
at December 31, 2008:





(in
      thousands)Total
                    As
      of
                    December
      31, 2008
                  
                  
                  Quoted
                    Prices
      in
                    Active
                    Markets
                    or
      Identical
                    Assets
                    (Level
      1)
                  
                  
                  Significant
                    Other
                    Observable
                    Inputs
                    (Level
      2)
                  
                  
                  Significant
                    Unobservable
                    Inputs
                    (Level
      3)Cash
      and cash equivalents
                  
                  $
                  19,607
                  
                  
                  $
                  19,607
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total
                  
                  $
                  19,607
                  
                  
                  $
                  19,607
                  
                  
                  $
                  -
                  
                  
                  $
                  -





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. SFAS No. 159 permits
companies to choose to measure at fair value certain financial instruments and
other items that are not currently required to be measured at fair
value.  SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007.  The Company adopted SFAS No. 159 on July 1, 2008
and elected not to measure any additional financial instruments or other items
at fair value.





4.
            INVENTORIES




Inventories
      consist of the following:(in
      thousands)December
      31,
                              
                              
                              June
      30,2008
                              
                              
                              2008Coins
                              
                              $
                              686
                              
                              
                              $
                              751Other
      collectibles
                              
                              
                              64
                              
                              
                              
                              28Grading
      raw materials consumable inventory
                              
                              
                              287
                              
                              
                              
                              2731,037
                              
                              
                              
                              1,052Less
      inventory
      reserve
                              
                              
                              (246
                              )
                              
                              
                              (91
                              )Inventories,
      net
                              
                              $
                              791
                              
                              
                              $
                              961





During the three and six months ended
December 31, 2008, we recorded additional inventory provisions of $155,000 in
the Condensed Consolidated Statements of Operations, that included approximately
$137,000 to reflect current market values at December 31, 2008 for certain coins
that were sold in January 2009.


11


5.           PROPERTY
AND EQUIPMENT





Property
      and equipment consist of the following:(in
      thousands)December
      31
                        
                        
                        June
      30,2008
                        
                        
                        2008Coins,
      jewelry and stamp grading reference sets
                        
                        $
                        845
                        
                        
                        $
                        610Computer
      hardware and
      equipment
                        
                        
                        1,565
                        
                        
                        
                        1,861Computer
      software
                        
                        
                        1,032
                        
                        
                        
                        1,032Equipment
                        
                        
                        4,192
                        
                        
                        
                        4,206Furniture
      and office
      equipment
                        
                        
                        1,362
                        
                        
                        
                        1,113Leasehold
      improvements
                        
                        
                        2,669
                        
                        
                        
                        1,598Trading
      card reference
      library
                        
                        
                        52
                        
                        
                        
                        5211,717
                        
                        
                        
                        10,472Less
      accumulated depreciation and amortization
                        
                        
                        (8,743
                        )
                        
                        
                        (5,999
                        )Property
      and equipment, net
                        
                        $
                        2,974
                        
                        
                        $
                        4,473





During the second quarter of fiscal 2009, and the fourth quarter of fiscal 2008,
we recorded impairment losses related to property and equipment in the amounts


of $2,437,000 and $176,000,
respectively.  These amounts are presented as part of accumulated
depreciation and amortization in the above table.





6.           ACCRUED
LIABILITIES





Accrued
      liabilities consist of the following:
                  
                  (in
      thousands)December
      31,
                  
                  
                  June
      30,2008
                  
                  
                  2008Warranty
      costs
                  
                  $
                  648
                  
                  
                  $
                  665Professional
      fees
                  
                  
                  140
                  
                  
                  
                  125Other
                  
                  
                  848
                  
                  
                  
                  934$
                  1,636
                  
                  
                  $
                  1,724





The
following table presents the changes in the Company’s warranty reserve during
the six months ended December 31, 2008 and 2007:





(in
      thousands)Six
      Months
                    Ended
                    December
      31,
                  
                  
                  Six
      Months
                    Ended
                    December
      31,2008
                  
                  
                  2007Warranty
      reserve, beginning of
      period
                  
                  $
                  665
                  
                  
                  $
                  735Charged
      to cost of
      revenue
                  
                  
                  250
                  
                  
                  
                  1,008Payments
                  
                  
                  (267
                  )
                  
                  
                  (311
                  )Warranty
      reserve, end of
      period
                  
                  $
                  648
                  
                  
                  $
                  1,432





7.
            DISCONTINUED
      OPERATIONS





In
December 2008, the Company’s Board of Directors authorized the sale of the paper
currency grading business; therefore, the balance sheet amounts related to this
business have been classified as discontinued operation held for sale in the
Condensed Consolidated Balance Sheets for all periods shown. The results of
operations and cash flows for this business are classified as loss from
discontinued operations in the Condensed Consolidated Statements of
Operations and the Condensed Consolidated Statements of Cash Flows,
respectively, for all periods shown.





12


The
remaining activities of the discontinued collectibles sales businesses that
we disposed of in fiscal 2004 and which are included in the accompanying
Consolidated Financial Statements are deemed to be immaterial to warrant
separate disclosure.





The operating results of the
discontinued businesses that are included in the accompanying Condensed
Consolidated Statement of Operations, substantially all of which are associated
with the paper currency grading business, are as follows:





(in
      thousands)Three
      Months Ended
                        December
      31,
                      
                      
                      Six
      Months Ended
                        December
      31,2008
                      
                      
                      2007
                      
                      
                      2008
                      
                      
                      2007Net
      revenues
                      
                      $
                      203
                      
                      
                      $
                      186
                      
                      
                      $
                      417
                      
                      
                      $
                      370Loss
      before income tax
      benefit
                      
                      
                      (95
                      )
                      
                      
                      (80
                      )
                      
                      
                      (229
                      )
                      
                      
                      (212
                      )Income
      tax expense
      benefit
                      
                      
                      -
                      
                      
                      
                      (32
                      )
                      
                      
                      -
                      
                      
                      
                      (85
                      )Loss
      from discontinued
      operations
                      
                      $
                      (95
                      )
                      
                      $
                      (48
                      )
                      
                      $
                      (229
                      )
                      
                      $
                      (127
                      )





The
following table contains summary balance sheet information (in thousands) with
respect to the net assets and liabilities of the discontinued operation held for
sale that is included in the accompanying Condensed Consolidated Balance Sheets
as of December 31 and June 30, 2008.





At
      December 31, 2008
                  
                  
                  At
      June 30, 2008Current
      Assets:Accounts receivable,
      net
                  
                  $
                  17
                  
                  
                  $
                  25Inventories,
net
                  
                  
                  157
                  
                  
                  
                  21Prepaid
expenses
                  
                  
                  59
                  
                  
                  
                  71$
                  233
                  
                  
                  $
                  117Non-current
      assets:Property and
      equipment
                  
                  $
                  6
                  
                  
                  $
                  9Intangible
    assets
                  
                  
                  86
                  
                  
                  
                  109Other assets
                  
                  
                  35
                  
                  
                  
                  59$
                  127
                  
                  
                  $
                  177Current
      liabilities:Accounts
payable
                  
                  $
                  39
                  
                  
                  $
                  53Other accrued
      expenses
                  
                  
                  98
                  
                  
                  
                  98Deferred
revenue
                  
                  
                  107
                  
                  
                  
                  47$
                  244
                  
                  
                  $
                  198





8.
            INCOME
      TAXES





At
December 31, 2008, due to the Company recognizing additional impairment losses
for its jewelry businesses, and the Company’s core profitable operations not
meeting short-term expectations, combined with uncertainty as to the performance
of those businesses due to the severe economic conditions currently prevailing,
management did not recognize any deferred tax assets for the impairment losses
recognized in the three months ended December 31, 2008 and established a
valuation allowance against $1,204,000 of the $1,395,000 of deferred tax assets
at September 30, 2008, such that the remaining net deferred tax assets at
December 31, 2008 were $191,000.  Current net deferred tax asset of
$496,000 relates to deferred tax assets established for compensation expense
recognized for non-employee supplier stock options in 1999, and these options
are expected to expire in the six months ended June 30, 2009.  It is
expected that these options will expire unexercised due to the exercise price of
the options relative to the Company’s current share price, and in accordance
with SFAS 123R and related interpretations, the $496,000 will be recognized as a
reduction to additional-paid-in capital upon expiration. Deferred income tax
liabilities of $305,000 are associated with timing differences related to
indefinite-lived intangible assets including goodwill that are amortizable for
income tax purposes but not for financial reporting purposes under
GAAP.





The
effective tax rates were a tax expense of 11% and a 40% tax benefit in the six
months ended December 31, 2008 and 2007, respectively.






13





9.
            NET
      LOSS PER SHARE





The
number of shares used in the computation of the losses per share gives
retroactive effect to a 10% stock dividend that was distributed on November 3,
2008 to stockholders of record as of October 20, 2008.





The
aggregate numbers of shares subject to options and warrants that were excluded
from the computation of diluted loss per share, because they would have been
anti-dilutive in the calculation of diluted earnings per share, totaled
approximately 1,078,800 and 1,185,000 for the three months ended December 31,
2008 and 2007, respectively.  The aggregate numbers of options,
warrants and restricted shares excluded for the six month periods ended December
31, 2008 and 2007 were 1,046,300 and 1,191,100, respectively.





10.
            BUSINESS
      SEGMENTS





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





For our
continuing operations, we operate principally in four reportable service
segments: coins, sportscards, jewelry and other high-end
collectibles.  Services provided by these segments include
authentication, grading, publication advertising and subscription-based
revenues.  The other collectibles segment is comprised of autographs,
stamps, the CCE subscription business and our collectibles conventions
business.  During the second quarter of fiscal 2009, we excluded the
paper currency grading business as part of the other collectibles segment for
all periods presented and classified the operating results of this business as
discontinued operations in the Condensed Consolidated Statements of Operations
(see note 7).





14


We
allocate operating expenses to each service segment based upon each segment’s
activity level.  The following tables set forth on a business segment
basis, including reconciliation with the Condensed Consolidated Financial
Statements, (i) external revenues, (ii) amortization and depreciation, (iii)
stock-based compensation expense and impairment losses as significant other
non-cash transactions, and (iv) operating income for the three and six months
ended December 31, 2008 and 2007. Net identifiable assets are provided by
business segment as of December 31, 2008 and June 30, 2008. All of our sales and
identifiable assets are located in the United States.





Three
      Months Ended
                    
                    
                    Six
      Months EndedDecember
      31,
                    
                    
                    December
      31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Net
      revenues from external customersCoins
                    
                    $
                    4,370
                    
                    
                    $
                    5,527
                    
                    
                    $
                    9,365
                    
                    
                    $
                    11,565Sportscards
                    
                    
                    2,007
                    
                    
                    
                    2,192
                    
                    
                    
                    4,196
                    
                    
                    
                    4,484Jewelry
                    
                    
                    402
                    
                    
                    
                    534
                    
                    
                    
                    837
                    
                    
                    
                    914Other
                    
                    
                    1,426
                    
                    
                    
                    1,539
                    
                    
                    
                    3,285
                    
                    
                    
                    3,473Total revenue
                    
                    $
                    8,205
                    
                    
                    $
                    9,792
                    
                    
                    $
                    17,683
                    
                    
                    $
                    20,436Amortization
      and depreciationCoins
                    
                    $
                    77
                    
                    
                    $
                    62
                    
                    
                    $
                    152
                    
                    
                    $
                    119Sportscards
                    
                    
                    46
                    
                    
                    
                    24
                    
                    
                    
                    94
                    
                    
                    
                    47Jewelry
                    
                    
                    322
                    
                    
                    
                    322
                    
                    
                    
                    640
                    
                    
                    
                    635Other
                    
                    
                    130
                    
                    
                    
                    84
                    
                    
                    
                    237
                    
                    
                    
                    170Total
                    
                    
                    575
                    
                    
                    
                    492
                    
                    
                    
                    1,123
                    
                    
                    
                    971Unallocated amortization and
      depreciation
                    
                    
                    84
                    
                    
                    
                    84
                    
                    
                    
                    171
                    
                    
                    
                    167Consolidated amortization and
      depreciation
                    
                    $
                    659
                    
                    
                    $
                    576
                    
                    
                    $
                    1,294
                    
                    
                    $
                    1,138Impairment
      lossesCoins
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Sportscards
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Jewelry
                    
                    
                    7,695
                    
                    
                    
                    -
                    
                    
                    
                    7,695
                    
                    
                    
                    1Other
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Total
                    
                    
                    7,695
                    
                    
                    
                    -
                    
                    
                    
                    7,695
                    
                    
                    
                    1Unallocated impairment
      losses
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Consolidated impairment
      losses
                    
                    $
                    7,695
                    
                    
                    $
                    -
                    
                    
                    $
                    7,695
                    
                    
                    $
                    1Stock-based
      compensationCoins
                    
                    $
                    62
                    
                    
                    $
                    33
                    
                    
                    $
                    95
                    
                    
                    $
                    67Sportscards
                    
                    
                    -
                    
                    
                    
                    5
                    
                    
                    
                    -
                    
                    
                    
                    9Jewelry
                    
                    
                    4
                    
                    
                    
                    3
                    
                    
                    
                    7
                    
                    
                    
                    6Other
                    
                    
                    20
                    
                    
                    
                    23
                    
                    
                    
                    64
                    
                    
                    
                    46Total
                    
                    
                    86
                    
                    
                    
                    64
                    
                    
                    
                    166
                    
                    
                    
                    128Unallocated stock-based
      compensation
                    
                    
                    178
                    
                    
                    
                    196
                    
                    
                    
                    366
                    
                    
                    
                    372Consolidated stock-based
      compensation
                    
                    $
                    264
                    
                    
                    $
                    260
                    
                    
                    $
                    532
                    
                    
                    $
                    500Operating
      income (loss) before unallocated expensesCoins
                    
                    $
                    809
                    
                    
                    $
                    457
                    
                    
                    $
                    2,610
                    
                    
                    $
                    2,941Sportscards
                    
                    
                    258
                    
                    
                    
                    424
                    
                    
                    
                    603
                    
                    
                    
                    942Jewelry
                    
                    
                    (9,276
                    )
                    
                    
                    (1,882
                    )
                    
                    
                    (10,906
                    )
                    
                    
                    (3,691
                    )Other
                    
                    
                    (21
                    )
                    
                    
                    104
                    
                    
                    
                    133
                    
                    
                    
                    528Total
                    
                    
                    (8,230
                    )
                    
                    
                    (897
                    )
                    
                    
                    (7,560
                    )
                    
                    
                    720Unallocated operating
      expenses
                    
                    
                    (1,463
                    )
                    
                    
                    (1,721
                    )
                    
                    
                    (3,430
                    )
                    
                    
                    (3,834
                    )Consolidated operating
      loss
                    
                    $
                    (9,693
                    )
                    
                    $
                    (2,618
                    )
                    
                    $
                    (10,990
                    )
                    
                    $
                    (3,114
                    )





At
      December 31,
                  
                  
                  At
      June 30,Identifiable
      Assets
                  
                  2008
                  
                  
                  2008Coins
                  
                  $
                  2,940
                  
                  
                  $
                  3,346Sportscards
                  
                  
                  1,001
                  
                  
                  
                  1,035Jewelry
                  
                  
                  2,197
                  
                  
                  
                  9,061Other
                  
                  
                  9,245
                  
                  
                  
                  10,761Total
                  
                  
                  15,383
                  
                  
                  
                  24,203Unallocated
      assets
                  
                  
                  22,536
                  
                  
                  
                  27,815Consolidated
      assets
                  
                  $
                  37,919
                  
                  
                  $
                  52,018









15




11.           SUBSEQUENT
EVENT






Stockholder
Rights Plan




On
January 9, 2009, the Company’s Board of Directors unanimously adopted a
limited duration stockholder rights plan. In accordance with ISS guidelines, the
Plan has an initial term of one year ending in January 2010, but may be extended
for two additional years if the Plan is approved by our stockholders on or prior
to the end of that initial one year term.




In
connection with the adoption of the stockholder rights plan, the Board of
Directors declared a non-taxable distribution of rights to purchase shares of a
new series of preferred stock to all stockholders of record as of
January 23, 2009. Under the Plan, if anyone becomes the beneficial owner of
20 percent or more of the Company’s outstanding shares, then, subject to limited
exceptions, each right (other than those held by that person) will become
exercisable and entitle its holder to purchase, at the exercise price of the
right, a number of the Company’s shares having a market value of twice the
right’s exercise price. If anyone announces or commences a tender offer or
exchange offer for the Company’s shares, then, subject to limited exceptions,
each right will entitle its holder (other than the offeror) to purchase, at the
exercise price of the right, a number of the acquiring party’s shares having a
market value at that time of twice the right’s exercise price. Unless and until
either of those events occurs, the rights will not be exercisable, will trade
with the Company’s common stock and no rights certificates will be
issued.








16


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




Forward-Looking Statements




The
discussion in this Item 2 and in Item 3 of this Quarterly Report (“Report”) on
Form 10-Q includes “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended (the “1933 Act”) and Section 21E
of the Securities Exchange Act of 1934, as amended (the “1934
Act”).  Those Sections of the 1933 Act and 1934 Act provide a “safe
harbor” for forward-looking statements to encourage companies to provide
prospective information about their financial performance so long as they
provide meaningful, cautionary statements identifying important factors that
could cause actual results to differ from projected or anticipated
results.  Other than statements of historical fact, all statements in
this Report and, in particular, any projections of or statements as to our
expectations or beliefs concerning our future financial performance or financial
condition or as to trends in our business or in our markets, are forward-looking
statements.  Forward-looking statements often include the words
"believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or
words of similar meaning, or future or conditional verbs such as "will,"
"would," "should," "could," or "may."  Our actual financial
performance in future periods may differ significantly from the currently
expected financial performance set forth in the forward-looking statements
contained in this Report.  The sections below entitled “Factors That
Can Affect our Financial Position and Operating Results” and “Risks and
Uncertainties That Could Affect our Future Financial Performance” describe some,
but not all, of the factors and the risks and uncertainties that could cause
these differences, and readers of this Report are urged to read those sections
of this Report in their entirety and to review certain additional risk factors
that are described in Item 1A of our Annual Report on Form 10-K, as filed
by us with the Securities and Exchange Commission (the “SEC”), for the fiscal
year ended June 30, 2008.




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




Our Business




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




We
principally generate revenues from the fees paid for our authentication and
grading services.  To a much lesser extent, we generate revenues from
other related services consisting of:  (i) the sale of
advertising on our websites; (ii) the sale of printed publications and
collectibles price guides and advertising in such publications and on our
website; (iii) the sale of Collectors Club membership subscriptions;
(iv) the sale of subscriptions to our CCE dealer-to-dealer Internet bid-ask
market for certified coins; and (v) the collectibles trade show conventions
that we conduct. We also generate revenues from sales of our collectibles
inventory, which is comprised primarily of collectible coins that we have
purchased under our coin grading warranty program; however, these activities are
not the focus of or an integral part of our business.




Discontinued
Operations.  In the three months ended December 31, 2008, the
Company approved a plan to dispose of the Company’s currency authentication and
grading business and this business was sold in February
2009.  Accordingly, the operations of the currency authentication and
grading business have been classified as a discontinued operation held for sale
at December 31 2008, and the operations of that business have been reclassified
as discontinued operations for all periods presented.  In addition, as
previously disclosed, we have classified as discontinued operations the
remaining activities of our divestiture of the collectibles auctions and sales
businesses which we disposed of in fiscal 2004.  The discussion that
follows focuses almost entirely on our on-going authentication and grading
businesses, which comprise substantially all of our continuing
operations.




17


Overview of Results of Operations for the Three and Six Months
Ended December 31, 2008




The
following table sets forth certain financial data, expressed as a percentage of
net revenues, derived from our interim Condensed Consolidated Statements of
Operations (included earlier in this Report) for the respective periods
indicated below:





(in
      thousands)
                  
                  
                  (in
      thousands)Three
      Months Ended
                  
                  
                  Six
      Months EndedDecember
      31,
                  
                  
                  December
      31,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Net
      revenues
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Cost
      of revenues
                  
                  
                  58.5
                  %
                  
                  
                  67.8
                  %
                  
                  
                  55.1
                  %
                  
                  
                  57.1
                  %Gross
      profit
                  
                  
                  41.5
                  %
                  
                  
                  32.2
                  %
                  
                  
                  44.9
                  %
                  
                  
                  42.9
                  %Operating
      expenses:Selling and marketing
      expenses
                  
                  
                  15.8
                  %
                  
                  
                  18.2
                  %
                  
                  
                  16.7
                  %
                  
                  
                  18.1
                  %General and administrative
      expenses
                  
                  
                  46.0
                  %
                  
                  
                  37.9
                  %
                  
                  
                  43.3
                  %
                  
                  
                  37.4
                  %Amortization of
      intangibles
                  
                  
                  4.0
                  %
                  
                  
                  2.8
                  %
                  
                  
                  3.5
                  %
                  
                  
                  2.6
                  %Impairment
losses
                  
                  
                  93.8
                  %
                  
                  
                  -
                  
                  
                  
                  43.5
                  %
                  
                  
                  -Total operating
      expenses
                  
                  
                  159.6
                  %
                  
                  
                  58.9
                  %
                  
                  
                  107.0
                  %
                  
                  
                  58.1
                  %Operating
      loss
                  
                  
                  (118.1
                  )%
                  
                  
                  (26.7
                  )%
                  
                  
                  (62.1
                  )%
                  
                  
                  (15.2
                  )%Interest
      income, net
                  
                  
                  0.9
                  %
                  
                  
                  3.1
                  %
                  
                  
                  1.1
                  %
                  
                  
                  3.6
                  %Other
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Loss
      before income taxes
                  
                  
                  (117.2
                  )%
                  
                  
                  (23.6
                  )%
                  
                  
                  (61.0
                  )%
                  
                  
                  (11.6
                  )%Provision
      (benefit) for income tax
                  
                  
                  14.8
                  %
                  
                  
                  (9.4
                  )%
                  
                  
                  6.8
                  %
                  
                  
                  (4.6
                  )%Loss
      from continuing operations
                  
                  
                  (132.0
                  )%
                  
                  
                  (14.2
                  )%
                  
                  
                  (67.8
                  )%
                  
                  
                  (7.0
                  )%Loss
      from discontinued operations,  net of income
    taxes
                  
                  
                  (1.1
                  )%
                  
                  
                  (0.5
                  )%
                  
                  
                  (1.3
                  )%
                  
                  
                  (0.6
                  )%Net
      loss
                  
                  
                  (133.1
                  )%
                  
                  
                  (14.7
                  )%
                  
                  
                  (69.1
                  )%
                  
                  
                  (7.6
                  )%




On going
grading, authentication and related service revenues decreased by $878,000 or
9.8% and $1,964,000 or 10.0% in the three months and six months ended December
31, 2008, respectively, compared to the same period of the prior fiscal year,
largely due to decreases in grading and authentication fees.  Such
fees decreased by $781,000 or 10.4% and $1,821,000 or 11.1%, respectively, in
the three and six months ended December 31, 2008, while related services
decreased by $97,000 or 6.7% and $143,000 or 4.5%, respectively, for those same
three and six month periods. We experienced reductions in grading and
authentication fees in all of our markets in the three and six months ended
December 31, 2008, which we believe were primarily attributable to the increased
severity of the economic recession and the tightening of business and consumer
credit in the United States during the six months ended December 31,
2008.




The
operating losses for the three and six months ended December 31, 2008 (which
included an impairment loss related to the Company’s jewelry businesses of
$7,695,000 recognized in the three months ended December 31, 2008 and reflected
in both periods) was $9,693,000 and $10,990,000,
respectively.  Excluding those impairment losses in the three and six
months ended December 31, 2008, and a warranty charge of $822,000 recognized in
the three and six months ended December 31, 2007, the operating losses would
have been $1,998,000 and $3,295,000, respectively, in the three and six months
ended December 31, 2008, compared to $1,796,000 and $2,292,000, respectively, in
the three and six months ended December 31, 2007.




Our
jewelry grading and authentication businesses accounted for substantially all of
those operating losses, incurring operating losses (before the impairment loss)
of $1,581,000 and $3,211,000, respectively, in the three and six months ended
December 31, 2008, compared with $1,882,000 and $3,691,000, respectively, in the
three and six months ended December 31, 2007.




We
implemented cost reduction measures in all of
our operations throughout the six month period ended December 31, 2008
and will continue to review and make changes considered necessary to our costs
based on our expectations regarding near term revenues.






18




We
recognized the impairment losses in our jewelry businesses during the three
months ended December 31, 2008, due primarily to the uncertainties of
forecasting the impact of the economic recession on our jewelry
businesses.




These, as
well as other factors affecting our operating results in the second quarter of
fiscal 2009, are described in more detail below.




Factors That Can Affect our Financial Position and Operating
Results




Factors that Can Affect our
Revenues.  Our authentication and grading fees, which accounted
for approximately 82% of our total net revenues in the six months ended December
31, 2008, are primarily affected by (i) the volume and mix, among coins,
sportscards and other collectibles and high-value assets, of authentication and
grading submissions; (ii) in the case of coins and sportscards, the
“turn-around” times requested by our customers, because we charge higher fees
for faster service times; and (iii) the mix of authentication and grading
submissions between vintage or “classic” coins and sportscards, on the one hand,
and modern coins and sportscards, on the other hand, because dealers generally
request faster turn-around times for vintage or classic coins and sports cards
than they do for modern submissions, as vintage or classic collectibles are of
significantly higher value and are more saleable by dealers than modern coins
and sportscards.




Our
revenues are also impacted by the level of grading submissions and revenue
earned from such coin grading submissions at collectibles trade shows where we
provide on-site grading and authentication services to show attendees who
typically request same-day turn-around.  The level of such revenues
can vary depending upon a number of factors, including the number and timing of
the shows held during each reporting period, and the number of dealers attending
and the volume of their coin transactions at such shows, which affect the volume
of submissions to us for on-site grading and same-day turn-around at the
shows.  Dealer show attendance, and the volume of coin transactions at
the shows are, in turn, affected by economic and market conditions, such as
those we are experiencing currently, and are sometimes also affected by
short-term changes in the price of gold that may occur around the time shows are
held.




Six of
our coin authentication and grading customers accounted for, in the aggregate,
approximately 13% of our total net revenues in the three months ended December
31, 2008, as compared to 10% in the year ended June 30, 2008.  As a
result, the loss of one or more of those customers, or a decrease in the volume
of grading submissions from any of them to us, would cause our net revenues to
decline and, therefore, could adversely affect the profitability of our grading
and authentication operations.





Factors Affecting our Gross Profit
Margins.  The gross profit margins on authentication and
grading submissions also are primarily affected by (i) the volume and mix,
among coins, sportscards and other collectibles and high value assets, of
authentication and grading submissions, because we generally realize higher
margins on coin submissions than on submissions of other collectibles and
high-value assets; (ii) in the case of coins and sportscards, the
“turn-around” times requested by our customers, because we charge higher fees
for faster service times, (iii) the mix of authentication and grading
submissions between vintage or “classic” coins and sportscards, on the one hand,
and modern coins and sportscards, on the other hand, because dealers generally
request faster turn-around times for vintage or classic coins and sports cards
than they do for modern submissions, and (iv) the stage of development and
the seasonality of our newer businesses.  Furthermore, because a
significant proportion of our direct costs are generally fixed in nature, our
gross profit also can be affected by the overall volume of collectibles
authenticated and graded in any period.





Impact of Economic Conditions on
Financial Performance.  We generate substantially all of our
revenues from the collectibles and the diamond and colored gemstone
markets.  Accordingly, our operating results are affected by the
financial performance of those markets, 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, (iii) the
availability and cost of financing that collectibles dealers and consumers need
to fund their purchases of collectibles or diamonds and colored gemstones, and
(iv) the performance and volatility of the gold and other precious metals
markets and the stock markets.  These conditions primarily affect the
volume of purchases and sales of collectibles and high-value assets 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 often lead investors to
increase their purchases of precious metals, such as gold bullion and other
coins and collectibles, may 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,
may decline during periods characterized by recessionary economic conditions,
declines in disposable income and consumer confidence, reductions in the
availability or increases in the costs of financing, or by increasing stock
prices and relative stability in the stock markets.  Due to the
severity of the economic recession and the worsening of the credit crisis in the
United States in the three and six months ended December 31, 2008, we have
experienced declines in the demand for our services in all of our grading and
authentication markets, as the collectibles and jewelry that we authenticate and
grade are considered luxury items.  As a result of these economic
conditions and the resulting uncertainties as to the level of revenues we can
expect from our jewelry businesses in future periods, in the three months ended
December 31, 2008 we recognized additional impairment losses, totaling
approximately $7.7 million, in the carrying values of the assets of our jewelry
businesses, which are reflected in our results of operation in both the three
and six month periods ended December 31, 2008.






19




The
following tables provide information regarding the respective numbers of coins,
sportscards, autographs, currency, diamonds and colored gemstones that were
graded or authenticated by us in the three months ended December 31, 2008 and
2007 and their estimated values, which are the amounts at which those coins,
sportscards and stamps and other high-value assets were insured by the dealers
and collectors who submitted them to us for grading and
authentication.





Units
      Processed
                      Three
      Months Ended December 31,
                    
                    
                    Declared
      Value (000)
                      Three
      Months Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Coins
                    
                    
                    291,500
                    
                    
                    
                    44.9
                    %
                    
                    
                    292,800
                    
                    
                    
                    43.0
                    %
                    
                    $
                    250,052
                    
                    
                    
                    70.4
                    %
                    
                    $
                    246,840
                    
                    
                    
                    59.8
                    %Sportscards
                    
                    
                    292,300
                    
                    
                    
                    45.1
                    %
                    
                    
                    313,000
                    
                    
                    
                    46.0
                    %
                    
                    
                    17,548
                    
                    
                    
                    4.9
                    %
                    
                    
                    19,402
                    
                    
                    
                    4.7
                    %Autographs
                    
                    
                    47,700
                    
                    
                    
                    7.3
                    %
                    
                    
                    50,000
                    
                    
                    
                    7.3
                    %
                    
                    
                    3,685
                    
                    
                    
                    1.1
                    %
                    
                    
                    6,159
                    
                    
                    
                    1.5
                    %Stamps
                    
                    
                    6,600
                    
                    
                    
                    1.0
                    %
                    
                    
                    11,700
                    
                    
                    
                    1.7
                    %
                    
                    
                    7,129
                    
                    
                    
                    2.0
                    %
                    
                    
                    8,928
                    
                    
                    
                    2.1
                    %Diamonds
                    
                    
                    9,700
                    
                    
                    
                    1.5
                    %
                    
                    
                    12,000
                    
                    
                    
                    1.8
                    %
                    
                    
                    43,778
                    
                    
                    
                    12.3
                    %
                    
                    
                    115,418
                    
                    
                    
                    28.0
                    %Colored
      Gemstones
                    
                    
                    1,600
                    
                    
                    
                    0.2
                    %
                    
                    
                    1,100
                    
                    
                    
                    0.2
                    %
                    
                    
                    32,918
                    
                    
                    
                    9.3
                    %
                    
                    
                    16,066
                    
                    
                    
                    3.9
                    %Total
                    
                    
                    649,400
                    
                    
                    
                    100.0
                    %
                    
                    
                    680,600
                    
                    
                    
                    100.0
                    %
                    
                    $
                    355,110
                    
                    
                    
                    100.0
                    %
                    
                    $
                    412,813
                    
                    
                    
                    100.0
                    %





Units
      Processed
                      Six
      Months Ended December 31,
                    
                    
                    Declared
      Value (000)
                      Six
      Months Ended December 31,2008
                    
                    
                    2007
                    
                    
                    2008
                    
                    
                    2007Coins
                    
                    
                    619,600
                    
                    
                    
                    46.3
                    %
                    
                    
                    659,900
                    
                    
                    
                    45.2
                    %
                    
                    $
                    552,774
                    
                    
                    
                    72.9
                    %
                    
                    $
                    711,762
                    
                    
                    
                    74.9
                    %Sportscards
                    
                    
                    593,900
                    
                    
                    
                    44.3
                    %
                    
                    
                    651,500
                    
                    
                    
                    44.6
                    %
                    
                    
                    44,109
                    
                    
                    
                    5.8
                    %
                    
                    
                    41,997
                    
                    
                    
                    4.4
                    %Autographs
                    
                    
                    89,300
                    
                    
                    
                    6.7
                    %
                    
                    
                    94,800
                    
                    
                    
                    6.5
                    %
                    
                    
                    8,538
                    
                    
                    
                    1.1
                    %
                    
                    
                    16,634
                    
                    
                    
                    1.7
                    %Stamps
                    
                    
                    13,900
                    
                    
                    
                    1.0
                    %
                    
                    
                    31,400
                    
                    
                    
                    2.2
                    %
                    
                    
                    12,200
                    
                    
                    
                    1.6
                    %
                    
                    
                    11,987
                    
                    
                    
                    1.3
                    %Diamonds
                    
                    
                    19,500
                    
                    
                    
                    1.5
                    %
                    
                    
                    19,700
                    
                    
                    
                    1.4
                    %
                    
                    
                    78,843
                    
                    
                    
                    10.4
                    %
                    
                    
                    138,627
                    
                    
                    
                    14.6
                    %Colored
      Gemstones
                    
                    
                    3,000
                    
                    
                    
                    0.2
                    %
                    
                    
                    2,000
                    
                    
                    
                    0.1
                    %
                    
                    
                    61,723
                    
                    
                    
                    8.2
                    %
                    
                    
                    29,210
                    
                    
                    
                    3.1
                    %Total
                    
                    
                    1,339,200
                    
                    
                    
                    100.0
                    %
                    
                    
                    1,459,300
                    
                    
                    
                    100.0
                    %
                    
                    $
                    758,187
                    
                    
                    
                    100.0
                    %
                    
                    $
                    950,217
                    
                    
                    
                    100.0
                    %





Critical Accounting Policies and Estimates





During
the quarter ended December 31, 2008, there were no changes except as noted below
in the critical accounting policies or estimates that were described in Item 7
of our Annual Report on Form 10-K, filed with the SEC, for the fiscal year ended
June 30, 2008.  Readers of this report are urged to read that Section
of that Annual Report for a more complete understanding of our critical
accounting policies and estimates.





Grading Warranty
Costs.  We offer a limited warranty covering the coins,
sportscards, stamps and currency that we authenticate and
grade.  Under the warranty, if any such 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 resubmittal or
(ii) is determined not to have been authentic, we will offer to purchase
the collectible or, at our option, 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
the item.  If we purchase an item under a warranty claim, we recognize
the difference in value of the item at its original grade and its re-graded
estimated value as a reduction in our warranty reserve.  We include
the purchased item in our inventory at the re-graded estimated value of the
item.  We offer a similar limited warranty of two years’ duration on
the diamonds we grade.  We accrue for estimated warranty costs based
on historical trends and related experience.  Certain warranty claims
were received by us in the second quarter and early in third quarter of fiscal
2008 that were significant in relation to our historical claims experience and,
as a result, we recognized, in the second quarter of 2008, an additional expense
of $822,000 for those claims.  We also decided to increase our
warranty accrual rate, effective January 1, 2008, to reflect this higher
warranty claims experience, and we continue to monitor the adequacy of our
warranty reserves on an on-going basis.  In relation to those items,
which we include in inventory at the re-graded estimated value (as discussed
under Inventory Valuation
Reserves below) there are a number of factors that can cause such
estimated values of those items between the time they are purchased under our
warranty policy and they are sold by us.  However, once we have
classified such items as inventory and they have been held in inventory over a
quarter end period, we classify the ultimate gain or loss on the disposal of
such inventory as part of the gain or loss on product sales and not as an
adjustment to our warranty revenues.






20




Inventory Valuation
Reserve.  Our collectibles inventories are valued at the lower
of cost or fair value and have been reduced by an inventory valuation allowance
to provide for potential declines in the value of those
inventories.  The amount of the allowance is determined and is
periodically adjusted on the basis of market knowledge, historical experience
and estimates concerning future economic conditions or trends that may impact
the sale value of the collectibles inventories.  Additionally, due to
the relative uniqueness of some of the collectibles included in our collectibles
inventory, valuation of such collectibles often involves judgments that are more
subjective than those that are required when determining the market values of
more standardized products due to volatility in the price of precious metal, the
condition of the collectible and any specific features of the individual
collectible.  We review the market values of the collectible on a
quarterly basis.  Ultimately, we recognize a profit or loss on the
actual sale of the collectible relative to its most recent inventory carrying
value.





Long-Lived Assets Other Than
Goodwill.  We regularly conduct reviews of property and
equipment and other long-lived assets other than goodwill, including certain
identifiable intangibles, for possible impairment.  Such reviews occur
annually or more frequently if events or changes in circumstances indicate the
carrying amount of the asset may not be recoverable in full.  In order
to determine if the value of a definite-lived asset is impaired, we make an
estimate of the future undiscounted cash flows expected to result from the use
of that asset and its eventual disposition in order to determine if an
impairment loss has occurred.  If the projected undiscounted cash
flows are less than the carrying amount of the asset, an impairment loss is
recorded to write down the asset to its estimated fair value.  The
Company has incurred significant operating losses in its jewelry reporting units
since the acquisitions of these businesses and the Company recognized impairment
losses for these businesses in the three months and year ended June 30, 2008 due
to these businesses not meeting management’s revenue expectations.  In
the three months ended December 31, 2008, due to continued uncertainty as to the
level of revenues we can expect from these businesses in the future, as well as
worse than expected actual performance during the first six months of fiscal
2009 and the continued economic downturn, management has recognized additional
impairment losses of $6,347,000 for these businesses during the three month
period ended December 31, 2008.





Goodwill. We test the
carrying value of goodwill and other indefinite-lived intangible assets on a
formal basis at least annually on their respective acquisition anniversary
dates, or more frequently if indicators of impairment are determined to exist.
We apply a discounted cash flow model or an income approach to determining a
fair value that is used to estimate the fair value of the reporting unit on a
total basis, which is then compared to the carrying value of the reporting
unit.  If the fair value of the reporting unit exceeds the carrying
value of the reporting unit, no impairment of goodwill exists as of the
measurement date. If the fair value is less than the carrying value, then there
is the possibility of goodwill impairment and further testing and remeasurement
of goodwill is required. In accordance with GAAP, we consider the diamond and
colored gemstone grading businesses as separate reporting units for the purpose
of testing separately for the impairment of goodwill.  The Company has
incurred significant operating losses in its jewelry reporting units since the
acquisitions of these businesses and the Company recognized impairment losses
for these businesses in the three months and year ended June 30, 2008 due to
these businesses not meeting management’s revenue expectations.  In
the three months ended December 31, 2008, due to continued uncertainty as to the
level of revenues we can expect from these businesses in the future, as well as
worse than expected actual performance during the first six months of fiscal
2009 and the continued economic downturn, management has recognized additional
goodwill impairment losses of $1,348,000 for these businesses at December 31,
2008.


21


Income Taxes and Deferred Tax
Assets.  We account for income taxes in accordance with SFAS
No. 109, Accounting for
Income Taxes and FASB Interpretation 48, Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109
(“FIN48”).SFAS No. 109 requires the recording of
deferred tax assets and liabilities for the future consequences of events that
have been recognized in the Company’s financial statements or tax
returns.  Measurement of the deferred items is based on enacted tax
laws.  In the event the future consequences of differences between
financial reporting bases and tax bases of the Company’s assets or liabilities
result in a deferred tax asset, SFAS No. 109 requires that we evaluate the
probability of realizing the future benefits comprising that asset and we review
the nature, the expected timing of the realization of these assets and the
expiration dates for net operating losses or credits, when determining the
likelihood of realization.  In the fourth quarter of fiscal 2008, due
to the length of time and the extent of the taxable income required to fully
realize the deferred tax assets related to impairment losses recognized in the
fourth quarter of fiscal 2008, and certain California Enterprise Zone Credits,
the Company recorded a valuation allowance of $4,572,000 against deferred tax
assets of $5,967,000 at June 30, 2008.  The remaining net deferred tax
asset of $1,395,000 at June 30, 2008 was determined by management to be more
likely than not realizable at June 30, 2008.  At December 31, 2008, due to
the Company recognizing additional impairment losses for its jewelry businesses,
and the Company’s core profitable operations not meeting short-term
expectations, combined with uncertainty as to the performance of those
businesses due to the severe economic conditions currently prevailing,
management did not recognize any deferred tax assets for the impairment losses
recognized in the three months ended December 31, 2008 and established a
valuation allowance against $1,204,000 of the $1,395,000 of deferred tax assets,
such that the remaining net deferred tax assets at December 31, 2008 were
$191,000.   The current net deferred tax asset of $496,000
relates to deferred tax assets established for compensation expense recognized
for non-employee supplier stock options in 1999, and these options are expected
to expire in the six months ended June 30, 2009.  It is expected that
these options will expire unexercised due to the exercise price of the options
relative to the Company’s current share price, and in accordance with SFAS 123R
and related interpretations, the $496,000 will be recognized as a reduction to
additional-paid-in capital upon expiration. Deferred income tax liabilities of
$305,000 refer to timing differences related to indefinite-lived intangible
assets including goodwill that are amortizable for income tax purposes but not
for financial reporting purposes under GAAP.




The
effective tax rates were a tax expense of 11% and a 40% tax benefit in the six
months ended December 31, 2008 and 2007, respectively.




Results of Operations – Three and Six Months Ended December
      31, 2008 versus the Three and Six Months Ended December 31,
      2007.




Net
Revenues





Net
revenues consist primarily of fees that we generate from the authentication and
grading of high-value collectibles, including coins, sportscards, autographs and
stamps, and high-value assets consisting of diamonds and colored
gemstones.  To a lesser extent, we generate collectibles related
service revenues (referred to as “other related revenues”) from sales of
collectibles club memberships and advertising on our websites and in printed
publications and collectibles price guides; subscription-based revenues
primarily related to our CCE dealer-to-dealer Internet bid-ask market for coins
authenticated and graded by us; and fees earned from promoting, managing and
operating collectibles conventions.  Net revenues also include, to a
significantly lesser extent, revenues from the sales of products, consisting
primarily of coins that we purchase under our warranty policy and are not
considered to be an integral part of our on-going revenue generating
activities.





22


The
following tables breakout the total net revenues for the three and six months
ended December 31, 2008 and 2007 between grading and authentication services
revenues, and other related services revenues:




Three
      Months Ended December 31,2008
                  
                  
                  2007
                  
                  
                  Increase
      (Decrease)Amount
                  
                  
                  %
      of Net
                    Revenues
                  
                  
                  Amount
                  
                  
                  %
      of Net
                    Revenues
                  
                  
                  Amount
                  
                  
                  %
      of Net
                    Revenues(Dollars
      in thousands)Product
      sales revenues
                  
                  $
                  102
                  
                  
                  
                  1.2
                  %
                  
                  $
                  811
                  
                  
                  
                  8.3
                  %
                  
                  $
                  (709
                  )
                  
                  
                  (87.4
                  )%Grading
      and authentication service fees
                  
                  
                  6,753
                  
                  
                  
                  82.3
                  %
                  
                  
                  7,534
                  
                  
                  
                  76.9
                  %
                  
                  
                  (781
                  )
                  
                  
                  (10.4
                  )%Other
      related services
                  
                  
                  1,350
                  
                  
                  
                  16.5
                  %
                  
                  
                  1,447
                  
                  
                  
                  14.8
                  %
                  
                  
                  (97
                  )
                  
                  
                  (6.7
                  )%Total
      services
                  
                  
                  8,103
                  
                  
                  
                  98.8
                  %
                  
                  
                  8,981
                  
                  
                  
                  91.7
                  %
                  
                  
                  (878
                  )
                  
                  
                  (9.8
                  )%Total
      net revenues
                  
                  $
                  8,205
                  
                  
                  
                  100.0
                  %
                  
                  $
                  9,792
                  
                  
                  
                  100.0
                  %
                  
                  $
                  (1,587
                  )
                  
                  
                  (16.2
                  )%





Six
      Months Ended December 31,2008
                
                
                2007
                
                
                Increase
      (Decrease)Amount
                
                
                %
      of Net
                  Revenues
                
                
                Amount
                
                
                %
      of Net
                  Revenues
                
                
                Amount
                
                
                %
      of Net
                  Revenues(Dollars
      in thousands)Product
      sales revenues
                
                $
                103
                
                
                
                0.6
                %
                
                $
                892
                
                
                
                4.4
                %
                
                $
                (789
                )
                
                
                (88.5
                )%Grading
      and authentication service fees
                
                
                14,527
                
                
                
                82.1
                %
                
                
                16,348
                
                
                
                80.0
                %
                
                
                (1,821
                )
                
                
                (11.1
                )%Other
      related services
                
                
                3,053
                
                
                
                17.3
                %
                
                
                3,196
                
                
                
                15.6
                %
                
                
                (143
                )
                
                
                (4.5
                )%Total
      services
                
                
                17,580
                
                
                
                99.4
                %
                
                
                19,544
                
                
                
                95.6
                %
                
                
                (1,964
                )
                
                
                (10.0
                )%Total
      net revenues
                
                $
                17,683
                
                
                
                100.0
                %
                
                $
                20,436
                
                
                
                100.0
                %
                
                $
                (2,753
                )
                
                
                (13.5
                )%




The
following tables set forth certain information regarding the increases
(decreases) in net revenues in our larger markets (which are inclusive of
revenues from our other related services) and in the number of units graded and
authenticated  in the three and six months ended December 31, 2008 and
2007.




Three
      Months Ended December 31,2008
                
                
                2007
                
                
                2008
      vs. 2007Increase
      (Decrease)%
      of Net
                
                
                
                
                
                %
      of Net
                
                
                Revenues
                
                
                Units
      ProcessedAmount
                
                
                Revenues
                
                
                Amount
                
                
                Revenues
                
                
                Amounts
                
                
                Percent
                
                
                Number
                
                
                Percent(in
      thousands)Product
      revenues (1)
                
                $
                102
                
                
                
                1.2
                %
                
                $
                811
                
                
                
                8.3
                %
                
                $
                (709
                )
                
                
                (87.4
                )%
                
                
                N/A
                
                
                
                N/ACoins
                
                
                4,268
                
                
                
                52.0
                %
                
                
                4,720
                
                
                
                48.2
                %
                
                
                (452
                )
                
                
                (9.6
                )%
                
                
                (1,300
                )
                
                
                (0.4
                )%Sportscards
                
                
                2,007
                
                
                
                24.5
                %
                
                
                2,192
                
                
                
                22.4
                %
                
                
                (185
                )
                
                
                (8.4
                )%
                
                
                (20,700
                )
                
                
                (6.6
                )%Other
      (2)
                
                
                1,828
                
                
                
                22.3
                %
                
                
                2,069
                
                
                
                21.1
                %
                
                
                (241
                )
                
                
                (11.6
                )%
                
                
                (9,200
                )
                
                
                (12.3
                )%Net
      Revenues
                
                $
                8,205
                
                
                
                100.0
                %
                
                $
                9,792
                
                
                
                100.0
                %
                
                $
                (1,587
                )
                
                
                (16.2
                )%
                
                
                (31,200
                )
                
                
                (4.6
                )%





23





Six
      Months Ended December 31,2008
                
                
                2007
                
                
                2008
      vs. 2007Increase
      (Decrease)%
      of Net
                
                
                
                
                
                %
      of Net
                
                
                Revenues
                
                
                Units
      ProcessedAmount
                
                
                Revenues
                
                
                Amount
                
                
                Revenues
                
                
                Amounts
                
                
                Percent
                
                
                Number
                
                
                Percent(in
      thousands)Product
      revenues (1)
                
                $
                103
                
                
                
                0.6
                %
                
                $
                892
                
                
                
                4.4
                %
                
                $
                (789
                )
                
                
                (88.5
                )%
                
                
                N/A
                
                
                
                N/ACoins
                
                
                9,262
                
                
                
                52.4
                %
                
                
                10,677
                
                
                
                52.3
                %
                
                
                (1,415
                )
                
                
                (13.3
                )%
                
                
                (40,300
                )
                
                
                (6.1
                )%Sportscards
                
                
                4,196
                
                
                
                23.7
                %
                
                
                4,484
                
                
                
                21.9
                %
                
                
                (288
                )
                
                
                (6.4
                )%
                
                
                (57,600
                )
                
                
                (8.8
                )%Other
      (2)
                
                
                4,122
                
                
                
                23.3
                %
                
                
                4,383
                
                
                
                21.4
                %
                
                
                (261
                )
                
                
                (5.9
                )%
                
                
                (22,200
                )
                
                
                (15.0
                )%Net
      Revenues
                
                $
                17,683
                
                
                
                100.0
                %
                
                $
                20,436
                
                
                
                100.0
                %
                
                $
                (2,753
                )
                
                
                (13.5
                )%
                
                
                (120,100
                )
                
                
                (8.2
                )%







(1)
              Consists
      of coins that we purchase under our warranty policy and are not considered
      to be an integral part of our on-going revenue generating
      activities.
 
 (2)
              Consists
      of autographs, stamps, diamonds and colored gemstones, CCE subscription
      business, our CFC dealer financing business, and our collectibles
      convention business.


For the
three and six months ended December 31, 2008, our net revenues decreased by
$1,587,000, or 16.2%, and by $2,753,000, or 13.5%, respectively, compared to the
corresponding periods of the prior fiscal year.  The decrease in net
revenues in the three months ended December 31, 2008 was attributable to
decreases of (i) $781,000, or 10.4%, in grading and authentication service fees,
(ii) $97,000, or 6.7%, in other service related revenues, and
(iii) $709,000 in revenues from product sales of collectible
coins.  The net revenue decease in the six months ended December 31,
2008 was attributable to decreases of (i) $1,821,000, or 11.1%, in
authentication and grading service fees, (ii) $143,000, or 4.5%, in other
service related revenues, and (iii) $789,000 in revenues from product sales
of collectible coins, made primarily in last year’s second
quarter.  As discussed above, the revenues from product sales are not
considered to be an integral part of the Company’s revenue generating
activities.  Therefore, excluding such product revenues, total service
revenues decreased by 9.8% and 10.0% in the three and six months ended December
31, 2008, respectively, compared to the same respective periods of the prior
fiscal year.




Overall,
the worsening economic recession and credit crisis that prevailed in the United
States and the resulting decline in confidence among collectibles and jewelry
dealers and their customers in the first half of the year led to decreases in
the demand for our services, such that the decrease in grading and
authentication fees in the three and six months ended December 31, 2008, of
$781,000 and $1,821,000 respectively, comprised decreases in all our grading and
authentication markets.




Our coin
grading and authentication business experienced decreased grading and
authentication fees of $343,000 or 8.1% and $1,198,000 or 12.3% in the three and
six months ended December 31, 2008, respectively attributable to decreases in
(i) coin trade show grading revenues, which we believe was due to the
continued high price and a high level of volatility in the price of gold in the
three and six month periods, and (ii) modern coin grading revenues, due
primarily to lower activity combined with a lower average service fees earned,
due to the mix of coins graded in the quarter.  Those decreases were
partially offset by increases in our vintage coin grading
submissions.




Our
sportscards grading and authentication business showed declines of $150,000 or
8.2% and $241,000 or 6.3% in the three and six months ended December 31, 2008
due to decreases in the number of units graded.  Our jewelry
businesses experienced a 27% reduction in grading and authentication fees in the
current second quarter, related to lower demand and lower average service fees
earned on diamond grading, such that jewelry fees  declined 10% for
the first half of the year.   Our other grading and
authentication businesses (comprising stamps and autographs), experienced fee
reductions of about 16% in both the second quarter and six month
periods.




The
decrease in revenues from other related services of $97,000 or 6.7% and $143,000
or 4.5% in the three and six months periods, was primarily attributable to lower
collector club revenues in the current quarter as a result of lower club
subscription renewals and a decline in advertising revenues in the six months
ended December 31, 2008 resulting from the Company’s decision to discontinue the
publication of the Rare Coin Marketing Report, the revenues from which no longer
justified the expenses of publishing that Report.




24


Gross
Profit




Gross
profit is calculated by subtracting the cost of revenues from net
revenues.  Gross profit margin is gross profit stated as a percent of
net revenues.  The costs of authentication and grading revenues
consist primarily of labor to authenticate and grade collectibles, production
costs, credit card fees, warranty expense, occupancy, security, depreciation,
amortization and insurance costs that directly relate to providing
authentication and grading services.  Cost of revenues also includes
printing, other direct costs of the revenues generated by our other non-grading
related services and the costs of product revenues, which represent the carrying
value of the inventory of products (primarily collectible coins) that we sold
and any inventory related reserves, considered necessary.  In
addition, costs of revenues include stock-based compensation attributable to
employees whose compensation is classified as part of the costs of
authentication and grading revenues.




Set forth
below is information regarding our gross profits in the three and six months
ended December 31, 2008 and 2007.




Three
      Months Ended December 31,
                
                
                Six
      Months Ended December 31,2008
                
                
                2007
                
                
                2008
                
                
                2007Gross
                  Profit
                
                
                
                
                
                Gross
      Profit
                
                
                
                
                
                Gross
      Profit
                
                
                
                
                
                Gross
      ProfitAmount
                
                
                Margin
                
                
                Amount
                
                
                Margin
                
                
                Amounts
                
                
                Margin
                
                
                Amount
                
                
                MarginGross
      profit-products
                
                $
                (193,000
                )
                
                
                (189.2
                )%
                
                $
                23,000
                
                
                
                2.8
                %
                
                $
                (203,000
                )
                
                
                (197.1
                )%
                
                $
                85,000
                
                
                
                9.5
                %Gross
      profit-services
                
                
                3,602,000
                
                
                
                44.5
                %
                
                
                3,130,000
                
                
                
                34.9
                %
                
                
                8,148,000
                
                
                
                46.3
                %
                
                
                8,688,000
                
                
                
                44.5
                %Gross
      profit-totals
                
                $
                3,409,000
                
                
                
                41.5
                %
                
                $
                3,153,000
                
                
                
                32.2
                %
                
                $
                7,945,000
                
                
                
                44.9
                %
                
                $
                8,773,000
                
                
                
                42.9
                %





As
indicated in the above table, our total gross profit margin increased from 32.2%
and 42.9% in the three months and six months ended December 31, 2007,
respectively, to 41.5% and 44.9% in the three and six months ended December 31,
2008, respectively.  Excluding the gross profit on product revenues
for all periods, which are not an integral part of our core revenues generating
activities, and increased warranty costs of $822,000 recognized in the second
quarter of fiscal 2008 as a result of certain significant unexpected claims that
arose, the gross profit margin for grading and authentication and other related
services were 44.5% and 46.3% for the three and six months ended December 31,
2008, respectively, compared with 44.0% and 48.7% for the three and six months
ended December 31, 2007, respectively.  The gross profit margins for
the three and six months ended December 31, 2008 reflect cost reductions
implemented in certain of our businesses, primarily coins, in anticipation of
reduced revenues in the period, offset by a lower gross margin earned, primarily
in our sportscards and jewelry businesses, due to the lower revenues earned as a
result of the severe economic conditions that prevailed in the second fiscal
quarter of fiscal 2009.





Selling
and Marketing Expenses




Selling
and marketing expenses include advertising and promotions costs, trade-show
related expenses, customer service personnel costs, depreciation and third-party
consulting costs.  Set forth below is information regarding our
selling and marketing expenses in the three and six months ended December 31,
2008 and 2007.




Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007Selling and marketing
      expenses
                
                $
                1,298,000
                
                
                $
                1,780,000
                
                
                $
                2,953,000
                
                
                $
                3,708,000Percent of net
      revenue
                
                
                15.8
                %
                
                
                18.2
                %
                
                
                16.7
                %
                
                
                18.1
                %





The
decrease of $482,000 and $755,000 in selling and marketing expenses in the three
and six months ended December 31, 2008, compared to the three and six months
ended December 31, 2007, was primarily attributable to the transition in our
jewelry grading businesses from branding and awareness marketing programs to a
more unit-driven marketing approach in the three and six months ended December
31, 2008.  There were also reductions in sales and marketing cost in
our other businesses in the second quarter of fiscal 2009.





25


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, depreciation, amortization and other miscellaneous
expenses.





Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007General
      and administrative expenses
                
                $
                3,775,000
                
                
                $
                3,717,000
                
                
                $
                7,657,000
                
                
                $
                7,645,000Percent
      of net revenue
                
                
                46.0
                %
                
                
                37.9
                %
                
                
                43.3
                %
                
                
                37.4
                %





G&A
remained relatively unchanged for both the three and six months ended December
31, 2008, compared to the same periods of the prior year.  The Company
has implemented a number of cost reduction initiatives to reduce G&A
expenses, including staff reductions.  However, the positive effects
of these cost reductions on general and administrative expenses were
substantially offset by higher professional fees incurred in connection with
certain litigation matters, including the Miller lawsuit, and an increase in
rent expense as a result of the expansion of our colored gemstone
laboratory.





Amortization
of Intangible Assets





Amortization
of intangible assets is comprised of amortization of intangible assets that were
acquired through acquisitions and amortization of software development
costs.





Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007Amortization
      and intangibles
                
                $
                334,000
                
                
                $
                274,000
                
                
                $
                630,000
                
                
                $
                533,000Percent
      of net revenue
                
                
                4.0
                %
                
                
                2.8
                %
                
                
                3.5
                %
                
                
                2.6
                %





The
increases in the amortization expense in the three and six months ended December
31, 2008, compared to the same periods of the prior year, was primarily related
to the amortization of capitalized software costs incurred in prior fiscal
quarters, amortization of which commences as software development projects are
completed.  That increase was partially offset by a reduction in
amortization of intangible assets of our acquired jewelry businesses, resulting
from an impairment in the carrying values of certain of those intangible assets
that were recognized in the fourth quarter of fiscal 2008.





Impairment
Losses


Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007Impairment
      losses
                
                $
                7,695,000
                
                
                $
                -
                
                
                $
                7,695,000
                
                
                $
                1Percent
      of net revenue
                
                
                93.8
                %
                
                
                -
                
                
                
                43.5
                %
                
                
                -




The
impairment losses in the three and six months ended December 31, 2008, are due
to the impairment of our jewelry businesses.   The impairments
were the result of continued losses and the continued uncertainty of the timing
and magnitude of future revenues and related cash flows that are used in the
determination of fair value. Under circumstances in which the fair values of
long-lived assets and goodwill are not recoverable on the basis of future cash
flows, or other more applicable fair value methods, we record impairment losses
such that the carrying values of these assets reflect their current estimate of
fair values.  Impairment losses for these businesses had already been
recorded in the fourth quarter of fiscal 2008 (see further discussion under
Critical Accounting Policies and Estimates: Long-Lived Assets Other Than
Goodwill andGoodwill).




26


Stock-Based
Compensation





As
discussed in Note 1 to the Company’s Condensed Consolidated Financial
Statements, in accordance with SFAS 123(R) the Company recognized the following
stock-based compensation expenses in the periods presented below:





Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,Included In:
                
                2008
                
                
                2007
                
                
                2008
                
                
                2007Cost
      of revenues
                
                $
                86,000
                
                
                $
                55,000
                
                
                $
                158,000
                
                
                $
                110,000Selling
      and marketing expenses
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (7,000
                )General
      and administrative expenses
                
                
                178,000
                
                
                
                205,000
                
                
                
                374,000
                
                
                
                397,000$
                264,000
                
                
                $
                260,000
                
                
                $
                532,000
                
                
                $
                500,000




Stock-based
compensation expense is recorded over the vesting periods, or the service
periods, of stock-based compensation awards.  Stock-based compensation
expense in the three months ended December 31, 2008 reflects a lower forfeiture
rate on stock awards recognized in the fourth quarter of fiscal 2008 and the
granting of new restricted stock awards.




The total
amount of compensation cost related to non-vested awards not yet recognized at
December 31, 2008 was $799,000, which is expected to be recognized as
compensation expense through fiscal 2012, as set forth in the following table,
assuming the employees to whom those awards were granted continue to be employed
by us.   However, such amounts do not include any additional
stock awards that may be granted in the future or any changes that may occur in
the applicable forfeiture percentage.




Fiscal Year Ending June 30,
                      
                      Amount2009
                      
                      $
                      311,0002010
                      
                      
                      347,0002011
                      
                      
                      125,0002012
                      
                      
                      16,000$
                      799,000





Interest
Income, Net





Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007Interest
      Income, net
                
                $
                75,000
                
                
                $
                296,000
                
                
                $
                199,000
                
                
                $
                740,000





Interest
income is generated on cash and cash equivalent balances that we invest
primarily in highly-liquid money-market funds.  Interest income, net
was $75,000 and $199,000, respectively, in the three and six months ended
December 31, 2008, compared with $296,000 and $740,000, respectively, in the
three and six months ended December 31, 2007.  These decreases in
interest income were primarily attributable to (i) a shift, during the
three and six months ended December 31, 2008, of our cash and cash equivalent
balances into money-market investments that include only government guaranteed
securities which resulted in a lower yield on such investments; (ii) a
decrease in our average cash balances in the three and six months ended December
31, 2008, compared to the three and six months ended December 31, 2007, due to
our use of a portion of our available cash to fund payments of quarterly
dividends, repurchases of common stock under our stock buyback program and
capital expenditures, including capitalized software costs; and (iii) lower
prevailing interest rates due as a result of actions taken by the Federal
Reserve Board.





27


Income
Tax (Benefit) Expense





Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007Provision
      (benefit) for income tax
                
                $
                1,210,000
                
                
                $
                (925,000
                )
                
                $
                1,210,000
                
                
                $
                (945,000
                )




No income
tax benefit has been recognized for the three and six months ended December 31,
2008 due to the Company establishing a valuation allowance against the related
deferred tax asset because of uncertainty of realization.  As of June
30, 2008 and December 31, 2008, the Company has established a valuation
allowance against certain deferred tax assets due to the length of time and the
extent of taxable income required to fully realize those deferred tax
assets.  See further discussion under Critical Accounting Policies and
Estimates: Income Tax and
Deferred Tax Assets.  The effective tax rate was a provision of
11% and a benefit of 40% in the six months ended December 31, 2008 and 2007,
respectively.




Discontinued
Operations





Three
      Months Ended
                
                
                Six
      Months EndedDecember
      31,
                
                
                December
      31,2008
                
                
                2007
                
                
                2008
                
                
                2007Loss
      from discontinued operations,
      net of income taxes
                
                $
                (95,000
                )
                
                $
                (48,000
                )
                
                $
                (229,000
                )
                
                $
                (127,000
                )




The
results of our discontinued operations (net of taxes) were attributable to (i)
the Company’s currency division, which the Company decided to dispose of and
discontinue in the second quarter of fiscal 2009; and (ii) to the remaining
activities of the collectibles sales businesses that we disposed of in fiscal
2004.




Liquidity and Capital Resources




At
December 31, 2008, we had cash and cash equivalents of approximately
$19,607,000, as compared to cash and cash equivalents of $23,345,000 at June 30,
2008.




Historically,
we have relied on internally-generated funds, rather than borrowings, as our
primary source of funds to support our grading operations.




During
the six months ended December 31, 2008, our operating activities from continuing
operations used net cash of $1,728,000, reflecting the net loss for the period
as adjusted for non-cash expenses, and changes in the level of our current
assets and current liabilities, due to the timing of activities in the
period.




Net cash
generated by investing activities totaled $636,000 during the six months ended
December 31, 2008 and consisted primarily of $2,261,000 of net cash generated by
CFC notes receivable collections, substantially offset by capital expenditures
of $1,385,000 and capitalized software costs of $286,000.




In the
six months ended December 31, 2008, financing activities used net cash of
$2,413,000, related to the payment of cash dividends of $2,091,000 to
stockholders and the repurchase of $484,000 of common stock from the Company’s
CEO, partially offset by proceeds from the sale of common stock to two directors
of $161,000.




28


Outstanding
Financial Obligations




In
December 2008, the Company renegotiated and extended through March 2019, its
operating lease for its corporate headquarters in Santa Ana, CA.  The
amended lease will be effective February 2009.  As part of such
renegotiation, the Company will occupy less space and will receive a
contribution of up to $200,000 toward tenant improvements.  In
addition, the base rental rate per square foot was reduced in the earlier years
of the extended period.  In accordance with GAAP, the Company will
recognize the rent cost on a straight line basis over the rental
period.




We had
the following financial obligations under operating leases, net of sublease
income, at December 31, 2008:




Fiscal Year
                  
                  Amount2009
      (remaining 6 months)
                  
                  $
                  1,081,0002010
                  
                  
                  1,861,0002011
                  
                  
                  1,893,0002012
                  
                  
                  1,948,0002013
                  
                  
                  1,972,000Thereafter
                  
                  
                  10,149,000$
                  18,904,000




With the
exception of those obligations, we do not have any material financial
obligations, such as long-term debt or capital lease or purchase
obligations.




Dividends.  The
Company’s dividend policy, through September 26, 2008, called for the payment of
quarterly cash dividends of $0.25 per common share and, in accordance with that
policy, dividends in an aggregate amount of $2,091,000 were paid to stockholders
in the six months ended December 31, 2008.




On
September 26, 2008, the Board of Directors suspended the payment of future cash
dividends based on its determination that, due to market and economic
conditions, including the liquidity crisis in the United States, the prudent
course of action would be to preserve the Company's cash
resources.  At the same time, the Board of Directors declared a 10%
stock dividend on the Company's outstanding shares, which was distributed on
November 3, 2008 to all stockholders of record as of October 20,
2008.




Stock Buyback
Program.  At December 31, 2008, the Company continued to have
approximately $3.7 million remaining under its buyback program.  In
the three months ended December 31, 2008, the Company repurchased approximately
120,000 shares under this program due to an involuntary sale of shares by its
Chief Executive Officer, at a cost of approximately $484,000.  At the
same time two directors purchased an aggregate of 40,000 shares for an aggregate
amount of $161,000.




Future Uses and Sources of
Cash.  We plan to use our cash resources, consisting of
available cash and cash equivalent balances, together with internally generated
cash flows, to (i) expand our existing and implement new marketing
programs, (ii) introduce new services for our customers, (iii) acquire
or start-up other high-value collectibles or high-value asset authentication and
grading businesses; and (iv) fund working capital requirements, and for
other general corporate purposes.  Although we have no current plans
to do so, we also may seek borrowings, and we may issue additional shares of our
stock, to finance acquisitions of additional authentication or grading
businesses.  However, due to the economic recession and the credit
crisis in the United States, there is no assurance that we would be able to
obtain such borrowings or generate additional capital on terms acceptable to the
Company, if at all.




Although
at December 31, 2008 the Company had more than adequate cash resources to fund
its operations for the foreseeable future, we are continually reviewing all our
operations with the aim of achieving profitability in the fourth quarter of
fiscal 2009.






29




Risks and Uncertainties That Could Affect Our Future
Financial Performance




There are
a number of risks and uncertainties to which our business operations are subject
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 the present time.  Those risks and uncertainties include,
but are not limited to:




·
            a
      worsening of the current banking and credit crisis in the United States,
      or changes in conditions in the collectibles or high-value assets markets
      in which we operate, including a possible decline in the popularity of
      some high-value collectibles or assets, any of which could reduce the
      volume of authentication and grading submissions to us and, therefore, the
      grading fees we generate;




·
            a
      lack of diversity in our sources of revenues and, more particularly, our
      dependence on collectible coin authentication and grading for a
      significant percentage of our total revenues, which makes us more
      vulnerable to adverse changes in economic conditions affecting the
      collectible coin market, including volatility in the prices of gold and
      other precious metals or recessionary or other conditions that could lead
      to reduced coin and other collectibles submissions or trade show
      activities 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
      fact that for the fiscal year ended June 30, 2008 and the three months
      ended December 31, 2008, our six largest coin authentication and grading
      customers accounted, in the aggregate, for approximately 10% and 13% of
      our net revenues, respectively, which means that the loss of one or more
      of those customers, or a significant reduction in their grading
      submissions to us, could result in a decline in our revenues and adversely
      affecting our results of
operations;




·
            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 warranty claims will increase to a higher level than in the past
      such that we will have to recognize additional warranty accruals as a
      result of these claims and increase our ongoing warranty accrual rate to
      cover potential higher claims in the
future;




·
            the
      risk that newer collectibles service offerings and business initiatives,
      such as autograph, and stamp, and diamond and colored gemstone grading
      services, will not gain market acceptance or will otherwise be
      unsuccessful and will, as a result, increase our operating expenses and
      reduce our overall profitability or cause us to incur losses that could
      require us to write down the carrying value of their assets or possibly
      cause us to decide to discontinue one or more of those businesses, in
      which case we could incur expenses and losses on any disposition or
      winding down of those businesses.




·
            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 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; that we will not
      achieve adequate returns on the investments we may make in acquiring other
      or establishing any new businesses, which could increase our expenses and
      , therefore, reduce 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.






30




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 Item 1A of Part 1, entitled “Risk Factors” in our Annual Report on Form 10-K
for our fiscal year ended June 30, 2008, as filed with the SEC under the
Securities Exchange Act of 1934 and investors are urged to read that section of
that Annual Report.




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
our2008 Annual
Report on Form 10-K.




ITEM 2A.   QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK




Market
risk represents the risk of loss that may impact our financial position, results
of operations or cash flows 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, 2008, we had
approximately $19,607,000 in cash and cash equivalents, primarily invested in
low-yield money-market funds that invest in government-generated
securities.  Reductions in short-term interest rates could result in
reductions in the amount of that income.  However, the impact on our
operating results of such changes is not expected to be material.




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




ITEM 3.      CONTROLS AND
PROCEDURES





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




Our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures in effect as of December 31,
2008.  Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of December 31, 2008, 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, such as 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, 2008, that has materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.









31


PART
II – OTHER INFORMATION




ITEM 1A.    RISK FACTORS




There
were no material changes in the risk factors that were disclosed under the
caption “Risk Factors” in Part IA of our Annual Report on Form 10-K for our
fiscal year ended June 30, 2008, except as may otherwise be set forth above
under the caption “Risks and Uncertainties That Could Affect Our Future
Financial Performance” in Item 2 of Part I of this Report.





ITEM 2.     UNREGISTERED SALES OF
SECURITIES AND USE OF PROCEEDS




In
October 2008, the Company purchased approximately 120,000 shares of its common
stock from its CEO for $484,000, pursuant to its previously announced stock
buyback program. The Company sold, in a private transaction, 40,000 of those
shares to two directors at the same price per share.






ITEM 3.
            SUBMISSION
      ON MATTERS TO A VOTE OF THE SECURITY
HOLDERS




Our
Annual Meeting of Stockholders was held on December 2, 2008.  The
matters voted on by stockholders at that Meeting were (i) the election of eight
directors to serve for a term of one year and until their successors are
elected, and (ii) approval of an amendment of the Company’s Certificate of
Incorporation to reduce the authorized number of shares of the Company’s common
and preferred stock.




Election of Directors The eight
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.  Under the Company’s Bylaws, however, to be elected to the
Board, a candidate must receive a majority of the votes cast in the election of
directors.  All of those eight candidates received a majority of the
votes cast and, accordingly, 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 in the following table are the number of votes cast for the election
of and the number of votes withheld from each of those eight
candidates.  As the election was uncontested, there were no broker
non-votes.




Nominees
                      
                      Votes
      For
                      
                      
                      Percent
      of Shares Votes
                      
                      
                      Withheld
                      
                      
                      Percent
      of
                        Shares
      VotesA.
      Clinton Allen
                      
                      
                      4,958,420
                      
                      
                      
                      68.4
                      %
                      
                      
                      2,294,266
                      
                      
                      
                      31.6
                      %Deborah
      A. Farrington
                      
                      
                      5,019,827
                      
                      
                      
                      69.2
                      %
                      
                      
                      2,232,859
                      
                      
                      
                      30.8
                      %David
      G. Hall
                      
                      
                      5,941,395
                      
                      
                      
                      81.9
                      %
                      
                      
                      1,311,291
                      
                      
                      
                      18.1
                      %Michael
      R. Haynes
                      
                      
                      5,177,929
                      
                      
                      
                      71.4
                      %
                      
                      
                      2,074,757
                      
                      
                      
                      28.6
                      %Michael
      J. McConnell
                      
                      
                      6,362,009
                      
                      
                      
                      87.7
                      %
                      
                      
                      890,677
                      
                      
                      
                      12.3
                      %A.
      J. “Bert” Moyer
                      
                      
                      4,931,384
                      
                      
                      
                      68.0
                      %
                      
                      
                      2,321,302
                      
                      
                      
                      32.0
                      %Van
      D. Simmons
                      
                      
                      5,177,934
                      
                      
                      
                      71.4
                      %
                      
                      
                      2,074,752
                      
                      
                      
                      28.6
                      %Bruce
      A. Stevens
                      
                      
                      5,177,829
                      
                      
                      
                      71.4
                      %
                      
                      
                      2,074,857
                      
                      
                      
                      28.6
                      %









32




Approval of Amendment of the
Company’s Certificate of Incorporation.  The Board of Directors
approved and recommended that the stockholders vote at the Annual Meeting to
adopt an amendment to the Company’s Certificate of Incorporation to reduce
(i) the authorized number of shares of the Company’s common stock from
45 million to 20 million shares and (ii) the authorized number of
the Company’s preferred shares from 5 million to 3 million shares, in
order to reduce the Company’s Delaware corporate taxes by approximately $50,000
per year.  Adoption of this amendment by stockholders required the
affirmative vote of the holders of a majority of the outstanding shares. The
amendment was adopted by the following vote of the Company’s
stockholders:




Number
      of Shares
                    
                    
                    Percent
      of
                      Shares
      VotedVoted
      For
                    
                    
                    5,177,736
                    
                    
                    
                    62.5
                    %Voted
      Against
                    
                    
                    7,969
                    
                    
                    
                    0.1
                    %Abstaining
                    
                    
                    1,910
                    
                    
                    
                    -




There
were 2,065,071 broker non-votes with respect to this proposal.




ITEM
      6.
            EXHIBITS




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








33





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, 2009
              
              /s/
      MICHAEL R. HAYNESMichael
      R. HaynesChief
      Executive Officer











COLLECTORS
      UNIVERSE, INC.Date:           February
      9, 2009
              
              /s/
      JOSEPH J. WALLACEJoseph
      J. WallaceChief
      Financial Officer



























































S-1


INDEX TO EXHIBITS











Number
              DescriptionExhibit
      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