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Article by DailyStocks_admin    (01-29-09 09:01 AM)

Filed with the SEC from Jan 15 to Jan 21:

Collectors Universe (CLCT)
Shamrock Activist Value Fund sent a letter to CLCT's chairman, opposing the board's adoption of a so-called poison pill. Shamrock urged the board to immediately rescind its decision to adopt the poison pill and put the matter to a shareholder vote at the 2009 annual meeting. Shamrock holds 806,005 shares (8.85%).

BUSINESS OVERVIEW

Overview

We are a leading provider of value-added authentication, grading and information services to dealers and collectors of high-value coins, sportscards, autographs, stamps and vintage U.S. currency notes (which we will sometimes generally refer to as “collectibles”) and to wholesale and retail dealers of diamonds and colored gemstones.


Collectibles . The collectibles that we authenticate and grade have market values generally ranging from $100 to over $1 million, due principally to their rarity, age or association with famous individuals or historical events.

The authenticity and the state of preservation, or quality, of these collectibles are also important determinants of their value in the collectibles markets. For that reason, sellers, purchasers and collectors submit their high-value collectibles to us for:





Certifications by our independent experts of their authenticity; that is, confirmation that the collectibles are real and are what they have been represented to be; and





Evaluations of their physical condition and appearance and the assignment of a grade by our independent experts on the basis of uniform quality standards.

Once we have authenticated and assigned a grade to a collectible, we encapsulate it in a tamper-evident, clear plastic holder, or issue a certificate of authenticity, that (i) identifies the specific collectible, (ii) sets forth the quality grade we have assigned to it and (iii) bears one of our brand names and logos: “PCGS” for coins, “PSA” for sportscards, “PSA/DNA” for autographs and memorabilia, “PSE” for stamps and “PCGS Currency” for U.S. vintage currency notes 1 . Additionally, we warrant our certification of authenticity and the grade that we assign to the coins, sportscards, currency and stamps bearing our brands. We do not warrant our authenticity determinations for autographs.

Diamonds and Colored Gemstones . In November 2005, we began offering diamond authentication and grading services to wholesale and retail dealers of diamonds as a result of our acquisition of Gem Certification & Appraisal Lab (GCAL), an independent diamond certification and grading laboratory. In August 2006, we began offering identification, authentication and grading services to wholesale and retail dealers of high value colored gemstones, including emeralds, rubies and sapphires, as a result of our acquisition of American Gemological Laboratories (AGL), an independent colored gemstone certification and grading laboratory.

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Collectors Universe, PCGS, Professional Sports Authenticator and PSA/DNA, Set Registry, CU3000 First Strike, and each of the logos associated with those names, are registered service or trade marks of the Company.

The market values of the diamonds and colored gemstones that we grade generally range from approximately $200 to over $1 million, depending, in the case of diamonds, primarily on their weight, color and clarity. The market values of colored gemstones depend primarily on their color, tone, and clarity and the presence of and type of enhancements, which are made to almost all colored gemstones to improve their color or clarity or both. The market value of a colored gemstone also can be affected by its country of origin.

Our customers, who usually consist of wholesale and retail dealers and auction companies, submit diamonds and colored gemstones to us for:

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Confirmations, by our independent experts, that the diamonds or colored gemstones are, in fact, natural (as opposed to synthetically manufactured); and

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Evaluations of their physical condition and appearance and the assignment of a grade by our independent experts on the basis of uniform quality standards that, in the case of diamonds, relate to their color and clarity and, in the case of colored gemstones relate to color, tone, clarity, enhancements and, in some cases, country of origin.

Our Diamond Grading and Certification Services . Upon completion of the grading process for diamonds, a GCAL certificate is issued that sets forth the weight, cut, color and clarity grades assigned to the diamond by GCAL, along with other information that is measured as part of the grading process, such as the dimensions of the diamond. GCAL also includes a direct light performance analysis of each diamond utilizing a proprietary process that measures, in a digital image, the number of pixels of light that pass through a diamond, ranking the light performance higher for more light and lower for less light. A similar process measures the symmetry of the cut of the diamond, another feature that can have a direct impact on the brilliance and reflectivity of a diamond. A graphic representation of the brilliance and symmetry is included on the certificate. Additionally, using a patented technology for non-invasive diamond identification that we acquired in December 2005, we digitally capture and record the unique refractive light pattern of the diamond (which we refer to as a “Gemprint”), that we store in our computer database, cross-indexed to the certificate number issued with the diamond 2 . This “Gemprint” process enables us to match GCAL graded diamonds, on a one-to-one basis, with their GCAL certificates, thereby providing an additional measure of protection against misrepresentations of diamond quality that can occur by, for example, switching a diamond grading certificate issued for a higher quality diamond to a lower quality diamond. GCAL provides a limited warranty with respect to the color and clarity grades that GCAL assigns to the diamonds it certifies.

We believe that Gemprint’s process provided by GCAL is the only non-intrusive diamond identification service offered by any diamond certification company and that no diamond certification company, except GCAL, warrants the color and clarity grades it assigns to the diamonds they certify.

In fiscal 2008, we began offering some of our services separately that were previously only available as a part of the bundled services on a diamond grading certificate. These separately offered services, include the issuance of (i) a direct light performance report, which provides information on the optical brilliance and optical symmetry of a diamond that can assist a retailer in demonstrating one of the most important points of differentiation between two or more diamonds; and (ii) a Diamond ID report that provides a “gemprint” of the diamond and registration of that gemprint in our global database to assist in positive identification of the diamond in the event it is lost or stolen or to confirm its authenticity in the event the owner later seeks to sell it.

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GCAL, Gemprint and AGL and each of the logos associated with their respective names, are registered service marks of the Company.

Additionally, in fiscal 2008, we launched the Certified Diamond Exchange (CDE), an Internet based business-to-business exchange exclusively for GCAL certified diamonds. The buyers and sellers on CDE register with us, which entitles them, without charge, to buy or sell GCAL certified diamonds on the exchange. The buyers on CDE are generally retailers and jewelry manufacturers. Wholesale sellers have presented for purchase millions of dollars of GCAL certified diamonds and will generally deliver the diamond via overnight delivery directly to the buyer’s store or facility. There are over 30,000 retailers in the United States registered with the Jewelers Board of Trade and since inception in November 2007, CDE has registered over 2,000 buyers. The sellers on CDE are, for the most part, diamond dealers and cutter/polishers who offer diamonds on the exchange that are GCAL certified diamonds. CDE increases the availability and distribution of GCAL certified diamonds and provides an incentive for diamond sellers to obtain GCAL diamond certifications on diamonds in order to place those diamonds on the CDE for sale directly to thousands of retailers in the United States who have registered to purchase GCAL certified diamonds on the CDE.

Our Colored Gemstone Grading and Certification Services . AGL offers different levels of service to its customers:



Its “Prestige” Service, which is designed for grading and certification of colored gemstones whose weight and market value justify the costs of a higher level and more comprehensive suite of grading and certification services; and



Its “Fast Track” Service, which is designed for lower weight and less valuable colored gemstones.

AGL’s Prestige Service provides the customer with a comprehensive quality analysis and report that sets forth the identification, weight, cut, color, tone and clarity grades assigned to the gemstone, along with the description of the quality enhancements that had been made to the gemstone and, in some cases, its country of origin. A high resolution color image of the colored gemstone is included on the certificate for identification purposes.

AGL’s Fast Track Service allows the customer to select from among a variety of grading services that includes, for a minimum fee, information relating to the identification, weight and cut of the gemstone, which is set forth on a small plastic card, similar in size and materials to a credit card. Fast Track customers also may order one or more supplemental services that will provide them with information regarding the color, tone, clarity and/or country of origin of the gemstone, for additional fees that will vary based on the extensiveness of the services ordered.

AGL warrants the identification information with respect to the colored gemstones it certifies, but does not warrant information relating to the enhancement, color, clarity or country of origin of the colored gemstone.

In fiscal 2008, we developed the Colored Gemstone Exchange (CGE), an Internet based business-to-business exchange exclusively for gemstones carrying AGL documents. The buyers and sellers on CGE register with us, which entitles them, without charge, to buy and sell AGL certified colored gemstones from the exchange. The buyers on CGE are generally retailers and jewelry manufacturers. Gemstone dealers list for purchase on the CGE, gemstones with AGL documentation as to their identification, weight, shape and enhancements. Of key importance in this market is the inclusion of color images on the exchange for each of the gemstones, since the color of a colored gemstone is perhaps the most important feature. Generally, in the current marketplace, there are no methods for a buyer to know the color of a gemstone without physical examination as imaging is not widely utilized. Because each gemstone has an AGL document with an image, CGE electronically shares the digital image from the AGL document database to display an attractive color image. On CGE, buyers have the opportunity to purchase these gemstones directly from wholesale sellers who will generally deliver the gemstone via overnight delivery directly to the buyer’s store or facility. The sellers of AGL certified gemstones on the CGE are primarily gemstone dealers and cutter/polishers. We believe that CGE increases the availability and distribution of many of the smaller colored gemstones, valued from $200 to approximately $20,000, that carry the new AGL Fast Track documentation and that the increased liquidity offered by CGE creates an incentive for gemstone sellers to obtain AGL Fast Track documentation for these smaller and less valuable colored gemstones..

Benefits Provided by our Authentication and Grading Services . We believe that our authentication and grading services increase the liquidity and marketability and, therefore, add to the value, of the collectibles, diamonds and colored gemstones that we authenticate and grade. Our services provide sellers, purchasers and collectors with (i) the confidence of knowing that the collectibles, diamonds or colored gemstones they are buying or selling are authentic or natural, as the case may be; (ii) information, in the form of objective and uniform measures of quality, that enable sellers, purchasers and collectors to assess the value of those collectibles, diamonds or colored gemstones; and (iii) information, based on analysis of the colored gemstone and technological comparisons to known origin specimens, relating to the country of origin of a colored gemstone. Armed with this information, a prospective buyer who might otherwise be reluctant to purchase a high-priced collectible, diamond or colored gemstone, is more informed and more confident about, and more willing to make such a purchase, particularly “sight-unseen,” on Internet auction sites such as those operated by eBay and Blue Nile and even in higher value assets as may be offered by Sotheby’s. We also believe that dealers who sell collectibles, diamonds or colored gemstones that have been authenticated and graded by us are more readily able to sell, and are more likely to obtain higher prices for, those items than if they had not been authenticated and graded by us, because our services give prospective buyers the confidence to purchases those collectible, diamonds or colored gemstones from those dealers.

We originated the standards and methodologies we use for authenticating and grading coins, sportscards, autographs and stamps. Those standards and methodologies have become generally accepted in the collectible coin, sportscard and autograph markets. At the time we launched our independent third party stamp grading service, the concept of grading the quality of stamps, in addition to authenticating them, was relatively novel. Since that time, our stamp grading standards have become increasingly accepted, especially for higher value stamps.

The standards and methodologies we use in grading diamonds are generally accepted in the diamond market. Those standards and methodologies were developed by the Gemological Institute of America, a non-profit educational corporation. However, we believe that the diamond grading services we offer differ from those that are available from competing diamond grading services primarily in terms of the rigorousness and consistency with which we apply those grading standards. For that reason, among others, Blue Nile, which is the largest seller of diamonds on the Internet, has chosen GCAL to certify all of Blue Nile’s Signature Collection which, according to Blue Nile, includes the world's most brilliant round diamonds, as well as the world's first and only princess, emerald, and Asscher diamonds, cut to Blue Nile’s finest ideal standards.

AGL has developed certain proprietary standards for the colored gemstone market relating to color, tone and clarity of colored gemstones and descriptive terms used in the disclosure of colored gemstone enhancements.

We also have developed some of the leading brands in the collectibles, diamonds and colored gemstones markets in which we conduct our business:

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“PCGS” (Professional Coin Grading Service), which is the brand name for our independent coin authentication and grading service;

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“PSA” (Professional Sports Authenticator), which is the brand name for our independent sports and trading cards authentication and grading service;

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“PSA/DNA” (PSA/DNA Authentication Services), which is the brand name for our independent authentication and grading service for vintage autographs and memorabilia;

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“PSE” (Professional Stamp Experts), which is the brand name for our independent stamp authentication and grading service;

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“PCGS Currency” the brand name for our currency authentication and grading service;

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“GCAL” (Gem Certification & Assurance Lab), which is the brand name for our independent diamond authentication and grading service; and

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“AGL” (American Gemological Laboratories), which is the brand name of our independent third party colored gemstone grading business.

PCGS and PSA are among the leading independent authentication and grading services in the collectible coin and sportscard markets in the United States. PSA/DNA and PSE also are among the leading independent authentication services in their respective markets. Currency authentication and grading are new to the currency market and PCGS Currency is one of the leading independent authentication and grading services in the currency market. GCAL is among the top quality independent authentication and grading services in the diamond market and we believe it is the only diamond certification service that offers a non-invasive and unchangeable diamond identification method that makes it possible to detect the switching or alteration of diamond grading certificates and the only service that offers a warranty with respect to the quality grades relating to the diamond’s color and clarity. AGL is one of the world leaders in colored gemstone authentication, grading, enhancement disclosure and for the most valuable colored gemstones, identification of the country of origin.

We began offering our PCGS coin authentication and grading services in 1986 and, from inception through fiscal year ended June 30, 2008, we had authenticated and graded more than 15 million coins. In 1991, we launched our PSA sportscard authentication and grading service and, through June 30, 2008, had authenticated and graded over 11 million sportscards. In 1999, we launched our PSA/DNA vintage autograph authentication business and in June 2004 we extended that business by introducing vintage autograph grading services to dealers and collectors of autographed sports memorabilia. We started our PSE stamp authentication and grading service in 2000. We launched PCGS Currency as an extension of the PCGS brand in March 2005. In the second quarter of fiscal 2006, we acquired GCAL and the Gemprint technology. We acquired AGL in the first quarter of fiscal 2007.

Industry Background

The primary determinants of the prices of, and the willingness of sellers, purchasers and collectors to purchase, high-value or high-priced collectibles, diamonds, colored gemstones or other high-value assets are their authenticity and quality. The authenticity of a collectible relates not only to the genuineness of the collectible, but also to the absence of any alterations or repairs that may have been made to hide damage or to restore the item. The authenticity of a diamond or colored gemstone relates to its formation in a natural method and mined from the earth as opposed to laboratory grown or synthetically produced, and in the case of colored gemstones, the country of origin. The quality of a collectible relates to its state of preservation relative to its original state of manufacture or creation. The quality of a diamond is largely a function of its color and clarity. The quality of a gemstone relates to color, tone, clarity, enhancements and in some cases, the country of origin. With regard to value, confirmation of authenticity generally is required before a buyer is willing to proceed with a purchase of a high-priced collectible, diamond or colored gemstone. Quality directly affects value and price, usually on an exponential basis, with higher quality collectibles, diamonds and colored gemstones, generally attracting dramatically higher prices than those of lower quality. Even a relatively modest difference in quality can translate into a significant difference in perceived value and, therefore, in price. For example, a 1952 Mickey Mantle baseball card that received a PSA grade from us of 9 on our PSA grading scale of 1-to-10 was sold at public auction in 2006 for $282,588. By comparison, a similar 1952 Mickey Mantle baseball card that received a PSA grade of 8 was sold at public auction also in 2006 for $72,057.

Although, in the case of diamonds and colored gemstones, the weight of the stone (as measured by mechanical devices) has a significant impact on value, quality ratings also have a material impact on value. A round brilliant cut two carat natural diamond with a GCAL grade D color (which is the most desirable blue-white color on the scale from D to the yellow tint of a P color) and a clarity grade of flawless or “FL” (which indicates that the diamond has no imperfections or inclusions) has an approximate wholesale market value ranging from $75,600 to $79,800. By comparison, a similar cut two carat diamond with a GCAL grade I color and a clarity grade of SI2 (which is in the midpoint range of clarity) has an approximate wholesale market value ranging from $13,200 to $13,940. In the same manner, a rectangular cut two carat emerald with AGL color grade 3, a tone of 70 (a very attractive and intense green) and a clarity grade of “LI” (or lightly included) has an approximate market value ranging from $18,000 to $20,250. By comparison, a similar cut emerald with AGL color grade 6, a tone of 50 (an average color and intensity of green) and a clarity grade of “MI2” (moderately included) has an approximate market value ranging from $3,600 to $4,800. The country of origin, of a colored gemstone also can affect its market value. For example, the same oval cut two carat Blue Sapphire with an AGL color grade of 3, a tone of 70 (rich and deep blue) and a clarity grade of “LI” has an approximate market value ranging from $2,800 to $3,400 if its country of origin is Burma, but would have an approximate market value ranging from $20,000 to $22,000 if its country of origin is Kashmir.

Until the advent of independent third party authentication and grading, most prospective buyers, including experienced collectibles, diamond and colored gemstone dealers and retailers, insisted on physically examining high-priced collectibles, diamonds and colored gemstones before consummating transactions. However, unlike professionals in the trade, most purchasers and collectors lacked the experience and knowledge needed to determine, with confidence, the authenticity or the quality, and hence the value, of high-priced collectibles, diamonds and colored gemstones, even when they had the opportunity to examine them physically. As a result, purchasers and collectors had to rely on representations made by sellers regarding authenticity and quality. For these reasons, “buyer beware” characterized the high-value collectibles, diamond and colored gemstone markets, and “sight-unseen” markets for rare coins, diamonds, colored gemstones and other high-value collectibles were practically non-existent.

High-value collectibles have been traditionally marketed at retail by dealers through direct mail, catalogues, price lists and advertisements in trade publications, and sold and purchased by them at collectibles shows, auction houses and local dealer shops. Diamonds and colored gemstones have been marketed at retail through tens of thousands of retail jewelry stores or in departments of large general retail stores. These markets were highly inefficient because:

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they were fragmented and localized, which limited both the variety of available collectibles, diamonds and colored gemstones and the number of potential buyers;

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transaction costs were often relatively high due to the number of intermediaries involved;

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buyers usually lacked the information needed to determine the authenticity and quality and, hence the value, of the collectibles, diamonds and colored gemstones being sold; and

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buyers and sellers were vulnerable to fraudulent practices because they had to rely on the dealers or other sellers in the often long distribution channel for opinions or representations as to authenticity and quality.

Coin Market . In an effort to overcome some of these inefficiencies, approximately 30 years ago, professional coin dealers began using a numerical grading scale for grading coins. That scale ranged from 1 to 70, with higher numbers denoting a higher quality. Previously, professional dealers used descriptive terms, such as “Fair,” “Fine” and “Uncirculated,” to characterize the quality of the coins they sold, a practice that continued after the development of the numeric grading system. However, whether using a numeric or a descriptive system, grading standards varied significantly from dealer to dealer, depending on a dealer’s subjective criteria of quality. Moreover, dealers were hardly disinterested or independent since, as the sellers or buyers of the coins they were grading, they stood to benefit financially from the assignment of a particular grade.

Sportscard Market . Misrepresentations of authenticity and quality also operated as a barrier to the liquidity and growth of the collectibles market for sportscards. Even experienced and knowledgeable dealers insisted on physically examining purportedly rare and higher priced sportscards. Most collectors lacked the knowledge needed to purchase collectible sportscards with confidence, even when they had physically examined them. Sportscard dealers eventually developed a rudimentary adjectival system to provide measures of quality, using descriptive terms such as “Poor,” “Very Good,” “Mint” and “Gem Mint.” These measures of quality were assigned on the basis of such characteristics as the centering of the image on the card and the presence or absence of bent or damaged corners, scratches and color imperfections. However, as was the case with coins, grading standards varied significantly from dealer to dealer, depending on a dealer’s subjective criteria of quality. Additionally, since the dealers who bought and sold sportscards were the ones that assigned these grades, collectors remained vulnerable to fraudulent practices.

Autographed Memorabilia Market . The market for autographed sports, entertainment and historical memorabilia has been plagued by a high incidence of forgeries and misrepresentations of authenticity. For example, Operation Bullpen, initiated by the FBI and other law enforcement agencies beginning in 1997, has uncovered a high volume of outright forgeries of signatures and widespread misrepresentations as to the genuineness of sports memorabilia. We believe that the high incidence of such fraudulent activities was due, in large part, to a dearth of independent third party memorabilia authentication services and an absence of systematic methodologies and specimen data needed for verification of authenticity.

Stamp Market . Stamp dealers developed an adjectival system, similar to the one developed for sportscards, by which they valued and priced stamps based primarily on the centering of the stamp image on the stamp paper background, ignoring other faults in the stamp. As a result, experienced and knowledgeable dealers insisted on physically examining purportedly rare and higher priced stamps before purchasing them. Additionally, most collectors lacked the knowledge and experience needed to purchase higher priced stamps with confidence. Consequently, as was the case with coins and sportscards, collectors were forced to depend on representations of authenticity and quality from the very dealers from whom they purchased or to whom they sold stamps. However, prior to our entry into the market, independent third-party stamp grading was non-existent.

Currency Market . There has been some grading of currency in the past, but none of the grading businesses have been successful as the market was not developed, such that there was not substantial demand for grading services. In addition, the grading businesses were not third-party independent grading businesses, as they were operated and owned by currency dealers, who also bought and sold the same materials that they graded; thereby, creating potential conflicts of interest. PCGS Currency is an independent third-party grading service that does not have such conflicts of interest. Our currency grading utilizes a numerical 70 – point system to determine the overall grade or condition of a note.

Diamond Market . Approximately 70 years ago, the Gemological Institute of America (“GIA”), a non-profit educational corporation, developed a system for classifying and grading diamonds which consisted of the “4C’s” of carat, cut, color and clarity. The system provided terminology for identifying (1) the weight of a diamond, denominated as “carats,” (2) the shape and proportion of the diamond with a cut analysis; (3) the relative color of the diamond using an alphabetic scale from a high quality color of “D” to the lowest quality color of “P”; and (4) the relative clarity of, or imperfections in the diamond, using descriptive terms on a scale from “Flawless” (“FL”) to “Very Slightly Included” (“VSI”) to “Slightly Included” (“SI”) to “Included” (I”). In its gemologist educational programs, the GIA taught this grading system as a required part of the curriculum. Notwithstanding the widespread use of common terminology, these measures of quality can be subjectively and inconsistently applied.

Colored Gemstone Market. Although the GIA has held classes on the identification, authentication and grading of colored gemstones for approximately 30 years, no significant standard or system of color, tone and clarity grading has been in widespread use in the marketplace. In addition, the availability of sample gemstones for technical trace element analysis needed to determine country of origin was very limited, in part because of the limitation of the number of trusted samples from various regions of the world and in part due to the limitations of the technology to examine and classify the samples. As a result, buyers were largely dependent on subjective assessments of quality and country of origin from the dealers from whom they purchased colored gemstones, and no sight-unseen market for colored gemstones existed.

These conditions created a need and the demand for independent authentication and grading services from which sellers, purchasers and collectors could obtain:

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determinations, from independent, third party experts, of the authenticity of the high-value collectibles, diamonds and colored gemstones that sellers, purchasers and collectors purchased, particularly “sight-unseen” or over the Internet;

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representations of quality based on uniform standards applied by independent, third party experts; and

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authoritative information, compiled by a credible third party, to help purchasers and collectors understand the factors that affect an item’s perceived value and price, including:



its rarity;



its quality or grade; and



its historical and recent selling prices.

The Impact of eBay and other e-Commerce Websites on the Collectibles, Diamond and Colored Gemstone Markets . The advent of the Internet and, in particular, eBay’s development of an Internet or “virtual” marketplace and other Internet-selling websites such as Blue Nile and Amazon, have overcome many of the inefficiencies that had characterized the traditional collectibles, diamond and colored gemstone markets. eBay and other online marketplaces (i) offer enhanced interaction between and greater convenience for sellers and buyers of high-value collectibles, diamonds and colored gemstones; (ii) eliminates or reduces the involvement of dealers and other “middlemen;” (iii) reduce transaction costs; (iv) allow trading at all hours; and (v) continually provide updated information. However, Internet commerce still raises, and has even heightened, concerns about the authenticity and quality of the collectibles, diamonds and colored gemstones that are listed for sale on the Internet. Buyers have no ability to physically examine them, and no means to confirm the identity or the credibility of the dealers or sellers on the Internet. As a result, we believe that the growth of Internet selling websites, such as eBay, Blue Nile and Amazon, has increased awareness of the importance of, and the demand for, independent third party authentication and grading services of the type we provide. Our services enable purchasers and collectors to use the Internet to purchase collectibles, diamonds and colored gemstones “sight-unseen,” with the confidence of knowing that they are authentic and are of the quality represented by sellers. The importance and value of our services to purchasers and collectors, we believe, are demonstrated by:

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eBay’s inclusion, on its collectibles websites, of information that identifies, and encourages visitors to use, our independent third party authentication and grading services, as well as similar services offered by some of our competitors; and

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Blue Nile’s use of GCAL’s services to certify all of the diamonds comprising its Signature Collection, which are the highest quality diamonds that Blue Nile sells, even when those diamonds have already been certified by other well-known diamond certification services.

Our Services

PCGS Coin Authentication and Grading Services . Recognizing the need for third party authentication and grading services, we launched Professional Coin Grading Service in 1986. PCGS employs expert coin graders, who are independent of coin buyers and sellers, to provide impartial authentication and grading services. Currently, we employ 20 experts who have an average of 27 years of experience in the collectible coin market. We also established uniform standards of quality measured against an actual “benchmark” set of coins kept at our offices. We place each coin that we authenticate and grade in a tamper-evident, clear plastic holder that bears our logo, so that any prospective buyer will know that it is a PCGS authenticated and graded coin. We also provide a warranty as to the accuracy of our coin authentication and grading.

By providing an independent assessment by coin experts of the authenticity and quality of coins, we believe that PCGS has increased the liquidity of the trading market for collectible coins. Following the introduction of our independent, third party authentication and grading service, buyer confidence, even between dealers, increased to such a degree that coins authenticated and graded by PCGS were able to be traded “sight-unseen.” As a result, PCGS facilitated the development, in 1990, of a dealer market, known as the “Certified Coin Exchange,” on which coin dealers traded rare coins “sight-unseen,” over a private satellite network, which now operates on the Internet.

In addition, we began to provide a range of authoritative content on coin collecting to inform and communicate with the collector community, including guides and reports that track the trading prices and the rarity of PCGS-graded coins.

More recently, our coin authentication and grading services have facilitated the development of a growing Internet or “virtual” marketplace for collectible coins. A prospective buyer, who might otherwise be reluctant to purchase a high-priced coin listed on the Internet, is able to rely on a PCGS certification in deciding whether or not to bid and in determining the amount to offer for the coin. As a result, to enhance the marketability of higher priced coins, many sellers submit their coins to PCGS for authentication and grading. That enables the sellers to include, in their Internet sales listings, digital images of the coins in their tamper-evident, clear plastic holders, which identify the coins as having been authenticated and graded by PCGS as well as their PCGS-assigned grades.

PSA Sportscard Authentication and Grading Services . Leveraging the credibility and using the methodologies that we had established with PCGS in the coin market, in 1991 we launched Professional Sports Authenticator (PSA), which instituted a similar authentication and grading system for sportscards. Our independent sportscard experts certify the authenticity of and assign a grade to sportscards using a numeric system with a scale from 1-to-10 that we developed, together with an adjectival system to describe their condition. At June 30, 2008, we employed 15 experts who have an average of 24 years of experience in the collectible sportscard market. We believe that our authentication and grading services have removed barriers that were created by the historical seller-biased grading process and, thereby, have improved the overall marketability of and facilitated commerce in sportscards, including over the Internet and at telephonic sports memorabilia auctions.

PSA/DNA Autograph Authentication and Grading Services . In 1999, we launched our vintage autograph authentication business, initially offering authentication services for “vintage” sports autographs and memorabilia that were autographed or signed prior to the time they were presented to us for authentication. The vintage autograph authentication business is distinctly different from the “signed-in-the-presence” authentication of autographs where the “authenticator” is present and witnesses the actual signing. Vintage autograph authentication can involve the rendering of an opinion of authenticity by an industry expert based on (i) an analysis of the signed object, such as the signed document or autographed item of memorabilia, to confirm its consistency with similar materials or items that existed during the signer’s lifetime; (ii) a comparison of the signature submitted for authentication with exemplars; and (iii) a handwriting analysis. As of June 30, 2008, we employed 3 autograph experts with an average of 23 years of experience in the autograph memorabilia market, as well as 3 consultants on a contract basis.

In June 2004, we also began offering grading services for autographs, beginning with baseballs containing a single signature or autograph. We use uniform grading standards that we have developed and a numeric scale of 1-to-10, with the highest number representing “Gem Mint” condition or top quality. We assign grades to the collectibles based on the physical condition or state of preservation of the autograph. Autograph grading is in its infancy, and we cannot predict whether it will gain market acceptance.

PSE Stamp Authentication and Grading Services . In January 2000, we launched our Professional Stamp Experts (PSE) as an independent, third party stamp authentication and grading service. We use both an adjectival system and a numeric scale from 1-to-100 to grade stamps. We assign grades based on the centering of the stamp image on the stamp paper background and the absence or presence of other faults on the stamp. There have been viable third party stamp authentication services in operation for several decades, and stamp dealers and collectors had been using a subjective grading system based primarily on the centering of the stamp image on the stamp paper background, ignoring other faults. However, prior to our entry into the stamp market, independent third party stamp grading was non-existent. As a result, we encountered some resistance to this concept in the stamp collectibles market, which is steeped in tradition and slow to change, as we did from coin dealers when we launched PCGS and from sportscard dealers when we launched PSA. In October 2005, the Philatelic Foundation based in New York began using PSE’s numerical grading system to assign grades to stamps. In the spring of 2006, Scott Publishing Company, the long-time publisher of the Scott Catalogs also adopted and incorporated PSE’s numerical grading system into their bi-annual valuing supplement. These two events have established PSE’s numerical grading scale, and we believe has facilitated the continuing spread of third-party stamp authentication and grading, throughout the philatelic industry. As of June 30, 2008, we employed 6 stamp graders, and use another expert on a part-time basis. Those graders have an average of 33 years of experience in the collectible stamp market.

Vintage U.S. Paper Currency Authentication and Grading . In the third quarter of fiscal 2005, we began marketing a U.S. paper currency authentication and grading service, which we decided to brand as “PCGS Currency” because many of the dealers of currency notes are familiar with and have used PCGS’ coin authentication and grading service. As of June 30, 2008, we employed 3 currency experts with 16 years of experience and use the services of 2 other experts on a contract basis.

GCAL Diamond Authentication and Grading Services . In November 2005, we acquired Gem Certification & Assurance Lab (GCAL), which is as an independent, third party diamond authentication and grading service that has been in the business of diamond authentication and grading since 2001. We use the internationally recognized system for grading diamonds, commonly referred to as the “4C’s”. In December 2005, we acquired the assets of Gemprint Corporation, which consisted primarily of a patented non-invasive diamond identification technology that enables us to create and record the digital image of the unique refractive light pattern or “fingerprint” (which we refer to as the “Gemprint”) of the diamonds that GCAL grades. We store the digital image of the “Gemprint” in our database, cross-indexed to the diamond’s grading certificate that is issued by GCAL, which is assigned its own number for recordkeeping and identification purposes. This “Gemprint” process enables us to match GCAL graded diamonds, on a one-to-one basis, with their GCAL certificates, thereby providing an additional measure of protection against misrepresentations of diamond quality that can occur by, for example, altering the grading certificate or switching a diamond grading certificate issued for a higher quality diamond to a lower quality diamond.

There are more than ten diamond grading services in operation. Four of those existing grading services, including GIA, have been in operation for more than 20 years and are larger and better known than GCAL. However, unlike GCAL, almost all of the key competitors are owned, managed or governed by diamond dealers that are in the business of selling diamonds, including those graded by such grading services. As a result, we believe that those grading services potentially have inherent conflicts of interest when grading diamonds submitted by those dealers and, therefore, do not provide truly independent third party grading services. Additionally, unlike GCAL, none of these existing services has any non-intrusive process to secure the identification of diamonds that they have certified in order to make it possible to detect misrepresentations of the quality which can occur by altering the information on or switching a grading certificate. As a result, we believe that GCAL’s greater independence and its Gemprint diamond identification technology, along with the warranty of the quality determinations of color and clarity that CGAL issues provide it with a competitive advantage that we are promoting as a means of increasing GCAL’s share of the diamond grading market. Currently, we employ 8 diamond graders who have an average of 21 years of diamond grading experience.

MANAGEMENT DISCUSSION FROM LATEST 10K

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Selected Consolidated Financial Data” and our Consolidated Financial Statements and related notes, included elsewhere in Part II of this Annual Report. This discussion also should be read in conjunction with the information in Item IA of Part I of this Report, entitled “Risk Factors,” which contains information about certain risks and uncertainties that can affect our business and our financial performance in the future.

Introduction and Overview

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, stamps, and vintage U.S. currency notes 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 generate revenues principally from the fees paid for our authentication and grading services. To a much lesser extent, we generate revenues from: the sale of advertising on our websites; the sale of printed publications and collectibles price guides and advertising in such publications; the sale of Collectors Club membership, subscriptions to our CCE dealer-to-dealer Internet bid-ask market; for certified coins product revenues that we generate from sales primarily of coins that we purchase under our warranty policy, and revenues that we generate from the collectibles trade show conventions that we conduct.

Recent Business Acquisitions . On July 14, 2005 we purchased, for an aggregate purchase price of $515,000, substantially all the assets of CoinFacts.com, which operated an Internet website on which it published detailed proprietary information and history on U.S. Coins.

On September 2, 2005 we acquired, for an aggregate purchase price of $2,377,000, the common stock of Certified Coin Exchange (“CCE”), which operates a subscription-based dealer-to-dealer Internet bid-ask market for third party certified coins.

On November 8, 2005 we acquired Gem Certification & Appraisal Lab (“GCAL”), a gemological certification and grading laboratory. As part of that transaction, we also acquired Diamond Profile Laboratory, Inc. (“DPL”), a scientific diamond light performance analysis laboratory, and all publishing and other rights to “Palmieri’s Market Monitor,” an educational and informative industry publication. We paid an aggregate acquisition price of $3,268,000 in cash for GCAL, DPL and the publishing and other rights to Palmieri’s Market Monitor.

On December 22, 2005 we acquired the business and substantially all of the assets of Gemprint Corporation (“Gemprint”), consisting primarily of a patented technology for non-invasive diamond identification which Gemprint uses to digitally capture the unique refractive light pattern (or “Gemprint”) of each diamond that is processed with that technology. We paid an aggregate purchase price for Gemprint’s business and assets of $8,583,000 in cash, assumed certain pre-acquisition liabilities and lease commitments, and agreed to pay additional contingent purchase price of $1 for each diamond that we register using the Gemprint process in excess of 100,000 registrations per year during the five year period ending December 22, 2010.

Effective July 1, 2006 we acquired, for an aggregate purchase price of $2,475,000 in cash, all of the outstanding ownership interests of Expos Unlimited LLC (“Expos”), a California limited liability company engaged in the business of owning and conducting collectibles trade shows and conventions. Depending on the future revenue performance of Expos, we may become obligated to make contingent payments to the former owners of Expos up to an aggregate of $750,000 in July 2011. Expos owns and operates the Long Beach Coin, Stamp & Collectibles Expo (“Long Beach”) and the Santa Clara Coin, Stamp & Collectibles Expo (“Santa Clara”), which comprise, in total, five trade shows that are held annually.

On August 18, 2006, we acquired American Gemological Laboratories (“AGL”), an international colored gemstone certification and grading laboratory. AGL is one of the leading third party authentication and grading services for colored gemstones, including colored gemstones that are sold at auction through Sotheby’s and Christie’s and by jewelry retailers such as Cartier and Fred Leighton. We paid an aggregate acquisition price of $3,947,000 in cash for AGL, and, depending on the future revenue performance of AGL, we may become obligated to make payments of up to an aggregate of an additional $3,500,000 over the next five years.

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

Discontinued Operations . As previously disclosed, in fiscal 2004 our Board of Directors authorized the divestiture of our collectibles auctions and sales businesses. As a result, we sold our collectibles sales businesses during that year, but retained the collectibles inventory and accounts receivable of those businesses, which have since been substantially liquidated. The activities resulting from the divestiture of those businesses have been classified as discontinued operations and the discussion that follows focuses almost entirely on our authentication and grading businesses, which comprise substantially all of our continuing operations.

Factors That Can Affect our Financial Position and Operating Results

Factors that Can Affect our Revenues . Our revenues are comprised of (i) fees generated by the authentication and grading of high-value collectibles, and other high value assets consisting of diamonds and colored gemstones, and (ii) to a lesser extent, revenues from sales of collectibles club memberships; advertising on our websites and in printed publications and collectibles price guides; subscription-based revenues primarily related to our CCE dealer-to-dealer Internet bid-ask market for collectible coins certified by us; fees earned from the management, operation and promotion of collectibles trade shows and conventions and revenues from sales of products, which consist primarily of coins that we purchase under our warranty policy.

Our authentication and grading revenues accounted for approximately 81%, 84% and 90% of our total net revenues in the fiscal years ended June 30, 2008, 2007 and 2006, respectively. The amounts of such revenues are primarily affected by (i) the volume and mix, among coins and sportscards, on the one hand, and other collectibles and diamonds and colored gemstones, on the other hand, 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 sportscards 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.

Six of our coin authentication and grading customers accounted, in the aggregate, for approximately 10% of our total net revenues in the fiscal year ended June 30, 2008. As a result, the loss of any of those customers, or a significant decrease in the volume of grading submissions from any of them to us, would cause our net revenues to decline and, therefore, could adversely affect our results of operations. Our revenues from these customers are also impacted by the level of submissions and revenue earned from 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 submissions can vary depending upon a number of factors, including the timing of the shows or short-term decisions made by dealers during shows. In addition, the level of our revenues can be impacted by short-term changes in the price of gold that may occur around the time of the show, which can affect the volume of coin transactions from these customers at the shows and which, in turn, can affect the volume of submissions to us for on-site grading and same-day turn-around.

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 sportscards than they do for modern submissions, and (iv) the stage of development and the seasonality of our newly acquired businesses. Furthermore, because a significant proportion of our direct costs are fixed in nature, our gross profit is also affected by the overall volume of collectibles authenticated and graded in any period.

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, and (iii) 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 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, usually result in increases in submissions of collectibles for our services. By contrast, the volume of collectibles sales and purchases and, therefore, the volume of authentication and grading submissions, usually decline during periods characterized by recessionary economic conditions and by declines in disposable income and consumer confidence or by increasing stock prices and relative stability in the stock markets.

(1)

Net of gain on sales of discontinued businesses (net of income taxes).

As the above table indicates, we generated a 3.8% increase in net revenues in fiscal 2008, as compared to fiscal 2007 primarily as a result of increases in revenues from (i) our non-grading service businesses, including increased advertising revenues earned on our coin and sportscards publications and increased revenues from our CFC financing activities (“other-related businesses”), and (ii) sales of collectible coins purchased by us under our coin grading warranty policy. However, despite that increase in net revenues, we incurred an operating loss of $17,768,000 in fiscal 2008, as compared to an operating loss of $2,932,000 in fiscal 2007, due primarily to:

§

Increased operating losses of $13,140,000 incurred by our diamond and colored gemstones operations, including a $1,907,000 increase in losses from on-going operations of those businesses and an impairment loss of approximately $11,233,000 with respect to goodwill and other tangible and intangible assets. Such impairment losses reflected a fair value determination of these two reporting units at June 30, 2008; and

§

A $3,254,000 decrease in operating income generated by our coin grading business in fiscal 2008, as compared to fiscal 2007, which was due primarily to a decline in trade show revenues of approximately $1,500,000 in fiscal 2008, and higher costs of sales, which included warranty costs of $822,000 recognized in the second quarter of fiscal 2008 as a result of certain significant coin warranty claims.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

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. (the “Company”) provides grading and authentication services to dealers and collectors of high-value coins, sportscards, autographs, stamps, and U.S. currency notes 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; (v) the collectibles trade show conventions that we conduct; and (vi) the sale of our collectibles inventory, which is comprised primarily of collectible coins that we have purchased under our coin grading warranty program.

Discontinued Operations . As previously disclosed, the remaining activities resulting from our divestiture of our collectibles auctions and sales businesses have been classified as discontinued operations and the discussion that follows focuses almost entirely on our authentication and grading businesses, which comprise substantially all of our continuing operations. The remaining activities in our discontinued operations are insignificant.

Overview of Results of Operations for the Three Months Ended September 30, 2008

Revenues decreased by $1,133,000 or 10.5% in the three months ended September 30, 2008, compared to the same period of the prior fiscal year, primarily as a result of a decrease of $1,011,000 or 11.3%, in authentication and grading service fees and a decrease totaling $122,000 or 6.6%, in our other related services. The decrease in authentication and grading service fees was due primarily to a decrease in the revenues of our coin grading and authentication business that was attributable primarily to declines in (i) higher margin coin grading submissions at trade shows (which we believe was the result of the continued high price and a high level of volatility in the price of gold during this year’s first quarter) and (ii) modern coin submissions and the average service fee on those submissions. Although total costs of revenue in this year’s first quarter were approximately the same in dollar amounts as in the corresponding quarter last year, the decrease and the change in the mix in net revenues caused gross profits in this year’s first quarter to decline by $1,115,000, or 19.8%, as compared to the same quarter of fiscal 2008. As a result, although we were able to reduce operating expenses by $295,000 in this year’s first quarter, we incurred an operating loss of $1,431,000 in the three months ended September 30, 2008, as compared to an operating loss of $611,000 in the same three months of 2007. These, as well as other factors affecting our operating results in the first quarter of 2008 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 revenues, which accounted for approximately 82% of our total net revenues in the three months ended September 30, 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 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 timing of the shows or short-term decisions made by dealers during shows. In addition, the level of our revenues can be impacted by short-term changes in the price of gold that may occur around the time of the show, which can affect the volume of coin transactions at the shows and, therefore, also the volume of submissions to us for on-site grading and same-day turn-around at shows.

Six of our coin authentication and grading customers accounted, in the aggregate, for approximately 12% of our total net revenues in the three months ended September 30, 2008, as compared to 10% in the year ended June 30, 2008. As a result, the loss of any of those customers, or a decrease in the volume of grading submissions from any of them to us, would cause our net revenues to decline and, therefore, could adversely affect 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 is also 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.

Critical Accounting Policies and Estimates

During the quarter ended September 30, 2008, there were no changes 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.

Results of Operations – Three Months Ended September 30, 2008 and 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, stamps and currency, 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.

CONF CALL

Lesley A. Snyder

Good afternoon everyone and thank you for joining us to discuss Collectors Universe’s financial results for the first quarter of fiscal year 2009. With us today from management are Michael Haynes, Chief Executive Officer and Joe Wallace, Chief Financial Officer. Management will provide a brief overview of the quarter and then open up the call to your questions.

Comments made during today’s call may contain statements regarding the company’s expectations about its future financial performance, including forecasts and statements concerning business trends and profitability that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The company’s actual results in the future may differ, possibly materially, from those forecasted in this call due to the number of risks and uncertainties. Certain of these risks and uncertainties in addition to other risks are more fully described in the company’s filings with the Securities & Exchange Commission. The forward-looking statements are made only as of the date of today’s conference call and the company undertakes no obligation to update or revise the forward looking statements whether as result of new information, future events or otherwise. With that I would now like to turn the call over to Michael Haynes.

Michael R. Haynes

Welcome to today’s conference call. We will first review our results in the first fiscal quarter of 2009. Next Chief Financial Officer, Joe Wallace, will provide a quick overview of our financials. At the conclusion of these remarks we will then be happy to answer any questions you may have.

As announced on September 30, 2008, in response to the economic and market conditions, the company suspended its cash dividend and declared a 10% stock dividend, which dividend was recently paid. The Board of Directors considered it prudent to maintain an extremely strong and conservative balance sheet as the company holds almost 50% of total assets in cash with no debt.

From an operating perspective the company is focused on properly sizing capacity and reducing operating costs with the objective of increasing cash flow from all divisions to provide a consolidated positive cash flow and consolidated, profitable operations.

In that effort, every division and department has been examined and changes are in motion to achieve this objective. At the same time, the growth initiatives in both the markets we dominate and those that hold high potential are being honed, shaped, and specifically directed toward those initiatives with more immediate and higher returns.

The market for high-quality and high-value items authenticated and graded by our collectibles group continues to be firm for the while. The market for the lower-value items has been weakening. The coin market has also been influenced by the volatility of gold and silver, but the sports card market has been more consistent with the themes of increases for high-value items and decreases for low-value items. These market reactions are typical of what management has seen and experienced over the last 30 years through several business cycles in the general economy.

With respect to our coin division these market conditions are manifested with modest increases in both units and revenue from our sector in vintage [pour] coin which generally are comprised of the coins with higher value, and with decreases in units in revenue from the modern sector, which generally relates to coins of lower value.

Because the coin trade show sector is tied to units submitted only at coin shows for immediate delivery of our services, the volume at these shows is more volatile, as dealers at the coin shows respond to the market conditions that exist during the few days of the specific coin show.

Outside of these trends is the growth in units and revenue from our world coin sector as evidenced by an increase of 77% in units processed in the first quarter of fiscal 2009 as compared to the same quarter of fiscal 2008. Approximately half of the volume in the global coin market is realized for coins outside of the United States where third-party authentication and grading has not yet been significantly promoted. As we continue the execution of our plans to penetrate the global market, we anticipate further increases in unit volume and revenues from this sector.

Overall, the collectibles group provided positive cash flow which we expect will improve as the planned reductions in operating costs and adjustments in capacity are more fully implemented in the second quarter of fiscal 2009.

The jewelry group achieved revenue growth of 14% in the first quarter of fiscal 2009 as compared to the comparable period in fiscal 2008, while the cash investment in this initiative declined by 12% for the comparable period. This is the second consecutive quarter of operational improvement in the jewelry group as we continue to capture more market share utilizing a lower cost and more focused marketing plan.

For our diamond sector submissions increased 27% for the first quarter of fiscal 2009 over the first quarter of fiscal 2008. The aggregate value of the diamonds submitted for authenticity and grading increased to approximately $35.0 million in the first quarter from approximately $32.0 million in the same period in the prior year.

In terms of the aggregate value of items submitted for authenticity and grading, the diamond division now possesses and processes the second largest aggregate value behind the aggregate value of our coin division.

Our diamond division benefits from the growing success of our Certified Diamond Exchange, or CDE, an Internet-based business-to-business distribution system that connects sellers of our diamond grading divisions certified diamonds directly to jewelry retailers across the country.

The CDE is a central element in our marketing plan in that it provides direct access for jewelers to diamonds certified by our diamond division. CDE was launched about one year ago in the second quarter of fiscal 2008 and as of today has over 2,400 independent retailer members with offerings of thousands of diamonds valued at tens of millions of dollars.

By launching CDE we have created our own distribution network for our certified diamonds that rivals even the largest of the jewelry chain stores. As we continue to grow this distribution network we will intensify the training of these stores to first access and check CDE for their diamond needs.

For the colored gemstone sector unit volume was up 56% in the first quarter of fiscal year 2009 over the comparable quarter of fiscal year 2008 with unit values increasing by 162% for the same comparable period. The aggregate value of the colored gemstones submitted for authenticity and grading is now the third largest aggregate value behind our coin and diamond divisions.

During the first quarter of fiscal 2009 we launched the Colored Gemstone Exchange, or CGE, using basically the same concepts and software platform as we used when we launched the Certified Diamond Exchange. Using similar marketing programs, the CGE offers only colored gemstones with documents of authenticity and identification issued by our colored gemstone division. We expect that the CGE will influence more submissions to our colored gemstone division in fiscal 2009.

Corporate, general, and administrative costs decreased during the first quarter of fiscal 2009 as compared to the prior year period as evidenced by the reduction in non-allocated expenses by 7% and a reduction in the cash requirement for such unallocated expenses of 9% for the comparable period.

The first fiscal quarter of 2009 represents the fifth consecutive quarter of decreases in corporate unallocated expenses.

Our core business in the collectibles group continues to provide positive cash flows and enjoys large market shares with potential for growth both domestically and globally. We expect that the continuing deployment of operational improvements and adjustments in capacity will lead to improved operating margins and increasing cash flow.

We also have several initiatives to monetize our significant website traffic from our top-ranked coin and sports websites and to obtain relationships in the global coin market. Although the initiative into the jewelry markets has yielded slower growth than anticipated, we are encouraged with the direction and progress of our jewelry business.

We have several new and exciting pilot programs in place for the 2008 holiday season and we expect some of these programs to develop into mainstream volume in calendar year 2009.

I thank you for your time and at this stage I would like to turn the call over to Joe Wallace who will give us a financial review of the quarter.

Joseph J. Wallace

I will now give a brief overview of the financial results of the first quarter of fiscal 2009.

For the first quarter of fiscal 2009 our net revenues were $9.7 million and we incurred a loss from continuing operations of $1.3 million, or $0.14 per diluted share. This compared to net revenues of $10.8 million and a loss from continuing operations of $100,000, or $0.01 per diluted share, for the first quarter of fiscal 2008. The loss per share data has been retroactively adjusted to give effect to the 10% stock dividend.

The revenue decline of $1.1 million, or 10.5%, in the current first quarter, compared to the same quarter of the prior year primarily was the results of the decrease of $1.0 million, or 11%, in authentication grading fees and a decrease of $122,000, or 7%, in our other related services.

The decrease in authentication grading fees comprised decreases of $855,000, or 16%, in coin grading and authentication revenues, a $158,000, or 38%, decrease in stamp grading and authentication revenues, and $91,000, or 5%, decrease in sports cards grading and authentication revenues.

Those decreases were partially offset by a $93,000, or 8%, increase in the revenues generated by our other smaller grading and authentication businesses.

The 16% decrease in coin authentication grading revenues was primarily the result of: one, a decrease in revenues earned from coin grading at trade shows, which we believe was due to the continued high price and a high level of volatility in the price of gold in the quarter; and two, a decrease in modern coin grading revenues due primarily to lower activity combined with lower average service fees earned on the mix of coins graded in the quarter.

Both declines were partially offset by increases in the number of units and revenue earned from our vintage coin submissions.

The decrease in stamp grading revenues in the quarter reflects a decrease in submissions of modern stamps, which we believe was due to excess supply and lower market prices in the modern stamp market, partially offset by increased average service fees as we increased our focus on grading vintage stamps.

The decrease in sports cards grading authentication revenues was the result of a lower number of units graded in the quarter due to less demand for our services for lower value sports cards, partially offset by the positive effects of an increase in the average service fee for the units graded in the quarter.

The decrease of revenues from other related services was primarily due to a decline in sale of coins purchased under our warranty policy and to a lesser extent, lower advertising revenues resulting from the company’s decision to discontinue the publication of the rare coin marketing report, the revenues from which no longer justified the publication expenses.

The gross profit margin was 46.5% in the current first quarter compared to 52% in the same quarter of last year. This decline in our gross profit margin reflects: one, the relatively fixed nature of many of our direct costs, such that the decline in our coin, sports cards, and stamps revenues as discussed above did not result in a proportionate reduction in our direct costs; two, the 17% reduction in our coin revenues, on which we earn a higher gross profit margin than on our other grading businesses, such that our coin revenues in the current first quarter represented 51.5% of revenues compared with 55.8% of revenues in the first quarter of last year, and three, increased infrastructure costs allocated and other direct costs incurred in support of our other businesses.

Total operating expenses for the current first quarter were $5.9 million compared to $6.2 million for the first quarter of fiscal 2008. The reduction in $0.3 million primarily reflects decreases in sales and marketing expenses related to our jewelry businesses.

The resulting operating loss for the quarter was $1.4 million compared with $0.6 million for the first quarter of last year.

Income from continuing operations benefitted from interest income of $0.1 million in the current first quarter compared with $0.4 million in the first quarter of last year. The reduction in interest income reflects lower available cash balances and lower interest rates in the current first quarter compared to the same quarter of last year.

Turning to our balance sheet. On September 30, 2008, cash and cash equivalents were $23.0 million. The net cash usage of $0.4 million in the current quarter related to net cash proceeds generated from customer notes receivables of $3.3 million, offset by cash dividends to stockholders of $2.1 million, expenditures for capital equipment software of $0.6 million and cash used in operations of $1.0 million.

On September 30, 2008, the company had working capital of $23.0 million and no long-term debt.

As previously announced, the company declared a 10% stock dividend to stockholders of record on October 20, 2008, with a distribution of such shares on November 3, 2008.

With that I would like to thank you for your attention. We are now ready to take questions.

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