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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

Form 10-Q

(Mark One)

Commission File Number:    0-27887

Collectors Universe, Inc.
(Exact name of registrant as specified in its charter)

1921 E. Alton Avenue, Santa Ana, California 92705
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (949) 567-1234

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

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COLLECTORS UNIVERSE, INC.

INDEX

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PART I.  FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of September 30, 2002 and June 30, 2002
(in thousands, except share data)
(unaudited)

See accompanying notes to condensed consolidated financial statements

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COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

See accompanying notes to condensed consolidated financial statements

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COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)
(unaudited)

See accompanying notes to condensed consolidated financial statements

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COLLECTORS UNIVERSE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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Forward-Looking Statements

          The discussion in this Item 2 and in Item 3 of this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  That Act provides 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 the projected 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 position or as to future trends in our business or in our markets, are forward-looking statements.  Forward-looking statements reflect our current expectations about trends in our business and our future financial performance and our actual results in future periods may differ significantly from those expectations.  The sections below entitled “Overview – Factors Affecting Revenues and Margins” and “Additional Factors That May Affect Future Operating Results” describe some, but not all, of the factors that could cause these differences, and readers of this Report are urged to read those sections of this Report in their entirety and the Company’s Annual Report on Form 10-K for its fiscal year ended June 30, 2002, which contains additional information regarding factors that could affect our future financial performance.

          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 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 referred to above.

Critical Accounting Policies and Estimates

          General.    The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In determining the carrying value of some of our assets and liabilities, principally accounts receivable, inventories, warranty obligations, deferred income taxes, and goodwill, we must make judgments, estimates and assumptions regarding future events and circumstances that could affect the value of those assets and liabilities, such as future economic conditions that will affect our ability to collect our accounts receivable or sell our inventories in future periods. Those judgments, estimates and assumptions are based on current information available to us at the time they are made. Many of those events and circumstances, however, are outside of our control and if changes in those events or circumstances occur thereafter, GAAP may require us to adjust our earlier estimates that are affected by those changes. Any downward adjustments are commonly referred to as “write-downs” of the assets involved.

          Additionally, decisions of when adjustments of this nature should be made also require subjective judgments involving an assessment or prediction about the effects and duration of events or changes in circumstances. For example, it is not easy to predict whether events, such as occurred on September 11, 2001 or increases in interest rates or economic slowdowns, will have short or longer term consequences for a particular business and it is not uncommon for it to take some time, after the occurrence of an event or the onset of changes in economic circumstances, for the full effects of such events or changes to be recognized.

          It is our practice in certain cases to establish reserves or allowances to record any downward adjustments or “write-downs” in the carrying value of assets such as these. Examples include reserves or allowances established for uncollectible accounts receivable (sometimes referred to as “bad debt reserves”) and reserves for slow moving inventory. Write-downs are charged against these reserves or allowances and those reserves are replenished following such write downs, or increased to take account of changed conditions or events, by charges to income or increases in expense in our statement of operations in the periods when the effects of those changed conditions or events become known. With respect to other assets, such as goodwill, we write down their carrying value directly in the event of an impairment as a charge to income. As a result, our judgments, estimates and assumptions about future events can and will affect not only the amounts at which we record these assets on our balance sheet, but also our results of operations.

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          Under GAAP, we also must make estimates or judgments regarding the periods during which, and also regarding the amounts at which, sales are recorded. Those estimates and judgments will depend on such factors as the circumstances under which customers may be entitled to return the products or reject or adjust the payment for the services provided to them. Additionally, in those cases when we grant our customers contractual rights to return products sold to them, we establish a reserve or allowance for product returns by means of a reduction in the amount at which the sales are recorded, based primarily on the nature, extensiveness and duration of those rights and our historical product return experience.

          In making our estimates and assumptions we follow GAAP and accounting practices applicable to our business that we believe will enable us to make fair and consistent estimates of the realizable or recoverable amounts of those assets and establish adequate reserves or allowances. Set forth below is a summary of the accounting policies that we believe are material to an understanding of our financial condition and results of operations that are discussed below.

          Revenue Recognition and the Allowance for Returns.     We record, as deferred revenue, all prepaid grading submissions until the items are graded and returned to the submitter. Upon shipment back to the customer, we record the revenue from grading and deduct this amount from deferred revenue. For dealers who have open account status, we record revenue at the time of shipment.

          We record revenue from the sale of collectibles at our auctions at the time the collectible is either shipped based on agreement with the customer or delivered in-person to the successful bidder. Shipment or delivery generally takes place after payment is received from the successful bidder, which can be as long as 60 days after completion of the auction. As a result, revenues from sales made at auctions conducted in the second half of a fiscal quarter usually will not be recorded until the subsequent quarter. However, for certain repeat bidders we ship or deliver in-person the collectibles at the close of an auction and allow them to pay up to 60 days following the auction. Those sales are also recorded at the time of delivery or shipment. We also offer extended payment terms to certain collectors or dealers. For collectibles that we own and sell at auction, we record the successful bidder amount, or “hammer,” as the sale of the merchandise and record the buyer’s fee as commission earned. We also record the cost of the merchandise sold as cost of revenues. For collectibles that are consigned to us for auction, we record, as commissions earned, the amounts of the buyer’s and seller’s fees. Depending upon the type of collectibles auction, we charge successful bidders a 10% to 15% commission and generally charge consignors a 5% to 15% selling commission. On some large or important consignments, we may negotiate a reduced consignor commission or even pay a fee to the consignor.

          We sometimes provide our customers with limited rights to return items sold.

          We establish an allowance for estimated returns, if necessary, which reduces the amounts of our reported revenues, based on historical returns experience.

          Accounts Receivable and the Allowance for Doubtful Accounts.    In the normal course of business, we extend payment terms to more creditworthy collectibles dealers. We regularly review their accounts and estimate the amount of and establish an allowance for uncollectible amounts in each reporting period. The amount of that allowance is based on several factors, including the age of unpaid amounts, a review of significant past due accounts, and economic conditions that may affect the ability of dealers to keep their accounts current. Estimates of uncollectible amounts are reviewed each period and, based on that review, are revised to reflect changed circumstances or conditions in the period they become known.  For example, if the financial condition of certain dealers or economic conditions were to deteriorate, adversely affecting the ability of those dealers to make payments on their accounts, increases in the allowance may be required. Since the allowance is created by recording a charge against income that is reflected in selling, general and administrative expenses, an increase in the allowance will cause a decline in our operating results in the period when the increase is recorded.

          Inventory Valuation Reserve.    Inventories are valued at the lower of cost or market and are reduced by an inventory valuation allowance to provide for declines in the value of our inventory, which consists of collectible coins, sportscards and other collectibles. The amount of the allowance is determined on the basis of historical experience, estimates concerning future economic conditions and estimates of future sales. If there is an economic downturn or a decline in sales, causing inventories of some collectibles to accumulate, it may become necessary to increase the

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allowance. Increases in this allowance will cause a decline in operating results as such increases are effectuated by charges against income.

          Long-Lived Assets and Goodwill.  Long-lived assets such as property and equipment, and goodwill and intangible assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable.  Prior to the current fiscal year, in accordance with GAAP, we used estimated undiscounted future cash flows to determine if an asset was impaired.  If an asset was determined to be impaired its carrying value would have been reduced to fair value and any resulting impairment would have been recorded as a charge against income in the period in which the impairment determination was made.  Effective as of the July 1, 2002, which is the beginning of our current fiscal year, we are required to assess our goodwill for impairment based on new standards established by SFAS No. 142, which requires that goodwill be tested for impairment annually, or more frequently if circumstances indicate potential impairment, by comparing the fair value of the asset to its carrying amount.  During the quarter ended September 30, 2002, we completed the two step transitional impairment test required by SFAS No. 142, which required the Company, first, to assess the fair value of the assets and, second, to compare the implied fair value of its recorded goodwill, determined in a manner similar to a purchase price allocation in a business combination, to the carrying amount of the goodwill.  Based on this analysis, the Company has determined that its goodwill, which totaled $14,961,000 as of June 30, 2002, had been impaired by $8,973,000, net of taxes of $4,511,000.  As a result, in accordance with SFAS No. 142, the Company is reporting, as a cumulative effect of a change in accounting principle, a non-cash goodwill impairment charge in that amount in its statement of operations for the quarter ended September 30, 2002.  This charge, which reduces reported earnings and stockholders' equity, does not affect the Company’s tangible net worth and is not expected to adversely affect its business operations or cash flows.  See Note 4 to our Condensed Consolidated Financial Statements included earlier in this Report.

Overview of Factors that Affect Our Operating Results and Liquidity

          Factors Affecting Revenues and Margins

          Our Business.  Collectors Universe provides grading and authentication services for sportscards, rare coins, vintage stamps and authentication services for autographs and sports memorabilia.  We also sell rare coins and rare currencies, sportscards, sports and entertainment memorabilia and other collectibles through auctions and direct sales channels.  Most of our collectibles auctions are conducted utilizing a “multi-venue” format that may include in-person, Internet, mail-in, and telephone bidding options.  This multi-venue format allows bidders to enter auction bids at any time and from any place in the manner that is most convenient for them.  We also sell rare coins, sportscards, sports memorabilia and autographs through shows, catalogs, Internet and direct sales.

          Revenue Recognition Policies.    We record, as deferred revenue, all prepaid grading submissions until the items are graded and returned to the submitter. Upon shipment back to the customer, we record the revenue from grading and deduct this amount from deferred revenue. For dealers who have open account status, we record revenue at the time of shipment.

          We record revenue from the sale of collectibles at our auctions at the time the collectible is either shipped based on agreement with the customer or delivered in-person to the successful bidder. Shipment or delivery generally takes place after payment is received from the successful bidder, which can be as long as 60 days after completion of the auction. As a result, revenues from sales made at auctions conducted in the second half of a fiscal quarter usually will not be recorded until the subsequent quarter. However, for certain repeat bidders we ship or deliver in-person the collectibles at the close of an auction and allow them to pay up to 60 days following the auction. Those sales are also recorded at the time of delivery or shipment. We also offer extended payment terms to certain collectors or dealers. For collectibles that we own and sell at auction, we record the successful bidder amount, or “hammer,” as the sale of the merchandise and record the buyer’s fee as commission earned. We also record the cost of the merchandise sold as cost of revenues. For collectibles that are consigned to us for auction, we record, as commissions earned, the amounts of the buyer’s and seller’s fees. Depending upon the type of collectibles auction, we charge successful bidders a 10% to 15% commission and generally charge consignors a 5% to 15% selling commission. On some large or important consignments, we may negotiate a reduced consignor commission or even pay a fee to the consignor.

          Our auctions are held periodically throughout the fiscal year. The number and size of the auctions we conduct vary from quarter to quarter, depending largely on the volume, value and timing of the collectibles consignments that

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we receive for our auctions.  For this reason, our auction revenue and, as a result, also our cash flow, can vary, sometimes significantly, from quarter to quarter.  These circumstances, coupled with our revenue recognition policy under which in most instances we do not recognize revenue from auction sales until 60 days after completion of an auction, make it difficult to forecast, on a quarterly basis, revenue that will be attributable to our auction business.

          Gross Profit Margins.  The gross profit margins on grading submissions are affected by the mix of submissions between vintage or “classic” coins and sportscards, on the one hand, and modern coins and sportscards, on the other hand.  Generally, our prices for grading services vary depending on the “turn-around” time requested by submitting dealers and collectors, who are willing to pay more for faster turn-around of the coins and sportscards they submit for grading.  As a general rule, dealers and collectors request faster turn-around for vintage or classic coins and sportscards than they do for modern submissions.

          The gross margin on sales of consigned collectibles is significantly higher than the gross margin on sales of owned collectibles because we realize commissions on sales of consigned collectibles without having to incur any significant associated costs.  By contrast, upon the sale of owned collectibles, we record the costs of acquiring those collectibles, which are usually a significant percentage of the selling price.  As a result, the sale of owned collectibles reduces our overall auction margins to a level that is significantly below that realized for authentication and grading services.

          Consequently, our overall gross margin depends, not only upon the mix of grading revenues and auction revenues, but also upon the mix of consigned and owned collectibles sold at our auctions and the mix of vintage and modern collectibles submitted for grading and authentication.

          Impact of Economic Conditions on Financial Performance.  The Company generates substantially all of its revenues from the collectibles market segment, which primarily relies on discretionary consumer spending.  Unfavorable economic conditions have in the past, and could in the future, adversely affect the Company’s operating results and financial condition.

RESULTS OF OPERATIONS

          Net Revenues

          Net revenues include fees generated from the grading and authentication of sportscards, coins, autographs and stamps; the sales prices of owned collectibles sold in our auctions and directly to collectors; commissions earned on sales of consigned collectibles at our auctions; and revenue from the publication of collectibles magazines.  Net revenues are determined net of discounts and allowances, product returns, and commissions paid to consignors on sales of their collectibles.

          Net revenues for the three month period ended September 30, 2002 increased by 35% to $12,593,000 as compared to the corresponding three month period of the prior year, due to increases in both our grading and authentication and our collectibles sales business segments.

          Grading and authentication revenue increased by 27% in the three months ended September 30, 2002, when compared to the same period last year primarily because of a continued increase in coin grading submissions.  Grading submissions for coins began to increase noticeably in the quarter ended June 30, 2002 and continued to do so throughout the three months ended September 30, 2002.  Sportscard grading revenues for the three months ended September 30, 2002 declined slightly compared to the same period last year, indicating a stabilization in the demand for sportscard grading.  We believe the increase in coin grading submissions was attributable to a number of factors, including our introduction of new marketing programs and improvements in consumer confidence and increases in the market values of coins, which tend to be countercyclical to the economy and the stock market.

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          Auction and collectibles sales revenues were higher by 42% for the three-month period ended September 30, 2002 as compared to the same prior year period.  This increase in the auction and collectibles sales revenues is the result of (i) an increase in demand for rare coins, currency and celebrity memorabilia; and (ii) the postponement of a September 2001 auction as a consequence of the September 11 terror attack on the World Trade Center.  We believe the increased demand in coins, currencies and memorabilia may be the result of investors looking for investment alternatives to the stock market. 

          Gross Profit