Forward-Looking Statements

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

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

Our Business

Collectors Universe, Inc. ("we", "us" or the "Company") provides grading and authentication services to dealers and collectors of high-value coins, trading cards, event tickets, autographs, memorabilia and stamps. We believe that our authentication and grading services add value to these collectibles 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 membership subscriptions; in our Collectors Club which is designed to attract interest in high-value collectibles among new collectors; (iv) the sale of subscriptions to our CCE dealer-to-dealer Internet bid-ask market for certified coins; and (v) the collectibles trade show conventions that we conduct. We also generate revenues from sales of our collectibles inventory, which is comprised primarily of collectible coins that we have purchased under our coin grading warranty program; however, these activities are not the focus of or an integral part of our business.

Recent Developments:

Discontinued Operations. In the three months ended March 31, 2009, our Board of Directors approved a plan to discontinue and dispose of the Company's diamond and colored gemstone ("jewelry") authentication and grading businesses, which we closed effective March 2, 2009. We are in the process of disposing of the assets of those businesses and have established certain accruals, primarily related to real estate lease obligations at March 31, 2009. We are evaluating our patented Gemprint identification technology ("Gemprint") for the use in a licensing business. In addition, in the three months ended December 31, 2008, our Board of Directors approved a plan to dispose of our currency grading and authentication business, which was sold in February 2009.

Accordingly, the assets and liabilities of the jewelry and currency authentication and grading businesses have been classified as held for sale at March 31 2009, and the operations of these businesses have been reclassified as discontinued operations for all periods presented. Our "Gemprint" business continues to be part of continuing operations. In addition, we continue to classify as discontinued operations the remaining activities, consisting of the disposition of our remaining collectibles inventories, of our collectibles auctions and sales businesses which we disposed of in fiscal 2004.

For the three and nine months ended March 31, 2009, we recorded losses from discontinued operations, before taxes, of $5.5 million and $14.8 million, respectively, as compared to losses from discontinued operations, before taxes, of $2.0 million, and $5.3 million in the same three and nine month period of 2008. The increased loss in the three months ended March 31, 2009 was primarily attributable to the cost and losses recognized as a result of the closure of our jewelry authentication and grading businesses effective March 2, 2009. The loss in the nine months ended March 31, 2009 also includes an impairment loss of $6.2 million in the carrying value of the remaining goodwill and intangible assets recognized in the second quarter of 2009. However, we expect such losses to decline substantially during fiscal 2010, which will begin on July 1, 2009. See "Results of Continuing Operations and Discontinued Operations-Three and Nine Months ended March 31, 2009 and 2008-Discontinued Operations".

Departure of Chief Executive Officer. On March 16, 2009, the Company announced the departure of the Company's Chief Executive Officer, effective April 1, 2009 and the hiring of Michael McConnell, a director of the Company, as its interim Chief Executive Officer. As a result of his service on the Board, Mr. McConnell is familiar with the Company's businesses and has worked with our executive officers and other key management employees.

Overview of Results of Operations for the Three and Nine Months Ended March 31, 2009 and 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              Nine Months Ended
                                               March 31,                       March 31,
                                          2009            2008            2009           2008
Net revenues                                100.0 %         100.0 %         100.0 %        100.0 %
Cost of revenues                             44.1 %          47.6 %          46.9 %         50.4 %
Gross profit                                 55.9 %          52.4 %          53.1 %         49.6 %
Operating expenses:
Selling and marketing expenses               11.4 %          14.6 %          12.6 %         13.3 %
General and administrative expenses          33.1 %          31.8 %          36.5 %         33.1 %
Amortization of intangible assets             2.7 %           2.0 %           2.7 %          1.9 %
Impairment loss                                 -               -             5.8 %            -
Total operating expenses                     47.2 %          48.4 %          57.6 %         48.3 %
Operating income (loss)                       8.7 %           4.0 %          (4.5 )%         1.3 %
Interest income, net                          0.5 %           2.3 %           0.9 %          3.3 %
Other income                                  0.1 %             -             0.1 %            -
Income (loss) before provision for
income taxes                                  9.3 %           6.3 %          (3.5 )%         4.6 %
Provision (benefit) for income taxes          1.2 %           3.7 %           5.1 %          2.2 %
Income (loss) from continuing
operations after income taxes                 8.1 %           2.6 %          (8.6 )%         2.4 %
Loss from discontinued operations,
net of gain on sales
Of discontinued businesses (net of
income taxes)                               (59.5 )%        (11.9 )%        (56.4 )%       (10.8 )%
Net income (loss)                           (51.4 )%         (9.3 )%        (65.0 )%        (8.4 %)

These, as well as other factors affecting our operating results in the third quarter and nine months ended March 31, 2009, are described in more detail below.

Factors That Can Affect our Financial Position and Operating Results

Factors that Can Affect our Revenues. Our authentication and grading fees, which accounted for approximately 80% of our total net revenues in the nine months ended March 31, 2009, are primarily affected by (i) the volume and mix, among coins, trading cards and other collectibles of authentication and grading submissions, because we typically charge higher fees for coin grading than we do for the grading of other collectibles; (ii) in the case of coins and trading cards, 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 trading cards, on the one hand, and modern coins and trading cards, on the other hand, because dealers generally request faster turn-around times for vintage or classic coins and trading 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 trading cards.

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

Six of our coin authentication and grading customers accounted for, in the aggregate, approximately 13% of our total net revenues in the nine months ended March 31, 2009, as compared to 11% in the year ended June 30, 2008. As a result, the loss of one or more of those customers, or a decrease in the volume of grading submissions from any of them to us, would cause our net revenues to decline and, therefore, could adversely affect the profitability of our grading and authentication operations.

Factors Affecting our Gross Profit Margins. The gross profit margins on authentication and grading submissions also are primarily affected by the same factors, described above, that have the greatest effect on our net revenues, because we generally realize higher margins on coin submissions than on submissions of other collectibles and we charge higher fees for faster service times. In addition, our margins are affected, to a lesser extent, by the stage of development and the seasonality of certain of our smaller businesses. Furthermore, because a significant proportion of our direct costs are generally fixed in nature (at least in the short term), our gross profit also can be affected by the overall volume of collectibles authenticated and graded in any period. We expect our consolidated gross profit margin to increase in fiscal 2010, due to the discontinuance of the jewelry grading businesses on March 2, 2009, because the costs of revenues of those businesses exceeded their net revenues, resulting in a negative gross margin.

Impact of Economic Conditions on Financial Performance. We generate all of our revenues from the collectibles markets. Moreover, the demand for our services and, therefore, our revenues, depend to a great extent on the volume of purchases and sales of the high-value collectibles that we authenticate, because dealers and collectors most often submit collectibles to us for authenticating and grading in anticipation of or in connection with their sales and purchases of those collectibles. The volume of collectibles purchase and sale transactions is primarily affected by (i) the disposable income available to collectibles dealers and collectors, because high-value collectibles are generally viewed as luxury goods and the confidence that collectibles dealers and collectors have in the economy, which affects their ability and their willingness to use their funds to purchase collectibles and to use our services;
(ii) the availability and cost of borrowings because collectibles dealers and consumers often fund their purchases of collectibles with borrowings,
(iii) prevailing and anticipated rates of inflation, because the threat of and actual increases in inflation lead investors and consumers to purchase gold and silver coins as a hedge against inflation, which results in an increase in collectibles commerce and, as a result, in the demand for our services, and
(iv) the performance and volatility of the gold and other precious metals markets and the stock markets, which affects the level of purchases and sales of collectible coins and, therefore the need and demand for our services. Accordingly, factors such as improving economic conditions which usually result in increases in disposable income and consumer confidence, volatility in and declines in the prices of stocks, a weakening in the value of the U.S. Dollar and concerns about inflation, often lead investors to increase their purchases of precious metals, such as gold bullion and other coins and collectibles, which often results in increases in submissions of collectibles to us for authentication and grading. By contrast, the volume of collectibles sales and purchases and, therefore, the volume of authentication and grading submissions to us, usually declines 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 increasing stock prices and relative stability in the stock markets, which sometimes leads investors to move their funds from the gold and precious metals markets to the stock market.

The severity of the current economic recession in the United States, continued uncertainty and worries about the ultimate severity and duration of the recession, and the significant decreases as a result of the credit crisis in the availability of borrowings on which collectibles dealers and collectors often rely on to help them to fund purchases and, in the case of dealers, the carrying costs in maintaining an inventory of high-value collectibles, have combined to reduce disposable income, erode the confidence of consumers and small businesses, such as those operated by collectibles dealers, and hence their willingness and ability to purchase and sell collectibles and other high-value assets. As a result, in the three and nine months ended March 31, 2009, we experienced declines in the demand for our services in all of our grading and authentication markets.

In addition, these economic and market conditions created increased uncertainties for us with respect to the future financial performance of our jewelry authentication and grading businesses, significantly diminishing their prospects for generating increases in their revenues and achieving profitability. During the second fiscal quarter ended December 31, 2008, the revenues of those businesses declined by approximately 25% and, in the early part of the third fiscal quarter, revenues continued to decline. As a result, the Board of Directors decided that the Company should discontinue the jewelry businesses and, on March 2, 2009, we ceased operating those businesses and began the process of disposing their assets. As a result of this decision, the operating results of the jewelry businesses for the three and nine months ended March 31, 2009 and 2008 are reflected in our loss from discontinued operations in the Condensed Consolidated Statement of Operations included in this Report.

The following tables provide information regarding the respective numbers of coins, trading cards, autographs, and stamps that were graded or authenticated by us in the three and nine months ended March 31, 2009 and 2008 and their estimated values, which are the amounts at which those coins, trading cards and stamps were insured by the dealers and collectors who submitted them to us for grading and authentication.

                                   Units Processed                                  Declared Value (000)
                            Three Months Ended March 31,                        Three Months Ended March 31,
                           2009                      2008                      2009                      2008
Coins                404,600        55.8 %     484,100        55.5 %   $ 286,943        91.9 %   $ 336,683        90.4 %
Trading cards        273,000        37.7 %     327,000        37.5 %      16,100         5.2 %      25,865         7.0 %
Autographs            40,600         5.6 %      49,000         5.6 %       3,616         1.2 %       4,514         1.2 %
Stamps                 6,200         0.9 %      12,400         1.4 %       5,427         1.7 %       5,321         1.4 %
Total                724,400       100.0 %     872,500       100.0 %   $ 312,086       100.0 %   $ 372,383       100.0 %



                                       Units Processed                                       Declared Value (000)
                                 Nine Months Ended March 31,                              Nine Months Ended March 31,
                              2009                         2008                        2009                        2008
Coins                 1,024,200         50.2 %     1,144,000         49.6 %   $ 839,717         90.3 %   $ 1,048,444         90.8 %
Trading cards           866,900         42.5 %       975,500         42.3 %      60,209          6.5 %        67,863          5.9 %
Autographs              129,900          6.3 %       143,800          6.2 %      12,155          1.3 %        21,148          1.8 %
Stamps                   20,100          1.0 %        43,800          1.9 %      17,627          1.9 %        17,308          1.5 %
Total                 2,041,100        100.0 %     2,307,100        100.0 %   $ 929,708        100.0 %   $ 1,154,763        100.0 %

Trends and Challenges in our Businesses

During the past three years, our costs of revenue and selling, general and administrative expenses increased significantly due in large part to the costs we were incurring to grow our jewelry businesses. Those costs and expenses substantially exceeded their revenue contributions and was the principal cause of the increased operating losses that we incurred in the first nine months of the current fiscal year.

During the first quarter of 2009, we began implementing a cost reduction program in order to reduce our costs of revenue and our operating expenses and, thereby, bring those costs and expenses more in line with our revenues and, increase our gross profits and operating income. During the three months ended March 31, 2009, we realized reductions in both our costs of revenues and operating expenses and increased our cash flows due, in part, to this program.

The discontinuance of the operations of our jewelry businesses provides us with the opportunity to realize even greater costs savings, which we believe will be reflected in improved results of operation in future periods.

Critical Accounting Policies and Estimates

During the nine months ended March 31, 2009, except as discussed below, 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.

Accrual for Losses on Facility Leases. At March 31, 2009, the Company established accruals for the facility leases associated with the Company's discontinued grading and authentication jewelry businesses. Those lease accruals were based on estimates on a discounted basis, of (i) market rental rates; (ii) the time required to sublet the facility; and (iii) other direct costs associated with the leases. Such estimates are uncertain due to the current market conditions and will need to be reviewed on a quarterly basis.

Grading Warranty Costs. We offer a limited warranty covering the coins, trading cards, stamps and currency that we authenticate and grade. Under the warranty, if any such collectible that was previously authenticated and graded by us is later submitted to us for re-grading and either (i) receives a lower grade upon resubmittal or (ii) is determined not to have been authentic, we will offer to purchase the collectible or, at our option, pay the difference in value of the item at its original grade as compared with its lower grade. However this warranty is voided if the collectible, upon resubmittal to us, is not in the same tamper-resistant holder in which it was placed at the time we last graded the item. If we purchase an item under a warranty claim, we recognize the difference in the value of the item at its original grade and its re-graded estimated value as a reduction in our warranty reserve. We include the purchased item in our inventory at the re-graded estimated value of the item. We accrue for estimated warranty costs based on historical trends and related experience. Certain warranty claims were received by us in the second quarter and early in third quarter of fiscal 2008 that were significant in relation to our historical claims experience and, as a result, we recognized, in the second quarter of 2008, an additional expense of $822,000 for those claims. We also decided to increase our warranty accrual rate, effective January 1, 2008, to reflect this higher warranty claims experience, and we continue to monitor the adequacy of our warranty reserves on an on-going basis. We include the collectibles we purchase pursuant to our warranty policy in inventory at the re-graded estimated value (as discussed under Inventory Valuation Reserves below). There are a number of factors that can cause the estimated values of such collectibles to change during the period from the respective dates we purchase them and the respective dates on which we sell them. However, once we have classified such items as inventory and they have been held in inventory beyond the end of a fiscal quarter in which we purchased them, we classify any gains or losses on the disposal of such inventory as part of the gain or loss on product sales and not as an adjustment to our warranty reserves.

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

Long-Lived Assets Other Than Goodwill. We regularly conduct reviews of property and equipment and other long-lived assets other than goodwill, including certain identifiable intangibles, for possible impairment. Such reviews occur annually or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable in full. In order to determine if the value of a definite-lived asset is impaired, we make an estimate of the future undiscounted cash flows expected to result from the use of that asset and its eventual disposition in order to determine if an impairment loss has occurred. If the projected undiscounted cash flows are less than the carrying amount of the asset, an impairment loss is recorded to write down the asset to its estimated fair value. The Company incurred significant operating losses in its jewelry reporting units since the acquisitions of those businesses and the Company recognized initial impairment losses for those businesses of $11.2 million in the three months and year ended June 30, 2008 because those businesses had failed to meet management's revenue expectations for them. In the three months ended December 31, 2008, we recognized additional impairment losses of $4.8 million in the jewelry grading and authentication businesses and $1.5 million to the long-lived assets of our Gemprint business, due to continued uncertainties as to the level of revenues we could expect those businesses to generate in the future, worse than expected financial performance during the first six months of fiscal 2009 and the increasing severity of the economic recession and credit crisis which have adversely affected the future prospects of those businesses. In the three months ended March 31, 2009, we decided to exit the jewelry grading and authentication businesses other than our Gemprint business. As a result, the impairment losses that were attributable to those jewelry businesses in the nine months ended March 31, 2009 have been classified as part of discontinued operations; whereas, the impairment losses attributable to our Gemprint business in the nine months ended March 31, 2009 have been classified as part of our continuing operations.

Goodwill. We test the carrying value of goodwill and other indefinite-lived intangible assets on a formal basis at least annually on their respective acquisition anniversary dates, or more frequently if indicators of impairment are determined to exist. We apply a discounted cash flow model or an income approach in determining a fair value that is used to estimate the fair value of . . .