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

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

                                                               Three Months Ended September 30,
                                                                2008                      2007
Net revenues                                                         100.0 %                   100.0 %
Cost of revenues                                                      53.5 %                    48.0 %
Gross profit                                                          46.5 %                    52.0 %
Operating expenses:
Selling and marketing expenses                                        17.9 %                    18.7 %
General and administrative expenses                                   40.2 %                    36.4 %
Amortization of intangibles                                            3.2 %                     2.5 %
Total operating expenses                                              61.3 %                    57.6 %
Operating loss                                                       (14.8 )%                   (5.6 )%
Interest income, net                                                   1.3 %                     4.1 %
Other income                                                           0.1 %                       -
Loss before income tax benefit                                       (13.4 )%                   (1.5 )%
Income tax benefit                                                       -                      (0.6 )%
Loss from continuing operations                                      (13.4 )%                   (0.9 )%
Loss from discontinued operations (net of income taxes)                  -                      (0.1 )%
Net loss                                                             (13.4 )%                   (1.0 )%

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.

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 September 30, 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                                  Declared Value (000)
                           Three Months Ended September 30,                    Three Months Ended September 30,
                            2008                      2007                      2008                      2007
Coins                 328,100        46.4 %     367,100        47.0 %   $ 302,722        73.6 %   $ 333,351        80.0 %
Sportscards           301,600        42.7 %     338,500        43.0 %      26,562         6.5 %      20,534         5.0 %
Autographs             41,600         5.9 %      44,800         6.0 %       4,854         1.2 %       5,811         1.0 %
Stamps                  7,300         1.0 %      19,700         2.0 %       5,071         1.2 %       4,351         1.0 %
Currency               16,800         2.4 %      11,000         1.0 %       8,092         2.0 %       9,349         2.0 %
Diamonds                9,800         1.4 %       7,700         1.0 %      35,065         8.5 %      31,963         8.0 %
Colored Gemstones       1,400         0.2 %         900           -        28,804         7.0 %      10,986         3.0 %
Total                 706,600       100.0 %     789,700       100.0 %   $ 411,170       100.0 %   $ 416,345       100.0 %

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.

The following tables breakout the total net revenues for the three months ended September 30, 2008 and 2007 between grading and authentication services revenues, and other related services revenues:

                                                  Three Months Ended September 30,
                                  2008                         2007                  Increase (Decrease)
                                       % of Net                     % of Net                       % of Net
                         Amount        Revenues       Amount        Revenues        Amount         Revenues
                                                       (Dollars in thousands)
Grading and
authentication fees     $   7,960           82.1 %   $   8,971           82.9 %   $    (1,011 )       (11.3) %
Other related
services                    1,732           17.9 %       1,854           17.1 %          (122 )        (6.6) %
Total net revenues      $   9,692          100.0 %   $  10,825          100.0 %   $    (1,133 )        (10.5 )%

The following table sets forth certain information regarding the increases in net revenues in our larger markets (which are inclusive of revenues from our other related services) and in the number of units authenticated and graded in the three months ended September 30, 2008 and 2007:

                                                  Three Months Ended September 30,
                       2008                       2007                                 2008 vs. 2007
                                                                                    Increase (Decrease)
                           % of Net                    % of Net            Revenues                Units Processed
              Amount       Revenues       Amount       Revenues      Amounts      Percent        Number       Percent
                                         (Dollars in thousands)
Coins         $ 4,995           51.5 %   $  6,038           55.8 %   $ (1,043 )     (17.3) %      (39,000 )      (10.6 )%
Sportscards     2,189           22.6 %      2,292           21.2 %       (103 )      (4.5) %      (36,900 )      (10.9 )%
Other (1)       2,508           25.9 %      2,495           23.0 %         13          0.5 %       (7,200 )       (8.6 )%
              $ 9,692          100.0 %   $ 10,825          100.0 %   $ (1,133 )      (10.5 )%     (83,100 )      (10.5 )%

The $1,133,000, or 10.5%, decrease in net revenues in the three months ended September 30, 2008, compared to the same three months of the prior year, was attributable to decreases in authentication and grading service fees of $1,011,000 or 11.3%, and decreases in other related services revenues of $122,000 or 6.6%.

The decrease in authentication and grading fees was attributable to (i) an $855,000, or 16%, decrease in coin grading and authentication revenues, (ii) a $158,000, or 38%, decrease in stamp grading and authentication revenues, and
(iii) a $91,000, or 5% decrease in sportscard grading and authentication revenues, that was only partially offset by a $93,000, or 8%, increase in the revenues generated by our other grading and authentication businesses.

The decrease in coin authentication and grading revenues in this year's first quarter was primarily 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 quarter, 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 the volume of our vintage coin grading submissions. The decrease in stamp grading and authentication revenues in the quarter reflects a decrease in submissions of modern stamps, which we believe was attributable to excess supply and lower market prices in the modern stamp market, partially offset by increased average service fees earned as we increased our focus on grading vintage stamps. The decrease in sportscards grading and authentication revenues was primarily attributable to a lower number of units graded in the current quarter (due to less demand for our services for lower value sportscards), partially offset by the positive effects of an increase in the average service fees for the units graded.

The decrease in revenues from other related services was primarily attributable to a decline in sales of coins that we had purchased under our warranty policy (which is not considered an integral part of our primary revenue generating activities) and, to a much 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 expenses of publishing that Report.

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 services and the costs of product revenues, which represent the carrying value of the inventory of products (primarily collectible coins) that we sold. 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 months ended September 30, 2008 and 2007.

                                Three Months Ended September 30,
                            2008                                2007
                 Amount         % of Revenues        Amount         % of Revenues
Gross profit   $ 4,510,000                46.5 %   $ 5,625,000                52.0 %

As indicated in the above table, our total gross profit margin declined from 52% of revenues in the three months ended September 30, 2007 to 46.5% of revenues in the three months ended September 30, 2008. This decline in our gross profit margin reflects (i) the relatively fixed nature of many of our direct costs such that the decline in our coin, sportscards and stamps revenues as discussed above, did not result in a proportionate reduction in our direct costs (ii) the 17% reduction in our coin grading and authentication 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 total revenues, compared with 55.8% of our total revenues in the first quarter of the prior year; and (iii) increased infrastructure costs allocated and other direct costs incurred in support of our other businesses.

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 months ended September 30, 2008 and
2007.

                                         Three Months Ended September 30,
                                     2008                                2007
                          Amount         % of Revenues        Amount         % of Revenues
Selling and Marketing   $ 1,730,000                17.9 %   $ 2,018,000                18.7 %

The decrease of $288,000 in selling and marketing expenses in the three months ended September 30, 2008, compared to the three months ended September 30, 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.

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 September 30,
                                                        2008                                2007
                                             Amount         % of Revenues        Amount         % of Revenues
General and Administrative                 $ 3,901,000                40.2 %   $ 3,948,000                36.4 %

G&A expenses decreased by $47,000 in the three months ended September 30, 2008, compared to the same period of last year. That decrease was primarily attributable to the initiation of staff reductions and other cost savings measures, the effect of which on general and administrative expenses was 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 September 30,
                                                        2008                               2007
                                             Amount         % of Revenues       Amount        % of Revenues
Amortization of Intangibles                $   310,000                 3.2 %   $ 270,000                 2.5 %

The increase in the amortization expense was primarily related to the amortization of capitalized software costs incurred in prior fiscal quarters, amortization of which commenced as software development projects were completed. That increase was partially offset by a reduction in amortization of intangible assets of our acquired jewelry businesses, resulting from an . . .