Forward-Looking Statements

The discussion in this Item 2 of this Quarterly Report on Form 10-Q (this "Report") 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 expected future financial performance so long as they provide cautionary statements identifying important factors that could cause their 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 due to the risks to which our business is subject and other circumstances or occurrences which are not presently predictable and over which we do not have control. Consequently, the forward-looking statements and information contained in this Report are qualified in their entirety by, and readers of this Report are urged to read the risk factors that are described in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2011 (the "Fiscal 2011 10-K"), which we filed with the Securities and Exchange Commission (the "SEC") on August 26, 2011, and the section, entitled "Factors that Can affect our Results of Operations or Financial Position," below in this Item 2.

Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained or recent trends that we describe in this Report, which speak only as of the date of this Report, or to make predictions about future performance based solely on our historical financial performance. We also disclaim any obligation to update or revise any forward-looking statements contained in this Report or in our Fiscal 2011 10-K or any other prior filings with the SEC, except as may be required by applicable law or applicable Nasdaq rules.

Our Business

Collectors Universe, Inc. ("we", "us" "management" "our" or the "Company") provides authentication and grading services to dealers and collectors of high-value coins, trading cards, event tickets, autographs, sports and historical memorabilia and stamps. We believe that our authentication and grading services add value to these collectibles by providing dealers and collectors with a high level of assurance as to the authenticity and quality of the collectible they seek to buy or sell; thereby enhancing their marketability and providing increased liquidity to the dealers, collectors and consumers that own, buy and sell such collectibles.

We principally generate revenues from the fees paid for our authentication and grading services. To a lesser extent, we generate revenues from other related services which consist of: (i) the sales of advertising and commissions earned on our websites, including Coinflation.com, which we acquired in September 2011 (see note 4 to the condensed consolidated financial statements); (ii) the sales of printed publications and collectibles price guides and advertising in our publications and on our websites; (iii) the sales of membership subscriptions in our Collectors Club, which is designed primarily to attract interest in high-value collectibles among new collectors; (iv) the sales of subscriptions to our CCE dealer-to-dealer Internet bid-ask market for certified coins and to our CoinFacts™ website, which offers a comprehensive one-stop source for historical U.S. numismatic information and value-added content; and (v) the management and operation of collectibles trade shows and conventions. We also generate revenues and recognize costs associated with the sale of our collectibles inventory, which are primarily comprised of collectible coins that we have purchased under our coin grading warranty program; however, such product sales are neither the focus nor an integral part of our on-going revenue generating activities.

Factors That Can Affect our Operating Results and Financial Position

Factors That Can Affect our Revenues and Gross Profit Margins. Collectibles authentication and grading fees accounted for approximately 82% and 81% of our total net revenues in the three and six months ended December 31, 2011, respectively. The fees we generated from authentication and grading services and the gross profit margins we realize on those services are driven primarily by the volume and mix of coin and collectibles sales and purchase transactions by collectibles dealers and collectors, because our collectibles authentication and grading services generally facilitate sales and purchases of coins and other high value collectibles by providing dealers and collectors with a high level of assurance as to the authenticity and quality of the collectibles they seek to sell or buy. Consequently, dealers and collectors most often submit coins and other collectibles to us for authentication and grading at those times when they are in the market to sell or buy coins and other high-value collectibles.

In addition, our coin grading and authentication revenues are impacted by the level of modern coin submissions, which can be volatile, primarily depending on the timing and size of modern coin marketing programs by the United States Mint and by customers or dealers who specialize in sales of such coins.

Our authentication and grading revenues and gross profit margins are affected by
(i) the volume and mix of authentication and grading submissions among coins and trading cards on the one hand, and other collectibles on the other hand; (ii) in the case of coins and trading cards, the "turnaround" 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 turnaround 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; and (iv) as discussed above, the timing of marketing programs for modern coins. Furthermore, because a significant proportion of our costs of sales are fixed in nature in the short term, our gross profit margin is also affected by the overall volume of collectibles that we authenticate and grade in any period.

Our revenues and gross profit margins are also affected by the volume of submissions we receive at collectibles trade shows for on-site authentication and grading services that we provide to show attendees, because they typically request higher priced same-day turnaround for the coins they submit to us for authentication and grading at those shows. The level of trade show submissions varies from period to period depending upon a number of factors, including the number and the timing of the shows in each period and the volume of collectible coins that are bought and sold at those shows by dealers and collectors. In addition, the number of such submissions and, therefore, the revenues and gross profit margin we generate from the authentication and grading of coins at trade shows can be impacted by short-term changes in the prices of gold that sometimes occur around the time of the shows, because gold prices can affect the willingness of dealers and collectors to sell and purchase coins at the shows.

Five of our coin authentication and grading customers accounted, in the aggregate, for approximately 11% of our total net revenues in the three and six months ended December 31, 2011. 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, could cause our net revenues to decline and, therefore, could adversely affect our results of operations.

The following tables provide information regarding the respective numbers of coins, trading cards, autographs, and stamps that were authenticated and graded by us in the three and six months ended December 31, 2011 and 2010, respectively, and their estimated values, which are the amounts at which those coins, trading cards and stamps are declared for insurance purposes by the dealers and collectors who submitted them to us for grading and authentication (in thousands):

                                    Units Processed                                  Declared Value (000)
                            Three Months Ended December 31,                     Three Months Ended December 31,
                            2011                      2010                      2011                      2010
Coins                 428,900        54.8 %     403,600        56.9 %   $ 298,057        91.9 %   $ 287,155        91.6 %
Trading cards and
autographs(1)         349,500        44.7 %     301,900        42.6 %      24,723         7.6 %      24,120         7.7 %
Stamps                  4,100         0.5 %       3,900         0.5 %       1,513         0.5 %       2,163         0.7 %
Total                 782,500       100.0 %     709,400       100.0 %   $ 324,293       100.0 %   $ 313,438       100.0 %



                                       Units Processed                                      Declared Value (000)
                                Six Months Ended December 31,                           Six Months Ended December 31,
                              2011                         2010                        2011                       2010
Coins                   907,700         56.1 %       851,500         56.6 %   $ 634,616         91.2 %   $ 616,132         91.6 %
Trading cards and
autographs(1)           703,000         43.4 %       646,400         42.9 %      57,450          8.3 %      51,714          7.7 %
Stamps                    7,600          0.5 %         7,800          0.5 %       3,404          0.5 %       4,730          0.7 %
Total                 1,618,300        100.0 %     1,505,700        100.0 %   $ 695,470        100.0 %   $ 672,576        100.0 %

Impact of Economic Conditions on our Financial Performance. As discussed above, our operating results are affected by the volume of collectibles transactions by collectibles dealers and collectors which, in turn, is primarily affected by
(i) the cash flows generated by collectibles dealers and their confidence about future economic conditions, which affect their willingness and the ability of such dealers to purchase collectibles for resale; (ii) the availability and cost of borrowings because collectibles dealers often rely on borrowings to fund their purchases of collectibles, (iii) the disposable income available to collectors and their confidence about future economic conditions, because high-value collectibles are generally viewed as luxury goods and are purchased with disposable income; (iv) prevailing and anticipated rates of inflation and the strength or weakness of the U.S. dollar, and worries about sovereign debt obligations and ratings in the United States and Europe, because the threat of increased inflation and concerns about the weakening of the U.S. dollar and about the creditworthiness of governments often lead investors and consumers to purchase or invest in gold and silver coins as a hedge against inflation or reductions in the purchasing power of the U.S. currency; and as an alternative to investments in government bonds and other treasury instruments; and (v) the performance and volatility of the gold and other precious metals markets, which can affect the level of purchases and sales of collectible coins, because investors and consumers will often increase their purchases of hard assets, including gold coins if they believe that the market prices of hard assets will increase. As a result, the volume of collectibles transactions and, therefore, the demand for our authentication and grading services, generally increase during periods characterized by economic growth, the availability of lower cost borrowings, or increases in inflation or in gold prices or a weakening of the U.S. dollar. By contrast, collectibles transactions and, therefore, the demand for our services generally decline during periods characterized by economic downturns or recessions, declines in consumer and business confidence, an absence of inflationary pressure, or declines in the market prices of gold. However, these conditions can sometimes counteract each other as it is not uncommon, for example, for investors to shift funds from gold to other investments during periods of economic growth and growing consumer and business confidence.

We believe that these economic uncertainties and conditions, which led to an increase in coin transactions, not only by collectibles dealers and collectors, but also by investors, contributed to the 28% increase in total revenue from the authentication and grading of collectible coins (which is our largest authentication and grading market) in the first half of fiscal 2012. We believe those increases are primarily the result of continued high prices of gold, concerns among collectors and investors about inflation, the continued weakness of the U.S. dollar and, more recently, about the ability of governments to meet their sovereign debt obligations, as well as customer-specific marketing initiatives that drive the grading of modern coins. Our revenues are discussed in more detail below under the caption Results of Operations: "Net Revenues."

Factors That Can Affect our Liquidity and Financial Position. A substantial number of our authentication and grading customers prepay our authentication and grading fees when they submit their collectibles to us for authentication and grading. As a result, we have historically been able to rely on internally generated cash and have never incurred borrowings to fund our continuing operations. We currently expect that internally generated cash flows and current cash and cash equivalent balances will be sufficient to fund our continuing operations at least through the end of fiscal 2012.

In addition to the day-to-day operating performance of our business, our overall financial position can also be affected by the dividend policy adopted by the Board of Directors from time to time, the Company's decisions to invest in and to fund the acquisition of established and/or early stage businesses and any capital raising activities or stock repurchases. In the first half of fiscal 2012, our dividend policy provided for the payment of cash dividends of $0.325 per share per quarter. In addition, our liquidity and financial position are affected by our tax position, because we have had net operating losses and other tax attributes available to offset or reduce taxes payable by us. However, it is our expectation that we will have utilized all of our federal net operating losses and other tax attributes sometime in the second half of fiscal 2012, depending upon the financial performance in the second half of fiscal 2012. Therefore, beginning with the second quarter ended December 31, 2011, we began making estimated tax payments for federal income tax purposes at an estimated tax rate of approximately 34%.

Critical Accounting Policies and Estimates

Except as discussed below, during the three and six months ended December 31, 2011, there were no changes in our critical accounting policies or estimates which are described in Item 7 of our Annual Report on Form 10-K, filed with the SEC, for the fiscal year ended June 30, 2011. Readers of this report are urged to read that Section of that Annual Report for a more complete understanding and detailed discussion of our critical accounting policies and estimates.

Goodwill. We test the carrying value of goodwill and other indefinite-lived intangible assets at least annually on their respective acquisition anniversary dates, or more frequently if indicators of impairment are determined to exist. When testing for impairment, in accordance with Accounting Standards Update No. 2011-08, we consider qualitative factors, and where determined necessary by management, we proceed to the two-step goodwill impairment test. When applying the two-step impairment test, 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 the reporting unit on a total basis, which is then compared to the carrying value of the reporting unit. If the fair value of the reporting unit exceeds the carrying value of the reporting unit, no impairment of goodwill exists as of the measurement date. If the fair value is less than the carrying value, then there is the possibility of goodwill impairment and further testing and re-measurement of goodwill is required.

During the first quarter ended September 30, 2011, we completed the annual goodwill impairment evaluations with respect to the goodwill acquired in our fiscal year 2006 purchases of CCE and CoinFacts. We assessed qualitative factors, including the significant excess of fair value over carrying value in prior years, and any material changes in the estimated cash flows of the reporting unit and determined that it was more likely than not that the fair value of CCE and CoinFacts exceeded its carrying value, including goodwill, and therefore it was not necessary to proceed to the two-step impairment test.

With respect to our Expos trade show business, as previously reported in our Form 10-K for the year ended June 30, 2011, based on our impairment testing of that business at June 30, 2011, we recognized an impairment loss of approximately $1.4 million in the fourth quarter of that fiscal year. We have determined that no further impairments existed at December 31, 2011.

Stock-Based Compensation. We recognize share-based compensation attributable to service-based equity grants over the service period based on the grant date fair value. For performance-based share grants with a financial performance goal, we begin to recognize compensation expense when it becomes probable that we will achieve the financial performance goal based on the grant date fair value. Stock-based compensation in the three and six months ended December 31, 2011, represents expenses attributable to (i) prior year grants of restricted stock and stock options, recognized over the remaining service periods of those grants; (ii) grants of 92,000 shares that were granted in July 2011 to executive officers and senior management (the "Fiscal 2012 Equity Incentive Grants"); and
(iii) 11,000 restricted shares awarded to non-employee directors. The Fiscal 2012 Equity Incentive Grants included both service-based shares and performance-based shares. In the first and second quarters, we recognized stock-based compensation for the service-based shares. No compensation expense was recognized in the first quarter for the performance-based shares, as it was too early in the year for management to determine that it was probable that the financial performance goal for fiscal 2012 would be achieved. In the second quarter of fiscal 2012, we began recognizing stock-based compensation expense for the Performance-Based Shares, and the expense recognized included $110,000 as a catch-up adjustment related to the first quarter of fiscal 2012.

Results of Operations for the Three and Six Months Ended December 31, 2011
Versus the Three and Six Months Ended December 31, 2010.

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              Six Months Ended
                                                  December 31,                   December 31,
                                              2011            2010            2011           2010
Net revenues                                    100.0 %         100.0 %         100.0 %        100.0 %
Cost of revenues                                 41.1 %          40.6 %          40.1 %         39.6 %
Gross profit                                     58.9 %          59.4 %          59.9 %         60.4 %
Operating expenses:
Selling and marketing expenses                   13.7 %          13.7 %          13.7 %         14.7 %
General and administrative expenses              28.7 %          29.6 %          27.6 %         28.2 %
Total operating expenses                         42.4 %          43.3 %          41.3 %         42.9 %
Operating income                                 16.5 %          16.1 %          18.6 %         17.5 %
Interest income and other expense, net            0.2 %           0.3 %           0.2 %          0.3 %
Income before provision for income taxes         16.7 %          16.4 %          18.8 %         17.8 %
Provision for income taxes                        7.0 %           6.3 %           7.7 %          7.0 %
Income from continuing operations                 9.7 %          10.1 %          11.1 %         10.8 %
Loss from discontinued operations, net
of income taxes                                  (0.2 )%         (0.2 )%         (0.2 )%        (0.2 )%
Net income                                        9.5 %           9.9 %          10.9 %         10.6 %

Net Revenues

Net revenues consist primarily of fees that we generate from the authentication and grading of high-value collectibles, including coins, trading cards, autographs and stamps. To a lesser extent, we generate collectibles related service revenues (referred to as "other related revenues") from sales of Collectors Club memberships and advertising and commissions earned on our websites (including Coinflation.com which we acquired in September 2011-see note 4 to the condensed consolidated financial statements), and in printed publications and collectibles price guides; subscription-based revenues primarily related to our CCE dealer-to-dealer Internet bid-ask market for certified coins and CoinFacts; 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, which consist primarily of coins that we purchase under our authentication and grading warranty policy. We do not consider such product sales to be the focus of or an integral part of our ongoing revenue generating activities.

The following tables set forth the total net revenues for the three and six months ended December 31, 2011 and 2010 between grading and authentication services revenues, other related services revenues and product sales (in thousands):

                                                 Three Months Ended December 30,
                                  2011                         2010                       Increase
                                       % of Net                     % of Net                     % of Net
                         Amount        Revenues       Amount        Revenues       Amount        Revenues
Grading and
authentication fees     $   9,389           81.9 %   $   7,808           81.3 %   $   1,581           20.2 %
Other related
services                    1,918           16.7 %       1,580           16.5 %         338           21.4 %
Product sales                 165            1.4 %         212            2.2 %         (47 )        (22.2 )%
Total net revenues      $  11,472          100.0 %   $   9,600          100.0 %   $   1,872           19.5 %



                                                  Six Months Ended December 30,
                                  2011                         2010                       Increase
                                       % of Net                     % of Net                     % of Net
                         Amount        Revenues       Amount        Revenues       Amount        Revenues
Grading and
authentication fees     $  19,056           80.9 %   $  15,580           80.5 %   $   3,476           22.3 %
Other related
services                    4,151           17.6 %       3,495           18.1 %         656           18.8 %
Product sales                 337            1.5 %         280            1.4 %          57           20.4 %
Total net revenues      $  23,544          100.0 %   $  19,355          100.0 %   $   4,189           21.6 %

The following tables set forth certain information regarding the increases (decreases) in net revenues in our larger markets (which are inclusive of revenues from our other related services) and in the number of units graded and authenticated in the three and six months ended December 31, 2011 and 2010.

                                                         Three Months Ended December 31,
                                                                                              2011 vs. 2010
                             2011                        2010                              Increase (Decrease)
                                  % of Net                    % of Net             Revenues                Units Processed
                     Amount       Revenues       Amount       Revenues       Amounts         %          Number           %
Coins (1)           $  7,797           68.0 %   $  6,276           65.4 %   $   1,521         24.2 %     25,300            6.3 %
Cards and
autographs (2)         2,663           23.2 %      2,384           24.8 %         279         11.7 %     47,600           15.8 %
Other (3)              1,012            8.8 %        940            9.8 %          72          7.7 %        200 (4)        5.1 %
                    $ 11,472          100.0 %   $  9,600          100.0 %   $   1,872         19.5 %     73,100           10.3 %



                                                            Six Months Ended December 31,
                                                                                                2011 vs. 2010
                              2011                        2010                               Increase (Decrease)
                                   % of Net                    % of Net             Revenues                 Units Processed
                      Amount       Revenues       Amount       Revenues       Amounts         %          Number             %
Coins (1)            $ 15,702           66.7 %   $ 12,252           63.3 %   $   3,450         28.2 %      56,200             6.6 %
. . .